Kentucky awards more expensive asphalt tenders than its neighboring states Indiana, Ohio and West Virginia, according to Research presented to Kentucky lawmakers last week.
Half of the asphalt contracts awarded by the Kentucky Department of Transportation between 2018 and 2023 went to companies that submitted the sole bid, analysts found. Single-bid contract win rates in Indiana, Ohio and West Virginia were significantly lower, at 10%, 15% and 35%, respectively.
Legislative analysts cautioned against drawing conclusions from the results because the data provided by each state varied in scope. Kentucky’s data included all projects with an asphalt component, while West Virginia authorities provided a narrower dataset that included only road construction and repaving projects. Indiana and Ohio authorities provided data on asphalt projects but did not provide details on the type of work.
Although there are about 50 asphalt suppliers operating in Kentucky, state analysts found that most of the single-bid contracts are accepted by the same five companies: Hinkle Contracting Company, Mountain Enterprises, Scotty’s Contracting & Stone, LM Asphalt Partners and Jim Smith Contracting Company.
The lack of competition in the asphalt industry is a long-standing problem that drives up the cost of roadwork for Kentucky taxpayers. In 2021, the Kentucky Center for Investigative Reporting found that almost a third of all road construction contracts awarded between 2018 and 2021 went to single bidders – and cost taxpayers $9.6 million more than state authorities had estimated.
The Kentucky General Assembly’s Investigations and Oversight Committee called for a review of the single-bid contract award process in 2022.
Legislative analysts presented preliminary findings in December 2023. At that hearing, committee chairman Brandon Storm, a Republican from London, said a more detailed report would be released the following month. But that didn’t happen until last week’s hearing, after a KyCIR report on the 8-month delay.
Storm did not respond to a request for comment on this report.
Analysts have found that individual bids typically cost more than state estimates prepared by transportation departments. Contracts that attract more competition tend to cost less than state estimates.
However, the Ministry of Transport did not want to explain the procedure for determining the estimates to the analysts in Parliament, as this could further impair competition among bidders.
According to the report, bidding is more competitive in the Jefferson County and Northern Kentucky areas. Single-bid bidding is more common in Eastern, Central and Western Kentucky. Analysts said the lack of competition in the state’s rural areas could be attributed to limitations on asphalt production and the high barriers to entry for new companies in the industry.
According to the report, Kentucky’s asphalt industry is shrinking, with more than half of all asphalt plants in the state owned by just six companies.
Chad Larue, executive director of the Kentucky Association of Highway Contractors, did not respond to a request for comment.
Andrew McNeill, president of the research organization Kentucky Forum for Rights, Economics and Education, said it was important that the public finally had a chance to see the full report eight months after its scheduled release.
“It details the ongoing waste and abuse of asphalt tenders enabled by the Department of Transportation, and it is important that taxpayers understand where their money is being spent,” McNeill said.
The report made six recommendations to the Department of Transportation. The department agreed to five of the recommendations and said each was at different stages of implementation. Among other things, the department agreed to keep lists of potential bidders secret until contracts are awarded and to use software to detect collusion. However, the department did not agree with the proposal to develop written guidelines for awarding or rejecting bids, saying transportation officials need flexibility in evaluating potential contracts.
McNeill suggested going a step further than those recommendations. He said the state should remove the Department of Transportation’s exemption from the Model Procurement Code – a set of guidelines enacted by the Legislature designed to make the state procurement process uniform, fair and transparent.
“Now we have clear evidence from an oversight committee documenting the asphalt single bid problem, and it’s time for Frankford to stop ignoring it and take meaningful action,” McNeill said.
The Kentucky Department of Transportation did not immediately respond to emailed questions about the procurement code exemption.
