Advisory Board Perspective: Contract Awards and What We’re Seeing
At the March 18th Board of Directors meeting, discussion of the cryogenic oxygen generation compressor services contract highlighted a recurring dynamic in how contract awards are presented and understood.
In that case, the Board was asked to approve a contract with only one eligible bid, at a cost significantly higher than the engineer’s estimate. The discussion reflected clear surprise and concern, particularly around limited competition, the gap between estimate and bid, and whether rebidding might lead to a different result.
At the same meeting, discussion of a separate contract for engineering services at the Somerville Marginal CSO Facility highlighted a different, but related dynamic. There, the focus was not on the hourly rates themselves, but on the total level of effort proposed.
“My bigger concern now is, why is it 10,000 hours more? The bigger gap is because the number of hours, not because the cost per hour,” said Board member Joseph Foti.
In that case, the question was not simply why a proposal cost more, but why it assumed significantly more work than the engineer’s estimate.
At the same time, staff explained that both situations reflect real constraints. The cryogenic compressor work is highly specialized, with a limited pool of qualified contractors and prior attempts that produced few or no bids. In the Somerville case, the level of effort reflects differing assumptions about how much work is required to complete a complex, active facility rehabilitation project.
Taken together, these examples point to a broader question. When these conditions are known, to what extent should these outcomes be expected? And what can recent contract awards tell us about how often this occurs?
How Project Costs Evolve Before the Board Sees Them
Part of the challenge in interpreting these outcomes is that the price of a project is not fixed when it reaches the Board. In most cases, it has already evolved through multiple stages.
Projects generally move through three pricing points. An initial estimate is developed in the CIP during the planning phase, often based on early assumptions about scope and conditions. As the project advances toward procurement, that estimate is refined into an engineer’s estimate, reflecting a more detailed understanding of the work, updated design information, and current market considerations. The final stage is the actual bid or award, where contractor proposals determine the price under real market conditions.
By the time a contract reaches the Board, it reflects the last of these stages. However, discussion often centers on how it compares to the engineer’s estimate, without always considering how that estimate may have already shifted from earlier planning assumptions.
Recent CIP data suggests that these earlier planning estimates can change significantly as projects develop. For example, several Deer Island-related projects have seen notable increases in estimated contract value from one year to the next as scope and assumptions were refined. In one case, a project increased from approximately $68 million to $400 million, while others more than doubled over the same period.
These figures are still being reviewed, but they illustrate a broader point. What appears as a single increase at the time of award may actually reflect a series of adjustments as a project moves from planning to procurement to market pricing. In some cases, particularly for large and complex facility work, these adjustments can be substantial, reflecting both the evolving understanding of project scope and the realities of delivering work in constrained and specialized environments.
What We’re Seeing in Recent Contract Awards
This review is based on projects included in MWRA staff summaries and meeting materials and is not intended to capture the full capital program. As outlined in the FY26 CIP, MWRA anticipates awarding 74 contracts in FY26 across waterworks, wastewater, and business and operations services, including many projects that are not individually highlighted in Board materials.
A review of contract awards from Board staff summaries since 2023 suggests that outcomes vary widely by project type. This is not a formal analysis, but a look at how projects have come before the Board.
Bidder participation ranged from one bidder to as many as eight. That difference matters.
More specialized projects, such as facility systems or certain engineering services, often draw one or two bids. In several cases, those bids exceeded the engineer’s estimate, sometimes by a wide margin.
The compressor services contract is one example, with a single bid roughly 80 percent above estimate. But it is not unique. Similar patterns appear in other recent contract awards involving specialized work.
By contrast, more conventional construction projects, such as pipelines or structural work, tend to attract more bidders. In one case, a project with eight bidders was awarded about 20 percent below estimate.
Based on this limited review, a pattern begins to emerge. Projects with more bidders tend to come in below estimate, while those with one or two bidders are more likely to meet or exceed estimates. This is not a definitive finding, but it appears consistently across the contracts reviewed and reflects underlying differences in project complexity, risk, and contractor availability.
The challenge is not just identifying these differences, but understanding them. When bids come in well above the engineer’s estimate, it can appear that something went wrong. In some cases, however, the bid reflects not just a single deviation, but the final step in a longer process where project costs have already been adjusted as scope, assumptions, and market conditions evolve.
That does not mean these differences should go unquestioned. But it does mean the reasons behind them should be clearly understood and communicated.
Why This Matters
Contract awards directly shape the cost of capital delivery. Where competition is strong, bids tend to align with or fall below estimates. Where competition is limited, particularly for specialized work, costs may exceed expectations.
Over time, these differences can influence project costs, planning assumptions, and long-term affordability for member communities.
Advisory Board Role
Procurement decisions are the responsibility of MWRA. The Advisory Board’s role is to stay informed about how contract awards relate to costs and affordability, and to raise questions when patterns or outcomes warrant closer examination.
This includes following how projects are presented, understanding how market conditions may affect pricing, and identifying where additional explanation may be helpful.
What Comes Next
Advisory Board staff have begun reviewing recent staff summaries to better understand how contract awards vary by project type.
This is not intended to replicate MWRA’s work, but to better understand what may be driving differences between estimates and bids, especially where competition is limited, and how those estimates may have evolved from earlier planning assumptions.
A clearer understanding may also help explain these outcomes to ratepayers, particularly when higher costs reflect market conditions rather than isolated issues.
From Estimate to Reality: Why Costs Don’t Stand Still
Contract awards are where planning meets market conditions, but they are not where project costs begin.
As recent examples suggest, project costs do not move in a straight line from initial estimate to final bid. Instead, they evolve over time as scope is refined, assumptions are updated, and market conditions come into focus. By the time a project reaches the Board, the price under consideration is often the result of multiple adjustments rather than a single shift.
In some cases, particularly for large and complex facility investments, these changes can be significant. That has important implications for how projects are understood at the time of award, as well as how future system needs are planned and communicated.
For the Advisory Board, this highlights the importance of looking beyond individual contract awards to better understand how project costs develop over time.
Staff will continue reviewing contract awards and related materials to identify where differences between estimates and bids are most pronounced and better understand the factors driving those outcomes. This will help provide additional context for how these results are interpreted at the time decisions are made.
As this work continues, the Advisory Board will be better positioned to identify whether these patterns are isolated or indicative of broader trends. If more consistent or concerning patterns emerge, the Advisory Board can bring those observations back to the Board for further discussion and, where appropriate, consider whether additional questions or recommendations are warranted.
Over time, this approach may also support more informed discussions, particularly as the region moves toward large and complex capital investments on the horizon, where costs may evolve significantly from initial planning assumptions.
