Help wanted: Contractors to build smart roads that pay them back
By Jenny LescohierMarch 22, 2022
Smart roads are being talked about more and more in construction, particularly in response to the Infrastructure Investment and Jobs Act (IIJA). Many contractors are wondering what roadbuilding jobs of the near future might look like, and how they can win those bids.
To dig into these topics, we talked with Tim Sylvester, founder and CEO of Integrated Roadways, a company which 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 the next generation of mobility and municipal development. Following is an excerpt from that discussion.
CONEXPO-CON/AGG 365: Tell us about your connection to construction, tech and infrastructure.
Sylvester: I’m a first-generation internet user, I grew up online before that was normal. Being from rural Missouri, there weren’t any tech jobs in the 90s, so I went into construction. Now I have 20 years of experience and I also have electrical and computer engineering degrees.
In the late 90s I could already predict that roadways would eventually converge with networks to enable connected, electric and autonomous vehicles. I also knew from my experience with the tech industry and watching Internet 1.0 and how investors behaved, that they were never going to invest in infrastructure. I also knew from my experience in construction that builders did not have the ability to develop or drive the adoption of new technologies.
We organized Integrated Roadways to bridge that gap between tech and infrastructure. The way I describe it is kind of like Cisco’s relationship to a data center. A contractor builds a data center, but a telecom company uses it, and Cisco needs to exist in order to enable both of them and that’s kind of where we sit in relation to roads.
CONEXPO-CON/AGG 365: How do you see the evolution of how infrastructure gets developed, funded and built, both traditionally and into the future?
Sylvester: The model that’s been in use for 100 years - where the owners specify; they finance and contractors deliver - worked very well initially, but it started breaking down in the 80s. Now half of our infrastructure needs to be rebuilt and there’s no money to do it. All of the solutions are decades old.
We’re taking a different approach by transforming the road into a network. It pays for itself; it’s no longer a public liability that’s funded through taxes.
We use the road to deliver a networking platform that provides services people are eager to pay for, and so we use a new market approach that’s no longer top down. It’s bottom up.
Simply put, we ask municipalities to let us have a concession to upgrade 10% to 20% of their roads over the next decade. The municipalities don’t need to pay for it. We just need the concession that allows us to do the work.
We then take that concession to the finance industry and tell them, “We’re delivering data services, telecom services, all kinds of stuff people will pay for. We need you to finance this like a real estate development. Instead of physical tenants, we have digital tenants that are leasing services.”
We can then tap into traditional finance organizations in order to deliver road improvements. Once they’re up and running, they pay for their own existence. Every section of road we deliver draws more investment, more interest, more attention from finance, and it also takes that section off the public liability. It no longer needs to be funded by public sources.
The more we do this, the more money can be freed up in public budgets for other things.
CONEXPO-CON/AGG 365: How do the projects get paid for?
Sylvester: That’s the best part. People don’t pay for it. It’s paid for by the commercial enterprises that receive benefits from the physical economy. Think about it this way: Every business that exists relies on roadways for transport, whether it’s moving people or goods, or both.
We need wireless services everywhere, and the entire internet economy is based on internet traffic data.
The physical economy is based on physical traffic, so with our projects we’re collecting and commercializing extremely valuable traffic data. We’re also delivering fiber improvements, wireless improvements, electric vehicle charging, edge networking.
We’re not a tollway where you have to pay just to get into it. We’re more like a WalMart where it’s free to enter. You can buy things if you want, but the reality of individual persons buying things from us is still maybe 10 to 15 years away.
The beneficiaries are the businesses which are operating the physical commercial economy within your area, such as local restaurants and retail shops.
These businesses have been destroyed by delivery, whether it’s delivery companies for food or online retail, while online businesses get so much benefit from internet traffic data to optimize their operations.
But what if you’re building a restaurant. You’re going to spend a million dollars and it’s going to take a year before the restaurant opens. It’s going to cost a million dollars a year to run. And what do you really know about the people in the area? What do they like to eat? Where do they like to go? What time of day? The reality is, most just guess or assume.
What we’re selling to brick-and-mortar business owners is traffic data. What are the demographics of your geographical market, what is your audience and what are those people interested in? Your average brick-and-mortar business owner spends $1,500 to $2,000 a month on advertising, but do they really know who they’re advertising to?
We can help by determining the types of vehicles using the roadway in a physical economy, and this tells us the demographics and socio-economic profiles of those consumers. We then charge those business owners, who instead of advertising into the void – without knowing if it’s working or not – can target their advertising to the exact types of consumers that drive around their business all the time.
