Responsible bidder ordinances (RBOs), which establish local construction standards on municipally funded public works, raise wages and reduce employee turnover according to a new study by the Midwest Economic Policy Institute (MEPI). As of May 2018, 40 Indiana counties, townships, cities, towns, school districts, and hospital districts have passed RBOs.
Read the Full Report, Responsible Bidder Ordinances Promote Local Construction Standards: Evidence from Indiana, Here.
Read a Summary of the Report Here.
Nearly all governments award construction contracts to the lowest bidder, which can put pressure on contractors to cut corners on quality, wages, and safety. RBOs guarantee that contractors and subcontractors building public projects have proven track records of performance and legal compliance, adhere to local quality standards, and participate in USDOL-approved apprenticeship training programs.
Utilizing publicly-available data from the U.S. Census Bureau, the study examined county-level economic data on “heavy and civil engineering construction,” which includes the construction of public infrastructure such as highways, bridges, and parks. Overall, the researchers found that construction workers in 9 counties with RBOs are 1.6% less likely to leave or quit their jobs and construction workers earn about $500 more per month (or 8.3%) than their counterparts in jurisdictions without RBOs.
“By helping to raise incomes, reduce turnover, and boost productivity through apprenticeship training, RBOs help attract and retain the skilled construction workers that Indiana needs to build a 21st Century infrastructure,” said study co-author Jill Manzo. “RBOs can be a local solution to ensure that these vital projects are completed safely, on time, and on budget.”
MEPI’s analysis notes that RBO’s emphasis on quality and employment of higher-skilled workers provides additional safeguards for taxpayers, reducing the risk of design problems, cost overruns, change orders, and added safety risks.
In fact, research has shown that RBOs have no meaningful impact on total construction costs. A recent peer-reviewed study investigated the bid costs of over 300 elementary schools from 1997 to 2008 and found that responsible contracting policies “exert no discernible statistical impact on construction bid costs” after controlling for geographic location.
“Responsible bidder ordinances protect taxpayers by ensuring that public projects are awarded to responsible contractors who employ skilled tradespeople and provide high quality work,” added study co-author Frank Manzo IV. “By establishing verifiable standards for both contractors and workers, RBOs make sure that taxpayer dollars are spent efficiently and safely.”
Indiana currently has 40 local responsible bidder ordinances– including 9 county-level RBOs and 31 other policies in effect in cities, school districts, and other local units of government. Among county-wide RBOs, the typical project cost threshold to trigger these standards is $150,000.
Username ITB495. (2017). “I-69 Construction Indiana.” Flickr. CC0 1.0 Universal (CC0 1.0) Public Domain Dedication.