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How the Infrastructure Investment and Jobs Act Will Impact the Construction Industry

How the Infrastructure Investment and Jobs Act Will Impact the Construction Industry

Construction & Real Estate

The Infrastructure Investment and Jobs Act (IIJA) gives the United States a generational investment in our nation’s infrastructure and competitiveness. According to the White House, this bipartisan infrastructure deal will rebuild America’s roads, bridges and rails, expand access to clean drinking water, and ensure every American has access to high-speed internet. The legislation is intended to help ease inflationary pressures and strengthen supply chains by making long overdue improvements for our nation’s ports, airports, rails and roads.

Members of the construction industry largely applauded the bill's passage, saying it provides much-needed resources to modernize the country's aging and overburdened infrastructure. Let’s take a look at how the infrastructure legislation will affect construction contractors.

Infrastructure Investment and Jobs Act Highlights

To understand the sheer magnitude of the legislation and its impact on the construction industry, it’s worth looking at how the funds will be distributed.

  • $303.5 billion over five years for federal highway programs, a 35% increase from previous bills
  • $450 billion for highway and public transportation investments and a new, five-year reauthorization of federal surface transportation programs
  • Overall package includes $40 billion in dedicated resources for bridge repair, replacement and rehabilitation, which is the single largest dedicated bridge investment since the construction of the interstate highway system
  • $55 billion for water projects with a focus on upgrading infrastructure, the largest investment in clean drinking water in our nation's history
  • $66 billion for passenger and freight rail improvement
  • $65 billion to rebuild the electric grid
  • $65 billion to expand broadband internet access
  • $39 billion to modernize and expand transit systems
  • $25 billion to repair and maintain airport infrastructure
  • $17 billion to modernize port infrastructure
  • $7.5 billion to build a national network of charging infrastructure for electric vehicles

Jobs to be Created for Years to Come

The legislation has been touted as a job creator as it will disperse billions of dollars to state and local governments with the goal of repairing crumbling bridges and roads. However, it is likely to take months or years for many of the major construction projects in the legislation to get started.

Permitting Should Get Faster and Easier

The Arlington, Virginia-based Associated General Contractors of America (AGC) and its CEO, Stephen Sandherr, say the bill “provides the kind of funding needed to modernize the country’s aging and overburdened infrastructure. The legislation also maintains the policy of One Federal Decision (OFD), cutting the amount of time needed for federal reviews of infrastructure projects.”

Permitting delays can be a major impediment to construction projects, as permit reviews can involve up to 30 statutes and a dozen departments and agencies. The OFD, which aims to streamline and shorten the process from up to 10 years to two years, made it into the final version of the bill. Preceding the development of the OFD framework, studies had suggested that the cumulative impact of six-year permitting delays would impose an estimated $3.7 trillion in additional costs. For roads, rail and bridges alone, the approximated extra cost was $1.65 trillion. Avoiding these costs saves more than the entire cost of the bipartisan infrastructure bill, savings that will be used for building infrastructure projects.

Sandherr adds, “our members are ready to begin the hard, but necessary, work of rebuilding the nation’s infrastructure. They will also begin the work of building rewarding careers for a generation of new construction professionals because of this measure. Ultimately, these new infrastructure investments will provide a needed boost for the construction industry while making our economy more efficient.”

State and Local Officials Will Need to Mobilize Quickly

With the passage of this landmark legislation, federal agencies like the Departments of Transportation and Energy will begin setting up programs and figuring out how to get the funds flowing to the state level. State and local officials carry an even greater burden. As the owners and operators of most infrastructure, they must design and build new assets, hire more workers and even mobilize their own financial resources. This will also develop a significant amount of urgency for construction owners and operators, as they will be tasked with designing and building new assets and hiring new workers to handle this demand.

Construction Contractors Will Need to Offer Even Higher Wages to Compete for Workers

The downside to the welcome influx of civil work is that the bill's passage comes at a time when the construction industry is already in desperate need of workers. Supply for skilled construction workers has not met demand for decades, and now that demand is going to increase. Among other issues, this will mean that contractors will have to pay their onsite workers more.

Meanwhile, public agencies will be competing for scarce talent with the private sector. More good-paying jobs is a good thing, but it raises the urgency to expand the infrastructure-related talent pipeline.

Construction Timelines Could Get Slower

But even after the work arrives, there will still be challenges. Part of the challenge of delivering projects is that finding labor to complete the work, especially for specialized jobs, could be difficult, leading to slower construction timelines. This shortage of workers will most likely lead to much higher labor costs just as these infrastructure projects begin to break ground, according to industry experts.

Supply Chain Challenges Could Worsen

The Infrastructure Investment and Jobs Act also will mean greater aggregate demand for input materials, in some cases creating greater competition between government, businesses and households for the same goods. Building new physical infrastructure will require various steel products, cement, lumber and other material inputs. Modernizing federal equipment includes buying new vehicles. Weatherization programs will require similar inputs to many real estate construction projects. New management systems and equipment requires new processors and other computing equipment. With global supply chains still under stress, the timing of when infrastructure orders start to increase merits a close watch.

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Published on December 20, 2021