Sam 'Stupid' Smith and secrecy in Harrisburg PA - COMMENT

Jose Lopez head of Cintra in North America more than once has explained in his accented but very clear english his company's approach to bidding for toll concessions: "We study very hard, we examine every aspect, we bring in our experts, sometimes other experts, we do traffic and revenue studies, not just one sometimes we get another. We think about the risks, we look at the costs, what will it cost us to borrow, what is the rate of return our shareholders expect.

"We do lots of due diligence.

"And so we work out what it is worth. We bid that amount. We never ask what is the competition going to bid.

"We never try to get it cheap. If we bid a billion over the competition we have no regrets. We paid what we thought it was worth."

Cintra has obtained its interest in the 407ETR concession in Toronto, in the Chicago Skyway, the Indiana Toll Road and the concessions in Texas through paying what it judged these were worth. It has paid several billion dollars more in aggregate than the offers by its competitors, Lopez agrees, but he says that's simply what you have to do to get into business under closed bid rules. It's a price of doing business.

Lopez' shareholders of course would love it if he were able to get toll concessions not for what his company judged they were worth but for one dollar more than the next competitor.

If we take the comments of Sam Smith, state house GOP leader, as serious comments rather than grandstanding for a Rah, Rah kneejerk reaction of approval from journalists who are professionally committed to open government, then he'd have the state abandon the "secrecy" surrounding the bids for the Pennsylvania Turnpike concession. He'd transform a standard blind bid procurement designed to get best offers into an open declamation auction.

He'd get for the state's taxpayers not what the high bidder thought the concession was worth but the 2nd bid + $1. He could leave hundreds of millions on Jose Lopez' table.

That would be great for Cintra shareholders but stupid for Pennsylvania taxpayers. 

TOLLROADSnews 2008-04-29