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Amendments Adopted in US Infrastructure Bill

Tuesday, August 10, 2021

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In working through a series of submitted proposed amendments to the United States government’s infrastructure package, the Senate was recently reported to have approved a proposal to broaden the reach of federal surety-bond protections.

 

The protections would directly affect construction projects in that they would include projects assisted by the Transportation Infrastructure Finance and Innovation Act (TIFIA).

 

“Contractor defaults on infrastructure projects can cause costly delays, wasting taxpayer dollars and leaving residents, local stakeholders, and project workers in the lurch,” said U.S. Senator Chris Van Hollen (D-Maryland). “As we work to make historic investments in our nation’s transportation network, we must ensure that projects are financed securely.”

 

Infrastructure Funding, Changes and Proposals

 

Most recently, at the end of June, the U.S. Department of Transportation Secretary Pete Buttigieg announced $905.25 million worth of intended awards by the Biden-Harris Administration regarding the Infrastructure for Rebuilding America (INFRA) discretionary grant program.

 

Awarding both small and large projects this year, the Department was instructed to award at least $25 million per large project and a minimum of $5 million in grants per small project award. Under statutory requirements, 10% of available funds were received for small projects, with at least 25% of funding awarded to rural projects.

 

However, the USDOT was reported to have prioritized funding to rural areas to address historic underinvestment, reporting that approximately 44% would be awarded to rural projects, exceeding its traditional statutory requirements set by Congress by 19%.

 

In total, the USDOT evaluated 157 eligible applications from 42 states, as well as Guam. Applicants collectively requested approximately $6.8 billion in grant funds—more than seven times the funding available.

 

levkr / Getty Images

In working through a series of submitted proposed amendments to the United States government’s infrastructure package, the Senate was recently reported to have approved a proposal to broaden the reach of federal surety-bond protections.

 

When the available funding was first announced in February, the USDOT reported that it would be looking for projects that addressed climate change and environmental justice. Project applications are slated to be evaluated on support strategies to reduce greenhouse gas emissions as well as whether they were planned as part of a comprehensive strategy to address climate change.

 

In addition, the Biden administration has added that applications would also be considered based on racial equity, to the extent that project sponsors have completed equity-focused community outreach, and projects are designed to improve connections to underserved communities to reduce barriers to opportunity. The Department will also consider whether the project is located in a federally designated community development zone, including qualified Opportunity Zones, Empowerment Zones, Promise Zones, or Choice Neighborhoods.

 

These types of projects are suggested to be positioned to proceed quickly to the construction phase where project costs may include reconstruction, rehabilitation, acquisition of property (including land related to the project and improvements to the land), environmental mitigation, construction contingencies, equipment acquisition and operational improvements directly related to system performance.

 

A final change this year, the Notice of Funding Opportunity highlighted the creation of the “INFRA Extra” Program, which identifies competitive INFRA applicants who did not receive an INFRA award and authorizes them to seek a Transportation Infrastructure Finance and Innovation Act of 1998 (TIFIA) loan for up to 49% of their project cost.

 

A NOFO for the funding opened to the public in mid-February and closed on March 19.

 

A full list of the proposed project awards and project descriptions can be viewed here.

Work on the new infrastructure package, however, stems from President Joe Biden’s $2.25 trillion “American Jobs Plan” which was released at the of March. The spending proposal aims to invest in the nation by creating millions of good jobs, rebuilding the country’s infrastructure, and positioning the nation to out-compete China.

 

The proposal includes traditional infrastructure projects like roads and bridges, but also focuses on tackling climate change, boosting human services and fighting racial injustice.

 

Working in tangent with Biden’s coronavirus relief package, the initiative intends to give the federal government a bigger role int he U.S. economy, accounting for 20% or more of annual output. As for how the plan will be paid for, a senior administration official reported at the time that the plan would increase the corporate tax rate to 28% from 21% and change the tax code to close loopholes that allow companies to move profits overseas.

 

Looking at specific investments, the plan allots $621 billion to rebuild the nation’s infrastructure; $689 billion for buildings and utilities; and $500 billion for worker training, research and development and domestic manufacturing initiatives. To further break things down on the transportation front, the proposal includes:

  • $174 billion for electric vehicle incentives;
  • $115 billion for roads and bridges;
  • $85 billion for public transit;
  • $80 billion for passenger and freight rail;
  • $50 billion in disaster resilience of infrastructure;
  • $25 billion for airports;
  • $20 billion to improve road safety;
  • $20 billion to mitigate infrastructure impact on underserved communities; and
  • $17 billion for waterways and ports.

