It’s never too early for contractors to start planning when Congress is talking trillions

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No one knows what an infrastructure law would look like. But it seems likely Congress will end up printing another trillion dollars anyhow. It might be months before the spending takes final form. But now is the time for contractors to start planning to get their share. Federal Drive with Tom Temin got details from the senior vice president for information solutions at Deltek, Kevin Plexico.

Interview transcript:

Tom Temin: Kevin, good to have you on.

Kevin Plexico: Thanks Tom. Thanks for having me.

Tom Temin: Yeah. So let’s ask you how you keep track of how this thing is shaping up because it seems to morph and change almost daily, depending on who’s talking to whom.

Kevin Plexico: Well, we have a team of analysts that have basically been devoted to monitoring what’s come out of the Biden administration. There’s a number of initiatives, including their latest budget proposal that have come out. And of course, the American Jobs Plan is the big one, which is primarily focused on infrastructure that our team is really just devoted to monitoring how it’s going to shape up and what it means for the contracting industry.

Tom Temin: Yeah, because infrastructure means the traditional IT vendors that we, you and I have dealt with so many years, but also builders, architects and construction and all of the engineering would be swept into this as well, we can pretty much assume. Correct?

Kevin Plexico: Yeah, I mean, this one’s pretty broad in terms of how it defines infrastructure. You have the traditional kind of transportation infrastructure, which you and I would think of as highways, mass transit, that type of thing. But it also has water infrastructure, electrical infrastructure, it has schools and housing and living facilities for seniors. It’s got a little bit of everything. And then it also has some elements of it that are focused on manufacturing and workforce training.

Tom Temin: Yeah. And so the question then, maybe the most fundamentally difficult question to know is the stream by which the money could come to contractors, that is to say, will it be federal contracting, or more likely, these will be through block grants, loans, just direct entitlements to the states and counties, and it would be their contracting mechanisms? That is kind of hard to picture at this point, correct?

Kevin Plexico: Yeah, I mean, it’s hard to kind of forecast that, but just based on the way the money is allocated to these different types of infrastructure and different types of projects, you can basically get a good guess that the two thirds of it is going to kind of flow down in the form of state and local funding, or higher education in K through 12 institutions, with just about a third of it being retained at the federal level for things like veterans facilities, that type of thing.

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Tom Temin: So many federal contractors then that don’t have state and local chops would be wise to maybe start figuring that out, would you say?

Kevin Plexico: If they’re in there in the infrastructure space, for sure. I think there’s also an element for broadband and technology R&D, which I think, again, would primarily be at the state local level. But yeah, I mean, if you’re a federal contractor that’s doing infrastructure related work, this is a good time to kind of turn your eyes to the state-local market, where, for the most part, a lot of those funds are spent anyway, given the nature of transportation spending at the state and local level.

Tom Temin: And we also see some convergence of the electronic and digital technologies with the standard infrastructure construction, because roads are getting smarter. grids are getting more intelligent, bridges have different types of broadband mechanisms built into them to be able to track tolls and all of this. So do you see that kind of convergence happening where teaming with the right partner might help in future contracting situations?

Kevin Plexico: So I guess I would put it this way, I mean, you would think that that convergence would take place and this infrastructure legislation would take that on. I will say that the proposal that came from President Biden was largely silent on kind of smart transportation mechanisms, it was really largely focused on just kind of traditional infrastructure modernization, it didn’t get too deep into the weeds on what type of kind of technology convergence would take place in that. One would expect that to be the case at some point.

Tom Temin: Yeah you see like an old retaining wall in New York City with lights built into it. So somebody put electric wires in a concrete wall 75 years ago, it’s all burned out, none of it works. So maybe it would be a little bit more modern approach. I guess now. We’re speaking with Kevin Plexico, he’s the senior vice president for information solutions at Deltek. And what about the possibility of contractors maybe helping influence how the legislation comes out based on their knowledge? Is that something that’s doable, have you seen?

Kevin Plexico: I wouldn’t say that we’ve seen that show up yet. But as we get into this turning into legislation, I’m sure lobbyists will be involved in helping to shape the the nature of it. I think one of the example areas that I think is interesting is there’s a big focus on electric power and battery operated vehicles, for example, in a big switchover to battery operated vehicles. And that would be a kind of an interesting wrinkle as you think about infrastructure that doesn’t naturally flow into your head is like a key part of infrastructure. But I think about how many cars the federal government has, for example, and that would be a major shift in terms of emphasis that I can see contractors having an influence over.

Tom Temin: Alright, so as the negotiations drone on and different committees discussed this and the delegations go to and from the White House, what are some specific measures contractors should be taking now to be ready for when something does get enacted?

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Kevin Plexico: Well, I think the key thing is just making sure you understand the provisions that have been proposed, because that’s going to draw you into certain areas of infrastructure and where the investments are placed. And I think it’s probably unrealistic for most companies to think they’re going to touch on all the different areas that are incorporated into the American Jobs Plan. But for example, someone who provides power cabling and electricity infrastructure, that’s one stream that’s very focused, and a lot of that has to also do with climate change measures and kind of preventing the shift in the climate. If you’re focused in Department of Veterans Affairs, then you want to be focused on medical care facilities, and what does that mean for how they’re going to make investments. Where might they be pushing those investments. And we’ve talked a lot about this notion of what they call shovel ready projects, you expect that they’re going to focus on things that have already been identified as a need area. And so trying to get your arms around some of those areas that were identified, even under the Trump administration, when he was trying to push forward for the infrastructure legislation, I think would be a good place to start in terms of identifying where these priority areas might be.

Tom Temin: That would then imply making sure that you’ve got a good roster of subcontractors if you’re a prime, or if you’re a sub in general, finding the most promising primes to try to get together with.

Kevin Plexico: Yeah, and I think that you probably have time on that one if you’re a likely prime contractor, for sure. This is one that I think is going to have a long tail associated with it, this is probably going to be $2 trillion, spent over 10 years in this industry. As you and I were talking about retirement days, we’ll probably be retired by the time all this money is spent. But I think that’s the the key thing is just paying attention to where their focus is going to be and how this promulgates itself into legislation at some point and figuring out where those funding streams are going to go by agency really.

Tom Temin: And I would think that contractors would want to make sure that their accountability and compliance systems are totally up to date, because let’s face it, we can expect this money to be accompanied by not only oversight from several different bodies, the IG groups and so on. But also the labor practices, the labor rates, a lot of those things related to the people doing work on the projects, that’s going to get a lot of scrutiny, I think, given the Biden administration’s bent.

Kevin Plexico: Yeah. And I think that’s we can look at the the old economic stimulus legislation from many years ago, and how they set up its own little oversight body to monitor the money and track it and provide transparency to it. And I think that’s probably going to be a footprint we’re going to see is kind of a model going forward for these types of legislation. We even had with the COVID and government relief efforts there specific tracking in the federal procurement data system for how they were going to track the money that was spent related to that. So I certainly would expect that similar kind of oversight to take place with a piece of legislation of this magnitude.

Tom Temin: Alright. Kevin Plexico is senior vice president for information solutions at Deltek. Thanks so much for joining me.

Kevin Plexico: Thank you Tom. Good to be with you.

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