Around television ratings weeks investigative reporters pull out their eye-raising stories that are typically about government waste and abuse. They often use “gotcha” tactics to surprise government workers who are not really working. A favorite is the story about some item that you or I could buy at the local Home Depot for under ten dollars, but our government has paid hundreds or even thousands for. I, like many have asked why the government pays so much for stuff and even more for any work that it wants performed.
I recently came across a document prepared by a federal agency for a small construction job. This is not for any building of significance, in fact there is a provision that the main work is to be completed within two weeks. Again, this is not a big job. I took a brief look at this document (it’s an inch thick) and was amazed, though not surprised at what I found.
So why do government hammers cost $1000.00? I know I am repeating, but I would like you to keep one fact in mind as you read through the following reasons; This is a small construction job that, by contract, will have to be completed within two weeks.
Reason 1 – Artificial Wages: This job will be funded by our tax dollars and so there is a provision to pay “prevailing wages.” Essentially you have to pay your employees the wages specified by government regardless of market rates. The federal law that requires these higher rates is is the Davis-Bacon Act (most states have their own version). A general laborer rate for this job is over $45.oo per hour (including fringes). Many believe that prevailing wages are a way to allow unions to compete with smaller, leaner companies and it’s hard to argue against that as I note that this adds cost to the project.
Reason 2 – Red Tape: Whom ever the lucky devil is that will get this job will have to write and gain approval of a few plan documents including:
- Work Plan (it makes sense to give them your plan)
- Disposal Plan (also makes sense to show them where you’ll dispose of waste)
- Environmental Protection Plan (OK?)
- Accident Prevention Plan (safety is important)
- Activity Hazard Analysis (this is a detailed look at all expected tasks to identify hazards and measures to prevent injury such as how to lift, how to unload a truck, etc.)
- Site Safety and Health Plan (not sure why it is not included in above)
- Temporary Facilities Plan and
- Dry Work Environment Plan
None of these on their own are unreasonable, but remember that this is a two week job and the development, submittal and approval of these plans is likely to take much longer than the actual job. In addition to these Plans there are dozens and dozens of other submittals. To the agency’s credit the document contains a six page Submittal Register to track submittals and approvals. Development and seeking approval of these plans adds cost to the project.
Reason 3 – Too Many Cooks: Even though this will be a federally funded project, other local, county, and state governments have included specifications that will have to be met. I mentioned earlier that the document was approximately one inch thick. If I were to print out all of the documents incorporated by reference that thickness would swell to probably four inches. Also any of these agencies have the right to ”inspect” the project and could presumably order work to be stopped. While much of the specifications in those documents may not apply to this project they have to be considered in the bid which adds cost to the project.
Reason 4 – Minutia: A while back I wrote an article on uncertainty and briefly discussed how uncertainty in bidding a job will add cost. The flip side is providing every minute detail thereby limiting any flexibility to comply with the requirements. This document includes fives pages of specification on the two project signs that must be provided and specifications on a work trailer for inspectors including;
- heat (even though this job is scheduled to be completed in the summer)
- 150 foot-candles of light at desktop level
- electricity (gasoline generators must be provided if necessary – doesn’t seem very environmental)
- lockable doors
- partitioned restroom facilities
- a lockable mail box (the size is specified)
- water cooler (no mention that water must be provided)
- one desk “having 60-inch by 30-inch top, with lockable drawers
- two swivel chairs
- one table with 60-inch by 30-inch laminated top
- one lockable, fire-resistant, letter size, two drawer 36 inch wide steel lateral filing cabinet set up for side-by-side filing with ball-bearing suspension for full drawer extensions
- one shelf set, two shelves high, measuring 12 inches deep by 3 feet long
- two waste baskets (no mention of a recycle bin)
- copier, Konica Model 3290 desk top copier, or approved equal, including adequate supplies and service agreement (it is interesting to note that there is a “buy American” provision in the document and yet they specify a Konica copier)
- Fax machine, Xerox Model N58, or approved equal, including adequate supplies and service agreement (Xerox is an American company, but I doubt that the the Model N58 is made anywhere in North America) – There was no mention about providing telephone service for the fax machine.
- a clock; not just any clock, but a battery-powered quartz round wall clock, 8.5 inch minimum diameter, constructed of a plastic case and lens, having a white dial with Arabic numbers and black hour, minute, and second hands.
- a countertop microwave oven, with digital display, interior light, and a minimum of 0.6 cubic feet of capacity
- a compact refrigerator, with 1.58 cubic foot capacity, and ice tray
Most of the text for these was taken directly from the document (except for my pithy comments) and I am not exaggerating. As a reminder this is a two week job. This stuff all adds cost to the project.
Reason 5 – Buy American: It is hard to argue against a provision to use American tax dollars to purchase American products. Politicians love these provisions and they work well in their thirty second television sound bites, but protectionist policies are sophisms and only work for the protected industry. An even then they only work until all of the other industries cry for protection and all prices are raised. The documents do provide an out if the price of an American product is more than 25% higher than a similar foreign-made product. You do, however have to get prior approval (red tape) and this, of course adds cost to the project.
Reason 6 – Damages: Many contracts contain provisions requiring construction bonds or damage payments if a contractor does not perform the work to standards or takes much longer to complete the project. This is one way to ensure that the job is done correctly and on time. This bid document provides for damage payments for non-performance, including missing deadlines yet there are not any provisions for government guarantees regarding how fast they will respond to approve plans (Reason 2) or allow alternative products (Reason 5) or resolve issues between all of the government agencies (Reason 3). Any government agency that put together a bid document this size cannot be expected to approve plans and alternatives in a timely fashion. A contractor knows this and has to build in costs for anticipated delays (damage payments, payments to workers not working, etc.) and this adds cost to the project.
Reason 7 – Payment: Government agencies pay slow, very slow. Government agencies require exhaustive amounts of paperwork to request payment. If you miss crossing a “t” or dotting an “i” they will bounce the request back without payment. Any government contractor has to factor in the costs associated with delayed payments since they will have to pay their workers, suppliers, and subcontractors long before they get paid. Time is money and this adds cost to the project.
At the risk of being repetitive I will ask you to remember that this is all for a two week, small, construction project. It is likely that any company willing to bid this will pay someone more than two weeks to develop the bid and then, if successful, supply all of the information and probably have a person on-site completing nothing but paperwork.
As a note, I own a very nice Estwing hammer that cost much less than $1000.00 and it was made in America!