It’s almost the end of another year, and as the industry takes a well deserved break for a few days it may be a good time to consider next year’s prospects.
A lot has happened in 2024 and with an incoming Trump administration in January, there could be some unexpected shake-ups.
That notwithstanding, here’s our overview of the military construction projects outlook for 2025, based on available government reports and forecasts.
General Military Construction Project Information
Areas of Interest
Advanced Air Mobility (AAM)
The AAM industry, focusing on electric vertical takeoff and landing (eVTOL) aircraft, is expected to continue growing in 2025. Professional investors are showing increased interest, with 93% of a cohort of managers responsible for more than $1.787 trillion of assets under management expressing an interest in the eVTOL sector.
Infrastructure Costs
According to the Congressional Budget Office (CBO), infrastructure costs in the Department of Defense’s (DoD) budget are projected to increase by an average of 2.3 percent per year after the Future Years Defense Program (FYDP) period (2025-2029). By 2039, infrastructure costs are expected to rise from $16.0 billion to $20.0 billion (in 2025 dollars).
Military Construction Projects
The Future Years Defence Program (FYDP) 2025 budget request allocates over $15 billion for military construction projects, including development centers, hangars, and other facilities. However, poor initial planning has contributed to about 25% of projects being delayed for at least a year over the last 5 years.
Solar Technology and Renewable Energy
Solar technology and renewable energy construction projects are expected to be prime prospects for private equity (PE) investors in 2025.
Workforce Issues
The engineering and construction industry is likely to face ongoing workforce challenges, including talent shortages, aging workforce, and lessening interest among younger generations to choose construction as a career. Strategies to address these issues may include integrating AI-enabled automation and digital tools, offering more opportunities for career growth and diversification, and leveraging emerging technologies like robotics.
Key Takeaways
- Infrastructure costs are projected to increase by 2.3% per year after the FYDP period.
- Military construction projects face delays due to poor initial planning, with 25% of projects delayed for at least a year over the last 5 years.
- The AAM industry is expected to continue growing, with increased interest from professional investors.
- Solar technology and renewable energy construction projects are prime prospects for PE investors.
- Workforce issues, including talent shortages and aging workforce, will continue to challenge the industry.
- Improved oversight and sharing of lessons learned are necessary to reduce delays and improve project execution.
GAO Recommendations
To improve oversight and reduce delays, the Government Accountability Office (GAO) recommendations to the DoD include:
- Gather more detailed information on construction projects to identify individual and systemic problems.
- Share lessons learned from each project to prevent repeated mistakes.
- Develop guidance, training, and processes for sharing lessons learned.
- Improve monitoring and reporting of project execution.
It is worth noting that the latter three points are addressed somewhat in the updated 2024 EM385 manual, which focusses on improving many of these processes.
2025 Outlook
Overall, the military construction projects outlook for 2025 is cautiously optimistic, with expected growth in infrastructure costs, military construction projects, and advanced air mobility. However, challenges persist, including poor initial planning, workforce issues, and the need for improved oversight and sharing of lessons learned.
Outlook for EM385 Certified Contractors in 2025
Positives
So, based on the above, we can infer that 2025 is likely to be a positive year for EM385 certified contractors. Here are some reasons why this could be the case:
- Increased Military Construction Projects: The FYDP 2025 budget request includes over $15 billion for military construction projects, which will likely create opportunities for EM385 certified contractors.
- Growing Demand for Construction Services: The expected growth in infrastructure costs and military construction projects will drive demand for construction services, including those provided by EM385 certified contractors.
- Emphasis on Safety: EM385 certification demonstrates a commitment to safety, which is a top priority for the US Army Corps of Engineers and other government agencies. As a result, EM385 certified contractors may have a competitive advantage when bidding on military construction projects.
- Renewable Energy and Solar Technology Projects: The growth of the solar technology and renewable energy sectors may also create opportunities for EM385 certified contractors, particularly those with experience or specialization in these areas.
Challenges
It is, however, essential to recognize that the industry will continue to face challenges, such as:
- Workforce Issues: The construction industry’s ongoing workforce challenges, including talent shortages and an aging workforce, may affect contractors, especially those without EM385 certification.
- Competition: The increased demand for construction services may also attract more competitors, making it essential for EM385 certified contractors to differentiate themselves and demonstrate their value proposition.
Recommendations for EM385 Contractors
To capitalize on the opportunities in 2025, EM385 certified contractors could look to:
- Stay up-to-date with industry developments: Monitor changes in military construction projects, renewable energy, and solar technology to identify potential opportunities.
- Develop a strong safety culture: Continue to prioritize safety and demonstrate a commitment to EM385 standards to maintain a competitive advantage.
- Invest in workforce development: Address workforce challenges by investing in training, recruitment, and retention strategies to attract and retain top talent.
- Diversify services and expertise: Consider expanding services and expertise to include emerging areas like renewable energy and solar technology to stay competitive.
Conclusion
By being proactive and adaptable to changing conditions, EM385 certified contractors can position themselves for success in 2025 as there is a projected increase in military project spend.
