For Construction Projects, 'Buying American' Means Higher Costs

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There are hints that the Trump administration might require all federally-funded construction projects to be done not only with steel and concrete made in the U.S. but also with American-made equipment, like this Caterpillar backhoe.

When he addresses a joint session of Congress Tuesday night, President Trump is expected to outline some of his plans for rebuilding the nation's crumbling infrastructure.

And he will likely reiterate his commitment to "buy American and hire American," as he repeated often during the campaign and since taking office last month.

But what exactly does that mean for state departments of transportation and the contractors who build transportation projects?

"I think for the most part that means business as usual," says Jim Tymon, chief operating officer for the American Association of State Highway and Transportation Officials, or AASHTO.

"There are already requirements in federal law that require state DOTs and local transit agencies to buy American products as they construct infrastructure projects around the country," he says.

Those requirements, actually called "buy America" in federal law, were first put in place in the late 1970s after the collapse of the steel industry. They were gradually expanded to include almost all federal grant-funded transportation projects.

"For the folks building highways and bridges in this country, it really is the default to use locally and American-made products because they're locally available and sometimes cheaper to use," Tymon says.

And it's evident in the massive reconstruction of the Jane Byrne Circle Interchange near downtown Chicago.

It's one of the worst traffic bottlenecks in the country, as three major expressways carrying about 400,000 vehicles a day all converge there.

The Illinois Department of Transportation is in the midst of a six year, $600 million construction project aimed at reducing chronic congestion and lengthy delays.

Just one recently completed fly-over ramp, from the northbound Dan Ryan Expressway, I-90/94, to the westbound Eisenhower Expressway, I-290, contains 6,900 cubic yards of concrete, 4.8 million pounds of structural steel and 2.5 million pounds of steel rebar. And all of those materials were made in the U.S., with much it coming from the steel mills of Gary, Ind., about 25 miles away.

But preserving American steel industry jobs comes at a cost.

"Economics is always about trade-offs," says Jeff Davis, senior fellow at the Eno Center for Transportation, a non-partisan policy think tank in Washington, D.C., who has written extensively about "buy America" rules.

"Domestic-made steel usually out of the mill will cost 70, 80 percent more than Chinese steel out of the mill," Davis says.

Davis says the cost of shipping Chinese steel over the Pacific Ocean mitigates that cost difference a little bit, but he says Americans should know that buying homemade products will usually increase the price, sometimes significantly. And Davis adds that this administration seems willing to pay that higher price.

"Clearly, President Trump has decided that preserving steel-working jobs is a worthwhile endeavor and is probably worth less efficient procurement of highway and bridge projects," Davis says.

States can get waivers from the federal government's "buy America" and other such requirements if complying increases the costs significantly, if a certain material or product is difficult to get, or if it may create significant construction delays.

And some industry groups want those waivers to remain, in case of any unforeseen circumstances.

"Our concern is that someone would take an extreme interpretation of those rules, and the cost of complying with an extreme interpretation would far outweigh the economic benefit of 'buy America'," says Rich Juliano of the American Road and Transportation Builders Association.

For example, Juliano says contractors often need to purchase extra parts or materials on the fly, such as "very small components, literally nuts and bolts and tie-wires." Those are things that may cost just pennies a piece.

"If you're requiring a contractor to document the origin of nuts and bolts or tie-wire or something like that, all the way back to when they were first produced, that could be difficult to do," Juliano says.

It's not clear if the Trump administration will expand requirements for buying American-made products to such small parts, but the president is already going beyond existing mandates in other ways. He's requiring American steel in the construction of the privately-owned Dakota Access Pipeline.

And Vice President Mike Pence in St. Louis last week hinted buy America requirements could be expanded even further.

"We're gonna rebuild America with American workers and American tools," he said during a speech to workers at the Fabick Cat company in Fenton, Mo.

Could that mean private contractors on government projects would be required to use American-made backhoes, graders and dump trucks? Even American-made hammers, screw-drivers and wrenches? A White House spokesperson would not clarify, saying in an emailed statement, "we are currently considering many options and it would be premature to speak about specifics."

Juliano worries about how that might play out.

"It might be that, you know, costs of these projects would increase a great deal because of that," he says.

Nonetheless, this is one of the rare instances in which President Trump's agenda may have bipartisan support. A number of congressional Democrats are already backing legislation to expand "buy America" requirements.

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