Bid Inflation for Highway and Bridge Projects: Challenges & Solutions

Details

• Creators:
  O’Brien, Peter ; Rubin, Jonathan ; Brown, Erin
• Corporate Creators:
  MCS Policy Center ; University of Maine. Transportation Infrastructure Durability Center (TIDC)
• Corporate Contributors:
  United States. Department of Transportation. University Transportation Centers (UTC) Program ; United States. Department of Transportation. Office of the Assistant Secretary for Research and Technology
• Subject/TRT Terms:
  Bids Bridge Construction Contracting Cost Allocation COVID-19 Data Analysis Empirical Methods Highway Bridges Inflation Labor Market Paving Public Roads Surveys

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• Resource Type:
  Tech Report
• Geographical Coverage:
  United States ; New England
• Corporate Publisher:
  University of Maine. Transportation Infrastructure Durability Center (TIDC)
• Abstract:
  Construction input prices have increased dramatically both nationwide and in Maine. According to the U.S. Bureau of Labor Statistics Producer Price Index, the cost of construction materials has increased nearly 50% nationally over the past four years. Our analysis suggests that input prices in Maine largely match the trends observed nationwide. While the data suggest that Maine highway and bridge construction wages levels closely match those seen in New Hampshire and Vermont, we have evidence to suggest that Maine firms are paying more on a per unit basis for liquid asphalt and gravel—two key inputs to road paving work—than its neighbors. Results from our survey of relevant contractors (16 responses of 27, ~ 60%) shows that labor costs account for nearly 40% of total project costs on average. Most contractors report challenges arising from labor shortages, rapid wage growth, and materials cost inflation. While estimates of weekly wages paid in the construction industry have risen nationwide over from 2015 to 2021, Maine’s 27.7% growth in nominal construction wages outpaced the national trend of 19.4% over this same period. At the same time, materials cost increases and the risk of future materials cost increases are also significant. Results from a statistical analysis of five years of MaineDOT and MTA highway and bridge contract bid data suggests that lack of competition, elevated input costs, and project type (and size) appear to drive higher bid offers. These factors, along with internal cost estimates from MaineDOT engineers, are able to explain nearly all of the variation seen in low-bid offer amounts within our study. Combining the results from our analysis with the sentiment expressed by relevant firms in our survey, it seems reasonable to expect that recent bid offer amounts would exceed historic expectations of the costs for highway and bridge work.
• Format:
  PDF
• Collection(s):
  University Transportation Centers
• Main Document Checksum:
  urn:sha-512:063eed91b66b7f7a4fd132dda4c3c1c34a67364e9de3ba626265c48a7589e56a66fb71cd68e3b4a85262639a52104b91af9f311a79161220104c42f4f0dee356
• Download URL:
  https://rosap.ntl.bts.gov/view/dot/88857/dot_88857_DS1.pdf
• File Type:
  [PDF - 687.66 KB ]