Bidding on the future

Pandemic complicates competition for new work

As the pandemic continues and economic forecasts keep shifting, construction companies will have to grapple with new realities and lingering uncertainties as they compete for future work. Market analyses and industry experts suggest contractors give added attention to some issues and best practices as they prepare bids and make business plans.

Delayed and decreased contracting

Heavily involved in laboratory/medical renovations and projects for the federal government and large universities, Matos Builders is experiencing a surprisingly normal business year, despite several project shutdowns this spring, said Richard Skayhan, Vice President. “A lot of jobs are moving along normally…and I think we are going to have a strong year next year,” he said.

The one caveat to that prediction is the pace of new contracting.
“There is definitely still work coming from our clients, but the number of projects they are sending out to bid is down. We are hearing from other people in the industry that the contracting volume is not the same,” Skayhan said. With many federal offices still fully or partly vacated, “there are a ton of [federal contracts] pending that haven’t been awarded that typically would be by now.”

While already-funded federal projects will likely be awarded this fall, industry watchers caution that contracting by all levels of government could decline in 2021 due to tax revenue shortfalls and heightened government expenses from the pandemic. Those conditions could also increase a trend among state and local governments in Maryland to award contracts based on low bid rather than quality base.

Sharper designs and bids

To contend with the prospect of heightened competition and squeezed profit margins, Gipe Associates is refining its processes to craft competitive but profitable bids. That includes several steps.

“The better job we do in creating a high-quality design, the fewer issues we are going to have during construction and that will save us a lot of money,” said Michael Purtell, Senior Vice President.

Consequently, a company principal and a group of engineers will review every job early to make key decisions about design and systems. Bids will be refined to “manage expectations, keep us within the scope of work and make production as tight and efficient as possible,” Purtell said.

Then “at every submission point, at every major milestone, we will reassess to make sure we are staying on track,” he said. “If you don’t review until you’re 95 percent done, guys may have gone off on a tangent that ends up costing you a lot of money.”

Costs, clauses, supplies and labor

The pandemic saddled contractors with additional costs and prolonged schedules on existing projects. While many are still working to resolve those expenses, contractors will need to calculate mid-pandemic operational costs into bids on future work. Industry analysts urge companies to closely review contracts for clauses that deal with compensation for unexpected costs or work slowdowns/project shutdowns, as well as language that explains what conditions would trigger a force majeure clause.

The industry’s long-standing labor shortage has worsened during the pandemic. Meanwhile, supply chains are continuing to experience some challenges, especially with lead times. When putting together bids, contractors will need to give added attention to multiple sourcing options for some materials and the potential availability and cost of labor.