Bay Bridge Project: Lost Opportunity for US Jobs?
By: Scott Cohn | CNBC Senior Correspondent
“We shot ourselves in the foot,” Applebaum said. “We never even took seriously the domestic bid.”
Not so, says Anziano. But with only one domestic bid, which came in at more than double the CalTrans engineers’ estimate, the state had a duty to look elsewhere.
“That’s telling you there’s something wrong. You’re not getting competitive bidding,” he said.
Opening the project to foreign competition was not a simple matter. It required some fancy legislative footwork that still angers some U.S. manufacturers, who saw the Bay Bridge as a unique opportunity to revitalize American manufacturing just as the nation was heading into a recession.
Early on, some in California saw the Bay Bridge project — necessitated when the existing bridge was damaged in the 1989 Loma Prieta earthquake — as a potential job creator.
Flush with wealth from the dot-com bubble, the state and Bay Area leaders mandated the new bridge be “iconic” in its design. The costs — and potential benefits to the winning bidders —ballooned.
After lobbying from labor and industry groups, then-governor Gray Davis won federal funding for the bridge. That meant the project was covered by a 1982 “Buy America” law requiring the state to give preference to American contractors.
But then the 2004 bid came in, just months after the new governor, Arnold Schwarzenegger, took office. Hit by sticker shock, the Schwarzenegger administration decided to regroup.
“One of the things that stuck out was the Buy America component,” Anziano said. “That was restricting, and we heard this loud and clear from the construction community.”
So the administration reconfigured the funding formula for the 16 separate contracts that made up the Bay Bridge project. While most of the contracts would continue to receive federal funds and be subject to the Buy America requirement, the self-anchored suspension span — the signature segment of the project and by far the most lucrative — would be paid for with state and local funds, exempting it from the requirement.
Last month, the U.S. House of Representatives passed a bill that would ban such a maneuver in the future. It faces an uncertain future in the Senate. Regardless, it comes years too late for some who had hoped to win the Bay Bridge project, until the state changed the rules.
“We thought it was gamesmanship, that it was a way of getting around the system,” says Thomas Hickman, a vice president at Oregon Iron Works outside Portland.
His firm was part of a consortium, Bay Bridge Fabricators, that had been preparing a bid for the project. The proposal included a new, state-of-the-art fabrication plant to be built at the port of Vancouver, WA. Hickman says the factory would have been a huge boost to U.S. manufacturing capacity, allowing American firms to compete for even bigger projects around the world.
“The impact on the economy throughout this country would have been tremendous,” he said.
But when state officials announced in 2005 that the suspension span would no longer be subject to the Buy America requirement, the plan died.
“At that point, we all looked at each other and said it's really time to go home,” said Hickman, “Because they're determined to go to China, or Korea, or somewhere other than the U.S. for this bridge.”
“That was not part of the thinking — let’s just send it overseas,” said Anziano. “It was the reality of the market.”
Nonetheless, Schwarzenegger and his administration began actively courting foreign bidders. In 2005, Schwarzenegger traveled to China on a trade mission. During the visit, state transportation secretary Sunne Wright McPeak ceremonially presented officials with a set of CDs including bidding specifications for the Bay Bridge project.
From the state’s standpoint, the strategy worked as planned — increasing competition. When the project was rebid in 2006, the American Bridge-Fluor joint venture won out. Unencumbered by the Buy America law this time, the group bid $1.43 billion, nearly $400 million below its 2004 bid. After winning the contract, the group promptly subcontracted the steel fabrication to ZPMC, a Shanghai-based firm whose primary expertise is building cranes.
“I don't believe they ever really took a fair look at what was available here in the United States before they made the decision to effectively abandon the U.S. as a supplier of the structural steel for the bridge,” Hickman said. “I don't mean that to sound harsh, but at the same time, that's really exactly what they did.”
His firm did win a contract to build some components of the Bay Bridge, but he says it is nothing compared to the contract for the suspension span.
State officials say the bidding results proved the U.S. did not have the capacity to build the bridge on time and at a reasonable cost, and they could not rely on a hypothetical U.S. factory to build such a vital span. But it is not clear China had the capacity either.
Soon after winning the contract, ZPMC built its own new factory in China, just as Hickman’s consortium had planned to do in the U.S. And more than 200 American experts and engineers traveled to China to help supervise the project.
“Building a new facility, which they had to do, training their people, which they had to do, all of those were an investment in China that in my mind should've been done here,” Hickman said.
“It's not quite that simple,” said Anziano, who says it is unfair to blame CalTrans for the work going to China. “You have to keep in mind, first of all, that the capacity situation that we have in this country is something that has evolved over decades. You can't fix it overnight. You really can't fix it on the back of one single project.”
Besides, the Chinese managed to build their plant in just eleven months, American Bridge’s then-CEO Robert Luffy told a Congressional committee in 2007.
“Believe me, they have the capacity,” Luffy testified. “It is beyond your comprehension if you haven’t been there.”
But he acknowledged that had the state approved the venture’s initial bid in 2004, it would have added the capacity in the U.S.
“A lot of additional capacity,” he said.
Today, one more major Bay Bridge contract has yet to be awarded: a five-year, quarter billion dollar project to tear down the existing bridge. Among the rumored bidders: a firm from China.
-By CNBC's Scott Cohn
Follow Scott Cohn on Twitter: @scottcohncnbc
