As a result, some segments of the market have yet to see any stimulus money.
"As a building contractor, as opposed to a highway contractor, it takes a while [on] a capital expenditure project for an architect to produce the drawings that can be put out to bid," says Dave Higgens Jr., president, HMH Builders, Sacramento, CA. "What we have been told is that the GSA will look at alternative delivery methods, such as design/build, to be able to produce the documents quickly. We are cautiously optimistic that we are going to see that work, but we haven't seen it yet."
"We are only five months into a multi-year stimulus program," Sandherr emphasizes. "The stimulus will keep our industry alive, but it will not turn around a trillion dollar construction industry overnight.
"The stimulus is working," he continues. "It is just not working fast enough for many construction workers and many communities."
Competition proves fierce
Jim Andoga, president, Austin Bridge & Road, Irving, TX, says you really can't distinguish between stimulus-funded projects and other projects the company bids.
"Our parent company bids on hundreds of projects every year," he states. Stimulus funding just means there are more opportunities to bid jobs than there would be otherwise. Yet, that doesn't necessarily translate into more work. "Our problem is that we have a hit ratio of about one of every 20 jobs this year," says Andoga. "In previous years, it has been much higher than that."
This stems largely from increased competition. "We bid a fairly typical project a week ago," comments Art Daniel, president and CEO, AR Daniel Construction Services, Cedar Hill, TX. "It was a rural type of water project, where a lot of EPA state revolving fund money is going. It is a small project, a $1.5 million estimate by the engineer.
"Normally you might have 15 or maybe 20 contractors pull bids on that. Of that number, six might turn in bids," he continues. "With this project, there were over 40 plan holders and 27 bids were turned in." The lowest bidder came in at just under $1.1 million -- 27% below the initial estimate.
"I think it is fairly typical of what we are seeing in a lot of projects, both in the transportation highway business and the utility business that we operate in," says Daniel. "It is because a lot of people are moving from other markets. That is bringing the prices down. People are just trying to get enough money in to keep their investment in their equipment working."
According to Doug Pruitt, chairman and CEO of Sundt Construction, Tempe, AZ, "Ultimately, that may be problematic. You are going to have some people pick up this work who do not have the skill set or the experience with some of the agencies they are going to be working for. You could see some significant increases in costs or delays on those projects because of that."
Consequently, Pruitt advises fellow contractors to avoid the temptation to take no-margin jobs just to keep equipment and employees busy.
"When we take on bad work because we have jumped in a market that we don't understand, or when we take on a project with no margin and we have missed our cost, now we are paying for it out of pocket," he asserts. "We do that as an industry for all of the wrong reasons. Contractors load up with work that turns out not to be good work. It costs them money. It erodes their net worth. It is not a time to load up with work or move into markets. Be prudent and be cautious about jumping into markets that you don't know anything about, because it could be what takes you down as a company."
Instead, he recommends right-sizing the organization to the markets you're in and for which you have the required skill sets. Unfortunately, that probably means layoffs and cutting costs.
"But you need to be liquid," he stresses. "You need to be prepared, too, which means investing in certain things to be prepared when the market recovers. You need to be prudent.