Geographic preference in FHWA and FTA contracting—balancing competition with local hiring preferences

By Mary Ebeling
For 40 years state, local, and tribal governments that wished to use local hiring preferences for transportation projects have been prevented from doing so by federal restrictions barring this consideration. The restriction prevents governments from offering workforce development and employment opportunities to local people directly affected by an infrastructure project. There is increasing recognition at all levels of government that transportation projects have the potential to stimulate local economies through workforce development, job access, and local economic development. Now FHWA and FTA are proposing new rules and launching a pilot program to potentially allow use of local hiring programs for these projects.
USDOT announced these changes in two documents. First, USDOT issued a Notice of Proposed Rulemaking on March 6, 2015 that amends current regulations to allow geographic hiring preferences in federal grant awards, except in areas explicitly prohibited by federal statute. In effect, this allows states and local governments, as grant recipients and subrecipients, to apply local hiring preferences in federally-sponsored contracting.
Second, USDOT published a notice of a complementary pilot program, Special Experimental Project No. 14-Local Labor Hiring Pilot Program. This pilot seeks to determine if lifting these hiring preferences for recipients of FHWA and FTA grants will restrict competition, or if it is consistent with a competitive bidding process. The pilot also takes the additional steps of allowing states and local grant recipients “to utilize social and/or economic contracting requirements in order to evaluate the impacts to the competitive bidding process.” This means, in addition to geographic hiring preferences, this pilot program specifically allows economic-based, i.e., low-income and hiring preferences for veterans.
Not every group is excited about this pilot program. Some national organizations, such as The American Road & Transportation Builders Association, quickly came out in opposition to the pilot test, citing concerns about open competition and stability in the existing workforce.
Despite skeptics, others see the opportunity and potential benefit for local communities building transportation infrastructure. As a recent post in the USDOT Secretary’s blog, The Fast Lane, notes:

DOT grant recipients tell us that more local hiring would be a win for residents and for the community at large. It can help people gain good-paying jobs, and even new skills that can help them enter into a new trade.

Mary Ebeling is a Transportation Policy Analyst at SSTI.