November 13, 2007
Construction Inflation Is Killing Us
How bad is construction inflation for roads projects? It's bad enough the Snohomish County Council sees it more cost effective to borrow money to get local roads projects going rather than to wait for the money to be available later. Yet another example of the thanks we owe Olympia for its years of dithering and debate on long overdue improvements to roads like Highway 9, 405, and the Valley Freeway (let alone replacing 520!). The longer they fuss, the less bang we get for our tax buck.
Posted by Eric Earling at November 13, 2007
07:14 AM | Email This
1. What do you expect with what's happening with the price of oil? Did you know that approximately 40% of the price of 'asphalt' is related to the cost of oil.
Hopefully Mrs Clinton will remedy this situation, since apparently our current President has absolutely NO CLOUT left whatsoever (if in fact he ever had ANY to begin with).
'BUSH, party of how-ever-many, your plane is ready; BUH-bye!!!'
2. Not to mention the double-dipping on tax revenue Olympia does by charging sales tax on construction materials. And of course we can thank unions too. No wonder no one wants to build anything for transportation.
Pssst, Duffman. Did you know that Bush started the recent fires in California himself. Pass it on.
4. Actually, I did NOT know that. :) I'll let you be the purveyor of that.
And what percentage of oil is in rock, concrete and wood products that makes the prices skyrocket?
Come on guys. This is serious now. We can't go ranting about the high cost of union labor at this time because unions aren't going away.
We can declare emergencies (i.e. abuse of 'emergency' powers) to speed up the project by reducing environmental review times (notice I didn't say get rid of them) and we can let the legislature know that we don't want sound barriers and they should stop pandering to the Mercer Islands, Clyde Hill and every other special interest group that justs adds cost to a project.
Again, this is serious times and calls for serious dialogue. BTW, I agree with all everyone says on the high costs, but now is not the time to dwell on unchangeable items.
Following along Swatters line of thought.
A brief review of the EIS and SEPA, not 2 years and 30% of the cost of the Total Project. The Governor recently reversed a County on a Wind Farm Site in Kittitas, so she obviously doesn't mind circumventing process to get to a desired outcome.
Compliance for the 135 million offered from the Fed's may be more trouble than it is worth.
Remove any of the unnecessary hiring requirments of State Jobs (% of apprentices on the job, % of apprentices that must be minorities). Declare an Emergency and suspend prevailing wage requirments(you can and should still use qualified Union Labor), normal union scale should be enough to get by on.
Remove the Tax on materials for State construction projects.
Encourage Public Private Partnerships with major employers on both sides of the lake to invest in more capacity on 520. Use B&O relief and other tax incentives to get up front private investment to reduce long term bonded debt for the public.
7. EXCELLENT, Smokie!
Smokie, I have found the private contractors to be more efficient and cheaper than union shops for smaller projects.
For larger projects, I don't see how you can get around union. They provide a trained workforce which is used to these megaprojects. While I would like to drive by a construction site and not see one guy in a trench with a shovel and six supervisors watching, I don't think that is going to happen in my lifetime.
Great. I hope that costs rise so high that it becomes impossible to build a new 520 or Viaduct.
And I hope it takes them another 30 years to finish the current light rail before they soak us for more.
Yet, everyone still gets paid.
I said to use Union labor, just waive the Davis-Bacon Act prevailing wage provisions. If you call the 520 bridge a "private project" you would use union labor at their normal rate per hour. Call it a Government project under Davis-Bacon and add 15% for the same guys and gals doing the same job. What sense does that make?
11. This inflation is one reason why gas taxes and sales taxes are no longer a good way to fund transportation infrastructure. Instead, we need user fees that can adjust with construction inflation. A higher price of gas means both higher construction costs and lower revenue because people cut back their driving as the price of gas goes up. Sales tax revenue also can get squeezed, as Walmart is finding out, as a result of higher gas prices.
12. The first thing is to solve the meta-problem. The state holds itself and its employees unaccountable for the good stewardship of the publics funds. The voters of this state need to put people into positions of authority in the state government who will reverse the attitude that they can always either raise taxes or let us eat cake.
13. ...sorry 'bfr', I'm afraid all those people are in the 'corporate world'.
14. Design/Build contracts have been proved to save up to 45% of the cost of traditional public works contracts in which the government is the designer. Implementation requires a change in the law. At present design/build contracts are limited primarily to bridges. If the DOT design department was eliminated, more than 1100 designers could be terminated.
The state lets the contracts. The State manages the contracts. The state *could* decide to get the best value for the money.
There is no reason why roads in Oregon cost so much less than roads in WA other than the state gov't allows it.
16. The Baloney above was specific to #13.
#14 is a clear example of my previous point.
Sorry for any confusion.
17. Does any reader of this blog know what the construction inflation is like in terms of numbers? I am beginning to think that it is about the same as the inflation in college tuition, and I am wondering if this anything to do with the strong grip by labor unions.
18. There is an enormous amount of tax dollars being spent on environmental regulations. Not that I advocate polluting the environment while building roads, but all those little "environmental offset" wetlands and settling ponds we're required to build is driving up costs. Maybe some common sense should prevail.
