The Infrastructure Investment & Jobs Act (IIJA) was recently signed into law in the United States and it’s poised to have a significant impact on the construction industry. This week we’re looking closely at the nuances of the bill to clarify what’s included, when these projects will be available to bid on, and how contractors can prepare for such a significant opportunity.
“This is the biggest investment [in infrastructure] we’ve seen in our lifetimes, and definitely within my parents’ lifetimes since Eisenhower. So, it’s a big investment and an opportunity to actually build all of the things that folks have been talking about for decades.”
– Jimmy Christianson, Vice President of Government Relations, Associated General Contractors of America
Industry leaders from Associated General Contractors (AGC) of America and Shumaker Advisors joined me to talk about what the Infrastructure Investment & Jobs Act (IIJA) really means for the future of the industry.
The IIJA, at a high level, is a $1.2 trillion bill meant to improve American infrastructure while providing over two million jobs to the sector over the next 10 years. The final decisions regarding how that funding gets split up between research, design, and actual construction is still unfolding as we speak.
That said, the funds being made available through the IIJA present a serious opportunity for contractors to bid on a myriad of infrastructure projects now, and over the next several years.
Jimmy explains, “I’m thinking this is $351 billion total for roads and bridges construction, $106 billion for transit, passenger, and freight rail, over $100 billion for water infrastructure $60 billion, for broadband $44.8, for airports $20–of actual construction to be put in place. This is the biggest investment we’ve seen in our lifetimes … and an opportunity to actually build all of the things that folks have been talking about for decades.”
Jimmy points out that there has been around a 20% increase above baseline federal funding so far. A significant portion of the funds are expected to be released in the months and years to follow.
He continues, “I’ve been talking to state DOTs. A lot of the money, for them, will be hitting in the latter part of the year or early part of next year (2023).”
The IIJA presents exciting, “once-in-a-generation” opportunities for contractors across the US. At the same time, preparing to bid on infrastructure projects and perform the work is likely to present new hurdles for those who haven’t worked on federal or state funded projects before.
Before bidding on a contract for IIJA projects, firms need to fully understand what the requirements are for each job, and whether or not they can fulfill them.
Ryan Walker provides some examples, “You have the National Environmental Policy Act (NEPA), which requires that some projects go through federal and environmental impact studies. In addition to that, wage rates are affected by the Davis Bacon Act, which is built into a lot of these federal contracts, if not all of them. There are also labor shortages, so getting enough people to do the work is a national problem.”
He continues, “The IIJA also includes proposals that have diversity, equity, and inclusion metrics built into them. So as people look to bid on these projects, that’s something they need to be cognizant of, to be sure if they can fulfill them or not.”
Jimmy Christianson adds some additional questions that may come up in project proposals, “Is the material made in America? Is the material also environmentally friendly?” Among meeting these project material requirements, he says, “We’re looking at the administration’s climate goals and trying to find a way to help our clients meet those as well.”
The big takeaway here is for firms to really be honest with themselves about their capabilities. Government agencies have a responsibility to protect taxpayer dollars so they’re likely to look for contractors that are in the best position to help the administration achieve its many goals.
Alex Etchen shares some insight on how AGC is helping contractors navigate the IIJA.
“I think one of the big things we’re hearing right now from AGC members is about the supply chain crisis, the availability of materials, and the price escalation. The first thing I would point out to someone wanting to make a bid would be to check to see if there is a price escalation clause available.”
Having a price escalation clause in place could help prevent delays and additional expenses if costs continue to rise. Alex continues, “You go and you bid a project when steel costs $10 and concrete’s $15, but six months to a year later when you go to actually build the contract, steel’s now $22 and concrete’s $28. What are you supposed to do if you don’t have a price escalation clause in place? You’re going to maybe try to delay as long as you can in the hopes that those prices come down.”
The availability of those clauses is expected to vary between the government agencies, but he considers this one of the most important takeaways from discussing IIJA projects with AGC members.
Jimmy also points out the importance of understanding the delivery expectations for the project that you’re bidding on. “Is it a design-build project, design-bid-build project? Project delivery matters in these cases, and you want to be able to assume the appropriate risks or make sure your owner is going to share or allocate those risks.”
Project delivery matters in these cases, and you want to be able to assume the appropriate risks or make sure your owner is going to share or allocate those risks.”
–Jimmy Christianson, Vice President of Government Relations, AGC
Jimmy shares additional context on how important it is to fully understand the contract requirements, “You can take on environmental risks for which you, as a contractor and designer, have absolutely very little ability to control. You do not control the federal government’s ability to approve or not approve a permit. And all of a sudden you’re waiting for that permit and time is money to you although sometimes it doesn’t seem like it is for the government. That’s going to come to bear for you later.”
In other words, by evaluating project risk, you’re in a much better position to manage project outcomes because you can plan your contingencies in the event you’re awarded a contract.
All these issues have to be considered before you take on a project. The big questions: how can you be sure you’re bidding on the right project?
Technology is also going to play an important part of all these infrastructure projects. As shared by Construction Dive, the IIJA “includes money for advanced digital construction management systems and related technologies. The program is funded at $20 million per year, for a total of $100 million, over five years.”
“You’re going to have to look at how you’re using people or supplies in the most time- and cost-effective manner. A lot of that work involves project management software,” remarks Jimmy. “Our clients will often use drones to keep track of materials or to get a better idea of the land that they’re going to be working on.”
As more firms see the benefits of streamlining their workflows, many are boosting their intake of new technologies to assist in reaching those goals.
“It’s not just the big contractors,” Jimmy goes on, “Now you have the small contractors and subcontractors looking to take advantage of those efficiencies in the absence of more workers, and while working with an aging workforce. They need to try to find out how they can get the job done with even less.”
The value of construction technology to contractors is its ability to help them manage incredibly complex infrastructure projects more efficiently, which in turn, enables them to meet tighter budget and timeline expectations with fewer resources.
For contractors eager for news about how quickly they’ll see the funding become available, this episode is a great deep dive into all the opportunities and challenges that come with the passing of this bill. By preparing today, you’ll be in a more competitive position to secure the projects your firm is most interested in winning.
If you’d like to take an even deeper look at the IIJA, catch the full episode of Digital Builder to learn more.
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