Businesses compete to offer the best products and services at competitive prices. In a capitalistic society, the first to introduce novel or revolutionary concepts reaps the rewards, and society benefits as a whole. Ideally, the government protects the rights of companies to compete in our country. But when laws are wrongfully passed, companies, as well as legislatures and taxpayers, lose.
The Impact of Senate Bill 372
On Friday, April 16, 1999, Tom Rueschhoff, P.E., a regional engineer for Advanced Drainage Systems, Inc. (ADS), a leading producer of polyethylene pipe based in Columbus, Ohio, felt the impact of what a wrongfully passed law could do. A colleague of Rueschhoff's from the Michigan Department of Transportation informed him that just weeks before, the Michigan Senate passed a Budget Appropriations Bill that prohibited MDOT, as well as any other government agencies, from using not only ADS pipe, but any HDPE (high density polyethylene) pipe, in the state of Michigan. Senate Bill 372, Section 606, included language drafted by ADS' primary competitors- concrete pipe manufacturers- that created a noncompetitive monopoly for concrete pipe in the state of Michigan. Should the Bill be passed by the House, ADS and other HDPE manufacturers would be prevented from doing business in the state. Caught totally off guard by the situation, Rueschhoff realized that his company must do everything necessary to prevent the Bill from becoming the law.
Building the ADS Case
Early Monday morning, Rueschhoff began intense research to devise an action plan that his company could use to defeat the Senate Bill in the House. A series of calls to consultants, the Association of Underground Contractors, the Michigan Road Builders Association, state Representatives for the districts of ADS' Owosso plant, and many others, began laying the ground work for Rueschhoff's plan. His first order of business was to schedule a hearing before the House subcommittee. The following week, while calling to set up that meeting, Rueschhoff learned that the Bill would be introduced the next day. Rueschhoff, who believed he had a few weeks before the Bill's introduction, had to improvise his plan.
Within 24 hours, Rueschhoff and his associates found themselves in Michigan testifying before the House subcommittee on the seriousness of the proposed legislation. Accompanied by the deputy director of the Michigan Department of Transportation, ADS demonstrated how passing such a bill could potentially cost the Michigan taxpayers $4 million to $6 million a year as a result of the lack of fair competition. Not only would the Bill cause the price of concrete pipe to rise and put taxpayers in the HDPE industry in Michigan out of work, but DOT engineers would also lose their right to specify requirements for projects.
After following up with the chairperson to see where the House subcommittee stood on the issue, Rueschhoff was confident of ADS and MDOT's success in illustrating the seriousness of the issue the chairperson (Rep. Judy Scranton) would recomm that Section 606 be removed entirely from the Bill. Unfortunately, the events that unfolded over the next few weeks proved to Rueschhoff that there was much more work to be done.
How the Bill Came About
In the state of Michigan, as well as throughout the country, manufacturers of concrete pipe have been losing market share to a newer competitor: the plastic pipe industry. Since the emergence of HDPE, it has been repeatedly used with success, and its superior structural strength, ability to resist abrasion and corrosion, and light weight has been increasingly attracting the attention of DOT officials across the nation. In the state of New York, the director of the materials bureau for DOT labeled HDPE a "durable, well performing and cost-effective material" and noted the increased awareness among industry players of polyethylene pipe's "favorable performance." In addition, every year since 1996, NYSDOT's use of polyethylene pipe has exceeded its use of concrete pipe.
Nationwide, statistics such as these have aided in the increasing success of polyethylene pipe. In an attempt to protect its position, the Concrete Pipe Association leveraged its long-term relationship with the Michigan Senate and arranged to add a clause to the Annual Transportation Appropriations Bill that in essence eliminated HDPE as a competitive material.
To the members of the Michigan Senate, the clause seemed harmless. The proposed amment merely required that any manufactured pipe used should "meet the standards established by the American Society for Testing and Materials (ASTM)," a leading and respected organization. But to the plastic pipe industry, the amment had a substantially detrimental effect. For unbeknownst to the Michigan Senate, the ASTM does not currently have standards for polyethylene pipe more than 12 inches in diameter. Although the plastic pipe manufacturers have representatives on the ASTM, the concrete pipe industry's dominance of the organization is solid, and the polyethylene pipe industry has yet to penetrate that dominance.
