Connecting state and local government leaders
COMMENTARY | To take advantage of the federal government’s $2 trillion in investments, municipalities must think big, start small and scale fast.
The federal government is investing nearly $2 trillion in American infrastructure and competitiveness through three historic efforts: the Infrastructure Investment and Jobs Act (IIJA), the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act and the Inflation Reduction Act (IRA).
Taken together, these laws represent a uniquely difficult execution challenge, not only for the federal government, but for local governments across the country. By recognizing some of these challenges in advance, county and municipal leaders can adopt strategies to help them realize the ambitious goals of these programs.
The first step is to recognize the complexity of the task ahead. This nearly $2 trillion competitiveness agenda will contend with challenges of scale, accountability and complexity. The IIJA alone involves 45 federal bureaus and 16 federal agencies and commissions, and it allocates funding for 369 new and existing programs. These initiatives often involve close collaboration with the public and private sectors, municipalities and universities—which can complicate execution.
The complexity of these programs is exceptional. Instead of straightforward efforts to build infrastructure, these laws seek to change the behaviors of industries and individuals by reshaping markets and incentivizing new behaviors. These sorts of ecosystem interventions can be powerful, but they can also be tricky. Markets can be harder to design than top-down hierarchies. Startup programs might be more challenging to execute than existing programs. And doing many things at once—instead of one thing at a time—can pose several challenges.
The Ecosystem Challenge
Ecosystem interventions can create powerful impacts. For example, the IRA and IIJA incentivize a mutually reinforcing system of electric vehicle charging infrastructure, EV manufacturing and domestic battery sourcing. At the same time, the CHIPS Act will create partnerships with universities to establish regional manufacturing hubs.
To navigate this complex change, local leaders can employ a “catalytic toolkit” to monitor and shape the impact of these interventions. As industry and consumers alter behaviors based on new incentives, care should be taken to avoid unintended consequences. Tools such as local regulations and tax incentives should complement, not complicate, the influx of investment.
The Herding Cats Challenge
The IIJA, IRA and CHIPS Act generally strive to employ “catalytic tools” to inspire investment. It makes sense from a market standpoint. Rather than having a government official select the location of an EV factory or choose the factory’s chip supplier, the laws empower producers in the market to make these important decisions within the framework of the guidelines established by policy goals. This approach enlists a vast array of businesses, nonprofits and municipalities in advancing a sustainable competitiveness agenda. But the challenge lies in ensuring that each stakeholder uses these grants in their intended manner, rather than in unanticipated ways that further self-interest and fail to achieve broader goals.
Public leaders concerned about the herding cats challenge should manage projects as a strategic portfolio of projects, providing third-party scrutiny to ensure proper alignment. Many states have already appointed infrastructure czars or de facto leaders, as well as organizing program management offices (PMOs) that are often directly connected to the governor’s office to ensure appropriate decision-making authority and oversight. Local governments should designate program leads or coordinators to keep an eye on the big picture and work closely with state-level counterparts. Above all, agencies must emphasize clear communication across all stakeholder engagement, management decisions and reporting.
The Startup Challenge
Building a startup—even in the public sector—is fundamentally different from running a legacy organization. New programs have to staff up quickly and require a rapid innovation cycle to identify what works and modify what’s not working. All told, these three new laws will create more than 160 entirely new programs and substantially expand others.
To manage the startup challenge, local governments should adopt a startup mindset: Think big, start small and scale fast. They'll need to understand feedback mechanisms and closely monitor success metrics. Fortunately, local leaders now have access to tools like digital twins and simulation models to test concepts before committing to construction projects.
Managing Complexity to Ensure Success
The IIJA, IRA and CHIPS Act aim to fast-track the complex process of market development to achieve specific public goals, such as accelerating the shift to EVs or boosting domestic chip manufacturing. Market ecosystems have elements of chaos and competitive friction, and participants all have their own self-interests. Successfully managing the implementation of these laws will require balancing this complexity.
Fortunately, these challenges are not insurmountable. They do, however, require strategic responses. Effective frameworks, best practices and innovative tools exist to help meet this moment. American business and local government leaders can track progress while reducing red tape. They can solve immediate needs while monitoring the big picture. They can coordinate construction timelines and communicate lessons learned.
It will take effort, experimentation and goodwill. There will be mistakes and failures. But that’s no reason to get discouraged. With careful management, monitoring and communication, local leaders can maximize the impact of these historic investments in American communities and strengthen the nation’s economic competitiveness and prosperity in the years ahead.
William D. Eggers serves as the executive director of the Deloitte Center for Government Insights.
Kevin Pollari leads the Deloitte Government and Public Services infrastructure and capital projects program for state and local governments.