Where’s the Money?

On November 15, 2021, President Joseph Biden signed the Infrastructure Investment & Jobs Act (IIJA). Observers greeted the bipartisan bill with great fanfare. The bill had been years in the making and was passed during a period of lingering economic uncertainty amidst an ongoing pandemic.

It tallies $1.2 trillion overall, with $550 billion in new monies. Approximately $110 billion are slated for improving the nation’s roads and bridges as well as investments in other major transportation programs. The package also encompasses the largest federal investment in public transit in history while funding the repair of more than 24,000 buses, 5,000 railcars and thousands of miles of train tracks. It includes financing for cleaner drinking water, more than $25 billion to modernize the nation’s airports, and $7.5 billion for America’s first network of electric vehicle charges along highways. It even includes $2.5 billion for ferries along with massive monies to upgrade the nation’s electricity grid and expand broadband reach.

Congress passed the package after a series of other packages designed to counter the worst effects of the pandemic on the economy. Funding from the Coronavirus Aid, Relief, and Economic Security Act (March 2020) and the American Rescue Plan Act (March 2021) quickly poured through the economy, helping to foment a V-shaped economic recovery. Perhaps the rapidity with which much of that money was spent shaped expectations that infrastructure dollars would also quickly impact the economy. Alas, as is often the case, infrastructure policy implementation has followed a different path.   

While contractors are thankful for the legislative success, there is growing impatience regarding project starts. While there are many intervening factors at work, including structural shortages of skilled construction workers, rising wages, equipment shortages, and materials price escalation (e.g., concrete), regulatory overlays also appear to have contributed to project delays.

Federal Buy American Requirements

When Congress passed the IIJA, it also enacted the Build America, Buy America Act (BABA). The Act represents a “sweeping change to domestic sourcing requirements for federally funded infrastructure projects.” Implementation of BABA can be difficult to monitor given piecemeal guidance from the federal government regarding interpretation and an array of waivers that vary by agency.

BABA requires that “none of the funds made available for a federal financial assistance program for infrastructure, including each applicable program, may be obligated for a project unless all (emphasis added) of the iron, steel, manufactured products, and construction materials used in the project are produced in the United States.”[1] Superficially, this may not appear to be especially burdensome.

After all, federal construction projects have been subject to requirements to purchase materials domestically or designated US trade partners for decades. Policymakers originally passed “Buy American” legislation during the 1930s in order to support struggling manufacturers in the context of the Great Depression.

But public infrastructure projects administered by state and local governments have generally not been subject to those requirements. While many government contractors are familiar with the Federal Acquisition Regulation Buy American requirements, BABA represents a substantial new compliance burden for companies that do not frequently contract or subcontract with the federal government, but which may have worked on prior generations of federally-funded state and local infrastructure projects.[2].

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About the Author

Anirban Basu

Anirban Basu is Chairman & CEO of Sage Policy Group, Inc., an economic and policy consulting firm in Baltimore, MD. He is one of the Mid-Atlantic region’s most recognizable economists in part because of his consulting work on behalf of such clients as prominent developers, bankers, brokerage houses, energy suppliers, and law firms.

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