By Aaron Lauinger, Market Director, Ulteig
All eyes are on Washington D.C. as the Biden-Harris Administration attempts to navigate a potential $2 trillion dollar spending bill focused on a wide variety of infrastructure projects, including traditional roads and bridges, renewable energy, water systems, public transit, high-speed rail, and the expansion of broadband.
If the bill becomes law, it will launch a new golden age of construction as small towns and cities obtain funding over the next eight years to repair and maintain existing infrastructure, such as roads and bridges, and to build new infrastructure, such as high-speed rail or new water treatment plants and water towers.
However, while the proposed amount will certainly offer an injection into the economy, many of us within the engineering and construction community know that it’s just a fraction of what is actually needed to repair and maintain America’s infrastructure, as well as build new infrastructure to allow the United States to maintain its global competitiveness. For example, there are more than 220,000 bridges in the U.S. in serious need of repair and maintenance – some experts estimate that all of these repairs will take 40 years to make at present spending levels.
There’s also another important aspect of the infrastructure bill to consider – resiliency. At the present time, $50 billion has been proposed to make our infrastructure more resilient to super storms, such as Winter Storm Uri that hit Texas hard last February and paralyzed both the state’s electrical grid and its water system.
Regardless of how much is approved for the infrastructure bill, it’s critical for infrastructure developers, owners and utilities to make existing and new projects more resilient (able to withstand disruptive events, such as a super storm), and more able to recover quickly from the impact of a major disruptive event, such as a hurricane, earthquake, flooding, wildfire, drought or derecho. Based on existing patterns, more super storms are not only in our future, but more powerful, and deadly, storms are on their way.
So the question is: How should your organization be prepared for the a potential wave of new infrastructure spending?
Here are some thoughts to consider when it comes to infrastructure spending:
Prioritize your projects – While we do not anticipate regulations saying infrastructure funds must be spent by a certain date (use it or lose it) in this infrastructure bill (which was the case for the $48 billion in infrastructure spending in the 2009 Recovery Act), the whole point is to get Americans working again – as quickly as possible. When it comes to government spending, it’s often best to be at the table first, so look at your list of projects, prioritize them, and be ready to recommend shovel-ready projects to be the first to gain access to infrastructure funding.
Be prepared for sticker shock – In 2009, the federal government approved $48 billion in infrastructure spending to get the economy moving again. While the amount being proposed in the current infrastructure bill is much more, with the rising cost of construction materials, rising transportation costs, and inflation trending up, etc., the amount you will be able to “buy” will not go as far as the amount approved in 2009.
Line up your partners – Many construction companies are facing serious worker shortages. Trucking companies are having a difficult time recruiting drivers. And manufacturers can’t attract workers, either. This will only accelerate over the next eight years as more highly skilled Boomers retire from their construction jobs. This means that finding workers to build your project will likely become more competitive. Now is the time to shore up relations with current and potential partners to gain access to critical talent.
Be aware of changing environmental regulations – As we recently discussed during the Ulteig Energy and Infrastructure Podcast, the Biden-Harris Administration is moving swiftly to overturn many environmental regulations via executive order. As you review your infrastructure projects, don’t overlook aspects that may be linked to the country’s changing environmental regulations.
More spending on clean energy – Both the infrastructure bill and the Administration’s 2022 budget will include infrastructure spending for clean energy infrastructure. This could take the form of extending tax credits to developers to encourage the development of more wind and solar farms, the building of battery energy storage systems (BESS), and accelerating the build-out of infrastructure to support electric vehicles (EVs). Local communities and utilities should be thinking about their clean energy strategy, and how to take advantage of this influx of spending on a cleaner, sustainable future.
Explaining the Benefits of Infrastructure – Not everyone is in favor of the Administration’s proposed infrastructure bill. For one thing, corporate taxes may be adjusted upwards to pay for it. Because many infrastructure projects are open to public comment (including public meetings), it’s important for city, county or state administrators to be prepared to explain and advocate for the benefits of infrastructure to local stakeholders. As I think about the impact of the infrastructure bill, I would emphasize the following:
- Our nation’s infrastructure is in dire need of repair and maintenance – we continue to rely on an electrical grid, for example, that is 75 years old in some places;
- We need our infrastructure to be more resilient – to withstand 500-year rainfall events hurricanes, tornadoes, and blizzards (we do not want another Texas situation);
- We need modern, functional infrastructure to move products and people more efficiently and safely across our country for businesses and personal purposes;
- We need modern infrastructure systems that are secure and reduce our nation’s risk to cyberattacks, just look at the impact of the recent cyberattack on the Colonial Pipeline, affecting millions of American’s gas consumption;
- We need modern, functional infrastructure for the U.S. to compete head-on with China, which seeks to be the world’s dominant economic superpower.
In the weeks and months ahead, we will keep our eyes on the proposed infrastructure bill. Watch for more updates here, on the Ulteig Connections Blog, and for insightful conversations on the Ulteig Energy and Infrastructure Podcast, where we will invite experts within and outside of Ulteig to weigh in on the impact of future infrastructure spending in the years to come.
Aaron Lauinger is Market Director for two of Ulteig’s Lifeline Sectors – Transportation and Water. Lauinger joined Ulteig 15 years ago and is the host of the Ulteig Energy and Infrastructure Podcast.