Why Infrastructure Projects Cost Too Much

Government Construction Jobs Are Too Expensive

In general, I tend to be very pro-government. I usually think that government programs and ideas are useful; however, when it comes to infrastructure projects, the government needs a reality check. The building and maintaining of highways, roads and bridges is not particularly political, but perhaps it should be. In the United States, both Democratic and Republican lawmakers have been routinely supporting popular but nonsensical regulations regarding infrastructure projects. 

The Funding Gap Issue

Before considering the specific policies in place to raise infrastructure costs, it is important to understand exactly how these programs are supposed to be funded. In theory, the gas tax is meant to support infrastructure needs in America. In general, most people do not like the gas tax because they do not really understand it. As a result, it is politically unpopular to raise the tax to appropriate levels. The current federal gas tax is 18.4 cents per gallon and has been at this level since 1993. In order to properly fund construction projects and road maintenance, this tax would need to be raised to 33.4 cents per gallon, nearly twice where it currently stands.

As a result of the underfunded system, the Highway Trust Fund, which funds the roads, is soon to run out of money. Funding is certainly an issue, but so are the actual policies that raise costs.

The Cost Issue

So sure, we don't fund our road system, but we at least promote cost effective policies right? Wrong! We actually have 4 specific provisions that prohibitively raise the cost of government road maintenance and construction way above market levels. 

1. Davis-Bacon Laws

This series of laws dating back to 1931 was intended to protect government contractors by paying them local prevailing wages. While this is a great idea in theory, the wage rate for these contractors is set not by the Bureau of Labor Statistics, but by another agency. As a result, the average wage rate for government highway contractors is about 22% above the Bureau of Labor Statistics rate.

2. Project Labor Agreements

This one dates to an Executive Order from President Obama in 2009. This order was intended to mandate that costly contracts went to union workers. Again, this is a great idea in theory. But what has happened as a result is that is has removed some competition from the market, which has driven up costs by another 14%.

3. Buy-America Provision

Sorry politicians, I can't even say that this one is a good idea in theory. This provision encourages using American made materials in construction projects. Obama widened the scope of this provision in 2009 to include a variety of construction projects because it was politically popular. The problem here is obvious. American goods cost more because of the high cost of labor here. While this has provided a boost to expensive American manufacturing companies that are inevitably headed for a decline, it has raised construction materials costs by about 25%.

4. Toll Bans 

Tolls are generally not permitted on federal interstate highways, with a few exceptions in special cases. This is outright foolish. Right now the gas tax funds road maintenance and for the most part, tolls do not. This means that in general, everyone shares the cost for roads all throughout a state and throughout the country, regardless of which roads they drive on. Allowing tolls on highways would redistribute the costs of road maintenance so that roads were paid for by the drivers of the roads. This is much more efficient, but tends to be politically unpopular.