Open Competition Laws Save Taxpayers Millions

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Posted by Daniel Uzi Frydman on Tuesday, April 4th, 2017, 10:22 AM PERMALINK

Infrastructure policy has received a plethora of attention from the media and the Trump administration this year, following campaign promises to pass a large infrastructure package. As the Trump administration and lawmakers on Capitol Hill look to implement such a package this year it is important to take into account pro free-market and pro taxpayer laws being used in the states that can inform discussions on the federal level, such as “open competition laws.”

Currently a number of local governments impose “closed competition laws” as it relates specifically to water infrastructure projects. Such arcane laws have clogged up competitive markets by allowing only pre-determined materials to be used in water infrastructure projects, thus preventing innovative new products from competing for certain government contracts.

Closed competition laws as such result in government selected winners and losers. Unfortunately, the winners are not the taxpayers, rather the specific industries that the government has gifted with monopolies on government-approved materials, leaving taxpayers with a loss.

Taxpayer relief and improved infrastructure have proven achievable at the state and local level through the process of repealing and reforming existing closed competition laws, and replacing them with open competition laws. At its core, open competition laws allow for basic free market principles to flourish. Open competition laws could be used to breath new life into not just water infrastructure projects but could have wider application for infrastructure projects in general by enabling the use of less costly, and often times more effective infrastructure materials.

The positive effects open competition laws have had at the local level should give state and federal lawmakers new perspective when discussing infrastructure projects. Comparing the experience of various cities in Arkansas, North Carolina, and Michigan offers evidence as to the benefits open competition laws can have for taxpayers and government coffers.

In Arkansas the city of Fayetteville, where open competition laws are in place, saves taxpayers an average of $278,625 per mile on the cost of water infrastructure piping when compared to Hot Springs Arkansas which has closed competition laws. Fayetteville is not a lone example of open competition laws benefiting taxpayers.

Charlotte, North Carolina’s largest city, follows open competition laws for water infrastructure projects, whereas Raleigh, North Carolina’s second largest city adheres to closed competition laws. Just as Fayetteville enjoys the fruits of open competition, Charlotte saves taxpayers an average of $155,902 per mile of pipe when compared to Raleigh.

Finally, in Michigan, the cities of Monroe and Livonia join Fayetteville and Charlotte as cities that follow open competition laws, saving the cities of Monroe and Livonia an average of $114,154 per mile of pipe. Port Huron and Grand Rapids have closed competition laws and thus suffer from exponentially higher water infrastructure costs.

Successful adoptions of open competition laws by municipalities have spurred interest by states, with both Arkansas and South Carolina proposing bills that would implement open competition for the entire state. Other states such as Ohio and Michigan have also begun investigating the benefits of open competition.

This new wave of free market reforms not only save millions in taxpayers dollars on water infrastructure projects but also can be used to inform larger state and most importantly federal infrastructure discussions this year.

If open competition laws were implemented on the national level, the National Taxpayers Union estimates that would save taxpayers over $371 billion. This is significant as the American Water Works Association estimates that more than $1.3 trillion is needed for water infrastructure improvements in the coming decades.

With abundant savings that could be achieved at the state level, such open competition policies could have an extreme benefit at the federal level and not just with regard to water infrastructure projects. With a planned federal infrastructure package being negotiated this year, free-market pro-taxpayer policies such as open competition laws should inform lawmaker’s discussions.

Photo Credit: Lindsey G

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