AMERICAN CANYON — For the second time this spring, a construction project in American Canyon has encountered delays or higher costs because contractors were too busy with other work to bid. The snags have demonstrated the local impact of much larger issues in the construction industry.
Last week, Public Works Director Jason Holley asked the City Council for permission to reject bids for a project expanding the eastern portion of the Highway 29 and Napa Junction Road intersection.
Holley’s reason for the request: only one company submitted a bid.
Ghilotti Brothers, Inc. said they could do the work — adding turn lanes and widening curbs — for $1.43 million. The Public Works Department felt the estimate was a little high, citing an engineer’s calculation that pegged the construction cost at $1.12 million.
But Holley had no other bids to consider, though he had expected more companies to submit estimates.
“There were four general contractors who expressed interest in the Project,” Holley informed the council through a staff report. “But only one who actually bid on it.”
He went to say the “lower than anticipated response is due to an active construction market that allows contractors to be selective on which projects they choose to bid on.”
A similar hiccup occurred a few months ago when the developer for an affordable housing project, slated for the west side of town, asked for bids from contractors.
Satellite Affordable Housing Associates (SAHA) sought builders for Valley View Senior Homes, only to discover the lowest bids were $4 million more than SAHA had budgeted.
Aubra Levine, associate director for SAHA, said they went back out to bid a second time, and managed to get less expensive estimates. Still, those bids put the construction budget over by $2 million, forcing SAHA to ask the Napa County Board of Supervisors for help.
Levine told the American Canyon Eagle some contractors SAHA usually hires were busy with other projects.
Holley echoed similar reasoning in an interview with the Eagle. “There’s a lot of economic activity and a lot of construction projects out there,” he said.
“This time of year is typically busy,” Holley added. “It certainly is busier than three or four years ago when the economy was still coming out of the economic downturn.”
Jacques LaRochelle, the city of Napa’s public works director, said Napa was encountering similar problems. “Fortunately, we have been able to get multiple bidders, however, prices have certainly gone higher,” he said.
The Great Recession, in fact, had some lasting impacts on the construction industry, according to Holley and others.
“A lot of contractors didn’t make it out of the economic downturn,” said Holley. “That pool of contractors got thinned.”
“Now there’s more work, [but] there isn’t an expanding batch of new contractors doing work.”
Some companies went out of business during the recession, while others retracted and let go of crews, which reduced the scope of their construction work, according to Holley.
“They might have done a lot of different kinds of things with their own equipment, but got rid of that equipment and some people,” he said. “They might still be around, but they’re a smaller version of themselves.”
Contractors are also charging more because they’re paying higher wages for workers, who are in shorter supply.
“There is pressure on the labor pool,” said Holley. “You see it in labor costs going up for contractors.”
Levine said the “subcontractor community is feeling stretched” because of labor shortages.
The shortage isn’t limited to the Bay Area or even California. National publications have reported on this problem, citing everything from the Great Recession to changes in immigration policy for curtailing the number of available construction workers.
Forbes reported in April that the share of builders reporting labor shortages had soared from 21 percent in 2012 to 56 percent in 2016.
The smaller labor pool has forced many contractors to pay higher wages and raise their bids, according to a survey last year by the National Association of Home Builders. The same survey reported 64 percent had delayed projects because they couldn’t locate enough labor.
Those who worked in the industry before the recession went elsewhere when work dried up, and never came back. That included immigrant laborers, some of whom returned to their home countries and stayed there.
The two states most impacted by the loss of immigrant labor were Texas and California, where 40 percent of the construction workforce is foreign-born, according to Forbes.
As for American Canyon, projects impacted by the construction industry should still move forward.
SAHA was able to get the additional funding it needed from the Board of Supervisors. Groundbreaking for Valley View is tentatively planned for July.
Holley intends to put the intersection project back out to bid, albeit with changes intended to attract more contractors.
“Staff is in the process of making modifications to the Project that will (hopefully) make it more appealing to a broader audience,” Holley wrote in his report to the City Council. “It is anticipated these modifications will result in more bids and will provide a more competitive price for the work.”