Promised report on Kentucky single-bid paving contracts 8 months late

Last December, a committee of Kentucky lawmakers met to hear a presentation from legislative analysts that confirmed a longstanding concern with the way the state doles out road paving contracts: Single-bid jobs are costly.

According to the Legislative Research Commission analysts, most of the contracts awarded by the Kentucky Transportation Cabinet from January 2018 through July 2023 went to companies that submitted the only bid to do the work.

Without competition, the analysts found that those jobs cost taxpayers more money than other paving projects that pitted two or more companies against each other to bid for the lowest price.

The presentation followed a 2021 Kentucky Center for Investigative Reporting analysis which 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 legislative researchers provided a list of policy recommendations they said could make the bidding process more competitive — like ending the practice of publishing a list of contractors who planned to submit bids for a project, which the analysts warned can stifle competition.

Brandon Storm, a Republican from London and chair of the oversight and investigations committee that heard the presentation about single bids, said a full report on the issue would be released in January 2024.

But lawmakers have yet to release the report. And Kentucky Transportation Cabinet officials have implemented just one of six policy changes recommended by the analysts — they started using software to help detect collusion in the bidding process, according to a cabinet spokesperson who said the cabinet was working to implement other recommendations.

In the months following the committee meeting, Kentucky transportation officials have continued to award single-bid contracts, resulting in higher costs for the taxpayers, according to research from Andrew McNeill, president of the research organization KY Forum for Rights, Economics and Education.

McNeill has tracked Kentucky Transportation Cabinet bids for years, often arguing the state’s practice of awarding single-bid contracts is fiscally irresponsible.

He analyzed state transportation contracts awarded in the first six months of 2024 and found $142 million in work awarded to single-bid contracts, which he estimates is about $4.5 million more than state officials would have paid if multiple companies vied for contracts.

He based his estimation on research from the University of Kentucky in 2015 that determined that bids with two or more bidding companies resulted in costs that were 86.6 percent of the state’s estimated costs.

These numbers are similar to those presented to the legislature in December. Legislative analysts at that presentation said single-bid contracts cost 100.5% of the engineers’ estimate, while those with two or more bidders cost 93.3% of the estimates.

McNeill said wasting money on single-bid contracts takes away funding that could be used on other transportation needs across the state.

“These dollars are going towards these companies’ bottom line, because the Transportation Cabinet is either unwilling or incapable of designing procurements to generate competition,” he said.

Naitore Djigbenou, the spokesperson for the Kentucky Transportation Cabinet, said in an email that “fostering a competitive bidding process for advertised projects has always been our goal and part of the Transportation Cabinet’s longstanding effort to continually benchmark procurement practices and results with other states.” Djigbenou said the cabinet has been working to implement five of the six recommendations from the presentation, and Djigbenou said those changes “are at various degrees of implementation.”

Chad Larue, executive director of the Kentucky Association of Highway Contractors, said he’d defer speaking to reporters until after the legislators issue their promised report.

The investigations and oversight committee has met twice this year, in June and July, respectively. The topic of single-bid contracts was not on either meeting’s agenda. Storm, the committee chair, said in an email to KyCIR that he anticipates the report will be released in August.

To McNeill, the delay raises questions.

“Why wouldn't the legislature want the public to see the full report? Is there something in there that is more damning than what was presented in December? Are they simply more interested in protecting their friends in the highway contractor industry and their relationship with the Transportation Cabinet than they are with being transparent with the public?” he asked.

Power, problems and politics

Asphalt companies are powerful job suppliers that donate thousands to political campaigns. Online records maintained by the Kentucky Registry of Election Finance show asphalt company employees across the state donated $117,000 thousand in donations from employees of asphalt companies during the 2023 election cycle.

The industry also has a checkered past. Leonard Lawson , who founded paving company Mountain Enterprises, was accused of bid rigging and indicted on federal antitrust charges in 2008. He was acquitted of those charges along with two state transportation cabinet officials.

Federal investigators raided the Lexington offices of ATS Construction and its subsidiaries, companies owned by Leonard Lawson’s son, Steve Lawson, in 2017 as part of another federal antitrust investigation. Company officials did not immediately return a request for comment.

After the December committee meeting, the cabinet agreed to monitor contracts awarded for work in Fayette County and follow up if the pattern of single-bid contracts continued. According to McNeill’s review of the data for 2024, the cabinet awarded $52.8 million in single-bid contracts in Fayette County.

December's hearing included some explanations for the lack of competitiveness in Kentucky's road paving industry. Asphalt can only be transported for 30 to 40 minutes before it starts to set, so companies are limited to jobs close to asphalt plants. And asphalt plants are expensive, making it difficult for new companies to enter the industry. Researchers said about half of all asphalt contracts from 2018 to 2023 went to single bidders, with five companies winning 60% of single-bid contracts.

At the time, lawmakers seemed unbothered by analysts' findings.

Sen. Reginald Thomas, a Democrat from Lexington, said he didn’t see the problem with the state’s contracting system.

“As I sit here and listen to all these different points, I'm trying to figure out, what's the problem here?” Thomas asked. “There's no indication the quality of the work is not fine.”