March 21, 2024 • 23 mins
With the price of materials and construction rising, inflation has hit the construction industry particularly hard. On this episode of Driving Forward, host Andrew Stasiowski talks to Alex Etchen, Senior Director for Infrastructure Advancement with the Associated General Contractors of America.
Alex tells Andrew how, despite the billions invested in America’s infrastructure from the Bipartisan Infrastructure Law of 2022, roughly 40 percent of U.S. roads are still in poor or mediocre condition. With roughly $800 billion needed to address America’s backlog of repairs, Alex talks about what should be done in future highway bills to help bolster America’s construction industry.
Subscribe and listen for new Driving Forward episodes released each month. To learn more about the Highway Users, you can visit their website.
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Episode Transcript
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(00:00):
(upbeat music)
(00:05):
- Hello and welcome to the"Driving Forward Podcast."
I am your host, Andrew Stasiowski
of the American Highway Users Alliance.
We have a great interview
in the construction industrylined up for you today.
But first, here are my threekey points from the interview.
First, inflation has beena significant problem
(00:26):
for the construction industry.
Estimates show about a37% increase in the cost
of construction materialssince inflation started.
That's compared to about19% for consumer goods
over the same period.
Though costs have stabilized,
there is no indicationthat they'll come back down
to where they were pre inflation.
This means that the IIJAwill fund fewer projects
(00:47):
than originally thought, and we will need
to maintain IIJA funding levelsin the next highway bill.
Second, reforming the HighwayTrust Fund is essential.
We need to get awayfrom general fund money.
Funding the long-term solutionto the Highway Trust Fund
will not only give statesthe certainty of funding,
it'll allow the construction industry
(01:08):
to invest in new equipmentand add employees.
Third, the Federal Highway Administration
did not have congressionalauthority when it issued
its Greenhouse GasPerformance Measurement Rule.
This rule penalizes statesexperiencing population
and economic growth and discourages states
from investing in new roads and bridges.
(upbeat music)And now onto our interview.
(01:33):
Joining us today is Alex Etchen.
Alex is the Senior Directorfor Infrastructure Advancement
with the Associated GeneralContractors of America.
AGC is the voice of theconstruction industry.
Their members build everythingfrom roads and bridges
to airports, military bases,schools, and hospitals.
Alex, welcome to the"Driving Forward Podcast."
- Thank you, Andrew, andthank you for having me.
(01:53):
- Thank you for coming on.
So I think, like we liketo do on this podcast,
just hoping you could talk
about the constructionindustry as a whole.
How big are you,
what is your industry'simpact on the economy?
Just kind of give us anoverview of what AGC does.
- So, AGC representsconstruction companies
all across the country.
We have about 27,000 firms in total
(02:16):
that all belong to AGCchapters across the country,
so we have about 89 of those,
represent union and openshop construction companies.
And by nature, the construction industry,
I like to remind people,is very small business.
91% of construction companieshave 20 or fewer employees.
- Oh wow, that's unexpected.
(02:38):
So, we're a little overtwo years into the IIJA.
What has been the impact of the law
on the construction industry?
- Sure, so the last year or two years
have really been markedby managing inflation.
We've seen the price ofconstruction materials increase
by about 37% since 2020,
(02:59):
nearly twice as high as therate of consumer inflation,
which was about 19%during that same period.
And according to the FederalHighway Administration,
construction costs hasbeen hit even harder,
and we've seen about a 50%increase since December of 2020.
Specifically, some of thosematerials I was gonna highlight
were just, you know,
we've seen a increase in113% in the price of diesel,
(03:23):
60% increase in the price of steel mills,
44% increase in the price of gypsum,
which is used in drywall,
and a 31% increase in the price of cement.
So I flag that before I get into the IIJA,
because I know the IIJAincluded these large funding
for our transportation assets,
but really, a lot of it hasbeen absorbed by inflation.
(03:46):
And I also wanna flag that,
because without theIIJA the past two years,
I think you would'veseen state departments
of transportation cuttingtheir budgets by 20 to 30%
and in terms of the projects
that they were able tolet out for construction.
- So with all thatinflation, have you seen,
how has that been on theconstruction phase itself?
(04:09):
Has that caused states
to reduce the number ofprojects they're building
or slow down some of the projects
that they may have done,
instead of doing three,they're gonna do two.
How has that played out on your end?
- Yeah, so in the beginning,
it really caused chaos, if you will,
because what was happening is
before a state DOT lets these projects,
(04:30):
they have what they callan engineer's estimate,
so they've looked at these projects
and think it's gonna cost X,
and you were having these bids come in
from construction companiesthat were 30, 40, 50%
over what these engineers had estimated,
so they had to pull back on projects.
I think now we've seeninflation really level off,
so there's a little bitmore certainty there.
(04:52):
I do flag.
Our members have reported tous, they haven't seen the cost
of these construction materials
necessarily come down significantly,
but the inflation has stopped.
