February’s view from the Bid Room

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February’s view from the Bid Room

I found three apparently unrelated facts in my email last week :

  1. Nationwide, 1 in 9 homes (11%) with a mortgage is under water, worth less than the balance due. The Las Vegas area is the poster child of the debacle.
  2. Lend Lease on Oahu is in the process of starting  its $ 2.3 Billion worth of work on Oahu’s military bases.
  3. A bridge in North Carolina was awarded in the beginning of the month to the lowest responsive bidder for 50% of the Engineer’s Estimate.

The sum of these elements seem to typify our current marketplace, and speaks volumes about the economy. Clearly the residential market’s predicament is much deeper than anyone saw at the onset of the crash. It appears headed for years of uncertainty on the whole. Some regions are already regaining strength, but it’s hard to envision a broad, smooth nationwide upswing anytime soon.

Despite the rocky situation of the commercial market as a whole, military spending remains strong, and buoys the economy in select markets where the armed forces have a strong presence. Likewise some stimulus projects are still creating jobs and sustaining the companies working on them. But overall, both public and private construction remain depressed, dragged down by tight money supply and stricter lending practices.

The bid market is as cut-throat as ever, with companies continually willing to bid razor-thin margins just to get work, and drastically increasing their risk of survival in the process. Bid lists still resemble a directory of every eligible contractor in the entire region, if not the country. You’d think savvy owners would be rushing to build facilities while the feeding frenzy is on. But the the tight money situation makes it a Catch-22 for inaction.

In summary, I think most of us agree it’s better than the worst of the recession 2 years ago, but not much. The more disturbing factor is the lack of a clear positive direction indicative of recovery. It feels more like we’re randomly drifting without a rudder, bouncing off rocks, occasionally being lifted by a good strong tide, only to scrape bottom around the next bend. (Is that the roar of precipitous falls in the distance, or a huge run of fish headed for our net?) We see neither a positive recovery nor a deepening recession. I guess we can be grateful for half that statement.

2014-11-05T17:02:32+00:00 By |Consulting, Digital Dry Shack Blog|