What states can do to build more for less
America has an infrastructure cost problem, but researchers and states can work together to solve it
The poor state of American infrastructure has long been criticized on the grounds that we are underinvesting—at all levels of government—in rebuilding and repairing it.
Only more recently, however, have we learned how little we get for the money we do spend. In the second half of the twentieth century, the cost to build a US interstate tripled. Today, we are a global outlier on infrastructure spending—paying three times as much to build rail systems as other wealthy countries, and the disparity appears even larger for highways.
Construction materials have increased in price over time, but not enough to explain these higher price tags.
To fix our infrastructure and pave the way for a new era of innovation, we need to figure out how to build more for less. Because states overwhelmingly manage infrastructure projects, a lot of this problem-solving needs to happen at the state level.
Research to boost state capacity on infrastructure
Fortunately, research is beginning to uncover some practical steps we can take to build faster and reduce costs.
In recent research that uses data from highway projects across the United States–and takes a particularly deep look at California–Cailin Slattery (UC Berkeley), William Nober (Columbia), and I examined how staffing and outsourcing decisions at state Departments of Transportation affects project costs.
In other research with Leah Brooks on rising highway costs, we uncovered important evidence on how “citizen voice” in government decision-making has contributed to higher costs over time.
What states can do to build more for less
Recently, I had the opportunity to brief the Oregon Legislative Assembly’s Joint Committee on Transportation Oversight on what the research says about rising infrastructure costs.
What I heard at the briefing echoes conversations I’ve heard from experts and policymakers around the country: States are eager to get building—and looking for ways to do it quickly and efficiently.
To aid that effort, here are the key points I made in my presentation in Oregon.
- States should pay more to retain the best engineers.
Transportation agencies all across the country rely on engineers to manage projects from beginning to end. Our research found that engineers ranked in the 75th percentile of quality can deliver projects for 14% less than those ranked in the 25th percentile of quality, amounting to savings greater than three times the average engineer's salary. In California, a single high-quality engineer can save the state transportation agency up to $750,000 a year.
Unfortunately, that expertise is being pulled away from some of the projects that need it the most. In California, we saw senior engineers retiring early to join the private sector and earn more. Across the country, internal staffing is often replaced with expensive consultants whose own objectives are not always aligned with the project objectives.
States need to staff up, and they should pay public engineers closer to what those in the private sector earn. They need to be purposeful about recruiting and retaining high-quality engineers, and be careful–even hesitant–about outsourcing infrastructure planning.
- States need to increase competition and find more bidders per project.
Our research also found that a limited–or wholly lacking–amount of outreach to inform more contractors of bidding opportunities may also be impacting prices. We find a correlation between an 8% reduction in total project costs for every additional bidder that a project receives. Unfortunately, our data showed that most projects only get about 3.3 bidders.
Practices that have the effect of dampening competition—like subcontracting limits—are also correlated with higher costs. Additionally, lengthy and complex contract templates mean fewer companies make it through the bidding process. Our research found that the average length of a contract template for a highway project across the country is 165 pages. For every additional 50 pages in a contract, project costs increase by 10%. - At the federal level, permitting reform is long overdue.
But lack of outreach and complex state paperwork isn’t the only thing limiting competition. Permitting reform is also needed at the federal level.
Arduous administrative requirements imposed by the National Environmental Policy Act (NEPA)—such as the need for complex environmental impact statements—also prevent new contractors from entering the infrastructure construction space.
- While well-intentioned in its effort to protect the environment and safeguard communities (and that really matters), NEPA also spurs complex and lengthy litigation that slows projects nationwide. As a result, agencies end up spending a lot of time and money on both defensive and reactive legal measures—money that affects an infrastructure project’s bottom line.
Through permitting reform, we need to figure out how to preserve public participation and protect the environment while speeding up project delivery and reducing project costs.
- With more (standardized) data from states, we can learn more
The best way to learn how to reduce costs is through research—and research requires data.
Unfortunately, many vital data–for example data on spending-per-mile in highway construction or project timeline data—are not public. When they are, they’re not standardized across states. It took my research team years to meticulously collect and sort through the data we needed to understand the growth in highway project costs and what contributed to it.
States can help us learn more by making current and historical project cost and timeline data more accessible to the public, for example designating a point of contact that researchers can reach out to for data collection. Data collection should also be standardized to increase comparability across states.
The US has an infrastructure costs problem—one that we need to tackle immediately. Research can help, and there’s a lot that researchers and states can do to collaborate and make progress. Working together, we can tackle rising infrastructure costs and create new paths for American innovation.