House T&I Examines “The State of Transportation”
January 19, 2024|Kirbie Ferrell
On Wednesday, January 17th, the House Transportation and Infrastructure Committee convened for a hearing with the impossibly broad title, “The State of Transportation.” This hearing focused on the supply chain with specific attention to the current state and potential risks for the U.S. chain, successes and challenges of Infrastructure Investment and Jobs Act (IIJA) funding, and needs for the transportation system moving forward.
The committee invited testimony from the following witnesses:
- Stephen A. Edwards, Chief Executive Officer and Executive Director, Virginia Port Authority
- Roger Millar, Secretary of Transportation, Washington Department of Transportation
- Jeffrey G. Tucker, Chief Executive Officer, Tucker Company Worldwide, on behalf of Transportation Intermediaries Association (TIA)
- Lauren Benford, Controller, Reiman Corporation, on behalf of Associated General Contractors of America
The tone of the hearing was set in opening comments from Water Resources and Environment Subcommittee Chairman David Rouzer (R-NC), filling in for Committee Chairman Sam Graves (caught in Mother Nature’s icy crosshairs trying to travel back to DC), and ranking member Rep. Rick Larsen (D-WA). Rouzer discussed the critical importance of the US supply chain, the need for resilience and adaptability in supply chain operations, the importance of targeted funding for supply chain improvements, and the ways in which overregulation can hinder goods movement.
Larsen covered the impacts of the IIJA, rattling off statistics related to the $262 billion which has been distributed by the US Department of Transportation (USDOT) in the first years of the IIJA to support more than 40,000 projects across the country. Witness testimony primarily focused on construction and roadway project delivery, goods movement by truck, and water transport, but their testimony followed suit, highlighting the “game changing” funding injected into transportation via the IIJA, while noting hinderances and opportunities for improvement.
While highway and port projects fall into categories of project delivery, one witness, Lauren Benford, Controller for the Reiman Corporation, joined the panel to discuss contracting work across the country. Benford conveyed the importance of IIJA funding in repairing and repaving roadways thus far and the ability for the next few years to allow for new projects to move through the process to the construction phases in the coming years. The influx of funding has increased construction opportunities, and without IIJA funding, she estimates a 20 to 30 percent reduction in projects available for bid at the state level.
For the state of Washington specifically, Washington Department of Transportation (WSDOT) Secretary Roger Millar stated that WSDOT anticipates $5 billion in funding for Washington over the IIJA’s lifetime. The state has already used IIJA funding toward more than 370 projects, spanning the areas of safety improvement, stormwater and culvert projects, and roadway and bridge preservation, with attention to ensuring these projects benefit all Washingtonians. The state has also recently announced a megaproject to replace the aging Interstate 5 bridge between Washington and Oregon, which will be highly reliant on federal funding.
In the ports realm, Stephen Edwards, the CEO and Executive Director of the Virginia Port Authority, detailed the importance of the IIJA for water trade and transportation. Within the IIJA, Edwards claimed there is about $5.2 billion available for ports, which is more than has ever been allocated for this sector. This funding has made it possible for the Virginia Port Authority to take on a $1.4 billion gateway investment project, focusing on elements like deepening and widening channels, expanding semi-automated container capacity, advancing rail capabilities, and others. The availability of funding for major port projects is allowing for the modernization of port facilities to keep pace with changing port and supply chain demands.
Infrastructure and Continued Funding
While the panel spent a lot of time on the importance of IIJA funding, there was a simultaneous acknowledgement that there is a need for sustained funding past the expiration of the IIJA in 2026. Secretary Millar covered many of the big issues, noting that infrastructure has been underfunded for years which has led to a significant lag in preserving and enhancing current infrastructure – let alone letting new projects. At this time, he estimates they have less than half of the actual funding needed to maintain the system in a state of good repair. Benford echoed similar sentiments but with an added contractor perspective. While many of the projects taken on thus far have been maintenance and repair projects, while many new construction and larger projects have lagged. They are optimistic more of these projects will come out in coming years.
Within the conversation of larger projects, Jeffrey Tucker, the CEO of Tucker Company Worldwide, spoke to trucking needs including changing supply chain patterns and potential future trucking needs. A topic he returned to multiple times included the emerging pattern of companies nearshoring operations to the Americas – frequently moving their operations to central America and Mexico. While this can increase supply chain resilience in preventing dependence on goods from other continents, this is likely to generate increased truck traffic across the southern border of the US shared with Mexico. Tucker repeated emphasized the need to improve and expand southern border freight infrastructure and capabilities.
Benford captured the issue of inflation in her testimony with a few quick statistics.
- Since February of 2020, the average cost of construction material has increased by 37 percent, which is nearly twice as high as consumer inflation for the same period (19 percent).
- Highway construction costs have increased 50 percent since December of 2020.
- According to the Federal Highway Administration, the following specific construction materials have seen significant increases between February 2020 and November 2023:
- Diesel fuel costs have increased by 113 percent.
- Steel mill product prices have increased by 60 percent.
- The cost of gypsum, used in many building materials, has increased by 40 percent.
- Cement prices have increased by 31 percent.
Not only have increased prices impacted cost of projects, this has created additional challenges for contractors through the proposal process if project cost is significantly higher in later phases of the bidding process.
Workforce, workforce, workforce. The challenges across transportation-related industries around the U.S. ihave been well documented in recent years. Benford cited a 2023 Associated General Contractors survey which found that 93 percent of construction firms had open positions they were trying to fill. Of those firms, 90 percent reported that they were struggling to fill those positions. There are a variety of reasons for shortages in construction-related staffing, but it is a major challenge for the industry.
Beyond finding enough people to fill positions, there was also mention of trying to increase diversity in construction related fields. Secretary Millar detailed Washington efforts to attract more women, people of color, and other underrepresented groups to this sector through recruiting as well as educational opportunities for younger people.
Legal and Regulatory Issues, Global Instability
An array of legal and regulatory challenges are hindering the shipping and construction industries. For shipping, Tucker mentioned rampant fraud in the trucking industry numerous times. Globally, the maritime industry has faced instability in international goods movement, including current issues with Houthi rebel attacks on cargo ships in the Red Sea. Criminal activity leads to lost revenue, increased shipping costs, and other negative impacts.
Stateside, many of the issues conveyed related to vague legislative requirements, blanket rather than flexible regulation (particularly related to sustainability and air quality), and flexibility in the use of IIJA funding. Benford relayed concerns that Buy America requirements continue to cause confusion amongst their stakeholders, including contractors and departments of transportation. There are additional concerns that new emissions reduction requirements will influence project selection, potentially having greater negative consequences for more rural states which have fewer carbon reduction strategies like transit available as options for mobility. And finally, limitations on IIJA formula funding hinders states’ ability to use funding flexibly. Adjustments to IIJA funding use requirements could expedite the ability of states to use said funding and bring about more rapid steps forward in modernizing US infrastructure.