Masonry contractors should keep their eye on the public construction market in 2009 and beyond, as there are some signs pointing to increased spending in this market segment. The durability, safety, and low maintenance of masonry continue to make it a top choice for highly trafficked public facilities.
President-elect Barack Obama's economic stimulus plan includes $25 billion for rebuilding roads, bridges, and schools. According to the Associated General Contractors (AGC), 3000 highway projects totaling approximately $18 billion, and water and wastewater infrastructure work amounting to $10 billion, are ready to start within 30 - 90 days from enactment. Other backlogged public works programs would also create immediate opportunity.
The long-term outlook for public construction looks positive as well. The new president wants to create a National Infrastructure Reinvestment Bank to expand and enhance existing federal transportation investments. He also favors updating our aging school facilities to improve their environment, while increasing energy efficiency
This outlook is good news for masonry contractors. However, public construction operates very differently than the private market. Jumping in without proper planning could prove disastrous. Complicating matters is a growing interest by government agencies to explore alternative project delivery methods and Building Information Modeling (BIM) technology.
Demands of public construction
“In many cases, the requirements for quality are a bit higher on public projects,” said Bruce Cornwall, project principal and designer for Duluth, Minn.-based LHB, whose public work includes the National Eagle Center, Wabasha, Minn. “There is more craftsmanship involved.”
Darold Berger, owner of Berger Masonry, whose Waukon, Iowa, firm constructed the National Eagle Center from brick, cast stone, and concrete masonry, concurs with Cornwall. “The building is a source of pride for both the contractor and community,” he said. A stunning sculpted eagle emerges out of the brick facade, matching the veneer with colored grout. It was constructed in 90 bricklayer hours and 45 labor hours.
“Public projects are more demanding in the sense that the client is often more sophisticated,” according to Sinan Sinanian, president of Sinanian Development Corp., a general contracting firm based in Tarzana, Calif., who was involved in the Folsom Public Library job. “In many ways, it is much better than private work.”
On the construction of the Valley Recruit Training Facility, CMU was selected for its strength, ease of construction, and economics. The only real challenge was related to schedule. “The general contractor faced damages if the job was not completed in a certain number of days,” explained Jora Kirimi, president of La Crescenta, Calif.-based ARC - Accucon Construction. The masonry contractor assigned his most experienced project manager and as many workers as possible to the job when heavy rains threatened to jeopardize the schedule.
In addition to increased supervision, masonry contractors must contend with additional paperwork on public projects. All federal government construction contracts, and most work for federally-assisted buildings, must include provisions for paying workers no less than the locally prevailing wage and benefit packages found on similar projects. This provision can be cumbersome for non-union contractors, according to Karimi.
He advises masonry contractors to have all their paperwork for materials turned in on time to avoid cash shortfalls. “Unless they have all the paperwork received by a certain date, you won't get paid,” Karimi concluded.
Winning the bidding war
Historically, most public work employs the design-bid-build delivery method. Competitive bidding among general contractors, performance bonds, and other statutory requirements protect taxpayers' investments. Final selection is based on the lowest bid or total contract price.
Three of the four projects profiled in this article were design-bid-build jobs. In each case, the masonry contractors were invited to submit bids by the general contractor.
“It is extremely important to have friends at the general contractor,” said Kirimi. “They may call you if your price is unattractive.” To minimize shopping by the general contractor, subcontractors routinely send their bids at the last possible moment.
In the case of the Valley Recruit Training Facility, the general contractor called Kirimi after he submitted his bid and asked if the company could do the work for a specific amount. “Either he had a lower bid than mine, or knew it would take that number to get the project,” he reasoned.
Subcontractors should let the general contractors know they are interested in bidding, and provide references and a list of completed projects. Paid subscription services can provide masonry contractors with a list of projects in their area. Berger, who started out doing masonry jobs on the side and now employs 20 - 40 workers, advises companies to first establish a track record with successful smaller commercial work.
In cases where subcontractors bid directly on projects, only those firms meeting the prequalification requirements will be allowed to submit. Information on management personnel, project experience, safety records, references, and bonding capacity will be among the information required.
Competition heats up
Competition on public construction projects has increased dramatically in recent months as private work has slowed to a crawl, or worse, in many areas. “Prices have reached the point where they were four or five years ago,” said Karimi. “A contractor has to bid more projects with a smaller profit margin to stay afloat.” Nearly all the masonry contractors interviewed for this article have seen a shift in their business mix towards more public construction.
Denny Ross, owner of Urbandale, Ia.-based Ross Masonry, has noticed some incredibly low pricing from some masonry contractors in recent months. “They bid an $800,000 job at $410,000,” said Ross. They get the work, but at a heavy price. It is not uncommon to see the low bid contractors go under in the middle of the job.
To win the Iowa State Capital project, Ross bid on work that was a little out of the company's comfort zone. Only three bids were submitted, and Ross had a good relationship with Larson Construction, the general contractor on the project. This niche approach is helping Ross weather the current market downturn.
When extremely low numbers come in, Sinanian reports that generals will typically call the subcontractors and ask them to review their bid. If it still comes back low, the general may demand a performance bond for the amount.