The Low Bid Conundrum

| May 21, 2010

Something about an ill wind, or silver linings in the worst of clouds. The prevalence of low bids that are everywhere and anywhere governments are asking for bids, continues to put its thumb on the scales. Inevitably, there are those who benefit.  When and how will the market take care of this?

This from Ken Simonson, Chief Economist, Associated General Contractors of America, under the headline Low bid prices squeeze contractors but spur Indiana work 

Because of falling bid prices, Indiana Governor Mitch Daniels “dramatically ramped up the timetable for the I-69 extension from Indianapolis to Evansville on Wednesday,” the Indianapolis Star reported on Thursday. “The driving factor: Construction bids on I-69 have been far below estimates. [Daniels said,] ‘we want to get as much under contract as we can with these terrific below-estimate prices. You never thought you’d hear the term government underrun, but that’s what we’re getting.’ So far, the five I-69 contracts INDOT has awarded have come in between 25% and 35% below original estimates, primarily because of the struggling economy and prevalence of cash-strapped governments that have limited road projects.”

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