IWUB Hears Proposed New Capital Strategy

The Inland Waterways Users Board (IWUB), the maritime industry federal advisory committee that makes recommendations to Congress and the Secretary of the Army regarding infrastructure project priorities and spending from the Inland Waterways Trust Fund (IWTF), gathered April 11 in Springfield, Va., for its 102nd meeting. Besides recurrent status updates on congressional appropriations, the president’s budget proposal and key waterway construction and repair projects, representatives from the U.S. Army Corps of Engineers discussed the 2025 update to the Capital Investment Strategy (CIS), including proposed changes to the way the Corps categorizes current and future projects.

The  strategy, essentially the Corps’ priority list and planning framework for major construction and rehabilitation projects on fuel-taxed inland waterway systems, was last updated in 2020. The CIS sets forth a 20-year plan for enhancing and maintaining infrastructure on inland and intracoastal commercial waterways.

“The Capital Investment Strategy update was the biggest news of the meeting, as this crucial document informs future funding recommendations and guides the overall direction of construction on the inland waterways,” said Spencer Murphy, general counsel and vice president of risk management for Canal Barge Company and IWUB chairman.

Michael Tarpey, senior program manager for the Corps, told the Users Board that major developments since the 2020 CIS include legislation that changed the cost share ratio for waterway projects to 65 percent from the federal treasury and 35 percent from the Inland Waterways Trust Fund and construction authorization for the Brazos River Floodgates and Colorado River Locks projects. In addition, recent construction new starts include the Upper Ohio, the Navigation and Ecosystem Sustainability Program (NESP), Three Rivers on the McClellan Kerr Arkansas River Navigation System and T.J. O’Brien Lock and Dam in Chicago.

New components for the 2025 CIS include the stated goal of completing lock construction projects in eight years or less and the policy to not begin design work earlier than three to five years before the planned start of construction.

Murphy said that change in project scheduling demonstrates lessons learned from recent long-drawn-out construction projects and the resulting cost overruns.

“Starting design on a lock that will not be constructed for a decade or longer creates several challenges,” Murphy said. “First, it doesn’t make sense to rush a design that will sit on a shelf, especially when many assumptions used in the development of that design can change, and significant rework or modification may be necessary to address changes in those assumptions related to site conditions, technical requirements, technology advances, labor laws, supply chain, material, labor costs, etc.”

Murphy said a recent example of this would be budgetary decisions for $2.5 billion from the Bipartisan Infrastructure Law (BIL). Some of those decisions were based on outdated design documentation and cost estimates for projects, with the consequence being projects that had been “funded to completion” in the BIL actually needed hundreds of millions more dollars.

“While inflation and post-COVID supply chain issues caused some of this escalation, much was also a result of outdated information,” Murphy said. “Starting design work three to five years prior to construction ensures the design assumptions are not only relevant, but also that the timing of initiating a new large-scale construction project is appropriate given other ongoing projects’ needs to ensure the Corps finishes what they start, and projects do not take decades to complete.”

Another significant change for the Capital Investment Strategy is an update to how the Corps categorizes projects. Category 1A will be active construction projects, while Category 1B will be projects in the design phase. Category 2 will be projects authorized for construction yet awaiting the start of design. Category 3A will be ongoing studies and project re-evaluations, while Category 3B will be ongoing major rehabilitation reports. Category 4 will cover “future work.”

“The category changes allow the Corps to show Congress progress on active ongoing construction projects,” Murphy said. “It does this by breaking out those projects that are physically underway versus the projects that have received construction funding but are still undergoing design with no physical work ongoing. The distinction is important as projects with active work on site are at a much higher risk of unavoidable budget and schedule impacts if needed funding is not received.”

According to Tarpey, the Corps plans to finalize the 2025 CIS by September, at which time the plan will be submitted to the Office of Management and Budget for review and approval. Then, the final report will be sent to Congress.

“The Corps does not have an exact timeline for that review but in separate conversations has indicated their desire to transmit it before the election in November,” Murphy said.

Later during the meeting, IWUB members unanimously approved moving $82 million in excess funds from Three Rivers to the Kentucky Lock and Dam project.

“That project is now four years behind schedule, mostly due to escalating costs due to inefficient funding,” Murphy said. “Reallocating this funding provides an achievable path forward to funding the Kentucky Lock project to completion in FY25.”

Another motion that garnered unanimous support reallocated funding from the design of Emsworth Lock on the Upper Ohio River to Montgomery Lock, which is an ongoing construction project. That action, Murphy said, reflected the new policy of only conducting design work within three to five years of the start of construction.

“The Emsworth Lock project received $77 million in BIL funding to start design, but the best-case scenario to start construction at Emsworth is 2031,” Murphy said. “It does not make sense to invest scarce resources for designing a project that will likely not start for another decade when there is an ongoing construction project on the same system that needs an estimated $800 million to complete.”

Murphy said those actions, along with the board’s support of the proposed Capital Investment Strategy and new categories for projects, reflect the board’s commitment to partnering with the Corps and Congress to build an efficient and reliable inland waterway infrastructure system.

“We recognize the challenges that come with these large and complex projects and that difficult decisions must be made to ensure the most effective use of taxpayer dollars,” he said. “We look forward to working with our federal partners to resolve these complex issues so the Corps can deliver projects. We share Assistant Secretary of the Army-Civil Works Michael Connor’s goal of attending ‘fewer groundbreakings and more ribbon-cuttings.’”