How to Get the Most Bang for Your Buck Out of the Infrastructure Bill
The U.S. federal contracts and grants space has historically been one of the largest, most predictable global marketplaces. The U.S. government spends a staggering amount of money on the procurement of goods and services. The government is also an extremely reliable payer and can quickly become one of the organization’s most consistent customers. Plus, federal awards tend to have longer periods of performance, adding predictability to business planning through consistent revenue projections driven by a steady pipeline of recurring and potential new work.
For both companies and longtime contractors that have hesitated to enter the U.S. federal market, new opportunities and advantages may be present through current infrastructure spending.
The Infrastructure Investment and Jobs Act, signed into law by President Biden in November 2021, authorized approximately $550 billion in guaranteed funding across an array of construction and other initiatives.
OVERVIEW OF THE INFRASTRUCTURE INVESTMENT AND JOBS ACT
Authorizes nearly $550 billion in new federal money for infrastructure projects, as well as to renew existing programs that were set to expire in September.
• $110 billion for roads, bridges, and other major projects
• $73 billion to update the nation’s electricity grid
• $66 billion for passenger and freight rail
• $65 billion for broadband internet
• $55 billion for water infrastructure
o $15 billion for removing lead pipes
• $50 billion for climate resiliency projects
• $39 billion for public transit
• $25 billion for airports
• $21 billion for environmental remediation projects
• $17 billion for ports and waterways
• $11 billion for transportation safety projects
• $7.5 billion for low emissions buses and ferries
• $7.5 billion to construct EV charging stations
Agencies are beginning to make awards of this funding, but there is a long road ahead. If these initiatives are in line with a construction organization’s current services, or if the organization is looking to strategically expand, the IIJA may present substantial opportunities.
REGULATORY AND OVERSIGHT CONSIDERATIONS
The IIJA funding will largely be awarded through a combination of contract and grant vehicles. Even for experienced contractors and grant recipients, conducting business in this market comes with unique administrative and regulatory considerations and challenges. Depending on the vehicle utilized by the government, different regulations will apply.
Grants are typically governed by the Uniform Guidance issued under the Office of Management and Budget, as well as agency-specific supplements. The Uniform Guidance establishes cost principles and audit requirements for federal awards to non-federal entities and administrative requirements for all federal grants. Grant oversight has historically been conducted through a variety of mechanisms by each awarding agency or third party; however, on Aug. 9, 2023, OMB established the Council on Federal Financial Assistance “to improve coordination, transparency and accountability for the award and management of federal funding.” OMB wrote, “The COFFA will create a partnership among federal grant-making agencies, providing a single forum to inform federal financial assistance policy, oversight and technology activities.” Organizations will be subject to audit under the Uniform Guidance if they exceed $750,000 of federal expenditures in a single fiscal year. It is the responsibility of the awardee to engage an independent CPA firm to audit the accuracy and compliance of federal expenditures.
U.S. federal contracts are typically governed by the Federal Acquisition Regulation, which is the primary regulation used by all executive agencies in their acquisition of goods and services. Oversight of contracts depends on the agency and typically involves an audit agency such as the Defense Contract Audit Agency or independent third-party CPA firms authorized by the awarding agency.
There are several free websites that interested organizations can use to identify potential opportunities. Specifically, www.sam.gov can be used for both contracts and grants, while www.grants.gov can be utilized to identify grants. There are also numerous paid third-party services that pull publicly available information and enhance the data to provide a more customized offering.
STRATEGIC CONSIDERATIONS FOR AN EFFECTIVE PROPOSAL
Depending on their area of expertise, service offerings, socioeconomic attributes and the circumstances of the global marketplace, construction companies may be poised to align directly to the current administration’s agenda and the purpose of the IIJA.
When developing a business case within a proposal, it is critical to clearly outline what the organization can contribute that aligns with the IIJA. This may be the organization’s ability to introduce a new technology capability, develop or build a new infrastructure asset, establish or increase domestic production capabilities, or introduce new considerations in alignment with other objectives of the IIJA.
Considerations should also include how the proposal fits into the definition of infrastructure (defined broadly in the IIJA); if there are any benefits to disadvantaged communities, such as those defined in the Biden Administration’s Justice40 Initiative; and how the proposed scope provides potential solutions to the current domestic infrastructure issues.
The proposal also should illustrate the organization’s ability to maximize the benefit to the government through efficient use of the funds; highlight the organization’s qualifications and experience; and include compliance capabilities around systems and reporting processes.
SPECIAL CONSIDERATIONS FOR CONSTRUCTION COMPANIES
The applicable regulations are meant to cover all industries in which the U.S. government procures goods and services or issues grants to recipients. However, it is worth mentioning a few considerations particular to the construction industry.
A key goal of the IIJA is to stimulate the American economy. Therefore, it is no surprise that the IIJA applies “Buy America”-style domestic sourcing requirements to the funding. Key requirements include: All iron and steel must be domestically sourced; all manufactured products must be U.S. manufactured and exceed a 55% component threshold; and all construction materials must be domestically sourced. These requirements could have significant impacts to an organization’s existing supply chain and business practices.
While U.S.-based construction companies are generally familiar with prevailing wage requirements commercially, the Davis-Bacon Act could introduce additional administrative and reporting requirements, such as submission of certified weekly payroll records, and fringe benefit implications such as rules concerning allowable payroll deductions.
There can be significant requirements for a construction company performing a U.S. federal contract or grant related to the handling and reporting of U.S. government property. Government property is all property owned or leased by the government, including both government-furnished property and contractor-acquired property paid for with government funds. It is important to understand both the definitions and the requirements around government property.
There are certainly levels of risk and compliance in doing business with the government. Even the delivery of commercially available (i.e., non-governmental or non-military) products or services triggers the inclusion of certain government-specific contract and grant requirements. The most basic of these requirements generally focus on the organization’s ethics and compliance policies and programs, such as display of hotline posters, employee health and safety, anti-human trafficking and others. It is important for any organization doing business with the government in any capacity to understand their contract or grant terms and conditions.
RECOMMENDATIONS FOR SUCCESS
If pursuing IIJA-funded opportunities is right for the organization, effort invested on the front end can pay off exponentially and mitigate substantial future risk and expense. It is vital to establish specific knowledge about U.S. federal contracts and grants within the organization upon entry into the market so that all contracts and grants can be read thoroughly, and all requirements and provisions are clearly understood prior to committing the organization.
Throughout the proposal and negotiation process, all discussions, disclosures and negotiations with the government should be documented. Government agencies and auditors often change out roles and cognizance, so thorough documentation can support verbally agreed-to or understood nuances.
During contract or grant performance, organizations must remain vigilant and utilize the right technology and processes to facilitate reporting and audit support. Those new to federal contracting and grant receipts should weigh the balance of developing the necessary expertise in-house or engaging outside expertise when needed.
In summary, government awards are not “free money”; they come with significant requirements that can be problematic if not taken seriously by the organization, starting with leadership. Understanding the requirements, implementing reliable systems and controls, and monitoring ongoing compliance will be key to getting the most value out of a government award.