House T&I Committee Meets to Discuss Enhanced Project Delivery

On January 18, the House Transportation and Infrastructure (T&I), Subcommittee on Water Resources and Environment held a hearing on America’s Water Resources Infrastructure: Approaches to Enhanced Project Delivery.

Garret Graves (R–LA), chairman of the T&I Subcommittee on Water Resource and Environment opened the hearing focused on the challenges.

“The numbers speak for themselves, when you look at the challenges we’re facing, right now we have an estimated $100 billion of Corps of Engineers authorized projects; a backlog of $100 billion, yet the appropriations yield in the $4 to $5-billion-dollar range on annual basis, with less than $2 million of that for construction,” Graves said. He pointed out that many projects in Florida and Texas could have prevented some of the recent hurricane damage.

Graves said improvements could be made to the implementation process. Right now, he said, it takes an average six years to go through the environmental impact statement process, it takes on average about 4.5 years to go through the environmental permitting process. “These statistics are unacceptable when you look at the necessity of these projects,” Graves said.

Ranking Member Grace Napolitano (D–CA) agreed that the hearing was to examine the challenges. “How can local communities afford to pay for navigation projects, and who gets to decide what projects are to be funded?” she asked. On the later point, Napolitano said that she was pleased to point out that the President has opened the discussion on ending the moratorium on “congressionally directed spending requests” or earmarks. In February 2011, Congress imposed the temporary ban.

“This moratorium did not curtail spending, nor did it increase transparency,” Napolitano said. “It simply transferred decision making authority from locally elected individual to executive brand employees in Washington. She said those decisions were made in public with legislators’ names attached to them. “Now those decisions are made with no names or transparency attached to them,” she said.

Napolitano advocated for more sufficient and predictable funding for projects. She referenced a December 2016 Department of Treasury report, which concluded that a lack of public funding is the most important factor contributing to the incompletion of infrastructure projects.

While she supports the use of public-private partnerships (P3s), she wanted to clear up a widespread misconception that P3s increase financing available to local communities. “State governments are constrained by the lack of revenue needed to pay for the investment, and P3s do not alone solve this problem,” Napolitano said. P3s will work for some communities, she said, but not all communities. She said there may be tradeoffs to using P3s, as, “there is no free lunch,” she said. Using P3s may mean locking future appropriations to repay private lenders or allowing other mechanisms, such as new tolling tax or taxing authority to repay the cost of financing provided by the private entity.

Funding Shortfall and Project Delivery Obstacles

General Ed Jackson, deputy commanding general of the U.S. Army Corps of Engineers, opened the floor for the hearing’s witnesses, focused on the challenges of funding and project needs.

“The Corps faces a multitude of challenges, some old and some new. Much of our infrastructure is far beyond its design life, yet the requirements have never been greater. And the demands on the federal budget continue to grow, and as our infrastructure ages, we find more and more of our annual appropriations go to operations and maintenance at the expense of investments in investigations and construction,” Jackson said.

He said the Corps has $15 billion of work in authorized but unconstructed work. The Corps also has 97 ongoing feasibility studies, “which if authorized would simply add to the federal budget requirements,” Jackson said. In addition, he said, the feasibility studies are formulated with the assumption of efficient funding.

Jackson was critical of annual appropriations. “Most all projects take multiple years to implement, yet we budget on an annual basis with no assurances that adequate or consistent funding will be available from year to year,” Jackson said. He said this created uncertainty for project sponsors, drives up project costs and delays the realization of project benefits. Jackson said at the current funding rate, it would take more than 100 years to address the current backlog of projects.

To address the problem, Corps solutions and plans include working with the Environmental Protection Agency to leverage their capacity to explore new finance tools and programs, modeled on the success the EPA has had at the Water Infrastructure and Resiliency Finance Center, an information and assistance center that helps communities make informed decisions for drinking water, wastewater, stormwater and infrastructure.

