Over a Century of Wasted Tax Dollars

The Separations Act – Throwing Away Tax Dollars Since May 1, 1913

By Jon O’Brien

President Theodore Roosevelt was among the admirers of Pennsylvania’s new Capitol building at the dedication ceremony on Oct. 4, 1906.

“This is the handsomest state capitol I ever saw,” the president said as he entered.

While it was a magnificent building, the project was way over budget — three times more than the legislature allocated.

The subsequent investigation resulted in a law that, while well-intended at the time to protect taxpayers from fraud, is no longer relevant today. Instead, it is costing taxpayers money because it requires inefficient construction methods on public projects.

That $7.7-million Capitol overrun — the equivalent of more than $211 million today — triggered a probe that revealed grafting. Capitol Architect Joseph Huston, Superintendent of Construction James Shumaker, General Contractor John Sanderson, State Auditor William Snyder, and State Treasurer William Matheus were sentenced to prison.

With little financial stewardship, each convicted individual profited tremendously. But this sort of illegal activity wasn’t just happening at the Capitol project — it was the norm on public projects at the time.

Fast forward to 1913. Public outrage over the scandal remained. There was pressure on public officials to do something. Republican Gov. John Tener, a former congressman and major league baseball player signed the Separations Act.

It mandated multiple prime contractors on all public construction projects. The thought was that the more eyes there were on the project, the less likely that there could be collusion for fraud.

Perhaps 110 years ago, enacting the Separations Act made sense due to the circumstances at the time. Other states imposed similar rules.

But in this day and age, every cent can be easily tracked. All other states have done away with their laws because they recognized the laws were outdated and that providing options in construction delivery methods is the most efficient way to spend tax dollars on construction.

Pennsylvania continues to cling to its law. Here’s how that is hurting taxpayers by driving up the price of constructing public buildings.

Requiring multiple prime contractors — one for HVAC, one for electrical, one for plumbing, and one for general trades — means the owner must bid out and manage four separate contracts.

The primes are not contractually connected, and this impedes communication with each other. This lack of contractual relationship also hurts the communication between the architect and the primes. Each prime contractor and the architect are directly contracted with the project owner — like a school district, municipality, or other government entity — and because of that, all communication runs through the project owner. (continued)