NEW YORK, Aug. 4 /PRNewswire/ — As U.S. stimulus spending shines a spotlight on the country’s inadequate infrastructure, private sector infrastructure providers say that government effectiveness and economic conditions are the primary challenges to providing needed infrastructure, according to the second infrastructure survey by KPMG International, the global network of audit, tax and advisory firms.
The KPMG global survey, conducted by the Economist Intelligence Unit (EIU), surveyed 455 infrastructure executives, including 118 from the U.S. Among U.S. respondents, 76 percent cited governmental effectiveness as a barrier to delivering infrastructure, followed closely by 74 percent who cited economic conditions. This compares to 69 percent and 63 percent, respectively, of global respondents. Interestingly, both of these issues were of higher concern than availability of financing both in the U.S. (68 percent) and globally (60 percent).
Infrastructure providers are those in the private sector directly involved with the development, delivery, operation, providing of advice or finance in the transportation, energy, water or social services sectors.
“The survey results signal the need for fundamental changes in how we approach the planning, delivery and management of infrastructure. We need long-term thinking that allows for the transparent delivery of projects that are aligned with our national priorities,” said Richard Lee, partner, KPMG LLP (U.S.), and head of KPMG’s U.S. Infrastructure Advisory group. “While current economic challenges may make infrastructure development particularly difficult, it’s imperative that the public and private sectors work together to tackle the issues, so that critical projects can move forward.”
The survey revealed concerns about an overly politicized process, frequently changing public policy and excessive government bureaucracy. Almost half (47 percent) of the U.S. respondents said the perceived shortcomings in government effectiveness stemmed from excessive bureaucracy, while about one-third cited both a short-term planning horizon (34 percent) and neglecting long-term maintenance (33 percent).
U.S. and global respondents shared similar views on most of the survey topics. However, infrastructure executives in the Asia-Pacific, Western Europe and Latin American regions expressed the least concern about the impact of economic conditions on infrastructure, with 60 percent or less of respondents in these regions citing this as an impediment.
Concerns over government effectiveness, the economy and availability of financing were also consistent with the results of KPMG’s January 2009 EIU survey of C-level business executives, in which business leaders cited these three issues as the largest impediment to infrastructure projects in the U.S.
Improving the Process
When asked how government effectiveness in infrastructure could most likely be improved, almost half (48 percent) of the U.S. infrastructure providers highlighted the need to make infrastructure delivery less influenced by political considerations. This was followed by 40 percent of U.S. respondents who pointed to more transparency in infrastructure spending, and 34 percent who cited greater use of public-private partnerships. This was consistent with the global results, in which less politicization (45 percent), increased transparency (44 percent) and greater use of public-private partnerships (40 percent) were named as the top solutions.
“The good news is that the Obama administration is pushing aggressively for greater transparency and accountability, and some states have begun to successfully implement more disciplined processes to help ensure that public interest is at the forefront,” noted Lee.
Current Investment Won’t Support Economic Growth
Despite the boost from the Federal government’s stimulus bill early this year, a whopping 91 percent of U.S. infrastructure providers expressed concern that the current level of infrastructure investment can not support the long-term growth of their nation’s economy. This tracks with KPMG’s January 2009 survey, in which 74 percent of U.S. business executives surveyed said the current level of infrastructure investment is insufficient to help sustain the long-term growth of their organizations.
“Both infrastructure providers and business leaders agree that delivering needed infrastructure projects is more than just a nice to have — it’s a fundamental building block supporting our global economy,” said Stephen Beatty, head of infrastructure advisory for KPMG’s Global Infrastructure practice in the Americas and a partner in KPMG in Canada. “National competitiveness is at stake, both in developed and non-developed countries.”
The KPMG survey also found in other key areas:
Financing — Only 7 percent of U.S. infrastructure providers believe that financing constraints will resolve themselves. Many of those surveyed in the U.S. believe that government intervention is necessary, with 39 percent calling for more favorable risk allocation, 30 percent citing the need for government loan guarantees, and 29 percent calling for direct government contributions or co-lending.
Funding — U.S. respondents said the best sources of infrastructure funding was an increase in user fees and charges (41 percent) and an increase in budget allocations as part of an increase in general taxes (37 percent).
“State and local governments should explore alternative delivery models, such as public-private partnerships, which can make funding a ‘win-win’ situation if structured intelligently,” said Lee.
Private Sector Skills Shortage Looms
In addition, respondents identified another potential challenge facing the industry — a lack of qualified people to deliver the infrastructure. In the U.S., 58 percent of those surveyed said availability of relevant skills/people would inhibit the industry’s ability to provide needed infrastructure. To combat this shortage, most cited the need for more steady spending on infrastructure to maintain existing employment and skill base (70 percent), followed by increasing relevant training and education (69 percent).
The survey was fielded in late June and early July. For a copy of the full report, “Frontline Views from Private Sector Infrastructure Providers,” please visit http://www.kpmg.com.
About KPMG’s Global Infrastructure PracticeKPMG’s Global Infrastructure practice has extensive local and global experience advising government organizations, contractors, operators, and investors in planning, structuring and management of new infrastructure investments; procurement and financing support; improvement and monitoring of construction and operations; restructuring of distressed projects; investment due diligence assistance; and infrastructure related audit, tax, accounting and compliance issues.
About KPMG International
KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 144 countries and have 137,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss cooperative. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
CONTACT: Jennifer Hurson