One of the persistent themes of this blog has been the struggle between large and centralized control versus smaller and more nimble and innovative entities. My first blog post discussed the triumph of David over Goliath. (The Next Generation: Goliath v. David in the New World of Enterprise Scheduling). And so yesterday’s conversation with one of my regular clients brought me back to the keyboard for another post.
This contractor, growing from a backlog of $600,000 to $3mm and now back down over the past several years, was discussing some upcoming work and bids in progress. (Yes, they have their own scheduling and claims avoidance and resolution departments; I assist in especially difficult or complex situations, and so try to stay abreast of their total portfolio). For this contractor, all new major bids are now as a “partner” (read subcontractor) of a major national construction firm.
In the past I have assisted in several of their $100 million sections of new highways threading through Texas and adjoining states. These projects, in turn, were parts of programs ranging from $1-2 billion. But now, instead of breaking up the projects into segments, TXDOT and others are putting out entire highways as a single project, often including design as well as construction. Firms used to $100 million projects, construction and perhaps limited design, simply cannot compete as a prime player.
I think this trend is ill advised and will cost the DOTs, other funding agencies and the general public dearly. The DOTs especially have traditionally had the reputation of trainers of our best engineers. A college graduate entering employ could expect to be trained and rise to a level of leadership within a few years, then to either move to yet higher status of supervision (and training) at that DOT or “graduate” to industry. (This is like the military “up or out” except the DOTs have a relief valve when their successes exceed upward slots). No more.
The beauty of ten $100 million segments of a $1 billion highway is that we have ten opportunities to innovate, and can grow ten individuals to become seasoned engineers. (This is also repeated at the design and construction supervision levels). The senior engineers can and do set guidelines for necessary standardization, but segment specific experiments are both tolerated and welcome.
In one of “my” projects, the state offered a $4 million bonus for early completion of the segment. This required legislative action and was clearly an experiment. Initially neither the state nor contractor felt such was achievable. But with the team effort of the state and contractor it was. And so could be offered in subsequently bid segments. This experiment is much less likely to be possible today. First, $4mm of $100mm is a bonus which entices the contractor to compete. A potential bonus of $4mm of $1b would be likely considered neither by the owner nor contractor as worth attempting. Getting legislative approval for ten $4mm bonuses as an experiment is also unlikely.
Innovative design also requires some level of scale. Until actually built, there may be a lingering question of achievability. We have a proven design for traffic monitoring and control; can fiber optics improve upon such? Let’s try it on one segment – then determine if to change our standard design.
As noted, local and well respected contractors simply cannot now bid on work a magnitude larger than previous projects (and include full design). So local tax dollars will now flow to other states. More importantly, the cream of the contractor’s staff will follow. Local feedback from DOT “graduates” will no longer flow to these DOTs. The entire culture will decline much like a nation that chooses to shutter its military for a force entirely of foreign mercenaries. Neither the DOT engineering staff nor local contractors of tomorrow will be able to do as they have in the past – at least until a long period of regrowing that cultural infrastructure.