A Tight Market

There are many ‘haves’ in the current ‘have not’ Western PA construction market but there are not enough to ease the competitive nature of bidding at the moment. A couple of cases in point:

* Last week’s bids for the Natali Center at California University came in at $23.6 million, about $1.4 million under the published estimate for the job. Part of what drove the numbers was an extremely tight bid for general construction. Nello Construction was low by $37,000 on $13 million, a delta of 2/1000th – .002 from the second bid. the low three were:
1) Nello Construction $13,037,000
2) Walter Mucci Construction $13,070,000
3) Gurtner Contracting $13,450,000

* The $7 million, 12-screen Cinemark at McCandless Crossings in the North Hills has been released to 7 invited contractors to bid on November 28. This may be the most poorly-matched list I’ve seen in two decades. Asked to price the project were BRIDGES, Continental, EMJ, Graycor, Harchuck, PJ and Rycon. The sizes and styles of these contractors couldn’t be more disparate. The list includes the contractors that built Consol Energy Center, USSteel Clairton Battery C/D, Childrens Hospital, The Waterfront, as well as retail contractors who do $200,000 Dunkin’ Donuts profitably. Subcontractors and suppliers trying to figure out how to bid to this cast of characters will go crazy.

You can’t blame the contractors from accepting the opportunity to bid but the potential for an ugly job is high. The generals will end up with numbers from subs they never work with, can’t comfortably scope and don’t know their capabilities; however, the may have to take numbers from unknown subs to remain competitive. The owner may get a number he/she likes but the chances of the low general having a cohesive team for the project are slim.

Backlogs are too thin for too many contractors as the 2012 building season ends. Rather than laying low and riding out the market, contractors have been too willing to bid with little or no margins to get work booked. That doesn’t mean owners are getting bargains. It’s great to get low numbers on bid day; it’s even better to have them at closeout. Maybe the Cinemark has iron clad documents but it’s more likely they have asked contractors to bid representations of their intent that will leave the door open for a lot of interpretation.

At the other end of the spectrum is the Seton Hill Natural Health Sciences project, for which the owner is seeking preconstruction service proposals for the $13-14 million project. After earlier qualification submissions the college has narrowed the field to Jendoco, Landau, Mascaro, Mosites, PJ and Rycon. That’s a field of contractors that competes for similar projects all the time. More to the point, the subcontractors that serve these contractors have experience with almost all the contractors regularly and have experience with private higher education projects. The sub and supplier market won’t be as critical in preconstruction for final pricing but having reliable subs involved is the only way that the chosen general can provide a reasonable budget to Seton Hill, especially since the architect – MCF – is not one that has projects on the street regularly. MCF is a great designer but without regular feedback from the market it will be tough for them to hone in on a budget. Getting a homogenous construction team in place during design will be essential if Seton Hill wants to avoid the design/value engineer/re-design cycle.

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