Managing IIJA and SRF Funding for Water Infrastructure Programs

# Managing IIJA and SRF Funding for Water Infrastructure Programs

The Infrastructure Investment and Jobs Act changed the scale of federal investment in water infrastructure fundamentally. For the first time in decades, utilities across the country have genuine access to capital — low-interest loans, principal forgiveness, and in some cases outright grants — through the EPA's State Revolving Fund programs. The Pacific Northwest, served by EPA Region 10 and state SRF programs in Oregon and Washington, is no exception.

The challenge is not accessing this funding. The challenge is managing it. Most utilities were not operationally prepared for the volume of federal dollars available and the documentation requirements that accompany them. This article explains what IIJA and SRF funding means for your capital program, what compliance documentation you must maintain, and how a PMIS keeps you on the right side of a federal audit.

What IIJA Means for Water Utilities

The Bipartisan Infrastructure Law (formally the Infrastructure Investment and Jobs Act, signed November 2021) directed approximately $55 billion to water and wastewater infrastructure over five federal fiscal years. This breaks down into:

• **$11.7 billion** for the Clean Water State Revolving Fund (CWSRF) — supplemental capitalization over five years
• **$15 billion** specifically for lead service line replacement through the DWSRF
• **$10 billion** for emerging contaminant (PFAS) projects through both SRF programs
• **$4 billion** for general DWSRF supplemental capitalization
• Additional appropriations for water recycling, desalination, and rural water systems

In Oregon, the Oregon Department of Environmental Quality (DEQ) administers the CWSRF; the Oregon Health Authority (OHA) administers the DWSRF. In Washington, the Department of Ecology and the Department of Health administer their respective programs. Both states received significantly increased federal capitalization grants and established competitive application processes for IIJA supplemental funding.

For a mid-size water or wastewater utility in the Pacific Northwest, IIJA funding may represent the largest single capital financing opportunity in the utility's history — potentially making projects feasible that could not be funded through rate revenue or conventional debt alone, particularly for disadvantaged communities eligible for principal forgiveness.

Why Most Utilities Are Unprepared

The SRF programs have existed since the late 1980s. Many utilities have successfully managed SRF-funded projects before. What changed with IIJA is scale and complexity.

Scale: IIJA dramatically increased the capital available through SRF programs, which means utilities are managing larger projects, more projects simultaneously, and multi-year funding agreements with more complex reporting requirements.

Compliance provisions: IIJA added or strengthened several compliance requirements that were less prominent or not present in prior SRF rounds:

• Strengthened **Buy American provisions** requiring that iron, steel, and manufactured goods used in SRF-funded projects be produced in the United States, with limited waiver availability
• **Davis-Bacon Act** prevailing wage requirements applied broadly to SRF-funded construction contracts
• **NEPA and environmental review** requirements for projects receiving IIJA supplemental funding
• **DBE/MBE participation** documentation and good-faith effort requirements in procurement

Audit exposure: Federal funds attract federal oversight. The EPA Office of Inspector General and state audit agencies review SRF program administration. Utilities that receive principal forgiveness (which functions as a federal grant) face the same audit exposure as any federal grant recipient. Documentation that seemed adequate for a conventional SRF loan may not withstand scrutiny when the project receives 49% principal forgiveness.

Most utilities manage project documentation in spreadsheets, email threads, and shared drives. That approach cannot produce the organized, traceable, audit-ready documentation that federal compliance now requires.

What Documentation You Need

Managing IIJA-funded projects through the SRF requires maintaining organized documentation for the following compliance areas:

Procurement Compliance

• Solicitation documents: RFP or IFB as issued, including any addenda
• Bidder/proposer list and procurement method justification (competitive sealed bids, qualifications-based selection, etc.)
• Bid tabulation or evaluation matrix with scoring documentation
• Contract award justification memo, including DBE/MBE outreach documentation
• Executed contract with all exhibits, including prevailing wage schedule

The procurement record must demonstrate that the utility followed its own procurement policies and applicable state/federal requirements — and that the selected contractor was chosen on a competitive basis. Any sole-source or emergency procurement requires separate justification documentation.

Davis-Bacon Act Compliance

The Davis-Bacon Act requires contractors and subcontractors on federally funded construction projects to pay laborers the prevailing wage rates determined by the Department of Labor for the project location. Compliance documentation includes:

• Certified payrolls from the prime contractor and all subcontractors, submitted weekly for each pay period during which construction work is performed
• Your review and certification that payrolls have been received and reviewed
• Wage rate schedule incorporated into the contract
• Notice posting at the job site
• Resolution documentation for any underpayment findings

This documentation must be maintained for the duration of the project and for a period after completion specified in the funding agreement (typically three years). Managing certified payrolls for a 24-month construction project with a prime contractor and eight subcontractors means tracking hundreds of individual payroll submissions.

Buy American Documentation

For iron, steel, and manufactured goods used in the project:

• A material tracking log identifying each covered item, its domestic production status, and supporting documentation (mill certificates, manufacturer's affidavits, etc.)
• Any waiver applications filed with the state SRF program, with supporting analysis
• Contractor certifications of compliance

The scope of Buy American requirements under IIJA is broader than under prior law, and the waiver process is more restrictive. Utilities should establish their material tracking process at contract execution, not at project closeout.

Cost Eligibility Documentation

SRF funding can only pay for eligible costs as defined by the Clean Water Act or Safe Drinking Water Act. In a project that uses both SRF funds and other funding sources, you must maintain a clear cost allocation that separates:

• SRF-eligible construction costs
• Ineligible costs (operation and maintenance items, costs that benefit non-SRF-funded components)
• Costs funded by other sources (grants, bonds, rate revenue)

This allocation should be established at project inception and updated through the project lifecycle as costs are incurred.