19. Oh, Duffman, you are so full of it! In the corporate world, any CEO or CFO who financially leveraged his company and then couldn't account for expenditures, losses, lack of efficiency, not delivering on projects, would be on on his ear. That doesn't happen at the state level because no one is held accountable.
20. katomar: Pardon me if I caused confusion; that is exactly what I was implying. The 'real leaders' and 'real thinkers and doers' are not in Politics and/or Government - THEY ARE IN THE CORPORATE WORLD. That was the point I was trying to convey and I apologize if it was confusing.
Putting Sidewalks on North Road??!? North Road is Not 164th St Looking at a map so how can a sidewalk help traffic on 164th? HUUUHHHHHH??
The Only Escalation I see is voting out these idiots (Unless Diepenbrock and Fell see otherwise). Come on you make up these insane projects that do nothing. Sidewalks on Larch Way?
Seriously Escalation is not the issue here spending the money wisely on a new East West Corridor called 180th ST SE would be a good idea instead of sidewalks along North Road.
Say Councilmember Gossett needed more seats at the Thanksgiving table would he add a leaf to the dining room table or have the additional guests eat at the larger workbench he just put in the shop out back because he needed more capacity?
What in the blazes stinking thinking is this?!?!?
BTW Design Build Contracts do nothing for time and cost; it is reshuffling the cards and the designers now work for the contractor and the WSDOT folks now have to negotiate pricing instead of getting a hard bid. I bet they are the toughest negotiators you've ever seen. Wait they are only tough when it comes to us saying Capacity they say NOT IN Your Life here eat this sidewalk that we paid the contractor 1-1/2 times more than a hard bid because you know it changed a little right there. Then you can get on you bike and walk to work you lucky taxpayer you in a civilization built on the car and being chipped at by bitter hate mongers with a visceral anger at any driver.
Eating that Queen Cake Everyday.
This is INSULTING!
22. Re 21: Design build keeps the government out of the design process, which eliminates a major source of costly errors. It also prevents costly change orders by fixing the design when the contract is let. If you think government designers are superior to those in the private sector, you are delusional.
You still get lots and lots of change orders with design/build no matter the protections you put in there.
In a time of inflation, speed, speed and more speed saves the day.
24. Dopiolover@17 the best guess I see on various PW projects (schools, sewers, bridges) is 1% approx. per month construction inflation
25. Sorry, Duffman, I did misunderstand your comment. Isn't there some "sarc" button we could all use when appropriate?
#13, #25, et al
aaahhhh.... i get it.....
humor: it is a difficult concept....
So now were talking stupid on your behalf. right! LOL
28. Here's a way to instantly free up about 9% more $$ for these road project.
Stop charging sales tax and thereby diverting this roads only money back to the general fund!
Is this the only state that charges itself sales tax? A clever shell game they have.
29. I obviously misunderstood. When the gas tax advocates on this board were throwing a tizzy, didn't they know this was going to happen? Didn't whacking the project list ten minutes after the suckers around here voted for that tax increase give everyone a clue?
Duffman: it kills me when liberals complain about the price of oil, because for decades, the mantra of the left has been that we can decrease use of fossil fuels by making it cost more.
So. Um. You are getting what you wanted. Stop complaining.
swatter: note that we use a lot of oil to transport those materials, as well as to make/harvest/mine them. I have no idea if that is a majority of the cost increases.
pudge, I think you argue for the sake of arguing. Someone claimed the cost of construction was skyrocketing because the cost of oil in asphalt manufacture (since it is a large component of the materials). I replied that other products are also skyrocketing- wood, steel and concrete- which do not use oil in the product. You critiqued my critique with an off-the-wall and non-germane comment.
To ward off another blistering attack, let me agree with you that yes, indeed, the cost of materials and products have increased due to the cost of transporting them because of oil cost increases.
32. swatter: I wasn't arguing, I was adding information. If you don't like it, don't respond. I couldn't care less what you think.
33. #30, with all due respect sir/ma'am - I regard myself as an 'independent' who most often (but not exclusivly) votes for a Democrat.
34. Of course, the dithering in Olympia was mostly caused be Republicans who in the 90's abandoned the bipartisan approach to roads issues that had always been the norm in Washington. Republicans wouldn't provide the votes to address the gas tax, and instead foisted one performance audit after another on DOT as though somehow they had hidden piles of cash somewhere. The one bit of responsible Republican transportation funding of that era, Referendum 51, written by Jim West and Tom Huff and passed by the voters was gutted a year later by the GOP endorsed Eyeman initiative 695. Even when they got it right, they screwed it up later.
Duffman: I never implied you were independent or Democrat.
36. Eric - I take it you voter for Prop 1 then, right?
I think the state really needs to consider design/build for all transportation projects going forward.
It seems to have worked really well for the Second Narrows Bridge and has worked well in other regions for both road and public transit project. In most cases these design/build projects have finished in record time especially when compared to traditional transportation project management.
38. Daniel K: you must be talking about some other Prop 1 that actually did something significant for roads.