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Without a focus on maintenance, infrastructure dollars will be wasted

Without a focus on maintenance, infrastructure dollars will be wasted
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“Those who cannot remember the past are condemned to repeat it.” This frequently repeated saying applies well to the policymakers who authored the infrastructure policy recommendations in the Biden administration’s $2.3 trillion initiative. Although the plan includes a much-needed focus on improving America’s aging civil infrastructure, it does not address the most severe problem: widespread deferred maintenance, which is the main reason for the sorry state of American infrastructure today. Despite massive spending, there is nothing in the plan to ensure infrastructure maintenance will not be deferred in the future.

Just like a car, major new infrastructure facilities come with an owner’s manual. The manual instructs the state and local governments that own the vast majority of America’s civil infrastructure how to maximize its useful life by maintaining it over time. In tough economic times, infrastructure maintenance is, sadly, one of the easiest things for governments to defer. It has virtually no direct political consequences and its effects are not felt for years, or perhaps decades — long after current administrators and politicians are gone. 

The effects of deferring maintenance are cumulative, disastrous, and lead to larger and costlier repairs. One estimate found that if road pavement conditions drop from “fair” to “very poor,” repair costs are four to five times higher. That does not include the vehicle wear-and-tear costs paid by car owners. 

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The backlog of deferred maintenance for America’s roads, highways and other critical public assets is huge. Repairs to the nation’s aging infrastructure could cost over $1 trillion, or 5 percent of the country’s gross domestic product, according to a Volcker Alliance November 2019 report. Other studies report comparable findings.

As policymakers debate how to fix America’s infrastructure problems, they should consider two questions: What policies resulted in such poor maintenance despite America’s great wealth? And, more importantly, what new policies could prevent this from happening again?

The answer to both lies in how state and local governments procure or “deliver” U.S. infrastructure. “Traditional delivery,” used by governments for decades, includes two main elements. One is the separation of a facility’s design from its construction, and from its operation and maintenance. That approach, known as “design-bid-build,” or DBB, usually results in government owners undertaking operation and maintenance duties themselves.

Another is the use of tax-exempt municipal bonds to finance infrastructure. Many publicly owned facilities qualify for such bonds, which feature lower interest rates than comparable corporate bonds because of preferential federal income tax treatment. Those two elements together discourage private involvement in the operation and maintenance of infrastructure over time. 

Because infrastructure maintenance is often unnoticeable, it creates the political incentives that have contributed to the current sad state of affairs. There is, however, a simple policy solution to reduce deferred maintenance: bundling design and construction with operation and long-term maintenance. Such contracts are known as “design-build-operate-maintain,” or DBOMs.

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The changes are modest but the benefits legion. First, the public sector would be contractually required to commit funds to maintain the infrastructure asset over its entire life cycle. That has several salutary effects. One is that governments would have to take an infrastructure facility’s operation and maintenance costs into account during the project selection stage. Called “life-cycle asset costing,” that would improve project selection while enhancing government accounting for costs. Also, DBOM contracts commit governments to covering infrastructure’s maintenance costs over time, which prevents revenue diversion to other short-term budgetary needs. This is called “life-cycle asset maintenance.”

Moreover, these contracts allow governments to transfer some of the huge risks associated with the operation and long-term maintenance of major infrastructure from taxpayers to private partners. These firms are often in a better position to manage such risks. 

Finally, and perhaps most importantly, properly structured DBOM contracts can require private firms to adopt the latest technology for operation and maintenance. This is called “future proofing,” because it protects governments from the risks of not adopting the latest technologies — a critical point today with the quiet revolution in infrastructure technology. Examples include the capture of methane at wastewater treatment plants, the conversion of streetlights to LEDs, and the adoption of “smart” traffic lights using cameras to change lights based on current traffic.

Some localities already have seen the benefits of DBOM contracts. The Port Authority of New York and New Jersey, for example, delivered both the LaGuardia Airport renovation and the Goethals Bridge replacement under this framework.

A properly structured infrastructure bill can encourage state and local governments to adopt this approach. To avoid repeating the past, new “design-build-operate-maintain” contracts should be adopted after new federal money is spent reducing the backlog of infrastructure maintenance. It’s the only way to ensure American infrastructure is never again neglected.

R. Richard Geddes is a visiting scholar at the American Enterprise Institute, the founding director of the Cornell Program in Infrastructure Policy, and a professor of policy analysis and management at Cornell University.