Senate Committee Hears Private Sector on IIJA Implementation
December 2, 2022|Garett Shrode
On Wednesday, November 30 at 10 a.m., building on the work of its IIJA public sector implementation subcommittee hearing two weeks ago, the Senate Environment and Public Works Committee heard from stakeholders in the private sector on how IIJA implementation could be improved.
Five witnesses testified at the hearing (click on their name to read their prepared testimony):
- Dave Bauer, President and CEO, American Road & Transportation Builders Association
- Matt Stanberry, Managing Director, Highland Electric Fleets
- Ali Mills, President, Plum Contracting, Incorporated, Associated General Contractors of America (AGC)
- Jonathan Levy, Chief Commercial Officer, EVgo Services
- Gary W. Johnson, P.E, Vice President, Land & Quarry, Granite Construction Company
The witnesses were united in their gratitude for the funding afforded by IIJA. Bauer acknowledged the power of IIJA to enhance the ability of localities to engage in large scale projects by combining local resources with federal ones. Levy indicated his approval of congress’s aim to leverage and not supplant private sector dollars. However, they came ready to address IIJA implementation challenges in the private sector, which are best summarized in 3 categories: permitting and regulation, supply chain and Buy America requirements, and inflationary pressures.
Permitting and Regulation: Multiple witnesses expressed that one of the largest obstacles they face is the added time and complexity that the permitting and regulatory processes can add to a project. Johnson expressed his disappointment in the administration adding a Phase II ruling on NEPA. He further added that the inconsistencies between federal and state requirements, for example with CEQA in California, make the process more complicated and confusing for the private sector.
Mills noted that further permitting delays are hard on contractors in her state as they try to correct a large number of deficient bridges, especially the collapsed Fern Hollow Bridge in Pittsburgh. Bauer pointed to the changing regulatory regimes under each Presidential Administration as an added layer of complexity that make it harder for contractors. Levy noted the downsides of the regulations of NEVI funding to focus only on arbitrarily designated highway corridors and that states should pivot towards community charging projects. Unnecessary regulation on the Clean School Bus Program, such as scrappage requirements, make it more difficult for school districts that are historically underinvested in to take advantage of these funds, Stanberry said.
In order to address these concerns, the witnesses reinforced that the administration needs to follow through on the legislated goal of reducing permitting times from five to seven years down to two years. Levy said that the federal government should work with and learn from the state implementation level and from the success of other grant programs across the federal government. Stanberry suggests that underserved communities need more and different support for grant applications, and a specific budgetary allotment should be set aside for these communities and allow them to apply separately so they aren’t competing against grant applications from districts with a more resources and personnel.
Supply Chain and Buy America: In our post-pandemic situation, you cannot have a conversation about infrastructure construction and spending without mentioning the supply chain. The witnesses pointed to the challenges of acquiring the parts and materials needed for their work, stating that Buy America has further limited supply, thus driving up costs. Levy indicated that Buy America requirements and supply chain pressures can significantly slow down the deployment of EV charging stations, which typically only take eight to 12 weeks to construct.
Mills states that the AGC supports American job growth, but that new Buy America requirements have increased costs as well as created confusion as to what qualifies as a construction material or a manufactured product. Because of limited availability of materials, suppliers are oftentimes quoting projects but not signing purchase orders as to not be held accountable if projects costs increase. This puts the liability on the contractor, which for smaller, family-owned businesses like that of Mills, is often difficult or impossible to shoulder.
Mills recommends that USDOT should make a list of what construction materials are considered what, so it is easier to comply with Buy America requirements. Levy asked for an extension of the Buy America waiver—which expired in November—to the end of 2023, that could be followed by a data-based approach to determine if the waiver should be extended or modified even further.
Costs and Inflationary Pressures: Witnesses pointed to both permitting and supply chain issues as driving up costs. But additionally, generalized inflation is decreasing the buying power of IIJA funds and making it harder for the private sector to build infrastructure. Mills noted that Plum Contracting is the biggest installer of highway edge drain on the east coast. The cost of the plastic pipe used for these projects is almost double what it was last year. Contractors cannot absorb these cost increases as loses, but a lack of purchasing agreements requires them to do so. Additionally, many of her contractors are leaving for more urban construction firms as they can no longer afford to drive the long distances to their rural construction sites.
Sen. Mark Kelly (D-AZ) prompted Johnson to speak towards the “Rocks Act” in IIJA, which establishes a working group to better manage aggregates for Construction. It is modeled off Arizona policies developed over the last decade. Johnson elaborated, saying that not every rock in the ground can be used to create asphalt and concrete. Protecting access is important, as having to transport aggregates long distances, especially over land, is what typically inflates aggregate costs (rock is cheap, but moving the dense, heavy aggregates is not).
Costs for aggregates in Arizona are two to three times less than in neighboring states because of these protections, Johnson said. Hastening the implementation of similar policies at the federal level could provide much needed cost relief. Additionally, Johnson recommended a full year of appropriations and not continuing resolutions. This would get the money to states as soon as possible so the inflationary aspects don’t reduce the buying power when it gets pushed down the road. Chairman Tom Carper (D-DE) enthusiastically agreed.
In addition to the aforementioned, the witnesses provided the following generalized recommendations to keep in mind as IIJA continues to be implemented and for future legislation:
- Seek out structures that encourage cost share with the private sector, reduce uncertainty and risk, and increase competition for private sector cost sharing
- Provide states and contractors with the flexibility to get things done
- Help the private sector get the rules right; refinement of regulations that works towards clear rules of the road is needed to encourage private sector investment
It is clear that the private sector is benefitting from IIJA funds, however there is more that congress and the Biden administration can be doing to maximize those benefits.
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