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Creating Opportunities for Small Businesses by Improving the Government Construction Procurement Process

August 30, 2015
Although we often take it for granted, infrastructure is of critical importance to the economic success of the United States. Our infrastructure system is responsible for transporting the people, goods, and services necessary to have a healthy economy. Take the Brent Spence Bridge of Cincinnati, for example: just this one bridge facilitates economic activity accounting for 4% of the nation’s GDP. Despite its tremendous importance, the infrastructure of the United States is rapidly falling behind that of the rest of the world. In a recent hearing conducted by the Senate’s Small Business Committee, Cincinnati’s Matt Davis of the Build Our New Bridge Now Coalition testified as to the structural deficiency of the previously mentioned Brent Spence Bridge. According to Davis, the bridge has, on average, twice as much traffic as it was built to handle. In fact, vehicles are 3-4 times more likely to be in an accident on the Brent Spence Bridge than anywhere else on Ohio’s I-75 or I-71 interstate highways. This example highlights a large-scale problem with our infrastructure system.

Author: Aaron Hall, W’17

In 2010, the United States Department of Transportation released a report indicating that, out of the 604,493 bridges in the U.S., a staggering 12.8% were “functionally obsolete.” An additional 11.5% of our country’s bridges were designated as “structurally deficient.” This is because the bridges in the United States are an average of 42 years old. The problem with our infrastructure is not limited simply to bridges. According to the Economist, the roads and highways in the United States are so congested that the average commuting times in U.S. cities are longer than those of almost every country in Europe. These inefficiencies have and will continue to have a negative impact on the United States economy. According to estimates made by the American Society of Civil Engineers, the U.S. economy could suffer from a loss of nearly $1 trillion in business sales through 2020 as a result of our outdated infrastructure. This loss in sales could lead to a staggering loss of 3.5 million jobs through 2020. 

It is evident that the United States currently faces an unparalleled need for infrastructure investment. Re-building the Brent Spence Bridge in Cincinnati alone would cost nearly $3 billion. To repair the bridges in the United States would require $76 billion in government spending. According to the American Society of Civil Engineers’ 2013 Report Card for America’s Infrastructure that gave our infrastructure a letter grade of a “D+,” approximately $3.6 trillion in government spending is necessary between now and 2020.

This growing need for improved infrastructure shines a spotlight on our government’s process of procuring private construction companies to carry out repairs and other various projects. After all, once the government allocates the requisite funding to revamp our country’s infrastructure, it is the work of the private sector to actually carry out these repairs. As we go about reforming our system of infrastructure to make it more efficient, we must also take a look at the efficiency with which the government is able to oversee the design and construction of federal construction jobs.

To help accommodate the future increase in construction jobs, Senator Portman (R-OH) recently introduced Senate Bill 1526: Construction Consensus Procurement Improvement Act of 2015. The stated purpose of this Bill is to “amend title 10 and title 41, United States Code, to improve the manner in which Federal contracts for construction and design services are awarded, to prohibit the use of reverse auctions for design and construction services procurements, to amend title 31 and title 41, United States Code, and to improve the payment protections available to construction contractors, subcontractors, and suppliers for work performed.” This Bill is co-sponsored by U.S. Senator Mazie Hirono (D- Hawaii) and has gained support from various organizations, including the American Council of Engineering Companies, the Associated General Contractors of America, the National Association of Surety and Bond Producers, and the Surety and Fidelity Association of America.

An important provision of the Bill is to prohibit the use of the “reverse auction” system of procurement in favor of a more efficient system of “design-build” procurement. The Bill defines reverse auction as “a real-time auction conducted through an electronic medium between a group of offerors who compete against each other by submitting bids for a contract or task order with the ability to submit revised bids throughout the course of the auction; and the award of the contract or task order to the offeror who submits the lowest bid.”

By awarding construction contracts to the offerors who place the lowest bid, the reverse auction procurement process implicitly values cost more than quality. In addition, this method of procurement lends itself to larger construction companies that are able to achieve the economies of scale and process control necessary to be able to offer the lowest bid. Thus, by eliminating this method of procurement, Senator Portman’s proposed legislation would improve both quality and competition in the construction procurement process by allowing smaller companies to compete.

The Construction Consensus Procurement Improvement Act instead offers an improved version of the “design-build” method of procurement as a superior alternative. Under the design-build process, the government contracts out both the design and construction activities to a single private entity. Unlike the reverse auction system, the government selects a construction company based on the quality of their design, past experience, and cost. This allows for competition not just on price, but also quality, which gives smaller construction firms a chance to compete. It also centralizes and streamlines the process of project completion, which brings the added benefits of synergy.

All in all, this Bill brings up an interesting point for consideration: while the United States must direct its attention to revamping its physical infrastructure, it must also consider its legal infrastructure and its ability to accommodate the fast-approaching surge in demand for government construction jobs. This bipartisan effort led by Senators Portman and Hirono is a model for future efforts to reduce government inefficiency and provide opportunities for small businesses. 

“2013 Conditions and Performance.” United States Department of Transportation, Federal Highway Administration. 2013. Accessed June 15, 2015.

“Life in the Slow Lane.” The Economist. April 30, 2011. Accessed July 15, 2015.

“ASCE | 2013 Report Card for America’s Infrastructure.” ASCE | 2013 Report Card for America’s Infrastructure. 2013. Accessed August 3, 2015. 

“Portman Offers Amendment to Expand Opportunities for Small Businesses by Improving Federal Construction Procurement Process.” Portman.senate.gov. June 19, 2015. Accessed August 3, 2015.

S.1526 — 114th Congress (2015-2016)

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  • The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Penn Wharton Public Policy Initiative’s strategies, recommendations, or opinions.

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