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STERLING CONSTRUCTION COMPANY, INC.

20810 Fernbush Lane

Houston, TX 77073

(281) 821-9091

August 24, 2005

Tracey McKoy, Staff Accountant

Securities and Exchange Commission

1 Station Place, N.E., Stop 0510

Washington, D.C. 20549

    Re:

    Sterling Construction Company, Inc.

    Form 10-K for the fiscal year ended December 31, 2004

    File No. 1-31993

Dear Ms. McKoy:

     Pursuant to your letter of August 5, 2005, Sterling Construction Company, Inc. (“SCCI” or “the
Company”) has prepared the following responses and intends to re-file its Form 10-K for the year
ended December 31, 2004 and its Form 10-Q for the period ended March 31, 2005 in accordance with
items below, following your review of the proposed changes enclosed herewith.

Management’s Discussion and Analysis, page 10

Cash Flows, Page 15

    1.

    When preparing the discussion and analysis of operating cash flows, please address
material changes in the underlying drivers rather than merely describe items identified on
the face of the statement of cash flows. Specifically, we note you identify several
increases and decreases in particular balance sheet accounts, which is information that is
readily obtainable by the reader, however, you do not provide an analysis of these changes
or the positive or negative impact on future cash flows. Refer to SEC Release 33-8350 for
guidance.

    The Company has amended its Form 10-K for the year ended December 31, 2004 and its Form
10-Q for the quarter ended March 31, 2005 to describe changes in items included in the
cash flow statement. See page 17 of the Amended 10-K/A for the year ended December 31,
2004 and page 11 of the Amended 10-Q/A for the quarter ended March 31, 2005.

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    2.

    Address why cost and estimated earnings in excess of billings increased 359% from
2003 to 2004 and why billings in excess of cost and estimated earnings decreased 54% from
2003 to 2004

    The Company has amended its Form 10-K for the year ended December 31, 2004 and its Form
10-Q for the quarter ended March 31, 2005 to explain these
changes. See page 17 of the 10-K/A for the year ended December 31, 2004.

Contractual Obligations, page 11

    3.

    Include interest payments and firm purchase obligations as part of your tabular
disclosure. See Item 303 (a) (5) of Regulation S-K and footnote 46 to Release 33-8350
“Interpretation: Commission Guidance Regarding Management’s Discussion and Analysis of
Financial Condition and Results of Operations”.

    Footnote 46 to Release 33-8350 states that “cash requirements for items such as
interest may not be included in the tabular disclosure, but should be discussed if
material”. In its amended Form 10-K for the year ended December 31, 2004, the Company
has expanded its discussion below the contractual obligations table to include related
party interest. See page 12 of the document.

Results of Operations, pages 16-18

    4.

    We note you have presented the non-GAAP measure, EBITDA. Revise to provide all the
disclosures required by Item 10(e) of Regulation S-K and Question 8 to our Frequently
Asked Questions Regarding the Use of Non-GAAP Financial Measures. Address this comment as
it relates to your Form 8-K dated May 12, 2005 announcing your first quarter earnings.

    The Company believes that the non-GAAP measure of EBITDA is a standard measure within
the industry. Furthermore, certain incentive compensation paid by the Company is
measured in relation to EBITDA, as was the basis for the price of the Put. The Company
has amended its Form 10-K for the year ended December 31, 2004 and its Form 10-Q for
the quarter ended March 31, 2005 to include a more detailed statement regarding the use
of EBITDA See page 18 to the Company’s Form 10-K/A for the year ended December 31,
2004, and page 13 to the Company’s Form 10-Q/A for the quarter ended March 31, 2005.

    The Company has included an explanation of the use of EBITDA in the 8-K dated August
11, 2005 announcing the second quarter earnings and will file an amended 8-K in respect
of its first quarter earnings including such explanation.

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    5.

    Provide a comprehensive discussion of your interest expense and income taxes as these
amounts have materially changed from period to period and have had a material impact on
your income before taxes and net income for each period presented.

