Study shows savings through Wicks Law

Real Estate Weekly, July 21, 1993

In a setback for Governor Cuomo's and Mayor Dinkins' efforts to repeal the Wicks Law, an eye-opening independent study contradicts their assertions that the Wicks Law leads to higher costs on public construction jobs in New York State.

According to Professor Brian Becker of the School of Management at the State University of New York/Buffalo, an expert in the field who conducted the study, "The results in this study ... show that separately bid jobs ... not only had lower bid costs but also lower final costs" than single contracts under a general contractor.

Becker notes that other states, such as Minnesota, have moved beyond the acrimony of this debate and developed policies that combine the bid competition of separate primes with the coordination of single prime projects. He recommends consideration of these alternatives in New York.

The results of the study are likely to be controversial since Mayor Dinkins, Governor Cuomo and the editorial boards of several leading newspapers around New York State have called for repeal of the Wicks Law.

Said George V. Whalen, executive director of the Plumbing Foundation City of New York, "For at least the last 20 years, governors, mayors and editorial boards have found the Wicks Law to be a convenient whipping boy for the failures of the public construction system. This study -- independent, academic, statewide -- blows their arguments to pieces. Maybe now we'll begin to have a real dialogue on how to improve the public construction process. The cry of 'Repeal Wicks' just isn't good enough any more. The problem, as we've said, is not how construction projects are bid, but how they are managed."

Other findings of the study:

* Based on a statistical analysis of project bid and final costs in three New York sate agencies for 12 years (from 1980-1992), single-prime projects had a 2.9 percent higher final cost than equivalent projects organized with separate prime contractors

* A parallel analysis, drawing on data from F.W. Dodge and focusing on bid results in the first half of 1992, also found that single prime jobs were costlier. These results are consistent with evidence from states where separate and single prime bids are taken for the same jobs (New Jersey and North Carolina), which suggests that separate prime contracts are cheaper because they result in lower bid costs

The study was funded by a grant from the Electrical Contracting Foundation, a not-for-profit educational foundation established by the National Electrical Contractors Association (NECA).

Becker is professor of Industrial Relations and Chairman of the Department of Organization and Human Resources at the School of Management, State University of New York at Buffalo. Becker's work is regularly published in leading journals of human resources and labor problems. He is currently completing a study, funded by the National Science Foundation, of unions and corporate takeover activity.

Data was provided by three separate New York State construction authorities, two of which (Office of General Services and Facilities Development Corporation) manage separate prime projects exclusively, and one (University Construction Fund) that uses only single prime projects. All projects had $5 million values or greater.

A copy of the full study is available by calling 212-686-4551.