Stimulus Funds Go Further as Road-Building Costs Drop

This story appears in the April 20 print edition of Transport Topics.

Competition among construction firms is sharply reducing the cost of infrastructure projects, allowing states to build and repair more roads and bridges than originally anticipated under the federal stimulus legislation, President Obama said last week.

In an April 13 ceremony marking the launch of the 2,000th project funded by the stimulus program, Obama said, “The effort is coming in ahead of schedule and under budget.”

“I’m pleased to hear that, in state after state across America, competition for these projects is so fierce and contractors are doing such a good job cutting costs, that projects are consistently coming in under budget,” Obama said.

“And because these projects are proceeding so efficiently, we now have more recovery dollars to go around. And that means we can fund more projects, revitalize more of our infrastructure, put more people back to work and ensurethat taxpayers get more value for their dollars,” he said.

Besides citing millions of dollars in savings on individual projects — such as an $8.4 million overestimate in Connecticut and $4.7 million in savings on a Louisiana project — Obama said states were seeing huge drops in the cost of the transportation plans.

“Bids for projects in North Carolina have been 19% under budget,” he said. “Colorado is reporting bids up to 30% less than they expected, and the officials in California have seen bids that are close to half as much as they had projected.”

Brian Turmail, spokesman for the Associated General Contractors of America, said the association was “getting the same story.”

“A contract that used to get three or four or five folks bidding on it is getting 15, 20, 30 people bidding on it, and folks are offering very aggressive bids . . . as a way to keep their shops together,” he said.

Turmail said some contractors were even taking losses on their bids to keep working.

“We’re not surprised at all. It goes to a point that we’ve been making all along that the industry had the capacity for this type of work,” said Matt Jeanneret, spokesman for the American Road and Transportation Builders Association. “There are a lot of firms out there that are hungry for work. We’re seeing more people bid on projects, and that speaks to the need to get some business.”

Competition among contractors is not the only reason bids for stimulus projects are coming in under budget, Jeanneret said.

“Another significant reason why bids are coming in lower than anticipated is because material prices have been dropping for the last six to eight months,” he said.

“Once the demand starts popping up again and oil prices start going up again, it will start going in the other direction,” Jeanneret said.

Turmail agreed but said the decline in materials cost was “temporary.”

At the ceremony for the 2,000th project, Vice President Joe Biden said the stimulus was not just boosting the construction industry, but also the economy at large.

“We’re stimulating billions of dollars in economic activity; we’re creating millions of new jobs, and breaking ground on a brighter economic future,” he said. “The road to recovery must, quite literally, be repaved.”

The U.S. Department of Transportation said the 2,000th stimulus project was a $68 million widening of Interstate 94 in Portage, Mich.

Obama said the project would begin this summer, “creating an estimated 900 jobs right away — and it will go into 2011, creating nearly twice that many jobs altogether before it’s finished.”

The president also highlighted the pace at which DOT had distributed the $27.5 billion in highway and bridge funding.

“Now, some may have thought it would take months to get to this point,” Obama said, “but in part because of the hard work and commitment of the people in this department, we approved these 2,000 projects in just 41 days.”