For Construction Projects, 'Buying American' Means Higher Costs

Feb 28, 2017
Originally published on February 28, 2017 7:02 pm

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.

Copyright 2017 NPR. To see more, visit http://www.npr.org/.

AUDIE CORNISH, HOST:

Tomorrow night President Trump will address a joint session of Congress, and he's very much expected to talk about jobs.

ARI SHAPIRO, HOST:

Promises to bring back blue-collar jobs helped Trump win the election. In a moment, we'll hear from a factory worker in Indiana who voted for Trump for exactly that reason.

CORNISH: First, we're going to hear a bit more about one of the president's proposals. He wants to spend a trillion dollars on infrastructure, and he wants that money to buy American and hire American. From Chicago, NPR's David Schaper explores what that policy might mean.

DAVID SCHAPER, BYLINE: I'm standing at the Circle Interchange in downtown Chicago. It's one of the worst traffic bottlenecks in the country. Three major expressways carrying some 400,000 vehicles each day all come together here, so the Illinois Department of Transportation is in the midst of a six-year, $600 million project to untangle and rebuild the circle interchange. It's a massive project using tons of raw materials, and all of those materials were made right here in the USA. So just what exactly will the president's call to buy American mean to the state DOTs and private contractors who build highways and bridges like this one?

JIM TYMON: I think for the most part, that means business as usual.

SCHAPER: Jim Tymon is chief operating officer for the American Association of State Highway and Transportation Officials.

TYMON: 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.

SCHAPER: Those requirements were put in place in the late 1970s after the collapse of the steel industry and eventually were expanded to include most federally funded transportation projects. But preserving American steel industry jobs comes at a cost.

JEFF DAVIS: Economics is always about tradeoffs.

SCHAPER: Jeff Davis is a senior fellow at The Eno Center for Transportation, a nonpartisan policy think tank in Washington, D.C.

DAVIS: Domestic-made steel usually out of the - out of the mill will cost 70, 80 percent more than Chinese steel out of the mill.

SCHAPER: And Davis says this administration now seems willing to pay that higher price.

DAVIS: 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.

SCHAPER: States can get waivers from the federal government's buy-American requirements if complying increases the costs significantly. And some industry groups want those waivers protected, but the president is already going beyond existing mandates. 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-American requirements could be expanded even further.

(SOUNDBITE OF ARCHIVED RECORDING)

VICE PRESIDENT MIKE PENCE: We're going to rebuild America with American workers and American tools.

SCHAPER: So could that mean that private contractors on government projects will have to use American-made backhoes and dump trucks, even American-made hammers and wrenches? A White House spokesperson would only say, quote, we "are currently considering many options, and it would be premature to speak about specifics." Rich Juliano of the American Road and Transportation Builders Association worries about how that might play out.

RICH JULIANO: It might be that, you know, costs of these projects would increase a great deal because of that.

SCHAPER: 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-American requirements. David Schaper, NPR News, Chicago. Transcript provided by NPR, Copyright NPR.