Recently Reed Construction posting observations regarding contractor pricing strategies on its website in an article titled “Construction deflation’s impact on project cost estimates.”
The article, which provides contractors with thoughts regarding how to target opportunities within dollar ranges and discusses the cyclical nature of project pricing, states, ” the weakest project pricing in the current nonresidential building cycle is likely to be in late 2009 and early 2010.”
The article goes on to state “Unfortunately, all project owners and their cost estimators do not estimate project costs the same way. Every month similar projects go to bid with vastly different cost estimates. As a rule of thumb, assume that cost estimates attached to a request to bid are at least three months out of date. Some cost estimates, especially for public projects, are a much as a year out of date.” (and distributors wonder why they are doing so much bidding and rebidding!)
Granted this could pertain to other construction projects, but … then again, it could relate to all segments of the construction market.
So how much lower could margins go, especially with many distributors having the need for cash flow to support their business? If margins further erode, how can you maintain some level of profitability?
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