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Articles
"Cities Find Bids
Dwindling as Prices Rise" (c) Dean Narciso, Engineering News Record, July 13, 2008
The planners of Dublin's World War II memorial got a
shock when they opened the single bid for its
construction: A project they expected to cost about
$337,000 would cost $200,000 more.
Contractors who are skittish about unstable prices for
fuel and construction materials are overbidding, or
simply not bidding, on municipal projects.
Bidding high allows contractors to hedge their risks by
covering unexpected price hikes. But doing so, or not
bidding at all, might also limit bidding competition and
cause project delays.
Dublin's new roundabout being built at Avery-Muirfield
and Post roads also exceeded estimates. The low bid on
what engineers expected to be a $1.8 million traffic
circle came in at $2.3 million and with just four
qualified bidders, said Paul Hammersmith, Dublin's
engineer.
“Given the economic climate, I would have thought we'd
have more bidders,” Hammersmith said.
Dublin opened bids on May 29 for the city's long-delayed
Grounds of Remembrance World War II memorial.
Cities typically reject bids that are more than 10
percent over their estimated project cost, and Dublin
dumped its sole bid for being too high.
Dublin officials interviewed contractors who didn't bid
and learned that “fluctuation in fuel, metals, concrete
and stone costs has caused contractors ... to make
greater than normal allowances to assure that by the
time construction contracts are signed, their cost
assumptions are covered,” according to a city memo.
Those who monitor construction projects say that more
contractors statewide appear to be covering themselves.
“There's greater risk in putting in a fixed price bid
today than there was two years ago,” said Chris Runyan,
president of the Ohio Contractors Association. “We have
never seen price increases at this rate in all of the 25
years that I've been involved in the transportation
industry.”
Dublin has since upped its estimate for the memorial
project to $470,000 and is advertising for new bids,
said Fred Hahn, Dublin's director of parks and open
spaces.
McDaniel's Construction was one of several interested
companies that didn't bid on Dublin's project, blaming a
hypercompetitive market and volatile prices for not
wanting to lock into a long-term contract.
“If the price of fuel or materials goes up, that just
comes out of my pocket,” said Eric Girard, the company's
president.
Girard said competition has been intense this year from
contractors seeking work. But that doesn't always
translate into lower-priced projects.
“It is more competitive. But it's also harder to get
work,” Girard said. “And with the jobs you get, it's
harder to make money on them. They're fewer and farther
in between.”
The American Road Transportation Builders Association
reports that nationwide iron and scrap steel prices are
up 93 percent over last year; asphalt paving is more
than 8 percent higher.
“If you're bidding a project, where you won't be doing
any work for three or four months except for planning,
it's hard to predict those costs,” said John Mahoney of
the Ohio Municipal League.
Last week, Hilliard officials opened a lone bid for
generator work to prevent flooding under the city's two
railroad underpasses. The bid, from the Righter Co.,
came in more than $20,000 over the engineer's estimate
of $65,000 and was rejected, said Clyde Seidel, the
city's engineer.
Hilliard's street paving, which can be completed within
a few months, has not been a problem, he said.
Some suburbs, including Worthington and Westerville,
report that bids are coming in near estimates, but that
those estimates are much higher than a year ago.
Franklin County Engineer Dean Ringle said that bids for
major road projects also have been coming within
estimates.
“But it's not making us feel any better. The estimates
were already taking into account the higher cost of
materials,” Ringle said.
Asphalt and concrete rose 11percent compared with 2007,
Ringle said.
The engineer's office is contending with higher fuel
costs plus fee hikes from suppliers facing similar
costs.
The Ohio Department of Transportation also has seen a
decrease in the number of companies bidding on their
projects, said Scott Varner, ODOT spokesman.
Because state projects can take years to complete, their
contracts often include sliding adjustments to account
for unexpected cost changes that can help mitigate the
risk factor, Varner said.
Still, experts say the uncertainty is worse than they've
ever seen.
Steel suppliers have told many contractors that they
will guarantee their prices for no more than 30 days.
And asphalt suppliers have included the phrase “call for
market price” in marketing brochures that typically have
included firm pricing.
“It's like pricing for fish,” said Dublin's Hahn.
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