U.S. Engineering Local Recovery

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At last, good news for the local economy.

Hawthorne-based OSI Systems Inc. stands to reap tens of millions of dollars from the $789 billion federal economic stimulus package that was being readied for passage late last week. That could translate into expanded production facilities and nearly 200 additional jobs for the South Bay region this summer.

OSI is just one of several Los Angeles companies to benefit from the billions of dollars that will hit the local economy in the form of contracts to engineering, defense and construction companies, such as Northrop Grumman Corp., Aecom Technology Corp. and others.

OSI’s windfall comes through a provision in the stimulus package that would fully fund the installation of nearly 1,300 advanced X-ray scanner machines at airports across the country. Rapiscan Systems Inc., a wholly owned subsidiary of OSI, is one of the leading manufacturers of these X-ray machines.

“The bidding process is in place. Our production facilities are all ready to go,” said Peter Kant, Rapiscan’s vice president of global government affairs. “So assuming we can win the bid and everything else goes smoothly, we could start hiring up by midyear.”

The agreement which as of Feb. 12 still had to clear both the House and Senate before going to President Obama steers about $150 billion toward infrastructure projects, $357 billion to other government spending programs, and $282 billion in the form of individual and corporate tax cuts.

Engineering companies such as Pasadena’s Jacobs Engineering Group Inc. and Parsons Corp., and L.A.-based Aecom could be among the biggest local gainers from the estimated $150 billion in infrastructure spending on roads, highways, bridges, transit systems, water works and other projects. Major construction contractors such as Tutor-Saliba Corp. in Sylmar also stand to profit, as well as scores of paving companies, rebar manufacturers and other subcontractors.

Local health care technology companies could gain from stimulus funds to computerize health care records, and invest in medical research and development. In addition, alternative energy companies such as Solar Integrated Technologies Inc. in Los Angeles, could also see an influx of stimulus dollars.

On a broader scale, tens of thousands of local companies will likely be able to take advantage of the billions in tax cuts in the stimulus package, particularly provisions for accelerated deductions of investments in new plants and equipment.

The one catch: It will be months before significant amounts of federal stimulus dollars start to reach the ground in Los Angeles, where unemployment has soared to nearly 10 percent and home foreclosures are skyrocketing.

But when it arrives, the money may help a recovery take hold more quickly.

“These stimulus dollars will help us on the upside and will help counteract the drag we’re expecting from massive layoffs in state and local government and education,” said Jerry Nickelsburg, principal economist with the UCLA Anderson Forecast.

Nickelsburg said that he expects engineering companies to be among the first to benefit from the stimulus dollars because they are at the front end of projects.

“Engineering is a big industry here in Los Angeles, so this should help us,” he said.

Engineering and construction giant Aecom hopes to benefit substantially from the stimulus package. In a conference call with investors last week for the release of its fourth quarter earnings, John Dionisio, Aecom’s president and chief financial officer, said the company has about $3 billion worth of projects that have been fast-tracked and are ready to receive federal stimulus dollars.

Dionisio said that Aecom and its subsidiaries are working with state and local governments to help them prioritize their “shovel-ready” projects. But he said that he doesn’t expect to see the stimulus funding entering the marketplace until the third quarter or fourth quarter of this year.

“To plan on anything more aggressive than that I think might be a little bit reckless at this point in time,” he told investors.

Most of the stimulus dollars will likely have to be routed through state and local governments before reaching the engineering and construction contractors. And there may be political battles over spending priorities.

That is not a problem faced by federal contractors such as OSI or Northrop Grumman in Century City. Northrop executives are counting on the company’s share of several hundred million dollars for completion of a satellite system to track climate change. As of Feb. 11, the money remained in the House version of the stimulus proposal, but was reduced in the Senate version. Northrop is jointly developing the National Polar-Orbiting Operational Environmental Satellite System with Raytheon Co. of Waltham, Mass.

Northrop spokesman Randy Belote said some of the stimulus dollars may go to fund the installation of additional sensors on the satellites. One of the main satellites in this system is currently being assembled at Northrop’s Redondo Beach facility.

“We could have more employees there if this funding goes through,” Belote said.

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