Courtesy of Kentucky Lantern
A GOP lawmaker wants more scrutiny of anti-competitive practices in road paving in Kentucky in hopes of saving taxpayers money.
House Bill 505, primarily sponsored by Rep. Kim Holloway, R-Mayfield, is spurred in part by concerns that the state awards too many paving contracts based on only a single bid, driving up costs.
The bill would require Republican Auditor Allison Ball to examine the Kentucky Department of Highways’ road paving contracts every two years and produce a “statistical analysis” to detect anti-competitive practices in the bidding process. HB 505 is assigned to the House Transportation Committee and awaits further action by lawmakers.
Holloway told the Lantern she knows of a separate effort by another GOP lawmaker this session to reformulate and raise the gas tax to provide more funding for road maintenance and repair. Speaking about roads and bridges, she knows of “quite a few areas in my own district that need attention.”
“I know it’s that way across the state. People would like to see those things fixed, but they don’t want to spend any more money for anything else because they are spent out,” Holloway said.
She said increasing the gas tax “without auditing the process I think is a little bit premature.”
Holloway worked on the bill language with Andrew McNeill, the president of the think tank Kentucky Forum for Rights, Economics and Education, or KYFREE, which promotes free-market policies.
McNeill has been critical of the Kentucky Transportation Cabinet’s awarding of single bids for road paving contracts across the state, and past analyses from the think tank have found single bids for road paving contracts have driven up the costs of those contracts by millions of dollars. A 2023 study by the Legislative Research Commission, the research and support agency for the state legislature, found that Kentucky was an outlier for awarding large numbers of single-bid contracts.
McNeill said HB 505 would examine bidding activity “that is monopolizing contracts in counties and driving up the cost of these projects to the taxpayers.” He also said the lack of competition with road paving contracts has been an issue in Kentucky for decades.
“I believe that it’s time to answer the question of whether the asphalt industry is violating the state’s consumer protection laws against unlawful monopolies, and whether the Transportation Cabinet has been complicit in looking the other way with those violations,” McNeill said.
McNeill pointed to a specific statute that makes it unlawful to monopolize trade or commerce in the state.
Under HB 505, the auditor’s statistical analysis would look for a number of anti-competitive bidding practices. Those practices include complementary or cover bidding, when someone submits an intentionally costly or uncompetitive bid to ensure another bidder receives a contract, and bid suppression, when potential companies refrain from bidding to allow another company to win.
McNeill said the potential for tacit collusion comes to mind when he examines the state’s road paving contracts. “Would be competitors are refraining from bidding into markets where they could adequately serve for the purpose of allowing their competitor to have a local monopoly, and in exchange that competitor reciprocates,” McNeill said in explaining tacit collusion.
A University of Kentucky paper from 2017 examined the practice of tacit collusion and single-bid road paving contracts in Kentucky. That paper found that from 2005 to 2007, road paving contracts that had two bidders were an average 13.5% below the state engineer’s cost estimate for the project.
A legislative researcher, when presenting the 2023 Legislative Research Commission study, noted some of the reasons for single-bid road paving contracts. In rural areas, there are fewer asphalt plants and companies to compete and a road project cannot be too far from the asphalt plant. But the study also found a lack of competition in Central Kentucky where there are more companies and plants.
Chad LaRue, the executive director of the Kentucky Association of Highway Contractors, did not respond to emails or a voicemail requesting an interview about HB 505.
Naitore Djigbenou, a Transportation Cabinet spokesperson, in an emailed statement said the cabinet “prioritizes competition and works to ensure the state gets the best value during each bidding process.”
She said some of the measures the cabinet implements include having internal engineers, bound by a code of ethics, who develop internal estimates that aren’t shared publicly, and no longer sharing unit prices if no contract is awarded.
“They then compare bids and award projects based on the bid that is closest to the internal estimate,” Djigbenou said. “The cabinet has worked with the General Assembly to implement numerous recommendations, such as using a secondary internal process to review engineers’ estimates. To encourage more competition in a re-bid process, we no longer post unit prices publicly if a contract is not awarded.”
She said the cabinet would monitor HB 505 and “follow the rigorous procurement standards and procedures that guide our work.”
Kentucky Lantern is part of States Newsroom, the nation’s largest state-focused nonprofit news organization.
