Over the last two years, the U.S. saw the largest growth of federal investment in state and local infrastructure as a share of their total spending in over 40 years.
Three substantial investment packages — the Bipartisan Infrastructure Law, the Inflation Reduction Act and the CHIPS and Science Act — combined direct about $2 trillion to infrastructure, climate and advanced industries.
McKinsey, where I lead the Reinvesting in America initiative, estimates that Bipartisan Infrastructure Law spending in 2024 will be three times as much as in 2023, and $39 billion in CHIPS incentives to industry will begin distribution.
Though the country will turn its attention to the national election in the year ahead, these investments will shape the future of our country for generations to come.
Government leaders must now detail the industry plans and infrastructure to guide the funding to the businesses, households and organizations that animate the economy. If the government delivers, the country can make significant progress on its modernization and technology security goals.
At the same time, leaders could risk corroding public trust if implementation flops. According to the Partnership for Public Service, trust and performance go together; without first-class implementation, leaders may lose out on the opportunity to resurrect faltering confidence in the government’s capacity to deliver for its people.
These investments aim to achieve progress against large and persistent challenges. The three laws are complex, with hundreds of programs. Each addresses unique challenges, such as how to make public electric vehicle charging stations cost-effective or how to identify where all the lead pipes are. Major factors affecting implementation, such as supply chain risks and commodity prices, are largely outside government control, which makes it pivotal that leaders focus on the issues they can control.
To turn potential into performance, three capabilities make a significant difference:
Upgrade IT systems
Many agencies still manage with decades-old technology infrastructure. Unfortunately, legacy systems make routine processes, such as hiring and managing grants, more difficult than necessary. They also dominate spending by forcing leaders to maintain outdated systems. The federal government spends $100 billion on IT; 80 percent of that goes to keeping current systems operational. The private sector spends less than 60 percent of that amount.
Tech modernization improves outcomes, reduces waste and improves customer experience. Upgrading IT infrastructure is particularly urgent in the face of persistent and sophisticated cyber threats. By developing the business case for updating legacy systems, government leaders can achieve cost savings, enhanced security and faster innovation, while also advancing their mission. This clarity can galvanize and align stakeholders to make change happen.
Improve procurement
In fiscal 2022, contract spending on everything from office supplies to fighter planes was more than $700 billion, representing 11 percent of the entire $6.1 trillion federal budget. The government deserves the products and services it needs on time and at good value.
Yet, according to the McKinsey Global Procurement Evaluation 360 survey of 1,900 organizations, the U.S. public sector ranked last among industries in procurement performance. Three-quarters of government agencies scored poorly in creating or preserving value.
The government can adopt relevant private sector practices, such as category management and clean-sheeting large contracts, or better leverage data, to deliver projected savings of 10-15 percent annually.
Attract, hire and retain talent
Because government decisions can create an impact across generations, attracting, hiring and keeping the right talent enables the government to magnify this impact. Unfortunately, talent management remains a persistent challenge.
For a start, the labor market is tight, with fewer job openings than there are unemployed people. In such a competitive market, workers get frustrated by the long onboarding times; it takes an average of 119 days to hire a federal government employee, about three times as long as in the private sector. Another way to look at this is the fill rate, or capacity to efficiently fill jobs — in this regard, the federal government performs worse than any sector. No wonder, then, that federal job openings have doubled between 2018 and 2023.
Government agencies can incorporate the foundational purpose and meaning of their work in their talent attraction proposition. For example, Gen Zers rank meaningful work just as highly as workplace flexibility as a reason to take a new job, and 40 percent of respondents to our global and public sector surveys plan to stick with civil service jobs due to the meaningfulness of the work.
These three priorities all aim to improve productivity. McKinsey estimates that there is a $725 billion to $765 billion productivity improvement opportunity across the government or about $2,000 per resident. Improving productivity isn’t easy, and providing health care, education, national security and other essential services is not the same as producing more widgets. But it can be done, as other governments have demonstrated. And it matters.
Federal spending accounts for 23 percent of GDP; it is fair for taxpayers to want it spent effectively. With so much new spending in the pipeline, 2024 is a chance for the federal government to show that it can deliver the goods. If it does, it can go a long way to rebuilding the trust of Americans.
Adi Kumar, a senior partner in McKinsey & Company’s Washington, D.C. office, leads McKinsey’s Reinvesting in America initiative.