Mark Schieldrop reports on Patch that the Rhode Island Department of Transportation (RIDOT) expects to save $22.1 million over 10 years by creating its own road-striping crew.  RIDOT is now headed by Peter Alviti, a former director with the Laborer’s International Union of North America (LiUNA), whose former union will benefit through new members with the increase in government employees.  Yet Schieldrop evinces a surprising lack of skepticism about RIDOT’s claims:

Bucking the notion that the private sector does work for the government cheaper than the government, the state Department of Transportation on Monday announced that it will save the state more than $20 million over the next 10 years by internally shifting resources and handling road striping work in-house. …

“This is one in a large number of critical changes in the way RIDOT does business in order to allow us to provide a better service at a lower cost,” RIDOT Director Peter Alviti Jr. said. “It will have the added benefit of reducing our administrative staff by the 40 positions (eliminating positions with titles such as “Photographer”). We need more people filling potholes than taking pictures of them.”

As previously explained on Anchor Rising & the Ocean State Current, the 40 positions that have been replaced (1) were planned, not existing, (2) were not mostly “administrative,” but technical (mainly engineers), (3) were in keeping with the suggestions of a Gordon Proctor report on why RIDOT’s costs and effectiveness are so out of whack, and (4) would mostly have been members of a different union than Alviti’s.

The fact that Alviti is spinning the nature of the personnel changes to such a degree suggests that the management decisions are more political than considered.

So what about the projected savings?  While it certainly isn’t implausible that the RIDOT had been handing out unreasonably lucrative contracts to private road-marking companies, the agency’s explanation of the projected savings deserves a skeptical review.

Costs

According to RIDOT’s analysis, the agency will require two crews operating 25 new trucks.  The total expected cost for the trucks is $3.65 million, but the spreadsheet attempts to annualize that cost over 10 years, with operation and maintenance doubling the annual expense.*  The total each year would therefore be $730,000.

RIDOT’s plan also calls for 25 new employees: one supervisor, three foremen, and 21 operators.  This number adds four employees to the count originally planned in the agency’s reorganization.  Specifically, it adds a foreman, removes a mechanic, and removes a highway construction and maintenance operations manager, with the balance made up with operators.

The importance of this difference is that RIDOT’s calculations expect every employee to have exactly the same total salary and benefits: $75,000 per year.  Even a quick look at the state’s transparency site shows this to be inappropriate.  RIDOT doesn’t currently have a pavement marking crew or anybody with the title of “foreman,” but supervisors and foremen can be expected to make more money than workers.  If it turns out that the original plan was correct, and RIDOT would still need need the operations manager, that base salary alone would be upwards of $85,000.

The reference to base salary is important.  According to 2016 budget documents for the agency, the cost for benefits was 61% of the cost of salaries (including overtime) in the last fiscal year (2015).  The transparency site puts the average highway maintenance operator (of either rank) at total pay of $56,505 that year, meaning the total average cost, with benefits, would be $90,973, not $75,000.

If we assume another $5,000 in salary for the supervisor and three foremen, the total annual cost of personnel would not be $1.875 million, but $2.307 million.  Even this leaves out raises.  Even if personnel costs (salary and benefits) only go up 2% each year, that would add $2.191 million to the cost over a decade.  For simplicity’s sake, and allowing for the possibility that the costs of private contractors would go up similarly, we’ll leave the raises out for the comparison, though.

Totals

If we assume RIDOT is correct about the cost of its new trucks and the $1.6 million in materials needed per year, my change in personnel means the total is not $4.205 million, but $4.637 million, with the 15% contingency bringing the total annual cost to $5,332,550.

This cost is 15% lower than the contracts RIDOT claims it currently pays out for road striping, and that’s with full-year employees rather than the private contractors’ partial year of work, which should allow for more than half a million dollars of additional savings per year.  That’s a big difference.

If that’s the case, wouldn’t the first step — before committing to hiring 25 new employees, with their pay, healthcare, and pension costs — be to go back to the private contractors and ask if they can beat the estimate (perhaps with an eye toward figuring out if RIDOT missed anything in its own projections)?

But That’s Not All…

RIDOT’s spreadsheet claims that the agency, itself, spends $550,000 per year overseeing these contracts and assumes these costs would simply go away if the paint crew worked directly for the government.  Adding that to savings from a partial year of work means the state is claiming that it can save a whopping 31% by doing the work itself (apparently with less supervision than private contractors require).

And even that isn’t the end of the sales pitch.  Because RIDOT will be paying the painting crews for a full year, the agency says it will then save an additional $250,000 per year by bringing winter services (like plowing, presumably) in-house, too.  Although it doesn’t estimate the value, RIDOT also claims that its pavement markers will have spare time to provide “some redundancy for sweeping operations.”

Not surprisingly, given that this infamously inefficient government department has discovered that it could actually be a discount player in the road-marking business, another “tangible benefit” is that RIDOT expects to be able to begin making a profit by selling these services to other agencies and municipalities that need work done.

Isn’t it amazing what government can accomplish with just a few hours’ work on a spreadsheet!

As stated at the outset, it’s certainly possible that RIDOT has been handing out absurdly generous contracts for the road-marking services of private companies.  If Governor Gina Raimondo’s administration is claiming that Governor Lincoln Chafee’s administration was paying almost one-third too much on road-striping contracts, that certain deserves some investigation (by the governor’s administration, by the news media, and perhaps by the state police).

 

 

* This post originally misconstrued the application of “10% annually for” to the purchased vehicles operation and maintenance.  RIDOT meant 10% of the total cost of each vehicle would be spent on O&M each year.  That correction suggests the number wasn’t an outright error, as I’d initially suggested, but it does increase the cost of in-house painting.  The numbers throughout the post have been corrected.