Talking more specifically on the IIJA,
the other thing I'll sayis, as you and I know,
everybody, once they passan infrastructure bill,
(05:12):
wanna have ribbon cuttingsand wanna have new assets
to show their constituents,but these projects take time.
And Congress and the White House
really got it right this time.
If you remember back to the Recovery Act,
and I think it was 2009,they put in a stipulation
that the projects had tobe quote, "shovel ready,"
which really limited the types of projects
(05:34):
that could be built.
So you had a lot of bridge painting,
a lot of basic repaving of roadways,
but you didn't really get thelarge infrastructure projects.
You didn't get like the BrentSpence Bridges, if you will.
So, flash forward to theIIJA, they got it right.
They provided five yearsof dedicated funding,
increased funding for these states
(05:55):
to plan long-term projects.
And what you've seen though
is that funding for these projects
is just one part of the equation.
There's other project readinessfactors that go into that.
The project has to havegone through engineering.
It has to have gone throughNEPA, it has to have permits.
So, we're really just starting to see
these larger infrastructureprojects come to fruition.
(06:17):
The first two years really were
a lot of repaving andrepair work, if you will.
- I've heard that from our members
that the projects arebeing put out for bid,
but they're not actuallyreally being funded.
Are they starting to be funded more now?
- Yes, we actually had,
one of our members was justin Washington testifying
before the Transportation Committee,
(06:38):
and she was asked about this,
"Have you seen a largeinflux of projects?"
And before coming, she spokedirectly with her state DOT
and they said, "We'reanticipating 2024 and 2025
"to be much bigger construction projects
"where a lot of these largerinfrastructure projects
(06:58):
"are able to start tofinally break ground."
- That's good to hear, soanother thing you mentioned,
and it's an issue we've workedon a lot in the last year,
has been NEPA.
There was multiple effortsby CEQ in the last year
to get involved in NEPA.
What has been your take on the efforts
to shorten the NEPA timeline?
(07:19):
- Andrew, this is oneof the biggest issues
we hear from our members,
and we report to them all of these bills
that have been signed into law
that have provisions in themto streamline these processes.
And the IIJA had provisions,the Fiscal Responsibility Act,
efforts to streamline the process,
(07:39):
establish a lead federalagency, create timelines,
page limits, limit who can file lawsuits,
protesting a NEPA decision.
And what we've really seen
is that the administrationhas really cherry picked
which provisions they'regoing to implement
and further cherry picked
whether they're gonnaactually enforce them.
(08:00):
The other big challenge is,
and this goes for a lot of agencies,
you really need somebodyat all of these agencies
to champion these NEPA reforms,
somebody to remind project sponsors
that there's been changes made
that you're not allowedto relocate utilities
before a final record ofdecision, remind agencies
(08:21):
that they can use each other'scategorical exclusions,
and we really haven'tseen that happen yet.
- Okay, shifting gears a bit,
and I think you touchedon it a little bit earlier
when you were talking about the difference
between the IIJA and the Recovery Act.
But we're about two years in,
obviously we're looking atthe next highway bill already
the highway users.
Given what we havelearned during the IIJA,
(08:42):
what are your thoughts on the needs
for the next highway billto continue to move forward
with getting more projectsbuilt in that sense?
- The IIJA really representsthe biggest infusion
of investment in our infrastructure
since the interstate highwaysystem in about the mid 1950s.
And while this is a huge success,
(09:05):
you have to look at the data.
And the trip data out there shows
that about 40% of theroads in the United States
are still in poor or mediocre condition.
This ends up costing theaverage driver about $621 a year
in the form of repairs,accelerated vehicle depreciation,
increased fuel consumption and tire wear.
(09:25):
So you factor that in with the increase
in electric vehicleswithin the nation's fleet,
these EVs are heavier
than their internal combustionengine counterparts.
They're causing greater wearand tear on the roadways,
so there's really no question
that the needs are gonna be there.
So looking at the nexthighway bill, first off,
(09:46):
I would stress thatthere's gonna be the need
to preserve the Highway Trust Fund
and avoid relying in theannual appropriations process
to ensure that road and bridge projects
are not subject to governmentshutdowns or spending cuts.
For the Highway Trust Fund
for construction companiesis really important.
It provides certainty tothese construction companies
(10:09):
that there's years offunding in the pipeline,
so it provides them certainty
to invest in new constructionequipment, hire new workers.
It provides certainty to theactual workers themselves
or people consideringgetting into that field
that there's going to be work ahead.
- No, I think that's a great answer,
and I think you mentioned the trust fund
(10:30):
and the concerns there,we are in 100% agreement,
and it's something we've beentalking about on this podcast
with some of our other guests.
And so, what are your concerns
with the stability of the trust fund?
What would happen if wejust didn't do anything
and let it just continue to go as it is?
- AGC really supports theuser fee, user pay system.
We believe it's very fair.
(10:50):
Users are essentiallypaying for what they use.
Because the gas tax wasnot indexed to inflation,
we have increased fuel efficiency.
