Heavy Civil Industry Evolution & the Infrastructure Investment & Jobs Act

Despite current economic challenges, heavy civil contractors surveyed for FMI’s Heavy Civil Construction Index showed increased optimism, with the index climbing to 55.4 in the first quarter from 51.7 in the fourth quarter of 2021.

Every component of the index showed improvement except cost of labor, which, alongside cost of materials, continues to weigh heavily on the index. Expectations for the economy and the engineering and construction (E&C) industry have improved slightly, as anticipated with the passage of the Infra­structure Investment and Jobs Act (IIJA). Likewise, backlogs are expanding, and some improvement in productivity is welcomed going forward.

Sentiment toward most heavy civil segments improved from last quarter, and the majority indicate short-term expansion. The outlook continues to waiver for public utilities, other heavy civil, transit/rail, and aviation. Aviation and private utilities are the only two segments where the challenges may outweigh optimism going into the spring.

Contractors continue to grow backlogs faster than they are burning them (38% increase vs. 15% decrease), and backlogs are generally larger today than a year ago (52% higher vs. 23% lower). Nearly 1 in 5 respondents reported significantly higher backlogs, while less than 5% saw backlogs significantly below last year’s levels. Relative to expectations, one-third of respondents reported backlogs ahead of plan, while another 40% are in line with expectations.

Infrastructure Funding

One of the biggest drivers of backlogs in the coming years will be work being funded from the Infrastructure Investment and Jobs Act (IIJA), which is expected to fund $1.2 trillion dollars in E&C activity over the next eight years.

This legislation marks an important milestone by nearly doubling federal investment in new and existing programs, with approximately $560 billion in new funding. Additionally, nearly all these funds will be directed into engineering and construction-related fields, an important distinction from President Joe Biden’s original request via the $2.7 trillion American Jobs Plan.

While exciting, companies will see opportunities as well as challenges when it comes to putting the money to work. Nearly all HCCI respondents expect the passage of the IIJA to have some impact on 2022 revenue, but only 38% have adjusted or incorporated those impacts into their current business or strategic planning. Among those who adjusted business and strategic planning, hiring and capital investment were the factors most changed.


Naturally, heavy civil contractors are interested in how this funding is broken down across segments and geographic markets to help determine their strategies. Of the $560 billion in new funds, approximately 52% will be directed into roadway and transportation spending (30% of funds will be dedicated to transportation spending, and 22% will be dedicated to roads and bridges), 36% will be allocated to utility infrastructures (i.e., power, communications, and water/wastewater projects), and 14% will be used on resilience, remediation and community-related projects. Based on existing models and prior legislation, expected formula-based geographic distribution of new funds will be concentrated primarily in the South Atlantic (18%) and Pacific (15%) Census Divisions.


Additionally, 69% of program totals will be allocated to transportation and roadway agencies, while 31% will be allocated to utility agencies and other related government groups such as the Department of Energy, the Department of Agriculture, the Army Corps of Engineers and the Environmental Protection Agency.

Though each agency is expected to approach capital planning differently, a common thread across these agencies is that expansionary investment has regularly been postponed to prioritize rehabilitation and renovation needs. We expect to see a short-term emphasis on repairs and renovation projects, given the increase in funding and the backlog of needs.

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About the Authors

Brian Moore

Brian Moore is a Principal in FMI’s Management Consulting group.

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Brian Strawberry

Brian Strawberry is Chief Economist at FMI and leads efforts in market sizing, forecasting, building products and construction material pricing, and consumption trends.

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