Economic stimulus plan funds are being distributed to projects and programs across the nation, and without a doubt opinions on the matter are mixed. One definite high note is that the legislation—which includes around $48 billion in infrastructure transportation spending on everything from a high-speed rail service to highway projects to public transportation and intercity rail projects—finally recognizes that our nation's infrastructure is crumbling around us.
But the government had better look before it leaps. Why? Because the legislation authorizing the distribution of this massive funding program assumes the dollars spent on these projects will be used efficiently.
We've already seen what can happen when the government pumps money into industries without properly monitoring how it's used: billions of taxpayer dollars are wasted.
I'm speaking, of course, of the bailout money poured into America's financial and automotive industries—industries whose inept and inefficient ways have, to date, prevented the funds from benefitting the American people. Sadly, the construction industry may not be any better.
When you give money to an industry that, according to recent studies, wastes upwards of $120 billion a year, and don't take the steps necessary to ensure it's used wisely, you are going to end up once again with no ROI. That's the stark reality. For taxpayers already saddled with a terrible economy and a crushing mountain of national debt, this is bad news indeed.
The construction industry's woes are at the center of conversation, along with the industry's biggest problems: rampant cost overruns and missed (in some cases by several years) project deadlines. Grim as it may sound, I predict the construction industry will fritter away the roughly $48 billion allotted on projects that may well get underway—but will be abandoned before they're ever finished.
To advance billions in infrastructure funds for needed roads and bridges only to find the government run out of money before these projects are completed is totally wasteful. The amount of money being doled out for these projects is finite. Once it's gone, it's gone. Unfortunately, it's highly likely that it will be wasted, and Americans will end up with a nation of under-maintained highways and byways and only partially completed bridges and roads. Frankly, before infrastructure repairs can be made in a cost-effective and efficient way—both crucial for the current state of the nation—the construction industry must make more than a few repairs of its own.
The government, too, should do its part to ensure there is adequate protection against this waste in the accountability provisions of the stimulus plan. Without a true fixed-price structure for all construction projects that shifts the risk for inefficiency and waste to the construction industry, the government will be back footing the bill for an additional tens of billions of dollars within a few years.
Here are a few steps I would like for the nation's governing bodies to make before the infrastructure money is pumped into project contracts:
Create an infrastructure czar position. The current stimulus legislation proposes to set up oversight by an Accountability and Transparency Board composed of a chief performance officer and six members designated by the President, including inspectors general and secretaries of the Education, Energy, HHS, Transportation, and other federal departments. But it's unlikely that any of these officials have a true grasp of the inefficient way the construction industry operates or how to address them in future contracts. In order for these project negotiations to be mediated properly, the President should create an infrastructure czar position.
The czar should be a savvy construction expert who did not emanate from the construction industry but who is familiar with the low bid/change order process that consistently drives up costs on construction projects. This individual must know how critical it is to avoid traps like the fast-track process or guaranteed maximum price traps that never truly guarantee the contract price. A construction expert of this kind will help close the information gap that will likely exist between construction contractors and the policymakers trying to negotiate government contracts.