Sneak Preview: FHWA To Assess Contract Competition Procedures

May 25, 2012 | By Jerry Ashworth | Post a Comment

(The following was excerpted from an article in the Federal Grants Management Handbook.) A Federal Highway Administration policy expected by the end of the year will call for a review of state bidding and contract awarding procedures to ensure states encourage competition for grant-funded transportation projects. The policy stems from a recent Department of Transportation Office of Inspector General report that found a lack of contract competition for American Recovery and Reinvestment Act highway projects.

The report identified weaknesses in FHWA’s oversight of state contracting practices for Recovery Act-funded projects. About 19 percent of the 8,365 Recovery Act contracts that state departments of transportation awarded through March 2010 received only one or two bids. An OIG sample found that the contract price averages for projects with two or fewer bids were 11 percent higher than averages for those projects that received three bids.

FHWA sought to award Recovery Act contracts quickly to stimulate job creation, so neither the agency nor the states did much to encourage competition, the OIG said, adding that project location and type of work also limited completion. The OIG found that states that received three or more bids on 95 percent of their contracts had “significantly” lower average contract prices.

“The overall average price difference between contracts with one or two bids and those with three bids is at least $179 million,” the OIG said. This finding “highlights the importance of increasing competition because our results show that even minimal increases in the number of bids could have a significant impact on contract prices.”

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