Compliance Issues Stymie Infrastructure Act

The passage of the $550 billion Infrastructure Investment and Jobs Act (IIJA) includes industrial policy incentives that are designed to benefit manufacturers, but capital deployment is happening slowly, according to a new study just released by Ivalua.

The research finds that:

Seventy percent of public procurement budget owners are still not "fully confident" their suppliers are prepared to meet all the requirements of the Infrastructure Act. The skeptics say aligning their suppliers with regulations attached to IIJA will be difficult, potentially putting the timely and on-budget delivery of projects at risk from the start.

Here’s a quick outline of the type of projects included in the IIJA:

As IIJA projects roll out, developers and engineers, procurement, and construction contractors will face many of the same issues as manufacturers, including labor shortages, delivery delays, and quality issues.

Ivalua commissioned an independent research firm to survey 200 US public procurement budget owners about their plans for using federal funds in 2023.

Here are the key findings from the research:

We caught up with Jarrod McAdoo, smart public procurement expert at Ivalua, to get an idea of how the IIJA will be rolled out by the government.

Design News: Will it be mostly large suppliers that participate? They have the internal capabilities to deal with the requirements outlined in the Infrastructure Act.

Jarrod McAdoo: In many cases, it will be large suppliers, but it may not be for all the reasons we think, and it may not be a bad thing. The funding is a tremendous opportunity and will spawn many very large projects where we will need to rely on large firms that can manage these large projects. As procurement professionals, we should seek to leverage the talent of these organizations as an extension of our capabilities. This program is complex and there are a lot of moving parts.

DN: What is the best approach for those who want to apply for IIJA projects?

Jarrod McAdoo: Officials need to focus on the complexities of the tasks. I read some discussions about focusing on a “dig once” mentality. A municipality could get an award for installing broadband, implementing EV charging stations, and improving drainage. These projects are large and need to be sequenced correctly. Imagine a headline about having to dig up a brand new road to install EV stations. The cries of waste would be immense. So relying on large firms that have experience in this area can be a real opportunity. As a procurement professional, I can then focus on that working with that GC to ensure that the high number of sub-contracts include local, small, and diverse suppliers.

DN: So you’re saying the smaller suppliers can participate by picking up subcontracts from the larger suppliers?

Jarrod McAdoo: Yes. Many of the larger suppliers are already familiar with facilitating and tracking the participation of small businesses on government contracts. Procurement can help leverage this existing infrastructure and reporting apparatus and assist in expanding the reach into diverse suppliers. The devil is in the details when looking at the specific requirements of the bill and the project, but if we can stay focused on the big picture we can find some solutions. Let’s not lose the forest for the trees. Will large entities have an advantage for many of these projects? Yes. Does that mean that small, local, and diverse businesses will be shut out? Absolutely not.         

DN: Do you anticipate that compliance demands will be trimmed as the government sees that participation is thwarted by compliance difficulties?

Jarrod McAdoo: Short answer, yes. The longer answer, there has never been a project of this size and complexity that has not been subject to changes and course corrections. This is new territory. If you can remember the rollout of the Affordable Care Act, you probably can understand what I am talking about. There will be challenges, changes, corrections, clarifications, and a lot of firefighting throughout the process. This is a whole new world. The Government does not have an existing playbook that has been tested to rely upon. If we can avoid a dysfunctional government, we can count on alterations to ensure this landmark legislation is executed while holding to the spirit of the legislation.