An end-of-the-year infrastructure update: What’s next for funding and how businesses should prepare now
The Nov. 15 signing of the Infrastructure Investment and Jobs Act (IIJA) crossed a major item off the to-do list for President Biden and Congress. Now, many in the business community are asking one question: How can we make the most of this incredible opportunity?
As we have noted in prior alerts, the bill – now law – has allocated more than $1 trillion, including about $550 billion in new money, for the creation and repair of major parts of America’s infrastructure. From roads and bridges to airports, water supply, and electrical lines, the legislation is dense in detail and large in scope.
Implementation through federal and state agencies
The work now shifts from the nation’s capital to the countless federal and state agencies that will be tasked with implementing the programs created by IIJA. Topping the list are the departments of Energy and Transportation, each of which will be challenged with structuring ways to securely distribute the funding. In some cases, funding will flow directly to the states to deploy at the state and local levels.
In mid-November, the White House appointed former New Orleans mayor Mitch Landrieu as senior advisor responsible for coordinating implementation of the infrastructure program and its funding.
Governors and legislatures are already moving quickly to dust off plans that may have been shelved for years due to lack of funding. Implementation will be a long process; as the Brookings Institution notes, any new operations will require internal planning, internal and public review, and hiring staff and building knowledge resources before any services can be provided to communities.
Access our map to learn how infrastructure funding is being allocated to your state.
The National Association of City Transportation Officials (NACTO) noted that a majority of funding “will flow directly to state transportation departments with a significant portion reserved for new, USDOT-administered discretionary grant programs.”
About $76.6 billion will be distributed to states in a competitive grant process, according to a Federal Funds Information for States (FFIS) analysis, with local governments also eligible for many of the grant programs. FFIS reports that while much of the funding for water and broadband projects will be distributed using a formula (which will likely favor large states like Texas and California), funding for cybersecurity, rail, and safety programs will mostly be competitive.
Fitch Ratings reports that states may apply for $16 billion of federal grant funding specifically for “major projects that deliver substantial economic benefit to communities,” citing as an example that “Kentucky is expected to apply for this pool of funds to help fund the Brent Spence Bridge Project, a second bridge that would connect Cincinnati with Covington, Ky., in addition to the allocation that Kentucky will receive under the bridge formula program.”
The role of local government
Local counties will also be a key part of the allocation of IIJA funds. According to the National Association of Counties (NACo), counties own and operate 44% of public roads and 38% of bridges – more than any other level of government – and directly support 78% of public transit systems and 34% of airports.
“Counties can access the legislation’s transportation funds, which account for over half of its new investments, through three general ways,” NACo writes:
- “Competitively, through federal grant programs, such as RAISE and INFRA, and competitive processes run by state departments of transportation/Metropolitan Planning Organizations, like Transportation Alternatives funding
- “Suballocations based on population from state departments of transportation, such as the Surface Transportation Block Grant Program
- “Federal formulas, like transit formulas and the formula (entitlement) component of the Airport Improvement Program”
As the Brookings Institution noted in its report, all three levels of government – local, state, and federal – must be ready to hire a wide range of workers, such as budget experts, construction workers and skilled tradespeople, and conservationists and environmental engineers, and even expand their human resources teams to make all these hires. Competition for talent will be fierce.
What should businesses do next?
For construction, clean energy, multifamily and commercial real estate, and other businesses eager to take advantage of this funding, patience appears to be the watchword for now. Unlike a stimulus bill, the IIJA legislation is intended to be a long-term approach to sorely needed repairs to America’s infrastructure, not a quick fix. We expect that the plan’s rollout and flow of funding under Landrieu’s guidance will take months to initiate.
The approval of IIJA opens the door to what may be one of the largest public/private partnership programs in the nation’s history. Companies with minimal exposure to government projects, and those that have never worked with a government agency, need to prepare now. This could include taking steps such as:
- Learning how to structure a “winning” bid when proposing on government work
- Reassessing your operations to address the government’s stringent compliance and cost reporting requirements for contractors, and potentially implementing specific technology as needed, such as specific accounting and financial systems
- Establishing a standalone government office within the organization
- Assessing and updating your company’s cybersecurity and risk management protocols so they align with the government’s robust security policies
Now that the funding has been approved, please do not hesitate to reach out to us to explore ways to prepare your business for infrastructure funding and competing for projects in every region of the country.
Visit our Inside Infrastructure Resource Center for new insights and information as the implementation phase of IIJA takes shape in 2022.