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Wednesday, September 24, 2008

The Blog Post to Nowhere: Political Economy and the Convenience of Contract

You may have heard, Governor Sarah Palin said "thanks but no thanks" to the "bridge to nowhere" in Ketchikan, Alaska. Well, our fourth branch of government, CNN, has uncovered that Gov. Palin did, however, say "yes" to a "road to nowhere." In all fairness, the road to nowhere was to lead to the bridge to nowhere that was never built.

In an act of courageous reporting, CNN traveled to the site of the road to nowhere, and tried to find someone to take the position that, once the bridge project was cancelled, there was still good reason to spend millions of taxpayer dollars on the road that would have lead to the bridge. As you'll see in the clip (above), they found Meg Stapleton, a McCain-Palin spokesperson, who said that Gov. Palin had no choice - because the federal money was earmarked for the road, and the contract for the road's construction had already been signed before Palin took office. It is beyond my expertise to speak about federal earmarks, though I suspect that a State can return the money once the need for it is obviated, no questions asked. The point about an existing contract is, of course, more interesting to me -- at least, to the extent that it becomes a matter of political convenience, and an unconvincing excuse. People change their minds, why can't governments?

Even before the recent downward spiral of our financial markets, politicians have analogized the federal purse to the home budget. That is, just as each American family's budget, the government shouldn't be spending more than it can afford. (Which, of course, is in part to blame for our recent mess - that both the American family and the government are spending more than they can afford). But, I digress. The point: government contracts are no different than our own, private contracts, and people renege on deals all of the time. If I hired a contractor to build a fence around a pool that I was going to construct in my backyard, but then decided against building the pool, I would also renege on the contract to construct the fence. Sure, I might have to pay the contractor damages (likely, forfeit a deposit), but certainly not the full amount of original fence contract. Similarly, I'd rather pay a few million in taxpayer money in damages to a road contractor than more millions for a road to nowhere.

I wonder how effective it is as a political device to say to the American people that "a contract had already been signed." I wonder if the societal norm is to view a contract as an iron clad commitment. Or, is a contract seen as something there is always a way to weasel or pay your way out of? I can't be sure, but I suspect the latter. Which would make "the contract was already signed" an unconvincing political line.

[Meredith R. Miller]

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Comments

I believe that every public contract (all that I have ever seen) have a termination for convenience provision. The government has the right to terminate the contract and pay the contrator its incurred expenses and some O/H and profit on those expenses. Even if the contract was awarded Alaska should have been able to cancel at a minimal cost. Their explanation is likely false.

Gavin Craig
www.twincitiesbusinesslitigation.com

Posted by: Gavin Craig | Sep 24, 2008 7:22:53 AM

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