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Quashing competition boosts project prices

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The Merriam-Webster dictionary defines “competition” as “the effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms.” Competition is a fundamental economic principal in our country. When competition is reduced, costs will increase.

A November 2005 study by Cornell professor Paul G. Carr, published in the Journal of Construction Engineering and Management, quantified the link between more competition and more bidders for construction contracts and the benefits to taxpayers and project owners. The study found that reducing the number of bidders on a project will result in increased bid prices. Specifically, it found a “statistically significant relationship between the numbers of bidders on a project and the low bid received, relative to the project budget,” and a “negative correlation indicating the higher the number of bidders participating, the lower the bid price.”

On Tuesday, Oct. 2, there was a meeting of the Santa Fe City Council to go over the policies and procedures associated with the “Community Workforce Agreement (CWA).” The overriding theme among those testifying in the public hearing against the CWA was that it would result in a lack of competition — not only leaving out the majority of Santa Fe contractors who choose not to join a union, but increasing costs.

On taxpayer-funded projects, those entrusted with the public’s money should be doing all they can to find savings and increase competition.

Competition works. There is currently no credible evidence to suggest that less competition results in lower prices or better quality; especially when contractors already are held to rigorous laws, regulations and prequalification standards in public contracting.

On the evening of the 2nd, the unions argued that a reduced pool of bidders will have no impact on the cost of Santa Fe taxpayer-funded projects. This is a misguided argument. Reduced competition, coupled with implementation of the costly union terms contained within the Santa Fe CWA, will result in increased costs to the taxpayer.

Also testifying that evening was a union representative from California who stated that there were many studies attesting to the fact that CWAs save money; however, he never produced those studies. According to studies done by the National University System Institute for Policy Research in California and the Beacon Hill Institute in Massachusetts, “prevailing wage projects subject to collective bargaining agreements such as the Santa Fe CWA face increased costs between 12 and 18 percent when compared to similar prevailing wage construction projects not subject to government-mandated CWAs.”

The taxpayers of Santa Fe and the state of New Mexico are best served by free and open competition. The Santa Fe City Council needs to listen to the people it serves and repeal this mandate.

Roxanne Rivera-Wiest

President

Associated Builders and Contractors of N.M.

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