Watch those construction costs

In light of our recent discussion about the costs of transit, I thought I'd flag this story about the general rise in construction costs and how this is affecting capital projects.

Rising prices for steel, concrete and oil are swelling the city's capital improvement budget, forcing the delay of dozens of projects, city officials said Friday.

"Steel and cement are crazy," said James Tillman IV, director of the city's Capital Improvement Program. "In previous CIPs and previous years we could build a pretty nice fire station for $3 million. Now, we're having trouble building one for less than $5 million."

Tillman said there are many reasons for construction delays and cost increases, including unforeseen problems that appear mid-project or changes in codes and laws. But material construction costs seem to be a prevalent problem challenging both the private and public sectors nationwide.

Rebar prices have risen from $700 per ton to $1,000 in four months, said Ken Simonson, chief economist for the Associated General Contractors of America, a construction trade group. Diesel prices are rising faster than gasoline prices, he added, forcing governments to pay more to operate dump trucks, concrete mixers and cranes.

[...]

Construction costs have been rising faster than consumer prices. Between late 2003 and this February, the Consumer Price Index has gone up 15 percent. But the Producer Price Index, a measure of raw materials, grew 25 percent, according to Bureau of Labor Statistics.

Harris County has not seen a spike in construction costs for road building, but the county has not bid many projects recently, said Ron Krafka, head of the construction programs division of the county's Public Infrastructure Department.

Krafka said the county could see an increase in the next couple of months, as more projects are bid. But he said the economic slowdown also could work to the county's advantage if contractors are willing to submit lower bids because there's less work to go around.

"A couple years or so ago, we were being told that there was so much work in the pipeline that we might consider deferring some of our projects," Krafka said. "Now, we've got at least a couple calls from contractors saying they're very interested in the upcoming work."

It's not so much Harris County you have to worry about, though the 288 toll lane project is looming out there in the distance. It's TxDOT and its yet-to-get-underway overhauls of US290 and I-45 that should be reading this article with trepidation. I can't wait to see what the next round of cost estimates will be.

Posted by Charles Kuffner on April 12, 2008 to Planes, Trains, and Automobiles