With work scant, bids on highway jobs tighten
The widespread construction slowdown is more than just a downturn it’s the new norm, says Kyle Larkin, manager of construction for Granite Construction.
Highway work on Interstate 80 through the Sierra is winding down, and large-scale projects are scant throughout Nevada. Larkin expects the volume of work in the coming year to be similar to 2009.
Extremely competitive bidding among contractors eroded profit margins. Companies from outside the area entered the fray. There may not be enough pie for everyone to cut even a modest slice, and industry observers say a few major players could fall in 2010.
“The northern Nevada market in general will be another challenging year,” Larkin says. “The good news is that the industry will start to adjust to the new norm what we have experienced over the last several years is unrealistic, and the industry will have to adjust to what is a more reasonable market.”
Two long-awaited highway projects on U.S. 395 through Reno both set to break ground in the first quarter will employ hundreds and are expected to be among the most fiercely bid jobs of the year.
The Regional Transportation Commission and Nevada Department of Transportation have joined forces to widen U.S. 395 northbound from Moana Lane to the Spaghetti Bowl and add a Meadowood interchange a mile south of Moana Lane.
The widening project is estimated to cost between $70 million and $85 million, and the interchange is projected at $42 million to $45 million, says Felicia Archer, public information officer for the RTC.
Granite is vying for both big Reno road jobs, says Larkin and the bidding process requires estimator’s pencils to be honed to a razor’s edge.
“It’s probably as competitive as it gets which is really good for the taxpayer,” he says.
The contract award for the lane extension should be completed by mid-January, says Lee Gibson, director of the Regional Transportation Commission, and the contract for the interchange project should be awarded sometime in March. Both jobs are expected to last at least two years and will employ a hundred of construction workers, engineering and design firms, consultants and others. The Meadowood job alone is projected to employ between 500 and 600.
“That’s 500 mortgages that get paid, and folks who will spend money in the local economy,” RTC’s Gibson says.
With bids beating estimates, Gibson says the RTC has been able to shift funds to other projects and get them out the door sooner than planned.
“Labor costs are flat, materials costs are down, and contractors are eating into their margins,” he says. “They are taking a smaller profit in order to get the work and keep their businesses going.”
A good portion of the cost for both RTC projects is being funded through a gasoline inflation tax approved by Washoe County voters in November of 2008. Gibson calls the measure Washoe County’s “internally generated economic stimulus program.”
Granite’s Larkin says the voter-approved funding is the only way road and highway construction levels will hold even with 2009.
“It is huge,” Larkin says. “Without those two projects it would be even scarier for the whole area. Those jobs are extremely important for the local economy. These are challenging times for everyone in the industry.”
Although there aren’t many other large-scale projects on the radar for 2010, there will be many smaller improvement projects throughout the region, say Gibson and NDOT spokesman Scott Magruder.
The RTC has let more than $40 million in street and highway work through Dec. 18, Gibson says, with another $4 million in scheduled projects, including work at the Robb Drive/Sharlands Avenue intersection and Holcomb Lane.
Another project on the RTC radar is widening Moana Lane to six lanes from the freeway to Virginia Street.
“We will continue to move dollars out our door for the smaller arterial projects for the next year,” Gibson says.
Magruder says NDOT has spent $140 million of Nevada’s $201 million in federal stimulus money, and it expects to receive its normal federal allotment in the $200 million range for 2010.
“All indications say we will match previous years, which is good news,” Magruder says.
The agreements are designed to split the costs of improvements such as traffic signals between Carson City and developers whose projects generate the traffic increases that trigger the need for improvements.