What we've seen is thatover the last 30 years,
the Highway Trust Fundhas lost purchasing power.
Then you factor in anincrease in electric vehicles,
(11:11):
and we're really hitting a point
where the Highway Trust Fundis relying more and more
on a general fund transferinto the Highway Trust Fund,
which of course, Congress requires
that there has to be a pay for,
for that general fund transfer.
That makes it much more challengingto get these bills done.
We believe that highwaybills would, you know,
this wouldn't be a once in ageneration transportation bill
(11:34):
as they've been callingit, and instead, the norm,
if there wasn't this needto scrap together pay fors.
- I know we always kindof put a cost estimate
to the ability to bring our roads
and bridges into full repair.
Do you know what thatnumber is these days?
- I haven't seen...
So the number I have actuallylooked at in the past
has been from the FederalHighway Administration's
(11:55):
Conditions and Performance Report.
They haven't released anew issue of that report,
but it was prior to the IIJA,
I believe it was almost $800 billion
in a backlog of repairs.
Now again, the IIJA is goingto make a dent in that,
but we still have a long way to go.
- Right, so we need tofind the funding source
that's going to continueIIJA funding levels,
(12:19):
but be solidified.
We need real hard money,
not general fund, as you talked about,
especially as we look into the next decade
where Medicare, Medicaid,Social Security interests
on the debts gonna reallystart to take a big chunk
out of the available general fund.
So, we agree there needs to be a reform
(12:40):
that can move us into the new era
of vehicle and funding sources
and all of that forthe Highway Trust Fund.
Another issue on highway investment
and how we're allocating our funds,
the House and Senate haveintroduced a joint resolution
of disapproval for the FederalHighway Administration's
Greenhouse Gas PerformanceMeasurement Rule.
(13:02):
And what are yourthoughts on the GHG rule,
and how would it impact road construction?
- Well, I wanna startby saying AGC believes
that the administration doesn'thave the statutory authority
to issue this rule.
This is a proposal that'sbeen around for years.
Congress has repeatedly debated this topic
and repeatedly rejected it.
(13:24):
So starting there, I'll just reiterate,
we don't believe they have that authority.
Now, you hear them say a lot of times
that they're requiring states
to set declining carbon dioxide emissions
and that there's quote,
"no penalty if theydon't hit those targets."
However, the rule does statethat they have to submit a plan
(13:48):
to the Federal Highway Administration
that is backed up by data
on how they will hit thosetargets in the future.
That means this is definitelygoing to have an impact
on states' projectselections going forward.
It is going to favor moreclimate change-friendly projects,
like bike paths, electricvehicle chargers,
procurement of buses,investment in Amtrak trains
(14:10):
over investing in roads and bridges.
- Yeah, I think one of the concerns
we've also had with thisis as you have areas
that are seeing large growth,
I don't know why Ialways picked Nashville,
but I pick Tennessee a lot in this area,
a lot of people are moving there.
That means a lot more economic activity,
which you're gonna naturallyneed more trucks, more cars,
(14:33):
more roads to accommodate that.
I don't see how a place like a Nashville
or any growing area can be in compliance
with the declining measurement
that they're requiring inthis rule, what do you think?
- You're absolutely right.
I always use the example of New York.
If New York has to reduceits carbon dioxide emissions,
(14:56):
a very easy way for them to do that
will be to invest in theNew York City subway,
add capacity, add stops,get people to ride it more.
A lot of these other cities
do not have a large legacytransit system like New York
that they can invest in.
So they're, therefore,relying on encouraging people
to get out of their cars andonto a public transit bus,
(15:18):
or they're encouragingthem to bike to work,
or encouraging them toget an electric vehicle.
Back to our witness that washere testifying from Wyoming,
she gave the example of two towns
that are about 20 miles apart,
and in one town it can be 60 degrees
and snowing in the other townbecause it's in the mountains.
And she said, "How are they going
(15:40):
"to bike to work in that scenario?"
So you're truly relyingon electric vehicles.
And at that point, thereare very pre-established,
grounded opinions on electricvehicles in this country.
And trying to convincesome of these people
to give up their internalcombustion engine vehicle
(16:00):
in exchange for an electricone is gonna be challenging.
So you're absolutely right
that this rule reallytreats every state the same,
which is really something AGC objected to,
because these more rural states
are emitting a fraction ofthe greenhouse gas emissions
as these more populous states
(16:20):
and have fewer options to reduce them.
- We had Chris Spear on last month,
and I think he talked a lot
about how we've gone so farin our manufacturing space
on trucks and cars toreally reduce the amount
of greenhouse gas that arecoming out of the new vehicles.
And to me, it seems like we'rejust continuing down the road
(16:41):
of penalizing growth andpenalizing innovation
without really thinking about
how we can make this work better.
So, another issue that I know is out there
that I wanted to talk to youabout, which is Buy America.
There's a recent hearing on Buy America,
and I know there's been a lot of confusion
with the new standards comingout of the administration
as it relates to IIJA projects,so what is going on there
(17:05):
and how is that impactingconstruction projects?
