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(EST-912) Pricing Projects in a Continuing Hyper Competitive Market

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Primary Author: Mr Michael D Dell'Isola PE FRICS Faithful+Gould

Audience Focus: Advanced
Application Type: Experience-Based
Venue: 2012 AACE International Annual Meeting, San Antonio, TX, USA

Abstract: The construction marketplace in the USA experienced dramatic changes from 2002 through 2011. From 2002 to 2006, overall construction spending increased by 35%, an average of almost 7% per year. After the peak year of 2006, spending then decreased by 35% through the end of 2011.

The period of 2002 - 2011 has recorded the most significant upward and then downward change to have occurred in the last 40 years. As a result of the dramatic reduction in construction volume, exceptional competition has dropped bid prices 10%, 20% to even 40%. Construction volume remains constrained and bid prices remain very low.

This paper expands on one presented in 2011 that addressed how construction volume affects competition, how competition affects price, how to react to very low bids/prices and how to properly enhance competition. This paper further explores reasons why construction volume expands and contracts, presents an analysis of the latest data and pricing (2012) and offers projections on the construction marketplace to budget projects for the future.