In an effort to ensure that local residents get hired for a $1.4 billion multi-stage sewer project, the city of Akron, OH is planning to start its own construction company. It’s a bold plan. It’s an innovative and unique idea. It’s a grand and noble gesture to provide jobs for its citizens. But is it a good idea?
The mayor of Akron, Don Plusquellic, apparently thinks it is, going as far as introducing legislation to have the city purchase $1.9 million worth of concrete mixer trucks and dump trucks that they would lease or sell to the as yet formed, city-owned Akron City Construction Company (ACCC). A city employee even attended the World of Concrete tradeshow in Las Vegas back in February to do some research, which apparently couldn’t be done by reaching out to local heavy equipment dealers. If they really wanted to stay local, they could have just gotten their concrete mixers from the Kimble Manufacturing Company whose facility is about an hour away in New Philadelphia, OH. The city is planning to purchase or lease six concrete trucks and four dump trucks.
The city has run into problems in the past finding contractors that can meet the goals of their local hire program which requires 30 percent of their workers be Akron residents during the early stages of their multi-state sewer project. That percentage would grow by five percent each to 50 percent for later stages of the project in 2018. The city thinks they can do a better job of hiring locals than established construction firms by starting their own company.
They also hope to avoid any further legal challenges or potential legislation that would prohibit their local hire program. Last year the Ohio Contractors Association (OCA) filed a federal lawsuit challenging the local hire program on a combined sewer overflow (CSO) project on the basis that it was unconstitutional on the state and federal levels. The lawsuit was eventually dropped by the OCA, but the city went ahead with its plan to use city residents to perform some of the work to avoid any further legal delays. Ohio has some resident bidder preference laws, but none appear to apply to construction projects.
By starting their own construction company, the city of Akron would be able to hire city residents and skirt a provision in Ohio House Bill 53, Transportation and Public Safety Budget FY2016 and FY2017, that would prohibit cities from being able to require contractors adhere to local hire programs. (That provision has since been dropped from the language of the bill.) Local hire programs and local bidder preference laws have been enacted in a lot of states, counties and municipalities.
The city is considering using a CM-at-Risk with the city-owned construction company acting as a subcontractor. This brings up a couple of interesting questions as to how the CM-at-Risk contract would work. Would the guaranteed maximum price (GMP) exclude any work done by the ACCC? Would delays caused by the ACCC be treated the same as owner-caused delays? Would the ACCC be treated as a true subcontractor and could the CM-at-Risk require they provide performance and payment bonds?
The city is currently taking Statement of Qualifications from interested contractors for the largest part of their sewer project. The $317 million project which would primarily consist of construction of a 6,200-foot long, 27-foot diameter interceptor tunnel. Some of the work the city plans to perform on this project through their own construction company as a subcontractor includes hauling dirt and concrete, excavating and digging ditches.
To their credit, the city of Akron has done its part to ensure city residents are getting work on these sewer projects. In addition to the citizens hired last year to complete the project tied to last year’s OCA lawsuit, the city provided training to 48 residents in order to obtain a Commercial Driver’s License (CDL) some of which were hired by the city. The training was free of charge provided participants work 90 days for the city.
Last month the city began its first class of a five-week Construction Workforce Pre-Apprenticeship Program in conjunction with seven local trade unions and Akron Summit Community Action, Inc. The 52 participants of the inaugural class will receive training on the use of hand and power tools, materials handling and OSHA-10 certification. Successful completion of the program can lead to entrance into a local construction trade apprenticeship program.
OK, so the city has some equipment and construction workers covered, but what about the other things that go into starting a construction company? There’s licensing, bonding, insurance, safety. If they are purchasing dump trucks and concrete trucks, they need to consider maintenance and repair. They’ll also need to decide what to do with idle equipment as well as what to do should they need additional trucks in the event one is out of commission for repair. If they plan to perform excavating and ditch digging they will need heavy equipment such as excavators, bulldozers and skidsteers. They will also have to hire and train workers to operate these machines. The new company will also need administrative personnel, supervisors, a safety manager and possibly more.
If the city of Akron goes ahead with their plan and starts their own construction company it will be interesting to see if they are successful. Will they keep the company operational past 2018 when the sewer project ends? Will they bid on projects let out by the state and local governments in Ohio? Will they operate for profit or will they bid on just enough work to keep their workers employed and concentrate mostly on handling projects for the city of Akron?
As far as I know there isn’t a state or local government that owns a full-fledged construction company in the United States. There are some public entities that have departments that handle some construction work and countries like China and India have state-run construction companies, so this would be a first of sorts and it’s hard to be the first at anything. If Akron does succeed, would other municipalities follow in their footsteps and start their own construction company?