Construction Costs Outpace Producer Prices, AGC Finds

"Get used to higher materials cost inflation," said Ken Simonson, chief economist for the Alexandria, Va.-based Associated General Contractors of America.
Simonson commented after the Bureau of Labor Statistics issued its report on the producer price index for May.

Overall, producer prices had only a 0.2 percent increase in May and a 1.5 percent increase in the last year, outside of food and energy.

But the PPI for construction materials and components jumped 1.2 percent last month and 7.8 percent over 12 months. By project type, the 12-month increases range from 8 percent for new single-unit residential construction to 16 percent for highway construction.

Many materials are contributing to the increase, Simonson said. In the last 12 months, there have been increases of 87 percent for copper and brass mill shapes, 48 percent for asphalt, 40 percent for diesel fuel, 26 percent for gypsum products, 18 percent for plastic construction products, and 15 percent for cement.

"I expect a few of these increases to level off as the housing market cools, but most are tied to strong U.S. and world demand for materials and freight transportation," Simonson said. "Thus, I think construction materials costs will keep outstripping the overall inflation rate.

"Public agencies, private owners, and contractors need to face this new reality," he added. "Budgets must allow for more inflation, for purchasing materials earlier, and for sharing the risk and reward from price volatility."

Midwest Groups Take Three ARTBA Pride Honors

The Midwest came up big in the seventh annual Pride Awards hosted by the Washington, D.C.-based American Road & Transportation Builders Association Transportation Development Foundation. Three organizations took honors.

The Pride Awards honor "excellence in community relations and public education that enhance the image of the U.S. transportation construction industry."

An independent panel of public relations professionals and construction industry journalists selected the winners.

State transportation departments and private sector firms were recognized in the following categories in public-media relations/education and community relations.

o Eau Claire, Wis.-based Ayres Associates took third place in public-media relations/education in the private sector.

Ayres developed the "Transportation Funding & Maintenance Education Initiative" in Wisconsin to provide public officials, private sector transportation design and construction firms and the business community with strategies to meet these funding challenges. Presentations reached more than 2,000 transportation stakeholders throughout the state with messages about the importance of transportation infrastructure to the economy and quality of life and of participating in the political process to build support for increased investments by elected officials.

o The Illinois Department of Transportation tied for second, with the comparable organization in Mississippi, in community relations for state departments of transportation.

Dubbed "Upgrade 74," the $460 million, multi-year reconstruction of Interstate 74 through Peoria and East Peoria was initiated to better handle the traffic flow that has more than doubled in the past 40 years.

IDOT created a speaker's bureau for the agency's engineers to deliver more then 200 presentations to local groups and businesses detailing construction activities. IDOT's outreach campaign also included development of a project website, toll-free hotline, print and radio advertising and a special newspaper supplement to educate motorists about the timing of construction activities and help them avoid delays.

o Chicago-based CTE Engineers Inc. and city of Chicago were second place winners in private-sector community relations.

The 6.4-mile complete reconstruction of South Lake Shore Drive improved a major commuter route, restored two cherished lakeside parks and demonstrated that a major urban engineering project can be enhanced by community involvement.

The project team, with the continual involvement and feedback of a local advisory group, was successful at reconciling the demands of building an efficient modern highway in a major urban park while still preserving a strong connection to the lake and allowing for outdoor activities.