| OTIA III State Bridge Delivery Program |
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| Web Brief (Feb 07) |
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Bridge program uses innovation to manage costs.
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Bridge program manages cost increases with innovation and efficiency
Like most ODOT projects, the OTIA III State Bridge Delivery Program faced pressure in 2006 from increasing costs due to a variety of marketplace forces. As anyone who drives a car or pays a home heating bill these days understands, one of main reasons for cost escalation is a dramatic increase in the price of commodities such as fuel.
Gasoline and diesel prices increased steadily throughout 2006. Standard crude oil, the foundation of the gas and diesel market, reached a record high of $78.40 per barrel in mid-July—a major increase from around $59 per barrel when the year started.
Sharp price increases for gasoline and diesel fuel affect all areas of production and construction. Whenever materials must be transported, their cost rises. The price of sending staff to inspect sites is affected; the cost to remove demolition debris increases. It’s a ripple effect.
“In 2006, ODOT, like the rest of the nation, ggot hit with steep price increases in oil, and it pushed costs up,” said John Riedl, senior cost estimator for ODOT. “It was bad in the gasoline market, but it was worse in the diesel market, not just because it raised diesel prices, but because it led to a shortage of asphalt.”
The shortage of asphalt occurred when those who owned the commodity started converting it into diesel fuel to take advantage of the higher diesel prices. Suddenly, there was no supply—a far cry from a huge surplus of asphalt in 2004.
“In commodity economics, there are really two factors,” Riedl said. “First is a restriction in supply that can force up prices. The second factor is a disruption of supply, which is worse. With a disruption, you just can’t get the commodity, and that drives costs up as work slows down until a resource can be brought in. Asphalt went from being a surplus to being a major cost.”
Energy and fuel weren’t the only materials whose prices shot up. Steel prices increased sharply in the face of increased overseas competition and major construction projects in the Northwest and southern United States.
“The price of steel spiked rapidly over the past year and a half,” said Jeff Gower, ODOT’s state construction materials engineer. “It leveled off and has even come back down somewhat, but it is still 70 percent more than what it used to be.”
ODOT is responding to the 2006 pressures with flexibility and innovation. Among the steps the agency has taken on the bridge program are extending the schedule from eight to 10 years to alleviate some of the pressure on labor costs; designing and implementing a new statistical tool to more accurately estimate the cost of a new bridge, thus keeping prices down; and moving some projects in Stages 4 and 5 to a design-build delivery method, which is generally more cost-effective.
As ODOT continues to accomplish the objectives of the bridge program, it is frequently challenged by unexpected circumstances. Successful strategy, partnerships, planning and implementation will continue to guide the bridge program through these challenges as the repair and replacement of hundreds of state bridges moves forward.
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