WJ Editorial
WJ Editorial

Will Inflation Hamper Infrastructure Rebuild?

In this issue, we report on the delays and cost increases expected on the Kentucky Lock Addition Project. The Corps of Engineers reported them to members of the Inland Waterways Users Board in its first meeting since it was reconstituted after a “zero-based review” of advisory committees.  The Corps reported that “market conditions” had changed, causing price adjustments to timelines and contracts with contractors. 

A lot had happened since the previous Users Board meeting in 2020. The inland waterways industry has had cause to celebrate following the passage and signing of the historic Infrastructure Investment and Jobs Act (IIJA). But even as the ink was drying, inflation was already rearing its head. It has been a problem since last year, when consumer spending, pent up from years of coronavirus lockdowns and fueled by generous stimulus packages, roared back to life, contributing to price increases, trade imbalances and supply chain difficulties. 

Slowdowns at Chinese ports due to coronavirus resurgences added to the supply chain issues and inflation, as did Russia’s invasion of Ukraine, throwing world markets into further turmoil. Ukraine and Russia are both agricultural export powerhouses, and both are also significant exporters of steel and steel products. In 2019, Russia was the world’s fifth-largest exporter of steel ($16.2 billion worth, according to the Organization for Economic Development) and the United States was the third-largest importer ($18.7 billion worth). Fertilizer disruptions have added to significant food price increases. 

All these wild cards have introduced some uncertainty into plans for investing all that IIJA money we have so recently been celebrating. With steel and cement prices skyrocketing, and skilled labor higher-priced and hard to find, the Kentucky Lock Addition may not be the only waterways infrastructure project that faces adjustment of cost estimates and completion deadlines. It’s something for members of Congress currently working on passing a 2022 Water Resources Development Act by the end of the year to consider. It’s certainly encouraging that the Senate’s version of WRDA recently came out of committee with a permanent 75/25 federal cost share and is moving on to the full Senate for consideration. That could help a lot of local project co-sponsors that are also affected by inflation and cost increases. 

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