On The Floor: Manage Infrastructure

Q: How important is managing infrastructure?

A: The United States is almost at $20 trillion GDP (gross domestic product), which reflects the in-country goods and services produced. The U.S spends 2.4% of its GDP on infrastructure, which is about half of what more infrastructure-focused countries spend. Just like backlog in equipment maintenance, if it gets too far behind, you will never have enough resources to catch up.

The American Society of Civil Engineers (ASCE, Reston, VA) has compiled “grades” on the state of U.S. infrastructure since 1980 (infrastructurereportcard.org). An ASCE committee, made up of 28 civil engineers from across the country, compiles the ratings. Included in infrastructure are aviation, dams, energy, inland waterways, ports, rail, schools, solid waste, bridges, drinking water, hazardous waste, levees, public parks, roads, transit, and wastewater. The U.S. score is a D+, which equates to “poor and at risk.” By definition, this means “the infrastructure is in poor to fair condition and mostly below standard, with many elements approaching the end of their service life. A large portion of the system exhibits significant deterioration. Condition and capacity are of serious concern with strong risk of failure.” Studied is capacity, funding, future need, operation and maintenance, public safety, resilience, and innovation.

The infrastructure and systems currently in place were built to sustain fewer people and less movement and use. All are aging. “Economists are saying that delays and rising maintenance costs are holding economic performance back”. When I see survey results that say more than 40% of the reason for unscheduled downtime is aging equipment, it confirms that companies are not taking proper care of their machinery and equipment. Typically, aging equipment only becomes an issue if proactive maintenance has not been performed.

Also, the International Monetary Fund (2014) has shown that “in a sample of advanced economies, a 1 percentage point of GDP increase in investment spending increases the level of output by about 0.4% in the same year and by 1.5% four years after the increase”. As noted in a report “The State of U.S. Infrastructure by the Council on Foreign Relations”, “Many analysts say that investing in both new infrastructure and current maintenance would positively impact the economy in a number of ways. By increasing efficiency and reliability and lowering transportation costs, it would boost long-term U.S. competitiveness and insulate the economy from shocks.”

If you don’t do the timely fixes, Henry Petroski explains in his book The Road Taken: The History and Future of America’s Infrastructure, poor infrastructure can impose large costs on the U.S. economy. In addition to the threat to human safety of catastrophic failures such as bridge collapses or dam breaches, inadequately maintained roads, trains, and waterways cost billions of dollars in lost economic productivity. According to Petroski, the delays caused by traffic congestion alone cost the economy more than $120 billion/yr.

Airports are another choke point: international tourism supports 1.2 million U.S. jobs and brings in hundreds of billions of dollars of tax revenue. Some studies have found that delays and avoided trips due to the poor state of the nation’s airports cost the economy more than $35 billion/yr

This is a global issue. A London study showed the impact of infrastructure investment on the UK economy. The analysis found that:

• For each 1,000 jobs that are directly created in infrastructure construction, employment as a whole rises by more than 3,000 jobs.

• For each £1 billion increase in infrastructure investment, UK-wide GDP increases by a total of nearly £1.3 billion.

• Every £1 billion of infrastructure construction increases overall economic activity by more than £2.8 billion.

• UK GDP could have been 5% higher, on average, each year between 2000 and 2010 if infrastructure had matched that of other leading global economies.

“When you see steel breaking, the steel ripping apart, then you get an idea of what it means to have an old bridge in desperate need of repair,” said Ernst Grigat, head of chemical facility operator Chempark, which runs three industrial complexes in Germany, including one in Leverkusen. Crumbling bridges and traffic jams are staining Germany’s global reputation for efficiency. “I see numerous bridge repairs, weight limitations on older bridges, etc. Almost half of my train trips in my recent four weeks in Germany had delays/arrived late due to congestion or construction. Locals on business trips and vacation were stating similar facts and that the system is broken.”

Efforts to rebuild infrastructure in the U.S., UK, or Germany all have similar issues between levels of government (who pays for how much) and prioritization of projects (such as national highways versus local roads). How is your company managing facilities and infrastructure? Whether it’s your facility, company, or country, it’s all related, but only on a much bigger scale. Infrastructure needs to be managed with a total life-cycle cost perspective. When done properly, it can also make you money and help drive the economy. EP