Update on the Infrastructure Investment and Jobs Act
In November 2021, Congress passed a $1.2 trillion infrastructure bill know as the Infrastructure Investment and Jobs Act (IIJA). This bill sets a record as the largest federal investment in infrastructure. It’s estimated to add approximately 2 million jobs per year over the next decade. The AEC industry is on track for continued growth for years to come.
How the $1.2 Trillion bipartisan package being spent?
The Infrastructure Investment and Jobs Act contains $550 billion in new spending. The $1.2 trillion total includes additional capital routinely allocated each year for roads and other infrastructure projects.
A breakdown of the new spending includes:
|$66 billion for railroads||$21 billion for the environment|
|$65 billion for the power grid||$17 billion for ports|
|$65 billion for broadband||$11 billion for safety|
|$55 billion for water infrastructure||$8 billion for western water infrastructure|
|$50+ billion for cybersecurity and climate change||$7.5 bill for electric vehicle charging stations|
|$39 billion for public transit||$7.5 billion for electric school buses|
|$25 billion for airports|
How are things progressing six months later?
Six-months after the IIJA was signed into law, funds are now starting to flow to actual projects.
A White House fact sheet announced that more than $110-billion of IIJA funds has been released for bridges, roads, airports, ports, water, and internet projects. This includes funding for more than 4,300 specific projects in all 50 states, D.C., and Puerto Rico.
At the request of Infrastructure Coordinator Mitch Landrieu, fifty-three states and territories have appointed state infrastructure coordinators. In addition, the state coordinator also serves as a single point of contact for the White House Infrastructure Implementation Team.
One of the major funding initiatives includes the Bridge Formula Program. This program provides federal funding for bridge construction, replacement, rehabilitation, and preservation on public roads. The next round of funding will be be released in October 2022 .
As the rest of the year unfolds, federal agencies will continue to deliver new programs and support existing programs moving forward. Assuming the economy cooperates, we will all reap the benefits of this legislation.
However, labor and materials challenges temper IIJA expectations.
The Covid-19 pandemic has resulted in labor shortages, supply chain disruptions, and rising costs of materials impacting all industries. Consequently, the AEC sector has not been immune to the impacts. These constraints challenge the success of the IIJA as they may delay when we begin to realize the benefits of this legislation.
As of March 2022, there were just under 400,000 unfilled positions in the construction industry. As baby boomers with years of knowledge and expertise retire, there is not enough skilled talent to replace them. This is resulting in employee attrition and rising wages that stifle profitability.
In addition, lasting supply chain issues are contributing to spiking material costs. It is also important to consider that as inflation continues to linger near 40-year highs, real investment gains from this bill risk are off-set by increased expenses.
The IIJA enables AEC professionals across the U.S. to deliver on a scale not previously encountered. The unprecedented amount of work will come as a pleasant relief for firms negatively impacted by the pandemic and other factors.
Nevertheless, an industry already facing labor shortages will be challenged to find ways to deliver projects more efficiently. Despite these challenges the outlook for the AEC industry in 2022 remains positive with significant opportunity for growth and profitability.
Bridging the labor gap with technology investments.
With proper training and preparation, technology can help bridge the labor gap ensuring success despite the challenges ahead.
The IIJA includes budget for advanced digital construction management technologies. This initiative is funded at $20 million per year for the next five years, totaling $100 million. The goals of the program are to maximize interoperability with other applications, boost productivity, manage complexity, and reduce project delays and cost overruns.
Although $100 million is a small percentage of the overall IIJA, it indicates the importance of technology in the AEC industry. Funding from the public sector reaffirms people are realizing the critical role technology plays in designing and delivering cleaner, more efficient projects.
According to Deloitte’s 2022 Engineering and Construction Industry Outlook, “the industry landscape is rapidly evolving as engineering firms, contractors, and participants across the value chain realize the benefits of, and increasingly deploy, connected construction technologies. These technologies can help bring assets, people, processes, and job sites onto one platform—making everyone and everything work smarter—reduce downtime, optimize asset utilization and efficiency, and gain greater visibility into operations .”
Firms that can leverage technology to develop scalable operations with less dependence on labor will weather the current challenges facing the industry and ensure success into the future. Having the right construction technology in place will allow firms to overcome challenges by streamlining business practices and completing projects with greater efficiency. As a result, the adoption of digital construction technologies serves not only as a differentiator, but as a competitive advantage.
AEC industry outlook 2022 and beyond.
While the challenges with labor, supply chain issues, and rising material costs shouldn’t be ignored, the outlook for the AEC industry in 2022 and beyond is very optimistic. Presumably benefitting from an improving post-pandemic economy, several economists are forecasting a growth rate between 3.5% and 4.5% in 2022. Profitability has been on an upward trend in the AEC industry for 20 years and expert projections indicate 2022 will be the strongest year yet.
The positive market conditions and expanding project pipelines, in part due to the IIJA, have contributed to a positive outlook for the coming years. Taking advantage of this growth will require firms to stay focused on addressing talent gaps, being deliberate in the opportunities they pursue, and utilizing technology to increase efficiency.