Legislative report shows single-bid contracts pave way for road work

Kentucky awards more expensive single-bid asphalt contracts than neighboring states of Indiana, Ohio and West Virginia, according to research presented to Kentucky lawmakers last week.

Half of asphalt contracts awarded by the Kentucky Transportation Cabinet from 2018 to 2023 went to companies who submitted the only bid, analysts found. Single-bid contract rates in Indiana, Ohio and West Virginia were significantly lower, at 10%, 15% and 35%, respectively.

Legislative analysts cautioned against drawing conclusions from the findings because data provided by each state varied in scope. Kentucky’s data included any project with an asphalt component, while West Virginia officials provided a narrower set of data that included only paving and resurfacing projects. Indiana and Ohio officials provided data on asphalt projects, but did not detail the type of work.

Despite roughly 50 asphalt vendors doing work in Kentucky, state analysts found most single-bid contracts are gobbled up by the same five companies: Hinkle Contracting Company, Mountain Enterprises, Scotty’s Contracting & Stone, L-M Asphalt Partners and Jim Smith Contracting Company.

Lack of competition in the asphalt industry has been a long-simmering problem that drives up the cost of road work for Kentucky taxpayers. In 2021, the Kentucky Center for Investigative Reporting found that nearly a third of all road work contracts awarded between 2018 and 2021 went to single bidders — costing taxpayers $9.6 million more than state officials’ estimates.

The Kentucky General Assembly’s Investigations and Oversight Committee requested a review of single-bid contracting in 2022.

Legislative analysts presented preliminary findings in December 2023. At that hearing, committee chair Brandon Storm, a Republican from London, said a more detailed report would be released to the public the following month. But that didn’t happen until last week’s hearing, following a KyCIR report about the 8-month delay .

Storm did not respond to a request for comment for this report.

Analysts found that single-bid contracts typically cost more than the state’s own estimates prepared by transportation cabinet engineers. Contracts that attract more competition tend to cost less than the state's estimates.

The transportation cabinet declined to explain to legislative analysts the process used to determine the estimates, however, explaining that doing so could further undermine competition among bidders.

Bidding is more competitive in the areas surrounding Jefferson County and northern Kentucky, according to the report. Single-bid contracts are more common in eastern, central and western Kentucky. Analysts said the lack of competition in the state’s rural areas could be attributed to constraints on asphalt production and the high barriers to entry for new businesses in the industry.

Kentucky’s asphalt industry has been shrinking, the report says, with just six companies owning more than half of all asphalt plants in the state.

Chad Larue, executive director of the Kentucky Association of Highway Contractors, did not respond to a request for comment.

Andrew McNeill, president of the research organization Kentucky Forum for Rights, Economics and Education, said it's important that the public finally has the chance to view the full report, eight months after its intended release.

“It details ongoing waste and abuse through single bid asphalt contracts that is facilitated by the transportation cabinet, and it's important for taxpayers to be able to understand how their money is being spent,” McNeill said.

The report detailed six recommendations to the transportation cabinet. The cabinet agreed with five of the recommendations and said each were at various stages of implementation. The cabinet agreed to keep lists of potential bidders secret until after contracts have been awarded and start using collusion-detecting software, among other changes. But the cabinet disagreed with the suggestion that it develop written guidelines for awarding or rejecting bids, arguing that transportation officials need flexibility when evaluating potential contracts.

McNeill suggested going a step further than these recommendations. He said the state should end the transportation cabinet’s exemption from the model procurement code – a set of guidelines established by the legislature that are supposed to make the government procurement process consistent, fair and transparent.

“Now we have clear evidence from an oversight committee documenting the single bid asphalt problem, and it's time for Frankford to quit ignoring this and to step up in a meaningful way,” McNeill said.

The Kentucky Transportation Cabinet did not immediately respond to emailed questions about the procurement code exemption.