On a windy day in April, the mayors from Sea Isle City and Avalon met on the Townsends Inlet Bridge to decide whose town would be first to get its beaches heaped with new sand. The $10.4 million dredging contract did not specify where to start, so the mayors flipped for it.
Lost in the festival-like atmosphere of the event was any mention that it cost taxpayers $2 million to move the dredge and heavy equipment about 10 miles from Ocean City to Townsends Inlet and set up the network of pipes leading from the dredge to the beach.
Fewer companies are bidding now on New Jersey beach contracts than were just 10 years ago. That drives up the setup costs, called mobilization,a Press of Atlantic City analysis of 20 years of contracts shows.
Eight companies have submitted bids on projects between Barnegat Light and Cape May over the last 20 years. But most of those are either out of business or have sold their beach-dredging equipment to competitors.
“Would we like to see more competition? Absolutely,” said Richard Pearsall, spokesman for the U.S. Army Corps of Engineers in Philadelphia.
His office oversees most New Jersey beach projects. The corps used to do virtually all of its own dredging, Pearsall said. But since oceangoing dredges are expensive to maintain and more expensive to replace, government accountants decided it was best to privatize some of the beach work.
A child’s pail full of freshly dredged sand costs taxpayers about as much today as it did about 20 years ago.
The low bid on Ocean City’s beach project this year was $6.45 per cubic yard of sand, not much more than a quote of $5.75 per cubic yard for a 1992 Cape May project.
Dredging companies credit industry efficiency for this stability. Simply put, modern dredges can pump sand onto New Jersey’s beaches faster than ever.
But the cost of mobilizing equipment has skyrocketed over the same period. For example, the 1992 Cape May project had a low mobilization bid of $230,000. But mobilization costs over the past five years have averaged $1.5 million.
Weeks Marine of Covington, La., wanted $5.9 million to send its dredge to Ocean City last year. The contract went to competitor Great Lakes Dredge & Dock of Oak Brook, Ill., which bid $3.5 million for the mobilization.
Why does it cost so much to move a dredge to New Jersey, when it costs so little, by comparison, to pump the sand?
In the past decade, many private competitors have either gone out of business or sold their beach equipment. With fewer companies, the remaining dredges cover a wider geographic area.
C.F. Bean in Belle Chasse, La., which bid on Ocean City projects in 1995 and 2000, sold its beach dredges to focus on navigation, oil field and levee work.
American Dredging, which was founded in 1867 and bid on a 1991 Cape May project, was bought out by Weeks Marine two years later.
T.L. James Co., named the 1996 “dredger of the year” by the Western Dredging Association, was the high bidder in a 1992 Cape May project. It was bought out by Weeks Marine.
“There has been an evolution from all of it being Army Corps to very little of it being Army Corps,” Pearsall said. “It’s more efficient.”
The Army Corps commissioned a report on privatization in 2002 that recommended less reliance on private hopper dredges, which are dredges that clear navigation channels. In 1977, the Army Corps had 14 hopper dredges. By 2002, it had just three, replaced by 15 new commercial vessels that competed for the work.
The study found that West Coast dredging offered limited competition, more closely resembling a monopoly by a handful of companies than an open market. The Army Corps has not done a similar study on East Coast beach dredging.
Most beach-fill work is done by pipeline dredges, which account for 58 percent of Army Corps dredging contracts. But only three companies that perform work on the East Coast have these kinds of dredges, said Barry Holliday, director of the trade group Dredge Contractors of America.
“It’s a legitimate question,” he said. “Is there enough competition? The contracts are much more competitive for the maintenance work in the Gulf of Mexico and the Southeast Atlantic.”
Another reason New Jersey does not see much competition: sea turtles. Smaller companies have to schedule work around nesting seasons for various endangered species.
In the southeastern United States, that means no beach dredging in the spring, to allow sea turtles to nest. In New Jersey, dredging companies historically had to work around marine restrictions protecting winter flounder.
“If you have just one hopper dredge, it’s very hard to compete. You don’t have any flexibility,” he said. “The peak demand for hopper dredges is January. You can almost guarantee every hopper dredge will be busy in January.”
But these jobs dry up in the late spring.
“We maintain there is a need for at least some Army Corps dredges for a couple reasons. One is for emergencies,” Pearsall said. In the event of an emergency that causes a harbor to become shallow, waterways have to be cleared for shipping. “We have a dredge to go address these problems,” Pearsall said.
“The second reason is a check and balance,” he said. “We keep our finger in this business so we know how it’s run and what it costs.”
The Project on Government Oversight, an independent, nonprofit group that investigates government spending, said the lack of competition for government contracts is a regular concern.
