CPA & Business Advisory Blog

construction reform

The Ohio Construction Reform Today

In this year’s Northeast Ohio Construction Survey, Ohio Construction Reform dropped three notches from third to sixth place as a political issue which could affect survey respondents’ businesses in 2015. While it’s easy to shrug it off to the fact that contractors are becoming more accepting of construction reform, other indicators show that the reform continues to pose significant challenges.

Competition

First, 70% or more of 2014 and 2015 survey respondents report an increase in national and regional competition since Ohio Construction Reform was enacted. Those seeing a material increase in outside competition more than doubled from 12% in 2013 to 29% in 2015. As one respondent puts it, “Competition from outside our region is on the rise and hurting local businesses.”

Cloudy Transparency

One of the main objectives of Ohio Construction Reform – improved transparency – appears murky at best. Only 13% of survey respondents believe there is increased fairness and accuracy in the bidding process for public projects, falling from 31% in 2013. Perhaps more telling is that 49% see no change in transparency at all and 38% see a decrease. It’s clear that construction reform is falling flat in this regard. One respondent reflected this sentiment: “We continue to see less and less transparency in the bidding and award of large public financed projects.”

Contract Delivery

When asked about the most common contract delivery method our respondents have observed for public projects over the last year, survey respondents held steady from last year’s survey: Construction Manager at risk is still the clear number one, followed by design/ build proposals and single prime bidding as a close third. This is a shift from just two years ago when design/build proposals were ranked as the most common.

Project Size

For the first time since we began asking the question in 2013, roughly 70% of survey respondents are seeing an increase in the scope, size and nature of public projects since reform. This compares with only 56% in 2013 and 57% in 2014. While this number may not be as high as some expected, there still has been a slide toward larger projects.

One issue we’ll be watching is the ability of smaller contractors to get work as the size of projects increase—many contractors who were used to being prime have since become subcontractors. “Small to medium size general contracting / construction management companies are being pushed out of the public arena due to Ohio Construction Reform,” said one respondent. Another agrees, responding, “[Construction reform] cuts out many of the mid-size and open shop firms. It gives the projects to larger firms that are usually signatory.”

As for the future effect of reform, some respondents are not hopeful. “We will continue to see more negative impact from construction reform during 2015, as many of the jobs that were bid in 2014 were already in planning stages before construction reform was enacted…. construction/surety and industry efforts to enact positive changes are poorly organized.”

On a positive note, both general contractors and subcontractors are seeing more opportunities in public projects this year. According to our survey, 44% of general contractors surveyed see an increase in opportunities, a 13% improvement from 2013 results. Subcontractors have also trended upward with 34% seeing more opportunities on public projects, an increase of 8% form both 2013 and 2014 results.

Download your free copy of Skoda Minotti’s 2015 Real Estate and Contruction Survey for strategic insights on the real estate and construction industry and the chance to see how your company stacks up.

To learn more about the Skoda Minotti Real Estate and Construction Group, contact Roger T. Gingerich, CPA/ABV, CVA, CCA at 440-449-6800.


2015 Northeast Ohio Real Estate & Construction Survey Report

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