Inclusive infrastructure investment: How to empower communities

Since November 2021, Congress has passed three landmark investment bills—the Bipartisan Infrastructure Law (BIL), the Inflation Reduction Act (IRA), and the CHIPS and Science Act (CHIPS)—directing more than $2 trillion in investment to bolster physical infrastructure, promote innovation and economic competitiveness, and shore up the domestic industrial base.¹“The Inflation Reduction Act: Here’s what’s in it,” McKinsey, October 24, 2022. This suite of legislation also aims to redress long-standing inequalities by laying a stronger foundation for sustainable and inclusive growth. Two of these laws in particular—the BIL and the IRA—present a unique opportunity for public leaders to adopt a customer-centric approach to infrastructure strategy to ensure that communities and other stakeholders that historically had little to no say over large-scale projects are included in decision making and empowered to pursue funding opportunities.

While the BIL allocates a majority of its funding by applying a fixed formula, the law is distinct from past investments in that roughly 40 percent of all net new grant funding opportunities are available through competitive application processes.²“A new era of US infrastructure grants,” McKinsey, May 20, 2022. These competitive opportunities encompass more than $180 billion in available grant money—a resource pool that can empower state and local governments to develop infrastructure strategies that address the needs of all residents, including marginalized communities. These opportunities are further amplified by an additional $80 billion in competitive grants from the IRA.

Government leaders can approach funding pursuit and deployment from a customer-centric perspective by engaging communities that have been underrepresented in shaping public works. Our recent State of the States research, which surveyed 80,000 Americans across all 50 states, found that residents’ experiences with government services can vary significantly within states depending on their identity, location, and access to resources.³Ashka Dave, Marcy Jacobs, Kunal Modi, and Sarah Tucker-Ray, “Governments can deliver exceptional customer experiences—here’s how,” McKinsey, November 16, 2022. A relentless focus on customer experience could therefore help anchor state-level priorities in residents’ core pain points and maximize the impact of federal dollars.⁴“The call to rethink government customer experience,” McKinsey, July 28, 2022.

State leaders may face significant challenges in engaging a diverse range of voices in making plans and decisions about public investment. Public-works projects with negative second- and third-order effects are seared into the collective memory, leading to mistrust and skepticism that these projects could have a positive impact on the lives and livelihoods of all residents.

There can also be resistance, with communities objecting to projects that are close to home and citing disruptions to neighborhoods and ecosystems.

To navigate these challenges and harness federal infrastructure funds in the service of sustainable, inclusive economic growth, state leaders could consider three actions: identifying a broad range of state-specific stakeholders, including those that represent marginalized groups; optimizing funding by providing targeted support to critical stakeholders as they pursue competitive grant opportunities; and considering proactive steps to promote transparency at each stage of the infrastructure investment journey.

Identifying and engaging stakeholders

State leaders could begin the infrastructure investment and delivery journey by gathering investment ideas from critical stakeholders and generating community buy-in. This approach could help build greater trust between policy makers and communities that have been historically left out of infrastructure decisions. State-specific stakeholders could include eligible recipients of funding (for example, municipal governments, public utilities, and federally recognized tribes) as well as the residents represented by these recipients.

To begin identifying and mapping these critical stakeholders, state leaders could blend a data-driven perspective—informed by publicly available sources—with qualitative insights. For example, the Council on Environmental Quality’s Climate and Economic Justice Screening Tool collects data across eight categories (including climate change, energy, and health) to help policy makers identify underserved communities that could benefit from public infrastructure investment.⁵“Climate and Economic Justice Screening Tool,” Council on Environmental Quality, updated November 22, 2022. The eight categories are climate change, energy, health, housing, legacy pollution, transportation, water and wastewater, and workforce development. A data-driven approach can also help policy makers deliver on the federal government’s Justice40 Initiative, which aims to have at least 40 percent of the benefits from major federal investments flow to disadvantaged communities.⁶President Biden’s executive order on tackling the climate crisis created the Justice40 initiative in 2021 to orient federal stakeholders toward a goal that 40 percent of the benefits of federal investments flow to disadvantaged communities. See “Justice40: A whole-of-government initiative,” White House, accessed July 20, 2023; and “Executive order on tackling the climate crisis at home and abroad,” White House, January 27, 2021.

Another resource to consider is the Transportation Disadvantaged Census Tracts tool created by the US Department of Transportation.⁷“Transportation Disadvantaged Census Tracts (Historically Disadvantaged Communities),” US Department of Transportation, accessed July 20, 2023. The geospatial mapping tool uses American Community Survey and US Census data to identify disadvantaged census tracts across six key indicators (for example, transportation access disadvantage) and can help policy makers pinpoint areas in which infrastructure investment has not kept pace with more affluent communities.⁸The six key indicators are transportation access disadvantage, health disadvantage, environmental disadvantage, economic disadvantage, resilience disadvantage, and equity disadvantage.

