Print this ArticlePrint this Article Email this ArticleEmail this Article
Text Size: A | A | A

An upside to the recession

Costs running on the low side for city building projects
 Posted: 10:06 AM July 25, 2009

The city of Ashland is getting good deals on street and sidewalk projects as recession-battered construction companies compete for business.

The situation is far different than during the construction boom of the mid-2000s, when some city projects would attract only one bid and that bid would far exceed cost estimates.

"A lot of people are just interested in keeping their employees employed and making payroll — not making profits," Ashland Engineering Services Manager Jim Olson said. "In the past, sometimes we would only get one bid. Contractors could pick and choose. Now we have the reverse of that."

The city was recently awarded $200,000 in federal stimulus money to make Hersey Street sidewalks comply with Americans with Disabilities Act rules. Engineers estimated the work would cost about $160,000.

The city and the Oregon Department of Transportation, which is administering the stimulus funding, received five bids. The low bid, from Copeland Construction, LLC, was for $103,838.94, well below the engineers' estimate.

On another project funded by federal stimulus dollars, the city won $438,791 for pavement overlay projects on streets. Two bids came in, with Knife River Materials, also known as LTM, submitting the lowest bid at $358,810.25, Olson said.

Rather than having to give the leftover money back, the city of Ashland will be allowed to use the money to fund other street, sidewalk and storm drain work, according to Olson and Public Works Director Mike Faught.

"It's good for us because we can build more projects with the leftover money," Faught said.

Knife River Southern Oregon President Mike Crennen, who has been in the construction industry since 1980, said this is the worst business climate for construction that he's ever seen.

"Competition for work is fierce and profit margins are greatly reduced," he said.

Crennen said that Knife River has bid on projects with 20 or 30 other bidders, compared to a normal environment when four to six companies bid on a project.

The construction business climate would be even worse without federal stimulus spending, he said.

"We've picked up a number of projects this year that were funded by economic stimulus dollars. It's definitely helping. I don't think it's creating jobs, but it's saving jobs," Crennen said. "Without the stimulus dollars, we would be in a far worse state. We're down 30 to 40 percent with our workforce even with the stimulus dollars."

He said he would have liked to see more stimulus spending on infrastructure since that not only provides work, but creates something of economic value for years to come.

Not long ago, the city was repeatedly faced with bids coming in higher than engineers' estimates.

For example, in early 2005 the city received only one bid on a package of concrete projects that had been estimated to cost $379,751.50. The submitted bid was 48 percent higher than the estimate, according to a city staff memo to the Ashland City Council.

The city rejected that bid and made changes to try and reduce the cost of the projects, including rescheduling the projects in winter when contractors usually have less work. The city also sent plans and bid packages to 20 contractors to try and generate more competition.

The city rebid the package in late 2005 but again received only one bid. LTM proposed to do the work for $538,470 — $158,718.50 above the engineers' estimate.

That led the city to eliminate a third of the concrete work to keep within the original budget, according to a city staff memo to the council from January 2006.

Construction employment in Jackson County was at 5,950 workers in June 2006 but has been dropping until it reached 3,890 workers in June of this year, the Oregon Employment Department reported.

Federal stimulus funding is helping to provide work for employees in the construction industry and is also helping local governments pay for infrastructure projects while construction costs are low. Some budget-strapped local governments might not have been able to take advantage of the reduced construction costs without federal money.

To help close a budget gap, the city of Ashland slashed its own spending on infrastructure projects for this fiscal year. Infrastructure spending was budgeted at $10.34 million for the fiscal year that ended on June 30. The infrastructure budget was cut about in half for this fiscal year that started July 1.

Although stimulus funding is helping construction workers and local governments, it's also contributing to a ballooning national deficit.

Now at $1.1 trillion, the national deficit topped $1 trillion for the first time this summer, according to The Associated Press.

Government spending to boost the economy and deal with the financial crisis, a sharp drop in tax revenues and paying for wars in Iraq and Afghanistan are major factors in the growing deficit, the AP reported.

The national debt, or the accumulation of annual deficits over the years, is about $11.6 trillion — or about $37,000 for every person in America, according to various national debt clocks around the country.

Staff writer Vickie Aldous can be reached at 479-8199 or vlaldous@yahoo.com.


Reader Reaction
We reserve the right to remove any content at any time from this Community, including without limitation if it violates the Community Rules. We ask that you report content that you in good faith believe violates the above rules by clicking the Flag link next to the offending comment or fill out this form. New comments are only accepted for two weeks from the date of publication.
COUPON OF THE WEEK