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Kevin J. Dayton, P.E., Chief Engineer
Assistant Secretary, Regional and Mega Programs
Chris Christopher, P.E., State Construction Engineer
Joint Transportation Committee July 20, 2017
Connecting Washington
Bid Environment
Roger Millar, Secretary of Transportation
Keith Metcalf, Deputy Secretary of Transportation
Current project delivery
2
Challenges delivering the
Nickel/TPA projects
• Escalation in global material costs during the mid-2000’s
led to an increase in project costs
• 2003 and 2005 fuel tax forecasts did not anticipate the
economic recession
• Managing the growth and decline in the size of
WSDOT’s construction workforce
• Legislative project list baselines established with limited
engineering completed
• On-going maintenance impacts of increasing the size of
the state’s transportation system
3
WSDOT’s Construction Cost
Index
4
Chart from September 30, 2007 WSDOT Gray Notebook
WSDOT’s Construction Cost
Forecast
5
0.00
100.00
200.00
300.00
400.00
500.00
WSDOT’s CCI Forecast
Prediction of future
construction inflation
Corrected data based on
actual construction inflation
The New Challenges affecting
Connecting Washington
6
• Indicators are pointing to another period of increasing
construction costs.
• Appears to be driven by local/regional effects rather than
the global effects. For example:
– A booming Puget Sound economy
– Competition with other public Owners (Sound Transit,
Port of Seattle, City of Seattle, etc.)
– Significant private infrastructure projects
– Very low unemployment and potential labor shortages
– Shortage of subcontractors
Competitive bidding results
7
3.6 3.6
4.14
3.63.5
3.1
3.5
4.4
5.1
5.5
4.9
4.54.3
3.93.8
3.6
2.5 *
0
1
2
3
4
5
6
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Calendar Year
Average Number of Bidders on WSDOT Contracts
* 2017 data through June 30 (56 projects)
Bid Prices vs. Engineers Est.
8
-15.20%
-11.71%
-9.31%
9.80%
-20.00%
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
Bid Price Percentages Above/Below Engineer's EstimateFor all bid openings in the month of March from 2014 to 2017
12
Projects
9 Projects
24
Projects
23
Projects
Ab
ove
En
gin
ee
r's
Be
low
En
gin
ee
r's
March
2014March
2015
March
2016
March
2017
Driven by material costs?
9
-15.20%
-11.71%-9.31%
9.80%
-60.00%
-50.00%
-40.00%
-30.00%
-20.00%
-10.00%
0.00%
10.00%
20.00%
Change in the Price of Construction CommoditiesMarch 2014 to March 2017
% In
cre
ase
in C
ost
% D
ecre
ase
in
Co
st
March
2014March
2015
March
2016March
2017
Bid Prices
Driven by material costs?
10
-60.00%
-50.00%
-40.00%
-30.00%
-20.00%
-10.00%
0.00%
10.00%
20.00%
Change in the Price of Construction CommoditiesMarch 2014 to March 2017
% In
cre
ase
in C
ost
% D
ecre
ase
in
Co
st
Steel Mill
Products
↓ 5.2%
March
2014March
2015
March
2016March
2017
Driven by material costs?
11
-60.00%
-50.00%
-40.00%
-30.00%
-20.00%
-10.00%
0.00%
10.00%
20.00%
Change in the Price of Construction CommoditiesMarch 2014 to March 2017
% In
cre
ase
in C
ost
% D
ecre
ase
in
Co
st
Diesel
Fuel
↓ 30.6%
March
2014March
2015
March
2016March
2017
Bid Prices
Driven by material costs?
12
Change in the Price of Construction CommoditiesMarch 2014 to March 2017
% In
cre
ase
in C
ost
% D
ecre
ase
in
Co
st
Asphalt
Binder
↓ 40.6%
March
2014March
2015
March
2016March
2017
Bid Prices
Driven by material costs?
13
-15.20%
-11.71%-9.31%
9.80%
-60.00%
-50.00%
-40.00%
-30.00%
-20.00%
-10.00%
0.00%
10.00%
20.00%
Change in the Price of Construction CommoditiesMarch 2014 to March 2017
% In
cre
ase
in C
ost
% D
ecre
ase
in
Co
st
Asphalt
Binder
Steel Mill
Products
Diesel
Fuel
↓ 5.2%
↓ 40.6%
↓ 30.6%
March
2014March
2015
March
2016March
2017
Bid Prices
What we’re seeing
14
• Bid prices are averaging 11% above our engineer’s
estimate for January through June 2017 (55 projects
totaling $177M)
• Cost growth is exceeding what was anticipated when
Connecting Washington was passed by the Legislature
• The buying power of Connecting Washington projects
may be diminished by cost escalation
Estimate from 2015 Connecting
Washington package
Contractor Bid Price
Practical Solution Savings
Co
st
Esca
lation
What we’re doing about it
15
1. Collaborating with our Contractors to fully
understand the causes of the recent escalation
2. Two broad categories:
A. Factors outside of WSDOT’s control
B. Factors within WSDOT’s control
Examples of Factors Outside of
WSDOT’s Control
16
1. Global economy
2. Regional economy
3. Western Washington construction market
4. Material prices
5. Contractor capacity in the Washington
market
6. Labor supply
For these, we need to ensure our estimating practices reflect the
influences these factors exert on bid prices
Examples of Factors Within
WSDOT’s Control
17
• Contract time
• Daily work windows
• Timing of project
advertisements
• Using full closures rather
than nightly lane closures
• How projects are
packaged
• Delivery method (Design
Bid Build vs. Design Build)
• Flexible contracting that
allows innovation
• Risk allocation
• Quantity and complexity of
Contractor reporting
requirements (e.g.
Apprenticeship, DBE)
• Cash flow constraints
• Other?
But, implementation needs to
carefully consider:
18
• Impacts to the travelling public
• Long-term performance of the system
• Local community impacts and commitments
• WSDOT workforce impacts
• Environmental impacts
• Safety
• Quality
• Availability of funds
Next Steps:
19
• Continue to incorporate innovative practices and
practical design
• Ongoing discussion with the contracting community
• Identify factors to move forward while considering the
impacts
• Implementation in consultation with industry
• Come back with an update in January 2018
Questions?
Kevin J. Dayton, PE, Chief EngineerAssistant Secretary, Regional and Mega Programs
Washington State Department of Transportation
360-705-7032
Chris Christopher, PEState Construction Engineer
Washington State Department of Transportation
360-705-7821
17
