Sunday, Dec. 02, 2007

Cities see benefit to slump in building

Construction companies in tough competition for projects lower their bids

The housing slump has a silver lining for public agencies, which are finding a glut of private contractors looking for work and dropping their prices.

Businesses that once framed houses and laid asphalt driveways are lining up to build public community centers and roads. And the competition equates to lower bids.

"What is essentially happening is that there is no real construction for housing development right now so these contractors don't have a lot to do, and so they are bidding pretty tight to get these jobs," said Pete Martin, senior civil engineer for San Joaquin County's public works department. "It is not good for the industry, but it is good for us, at least temporarily. We get a lot for our money, and there is nothing wrong with that. But these companies are suffering."

Martin said if prices stay low through the year, the savings might be enough to pay for another project. Turlock is using low prices as an opportunity to increase its road resurfacing work. Other cities, including Modesto, have yet to see significant price drops but if they do, they expect to use the savings for future projects.

State, local spending rises 0.8 percent

The tables have turned. For the last several years, builders have had the upper hand in price negotiation. The lowest bids regularly came in above engineers' estimates as municipal projects competed with work on residential subdivisions and prices surged for materials -- particularly steel. They have since leveled off and even dropped.

The Commerce Department reported Friday that although construction spending was down 0.8 percent overall in October, government spending on state and local projects was up 0.8 percent, a record high. Private residential construction, in con- trast, dived 2 percent.

The Northern San Joaquin Valley has been among the hardest hit by the housing market cool-down. Merced, San Joaquin and Stanislaus counties led the nation in foreclosures in October. Home builders have put off plans for more subdivisions. Construction companies have laid off workers and are looking for commercial, industrial and public agency jobs.

San Joaquin County already has four proj- ects out to bid and an additional five con- tracts awarded of the roughly 30 planned for 2008. It hopes to get contracts signed while the market is good.

Among those projects, Teichert Construction bid $49 per ton for 9,400 tons of asphalt to pave Schulte Road in the Tracy area. That compared with a ballpark average of $57 per ton last year, Martin said. It equates to a savings of $75,000, or 14 percent. Typically, Martin said, he expects prices will be down about 10 percent.

Nine companies submitted bids to remodel Escalon's community center. All came in under the engineer's estimate of $2.7 million. The low bidder, Modesto-based Titan Structures Inc., estimated the project at $660,000 under.

Modesto has not tracked a clear trend of lower prices but it is seeing more bidders -- an average of five to seven compared with one to three last year.

"What we normally find is, the more competition, the better the pricing," said Dean Phillips, senior civil engineer for the city of Modesto. "It stands to reason. We were getting prices above the engineer's estimate in 2006 when we had little competition, and now that we're getting more, the pricing is closer to the estimate and even below the estimate."

That was the case with landscaping improvements for the Sylvan overcrossing at Enochs High School, which came in 13 percent below the $175,700 estimate at $152,100 by Stockton-based Odyssey Landscaping.