Bidder Barriers at Charlotte?

Hi Way Paving is headquartered in Hilliard, Ohio, about 440 miles from Charlotte.

Still, the company holds contracts for two of the largest ongoing projects awarded by the city of Charlotte. The two, totaling about $80 million, are for runway construction at Charlotte Douglas/International Airport.

One of the jobs, the second phase of construction for the airport’s new third parallel runway, is valued at $61.6 million. The other contract, worth $18.3 million, is for reconstruction of Runway 18C/36C.

But Hi Way Paving is not the only out-of-state contractor benefiting from city of Charlotte contracts at a time when struggling local companies could also use construction jobs during this lull in the industry.

A list of the top 20 ongoing construction projects awarded by the city shows that nearly half have gone to companies from outside the Charlotte region. Among the 20, eight contracts have gone to out-of-state firms, while less than half have gone to companies with a Charlotte address.

It’s not that Charlotte-area companies aren’t interested in those jobs. It’s that the recession has made it tough for companies in this area to get their hands on the public contracts, according to some firms.

Here’s the problem: In order to qualify for big public contracts, like runway jobs and major sewage projects, contractors must meet prequalification requirements that call for bidders to have handled a certain dollar value in projects in recent years. But with little work to go around these days, it’s a hard requirement for some companies to meet.

“Let’s just say that your prequalification is that you had to do three $25 million jobs or some magnitude like that in the last 10 years,” said Bill Norwood, president of Monroe-based State Utilities Co. “Well, the number of $25 million jobs done in North Carolina and South Carolina was, let’s say, four or even six. That’s not many. So I would have had to do 50 to 75 percent of those jobs to qualify.”

Before the Great Recession, State Utilities, which specializes in installing subdivision infrastructure, averaged about $65 million in projects under contract.

Today, though, that figure has been cut in half, to about $30 million, Norwood said, adding that the city’s prequalification requirements, which are similar to prequalification requirements in other municipalities across the state, are keeping his company from bidding on some projects.

Meeting the prequalification requirements is not the only challenge for Charlotte-area bidders hungry for a city contract. Out-of-state firms, just as desperate for work as any other contractor, are looking beyond their states’ borders in the hopes of snagging jobs.

That means Charlotte-area companies are finding themselves increasingly going up against firms from across the country, like Improved Technology Group of Knoxville, Tenn., which holds a $15 million city contract for sewage work, and E.S. Wagner Co. of Piedmont, S.C., which is overseeing a $57 million grading contract for Charlotte/Douglas’ third parallel runway.

“Used to be, when there was a lot of work, the Charlotte area didn’t get as many out-of-town contractors,” said Hazel Sanders, president of Charlotte-based Sanders Utility, a heavy-utility contractor. “Nowadays, people have to go where they can to bid the work.”

In the past, municipalities sometimes had trouble getting three companies -- the required minimum -- to bid on a public project, Sanders said. That’s not a problem anymore.

Norwood said the out-of-state bidders make the playing field unlevel.

“I don’t mind fair and good competition,” he said. “I just don’t like unfair competition. The problem is some are coming from out of town and beating your cost so bad. They can make a mistake and get the job and mess up the market. Of course, the market’s pretty shot now anyway.”

Before the recession, there were usually only between three to five companies bidding on every city of Charlotte job. Now, there can be 12 or 20, sources say.

City officials, though, say the prequalification requirements ensure that contractors are experienced enough to take on major public jobs.

“They have to have proof that they’ve done the work somewhere, because we don’t want to be a testing ground,” said Cam Coley, spokesman for Charlotte-Mecklenburg Utilities.

When it comes to the city’s projects, most do not have a prequalification requirement, he said. But those above a $20 million threshold often do.

Prequalifications vary depending on the type and size of the project. The time periods used for prequalification also vary and sometimes stretch back to the past 10 years, Coley said.

“When we require prequalification we are looking for evidence that the contractors have experience with similar projects of equal size or within two-thirds of the size,” he said.

