From the September issue: Construction firms have long had a habit of bidding below cost to beat out the competition and snare jobs. But as the backlog of construction jobs that had existed is petering out, the underbidding is happening even more — and it’s becoming even riskier.

As companies bid low, observers fear a spate of stalled projects down the line, when the firms run out of funds mid-construction.

“We’re in a very dangerous spiral,” said Louis Coletti, president of the Building Trades Employers’ Association. “I’m already starting to hear stories about subcontractors, and some general contractors, who aren’t able to finish their jobs because they don’t have any cash flow and they’re bankrupt. … There will come a point when they may be at risk of going out of business.”

In the past six months, Coletti said he’s observed increased concern surrounding this issue. For one, underbidding is becoming more prevalent.

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From the February issue: As New York City construction firms get slammed by the downturn, they are turning to more modest projects, in some cases taking on multimillion-dollar renovations rather than the multibillion-dollar skyscrapers. While it’s clear that the collapse of the New York development market has taken a toll on builders and brokers, there may be nobody in the industry hit as hard as construction firms. As banks have largely cut off financing for new projects and cranes have been mothballed, thousands of contractors have lost their jobs. “It’s having a devastating impact on the construction market,” said Lou Coletti, president of the Building Trades Employers’ Association, which represents 1,700 construction management and contractor firms. “There are very few, if any, new projects moving forward.” To combat that lack of work, major New York construction firms are bidding for much smaller projects and diversifying into public-sector work, while other firms have been forced into bankruptcy protection.[more] [more]

September brought the steepest rise seen in months in filings by frustrated lenders and claims by contractors on distressed real estate properties in Manhattan, although the numbers still remain below the recent highs. The number of lenders filing mortgage-related liens, generally consisting of foreclosure lawsuits, doubled in September to 15 from August, while the number of contractors filing mechanic’s liens rose to 286 in the same time period, marking a 25 percent jump, according to new data provided to The Real Deal from research firm PropertyShark.com. While the increases in September were substantial, both figures remain below their peak levels seen in the recent down cycle. The greatest number of mortgage-related liens filed in a month was 26 in July 2008, and March 2009 saw the most activity for mechanic’s liens, when 371 were filed in Manhattan, the figures show. more

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