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Delivering the Next Generation of Smart Roadways

New demands for transportation infrastructure require stepping outside the process.
By Tim Sylvester
March 1, 2022
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Transportation infrastructure and the engineering-procurement-construction industry that supplies it are desperate for change. For decades, builders have lamented ever-increasing costs, constantly being hammered on their margins and the ongoing accrual of overhead burdens for regulatory compliance. Even as the obstacles and complications for EPCs have mounted, investment in—and the quality of—our infrastructure has declined precipitously.

Nearly half our nation’s roads need to be rebuilt from the ground up, while costs are at all-time highs and infrastructure funding is at historic lows. As we spend less money overall, more of it goes toward paperwork, not the actual purpose: building roads, highways and bridges. Forty years of begging the government for more cash hasn’t worked and the industry needs accept it’s not going to change. We can’t fix these problems by ignoring them. We’re in a death spiral and have no choice but to change our approach.

The industry wasn’t always this risk averse and onerous. In the early 1900s, public officials saw the enormous economic opportunity of investing in better roads to support automobiles. Publicly funding roads for cars was unproven—there were no standards of practice, regulations, compliance requirements or design handbooks. Yet, the American Spirit meant we did it anyway because the possibilities were worth the risks and costs. Over the years, what was once an innovative, fast-evolving industry was subsumed into the public consciousness as a boring, highly regulated necessity. Now roads can and should be innovative and high-tech again.

There’ve been surges of innovation, with the Eisenhower era of interstate building, the emergence of public-private partnership financing and the adoption of information technology services. But even as demands increased, the tools remained rigid and unchanging—public funding, open letting, low-bid, build-in-place and a fundamental aversion to proprietary or patented products used as a core means or method to deliver a driving surface. Innovation moved from the builders to academics and regulators who focused on incremental improvement instead of moonshots creating dramatic leaps forward. The tools we were using aged, creaked, groaned and eventually broke.

In this same timeframe, the technology and telecom industries have taught us deeply important lessons about the power of network effects. Make no mistake, roads are not only humanity’s first network, but they’re also arguably our most important. When we stop thinking of roads as hard, flat driving surfaces, and instead think of transportation infrastructure as a network that enables nearly all our economic activity, that change in perspective can help us fix these issues.

As society spends hundreds of billions of dollars to develop connected, electric and autonomous vehicles (CEAVs), we need to add many new technologies to road networks to support them: traffic sensors for data collection and to support autonomous vehicles; wireless communications for dense distributed antenna systems for Wi-Fi, 4G offload, 5G, V2X and more; wireless charging capabilities to charge EVs as they drive; and augmented position, navigation and telemetry services to support semi-autonomous and autonomous vehicles.

We’re facing new demands that require stepping outside the traditional publicly funded, commodity-based, low-bid process used for the last several decades. This presents an opportunity to learn new approaches from technology and telecom industries that can deliver these new services, as well as help us address transportation infrastructure’s accumulated problems.

New services for CEAVs require adopting proprietary, commercial technologies that dramatically increase the cost of already expensive and complex projects. They also provide extremely valuable commercial services that can be sold to numerous business clients and private individuals. Despite the need, we can’t include commercial services in publicly funded projects, especially interstate improvements, yet without the revenues from these services, we can’t possibly afford the upgrades. For the next generation of America’s roadways, we must let go of public funding sources and instead focus on private financing of infrastructure.

This approach is essentially identical to P3 financing, with the major differences being there’s no toll for the managed lanes and it can be used on infrastructure that is not controlled access. Tollways would never work on Main Street, but smart infrastructure services that support and enable smart cities and CEAVs, and benefit the local economy, would be a perfect fit.

With this changed mindset, we find a watershed moment for the industry. For 100 years, the industry has been limited by public budgets, where traffic represents an expense. In this new model, traffic represents demand for a supply of services, which means as long as we have a minimum level of traffic on a given section of road, there’s always enough money to improve and maintain it. This releases contractors from the limits that public funding imposes, like low bidding, low margins and all the obstacles to implementing improved construction practices that cost more up front, but deliver a better roadway that lasts longer and needs less maintenance.

That provides another unique new approach for EPCs. Traditionally, a builder gets paid on a project basis, so it’s feast or famine. Builders have extremely high overhead, carrying labor, equipment, operations and other costs continuously. They invest weeks or months pursuing individual projects, but if they only win a fraction of their bids, the costs of pursuing projects and funding operations must be piled into those few bids. However, the builder also must stay low-cost, which means margins are razor thin and one wrong turn on a project can collapse the business.

With smart infrastructure, builders can act more like software companies and deliver infrastructure as a service. The EPC can take an equity position in the joint venture that finances the improvements and receive a portion of the revenue from the commercial service operations. Each project the builder delivers adds incremental long-term recurring revenue to their operations. This recurring revenue smooths out the cash flows of the business and starts to absorb the overhead costs of operations.

As a builder completes more smart infrastructure projects, their asset base and recurring revenues grow, risk goes down and margins increase, eliminating the need to recover non-project overhead from winning bids. Because they’re an equity owner in the construction project, it ensures the builder has a significant incentive to reduce the asset’s life-cycle costs. The builder can also receive a long-term maintenance contract, further improving their recurring revenues and ensuring they have every incentive to build the best possible project on day one.

Bearing all of this in mind, we can see how adopting smart infrastructure enables us to address infrastructure improvements on a commercial basis, without relying on limited public budgets or political processes, as well as build the best, most useful, cost-effective and advanced infrastructure in the world.

America dominated the 20th century because of its amazing public infrastructure. Now, we need to rebuild it for the 21st century to maintain economic competitiveness and dominance for the next century. We can achieve this without a single piece of federal legislation, we just have to adapt and evolve to meet today’s needs.

The question isn’t why should we do it this way; it’s what better choice do we have for EPCs to deliver the next century of American progress? When professionals’ tools break, they toss the broken one and get a new one fit for purpose. Builders: Let’s pick up new tools and get to work.

by Tim Sylvester
Tim Sylvester is the Founder and CEO of Integrated Roadways, a smart infrastructure technology provider. Integrated Roadways aims to transform America’s network of roadways into self-sustaining smart roads that support the current and future needs of drivers, vehicles, owners, and devices by providing services through the roadway that enable this next generation of mobility and municipal development.

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