Public-private partnerships can't close US infrastructure gap alone

Public-private partnerships can't close US infrastructure gap alone
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This week, leaders from the global finance and development communities will gather in Washington for the annual meetings of the World Bank and IMF. As they debate how to fund the world’s growing infrastructure needs, two things will be clear: The world is in an infrastructure race, sprinting to keep up with an expanding global economy – and the United States is falling behind.

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Recent data released by my organization, the Global Infrastructure Hub, shows that $97 trillion is required to meet the world’s total infrastructure needs by 2040, yet the spending currently forecasted will come up $15 trillion short. According to the 2017 Global Infrastructure Outlook, the United States will contribute $3.8 trillion to this deficit, which is the most of any country surveyed. And while President Trump’s plan to catalyze $1 trillion in investment was welcomed with bipartisan support when it was first proposed in June, progress has stalled and recent comments over the role the private sector will play raise new questions as to how to close this gap.     

Part of the answer will be addressed this week, when discussions center on the use of public-private-partnerships (PPPs). PPPs are a powerful investment tool and must be a core tenet of any domestic infrastructure plan. They are only one piece of the puzzle, however, and the United States must employ an “all of the above” approach in order to successfully address its needs.

First, the United States must understand how it’s performing against the underlying factors that affect the delivery of successful infrastructure projects, such as governance, regulatory frameworks, permits, and planning. Analysis shows the United States is a strong performer in terms of rule of law, taxation policies for incentivizing investment, and the ability to provide construction permits predictably and efficiently. But it falls short when it comes to planning, procurement and contract management.

The United States can improve its performance in these areas by creating federal guidelines for procuring PPPs and dedicated PPP units. Another way is to better measure how its infrastructure currently performs. Transparent, publicly available post-completion reviews – that check not only costs and schedule, but benefit realization – would lead to a long-term improvement in delivering quality projects.

Gains in planning and procurement would be particularly effective for closing the gap in the nation’s road sector, which is responsible for nearly 90 percent of its $3.8 trillion deficit. As roads tend to be state-procured, where other sectors are more private-sector led, PPPs at the state level are also needed to efficiently fund new highway and bridge projects that would reduce rising congestion levels, rectify network deficiencies, and improve public safety.

Pennsylvania provides a good example with its Rapid Bridge Replacement Project, the nation’s first multi-asset PPP using “bundled” assets, which reduced project costs by 20 percent and completed construction faster than traditional procurement programs.

But states can’t do it alone. The federal government must also assist with funding measures. One step would be to expand the TIFIA and WIFIA programs to provide further credit assistance for road, rail and water projects and remove restrictions and disincentives for revenue generating projects. Asset-recycling, where the government leases existing infrastructure assets to private companies to then invest proceeds in new projects, provides an additional funding mechanism.

Finally, more than funding, the federal government must provide leadership. Not having a clear national infrastructure plan has adversely impacted the U.S. market before. The government must take steps to reduce uncertainty over its current proposal, and chart a clear path forward. Doing so will enable all stakeholders to plan effectively and ensure they’re ready to answer the call when the time comes.

The data tells us that $3.7 trillion must be invested globally to meet infrastructure demands each year. Only when the United States arms itself with accurate information, improves its ability to deliver projects efficiently, and employs creative partnerships and funding schemes across public, private and state sectors, can it begin to ensure it not only crosses the finish line in the infrastructure race, but comes out ahead.

Chris Heathcote serves as the CEO of the Global Infrastructure Hub, an initiative launched by the G20 in 2014 with the mandate of growing the global pipeline of quality, bankable infrastructure projects.