Once state leaders have built a data-driven perspective on underserved municipalities with pressing infrastructure needs, public affairs staff could collaborate with municipal governments to identify partners in these areas that are best positioned to represent their communities, including not-for-profits, civic organizations, small businesses, and religious institutions. Recognizing the nuances and needs of specific communities could make outreach more effective and help states build trust-based relationships early in the infrastructure investment journey (see sidebar, “Engaging tribal nations”).

Once infrastructure stakeholders have been identified, engaging them meaningfully could be informed by five key considerations:

• Objectives. First, leaders can clarify their objectives to inform selection of a particular engagement strategy. If a state is trying to reconcile competing investment priorities, an infrastructure task force with committees focused on specific asset classes (such as transportation, energy, or broadband) or broader thematic priorities (such as sustainability or equity) could help structure and accelerate decision making.
• Trust. Standard channels and formats for engaging communities could be insufficient, especially for groups with low trust in government. Leaders could consider partnering with trusted local organizations, including not-for-profits and other community anchor institutions, to facilitate meaningful engagement with marginalized communities. State and local leaders could ask key questions such as the following: Which organizations and leaders meaningfully serve and understand the needs and aspirations of communities? How can we ensure that they have a seat at the table, that their voices are heard, and that they are included in decision making?
• Communication. How can state leaders reach critical stakeholder groups in the first place? What messages are most important to communicate to them? Is the format or channel conducive to conveying these messages?
• Visibility. Participation often hinges on awareness of outreach initiatives. A key factor for leaders to consider is what type of external attention this format or channel will draw.
• Access. Enabling community members to participate in outreach initiatives is another critical success factor. Leaders can consider the following questions: Are these outreach initiatives planned during a time of day when individuals from a range of socioeconomic backgrounds can participate? Could the event be held in a virtual or hybrid format? Could the organizers provide resources such as food and childcare to make the event more accessible? Could existing state programs that are effective in reaching target populations be leveraged to gather input?

Providing hands-on support to stakeholders

Because new federal funding allows a diverse range of entities (such as states, local governments, tribal governments, utilities, not-for-profits, and research institutions) to apply for competitive grants (both directly and as subgrantees), state leaders could help optimize the flow of funds into their state by providing hands-on support to critical stakeholders. For instance, the executive director of a digital equity not-for-profit told us that states could help alleviate resource constraints for small not-for-profits by managing the administrative side of grant applications and providing support with reporting during project implementation. By taking a direct role in the application process, state leaders could help direct federal funds to grassroots organizations that are working directly with communities, increasing the overall flow of funds into the state’s economy (that is, beyond grants that go directly to the state government).

When deciding how to structure support, state leaders could take stock of the common challenges that applicants face when pursuing competitive funding opportunities:

• Access to information. Keeping up to date with the latest eligibility requirements and funding deadlines can be challenging, given rapidly evolving funding environments.⁹“BIL Navigator,” McKinsey, accessed July 20, 2023.
• Technical expertise. Creating compelling, data-supported applications with visual materials requires technical expertise. This expertise may vary considerably among applicants.
• Capacity. In-house grant writing staff may be overburdened, and capacity may be constrained. Additional project management resources may also be scarce, making it difficult to complete the large amounts of paperwork required for applications.
• Credibility. Getting approval from state governments through letters of support may be challenging for smaller entities. Without sponsorship from states, grant applications may struggle to attract attention from federal agencies.

Three models, pursued together, could help support stakeholders to overcome these common grant application challenges:

1. Centralized assistance

States could centralize their technical-assistance services. For example, support centers with dedicated staff—grant writers, technical experts, and communications professionals—could help stakeholders secure funding for infrastructure projects (Exhibit 1). Support centers could be particularly helpful when federal support is lacking or when state officials want to play an active role in guiding the application process. They could also help stakeholders comply with eligibility requirements, establish performance management processes, and build credibility with federal agencies (for instance, through letters of support). To operationalize this approach, states could take inspiration from federal agencies with experience providing technical assistance. For example, the Environmental Protection Agency (EPA) has created 29 environmental finance centers to help disadvantaged communities access grants for clean water, clean air, and greenhouse-gas reduction; technical assistance includes hands-on support for project proposals and grant applications.¹⁰“Environmental finance centers,” US EPA, updated June 21, 2023; “EPA selects 29 finance centers to receive grants, provide technical assistance,” Water Finance & Management, November 14, 2022.

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2. Convening stakeholders with shared interests

Without coordination, different groups within a state could end up applying for the same funding, potentially canceling each other out or missing opportunities that are more suited to their needs. By convening stakeholders with common or overlapping interests, state leaders could facilitate discussions about which projects to prioritize and even increase awareness of other funding opportunities (Exhibit 2).

