Public works on the cheap

In the recession, valley construction bucks are going further — while creating jobs and enhancing infrastructure.

Steve Marcus

A truck sprays to keep down dust during construction at the Horse Drive/U.S. Highway 95 interchange, part of what one official calls the county’s “own stimulus plan.”

By Joe Schoenmann (contact)

Friday, Oct. 9, 2009 | 2 a.m.

Download a construction snapshot as of Oct. 6, 2009

State marks start of latest I-15 construction project (9-10-2009)
Development, redevelopment plans inching forward in North Las Vegas (7-24-2009)
Plan would weigh construction bidders' safety along with price (3-27-2009)
Expect help, not public works monuments (3-10-2009)
Construction projects curbed as economy falters (3-6-2009)

Regional Flood Control District

The collapsing construction industry is allowing local government to get public works projects done at fire-sale prices.

Regional Flood Control Director Gale Fraser told local government officials Thursday that his engineers expect tax dollars spent on infrastructure to stretch 25 percent to 50 percent further than before the recession because of increased competition among construction firms.

“We are getting 18 to 19 bidders for each project, where we used to get three or four,” he said. “With the engineers estimates we’re using today ... we can probably build $300 million worth of projects ... with $200 million.”

About 30 projects are under construction or will be over the next six months or so. Fraser referred to the numerous projects, nine of which will be funded by a new $150 million bond issue, as “Clark County’s own stimulus plan.”

Those nine projects include underground storm drain work on the Las Vegas Wash at Decatur Boulevard and Elkhorn Road ($38.6 million), a 222-acre Lower Flamingo Detention Basin with parks and ballfields ($17 million), expansion of a bridge over the Gowan Outfall Channel, and replacement of 900 feet of channel at Simmons Street ($5.5 million).

When all 30 projects are up and running, about 1,700 workers will be directly employed in construction and another 1,000 jobs could be created by the ripple, or multiplier, effect in service businesses that support the projects and their workers.

The projects are attracting so many more bidders than in the past because residential and commercial construction has come to a standstill.

The industry’s troubles are reflected in its rising unemployment.

Associated General Contractors, a trade organization for the construction industry, said that from April 2008 to April 2009, 14,400 construction workers lost their jobs, a decline in that workforce of 15.2 percent. A more recent estimate by the AFL-CIO put unemployment among union construction workers at 25 percent.

Since the recession began, construction employment in Southern Nevada has fallen from 125,000 to 76,000, experts say. Thousands more construction jobs will be lost when much of CityCenter opens in December.

Clark County Commissioner Larry Brown, chairman of the Flood Control District’s board of directors, said officials are keenly aware of the effect public projects have on the local economy, especially now that private projects are few and far between.

“That helps keep the private sector engaged and open for business, so we have to be focusing on our ability to get capital projects on the street,” Brown said after the meeting.

Although the dropoff in private construction work is driving down the cost of public projects, Brown said officials must balance such funding with the other demands on government. The county recently moved about $50 million from its capital projects fund to cover operational expenses because tax revenues are down.

“But how far do you freeze capital projects at the expense of the private sector?” Brown said.

Some of those questions are being examined by the Committee on Community Priorities, a citizens group formed to examine how Clark County can control spending and shape budget priorities. And some will be addressed early next month when the Las Vegas chapter of the Associated General Contractors holds a strategic planning retreat at Red Rock Resort.

Jeremy Aguero will address the group and talk about the connection between publicly financed projects and economic health. Aguero, principal analyst of his firm, Applied Analysis, said some the benefits are clear.

“For one, a capital project creates an economic impact because contractors have to buy services,” he said. “Secondly, at the end of the day, you’re left with an asset that adds value to the community.”

He said one estimate is that every public dollar spent on capital projects generates $1.56 in overall economic benefit. By that formula the Flood Control District’s $150 million in bond-funded projects would generate a $234 million benefit to the economy of Clark County.

To obtain that $150 million, the district — which manages flood control for Clark Clark County, Las Vegas, North Las Vegas, Mesquite, Boulder City and Henderson — is taking advantage of Build America bonds, which are part of the federal stimulus package.

Through Build America the district pays a rate of 7 percent on taxable bonds it sells. The federal government then reimburses the district 35 percent of the interest cost every six months. In the final calculation, that means the district is really paying a rate of about 4.5 percent.

Brown, meanwhile, sees publicly funded projects as one way to help prop up local companies until the economy rebounds.

“We have very little private-sector development and the public sector is critically important to bridging this gap during a recession,” he said.

Discussion: 12 comments so far…

By bdover

10/9/09 at 5:26 a.m.

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Now if we can assure that non-union companies have equal access to bid projects, we can save 10-20% more. With the same quality. Las Vegas Paving and their ilk should not be allowed to influence bid awards with higher prices than other contractors. Right, Sisolak and Collins? Oh, that's right, you're Union flacks singing "Signed, sealed, delivered, I'm yours".
By 2zero

10/9/09 at 7:35 a.m.

