A real triumph for outsourcing opponents

Not often, but every once in a while, opponents of outsourcing manage to implement policy designed to thwart the subcontracting of tasks overseas. We here at danieldrezner.com feel that they should be congratulated for these efforts, as well as the transparently obvious economic benefits that such policy measures bring to our great country. So let’s hear it for the state of California’s anti-outsourcing procurement rules, which are having quite an effect on the state’s efforts to rebuild the Bay Bridge. Jean-Paul Renaud of the Los Angeles Times reports:

When officials six years ago unveiled their plans to rebuild portions of the earthquake-damaged San Francisco-Oakland Bay Bridge, they said the span would rival even the famed Golden Gate Bridge. They envisioned a sleek, modern design that would have at its center a 525-foot suspension tower rising from San Francisco Bay, providing a distinctive addition to the area’s skyline. But this gem is proving to be costly. The elaborate design, praised at its inception, now is being blamed for ballooning costs and several delays. Caltrans says it will cost about $4 billion to build the bridge — three times more than the agency expected in 2001. This week, officials announced that the suspension tower alone would cost $1 billion more than originally expected. One reason, they said, is the state’s “Buy America” rules, which dictate that Caltrans can use foreign steel on the bridge only if its cost is at least 25% less than domestic steel. In this case, the difference is only 23%, so the state must go with domestic steel. That added $400 million to the price tag. (emphasis added)

$400 million? It’s a good thing the state of California doesn’t face a budget crunch or anything! Way to stop outsourcing!! Thanks to alert danieldrezner.com reader C.W. for the tip. UPDATE: Thanks to alert danieldrezner.com commentor gw, who points out that the Buy American Act is a federal law. One wonders, however, how the cost differential of 25% was determined as meeting the “unreasonable cost” standard. ANOTHER UPDATE: gw strikes again!! Here’s the relevant link for an explanation of how Buy America affects steel. And here’s a link to Michael Cabanatuan’s San Francisco Chronicle story about the bridge, which has further details:

Transportation officials were stunned Wednesday when the only bids on the new suspension span, both from a joint venture of American Bridge, Nippon Steel Bridge and Fluor Enterprises, came in at $1.4 billion and $1.8 billion, the latter more than a billion over estimate. Because the bridge project is subject to federal Buy America requirements, the contractor was allowed to submit two bids — one using only steel from U.S. firms, one using foreign steel. (emphasis added)

However, it appears that even California officials were temporarily confused by the provisions of the Buy America act:

On Wednesday, when the bid was opened in a Caltrans basement in Sacramento, it appeared that the agency would have to go with the $1.8 billion domestic steel bid, unless it chose to reject the bid and start over. But transportation officials said Thursday that the way the cost differential is calculated would allow the state Department of Transportation to take the lower bid — and use foreign steel. “The way everyone thought it works apparently isn’t,” said Randy Rentschler, spokesman for the Metropolitan Transportation Commission, a partner with Caltrans in building the new Bay Bridge. Dan McElhinney, Caltrans deputy district director, said that as long as the bid is deemed “responsive and responsible” and in tune with market conditions, Caltrans is free to use the foreign steel bid.

Many thanks to gw for doing the cyberwork on this story.