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Manufacture This

The blog of the Alliance for American Manufacturing

Dateline report takes a look at California's very expensive missed opportunity.

Dateline, the NBC News program, took a hard look at the construction of California’s Bay Bridge this weekend – yes, that one – and, as you would expect, it’s a bad look. The longer you look at this thing, the more disappointing it becomes.

You should really watch the whole thing, but an exchange between reporter Josh Mankiewicz and Steve Heminger, executive director of the Metropolitan Transportation Commission (MTC), stuck out. It’s in regards to the Chinese-made center span of the bridge, and it starts at about the 23:40 mark:

Steve Heminger: “The taxpayer was not going to get a good deal if we built this project in the United States.”

Josh Mankiewicz: “Unless you consider the money that would have gone to those steelworkers, that they would have later used to buy houses and cars, and go to the super market and pay taxes.”

Heminger: “We played by the rules, fair and square. And the fact is, the American steel industry is not what it used to be, unfortunately.”

Mankiewicz: “But the American steel industry would argue that one of the reasons the American steel industry is not what it used to be is that guys like you keep sending the business overseas.”

Heminger: “Guys like me have to comply with federal law. If the American bid is higher, are we still supposed to reward that with tax money?”

But ya boy Steve Heminger is sorta obfuscating what really went on.

Back in 2004, when the California Department of Transportation (CalTrans) was soliciting bids for work on the span, it got only a pair from an American company – a consortium of U.S.-based construction firms and fabricators. One of its bids used American steel and cost $1.8 billion, while the other used foreign steel and cost $1.4 billion.

California was obliged to use the American-made contract, because the state had already secured federal funding for the 16 separate contracts that made up the Bay Bridge project – and any federal money spent on transportation projects comes with Buy America provisions attached. That means that as long as the American-made bid isn’t 25 percent more costly than the foreign competition, you gotta go with the American one.

The different between $1.8 billion and $1.4 billion is 23 percent – and the administration of Governor Arnold Schwarzenegger didn’t want to pay that difference.

Sticker Shock Leads to a Bad Decision

So what did it do? It refigured the funding formula so that the center span wouldn’t receive federal funding, and therefore wouldn’t be subject to Buy America provisions.

So the bridge ended up built in China, by a subsidiary of a state-owned enterprise, which turned in lots of shoddy work and charged California extra money to make up for delays.

When Heminger says they had to "comply with federal law" in the bridge's construction, he's right: they did! They also went out of their way to avoid compliance and save some cash. Nothing illegal about it, but it was certainly costly.

It was the Bay Bridge boondoggle, and the rest is history. Watch the whole Dateline report here.