- You know, every member Italk to out of AGC is all in
on bringing back domesticmanufacturing in this country.
Unfortunately, the challengeconstruction companies face
is whenever they decideto bid on a project,
they go to their suppliers
to get quotes for different materials,
(17:25):
and when they get thesematerials from them,
they'll get what they call
a Buy America certification letter.
In transportation space at USDOT,
they've been dealing withthese Buy America requirements
for decades at this point.
Now, the IIJA expanded these iron
and steel Buy America requirements
into construction materials.
(17:45):
This is a very broadexpansion of this policy,
and I would stress thisis going to take years
to see the benefits of the USmanufacturing brought back.
This is not going to bethe flick of a switch.
One of the challenges we've seen
is the Office of Management and Budget,
who has the Made in America Office,
(18:06):
has put out conflictingguidance from time to time,
often six months apart, a year apart,
and it's really created confusion.
And so what it means for our members,
again, who aren't suppliers,is they go to their suppliers
and instead of getting a BuyAmerica certification letter,
they get a quote with an asterisk,
denoting that they cannot certify
(18:27):
that these materials willbe Buy America compliant.
So what that does for a contractor
is it really creates a lot of uncertainty.
Do you choose to go forwardwith bidding on a project
that you're not surethat you're gonna be able
to get the materials neededthat are Buy America compliant?
And what it usually means isthat you've got to account
(18:47):
for that uncertainty in yourbid, which means higher bids
to make sure you don't lose your shirt
if you choose to goforward with this project.
- So if you do get, let's say,
because of the uncertainty with the letter
that say they can'tguarantee it will meet that,
what if you move forwardand you get the products,
(19:08):
but then, what happens?
How does that work inthe construction phase,
if what you're using isactually not compliant?
Do you have to restart,how does that work?
- No, that's a great question.
So you have to get what theycall a Buy America waiver.
And again, since we'vehad these requirements
of USDOT for almost 40 years,
(19:29):
this is something thatthere's a history of,
and that history is that that process
can be very opaque and very slow.
You'll oftentimes, justrecently about past summer
in, I think it was August of2023, they put up a notice
that they had receiveda Buy America waiver
(19:49):
at Federal Highways from arequest from the Illinois DOT
for some pumps, and inthe request they noted
that the waiver wasreceived by Federal Highways
in May of 2021.
So for two years, they had this waiver
that they never putout for public comment.
(20:09):
Once they did put itout for public comment,
it appears that there'sa manufacturer in the US
that says that they make those pumps
that are Buy Americacompliant and could help.
And so, again, why didn't they publish it?
Well, to even publish the waiverrequest for public comment,
it has to go up all the way
through the Office of the Secretary
(20:30):
and over to the Officeof Management and Budget
in the White House, andto us, that's absurd.
I mean, that is like makingevery public school principal
send up a sick note from aparent and get signed off
by the Secretary or theDepartment of Education.
Or, as our member pointed out,
that would be like me being the CEO
(20:51):
of a construction company of 400 people
and having to approveevery single PTO request
for every single employee.
- Right, so this soundslike something that,
as we look at the next highway bill,
there's some opportunitiesto maybe clear this up
and have Congress reallytell the administration
how we should be implementing this.
Is that something thatyou think should be done?
(21:11):
- Yes, we believe that we need to...
The term we keep using
is we need to depoliticize the process.
And how you depoliticize the process
is let the people who know the projects
out in the field makethe decisions on this.
For example, right now Imentioned all the waiver requests
are going all the wayup to the White House.
The Federal Highway Administration
(21:32):
has a division office in each state.
These division offices arefamiliar with the state DOTs,
roadways, the projects,let them be the determiner
of whether it merits a Buy America waiver.
- That makes a lot of sense.
All right, so we're gonnamove into our last question,
and this is a question we'veasked every guest so far,
and we've had some fun answers,
(21:53):
so I wanted to hear what your take is.
If you had the ability to do one thing,
wave your magic wand anddo one thing to really help
and improve the constructionindustry in America,
what would it be?
- You're asking about improvethe construction industry?
- Yeah, your portion of theinfrastructure highway bill.
(22:14):
- Well, I would give two answers to that,
actually, if I'm allowed.
First establish a sustainable user fee
and get back to a system
where everybody pays for what they use.
And we have a real opportunity,
the growth of electric vehicles.
We don't have a hugemarket penetration yet,
and it would be an opportune time
to come up with a sustainable user fee.
(22:36):
The second would be tobring back earmarks.
I think if you can get membersof Congress more engaged
with specific projects in their district
and have a skin in thegame and an interest
in helping those specificprojects move forward,
it will help highway bills move more.
- I remember one one year doinga highway bill as a staffer,
(22:56):
that was a very big point of discussion
among many of the (indistinct),
longer term members of Congress
who I think would definitelyagree with you on that.
Well Alex Etchen, thank you so much
for coming on the"Driving Forward Podcast."
