GROWTH IN HIGHWAY CONSTRUCTION AND 

MAINTENANCE COSTS 

Federal Highway Administration 

Report Number: CR-2007-079 

Date Issued: September 26, 2007 
i

U.S. Department of 

Memorandum

Transportation 

Office of the Secretary 

of Transportation 

Office of Inspector General 

Subject: INFORMATION: Report on the Growth in 

Highway Construction and Maintenance Costs 

Report Number CR-2007-079 

Date: September 26, 2007 

From: David Tornquist

Assistant Inspector General 

 for Competition and Economic Analysis 

Reply to 

Attn. of: JA-50 

To: Federal Highway Administrator 

The Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy 

for Users (SAFETEA-LU), enacted in August 2005, provides $244.1 billion for 

highway and transit projects for fiscal year (FY) 2005 through FY 2009. Within a 

year of its enactment, dramatic cost increases led some state planners to cancel or 

delay highway projects due to insufficient funds. An April 2006 survey by the 

American Association of State Highway and Transportation Officials (AASHTO) 

confirmed this trend, with 42 states and the District of Columbia indicating that 

they were witnessing significant growth in the costs of their highway projects. 

This rapid cost escalation has significant implications for the funding levels 

needed in the next highway bill to maintain or expand highway construction 

nationwide. 

In September 2006, the House Committee on Transportation and Infrastructure 

requested that the Office of Inspector General analyze the growth in highway 

project costs. Our objectives were to determine: (1) the extent of recent cost 

increases for highway construction and maintenance projects, (2) whether the cost 

increases are the product of transitory factors or indicative of longer term 

structural changes that need to be incorporated into future transportation funding 

plans, and (3) the degree to which the cost increases are subject to regional 

variations. 

In conducting this performance audit, we examined both national and state data on 

highway construction and maintenance costs. In addition, we analyzed a range of 

supporting information, such as data on the number of bidders per project, industry 

profit margins, and wages. Further, we interviewed experts on each of the major 

categories of commodity inputs used in highway construction and maintenance, as 
ii

well as on the highway construction industry. We performed this audit in 

accordance with Generally Accepted Government Auditing Standards prescribed 

by the Comptroller General of the United States with the exception of the data 

quality standards. We did not systematically audit or validate the data used for 

this report. However we conducted checks of the data to assess reasonableness 

and comprehensiveness and concluded that the data, despite shortcomings, was 

sufficient to support our findings. Exhibit A more fully describes our scope and 

methodology. 

RESULTS IN BRIEF 

We found that highway construction and maintenance costs nationwide grew 

approximately three times faster from 2003 through 2006 than their fastest rate 

during any 3-year period between 1990 and 2003, substantially reducing the 

purchasing power of highway funds. These increases are largely the result of 

escalation in the costs of commodities used in highway projects, such as steel and 

asphalt, and reflect structural,1

 not transitory, economic changes. Consequently, 

we expect these commodity costs to remain elevated, and possibly continue 

expanding, in the near term. Finally, we found that highway project cost growth 

varied across states due primarily to differences in costs of transporting 

commodity inputs. 

Continuing elevated highway construction costs will create a significant challenge 

for both Congress and the Administration as they consider, in the next highway 

bill, how best to maintain and improve the nation’s aging highway infrastructure. 

Higher construction costs have significantly reduced the purchasing power of 

current highway funding. The next highway bill may need to provide a significant 

increase in funding just to maintain, let alone exceed, the volumes of highway 

construction and maintenance undertaken prior to 2003. 

Highway construction and maintenance costs have soared in recent years. 

Figure 1 shows the escalation in the two major national indices2

 of highway 

construction and maintenance costs: the Federal Highway Administration Bid 

Price Index (FHWA BPI), and the Bureau of Labor Statistics bridge and highway 

construction producer price index (BHWY PPI).3

 The FHWA BPI increased 47.7 

 

1

 In this setting, structural economic changes are either lasting modifications in the demand for these commodities, or 

long-term reductions in their supply. 2

 Indices are a common means of measuring inflation. Most indices discussed in this report track the cost of 

purchasing fixed quantities of inputs to highway projects over time. The costs in an index are scaled to have a value 

of 100 in a base year. This facilitates calculation of the percentage inflation in the costs tracked since the base year. 

