City may see discounts on construction

A wider pool of contractors is offering more competitive bids for Juneau projects

Posted: Sunday, January 11, 2009

A few years ago, city officials were pushing to get construction projects done as quickly as possible in a race against rocketing costs driven by high oil prices and building booms overseas.

Now, oil prices are down and many economies are in recession, but Juneau taxpayers may end up saving big on a glut of city construction projects.

A wider pool of contractors is offering more competitive bids for city projects below engineers' estimates, Juneau Director of Engineering Rorie Watt reported to the Juneau Assembly last week.

He said a recent sewer project had four contractors offering bids below estimates and that even out-of-town contractors have begun expressing interest.

That's a major departure from the last few boom years, when massive overbids were common.

In August 2006 the winning bid for renovations at Bartlett Regional Hospital was $20.4 million, but the project was estimated to cost only $14.3 million. City Manager Rod Swope attributed the overrun to labor and material costs at the time.

Now, the city has millions of dollars in projects lined up including the Dimond Park Aquatic Center, a new public works facility, major renovations at Juneau International Airport, and a downtown parking garage and transportation center. Watt expects to get "very favorable prices" on them while also buoying the local economy.

"I think accidentally, we have our own construction stimulus package queued up," he said.

It's not clear if the contracting trend is widespread or not. John MacKinnon, executive director of the trade organization Associated General Contractors of Alaska, said he recently heard of a few similar cases of unusually high contractor interest in government projects around the state, but could only speak anecdotally.

"To say that it was a statewide thing, I couldn't say that," MacKinnon said.

His organization puts out an annual construction forecast due in February that could offer more insight, though he said generally the design and permitting process involved in major government projects creates a one or two year cushion between when economic turmoil strikes and when it catches up with government contractors.

"I see a couple of years that are going to be OK. ... There's a cushion," MacKinnon said. His concerns are on 2011.

MacKinnon and other contractors are eager to hear how the next federal stimulus package, expected to emphasize government projects, shapes up.

"Put that $600 billion into construction, you put people to work and you've got something tangible at the end of it," MacKinnon said.

• Contact reporter Jeremy Hsieh at 523-2258 or e-mail

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