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Saturday, Feb 4, 2023

Competition Stiff for Public Works Construction Projects

Hathaway Dinwiddie Construction Company’s portfolio used to consist of about 70 percent commercial, and 30 percent higher education facilities. But recently, that ratio has flip-flopped. “It’s obvious the commercial office sector has virtually stopped,” said Scott McClure, director of business development for the L.A.-based company, adding, public and private university contracts are where the money’s at these days. Hathaway Dinwiddie, which is placing finishing touches on a science building at California State University Northridge and an 189,000 square foot office building in Glendale, is not alone. An increasing number of construction companies are vying for public works and educational contracts, especially considering the state of the economy. But stiff competition for these projects is also driving down profit margins for general contractors, according to industry experts. “There is an increase in the number of people who normally don’t bid for public works projects,” said Gary Boz & #233;, spokesperson for the Los Angeles County Department of Public Works. “Even the more experienced companies are challenged to get the best price for job(s).” An indicator of just how much new construction has slowed in L.A. County, June year-to-date non-residential building permit valuations are about half of what they were a year ago. Total permit valuations were $1.34 billion, down from $2.45 billion for the same period in 2008, according to the Construction Industry Research Board. New industrial construction saw the least amount of permit valuations, clocking in at $11.2 million compared to $134 million in 2008. State budget cuts have put the future of many municipal projects in question. But federal stimulus funds, which the state can’t touch to make up for its budget shortfall, are coming into California. L.A. County is being given $315 million for highways and roads. And the county has 19 projects worth $49 million for upgrading transportation infrastructure, said Boz & #233;, among other projects. There’s also billions of dollars in unused financing from state and local bond measures, also off-limits to help the state’s budget crisis, earmarked for building construction and upgrades at universities, community colleges and other public schools. John Conaty, senior vice president for Pasadena-based C.W. Driver, said his company is working through a healthy backlog for 2009 but is a bit worried about 2010. C.W. Driver, which has eight projects in the greater San Fernando Valley area, is also investing more of its energy into public projects such as schools and facilities for municipalities. But Conaty said competition is stiff. A few years ago four or five companies might bid on a contract, whereas now there’s 10 or more. And the decision about who’s awarded the contract seems to be swinging in some cases towards price-driven decisions versus overall value. “People are hungry and anxious, so we’re seeing a lot of downward pressure,” said Conaty. Boz & #233; echoes that statement. “Some companies are bidding just to keep people in their jobs.” There’s also uncertainty in the public works sector, said Conaty. Some municipalities are holding off on construction projects because while they might have enough money to build, they don’t have enough money to operate a new facility. Hathaway Dinwiddie shies away from contracts tied to the state’s general fund, said McClure. Instead, it prefers to compete almost exclusively for ones financed from education bonds and donations made to private universities. Marc Rapisardi, principal of S3 Builders Inc. in Santa Clarita, launched the company in 2004. In response to the bad economy, last January he and other principals registered as public works vendors for the city, state and federal government. But when it came to locking-in projects, the process was overwhelming, said Rapisardi, because there were so many companies bidding on the jobs and many of the companies had been around a lot longer than S3. “There might be 50-60 guys bidding on a $300,000 to $400,000 job,” he said. “So we decided focusing on public works was not a good fit for S3.” The company has been drumming up business in the down economy by drawing from its core clientele, and doing capital improvements, upkeep, upgrades and smaller projects. Woodbury University is one of those clients. S3 has also been streamlining its business to cut costs. “When it comes to bringing in new clients now, we’re challenged,” said Rapisardi. “But the thing in our industry is that you can only put off capital improvements for so long.”

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