For example, an index level of 120 indicates that costs have risen 20 percent since the base year. 3

 The FHWA BPI tracks the installed prices of several components to highway construction (that is, it includes other 

costs such as labor and overhead as well as materials costs). The BHWY PPI only tracks the costs of materials used 

in highway construction. For more information on these indices, see the Data Reliability section in exhibit A. 
iii

percent from 2003 through 2006, 3 times greater than its largest growth in any 3-

year period between 1990 and 2003 (16 percent). The BHWY PPI’s 35.3 percent 

growth from 2003 through 2006 was 3.2 times greater than its largest increase, 

10.9 percent, over a 3-year span between 1990 and 2003. We found similarly 

dramatic cost increases in state-level data. See exhibit A for a discussion of the 

shortcomings of the FHWA BPI, which the Federal Highway Administration 

(FHWA) has announced that it would be discontinuing. 

Figure 1. National Highway Construction and Maintenance 

Cost Indices* 

100

125

150

175

200

225

250

1990 1992 1994 1996 1998 2000 2002 2004 2006

Index level

FHWA BPI BHWY PPI

*These indices have been scaled to equal 100 in 1987. 

Highway project cost growth has substantially reduced the purchasing power 

of highway funds provided in SAFETEA-LU. A dollar will have lost between 

37 and 60 percent of its value between 2005 and 2009, if highway project inflation 

continues at its 2006 pace. Under these circumstances, the $42 billion provided in 

SAFETEA-LU for 2009 Federal-aid to highways will only be equivalent to 

between $16.8 billion and $26.6 billion in 2005 dollars. 

Growth in the costs of commodity inputs has been the primary driver of the 

recent increases in highway construction and maintenance costs. 

Nationally, prices have risen dramatically since 2003 for each of the major 

commodity groupings used as inputs in highway projects. These include 

aggregate (any of various loose particulate materials, such as crushed stone or 

gravel), asphalt, cement, and steel. Excavation and embankment costs have also 

risen dramatically during this time, but have contributed less to recent highway 

cost growth as they constitute a smaller share of project costs than commodity 

inputs. 
iv

The state data we examined support the national trends. For example, figure 2 

shows the unusually large growth in commodity input costs in the state of 

Washington since 2003. In this instance, the costs of hot mix asphalt grew by 

64.2 percent from 2003 through 2006, as opposed to 9.8 percent from 2000 

through 2003. The results were largely the same for the other states in our sample, 

which was designed to include representation from as many regions of the country 

as possible. (See exhibit B for information on the states included in our sample.) 

Figure 2. Growth in Commodity Input Costs for Highway 

Construction in Washington State* 

0

50

100

150

200

250

1990 1992 1994 1996 1998 2000 2002 2004 2006

Index level

Crushed Surfacing (Aggregate) Hot Mix Asphalt (Asphalt)

Structural Concrete (Cement) Steel Reinforcing Bar (Steel)

*All indices were scaled to equal 100 in 1990. 

We found no evidence that other elements of highway construction and 

maintenance costs exhibited comparable growth during this time. For example, 

wages for workers engaged in heavy and highway construction have increased 

gradually. Likewise, insurance and engineering costs have increased only to a 

limited extent. Further, we found no evidence to indicate that highway 

construction firm profit margins were an underlying cause of the recent surge in 

overall highway project costs. However, the information available on them was 

limited. 

According to industry analysts, structural economic changes have been the 

driving force behind the escalation in commodity input costs. The industry 

analysts we interviewed noted that the following structural economic changes are 

occurring in the markets for the commodities used in highway projects: 
v

• The per capita supply of steel scrap, the primary input to the production of 

steel used in highway projects, is falling. At the same time, international 

demand for scrap is growing. 

• Higher prices for higher grade fuel products are inducing refineries to increase 

the efficiency of their production processes, resulting in less production of byproducts, such as asphalt. 

• The price of cement is following the shift to higher oil prices, as its production 

is a highly fuel-intensive process. 

• Aggregate is becoming increasingly unavailable as a result of spreading urban 

and suburban development reducing opportunities for its extraction. 

