While many contractors are slashing profit margins to stay competitive, some builders say they must increase their bids when the federal stimulus program is involved. The reason: paperwork.
Take the village of Baldwin’s recent experience with bids for demolition of the Thompson building on Main Street. Village officials are unsure whether they will get stimulus money to pay for the demolition, so they asked contractors for two prices — one with and one without stimulus paperwork and wage requirements. The result: Most of the bids for the stimulus-aided project were higher.
“You’ve not seen the amount of paperwork that you have until now with the stimulus,” said Craig Albrightson, president of Albrightson Excavating Inc., Woodville. The contractor submitted a $26,600 bid for the Baldwin project without stimulus, but added $3,700 to its second bid to account for the cost of extra work for stimulus money.
“Just because of all of the government requirements in there, I guess, all of the paperwork,” Albrightson said in explaining the difference in his company’s bids.
Unlike Albrightson, low bidder on the Baldwin project TMS Construction Inc., based in Prior Lake, Minn., gave the same price for both bids.
Todd Schmidt, TMS president and owner, said he does the paperwork himself. It is a short project, so the requirement to report number of workers employed and hours worked does not amount to much paperwork, he said.
“It’s not that big of a deal for that little bit of time, that two days we’ll be there,” Schmidt said.
Winning bids on the first round of stimulus-aided public projects so far this year are 5 to 12 percent below estimate, according to the American Association of State Highway and Transportation Officials.
But depending on the contractor, the additional employment reporting rules for stimulus-aided jobs could add to project accounting costs, said Clark Wontach, Milwaukee Department of Public Works transportation manager.
“It probably depends on the size of the firm as to what impact it has on them,” he said.
The city of Milwaukee has let contracts for three road projects that received American Recovery and Reinvestment Act money. On projects that receive Wisconsin Department of Transportation money, the state usually relies on Milwaukee DPW to audit contractor reports of hours worked, Wontach said. But because of the heavy reporting requirements for federal stimulus-aided projects, the state is hiring a private consultant to review the paperwork because the city does not have the staff, he said.
The different bid amounts in Baldwin could be because some contractors are uncertain about the rules, said Dennis Johnson, supervisor of environmental services for project engineer Ayres Associates Inc., Eau Claire.
He said some contractors called him when the demolition project was out for bids to ask what is different about a stimulus project.
“Some of it is probably just an unknown to some of these companies that haven’t worked with recovery act funds and they aren’t certain of what it’s going to cost,” Johnson said. “If more companies had more experience with this, they could probably put a sharper pencil on the difference between the two.”
Another possible reason for different bid prices is the Thompson building demolition is too small to require state prevailing wages, Johnson said. But all stimulus projects, regardless of size, must use the federal prevailing wage rate, he said.
Johnson said the low bid Baldwin received is roughly 20 percent below estimates, so the village may not even need to get a stimulus grant to pay for the job.
Albrightson said the additional stimulus paperwork is more political than practical because it is intended to show the stimulus bill is putting people to work,
“I’d just like to see them reduce paperwork,” he said, “but when you are dealing with the government, that’s not going to happen.”