Crowded Market | With the construction sector still on life support, competition is fierce for government contracts
Photo/Edd Cote
FINDING WORK: Janet Ceddia, president and CEO of Security Construction Services Inc. in Hudson, said her firm is being more selective about what government jobs they bid on because of increased competition.
Earlier this year, the state put out a request for proposals to move some office furniture, expecting it would receive about eight bids.
The state received 16.
Weeks earlier, the Operations Services Division (OSD), which handles statewide contracts, put out an RFP for security installations expecting 14 submissions. The division got 33 bid submissions.
Competition for government contracts has become increasingly fierce in recent years. A prolonged slowdown in the private sector has meant more companies are turning to public jobs to keep workers busy.
“It’s been amazing to see the transformation,” said Buster O’Brien, who manages government procurement for Milford-based Consigli Construction Co. Inc. “You see bids from companies out of state, out of New England even. Small firms, big firms, everybody is taking a very aggressive approach to try and win this public work.”
The Effects Of Stimulus
Businesses that have been in the public contracting market for years, like Consigli, say they are lowering their margins and being more selective in the projects they bid on to win contracts in the new climate.
And the real winner in the entire situation has been the government, which has saved big bucks.
There may be numerous factors contributing to the increased competition.
For example, stimulus funding has increased the amount of public contracting jobs available, specifically in the construction market for road and bridge projects.
The OSD has also been reaching out and encouraging business to apply for contracts through workshops and training sessions. Plus, earlier in the decade, the state changed the way construction contracts are awarded, moving away from low-bid contracts into “best-value” awarding systems.
That, industry officials have said, has created interest from firms that did not traditionally bid on public jobs.
Undoubtedly the biggest factor leading to increased competition has been the slowdown in the private sector market.
“Increased competition drives down the prices, which is a good thing for the state and federal government,” said Sandra Ledbetter, who helps businesses apply for and win government contracts as an adviser for the Procurement Technical Assistance Center, which is part of the University of Massachusetts. “But it also makes it challenging for companies that are in the public market business or are trying to get in. It’s not necessarily a win-win for the business community.”
Some companies have been forced to change the way they bid on public contracting projects to land jobs they may have had an easier time winning a few years ago.
“We have to be more selective in what we chose to bid on and we have to be more critical in evaluating if we can offer a competitive bid,” said Janet Ceddia, president and CEO of Security Construction Services Inc. in Hudson.
Ceddia has submitted fewer bids for her company, which contributed to a decrease in the company’s revenues last year by about 5 percent. However, the company has also learned to work more efficiently, which has increased profitability.
“The level of competition for fixed-priced, competitive-bid contracts has significantly ramped up,” said Robert Band, president of Tutor Perini Corp. in Framingham, which bids mostly federal contracting jobs. “Contractors are sharpening their pencils and bidding very competitively.”
If the increased competition has been hard for companies that have a track record of winning public construction jobs, it’s even harder for companies that are looking to expand into the public contracting market.
“When it comes to bidding, there are a lot more people coming to the table and a lot of people are telling us they’ve never done public work before,” said Darcy Cook, president and founder of Cook Professional Resources Inc. in Auburn, which provides safety training, regulatory compliance and risk management for construction contractors.
To position her business to win the contracts, Cook has registered with the state as a woman-owned businesses as well as a disadvantaged business owner. To qualify as disadvantaged, businesses must have a socially or economically disadvantaged owner and must be below a certain threshold of sales. When the state is awarding contracts based not just on the lowest bid, companies with these certifications can be looked upon more favorably.
Cook said she’s always hoped that her company could win more government contracting jobs, even before the recession hit.
She remembers one job where she proposed selling the state safety training vests for about $30 each. An out-of-state direct manufacturer offered the products for $9 per vest.
“We just can’t compete with that,” she said.
For businesses that may be looking to get into the market, Geo Villegas, owner of New England Building Services in Worcester, said don’t expect too much, too soon from government work.
“It is slow, slow, slow getting into this market,” he said.
While businesses are struggling with the new climate, increased competition has been a good thing for the government.
Katherine Craven heads up the Massachusetts School Building Authority, which over the past five years has poured about $2.5 billion into the public construction market to build new elementary and secondary schools.
She said the evaporation of the private sector market has increased the competition on public construction jobs, leading to significant costs savings for the state.
In 2005 and 2006, for example, a Somerville school project was 25 percent over budget.
Bids for new a new school in Everett ballooned from $69 million to $89 million, and in Chicopee a project originally budgeted at $77 million cost $92 million.
Fast forward five years and it’s almost completely the opposite.
Norwood High School’s project came in at $54 million, $10 million below budget. Hanover High School’s bid landed at $38.6million when it was expected to cost $49.6 million.
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