WEDNESDAY, JULY 13, 2022
Nearly 50 transportation groups have asked the White House to extend the waiver for the new Buy America, Build America Act requirements for construction materials included in the bipartisan infrastructure law. In a June 21 letter to Senior Advisor Mitch Landrieu, the organizations commend the implementation of the Infrastructure Investment and Jobs Act, but are requesting to extend the 180-day waiver amid inflation and material shortages.
The requirement for infrastructure projects to be constructed with certain materials made in the United States was scheduled to take effect in May, but will now be waived until Nov. 10, unless extended.
The letter, published by the American Public Transportation Association, was also signed by the Associated General Contractors of America, the U.S. Chamber of Commerce, the American Association of State Highway and Transportation Officials, and the Associated Builders and Contractors, among others.
The coalition notes that infrastructure costs are continuing to climb, including rising construction material prices and shortages, with material prices doubling or tripling in some cases. Additionally, lead times for procurement and delivery of materials have “dramatically” increased, with conditions anticipated to worse as the year progresses.
“As a result, many infrastructure projects across the country face the risk of significant delay or a reduction in scope,” stated the letter.
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Nearly 50 transportation groups have asked the White House to extend the waiver for the new Buy America, Build America Act requirements for construction materials included in the bipartisan infrastructure law. |
“Before these requirements take effect, it is critical that the U.S. Department of Transportation conduct thorough analyses of domestic manufacturing capabilities, provide sufficient opportunity for public comment on draft rules, and provide adequate time for public and private entities to adjust and learn final rules,” the groups continued.
“To accomplish the necessary work, the Administration should extend the 180-day BABAA waiver to ensure that, in the meantime, projects are not needlessly delayed. Rushing through this process could further drive inflation and result in significant delays to projects that will facilitate the enhanced movement of people and goods that, in turn, will help improve the nation’s constrained supply chain.”
Buy America Requirement, Waiver
In an order issued mid-April, the Biden Administration announced that projects funded by the bipartisan infrastructure law will be required to use only iron and steel produced in the U.S. The Buy America Act, included in the Infrastructure Investment and Jobs Act, aims to support the country’s industrial base, protect national security and support jobs.
The requirement was set to go into effect on May 14. The 17-page guidance released on April 18 notes that “none of the funds” provided under the law may be used for infrastructure, unless:
The rule also indicates to waive the process in the event there are not enough domestic producers or material costs are too high. However, the goal is to issue fewer waivers over time as U.S. manufacturing capacity increases.
If the purchase would be “inconsistent with the public interest,” the materials are not being produced in enough quantities or of necessary quality or the inclusion of these U.S.-based materials will increase the cost of the overall project by more than 25%, a request to waive the application can be submitted in writing to the agency.
At the end of May, the U.S. Department of Transportation issued a notice of a temporary public interest waiver regarding construction materials through the recent Buy America standards.
Implementation guidance issued earlier this year stated that materials are to be classified in one of three categories: iron or steel, a manufactured product or a construction material. Construction materials affected by the waiver include an material that is or consists primarily of non-ferrous metals, plastic and polymer-based products, glass, lumber or drywall.
“In order to deliver projects and meaningful results while ensuring robust adoption of Buy America standards, the department is establishing a temporary public interest waiver for construction materials for a period of 180 days, expiring on Nov. 10,” wrote the Department in its release. “DOT is establishing this transitional waiver to prepare for compliance with the new Made in America standards for construction materials.”
DOT reports that it received 83 comments in response to its previous notice, including from state transportation agencies, public transit agencies, airport operators, construction firms, manufacturers and suppliers, labor organizations, individuals and associations. A “vast majority” of these commentors supported the proposal to issue a temporary waiver.
According to the notice, the temporary waiver will provide the DOT time to:
Additionally, the DOT requests that implementing partners will also take action to prepare for compliance with the new requirements, including establishing certification processes; working to ensure that manufacturers, contractors and subcontractors are prepared to meet the Buy America Standards; and providing data to the DOT on the domestic availability of construction materials.
