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A Review of Competition for the Department of Transportation's Road Paving Contracts
December 2001

FOLLOW-UP (PDF)     REPORT (PDF)     SUMMARY (PDF)

Members of the General Assembly requested that we review the South Carolina Department of Transportation’s (SCDOT) procedures for awarding road paving contracts. We reviewed the level of competition among contractors for SCDOT’s road paving contracts and the department’s internal controls for detecting bid-rigging or other forms of anti-competitive behavior. We found evidence to indicate that the level of competition for some road paving contracts is less than optimal in certain geographic areas of the state. This is not necessarily the result of anti-competitive practices by contractors. However, SCDOT does not conduct a regular analysis of bidding patterns to ensure that the state’s bidding process for road paving and road construction is open and competitive.

Although we focused on road paving, the recommendations in this report could be applied to all of SCDOT’s road construction projects. Our findings are summarized below.

  • We analyzed all 496 road paving projects put out for bid by SCDOT between FY 95-96 and FY 00-01. We found that nearly one-half, (49%) of the projects, had two or fewer bidders, and 12% of the projects had only one bidder.
  • We examined the geographic distribution of road paving projects. We identified 13 counties in which the top company had over 70% of the market. We also examined the 12 counties where there was more than $10 million in road paving contracts awarded between FY 95-96 and FY 00-01. We found that, in four of these counties, the top two companies accounted for over 95% of the market.
    Improved competition could result in lower costs for road construction projects.
  • We compared SCDOT’s project cost estimates to the low bids for projects where there was a single bidder and those for projects with multiple bidders. We found that the average of the low bids on single bid projects was 5% above SCDOT’s cost estimate while the average of the low bids for projects which had multiple bidders was 4% below the cost estimate.
  • SCDOT does not conduct a formal analysis of bidding patterns to detect anti-competitive behavior. Over the last five years SCDOT has spent $246,000 leasing a computer software system for analyzing bidding patterns but has not used the system. The department expects to begin regular analysis of bids in 2003.
  • SCDOT has not monitored how closely it has met guidelines recommended by the federal government for the accuracy of engineers’ cost estimates for construction projects. The Federal Highway Administration (FHWA) recommends that the engineer’s estimate be within 10% of a project’s low bid at least 50% of the time. For road paving projects SCDOT’s engineers’ estimates have met the guideline. However, for all road construction projects, the department’s estimates have been within 10% of the bid less than 50% of the time.
  • SCDOT’s bid opening procedures increase the likelihood of bid-rigging. Once a month, the department opens contractors’ bids for paving and road construction projects at a hotel in Columbia. The deadline for submitting bids expires at the same time bids are opened. The night before bids are due, many contractors stay in the hotel at discount rates obtained by SCDOT. This process can make collusion among contractors easier.