Soaring Road Construction Costs Could Nix Some State and Local Projects

Inflation for construction materials far exceeds the already high inflation for consumer goods, a trend that, if it continues, threatens to sap the spending power of money flowing to states and localities from Washington in President Biden’s signature infrastructure law.

The cost of highway and street construction materials has increased by 21% in the last year, according to the American Road & Transportation Builders Association, compared with 7.9% for ordinary consumer goods.

The climbing cost of road construction is in line with increases in the broader construction industry, where prices have gone up 20% in the last year.

The high price of diesel and other petroleum-based products certainly plays a major role in those cost increases, because diesel-powered tractors, trucks and machines are used extensively throughout the process of turning rocks and other raw materials into streets and sidewalks.

But other factors are at work, too. There’s a shortage of both trucks and truck drivers. Lumber, steel and copper components have also ratcheted up in price.

“Since late 2020, the transportation construction industry has confronted unprecedented pandemic-related cost increases and often-limited availability for key commodities and materials,” ARTBA said on its website, explaining that the inflation numbers show the “extraordinary nature of the current market.”

The trade group pointed out that the costs of materials is a national overview, meaning that the situation could vary by location.

“Many states and regions are experiencing even more exaggerated cost spikes for certain commodities. Also, this data does not measure any shortages or delivery times for materials, another troublesome recent trend,” the road builders noted.

In Michigan, the cost of projects is about 10% higher than initial estimates, said Jeff Cranson, a spokesperson for the Michigan Department of Transportation, in an email.

The biggest increases have been for bridge projects, which are 40% higher than the agency predicted, Cranson said. Hot mix asphalt, which includes some petroleum products, is up 15% and aggregate – like sand, gravel and crushed stone – has increased by 10% for the agency, Cranson said.

“Since the increase seems to be sustained, MDOT bridge engineers have gone through and increased estimates for future lettings, which means eliminating projects, selecting fewer fixes and extending work into the future,” Cranson said.

But putting off projects could have long-term consequences, especially in Michigan, where state leaders have struggled for years to find a way to pay for needed maintenance and repairs.

“Fewer projects mean less proactive care of MDOT bridge inventory leading to steeper deterioration rates, a higher life cycle cost, more reactive maintenance and more unplanned delays for travelers,” Cranson said.

Supply issues could hamper both state and federal efforts to improve Michigan’s infrastructure, added Larry Hummel, a former state and county transportation official and a member of the American Public Works Association’s transportation committee.

Money from the federal infrastructure package should start flowing to localities in the coming months, and Michigan Gov. Gretchen Whitmer has used bonds to try to fix  major roads even before Congress passed the federal legislation.

“We have more money, but when things cost that much more, you don’t get the work that you thought you’d get a year and a half ago,” said Hummel, who is now a senior project manager for Fleis & Vandenbrink, a construction and engineering company in Grand Rapids.

The work may also take longer to complete, because of both supply chain issues and the lack of available workers to handle the expected increase in construction activity, he said.

One source of delays Hummel has seen has been with steel structures, like poles for streetlights or traffic lights. It used to take six to eight weeks to order those poles, he said, but now wait times can be as long as 40 weeks. For one project Hummel worked on in Grand Rapids, construction crews finished most of the work last fall but had to return this spring when they finally got the steel parts they needed.

Mike Millette, the director of public works for the Village of South Elgin, Illinois, said the cost of just running trucks is up 30% from two years ago. There’s no good way to reduce fuel consumption for much of that work, because trucks often have to idle at the work site before they can haul their loads offsite.

Millette, who is also chair of APWA’s government affairs committee, said the fuel and supply costs will probably narrow the scope of South Elgin’s public works projects for the coming year. City officials are still working on next year’s budget, but they are planning on the higher prices continuing.

That means fewer water main replacements and less road resurfacing, he said.

“We’re going to be challenged to get [funds] spread out as equitably as we always try to do, but purchasing power has dropped,” Millette said.

“My fingers are crossed that prices are stabilizing, as in, the rate of increase has slowed,” he added. “If we’re not reaching a peak, maybe it’s a plateau. That would help us plan a little better for next year’s capital budget if we can get to a plateau, or what people are calling the new normal.”