Again this construction season, the Montana Contractors’ Association (MCA) fielded calls from members disgruntled by various local governments and Montana Department of Transportation (MDT) maintenance crews “playing contractor,” employing what many construction professionals consider inefficient methods, excessive personnel, and lack of quality control and accountability.
One such complaint involved a city crew paving in a downtown area using single axle trucks, substandard traffic control, poor compaction and rough, uneven “completed” driving lanes. Another involved MDT’s “rut filling” operation that wouldn’t meet any of the agency’s own specifications for contracted work. Another call from an MCA member involved a request from MDT for the contractor to return to one of its recently completed projects to re-grind rumble strips and repaint on a stretch of highway. It seems MDT crews filled in the new rumble strips and covered the epoxy stripes.
As I walked up to the MCA office steps several weeks ago, I noticed one of our members, High Mark Traffic Services, painting an intersection a block down the street. I approached one guy on the sidewalk (who I assumed was an employee, but wasn’t actively working at the time) to introduce myself and talk about how the construction season was going. As it turned out, he wasn’t a High Mark employee — he was the MDT inspector on the project. Then, I glanced down the sidestreet and noticed a second MDT employee sitting in a state pickup. So, that means we had two MDT employees looking over the shoulders of four or five contractor employees as they worked on a pretty standard job. I’m not sure how that is efficient.
The MCA helped lead efforts to secure a fuel tax increase during the 2017 Legislative Session, which will result in substantial increases in funding for MDT and local governments to spend exclusively on roads, streets and bridges. Obviously, our motivation, aside from the obvious need to maintain and improve our transportation system, was to generate predictable, consistent funding for governments to award construction contracts to private companies. In fact, that was a key component of the MCA’s support and participation.
Taxpayers expect their fuel taxes to be spent efficiently and with accountability, regardless of what level of government is involved. The U.S. Congress is reluctant to raise federal fuel taxes for this very reason—taxpayers are not convinced of the need. The Montana legislature passed the state fuel tax increase with the caveat that a thorough audit be performed of MDT’s operations, which will include an analysis of privatization opportunities. The bill also included provisions requiring city and county governments to submit reports on how they spend their new allocation of money, so at least there is some level of transparency.
MCA leaders listened to an intriguing presentation in August from representatives of the Alberta Roadbuilders’ Association, about how that Canadian province systematically privatized virtually all aspects of highway design, construction and maintenance. Montana has a model on its northern border, demonstrating that private companies can, will, and do perform highway maintenance more efficiently than government.
We’ve heard for years from local and state governments that because of their “obligation” to plow snow in the winter, they need to keep that equipment, and thus the associated employees, busy the rest of the year. Our Alberta neighbors told us that is the single biggest efficiency they gained—better productivity from equipment—notably trucks. It worked so well at the provincial level, many local governments followed suit and signed maintenance contracts with the same companies doing the provincial work in their regions.
Governments are not entitled by statute or ordinance to perform construction services. They have assumed those roles by default, with taxpayers essentially ceding the authority to purchase equipment and hire employees rather than contract the work through competitive bidding.
Thankfully, the legislature recognized taxpayers were unwilling to raise fuel taxes without the assurance of better efficiency and accountability. The MCA will continue working with auditors, agency officials, and legislators toward the goal of spending taxpayer dollars wisely through competitively bid contracts that guarantee adherence to specifications and bonding for nonperformance. Please share your experiences, comments and suggestions with us.
This is a slippery slope for an opinionated Baby Boomer who is not a PhD Sociologist, but here goes…
Nearly every contractor we talk with indicates that finding and keeping employees, even so-called unskilled workers, is becoming increasingly difficult and poses one of the most significant threats to their company’s success. And the problem is not unique to construction—most business owners in almost any industry attest to facing the same dilemma.
So what is the cause of this widespread issue? Walk into any convenience store or fast food restaurant and you’ll see a bunch of “20 something” young men (and women) behind the counter. They are likely earning $9-$12/hour and working 20-30 hours per week. I’m curious — why are they not willing (or able) to work in construction earning easily twice that on a weekly basis, with benefits to boot?
The owners of those establishments will tell you they also have a devil of a time with employees who don’t show up on time, don’t show up at all, and generally leave the business hanging out to dry on a routine basis. We’ve all heard the quips about millennials and their work ethic, which in many ways are unfair, sweeping generalizations. But there must be something fundamentally wrong when businesses across the country—especially those requiring employees to travel or perform manual labor—simply cannot find reliable, responsible employees.
For generations, contractors in Montana had a steady stream of “farm kids” to hire. These kids grew up doing chores, running equipment, fixing fence, and learning basic skills like welding, mechanics, equipment maintenance, and even rudimentary carpentry. Small town kids helped relatives in the tire shop, fuel distributorship, mechanic business and the like. They were exposed to real work and real responsibilities at an early age, and they learned how their work brought them both financial rewards and self-esteem. There are bragging rights that come along with loading 500 bales of hay into a barn loft!
Today, a combination of societal factors and public policy decisions, like child labor laws, create a much different reality for kids. Consider the irony that we encourage boys to put on football helmets and shoulder pads, knowing a percentage of them will suffer broken knees and concussions, while the law prevents them from raking asphalt, packing shingles, or putting cones out on a highway project. If an entrepreneurial young person decides to start a lawn mowing or snow shoveling service, business owners in particular are so afraid of the liability they demand to see the kid’s Independent Contractor Certificate.
