Rep. Crawford Raises Inflation Challenges to Sec. Buttigieg in Transportation and Infrastructure Hearing
Washington — Today, Representative Rick Crawford (AR-01) participated in the House Transportation and Infrastructure Committee hearing entitled, “Implementing the Infrastructure Investment and Jobs Act.” Rep. Crawford raised the challenges inflation poses to contractors, deterring them from bidding on infrastructure projects due to the risk that raw materials costs could rise substantially from the date of bid submission to the date they are able to purchase materials and begin construction. Cost escalation is also making it harder for U.S. companies to compete against government-subsidized companies from adversarial nations such as China, subsidies that allow foreign competitors to undercut the bids of American contractors.
“[Inflation is] wreaking havoc on our economy, it’s destroying transportation businesses, which includes the small suppliers and disadvantaged businesses that work in that space. Companies just can’t afford this inflation and shoulder that risk. But what’s worse is that it’s creating a vacuum in the marketplace that allows for foreign companies to come in and further decimate U.S. industries and the U.S. economy. So my question is can D.O.T. provide guidance to states and other recipients that inflation adjustments are required in transportation contracts?”
Sec. Pete Buttigieg, Secretary of Transportation:
“Cost containment is a major focus for us right now in implementing the law because we are hearing this from both project sponsors and the business community. The impact of cost escalation and inflation is unquestionably going to affect our ability to deliver. I’m less sure that this is something that is going to put U.S companies at a disadvantage to international companies for the simple reason that inflation is international. I was just in Germany a few months ago and inflation there is somewhere around 8 to 9%, so a German company I would imagine would face the same kind of cost escalation.”
“With respect, I’m less concerned about a German company and more concerned with a Chinese company which subsidize at a much higher rate than anybody else. They do that obviously for reasons to disrupt our economy and to jeopardize our national security so that’s my focus, to make sure we’re not creating an opportunity for Chinese state-owned enterprises to come in and occupy space that should be occupied by U.S. businesses and particularly these Disadvantaged Business Enterprises that we’re trying to ensure have an opportunity to perform in that marketplace but let me move on for the sake of time. Has D.O.T. performed a legal analysis to see what is possible to address inflation in the contracting process? Are contracts firm, fixed, or are there any provisions in place for them to address this inflation?”
Sec. Pete Buttigieg:
“I have not addressed imposing additional requirements on the states for this purpose but we can look into that. Often contracts will have a contingency factor that can affect any unanticipated pressure on prices. It would depend on the certain program involved and what those contracts look like. I would certainly welcome a chance to work with your office to see if you’d agree that’s adequately contemplated in contract framework.” [End of excerpt.]
Runaway inflation harms not just families shopping for food or filling their gas tank. It also causes state and local governments to pick up the tab for project shortfalls as federal funds run dry, or pushes the costs onto private contractors who must pay out of pocket to complete a project that costs significantly more than when they submitted their bid. Rep. Crawford met with road and transportation builders last week to discuss the rising costs of materials that have made project expense predictions unreliable. He remains focused on ways to reduce inflation, improve contract provisions to protect contractors from the “inflation tax” disrupting their businesses, and enhance the efficiency of the processes used to deliver federal funding to local communities to expedite the commencement of infrastructure projects.
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