State trunk line maintenance offers another area of opportunity for cost savings. The 1998 transportation funding committee created by the Legislature recommended putting all maintenance above a financial threshold level on trunk line roads out for bid by private and public bidders. They made a similar recommendation for county and city roads.
Currently, MDOT does it own maintenance in some 21 counties, with its own buildings, equipment and state employees. Often times the state garages are almost next door to county garages used to maintain county roads – and there is extensive duplication of garages, equipment and personnel. If the state is looking for “consolidation” opportunities as discussed above, this is a leading candidate for combining state and county operations. In the other 62 counties MDOT contracts with the road commission to have work done. In order to gauge private and county costs, MDOT should put all maintenance work in the 21 counties out for bid, and allow bids for individual counties, groups of counties, or the entire set of counties where MDOT does its own work. Private contractors, county road commissions and local municipalities should be allowed to bid. Millions of dollars in savings should be possible. While more recent data is not available, MDOT spent $33 million on its own garages and staff in these 21 counties in 1997.
In order to judge costs and decide whether to accept bids, MDOT will need detailed information on its own costs – as noted in a 1999 Senate Fiscal Agency analysis of MDOT’s 1992 efforts to have a private contractor do a few miles of maintenance on state roads in Ingham County. This analysis found that road commissions had the lowest costs, followed by MDOT, with the private contractors having the highest costs. However the main reason the private costs were so high was the limited number of miles offered to them, which did not provide economies of scale. By requiring bids on the wider system cost savings should be possible from private providers. Generally speaking, where MDOT does its own work, the counties have not wanted to do the work for a variety of reasons that go back years. However, the possibility of having private contractors or other local government units doing this work may lead the local county road commissions to show increased interest.
MDOT should also end the practice of simply renewing contracts with the other 62 counties where it uses the local road commission for work on the state roads. Past practice has been to simply roll over contracts each year, with the counties latest hourly labor rates inserted into the new contract. Instead, to the extent that these changes are not yet in place, these maintenance contracts should be extended to three to five years. The contracts should be put out to bid by the home county, other counties, cities and private operators on a closed competitive bid system.