Report: US government should embrace private sector for infrastructure needs

Dive Brief:

A Bipartisan Policy Center report this week found that the private sector could be the solution to fixing the country’s deteriorating infrastructure, but investment must be more transparent and subject to less red tape, The Hill reported.
The Center recommended that all levels of government participate in public-private partnerships (P3s) to take advantage of the private sector’s "visions for a project’s design," as well as its capabilities in the areas of construction and maintenance.
The Center’s infrastructure council said one of the biggest barriers to more private investment and participation is inefficient bureaucracy and the lengthy process for permits and environmental reviews.

Dive Insight:

The Center cited the same looming infrastructure funding shortfall as the American Society of Civil Engineers (ASCE) reported last week. The ASCE said the shortfall leaves 2.5 million U.S. jobs and $4 trillion in gross domestic product at risk. The association added that the U.S. has made provisions for only $1.88 trillion of the requisite $3.32 trillion. Without reducing the shortfall, the ASCE said it will grow to $5.18 trillion by 2040.

The Center recommended that state and local governments take the following steps to assess their infrastructure needs and overcome obstacles:

Identify public benefits of a project and focus on the consequences, financial or otherwise, of inaction.
Create an inventory of both the physical and fiscal status of public assets.
Set up an office that will concentrate on drawing private infrastructure investments.

According to a Moody's Investors Service report in March, the U.S. is ready for P3s to take off, as the country's market for this type of project structure could become one of the world's largest. Moody's said the U.S. has everything P3s need to be successful — generally accessible government resources, political backing, a robust capital market and the legal infrastructure to enforce P3s.

P3s are increasingly considered a viable option — and oftentimes the best choice — for large public projects, especially those with a major maintenance component, which creates a commitment of both time and expertise. This delivery method is becoming more popular as a way for public agencies to minimize the risks for themselves and shift more to the private sector, as well as a way to ensure funding without having to jump through the typical regulatory hoops.

Several large projects in the U.S. have recently been announced as using the P3 structure, such as the $3.3 billion, 16.2-mile Purple Line light rail project in Maryland. The project was awarded to Fluor Enterprises-led Purple Line Transit Partners and construction will begin later this year. The joint venture will design-build, finance, operate and maintain the rail for the state.