If left unaddressed, the USA’s infrastructure gap could lead to millions of job loss in over two decades, the Hill article, “Infrastructure gap reaches $5.6 trillion: Trade group,” says.
According to the American Society of Civil Engineers (ASCE), America needs to invest $13 trillion in infrastructure, but only $7.3 trillion is expected, which leaves a $5.6 trillion gap.
Due to underinvestments, rundown infrastructure systems cost average American households $3,300 a year from power outages, lost productivity from traffic, and delays due to worn-out roads.
The ASCE warns that if infrastructure underinvestment continues, it will lead to significant GDP losses, business productivity in hundreds of trillions of dollars, and increase trade deficits.
An article from McKinsey & Company, “Reimagining infrastructure in the United States: How to build better,” says that infrastructure is crucial in a country’s health and well-being. There is value in investing in good infrastructure in terms of job creation and other economic benefits.
The article offers practical guidance on using capital budgets and stimulus funding in the context of the COVID-19 recovery.
The US government rolled out three relief packages worth $2 trillion to counter the economic consequences of COVID-19, where money was used to retain jobs and staff in infrastructure agencies, but none was designated for capital projects.
In contrast, the EU, Japan, and China announced a stimulus where infrastructure investment is crucial. The article says that the United States could also follow what these countries are doing and take advantage of low-interest rates to rebuild and renew their physical assets.
In 2009, infrastructure spending was a crucial part of economic recovery during the financial crises. Congress passed legislation to prioritize “shovel-ready” projects or projects that can be completed within three years; however, these projects did not significantly expand US capital stock or strengthen economic competitiveness.
In the future, infrastructure spending should balance short-term spending on infrastructure to create employment with “large-scale goals to build transformative projects.”
When infrastructure agencies receive funding, money is usually spent on maintenance and upgrade work to boost the local economy. Still, money should also be spent in long-term and transformational projects such as: reinvesting in existing assets to operate on peak performance, reducing the cost of service delivery by investing in automation, contactless service, and energy efficiency, investing in projects that are in the final stage of development, and investing on technology and digitalization, the article says.
Proposed projects should also be ranked based on their estimated benefits, where benefits are quantified based on measures like service or operation metrics, environmental targets, user experience, etc.
In the context of recovery from COVID-19, prioritizing projects should use metrics on resiliency, economic equity, and its ability to protect vulnerable communities.
In times of poor economic condition and low funding, like what happened during the 2008 financial crisis, the budget should prioritize projects that will increase asset resiliency and reduce ownership costs.
“Agencies may also choose to delay projects that do not core to operations, eliminate those that may decline in value over the next decade (such as airport parking garages), and take a broader view of what qualifies as a capital project (such as digitization).” It could mean postponing low-benefit projects to prioritize higher-benefit ones.
The article presents the following four priorities when managing current budget constraints and prepare for the new normal on infrastructures like airports, mass transit, roads, water and wastewater, broadband, publicly owned buildings:
- Enhance the user experience by modernizing service offerings to attract users back and manage future capacity needs.
- Transform operations by using advanced analytics and flexible models to reduce life-cycle costs and increase asset productivity.
- Improve delivery by taking advantage of lower interest rates and accelerate projects to benefit from reduced asset utilization.
- Consider innovative revenue models by looking into alternative delivery mechanisms to unlock new revenue streams and consider the use of public-private partnerships to stretch funding.
The article says that using these actions will vary and depend on the type of assets and how it is affected by the crises.
Inframanage notes that the current US Administration promotes an infrastructure funding package in the Covid pandemic recovery.
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