Commentary: Seven Ways We Can Afford to Fix American Infrastructure
The nation’s infrastructure is in dire need of repair. But with decimated state budgets and an antiquated funding system that values big, flashy projects over repair and maintenance, finding the money is an uphill battle. And yet, at the five-year anniversary of the I-35W Bridge collapse, it’s critical that we figure out a way.
Here are my suggestions for infrastructure funding reforms.
• Improve funding oversight. The current system for overseeing the distribution of federal aid for state highway projects through the Federal Highway Administration is clearly broken. After funds are distributed to the states, it is hard to determine where the money goes. It’s critically important to ensure that forensic audits are provided for all construction projects in excess of $50 million. With the acknowledged fact that almost half of all labor costs on a project are wasted due to the inefficiencies of the construction industry, a higher level of transparency is needed to protect precious taxpayer dollars.
Since its inception, money collected as part of the federal gas tax has been used to build and repair the nation’s roadways. Over the years, though, state and federal officials have started reaching into that pot to fund other less-critical transportation projects not connected to roadways. Politicians frequently use infrastructure funds on new projects that will help them get re-elected—a practice often referred to as “the politics of ribbon-cutting”—rather than on their state’s much-needed maintenance and repairs.
According to the American Society of Civil Engineers, the amount of money needed to fix and sustain our nation’s infrastructure exceeds $2 trillion. Finding the money will require the federal government to play an active role.
It will require that infrastructure funds collected via an increase in gas taxes be used for their intended purpose. It will entail the development of new, creative relationships between the public and private sectors. It will require a renewed sense of urgency on the part of politicians. And it will involve an extensive re-education of our leaders and the public on how to develop regional transportation planning needed for the future growth of our nation.
• Demand true fixed-price contracts from contractors. When New Jersey Gov. Chris Christie froze plans to build a second rail tunnel under the Hudson River, he did so because he worried that potential cost overruns on the expensive project would be passed on to already struggling taxpayers. Construction cost overruns and missed project deadlines regularly plague projects in both the public and private sectors. The way to combat these cost overruns and protect state budgets and taxpayers from disaster is by demanding true fixed-price contracts.
Most construction contracts contain loopholes that allow contractors to drive up the cost. Standard contracts devised by members of the industry are generally insufficient as they a) fail to properly allocate risk among the parties, and b) provide proven loopholes for contractors to make claims for additional costs.
The right contract for any owner going into a project—be it public or private—is going to be one that offers a true fixed price. Securing true fixed-price contracts on infrastructure projects will require project architects and engineers to deliver construction documents for bidding that are fully detailed, complete in all respects and coordinated with each other.”
• Increase the use of money-saving technology. For a country generally smitten with technology, it’s ironic that it’s noticeably absent in maintaining our nation’s costly infrastructure. Using appropriate technology in our transportation infrastructure will produce enough savings to offset the staggering costs resulting from the past few decades of deferred maintenance. New assessment technologies are central to overcoming the limiting effects of visual inspection for both bridge management and funding allocation, and offer a variety of benefits to transportation departments and the public.
Technology exists to anticipate bridge remediation years before rust, corrosion, and cracks in the structure appear. The federal government needs to provide states with funds to purchase this equipment and train their inspectors to use it. Enabling bridge inspectors to ensure precision and objectivity in their evaluation process, which in turn allows us to catch problems earlier when they are easier and cheaper to fix, can save state governments countless millions of dollars a year in unnecessary remediation costs.
• Raise the gas tax. The federal gas tax has not been raised since 1993. It’s absolutely time to give serious consideration to increasing the federal gas tax. Most importantly, we must require that infrastructure funds collected via an increase in gas taxes be allocated for repairing the nation’s dilapidated roads and bridges.
• Increase the use of public-private partnerships (P3s). It is time to actively incentivize private investors to assist in making our failing infrastructure strong again. First, of course, we must take the right precautions.
We will have to ensure that there is a balance of competing governmental and private profit-seeking interests in P3 projects. We will also need to ensure that the proper financial advisors are sitting on the side of state and federal officials to balance out the experts who advise these private investors.
By taking the right steps, we can devise several workable models to use P3s to improve the nation’s infrastructure while still protecting the traveling public from excessive toll rates and ensuring that the interests of truckers, railroads, union workers and the towns and cities along those routes are fairly heard and balanced into the equation.
• Incentivize state and metro “remediation first” infrastructure projects. As Congress takes up reauthorization of the nation’s surface transportation law, they should encourage support for states and cities willing to form a new partnership with the federal government.
These partnerships should incentivize metropolitan areas to raise revenues for long-term regional funding of needed projects that will reduce congestion in our 100 largest cities. These “remediation first” projects, where states allocate funding to the maintenance of existing systems, will also create as much as 17% more jobs than applying the same funds to new projects.
• Cap construction cost overruns. Construction exigencies are going to occur, but the process for identifying them and quantifying them can be improved. Through sophisticated negotiations, agreement on a true fixed cost for a project—one that factors in negotiated costs for potential contingencies—can be secured before construction begins.
We can identify risks that may arise and secure agreement from contractors on pricing that caps potential cost increases and prevents unwarranted cost overruns. With this kind of reliable information in hand, cost-conscious politicians could begin to make the right decisions.
Barry B. LePatner is the founder of the New York City-based law firm LePatner & Associates LLP and the author of several books on the construction industry.
