Thoughts on the Engineering Industry

A blog covering engineering, technology and business topics

The Balance of Public Private Partnership and Government Funding in the Infrastructure Industry

 

     Hello everyone, sorry about being away for a bit.  I had an exam and had to focus in on school work, but I feel like I did good on the exam and can get back to a normal rhythm.  Today I would like to pose an interesting question.  What is best for the infrastructure industry – public private partnerships or government funded projects?

     I read a good letter-to-the-editor piece in CE Magazine recently that was critical of politicians who only wanted to pursue the infrastructure investment bank option for increasing investment.  In the author’s opinion, it is the job of the government to do whatever it takes to provide the infrastructure systems for this country.  I don’t see it as one dimensional as the author does, but this brought an interesting point to my attention.  A lot of people involved with the infrastructure industry like the public private partnership type projects as a way to bring more investment to the infrastructure construction and maintenance process.  Since increased funding in this area is needed ASAP, I have no problem with them pushing for this option if people are willing to do this.  However, issues in the infrastructure industry that can’t be addressed through a public private partnership system are largely over looked.

    Public Private Partnerships can help relieve a lot of the issues that drag our infrastructure down right now.  For example, a private company could charge tolls for a road and use that to maintain the road as part of a business plan.  This is a great system once you solve the oversight and standards issues.  Another area that this could be beneficial for is management of projects and procuring construction manpower and equipment.  As people have discovered with the government projects, having to maintain a large bureaucracy in managing these large projects is expensive.  Off loading those expenses to companies willing to do the work would allow for increased efficiency in the infrastructure construction process.

    However, there are some parts of the infrastructure industry where government investment is required to some degree.  The main one I see is the initial investment stage of these large scale projects.  Any private company will need some help (or at least an incentive) to take on the large amount of initial investment required.  Private businesses in general prefer projects that have large profits and the lowest possible expenses.  Government can provide a lot of aid to the infrastructure industry by allowing private companies to apply their preferred model for business.  The other area I see the government being essential are the parts of infrastructure where for profit motives aren’t the bottom line.  A great example of this is public transportation.  Overall, it is a largely inefficient industry in regards to cost and maintenance.  However, it doesn’t mean that it is something that shouldn’t be promoted as a part of our infrastructure improvement plan.  I’m not saying that we should take a loss in these projects, but it is something that should be offered without an eye towards massively cutting cost or increasing profits.  Since a company will not see the same high margin of profits they might find in a large highway construction project, they are more like to not take the project or to maintain an inadequate system due to their goals of minimizing inefficiencies and increasing profits.

    To sum it up, a balance needs to found between the application of public private partnerships and government funded projects in the infrastructure industry.  Some of the ways I think we can find a good balance are listed above.  What is your opinion about the balance of the infrastructure industry?  Is there anything you think we need to do to improve it?  Thanks for your time and have a good week!

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