Pavlov’s Dogs and Federal Infrastructure Dollars
Miller was professor of civil engineering at MIT, chair of the ABA Section of Public Contract Law, and is an expert on infrastructure procurement. Miller is on LinkedIn and Twitter @JohnBrownMiller
In a famous behavior psychology study, Ivan Pavlov’s dogs showed that human behavior can be changed by psychological conditioning. It was natural that Pavlov’s dogs produced saliva when they heard or smelled food. But, Pavlov showed that dogs could be conditioned to salivate in response to other events – ringing a bell. The word “infrastructure” is equivalent to ringing Pavlov’s bell.
In Mid-February, President Trump set the country salivating by releasing the administration’s Legislative Outline for Rebuilding Infrastructure in America. The administration proposes $200 billion in new federal spending over a ten-year period. designed to attract $1.3 trillion in non-federal resources. The program is outcomes based, requiring state and local sponsors to compete for $100 billion in incentive grants. The plan also includes a $50 billion Rural Infrastructure Program, a $20 billion Transformative Projects Program, and $10 billion for an Interior Maintenance Fund to address the deferred maintenance backlogs at the National Parks and Fish and Wildlife Services. The plan includes a $20 billion expansion in Private Activity Bonds and federal credit programs.
Like Pavlov’s Dogs, we have been conditioned to immediately ask: how will Congress pay for crumbling state and local infrastructure? This is the wrong question.
First, infrastructure is primarily a state and local government issue. Ninety-six percent (96%) of the nation’s road miles are owned by state (19%) and local (77.3%) governments. Most of the remaining miles are in federal parks. Nine-nine (99%) of the nation’s bridge traffic is carried on state (87%) and local (12%) highways. Nearly all (99.9%) of vehicle miles traveled are on state (72%) and local (27.9%) highways. Just five percent (5%) of the nation’s four million miles of road are primary roads. Just fifteen percent (15%) are secondary roads eligible for federal aid.
Second, the idea that Congress has paid or could pay for state and local infrastructure is fiction. Users are paying for the country’s networks – not government. Highway users are carrying the vast majority of the burden. The numbers are staggering. In 2007, the last year reported with all information, personal automobile expenditures were $863 Billion, and trucking company revenues were $304 Billion. Individuals spent $158 Billion on cars; $63 Billion on tires, tubes, accessories, and parts; $340 Billion on gasoline and oil; $7 Billion on tolls; $59 Billion on insurance; $224 billion on maintenance and repair; $6 Billion on registration and license fees; and $4.5 Billion on taxis.
Trucking companies paid $38 Billion in state and federal highway-user taxes. Taxes on users produced $33 Billion for the highway trust fund while the federal government spent $37 Billion on highways. User charges produced $69 Billion in state highway revenues, while both state and local governments spent $172 Billion. Much of the net state and local government investment in highways comes from real estate taxes.
Both of the nation’s two federal grant programs for highways were enacted to meet substantive federal needs. While members of the House and Senate enjoyed bringing federal project dollars home, the purpose was not simply to distribute money.
In 1916, the Federal Aid Highway act served the federal interest of defending the country. World War I confirmed the need to quickly move military forces on reliable roads. Higher, and uniform, engineering standards were required so that the nation’s roads could handle military vehicles and loads. The 1916 Act required states to raise these standards as a condition of receiving federal highway aid.
In 1956, the National Interstate and Defense Highways Act authorized the Interstate System. The Act’s name confirmed its federal purpose: improved defense and expansion of interstate commerce. Design standards for the new network were much higher. At-grade crossings and traffic lights were eliminated. Limited access, with dedicated exits and entrances, became standard. Higher loads, better foundation design, grade requirements, safety, and lane width were part of the design upgrade. The 1956 grant program had a federal purpose. States had to to build differently for defense and improved interstate travel at higher speeds.
In 2018, helping state and local governments gain effective management control over their infrastructure networks seems to be the President’s federal focus. Across the rest of the world, governments are asking the private sector to compete over the life cycle – using modern, competitive procurement systems to secure fully maintained facilities with value for money. Our research at MIT confirms there is a 30-40% typical saving in life cycle cost to be captured by governments who adopt international standards for asset management (ISO 31000), alongside modern procurement systems. These systems are consistent with the President’s infrastructure proposals. They attract private sector investment, new technologies, materials, and methods, all in the pursuit of higher levels of service at lower life cycle costs.
The President recognizes that state and local governments know best what needs to be done with their infrastructure, and that that life cycle commitments to deliver infrastructure services are best secured at the state and local levels – by the owners of these facilities.
It is time to re-condition Pavlov’s Dog.
Ringing the infrastructure bell should condition us to expect measurable outcomes, modern asset management, and competitive procurement over the life cycle.
We should be conditioned, when that bell rings, to higher levels of service at lower life cycle cost, and to phrases like on time, within budget, and fully maintained.