On Tuesday afternoons, I attend two Senate committees back-to-back: Transportation and Local Government and Taxation. Rarely do they connect like yesterday. First up was the standard annual report from the Idaho Transportation Department. A notable highlight was a series of cost-saving measures which will save $50 million of taxpayer dollars over the next five years. After the Governor challenged the ITD Board to show it had done everything it could to be efficient, ITD staff put out the word to employees at all levels, and they produced some very good ideas.
One employee, a welder, designed a bumper system to save wear and tear on snowplows. Another idea that makes good common sense: sealcoating only the traveled lanes of roadways and not the shoulders (which really don’t need it) saves significantly on material costs. The Associated General Contractors (AGC) is also involved, helping the agency find efficiencies in construction testing and inspection. The report reads like a case study in good management and if you want the details you can access it at: http://itd.idaho.gov/info/efficiencyreport/Efficiency_Report.pdf
Moments later, in the Local Government and Taxation Committee we heard from Keith Allred from the grassroots policy group The Common Interest who presented that organization’s policy findings and priorities for 2008 and one of his Powerpoint slides really got my attention. It showed that the profit levels for the management contracts for GARVEE (the “Connecting Idaho” highway construction program) are 13.3% for satisfactory performance, 17.3% for superior performance, and 9.3% for inferior performance. These profit levels were established through negotiations between the Kempthorne administration and the companies (WGI and CH2M Hill.) By comparison, negotiated profit levels for regulated utilities in Idaho are 7% to 8%. In the commercial construction business, where risks are much higher, builders commonly make 8 to 10% profit. (On non-speculative contracts, sometimes as little as 4%.) According to Allred, the Exxon/Mobil Corporation is currently being criticized for making excessive profits amounting to 10%.
I do not know, as of this writing, whether there are some unknown risks or other unknowns that would warrant these relatively high profit margins on a public works project, and Allred told the committee that he would return with any explanation that the ITD and the companies might offer. (I will post any pertinent info here as I get it.) But on its face, this information prompts me to wonder whether the Governor has made the same request of these two companies that he asked of ITD. (The contracts are currently being negotiated.) In showing us how the old phrase “make government run like a business” sometimes can work, the employees at ITD have set a good example. And as the new GARVEE contracts are negotiated, their success may also prompt the Governor’s office to ask if the managing businesses might be run a little bit more like the government.
Sen. David Langhorst