Summertime Blues

Even in the midst of a generally good regional economic environment the heightened level of uncertainty about the national/global economy has brought progress on new development and construction to a virtual standstill. After a winter/spring that looked like southwestern PA was on its way back to pre-recession levels of construction the activity has cratered, with public projects (an unusually slow sector in 2012) actually being the most appetizing opportunities on the street of late.

The sweet spot appears to be the $20 million education job.  PJ Dick was awarded the $22 million Avonworth Primary Center project and Nello Construction, the $19.3 million Campbell Hall at West Liberty University.  Two K-12 schools bid within the last month with similar results, both coming in about 25% higher than the published budget. L. S. Fiore Inc. was the low general on the $19.3 million Philipsburg-Osceola Middle School project and Mark Hudson Construction was the low bidder on the $21.2 million Lockley Early Child Learning Center in New Castle.

Still to bid are a couple of nice opportunities at WVU. The $12 million law library project opens on July 24 and the $30 million Advanced Engineering Building is out for pre-qualification of general contractors, with RFQ’s due on August 7.

ALCOSAN took bids on its main pump station upgrade on Preble Avenue, which came in at $22.4 million. Kokosing Construction from Columbus was the low general on that bid. Local contractors Wellington Power and A. J. Demor were the low bidders on the electrical and plumbing portions.

That ALCOSAN job highlights one of the real blues of summertime 2012: the heightened competition. Kokosing has been involved in less than a handful of projects in western PA in the last 20 years, virtually all of which involved repeat clients from Ohio. Like Gilbane, Whiting-Turner, Hunt, Clark, etc. , Kokosing finds its home market too slow to support its operations and has received the news that Pittsburgh is a hot city. This is something of a surprise to the local contracting and design community, whose firms are still fighting to get back to “normal” market conditions.

Owners in the region – and I’m talking about some of the region’s biggest institutional owners – are finding it difficult to resist the siren song of more competition, even though most know that forcing bids lower seldom results in savings by job’s end and often leads to a painful project. That contractors and architects with overhead structures much larger than Pittsburgh companies can be competitive here is mystifying, and in fact most times the truth is that the larger companies are better at making it up as the job progresses (which isn’t good for owners). The phenomenon does not appear to be going away however, so Pittsburgh area firms will have to not only fend off increased competition from local businesses but also those from Ohio, DC and the east coast that are finding their pickings slimmer.

On the private sector front, UPMC has the new $45 million Penguins practice and sports medicine facility in Cranberry out for construction mgt. proposals. They have asked Mascaro, Massaro/Clark, PJ Dick and Rycon/Whiting Turner to respond.  Norfolk Southern has awarded Shiloh Construction a contract for the $14 million Back Shop renovations at their Conway yard.

There will continue to be these sorts of gems bid throughout the remainder of the year but the backlog of projects in the pipeline for 2012 is shrinking. Perhaps a pro-business result in the November election or some easing of economic concerns will trigger an unexpected spike in decision-making from users in the market, but the damage is mostly done for 2012. The pipeline of real estate demand continues to grow fuller but the valve remains closed for summer.

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