If you’ve noticed that contractor bids for public projects are consistently coming in 20-30% higher than the engineer’s estimates, you’re not alone. This widespread trend is frustrating for government agencies trying to budget accurately. But does this mean the actual cost of construction has increased by 20-30%? Not necessarily. The reality is that engineer’s estimates are generally accurate in terms of material and labor costs, but they don’t account for several key factors influencing contractor pricing.

Why Are Bids So Much Higher?

Much like the challenges government agencies face in attracting bids, the reasons behind inflated contractor pricing stem from the burdensome requirements of public bidding.

1. Contractors Are Making It Worth Their Time

The paperwork, bid bonds, compliance forms, and other administrative hurdles involved in public contracts create a significant burden for contractors. Given these extra efforts, the few contractors who do submit bids are factoring in the additional time and risk—leading to higher prices. Instead of offering their lowest possible price, they submit bids that make the project worth their while.

2. The Construction Market Is Overloaded

With the construction industry already stretched thin, contractors have more work than they can handle. Private-sector projects often come with fewer administrative hassles, making them more attractive. This means contractors willing to take on government projects are in a position to charge a premium, knowing demand is high.

3. Lack of Competition Drives Prices Up

Experienced contractors know that many smaller, more competitive companies won’t bother submitting bids due to the complexity of the process. With fewer bidders in the mix, those who do participate can afford to bid higher, capitalizing on the lack of competition.

Engineer’s Estimates Are Still Accurate—But Incomplete

It’s important to note that engineer’s estimates themselves are not necessarily flawed. They are usually based on material costs, labor rates, and historical data, providing a solid baseline for what a project should cost. However, they don’t account for the additional burdens placed on contractors through the public bid process, nor do they anticipate strategic pricing based on market conditions and reduced competition.

How Blue Streak Project Management Can Help

At Blue Streak Project Management, we understand these challenges and work to bridge the gap between government agencies and contractors. As Owner’s Representatives, we help:

✔ Adjust project estimates to reflect real-world bidding conditions.

✔ Identify and address barriers that deter smaller contractors from bidding.

✔ Streamline the bidding process to increase competition and drive costs down.

✔ Improve contractor outreach and pre-bid engagement to attract more competitive proposals.