    The Company has amended its Form 10-K for the year ended December 31, 2004 and its Form
10-Q for the quarter ended March 31, 2005 to include a discussion of interest expense
and taxes. See pages 19 and 21 of Form 10-K/A and page 14 of Form 10-Q/A.

Note 4 — Investment in Affiliated Company (“Sterling Transaction”), page 33

    6.

    We note that as a part of the Sterling Transaction, you granted the Selling
Shareholders a “Put” option for the remaining 19.9% of SHH stock owned by them, pursuant
to which they had the right to sell remaining SHH shares to the Company at a date of their
choosing between July 2004 and July 2005 at a minimum purchase price of $105 per SHH
share. We also note that effective July 19, 2004, the Selling Shareholders exercised
their put. Expand your disclosures to provide the following additional information.

    •

    Clarify how you determined the appropriate date at which to value your
common stock issued in connection with the exercise of the Put. Refer to
EITF99-12. In this regard, clarify what you mean by “at an agreed value
of $4.00 per share”.

    The Company determined that the November 13, 2004 date was the appropriate
date to set in valuing the common stock issued in the transaction based on
EITF 99-12. This was the date that the terms were settled and announced.
The Company used the stock price for several days prior to and after the
announcement in determining the value of the stock at which to record the
transaction. The $4.00 stock price was used as a basis in the negotiation
process between the parties in determining the number of shares to be
issued in the transaction.

    •

    You indicate that the final settlement of the Put transaction resulted
in an increase of approximately $5.1 million to the Company’s reported
amount of goodwill related to SHH. Clarify why you had no adjustments to
the fair value of the underlying assets and liabilities of SHH to the
extent of the additional ownership acquired (20%) separate from goodwill
in accordance with SFAS 141. Disclose your purchase price allocation to
help clarify your accounting.

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    The Company determined that there were no adjustments necessary to the
underlying value of the assets and liabilities due to the fact that book
value approximated fair value in all material respects. We have included
a copy of the purchase price allocation in the amended Form 10-K/A for the
year ended December 31, 2004 to clarify.

    •

    Clarify how the fair value of the Put was determined as of March 31,
2004 and June 30, 2004. It is unclear to us, given the likelihood the
Put would be exercised in 2004, why there was not an increase in fair
value prior to the July 19, 2004 exercise date.

    At the end of each of the quarters ended March 31, 2004 and June 30, 2004,
the Company evaluated the fair value of the Put and determined that no
adjustment was necessary. The Put liability was determined to be the
difference between the fair value of 19.9% of SHH and the expected
exercise price of the Put. Any increase in the expected Put exercise
price, being driven by an increase in SHH’s EBITDA, reflected a
proportional underlying increase in the fair value of SHH.

    In addition, the final computation of the purchase price of SHH was based
on a calculation of EBITDA at SHH for the 12 months ending with the
exercise date. The final calculation (by an independent party) was not
completed until November 2004, and thus, goodwill could not be calculated
until that date.

Provide us with the authoritative literature you relied on to account for this
transaction.

At the time the Put was initially recorded, the Company followed guidance in SFAS 141
paragraphs 35-37 and EITF 00-06 in paragraph 8D as well as analogous guidance in EITF
00-19 paragraph 9.

     Note 5 — Line of Credit and Long-Term Obligations — Subordinated Zero Coupon Notes, page 36

    7.

    Disclose the amount of interest forgiven on your subordinated zero coupon notes and
where such forgiveness is reflected within your financial statements. Also clarify why
the accretion of the discount on these notes is not reflected as an adjustment to
reconcile income from operations to net cash provided by operating activities within your
Consolidated Statements of Cash Flows for the periods the zero coupon notes were
outstanding.

    Interest in the amount of $48,000 was forgiven by NASCIT in December 2003 in
consideration for a partial prepayment on its zero coupon note. The

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Company reduced its reported interest expense by this amount. The Company has amended
its Form 10-K for the year ended December 31, 2004 to disclose within MD&A the amount
of accretion on the zero coupon notes, which was $617,000, $744,000 and $761,000 in
fiscal 2004, 2003 and 2002, respectively.
The Company believes such amounts were not material to its results of operations. See
page 40 of the document. The zero coupon notes were replaced by amortizing debt in
December 2004.

