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London, UK,
19
May
2017

Public-private partnerships to alleviate U.S. infrastructure crisis

Raymond Steege, Global Sector Leader, Transportation & Infrastructure

Historically, the American economy has thrived when investments were made in infrastructure. After World War II, the U.S. built a network of highways, hundreds of airports, a massive system of waterworks, expanded ports, and consequently boosted economic output. Today, roadways are worn, bridges are in disrepair and public buildings are crumbling. The desperate need for upgrades is causing public safety issues.

The American Society of Civil Engineers (ASCE) has rated the condition and capacity of the country's infrastructure as a serious concern with a strong risk of failure. According to a 2016 study by the ASCE, failure to invest could cause US$3.9 trillion in losses to the U.S. GDP by 2025. So, what gives?

These investments are expensive, therefore funding can be difficult.

One of President Trump’s major campaign promises was a US$1 trillion investment in infrastructure. It’s unclear how much will be allocated until the full year 2017 budget is passed. Due to the proposed increase in defense spending, there is speculation that this could lead to corresponding cuts in infrastructure programs.

In the meantime, the U.S. infrastructure continues to need significant investment.

Enter: public-private partnerships (P3s). P3s emerges when a private sector company steps in to partner with a public agency to provide additional funding sources. This model maximises value for the constituents, delivers a lower total cost and allows for a tighter schedule.

Standardisation of the process across the U.S. and adoption of the economic development benefits are the greatest challenges facing the P3 market. As the U.S. P3 market is still in its infancy, there is a general misconception that public infrastructure projects are being given away to private companies. Government agencies and companies delivering these projects should continue to educate the public about the P3 process, to increase their assurance that their interests are still at the forefront of project goals. 

The Texas Department of Transportation (TxDOT) is a great example of a success story using a P3 model. Its approach provides the public with earlier access to improvements that may have otherwise been delayed for decades. As the program has evolved, the public has greatly benefited from the availability of infrastructure and TxDOT has learned to better manage the risks.

In an environment of increasingly constrained financial resources, P3s are critical to aiding the renewal of U.S. infrastructure. With proper risk management, this can be a significant contributor to reviving America’s infrastructure and positively impact U.S. citizens to generate economic opportunity, enhance quality of life and prioritise public safety.

 

 

Meet the blogger

Raymond Steege oversees Amec Foster Wheeler’s transportation sector as Global Sector Leader and provides direction for major project pursuits in the design-build/Public-Private Partnerships, rail, ports, highway, bridge and airport markets. Ray became involved in infrastructure at an early age when he worked in construction with his father at a sand and gravel pit. He is a skilled public communicator and has helped guide successful public involvement activities on several controversial transportation improvement projects.