ACEC response to Pew Center article

The Pew Research Center recently posted an article noting five factors driving higher construction costs for road and bridge projects. The content was reposted in Governing and was linked yesterday in the AASHTO Daily News clips.

Unfortunately, the fourth item on the list of cost increases is staffing shortages at State DOTs who are forced to rely on “expensive outside consultants” for project delivery. The article links to a Yale University study published last year that correlates the loss of qualified in-house DOT engineers with higher construction costs.

Since this report will likely get some attention in State DOT circles, we wanted to make you aware and give you a few initial talking points. We are developing a more thorough response that we may publish next week.

Our initial response:

• The Pew blog post rightly notes that there are many factors that contribute to construction cost increases, including labor and material shortages, increased demand, permitting timelines and other administrative delays, and a significant backlog of deferred maintenance.
• The cited Yale study is not a true 1:1 cost comparison between private sector engineers and in-house staff. In fact, the paper specifically notes that they do not attempt to calculate the indirect / overhead administrative costs internal to the government. 
• The Yale research does not include any reference or citation to the NYU cost comparison study ACEC sponsored, which factored in an overhead rate for the DOTs and clearly demonstrated the true, all-in costs of in-house engineering staff. The NYU study reinforced the value and merit of contracting out – not just on cost but other important factors as well. 
• Misreading the Yale paper’s findings to justify restrictions on the government’s ability to partner with the private sector engineering workforce would be precisely the wrong policy response and would likely make the cost problem worse.
• The Yale study makes an important and largely correct argument: the quality and experience of engineers managing projects meaningfully affect infrastructure costs, and losing experienced public-sector engineers to retirement imposes real and measurable costs on taxpayers. We agree with the premise that engineering expertise is not a budget line item to be minimized but a value driver that pays for itself many times over.
• Experienced, skilled engineers generate returns that dwarf their compensation. This finding has direct implications for federal and state workforce policy, and ACEC is prepared to use it accordingly.
• However, the paper’s treatment of private-sector engineering consultants and the policy implications some readers may draw from it requires a careful reading. The research reveals that private sector engineering costs reflect the consequences of inadequate government capacity and procurement practices, not the quality or value of the engineering industry itself. 
• The research documents a well-established dynamic: when state DOTs are understaffed and lack experienced engineers, they turn to private sector firms to fill the gap. But when agencies lack the in-house capacity to effectively scope, manage, and oversee consultant relationships, costs rise. The problem is not contracting out the work. The problem is the absence of a qualified government counterpart.
• The paper’s own survey evidence makes this clear. Respondents describe consultants increasing costs not because of poor engineering work, but because of “misaligned incentives” in procurement structures, “lack of institutional knowledge” about agency-specific standards, and the challenge of making real-time field decisions without the authority or familiarity that an in-house engineer possesses. These are procurement design and contract management problems – problems that experienced government engineers, working in genuine partnership with qualified private firms, are equipped to solve.
• The paper is not an argument against contracting out for engineering services. It is a program management study that makes the argument for the kind of robust, experienced government engineering capacity that enables agencies to use consultants effectively. An understaffed DOT with a single overextended project manager cannot extract full value from any contractor or consultant. A well-staffed DOT with experienced project heads who understand scope, risk, and bidder markets can and does.
• ACEC has long advocated for exactly this model: a strong public-sector engineering workforce working in genuine partnership with private engineering firms. The paper’s findings reinforce that position.

Please reach out with any questions or concerns, particularly if the Yale report or Pew article get any traction with policymakers at the state level. We will follow up with additional communications next week.