I hope to have you on again sometime soon.
- Yes, thank you Andrew.(upbeat music)
- All right, well I thought
that was a greatinterview with Alex today.
(23:17):
I really appreciate him coming on.
I hope everyone learned a lot
about the construction industry.
Please continue to listen tothe "Driving Forward Podcast"
wherever you get your podcasts.
(upbeat music)
(00:05):
- Hello and welcome to the"Driving Forward Podcast."
I am your host, Andrew Stasiowski
of the American Highway Users Alliance.
We have a great interview
in the construction industrylined up for you today.
But first, here are my threekey points from the interview.
First, inflation has beena significant problem
(00:26):
for the construction industry.
Estimates show about a37% increase in the cost
of construction materialssince inflation started.
That's compared to about19% for consumer goods
over the same period.
Though costs have stabilized,
there is no indicationthat they'll come back down
to where they were pre inflation.
This means that the IIJAwill fund fewer projects
(00:47):
than originally thought, and we will need
to maintain IIJA funding levelsin the next highway bill.
Second, reforming the HighwayTrust Fund is essential.
We need to get awayfrom general fund money.
Funding the long-term solutionto the Highway Trust Fund
will not only give statesthe certainty of funding,
it'll allow the construction industry
(01:08):
to invest in new equipmentand add employees.
Third, the Federal Highway Administration
did not have congressionalauthority when it issued
its Greenhouse GasPerformance Measurement Rule.
This rule penalizes statesexperiencing population
and economic growth and discourages states
from investing in new roads and bridges.
(upbeat music)And now onto our interview.
(01:33):
Joining us today is Alex Etchen.
Alex is the Senior Directorfor Infrastructure Advancement
with the Associated GeneralContractors of America.
AGC is the voice of theconstruction industry.
Their members build everythingfrom roads and bridges
to airports, military bases,schools, and hospitals.
Alex, welcome to the"Driving Forward Podcast."
- Thank you, Andrew, andthank you for having me.
(01:53):
- Thank you for coming on.
So I think, like we liketo do on this podcast,
just hoping you could talk
about the constructionindustry as a whole.
How big are you,
what is your industry'simpact on the economy?
Just kind of give us anoverview of what AGC does.
- So, AGC representsconstruction companies
all across the country.
We have about 27,000 firms in total
(02:16):
that all belong to AGCchapters across the country,
so we have about 89 of those,
represent union and openshop construction companies.
And by nature, the construction industry,
I like to remind people,is very small business.
91% of construction companieshave 20 or fewer employees.
- Oh wow, that's unexpected.
(02:38):
So, we're a little overtwo years into the IIJA.
What has been the impact of the law
on the construction industry?
- Sure, so the last year or two years
have really been markedby managing inflation.
We've seen the price ofconstruction materials increase
by about 37% since 2020,
(02:59):
nearly twice as high as therate of consumer inflation,
which was about 19%during that same period.
And according to the FederalHighway Administration,
construction costs hasbeen hit even harder,
and we've seen about a 50%increase since December of 2020.
Specifically, some of thosematerials I was gonna highlight
were just, you know,
we've seen a increase in113% in the price of diesel,
(03:23):
60% increase in the price of steel mills,
44% increase in the price of gypsum,
which is used in drywall,
and a 31% increase in the price of cement.
So I flag that before I get into the IIJA,
because I know the IIJAincluded these large funding
for our transportation assets,
but really, a lot of it hasbeen absorbed by inflation.
(03:46):
And I also wanna flag that,
because without theIIJA the past two years,
I think you would'veseen state departments
of transportation cuttingtheir budgets by 20 to 30%
and in terms of the projects
that they were able tolet out for construction.
- So with all thatinflation, have you seen,
how has that been on theconstruction phase itself?
(04:09):
Has that caused states
to reduce the number ofprojects they're building
or slow down some of the projects
that they may have done,
instead of doing three,they're gonna do two.
How has that played out on your end?
- Yeah, so in the beginning,
it really caused chaos, if you will,
because what was happening is
before a state DOT lets these projects,
(04:30):
they have what they callan engineer's estimate,
so they've looked at these projects
and think it's gonna cost X,
and you were having these bids come in
from construction companiesthat were 30, 40, 50%
over what these engineers had estimated,
so they had to pull back on projects.
I think now we've seeninflation really level off,
so there's a little bitmore certainty there.
(04:52):
I do flag.
Our members have reported tous, they haven't seen the cost
of these construction materials
necessarily come down significantly,
but the inflation has stopped.
Talking more specifically on the IIJA,
the other thing I'll sayis, as you and I know,
everybody, once they passan infrastructure bill,
(05:12):
wanna have ribbon cuttingsand wanna have new assets
to show their constituents,but these projects take time.
And Congress and the White House
really got it right this time.
If you remember back to the Recovery Act,
and I think it was 2009,they put in a stipulation
that the projects had tobe quote, "shovel ready,"
which really limited the types of projects
(05:34):
that could be built.
