Where Running Government Like A Business Can Work
By Philip K. Howard
Earlier this year, a White House office of innovation was created to apply business techniques to make government work better. Leaving aside state enforcement powers, much of what government does is deliver (or subsidize) goods and services. What would have to change to make those government functions more business-like?
Fixing America’s fraying infrastructure, for example, enjoys broad public support. As a builder, President Trump would seem uniquely qualified to oversee this initiative. But government can’t seem to get projects moving. Only 3.6% of the $800 billion 2009 stimulus plan was put to use on transportation infrastructure. No one was able to make the needed choices — as President Obama put it, “there’s no such thing as shovel-ready projects.”
How would a business go about fixing America’s infrastructure? It would make choices in four broad categories, none of which Washington will do.
1. Set priorities. Washington has no action plan to rebuild the rickety power grid, or to prioritize interstate bottlenecks. It basically leaves the setting of projects to states and localities — as with the “bridge to nowhere.”
Solution: Put someone in charge of setting national priority projects, which then receive federal support. Australia, for example, has a central committee that receives applications from states and decides which get federal support.
2. Cut red tape. Decade-long review and permitting procedures compromise or kill projects by a) doubling the effective cost, b) creating uncertainty that discourages public and private capital from sponsoring projects, and c) skewing project design toward mollifying whoever threatens to sue. Lengthy environmental review — often thousands of pages of mind-numbing detail — turns out to be harmful to the environment in most cases, because it delays fixing polluting bottlenecks.
Solution: Set deadlines (two years maximum for major projects; six months for fix-it projects), and create clear lines of authority to make needed decisions. Only Congress can do this. Scores of well-meaning laws since the 1960s have resulted in a jumble of competing obligations and balkanized authorities, at the federal, state and local levels.
Clear lines of authority are essential; that’s how greener countries such as Germany are able to approve major projects within a 1–2 year timetable. Common Good has a three-page legislative proposal that: a) gives the chair of the Council of Environmental Quality, who reports to the president, the job of keeping environmental reviews focused on important issues; b) gives the director of the OMB the authority to resolve all interagency disputes and to balance competing regulatory concerns; c) preempts state and local approvals for national projects if their approval processes extend beyond federal timetable, and; d) expedites and limits lawsuits.
3. Outsource design and construction. Most businesses, like government, have no special know-how in large construction projects. Typically, businesses solicit “design-build-maintain” bids which put the contractor on the hook for long-term success of the infrastructure. Government, by contrast, tries to “spec” out every detail in advance — with the predictable result that government fails to anticipate contingencies and ends up paying for costly change-orders and higher maintenance.
Solution: Require best-practices procurement as a condition for federal infrastructure aid. Other countries, such as Australia, make much more use of so-called 3P arrangements (Public-Private partnerships), even in situations where the infrastructure has no revenue stream and the developer is repaid out of general tax revenues. It is generally more cost-effective to let private developers take the risks of the numerous contingencies and to bear the responsibility of maintenance.
4. Don’t be reluctant to invest in good projects. Businesses look at the return on capital invested. By most accounts, the economic benefits of fixing America’s infrastructure are huge — returning $5.20 on each $1 invested in modernizing the Interstate highway system, according to the American Society of Civil Engineers. Plus 2 million jobs. Plus a greener footprint.
A business would use whatever financing was available to achieve returns on this level. It would even raise price of products if it thought it customers saw the benefit. If a penny-pinching business let its physical plant deteriorate, to the harm of its customers, it would soon be taken over by someone else. Perhaps that’s what happened in the last election.
Solution: This should be the easiest change, because it requires no legal amendments. The Republicans’ refusal to consider any new revenue streams to fix broken infrastructure is another symptom of its dysfunction. Ask Alexander Hamilton: Raising revenues to invest for the greater good does not violate conservative principles. The decision here could hardly be more obvious: For example, a 25-cent rise in the gas tax, which has stayed at the same level for a quarter century, would finance about half of President Trump’s ten year trillion-dollar initiative.
Washington will resist these changes, because, unlike business, it doesn’t want to make new choices. That requires someone taking responsibility. In Washington, the deck is stacked for the status quo — no new infrastructure without a decade of review, no permit without approval from a dozen agencies, no new taxes even if traffic bottlenecks cost billions. No is everywhere. Maybe no is a good presumption for new laws, but not when government needs to deliver goods and services.
Back in the old days, when Washington leaders worked things out, the deal for an infrastructure initiative would be obvious. Democrats agree to streamline environmental review, and Republicans agree to raise taxes in exchange for a streamlined process that cuts costs in half.
Infrastructure is a kind of canary in the mine of democracy. Everyone says they want infrastructure, but there’s no movement. That’s because dense bureaucracy, by stifling any capacity to deliver projects in a reasonable time frame, has removed the oxygen of democracy. A congressional leader might be more amenable to funding infrastructure if he knows that his district’s stretch of Interstate 80 will get a new lane next year. What Washington needs is what every successful business has: a hierarchy of responsibility that allows responsible people to hammer out accommodations and start making decisions again.
A version of this article originally appeared on The Daily Beast on March 31, 2017.