Report: IIJA Implementation Faces ‘Challenges’
According to a report from the U.S. Department of Transportation Inspector General, the Department faces a “number of significant challenges” to implement the bipartisan infrastructure law, including inflation, labor and supply chain issues.
The news arrives as nearly $60 billion in funding was recently released for 12 formula programs under the Infrastructure Investment and Jobs Act (IIJA), with hopes of support investment in critical infrastructure, including roads, bridges and tunnels, carbon emission reduction and safety improvements.
Inspector General Report
In a report to U.S. Transportation Secretary Pete Buttigieg, Inspector General Eric Soskin issued a warning that the Department needs to recruit, develop and retain the necessary workforce to implement and oversee infrastructure law programs.
“As the Department is aware, the volume of IIJA funds, coupled with the creation of new programs and priorities, present a number of significant implementation and oversight challenges,” wrote Soskin.
Additionally, they will need to effectively coordinate with key stakeholders to overcome their immediate administrative challenges and mitigate risks they face amid broader economic challenges. Soskin added that the DOT will also need to enhance or establish effective and efficient processes for awarding and administering the billions of dollars in grants, as well as overseeing compliance.
“In order to maximize the benefits of IIJA infrastructure investments, the Department will also need to remain cognizant of the challenges that non-Federal partners face and develop strategies to coordinate with those partners to mitigate risks,” he wrote.
“For example, State and local governments—often the primary recipients of Federal infrastructure investments—are facing historic shortages of workers with expertise in important areas, such as auditing, procurement, and acquisitions.”
According to the report, the National Infrastructure Advisory Council concluded in a 2021 report that the United States is “ill-equipped” to ensure a skilled workforce for its critical infrastructure. Soskin noted that the bipartisan infrastructure law could exacerbate these existing workforce challenges.
Current goals over the next year for the Department include improving some 65,000 miles of roads and 1,500 bridges; investing in over 600 airport infrastructure projects; invest in an estimated 15,000 new buses, ferries and subway cars; invest in 75 new, Made-in-America locomotives and at least 73 Made-in-America intercity trainsets; and build 500,000 EV charging stations in the next five years.
However, Soskin explains, in order to successfully implement these IIJA goals, the DOT will be required to acquire and maintain sufficient staff and contractors with the required knowledge, skills, and abilities to achieve them. Otherwise, shortages of skilled workers could affect recipients’ abilities to deliver successful projects on time and on budget.
Continuing on, additional spending will put “significant pressure” on both the public and private sector to add these workers, among already rising prices. One related challenge is that funding recipients are reportedly receiving low numbers of bids for projects, increasing costs.
While the Department has implemented enhanced technical assistance to recipients to address these challenges, material shortages could also lead to problems such as change orders or project delays.
“In a recent review, we found that FHWA could enhance access to available data, improve its methodology for reviews of compliance results, and improve communication of definitions and responsibilities for overseeing change orders occurring on Federal-aid Highway Program projects,” wrote Soskin.
One potential solution he offers to extend the November 2022 waiver for the domestic content sourcing requirements for construction materials due to ongoing rising costs and delivery delays. Soskin reports that the DOT has acknowledged these challenges and stated it is working with external stakeholders and other Federal agencies to help address workforce shortages and project cost increases.
Finally, Soskin explains that with the development of 15 new discretionary grant programs through the IIJA, the Department will need to establish clear application, review, and award selection processes, while responding to the changes in existing programs.
“We are committed to supporting the Department’s efforts to maximize IIJA’s investments,” he wrote. “Working together, the Department and OIG can further identify risks, challenges, and areas for improvement.”
Inflation, Labor Concerns
Back in June, PaintSquare Daily News reported that rising costs for materials were 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.
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.
“Those dollars are essentially evaporating,” said Jim Tymon, Executive Director of the American Association of State Highway and Transportation Officials. “The cost of those projects is going up by 20%, by 30%, and just wiping out that increase from the federal government that they were so excited about earlier in the year.”
U.S. Rep. Sam Graves, the ranking minority member on the House Transportation and Infrastructure Committee, contended at the time that 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.
“They are borrowing more money so they can spend more money, (which) is driving inflation, which is cutting down on the projects that they’re actually wanting to do,” said Graves.
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. The USDOT issued a notice of a temporary public interest waiver regarding construction materials through the recent Buy America standards through Nov. 10, unless extended.
In terms of labor shortages, in an analysis of federal employment data released by the Associated General Contractors of America in August, construction employment in July continued to trail pre-pandemic levels in 15 states.
