The City of Chicago has sparked frustration among local contractors after quietly requesting a 3% reduction on all current invoices for city projects—a move that many small builders say could have serious financial consequences.

A letter dated March 16 and signed by Chief Procurement Officer Sharla Roberts was sent to vendors with existing city contracts. It asked them to reduce their prices by “at least 3%” on any invoices submitted over the next 12 months, even for contracts that had already been signed.

The unexpected appeal caught many in the city’s construction sector off guard. “We don’t think it’s a fair ask,” said Jacqueline Gomez, executive director of the Hispanic American Construction Industry Association. “Contracts have already been signed.”

Henry Lopez, president of Chicago-based Accel Construction, was stunned when he received the letter. His firm has worked on city projects for more than 10 years, and public contracts make up as much as 70% of his business.

“To ask for, essentially, 100% of our profits back is an insult,” Lopez said, explaining that his profit margins are often around 3%. He made clear to the city that his company would not comply. “I have yet to have a conversation with any other construction pros who would participate,” he added.

The city’s request comes at a time when it faces serious financial strain. A $175 million budget shortfall looms due to unpaid pension reimbursements from Chicago Public Schools, according to local outlet ABC7. In response, the city recently raised fees and taxes on items like parking, grocery bags, and streaming services to help close a nearly $1 billion budget gap.

Despite the budget pressures, the letter did not explain what specific economic triggers led to the request. Sheila Marionneaux, director of public affairs for the procurement department, said the decision is in line with past municipal practices. “The purpose of the cost reduction request to vendors is the rollout of the budget commitment to support the department budget goal,” Marionneaux said in an email.

Gomez acknowledged that prior administrations under former mayors Rahm Emanuel and Richard Daley had asked for vendor concessions before—but with advance notice and more context. This time, she argued, the sudden ask puts contractors, especially small ones, in a difficult position. “Particularly of small businesses that feel that, ‘If I don’t do it, will I get future work?’”

While the letter notes that responses are appreciated “even if you are not able to accommodate the request at this time,” Gomez warned that those who comply may be taking on unsustainable financial pressure.

“If a prime contractor takes the 3% cut and they funnel it down to their subcontractors,” she said, “we’re talking about small businesses potentially going out of business.”

Originally reported by Matthew Thibault in Construction Dive.