Compliance Issues Stymie Infrastructure Act
Suppliers face difficulties managing Infrastructure Act projects. Obstacles include government requirements, worker shortages, and lingering supply issues.
July 2, 2023
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:
Only 30% of procurement execs are confident their suppliers will be in compliance with IIJA regulations
A full 90% say obtaining federal funds is complex and time-consuming; 61% lack necessary resources; 56% cite staffing issues
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:
Supplier compliance is a challenge: Only 30% of public procurement professionals are confident that all their suppliers are in compliance with Infrastructure Bill funding regulations.
Procurement partnerships are critical to execution: 67% of public procurement leaders partner with other procurement or government agencies to maximize the impact of federal funds.
Sustainability, not cost, is a top priority in IIJA rollout: With specific ESG requirements outlined in this bill, 86% of public procurement budget owners say they are prioritizing projects that promote sustainability and resilience. In fact, 57% of public utility budget owners prioritize investing in sustainability over keeping prices down; 43% of public utility budget owners prioritize keeping prices down over investing in sustainability.
Supplier collaboration is critical to IIJA rollout: 57% of public procurement officers say that collaborating with and clearly defining expectations is the best way to prepare the supply base for new incoming funds.
Procurement leaders face challenges deploying funds and measuring success: 72% of public procurement leaders have established metrics and performance indicators to measure the success of projects funded by federal dollars. However, the majority of respondents (73%) recognize that there is a need to be more transparent with how these funds are spent.
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.
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