What's In the Infrastructure Bill For American Manufacturers?
Late into the evening on November 5, the House of Representatives passed an infrastructure bill that both parties agreed was nearly a decade overdue. The nation’s bridges, roads, trains, and other core infrastructure elements needed renewed funding years ago, but politics being what they are, the solution took years of wrangling.
Big picture: Everyone in Congress, irrespective of party, agrees that some amount of infrastructure spending is necessary. What often complicates the process is the disagreement about what is and isn’t considered infrastructure. And the longer this debate takes, the more the definition of infrastructure changes, which can set back negotiations even after they seem to be done.
For example, 20 years ago, it would have been hard to make the case that expanded broadband access was part of the nation’s infrastructure, but as the internet moved from luxury time-waster to daily necessity, the gap between haves and have-nots started to show up in other ways, like order flow and even material availability for manufacturers. By the time the 2021 infrastructure bill was drafted, its appearance in the final agreement was unremarkable: It simply needed to be included.
Broadband’s move from peripheral piece to core inclusion illustrates one of the challenges for most observers when it comes to massive bills like this one: The controversial pieces suck up all the attention while the vast majority of the impact is made by components that get little to no coverage.
So, rather than get bogged down in the optics of the bill — there’s plenty of that coverage already out there — this piece will be a dive into the specific elements of the $550 billion in new spending included in the bipartisan infrastructure deal that manufacturers should know about.
A Recommitment to the Buy American Act
The Buy American Act has been on the books since 1933, so it’s hardly a new feature of governmental buying, but its importance gets stronger or weaker as key elements of the act are enforced or ignored.
One of these key elements is the waiver and exemption systems that allow government contractors to buy non-American products when they’re the only one of their kind or substantially better than their American equivalent.
The bill narrows the scope of when these waivers can be used on infrastructure projects, meaning American-made products become the default for all the projects that will come from these new funds.
For manufacturers, this means both a wealth of new contracts coming up for bid and less foreign competition in the process. However, in the past we have seen infrastructure deals like this one produce a rush of new businesses trying to bid for contracts, so while the winner of the bid is likely to be an American firm, it may well be someone newer to that specific type of work.
$138 Billion to Help Materials Move Across the Country More Smoothly
Whenever someone brings up infrastructure spending, roads and bridges are always discussed, so it’s unsurprising that funding for them features so prominently in this bill with $94 billion allocated to road and bridge modernization and repair. The White House estimates that about 45,000 bridges need to be repaired, so the sooner that process gets started, the better.
The bill actually allocates $66 billion for rail improvements, but the $22 billion of grants to Amtrak won’t do much for manufacturing directly. The remaining $44 billion will, however, as it includes modernization across the country, with special focus on the dense northeast corridor. This should help goods moving by rail flow more efficiently and predictably.
In total, $138 billion goes to improving the elements of the supply chain on solid land, which should improve resilience and help ensure as few preventable catastrophic failures of the system happen as possible. As the last 18 months have shown, a small break in the chain can cause huge effects down the line, so foreseeing and preventing as many problems as possible is key.
These funds are also distinct from those specifically allocated for safety advancements, since the $11 billion set aside for that will include things like pipeline and hazmat safety, which are important to some manufacturers as well.
$42 Billion To Help Prevent The Next Supply Chain Crisis
Pretty much every finished good or raw material travels over land at some point, but those that arrive by sea or by air aren’t getting left out either. The bill allocates $17 billion for improvements at sea ports and $25 billion for airports.
There is a forward-focus with much of this allocation rather than simple maintenance, the goal being to modernize some of the broken pieces rather than simply replacing them with the hope that the newer technology will lead to efficiency gains above and beyond those specifically in the current plan.
There is no question that interest in how these funds will be spent has skyrocketed in the last few months. Sea ports have been a major bottleneck, though a shortage of operators and truck drivers means that there are problems beyond what modernization can fix. A focus on relieving the current crunch would be understandable, but a mistake, the focus of this spend should be on making sure the next crisis never happens.
$65 Billion To Expand High-Speed Internet Access Across the Country
Undoubtedly influenced by the experience of millions of American workers and school children who suddenly relied on the internet for much more than they had before, thanks to the COVID-19 pandemic, broadband expansion quickly moved from “nice to have, but not essential” to one of the key parts of the bipartisan agreement.
For manufacturers, getting reliable broadband access in areas away from the urban core of cities will help them reap the benefits of modern software, most of which is cloud-based rather than on-premise. In truth, this should have been passed years ago, but better late than never.
Beyond what we’ve broken out above, investments in the power grid and renewable energy as well as critical service weatherization should help manufacturers, but in ways that aren’t as direct.
In truth, the best case for the suggested improvements is that they’re never put into use at all, but with extreme weather events becoming more common and affecting wider sections of the country, proactive preparation is the name of the game.
A lot of what’s included in this bill has been a long time coming and manufacturers should benefit from the improvements it brings to the supply chain. In the short term, there will be new opportunities for American businesses to win reliable government contracts and in the long run, a more predictable flow of both materials and finished products across the country.