Could anyone comment on whether or not awarding contacts to the second-lowest bidder (whose bid meets technical merit) has ever been practiced by governments? Or other alternative auction strategies.
Most competent contracting doesn't go for lowest-cost bidder. Rather, bids are generally scored for some metric, and a good contracting agency should additionally be evaluating the contractors to figure out if they actually are capable of performing their bid without cost overruns.
One of the contentions of Alon Levy [author of the blog in question] is that the primary reason for inexcusably high costs in the US is the hollowing out of agencies to the point that they can't do this sort of evaluation anymore.
I've heard repeatedly that California in particular does not have enough engineering staff to manage contractors for state projects. That's a result of the US's obsession with neoliberal economics which sees those people are a waste of money and an impediment to getting things done.
My dad worked for the government doing management and oversight. It takes a lot of work to evaluate and reject bad low ball bids. Even more work to create bids that you can hold contractors to and to weed out shysters.
If you have to put this much effort into managing contractors and avoiding shysters, at what point does it make more sense to just not use contractors at all, and do it yourself?
This reminds me of when I used to own homes. It was generally easier to just do some home-repair job myself than deal with the hassles of finding a good contractor, and then having to deal with more hassles if the contractor didn't do it right.
I completely understand that dilemma. Outsourcing allows you to tap economies of scale and line up the tasks with contractors experience and capabilities. But you pay for that with another layer of management.
I suspect that there isn't a magic set of incentives that replaces appropriate levels of funding, good faith and sufficient oversight.
Most large infrastructure projects have a large number of trades for a short amount of time
Contractors have people,experience and equipment that would be cost prohibitive to maintain full time but can be relatively inexpensive when hired for just their needed duration.
The kinds of work that you describe fall more under maintenance and basic repair, which most public agencies have full time employees that perform that roles. For instance the NYC subway has signaling workers for a constant stream of signal work, track workers to maintain track and sign workers for endless lifecycle replacement of signs. New construction work, like tunnels and stations is done by contractors.
If sufficient regulatory oversight is politically infeasible, I would think that the government directly employing construction staff would be politically impossible.
I got no source for this, but I've heard about this happening before on European construction projects (lowest 2 bidders being excluded for being too low).
Generally bid that is not "technically complete" .i.e. does not demonstrate a real ability to undertake and complete the project can be rejected. There is some engineering discretion to this.
One of the contentions of Alon Levy [author of the blog in question] is that the primary reason for inexcusably high costs in the US is the hollowing out of agencies to the point that they can't do this sort of evaluation anymore.