Trump, Infrastructure and the Construction Industry
[This article appeared in The Wendel Report: Construction and Infrastructure Update, July 2017.]
If you are like us you’ve been glued to your television, radio or one of your many smart devices to find out the latest happenings in Washington. And there’s A LOT going on. But we’re here to keep things straight for you . . . at least with respect to how decisions in D.C. are expected to impact the construction industry.
President Trump Repeals Contractor “Blacklisting” Rule
In a win for federal contractors, including federal construction contractors, President Trump signed a resolution on March 27, 2017, eliminating former President Obama’s so-called “Blacklisting” rule, which required bidders on federal projects with a value in excess of $500K to report state and federal labor and safety violations within the past three years. The now eliminated rule, also known as the Fair Play and Safe Workplaces Executive Order 13673, was short lived as it only went into effect in October 2016.
President Trump Implements his “Buy American, Hire American” Campaign Promise
On April 18, 2017, President Trump signed Executive Order No. 13788, implementing his “Buy American, Hire American” campaign promise.
Federal construction contractors familiar with “Buy American” clauses in federal contracts under the Federal Acquisition Regulations (FAR) – which require materials to be manufactured in the United States (or, depending on the clause, not manufactured in certain countries) unless a waiver is obtained – have waited anxiously to see what Trump’s “Buy American, Hire American” promise would mean for them.
As it turns out, not much, or at least not yet.
With respect to "Buy American," the executive order calls on federal agencies to "scrupulously monitor, enforce, and comply with [existing] Buy American laws, to the extent they apply, and minimize the use of waivers, consistent with applicable law." To aid in this, the executive order requires:
1. the Secretary of Commerce and Director of the Office of Management and Budget (OMB) to issue guidance to federal agencies on how to monitor, enforce and comply with Buy American laws within 60 days of the executive order, or by June 17, 2017;
2. federal agencies to assess their compliance with Buy American laws, including the use of waivers, by type and impact on domestic jobs and manufacturing, develop policies to comply with Buy American laws, and to report their findings to the Secretary of Commerce and Director of OMB within 150 days of the executive order, or by September 15, 2017, and annually thereafter on November 15, 2018, 2019 and 2020; and
3. the Secretary of Commerce to submit a report to the President with recommendations on how to strengthen implementation of Buy American laws within 220 days of the executive order, or by November 24, 2017, and annually thereafter beginning January 15, 2019.
In short, no new Buy American requirements . . . at least until President Trump receives the Secretary of Commerce's report and then decides to do something.
With respect to "Hire American," which was the most anticipated aspect of Trump's campaign promise since there are no federal "Hire American" laws, the executive order states only that "[i]n order to promote the proper functioning of the H-1B visa program, the Secretary of State, the Attorney General, the Secretary of Labor, and the Secretary of Homeland Security shall, as soon as practicable, suggest reforms to help ensure that H-1B visas are awarded to the most-skilled or highest-paid petition beneficiaries." While this may impact the tech industry, it will likely have little to no impact on the construction industry, which hires few H-1B visa holders and will have no impact on the "hiring" of U.S. construction companies.
In short, thanks for playing.
Trump’s Infrastructure Plan
During the 2016 Presidential Elections, Hillary Clinton proposed a five-year $275 billion infrastructure spending plan. In response, then candidate Donald Trump promised to “at least double” Clinton’s proposed plan and later in his campaign promised to spend “at least” $1 trillion on improving the nation’s infrastructure through infrastructure bonds.
So now that candidate Trump is President Trump, what will he do for the country’s infrastructure?
According to the American Society of Engineers, which released its infrastructure “Report Card” earlier this year in which America’s infrastructure received a grade of “D+,” the United States has an estimated infrastructure investment need of $3.6 trillion by 2020 just to keep the nation’s infrastructure in “good” (not great) repair.
To date, not much is known about President Trump’s infrastructure plan, although what is known is that he can’t do it without congressional approval, and if the most recent federal spending bill is any indication of what’s to come (with no construction funding for his border wall) it may be an uphill battle.
There are, however, some clues as to what Trump’s infrastructure plan may look like:
- Tax Credits and Public-Private Partnerships: Trump’s economic advisors during his campaign – billionaire Wilbur Ross, who he appointed as Secretary of Commerce, and economics professor Peter Navarro, who he has selected as Director of his newly created National Trade Council – have suggested a $137 billion federal tax credit to private companies that finance infrastructure projects, which they say would unlock $1 trillion in infrastructure investments over a span of 10 years . . . all at no cost to taxpayers.
- Repatriation: Stephen Moore, a writer and political analyst, and tax advisor to Trump during his campaign, has pushed the idea of using monies received from a 10% overseas repatriation tax holiday to help fund infrastructure projects, although the proposal would likely raise only $150 billion over 10 years.
- Reduced Regulations: Elaine Chao, President Trump’s Secretary of Transportation and spouse of Senate Majority Leader Mitch McConnell (R-KY), said during her confirmation hearing that the Trump administration would streamline regulations to get projects off (or, one might say, “on”) the ground, which was one of the complaints of President Obama’s American Recovery and Reinvestment Act of 2009 (i.e., it took too long to get projects approved). She also said that direct federal investment in infrastructure is not off the table.
President Trump hasn’t indicated when he will unveil his infrastructure plan, but has said that it won’t be a “core” part of his agenda during his first few years, although when it is unveiled “we’re talking about a very large-scale infrastructure bill.”
Senate Democrats, in what appears to be an effort to drive a wedge between President Trump and congressional Republicans, have unveiled their own $1 trillion infrastructure plan and have urged President Trump to work with them. The plan, entitled “A Blueprint to Rebuild America’s Infrastructure and Create 15 Million Jobs,” relies heavily on direct federal investment.