Consequently, the costs of these commodities can be expected to remain elevated, 

and possibly continue to escalate, in the near term. 

The extent of the increases in commodity input costs differed significantly 

across states. For example, the increases in the costs of structural concrete were 

much higher in some states than in others. According to industry experts, these 

variations in costs resulted primarily from differences in transportation costs. 

Each of the commodity inputs to highway projects either requires special handling 

to be transported or is very heavy or cumbersome. As a result, transportation costs 

tend to comprise a substantial share of total commodity input costs. 

ACTION REQUIRED 

This report does not include recommendations. Accordingly, our findings are not 

subject to follow-up review. However, we intend to raise with FHWA, under 

separate cover, the need for accurate highway construction cost data and the 

challenges FHWA and states face in developing such data. 

We appreciate the courtesies and cooperation of the government and private sector 

representatives that provided assistance during this audit (see exhibit C). If you 

have any questions concerning this report, please call me at (202) 366-9970 or 

Betty Krier, the Project Manager, at (202) 366-1422 

# 

cc: Audit Liaison, OST, M-1 

 Audit Liaison, FHWA, HAIM-13 
TABLE OF CONTENTS 

FINDINGS_________________________________________________ 1

Highway Construction and Maintenance Costs Have 

Grown Dramatically in Recent Years ..................................................... 1

Highway Construction and Maintenance Cost Growth Has 

Substantially Reduced the Purchasing Power of Highway 

Funds..................................................................................................... 3

Growth in the Costs of Commodity Inputs Has Been the 

Primary Driver of the Recent Escalation in Highway 

Construction and Maintenance Costs .................................................... 4

Structural Economic Changes Have Been the Driving 

Force Behind the Escalation in Commodity Input Costs...................... 11

The Extent and Timing of Commodity Input Cost Increases 

Varies Across States............................................................................ 12

EXHIBIT A. SCOPE AND METHODOLOGY ____________________ 16

EXHIBIT B. STATES CONTACTED AND DATA OBTAINED _______ 24

EXHIBIT C. AGENCIES VISITED OR CONTACTED ______________ 26

EXHIBIT D. MAJOR CONTRIBUTORS TO THIS REPORT _________ 28
Findings 

1

FINDINGS 

Highway Construction and Maintenance Costs Have Grown 

Dramatically in Recent Years 

Both national and state data show that the growth in highway construction and 

maintenance costs has accelerated notably in recent years. Figure 1 on page iii 

shows the cost growth measured by two national indices of highway construction 

and maintenance costs. We also examined data from nine states representing 

seven regions of the country.4

 Figures 3 and 4 show the highway construction cost 

indices (CCI) for seven states, each representing one of the seven regions.5

 

Figure 3. State Construction Cost Indices* 

*All indices were scaled to equal 100 in 1997.

 

4 Those states were New Hampshire, South Carolina, Georgia, Texas, Nebraska, Utah, Colorado, California, and 

Washington. The regional definitions were those delineated by FHWA. South Carolina and Georgia are in the same 

region, as are Utah and Colorado. Our sample did not include regions 3 and 5, the mid-Atlantic and eastern upper 

Midwest regions, respectively, because no states in region 3 and only one in region 5, Wisconsin, had construction 

cost indices with sufficient historical data that we could use in our analyses. The Wisconsin data was received at too 

late a date to be included in our analysis. See Exhibit B for a list of the states contacted in performing our review 

and the data collected. 5

 Figures 3 and 4 cannot be used to compare growth rates across states because the composite indices shown do not 

track the costs of the same highway construction and maintenance activities. Specifically, different states apply 

radically different weights to the various commodity component price series, and often price different products 

within each commodity group in constructing their composite indices. 

0

50

100

150

200

250

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Index level

California Colorado Nebraska Washington
2

Findings 

The four states represented in figure 3 had CCI data available at least as far back 

as 1997. For these states, the cost growth since 2003 contrasted strongly with any 

other experienced from 1997 through 2003, with the contrast being the most 

marked for California and the least striking for Nebraska. In California, the cost 

growth of 88.8 percent from 2003 through 2006 was 4.5 times the 19.1 percent 

occurring over the previous seven years, a time period more than twice as long. In 

Nebraska, the 36.2 percent growth rate from 2003 through 2006 was still 1.6 times 

higher than the 23.1 percent occurring from 1997 through 2003. 

