According to a report issued in early April by the American Road & Transportation Builders Association (ARTBA), state and local Departments of Transportation are wasting no time in obligating expenditures from the American Recovery and Reinvestment Act. Approximately 20.7 percent of the $27.5 billion highway stimulus fund has been obligated by 44 states, according to the Federal Highway Administration. All states were apportioned funds on March 2 and have until June 30 to obligate the first $9.3 billion of the stimulus funds earmarked for surface transportation projects designed to create jobs and boost the economy.
Eight states are already paying contractors for construction work performed, which demonstrates just how quickly state and local highway agencies have been able to put the added funding to work.
But if you're bidding on some of the projects funded by the stimulus program, you're probably finding a lot of other contractors bidding on those same projects. Some agencies have reported bids that are much lower than in the past and some agencies are also reporting more bids than in the past for typical projects. In fact some of the contractors bidding on available projects are willing to travel outside of their normal market if they're fortunate to win the bid. Remember, construction firms who normally built new housing and retail developments are still hurting and will go after government work. All this is great news for local and state governments who will be able to stretch the stimulus dollars they receive.
Contractors should be able to sharpen their pencil a bit more this year as a result of lower material costs. Lower crude oil prices, compared to the record highs of a year ago, translates into lower diesel fuel costs to operate equipment and lower liquid asphalt cement prices. I'm sure none of you have forgotten the $700+ and even $800+ per ton prices you had to pay last summer.
So, you may be able to trim your bids and even work off of a slimmer profit margin in order to win a project and put your crews back to work, but chances are you may also have to look at new technology. It's natural to have some reservations about purchasing new equipment in a down economy, but you also have to consider how a new piece of equipment could help you be more competitive. A new paver or roller may be just the solution you need to increase your productivity output, but more importantly an equipment purchase may help improve the quality that generates incentives on a project.
When you start considering how you could execute a project more efficiently and better with the addition of the right equipment, you'll be in a much better position to submit a competitive bid to win the project. And then that equipment purchase becomes an investment and not a cost.
If the competitive nature of current and future stimulus-funded projects continues, agencies benefit by getting more work done, more jobs are created, and contractors will have more projects to bid. Stay in the race by considering how new equipment can give you a competitive edge.
To help you evaluate the equipment solutions available, check out our new Equipment Connection on ForConstructionPros.com.