Overcoming barriers to infrastructure investment

L. Joe Boyer | 15 May 2015 | Comments

In celebration of U.S. Infrastructure Week 2015, Joe Boyer advocated the key role engineers should play in attracting much needed investment to the infrastructure sector.

There have been many headlines over recent months about our nation’s infrastructure crisis. A generation of roads, bridges, airports, and water and sewer pipes built more than a half a century ago is nearing the end of its useful life. Some of the staggering numbers included in the headlines include:

  • 16th: Where the World Economic Forum ranks US infrastructure in a global context
  • 3.6 trillion: Estimated cost to fix the US infrastructure problem
  • 70,000: The number of bridges in the US deemed structurally deficient
  • 1947: The last time infrastructure spending in the US was this low

There is no doubt the current lack in investment in infrastructure is a big problem, but what are the solutions? Some of the ideas proposed to bridge the funding gap have included more empowerment of state and local governments to enable greater flexibility in the ways federal funding is spent. Increases to the gas tax that helps fund the maintenance of our roads and bridges are also being considered by congress, but are unpopular with taxpayers despite the necessity.

But Federal funds alone are not likely to bridge the gap . Back in 2013, President Obama outlined his “partnership to rebuild America”, proposing to revamp ailing public projects with private financing. While traditional public resources may be insufficient to foot the bill, investors from home and abroad are willing to invest in infrastructure projects that provide stable, long-term returns, through public-private partnerships (PPPs) and other innovative investment models.

As engineers, we can play a role in attracting funding for these important projects by taking a proactive approach to inform and advise investors. But how can we influence the “supply” side to overcome barriers to investment, and how can engineers help clients prioritize projects and determine the best way to deliver?

Domain knowledge is key. This knowledge, held by engineers and gleaned through due diligence, should be the subject of closer consultation and engagement with fund managers in order to better analyze and manage financial risk. Ultimately, a more proactive conversation between engineers and the financial community will help fuel investment.

We can add value for our clients by taking an “advisor-friend” role—building capacity and ensuring an integrated and holistic approach to strategy development is followed through in project implementation.

Investor risk can be mitigated though appropriate structuring. This requires greater certainty around revenue projections and project input costs—which reflects the complexities of design, construction, and engineering delivery risk.

By better applying critical domain knowledge, we can help investors understand the risk and stimulate investor appetites. Working alongside our clients, engineers can carefully profile potential projects before bringing them to market. This kind of due diligence is not new, but if carried out in a thorough and independent manner it would help investors focus and prioritize the most “deliverable” projects.