In terms of project delivery, Jackson said that the Corps’ role in the future may be different than it has been in the past. “It could include no involvement at all, technical assistance or the standard cradle-to-grave Corps delivery model,” he said.

Jackson said the Corps is engaged with the administration to streamline the regulatory process, including establishing discipline and accountability in the environmental review process and reviewing the nationwide permit program to increase efficiency. “We are committed to looking at old problems in new ways,” Jackson said.

Permit Process Reforms

In introducing James Dalton, director of Civil Works at the Corps, the top civilian in the organization, Chairman Graves thanked him for the work he has done to reform the 408 process. Under the Clean Water Act, a Section 408 permit is needed to change a previously authorized project, but repeated environmental authorizations can slow down the planning process.

Dalton said he has been committed to changes to the Corps delivery process to be more efficient and effective, and he discussed some of the initiatives. He talked about “flattening the organization.” Echoing what Rep. Napolitano discussed with regard to earmarks and project appropriation, this means moving decision-making authority closer to the project, rather than in Washington.

He said the Corps is working to transform to a more risk informed decision-making organization. Rather than rely on lengthy analysis and modeling, the Corps technical experts can make engineering judgments based on their knowledge, experience and competence. He said they should be free to do that, outside of a “rigid process that dictates a more lengthy analysis” and decisions shouldn’t be subjected to numerous reviews after an initial decision.

He said the Corps is examining existing authorities that it already has but has not fully utilized, such as WRDA 1986, section 203 and 204. The former is for studies and the later is for construction, and each authorizes a non-federal interest to undertake a project or study without Corps involvement.

Another authorization the Corps is examining is WRDA 2014, Section 1043, which establishes a pilot program to allow non-federal sponsors to provide full management control for construction of water resource development projects.

Regarding the 408 permit issue, Dalton said the Corps is finalizing changes to that program, those it has already made and those it wants to make, and will release the formal engineer circular soon.

Leah Pilconis, senior counsel for environmental policy law and policy, The Associated General Contractors of America, said contractors find the permitting process to be “cumbersome and uncertain.” That uncertainty is priced into bids and drives up costs.

“Critical projects are getting caught on a NEPA treadmill,” she said, of the permitting process. The National Environmental Pollution Act guides much of the environmental review and permitting process. She supports a “one federal decision process,” so one lead agency conducts one NEPA review that ends with a single record of decision. Pilconis also advocated for a merger of NEPA and the Clean Water Act 404 permit processes.

Lastly, she urged Congress to “limit the scope for reevaluation” of projects. “ACG urges Congress to consider a reasonable approach to citizen suit reform to prevent the misuse of environmental concern,” Pilconis said.

P3s: Infrastructure Delivery Tool, Not Funding Strategy

Jill Jamison, managing director at Jones Lang LaSalle has 25 years experience advising public authorities at the state ad federal level on complicated project implementation.

Of the $1 trillion infrastructure bill, “I just want to put that in perspective,” Jamison said. She referenced a recently released report from the Global Infrastructure Institute by McKinsey & Company. The report said the U.S. will need $7.7 trillion in infrastructure by 2030. “So excuse the pun, but a trillion dollars is really a drop in the bucket,” Jamison said. A one-time cash infusion will not be the solution, she said. “We need a long-term strategy for building and maintaining this great nation’s infrastructure,” Jamison said.

On the topic of P3s, she said they are “not a funding strategy. They are an infrastructure delivery tool,” Jamison said. “P3 does not equate to free money.” She said the current infrastructure delivery system is “fundamentally flawed,” citing protracted appropriations, uncertainty about project timing and funding, which escalates project cost. The value in enhanced delivery models, such as P3s, is that they provide greater security in terms of cost and schedules. “You don’t get paid until you deliver infrastructure and that definitely changes behavior,” Jamison said.

In a life-cycle approach, project planning links design and construction with operation and maintenance. “Let’s build these things to last and figure out how to fund them over the life of the asset,” Jamison said.