By: Ronald W. Brenke, PE
A recent story by Eric Lawrence, Detroit Free Press, relied heavily on a study by Dr. Rolland Zullo of the University of Michigan Dearborn to conclude that it is more cost effective to complete engineering services by government workers versus the private sector. Unfortunately, Zullo’s study is severely flawed in its methodology. For example, Zullo concluded that Michigan’s use of private sector firms cost the state $90 million more than if the work was done solely by MDOT employees. However, the study fails to include a multitude of government costs in its comparison, including facility costs, executive, supervision and administrative costs, paid time off and non-project related time spent by project staff. A similar study completed by the NYU Tandon School of Engineering in 2016 used a comparable model to Zullo but considered these variables across 28 states. It found that overhead costs averaged 40% of direct wages, not 10% as “assumed” in the Zullo study. Factoring in these and other costs, NYU reached the opposite conclusion and estimated the total annual average cost for a DOT engineer was $272,684 versus $217,020 for private sector firms.
That being said, simple cost comparisons cannot accurately measure actual value in delivering design services to the public. As stated in the NYU study, the real value in using the private sector in partnership with public agencies is in what the numbers cannot tell you. It’s in innovation, efficiency, timely project delivery, sustainability, and project success (including costs). As transportation funding fluctuates over time, the private sector helps to supplement DOT staff to get projects off the planning desk and into the real world. The key word here is supplement, not replace. Private sector firms seek to provide their expertise in coordination with talented state DOT employees, while under the watchful eye of government oversight. Competition in Michigan between engineering firms is fierce and the DOT and taxpayers are the beneficiary of this competition.
Private sector engineering firms have brought many innovations to Michigan and are often used to design complex projects, accepting the risk for any design errors or omissions. It is also important that we do not lose sight of the fact that these firms employ people who live in the communities they work to improve. Those salaries are reinvested into the community and support the local tax base.
In the end, leveraging the knowledge and expertise of the state’s engineering industry to deliver MDOT’s transportation program is a benefit to all Michiganders. The engineering consultant community brings lessons learned from projects around the globe, to improve technology, delivery methods and efficiencies. Having a healthy, highly-sophisticated private industry to supplement MDOT’s workforce has and will continue to be the best recipe for success as we work to fix the roads.
Published by Detroit Free Press 2/22/2019
A recent story by Eric Lawrence, Detroit Free Press, relied heavily on a study by Dr. Rolland Zullo of the University of Michigan Dearborn to conclude that it is more cost effective to complete engineering services by government workers versus the private sector. Unfortunately, Zullo’s study is severely flawed in its methodology. For example, Zullo concluded that Michigan’s use of private sector firms cost the state $90 million more than if the work was done solely by MDOT employees. However, the study fails to include a multitude of government costs in its comparison, including facility costs, executive, supervision and administrative costs, paid time off and non-project related time spent by project staff. A similar study completed by the NYU Tandon School of Engineering in 2016 used a comparable model to Zullo but considered these variables across 28 states. It found that overhead costs averaged 40% of direct wages, not 10% as “assumed” in the Zullo study. Factoring in these and other costs, NYU reached the opposite conclusion and estimated the total annual average cost for a DOT engineer was $272,684 versus $217,020 for private sector firms.
That being said, simple cost comparisons cannot accurately measure actual value in delivering design services to the public. As stated in the NYU study, the real value in using the private sector in partnership with public agencies is in what the numbers cannot tell you. It’s in innovation, efficiency, timely project delivery, sustainability, and project success (including costs). As transportation funding fluctuates over time, the private sector helps to supplement DOT staff to get projects off the planning desk and into the real world. The key word here is supplement, not replace. Private sector firms seek to provide their expertise in coordination with talented state DOT employees, while under the watchful eye of government oversight. Competition in Michigan between engineering firms is fierce and the DOT and taxpayers are the beneficiary of this competition.
Private sector engineering firms have brought many innovations to Michigan and are often used to design complex projects, accepting the risk for any design errors or omissions. It is also important that we do not lose sight of the fact that these firms employ people who live in the communities they work to improve. Those salaries are reinvested into the community and support the local tax base.
In the end, leveraging the knowledge and expertise of the state’s engineering industry to deliver MDOT’s transportation program is a benefit to all Michiganders. The engineering consultant community brings lessons learned from projects around the globe, to improve technology, delivery methods and efficiencies. Having a healthy, highly-sophisticated private industry to supplement MDOT’s workforce has and will continue to be the best recipe for success as we work to fix the roads.
Published by Detroit Free Press 2/22/2019
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