Other nbotable initiatives for buildings and utilities include:

  • $100 billion for electric grid and clean energy;
  • $66 billion for water systems; and
  • $45 billion to eliminate lead pipes.

According to an article published by The Hill, Biden hopes the package is passed by Congress by this summer. White House Press Secretary Jen Psaki noted that the longer timeline could allow for more negotiations with congressional Republicans and Democrats as it doesn’t require the same type of urgency as the prior relief plan.

 

A few months later, in June, the House Transportation and Infrastructure Committee began a days-long mark up process on what was a recently introduced Investing in a New Vision for the Environment and Surface Transportation in America (INVEST in America) Act.

 

The $547 billion surface transportation reauthorization bill was introduced on June 4 by Chair of the House Committee on Transportation and Infrastructure Peter DeFazio (D-Oregon), Chair of the Subcommittee on Highways and Transit Eleanor Holmes Norton (D-Washington D.C.) and Chair of the Subcommittee on Railroads, Pipelines and Hazardous Materials Donald M. Payne, Jr. (D-New Jersey).

 

Reported to be a five-year plan, the INVEST in America Act is slated to meet President Biden’s vision of getting people to work and addressing the climate crisis, as outlined in his American Jobs Plan.

 

The legislation acknowledges the Buy America provisions and labor protections and reports that the work outlined in the Act will be fueled by American workers, manufacturing, and ingenuity, with targeted investments in rural and underserved communities.

 

Looking at the numbers, the INVEST in America Act plans to provide $343 billion for roads, bridges, and safety (with $32 billion specifically outlined for bridge funding); $109 billion for transit; and $95 billion for passenger and freight rail. Of that, some $4 billion plans to be invested in electric vehicle charging infrastructure, while another $8.3 billion would go to activities to reduce carbon pollution.

 

Developing a Final Package

 

On Aug. 4, the Senate approved a surety amendment, sponsored by Van Hollen, to extend Miller Act bonding protection, which now applies directly to federal construction projects and others financed by TIFIA, in a 97-0 vote.

 

Traditionally, the program is used to finance public-private partnerships (P3s) in order to have DOTs ensure the design and construction of a project that receives benefits from the TIFIA program have appropriate payment and performance security in place. However, oftentimes P3 projects fail to maintain the same level of protection required on public infrastructure projects. Without these protections, in the event of a contractor default, the projects are in turn halted, or can even be terminated, leaving contractors and workers without pay.

 

In addition, Van Hollen reports that states and taxpayers are then forced to absorb any additional costs of rebidding.

 

Mark McCallum, the National Association of Surety Bond Producers' President and Chief Executive Officer, said in an interview that at present, “There’s no guarantee that [TIFIA] infrastructure projects—particularly if they have some element of a private participation—would necessarily have bond protections in place.”

 

As a solution, Van Hollen proposed new payment and performance protections through the use of surety bonds, which would provide monetary compensation in case a contractor fails to perform the acts as promised. The bonds would play a vital role in ensuring contractors in financial distress avoid bankruptcy allowing subcontractors and workers of public works projects to receive compensation and allowing the project to be delivered within the budget and on time.

 

By adopting the solution, McCallum continued that TIFIA-assisted projects were ensured to “at least have performance and payment protection."

 

Under the approved amendment, when considering TIFIA projects, the U.S. DOT Secretary will determine if a surety bond is required by existing statue (state/local law) and if a determination is made that existing statue (at the sate level) doesn’t require it, then the project will be subject to the federal requirement for security.

 

 

The surety provision is reported to have House support, too. A similar amendment was included in the House-passed infrastructure bill, the INVEST in America Act.

 

Additional Amendments

 

While the surety provision was reported to have received much industry support, other proposed amendments didn’t make the cut. In a proposal sponsored by Sen. Ron Johnson (R-Wisconsin), pushed to prevent the White House from canceling contracts to build segments of the barrier on the U.S.-Mexico border.

 

In recent months, various legislators have attemped to pass bills for border wall construction. Most noably, in July, Texas Gov. Greg Abbott issued an emergency declaration regarding the state’s southern border immigration crisis late last month, in addition to his recent authorization of a $250 million down payment for the construction of hundreds of miles of border wall.

 

The amendment received a total of 48 votes, but required 60 to pass.

 

In all Senate Majority Leader Chuck Schumer (D-New York) said, as of Aug. 4, the Senate had considered 22 amendments to the infrastructure measure. Of those,12 were approved and 10 were not. Schumer also said that 13 of which were sponsored by Republicans.

 

   

Tagged categories: Department of Transportation (DOT); Funding; Government; Infrastructure; Infrastructure; NA; North America; Program/Project Management; Public-private partnerships (P3); Transportation

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