Environmental Review Documentation

Projects receiving IIJA supplemental SRF funding must satisfy federal NEPA requirements or qualify for categorical exclusions. Documentation includes the environmental review record as submitted to and approved by the state SRF program, consultation records for Section 7 (Endangered Species) and Section 106 (Historic Preservation) if required, and any conditions imposed by the environmental review process.

Closeout Reporting

State SRF programs require formal project completion documentation, including:

• Final project cost report showing actual costs by category against the funded budget
• As-built drawing certification
• Completion certificate executed by the engineer of record
• Any applicable operations permits (NPDES, drinking water system approval)
• Audit trail for cost eligibility determinations

How a PMIS Keeps You Audit-Ready

Audit readiness is not a function you can turn on before an audit. It is a function you maintain throughout the life of a project by keeping documentation organized, current, and accessible.

A PMIS built for utility capital programs maintains audit readiness by design:

Structured procurement filing. Every procurement action — solicitation, addendum, bid tabulation, award memo — is filed in a defined project location with version control and a clear record of when documents were issued and to whom.

Certified payroll tracking. A Davis-Bacon compliance module tracks each subcontractor's payroll submission status by pay period. Open items are visible in real time — the project manager knows immediately if a subcontractor's payroll is late rather than discovering it during an audit.

Change order cost eligibility tracking. Every change order includes a cost eligibility field — SRF-eligible, ineligible, or partially eligible — with the rationale documented. This field updates the project's cost allocation in real time.

Document version control. Contract documents, environmental review records, and funding agreements are maintained in version-controlled libraries. When an auditor asks for the version of the specifications in effect at bid award, you can produce it immediately.

Closeout documentation workflow. The PMIS tracks closeout documentation completeness — what has been submitted, what is pending, and what requires action — so that the final reporting package is assembled progressively throughout the project rather than assembled in a rush after substantial completion.

Portfolio-level compliance dashboard. Across all IIJA-funded projects, the program director can see the status of Davis-Bacon payroll submissions, Buy American documentation completeness, and cost eligibility tracking in a single view — not reconstructed from individual project folders.

Pacific Northwest Context

Utilities in Oregon and Washington operate in a specific regulatory and funding context.

Oregon DEQ CWSRF: Oregon's Clean Water SRF administers federal capitalization through a project priority list system. Projects are ranked based on environmental and public health need. IIJA supplemental capitalization has increased the funding available for clean water projects, with specific set-asides for emerging contaminants and projects serving disadvantaged communities.

Oregon OHA DWSRF: Oregon's Drinking Water SRF similarly prioritizes projects based on public health criteria. Lead service line replacement funding through IIJA is administered through this program, with Oregon utilities eligible for principal forgiveness under certain conditions.

Washington Ecology and DOH: Washington state's SRF programs have similar structure and have seen increased activity under IIJA. The Washington Clean Water Fund and Drinking Water State Revolving Fund both administer IIJA supplemental funds.

EPA Region 10: The Pacific Northwest falls under EPA Region 10 (Seattle). Regional policies on Davis-Bacon, Buy American, and environmental review can vary somewhat from national guidance — utilities should work directly with their state SRF program administrator to understand the specific requirements for their jurisdiction.

BRIC and other FEMA programs: The Building Resilient Infrastructure and Communities (BRIC) program, administered by FEMA, provides hazard mitigation funding that some utilities have used for resilient infrastructure projects. While not directly related to SRF, BRIC grants carry their own federal compliance requirements and have similar documentation expectations.

Building Compliance Infrastructure Before You Accept the Money

The most common mistake utilities make with federal infrastructure funding is accepting the funding agreement before establishing the compliance infrastructure to manage it. The compliance requirements become binding at the moment the agreement is executed. If you have not built your documentation systems, established your certified payroll process, or trained your project management staff on Buy American tracking before construction begins, you are already behind.

The right sequence is:

**During SRF application:** Identify all applicable compliance requirements. Establish your project cost allocation framework. Begin your environmental review process.

**At funding agreement execution:** Establish the PMIS project site with all compliance tracking elements. Incorporate Davis-Bacon and Buy American requirements into your contract documents.

**At Notice to Proceed:** Begin tracking certified payrolls from week one. Initiate material procurement logging.

**Throughout construction:** Maintain real-time documentation. Do not let compliance documentation accumulate as a closeout task.

**At project closeout:** Assemble the complete compliance package using the documentation maintained throughout the project — not reconstructed from memory.

Utilities that follow this sequence can produce a complete audit package within days of a request. Utilities that do not spend weeks assembling documentation and hoping that nothing is missing.

Practical Takeaways

• IIJA funding does not simplify utility capital management. It provides access to capital at the cost of significantly increased documentation and compliance requirements.
• Davis-Bacon certified payroll tracking is an ongoing, weekly process — not a closeout task. If you are not tracking payrolls from week one, you have a compliance gap that may take months to reconstruct.
• Buy American requirements apply to iron, steel, and manufactured goods in the project. Establish your material tracking process at contract execution, and require contractor certifications before materials are delivered to the site.
• Your state SRF program administrator is your primary compliance resource. Build a working relationship with them before your project starts, not after a compliance question arises.
• A PMIS with compliance tracking built into its workflows does not just make audits easier — it makes them survivable. The difference between a clean audit finding and an adverse one is often whether your documentation was maintained throughout the project or assembled after the fact.

For utilities in the Pacific Northwest, IIJA represents a generational funding opportunity. Managing it correctly — with the documentation discipline and program infrastructure to stay audit-ready throughout the project lifecycle — is what determines whether your utility captures that opportunity or spends the next three years responding to audit findings.