Sunday, January 22, 2006

Competing Highway Maintenance

The debate over transportation funding is reaching full gear. Surplus revenue will certainly go towards new projects - the only question is how much. A larger question remains though, will the General Assembly agree to other additional sources of new revenue.

But why not look at how the money currently dedicated to transportation is being spent. Let's see if there is another way to do the same thing. VDOT is slated to spend at least $9 billion over the next two years -- nearly $2 billion ($1.73 billion to be exact) of that is spent on maintenance of our interstate, primary, and secondary roads.

Delegate Wardrup has introduced HB667 that would require all maintenance to be carried out by competitive contract. The Commonwealth does have some experience here - a contract for 251 miles of maintenance saves us around $20m a year. A second contract was signed last year. But there remains so much more that can be done. About $159 million a year is spent on highway maintenance. Experience from around the country suggests that savings are at least 15 percent, and as high as 30 percent -- savings between $23.85 and $47.7 million. These savings could be moved into new construction (a small piece of should be retained to pay for maintaining those new roads).

However, HB667 could go much further. Virginia's road system is unique. The state is responsible for an exorbitant amount of roads. Seeking competitive solutions to Primary ($263m/year) and Secondary ($445m/year) roads can produce equally high savings. Contracting for just 25% of each of these could generate savings of $27-54m a year.

That's a $100 million that could be rededicated to new construction. And the numbers only go up as the state seeks more contracts.

There are some other business practices within VDOT that could be contracted out. The following is a snapshot of Florida's DOT - the number corresponding with each major service area is the percentage of operations currently contracted out.

Construction Engineering and Inspection - 85
Design - 83
Materials Testing/Research - 55
Planning - 57
Right-of-Way - 74
Maintenance - 74 (6 new contracts to be awarded in near future - will bring number above 85)
Toll Collection - 99

While VDOT may have moved somewhat in this direction, they don't come close to this.


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