Razor-Thin Margins As Contractors Fight For Stimulus Projects
...putting stimulus projects on the street. With contractors eager to keep as fully staffed as possible, the state is benefitting. Bid prices have been about 20%-25% lower than N.C. Dept. of Transportation estimates, says Barry Jenkins, director of the Heavy-Highway Division of the Carolinas AGC in Raleigh.
In Florida, a June 10 FDOT bid letting resulted in three contract awards for a combined total of $46.5 million for jobs the agency’s estimators had tagged at $90.3 million.
The competitive prices mean state agencies can get more work done. Oregon DOT “is able to contract out more work, which in turn spreads the work out to more contractors,” says Karen Jones-Jackley, ODOT spokeswoman.
“Colorado now is able to move shelved projects forward and add additional work to projects that were scaled back because of the wildly fluctuating market,” says CDOT Executive Director Russ George.
Tennessee also is trying to leverage its stimulus dollars to maximum effect. TDOT already has awarded 193 projects worth $421 million for various projects in all of the state’s 95 counties. Gerald Nicely, Tennessee’s transportation commissioner, says ARRA funds are plugging what would have been a $50-million budget shortfall this year.
Cash-strapped state agencies have struggled to deal with white-hot bidding action and federally mandated deadlines to get stimulus work moving. “The stimulus projects are the only game in town right now,” says Tony Milo, executive director, AGC’s Colorado Contractors Association. “Profit margins are razor-slim or not there at all. This is all about keeping your people working and the equipment from sitting idle in your yard.”
It is not only the small state jobs that are attracting attention. In the mid-Atlantic region, the federal Base Realignment and Closure Act offers numerous jobs in excess of $500 million. Mike Crase, senior manager of the federal services group at Gilbane Building Co., Washington, D.C., says that with fewer mega-projects being let through government agencies, large contractors are finding themselves going up against less familiar, smaller firms. The large construction-management firms, which bank on best-value propositions, are finding it difficult to match some of the bids coming from smaller firms, Crase says.
Mike Gibson, executive director of the Associated Contractors of New Mexico, cautions that despite the consensus that the recession is far from over, the current low-bid scenario may be temporary. “The price of oil is climbing fast, and this will again affect the cost of asphalt,” he says.
Picking a Winner
The California Dept. of Transportation came up with a novel approach in picking a winner: leave it to chance. When six of 11 bidders submitted identical low bids for the first phase of San Francisco’s Doyle Drive reconstruction project, Caltrans District 4 headquarters in Oakland determined the winner lottery-style by pulling ping-pong balls from a container. “It was dramatic as you can get,” says Mike Ghilotti, president of the winning firm, Ghilotti Bros. Inc., San Rafael.
Caltrans is rearranging personnel across the state to handle what is expected to be an unprecedented number of contract awards this summer, says Richard Land, Caltrans’ chief engineer and deputy director for project delivery. “We could be advertising 25 projects a week and maybe up to 40 in the busier periods,” says the 28-year Caltrans veteran. “We intend to do this in an intelligent manner with high accountability standards.”
The cutthroat nature of competition is tough on contractors, but it also imposes risks on project owners as well. “If someone comes in and makes a mistake or low-balls a project, it is important that owners make sure [the contractor] is building it right,” says Rich Thorn, president and CEO of the AGC chapter in Salt Lake City.
With new bidders ranging far afield, some owners are questioning the capabilities of some contractors bidding on their projects, says John Saliba, vice president of Irvine, Calif.-based FTR International Inc. “The most interesting...
