When it comes to building roads, increased competition between pavement industries can lower prices and save public money, writes Karl Downey.
Karl Downey is secretary general of EUPAVE, the European Concrete Paving Association.
Today, many EU member states and local authorities stick blindly to their traditions, despite the fact that alternative, long-lasting solutions turn out to be very competitive elsewhere. A new paper from the US shows the potential to save millions in public money – and the concept could easily be applied in Europe too.
Non-discrimination, transparency and open competition are principles enshrined in the treaties of the European Union and relevant EU legislation, such as the EU Public Procurement Directive. However, for various reasons (tradition, lack of experience, aversion to change) road authorities are often conservative when it comes to pavement type selection. This restricts competition by shutting potential competitors out of the market.
A recent paper from the US illustrates how greater competition in the pavement sector results in savings for road authorities. The study uses publicly available highway agency bid information, whose data covers 45 US states. Average five-year state cost data confirm that US states that use a more even balance of pavement types (asphalt and concrete) get better value for money than those that use only one pavement type. As the share of concrete in the overall paving budget increases from 0 to 35%, asphalt unit prices drop around 22% and concrete unit prices drop an incredible 45%. That means a road authority could get over one million square metres of extra concrete pavements for the same annual budget!
The USA and Canada moved in this direction a decade or two ago and have refined processes to fully capture the benefits of competition.
Encouraging competition is simply better business practice for road authorities. There are no downsides!
Recommendations for the European situation
Currently, on average in Europe, concrete pavements account for just a small percentage of all roads. This share varies from 0% in many member states, up to 50% in a select few. Clearly, healthy competition between pavement types does not exist in many jurisdictions.
- One way to stimulate the kind of systematic healthy competition that works well in North America is alternative bid contracts, whereby two alternative equivalent designs can be jointly put to tender. In most cases an adjustment factor allows for differences in durability and life-cycle costs to be taken into account to make sure the best solution for the tax-payer is eventually selected.
- In the Netherlands a “decision support tool” was developed by CROW (Technology Platform for Transport, Infrastructure and Public Space), which allows costs, environmental impacts and other aspects to be objectively weighed up. This makes sure alternative designs are compared upfront, thereby also creating healthy competition.
- Public-private partnerships (PPPs) are another way to stimulate healthy competition, as seen in Poland, as the promoter will usually review all alternatives at hand to optimise the financial outcome.
That said, even where pavement type selection procedures use some sort of objective life-cycle cost criteria, one can wonder whether the analyses (and the cost data etc.) are really valid when one pavement type has been excluded from the market for many years. Where no competition between industries exists, it would even be worth specifying a certain pavement type to stimulate greater competition between industries. This may sound like discrimination in itself, but it should only be done where the road authority can show that introducing a certain minimum of competition into the market will result in savings on the long term. Alternatively, opting for composite pavements, combining concrete and asphalt in a single pavement structure, is a smooth way to introduce new pavement industries to the market.
As shown in the US, in jurisdictions where both pavement types are used on a regular basis, prices decrease while construction experience and skills increase, leading to better quality pavements and savings of public money. This experience could be replicated in Europe.
The European Commission, member states and road authorities should examine public tendering processes and foster healthy competition in pavement types. In particular, I call on the European Commission to:
- encourage member states to take a more innovative approach in public procurement, and avoid focusing on lowest initial cost;
- assess the outcomes of the 2008 Communication on green public procurement;
- collect examples of best practices in public procurement across Europe;
- ensure competition is encouraged in European-funded projects.
Ensuring more competition between pavement industries would significantly increase public spending efficiency and stimulate innovation. It’s a win-win for everyone – taxpayers, public authorities and industry!