US Iron, Steel Mandated for Infrastructure Projects
In an order issued last week, the Biden Administration announced that projects funded by the bipartisan infrastructure law will be required to use only iron and steel produced in the United States. 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.
Buy America Requirement
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.
“There are going to be additional opportunities for good jobs in the manufacturing sector,” said Celeste Drake, Director of Made in America at the White House Office of Management and Budget.
According to reports, President Joe Biden hopes that the order will create more jobs, ease supply chain pressures and reduce the reliance on China and other countries with interests that deviate from the U.S. But the announcement has been met with mixed reviews from contractors and suppliers.
“We appreciate the commitment of the Biden-Harris administration to ensure that all federally-funded infrastructure and public works projects use iron, steel and other products that are made in America,” said Kevin Dempsey, President and CEO of the American Iron and Steel Institute in a statement following the announcement.
“As some federal programs do not apply Buy America requirements for the procurement of iron and steel products, we are pleased that today’s initiative begins the process to remedy this situation by providing clear guidance to federal agencies for adopting appropriate Buy America requirements for all federally-funded infrastructure projects.
“This announcement is an important first step toward ensuring the fullest possible implementation and enforcement of Buy America domestic procurement preferences by all federal agencies. But this represents just the beginning of a process, and we look forward to working in partnership with the administration and Congress to continue to ensure the use of cleaner American steel in all federally-funded infrastructure projects.”
However, the Chief Executive Officer of the Associated General Contractors of America, Stephen E. Sandherr, also issued a statement in response to the release, expressing the support of the administration’s efforts, but notes they are “doubling down on failed procurement policies” with the mandate:
“It makes no sense to place unrealistic limitations on firms’ ability to source key materials at a time when prices for those products are skyrocketing and supplies are limited. Supply chain shortages are already prompting firms to avoid bidding on new projects, as the Army Corps of Engineers discovered on a recent project that received zero bids because of concrete scarcities in parts of the country.
“Worse, the new mandate requires individual federal agencies to run waivers by the White House for materials not made in America. This means that contractors, in addition to facing a patchwork of inconsistent, and likely conflicting, guidelines from individual agencies’ waiver processes, will also have to wait as the highest office in the land verifies them.”
Sandherr continued, “Whatever minimal gains in domestic construction material production this new mandate might temporarily generate will be offset by the increased cost of constructing new projects, slower schedules to build those projects and the fact some key projects could be hamstrung from moving forward.”
Cost Concerns, Tariffs
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 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%. According to the most recent report from earlier this month, year-over-year steel mill product prices rose 42.9% and the price momentum of iron and steel was going upward 1.4%.
As a result of the continued uptick in prices and inflation, the AGC has urged President Joe Biden to remove the tariffs on several building materials. Currently, tariffs run as high as 25% on steel, 18% on Canadian lumber 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.
And, 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%.
“Given the impact inflation is already having on the economy, it makes no sense for the administration to continue to needlessly inflate the cost of key construction materials,” said Stephen E. Sandherr, AGC Chief Executive Officer. “Removing these tariffs will take some of the price pressure off of employers grappling to control costs.”
Bipartisan Infrastructure Bill
With the goal of rebuilding the nation’s deteriorating roads and bridges, as well as funding new climate resilience and broadband initiatives, the $1.2 trillion Infrastructure Investment and Jobs Act reportedly serves to deliver a key component in President Joe Biden’s agenda.
The White House also reports that the Infrastructure Investment and Jobs Act, alongside the Build Back Framework, will add on average 1.5 million jobs per year for the next ten years.
As potential effects of climate change woe the world, the legislation has recognized that nearly 75% of the nation’s electricity can be accounted for in both its residential and commercial structures, such as housing, stores and offices.
To mitigate the high usage, the Build Better Plan has dedicated roughly $5 billion to various programs aimed at reducing electricity use in buildings, improving building materials and training on design, construction and maintenance for energy-efficient structures.
The bill will also fund a series of problem-solving programs, for issues varying from drafty windows in affordable housing complexes to aged air ducts and outdated building codes.
According to reports, the largest chunk of the $5 billion will be utilized for the Department of Energy’s Weatherization Assistance Program, which aids structures owned or occupied by people with low incomes. The legislation is expected to provide a $3.5 billion infusion for the program, which will be used to fund upgrades such as insulation, windows, roofing, and heating and cooling devices.
Though seemingly minor, the upgrades are expected to result in sizable energy savings.
Later in November, the White House announced that President Biden named former New Orleans Mayor Landrieu as senior advisor responsible for the implementation of the bipartisan infrastructure bill.
At the beginning of the year, Landrieu reached out to state leaders at the beginning of the month encouraging them to appoint their own infrastructure coordinators to implement the $1.2 trillion law.
The three-page letter, sent to all the nation’s governors on Jan. 4, he requested that they appoint a “high-level” representative to serve as the state’s own Infrastructure Implementation Coordinator. Landrieu also reportedly suggested that governors create task forces modeled after the Infrastructure Implementation Task Force created by President Biden in November.
The role of these positions will help integrate aspects of the bill, including funding, alongside departments responsible for transportation, water, broadband and energy investments for projects.
In February, the White House released the first edition of its Bipartisan Infrastructure Law guidebook that contains a comprehensive list of the more than 375 programs and available funding included in the law.
Acting as a “roadmap” for the funding available under the law, as well as an explanatory document that shows direct federal spending at the program level, the 465-page guidebook outlines 12 chapters grouping the programs by area
Of the 375 programs, 125 are new, with 60% of the funds are available through formula and 40% are through competitive applications. Future phases of the guidebook are expected to update dates and timelines for program implementation, best practices, case studies and links to key resources.