As a result of the findings, the Association has again called on government officials to allow employers to sponsor more foreign-born workers and support more career and technical education to broaden opportunities for individuals to gain construction skills.
At the beginning of that month, the Associated Builders and Contractors announced that the construction industry added 32,000 jobs on net in July per its analysis of data released by the U.S. Bureau of Labor Statistics.
In looking more closely at the numbers, ABC reported that nonresidential construction employment increased in all three subsectors. Nonresidential specialty trade added 10,300 net new jobs, nonresidential building added 4,900 and heavy and civil engineering added 3,100 new positions.
Overall, nonresidential construction employment increased by 18,300 positions on net in July.
The report went on to note that although the construction unemployment rate decreased to 3.5% in July, unemployment across all industries only dropped 0.1% from June (3.6%).
“Today’s employment report was expected to show an economy not yet in recession but at least headed in that direction,” said ABC Chief Economist Anirban Basu. “Shockingly, that did not come to pass, as U.S. employers added 528,000 jobs in July, more than twice the consensus forecast of 250,000, and the unemployment rate across all industries fell to 3.5%, tied for the lowest rate since the late 1960s.”
On a year-over-year basis, industry employment was noted to increase by 311,000 jobs (4.2%).
White House Actions
At the beginning of August, the White House announced that over $40 billion in American Rescue Plan funds have been committed to strengthening and expanding the United States’ workforce.
According to the announcement, the investments in the workforce—along with the American Rescue Plan’s direct payroll support that has saved or restored jobs across a broad set of industries—have contributed to a record 9 million jobs added since President Biden took office.
To highlight the achievements, government officials hosted a half-day White House Summit in July, which highlighted top American Rescue Plan workforce best practices from governors, mayors and county leaders across the country. The summit also called on other government officials and private sector leaders to expand investments in the workforce.
Starting as far back as September 2021, the U.S. Chamber of Commerce found that contractors in the commercial construction industry were witnessing a slowdown in post-pandemic recovery. The third-quarter Commercial Construction Index noted that worker shortages, material shortages and rising prices were just some of the industry’s ongoing challenges.
Several months later, in February 2022, a variety of jobs reports, employment forecasts and publications reported that the industry was still suffering from labor shortages. From skilled craftworkers to painters, the workforce continued to report an employment decline despite new work opportunities and design contracts.
Around that time, cloud-based human resources and talent acquisition solution LaborIQ, by ThinkWhy, issued a new job forecast for construction and extraction occupations, detailing that while the industry is expected to expand by 3.9% (nearly 240,000 jobs) in 2022, the growth could be thwarted by limited labor supply.
Overall, the White House summit earlier this year was noted to focus on thee major areas of the American Rescue Plan investment:
Through these initiatives, it was reported that President Joe Biden and Vice President Harris launched the Administration’s Infrastructure Talent Pipeline Challenge. The program reportedly encourages partnerships by the public and private sectors to ensure a strong and diverse workforce to help rebuild the nation’s infrastructure and supply chains.
On Aug. 16, President Biden was joined by Senate Majority Leader Chuck Schumer (D-New York), Senator Joe Manchin (D-West Virginia) and Representatives Jim Clyburn (D-South Carolina) and Kathy Castor (D-Florida) for the signing of the Inflation Reduction Act.
Prior to arriving at the president’s desk, the legislation narrowly passed the U.S. Senate in a vote of 51-50 (with no Republican votes) at the beginning of the month and by a 220-207 margin in the House of Representatives last week.
Also known as H.R. 5376, the new legislation provides for reconciliation of the Federal Budget pursuant to the Fiscal Year 2022 Budget Resolution. In addition, the law addresses climate change, health care, taxation and the Federal deficit through direct appropriations, new programs, modifications to existing programs and changes to the tax code.
According to reports, the $437 billion spending package is expected to raise $737 billion in revenue over the next decade. The outlined spending includes $369 billion for climate and energy policies, $64 billion to extend a policy under the Affordable Care Act and a 15% corporate minimum tax aimed at companies earning more than $1 billion per year.
In an analysis of the legislation by the Labor Energy Partnership, a joint project of the Energy Futures Initiative and the AFL-CIO, officials claim that the Inflation Reduction Act could add 1.5 million jobs and $250 billion to the economy by 2030, all while decreasing overall energy consumption.
While some construction groups are in favor of the new legislation, others have strongly opposed it.