Building material shortages are delaying TxDOT projects and increasing their costs
A shortage of construction materials like steel and concrete is driving up costs for Texas Department of Transportation highway projects and could delay some construction contracts.
“We have also seen significant increases (more than 100% in some cases) in the price of certain materials,” Duane Milligan, director of TxDOT’s Construction Division, wrote in an internal memo dated April 5. Quorum Report broke the story Friday morning, TxDOT provided the memo upon request.
Economists say rising oil costs, COVID-related shutdowns, increased demand for materials, and labor shortages are among the factors driving up prices for road construction materials like l steel and concrete.
“Contractors across the country have had to contend with extreme price increases and delays in delivering materials, as well as shortages of workers to complete the job when they have the materials,” Ken said. Simonson, chief economist at Associated General Contractors of America.
TxDOT has more than 15,000 projects underway totaling $156 billion, according to the agency’s project tracker. About half of the projects are in progress or should start soon.
Milligan offered a handful of tactics to officials at TxDOT’s 25 district offices to deal with shortages and price hikes, including delaying projects to give contractors more time to get the materials they need.
District engineers and building officials could also substitute building materials “when the substituted material and design performs the same function as the original design,” Milligan wrote.
The memo advised local TxDOT officials to consider removing work or materials from a highway project “when removal will not affect the safety of the completed project.”
A TxDOT spokesperson said it’s too early to tell how inflation and material shortages might affect the timing or cost of the I-35 Capital Express project, a massive plan to widen the freeway to through Travis County by adding additional lanes.
The estimated cost of the I-35 expansion is $5.7 billion, including $4.9 billion for the central portion of Ben White Boulevard at US 290 East.
The I-35 expansion requires the seizure of approximately 30 acres of land from dozens of parcels across central Austin. With the median sale price of a home in Austin exceeding $600,000, land acquisition is likely to increase project costs as well, as TxDOT must pay the market value of any expropriated land.
Another infrastructure megaproject in Austin is facing similar market forces. A voter-approved plan to build two light rail lines across the city, including a downtown subway, is now over $10 billion, an increase of more than 40% from initial estimates.
As $2 billion of Project Connect’s rising costs are attributed to lengthening a subway tunnel, rising prices for construction materials, labor and real estate push also the upward estimates.
Even if prices for materials and real estate stop accelerating – economist Simonson said more steelmaking capacity will come online over the next year – a shortage of construction workers could complicate both projects.
“It’s an ongoing challenge for contractors to get enough workers,” Simonson said. “The country has really neglected its career and technical education programs which are the pipeline to get people into fields like construction.”