Friday Rant: An Ode to the Market

At Spend Matters, it's not a secret that we are strong proponents of free markets and the benefits of competition. An upcoming piece on the GSA's new efforts to track greenhouse gas creation inspired us to take a look at the government side of procurement. First, an excerpt from a piece on this topic written by Dr. Tim Nerenz, PhD -- clearly a man cut from a bolt of cloth woven by Adam Smith himself.

"President Obama recently announced another regulation (because we so desperately need more) that will instruct federal agencies to give preferential bid treatment to bidders who demonstrate a commitment to his administration's policies in the fields of environmentalism and nutrition. --- The federal government already requires bidders to hire union workers on some contracts, pay prevailing union wages on others, enact affirmative action programs, etc. Preferences are already given to firms who are owned by minorities, women, disabled people, and veterans, or who locate operations in historically underutilized economic zones. The Code of Federal Regulations (FARS) covers every aspect of contracting imaginable and compliance with those burdensome federal regulations is why hammers cost $750 when the government buys them.

More importantly, those FARS are why there are still 135,000 bridges in need of repair in this country that are not getting fixed. The cost of fixing bridges is prohibitively high because of the regulations and risks that are imposed on contractors doing the work. So bridges go unrepaired while special interests lobby for more transportation funding. --- Why don't we suspend all the those ridiculous FAR regulations and let eager, qualified non-union companies go out and fix those bridges without having to write up climate-change plans --- We could fix twice as many bridges at half the cost if we would let markets work. Or we could just keep talking about our crumbling infrastructure and the need for more government to regulate markets and protect us from ourselves.

I say let's go fix some bridges."

Do fewer regulations really help?
To give us a recent point of reference of the impact fewer regulations can have, in 2007, a full tank truck crashed and spilled around 8,600 gallons of gasoline underneath a raised portion of highway in the highly congested Bay Area. The ensuing fire weakened the highway above, which collapsed into the lower portion of the highway. Caltrans estimated needing several months to rebuild the damaged sections. A private contractor with a successful track record was chosen, and incentivized with a $200K per day premium for early completion -- say no more, the job was done in 26 days after the accident -- over one month ahead of schedule! Private enterprise at work.

Even more recently, only one year ago, California's Governor Jerry Brown (not exactly a free market zealot) declared in an executive order that "strict compliance with the provisions of the Government Code and the Public Contract Code applicable to state contracts would prevent, hinder, or delay" efforts to address the effects of the tsunami and water surges affecting residents in the northern parts of the state. Imagine what could be done if we didn't have to deal with those onerous regulations at any time during the year!

While on the California track, in 1989, a 7.1 magnitude earthquake hit the San Francisco Bay Area, causing substantial damage to the cities of San Francisco and Oakland as well as the Bay Bridge, and also collapsing over a mile of suspended highway in the Oakland area. Over 10 years later, when I lived in San Francisco myself (btw 1999-2002), I could still see exit ramps that dead-ended since they had never been rebuilt! Much of that 'thanks' to lawsuits and political lobbying by limousine liberals in San Francisco that wanted to keep their windfall waterfront views from being blocked by highways again.

The Bay Bridge itself is actually only getting properly rebuilt now, almost 25 years later, with a new bridge opening next year. The new bridge is to a large degree prefabricated in China, with Chinese steel and other materials. This is ironic, since California is not a right-to-work state and union labor is frequently prescribed, but a main reason for the outsourcing of this project was to avoid the expense of fabricating in the US. California even forewent federal funding for the over $7 billion project since the federal funds would have had a proviso around "Buy America" which would have required using US steel mills and workers. The more you think about it, the stranger this arrangement becomes. But then again, it is California. If people are afraid that corporations might offshore production, look at what government does!

At Spend Matters, we also say, let's go fix some bridges -- Mr. President, tear down those regulations!

- Thomas Kase

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