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Are you a highway user who wants to travel on safe, less congested roads?
Join Andrew Stasiowski, President and CEO of the American Highway Users Alliance, as he speaks with leading experts about the latest policies impacting the transportation community. Each month, Andrew will cover topics of critical importance to the highway user community, from reducing congestion on roads, to reforming highway trust funds, to increasing global competitiveness.
Listen to new episodes of “Driving Forward” wherever you get your podcasts.
The American Highway Users Alliance is a nonprofit organization advocating for public policies that promote roadway safety, increase freedom of movement, and preserve opportunities for all people to live, work, shop, and travel unencumbered.
To learn more about AHUA, you can visit our website.
(upbeat music)
- 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 industry
lined up for you today.
But first, here are my three
key points from the interview.
First, inflation has been
a significant problem
for the construction industry.
Estimates show about a
37% increase in the cost
of construction materials
since inflation started.
That's compared to about
19% for consumer goods
over the same period.
Though costs have stabilized,
there is no indication
that they'll come back down
to where they were pre inflation.
This means that the IIJA
will fund fewer projects
than originally thought, and we will need
to maintain IIJA funding levels
in the next highway bill.
Second, reforming the Highway
Trust Fund is essential.
We need to get away
from general fund money.
Funding the long-term solution
to the Highway Trust Fund
will not only give states
the certainty of funding,
it'll allow the construction industry
to invest in new equipment
and add employees.
Third, the Federal Highway Administration
did not have congressional
authority when it issued
its Greenhouse Gas
Performance Measurement Rule.
This rule penalizes states
experiencing population
and economic growth and discourages states
from investing in new roads and bridges.
(upbeat music)
And now onto our interview.
Joining us today is Alex Etchen.
Alex is the Senior Director
for Infrastructure Advancement
with the Associated General
Contractors of America.
AGC is the voice of the
construction industry.
Their members build everything
from roads and bridges
to airports, military bases,
schools, and hospitals.
Alex, welcome to the
"Driving Forward Podcast."
- Thank you, Andrew, and
thank you for having me.
- Thank you for coming on.
So I think, like we like
to do on this podcast,
just hoping you could talk
about the construction
industry as a whole.
How big are you,
what is your industry's
impact on the economy?
Just kind of give us an
overview of what AGC does.
- So, AGC represents
construction companies
all across the country.
We have about 27,000 firms in total
that all belong to AGC
chapters across the country,
so we have about 89 of those,
represent union and open
shop construction companies.
And by nature, the construction industry,
I like to remind people,
is very small business.
91% of construction companies
have 20 or fewer employees.
- Oh wow, that's unexpected.
So, we're a little over
two 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 marked
by managing inflation.
We've seen the price of
construction materials increase
by about 37% since 2020,
nearly twice as high as the
rate of consumer inflation,
which was about 19%
during that same period.
And according to the Federal
Highway Administration,
construction costs has
been hit even harder,
and we've seen about a 50%
increase since December of 2020.
Specifically, some of those
materials I was gonna highlight
were just, you know,
we've seen a increase in
113% in the price of diesel,
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 IIJA
included these large funding
for our transportation assets,
but really, a lot of it has
been absorbed by inflation.
And I also wanna flag that,
because without the
IIJA the past two years,
I think you would've
seen state departments
of transportation cutting
their budgets by 20 to 30%
and in terms of the projects
that they were able to
let out for construction.
- So with all that
inflation, have you seen,
how has that been on the
construction phase itself?
Has that caused states
to reduce the number of
projects 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,
they have what they call
an 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 companies
that were 30, 40, 50%
over what these engineers had estimated,
so they had to pull back on projects.
I think now we've seen
inflation really level off,
so there's a little bit
more certainty there.
I do flag.
Our members have reported to
us, 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 say
is, as you and I know,
everybody, once they pass
an infrastructure bill,
wanna have ribbon cuttings
and 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 to
be quote, "shovel ready,"
which really limited the types of projects
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 the
large infrastructure projects.
You didn't get like the Brent
Spence Bridges, if you will.
So, flash forward to the
IIJA, they got it right.
They provided five years
of dedicated funding,
increased funding for these states
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 readiness
factors that go into that.
The project has to have
gone through engineering.
It has to have gone through
NEPA, it has to have permits.
So, we're really just starting to see
these larger infrastructure
projects come to fruition.
The first two years really were
a lot of repaving and
repair work, if you will.
- I've heard that from our members
that the projects are
being put out for bid,
but they're not actually
really being funded.
Are they starting to be funded more now?
- Yes, we actually had,
one of our members was just
in Washington testifying
before the Transportation Committee,
and she was asked about this,
"Have you seen a large
influx of projects?"
And before coming, she spoke
directly with her state DOT
and they said, "We're
anticipating 2024 and 2025
"to be much bigger construction projects
"where a lot of these larger
infrastructure projects
"are able to start to
finally break ground."
- That's good to hear, so
another thing you mentioned,
and it's an issue we've worked
on a lot in the last year,
has been NEPA.
There was multiple efforts
by CEQ in the last year
to get involved in NEPA.
