Millions in Road Contracts Awarded With Little Competition - NewsChannel5.com | Nashville News, Weather & Sports

NewsChannel 5 Investigates: High-Dollar Highways

Millions in Road Contracts Awarded With Little Competition

(Story created: 5/24/04)

A six-month NewsChannel 5 investigation of Tennessee's High-Dollar Highways has uncovered serious questions involving hundreds of millions of your tax dollars. And, now, the industry that builds Tennessee's roads is the focus of a criminal investigation.

Some say Tennessee highways are paved with gold -- black gold!

"Black gold in our situation would be hot mix asphalt," says Greene County road superintendent J.C. Jones.

Yet, to keep contractors from jacking up the costs, the system depends upon them competing to offer the best deal. The low bidder gets the job.

But our exclusive NewsChannel 5 investigation discovered hundreds of millions of dollars in state and local highway contracts awarded with little or no real competition.

"We did look at the difference in the cost you get between single bids and multiple bids, and clearly they are higher," says Tennessee Department of Transportation commissioner Gerald Nicely.

He says the Tennessee Department of Transportation's own analysis recently spotted some suspicious bidding patterns.

And it has now triggered a criminal investigation of Tennessee's entire road-building industry.

"You are talking about bid-rigging," NewsChannel 5's chief investigative reporter Phil Williams asks Nicely.

"That's right," the TDOT commissioner responds. "It would imply that people are getting together and working on bids before they are actually opened."

In fact, a computer analysis by NewsChannel 5 --  involving hundreds of state highway contracts between July 1, 1998 and June 30, 2003 -- discovered a disturbing pattern.

Out of $3.4 billion spent by TDOT on highway construction and maintenance contracts in that 5-year period, almost $360 million was for contracts for which there was only one bidder.

That's $360 million with no competition.

About one out of every six contracts had only one bidder.

For example, two resurfacing projects on I-24 through Coffee County. Total cost: $9 million -- and just one bidder.

"Obviously, a red light should go off," says Rep. Frank Buck, D-Dowelltown, vice chairman of the House Transportation Committee.

"You are creating a natural monopoly. And we know what folks do when they have a monopoly. They charge every penny they can get."

But it isn't just a TDOT problem.

Across Tennessee, road superintendents like Greene County's Jones say road builders aren't competing for their county projects either.

"When you have all this money to spend and nobody comes to see you, it makes you wonder why," he adds.

To get an idea of the problem, we surveyed all 95 counties. Altogether, more than a quarter of Tennessee's counties get no competition for millions of dollars of your money.

"It gets down to a business decision as to what is most profitable to a company at a time they are bidding," says Kent Starwalt, executive director of the Tennessee Road Builders Association.

He says there are all sorts of reasons companies may not bid. For example, they may not own plants close enough to meet requirements that the asphalt be delivered hot.

"Asphalt plants -- it's sort of like real estate -- it's all about location, location, location," Starwalt adds.

So what about a resurfacing project here on I-40 through Humphreys County? The price tag: $8 million dollars.

There was also a resurfacing job on this part of I-40 through Putnam County. The cost: $4.4 million dollars.

In both cases, there were other nearby companies that could have bid, but did not.

"That sounds like our old boys in the construction business have been drifting back into the habits that they had in the 70s -- and that was bid-rigging," Buck says.

Starwalt responds, "It's a very serious allegation."

"Is it true?" Williams asks.

"Not that I'm aware of."

But Wilson County road superintendent Steve Armistead insists highway contractors have divided up the state -- if not through outright collusion, then certainly with a wink and a nod.

"There's four or five major players in the state of Tennessee that have pretty much regionalized the asphalt industry," Armistead says. 

"There's this imaginary boundary line that we don't cross, we don't compete. You stay out of my territory, and I'll stay out of your territory."

Nicely says, "Clearly, if that's happening, it is costing the taxpayers money, it is costing the traveling public money and it could be in large sums."

Niceley says TDOT's analysis hints at regions of the state where bid-rigging may be more prevalent.

But finding suspicious patterns and proving a conspiracy to rip off taxpayers are too very different things.

"Have you ever had anyone tell you confidentially what's going on?" Phil Williams asks the Greene County road superintendent.

"No, no, nobody would discuss that," Jones replies. "That's illegal. That's against the law. You get put in jail for that."

As for the criminal investigation, a few weeks back, TDOT took the unusual step of asking us to hold our story until investigators could get into the field and begin interviewing people.

Because it was in the public interest, NewsChannel 5 agreed.

That investigation is now being coordinated out of the state attorney general's office.

Niceley says he believes there are law-abiding road contractors, who are hurt if there is bid-rigging.

Still, he said, "it's essentially a statewide investigation."

Starwalt issued the following statement on behalf of the Tennessee Road Builders Association:

"Any internal TDOT study that gives Commissioner Nicely concern about the integrity of the low open bid system should be fully and completely reviewed. TRBA welcomes this review. It is only through reviews such as this that the public can be assured that the system is fair and unbiased. Although TRBA was unaware of Commissioner Nicely's concerns, and has yet to review the details of the internal study, it will, of course, fully support his efforts."

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