Despite President Obama’s call for increased investment in infrastructure, care must be taken to ensure the government operates on sound financial footing.
In recent years, there have been numerous projects that have faced immense cost overruns. For example, the Boston Harbor Tunnel project, commonly known as “The Big Dig,” was announced to have cost $2.8 billion when it was announced in 1985. When it was finally finished in 2006, it carried a price tag of $15 billion.
New Jersey Governor Chris Christie shelved a tunnel project because its original $5 billion estimate ballooned to $8.7 billion.
There is no longer any excuse for hiding or ignoring the truce costs of infrastructure. The American people elected a Republican majority to the House of Representatives, as well as a wave of Republicans in state legislatures. Based on the results of the 2010 midterm elections, Americans are demanding fiscal reform and they expect legislators to make good on that promise.
Several studies support the use of life-cycle budgeting. A study by the Massachusetts Institute of Technology examines the life-cycle window of paving materials. In a 50-year window, 85 percent of carbon emissions. Improved efficiency in construction can have long-term environmental benefits.
According to a 2008 study by the Congressional Budget Office (CBO), “asset management includes evaluating total life-cycle costs—both the initial capital costs and the subsequent costs for operation maintenance, and disposal to ensure not only that projects are prioritized appropriately.” That study went on to say that life-cycle budgeting can aid in extending the life of construction equipment, and reducing the cost of operations by as much as forty percent.
In addition, to financial concerns, life-cycle budgeting also considers a multitude of factors. The state of Indiana Department of Transportation (DOT), for example, recently issued a white paper that examined a number of factors in highway construction such as “traffic, climate, pavement layer thickness and properties.”
From January to December 2009, the Indiana Department of Transportation staff designed more than 100 new pavement sections. These sections, when accounting for pavement thickness and other variables, saved $3 million on the entire project.
The Indiana DOT notes that savings for highway maintenance projects (as opposed to new constructions) could be as high as $20 million.
Using life-cycle budgeting will bring transparency and common sense to the infrastructure process. States are under heavy financial stress and facing steep budget shortfalls. Careful planning and truthful accounting will make the most of these projects and can help ease financial burdens several generations into the future.
Rich Danker is the project director for economics at the American Principles Project, a Washington political organization.