DETAILS MATTER by Bob Ginsburg April 18, 2021
Will “Building Back Better” Just Repair What We Have Now Or Create Something New? And Will It Do It Quickly Enough?
Welcome to Details Matter a Newsletter about urban development, public finance, Transportation, and politics in Chicago and Illinois. You can subscribe/unsubscribe at (https://robertginsburg.substack.com/welcome). Get previous issues which mostly focus on dealing with the fiscal crisis at (https://robertginsburg.substack.com/archive). PLEASE FORWARD if interested.
Will “Building Back Better” Just Repair What We Have Now Or Create Something New? And Will It Do It Quickly Enough?
I have mentioned several times how our structure of government and funding (i.e. tax structure) as set up a hundred years ago and maintaining it requires all sorts of political and financial contortions. Our tax system is set up around taxing “physical goods” rather than services. Financial transactions and services make up much more of the economy in 2020 than even in 1980. We are much more of an urban country in 2020 with 84% of the population living in urban settings (compared to 64% in 1950.)
The pandemic has brought the significant problems in our urban and other areas into sharp relief. We have seen the results of dramatically unequal investment in urban immigrant, low income communities and communities of color in general. A week does not go by without some discussion of Transit deserts, critical shortages in affordable housing, unequal access to health care and quality schools, and/or the lack of broadband access. Despite the Illinois Infrastructure plan passed in 2019 and the Invest South/West initiative in Chicago there is no plan or resources for predictable and consistent investment into these communities and to provide some assurance that one-off trophy projects will be followed by the necessary collateral development of schools, transit, health care, food and commercial centers that make stable communities.
Now we have the appropriately ambitious Biden/Harris “American Jobs Act” proposal which could provide the stable funding across the board to begin to make up for the 40+ years of underfunding and disinvestment. The challenges are immense but the first (assuming the AJA or a major part of it passes) is how to make sure that there are demonstrable results and improvements in many communities and whether it’s actually possible to spend that amount of money on so many things without immense amounts of corruption or waste. As we saw with the ARRA in 2009-10 failure to do so will just give fodder to the Republicans and other critics saying it was ill conceived, wasteful and demonstrate the incompetence of government. We need to be successful but also show that government has a role and can be effective without outsourcing all aspects to consultants and the private sector. Government agencies in the past had enough expertise and knowledge to conceive of projects, prepare the initial designs and then oversee final design and construction by private businesses that have the needed staff and equipment. Projects cannot evaporate into a cloud of consultants and delays.
RECLAIMING GOVERNMENTS ROLE IN DEFINING AND OVERSEEING PROJECTS
So how do we break the circle of law firms, investment banks, and fellow professional services firms involved in bankruptcies, infrastructure spending, and other specialized institutional work? The Biden Harris administration is trying to channel FDR so it is useful to look back at what FDR did right.
Roosevelt’s first major infrastructure battle was over Muscle Shoals complex of dams, hydroelectric plants and factories. Instead of privatizing this new complex Roosevelt had the government directly build the facilities and control them with the Tennessee Valley Authority, a publicly owned and operated electric utility for much of Appalachia. TVA was part of a package of reforms to constrain and control the network of banks and corporations that dominated controlled infrastructure in the United States.
Federal rules first made sure that the consultants and construction firms and corporations did not determine and direct how public money or public resources were spent. They were (and still are) essential in the final engineering and construction but the design and operation were still left in public hands and thus publicly accountable.
Public institutions thus got bigger and more competent and succeeded at big projects. At the start, military procurement officers (despite all the stories and examples of waste and corruption) had immense capacity and power, imposing tight control over contractors, and ensuring, initially, significant competitive bids. They could peer into the books of contractors, and even claw back excessive profits. This governing capacity lasted well into the 70s and even, to some extent, the 80s and enabled the country in constructing the national highway system, winning the space race and landing on the moon, deploying the polio vaccine, building the internet, and even running the project Sematech in the 1980s to address foreign threats to semiconductors. Now it is clear that that system has eroded and changed. We can look no further than the FAA oversight of Boeings 737 MAX planes to see that. Changing it will not happen overnight.
The erosion of that system accelerated in the 1980s starting with the Reagan Administration and the Heritage Foundation blueprint (“Red Book”) . That Blueprint, among other things elevated OIRA (Executive Order 12291)from an incidental agency in the Executive Branch under President Carter to the major roadblock for regulations and programs and the focal point for eliminating or, at least, reducing funding for any institutions and programs oriented to workplace issues and communities of color. The “red Book” also established and codified the goal that government employment should not be a “destination job” or lifetime employment (e.g. emphasize “staff churn”.) The Clinton Administration further ensconced this “slimmed down government” approach with “reforms” on procurement, welfare, and other programs. Over 40 years this has led to a hollowing out of government expertise and outsourcing to the private sector.
HOW TO START DOING THINGS DIFFERENTLY?
We need to get funding out quickly to start building things while at the same time begin investing in new agency staffing to oversee and complete projects. However, we cannot get bogged down in staffing delays. We also cannot afford the slow rollout and inconclusive public perception of projects under Obama’s ARRA.
First, we need to appropriate the funds into separate accounts (to avoid annual budget funding battles) designated for different areas like affordable housing, broadband, Transit and equitable Transit Oriented Development, Critical Roadways, Rail projects, and healthcare delivery.
Next we need to create (mostly out of existing agencies) Project Management Offices (not new procurement offices which already exist.) These offices do not need consultants to provide strategic direction they need to hire consultants to prepare the specific specifications for projects. The office and existing departments will set the goals and insure the projects meet critical needs and direct their impacts to address the equity priorities. Putting together well thought out and clear and complete specifications and then requiring contractors to put together complete proposals will eliminate major (and expensive) mid project changes in construction.
Some programs can be run through existing departments such as affordable housing programs to provide low interest construction loans to high impact and visibility projects or to approve subsidized low interest rate operating loans for affordable housing projects. So0me projects may need to be re-evaluated to direct investments and development to address inequities and uneven development.
In those cases, creation of Project Management Offices and Officers are one option to make sure projects meet the larger goals and get completed on time at the best price. They could also be required to check the contractor’s books to make sure there is no padding or unnecessary billing and thus excess profits. We still do this with some construction projects but when projects get larger we have resorted to layers of consultants for where they virtually independently do everything from strategic planning, to initial design, to final design to construction and construction oversight. Instead projects should be conceived, justified and scoped out by government agencies which then contract out final design and construction. The preliminary work would include designing projects to maximize the possible number of bidders especially MBEs and DBEs.
This kind of buying system - clear prices, transparency, and competition - is precisely what firms like Amazon, Walmart do. Walmart, for instance, goes into excruciating detail to learn everything about its suppliers, making detailed demands about every facet of every product, including price. Unlike the government, Walmart demands value for its money. This is partly what Operation Warp Speed did but it needed the additional pressures and oversight added by the Biden/Harris administration and even then should have included public control of the patents and pricing. Over time we can build the capacity to run big projects without hiring consulting groups to do the initial thinking and planning.
This approach is not limited to transportation and infrastructure.Creating separately funded programs where you can control the implementation and focus could also be applied to economic development and subsidy programs and Public Safety changes. The latter, as is being done in several places around the country, creates new agencies for responding to many of the 911 calls involving domestic disputes and mental health issues.Controlling implementation and evaluation are critical in achieving clear results.