Contact Us

As Infrastructure Money Pours In, Construction Companies Prepare To Deal With Unintended Consequences

The $1.2T infrastructure bill has been lauded as a tonic for the crumbling state of U.S. infrastructure, but new funds might come with new problems for the construction industry.

The $550B surge in new funding will mean more work for an industry already struggling to meet current demand levels and exacerbate supply chain issues and labor shortages, experts predict. 

In short, the industry faces an even harder squeeze this year.


New construction technology will serve as a bright spot in mitigating some of the challenges brought by the influx of infrastructure funding.

"Innovation in design, including the use of 3D modeling and digital twins, and an approach that incorporates digital planning tools and effective program management, can help reduce conditions that often cause delays," AECOM Senior Vice President of Global Transportation Innovation Shailen Bhatt said. 

When it comes to ramping up the technology necessary to take on future projects more effectively, the construction industry is doing more than simply looking to tech vendors. The largest firms are investing in bringing tech expertise in-house.

U.S. construction and engineering firms acquired nearly 30 companies across the software, electronics and technology fields between August 2020 and 2021, according to Deloitte's 2022 Engineering and Construction Outlook.

Applying technologies such as artificial intelligence to ensure that the "unknown unknowns" are addressed upfront will be critical to construction projects' success in a time of higher material costs and tight labor markets, according to Metro21: Smart Cities Institute Executive Director Karen Lightman.

"Right now, a lot of the overhead and cost overruns are because the various groups are working like isolated silos, not sharing information, not collaborating," Lightman said. "With the right use of technology, to share data, a lot of those silos can be broken down."


"We expect that our construction activity in 2022 will surpass 2021," McHugh Construction Vice President Dave Bartolai said. "But we'll need to be selective about the opportunities we pursue, so we can field the right team to deliver each project successfully."

The infrastructure bill will result in a 5% increase in U.S. construction spending in 2022, and another 5.5% in growth in 2023, according to an estimate published by Moody's Investors Service last year. 

As for construction labor, Associated Builders and Contractors estimates that the industry has recovered only 92.1% of the jobs lost since the beginning of the coronavirus pandemic, even as the economy and demand for construction services expanded in 2021.

As the measure's funding pours into new construction projects, that will further drive the need for workers in the industry, which stands to fall short by as much as 1.5 million to 2 million workers by 2025, estimates the National Center for Construction Education and Research, as reported by The New York Times. 

The impact will likely show sooner than that, as a result of ongoing supply chain and otherwise increasing demand. 

"The labor market remains extremely tight going into 2022," ABC Chief Economist Anirban Basu said in a statement. "Contractors will be competing fiercely for talent."

As the infrastructure bill adds new jobs, "we will have to staff up,” Anchor Construction President John Irvine told the NYTs. “And no, there are not enough skilled workers to fill these jobs.”

Construction worker shortages and worker quality are among the top concerns in the industry now, according to a new survey by the Associated General Contractors of America and Sage.

A vast majority of the roughly 1,000 construction industry respondents nationwide reported that they are having a hard time filling some or all salaried and hourly craft positions. Also, three-fourths of respondents believe either it will continue to be hard to hire or it will become harder.

The infrastructure measure, which passed in November, is a historically unusual one in that its spending, while largely focused on big-ticket projects like roads, bridges and other transit with $283.8B in new spending, includes a significant variety of other projects, such as broadband, power grid, water and climate-resiliency infrastructure.

That will diversify the labor experience needed from the construction industry, which is already worried about keeping up with existing demand. 

Material costs and the availability of those materials are also top concerns for the industry, according to the AGC survey. 

As of the end of 2021, overall construction input prices were up 22.3% from a year earlier, according to Associated Builders and Contractors. Most notably, the price of steel mills products more than doubled year-over-year in December. Speculative buying and a lack of shipping containers contributed to these ballooning prices, but increased demand and constrained supply were the main drivers.


Infrastructure projects themselves offer special challenges, according to Ann Gray, president-elect of the Royal Institution of Chartered Surveyors.

"There are two very tricky aspects of cost-control on infrastructure with government sponsorship," Gray said. "The first is that the budgets are set legislatively and any adjustments are difficult at best or become political fodder. The other is that the projects can be very large and take years to complete."

During an extended construction timeline, costs will fluctuate naturally in the marketplace but project budgets can't always change to reflect that, Gray said.

The distribution of the funds will also impact the industry, with the measure setting aside funds for niche segments such as electronic vehicle infrastructure, which will get $7.5B from the bill.

“The infrastructure deal represents an investment of historic proportions in EV charging infrastructure," EV Connect Chief Operating Officer Patrick Macdonald-King said. "Still, wherever there are government subsidies, less-than-qualified entities will emerge that enter the market and unintentionally make the process more challenging."

In short, depending on how funds are dispersed, the surge of funding has the potential to encourage contenders of all qualifications and experience levels to come out of the woodwork, he said, especially from newer fields like EV. As a result, landing projects will be more expensive and time-consuming. 

Anticipating a rougher time ahead, contractors are adjusting their labor and materials strategies.

"We’re proactively lining up the labor we need, and we’re seeking commitments from our key subcontractors on their participation in upcoming projects so they can prepare and staff up," Bartolai said.

Regarding material pricing, Bartolai calls it risk/reward proposition. Prices are uncertain, so he says his company is setting up the conditions so that its key subcontractors can buy materials early, even though there is a risk that commodity prices could stabilize or decrease. 

"We – or our subs – will need to warehouse materials," he said. "We're also working to maintain good relationships with our subcontractors and suppliers to negotiate adjustments in material costs."

Contractual wording with materials suppliers that includes price-adjustment clauses is becoming more popular, Cumming Corp. Regional Vice President Mark Fergus said. 

"We're starting to see some of the erratic pricing starting to settle, but the supply chain will still take quite a while to run smoothly again, and future coronavirus variants could impact current forecasts," Fergus said.

As for the labor shortage, contractors will need to offer wages above union rates, or be creative in offering overtime, to attract new labor, Fergus said. 

To address long-term labor concerns, McHugh Construction is working with subcontractors, unions and organizations such as HIRE360, a Chicago-area not-for-profit that aims to help youth secure opportunities in the construction trades.