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My turn: Outside contractors are competitive

Posted: Sunday, April 13, 2008

As the general contractor recently awarded the Glacier Valley Elementary School Renovation Phase II job, we would like to respond to several quotes in the Juneau Empire article on March 20 regarding project budget and award of the Glacier Valley remodel.

In the article, Juneau Assembly members commented that out-of-town contractors have higher costs than local contractors and inferred this is why bids for Glacier Valley's Renovation came in over original cost estimates.

This simply isn't accurate.

Through all the years, regardless of the home town, we have seen Southeast contractors competitive throughout Southeast. Typically, the majority of labor is hired locally with any housing, equipment or other mobilization type costs making up an insignificant amount of the project's total costs. These types of costs are more than off-set by a contractor's methodology, efficiencies, planning, management, labor productivity, supervision, etc.

For example, Dawson's bid for the recently completed University of Alaska Southeast National Guard Recreational Facility ($9 million) was about one million below the local company's bid. On the adjacent organizational shop building ($3 million), our bid was 15 to 20 percent lower than the local Juneau contractors; our Juneau- and Sitka-based competitors can give similar examples of projects they were low on in other communities.

In regards to Dawson Construction, we have been building in Southeast for more than 40 years, with crews based throughout the region. We have had an office in Southeast for more than 25 years and built our new office/warehouse in Ketchikan several years ago.

We first started in Juneau in the 1960s, building Marie Drake; over the years our local projects, to name a few, have included: The Juneau Empire Building, Snettisham Fish Hatchery, Harborview Elementary School renovation, the Juneau Pioneer Home, University of Alaska Southeast Egan library, K-Mart, Douglas Fire Hall and library, UAS National Guard Recreational Facility, First Bank Totem Branch and Juneau Bone and Joint Center renovation. We currently have projects in Juneau, Haines, Petersburg, Sitka, Ketchikan, Soldotna and Denali.

So why are bids coming in over cost estimates? In recent years we have seen Juneau-Douglas High School renovation bid at 20 percent-plus and $2.5 million over the estimate, Bartlett Hospital Phase One's first two bids were $11 million and then $7 million over estimated costs and most recently Thunder Mountain High School's low bid was 20 percent-plus and nearly $9 million higher than the estimated cost (all with a Juneau-based contractor).

The answer is not simple and we see rising material costs, added contract requirements, busy subcontractors, labor and general market conditions all contributing to increased project costs.

So how does a does a public agency deliver a project on budget?

Many public owners are proactively addressing increasing construction costs and risks by hiring the general contractor through a best value (vs. low bid) selection process before the design is completed. This approach adds the contractor and ideally major subcontractors to the pre-construction team, which is typical on private work and is gaining approval with many public agencies.

With a contractor's expertise and input, the project scope, design and contract requirements can then be guided by budget considerations from those who really know the cost implications. Additionally, if involved in the design process, contractors will provide value engineering and constructability input providing an owner with greater value for their construction dollars.

The Haines Borough recently used this approach on its school addition and renovation project. Collectively with the owner, major subcontractors and design team, we value-engineered (saved) approximately $3 million from the original $17 million cost estimate, and upon completion the owner is receiving over $500,000 in cost savings from the construction contract amount.

In general terms, as part of a pre-construction team, the contractor can greatly assist in bringing value to the project and keeping the project within budget. With our current low bid system, an owner is making project decisions without really knowing if the budget will be met until after the design is completed and the bids received.

Please note that Dawson Construction has offices in Ketchikan and Bellingham, and our Alaska work is completed with 99 percent Alaska labor.

• Pete Dawson owns Dawson Construction Inc. and lives in Bellingham, Wash.



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