Although less historical data exists for the three states tracked in Figure 4, the 

available data showed the same pattern. Their CCIs increased significantly more 

from 2003 through 2006 than from 2000 through 2003. For example, the cost 

growth for South Carolina from 2003 through 2006 was 44.0 percent, almost 13 

times the 3.5 percent growth for the earlier period. 

Figure 4. State Construction Cost Indices* 

*All indices were scaled to equal 100 in 2000.

The rapid growth in highway construction and maintenance costs substantially 

outpaced the inflation in the rest of the economy over the last three years. 

Figure 5 compares the growth in general inflation indices with the growth in 

highway cost indices, both nationally and for our sample of states representing 

seven of the nine FHWA regions from 2003 through 2006. The measures of 

general inflation shown are: the consumer price index for urban consumers 

(CPI-U), the most commonly used measure of inflation, and the overall producer 

price index (PPI). The national indices of highway construction and maintenance 

costs used are the FHWA BPI and the BHWY PPI. As indicated, most of the 

0

50

100

150

200

2000 2001 2002 2003 2004 2005 2006

Index level

New Hampshire South Carolina Texas
3

Findings 

highway cost measures exhibit growth that was at least twice that of the PPI, and 

more than four times that of the CPI-U. 

Figure 5. Percent Changes in Measures of General Inflation 

and Highway Costs Between 2003 and 2006 

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

CPI-U

PPI – All Commodities

FHWA BPI

BHWY PPI

New Hampshire

South Carolina

Texas

Nebraska

Colorado

California

Washington

Percent change

National Measures 

of General Inflation

National Measures 

of Highway Costs

State Measures of 

Highway Costs

Highway Construction and Maintenance Cost Growth Has 

Substantially Reduced the Purchasing Power of Highway Funds 

The impact of this cost growth is illustrated in figure 6, which shows the path of 

Government expenditures on highway construction in nominal and real terms,6

using the two major indices of national highway costs. Between 1995 and 2002, 

both nominal and real expenditures increased. Between 2003 and 2005, nominal 

expenditures increased moderately, but real expenditures declined significantly. 

 

6

 Nominal expenditures are equal to the face value of the money spent. Real expenditures are adjusted for inflation so 

that each real dollar of expenditure has the same purchasing power. Consequently, real expenditures in figure 6 

increased only when the increase in expenditures exceeded the rate of inflation, and the total funds spent could buy 

more highway construction. 
4

Findings 

Figure 6. Federal, State, and Local Government Highway 

Construction Expenditures 

$.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

$ billion

s

Nominal Deflated using the FHWA BPI* Deflated using the BHWY PPI*

*The base year for this index is 1995.

When enacted in 2005, SAFETEA-LU authorized $42 billion for 2009 Federal-aid 

to highways. Should highway project inflation continue at its 2006 pace, as 

tracked by the two national indices, this $42 billion will have lost between 

37 percent and 60 percent of its value by 2009. In other words, it will be 

equivalent to between $26.6 billion and $16.8 billion in 2005 dollars when it 

becomes available to be spent. 

Growth in the Costs of Commodity Inputs Has Been the Primary 

Driver of the Recent Escalation in Highway Construction and 

Maintenance Costs 

Nationally, commodity prices have risen dramatically for each of the major 

commodity groupings used as inputs in highway projects—aggregate, asphalt, 

cement and steel. In addition to rising prices for commodity inputs, excavation 

and earthwork costs have also risen dramatically. However, they have contributed 

less to construction and maintenance cost growth because they comprise a smaller 

share of project costs. 

Figure 7 shows the growth over time in producer price indices for inputs drawn 

from each commodity grouping. The most dramatic growth occurred in the costs 

of hot-rolled steel bars and structures. After remaining virtually unchanged from 

2000 through 2003, they jumped 71.9 percent from 2003 through 2006. The cost 

growth for construction sand/gravel/crushed stone was the lowest of those shown 
5

Findings 

from 2003 through 2006, but at 20.8 percent was 2.4 times its 8.6 percent growth 

rate from 2000 through 2003. 

