Engineering firms were already optimistic about the next few years in the transportation market before the passage of the $1.2 trillion Infrastructure Investment and Jobs Act (IIJA). With the IIJA’s passage into law, that optimism turned to elation.
“Before the IIJA was approved, we were filling up with a lot of work with our state departments of transportation (DOTs) and local municipalities,” says Kyle Anderson, EVP at Felsburg Holt & Ullevig in Omaha, Neb., and chair of ACEC’s Transportation Committee. “Now, though, I think we’re looking at probably the strongest five-year period that we’ve seen in a very, very long time.”
Three factors in the IIJA will contribute to that market strength: the level of funding, the long-term commitment, and the transformational approach.
The $1.2 trillion infrastructure law includes $550 billion in new funding on top of the reauthorization of many Fixing America’s Surface Transportation (FAST) Act programs and other initiatives, such as water, electrical grid, and broadband.
Combining the reauthorization and the new transportation funding in the IIJA, the sector will receive $351 billion for roads and bridges, $91 billion for public transit, $66 billion for rail, and $42 billion for airports and ports.
“States are expecting roughly a 50 percent increase in their transportation spending over the life of the IIJA,” says Jon Gray, chief economist at the ACEC Research Institute. “It can’t be overstated how important this program is to the overall transportation market.”
Andy Lauzier, transportation planning and design director at HDR and vice chair of the ACEC Transportation Committee, says the firm had anticipated a fairly strong market going forward but now, “from a numbers perspective, we’re looking at 15 percent, or maybe a little bit more, year-over-year growth.”
The massive influx of money also presents new opportunities for firms, Lauzier says. “Some of the services we see growing are upfront advisory services and program management, because our clients are going to need help managing the huge increase in work.”
The five-year duration of the IIJA gives state DOTs and local municipalities a steady stream of committed funds, allowing them to begin long-term projects.
The winding down of the FAST Act and the systemic shock of the COVID-19 pandemic over the past two years “had a chilling effect on capital improvement projects,” says Lauzier. “With this long-term funding commitment, the transportation agencies can advance their projects and programs with more confidence.”
Anderson says, “Early on, we’re going to see fairly quick implementation of some maintenance and 3R projects (resurfacing, restoration, and rehabilitation), but our state agencies and others are already gearing up for longer-term projects, recognizing that our average project delivery is close to seven or eight years.”
The longer-term focus also helps firms. “When the funding comes in short bursts, or maybe a year or two of increased funding, it’s really hard to grow your base of employees,” says Anderson. “When you have a five- or six-year horizon, though, you can start to be more aggressive and make those investments.”
Labor availability, though, could be an issue over the life of the program.
“The biggest limitation to how well our industry does will be our ability to find people,” says Anderson. “And that’s not just in the firms. A concern among some of the DOTs and contractors that we’ve talked to is that they won’t have the capacity to deliver this program in the way they would like.”
Inflation could also eat into the impact of the program in the out years. “Prices are going up because of the increased cost of materials and people,” Anderson says. “If you look at a five-year bill and you infuse this much money into it, you could easily see 30 percent or more of it eaten up by inflation by the end.”
“This legislation represents a shift in the way we look at transportation,” says Lauzier. “We need to look at it holistically and not in mode-by-mode silos. It’s not just about highways or transit or aviation, but it’s about overall mobility and how that mobility comes together at the local level. Because at the end of the day, an efficient transportation network is a quality-of-life issue.”
For instance, he suggests that rather than just increase the number of interstate lanes, DOTs might build express lanes or hard shoulder running lanes to make bus transit more efficient. Or they could invest in a complete streets program, with onstreet parking converted to more community space or areas for bicyclists and pedestrians.
“This legislation requires that we think about transportation differently,” Lauzier says.
As a bottom-line issue for engineering firms, the IIJA will have a tremendous impact. Gray estimates that engineering firms will receive between 5 to 10 cents of every infrastructure dollar. In addition, much of engineering firms’ work will come at the front end of these projects, so the dollars will start flowing sooner.
The IIJA will also ripple through the rest of the economy. “One report estimates that the sales multiplier for infrastructure is 3.5, which means that each dollar invested in infrastructure through the IIJA will generate $3.50 in additional spending across the entire economy,” Gray says. “Given the size of the program, there will be an enormous impact.”