Cost Concerns, Tariffs
At the end of November 2021, the U.S. Department of Commerce increased tariffs on antidumping and countervailing duties on Canadian softwood lumber imports. Implemented by the Biden Administration, the increase nearly doubles the import rate from 8.99% during the Trump Administration to 17.99%.
At the beginning of 2022, the AGC found that increased prices of construction materials were outpacing the rate at which contractors are raising their bid prices. In a survey issued by the association in January, 86% of contractors rated material costs at their top concern for 2022, more than any other concern. Availability of materials and supply chain disruptions were the second most frequent concern, listed by 77% of the more than 1,000 respondents.
In that same report, when comparing year-over-year increases, that month ABC reported that steel mill product prices had increased 141.6% since October 2020, while iron and steel prices were up 101.5%. As a result of the continued uptick in prices and inflation, the AGC urged President Joe Biden to remove the tariffs on several building materials. In adition to the Canadian lumber tariffs (18%), tariffs on steel are run as high as 25% and 10% on aluminum.
In February, The White House announced a new deal between the U.S. and Japan to roll back tariffs on Japanese steel. The deal reportedly removed the 25% levy previously imposed by former President Trump from about 1.25 million metric tons of Japanese steel imports annually.
Should Japan go over that amount, however, the tariff would be reinstated on any additional steel imports. According to the U.S. Commerce Department, Japan is one of the top 10 sources of steel to the nation, but only accounts for roughly 4% of all steel imports.
Rising costs for materials are continuing to impact infrastructure projects across the United States, shrinking the effect of the bipartisan infrastructure law with officials scaling back, delaying projects and prioritizing needs. According to the U.S. Department of Labor, consumer prices across the board have surged 8.6% in May year-over-year, the highest rate since 1981.
Projects across the country, from Texas to New England, are experiencing the effects of the costs. Recent projects in Pennsylvania, including the Fern Hollow Bridge replacement, as well as the construction of the new Soo Lock in Michigan have had to choose materials carefully and update cost estimates.
According to reports, the price hikes are driven by a variety of factors, including worldwide supply chain backlogs, strong consumer and business spending in the country and Russia’s invasion of Ukraine. The coating industry has also been feeling these effects from raw material shortages since last year, with the COVID-19 pandemic and various weather events playing a hand in the shortages.
For example, the price of a foot of water pipe in Tucson, Arizona, is up 19%, the cost of a ton of asphalt in a small Massachusetts town is up 37% and the estimate to build a new airport terminal in Des Moines, Iowa, is 69% higher, with a several year delay. Additionally, the Federal Reserve Bank of St. Louis reports that asphalt paving and tar mixtures were up 14% in May, prices for fabricated steel plate up 23% and ductile iron pipes and fittings were nearly 25%.
Passed in November, the Infrastructure Investment and Jobs Act included $1.2 trillion for rebuilding the nation’s deteriorating roads and bridges, as well as funding new climate resilience and broadband initiatives, among other projects. However, officials now say that the funding isn’t going as far as they hoped, including the roughly 25% increase in regular highway program state funding.
U.S. Rep. Sam Graves, the ranking minority member on the House Transportation and Infrastructure Committee, contends the infrastructure law itself is contributing to inflation by pouring more federal money into an economy already flush with trillions of dollars in federal pandemic aid.
However, senior advisor for the bipartisan infrastructure bill Mitch Landrieu told reporters that the law “actually positions us for lowering costs for families in the short- and long-term,” pointing out the Made in American requirements for steel, iron and other construction materials to strengthen supply chains and lower costs.
Tagged categories: Associated Builders and Contractors Inc. (ABC); Associated General Contractors (AGC); Associations; Building materials; Construction; Department of Transportation (DOT); Government; Government contracts; Infrastructure; Infrastructure; President Biden; Program/Project Management; Transportation; Upcoming projects