Figure 7. Commodity Input Cost Inflation Nationally* 

0

50

100

150

200

250

1990 1992 1994 1996 1998 2000 2002 2004 2006

Index level

Construction sand/gravel/crushed stone (Aggregate) Hot-Rolled Steel Bars & Structures (Steel)

Ready-Mix Concrete (Cement) Paving Mixtures and Blocks (Asphalt)

*All indices were scaled to equal 100 in 1987.

Figures 8 through 10 show the growth in costs for inputs in the major commodity 

groupings experienced by three states in different parts of the country—New 

Hampshire, South Carolina, and California. The component costs depicted all 

increased substantially from 2003 through 2006. The costs of the major 

commodity inputs included in the CCIs of the other states in our sample exhibited 

similarly large growth over the last three years.7

 

7

 The exceptions were as follows. The costs of Portland cement concrete pavement in Georgia and the costs of 

structural concrete in Nebraska increased only moderately. Utah experienced a decline in the costs of structural steel. 
6

Findings 

Figure 8. Commodity Input Cost Inflation in New Hampshire* 

0

50

100

150

200

250

300

2000 2002 2004 2006

Index Level

Crushed Material (Aggregate) Hot Mix Asphalt (Asphalt)

Structural Steel (Steel) Structural Concrete (Cement)

Rebar (Steel)

*All indices were scaled to equal 100 in 2000. 

In New Hampshire, from 2003 through 2006, hot mix asphalt costs increased 

46.8 percent, while costs for structural concrete increased 79.0 percent. By 

comparison, from 2000 through 2003 those costs increased by 12.3 percent and 

4.8 percent, respectively. In South Carolina, the increases in the commodity input 

costs from 2003 through 2006 ranged from 36.3 percent for asphalt to 64.1 percent 

for aggregate base. The comparable figures for 2000 through 2003 were 

7.3 percent and -4.3 percent, respectively. The range of commodity input cost 

increases in California from 2003 through 2006 extended from 34.6 percent for 

aggregate base to 118.0 percent for structural steel. While the comparable 

increase for aggregate base from 2000 through 2003 was about the same, the 

change for structural steel was -37.9 percent. 
7

Findings 

Figure 9. Commodity Input Cost Inflation in South Carolina* 

0

50

100

150

200

2000 2002 2004 2006

Index Level

Graded Aggregate Base (Aggregate) Hot Mix Asphalt Surface Course (Asphalt)

Structural Concrete (Cement) Reinforcing Steel (Steel)

*All indices were scaled to equal 100 in 2000. 

Figure 10. Commodity Input Cost Inflation in California* 

0

50

100

150

200

250

300

1990 1992 1994 1996 1998 2000 2002 2004 2006

Index level

Aggregate Base (Aggregate) Asphalt Concrete Pavement (Asphalt)

Class "A" Port. Cement Concrete (Cement) Structural Steel "2" (Steel)

Bar Reinforcing Steel (Steel) Portland Cement Concrete Pavement (Cement)

*All indices were scaled to equal 100 in 1990. 

Increases in the costs of excavation and earthwork have also been dramatic since 

2003 (see table 1).8

 Consequently, they have also contributed to the recent 

escalation in highway construction costs. However, they account for a much 

 

8

 Some states include more activities than others when tracking the costs of excavation or earthwork. For example, 

some include embankment work while others do not. In addition, excavation costs vary significantly with the 

particular projects undertaken and environmental considerations. Therefore, these cost growth figures are not 

directly comparable across states. 
8

Findings 

smaller share of total cost growth than the various commodity inputs because they 

account for a smaller amount of total costs. For example, in South Carolina in 

1999 cost increases for excavation accounted for 16 percent of the costs measured 

by the South Carolina CCI and installed commodity inputs accounted for the 

remaining 84 percent.9

 Other highway construction and maintenance costs have 

not exhibited growth comparable to that of commodity inputs and excavation and 

earthwork. However, the number of bidders on projects has declined, which may 

have implications for future highway project cost growth. 