So you had a lot of bridge painting,
a lot of basic repaving of roadways,
but you didn't really get thelarge infrastructure projects.
You didn't get like the BrentSpence Bridges, if you will.
So, flash forward to theIIJA, they got it right.
They provided five yearsof dedicated funding,
increased funding for these states
(05:55):
to plan long-term projects.
And what you've seen though
is that funding for these projects
is just one part of the equation.
There's other project readinessfactors that go into that.
The project has to havegone through engineering.
It has to have gone throughNEPA, it has to have permits.
So, we're really just starting to see
these larger infrastructureprojects come to fruition.
(06:17):
The first two years really were
a lot of repaving andrepair work, if you will.
- I've heard that from our members
that the projects arebeing put out for bid,
but they're not actuallyreally being funded.
Are they starting to be funded more now?
- Yes, we actually had,
one of our members was justin Washington testifying
before the Transportation Committee,
(06:38):
and she was asked about this,
"Have you seen a largeinflux of projects?"
And before coming, she spokedirectly with her state DOT
and they said, "We'reanticipating 2024 and 2025
"to be much bigger construction projects
"where a lot of these largerinfrastructure projects
(06:58):
"are able to start tofinally break ground."
- That's good to hear, soanother thing you mentioned,
and it's an issue we've workedon a lot in the last year,
has been NEPA.
There was multiple effortsby CEQ in the last year
to get involved in NEPA.
What has been your take on the efforts
to shorten the NEPA timeline?
(07:19):
- Andrew, this is oneof the biggest issues
we hear from our members,
and we report to them all of these bills
that have been signed into law
that have provisions in themto streamline these processes.
And the IIJA had provisions,the Fiscal Responsibility Act,
efforts to streamline the process,
(07:39):
establish a lead federalagency, create timelines,
page limits, limit who can file lawsuits,
protesting a NEPA decision.
And what we've really seen
is that the administrationhas really cherry picked
which provisions they'regoing to implement
and further cherry picked
whether they're gonnaactually enforce them.
(08:00):
The other big challenge is,
and this goes for a lot of agencies,
you really need somebodyat all of these agencies
to champion these NEPA reforms,
somebody to remind project sponsors
that there's been changes made
that you're not allowedto relocate utilities
before a final record ofdecision, remind agencies
(08:21):
that they can use each other'scategorical exclusions,
and we really haven'tseen that happen yet.
- Okay, shifting gears a bit,
and I think you touchedon it a little bit earlier
when you were talking about the difference
between the IIJA and the Recovery Act.
But we're about two years in,
obviously we're looking atthe next highway bill already
the highway users.
Given what we havelearned during the IIJA,
(08:42):
what are your thoughts on the needs
for the next highway billto continue to move forward
with getting more projectsbuilt in that sense?
- The IIJA really representsthe biggest infusion
of investment in our infrastructure
since the interstate highwaysystem in about the mid 1950s.
And while this is a huge success,
(09:05):
you have to look at the data.
And the trip data out there shows
that about 40% of theroads in the United States
are still in poor or mediocre condition.
This ends up costing theaverage driver about $621 a year
in the form of repairs,accelerated vehicle depreciation,
increased fuel consumption and tire wear.
(09:25):
So you factor that in with the increase
in electric vehicleswithin the nation's fleet,
these EVs are heavier
than their internal combustionengine counterparts.
They're causing greater wearand tear on the roadways,
so there's really no question
that the needs are gonna be there.
So looking at the nexthighway bill, first off,
(09:46):
I would stress thatthere's gonna be the need
to preserve the Highway Trust Fund
and avoid relying in theannual appropriations process
to ensure that road and bridge projects
are not subject to governmentshutdowns or spending cuts.
For the Highway Trust Fund
for construction companiesis really important.
It provides certainty tothese construction companies
(10:09):
that there's years offunding in the pipeline,
so it provides them certainty
to invest in new constructionequipment, hire new workers.
It provides certainty to theactual workers themselves
or people consideringgetting into that field
that there's going to be work ahead.
- No, I think that's a great answer,
and I think you mentioned the trust fund
(10:30):
and the concerns there,we are in 100% agreement,
and it's something we've beentalking about on this podcast
with some of our other guests.
And so, what are your concerns
with the stability of the trust fund?
What would happen if wejust didn't do anything
and let it just continue to go as it is?
- AGC really supports theuser fee, user pay system.
We believe it's very fair.
(10:50):
Users are essentiallypaying for what they use.
Because the gas tax wasnot indexed to inflation,
we have increased fuel efficiency.
What we've seen is thatover the last 30 years,
the Highway Trust Fundhas lost purchasing power.
Then you factor in anincrease in electric vehicles,
(11:11):
and we're really hitting a point
where the Highway Trust Fundis relying more and more
on a general fund transferinto the Highway Trust Fund,
which of course, Congress requires
that there has to be a pay for,
for that general fund transfer.
That makes it much more challengingto get these bills done.
