Thursday, February 3, 2022

Infrastructure Act Breakdown

 The current infrastructure act is a combination of a Democrat plan and a Republican counteroffer introduced this past spring. While the final form of act is drastically different from the original proposals, many of the original measures proposed made it into law, especially those around transportation infrastructure, internet, water, power, and environmental resiliency.

If your company is looking to gain business from the infrastructure improvements there is still time to prepare, but you will need to either be a government contractor or a supplier to one. This act represents a longer-term plan for revitalizing infrastructure, to play out over the next five years and longer, where funding will go directly through government agencies from the federal to the local level. Governments will first need to ramp up operations to accommodate the increased activity, including hiring more people and purchasing more technology. Additionally, federal agencies will need to oversee funding and give grants while designing the dozens of new programs outlined in the act. For companies looking to get business from existing programs, like fixing roads or replacing water pipes, government contracts will be available sooner for existing infrastructure than for system expansions like additions to the broadband internet infrastructure. New programs, especially competitive grant programs, will take the longest to start, as they will need to be set up from scratch. Companies interested in what opportunities the new act will create in their state can find a state-specific report [1] on what it will accomplish in each state and territory.

While all states will get funding, some will get more than others, as their allotments were calculated based on factors like population and the amount of infrastructure they have. California, Texas, Pennsylvania, and New York will get some of the largest total amounts of funding for areas ranging from roads and bridges to electrical infrastructure, but other states will receive more funding per capita. Alaska, at the top of that list, will get $6,700 per capita, while California will get $1,127. Close behind Alaska will be Wyoming, which will get $4,400 per capita, and Montana and Vermont, which will each get $3,500. West Virginia and Rhode Island, some of the top 10 states with the worst infrastructure, are also in the top 10 receiving the highest amounts of money per capita. You can find more info on the total and per capita funding for each state here.

At a glance:

Transportation Infrastructure

In total, transportation infrastructure will claim $284 billion of the infrastructure act’s budget. All of this money will go directly to federal government organizations, including the Department of Transportation, the Department of the Interior, and the EPA, as well as state governments. It should be noted that there is a residual $5 billion set aside for smaller initiatives, including grants for companies, universities, and foundations working on infrastructure projects in the early stages.

Supply chain demand will focus on:

 

Details in the Infrastructure Act

Roads, Bridges, and Highways: $110 Billion

This represents the largest amount of money spent. While $110 billion in new funding will go toward improving and expanding transportation infrastructure, additional money will continue to fund surface transportation programs for the next five years. Out of the other $650 billion that makes up the $1.2 trillion total of the bill, $300 billion will go to the highway trust fund. Another $90 billion will go toward public transportation. Overall, state highway and transportation agencies will see a 21% increase in budget.

New funding in this area focuses on improving economically important bridges, as well as upgrading roads and bridges to be more resilient in the face of climate change. $11 billion is also to be spent on several transportation safety programs. These include a safe streets program to reduce traffic fatalities and additional funding to existing programs for highway, truck, pipeline, and hazardous material safety. An additional $7.5 billion is allotted to build a network of electric vehicle (EV) charging stations across the country to increase EV use, especially in rural and disadvantaged communities.

The highest amounts of money for roads, bridges, and electric vehicle charging networks are allotted to California and Texas, but New York, Pennsylvania, Florida, and Illinois will also get larger shares of formula grants for these types of infrastructure.

Suppliers of raw materials and infrastructure equipment will gain the most benefit here as infrastructure construction gets underway. These include providers of steel, aluminum, copper, cement, lumber, aggregates, and even materials like composites and lightweight metal. Secondary and tertiary suppliers likewise will see a boost; this includes grader, excavator, and other construction equipment suppliers as well as advanced manufacturing technology companies that specialize in automation and digital and communication technologies.

Repairing and Expanding Rail Infrastructure: $66 Billion

This money will go towards three main goals to improve both cargo and passenger infrastructure: eliminating Amtrak’s repair backlog, modernizing the Northeast Corridor, and expanding service outside of the East Coast. Representing the largest investment in the railroads since they were built, this money is to be divided up for operations, maintenance, capital investment, and administration.

Airports, Ports, and Waterways: $42 Billion

This funding is divided into $25 billion for airports and $17 billion for ports and waterways. It represents a 35% increase in historical budgets for airports, and is meant to improve terminals, traffic control infrastructure, and multimodal transport. The $17 billion for ports and waterways is meant not only for improvements, but to increase resilience to extreme weather and disasters. Here California will get the most total funding for airport improvements, although it is followed closely by Texas and Florida.

