Crazy Construction Cost Increases: Procurement Strategies That Actually Work

Construction costs have always been unpredictable, but the last few years have pushed “unpredictable” into “downright crazy.” For school districts and public agencies, this creates a Catch-22: while budgets and funding rules stay rigid, the marketplace feels more like Vegas odds. How can districts still get the best project possible without putting themselves at risk?

This post walks through California-specific procurement strategies and contract award rules that can help you stretch your dollars further — and avoid costly pitfalls.

The Catch-22

The pandemic, inflation, and economic uncertainty have made cost estimating nearly impossible. Yet fund source rules (state bonds, local bonds, grant agreements) don’t go away. Agencies need to adjust their procurement strategies early in project development.

Why Delivery Methods Matter More Than Ever

Your choice of project delivery can make or break your budget:

• Lease/Leaseback & Design/Build

  • Max price guarantees (except for unforeseen conditions)

  • Cost estimates and design reviews by the same team guaranteeing the price

  • Subcontractors can be listed during design, bringing real numbers to the table early

• Design/Bid/Build (Hard Bid)

  • Relies on architect’s opinion of cost (or a 3rd-party estimator)

  • No guarantee that cost projections will match bid-day reality

California’s Award of Contracts Law (PCC 20103.8)

Knowing how you can legally award contracts is key. California law lays out four methods for determining the “lowest responsible bidder.”

1. Option A – Base Bid Only

   Lowest base price wins.

   
   

2. Option B – Base + Pre-Identified Alternates

   Lowest total of base plus specified alternates (must be clear in writing).

   
   

3. Option C – List Order Within a Budget

   Additive/deductive items are considered in a set order, stopping when the disclosed budget is hit.

   
   

4. Option D – Blind Bids

   Price is separated from contractor identity until ranking is complete.

Each option has strict requirements — being unclear in documents can lead to disputes, protests, or worse, losing project time.

Fishing for the Best Project You Can Afford

Bid complexity can backfire. Remember: contractors spend real time and money bidding, and they’ll choose where to invest based on profit potential and clarity.

Strategies to stretch your budget:

• Define your base bid as the smallest project you can live with.

• Use deductive alternates sparingly.

• Consider strategic allowances (e.g., stormwater, dry rot, unforeseen underground).

• Award first, then request pricing for desirable “extras” after you uncover real site conditions.

• Delay design submittals for add-ons until you know where you landed on bid day.

Takeaways

• Select the best procurement method early

• Be honest and open with your team (architect, PM, contractor)

• Plan for surprises — don’t let them surprise you

• Keep bid documents simple and clear

• Always discuss creative strategies with legal counsel

• Learn from peers and use California’s procurement tools

Construction costs may be wild, but with smart strategies, you can still land the best project your budget allows.

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Joanne Branch, is a Public Works Expert with COLBI. She works with over 120 school districts and other non-school agencies statewide on procurement, contracts, and program management.

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