Breaking Down Infrastructure Funding for The American Rescue Plan Act and Bipartisan Infrastructure Law
by John Kronkus | March 21, 2022
Funding ‘About Me’
Signed into law in March 2021, the trillion American Rescue Plan Act (ARPA) is distributing more than $360 billion in infrastructure related funding for state, local, territorial, and Tribal governments, part of which can be used for “government services,” particularly of interest to state and local governments preparing for infrastructure projects (ref).
Passed in November 2021, the Infrastructure Investment and Jobs Act, also known as the Bipartisan Infrastructure Law (BIL), designates $1.2 trillion for long-term revitalization of the U.S.’s aging infrastructure.
Thanks to these two federal initiatives and a few others, funding is available for state and local governments, capital project owners, and those seeking to make infrastructure improvements.
The resulting question has been, "As a capital program manager, owner, or government service provider, how can you best position yourself to receive these infrastructure-related funds?”
Know How the Money Flows
Understanding the money available for each funding method starts creating more understanding of how it can best be spent on capital projects and related expenses.
The American Rescue Plan Act (ARPA)
According to Konkus and his extensive understanding of these funds for the American Rescue Plan Act (ARPA), the first round of the $360 billion was distributed from Congress to the U.S. Treasury in May 2021. The U.S. Treasury sent the initial distribution of funds directly to state and local governments, who then can distribute to eligible programs.
What was dubbed the “final rule” as it relates to ARPA—passed January 6th, 2022 with an effective date of April 1, 2022—offers a standard allowance for revenue loss of $10 million to be used for government services, and can be requested on the U.S. Treasury Website.
Government services can be defined as follows:
“Government services include, but are not limited to, maintenance or pay-go funded building of infrastructure, including roads; modernization of cybersecurity, including hardware, software, protection of critical infrastructure; health services; environmental remediation; school or educational services; and the provision of police, fire, and other public safety services.”
“The final rule offers a standard allowance for revenue loss of $10 million, allowing recipients to select between a standard amount of revenue loss or complete a full revenue loss calculation. Recipients that select the standard allowance may use that amount for government services.” (Ref, pg. 7)
The Bipartisan Infrastructure Law (BIL)
While ARPA traveled from the U.S. Treasury straight into the bank accounts of state and local governments, the Bipartisan Infrastructure Law (BIL) was distributed to federal agencies. In addition to funding agencies for normal operations assuredly for the next 5 fiscal years, funds were also provided to “supersize” agencies’ budgets.
Funds are being spent on any programs that were created through the BIL, and distributed from the programs by direct federal procurement, federal grants, and allocations to states. Congress then requires a report from each federal agency annually, from 2022 to 2026, to ensure that Congressional intent is reflected in the spending.
Among the $1.2 trillion of infrastructure funding opportunities of the BIL, allocations are approximately as follows:
- $110 billion for roads and bridges
- $73 billion for electric grid upgrades
- $50 billion for public transportation
- $66 billion for freight rail and passenger rail
- $65 billion for broadband upgrades
- $55 billion for water infrastructure
- $50 billion for climate change protection
- $42 billion for airports and ports
- $39 billion for public transport
- $21 billion for environmental cleanup
- $15 billion for electric vehicles
- $11 billion transportation safety
- $1 billion reconnecting communities
Navigating Potential Supply Chain Impacts on Project Schedule
As project funds become more widely distributed and capital projects begin, it is a possibility that the existing supply chain shortages that the construction industry has been experiencing will continue to worsen. Consultants, staff, and workers, not only on the project side, but also within the government approval side, will be in higher demand as project planning and execution surges. Konkus states,
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“Augmentation is an eligible expense under the American rescue plan, but as sure as staff is going to become a limited resource, there's a supply chain issue. There's going to become a constraint very quickly on the consultant resources as well, both from the engineering and administrative side, and from regulatory consultants. Time is of the essence for hiring the right team around you as quickly as possible. I can't emphasize enough that this is vitally, vitally important.”
One poll conducted during the webinar, “Get Started Demystifying Infrastructure Federal Funding” indicated there is a high concern among industry professionals for the increase in workload without an increase in resources (Ref webinar timestamp, 29:57).
Understanding the Funding Timeline
There has been a slow start to infrastructure-related spending of the initial 50% distribution of ARPA funds from May 2021, as funding recipients seek to gain insights regarding eligible expenditures from the Treasury, lawyers and other experts.
May 10, 2022, marks the final 50% distribution of ARPA funds. The funding allocation deadline approaches at the end of 2024, and in support of the stimulus bill, money must be spent in total by the end of 2026. State and local governments are responsible for reporting back to the Treasury on a spending plan, compliance, funding allocations, and actual spend (ref, pg 201 chart).
The IIJA was signed into law on November 15, 2021. With the 60-90-180 day reporting requirement built into the law, federal agencies are just now starting to come out with their fiscal spending plans of the funds they received. Spending plans will provide clearer insight as to what money is available for owner, state and local government infrastructure-related opportunities and how to position your organization as a potential recipient or applicant of the money.
Industry Best-Practices for Securing Funding
Owners of capital improvement projects or government leaders can benefit from having a high-level ‘plan of attack’ and best practice strategy to guide the project through the various funding opportunities.
Here are 3 simple steps to take for securing funding:
Step 1: Narrow Down by Project Urgency
What projects is your organization capable of managing? Put them all out on the table, then determine which project is the priority and align the project breakdown with federal funding opportunities. Konkus recommends that you,
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“know your various needs and put them on the board. Once you understand what you need, what is the most urgent priority? Organize your CIPs and then take a look at the available funding.”
Step 2: Determine Available Funding
Based on your capital improvement plan, what funding is available? There are rules and laws governing each category of available funding and it should be noted that the category you may expect to fund your project, may not end up funding it.
Consider dissecting each of the categories, and understand that each portion of your project may be funded by various categories from both the BIL and ARPA. Use funding in various combinations, including the PayGo structure, using ARPA (32:24) “money on a project that you're paying for as you work along a particular schedule,” to unlock ultimate value to develop a capital plan.
For more funding guidance, get our Cliff Notes version of the White House Funding Guide.
Step 3: Make ‘Help’ a Priority
One of the benefits of ARPA funding is using it to buy software programs that help with project planning and implementation for government services, such as e-Builder Enterprise. Having a top construction project management software in place ensures delivery on the projects funded—and ultimately, enables a single source of truth to improve productivity, gain transparency, enforce standardization and enable reliable communication for all project stakeholders.
Additionally, consultants can be hired to support the capital expenditures. Utilize ARPA funding to prioritize hiring consultants and staff who specialize in the type of project(s) you are pursuing, including grant assistance, reporting assistance, and data management.
The BIL also supplies funding for digital construction project management solutions, which increase productivity, manage project complexity, reduce delays and cost overruns, reduce reliance on paper, and enhance safety and quality.
Watch the full webinar, “Get Started Demystifying Infrastructure Federal Funding” for further insight into the timing, application process, and planning strategy for your Capital Improvement projects.
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Key Topics Covered: infrastructure