It is a bit late in the posting, but Reuters has a story about the low bids that have been coming in on construction projects funded by American Recovery and Reinvestment Act (ARRA) money. They are reporting that bids are coming in 30% below estimates. This is in keeping with observation by the Public Water Supply (PWS) section of the NC Department of Environment and Natural Resources (NCDENR). The section has been distributing ARRA funds for water projects across the state and bids are most definitely coming in low as a rule.
The article goes on worrying that contractors are bidding below cost to win the projects and will be unable to recover funds because of redistribution of funds. My understanding, however, is a bit different. The PWS funding promises are based on the original estimates. Even though contracts may come in lower, PWS is still liable for the same amount until the project is completed and all change orders have been dealt with. Therefore, so long as there is legitimate cause for a change order, there is still opportunity for contractors to recover costs. The only strings attached that I am aware of are that funding may be prorated according to the portion of work that has been contracted by the February 17, 2010 ARRA deadline and that no work will be compensated that has not been performed by February 17, 2012. As a result, the biggest concern is speed and not compensation.
Tags: ARRA, construction, Reuters, stimulus
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