Congress and the President Finally Pass Infrastructure Spending Law!

Cohen Seglias Pallas Greenhall & Furman PC
What Does It Mean for Utility, Heavy Highway, and Transportation Construction?

Last week, President Biden enacted into law the $1 trillion bi-partisan infrastructure bill following months of congressional negotiations. The Bipartisan Infrastructure Bill, formally titled the Infrastructure Investment and Jobs Act, directs $550 billion in new spending on hard infrastructure, the nation’s largest such investment in decades. Spanning over a thousand pages, the legislation’s numerous programs, policy enactments, and mandates will compel the transportation and highway construction industries to ramp up work and, possibly, expand operations into new areas.

Getting these projects underway will entail oversight by multiple federal agencies such as the U.S. Department of Transportation (DOT), the U.S. Army Corp of Engineers (Corps), and the Environmental Protection Agency (EPA). The act relies on multiple funding mechanisms that involve state and local authorities. With so many stakeholders pursuing projects through such varied avenues, projects will get off the ground at varying paces, with some coming years from now. Contractors can begin to prepare for an uptick in work by considering some potential effects of the legislation.

How will this legislation affect public contractors on projects funded by the bill?

  • Expands the Buy America Act to include “construction materials,” and directs the DOT to research supply chains and domestic materials’ availability and periodically review Buy America requirements nationally. Whether by request or on its own, the DOT could use such waivers to address major shortages of domestic materials or suspend a waiver if shortages end.
  • Enacts into law the “One Federal Decision” executive order signed by President Trump that sought to expedite the average time for environmental review of major infrastructure projects. The industry endorsed the order as it should reduce projects’ average review by at least three years, allowing construction to start sooner.
  • Authorizes the use of alternative delivery methods such as design-build (notwithstanding the Federal Acquisition Regulation) and includes provisions to facilitate using the public-private partnership (P3) delivery method. The bill also allows the DOT to mandate payment and performance bonds on P3 projects when state law does not, making projects less susceptible to defaults, more attractive to owners, and providing protection for subcontractors and suppliers.
  • Authorizes state or local agencies to mandate local, geographic, or economic hiring preferences when expending funds. Such mandates could require contractors to break up or expand crews in order to accommodate the preferences.
  • Authorizes about 1/5 of the new federal spending through competitive programs, which allows the DOT more leeway in selecting projects to fund. Some megaprojects that did not fare as well with traditional formulas may finally get off the ground and competition could spur innovation as states and municipalities challenge each other for the best project.
  • Directs that the Manual on Uniform Traffic Control Devices is updated every four years and that it focus also on “vulnerable road users” such as bicyclists, pedestrians, children, or people with disabilities.

How does the bill affect the infrastructure and transportation sectors?

