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While road and bridge construction costs remain high compared to pre-pandemic levels, prices for key materials such as concrete, asphalt and diesel have been falling, providing much-needed relief for builders.
Alison Black
Authorization granted by ARTBA
However, this does not mean that inflation is done with the industry, especially labor problems continue. The cost of highway construction projects increased by 53.8% in the first quarter of 2023 through the fourth quarter of 2020, according to the Federal Highway Administration’s National Highway Construction Costs Report.
National Highway Construction Cost Index reached a new all-time high the first quarter of 2023; up 2.7% from the previous quarter, according to the Bureau of Transport Statistics.
The sheer chaos caused by the pandemic has been a factor in those high prices, Black said.
“It wasn’t just isolated from the construction industry, which is a little bit different than what we’ve seen in the past,” he said. “It’s not unusual for there to be fluctuations in material prices, but this was more widespread and wider than we’ve seen over the past few decades.”
Positive signs on the horizon
As bad as these numbers look, inflation has started to cool for road builders, especially as material costs have come down.
“The good news is that things have stabilized,” Black said.
Construction input prices decreased by 1.2% in October. according to an analysis by Associated Builders and Contractors from the Bureau of Labor Statistics Producer price index data.
Ken Simonson
Courtesy of AGC
A big factor in that decline has been the price of concrete, which was a major issue in 2022, said Ken Simonson, chief economist for the Associated General Contractors of America. That year, AGC chapters in the state of the event reported that companies were being assigned and “getting as little as 60% of the ready mix deliveries they had expected or unexpected long lead times to get precast products from concrete,” he said.
That wasn’t the case in 2023, except in Washington, where aquaculture experts are working to help salmon in the state’s canals and waterways navigate upstream with fish passes, or say they require a lot of prefabricated concrete.
The cost of materials such as asphalt and diesel have also seen significant price decreases, he added, and steel delivery times have improved.
Blocks ahead
This does not mean that everything is rosy. Labor continues to drive up costs as contractors struggle to attract workers. Construction job openings rose to 459,000 in November, up 10.3% from the previous month, according to an AGC analysis of Data from the Office of Labor Statistics.
Wage increases for highway and bridge construction have also been in line with general increases in the private sector, meaning the industry can’t compete on money alone.
“With overall wages growing in the economy, there have to be other ways to attract more workers into the space,” Black said.
That’s long been a problem in the industry, but it can be exacerbated by the difficult nature of the work and what other types of high-paying jobs are available, Simonson said.
“Now there are so many jobs that can be done remotely or hybridly or flexibly. It puts construction at a bigger disadvantage,” he said.
That could drive up the costs of some specialized technical projects funded by the Jobs and Infrastructure Investments Act, Simonson added, if there aren’t enough fully staffed contractors able to bid on those projects.
Black said the long-term nature of the IIJA, which he said has enough purchasing power to support the market for the next five to 10 years, means inflation will have less of an impact as work progresses.
“There’s no doubt that the IIJA, along with some increases in state revenue, plus investment in state highways, are driving a very strong highway and bridge construction market despite the headwinds of inflation and strong of work,” he said.
