The Impact of the Stimulus on Public Bidding

By: Daniel M. Drewry

For those accustomed to doing public work, it comes as no surprise to hear that the number of bidders on a per project basis has increased. The economic downturn left the private sector credit-starved, and caused more contractors to turn to public projects to fill capacity. The stimulus has and will continue this competition. Michael Moore reported in the September 28, 2009 ENR Cost Report that the increased competition, in combination with stabilized material costs, has resulted in many states seeing dramatically lower bid prices, freeing up additional funding for more projects. On highway projects, for example, Moore pointed to the stabilization of steel and cement prices as one factor leading to lower bid prices as the bidder does not have to include an escalation factor in its bid. More significantly, the stiffer competition, whether in sheer number of bidders or quality of bidders, has caused some contractors to take jobs at cost or below cost simply to keep their doors open.

As the flow of stimulus funds increases and the bid prices decrease, state and local government entities will push to get more for their money. However, the question remains – if contractors are bidding jobs at a loss or at cost, will public owners find they have traded lower bid prices for increased performance risks, change orders and claims?