CONEXPO-CON/AGG 365: Is it a patchwork approach, with intermittent stretches of roadway being active in any given area?
Sylvester: Our goal is to build a network, so we start by planting seeds. We find the right place to plant a few seeds, which are going to be high-traffic intersections.
We do some intersections and eventually connect them together, and then we turn those connections into a circuit. We can then get automated electric transit moving people around and businesses can improve local deliveries and operations in that area.
As we’re doing that, we continue to add more locations, making more connections to the circuit. The network gets bigger and bigger. As we’re doing that in one place, we’re doing it in 1,000 other places as well. Over time, the networks will merge together.
CONEXPO-CON/AGG 365: Bringing this back to the construction space, what role can contractors play in this scenario?
Sylvester: In my view, eventually this will replace the need for the dependence on federal infrastructure funding. Right now, however, we’re only trying to improve 10% to 20% of the roadways over the next decade, which means 80% to 90% are going to be done the traditional way.
Contracting is tough work. You have massive overhead for labor, equipment and for materials. Sometimes you get a big job, and you earn a lot of revenue, but you also have a lot of expenses, and you can end up with a terrible margin.
Contractors are cutting each other’s throats to make less and less money with every deal. We can help them step around all of that. We know contractors are valuable. We know they deserve to make money. We know that they need access to new revenue. So instead of the typical feast or famine approach, we’re giving them access to an internet-style business model, where we do a contract with a city that gives us a concession to improve selected areas.
We work with the city to pick the areas and then we work with contractors to deliver those improvements. The roads are paying for themselves. The contractor has an incentive to provide the best possible improvement and for that, they have the option of getting a piece of the action on operations.
Every time a contractor does a job, now they have a piece of equity in a financial asset that generates recurring revenue. They get part of that money back as recurring cash flow, just like a website company or an online company has annual recurring revenues from their software.
The more jobs a contractor can deliver for us, the greater their balance sheet is. They have recurring revenue for essentially no cost to them, which means their profit and margins are better.
As they deliver more jobs, that recurring revenue from the operations piece allows them to eat up their overhead against recurring revenue instead of margin from low-bid projects. So even the low-bid projects get more competitive, because they don’t have to make back all of that overhead money from the low bid.
Eventually the contractor is going to have enough recurring revenue from their participation in operations that they can a lot more selective about whether or not to go after a low bid.
On top of that, this allows them to invest in more training for their workers so they can deliver better projects, as well as newer and more advanced equipment so they have the ability to deliver larger projects with the same labor base, and improvements to their own facilities and assets.
If we can show them that recurring revenue from operations will take over their overhead someday, they’ll realize they have a greater ability to reinvest in their own business, instead of trying to cut each other’s throats to get cheaper and cheaper all the time.
CONEXPO-CON/AGG 365: What does the physical technology used in these roadways look like? Does the construction process change?
Sylvester: Up to the point when you actually put down the pavement, it’s exactly the same. You’re setting up all the base and subgrade exactly the same way. When it comes to the pavement, instead of using very expensive machinery that lays asphalt or concrete continuously in place, this pavement comes as pre-made blocks, like a Lego set on the back of a truck, and the contractor just picks up the pieces and puts them down. It really is that easy.
CONEXPO-CON/AGG 365: What are some examples of projects you’re working on?
Sylvester: We started developing smart pavement in 2016. We got the notice to proceed for a project in Denver in 2018. It only took two years to complete.
We did 60 feet with four slabs. We know the tech works, we know the construction works. Now we need to do big projects so that more people understand the benefits.
Our next work is with the city of Lenexa, KS. We have the concession contract set up, we have the engineer and builder and fabricator lined up. All we need now is for the city to issue a permit so that we can proceed with the construction.
We’re going to do five intersections in Lenexa. Then we’re going to connect them together in those circuits and start turning on wireless charging, autonomous navigation, autonomous electric transit - all of these emergent capabilities - and then just grow the network from there.
CONEXPO-CON/AGG 365: What is the message you’d like the North American contractors to hear from this?
Sylvester: Smart infrastructure is a huge opportunity for contractors. They built this nation. They paved roads 100 years ago, they built interstates 50 years ago. Now this is the future of the industry.
The people who adopt technology soon are going to be the winners. We rely on contractors to build our nation for 2060. We need to build for the future, and this is the way to do it.