States Finding Good Deals on Transportation Projects

Here’s a silver lining – constructions costs for road and highway projects are down because companies need the work and are bidding lower than they have in the recent past. The Washington Post:

Construction firms are so eager for work in the sagging economy that project bids are coming in much lower than expected, allowing state and local governments to stretch their federal stimulus dollars further.

At Baltimore-Washington International Marshall Airport, a recent project to reconstruct the area around Piers C and D received six bids instead of the usual two or three. The result: The estimated $50 million project will be built for $8 million less than was budgeted, and the savings will be allocated to other projects. There were 21 bidders for a $200,000 drainage project in Carroll County, more than anyone could remember.

“Our bottom line is more bidders and better prices,” said Maryland Transportation Secretary John Porcari. “This we like.”

After years of rapidly escalating construction costs on highway and other projects due to skyrocketing prices of fuel, asphalt and steel, transportation departments are getting a break as the economy slows and construction firms that once built subdivisions and strip malls bid for government work.

In Virginia, state officials are receiving bids from companies as far away as the Ohio Valley. Projects that typically would have drawn four or five bids are receiving 10, said Byron Coburn, state construction engineer. C.J. Mahan Construction, based in Grove City, Ohio, for example, is bidding on a $100 million highway contract for the Virginia Department of Transportation.

“Anytime you have more competition, it drives prices down,” Coburn said. “You can’t do but so much with the cost of materials, but firms have cut their margins or found a better mousetrap, and that reflects in pricing.”

In a previous post, I mentioned states need to protect taxpayers against change orders and other things that may increase the costs of these projects after the initial bids are accepted.