What has been your take on the efforts
to shorten the NEPA timeline?
- Andrew, this is one
of 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 them
to streamline these processes.
And the IIJA had provisions,
the Fiscal Responsibility Act,
efforts to streamline the process,
establish a lead federal
agency, create timelines,
page limits, limit who can file lawsuits,
protesting a NEPA decision.
And what we've really seen
is that the administration
has really cherry picked
which provisions they're
going to implement
and further cherry picked
whether they're gonna
actually enforce them.
The other big challenge is,
and this goes for a lot of agencies,
you really need somebody
at all of these agencies
to champion these NEPA reforms,
somebody to remind project sponsors
that there's been changes made
that you're not allowed
to relocate utilities
before a final record of
decision, remind agencies
that they can use each other's
categorical exclusions,
and we really haven't
seen that happen yet.
- Okay, shifting gears a bit,
and I think you touched
on 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 at
the next highway bill already
the highway users.
Given what we have
learned during the IIJA,
what are your thoughts on the needs
for the next highway bill
to continue to move forward
with getting more projects
built in that sense?
- The IIJA really represents
the biggest infusion
of investment in our infrastructure
since the interstate highway
system in about the mid 1950s.
And while this is a huge success,
you have to look at the data.
And the trip data out there shows
that about 40% of the
roads in the United States
are still in poor or mediocre condition.
This ends up costing the
average driver about $621 a year
in the form of repairs,
accelerated vehicle depreciation,
increased fuel consumption and tire wear.
So you factor that in with the increase
in electric vehicles
within the nation's fleet,
these EVs are heavier
than their internal combustion
engine counterparts.
They're causing greater wear
and tear on the roadways,
so there's really no question
that the needs are gonna be there.
So looking at the next
highway bill, first off,
I would stress that
there's gonna be the need
to preserve the Highway Trust Fund
and avoid relying in the
annual appropriations process
to ensure that road and bridge projects
are not subject to government
shutdowns or spending cuts.
For the Highway Trust Fund
for construction companies
is really important.
It provides certainty to
these construction companies
that there's years of
funding in the pipeline,
so it provides them certainty
to invest in new construction
equipment, hire new workers.
It provides certainty to the
actual workers themselves
or people considering
getting 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
and the concerns there,
we are in 100% agreement,
and it's something we've been
talking 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 we
just didn't do anything
and let it just continue to go as it is?
- AGC really supports the
user fee, user pay system.
We believe it's very fair.
Users are essentially
paying for what they use.
Because the gas tax was
not indexed to inflation,
we have increased fuel efficiency.
What we've seen is that
over the last 30 years,
the Highway Trust Fund
has lost purchasing power.
Then you factor in an
increase in electric vehicles,
and we're really hitting a point
where the Highway Trust Fund
is relying more and more
on a general fund transfer
into 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 challenging
to get these bills done.
We believe that highway
bills would, you know,
this wouldn't be a once in a
generation transportation bill
as they've been calling
it, and instead, the norm,
if there wasn't this need
to scrap together pay fors.
- I know we always kind
of put a cost estimate
to the ability to bring our roads
and bridges into full repair.
Do you know what that
number is these days?
- I haven't seen...
So the number I have actually
looked at in the past
has been from the Federal
Highway Administration's
Conditions and Performance Report.
They haven't released a
new 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 going
to make a dent in that,
but we still have a long way to go.
- Right, so we need to
find the funding source
that's going to continue
IIJA funding levels,
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 really
start to take a big chunk
out of the available general fund.
So, we agree there needs to be a reform
that can move us into the new era
of vehicle and funding sources
and all of that for
the Highway Trust Fund.
Another issue on highway investment
and how we're allocating our funds,
the House and Senate have
introduced a joint resolution
of disapproval for the Federal
Highway Administration's
Greenhouse Gas Performance
Measurement Rule.
And what are your
thoughts on the GHG rule,
and how would it impact road construction?
- Well, I wanna start
by saying AGC believes
that the administration doesn't
have the statutory authority
to issue this rule.
This is a proposal that's
been around for years.
Congress has repeatedly debated this topic
and repeatedly rejected it.
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 they
don't hit those targets."
However, the rule does state
that they have to submit a plan
to the Federal Highway Administration
that is backed up by data
on how they will hit those
targets in the future.
That means this is definitely
going to have an impact
on states' project
selections going forward.
It is going to favor more
climate change-friendly projects,
like bike paths, electric
vehicle chargers,
procurement of buses,
investment in Amtrak trains
over investing in roads and bridges.
- Yeah, I think one of the concerns
we've also had with this
is as you have areas
that are seeing large growth,
I don't know why I
always 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 naturally
need more trucks, more cars,
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 in
this rule, what do you think?
- You're absolutely right.
I always use the example of New York.
If New York has to reduce
its carbon dioxide emissions,
a very easy way for them to do that
will be to invest in the
New York City subway,
add capacity, add stops,
get people to ride it more.
A lot of these other cities
do not have a large legacy
transit system like New York
that they can invest in.
