Global Infrastructure Hub’s Outlook report shows the United States has one of the largest infrastructure gaps. What can the GI Hub’s InfraCompass tell us about fixing it?
Globally, the need for infrastructure investment is forecast to reach $97 trillion by 2040.
While there are significant variations in investment needs across regions, the US, given its size and importance to the global economy, contributes $12 trillion to this need.
The US is predicted to fall well short of meeting its need. Based on current trends, if the US keeps investing at the current rate, it will fall $3.8 trillion (or 32%) short of what it needs to spend, restricting economic growth to well below potential.
Outlook shows substantial requirement for US investment in new highways and bridges, to both mitigate congestion from rising traffic levels, and to rectify deficiencies in the current network.
With Outlook defining the extent of the problem, and the sectors of concern, we can turn to another GI Hub tool, InfraCompass, to pave the way in solving the problem.
InfraCompass reviews country performances in the six most important elements driving successful infrastructure delivery:
- Institutions and governance
- Regulatory and competition frameworks
- Permits, licences and land acquisitions
- Plan and select
- Delivery and operations.
As seen in the radar diagram below, the US performance is mixed.
The US is a strong performer in rule of law, investment and competition regulatory frameworks, taxation policies to incentivise investment, and providing construction permits predictably and efficiently.
The US is below the average of like countries in project planning, procurement and contract management and improvement in these areas would help address the gap of $3.8 trillion. The US' performance in planning and procurement also leads to the gap in the road sector being the US' largest at $3.4 trillion, as roads tend to be state-procured while other sectors are more often market-based and private sector-led. Central government guidelines for procuring Public-Private Partnerships (PPPs), dedicated PPP units, or stronger infrastructure institutions would improve this area.
One of the best ways to improve is to better measure how your infrastructure currently performs. Transparent, publicly available post-completion reviews – that check not only costs and schedule, but benefits realisation - would lead to a long-term improvement in delivering quality infrastructure.
The lack of a clear central government infrastructure plan or pipeline of major national projects has affected the US market in the past. PPP activity and private financing in the US is well below the average of similar economies.
Recent moves to correct this are encouraging. President Trump’s administration has released a Budget Proposal with an enviable goal of spending $200 billion on infrastructure to catalyse a total of $1 trillion in infrastructure investment - a $4 co-contribution for every $1 of federal spending. Expanding the TIFIA and WIFIA schemes for concessional loans and guarantees for road, rail and water projects and removing restrictions and disincentives for revenue generating projects are important steps.
Some US states are also leading the way in improving their infrastructure procurement and planning practices through innovative managed motorways and high occupancy toll lanes in Virginia, such as the i95, and new PPP structures, such as the Pennsylvania Rapid Bridge Replacement Project. This was first multi-asset PPP to be undertaken in the US using a “bundled” approach; The largest roadway project in Pennsylvania’s history; and the bundling of assets will reduce project costs by 20% and achieve construction at a much faster rate than using a traditional procurement program.