What Is Shovel Ready?

Shovel ready is a phrase used to describe a construction project that is considered to be at an advanced enough stage of development for building to begin soon. The term generally implies that planning is more or less complete, approval permits are in place, and laborers can get to work once sufficient funding is secured.

Key Takeaways

  • Shovel ready is a phrase used to describe a construction project that is considered to be at an advanced enough stage of development for building to begin soon.
  • The term is mainly used when referring to projects that, if given stimulus money, will have the most immediate impact on employment and the economy.  
  • However, as the American Recovery and Reinvestment Act of 2009 taught us, many construction projects get labeled as shovel ready prematurely.

Understanding Shovel Ready

A lot of work goes into preparing a plot of land for construction. To reach this phase, various barriers must be overcome. Clearance is only given after viable plans are presented, the soil is tested, environmental concerns are addressed, and so forth.

Once a project secures shovel ready status, it generally means that it is ready to go. At this point, planning should have reached an advanced enough stage for building work to take place within a very short timeframe.

The term "shovel ready" is mainly used when referring to projects that, if given stimulus money, will have the most immediate impact on employment and the economy

Public infrastructure investment is one of the most advertised tools of anti-recessionary fiscal policy. The general belief is that spending government funds on roads, bridges, and other such projects increases the amount of money circulating in the economy and, subsequently, boosts consumer spending—a key component of economic growth—by virtue of providing much-needed job opportunities to the unemployed.

History of Shovel Ready

Shovel ready has become a controversial phrase. The term was thrown around loosely following the great recession of the late 2000s as the U.S. government looked for ways to jumpstart the depressed economy. These policies aren't always remembered fondly.

Under the government's American Recovery and Reinvestment Act of 2009, billions of dollars of borrowed money were allocated toward investments in the nation's infrastructure. Unfortunately, it turned out that many of these projects tasked with creating jobs and pulling the country out of recession weren't actually as shovel ready as originally advertised.

Massive construction projects take a lot of planning and few of them exist as sets of shovel ready plans, all filed away with the necessary approval permits in place.

Critics argued that shovel ready really meant six months to a year or even two or three years of planning before projects could be put into operation. Harvard economist Martin Feldstein calculated that each job created by President Obama's American Jobs Act would cost taxpayers $200,000—a figure that government officials didn't dispute at the time.

In the end, the government was accused of spending for the sake of it, blindly pouring billions of public dollars into questionable projects with a negligible return on investment (ROI) when its money could have been better deployed elsewhere. A lack of due diligence and failure to pursue programs offering the most bang for the buck gave critics more fuel to question the merits of government intervention.

Special Considerations

The actual definition of shovel ready is not always as clear it might appear. The inclusion of the word shovel would suggest that building can commence once a project reaches this phase. Other than that, the term is open to interpretation.

The government's infamous stimulus bill stated that for a project to be considered shovel ready it had to be ready to begin in 90 days. It's worth bearing in mind, though, that each state has different certification programs, meaning that being shovel ready doesn't always imply the exact same thing throughout the country.