The Eno Center for Transportation recently released a report, “Rising Construction Costs: Analyzing the Contributors to Cost Escalations and the Impact on Federal Transportation Infrastructure Investments.” This whitepaper analyzes increases in construction costs from the pandemic to today. Factors include pandemic-based supply chain issues, labor market changes, petroleum price increases, and increased demand for contractors. The paper looks at competing metrics to determine construction inflation and how this can undermine the funding made available through Federal transportation legislation. The paper also explores potential implications of a higher baseline for project costs and how the industry is adapting to continued uncertainty.
The paper noted that – since the passage of the Infrastructure Investment and Jobs Act or IIJA in 2021 – there has been significant growth in highway construction costs due to a number of factors: supply chain disruptions, higher material and input costs, higher borrowing costs, labor market shortages, demand side increases, growing regulatory costs, and higher quality projects.
“High material costs in every part of country have been a big concern for state departments of transportation over the last few years,” AASHTO’s economist Susan Howard said at a recent webinar discussing the report. “There is no one single factor that has gotten us to this place. State DOTs are also seeing a lower number of bidders on projects and that reduction in competition affects pricing as well. She added that new “Buy America, Buy American” rules could potentially drive costs higher where construction materials are concerned.