Funding for state infrastructure improvement projects has increasingly become a point of contention in the last decade. With state and local lawmakers examining new sources of revenue, tax increases are often pinned as the solution. Yet increasing taxes ignores more efficient legislative solutions that could free up billions in funding, such as implementing “Open Competition” laws. Currently, outdated “Closed Competition” laws are wasting taxpayer dollars, promoting cronyism, and whittling out American firms from the procurement process.
State and local governments throughout the country are imposing these anti-competitive practices – most notably in regards to materials used in water infrastructure projects. Certain products and materials, often proven to be safer and more affordable, are unfairly outlawed from being used in publicly funded projects.
Many closed competition laws were put in place decades before new and advanced materials existed, or were put in place for protectionist reasons. As a result, American taxpayers have been deprived of savings that result from competition in the procurement process by governments eager to pick winners and losers.
Cities in Arkansas, Michigan, North Carolina, South Carolina and Ohio have all significantly saved taxpayer dollars since implementing open competition laws. Fayetteville, Arkansas implemented open competition laws and saved taxpayers $278,625 per mile on water infrastructure piping compared to Hot Springs, which has closed competition laws in place.
Similarly, Charlotte North Carolina implemented open competition laws resulting in taxpayer savings of $155, 902 per mile of pipe compared to closed competition Raleigh. All told open competition cities see on average taxpayer savings of $100,000 or more per mile of pipe compared to closed competition cities, and that is just with regard to water infrastructure.
Opponents of open competition naturally are the protected interests white-knuckling their 100 year-old monopolies that see competition as a threat to the status quo. Yet it is the status quo that is driving up the cost of infrastructure projects for state and local taxpayers and pushing lawmakers to turn to big government solutions such as increasing the gas tax.
Additionally, open competition laws could also be beneficial at the federal level. A study released by the National Taxpayers Union (NTU) found that an entire replacement of U.S. water infrastructure would cost $1.32 trillion. Transitioning to an open competition process would reduce that number by 28% or $371 billion.
As these taxpayer savings relate only to water infrastructure projects, the savings to taxpayers from a wider application of open competition laws to the government infrastructure procurement process could be even greater. In addition to states, Congressional lawmakers should look to introduce federal legislation that allows for an open and competitive procurement process for construction materials.
In May of this year, Americans for Tax Reform, joined by 23 other organizations, led a coalition letter to Congress requesting that any federal infrastructure legislation should include language that clearly requires an open and competitive bidding process for materials that will be used in infrastructure projects.
In the coming year as state and federal lawmakers begin looking for ways to shore up spending on infrastructure projects, passing legislation to implement open competition laws should be an obvious free-market solution. Doing so would provide lawmakers a chance to be efficient stewards of taxpayer dollars, prevent misguided tax hikes, and improve America’s infrastructure.