In America, the recently passed Bipartisan Infrastructure Law will result in a generation-changing economic impact and give a massive boost to the US construction sector, says Mary Scott Nabers.
Massive amounts of information have been disseminated about the US government’s Bipartisan Infrastructure Law, but perhaps the volume and variety of messages have been overwhelming. For whatever reason, there is a troubling amount of confusion and a lack of clarity about all the new funding programmes, when the revenue will begin flowing and how it can be spent.
Because of the critical nature of this new law and the extremely large amount of funding it represents, there are a few important bits of information that merit restating. And, unfortunately, not everything that warrants repeating is what most people want to hear.
Despite that, here are some important reality checks about the Bipartisan Infrastructure Law: -
Pace of funding may be slow
The most disappointing thing may be that the funding will not move as quickly as everyone hoped. Congress has yet to pass the Reconciliation Bill. Almost everything is on hold until that action happens.
Much of the revenue allocated for state and local governments will be routed through federal agencies. The agencies must establish many new programmes, develop and approve rules and establish processes. Some of the agencies will be slow to stand up the new programs, finalize rules related to disbursements, and determine how the funding can be spent by the public officials it will eventually reach.
Some of the larger sums of money will be routed through these federal agencies.
- The U.S. Department of Transportation (USDOT) will oversee the bulk of funding for projects relating to transportation infrastructure - public transit, airports, seaports, and railways. Because of its long history of funding disbursement, the USDOT is expected to move the funds more quickly than other federal agencies can match.
- The Environmental Protection Agency (EPA) will cycle funding for water projects related to drinking water, wastewater and lead pipe removal.
- The Department of Commerce will oversee a large portion of funding for broadband, however, the pathway this funding must follow before reaching a final destination could be slow.
- The Department of Energy (DOE) will oversee funding for power projects such as power grids, clean energy and renewable energy.
- The Department of Interior will supervise funding for water management and resilience.
A plethora of programmes
Just this month, however, a $5bn slice of the new infrastructure revenue was announced for the National Electric Vehicle Infrastructure Formula Programme. The USDOT and DOE will jointly supervise revenue distribution among states annually for the five-year programme. To receive funding, states will be required to submit an electric vehicle deployment plan for approval. Then, once the states receive their share of the funding, decisions about how to spend it must be made according to certain federal guidelines.
Other new programmes include the USDOT’s $2bn Rural Surface Transportation Grant Programme and the DOE’s $8bn programme to fund new regional hydrogen hubs for clean hydrogen production. Both agencies are in the process of developing rules. The EPA will have $5bn for the new Clean School Bus Programme and the Department of Homeland Security has $1bn for a new State and Local Cybersecurity Grant Programme.
It will take longer for funding to cycle through the new programmes which means it will be some time before it reaches the local levels of government where it will ultimately be used to launch projects. Other funding that is routed through grant programmes already in existence will move faster.
Many pre-existing programmes will see substantial increases in funding. Programmes such as the USDOT’s Rebuilding American Infrastructure with Sustainability and Equity (RAISE) grant programme recently released a Notice of Funding Opportunity for 2022 that reflects a surge in funding capacity. The RAISE grant programme now has $1.5bn billion to invest in regional projects, which marks a 50% increase from the average in previous years.
Numerous other existing grant programmes will see equally dramatic increases in funding. Infrastructure money will bolster programmes such as the US Department of Agriculture’s (USDA) ReConnect Programme, which will open with a funding capacity of $2bn to build out rural broadband. The Federal Emergency Management Agency’s $3.5bn Flood Mitigation Assistance Programme will have $2bn in funds for the next five cycles for the Port Infrastructure Development Programme to modernise and expand US ports. Funding applications will be accepted beginning in February, so these funds are expected to be available sooner than most.
Key role of states and their leaders
In the past, state leaders have been able to direct a major part of federal funding to specific destinations and to specific projects. The infrastructure law preserves their authority, thus creating a need for officials in public agencies and local governments to convince state leaders to fund their projects.
Some states have guidelines that cities, counties and other local entities will use when preparing to vie for federal funding. Other states have not yet completed that process. And one provision that has garnered too little attention is the requirement in a number of new grant programmes for regional projects to have secured local matching dollars. This prerequisite will force officials at the local levels of government to earmark project funding in annual budgets.
The state of Alaska is planning to pursue an aggressive, and perhaps wise, method of pursuing federal funding. Lawmakers in the Alaska State House are discussing plans to establish local committees to monitor projects that provide appropriate opportunities to tap into infrastructure funding. Because the new programmes are numerous and somewhat complicated, this type of initiative will likely provide a good return on investment.
Although infrastructure assets have been maintained and cared for locally in the past, the infrastructure law will influence that to some degree in the future. Federal agencies that disburse infrastructure funding will be required to prioritise certain types of projects. For example, the new statute allocates over $100m to the Federal Transit Administration with a mandate to disburse the money to initiatives that will result in positive outcomes for equity and sustainability.
Another large funding allocation to the Infrastructure for Rebuilding America grant programme mandates that the monies are disbursed to projects that address climate change, environmental justice and racial equity.
It is impossible, of course, to structure legislation this large that will please all parties and stakeholders. But the new funding will result in a generation-changing economic impact and a national infrastructure upgrade that has been desperately needed for decades. It is important to know as much as possible about the opportunities that will exist for every region of the US.
Mary Scott Nabers is president and CEO of Strategic Partnerships Inc, a business development company specialising in government contracting and procurement consulting throughout the US.