Iowa Department of Transportation

Nov. 9, 2006

For more information, contact:
Roger Bierbaum
515-239-1414
roger.bierbaum@dot.iowa.gov

Rising construction costs continue to erode highway agencies' buying power

AMES, Iowa – Rising construction costs continue to erode the buying power of Iowa 's highway agencies. The Iowa Department of Transportation's analysis of construction award prices highlights the dramatic increases experienced in recent years.

According to Iowa Department of Transportation Director Nancy Richardson, “Higher construction costs, as well as other factors, are hindering the state's ability to make needed repairs, preserve our system, and build new roads. Delayed and deferred work is more costly in terms of financial outlay, as well as to our state's economic growth.”

The Iowa DOT's analysis of construction contract award prices for the last three and a half years showed roadway excavation prices have risen by 66.4 percent, hot-mix asphalt by 28 percent, Portland cement concrete by 2 percent, reinforcing steel by 33 percent, structural steel by 18 percent, and structural concrete by 9.5 percent.

Reflected in these higher construction prices are the increased costs of materials, machinery, wages, fuel, and insurance. For instance, diesel fuel used in asphalt mixes, and construction vehicles and equipment rose 88 percent in the last two years.

These higher construction prices are having a dramatic impact on the buying power of state and local highway agencies. The chart below illustrates how much less can be purchased today in comparison to 1989, which was the last time Iowa 's fuel tax rates were increased.

Construction Bid Item	What could be purchased in 1989	What can be purchased in 2006 with increased construction prices	Lost buying power
Roadway excavation	$9.90 could purchase 10 cubic yards	$9.90 can purchase only 4 cubic yards	60 percent
Hot-mix asphalt surfacing	$209.50 could purchase 10 tons	$209.50 can purchase only 5 tons	50 percent
Portland Cement Concrete surfacing	$1,401 could purchase 100 square yards	$1,401 can purchase only 53 square yards	47 percent
Reinforcing steel	$380 could purchase 1,000 lbs	$380 can purchase only 528 lbs	47 percent
Structural steel	$1,000 could purchase 1,000 lbs	$1,000 can purchase only 661 lbs	34 percent
Structural concrete	$16,931 could purchase 100 cubic yards	$16,931 can purchase only 52 cubic yards	48 percent

The Iowa Transportation Commission is scheduled to approve the FY 2007-2011 Transportation Improvement Program at its Nov. 14 meeting. The construction award price analysis is an important foundation for determining project cost projections for the five-year program. The proposed program includes $2 billion for right-of-way acquisition and construction. Due to the recent dramatic increases in construction costs, fewer projects than had been anticipated could be funded.

News Release