Prevailing Wages, Side-By-Side Bids, and School Construction Costs

Abstract

School districts in Maryland may ask contractors to submit two bids for the same construction project: one bid includes the payment of minimum prevailing wage and benefit rates, the other bid does not. Results from a fixed effects estimate of an unbalanced panel of nonunion roofing contractors indicate that the gap between the two bids decreases as the level of bid competition and accumulated contractor bid experience increases. The bid gap is also influenced by a contractor’s eagerness to win a project. Additional analysis illustrates how the sample average bid gap of 9.9 percent disappears under particular bid behaviors and outcomes.