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For example, the Abandoned Mines Reclamation Program uses fees paid by currently operational coal mining companies to reclaim coal mines abandoned before 1977, making these areas safer for people and the environment. Bringing together groups that focus on watersheds, recreation, or conservation could enable state leaders to identify applications with the most impact and plan strategically to maximize the opportunity to reclaim coal mines. Convening critical stakeholders can also be an effective way to provide technical assistance at scale. For example, the Alabama Department of Economic and Community Affairs (ADECA) is conducting a series of meetings across the state to help local governments and other stakeholders prepare for and access federal broadband grants (such as the Broadband Equity, Access, and Deployment Program or the Digital Equity Act).¹¹“Governor Ivey kicks off first of 67 county meetings to bring broadband to communities across the state,” Office of Alabama Governor Kay Ivey, December 12, 2022. Beyond promoting awareness, ADECA is supporting local stakeholders with mapping, planning, data collection, and overall strategy.

3. Forming partnerships between states and stakeholders

States could also consider forming partnerships with a variety of stakeholders (Exhibit 3). These partnerships can take a number of forms:

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State and critical stakeholder. When both the state and another critical stakeholder (such as an industry representative or a not-for-profit) are eligible for a certain kind of funding, they could apply jointly. Depending on the grant program, the state may choose to form a partnership with multiple groups. For example, the Consolidated Rail Infrastructure and Safety Improvement grant program aims to improve the safety and efficiency of passenger and freight rail. States could partner with Amtrak, Class II or Class III railroads, rail equipment manufacturers, universities, and not-for-profits to support shared research, safety, or workforce development goals.¹²See “Consolidated Rail Infrastructure and Safety Improvement Grants” in Building a better America: A guidebook to the Bipartisan Infrastructure Law for state, local, tribal, and territorial governments, and other partners, White House, accessed July 20, 2023.

State and subgrantee. This approach could allow states to gather input from potential subgrantees and applicants during the planning process, which can be required to unlock the state’s competitive or formula infrastructure funding. States could start by identifying programs in which the state receives funds initially but is later responsible for providing grants to other entities. The Small, Underserved, and Disadvantaged Communities grant program of the Water Infrastructure Improvements for the Nation Act is one such example. While this is not a competitive program, states are required to submit draft work plans to confirm that the eventual use of funds aligns with the requirements of the program.¹³“WIIN Grant: Small, Underserved, and Disadvantaged Communities Grant Program,” US EPA, accessed July 20, 2023. Coordinating early and often with underserved communities can help ensure that these investments in water infrastructure address the most pressing contamination and water quality issues.

State to state. State-to-state relationships could allow states to collaborate on complex grant applications for which implementation will cross state borders, such as interstate highway projects. Another example is the $8 billion Regional Clean Hydrogen Hubs program. Under the BIL, the Department of Energy is offering grants to industry, utilities, state and local governments, and other entities to improve clean-hydrogen production, processing, delivery, storage, and end use. Given that Regional Clean Hydrogen Hubs grants will be awarded to different regions of the country, states could form partnerships or coalitions to capitalize on each state’s distinct advantages (for instance, talent, infrastructure, or feedstock diversity).¹⁴For example, see “Wisconsin, other Midwest states announce plans to form hydrogen coalition,” WisBusiness.com, September 20, 2022. By working together, states could increase the overall competitiveness of applications and drive regional economic growth.

Communicating transparently during implementation

During project implementation, state leaders could take proactive steps to share information, promote transparency, and generate buy-in. Interactive, public-facing dashboards provide a high-impact way of engaging the public and could be linked to internal performance management infrastructure to create a single source of truth and minimize reporting friction. Public-facing dashboards could support transparency throughout the infrastructure investment and delivery journey by raising awareness of the following:

• potential opportunities: formula and competitive grant programs available to critical stakeholders across the state, along with key deadlines and eligibility requirements
• intake: formula and competitive grant money flowing into the state
• expectations and progress: timelines for project delivery, including delays and budgeting updates
• disruptions: major planned disruptions due to project delivery, and planned resolutions (for example, alternative routes during construction on a major highway)
• impact: how the state is tracking against key benchmarks and equity goals (for example, the percentage of residents who have gained broadband access or the number of lead pipes replaced)

To be sure, dashboards and other forms of digital engagement are not a substitute for traditional, nondigital channels, especially given the digital divide and its disproportional impact on marginalized communities.¹⁵“Closing the digital divide in Black America,” McKinsey, January 18, 2023. However, by centralizing information and tracking progress, dashboards can help promote accountability and advance key equity goals. States looking to implement this approach could look to Utah’s IIJA Opportunity Tracker for inspiration.¹⁶See “IIJA Opportunity Tracker,” Governor’s Office of Planning & Budget, accessed July 20, 2023.

There is no single standard formula for engaging stakeholders successfully, but state leaders could draw on best practices in customer experience to ensure that infrastructure investments yield positive benefits for all residents. Taking a data-informed, human-centered approach to identifying stakeholders, choosing inclusive formats for engagement, providing hands-on support, and promoting transparency during project execution could help state leaders connect infrastructure investments to the lived experience of residents and set a new bar for effectively implementing federal programs.