Road, rail, and port projects may have to be scaled back or postponed as a result of growing inflation’s impact on the purchasing power of the $1.2 trillion infrastructure bill passed last year.
The Infrastructure Investment and Jobs Act (IIJA), dubbed a “once-in-a-generation” funding bill by President Joe Biden, allocates approximately $660 billion over five years for grants and program funding for freight, transit, and other transportation projects overseen by the U.S. Department of Transportation (DOT). Biden claims responsibility for securing the legislation by rallying bipartisan support for it before signing it into law in November.
Approximately $79 billion of that total has been announced as of mid-May for grant and program funding for roadway, rail, and port infrastructure. The White House has been working rapidly to get the money into state coffers, but it recognizes that inflation may limit how much the unprecedented funding levels can do.
“The cost of construction materials has gone up considerably,” said Katie Thomson, who manages DOT’s IIJA implementation, at an event this week hosted by the Eno Center for Transportation (Eno).
“Some of it is specific to the current economic environment and inflation, and some of it is a long-term trend in rising building prices in the transportation industry.” It doesn’t matter to us whether the reason is acute or chronic; it’s something we need to address.”
Thomson, who previously worked as Amazon’s vice president of global transportation, said she was also hearing from states about difficulties in hiring staff and a lack of competition among bids.
“When they put these projects out to bid, they may only get up to three offers, all of which are costly, and they’re not seeing the kind of healthy competition among contractors,” she said. Project sponsors are “being left… with bids on projects that are significantly more expensive than they had anticipated.”
Given the rising danger of inflation, the Department of Transportation is attempting to shorten the time between when competitive grants are announced and when an application is accepted and a grant agreement is signed, according to Thomson, “so that those monies can have an impact sooner.”
That means that if states have numerous infrastructure projects set up for development at the same time, they may have to postpone them, Davis told FreightWaves, adding that inflation might impact both the amount and timing of projects.
“While states may know how much money they are receiving for highway upgrades, the question is what they will be able to buy with it.”
