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STERLING CONSTRUCTION COMPANY, INC.

20810 Fernbush Lane

Houston, TX 77073

(281) 821-9091

September 30, 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 September 27, 2005, Sterling Construction Company, Inc. (“SCCI” or
“the Company”) has prepared the following further 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.

Form 10-K for the Fiscal Year Ended December 31, 2004

Management’s Discussion and Analysis, page 10

Prior Comment 2 — Cash Flow, Page 15

    1.

    We believe your proposed disclosures should be enhanced to address the following
additional comments:

•       You attribute the change in cost and estimated earnings in excess of billings on uncompleted
contracts to timing differences and gross profit adjustments on certain projects. Your reference to
timing differences as a factor for the increase does not provide useful information to the
investor, instead we would expect a discussion of specific events or transactions driving the
timing differences. Please revise your disclosure to enhance your analysis

•       Please expand your disclosures to address the nature and dollar amount of the gross profit
adjustments and clarify why such adjustments were necessary. Clarify whether these adjustments
impacted the revenue you recognized during the year ended December 31, 2004 and if so expand your
disclosures within your discussion of your
results of operations to address these adjustments.

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•       You indicate that the decrease in billings in excess of costs and estimated earnings on
uncompleted contracts was due to the use during the period of advance payments for mobilization
received in prior periods on certain contracts. Please clarify what you mean by this.

The Company has included new language to clarify and expand its disclosure regarding the changes in
cash flow components. See page 16 of the document.

Prior Comment 3 Contractual Obligations, page 11

2.       We have read your revised disclosure to discuss the interest payments related to your long-term
debt. Based on this disclosure, it is unclear to us whether you included the estimated future
interest payments related to your Revolving Lines of Credit. Please revise your disclosures to
clarify and if necessary include these amounts in your estimated future interest payments.

The Company has expanded its disclosure of interest payments to clarify that these are not included
in the tabular disclosure, as stated in Footnote 46 to Release 33-8350.

You disclose that the Construction Segment generally has back-to-back agreements to assure the
supply of required materials, services, and subcontracting. If these agreements represent purchase
obligations as defined by Item 303 (5) (ii) (D) of Regulation S-K, please include these amounts in
your tabular disclosure of contractual obligations.

The Company obtains firm price and quantity quotations from suppliers that it relies on when it
bids projects, which, if the Company is successful in obtaining the project, the supplier honors
for the duration of the project. However, if the Company is unsuccessful in its bid, if market
prices change during construction, or if quantities required by the contract change during
construction, the Company has no obligation for market price increases or for materials or services
beyond those required to complete the contract.

The Company has revised its disclosure to better clarify these arrangements, which are not purchase
obligations as defined by Item 303 (5) (ii) (D) of Regulation S-K, and therefore are not included
in the tabular discussion of contractual obligations. See page 11 of the document.

Prior Comment 4—Results of Operations. pages 16-18

    3.

    We have read your revised disclosure and note that you have not addressed the
material limitations associated with use of the non-GAAP financial measure as compared to
the use of the most directly comparable GAAP financial measure, the manner in which
management compensates for these limitations when using this measure and the substantive
reasons why management believes this measure provides useful information to investors.

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Please revise your disclosure as previously requested to address all the disclosure
requirements set forth in Question 8 to our Frequently Asked Questions Regarding the
Use of Non-GAAP Financial Measures. Please ensure that when you discuss the material
limitations associated with the use of the non-GAAP measure that you individually
address the limitations associated with the elimination of interest expense, taxes,
depreciation and amortization

The Company has expanded its disclosure of the material limitations associated with the use of
non-GAAP financial measures. See page 16 of the document.

Prior Comment S — Results of Operations, pages 16-18

     4. We have read your proposed disclosure to our prior comment five. Please expand your
proposed disclosure to more clearly address the material impact that the reversal of the tax
valuation allowance had on your results of operations. Specifically address why it was appropriate
to decrease your valuation allowance in 2004 and 2003 and the impact these decreases had on the
income tax benefit (expense) you recognized in 2004 and 2003.

The Company has expanded its disclosure regarding its estimate of its tax valuation allowance. See
page 19 of the document.

Prior Comment 6 — Note 4 — Investment in Affiliated Company, page 33

5.       We note your response to prior comment six which indicates that at the time the put was
initially recorded you followed the guidance of EITF 00-6. However, it is unclear to us from your
response whether following the adoption of SFAS 150 in the third quarter of fiscal year 2003, that
you appropriately followed the initial and subsequent measurement guidance set forth in paragraphs
21 and 22 of SFAS I 50. Please refer also to paragraphs 19 and 20 of EITF 00-6 and tell us how you
appropriately considered the measurement guidance of SFAS 150. In this regard, we note you entered
into the Restructuring Agreement dated September 25, 2003 which changed the payment terms of the
Put Agreement. We note that the Alternate Exercise Price Payment Method under the Restructuring
Agreement was $2.4 million in cash. a $6.4 million 12% five year note (Five-Year Note) and a $3.2
million 14% five-year subordinated cash availability (Cash Availability Note). We also note that
the Company had sixty days after the Put Execution Date in which to negotiate with the selling
stockholders the issuance of shares in lieu of the issuance of some or all of the Cash Availability
Notes. Given the cash payments required by the Put Agreement, it is unclear to us why you continued
to record the Put Agreement at fair value rather than at its redemption amount in accordance with
paragraph 22 of SFAS 150. Please advise.

The Company agrees that SFAS 150 applies to the Put liability, but does not believe that paragraphs
21 and 22 of SFAS 150 were the proper guidance to follow, as the put liability was not a forward
contract, by definition. Rather, the Company believes that the

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appropriate guidance to follow was that in paragraphs 23 and 24 of the Statement. The liability
was initially measured at fair value and subsequent changes in the fair value were recorded as an
adjustment to earnings.

Until the time the Put liability was settled, the Company did not have the right of ownership of
the remaining shares of the subsidiary and it would be misleading to eliminate minority interests
in this case.

Prior Comment 7 — Note 5 — Subordinated Zero Coupon Notes. page 36

6.       We have read your response to our prior comment seven. Please address why the accretion of the
discount of 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.

The Company has revised its Consolidated Statements of Cash Flows to recognize the accretion of the
discounted zero coupon notes as an adjustment to reconcile income from operations to net cash
provided by operating activities. See page 27 of the document.

Prior Comment 8 — Note 6 — Financial Instruments. page 39

7.       Please revise your disclosure regarding the notes held by management and directors to better
describe your assessment of fair value, as noted in your response.

The Company has expanded its disclosure regarding the assessment of the fair value of the
management and director notes. See page 41 of the document.

Prior Comment 10 — Note 15 — Litigation. page 47

8.       As part of your response you clarified that you believe the Ames matter not to be material to
your results of operations and liquidity, however, you have not revised your disclosure to
incorporate this information. Please revise your disclosure accordingly.

The Company has expanded its disclosure regarding the Ames litigation. See page 49 of the
document.

Form 10-Q
for the Fiscal Quarter Ended March 31, 2005

Prior Comment 12 Item 9(A) — Controls and Procedures. page 15

9.       Please revise your disclosure to state whether there have been any changes in your internal
control over financial reporting for the period.

The Company has expanded its disclosure regarding changes in internal control over financial
reporting. See page 15 of the document.

Sincerely,

    /s/ Maarten D. Hemsley

    Maarten D. Hemsley

    Chief Financial Officer

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