Material costs to affect public project bidding.

A recent report issued by PinnacleOne, a national construction consulting firm, warns that as the industry experiences shortages in labor and materials, the public sector will encounter a shortage of bidders for its works.

According to Joseph Seibolb, president of PinnacleOne, contractors tend to be wary of the constraints inherent in public construction work and are afraid to find themselves liable for increases in material costs.

"While contractors understand the difference in bidding for public and private sector work and can prepare for the risks, what has added to the challenge in the public sector is the escalating cost of certain materials," Seibolb explains.

"Sometimes contractors are bound to lump sump proposals [and are forced to pick up the bill for extra costs]. There is a powerful attraction to the private sector where there is a hope that the risk will be shared between both parties."

And while the public sector is trying to adopt some of the cost-saving practices long practiced by private developers--including design build and best value bids--there is a worry that public servants are not experienced enough to execute such practices in the right way.

"They know their funds are limited and have to find strategies that will allow them to get a return on their dollar, which places an even greater premium on project planning and preconstruction services because the fate of the project is sealed before the shovel is even in the ground," Seibolb says.

"The disadvantage of this is that the public sector is still relatively new to this practice and the process can be difficult. The challenge is to become an expert relatively quickly on a new delivery method."

But while no one disagrees that the industry is facing a challenge in rising material costs, some members of New York construction community disagree with the assessment that the situation will cause fewer bids on public projects.

"I find it a hard argument to make because any public project is bid out," says Nick LaPorte, executive director of the Associated Builders and Owners of Greater New York. " If a contractor goes on a public project and underbids, it's no one's fault but his own."

On the other hand, Michele Medaglia, president of ACC Construction, admits that she is more attracted by private sector work, but pinpoints other factors as her reasons.

"There are a lot of agencies and formalities that come with doing public work that make it a lot more challenging, logistics-wise and paperwork-wise," she explains. "So when there is an abundance of private work, there is less of a reason to go after public [projects.] Material costs could very well be a factor because if you have a project and you are doing it and it is delayed and the costs have risen there is a whole claims process that's involved in public work that you have to go through and the contract is very stringent.

"So is there a risk? There is a risk. Is that a primary reason [people might stay away from public projects]? I disagree."