New findings from Kentucky legislative researchers show the state awards significantly more road paving contracts to a single bidder than other nearby states, generally driving up the overall costs of the contracts.?

Legislative Research Commission staff presented the new findings to a committee of lawmakers Aug. 15 as a part of releasing an LRC report.

That report from December 2023 found road paving contracts awarded by the Kentucky Transportation Cabinet most frequently only had one asphalt company bidding for the work and that contracts with two or more bids were rare. Single-bid road paving contracts were also more costly compared to state engineering estimates, the report said, though single-bid contract costs went down in 2022 and 2023.?

Jeremy Skinner, an analyst for the Legislative Oversight and Investigations Committee, told lawmakers that from January 2018 to July 2023, Kentucky had about 50% of its road paving contracts go to a single bidder. That percentage is much higher than neighboring Indiana, Ohio and West Virginia which had respectively 10%, 15% and 32% of contracts go to single bidders.?

“The data shows that same single-bid contracts tend to be more expensive. Therefore, anything you can do to increase competition is probably advantageous,” Skinner said.?

Skinner did caution road paving contracts from other states may not be a perfect comparison given that some states only shared partial data, and the methodologies of how states calculated the costs of projects to compare to the bids weren’t clear. Skinner’s findings also showed the cost of single-bid contracts in Kentucky, while higher than state estimates, were lower than the cost of single-bid contracts in Ohio and Indiana.

Skinner, referencing the December 2023 report, said reasons for the single-bid contracts could range from the fact there are fewer asphalt plants and companies in rural parts of the state to compete for contracts and the limited distance an asphalt plant can be from a road project to service it.?

Single bid contracts were more common in rural areas, Skinner said, but researchers also found a lack of competition for contracts in Central Kentucky where there are more companies and plants. More than two-thirds of the road paving contracts in Fayette County had single bidders over a nearly five year period; Clark County had 94.4% of contracts go to a single bidder.?

‘No longer an excuse for inaction’

Andrew McNeill, president of the think tank Kentucky Forum for Rights, Economics and Education focused on free-market policies, said the the lack of competition for road paving contracts has been a problem in Kentucky for decades.

The Kentucky Center for Investigative Reporting in reporting on the issue in December noted that the road paving industry has a history of alleged corruption. The investigative journalism outlet, a part of Louisville Public Media, also reported lawmakers had originally promised to release the December 2023 report months ago.?

“It’s going to take favoring the taxpayers over a very powerful special interest, but there’s no longer an excuse for inaction or ignoring this problem,” McNeill said. “The legislature needs to remain attentive to this so that if the cabinet is not willing to reform itself, then legislative action is the likely next step.”?

McNeill’s own analysis of road contracts over the first six months of 2024 found Kentucky awarded more than $142 million in single-bid contracts, which he asserts cost the state over $4.5 million compared to if a second bidder was competing. McNeill calculated that figure by relying on a paper from economics professors from the University of Kentucky and Brigham Young University-Idaho, which found that highway contracts in Kentucky between 2005 and 2007 that had two bidders were an average 13.5% below the engineer’s estimate for cost. He then reduced the cost of each single-bid contract in the state to 86.5% of the value and added up the difference.

Transportation Cabinet leadership at the Thursday presentation told lawmakers they were working on the recommendations for addressing single-bid contracts included in the December 2023 report. Those recommendations included creating an internal process to verify a state engineer’s estimate of a road paving project, developing written guidelines for accepting or rejecting a bid and using software to detect potential collusion on bids. The cabinet disagreed with a recommendation asking for written guidelines, saying the agency needs flexibility on how it weighs bids.?

James Ballinger, the State Highway Engineer for the Transportation Cabinet, told lawmakers following the presentation the cabinet wanted “as much competition as we can” on the contracts.

Chad LaRue, the executive director for the Kentucky Association of Highway Contractors representing the road paving industry, said the group appreciated the work of legislative researchers and stood “ready to work” with the Transportation Cabinet on the report’s recommendations, along with “educating lawmakers and others about the unique challenges inherent in the highway construction industry in the Commonwealth.”?

Rep. Adam Bowling, R-Middlesboro, co-chair of the legislative oversight committee, asked Ballinger for the cabinet to provide an update on the progress made on the recommendations in the next 30 to 60 days.?

McNeill, the think tank leader, told the Lantern the Transportation Cabinet has an opportunity to take further steps beyond the report’s recommendations “to really prioritize reforming their contracting processes and efforts to entice and create competition for these asphalt contracts.”?

“The ball is in the Transportation Cabinet’s court,” McNeill said.