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The Honolulu Advertiser
Posted on: Saturday, April 8, 2006

Cost surge delaying road work

By Kelli Kennedy
Associated Press

Road builders, like these rebuilding a hurricane-damaged overpass in Miami, find themselves forced to compete with construction companies for increasingly expensive materials and scarce labor.

LT. ERIC BAUM | Miami-Dade Fire Rescue via AP

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ORLANDO, Fla. The cost of building roads has gotten so high, not even dirt is cheap anymore. As a result, many states are postponing scores of highway projects.

The reconstruction work from the eight hurricanes that have hit the United States since 2004 has combined with a rise in population in some states to drive up the demand for labor, material and equipment. That, in turn, has pushed up wages and prices.

Surging fuel prices, China's immense demand for concrete and steel and the reconstruction of Iraq are also pushing U.S. road construction costs higher.

"We plan for cost increases, but this has been a situation (in which) a lot of events have come together all at one time," said Lowell Clary, an assistant secretary at the Florida Department of Transportation.

Until 2004, highway material costs nationally were fairly steady, with a 12-year average annual increase of 1.8 percent, according to the U.S. Bureau of Labor Statistics. But those costs rose 12.5 percent in 2005, the bureau said.

According to the bureau, hot-rolled steel bars and structures were up 45 percent in 2004 from the year before, and diesel fuel was up 27 percent. Marked increases were also reported for crushed stone, ready-mix concrete and asphalt paving material.

In Florida, concrete went from $564 a cubic yard in 2004 to $749 last year, and a cubic yard of dirt climbed from $4.38 to $7.24, according to the state Transportation Department.

"Between higher labor increases and the materials increases, we're having to pass that on to the customer. Therefore our prices are up substantially," said Mike Horan, a paving contractor near Sarasota.

Florida has about 8,000 projects in various stages in its five-year work program but was forced to defer 62 of them when its highway budget came up short about $1 billion, Clary said. Seven projects were deferred in booming Miami-Dade County.

Ricky Leme often sits in bumper-to-bumper traffic in an area where one of the projects has been postponed.

"They should get on it now," said Leme, a process server. "This is screwing up everybody's work. Right now it's taking about a half-hour to get to the freeway."

Some states are finding fewer contractors available because they have more work than they can handle, or because they cannot get the labor or the materials they need. Fewer bids can mean higher prices.

In Alaska, a road project that was expected to cost $6 million got only one bid, which came in at $10 million. Only two contractors bid on a Washington state road project in January, said Kevin Dayton, a construction engineer for the state. The low bid was $5 million over the engineer's estimate of $22.3 million.

To encourage more bids, Washington state is offering to give contractors a portion of the savings for coming up with creative ideas that reduce costs without compromising quality..

Contractors' bids are coming in well over the estimates in Georgia because the hurricane cleanup along the Gulf Coast has made it more difficult and costly to hire laborers, said David Graham, director of construction for the Georgia Department of Transportation. Georgia postponed 84 projects in 2005, Graham said.