New Mexico’s Highway 44 gets wider – and better
From the very beginning, migrating from point A to point B always has been an instinctive part of the human existence. Even as they became more settled and civilized, evolving from small units like families and clans to larger communities that grew into towns and cities, men and women have always sought to travel from one place to another in the most direct and unobstructed way possible. Thus they developed well-worn paths of travel – located within the towns and cities as well as between them – that became trails so popular and established that they acquired names by which people identified them.
Today roads, and the maintenance they require, are as important as the vehicles that traverse them. And if you’ve paid any attention to today’s news – or your daily commute to work – you are probably aware that roads, like much of America’s infrastructure, are literally going to pot. Local streets, county and state roads and highways, even the nation’s mighty interstates – they are all crumbling under the sheer weight and volume of our ultra-mobile society. State and local governments are hamstrung with the challenge of meeting other fiscal responsibilities (mainly social services) that have greater priority, as well as funding much-needed street and road maintenance and expansion. These projects take a lot of time – and money. To save both, governments are looking to the private sector to do the job of maintaining streets and roads.
An Ironclad Guarantee
One such outsourcer of road construction, expansion and maintenance is Koch Performance Roads, Inc., a subsidiary of Koch Industries, Wichita, Kan. Whether taking on the maintenance of 30 percent of the streets of Aspen, Colorado, or expanding 118 miles of New Mexico’s infamous State Highway 44 from two lanes to four, Koch has proven that outsourcing the maintenance of such a government asset is viable and, in many instances, preferable.
“As I remember it, they were looking for someone to take over some of the maintenance, or help them with the maintenance,” recalls Brian McWaters, pavement performance engineer and chief of warranties for Koch. “They were looking for a five-year warranty but would take alternate proposals. We proposed a 20-year warranty. And we were the only bidders.” Koch also offered a 10-year warranty on the bridges, drainage, and erosion control feature.
If you think 20 years is a long time for a warranty, you are right. According to McWaters, the typical warranty is three to five years. He says contractors don’t want to back projects for longer than that because it takes up too much of their funding capacity unless they are a big company. And typically, when governments do outsource road maintenance, it is with the smaller, more affordable construction contractors.
Saving Time, Money and Lives
Expanding NM 44 was a high-priority project mandated by Gov. Gary E. Johnson. He wanted a good road built at a reasonable cost, wanted it well maintained, and wanted it fast. The New Mexico State Highway & Transportation Department knew it could not deliver on the governor’s request. Using traditional road improvement processes that would build in roughly four- to five-mile increments, it estimated it would take about 27 years to complete the project. The state didn’t have that long. NM 44 has spawned such bumper stickers as, “Pray for me, I drive NM 44.” Though a primary trade and tourist road into the northwest portion of the state, the highway is notorious for its horrific automobile accidents. Enter Koch Performance Roads.
When the NMSHTD outsourced the enhancement of NM 44, it gained three very important advantages. First, it tapped into a cutting-edge company that utilizes a design in pavement construction that has been used in Europe but never in the US. This revolutionary design requires strict specifications for materials in the asphalt mix that reduces pavement volume by 20 percent. Second, according to NMSHDT estimates, it reduced the time of completion from 27 years to only three. Koch plans to finish construction by November of this year. Third, though the state will be liable for normal non-pavement maintenance like mowing, snow removal and signage, it stands to save about $89 million in pavement maintenance costs over the 20-year warranty period. Koch also will maintain the road at a performance level that would have cost the state $151 million. The cost of the warranty is $62 million.
Good Public Relations
Koch also provides services that are not so obvious but of vital importance when providing road maintenance. Take the city of Aspen, for example. When streets superintendent Jack Reed commissioned Koch to take on responsibility for maintaining 30 percent of its streets, it included more than just eradicating potholes, maintaining smoothness, minimizing cracks and warranting the streets for 15 years. They had to keep the inconveniencing of the locals to an absolute minimum. “In Aspen we have some limitations because we can’t do a whole lot of work between Memorial Day and Labor Day because that’s their big season and they don’t want any disruption,” says Koch’s McWaters. “We work interactively. If they know we’re going to do work, they have the mechanisms with the paper and other publications to let the residents know. But it’s our responsibility to inform the city.” McWaters says Koch used its Web site to keep residents apprised of any construction.
The fact that Koch also has signed a contract to do roadwork for the Commonwealth of Virginia is just another indication of a growing trend among governments to outsource the management of their assets to the private sector. Current circumstances demand it and the results support it. And it just makes good business sense.
Lessons from the Outsourcing Primer:
- Governments are finding that growing responsibilities and shrinking financial resources are making it too difficult to maintain assets properly.
- Governments can save time and money by outsourcing road management to the private sector.
- Outsourcing road management to the private sector allows governments to utilize full-time professional companies that use the latest techniques and materials.
About the Author: Ben Trowbridge is an accomplished Outsourcing Consultant with extensive experience in outsourcing and managed services. As a former EY Partner and CEO of Alsbridge, he built successful practices in Transformational Outsourcing, Managed services provider, strategic sourcing, BPO, Cybersecurity Managed Services, and IT Outsourcing. Throughout his career, Ben has advised a broad range of clients on outsourcing and global business services strategy and transactions. As the current CEO of the Outsourcing Center, he provides invaluable insights and guidance to buyers and managed services executives. Contact him at [email protected].