We believe that highwaybills would, you know,
this wouldn't be a once in ageneration transportation bill
(11:34):
as they've been callingit, and instead, the norm,
if there wasn't this needto scrap together pay fors.
- I know we always kindof put a cost estimate
to the ability to bring our roads
and bridges into full repair.
Do you know what thatnumber is these days?
- I haven't seen...
So the number I have actuallylooked at in the past
has been from the FederalHighway Administration's
(11:55):
Conditions and Performance Report.
They haven't released anew issue of that report,
but it was prior to the IIJA,
I believe it was almost $800 billion
in a backlog of repairs.
Now again, the IIJA is goingto make a dent in that,
but we still have a long way to go.
- Right, so we need tofind the funding source
that's going to continueIIJA funding levels,
(12:19):
but be solidified.
We need real hard money,
not general fund, as you talked about,
especially as we look into the next decade
where Medicare, Medicaid,Social Security interests
on the debts gonna reallystart to take a big chunk
out of the available general fund.
So, we agree there needs to be a reform
(12:40):
that can move us into the new era
of vehicle and funding sources
and all of that forthe Highway Trust Fund.
Another issue on highway investment
and how we're allocating our funds,
the House and Senate haveintroduced a joint resolution
of disapproval for the FederalHighway Administration's
Greenhouse Gas PerformanceMeasurement Rule.
(13:02):
And what are yourthoughts on the GHG rule,
and how would it impact road construction?
- Well, I wanna startby saying AGC believes
that the administration doesn'thave the statutory authority
to issue this rule.
This is a proposal that'sbeen around for years.
Congress has repeatedly debated this topic
and repeatedly rejected it.
(13:24):
So starting there, I'll just reiterate,
we don't believe they have that authority.
Now, you hear them say a lot of times
that they're requiring states
to set declining carbon dioxide emissions
and that there's quote,
"no penalty if theydon't hit those targets."
However, the rule does statethat they have to submit a plan
(13:48):
to the Federal Highway Administration
that is backed up by data
on how they will hit thosetargets in the future.
That means this is definitelygoing to have an impact
on states' projectselections going forward.
It is going to favor moreclimate change-friendly projects,
like bike paths, electricvehicle chargers,
procurement of buses,investment in Amtrak trains
(14:10):
over investing in roads and bridges.
- Yeah, I think one of the concerns
we've also had with thisis as you have areas
that are seeing large growth,
I don't know why Ialways picked Nashville,
but I pick Tennessee a lot in this area,
a lot of people are moving there.
That means a lot more economic activity,
which you're gonna naturallyneed more trucks, more cars,
(14:33):
more roads to accommodate that.
I don't see how a place like a Nashville
or any growing area can be in compliance
with the declining measurement
that they're requiring inthis rule, what do you think?
- You're absolutely right.
I always use the example of New York.
If New York has to reduceits carbon dioxide emissions,
(14:56):
a very easy way for them to do that
will be to invest in theNew York City subway,
add capacity, add stops,get people to ride it more.
A lot of these other cities
do not have a large legacytransit system like New York
that they can invest in.
So they're, therefore,relying on encouraging people
to get out of their cars andonto a public transit bus,
(15:18):
or they're encouragingthem to bike to work,
or encouraging them toget an electric vehicle.
Back to our witness that washere testifying from Wyoming,
she gave the example of two towns
that are about 20 miles apart,
and in one town it can be 60 degrees
and snowing in the other townbecause it's in the mountains.
And she said, "How are they going
(15:40):
"to bike to work in that scenario?"
So you're truly relyingon electric vehicles.
And at that point, thereare very pre-established,
grounded opinions on electricvehicles in this country.
And trying to convincesome of these people
to give up their internalcombustion engine vehicle
(16:00):
in exchange for an electricone is gonna be challenging.
So you're absolutely right
that this rule reallytreats every state the same,
which is really something AGC objected to,
because these more rural states
are emitting a fraction ofthe greenhouse gas emissions
as these more populous states
(16:20):
and have fewer options to reduce them.
- We had Chris Spear on last month,
and I think he talked a lot
about how we've gone so farin our manufacturing space
on trucks and cars toreally reduce the amount
of greenhouse gas that arecoming out of the new vehicles.
And to me, it seems like we'rejust continuing down the road
(16:41):
of penalizing growth andpenalizing innovation
without really thinking about
how we can make this work better.
So, another issue that I know is out there
that I wanted to talk to youabout, which is Buy America.
There's a recent hearing on Buy America,
and I know there's been a lot of confusion
with the new standards comingout of the administration
as it relates to IIJA projects,so what is going on there
(17:05):
and how is that impactingconstruction projects?
- You know, every member Italk to out of AGC is all in
on bringing back domesticmanufacturing in this country.
Unfortunately, the challengeconstruction companies face
is whenever they decideto bid on a project,
they go to their suppliers
to get quotes for different materials,
(17:25):
and when they get thesematerials from them,
they'll get what they call
a Buy America certification letter.
