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Rebuilding America

The infrastructure vital to our nation’s future prosperity is falling into disrepair. How can we find the means—and the will—to reverse that trajectory?

The country’s infrastructure is literally crumbling. Bridges and roads suffer from dire levels of congestion and are in desperate need of restructuring or replacement. Water and waste systems are cracking and leaking. The electric grid and broadband networks can’t handle the demands of a 21st century economy. In fact, our national infrastructure is in such bad shape that the American Society of Civil Engineers recently gave it an overall “D” grade in its 2009 Report Card for America’s Infrastructure. In the meantime, gaps imperil public safety, impair economic competitiveness and hinder efforts to give the economy a badly needed boost by creating new jobs.

Despite the multiple threats a failing infrastructure poses, it’s been tough to rally support around the issue, agreed CEOs gathered for a Rebuilding America roundtable discussion held in partnership with Terex, a $4 billion construction and infrastructure equipment company based in Westport, Conn. Infrastructure investment has never had much appeal for the American public, and in a post-stimulus package era, characterized by concern about spending in general and the swelling deficit in particular, shelling out the hefty sums needed is an even harder sell. Then there’s the undeniable lack of consensus around what, exactly, needs to be done and how to go about it.

“We’re living on the vision of our forefathers,” noted Ron DeFeo,CEO of Terex, who pointed out that the building of the interstate highway system—and the prosperity it brought—were made possible by the vision of President Dwight D. Eisenhower. “Eisenhower built the road system and FDR built dams, but we’re paving potholes today. The real challenge is where’s the vision for the future?”

Right now, countries like China and India seem to have cornered the market for that vision. As the U.S. debates priorities and potential sources of funding, China is planning to lay down 26,000 miles of new track by 2020 (much of it due by 2012), adding new high speed rail lines between major cities. India’s finance minister recently called for a doubling of the country’s infrastructure spending to $1 trillion over the next five years, and said private-sector firms would be allowed to sell special bonds to help pay for it. Meanwhile, the U.S. faces a $1.176 trillion shortfall in the estimated $2.2 trillion required over the next five years to bring the country’s roads, bridges, levees, schools, water supply and other systems up to speed.

“India and China are essentially where the U.S. was back in the ’50s and ’60s as it relates to infrastructure,” noted Chip McClure, CEO of Arvin Meritor. “Every time I go there I’m amazed by the progress they’ve made. It won’t happen overnight, but they have plans for the number of roads they want to build in the next year, five years and 10 years. They’re going to quickly pass us if we’re not careful.”

Unfortunately, from a political standpoint the timing of this crisis is not ideal. To politicians, pushing infrastructure initiatives is seen as political suicide. “The problem is that right now everyone is worried about the deficit,” observed Irene Walsh, managing director of Deloitte’s U.S. Infrastructure and Project Finance Advisory practice. “And in terms of spending, this is not a top priority. Health care was the top priority and now it’s climate change. Infrastructure is moving down the agenda.”Getting support to raise funds to finance infrastructure projects is even trickier—occasional efforts to hike the federal gas tax by 10 cents a gallon have been stymied by public outcry for 16 years now.

The Vision Quest

Investing in infrastructure could prove the key to revitalizing the economy, providing the critical growth in jobs and the foundation for greater international competitiveness that President Obama and Congress are so desperate to deliver. Yet in the current environment, communicating and advancing that concept and developing a plan to execute it may well fall to the private sector.

“We cannot expect the public sector to lead with a plan,” said Tom Wright, executive director of Regional Plan Association. “That’s asking them to lead with their chins. They’re just not going to do that. They’re going to need the private sector and other entities to put the ideas on the table.”

Rallying the necessary public and political support for such an effort will also require tying the infrastructure issue to a central message. “The dialogue will need to change,” argued George Pierson, CEO of Parsons Brinckerhoff. “We talk about spending, which has a connotation with the public of ‘there it goes,’ as opposed to investment and the return we will get in terms of jobs, tax revenue and economic development. Businesses understand a return on investment and so do people.”

The same Americans—and the politicians who represent them— who may not be able to get excited about backing an infrastructure initiative might find quantifiable outcomes of, say, creating 25,000 jobs, doubling exports or reducing energy consumption more appealing. “We need to get Washington on board,” said McClure. “That means recognizing what’s important to them and going in with a coherent, coordinated effort and specific measurables that it will deliver.”

Even then, getting agreement on how to revitalize the infrastructure is no easy feat. Ideally, the issue should be addressed with a national plan, DeFeo explained. “You start by asking, ‘Where do we want to be in America in 2050?’ ” he asked. “If you want to increase exports by 50 percent, what do you have to do to accomplish that? You need to start with the vision and then develop plans for each region that are part of that articulated national plan.”

Regional vs. National

McClure agreed, comparing the benefits of an integrated national approach to the benefit of IT protocols and the dangers of developing systems in silos. “If we don’t coordinate this, we’ll end up with the same issues we had in manufacturing—72 different systems that can’t communicate with one another,” he pointed out. “There’s got to be some kind of coordinated effort at the top or we’ll end up with lots of different islands that are never connected.”

But while agreeing that coordination would be ideal, Len Rodman, CEO of Black&Veatch, pointed out that less-efficient progress is better than no progress at all. “As businesspeople we look for optimum efficiency and we’d like to see an overall framework,” he said. “But as with ERP systems you can [build something] and function to some level of efficiency for a while before deciding, ‘I can’t have 72, I need to get down to 10.’ And that’s what will happen here.”

Other participants noted that although the issue is clearly a national one, it’s simply not feasible to address it at a national level now. “Looking to Washington is not going to be a solution during this era,” asserted Walsh. “What we have to do is concentrate, even though it’s complicated and hard to do, on how to approach these issues at the state and local level. There is a lot of private capital waiting to be deployed and many states who are very creatively going about developing public-private partnerships to engage that capital.”

Even within regions, aligning factions around initiatives can be difficult. Priorities vary greatly by state and efforts tend to get mired in tugs-of- war between the various localities angling for maximum benefit.

Given the controversy around what should be done and how to accomplish it, what will it take to move the envelope on infrastructure? For most, the answer is in creating a compelling, central message. “There are plenty of plans,” noted Pierson. “There are plenty of industry organizations who are interested in these issues. What seems to be lacking is the knitting that will pull this all together and drive a consensus plan.”

A commitment to promoting that message to the public and to politicians will also be critical. “We’ve got to continue the drumbeat,” says Byron Payne, executive vice president of Wells Fargo Equipment Finance. “Keep talking to politicians and get them to understand that this has to be a priority, then capital formation to take care of these issues will follow.”

Ultimately,meeting the infrastructure challenge is a national imperative. “There are some real challenges in the mentality and the philosophy in the U.S. relative to infrastructure that don’t exist in other parts of the world,” said Rodman. “That will truly be a challenge for this country as we compete in the global marketplace. We will become a second-class country if we these vital investments in infrastructure are not made.”

About Jennifer Pellet

As editor-at-large at Chief Executive magazine, Jennifer Pellet writes feature stories and CEO roundtable coverage and also edits various sections of the publication.