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Alternative Title:Impact of SB 1 on Construction Cost Escalation
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Edition:Final Report 09/10/2018 – 02/28/2020
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Abstract:In 2017, the California Legislature passed Senate Bill 1 (SB 1), which raises additional transportation funding through increases in the state gas excise tax, diesel excise tax, and license and registration fees. With the passage of SB 1, the California Department of Transportation (the Department) expects its program to grow significantly with similar expansions in the programs of local agencies. The infusion of additional spending has the potential to upend the transportation construction market (specifically highways and bridges) and lead to shortages of materials, fewer bids, and ultimately higher bid prices. While this outcome is not a certainty, the Department needs a better understanding of the potential effects that additional work can have on future construction costs. The Department asked HDR to investigate four primary questions to help it understand the market dynamics from SB 1 funding and implications for construction cost escalation: 1.What is the effect of SB 1 funding on contractor competition and the capacity of the contracting industry to bid the work anticipated over the next 10 years? 2.What is the effect of SB 1 funding on availability and pricing of materials, such as aggregates for asphalt concrete, port land cement concrete, aggregate base, aggregate subbase, and steel? 3.What is the effect of SB 1 funding on the construction labor workforce, including skilled labor and trucking services, in California? 4.If SB 1 funding impacts contractor competition and materials availability, how would this influence the escalation of construction costs on the Department’s projects? Please see attached report for more details.
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