Bidding Frenzy in Southwest a ‘Public Owner’s Dream’

Bids are coming in below estimates, but protests are on the rise.

The intense need to sustain workloads is driving some general contractors into vigorous, sometimes contentious, competition for public jobs.

“We are seeing anywhere from 20 to 30 bidders on public works jobs,” says Mandi Lindsay, government affairs specialist with the AGC Las Vegas Chapter. “Contractors are hungry. They are bidding below the expected value of the project, simply taking a hit to keep their people working.”

This is especially true in Las Vegas, where one mega-project cancellation after another has put thousands out of work.

“It’s a public owner’s dream right now because the projects are coming in so low,” Lindsay says.

“We’re seeing very favorable bids, which has been very good for the state,” says Scott Magruder, Nevada Dept. of Transportation’s public information officer. The first ARRA-funded project to be awarded by the state, a roadway reconstruction of Interstate 80 in Pershing County, received a low bid of $10.8 million from Fallon, Nev.-based A & K Earth Movers. The engineer’s estimate had been $12 million to $15 million, Macgruder says.

As bids come in lower than estimates, DOT’s have been scrambling to fill the gaps in order to assure that the stipulated 50% of stimulus funding is allocated by the end of June.

“NDOT added three additional projects because the bids on the original ARRA-funded projects came in lower than what we had estimated, to the tune of over $10 million,” Macgruder says.

Arizona’s Dept. of Transportation has benefited from the low bid situation. Since May, total project bids have resulted in approximately $56 million in savings over programming estimates, including $7.3 million from the 15 ARRA-funded projects that have been awarded so far, says Laura Douglas, public information officer with the Arizona Dept. of Transportation.

However, some owners see a downside. “There are some concerns as an owner about the low bids,” says Tauny Woo, Acting City Engineer of Phoenix. “It may appear that low bid is great, but in reality, nobody wins if a bid is too low. Sometimes we may ask them to verify bids.”

Mark Minter, executive director of the Arizona Builders’ Alliance, says 28 firms bid on a recent fire station project, resulting in a low bid of $2.2 million. Two years ago a similar station went for $3.8 million, he says.

“We have noticed a significantly larger number of bidders or firms submitting Statements of Qualification for projects,” Woo says. “We had a CMAR advertised three years ago for a project estimated at $2.5 million and we had to advertise it twice because we didn’t get any interest the first time. In just the past six months, projects in that range have been getting 20+ firms submitting.”

In some cases, lower bids have resulted from contractors bidding outside of their normal comfort zone, such as residential contractors switching to commercial. “Depending on the trade, some of the work is very different and they may not know the shortcuts or have the experience in that sector to make an effective evaluation on what the project should cost,” Lindsay says.

Mike Gibson, executive director of the Associated Contractors of N.M., cautions that these low bids may be temporary. “The price of oil is climbing fast and this will again affect the cost of asphalt,” he says.

100% of New Mexico’s $169-million ARRA allocation is now under contract, and contractors are ready for more. “This stimulus program was only a down payment on aging state and federal infrastructure and it is imperative that President Obama and Congress increase and pass MAP-21,” Gibson says.

Another downside to the current feeding frenzy is a rise in bid protests. According to Douglas, one of ADOT’s ARRA-funded projects to widen I-10 in Maricopa County is under protest from the second lowest bidder, who is claiming that the apparent low bidder was non-responsive and is not a responsible contractor. A ruling is forthcoming.

Lindsay says some of her AGC’s members have complained that the Clark County Public Works department has been holding up requests for bids because of fears of costly bid protests. The county recently received a protest over a licensing technicality. “It was an ambiguity that had been out there for a long time, but now people are looking through everything with a fine-tooth comb for loopholes,” she adds.

Some firms are using the slowdown to make adjustments that can pay off once the economy revs up again. “Many firms are seeking feedback from selection processes to help them improve for the next project,” Woo says. “It wasn’t unusual for some firms to seek feedback before, but it is definitely considerably more who do so now.”