Public Transportation: $40 Billion

This area encompasses several interrelated initiatives. The largest amount, at $39 billion, is meant to repair, modernize, and expand public transportation for the next five years, as well as improve accessibility on it for the elderly and disabled. Part of this money is also allotted to replace thousands of public transit vehicles now in service with electric versions, as well as passenger ferries and school buses. Finally, $1 billion is set aside to reconnect communities that have been divided by highways, railroads, or other transportation infrastructure. This is the first funding of its kind, and it’s meant to help with design and reconstruction of infrastructure like parks and street routes. California and New York will receive the highest amount of funding for these initiatives.

Because of upcoming upgrades to public transit and railways, bus, subway car, and railroad car manufacturers will see increased demand. Additionally, thanks to increased electric vehicle charger infrastructure, companies offering batteries and chargers will benefit, as well as their suppliers offering raw materials like lithium and cathode materials like nickel, manganese, and cobalt.

Corresponding Parts of the Original Proposal and Counterproposal:

From the American Jobs Plan: Key Focus 1: Fix Highways, Rebuild Bridges, Upgrade Ports, Airports and Transit Systems

The original plan’s first key focus encompassed all of these areas with a far greater original grant of $671 billion. As in the current infrastructure act, this section focused on modernizing roads and bridges, and increasing climate change resilience as well as electric vehicle use.

From the Republican Infrastructure Plan: Transportation

The Republican Infrastructure Plan set aside $454 billion total for this area. Although it did not call for increasing EV usage or climate change resilience, this plan did call for increased funding to safety programs including for highways, and hazardous materials, which also made it into the current infrastructure act.

Dive deeper: 

Water, Electrical, and Internet Infrastructure

Making up the rest of the infrastructure act apart from a $5 billion allotment discussed in the next section, these three areas will receive a combined influx of $266 billion. As with transportation infrastructure, this funding will all go to government agencies, from local to federal.

Supply chain demand will focus on:

 

Details in the Infrastructure Act

Environmental Resiliency and Remediation: $71 Billion

$50 billion of this funding is to go toward boosting environmental resiliency and water reserves in the Western US, while $21 billion is mean to clean up environmental pollution. The environmental resilience money is targeted toward building protections against extreme weather events such as drought, heat, wildfires, and floods, as well as increasing weatherization and cyberattacks. The largest amount of resiliency funding will go to California, followed closely by Texas. Arizona, Oregon, and Washington will also receive larger amounts totaling $40 million each.

The $21 billion to clean up pollution has several goals. It’s meant to reclaim abandoned mine land, cap orphaned oil and gas wells, turn brownfield sites into usable land, and clean up legacy pollution in Superfund sites, which are abandoned industrial and energy sites that continue to pollute the environment around them.

The Electrical Grid: $65 Billion

$65 billion will go toward expanding the electrical grid with resilient lines, as well as incorporating clean energies. This section of the act will also fund programs to increase development and use of green energy in the US. $21.5 billion will be set aside to build clean energy systems, like carbon capture and clean hydrogen projects, for utilities that don’t currently have the funds for it.

Businesses that supply electrical components like wire, substations, and transformers will gain the most from this part of the act, as well as those that offer cyber protection software and hardware. Anywhere the grid is expanded power transmission developers can benefit, as well as their suppliers of lines, wood, steel, concrete poles, and lattices. At the same time, since green energy will be more incorporated into the power system, solar panel, wind turbine, and other green energy manufacturers and their suppliers will stand to benefit. Oil and gas industry companies may also stand to profit from the carbon capture and storage technologies they’ve been developing as demand increases.

Broadband Internet: $65 Billion

This initiative is aimed at increasing internet coverage for more universal access, including for rural, low-income, and tribal communities. 65% of this funding is set aside specifically for underserved communities. Additionally, this measure will help make internet bills more affordable and increase digital literacy. Fiber optic cable suppliers and cable laying companies stand to benefit from this measure, especially in states without complete internet coverage.

Drinking Water Infrastructure: $55 Billion

The act pours $55 billion into modernizing drinking water infrastructure, with an emphasis on replacing lead pipes. It represents three times the historical amounts given to the Drinking Water State Revolving Fund. Michigan will receive the largest amount of water infrastructure money of any state at $1.3 billion. However, combined with other water infrastructure measures (such as water reserves), California, Texas, and New York will receive the most total funding. Industrial suppliers of water lines and those who lay them will see a boost in demand thanks to this act, and so will raw material suppliers of iron, concrete, clay, steel, and PVC.

Corresponding Parts of the Original Proposal and Counterproposal:

From the American Jobs Plan: Key Focus 2: Deliver Clean Drinking Water, a Renewed Electric Grid, and High-Speed Broadband to all Americans

Originally featuring a price tag of $311 billion, the administration’s second key focus included much of what made it into the final infrastructure act, although funding for PFA monitoring and remediation in water systems was cut out (PFAs are a type of chemical). Also cut was a goal for the national electrical grid to run carbon-free by 2035.