  • Roads, bridges, and other major projects:
    • The legislation reauthorizes the Federal-Aid-Highway Program for another five years and provides additional funding for the Highway Trust Fund (HTF). Disadvantaged Business enterprise (DBE) requirements apply, but the bill removes for FY23-26 the gross receipts cap requirement for DBE eligibility. Instead, firms seeking eligibility must meet the Small Business Administration’s annual volume caps for relevant North American Industry Classification System codes, which is $39.5 million for highways, streets, and bridge construction, a $13 million increase from before the current cap. This cap increase expands the number of eligible DBE firms. Given the supply-chain issues affecting all subcontractors and suppliers, but especially small businesses, increasing eligible DBE firms should help projects stay on schedule.
    • A new program was created to provide funding to states to address projects targeted towards transportation resiliency and improvement or restoration of “natural infrastructure.” It increases funding for “natural infrastructure,” essentially using natural land features—either rehabilitated or created—to address resiliency and flooding issues. Firms with experience working in sensitive natural environments, or who have the skills to construct dunes or restore wetlands, may have a competitive advantage for projects bid under this new program.
    • There is $27.5 billion in specific funding distributed through a conditions-based formula for bridge repair and replacement and $9.235 billion in discretionary funding for bridge projects.
    • Requires roadway designs to consider all users including pedestrians, bicyclists, public transit riders, children, older and disabled persons, motorists, and freight vehicles. While this is a broad statement, it could mean that designs include the construction of more islands for pedestrian crossings or signals with audible cues that enable the blind to cross streets safely.
  • The legislation also addresses passenger and freight rail, including funds to address Amtrak’s backlog of maintenance and repairs and to expand passenger rail service to new areas.
    • There is $22 billion dedicated to Amtrak in emergency appropriations for capital projects, including $6 billion dedicated to the Northeast Corridor (NEC).
    • An additional $36 billion for a new grant program to support the development of new routes, of which more than half could be used for the NEC to address repair and maintenance backlogs and to improve performance.
    • The NEC and Amtrak will benefit the most, and deferred repairs on the nation’s busiest route should finally get underway.
  • The law provides $20 billion in one-time emergency funding to public transit systems, $8 billion for capital investment grants, and almost $2 billion for ADA compliance at transit stations.
  • The bill includes $65 billion for expanding and improving broadband access.
    • It instructs the Department of Commerce to establish, within 180 days, a grant program to expand broadband access to underserved and rural communities. The bill allocates $42.4 billion, including $100 million for each state and $100 million to be shared amongst the territories. The remaining amounts are to be allocated via a formula that takes into account the number of unserved areas.
    • The bill allocates $1 billion exclusively for “middle-mile” infrastructure. This is the part of the broadband network that links the provider’s core network to the “last mile,” which is the local network entering people’s homes.
  • Water infrastructure. The law will fund projects to replace lead service lines ($15 billion), address contaminants, such as PFAS, ($10 billion), and address lead in school drinking water, as well as appropriate just under $12 billion for Clean Water and Drinking Water programs.
    • The loan programs mandates that 49% of the loans should be 100% forgivable, which will allow lower-income municipalities to compete for this funding.
  • The bill provides for $73 billion to improve power infrastructure and the electric grid, which includes $6 billion to make utilities become more resilient to extreme weather, wildfires, other natural disasters, and cyber security threats, with $1 billion allocated exclusively to rural areas.
  • $46 billion is designated for states and municipalities to improve resiliency and prevent damage from wildfires, flooding, droughts, and impacts of climate change.
  • The legislation appropriates $15 billion for capital improvement grants to airports for runways, taxiways, and other upgrades that are not terminals. It also has $5 billion for a discretionary grant program for terminal projects and $5 billion for projects pertaining to air traffic control.
  • There is $21 billion to clean up pollution including abandoned wells and mines, and Superfund sites.
    • The bill allocates $3.5 billion to Superfund Remediation for five years and waives state cost-share requirements. The waiver of cost-sharing will allow more projects to get off the ground where states have been unable to appropriate or borrow funds for the cost-sharing.
    • Directs the U.S. Department of the Interior to, within 60 days of the bill’s enactment, create a program to plug abandoned wells on federal land with a little under $5 billion. The wells can be on federal, state, private, or tribal lands. This mandate, if the Department is able to comply, will mean that these funds may be spent the soonest of all appropriated by the new legislation.
  • The bill allows for $17 billion for ports and waterways through supplemental appropriations to the Corps. Within 60 days of the law’s enactment, the Corps must submit to Congress a “detailed spending plan” that identifies the projects that will be funded or studies/plans that will be undertaken with the funds. The law’s emphasis on Corps projects means contractors working in this area should prepare for increased bidding and work opportunities, in particular those related to these spending initiatives. Highlights include:
    • $150 million to investigate or plan new projects.
    • $11.6 billion to spend on rivers, harbors, inland waterways, water-related environmental infrastructure assistance, erosion protection, navigation improvements, flood control, aquatic ecosystem restoration, storm damage reduction,
    • $808 million for the Mississippi River.
    • $4 billion for operation and maintenance.
  • $7.5 billion to construct electric vehicle charging stations.
    • The legislation directs the DOT to issue standards for charging stations. Thus, more details should be known soon on regulatory requirements for the chairing stations.
    • However, the bill does indicate that the charges should be placed in areas that are accessible to the public. This would include schools, parks, parking lots for public buildings, but may include privately-owned lots and garages publically accessible
    • The legislation prioritizes projects in rural areas, low-to-moderate income areas and urban or suburban areas where there is higher-density housing.
  • Invests $7 billion in the supply chain for batteries, including battery materials processing and manufacturing projects.
    • This is one of the legislation’s provisions that attempts to address long-standing supply-chain issues that have only been exacerbated by the COVID-19 pandemic.
    • Currently, 80% of the U.S. supply of “rare earths,” which are critical for many types of batteries, comes from China.
    • Funds were also allocated to encourage the development of recycling of critical minerals.
  • Workforce development. The legislation:
    • Expands the current DOT funding to states for workforce development, and allows this training to be provided by vocational schools, community colleges, and hands-on training opportunities such as apprenticeship programs.
    • Instructs the Department of Education to create grant programs for training programs related to energy efficiency and renewable energy skills
    • Expanded a grant program by the EPA for training and upskilling employees in water and waste-water industries.
    • Directs the DOT to conduct research related to workforce need and allocates monies for a public service campaign, and provides states with more leeway to address workforce development and training for transportation.
    • Most of the funding for workforce development appears in the Reconciliation Package, upon which a deal has not yet been struck. The House proposal includes approximately $80 billion for various forms of workforce development including apprenticeships and sector-based training.
  • $11 billion for highway, commercial and pedestrian safety programs.

The attorneys at Cohen Seglias will continue to follow any regulatory or other developments arising from this historic legislation that could affect infrastructure and transportation contractors.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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