According to a recent Washington Post article, “Construction firms are so eager for work in the sagging economy that project bids are coming in much lower than expected.”
Great news, right? Not necessarily. Lower bids can be a good thing if they are the result of increased efficiency in the construction process. But lower bids can also be the result of increased competition. These lower bids can be just that – too low – and result in delays and litigation.
What factors are causing the lower bids on stimulus projects? According to Kenneth Simonson, chief economist for the Associated General Contractors of America:
"Wherever I go, I hear of projects that used to attract two to three bids just a couple of years ago, now it’s 20 or 30," Simonson said. "Many [contractors] are coming down on the minimum size of projects they will bid on, and ones who didn’t do schools now are bidding on schools. Others are coming from out of state to a new region just to keep busy. And they are essentially giving away their services just to keep their key employees busy."
Why should this be a concern to the green building industry? As I have detailed, the stimulus is providing nearly $25 billion for green building projects. The green building industry is newer, the parties more inexperienced, and the technology relatively untested. The opportunity for underbidding these green building projects is tremendous. Projects that can’t be completed at the promised cost could lead to LEEDigation.
Be careful with your bids.
Photo: Jim Frazier