In transportation space at USDOT,
they've been dealing withthese Buy America requirements
for decades at this point.
Now, the IIJA expanded these iron
and steel Buy America requirements
into construction materials.
(17:45):
This is a very broadexpansion of this policy,
and I would stress thisis going to take years
to see the benefits of the USmanufacturing brought back.
This is not going to bethe flick of a switch.
One of the challenges we've seen
is the Office of Management and Budget,
who has the Made in America Office,
(18:06):
has put out conflictingguidance from time to time,
often six months apart, a year apart,
and it's really created confusion.
And so what it means for our members,
again, who aren't suppliers,is they go to their suppliers
and instead of getting a BuyAmerica certification letter,
they get a quote with an asterisk,
denoting that they cannot certify
(18:27):
that these materials willbe Buy America compliant.
So what that does for a contractor
is it really creates a lot of uncertainty.
Do you choose to go forwardwith bidding on a project
that you're not surethat you're gonna be able
to get the materials neededthat are Buy America compliant?
And what it usually means isthat you've got to account
(18:47):
for that uncertainty in yourbid, which means higher bids
to make sure you don't lose your shirt
if you choose to goforward with this project.
- So if you do get, let's say,
because of the uncertainty with the letter
that say they can'tguarantee it will meet that,
what if you move forwardand you get the products,
(19:08):
but then, what happens?
How does that work inthe construction phase,
if what you're using isactually not compliant?
Do you have to restart,how does that work?
- No, that's a great question.
So you have to get what theycall a Buy America waiver.
And again, since we'vehad these requirements
of USDOT for almost 40 years,
(19:29):
this is something thatthere's a history of,
and that history is that that process
can be very opaque and very slow.
You'll oftentimes, justrecently about past summer
in, I think it was August of2023, they put up a notice
that they had receiveda Buy America waiver
(19:49):
at Federal Highways from arequest from the Illinois DOT
for some pumps, and inthe request they noted
that the waiver wasreceived by Federal Highways
in May of 2021.
So for two years, they had this waiver
that they never putout for public comment.
(20:09):
Once they did put itout for public comment,
it appears that there'sa manufacturer in the US
that says that they make those pumps
that are Buy Americacompliant and could help.
And so, again, why didn't they publish it?
Well, to even publish the waiverrequest for public comment,
it has to go up all the way
through the Office of the Secretary
(20:30):
and over to the Officeof Management and Budget
in the White House, andto us, that's absurd.
I mean, that is like makingevery public school principal
send up a sick note from aparent and get signed off
by the Secretary or theDepartment of Education.
Or, as our member pointed out,
that would be like me being the CEO
(20:51):
of a construction company of 400 people
and having to approveevery single PTO request
for every single employee.
- Right, so this soundslike something that,
as we look at the next highway bill,
there's some opportunitiesto maybe clear this up
and have Congress reallytell the administration
how we should be implementing this.
Is that something thatyou think should be done?
(21:11):
- Yes, we believe that we need to...
The term we keep using
is we need to depoliticize the process.
And how you depoliticize the process
is let the people who know the projects
out in the field makethe decisions on this.
For example, right now Imentioned all the waiver requests
are going all the wayup to the White House.
The Federal Highway Administration
(21:32):
has a division office in each state.
These division offices arefamiliar with the state DOTs,
roadways, the projects,let them be the determiner
of whether it merits a Buy America waiver.
- That makes a lot of sense.
All right, so we're gonnamove into our last question,
and this is a question we'veasked every guest so far,
and we've had some fun answers,
(21:53):
so I wanted to hear what your take is.
If you had the ability to do one thing,
wave your magic wand anddo one thing to really help
and improve the constructionindustry in America,
what would it be?
- You're asking about improvethe construction industry?
- Yeah, your portion of theinfrastructure highway bill.
(22:14):
- Well, I would give two answers to that,
actually, if I'm allowed.
First establish a sustainable user fee
and get back to a system
where everybody pays for what they use.
And we have a real opportunity,
the growth of electric vehicles.
We don't have a hugemarket penetration yet,
and it would be an opportune time
to come up with a sustainable user fee.
(22:36):
The second would be tobring back earmarks.
I think if you can get membersof Congress more engaged
with specific projects in their district
and have a skin in thegame and an interest
in helping those specificprojects move forward,
it will help highway bills move more.
- I remember one one year doinga highway bill as a staffer,
(22:56):
that was a very big point of discussion
among many of the (indistinct),
longer term members of Congress
who I think would definitelyagree with you on that.
Well Alex Etchen, thank you so much
for coming on the"Driving Forward Podcast."
I hope to have you on again sometime soon.
- Yes, thank you Andrew.(upbeat music)
- All right, well I thought
that was a greatinterview with Alex today.
(23:17):
I really appreciate him coming on.
I hope everyone learned a lot
about the construction industry.
Please continue to listen tothe "Driving Forward Podcast"
wherever you get your podcasts.
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