Table 1. Excavation Cost Growth 

State Type of Excavation Percent Change in 

Cost (2003 - 2006) 

New Hampshire Roadway Excavation 56.5 

South Carolina Combined Excavation 26.1 

Texas Earthwork 47.2 

Nebraska Roadway Excavation 56.3 

Colorado Earthwork 70.6 

California Roadway Excavation 153.5 

Washington Roadway 13.1 

Other Highway Construction and Maintenance Costs Have Not Shown 

Comparable Growth 

Although commodity inputs have shown considerable growth over the last three 

years, other elements of highway project costs did not. We investigated the 

growth in wages, insurance and engineering costs, and highway construction 

companies’ profit margins. We found that wages for workers engaged in heavy 

and highway construction have increased only gradually from 2003 through 

2005,10 well below the increase in the highway cost indices both at the national 

level and for the states in our sample (see table 2). 

 

9

 Installed commodity input costs include labor, overhead, and transportation costs and a profit margin. 10 At the time of our audit, wage data were not available for all of 2006. 
9

Findings 

Table 2. Wages for Heavy and Highway Construction Versus 

Highway Cost Indices 

Percent Changes for 2003 through 2005 

Wages 

Highway Cost 

Indices 

National: 6.5 

FHWA-BPI 22.6 

BHWY PPI 26.4 

State: 

California 7.7 80.6 

Colorado 3.0 65.3 

Nebraska 7.2 39.0 

New Hampshire 2.6 40.6 

South Carolina 8.1 48.2 

Texas 7.8 47.2 

Washington 9.1 21.4 

Insurance and engineering costs also showed limited increases. As illustrated in 

figure 11, the growth in commodity input costs was far greater than that of these 

other costs.11

 

11 The cost increases in figure 11 were calculated using the relevant producer price indices. The BHWY PPI was used 

to derive the growth in commodities. 
10

Findings 

Figure 11. Comparison of Growth in Commodities and 

Other Major Costs 

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Percentage change

2003 2004 2005 2006

Commodities Engineering Services Liability Insurance

Worker's Comp Group Health

We found no evidence that highway construction firm profit margins were an 

underlying reason for the recent surge in overall highway project costs. Based on 

consultation with industry experts and our review of the available data, we 

determined that profits in the heavy and highway construction industry have not 

been unusually high in recent years. However, both provided information on a 

limited sample of the industry.12

The Number of Bidders on Highway Projects Has Declined in Recent 

Years 

A 2006 AASHTO survey found that 34 of 45 state respondents had experienced a 

decrease in the number of bids received on highway projects since 2003. In the 

State of Washington, for example, the average number of bidders per contract 

declined from 4.0 in 2003 to 3.0 in 2006. Historically, fewer bidders for highway 

projects has been associated with an increase in costs, due to decreased 

competition. The absence of clear evidence of an increase in the profitability of 

firms engaged in highway construction since 2003 indicates that the decline in 

bidders has not yet contributed to the growth in highway costs. However, the 

decrease in the number of bidders is a development that bears further monitoring. 

 

12 The primary available data on heavy and highway construction industry profits for the period since 2003 was 

collected by the Construction Financial Management Association through a voluntary survey of its members. The 

construction industry analysts we interviewed could only comment on the profitability of publicly traded heavy and 

highway construction firms. 
11

Findings 

Structural Economic Changes Have Been the Driving Force Behind 

the Escalation in Commodity Input Costs 

Industry analysts for each of the major commodity groupings indicated that 

structural economic changes have largely been responsible for the recent 

escalation in commodity input costs. Consequently, the costs of commodity inputs 

to highway projects can be expected to remain elevated, and possibly continue 

their rise in the near term. The effect of this is to reduce the purchasing power of 

each dollar of Federal highway construction and maintenance funding below its 

value in 2003. Therefore, if Congress and the Administration want to provide for 

the same amount of highway construction as was undertaken prior to 2003, 

significantly more funding may be required in the next highway bill. The 

following paragraphs summarize industry analysts’ views of the structural changes 

affecting the markets for each of the major commodity groups used in highway 

projects. 

