All Articles Infrastructure Construction How IIJA changes the value statement for construction technology

How IIJA changes the value statement for construction technology

New-age construction technologies help DOTs make the most of limited funds. What happens to contech when the funding pot grows?

7 min read


How IIJA changes the value statement for construction technology

Engg317/Wikimedia Commons

The Infrastructure Investment and Jobs Act is the United States’ largest federal investment in infrastructure since the Eisenhower administration. The law includes billions of dollars in new spending to upgrade roads, bridges, rail, public transportation, broadband, renewable energy, the electrical grid and water systems. It also takes steps to make infrastructure better equipped to withstand cyberattacks and the escalating threat of climate change. 

However, some skeptics have cast doubt on the law’s implementation due to many ongoing obstacles in the construction and engineering industry. In particular, productivity loss has been a major concern during the pandemic. According to McKinsey, the industry sometimes faces cost overruns as high as 80%, and projects can take 20% longer to finish than scheduled. While some agencies and contractors have found ways to keep projects on track during the coronavirus pandemic, a report published last year by the Sheet Metal and Air Conditioning Contractors’ National Association and the National Electrical Contractors Association found that construction teams experienced an 8.8% loss in labor productivity due to jobsite mitigation measures to prevent COVID-19 exposure. Labor shortages and the ongoing supply chain crisis have also put a strain on construction and engineering firms. Construction companies needed to hire 430,000 more workers this year than they did in 2020, according to an analysis of federal data earlier this year.

Many industry observers believe the key to overcoming these issues while bringing the vision outlined in IIJA to fruition is a commitment to nascent technologies that automate workflows, produce 5D modeling and optimize the delivery of resources. For the construction technology sector, this presents an opportunity to build on a robust value statement. Before IIJA, the sector’s elevator pitch was rooted in helping end users optimize limited funds. Now, the pitch shifts to how transportation agencies can deliver on the promise of a once-in-a-generation law and optimize their share of a bigger pool of cash.

For construction technology companies, the big victory in IIJA is the law’s allocation of $20 million per year over the next five years to have the Transportation Department implement advanced digital construction management systems. 

“This is a significant investment in digital transformation that may end up being an allowable expense where public agencies and organizations can submit the cost of their digital technology as a part of their infrastructure work,” said Tooey Courtemanche, CEO of Procore Technologies. “It could also work the other way, where digital construction management systems are mandated to digitize in order to receive funding. Regardless of what comes next, the expectation is that the public sector needs to evolve its use of technology in order to effectively manage their programs.” 

The other big victory, according to Si Katara, co-founder and president of inspection technology company HeadLight, is that USDOT has a reporting requirement to update Congress on the progress of that implementation. 

“Those two things I think will provide a bit of a stick and carrot to help agencies get over the friction point that change is hard,” Katara said. “Now, they’re also going to see that change is absolutely necessary. We’ve been working with agencies for 16 years since we started the business, and it’s always been a game of risk/reward. And in the public sector right now, to stay where you are makes sense because there isn’t really any reward for changing. But if something fails, that’s when you’re in trouble.” 

Transportation authorities in Hawaii and Louisiana have offered flattering testimonials about HeadLight’s technology after successful pilot projects. Other states, such as Minnesota, Iowa, New York and Utah, are beginning to accept construction plans in digital format. Katara says other states that don’t follow suit and embrace change run the risk of not being able to deliver on the promise of IIJA over the next five to 10 years. 

Pilot projects like HeadLight’s are key to overcoming barriers to widespread DOT adoption, but the bigger barrier, according to Tim Sylvester, founder and CEO of Integrated Roadways, is getting procurement out of the “dark ages.” 

“These federal bills are fantastic for motivating the use of federal funding, but they don’t actually change these state statutes or the local ordinances that dictate the procurement process that public agencies use,” Sylvester says. “The majority of those agencies are using low-cost, upfront bidding, which is not a good method to adopt new technology because you can’t innovate and try new things if you always have to [use] the cheapest available option. The cheapest available option is usually a well worn, traditional, thoroughly understood technique that doesn’t really have many new avenues for improvement.” 

Integrated Roadways has produced a patented system of precast concrete pavement sections that are embedded with digital technology and fiber optic connectivity to transform regular roads into “smart roads.” The company sees great potential for its product as demand increases for technologies that support connected, electric and autonomous vehicles. The problem, Sylvester says, is that current procurement protocols leave DOTs that want to use innovations like Integrated Roadways’ hamstrung. 

“For example, if you use federal funds on an interstate, you cannot operate a commercial service,” Sylvester explains. “So when a public agency is evaluating the use of wireless charging for electric vehicles … you either use federal funding to build an interstate and give away all of the wireless charging, because you cannot commercialize it and charge fees. Or you’ll ignore the 90% of funding that the feds can provide and try to make all of that money back from wireless charging.” 

Sylvester thinks two things need to change. First, he says, the infrastructure industry needs to move away from a strategy of expecting public agencies and the federal government to shoulder a majority of the cost burden for projects because it is economically practical.

“Most of our economy works on a market basis, where people supply goods and services into the market and willful buyers purchase them,” Sylvester says. “We have so many new demands for supporting technologies for connected, electric and autonomous vehicles that cannot be delivered through the existing procurement model.” 

Sylvester also believes there needs to be acceptance of the  design-build-finance-operate-maintain delivery model. He believes that model provides an inherent incentive to choose technologies that offer the best benefit cost-ratio over a project’s entire life cycle. And that includes not only minimizing the life cycle costs, but also maximizing the value of the services that can be delivered through the acceptance of those costs, Sylvester says. 

Mounir El Asmar, an associate professor at Arizona State University, agrees that alternative project delivery methods are key to executing projects under IIJA. He says that ASU and researchers at the University of Colorado have developed guidebooks to help state DOTs implement design-build and construction-manager-at-risk strategies. The team plans to supplement those guides with training opportunities next month. 

The short-term outlook for construction technology looks as promising as ever thanks to IIJA, but some might wonder how the sector can continue expanding after all the money from the legislation is fully distributed. Courtemanche noted a recent estimate that projects annual worldwide construction spending will grow to $14 trillion by 2025.

“[That means] we’ll have to build the equivalent of a Manhattan per month for the next 50 years,” Courtemanche said. “There will always be more projects to build than can be built – even without the bill.” 

This article has been updated.

If you liked this article, sign up for SmartBrief’s free email newsletter on virtual design and construction technology. It’s among SmartBrief’s more than 275 industry-focused newsletters.