By Morgan Hughes, Casper Star-Tribune Via Wyoming News Exchange
CASPER — When all is said and done, the state of Wyoming will have shelled out more than $42 million to construct a new office building in Casper. Hundreds of people will have worked on the structure and dozens of different companies will have had a hand in its completion.
The project is a sizable public investment, and given the huge sum, some have raised concerns over who the state has chosen to invest in. The general contractor that won the $33 million construction bid, FCI Constructors, is a Colorado-based company.
Wyoming has a handful of laws in place meant to keep public works money in the state. Contractors have to hire Wyoming workers unless they can prove none were available. General contractors have to hire a certain number of Wyoming-based subcontractors, and contractors that qualify as Wyoming residents can get a 5 percent preference on bids.
But “local first” advocates contend some of those laws are ineffective and don’t actually benefit Wyoming companies.
“It’s not working well for the general contractors,” Robert Moberly, president of Wyoming Financial Insurance, said. Moberly has been a longtime proponent of keeping public money local and founded an organization, 307 First, to that effect.
The law isn’t working because of the way the state determines residency, Moberly said. An individual is considered a Wyoming resident once they’ve lived in the state for a year; that’s pretty cut and dry. For a contractor to qualify for in-state residency status and the benefits it comes with, however, they need to have a physical office and at least 15 employees inside Wyoming.
Moberly said this criteria causes a problem because out-of-state companies can set up satellite or “shell” offices, as he called them, and qualify for in-state residency, even if their headquarters and owners are out of state.
“We then become a colony to produce money for the mothership somewhere else,” Moberly said.
The Casper state office building is a sort of case study for this issue. Of the seven general contractors that submitted bids for the $30 million project, only two were Wyoming-owned companies. But because of how the state determines residency, all seven are considered in-state contractors, according to state records. Because all seven companies qualified for Wyoming residency, none of the companies could leverage the 5 percent bid preference. (If a Wyoming company is bidding against an out-of-state company, and the out-of-state’s bid is lower by less than 5 percent, the in-state company still gets the contract.)
As the State Construction Department’s construction supervisor, Jim Chaput understands the dilemma. But there’s nothing the state could have done differently, he said. The state is legally obligated to award the contract to the lowest bidder and would have no way to contest a company’s residency status if that company meets the state’s qualifications.
Plus, Chaput said, there aren’t that many truly Wyoming-based general contractors that can bid on a project as large as the state office building.
“They have to be able to bond a project of that size,” he said. “There’s very few that can, especially if they don’t bid it.”
Before a contractor can submit a bid on a project, they need to be able to get approved for a surety bond that basically ensures the project’s bills will get paid. To qualify for the bond, a contractor needs a sturdy financial and workmanship track record and the collateral to back up the risk.
Chaput said there just aren’t very many Wyoming general contractors that can bond a $30 million project. Each of the experts consulted for this story said the same thing.
Pat Allen, a bond manager at Wyoming Financial Insurance and an advocate for Moberly’s 307 First program, agreed with Chaput. Allen has sat on the boards of both the state contractor association and the state construction coalition.
“It’s not the state’s fault; there are rules set up they have to follow,” Allen said. “The downside economically of that is they’re shipping their money out of state.”
Allen said even if an out-of-state company hires local workers (as they’re legally required to do) and buys products in state, Wyoming is still losing public money because of the administrative costs the company is likely paying out of state to lawyers, bankers and the like.
Rather than using the number of employees as the measure for qualifying as a resident company, Allen suggests making the criteria ownership based. But he isn’t very optimistic about the Legislature’s appetite for considering such a change.
He said it’s been difficult to lobby the Legislature, and he’s worried about rocking the boat because the local preference rules benefit subcontractors.
“They don’t want to lose preference altogether,” he said.
FCI’s vice president of operations, Becket Hinson, said he understands why some may be wary about awarding such a large contract to an out-of-state company.
FCI was founded in Grand Junction, Colorado, and now has nine offices across six states. But he said even though FCI is headquartered outside of Wyoming, the company is still an active participant in the state.
“We’ve been working out of this office in (Cheyenne,) Wyoming for 13 years,” Hinson said, adding the office has about 25 employees and almost all of them are Wyoming residents.
He also said everything they can purchase locally, they do. That’s not always an option for every project. Some things just aren’t made in Wyoming. The new state office building calls for a handful of elevators, for example. That’s something FCI had to seek elsewhere.
“But by and large the work is being done by Casper contractors,” he said.
Indeed, of the 27 different subcontractors FCI plans to work with, according to a document submitted by the company to the State Building Department, 11 are Casper companies and 17 are Wyoming-based. Of the remaining 10 out of state subcontractors, three were awarded because no Wyoming company submitted a bid for the work.
Hinson said this was intentional. While state law does require the majority of subcontractor work be awarded to Wyoming companies, the law doesn’t require those companies be local to the project. Hinson said FCI actively solicited Casper subcontractors for the state office building.
“We don’t have control over which contractors submit a bid,” Hinson said, “but the subcontractor community in Casper was very responsive.”