After 13 grueling years of political debate, Congress passed a bill that enabled some of the largest infrastructure spending in U.S. history—an almost 20% increase over the annual federal public works budget.
The spending created clean energy, jobs, addressed environmental issues (while creating others), and ultimately, while backstopped by Congress, paid for itself. If this sounds too good to be true—it isn’t—because this happened in 1928. The spending was for the Hoover Dam. And while there were other projects part of the “infrastructure stimulus” of that era, this iconic project is a great representation of the good and bad of a meaningful infrastructure spend.
Over the past 10 years, infrastructure has become an outsized and unrequited topic—it has featured prominently in presidential campaigns, has been the subject of many (mostly unpassed) bills and hundreds of conferences, and marketed in at least a dozen “Infrastructure Weeks.” Will it be said that 2021 is the year of Infrastructure?
Many are hopeful that in 2021 the legislation passed by the Senate will advance in the House and be signed into law by the President to increase the clip of infrastructure spending—by current estimates an additional $500B.
While securing new infrastructure spending is important, and certainly has been a difficult political challenge, there is much more to be said about how government agencies should spend new infrastructure dollars. Agencies responsible for setting infrastructure policy and for overseeing projects face many considerations beyond the dollar amount they will be asked to spend. Below are some questions, challenges, and infrastructure opportunities for governments to address:
NEW MODELS OF PROJECT GOVERNANCE
With the potential influx of more than $500 billion in new infrastructure spending, government agencies should have a governance game plan. Starting with a prioritized list of projects is essential to making the most of the amount of new funding and optimizing funding sources and uses. Having the governance structure in place to manage large new spends requires planning, resources, and enhanced reporting/IT capabilities. New program dollars often come with new reporting and controls requirements and can also be an opportunity to update project delivery methods. Spending new infrastructure funds the same way old funds were spent could be a missed opportunity, or worse, end up causing a gap in controls and unwanted public scrutiny.
Electrifying much of our infrastructure is an exciting opportunity to modernize, economize, and decarbonize. But each electrification program requires careful coordination. For example, switching bus fleets from combustion to electric engines is certainly a big opportunity. But the swap is more than procuring high-performing electric buses. Infrastructure around charging stations, scheduling, and operations concerns are often in mind, but what about maintenance? Do we have enough tradesmen to address electric bus fleets across the country, especially as other infrastructure also electrifies? With careful planning, agencies can turn the electrification disruption into an orderly transformation.
DEPLOYING BROADBAND AND DIGITIZING INFRASTRUCTURE
The relative ease with which so many could shift to remote activity demonstrated the power of broadband infrastructure. But it also spotlighted areas and communities that did not have ready access to broadband. Billions of dollars have been proposed to expand the 5G network. Building this network, especially in rural areas, is a large infrastructure challenge itself.
There are profound opportunities for 5G to transform the way an individual interacts with infrastructure. As sensors are embedded in everything and connected through 5G, it can help us control and personalize our infrastructure experience. It could be a wayfinding app for hospitals or an app that with a single click can book a scooter, train, and bus ticket so commuters can get to and from work without worrying about connections and having the right fare. It could personalize the temperature and lighting levels in our workspaces or even tell us when we need to buy more milk. Government will need to think through how to integrate this data in meaningful ways, decide how and whether to monetize such data, and how to use it to customize infrastructure that has traditionally been impersonal for the public at large.
As organizations rush to reap the benefits from new or upgraded/enhanced infrastructure, let us not forget that security of these infrastructures is paramount in today’s world. We need to anticipate that cyber-induced disruptions to critical infrastructure can significantly impact a large swath of our populace as well as our national security and economic health. As we look forward to improved access, enhanced efficiency, more functionality, and greater convenience from this new and improved infrastructure, let us ensure its resilience and security by properly engineering cybersecurity from the start, rather than “bolting it on” in situations where adversaries may already be in position to exploit weaknesses to a devastating effect. Those organizations digitizing our infrastructure should carefully employ the ideal mix of people, process, and technology to mitigate the pervasive cyber threat to such systems.
BUILDING WITH THE CLIMATE IN MIND, SUSTAINABLY
Over the past several years, government agencies and infrastructure developers have looked at climate risk—exposure to flooding, wildfires, other natural disasters—when choosing locations for new buildings and infrastructure. More challenging has been developing approaches to build resilience into existing infrastructure (for example, moving streetlights and transformers to high ground in flood-prone areas, or burying transmission lines in fire-prone areas).
Many versions of the proposed infrastructure bills have included billions of dollars to modernize buildings. While it makes climate and economic sense to retrofit systems to reduce carbon footprint and overall operating costs, how specifically can this be done? Which systems should be addressed, and how can (often delicate and complex) systems be maintained over the remaining life of the asset? When is an asset too old for a retrofit and really should be rebuilt? Developing a lifecycle view of asset portfolios is critical to making good decisions about how and whether an asset should be recapitalized or replaced. Developing a holistic view of portfolios often requires investment in data collection, better correlation between condition assessments and mission readiness, and an analytical approach to prioritize projects.
Overlaying all aspects of the infrastructure spending plan are the new Justice40 requirements that are part of Executive Order 14008, Tackling the Climate Crisis at Home and Abroad. In particular, the Administration created the Justice40 Initiative that aims to effectively implement the goal of directing 40 percent of the overall investment benefits to disadvantaged communities throughout the United States. Under the EO, federal agencies are required to begin to redress the high levels of pollution, chronic disinvestment, and lack of access to capital in communities of color and low-income areas. To accelerate the delivery of investment benefits to communities on the front lines of environmental, racial and economic injustice, and as well as communities dependent on the fossil fuel industry for their livelihoods, the White House directed federal agencies to remove funding barriers and strengthen existing programs to deliver benefits to marginalized communities. To comply with these EO requirements, federal agencies will likely need to develop new models and tools to forecast not only the total project benefits, but the specific benefits that accrue to communities of color and low-income areas.
HOW SHOULD WE PAY FOR ALL THIS?
It is unlikely that net new infrastructure spending will be enough to address the needs across every sector. New methods of paying for infrastructure would need to be developed. Perhaps new infra spending can be used to de-risk certain aspects of infrastructure projects that then encourages private investment. Perhaps, by making infrastructure more personalized, the public will likely be more open to user charges and treat them with less resentment than tolls.
One approach won’t fit every type of project or location. Developing multiple approaches to fund and finance projects can create a market that incentivizes new solutions and rewards those jurisdictions willing to use them. If we want an active infrastructure market, we should increase confidence in government’s (and private industry’s) ability to deliver meaningful projects on time and within budget.
There are at least a dozen Hoover Dam-like projects on the docket in the U.S., and hundreds of smaller but important projects that can also transform the infrastructure landscape. If we want to get them built, leaders will likely have to go to the public and show with confidence that these projects provide equitable benefit, electrify, digitize, mitigate climate impacts—and do so on-time, on-budget, and at high quality. While many iconic projects have fallen short of these attributes, if we want to put new infrastructure money to good use and preserve our ability to spend even more in the future, infrastructure leaders should keep these attributes in mind.
2021 can indeed be the year of infrastructure.
Avi Schwartz is a principal and Alan Falk is a managing director with Deloitte Transactions and Business Analytics LLP. Joseph D. Price is a specialist leader with Deloitte & Touche LLP. If you would like to learn more about Deloitte’s Government & Public Services (GPS) practice, please visit our career opportunities page.