Infrastructure: Competition Trumps Cronyism

REUTERS/Mike Blake

Bonner Cohen Author, Fixing America’s Crumbling Underground Infrastructure
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What will it cost to fix America’s crumbling infrastructure?

Nobody knows, but estimates are in the trillion-dollar range.

Rehabilitating the nation’s roads, bridges, tunnels, etc. at a time when governments at all levels are cash-strapped will be a daunting task. But an even greater challenge will be replacing our vast network of leaking, corroded underground water pipes. By one estimate, leaking pipes lose 2.6 trillion gallons of water a year, or 17% of all the water moved in the United States.

As the Trump administration and Congress, along with state and local governments, contemplate how to pay for long-overdue water infrastructure upgrades, one idea can help stretch scarce resources. To help keep costs down, we should ensure that an open and competitive bidding process is used for material selection in water infrastructure projects. This isn’t the heavy hand of government picking winners and losers; it’s about making sure that taxpayer dollars are spent responsibly and that the bidding process is based on merit.

Competitive bidding on infrastructure projects is also a protection against cronyism.  Where artificial barriers to competition exist, someone benefits. Suppliers who know they are protected against competition can jack-up prices and even neglect to upgrade their products. Sadly, the country is still riddled with municipalities that engage in quasi-monopolistic practices when it comes to replacing underground water pipes. In fact, approximately 75% of municipalities have closed bidding process for pipe material selection, tying the hands of engineers and limiting material choices. For example, the Pittsburgh Water and Sewer Authority states, “all waterlines shall be push-on joint ductile iron pipe with mechanical joint ductile iron fittings.”

Thankfully a proven program for fostering open bidding already exists at one federal department, and it is well worth emulating elsewhere. For over 15 years, the U.S. Department of Agriculture (USDA) has been at the forefront of fostering truly competitive bidding. USDA’s Rural Utilities Service (RUS) program provides funding for water systems in rural areas across the country. As is customary with government programs, there are safeguards in place to make sure taxpayers dollars are used responsibly.

In a March 2002 internal memorandum, USDA specified that bidding procedures under the RUS program “shall be conducted in a manner that provides maximum open and free competition.”  “Contractors, manufacturers, and suppliers with acceptable equipment and materials should have a chance to participate in the project,” the memo continued.  “Once the facility requirements have been established that assure good quality, the goal is to construct the project at the best price for the system and the taxpayer.”

Note that USDA does not mandate the materials or the technologies to be used in water projects; those decision are left up to local engineers.  The program is based on the assumption that advances in technology will outpace antiquated procurement specifications and that competition will drive down costs. That’s a model for all levels of government to follow – federal, state, and local.

Of the many factors that led to the water-contamination crisis in Flint, Mich., one merits closer scrutiny:  Flint did not allow for competitive bidding on underground water infrastructure projects.  Flint’s corroded underground water pipes were a disaster waiting to happen. By not allowing competitive bidding, Flint, over the decades, simply replaced corroded iron pipes with corrosion-prone iron pipes. As a result, the city’s long-suffering residents wound up paying the highest water rates in the country for water they dared not drink.

While underground water pipes lack the pizzazz of majestic bridges or other high-profile infrastructure projects, they are absolutely essential to public health. Flint shows what can happen when water systems fail to keep pace with innovations in technology. In the spirit of “may the best technology win,” we can apply the creative talents of our best engineers and inventors to development cost-efficient solutions to our pressing water-infrastructure needs. It also shows how costly and devastating bad public policy can be for communities.

When it comes to eliminating unnecessary regulatory restrictions, there’s nothing wrong with a little competition.

Bonner R. Cohen, Ph. D., is the author of “Fixing America’s Crumbling Underground Water Infrastructure,” published by the Competitive Enterprise Institute.