Unlocking Gridlock

A Five-Part series on improving transportation without raising taxes ". . . hold us accountable." – Governor Gary Locke

Part 3: Cost Savings

Before raising taxes to create more revenue for state transportation projects, legislators need to take a hard look at how tax dollars are already being spent. Programs that are unnecessary or have outlived their usefulness should be eliminated; needless policies that drive up the cost of services should be repealed; laws to create government efficiency should be created and strictly followed. Below are a few specific examples of cost-saving measures.

Review core missions and functions.

Sometimes a transportation agency is created for a purpose which is already being performed (or should be performed) by an existing agency. Other times, transportation agencies perform a function because it sounds good, but closer review shows the function falls outside the purpose for which the agency was created.

Lawmakers and agency officials should analyze every function performed by each transportation agency to see whether it is essential to the agency’s mission. If the service falls outside the scope of the mission and functions the agency was created to perform, it is best left entirely to the private sector. If lawmakers find that the service is legitimately within the scope of the agency mission, they should then analyze whether the service is already being provided, or could be better provided by another existing agency.

A review of core missions will permit a critical examination of the size of the transportation workforce. In 1996, Michigan reported a 14 percent reduction (from 4,206 down to 3,600) in Full-Time Equivalent (FTE) employees after a thorough review of the state’s Department of Transportation (DOT). Last month Michigan’s DOT staff level was down another 300 FTEs.

A similar review and reduction of the Washington State Department of Transportation’s (WSDOT) staff (currently at 7,706 FTEs) could result in a reduction of roughly 1,657 FTEs. Consider the fact that Washington, with a population of 5.8 million people, has twice as many FTEs in its transportation department than does Michigan with its population of 9.9 million people.

Refine competitive bidding.

After reviewing transportation missions and eliminating functions that fall outside the scope of these missions, the state should encourage competitive bidding to provide services. Competition in the marketplace improves performance and keeps costs down.

Contrary to some claims, competitive bidding does not necessarily mean that public services become privately operated. Rather, public employees and the private sector compete head-to-head for the opportunity to perform a public service. When former Indianapolis Mayor Stephen Goldsmith began pushing city services into competitive bidding, city employees, when given the time to prepare to bid competitively, won about 40% of bids.

Competitive bidding is a proactive change in the approach to buying government services, not a quick-fix, one-time money saver. Lawmakers should not expect millions of dollars in savings overnight, but continual savings over the long run. The Reason Foundation, a national policy research organization, has found that governments can save between 20 and 40 percent through competitive contracting.

EFF suggests lawmakers specifically look for competitive bidding opportunities in the development and upgrades of airports, roads and high-speed rail, rest-area maintenance (in return for letting businesses locate in rest areas, they could maintain the entire rest-area and pay a user fee to the state), public transit, motor vehicle registration, and fleet operations and maintenance.

Success through competitive bidding cannot be guaranteed unless there is strong support from elected leaders, explicit expectations and timelines, regular review, clear and cooperative lines of authority, and appropriate timing. Poorly planned, uncommitted, or manipulated efforts at competitive bidding are destined for failure.

Streamline the permitting process.

The current permitting process requires DOT to jump through numerous federal environmental regulatory hoops in order to obtain permits for transportation construction projects involving wetlands or other waters. The process results in wasted time and as the old maxim goes, "time is money." The Blue Ribbon Commission on Transportation has recommended that this process be streamlined so WSDOT can establish a one-stop environmental permitting process and quickly get down to the real business of building and maintaining our transportation systems. EFF agrees with this recommendation.

Avoid project labor agreements.

Another wasteful practice that can be eliminated to save money is the use of Project Labor Agreements (PLA). PLAs are made between the manager of a construction project and a group of local unions or a building trades council, and require that all employees on the construction project be represented by a union. A contractor who does not bargain with unions (open shop) and wishes to be awarded a construction project under a PLA must jump through a number of union hoops. For instance, the contractor is often forced to reduce his workforce to a handful of "core" employees, hire new workers from the union hiring hall, pay representation dues for all non-unionized employees, pay into union health and retirement funds, and agree to obey union work rules.

When entering into a PLA, government officials often claim the agreement will make final costs predictable, eliminate labor strikes that cause project delays, and provide a safer workplace with better-skilled workers. In reality, there are numerous examples of projects with PLAs that show contrary results (e.g., Safeco Field, the Boston Central Artery/Tunnel project). Many private contractors excluded from PLA projects see these agreements as little more than a payoff to unions for their political support.

Repeal the prevailing wage.

In 1945, Washington lawmakers enacted our state prevailing wage law. Fashioned after the federal Davis-Bacon Act, this law requires workers be paid "prevailing wages" when hired for public works projects or maintenance of public buildings. State law defines "prevailing wage" as the combination of hourly wage, usual benefits and overtime paid to the majority of workers, laborers and mechanics in the largest city of each individual county.

In essence, the prevailing wage law sets a super-minimum wage for labor on public work projects. Competition in contracting is substantially reduced or eliminated. Without this wage competition, contract prices cannot be driven down, resulting in an increased final price. Most studies on prevailing wage laws have concluded that they substantially add to the cost of construction.

In 1989, the Washington State Senate proposed legislation to eliminate application of the prevailing wage to projects that are estimated to cost less than $100,000, and limit wage surveys to collecting data from only non-public works projects. At that time DOT prepared a fiscal note for the bill (SB 5822), which concluded that if the law was passed, DOT projects of less than $100,000 would save 67% on labor costs and 20% of total project costs. For projects costing more than $100,000, DOT estimated a 33% savings on labor and 16.5 % savings on total project costs.

Washington should repeal the prevailing wage law to assure maximum efficiency of taxpayer dollars while protecting the workers and their wages in the local area. At a minimum, the law should be revised so the prevailing wage for each type of work being done is calculated from the average wage rates in the local area, not just the largest city in each county.

Watch for a future In-Brief detailing EFF’s cost savings suggestions.

Prepared by Amanda Jarrett, Research Analyst (360) 956-3482 or ajarrett@effwa.org

Evergreen Freedom Foundation P.O. Box 552, Olympia, WA 98507 Phone: (360) 956-3482, Fax: (360) 352-1874 Email: effwa@effwa.org