US president Joe Biden’s $1 trillion Infrastructure Investment and Jobs Act is rightly being recognised for its potential boost to the nation’s economy through upgrades to critical infrastructure. The need for improvements has become even clearer in the wake of Hurricane Ida and the wildfires in California.
One of the most powerful, but under-reported levers in the bill is the requirement to develop value-for-money studies for projects that cost more than $750 million and are supported by the Transportation Infrastructure Finance and Innovation Act or the Railroad Rehabilitation and Improvement Financing programme. During the VfM studies, innovative private finance initiatives, such as public-private partnerships, are often compared with traditional project delivery methods.
“State and local authorities should take advantage of the infrastructure bill and multiply its impact by supporting private capital participation, rather than using the funds to address short-term needs”
By incentivising developers to provide optimal services to consumers, the P3 model offers a thoughtful approach, as it carefully considers a project’s long-term maintenance, including its quality and lifecycle. P3 contracts are designed to ensure transparency, deliver on time and on budget, and provide higher certainty of delivery. Along with infrastructure developers’ ability to offer more upfront capital formation and expertise in climate change-related sustainability and resiliency, P3 shelters the public sector from numerous risks inherent in traditional procurement.
Another valuable lever in the bill is the prioritisation process pilot programme, which rewards public sponsors for developing data-driven approaches to project planning. The transparency of this programme will result in the selection of projects where a P3 component would be most beneficial. The programme will give state and local sponsors a long-term view of federal infrastructure spending, allowing for more organised project planning.
Spend it wisely
State and local authorities should take advantage of the infrastructure bill and multiply its impact by supporting private capital participation, rather than using the funds to address short-term needs. The bill supports and encourages the engagement of all parties best suited to rebuild US infrastructure.
Private investment frees up government funding for allocation to other distressed areas of the economy and generates economic growth through investment-grade projects. With environmental, social and governance values forming the foundation of P3, sustainability through modernisation can be achieved.
Take the redesign of New York’s LaGuardia Airport Terminal B as an example of how effective planning, continued engagement with the local community and commitment to efficiency and sustainability beget better quality and results. Valued at $5.1 billion, the redevelopment is the largest P3 in US aviation history and the first airport project in the world to be awarded LEED v4 Gold certification. The P3 model not only offered a financial path forward as government grants and passenger fees to fund airport projects fall short; it also provides a blueprint for how to successfully complete complex and sustainable development projects.
Ultimately, the Infrastructure Investment and Jobs Act is a win-win for the public and private sectors. It will encourage the further use of P3 to regenerate US infrastructure. Industry must do its part and demonstrate the power of P3. It must frame success not just on completing projects on time and within budget, but around these projects’ sustainable and social impacts. Only then will the infrastructure bill live up to its promise, and P3 deliver on its potential.
Nicolas Rubio is CEO, North America, at Meridiam