Steel 

Steel scrap, the primary input to the production of steel used in highway projects, 

is becoming harder to acquire.13 Less steel scrap is produced per capita in the 

United States than in the past because less manufacturing occurs in this country, 

and recycled manufactured products, such as motor vehicles, contain less steel. At 

the same time, international demand for steel scrap is growing. As a result, prices 

for common scrap have more than doubled in recent years. 

Further, since 2000 significant consolidation has occurred in the steel industry. 

Before this consolidation, the top 10 steel manufacturers held 30 percent of the 

world steel market, whereas they now hold 50 percent. One company created 

through a 2003 merger, Arcelor-Mittal, supplies 10 percent of the world steel 

market. Consolidation has increased the market power of the remaining firms, and 

their ability to maintain prices. 

Asphalt 

Higher gasoline prices and growing international demand for middle distillates, 

such as diesel fuels, has resulted in a decrease in the production and an increase in 

the price of asphalt. Until recently, asphalt had been produced largely as a byproduct of other refinery processes, rather than as a source of profits in its own 

right. Now, refineries are upgrading their processes to produce larger amounts of 

higher grade, profitable output from each unit of crude oil input, resulting in a 

 

13 Most of the steel used in highway projects is produced in mini-mills. Mini-mills rely on electric arc furnaces to melt 

scrap steel, which is the largest component of their costs. This is in contrast to integrated steel mills, which use blast 

furnaces to process iron ore and coke. 
12

Findings 

decrease in the production of by-products, including asphalt. This is causing the 

price of asphalt to increase to justify its production by refineries instead of other 

profitable output. 

Additionally, asphalt customers increasingly demand specialized products, such as 

asphalt meeting Superpave requirements.14 The demand for specialized products 

makes it more difficult for asphalt customers to obtain supplies meeting their 

needs. Combined with the changes in refinery processes, it is becoming less likely 

that available by-products can adequately provide the asphalt required to meet 

customer demand. 

Cement 

The price of cement tracks the growth in oil prices, as the production of cement is 

a highly fuel-intensive process. Not only must the kilns used to produce the 

intermediate outputs be heated to extreme temperatures, but considerable power is 

required to grind those intermediate outputs into powder. The near-term forecast 

of the Energy Information Administration and major energy forecasters we 

interviewed is for the price of oil to remain elevated, keeping the price of cement 

high. 

Aggregate 

Aggregate deposits are becoming increasingly unavailable as a result of spreading 

urban and suburban development. New residents often object to aggregate 

operations because of truck traffic, noise, or dust. Encroachment has already 

prevented the development of substantial aggregate deposits. 

Further, aggregate quarries are increasingly deciding not to supply Superpave 

projects, because they are finding that supplying those projects causes their output 

of other products to decline. Consequently, the number of quarries available to 

supply certain projects is decreasing. 

The Extent and Timing of Commodity Input Cost Increases Varies 

Across States 

States from across the country have seen the costs of commodities used in 

highway projects rise dramatically in recent years. However, we found that the 

timing and extent of the increase in the cost for any given commodity input 

differed significantly across states. 

 

14 Superpave, a principal product of the Strategic Highway Research Program, is a system of standard specifications, 

test methods, and engineering practices that enable the appropriate materials selection and mixture design of hot mix 

asphalt to meet the climatic and traffic conditions of specific roadway paving projects. 
13

Findings 

To investigate this issue, we identified instances where the states in our sample 

tracked the costs of the same commodity inputs over time.15 We made cross-state 

comparisons of the cost growth of inputs in each of the major commodity 

groupings across subsets of our sample of states. Specifically, we performed 

comparisons of costs across certain states for bituminous concrete pavement, 

reinforcing steel, structural steel, portland cement concrete (PCC) pavement, and 

structural concrete. The extent and timing of the cost increases for each of the 

inputs examined varied by state (see figures 12 through 14). 

The cost increases for the states in our comparison did not occur in step with each 

other nor were they of the same magnitude for any of the commodities. For 

example, from 2003 through 2006, Georgia experienced growth of 93.7 percent in 

the cost of bituminous concrete, while the comparable figure for Washington State 

was 64.2 percent. Also, between 2004 and 2005, the cost of bituminous concrete 

increased by 41 percent in California, but remained relatively flat in Georgia and 

Washington state. 

