Aaron Klein for the Brookings Institution: America has a highly decentralized infrastructure system, particularly for surface transportation and drinking water systems. State and local governments combine with infrastructure operators to design, build, operate, and maintain almost everything. There are benefits and drawbacks to this decentralized system. One problem is the lack of coordination among our multiple infrastructure agencies in purchasing products. Solving this problem could reduce costs for many types of infrastructure and ensure a more stable set of jobs and production of infrastructure assets. Pooled procurement is a promising method to achieve these gains.
Pooled procurement is when two or more infrastructure operators agree to coordinate their procurement of like assets. Combining forces allows infrastructure purchasers to utilize economies of scale and achieve lower costs per unit of infrastructure purchased. This can also spread certain fixed costs of infrastructure procurement (contracts, due diligence, and delivery) over a larger number of buyers, lowering each one’s share. These savings make the infrastructure cheaper or allow more to be built at the same price.
