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Army Corps Considering Public-Private Partnerships

By Kevin Wilcox

The U.S. Army Corps of Engineers is streamlining its project processes and weighing the possibility of public-private partnerships to help deliver projects faster and with less federal investment.

July 8, 2014—The U.S. Army Corps of Engineers, with the support of lawmakers, has streamlined its project load by $18 billion and is working to accelerate the internal processes by which its projects are developed. And yet, with $23.5 billion in active projects and an average annual allotment of $1.5 billion to move those projects forward, the Corps faces a significant shortfall.
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In 2012 the U.S. Army Corps of Engineers had to dredge the Mississippi River and remove rocks that were blocking the passage of commercial vessels after a prolonged drought. Recognizing that its projects often affect commercial entities and that its federal funding levels cannot pay for all of its mandates, the Corps is considering public-private partnerships. USACE

"We have a huge fiscal challenge and we are seeing that day to day in the execution of our mission. The infrastructure is slipping in its ability to deliver consistent and reliable services," says Lieutenant General Thomas P. Bostick, the U.S. Army chief of engineers and commanding general of the Corps. "Our annual civil works spending has declined from $70 per person in 1936 to $18 per person in 2011. The U.S. lags behind other developed countries in spending and public works infrastructure overall."

Speaking at a media roundtable in late June, Bostick noted that in the past 14 years, downtime at U.S. hydropower facilities has increased by 50 percent. The dams themselves are also a source of concern: 16 percent of the Corps's dams are categorized as being either extremely or very high risk. In just the past five years, delays and interruptions on the vital inland waterway locks and dams system have doubled.

"When everyone talks about infrastructure's only been recently that we've talked about water-related infrastructure," Bostick says. "It was always roads and schools and bridges [and] runways and railroads. A lot of people don't see the rivers. A lot of people don't see the commerce that moves up and down the rivers."

To illustrate this point, Bostick recalls the severe drought in the Midwest in 2012 that hampered barge traffic on the Mississippi River. Declining water levels in the river had exposed "pinnacle rocks" that threatened to stop barge traffic completely. It was one of the most challenging moments in his more than two years leading the Corps.

"Industry leaders went to the White House, got the ear of the president, and said, 'This is going to have an economic impact on this country and we have to find a solution.' We couldn't ask for more rain. I mean, we could, be we weren't going to get it.

"So what we could do was dig and dredge an additional two feet by removing this rock—which was not a simple task," Bostick explains. "But the message that I took away from that is [that] industry has a role in this, too."

Bostick says that although the Corps has carefully assessed its current portfolio of 653 feasibility studies to select an active portfolio of just 158 projects, and has committed to a streamlined process for managing those studies, the efficiencies that those initiatives create will not close the Corps's budget gap.

"Only so much can be done through process efficiencies," Bostick says. Alternative financing will have to come from "outside the federal government," he says. "We are going to have to ask the American public and our businesses to work together in public-private partnerships [PPPs]."

Leaders of the Corps met in April with government officials and approximately 24 chief executive officers from the private sector to begin exploring the possibilities of PPPs in infrastructure projects that are under the Corps's control. One of those private-sector leaders has been involved in more than 600 PPP projects, but just five of those are in the United States, Bostick says.

Although the Corps is just beginning to explore PPPs for its projects, the concept is not without precedent, Bostick notes. The U.S. Army's residential communities initiative (RCI) was a project that leveraged U.S. Army funds as well as private-sector funds to develop high-quality housing on military bases.

By virtue of managing 700 dams, the Corps is involved in two other types of projects that show the most promise for PPPs: hydroelectric power and recreational areas. Expanding the number of Corps dams that generate hydroelectric power and further developing recreational lakes could be attractive to private-sector investors, Bostick explains.

"We have to get organized. We have to understand what works and what doesn't work. We have to find a way to monetize what it is we [want] the private sector to invest in," Bostick says. "We have to find ways to monetize the infrastructure that we are talking about and then set up long-term contracts that will allow [investors] to accrue the benefits based on the investments they put in."

Bostick says that although aging infrastructure in the United States presents a challenge, he is encouraged that leaders have recognized the severity of the problem and are discussing it. "The infrastructure is aging—and there is so much of it aging—that we cannot properly execute our role in operations and maintenance, and potential construction, with the budget that we have," Bostick says. "The first step is to recognize that you have a challenge. And I think we have all done that. And I would tell you, a few years ago I'm not sure I would have said that.

"You can't wring your hands and roll your sleeves up at the same time, someone once told me," Bostick adds. "We are rolling our sleeves up and we are working. We are trying to first get the word out. What worries me the most is that we as a nation will not react soon enough."


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