Transportation Projects Cheaper than Expected
By Heather Perkins, CSG Membership Outreach
States are getting more bang for their stimulus buck.
Bids for stimulus-funded transportation projects are coming in from 5 percent to 27 percent below what states are projecting, according to Tony Dorsey, spokesman for the American Association of State Highway & Transportation Officials, known as AASHTO. That’s because many contractors and construction companies are hurting for business in the current economic downturn, he said.
“Both the current economic climate and the lower cost in materials have fueled the lower bids,” Dorsey said. “Companies are hungry for work, making the bids much more competitive.”
Unemployment in the construction industry reached 21.1 percent, according to March figures from the Bureau of Labor Statistics.
Take North Carolina, where the state’s Department of Transportation awarded contracts on 11 projects in March. Bids for those projects came in at nearly $15.8 million, or 19 percent, below state estimates. To date, bids on the nine projects released for contract in April have come in at roughly $10.2 million, or more than 17 percent below estimates.
Those savings mean states will be able to fund more projects.
“While it is still early in the process, states are hoping to stretch their stimulus dollars and look into how to use additional funds to create more jobs,” said Dorsey.
Lisa Crawley, a spokesperson for the North Carolina Deparment of Transportation, said the state will fund more projects with the savings. “Given the current economic climate and the high level of competition in the highway construction industry, we expect that low bidding will continue. The money that is saved as a result of low bids will be allocated out to future contracts,” Crawley said.
Other states are in similar situations.
Arkansas will most likely put any extra money toward projects that were only partially funded rather than creating brand new projects and having to secure all the funding, according to The Associated Press.
The Missouri Department of Transportation would like to use some of the funds to offset the loss of tax revenue as a result of the recession, the St. Louis Post-Dispatch reported.
But there are some drawbacks to the lower contracts. Some states have awarded contracts to out-of-state companies, a common practice that raised eyebrows earlier this month in Alabama. The low bid on the state’s largest stimulus-funded project came from Kentucky-based Hinkle Contracting Corporation, according to The Tuscaloosa News. The bid for the project to resurface 11 miles of Interstate 59 in Etowah County came in at $37.5 million—$14 million below the Alabama Department of Transportation estimate, the newspaper reported.
Critics look at this situation as the state essentially using its Recovery Act funds to stimulate another state’s economy. Dorsey disagrees.
“You can’t think of the stimulus money as having boundaries,” he said. “Materials for jobs come from all over the country.”
And, he said, a company in one state might use workers from other states on stimulus projects because states must get these shovel-ready projects underway quickly. Some states may not have the available work force. He cited American Infrastructure, a Maryland company that won contracts for stimulus-funded jobs in several states. Because stimulus funds must be used quickly, the company “is using Pennsylvania workers to do jobs in Maryland because essentially all the Maryland workers are being used,” he said.
And sometimes awarding contracts to out-of-state companies cannot be avoided. In North Carolina, for instance, the Department of Transportation is required to award contracts to the lowest qualified bidder, according to Crawley While it would be possible contracts could go to out-of-state companies if they submit the lowest bids, Crawley said all projects thus far have been awarded to North Carolina-based companies.
The U.S. House Committee on Transportation held its first oversight hearing about state progress on stimulus-funded transportation projects Wednesday. Pennsylvania Transportation Secretary Allen D. Biehler, the AASHTO president, discussed the bidding process for these projects.
Biehler told the committee the increased competition for projects—which has driven down costs—is an added benefit.
"The result should be that states will be able to stretch these investments even further than expected and will deliver more projects and the associated jobs generated by the added investment," Biehler told the committee, according to an AASHTO press release.