Tuesday, May 01, 2007
Costly Construction on the Pete
The recent audit of the Peterson Events Center at the University of Pittsburgh reveals that state taxpayers paid too much for its construction. The State’s Auditor General notes the 12,500 seat arena’s costs soared to $119 million—triple the original estimates of $35 million. This does not count needed repairs to the leaking roof—an estimated $6 million repair. Taxpayer contributions also ballooned from $13 million to $66 million.
The Auditor General made some good recommendations for reforming the process by which future projects will be regulated. These include the State’s Department of General Services holding outside managers accountable, keeping the number of prime contractors to a minimum of four, and establishing a mechanism to seek a return of state money for improper construction. While putting in recommendations to prevent cost overruns is needed, he neglected to mention one reform measure that can save taxpayers millions of dollars per year on state funded construction projects—the elimination of prevailing wage requirements.
Prevailing wages, which artificially raise the wages of workers participating in government construction projects, adds at least ten percent to the cost of a project. Thus if the prevailing wage requirement had been eliminated, taxpayers could have saved a minimum of $11.9 million on the construction of the Pitt arena.
The latest Census Bureau state expenditure data available (2003-2004) for the Commonwealth shows state and local outlays of $6.88 billion for construction projects. The repeal of prevailing wage laws can save a minimum of ten percent on these projects or more than $688 million.
The prevailing wage law is a relic from the Depression era that was designed to protect local workers from low-wage migrants. However, it has become a shield that protects union workers from competition through mandating higher wages. If Pennsylvania government is serious about reform, repealing the prevailing wage law is a great place to start.
The Auditor General made some good recommendations for reforming the process by which future projects will be regulated. These include the State’s Department of General Services holding outside managers accountable, keeping the number of prime contractors to a minimum of four, and establishing a mechanism to seek a return of state money for improper construction. While putting in recommendations to prevent cost overruns is needed, he neglected to mention one reform measure that can save taxpayers millions of dollars per year on state funded construction projects—the elimination of prevailing wage requirements.
Prevailing wages, which artificially raise the wages of workers participating in government construction projects, adds at least ten percent to the cost of a project. Thus if the prevailing wage requirement had been eliminated, taxpayers could have saved a minimum of $11.9 million on the construction of the Pitt arena.
The latest Census Bureau state expenditure data available (2003-2004) for the Commonwealth shows state and local outlays of $6.88 billion for construction projects. The repeal of prevailing wage laws can save a minimum of ten percent on these projects or more than $688 million.
The prevailing wage law is a relic from the Depression era that was designed to protect local workers from low-wage migrants. However, it has become a shield that protects union workers from competition through mandating higher wages. If Pennsylvania government is serious about reform, repealing the prevailing wage law is a great place to start.
