07-25-2024, 04:11 PM
(07-25-2024, 02:19 PM)bravado Wrote: I use the word on purpose. Corruption doesn’t always mean the mafia and cash envelopes. I mean corruption in the sense that a public contract is $x per kg of concrete.
A private contract, with transparency and competition, is $0.5x per kg of concrete.
The status quo is still corruption and it shows in all of our inflated costs covered up by secret contracts. I’d love to dive into the estimated costs for Phase 2 to see why they’re so high - but we can’t, on purpose.
I don't think it's quite as malicious as this, but you're not wrong that the existing system for estimating costs isn't perfect.
Generally speaking, when contractors bid on the project, they provide a single all-in-one cost for their work. Their cost is an estimate based on previous work they've performed, along with other estimating tools.
Where I think it's flawed is that the contractor is then paid based off their percentage of completed work, rather than based off the actual cost of doing that work (materials + labour). For instance, a contractor may estimate that a road reconstruction costs $1m to complete, and they win the project because it's the lowest bid. But it may only cost $750k once everyone has been paid, so that last $250k is just excess profit (on top of the 'regular' profit that the contractor received on all of their markups on materials and labour).
This system is supposed to protect municipalities because if the project goes over-budget, then the contractor is on the hook for the extra cost. I'd prefer a system where the contractors are only paid for the work that they complete, but I'm not sure how such a system could be implemented.