How Will the CHIPS Act Impact Construction and Manufacturing in the US?
In case you missed this good news among the torrent of midterm political ads, one of the most important pieces of recent legislation, The CHIPS Act and its $280 billion in funding, was signed into law on August 9, 2022.
What is the CHIPS Act?
Our government loves acronyms, but sometimes the results are a bit humorous, such as the CHIPS Act. However, despite what you might have already heard.
While we wish this were the case, the CHIPS Act isn’t some national guideline to settle the debate over the best tortilla chip shape between triangles, scoops, strips, or rounds. (Because the answer is clearly Fritos Scoops). That debate will most likely rage on, despite the passage of the CHIPS Act.
In this case, the acronym was spelled out as CHiPs and stands for the California Highway Patrols.
The official full name of this new law is “The Creating Helpful Incentives to Produce Semiconductors and Science Act.” This means the acronym should be The CHIPSS Act, or maybe even the CHIPS & S Act, but in a world of auto-correct, we ended up with The Chips Act.
With the name explained, it’s time to look at the funding mechanism of this new legislation. And while Congress is famous for passing legislation without a funding component, the CHIPS Act includes nearly $280 billion to be spent as follows:
- $200.0 billion for scientific R&D and commercialization
- $52.7 billion for semiconductor manufacturing and workforce development
- $24.0 billion in tax credits for chip production
- $3.0 billion for leading-edge technology and wireless supply chain
According to McKinsey & Company, the primary goals of the act are to bolster US semiconductor manufacturing capacity, catalyze ongoing R&D, and create regional high-tech hubs to encourage and foster a larger, more inclusive STEM workforce over the next ten years.
Today, the US produces just 12% of the world’s semiconductors (chips), down from a peak of 40% in the early 1990s. Due to wage and profit concerns, many companies either relocated or began outsourcing using overseas providers. These chips are used in everything from your car, smartphone, and computer to complex weather, air traffic control, and defense tracking systems. So having them readily available when needed is a big deal for both your personal tech needs and national security.
How Will the CHIPS Act Impact the US Labor Force?
This new bill will provide a variety of benefits for companies, individuals, and especially the construction industry.
As we mentioned above, $280 billion worth of subsidies and funding is about to be introduced to the US market. One important caveat is that the CHIPS Act funds go directly to the manufacturers, to help streamline the design and construction processes required to re-establish supply chains and increase market share. Both Intel and Samsung have already announced plans for new US plants, thanks to the 25% tax credit being offered.
Adecco recently reported that the chip/semiconductor is already extremely competitive, and US companies are still struggling to recruit and keep the highly skilled tech staff required for current operations. As a result, the US will need to fill 300,000 new positions by 2030 to sustain the proposed domestic chip production goals.
It will take years for US chip production to alleviate the current shortages, so consumers shouldn’t expect to see a difference in chip/semiconductor costs or inventories anytime soon. However, as the new plants are built and brought online over the next three years, US consumer reliance on foreign manufacturers and suppliers will begin to decline.
How Will the CHIPS Act Affect the US Construction Industry?
As reported by Construction Dive, several industry leaders have already expressed their support for this much-needed piece of legislation.
Richard Branch, the chief economist for Dodge Data & Analytics, said the CHIPS Act will “keep the construction sector on sure footing as the economy slows over the next year.” He also stated that Dodge is currently tracking nearly $33 billion in semiconductor fabrication plants still in the planning stages.
In a letter praising the passage of the CHIPS Act, James Christianson, Vice President of Government Relations at the Associated General Contractors of America, said the act will “spur broader economic development and new, long-term construction jobs.”
However, despite all the good news about these long-term projects, two main questions remain for the construction industry.
We all know that labor costs for a public works project can easily triple, or quintuple compared to a non-DBRA (Davis-Bacon and Related Acts) project. So, the first question involves prevailing wages for these projects.
For the last 40 years, any on-site construction project that receives federal funding must adhere to the latest Davis-Bacon wage standards (prevailing wages). However, off-site construction projects, sometimes referred to as modular or prefab construction, have remained exempt from this requirement since 1985.
Then, on March 11, 2022, the Department of Labor quietly announced proposed verbiage changes that would eliminate the off-site construction exemption for DBRA projects. Unfortunately, a decision to adopt the new proposed rules or stick with the current wage standards probably won’t occur until sometime in late 2023 or early 2024.
In the meantime, design and construction firms should closely follow the proposed changes to the DBRA requirements to ensure wage compliance when these projects come up for bid.
The second question focuses on the company’s ability to handle such complicated projects. In addition to special skill sets, workers may also need to meet heightened security clearances, which could limit the potential worker pool for contractors.
Infrastructure projects like these normally require a progressive and responsive team to provide a superior IPD (Integrated Project Delivery) product while maintaining transparency. But the team can only be as good as the platform used to handle the design-build, engineering, procurement, and construction processes required for complex infrastructure projects, such as chip manufacturing plants.
Be ready when the chips are down! If you need to improve your design, procurement, and construction processes to handle projects like these, Join is always a mouse-click or phone call away.