From the Republican Infrastructure Plan: Water and Internet

The original counterproposal followed along similar lines to the final act as well, though with a lower budget: it offered $35 billion for drinking and wastewater, $14 billion for Western water storage, and $65 billion for investing in internet infrastructure.

Dive Deeper: 

Moving Forward: Short- and Long-Term Effects of the Infrastructure Bill’s Implementation

While the White House has released fact sheets describing the effects of the infrastructure act, other organizations like Moody’s Analytics, PwC, Brookings, and Standard and Poor’s have also analyzed the effects this legislation will have on the US. The consensus is that it will benefit the economy not only through immediate spending on revitalization activities but by the improved infrastructure giving companies a boost. However, this act will also create high demand in some areas that may lead to scarcity in talent or resources, especially if supply chain snarls continue.

Apart from the state-by-state analysis of how the act will affect each state as mentioned in the beginning, the current administration predicts several ways the infrastructure act will aid small businesses. The fact sheet on the subject points out that shipping delays will be reduced as roads, bridges, rail, and other types of goods transport will no longer exist in states of disrepair (the American Society of Civil Engineers rated American infrastructure as a C- in a 2021 report). At the same time, increased internet access will also allow employees to better do their jobs. More potential customers will also access to companies online. Companies in underserved communities will especially benefit from this act, as it will give the Minority Business Development Agency greater power to create and run programs. Additionally, as this article has focused on, the act will allow access to billions of dollars in government contracts, with $37 billion in contracts alone through the Department of Transportation. Under the DOT, the Federal Highway Administration, the Federal Transit Administration, and the National Highway Traffic Safety Administration will spend at least 10% of their funding in contracts with small disadvantaged businesses.

Outside of the government, several other organizations have analyzed the impacts of the infrastructure act. A Moody’s Analytics analysis of both the infrastructure plan and the Build Back Better plan shows that both of these initiatives would help the economy. The bipartisan infrastructure plan will benefit low- and middle-income Americans as well as companies; it will lower business costs, allow workers to live closer to jobs, and improve labor participation as companies will have to work less around infrastructure weaknesses and failures. However, some new initiatives will require careful management to ensure they work. The Build Back Better bill will also benefit companies more indirectly, according to Moody’s, by increasing and improving the labor force, as social initiatives increase access to education for lower-income Americans. At the same time, childcare and tax credit programs will allow lower-income women to work more hours and receive a better education, increasing the amount of available and skilled workers. As baby boomers retire and the necessary skill sets change, this increased workforce will become increasingly important.

Standard and Poor’s concludes the infrastructure bill alone will add 900,000 jobs and $1.4 trillion to the economy over an eight-year period. As mentioned above, PwC’s analysis shows that a range of primary, secondary, and tertiary companies will stand to benefit, from components producers to aggregate and advanced materials companies. Overall, manufacturers who benefit will include smaller local companies as well as major corporations. However, PwC notes that increased excise taxes for industrial chemicals (starting on July 1st, 2022) will lead to higher prices, and potentially supply chain problems for companies that rely on petrochemical products to manufacture or operate. At the same time, demand for industrial workers will continue to grow, especially for those in green energy and industrial technology. Brookings also points out that with the increased demand for raw materials like steel, cement, and lumber there will be increased competition for these resources, which could become difficult if supply chain issues continue. The same will hold true for skilled workers. It will be important to increase the talent pipeline for jobs in the sectors affected, especially with the current skills and job openings gaps across industry.

Whatever size company you are, there are steps you can take to plan for forthcoming infrastructure improvements. For those who want to gain government contracts, PwC’s report advises companies to pay a premium for top talent now, before the labor market gets even tighter. They also suggest thinking about what kind of role your business can play in these initiatives as well as considering acquisitions, partnerships, and joint ventures to position your company to get a contract. For companies not interested or able to get a contract, there are still preparations you can make. Chemical companies will want to prepare for the excise tax mentioned above. Additionally, all companies will want to consider how infrastructure improvements will bear on supply chain problems for future planning, including any plans to reshore. This way your company will be able to reap the most benefit from the improvements over the coming years.

Thomas is North America’s number one industrial sourcing platform and marketing powerhouse. Since 1898, we’ve met the needs of professionals on both sides of the industrial buying process. Thomas’ marketing and advertising solutions work together to grow your business and attract the most qualified, in-market industrial buyers searching for suppliers. In addition, our platform connects buyers, engineers, and MRO professionals to over 500,000 North American manufacturers daily. We help connect industrial buyers and suppliers to grow their businesses.

 

[1] Though these reports were written in August, they still apply to the current infrastructure act according to the White House.

 

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