The Hill.com 6/13/14 10:00 am By Rob Palter
The list of stalled or over-budget infrastructure projects in the U.S. is long. In its most recent evaluation, the American Society of Civil Engineers gave the U.S. a C grade for the quality of its infrastructure and estimated that a failure to address these issues will hurt the country’s global competitiveness; costing $1.1 trillion in U.S. trade value and 3.5 million jobs over the next five to ten years. Obviously, infrastructure matters. So how can the U.S. do better?
That was the question we set out to research through meetings with government leaders, private investors, and private operators in the field of infrastructure. These meetings highlighted that while money for infrastructure is important, it is not the main issue, as many would have us believe.
More important, the experts said, was that regulatory and political issues stall the process, prolonging construction and development. Some of this is inevitable and positive, such as improved environmental planning and better safety standards. But in too many cases, projects undergo death by a thousand meetings. Most solutions to these process problems have tended to be legislative in nature (e.g., PPP frameworks, new infrastructure delivery organizations, creative tax or financing structures) and generally fail to get implemented or get implemented in a sub-optimal manner.
There are short-term tactical actions to quickly unlock the infrastructure bottleneck while long-term legislative solutions are undertaken. The experts we spoke with agreed on a few principles to accomplish this.
Shorten the planning process: A big chunk of the costofUS infrastructure projects is incurred before a shovel is put in the ground, chiefly in the form of myriad hearings and negotiations across multiple agencies. Waiting for lawmakers to remove the inertia and complexities in the current approach is likely to take a long time. Nevertheless, some regions are making progress in streamlining planning and permitting processes without introducing new legislation.
Louisiana’s Transportation Infrastructure Model for Economic Development (TIMED), a multi-billion-dollar road and bridge construction program funded by a gasoline tax, has made the planning process much more efficient. The agency got permission from the state Department of Transportation (DoT) to hire a program manager to acquire access rights and negotiate deals with utilities all along the route, rather than parcel by parcel. Then the manager returned the files to the DoT for execution (as the law required), but with a pre-negotiated outcome in almost 80 percent of the cases. Analysts say this approach saved years of planning.
Moreover, there is no reason that different agencies cannot find new ways to cooperate to streamline environmental reviews, while still fulfilling their duties. Through a program offered by the Federal Highway Administration, for example, the Utah Department of Transportation used a cloud-based distribution system to share digital maps of proposed transportation systems with the state Division of Wildlife Resources. Both departments could now access, review, and collaborate almost instantaneously. The process enabled Utah to cut the cost of some reviews by as much as 98 percent.
Shift risk toward the private sector: The consensus of the 50 experts was that private companies would accept more risk in exchange for more profit potential and less complication in development. Under the current paradigm (“design-bid-build”), agencies put out one proposal for design and one for building. Not only does the agency sponsoring the project have to manage multiple rounds of proposals, but builders have to interpret what the designers had in mind. The process is costly, both in time and money for all involved.
An alternative approach is “design-build”, in which the agency structures the process for participating bidders to both design and build the project. This can, in the right circumstances, save time and create greater accountability for project completion.
Texas adopted this system with its recent extension of the George Bush Turnpike, a 52-mile, six-lane toll road in that included more than 40 bridges. It was completed under budget and within an aggressive, 32-month schedule while maintaining a strong safety record.
Be a pioneer: Pilot projects can test the rules governing planning and development processes; they can show legislators and regulators that new development approaches can work while still protecting the public’s interests. The Federal Highway Administration’s Special Experimental Project Number 15 (SEP-15) and the federal government’s Moving Ahead for Progress in the 21st Century Act (MAP-21) are forcing re-evaluation of the status quo and enabling greater efficiency in the review process. Agencies can take advantage of these programs to not only develop projects faster by assigning them pilot status, but they can also shed light on the burdens of existing rules and improve the planning and development processes for future projects.
Think about how not to build: The most cost-effective project is the one that does not have to be built; that means getting more out of existing infrastructure. Technologies like smart traffic signals, dynamic pricing, smart grids, and bridge sensors increase capacity without bricks and mortar. The I-95 highway in Miami, infamously the most crowded road in South Florida, uses camera and sensor-based technology to assess congestion, then imposes different toll rates on that basis. This “variable demand pricing” allows both the free and toll roads to operate at maximum efficiency, reducing the need to build more, and has helped to boost demand for buses, which have become more reliable.
New infrastructure projects typically generate a lot of enthusiasm. As the new roads, bridges, and mass transit is built, there is genuine excitement to see its beauty begin to emerge. But commuters and taxpayers have every right to ask: Why couldn’t these solutions have happened decades ago? That’s a fair question. The U.S. has spent decades to get into this infrastructure muddle, and it will not get untangled quickly. But these relatively simple fixes can help address the country’s infrastructure needs in a faster and more effective manner.
Palter is a senior partner and global head of McKinsey & Company’s Infrastructure Practice.
Improve America’s infrastructure quickly? Yes, we can
The Hill.com 6/13/14 10:00 am By Rob Palter