Public Works Agencies Hit by Rising Prices and Supply Delays

State and local agencies that build and maintain the nation’s streets, bridges and waterworks are getting squeezed by rising costs for materials and equipment, supply chain disruptions and workforce shortages—combined pressures that are threatening to take some punch out of pending infrastructure legislation in Congress and other boosted spending on public works. 

Price increases and supply shortages are playing out across the economy and are in many cases linked to the turmoil the coronavirus outbreak caused. It’s likely these issues could fade as more industries recover and stabilize. Finding workers, like truck drivers and laborers, is a problem that agencies faced before Covid-19. But officials say the pandemic has made it worse, especially as private sector employers compete more aggressively in a tight labor market.

These factors are in some cases driving up overall construction and maintenance costs and causing places to question if they should scale back, or hold off on projects—at least for now.

Costs for materials like concrete and steel are up and there are delays procuring items ranging from streetlight parts to recycling facility equipment, according to local public works departments.

In Tacoma, Washington, for example, staff in the city’s traffic signal and streetlight warehouse said earlier this month that steel J-hooks used to hang traffic signal heads cost $23.30 each, roughly triple the price of $7.72 in 2019. The city’s street operations division said the price of oil used to make hot mix asphalt had jumped by $150 per ton since February 2021, to around $500 from $350.

These factors are casting a shadow over an otherwise upbeat time for infrastructure spending.

There is bipartisan support in Congress for a roughly $1 trillion infrastructure bill, with around $550 billion in new spending. Billions of dollars that can be used on certain types of projects are already gushing toward states, cities and counties from pandemic relief legislation. And interest rates are low, meaning that it’s inexpensive for states and localities to finance public works.

“We almost have an infrastructure bill, but now the money that will be appropriated might not go as far as we once thought,” Scott Grayson, CEO of the American Public Works Association, said in an interview. “It’s a real issue.”

“When I speak to public works directors around the United States, a lot of them say, ‘You know, we had a bonding bill three years ago, we’ve got the money, but we can’t actually make the project happen anymore,’” Grayson added. “I’m hearing that a lot of projects are on hold right now until the materials arrive and they actually have the workforce.”

Rising Costs and Delayed Supplies

Dan Hartman, public works director for Golden, Colorado, said that at a conference the public works association held about three weeks ago it was clear that one common theme for public works agencies across the country “is that costs are becoming a significant issue.” 

He offered up an example from his city. Golden, he said, is in the design process for a road interchange. It’s very similar to a project that the city completed about four and a half years ago. That earlier project cost about $25 million. This time around, the city projected $30 million after accounting for construction inflation. But Hartman said the latest cost figures show the project will cost over $40 million. 

“We are $15 million dollars more in five years for similar interchanges,” he said.

Rising labor expenses as well as higher prices for the delivery and cost of concrete and rebar are among the factors driving up the cost of the project, according to Hartman.

Ballooning prices aren’t unique to the public works sector.

Data the U.S. Bureau of Labor Statistics released this month show that while inflation eased somewhat in August, the overall consumer price index was still up 5.3% compared to a year earlier. There’s disagreement among economists over how much of the rise in prices is due to the pandemic and will taper off, and how much will persist.

Golden has also experienced delays getting certain goods, Hartman said. The city is converting streetlights to LED fixtures, but is now looking at 20-plus weeks to get supplies delivered for that project. “Supply on a lot of things is very far out,” he added. 

He also said it’s become harder to get chlorine and other chemicals needed to treat the city’s water and wastewater, mainly because suppliers are having trouble finding drivers to deliver them. “If we can’t get the required chemicals, we cannot just send the water that we have,” Hartman said. It's similar with treating sewage.

“We can’t put a cork in it," he added.

In Phoenix, public works director Joe Giudice said delivery of a piece of equipment the city ordered for its recycling facility has been delayed by about six months.

Grayson, with APWA, said “it’s almost like Whac-a-Mole” figuring out where supply shortages might crop up. Agencies don’t know in some cases until they go to place an order. “I believe the logjam will open up in the next year, year and a half,” he added.

While rising prices and supply chain kinks can create headaches for public works agencies, they aren’t necessarily at crisis proportions.

In Tacoma, assistant public works director Jeffrey Jenkins said by email in early September that rising costs and the limited availability of goods so far hadn’t caused significant delays to city public works projects. And the department, he said, had for the most part been able to stick to project budgets and schedules within planned contingencies.

But, at the same time, different divisions of Tacoma Public Works were reporting unusual delays or difficulties getting items ranging from a boom truck, to streetlight parts, to certain paint.

Workforce Shortages

Brette Hjelle, interim public works director in Minneapolis, said his agency hadn’t seen any widespread price spikes or supply chain disruptions, even with a roughly $50 million stormwater project it recently bid out. “We haven’t run into any big hiccups, yet,” he said.

Hjelle did say, though, that it can be tough finding workers. Prior to the pandemic, the agency was holding the line filling empty positions, he said. But after the Covid downturn dented the city’s budget, Minneapolis offered a retirement incentive for certain employees in an attempt to trim costs. Of roughly 1,200 public works employees, about 60 to 70 took the deal and retired.

“Because we were just keeping up with things, that was a bit of a shock to the system,” Hjelle said. “We don’t have as many people out in the field right now as I would like. We’re short.”

“We’re feeling that the most on our laboring side,” he added. The department’s laborers, or “service workers,” perform duties like paving, snowplowing, mowing grass, maintaining stormwater systems and street sweeping. Some are qualified to operate heavy machinery.

Having a commercial truck driving license, or CDL, and a year of relevant work experience are among the requirements for the agency’s entry level laborer jobs. In recent years, Hjelle said the agency instituted a trainee program where people could come aboard at a lower pay rate to fulfill the experience requirement, while also getting department support in obtaining a CDL. 

“We have a lot more luck hiring people into those positions,” he said. But there’s a balance that needs to be maintained to ensure there are enough seasoned workers alongside those who are newer to the field. “We might hire 20 full service workers and 10 trainees,” Hjelle said.

Pay for the Minneapolis laborer jobs starts around $25 an hour and goes up in steps from there. People who come on through the training program start at $16.80, and get a raise to $18 an hour after six months if they get their CDL. Workers who specialize in areas like asphalt raking, cement finishing and operating large machinery can earn around $30 an hour and up.

In Golden, most street and utility workers are required to have CDLs. But Hartman said public works sees high turnover with these employees. The phenomenon predated Covid, he said, adding that the city would often hire employees and help them get a CDL, only to see them leave for jobs as over the road truckers or with other cities.

“We were turning over almost 100% every two years,” he said. 

To help with retention, the department about a month ago bumped pay for CDL-holders up by $3 to $4 an hour, and is hiring CDL drivers in the $25 to $27 per hour range, and “struggling to find them,'' Hartman said. He noted that raising pay for new hires, or certain jobs, can have a ripple effect, with other existing staff and supervisors then also expecting higher wages.

Giudice said Phoenix’s human resources department is carrying out a policy update with recruitment bonuses for certain hard to fill positions, including garbage truck drivers. Phoenix Public Works also has a stepped pay scale, and Giudice said there are plans to start advertising minimum starting wages for some jobs in the middle tiers.

“Basically bringing people in at a higher pay than we would have in the past,” he said. “Just to try to be competitive.”