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Low construction costs are saving Missouri millions

Saturday, April 25, 2009 | 4:08 p.m. CDT

ST. LOUIS — The tough economy is forcing construction firms to cut costs, which is helping Missouri and Illinois get more for their road-building dollars, according to a published report.

The St. Louis Post-Dispatch reported Saturday that Missouri Department of Transportation figures show the average cost for state highway construction has shrunk about 14 percent since last July. That's saved the state $108 million on 346 jobs.

The trend is continuing for the state's federal stimulus projects as contractors competing for the first two rounds have offered bids 15 percent below the department's estimates.

In Illinois, the bids are coming in 14 percent under budget, saving about $42 million.

"We are definitely seeing more competition," said Marisa Kollias, spokeswoman for the Illinois Department of Transportation.

State transportation departments welcome the savings as the recession has forced drivers to cut back on purchases of gas and new cars, providing less fuel tax and sales tax revenue for road and bridge work.

"We'll use some of these savings to offset that reduction," said Kevin Keith, chief engineer for MoDOT.

The department will also use that extra money to get some projects done faster and to start projects in addition to the ones originally listed to receive the state's $525 million share in stimulus funds.

"We're just getting fabulous bids," Keith said.

For example, the winning bid for repaving and widening about 17 miles of Highway 60 in southwest Missouri calls for $8.7 million, or $12 million less than the department had budgeted. Another bid to do pavement and bridge work along seven miles of Interstate 35 in Clinton County will save the state $3.2 million.

Besides the stimulus work, contractors looking to upgrade about 800 of Missouri's worst bridges are placing bids 28 percent below budget estimates.

The trend reverses the price escalation that transportation officials have had to deal with in recent years as the rising cost of fuel, asphalt and steel made road-building less affordable. Over the last five years, the cost of materials rose 42 percent.

But the prices dropped 2.5 percent in February from the same month a year ago, according to the American Road and Transportation Builders Association.

That cost decline has made it easier to offer cheaper bids, contractors said.

The American Association of State Highway and Transportation said bids for economic recovery projects are coming in 19 percent below budget in North Carolina, 10 percent below in Rhode Island and 20 percent in Texas.

"The states are going to be able to do more projects than they originally anticipated," said Tony Dorsey, spokesman for the association.

Contractors said they feel a sense of urgency in bidding for the wealth of highway and bridge jobs being made possible by the economic stimulus bill. Once that money is spent, they're afraid the competition for fewer jobs will be fierce.

"It's definitely a concern with the economy like it is," said Andy Ernst, vice president of construction operations for Pace Construction Co. of St. Louis.

As the recession has reduced the construction of shopping centers and parking lots, many of those companies have gone into road construction, increasing the pressure. Some Missouri highway projects are attracting up to a dozen bids when officials have typically been lucky to get more than three.

"There are a lot of contractors who are low on work," said Mike Bross, vice president of Chester Bross Construction Co., which has won six stimulus projects mostly in northeastern Missouri. "Contractors who maybe were doing more private work, like development work, well that's dried up. They've moved into other areas."

Bross said his company will continue to bid low as he waits for the construction industry to bounce back.

"You try to be more efficient in controlling your costs and having better production," he said. "Sometimes you have to cut your profit."


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