TL/DR –
The U.S. has seen a significant increase in federal investment in infrastructure, with three investment packages combining to contribute about $2 trillion to infrastructure, climate, and advanced industries over the last two years. The largest growth of such investment in over 40 years, it is expected to shape the future of the country for generations. However, some challenges remain, such as improving procurement, upgrading IT systems, and recruiting and retaining talent, with McKinsey estimating a potential productivity improvement opportunity of up to $765 billion across the government.
U.S Infrastructure Investment: A Look At The Last Two Years
Over a span of two years, the U.S has seen the largest growth in federal investment in local and state infrastructure in four decades. Three major investment packages – the Bipartisan Infrastructure Law, the Inflation Reduction Act, and the CHIPS and Science Act – have jointly directed roughly $2 trillion to infrastructure, climate and advanced industries.
Estimates from McKinsey’s Reinvesting in America initiative indicate a threefold increase in Bipartisan Infrastructure Law spending in 2024 compared to 2023, with $39 billion in CHIPS incentives set to be distributed to the industry.
Laying the Foundation for the Future
While the nation anticipates the upcoming national election, these investments will significantly shape the nation’s future. However, successful implementation is critical to avoid eroding public trust. The Partnership for Public Service asserts that trust and performance are intertwined; without effective execution, leaders risk losing a golden chance to restore public confidence in the government’s capacity to deliver.
Turning Potential into Performance
Key steps to convert potential into performance and overcome implementation challenges include upgrading IT systems, improving procurement, and attracting, hiring, and retaining talent.
Upgrading IT Systems
Many agencies operate with outdated technology infrastructure. The federal government spends 80 percent of $100 billion on IT costs on maintaining these systems, whereas the private sector spends less than 60 percent. Upgrading IT systems is urgent, particularly in the face of sophisticated cyber threats.
Improving Procurement
In 2022, contract spending was over $700 billion, representing 11 percent of the $6.1 trillion federal budget. The government could adopt relevant private sector practices to achieve annual savings of 10-15 percent.
Attracting, Hiring, and Retaining Talent
Attracting, hiring, and retaining the right talent is crucial, but is a persistent challenge. In such a tight labor market, workers get frustrated by lengthy onboarding times; in the federal government, the hiring process takes three times as long as the private sector. By emphasizing meaningful work, government agencies can attract Gen Zers, as they rate meaningful work as highly as workplace flexibility.
Federal Spending and Productivity
Federal spending makes up 23 percent of GDP, and taxpayers rightly expect this to be spent effectively. With so much new spending, 2024 presents an opportunity for the federal government to reassure Americans of its capability to deliver. McKinsey estimates a $725 billion to $765 billion productivity improvement opportunity across the government.
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