Going into the first quarter of any year, we expect the bid market to pick up with the expectation of spring projects that have been in design throughout the winter. What we are seeing is a mixed bag of trends, and we hope sharing these trends with you will help you plan your pending projects.
Below is a quick summary of what we have been seeing over the last 60 days:
- The broad trend speaks to the rising interest rates and rising construction costs. The private market has slowed down. Our private clients request budgets, but only some projects are heading into construction. We have currently been bidding and working on more public projects. We don’t expect this to continue because the slowdown in demand will drive construction pricing lower, which will eventually offset the rising interest rates in proformas.
- There has been an increased sense of urgency to get formal approval for change orders on our existing projects and across all types of projects we work on. Subcontractors are hesitant to hold their pricing for over a few weeks, so we are forced to push owners and construction managers to get signed approval to lock in pricing. We support our subcontractor team in this effort, but in return and to help protect our clients, we ask for secured manpower so that our clients receive the service on time.
- Owner’s preconstruction budgets continue to underestimate the cost of future construction. This creates rebid situations for public and private projects, resulting in project delays and frustrated owners before the project starts. We recommend multiple looks at the budgets you are creating today: one by your architect and one by your contractor. Then lock the project leaders in a room until they agree on the budget.
As a recent example, we bid on a health clinic in early August 2022. It was a competitive bid and Miles-McClellan was not the lower bidder. Our bid was 94% over the owner’s budget, coming in at $1.4M. The owner and architect rebid the project after taking the time to redesign and go through value engineering. The revised budget was raised 55% over the original budget, and our revised bid in October 2023 was submitted just above the revised budget. We were awarded the project 14 months after the initial bid.
While at times it may feel like we are spinning our wheels with all the budgets and rebidding, we would rather provide realistic, inclusive budgets and bids then submit low numbers with the hope of winning and not failing.