So they're, therefore,
relying on encouraging people
to get out of their cars and
onto a public transit bus,
or they're encouraging
them to bike to work,
or encouraging them to
get an electric vehicle.
Back to our witness that was
here 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 town
because it's in the mountains.
And she said, "How are they going
"to bike to work in that scenario?"
So you're truly relying
on electric vehicles.
And at that point, there
are very pre-established,
grounded opinions on electric
vehicles in this country.
And trying to convince
some of these people
to give up their internal
combustion engine vehicle
in exchange for an electric
one is gonna be challenging.
So you're absolutely right
that this rule really
treats every state the same,
which is really something AGC objected to,
because these more rural states
are emitting a fraction of
the greenhouse gas emissions
as these more populous states
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 far
in our manufacturing space
on trucks and cars to
really reduce the amount
of greenhouse gas that are
coming out of the new vehicles.
And to me, it seems like we're
just continuing down the road
of penalizing growth and
penalizing 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 you
about, 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 coming
out of the administration
as it relates to IIJA projects,
so what is going on there
and how is that impacting
construction projects?
- You know, every member I
talk to out of AGC is all in
on bringing back domestic
manufacturing in this country.
Unfortunately, the challenge
construction companies face
is whenever they decide
to bid on a project,
they go to their suppliers
to get quotes for different materials,
and when they get these
materials from them,
they'll get what they call
a Buy America certification letter.
In transportation space at USDOT,
they've been dealing with
these Buy America requirements
for decades at this point.
Now, the IIJA expanded these iron
and steel Buy America requirements
into construction materials.
This is a very broad
expansion of this policy,
and I would stress this
is going to take years
to see the benefits of the US
manufacturing brought back.
This is not going to be
the 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,
has put out conflicting
guidance 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 Buy
America certification letter,
they get a quote with an asterisk,
denoting that they cannot certify
that these materials will
be Buy America compliant.
So what that does for a contractor
is it really creates a lot of uncertainty.
Do you choose to go forward
with bidding on a project
that you're not sure
that you're gonna be able
to get the materials needed
that are Buy America compliant?
And what it usually means is
that you've got to account
for that uncertainty in your
bid, which means higher bids
to make sure you don't lose your shirt
if you choose to go
forward with this project.
- So if you do get, let's say,
because of the uncertainty with the letter
that say they can't
guarantee it will meet that,
what if you move forward
and you get the products,
but then, what happens?
How does that work in
the construction phase,
if what you're using is
actually not compliant?
Do you have to restart,
how does that work?
- No, that's a great question.
So you have to get what they
call a Buy America waiver.
And again, since we've
had these requirements
of USDOT for almost 40 years,
this is something that
there's a history of,
and that history is that that process
can be very opaque and very slow.
You'll oftentimes, just
recently about past summer
in, I think it was August of
2023, they put up a notice
that they had received
a Buy America waiver
at Federal Highways from a
request from the Illinois DOT
for some pumps, and in
the request they noted
that the waiver was
received by Federal Highways
in May of 2021.
So for two years, they had this waiver
that they never put
out for public comment.
Once they did put it
out for public comment,
it appears that there's
a manufacturer in the US
that says that they make those pumps
that are Buy America
compliant and could help.
And so, again, why didn't they publish it?
Well, to even publish the waiver
request for public comment,
it has to go up all the way
through the Office of the Secretary
and over to the Office
of Management and Budget
in the White House, and
to us, that's absurd.
I mean, that is like making
every public school principal
send up a sick note from a
parent and get signed off
by the Secretary or the
Department of Education.
Or, as our member pointed out,
that would be like me being the CEO
of a construction company of 400 people
and having to approve
every single PTO request
for every single employee.
- Right, so this sounds
like something that,
as we look at the next highway bill,
there's some opportunities
to maybe clear this up
and have Congress really
tell the administration
how we should be implementing this.
Is that something that
you think should be done?
- 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 make
the decisions on this.
For example, right now I
mentioned all the waiver requests
are going all the way
up to the White House.
The Federal Highway Administration
has a division office in each state.
These division offices are
familiar 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 gonna
move into our last question,
and this is a question we've
asked every guest so far,
and we've had some fun answers,
so I wanted to hear what your take is.
If you had the ability to do one thing,
wave your magic wand and
do one thing to really help
and improve the construction
industry in America,
what would it be?
- You're asking about improve
the construction industry?
- Yeah, your portion of the
infrastructure highway bill.
- 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 huge
market penetration yet,
and it would be an opportune time
to come up with a sustainable user fee.
The second would be to
bring back earmarks.
I think if you can get members
of Congress more engaged
with specific projects in their district
and have a skin in the
game and an interest
in helping those specific
projects move forward,
it will help highway bills move more.
- I remember one one year doing
a highway bill as a staffer,
that was a very big point of discussion
among many of the (indistinct),
longer term members of Congress
who I think would definitely
agree 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 great
interview with Alex today.
I really appreciate him coming on.
I hope everyone learned a lot
about the construction industry.
Please continue to listen to
the "Driving Forward Podcast"
wherever you get your podcasts.