Granted, we should not go back to the days of putting teenagers into inherently dangerous situations. But giving them opportunities to earn money doing “real work” and learning job skills would go a long way toward addressing the labor shortage issue.
In addition, is it also possible that some youth raised in single-parent homes simply never had the right role model and the proper encouragement to prepare for the workforce? Whether that’s because the caregiver worked more than one job and lacked free time, or wasn’t necessarily adept at fixing leaks in the sink or replacing spark plugs, the result may be a young person who is less motivated, or not independent enough, to go on the road with a construction crew. That problem is compounded if a parent is willing to let their son or daughter stay home and work 20 hours a week at convenience store. There are obviously many exceptions to this observation, as there are plenty of examples of single parents who raised highly responsible, successful young adults. But the statistics are staggering—there are far more women than men enrolled in U.S. universities today, and the percentage is growing. So what are the young men doing?
To bring young people into the construction trades, we need a societal shift. We need to help them and their parents understand the opportunities and the rewards of learning a trade and working toward a goal. We need to give kids more opportunities and encouragement to learn how to work while they are learning the knowledge they’ll need in the workplace. We need to provide them with mentors and role models who can demonstrate the value of learning new skills and developing a strong work ethic.
There is no quick fix to the workforce shortage facing MCA members, but the association is actively working with education officials, elected leaders, and other business groups to address this pressing issue. Watch for more information in the months to follow.
Along with increasing Montana’s tax on gasoline and diesel, HB 473 calls for an interim audit of the Montana Department of Transportation to assess where efficiencies can be gained. Specifically, the legislation directs state auditors to look at opportunities to privatize functions within the agency.
The MCA will be tracking and attempting to influence both how the audit is conducted and how the findings are ultimately implemented by the legislature. We have long advocated that state and local governments outsource as many construction and maintenance functions as possible to the private sector, which is more effective and more accountable than government-run operations.
In the case of MDT, we are asking auditors to take a full inventory of equipment the agency owns, how much use it gets, and assess whether private sector firms are available, or would be available, to perform the same functions. Chip sealing, painting, and even snowplowing are prime examples of activities contractors may be more proficient at performing than MDT. Contrary to local lore, more than one highway contractor in Montana has said they would gladly respond to a RFP to plow snow on Montana highways and roadways.
The rationale state and local officials often use for milling/paving/chip sealing roads is the fact they “must” own a fleet of snowplow trucks to maintain roads in the winter, so it only makes sense they keep those trucks and crews busy during the summer months. They ignore the rows of trucks lined up in contractors’ yards and the scores of unemployed drivers on contractors’ payrolls. Indeed, many of MDT’s seasonal snowplow drivers are employees laid off for the winter by construction companies.
We are also asking auditors to consider the full and actual costs—including opportunity costs—of MDT performing construction/maintenance activities. It is astounding how often we hear comments from state or local government employees like, “we already own the equipment, so it isn’t costing anything to do this project…” Contractors build depreciation costs of trucks and equipment into bids on projects because maintenance and replacement costs are significant. Contractors also factor administrative overhead costs into bids, while government entities seldom do. Plus, contractors pay health insurance for employees and put money into retirement accounts or pension funds—they factor those costs into bids as well. When public entities calculate the “cost” of performing work themselves, they don’t consider the pension obligations and health insurance for employees.
Opportunity costs are also associated with government performing work versus the private sector. Contractors pay taxes on all business equipment, but the government does not pay tax to itself. By law, contractors use clear (taxed) fuel in all equipment, while government does not. How much more money would go into the Highway Special Revenue account to match federal funds if contractors did most of the work state/local governments perform?
Another aspect of the MDT audit is to look at accountability. When contractors perform work for MDT, they are held to rigid specifications and face liquidated damages, or in some cases, “remove and replace” requirements if they fail to meet the specs. If a state crew fails to meet specifications (not that anybody even checks), where is the recourse for taxpayers? The “remove and replace” option would simply be absorbed by taxpayers a second time. The MCA is asking auditors to consider the “costs” associated with this lack of oversight and accountability when the agency performs work that could otherwise be outsourced.
In addition to mandating the audit, the legislature approved a reduction of about 65 FTEs from MDT’s budget, which will cause the agency to closely scrutinize its operations. Recognizing some functions are more critical than others, we expect them to acknowledge there are functions that can easily and seamlessly be outsourced to companies that already contract with them for similar, if not identical, types of work.
The MCA suggests auditors look at the Canadian province of Alberta for guidance on cost comparisons and efficiencies of privatizing highway maintenance and construction. Alberta awards multi-year contracts to private companies to perform all maintenance on highways, subject to provincial standards and oversight. Granted, not every function in every area of Montana may lend itself to privatization, but we should at least take a hard look at it.
The fuel tax discussion opened the door to a much broader review of how Montana builds and maintains our highway system, and the legislature is to be commended for taking this comprehensive approach. The MCA played a key role in promoting the fuel tax increase and we stand ready to assist in efforts to assure the funds are spent as cost effectively as possible.