Bridge Construction Estimates Escalation 3

[jimaitken]

I am curious to know the effect of the rise in the cost of construction materials, is having on the engineer's construction estimates for bridges around the U.S.

In the State of Georgia we have traditionally had extremely low costs, on average $65/sf for AASHTO beam bridges, $80/sf for steel (rolled and plate girder). These estimates were pretty good until 2 or 3 years ago. My company is currently using estimates around $100/sf for concrete and $135 to $150/sf for steel (Girders not box beams). It is hard to know if these values are in the ballpark since it seems to vary quite a bit from month to month.

What kind of escalation have others been experiencing from what they used a few years ago?

 

[MichSt]

I have noticed a sharp rise in material costs recently over the past year or so. I worked on the design of a prestressed concrete box beam bridge in the winter of 05. The job was let this summer and our estimate was about 30% below the winning bid, which was high enough that an explanation had to be written to the state explaining the overrun in cost. This was mostly due to the costs we had for the concrete box beams, steel piles and the asphalt approach work.

Our state DOT has put out more recent price data on bid items which confirms this trend is happening state wide .

All estimates for the jobs I’m currently working on are based on these inflated prices, which has let to estimated construction costs far over budgeted amounts. What can you do though…you have to be realistic about the cost.

 

[DRC1]

Materials are increasing 15 to 30% a year. availability has become a key factor. Right now off road tires are hard to get and accutely affecting construction. Asphalt has been going through the roof, as well as diesel fuel. concrete and steel are on the rise again. Supliers would produce annual price sheets in early spring. Now most release prices two or three time a year. For large long term projects, it is impossible to get firm quotes for concree or steel. Labor has risen and will continue to rise sharply. Another market factor is that a lot of work is available, which drives up prices.

 

[cvg]

ditto on asphalt prices which have risen from about $40/ton to $100 in a few years. Concrete pipe has also risen sharply. In this area, the available work force is limited and contractors are busy - so you get few bids and they can be very high

 

[jimaitken]

Let me modify the question in 3 parts.

a.) How does the increase in construction costs and uncertainty when costs will begin to stabilize, effect how you determine constuction value during the concept stage of a project that may not let for several years?
b.) Do you base your engineering fee on current estimated construction value or the projected construction value?

c.)Is it ethical to increase engineering fees to reflect the higher cost of construction, outside of normal inflation and labor increases?

Let me explain part c; my thoughts are that the increase in construction cost is mainly due to material costs, and has little effect on the effort required to complete the design. If material costs are rising at a rate faster than inflation and labor costs then the final construction cost will be much greater than the original estimate. (30% or more from responses so far) Engineering fees will increase but only due to inflation and labor increases. The value of the engineering services decreases as it is related to the final completed costs. Do engineers increase fees by 30% + to capture the expected increase in construction and keep engineering fees vs construcion value at the current percentages?

Sorry... I'm explaining part c with part d.

 

[cvg]

b) our fees are not directly related to the construction cost (too bad for us!) However, our fees have gone up substantially due to increases in our overhead costs.

 

[DRC1]

Economists have a saying " arising tide lifts all boats" If you would like to increase your fees, which should be based on your costs and the fees charged by competing engineering firms.Owners are resigned to the fact they are spending more to get a project built, so if you want to increase your fees, now is probably a good time. Once the market falls, everyone will be looking to you to "sharpen your pencil" on your quotes. Now we can use a piece of big chalk.

 

[asdf]

Gents, also keep in mind that the sharp climb in construction costs also are in part due to the lack of experienced designers. More often than a few years ago, we are finding that particular details that were developed over decades, have been replaced with 'improved' details, which are typically more complicated to build, and at times do not even work. Young engineers are churning out plan sheets as fast as their cad machines can print them, and reviewers cannot keep up. The days of a design engineer working in the field for a while, then heading for the office with an understanding that most things are bigger than a plan sheet are gone, not to mention they are always more complicated. I will relay one story - two projects ago, we were handed revised plan shhets at a project meeting by the owner, who relayed that there was a potential of future expansion of the project, and directed us to add additional reinforcing steel to the substructure. After reviewing the drawings for a minute or two, I commented that I did not think all of the additional reinforcing steel would fit as depicted, specifially 16 bundles of 3 No 18 bars, spliced at the same elevation, in a 2'x2' column (the problem is the coupler splicing at the same elevation is wider than the coulmn, for you younger guys). After pointing it out, the designer, who was a lead designer for a prominent firm before striking out on his own after all three years of experience, replied that he could "draw the couplers smaller if that would help". But this is not the part that drives up construction costs, what drives up the construction cost is the fact that an equally inexperienced owner's representative believe that the designer is correct, and directs us to file a claim if we think otherwise. So we do, then we hire a proper designer who adds post tensioning to the column, procure and install the material, finish the project, fight the claim, and barely cover our expenses when we sit before an mediator. But in the mean time, we have increased our mark up 10% to cover our anticipated losses up front.

 

[MichSt]

Good point asdf, but I believe the sharp climb in construction costs is mainly due to increased material costs. See this article in Roads and Bridges (Feb, 2006):

http://www.roadsbridges.com/rb/index.cfm?fuseaction=showNewsItem&newsItemID=10919

They put the increase at 22% over two years, which agrees with what others in this thread have reported.

 

[jimaitken]

asdf
While there is some cost associated with construction claims due to incomplete or faulty design, these costs do not be happen on every project. Most of the contractors I have worked with catch constructabilty issues before they bid the job and those that they miss are worked out before they result in a claim.

We seem to throw the blame on in-experienced designers for a lot of things on this site... but the increase in constuction costs? C'mon. Material, fuel and labor costs are the primary reasons for the recent sharp rise in construction costs.

 

[Ingy]

Here's a good link to look at. Caltrans (California DOT) has had similar experience.

http://www.dot.ca.gov/hq/construc/MaterialMktInfluencecontractbidprice91106.pdf

As a chief estimator at a public works contractor I can vouch for the increased costs of materials. It also affects how we price long term work, e.g. two years or more. A smart owner will include a market escalation clause in the contract so that they are not paying a premium for the contractor to take the risk. The more risk pushed down to the contractor, the higher the margin.

 

[cvg]

since fuel costs has been so volatile, one way is to put an allowance in the contract for fuel which reduces the risk on this item. This may not affect bridges so much, but definitely roads and grading.

 

[jimaitken]

Thanks for the responses.

 

[Panars]

Ohio DOT uses a steel price index, an asphalt paving index, and a fuel price adjustment to try to compensate contractors for the volitility of these items.

 

[facca]

Materials pricing is increasing but I think the biggest increase are due to regulations in the public sector and the lack of skilled labour to meet some public sector which sometimes ramp up with large bridge programs.It takes 5 years on average for a foreman to learn how to build bridges on his own.The hardest part is being able to keep these employees to teach them in this age where everyone wants to do things instantly.

 

[bridgebuster]

asdf,

I have to agree with your observation about inexperienced designers. I've seen it first hand in the office but it's usually engineers with 5+ years under their belts. Some recent incidents: "...I need Number 5's at 12 but I think I'll call for Number 6 @ 9 to be certain..." ; "...I need 7 piles but I'm using 12 because it looks better...", and "... I could put the footing at -4 but I already drew it at -8...".

Sometimes I can can things and other times I'm told to MMOB.