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Kennedy School Review

Topic / Development and Economic Growth

Approving $1 Trillion is Easy, Spending It Is the Hard Part: Local Governments Need Diplomatic Hustle to Make Effective Use of Infrastructure Funding

The $1.2 trillion Infrastructure Investment and Jobs Act (IIJA) was signed into law over a year ago – a bipartisan accomplishment that felt akin to winning the lottery. With the big checks inbound, are state and local governments actually prepared to spend them? Can government administrators avoid fraud, waste, and abuse?

The trillions of dollars mobilized through COVID-19 stimulus successfully (albeit temporarily) brought poverty rates to a record, pre-pandemic low. Taxpayers, however, will not easily forget their infuriation over the misuse of the stimulus funds along the way – such as well-funded universities accepting scarce aid, businesses defrauding billions in Paycheck Protection Program (PPP) loans, and late or missing checks for millions of Americans.

These missteps were made simply by distributing the stimulus money. Now, with the IIJA investing 7x the annual federal infrastructure budget of 2021, not only does the administration need to distribute this funding wisely, but it needs to build stuff, too.

Running effective development projects poses logistical challenges. On the one hand, trust in local government is at an all-time low and administrators who move too hastily meet resistance. Take the $1.4 billion initiative to reconstruct New York City’s East River Park. Rushed feasibility assessments and poor communication with residents led to local resistance and significant financial waste while administrators struggled to balance speed and effectiveness.

On the other hand, moving too cautiously risks missing critical deadlines and facing federal claw backs. A notable example occurred in 2019 when the State of California’s high speed rail project lost $929 million in rescinded funding when the federal government claimed the project was dragging. While the Biden-Harris administration eventually reversed this decision, the current Congress has renewed interest in expanding claw back protocols for local infrastructure projects.

As IIJA projects begin, government leaders can better navigate challenges of time, trust, and expertise if they adopt management practices from, of all places, business startups. Administrations need diplomatic hustle, which means getting community-level endorsements for project plans, limiting expensive overhead, and nurturing local labor talent for future projects.

Before receiving funds, administrators should start community outreach. Startups call this “idea validation” – the time used to meet potential customers to understand what products are useful. Effective government seeks feedback from constituents to avoid future project delays like protests, lawsuits, and votes for new leadership. Traditional opinion gathering through town meetings does not suffice because it tends to attract wealthier, more privileged voters who are able to attend weeknight forums and craft technical NIMBY (“not in my back yard”) arguments. Finding data that’s more representative of diverse constituents requires more creativity, like conducting meetings in different neighborhoods, inviting underrepresented voters and associations, and soliciting feedback over social media. The Udall Foundation has identified exemplary governments that do this well.

In parallel, governments must also connect with other stakeholders to validate technical and administrative requirements. An error on the East River Park initiative was administrators designing a new park in collaboration with constituents but later realizing that it was infeasible given existing infrastructure and regulations. After rushing a redesign with city engineers and policymakers, they sidelined the community and lost trust. Idea validation requires a holistic approach incorporating implementation experts, constituents, and project leads to outline aspirational and practical goals together.

What if these stakeholders do not know all the practical components to build a project? The IIJA includes major advances in climate resilience, utilities, and transportation while some cities have not renovated their public works for years. It may not be realistic for local agencies to find seasoned development experts to guide the project, let alone hire skilled labor or established organizations to implement it.

For better or worse, the sound of checks cashing is heard from contractors nationally – each with an army of salesmen to help think through spending it. Witold Henisz, a Vice Dean at The Wharton School who focuses on the role of political, business, and social risk for development projects, explains how cities can think about working with outside groups. He believes that partnering with external groups is an excellent way to quickly bring seasoned experts to complex projects. However, he caveats that working with these groups could result in cash and institutional knowledge flowing out of communities during and after a project’s completion.

Similarly, startups must decide what to build from scratch versus outsource to professional services. Administrators with diplomatic hustle carefully identify project aspects that need outside help and creatively develop local capacity simultaneously. This may require local subcontractors owning project workstreams, national providers hiring locally and establishing nearby offices, and contracts including comprehensive knowledge transfer. Nurturing local talent is critical and leads to higher employment, taxable incomes, and commercial industries. While the infrastructure funding is temporary, new talent can persist for years.

When juggling people and priorities, administrations may also forget about consistent communications. Startups know that finding new clients and partners requires good products, but also clear messaging on how the business will improve. Development takes years and slow progress can lead to constituents assuming the worst. Like sharing business updates with a Board of Directors, transparency facilitates trust and crowdsourcing ideas for improvements. Unrelenting conversations are a symptom of good project management.

Administrators may argue that constituents and federal grantors delegate decision-making authority so that, unlike a startup, they can focus on development instead of frequent check-ins. Managing the voices from concerned citizens, scrutinizing regulators, plus dozens of interrelated agencies and contractors can feel arduous when there is ground to break. But the alternative of widespread fraud, waste, and abuse is far worse.

Fortunately, the Biden-Harris Administration has provided a set of tools to improve constituent engagement. The administration’s portfolio of resources on helps agencies to better utilize funding and to create more equitable outcomes for groups that may be underrepresented, such as rural and tribal communities. Through the interactive Maps of Progress, the administration offers unparalleled visibility into how IIJA funding translates into projects on the ground. These solutions give local governments and their constituents the tools to engage in meaningful conversation and hold one another accountable for results.

The IIJA is a once-in-a-generation opportunity to transform America. If local administrations bring together good policy and startup practices through diplomatic hustle, then they can see their communities thrive for years to come.

Photo credit: John Guccione via Pexels