“We’ve seen merger mania in the defense industry. We’re starting to see it in the Information Technology industry and health care,” general counsel Scott Amey said. “When you have less competition, you may actually jeopardize both taxpayer dollars and the overall performance on a contract.”
Despite the shrinking competition, most of the New Jersey contracts fell within the government’s estimate for the work.
“We’d rather there be more bids to choose from. But there is a way to ascertain they’re within 25 percent of the estimate,” the Army Corps’ Pearsall said.
That’s good news for towns that have little to no say about the contracts.
Under the cost-sharing agreement, the Army Corps covers 65 percent of the total cost. The state picks up 75 percent of the remainder, so towns ultimately pay about 8 percent of the total price. Even so, this can account for $1 million or more of a municipal budget — sometimes the single biggest capital expense of the year.
Ocean City is not shy about rejecting bids that are unfavorable or noncompetitive.
In April, City Council rejected a $180,500 bid for Haven Avenue reconstruction at 11th Street because it exceeded the engineer’s estimate by about $10,000.
City Business Administrator James Rutala said the city saved more than $100,000 per year after rejecting all bids for trash disposal. When the city solicited new bids, a newcomer, Blue Diamond Disposal, entered the market and provided more competitive prices for Ocean City and Wildwood.
“Wildwood is now saving $1 million,” Rutala said. “In that case, competition worked. That same model could be used for dredging. That would be wonderful.”
Beach replenishment projects are common in New Jersey, though not common enough for some sand-starved beach towns. Getting the dredge before the start of summer was no small advantage to the winner of the coin flip, which happened to be Avalon.
Mayor Martin Pagliughi said towns have few options but to pay their share.
“We don’t have much choice,” Pagliughi said. “There has been a lot of talk about the state buying a dredge. I can tell you right now, that would not be cost-effective between the liability, the certifications for an oceangoing dredge, manpower and salaries.”
But Surf City Mayor Leonard T. Connors Jr. disagrees. His town was part of a larger $31 million Long Beach Island project in 2006. And now most of that sand has already disappeared, he said.
Connors remembers urging the state to buy its own dredge in the 1980s when he was an Ocean County freeholder. He still thinks it’s a good idea.
“They paint the George Washington Bridge from one end to the other. When they’re done, they start all over,” he said. “That’s how I felt they should be dredging in New Jersey. You could have a smaller dredge doing constant maintenance on the beaches.”
He still thinks it’s a good idea.
“I would highly recommend it. I’d be a big proponent of that,” he said.
The smaller pool of competition means that instead of lots of companies competing for projects, the projects compete for the attention of a few bidders.
The same companies that work in New Jersey have projects in states as far away as Texas.
Weeks Marine, which is based in Cranford Township, Union County, did not reply to requests for comment. A spokesman for C.F. Bean also declined to comment.
Great Lakes Dredge & Dock, based in Chicago, is the nation’s largest dredging company with a fleet of 180 specialized vessels. A regular bidder on New Jersey projects, Great Lakes won contracts this year in Ocean City, Avalon and Sea Isle City.
“When we’re doing one job, we have to bid one or two jobs down the road to keep it moving. We can’t have the equipment sit idle,” said Bill Hanson, vice president for Great Lakes.
The industry is hugely dependent on federal projects. Budget cuts or shifting Army Corps priorities can severely affect the economic outlook for the companies, he said.
Dredging companies benefited recently from an influx of federal stimulus funding. And some, including Great Lakes, are building protective dunes to protect sensitive wetlands from the British Petroleum oil spill in the Gulf of Mexico.
Hanson said dredging work in New Jersey remains competitive, despite the shrinking pool of routine bidders.
“We do think (taxpayers) are getting value,” he said. “We know there will always be concerns about the rising cost of dredging. But in actuality, we have more efficient equipment now than we’ve ever had.”
This also helps explain why the price of sand in those New Jersey sandcastles has remained stable for 20 years.
Hanson said there are steps towns can take to cut costs, including getting their state permits well in advance and bidding cooperatively on multi-town projects.
“What we encourage our clients to do is to package several jobs together if they can to save on mobilization,” Hanson said.
That was an effective strategy for Avalon and Sea Isle City this year and a 2009 project involving Sea Isle, Upper Township, North Wildwood and Stone Harbor.
Hanson said companies typically are willing to ask for less money if contracts offer more flexibility.
“Don’t throw all the risk on the contractor. Realize we are working offshore. Mother Nature has her own ideas,” he said. “The best clients get the best prices. We know they’re going to be reasonable to deal with.”
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