In the past, ASTM's refusal to set standards for polyethylene pipe has never been an issue. MDOT, along with DOTs in all other 49 states, approves the use of polyethylene pipe up to 48 inches in diameter through standards set by its own professional organization, American Association of State Highway and Transportation Officials (AASHTO). Appropriate testing for HDPE pipe by AASHTO has proven the pipe to be a viable alternative to reinforced concrete pipe. Unfortunately, most legislators are unaware of the differences between the two organizations' standards.
By wording the proposed amment to "require that all pipe used meet the standards established by the American Society for Testing and Materials," the concrete pipe industry tried to overturn a technical decision already established by the MDOT to approve the use of polyethylene pipe in its projects. Should the Bill not be amed, MDOT would be forced to use concrete products in situations in which it determined polyethylene pipe to be a better alternative. HDPE would be legally barred from use in the state of Michigan, and the concrete pipe manufacturers would establish a "legal" monopoly.
The Political Process
Initially learning of the passing of Senate Bill 372 with the inclusion of Section 606 - the amment requiring the use of ASTM standards - both surprised and outraged MDOT as well as major manufacturers of plastic pipe. MDOT did not want to be prohibited from making the technical decisions it is professionally trained to make and was willing to contest the Bill alongside ADS and other polyethylene pipe industry leaders.
Following ADS and MDOT's testimony to the House subcommittee and a full month of meetings with subcommittee members, the subcommittee was fully aware of the issues involved in the legislation and in agreement with ADS that the amment should be altered. On May 21, the House subcommittee and full appropriation's committee revised the wording of Section 606 and approved House version Section 616, which stated: "All construction materials shall meet nations' standards."
ADS believed it had fulfilled its objective. However, six days after the appropriation's committee vote, the revised Bill went to a full House (110 members) vote. Just prior to the final vote, a state representative (Rep. A.T. Frank) made an amment to include the original language proposed by the Concrete Pipe Association- the same amment that had been approved by the Senate and removed by the House subcommittee. The legislation passed 84 yeas to 26 nays, and ADS found itself in an even more precarious position.
Facing the very real possibility of losing the business of one of its major markets, ADS became even more aggressive in its attempt to keep the Bill from becoming law. The company drew all its resources together and enlisted the help of a professional lobbying firm, Governmental Consultant Services, Inc. Due to a technicality discovered by the lobbyists, ADS was successful in having the Bill sent back to be reevaluated by a conference committee.
Eight days of intense lobbying and educational efforts followed. On June 16, 1999, the committee approved the bill with revised language that states:"If the department uses manufactured pipe for road construction drainage, the department shall require that pipe used under certain load bearing conditions beneath the roadway meet the standards established by the American Society for Testing and Materials (ASTM) or American Association of State Highway and Transportation Officials (AASHTO). . . ."On July 27, the Bill was signed by the Governor.
ADS, with the help of other polyethylene pipe manufacturers and MDOT, managed to stop the concrete pipe industry from forming a noncompetitive monopoly in the state of Michigan by aggressively educating the involved parties about the issues incorporated in Senate Bill 372. Playing the political game was costly, but fortunately, ADS was able to gather and implement the resources necessary to achieve a political victory.
"It's entirely inappropriate for a legislative Bill to include specifications for pipe," Rueschhoff said. "Had the legislators understood the potential of such wording to create a monopoly for the concrete pipe industry and the detrimental effects such legislation would ultimately have on taxpayer, the Senate would never have passed the amment.
Legislators are responsible for protecting the best interest of taxpayers at all times. It is in everyone's best interest to keep legislators from making uninformed decisions that negatively affect their constituents."
ADS is confident that the use of polyethylene pipe will continue to increase in the state of Michigan as well as in other states. The company is just as confident that as the concrete pipe industry's market share continues to give way to HDPE pipe, the attempt in Michigan could be repeated in another state.
The plastic pipe industry has a responsibility to lead the way in providing and promoting awareness among the DOTs, engineers and legislatures. Education will reduce susceptibility to blinding maneuvers by competitors. Legislators will be able to make informed decisions about the issue, and DOTs will be able to detect warning signs when they first appear.
According to Rueschhoff, "The plastic pipe industry must continue where the Michigan story leaves off. We've already solidified our position in this market. As HDPE pipe continues to gain market share, there's no doubt that the concrete pipe industry will continue to attempt to stymy our progress. It will take the combined efforts of leaders in the industry to maintain our products as a viable alternative to concrete pipe."
For more information, contact Advanced Drainage Systems, Inc. 4640 Trueman Boulevard, Hillard, OH 43206. Tel.: 1-800-821-6710.