Springs' slumping economy could be a $10 million silver lining for the city

Those who don’t think clouds have silver linings should step into Steve Gess’ office at the City Administration Building.

Gess oversees contracting for the city of Colorado Springs, and these days he’s finding bargains for taxpayers.

That’s because sour economic times have sweetened the competition for city work, driving prices down as contractors without work flock to bid on public jobs.

Gess estimates the city might spend $10 million less in a year’s time because of the competition.

To gain an edge, he said, contractors must cut their profit margins, meaning taxpayers pay less than during boom times, when there’s plenty of work for everyone.

The city must be on its toes, though, hiring only qualified contractors and keeping tabs to assure they do the work right, he said.

So far, so good, Gess reports.

A similar situation arose in 1999 — before Intel announced plans to locate here. After the plant got under way the economy took off, and the pool of firms vying for city work returned to normal.

Last fall, Gess again noticed the number bids picking up.

This time, there’s more work because of two new money sources feeding the city’s construction program.

In 2004, voters approved the Pikes Peak Rural Transportation Authority sales tax, which brings in about $70 million a year for road projects and transit services.

In 2007, the City Council imposed stormwater fees on the city’s property owners to generate about $15 million a year.

That’s a lot of asphalt and concrete.

Contracts that used to draw two or three bids now attract double or triple that number, or even more. “On one of them, we got 17 bids,” Gess said.

“What we’ve seen on the spreads is very competitive,” he added.

In November, for example, the city opened bids for neighborhood improvements on the west side. It got 12 bids, and the lowest one, for $162,625, was only $17 less than the next-closest bid.

Fifteen firms bid on Cottonwood Creek channel improvements in December. The winner was $9,617 lower than the next-lowest bidder for the $1.5 million contract.

Even a little job of replacing a concrete slab at a fire station drew seven bids in December, with the low coming in at $75,230.

Gess estimated competition has driven construction contracts down by 5 percent to 10 percent. While some savings might be seen on all contracts, the real difference has come in construction, he said. With the city hiring about $100 million worth of construction work, the savings are significant.

“The thing you worry about is if they don’t have enough built in for contingencies, they might start cutting corners,” he said, noting the city scrutinizes new contractors’ qualifications to be sure they can handle the work.

“They’ve got to give us references, and they have to have expertise in the field that they’re bidding on,” he said. Bid bonds, required on contracts over $50,000, also weed out weaker firms that aren’t able to get a bond, he said.

As for oversight, the city added a few inspectors after the transportation tax was approved. “We’ve got a lot more eyes and ears out there to monitor these projects,” he said.

When the Parks Department needed to install automatic locks on restrooms, officials estimated the job would cost about $79,500. But the low bid came in at $28,130. City officials couldn’t believe the contractor could do the work for that cheap. But the firm’s capability and product checked out, Gess said.

Another factor that pushes prices down is timing, he said.

Late winter and early spring are ideal, he said, because contractors want to know they’ll have work through the summer to keep their crews on the payroll.

Some contractors will work for next to no profit just to keep their people employed, he said.

“We’ve certainly lowered our prices to keep busy,” said Pete Sprouse, owner of Pete Sprouse Construction of Colorado Springs, which helped reconstruct Union Boulevard.

“I need to keep the men busy,” he said of his seven regular employees. “You get to know them and all that. Actually, you try to work them when you don’t have the work.”

So when contractors crowd into the City Administration Building’s second-floor conference room, they’re on edge to find out who won the job.

The beneficiaries of those contractors’ sharp pencils and razor-thin profit margins are the city’s 385,000 residents.

“It’s a win for the taxpayers because right now we’re saving money so we’re able to do more projects,” Gess said.

But it won’t last forever, and Gess’ staff doesn’t need an economist to know when the slump ends.

“We can always tell when the economy gets cooking again,” he said, “because the number of bidders decreases. They’re all busy.”

CONTACT THE WRITER: 636-0238 or pam.zubeck@gazette.com