Note 6 — Financial Instruments, page 39

    8.

    Clarify what you mean by the statement “The Company’s other debt is subordinate to
the SHH Revolver, thus the carrying value of 12% approximates its fair value”.

    The Company is referring to notes held by management and directors, of which book value
is equal to fair value. These notes are subordinate to the Company’s lines of credit,
thus there is more risk associated with the repayment of these notes, hence their
higher interest rate, which approximates market rates of interest for such subordinated
debt.

Note 15 — Self-Insurance, page 46

    9.

    We assume your policy to accrue the estimated liability for employee health claims
includes an estimate for incurred but not reported claims. Clarify your policy in future
filings or tell us how your policy is appropriate.

    The Company has amended its Form 10-K for the year ended December 31, 2004. See page
50 of the document.

Note 15 — Litigation, page 47

    10.

    We note that you have assessed the materiality of the Ames preference claims with
reference to the overall financial condition of the Company. Expand your assessment of
materiality with reference to your results of operations and liquidity.

    The Company’s Steel City Products subsidiary (“SCPI”) has an administrative claim in
the Ames bankruptcy case for approximately $171,000 (gross) which has been written down
to $19,000 as of June 30, 2005. The latest indications from the bankruptcy court
filings are for a distribution approaching 100 cents on the dollar to administrative
claimants, which would value this claim at close to $170,000, i.e. $150,000 more than
its current carrying value. Ames has made partial payments on these administrative
claims except to claimants against whom an unresolved preference action is outstanding
(Ames having filed preference actions against several thousand of its suppliers,
including SCPI). The total preference action initially brought by

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Ames against SCPI was for $412,000, but Ames has subsequently acknowledged that this
amount should have been approximately $153,000. Based on extensive research by its
lawyers, SCPI believes the Ames preference action filed against it to be totally
without merit, but has initiated settlement discussions in an attempt to resolve the
preference action for a modest payment, which would be offset against the expected
recovery on the administrative claim of $171,000 described above. In the
circumstances, the Company does not believe that the liability for any successful
preference action by Ames could exceed the amount due on its administrative claim.

Item 9(A) — Controls and Procedures, page 50

    11.

    We note your statement that the chief executive officer and chief financial officer
have concluded that the company’s disclosure controls and procedures are effective “except
as discussed below.” Given the exception noted, it remains unclear whether your chief
executive officer and chief financial officer have concluded that your disclosure controls
and procedures are effective. Please revise your disclosure to state, in clear and
unqualified language, the conclusions reached by your chief executive officer and your
chief financial officer on the effectiveness of your disclosure controls and procedures.

    For example, if true, you can state that your disclosure controls and procedures are
effective including consideration of the identified matters, so long as you provide
appropriate disclosure explaining how the disclosure controls and procedures were
determined to be effective in light of the identified matters. Or, if true, you can
state that given the identified matters, your disclosure controls and procedures are
not effective. You should not, however, state the conclusion in your current
disclosure, which appears to state that your disclosure controls and procedures are
effective except to the extent they are not effective.

    The Company has amended its Form 10-K for the year ended December 31, 2004 to state
that its controls and procedures were not effective.

    12.

    Please address the above comment as it relates to your Form 10-Q for the quarter
ended March 31, 2005.

    Corrective steps were taken in the first quarter of fiscal 2005, and the Company has
amended its Form 10-Q for such quarter to confirm that its disclosure controls and
procedures for the period were effective.

The Company acknowledges that:

    •

    The Company is responsible for the adequacy and accuracy of the
disclosure in the filings;

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    •

    Staff comments or changes to disclosure in response to staff comments
do not foreclose the Commission from taking any action with respect to
the filing; and

    •

    The Company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the federal
securities laws of the United States.

    Sincerely,

    /s/ Maarten D. Hemsley

    Maarten D. Hemsley

    Chief Financial Officer

8/25/2005

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