Modernizing infrastructure policies to advance public-private partnerships

Infrastructure investment is one of the few areas where there is political consensus; (P3s) can be part of the solution

The challenge of keeping up with the country’s enormous investment needs, whether it’s maintaining what we’ve already built, integrating new digital technologies, or adding capacity in growing regions, is daunting. State and local governments—who are responsible for managing our public assets—continue to spend larger amounts, but there is always more to do.

One of the most promising innovations to emerge over the past decade is greater use of public-private partnerships (P3s) to complement traditional funding. When designed well, collaborating with the private sector can attract greater net investment, unlock new management efficiencies, and strike an ideal balance between protecting the public interest and generating private return on investment. Yet not all collaborations are designed well, and there is a growing recognition that it is often state and local governments who are not yet ready to tap these new approaches.

The Brookings Metropolitan Policy Program and the National Association of Counties hosted “Collaborate to Build: Modernizing Infrastructure Policies to Advance Public-Private Partnerships” and concluded that there were three common areas where improved public policy has the power to unlock P3’s potential:

Asset management

For state and local governments, it’s often what they don’t know that stops them. In this case, there is little clarity about exactly what assets they own, where they’re located, what their value is, or their physical quality. This is especially the case in the water sector—where many older cities, in particular, don’t even know the type of pipes they manage—but it exists for everything from real estate holdings to transportation assets. The response is to mandate asset inventories and life-cycle asset management plans.

Staffing capacity

It’s easy to think of infrastructure as project-driven, but workforce components are equally essential. Private investors often have savvy full-time staff with deep expertise in complex P3 contracts, but rarely is there equivalent public staff capacity to broker the right deals from the perspective of public good. The response is to give the private sector more incentives to increase involvement and attract this talent.

Political risk and information sharing

The overlay of short-term election cycles on long-term infrastructure projects can lead to misaligned incentives. Even for communities where innovative public agencies are interested in pursuing alternative financing or new technologies, the reputational risk to elected officials in putting forth a different strategy can stifle innovation. At the same time, states and localities that do forge successful partnerships have a responsibility to share information on what works and what doesn’t–from which entity has control over policy decisions, to public transparency, and RFPs.

There is much to be done to modernize infrastructure policy for public-private collaboration. It is important to remember, though, that infrastructure is not an end, but a means to an end. The end here is public good–and P3s can have the potential to enhance public good with better asset management, improved staff capacity, and mitigated political risk.

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