AASHTO Journal - Letter Reinforces Need for COVID Funding Flexibility

The American Association of State Highway and Transportation Officials joined 13 other organizations in sending a letter to U.S. Treasury Secretary Janet Yellen on March 25 reinforcing the need for greater flexibility in the use of COVID-19 relief funds for transportation projects – especially as the cost of materials has spiked over the last 18 months due to inflation.

[Above photo by VTrans]

For example, according to the Bureau of Labor Statistics, price increases for steel mill products were up 22 percent in 2021 and up an additional 74 percent in 2022 to date. Plastic construction products witnessed similar increases, up 7.6 percent in 2021 and 36 percent in 2022 to date, the letter noted.

“Recent member surveys by the Associated General Contractors of America, as well as by AASHTO, of the state transportation departments across the country found that companies and government agencies are reporting both shortages of and increased prices on manufactured steel, steel and plastic piping, paint, concrete materials, and many other items,” the letter stressed. “Cost increases ranged from 15 percent to a doubling or tripling on some items like manufactured steel. Lead times for procurement and delivery of many of these materials has dramatically increased as well, and prospects for the coming year are worse.”

Furthermore, as companies are unable to foresee things like the Russian invasion of Ukraine, spiking oil prices, and soaring inflation, many must absorb such price increases because there is no price escalation clause available to them.

“The impacts of that have been especially devastating to small and Disadvantaged Business Enterprise construction firms that lack the resources to absorb these unexpected costs,” the letter added.

One solution would be to clarify the use of Coronavirus State and Local Fiscal Recovery Funds from the American Rescue Plan or ARP by state and local governments to mitigate the effects of supply chain delays and shortages, such as for material, products, and equipment price increases and the effects they are having on infrastructure project costs.

The letter noted that the ARP’s legislative language notes that those funds should be used to “mitigate the fiscal effects stemming from the public health emergency” with respect to COVID-19. Since the pandemic is clearly the driving force behind material delays and shortages, “it is clear that such utilization of the funding would fall within congressional intent of the legislation,” the letter emphasized.

“Accordingly, we respectfully request the Department of the Treasury update its ‘Frequently Asked Questions’ document and regulations for ARP funds, clarifying that recipient governments can use them to mitigate the effects of supply chain delays and shortages, such as for material price increases and the effects they are having on project costs,” the letter said.

AASHTO has signed on to several similar efforts over the last several months urging the Treasury Secretary and Congress to allow for the re-direction of COVID-19 funds to mitigate infrastructure project costs, most notably in April 2021, July 2021, December 2021, and on March 4 this year.