What's the Deal with COVID Impacts on Public Work Contractors?

So, have you seen an uptick in contractors you’ve never heard of trying to get prequalified to work school projects? Probably. Why now? Well, it is all about the almighty dollar! Contractors and all their subcontractors and suppliers need to keep working and they go where the money goes. During financial stress, whether local, State-, or nation-wide, every industry and business feels different impacts and reacts to them. In the case of our friendly neighborhood licensed contractors, they saw that work from some fund sources dried up and others didn’t in 2020.

Large school projects in CA are usually funded by a combination of local school bond measures and CA State bond funds. The local school bonds are where the local taxpayers vote for it and the school district sells bonds to get the funds as soon as they can. The bonds create local debt and the approved school bond tax is placed on taxpayer's property tax bills to repay that debt over time with interest.

State bond funds are where statewide taxpayers vote for it and the State sells the bonds and gets the funds on a paced schedule. This creates debt for everyone in the State with interest. The State then doles out the funds to the districts that qualify and manages the repayment of the debt from State taxes. As long as the local taxpayers continue to pay their property taxes and the State of CA continues to pass bonds regularly, the system of debt and taxes functions to fund school building programs.

During economic downturns, the State has often looked to the State school bond-funded construction funding to stimulate the economy and keep jobs in the school construction sector while waiting for the rest of the sectors such as housing and commercial construction work to resume. Businesses tend to tighten their belts, hunker down and try to avoid large or unnecessary expenditures until the storm blows through. Businesses have moved to work from home and there is a trend to continue that to some degree so may not need new square footage right now. Housing starts are down, so folks who specialize in that are also reaching for alternative prospects.

So, What’s the Deal during COVID?

• The Governor has specifically allowed the State School Bond sales to continue which lets the dollars continue to flow to school districts.
• The cost of money is low (for now) because interest rates are low, so school districts are looking at their local bonds and working to keep those dollars flowing.
• The cost of some construction materials is up, and certain things are harder to source due to manpower shortages in factories, and overseas shipping impacts, but overall the construction industry is looking for work, so the bid costs are down as much as they can be in these strange times.

Contractors whose usual target client’s work has tightened down and slowed are now looking to where the money is still flowing – schools! They may have never looked there before, but they sure are now! They don’t realize that Public Works in general, and school work particularly is harder to get into than some other sectors. ?

Schools have the Division of the State Architect as their permitting agency and 100% inspection oversight – commercial construction doesn’t have that. Schools have weird rules regarding paying prevailing wages – housing doesn’t usually have that. Schools have prequalification, but not every project, every time – how confusing! ?But, here they come trying to figure it all out in the worst of times possible when they are desperate to keep food on the table of all who rely on construction work to survive. They have a high learning curve and don’t know what they don’t know until they try.

Contractors who partially or fully specialize in school work have the system down. They talk amongst each other and have special meetings about school work and get training on doing it right. Those that are desperate to follow the flow of funds right now may not know they should have done their homework before this pandemic. They just need work and are trying to find it any way they can.

School district owners need to be kind and patient with them. They have every right the other firms have to this work.?They put pressure on the usual folks to sharpen their pencils!?But, they must meet the requirements and the need to do that may be news to them. They may get angry that somehow they are being unnecessarily blocked from this work. They may get frustrated with the entire crazy system that is CA school work, with prequalification being only one part.

The good news is, after an economic downturn we often end up with a few new contractors who figure school work out and want to stay in the mix! Without this pandemic they may have never looked for school work and the districts wouldn’t have had the joy of adding new, fresh competition to the usual and customary players. Taxpayers should be grateful that new faces are looking to expand into school work. It helps the school districts and the taxpayers in the long run!

If you have any questions or want to learn more about how COLBI helps with finding public works construction opportunities, online bidding or prequalification, contact us today!

Joanne Branch, DBIA

Facilities and Procurement Specialist

Retired in 2020 with 28+ years supporting CA public K-12 capital program delivery – at your service!