the newsletter of tbd consultants - 3rd qtr 2018

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In this Edition

Value Capture Funding
Mixed Markets

Construction Management Specialists

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Finding qualified staff has become a growing problem on construction sites, and one solution that has been proposed is prefabricating off-site. In this article we look at some of the advantages and problems with prefabrication.


Value Capture Funding

In this article we look at one method of funding that can be used for public infrastructure projects, including transit systems.


Mixed Markets

It is looking as though the tariffs and trade wars are back on the table (writing around the end of May), and the issues with Iran are again raising global tensions and pushing oil prices higher. National inflation levels remain under control for now, but construction prices have been rising rapidly over the past few years. Here we take a look at some of the drivers for these increases.

There has been shown to be a relationship between the number of bidders and the level of the bid prices. Taking seven bids as a norm for a fairly competitive market, studies have shown that if more bids are received, the price comes down, and fewer bids leads to higher prices. Only getting two bids on a project might result in the low bid being about 15% higher than would be expected in a ‘normal’ market.

The relationship between number of bids and bid prices is not causal, but both are driven by the market conditions. The construction industry has been suffering from a shortage of qualified staff for some time now, while businesses have been booming and providing a high demand for construction services. Consequently, contractors generally have as much work as they can handle, and if they are going to bid on a job they will make sure that they cover any risks well.

The staff shortages will add to the contractor’s costs in a number of ways, which can include providing incentive packages to obtain and keep staff, providing additional training, and maybe suffering lower productivity where newer staff is involved. These kinds of additional costs will further push up bid prices.

Full work-books will also mean that contractors can be picky about what projects they bid on. A new-build project on a green-field site will not carry the same kind of risk as an alteration project. So, the alteration project will have greater problems attracting bidders, and those who do bid will be making sure they cover any risks well. Projects with difficult access, restrictions on work or delivery hours, or heavy oversight are also jobs that will be less attractive to bidders, even if they are new-build.

To summarize the above factors affecting bids, we have the following range of effects:

  Low Range High Range
Lack of bidders 0% 15%
Hot market conditions 5% 30%
Attractiveness markup 0% 50%
Total effect 5% 95%

Geoff Canham, Editor, TBD San Francisco



Design consultant: Katie Levine of Vallance, Inc.