With the “Infrastructure Investment and Jobs Act” (or IIJA) now law, politicians and appointees at the federal, state, and local level will be charged with allocating billions of dollars in spending on transportation, energy, water, broadband internet, and natural resource projects. How might your firm benefit?
How the Spending Breaks Out
The price tag for the infrastructure bill is at $1.2 trillion, nearly half ($550 billion) of which is attributed to new civil works spending above baseline levels. The spending breaks out as follows:
- Transportation: $283.8 billion
- Broadband internet: $65 billion
- Power and grid: $65 billion
- Water: $55 billion
- Resiliency: $47.2 billion
- Legacy pollution: $21 billion
Roads and bridges account for $110 billion, more than one-third of the transportation component of the bill. The rest will go to airports, passenger and freight rail, ports and waterways, public transit, safety and research, electric vehicle charging, and reconnecting communities.
The bill contains policy reforms and funding for hundreds of federal programs, many of which have been around for years but will now be funded at higher levels.
Comprehensive Broadband Investment
The infrastructure bill represents the nation’s first comprehensive investment in broadband deployment, equity, and affordability. It adopts formal language and definitions for addressing and overcoming the digital divide.
More than $48 billion in broadband funding is appropriated to address middle-mile deployment and broadband affordability. Funds are also appropriated to address growing cybersecurity concerns and invest in climate-focused environmental monitoring and R&D.
A Generational Shift
It’s important to note that the IIJA is not just another stimulus bill. Instead, it represents a generational shift in which types of infrastructure projects are targeted and how they get done. Federal agencies will administer new grants and design new programs while state and local governments will identify and execute specific infrastructure projects.
Spending on infrastructure projects will occur over years, not months. The pace at which projects proceed will depend on the types of projects and which programs fund them. So-called “state of good repair” projects like road improvements tend to move faster than sophisticated capital projects.
Meanwhile, funds distributed by formula from existing programs tend to be distributed faster than funds allocated to new programs, which usually involve new rulemaking. For example, the Department of Transportation only spent about 9 percent of the funds allocated to it by the American Rescue and Recovery Act a decade ago during the first six months, and about half of the funds during the first 18 months, according to the Congressional Budget Office.
The IIJA is sure to result in greater aggregate demand for goods and materials like lumber, cement, and steel—sometimes resulting in more competition between the government and the private sector. For example, weatherization projects will require similar materials as real estate construction projects. This is worth watching closely as global supply chains remain under duress.
Opportunities for Contractors
The construction industry has cheered passage of the infrastructure bill. Given its breadth and scope, the IIJA will provide a needed boost to contractors, says the CEO of the Associated General Contractors of America, Stephen E. Sandherr, in a statement after the House passed legislation.
“The bill provides the kind of funding needed to modernize the country’s aging and overburdened infrastructure,” says Sandherr. “Our members are ready to begin the hard, but necessary, work of rebuilding the nation’s infrastructure.
“They will also begin the work of building rewarding careers for a generation of new construction professionals because of this measure,” he adds. “Ultimately, these new infrastructure investments will provide a needed boost for the construction industry while making our economy more efficient.”
Sandherr is especially pleased that the IIJA includes the policy of One Federal Decision, which streamlines the cumbersome and lengthy permitting process for many infrastructure projects. Permitting reviews for federal projects can involve up to 30 statutes and more than a dozen departments and agencies. It’s estimated that One Federal Decision will shorten the permitting process for infrastructure projects from up to 10 years to just two years.
Start Preparing Now
The greatest opportunities to win infrastructure projects arising from the IIJA will go to companies that are prepared. That means ensuring that you have the resources and expertise to effectively bid on these projects and work your way through procurement processes.
With over 40 years of service to government contractors and 25 years working on contracts with the federal government, Dembo Jones is a valuable partner for any firm looking to begin or expand work in this sector. Our contracting clients benefit from our close relationships with banking partners, GovCon legal specialists, and other industry experts. Contact us today.