Worldwide there is a chronic difficulty in raising money through public private partnerships or taxes, or even raising the topic of taxes, to pay for new, or repairing old, infrastructure.
There are four mismatches that are apparent in the debate over infrastructure spending.
1. Benefits & Beneficiaries – The first mismatch is that the project beneficiaries are not fully informed of how they are better off from infrastructure. As an example, the benefits of mass transit are numerous: cleaner air, better access to jobs, reduced congestion, higher productivity, a more active populace. The beneficiaries likewise are many: transit riders, automobile drivers, the environment, cabbies, businesses and delivery services. The case that non-users benefit from infrastructure projects is not being made. And people are unwilling to pay unless they understand “what’s in it for me?” A concerted effort is required to explain to all stakeholders of infrastructure projects in terms that are important to them.
2. Costs and Benefits – The second is that taxes collected often go to general government revenues and not to the infrastructure people see and use. There is no obvious link between the pain of taxes and government expenditures on services and assets. A basic principle of matching benefits and costs has been lost. Making this link for the people who will pay will help to restore the willingness to pay for infrastructure through taxes.
3. Past, Present & Future – The third is that we are asking people to pay for long-lived projects and they are being encouraged by politicians to be short-sighted. We have become too focused on the present and are not investing for the future. The fact that we are benefiting from past investments does not affect our lack of inter-generational altruism. Politicians have shorter horizons than in the past. Voters have been sold on short-term benefits and short-term gains. To break this destructive cycle of short-term-ism requires a leader or agency with a long horizon to push infrastructure’s inter-generational agenda with the public and political sectors is desperately needed.
4. Promise & Delivery – The fourth mismatch is between the promise and reality of public private partnerships (P3s). There is a cynicism with regard to the cost of private sector’s involvement in public infrastructure projects. The value of P3s or alternate financing is in a risk transfer that is tough to understand and even more difficult to demonstrate after the deal is done. Often the wrong project, or the right project done wrong, is procured through a P3 to the detriment of the public’s trust. The P3 may be the most efficient or least costly procurement process but that the project is not designed correctly means that the benefits of the P3 are lost in cost overruns, schedule delays or undelivered benefits. More effort needs to be put on choosing the correct project, the best design and less emphasis on whether the procurement should be by P3 or traditional government funding. An open, transparent, and consistent procurement process is needed.
Building information Modelling (BIM) is a developing engineering standard that has built into it the ability to monitor and manage complex projects easily and transparently. A continual decision feedback loop can be added that makes the business case for each design alternative and ensures that the right project is done right. At each stage of planning, design, procurement, construction, and operation the question is answered “what’s in it for me?” and the public trust is cemented.
What is needed to break the infrastructure deadlock is:
- Voicing vociferous support for expanded investment in infrastructure to quantify and monetize the often hidden benefits of infrastructure so that different types of benefits accruing to disparate stakeholders can be understood. We need to be explicit about the benefits and beneficiaries of infrastructure.
- Lobbying for reforms to fiscal and tax policies, a longer decision making horizon and consistent and apolitical business cases for infrastructure projects.We need to look beyond election cycles, the current economic environment. Each public dollar needs to be demonstrated and seen to be put to its most efficient and effective use.
- Advocating for the use of BIM for infrastructure projects combined with an objective, standardized decision-making framework. Trust in the process of infrastructure and city building needs to be re-established. Governments do not have enough money for all infrastructure requirements. Public works projects are needed badly. Transparency and consistency are critical to unleash private capital for the greatest public benefit.
We can address our infrastructure deficit only with money from the private sector, trust that the projects are designed for maximum public benefit and a clear demonstration of who wins and how.