A new year would be an opportune time for Kentucky’s Transportation Cabinet to update its costly and outdated road construction-bidding policies in too many ways reminiscent of the days when smokey back-room deals sealed with a wink and nod dominated Kentucky’s political landscape.
If good-ole-boy practices are no longer acceptable when it comes to choosing our political leadership, then neither is the winking and nodding between powerful and politically connected highway contractors in the bidding process, resulting in contractors having monopolies on local projects, especially asphalt paving.
Jim Waters
Such practices drive up the costs of roads and bridges, reduce resources available for needed construction and fail to provide Kentuckians an adequate return on their hard-earned tax dollars.
To be sure, the practice isn’t overt.
Researchers at the University of Kentucky instead deem it “tacit collusion.”
“Unspoken,” “inferred” and “understood” are listed synonyms of “tacit” in my handy thesaurus which seem relevant to the discussion about the Transportation Cabinet’s road-bidding policies and practices.
Such “understood” arrangements may be “unspoken,” perhaps even legal, but they aren’t without consequence to our commonwealth and its taxpayers.
The lack of competition means it’s costing more to build, maintain and repair Kentucky’s roads and bridges than it otherwise would or even should.
An analysis by the Kentucky Center for Investigative Reporting (KyCIR) found that one out of every three road-work contracts awarded between 2018 and October 2021 – excepting one month in 2019 when the state failed to provide bidding information – were single-bid contracts “in which the company awarded the contract was the only bidder.” Nearly 60% of those bids exceeded state engineers’ cost estimates.
KyCIR found that only one contractor was awarded a state contract this year in eight Eastern Kentucky counties and was the sole bidder on 154 projects costing taxpayers more than $87 million; 60% of these contracts also had higher price tags than the commonwealth’s own estimates of what the jobs should cost.
KyCIR also reported that 85% of contracts with multiple bids were awarded at a total cost of a quarter-billion dollars less than what state engineers estimated they should cost.
How many roads and bridges could the cabinet build and repair by freeing up money generated by more competitive bidding rather than using harmful measures like raising the state’s gas tax?
Competition works.
The Transportation Cabinet should – but for some reason doesn’t – make every effort to ensure it.
The KyCIR’s investigation relates to testimony about such arrangements offered by Bluegrass Institute Visiting Policy Fellow Andrew McNeill at the legislature’s joint transportation committee meeting in November.
McNeill told the committee that just four companies were awarded 39 of the 44 single-bid contracts awarded between 2019 and 2021 in four counties: Fayette, Scott, Bourbon and Clark.
Of the total 59 contracts awarded, McNeill said he can only find four times “where any of these companies submitted a bid across county lines.”
Highway contractors claim such scenarios occur because companies bid on projects closer to their asphalt plants. Yet McNeill provided evidence from economists at the University of Kentucky that these four contractors have secured single-bid projects at a further distance while not bidding on many that were plenty close to their plants.
McNeill noted during his testimony that the goal isn’t just to keep the cabinet from awarding single-bid contracts – which he calls a “Band-Aid on a larger problem.”
Rather, it’s to increase the amount of competitive bidding, which, as the KyCIR reports, yields great savings for taxpayers.
While McNeill didn’t claim the information he presented proved “tacit collusion” within Kentucky’s highway industry, he did argue that there’s more than enough questionable bidding activity to at least justify an audit of the cabinet’s bidding practices.
State Auditor Mike Harmon has indicated he’s a “follow the data” kind of leader.
Isn’t this the type of data that calls for a look at the transportation cabinet bidding practices with an eye toward increasing competition and thus getting more miles out of Kentuckians’ dollars?
Jim Waters is president and CEO of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free-market think tank. He can be reached at jwaters@freedomkentucky.com and @bipps on Twitter.