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The economy may rebound, but growth and construction in Vegas is not.

Vegas needs educated workers and real jobs, not projects that last a few months or a year or two.

The sooner we let the construction industry shrink to a sustainable size, find work outside Clark County and move on the better!
By lv1

10/9/09 at 8:20 a.m.

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blah blah blah bdover..

Haven't you found a new argument by now.
By Krases

10/9/09 at 8:31 a.m.

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This is why I think now is a good time to expand UNLV, the medical education sector and the technology sector to both diversify our economy and do it on the cheap.

Plus tech jobs seem to be the most stable. Medical jobs can't seem to hire fast enough even in this economy.
By lvdjlv

10/9/09 at 9:24 a.m.

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There is nothing good about this article for Las Vegas if you read between the lines.

First, when 19 general contractors are bidding against each other it's not good because the low bid is never qualified.

If 10 of the 19 contractors bid the project at $11, 3 bid it at $10, 2 bid it at $9, 2 bid it at $8, 1 bids it at $7, and the low bid gets it at $6 then there are going to be multiple problems.

10 bid at $11.
3 bid at $10.
2 bid at $9.
2 bid at $8.
1 bid at $7.
1 bid at $6.

Here are some of the problems:

1. 10 contractors looked at the project and came in around $11 so they probably have a complete bid with all parts of the project scoped out. They won't get the work and their company will fail even though they submitted a qualified bid.

2. The contractor with the super low bid at $6 either missed something and will take it on the chin and his business fails, or believes that he can Change Order the government to make up the difference and trust me, that won't happen.

The low bid contractor got the work, but won't make a profit and that company will fail.

(For those who don't know, a Change Order is when you tell an owner you need more money for something on the project. Whether it was supposed to be included in the bid is always subject to debate.)

3. Do you know that all these projects are prevailing wage which costs just about the same as union wages? Guess who pays for these prevailing wages? You, me, and everybody else.

A drywall installer who normally gets $15/hour now gets about $40/hour. And the quality won't be any better even though you're paying more.

So even though the bids are coming in lower right now, we're still paying far too much as taxpayers for these projects and not getting the quality construction we deserve for our tax dollars.

4. You know what happens when times are good? There are only four or five bidders on these projects and they bid it high and the taxpayers pay through the nose and the quality still isn't good.

My company bid a project against one other G.C. one time and our number was $150 and the other G.C.'s number came in at $237. It was our first time bidding public works and I would have tacked on another $50 and still been low.

5. Why don't G.C.'s usually bid these projects? The public works board has a lot of paperwork you have to fill out and hoops to jump through just to bid the work. And it isn't much better when you get the work so G.C.'s generally shun public works when times are good.

Right now, our economy is in the toilet and G.C.'s are so desperate for work they're doing anything to get a job and keep cash flow coming in - even if it's negative cash flow - which is pretty scary.

Do I have a solution? Scrap prevailing wages and save the taxpayers some money. As for G.C.'s? It's going to be terrible in Las Vegas until 2016. I have first hand experience in watching a company fold. It's not fun. Good luck to all.
By lvdjlv

10/9/09 at 9:34 a.m.

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Because I was limited by 3,000 characters I wanted to add a little more...

The article spins it like this is good for everyone. I disagree and that's just my opinion.

The G.C.'s that are still trying hard to get work are not getting work and will probably close their doors and lots of blue collar and white collar workers will leave Las Vegas.

The G.C.'s that get this work by submitting a super low bid are slitting everyone's throats, including their own.

I highly doubt you'll be getting the best quality results for taxpayer dollars. You might get a bid that's 50% lower, but quality usually goes right down with it.

I'd be very surprised if these bids that are 50% lower include the scope of the higher bids. I doubt these super low bids are apples to apples. It's probably apples to a banana peel.

I could be wrong, but if you went to every G.C. that's still busting their tail out there, you'd probably get a lot of similar answers.

Just be aware that there is a lot more going on to this article than "taxpayers save money and can do more work!" because it's not that simple.

What this tells me is people are really, really desperate. Quality of work will be suspect. And things have a long ways to go before they get better. Happy Friday! (Sorry about the gloom & doom, but I gotta call it like I see it...)
By afveteran

10/9/09 at 9:44 a.m.

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The construction industry is seasonal in nature and is not a big factor in anyone's local economy. The industry only helps a small sector located on the economic pie chart.
By 70aarcuda

10/9/09 at 1:55 p.m.

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on public work project there is no different in labor cost due to prevailing wage laws...

the non-union contractor has to pay his employees the prevailing wage which is what the union worker gets...

only difference no money goes to the union hall from the non union workers...the health and welfare benefits are paid directly to the worker or into a 401k...
By reg373

10/9/09 at 3:12 p.m.

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Those thinking about long-term recovery, know the enviroment will be a big winner in the conversion to biofuels & biopower -- found a cool site; Balkingpoints ; incredible satellite view of earth

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