Coley said the city has split large projects into smaller ones to bring in more competition, because many local contractors are unable to get $25 million or more in bonding. Some examples of that are the South Water Main/Park Road project and the Briar Creek Relief Sewer, he said.

But for some projects, like large-scale utility ones, there are only a few companies in the country that can handle them, Coley said.

James Taylor, president of Hi Way Paving, describes his company -- known for large highway and airport concrete paving projects -- as a “traveling contractor” that works in Ohio, West Virginia, Virginia and Pennsylvania, among other states.

“It’s kind of the nature of the concrete paving business,” he said. “There’s usually not enough big volume work to keep us busy at home.”

Taylor, too, said he’s seeing more bidders fighting for contracts.

“Generally, we are competing against the same companies over and over with eight to 10 bidders per project,” he said. “It used to be companies would focus on a smaller geographic territory. They are going further now.

“In the case of the work in Charlotte, there’s really not a local large concrete paving contractor there.”

Sanders and others see problems with the city’s prequalification process.

For one, it’s time-consuming, she said, especially when companies like hers have had to downsize. She has about 40 employees, but she’d like to be at 50. Norwood had between 210 and 220 employees before the recession but is down to slightly more than 100.

Sanders would like the city to do a general prequalification, maybe every six months, instead of for each job.

“For a bid itself, if it’s a $10 million job, you may have two to three weeks tied up in a job before you even bid,” said Sanders, who said her company is bonded up to $50 million with about $20 million in projects ongoing. “If you are not the low bidder, that’s just money out of your pocket.”

Sanders said she has seen the city change prequalification requirements for projects before, so she doesn’t believe the city is deliberately excluding contractors from the process.

The prequalification requirements have not kept Sanders from qualifying to bid on any projects -- yet.

“It has not been a problem for our company so far,” she said, “but I’m not saying that it might not be in the future because of the availability of work being performed.”

Norwood said municipalities, when evaluating bidders, should consider local experience, past experience with the municipality, financial strength and bonding capacity.

“If the bonding company and banks are comfortable with us, the city of Charlotte and any other municipality should be comfortable, too,” he said.

“We put the water line down the middle of Park Road. How much more difficult could that be?”

Norwood, who said his company slashed its employees’ salaries 10 percent last year, said the increase in out-of-town bidders has worn him down.

Still, he’s just as guilty as companies like Hi Way Paving:

State Utilities is snatching up jobs out of state, in places like Charleston, S.C.

NINE NONLOCALS

Of the 20 highest-priced “open” construction projects awarded by the city of Charlotte, nine are in the hands of companies from outside the region. The city considers projects to be “open” when the funding allocated for them has not been completely spent. Below are the project descriptions, award dates, low bidders and bid amounts for the nine.

1. Charlotte/Douglas third parallel runway Phase II

June 2008

Hi-Way Paving Inc., Hilliard, Ohio

$61.57M

2. Charlotte/Douglas third parallel runway grading

March 2007

E.S. Wagner Co., Piedmont, S.C.

$57.03M

3. Franklin Water Reservoir improvements

August 2009

Thalle Construction Co., Hillsborough, N.C.

$18.72M

4. Charlotte/Douglas runway 18C/36C reconstruction

March 2011

Hi Way Paving, Hilliard, Ohio

$18.25M

5. Fiscal 2007 rehab sewer main sanitary sewer

February 2007

Mountain States of Durham, now DBA Improved Technology Group, Knoxville, Tenn.

$15.08M

6. Briar Creek relief sewer

Phase 1B

July 2007

Rockdale Pipeline Inc., Conyers, Ga.

$13.76M

7. McAlpine relief sewer Phase II

July 2009

Oscar Renda Contracting, Roanoke, Texas

$11.80M

8. Deicing trucks

December 2010

Global Ground Support, Olathe, Kan.

$10.55M

9. NASCAR Hall of Fame architect

April 2007

PEI Cobb Freed & Partners, New York

$10.52M

Source: city of Charlotte