Figure 12. Bituminous Concrete Pavement Costs* 

*All indices have been scaled to equal 100 in 1997. 

 

15 This required the collection of detailed technical data on the commodity inputs included in various CCIs and 

consultation with our engineering group. 

0

50

100

150

200

250

300

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Index Value

Georgia Utah California Washington
14

Findings 

Figure 13. Reinforcing Steel Costs* 

0

50

100

150

200

250

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Index Value

Georgia Nebraska Colorado Utah California Washington

*All indices have been scaled to equal 100 in 1997. 

Figure 14. Structural Concrete Costs* 

0

50

100

150

200

250

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Index Value

Georgia Nebraska Colorado Utah California Washington

*All indices have been scaled to equal 100 in 1997. 
15

Findings 

While some timing differences may result from differences in ongoing contracts, 

the industry experts we interviewed stated that these variations in costs resulted 

primarily from differences in transportation costs. The commodity inputs to 

highway projects require special handling in transportation, or are simply very 

heavy or cumbersome. For example, asphalt products must be heated in order to 

become soft enough to pour into and out of the containers in which they are 

transported. Consequently, transportation costs tend to comprise a substantial 

share of total commodity input costs. 

CONCLUSION 

Highway construction and maintenance costs nationwide grew dramatically from 

2003 through 2006, substantially reducing the purchasing power of highway 

funds. Increases in the costs of the commodities used in highway projects, such as 

cement and steel, have largely driven this growth. Since these increases are the 

result of structural economic changes, the costs of these commodities can be 

expected to remain elevated, and possibly continue to increase in the near term. 

Finally, the extent of highway project cost growth has varied across states 

primarily due to differences in transportation costs 

The challenge of rebuilding our nation’s highway and bridge infrastructure is 

likely to be compounded by rising construction costs driven by increasing prices 

for construction materials. Given these cost increases, the next highway bill may 

need to provide a significant increase in funding to maintain, let alone exceed, the 

volumes of highway construction and maintenance undertaken prior to 2003. 
16

Exhibit A. Scope and Methodology 

EXHIBIT A. SCOPE AND METHODOLOGY 

Scope 

In September 2006, the House Committee on Transportation and Infrastructure 

requested that our office analyze the growth in highway construction and 

maintenance costs. Our objectives were to determine: (1) the extent of recent cost 

increases for highway construction and maintenance projects, (2) whether the cost 

increases are the product of transitory factors or indicative of longer term 

structural changes that need to be incorporated into future transportation funding 

plans, and (3) the degree to which the cost increases are subject to regional 

variations. 

In conducting this performance audit, we examined both national and state data on 

highway construction and maintenance costs. In addition, we analyzed a range of 

supporting information, such as data on the number of bidders per project, industry 

profit margins, and wages. Further, we interviewed experts on each of the major 

categories of commodity inputs used in highway construction and maintenance, as 

well as on the highway construction industry. We performed this audit in 

accordance with Generally Accepted Government Auditing Standards prescribed 

by the Comptroller General of the United States with the exception of the data 

quality standards. We did not systematically audit or validate the data used for 

this report. However we conducted checks of the data to assess reasonableness 

and comprehensiveness and concluded that the data, despite shortcomings, was 

sufficient to support our findings. 

The methodology section below describes the steps we took to answer the 

objectives of this audit. In the data reliability section, we describe the quality of 

the data collected for this report and its limitations. 

Methodology 

Gauging Highway Construction and Maintenance Cost Increases 

We examined both national and state measures of highway costs to determine the 

extent of recent increases. For national highway construction and maintenance 

costs, we examined all available indices—the FHWA BPI, the BHWY PPI, and 

the Engineering News Record's Construction Cost Index (ENR CCI). We later 
17

Exhibit A. Scope and Methodology 

excluded the ENR CCI from our analysis because we determined it was a poor 

measure of highway construction costs.16

We conducted a survey, with the help of AASHTO, to determine which states 

maintained construction cost indices.17 From the states that replied to the survey, 

we selected a judgmental sample, including one state from each FHWA region.18 

Exhibit B lists the survey respondents and states in our sample. 

Effects of Cost Increases on Highway Construction Expenditures 

We used data from the United States Census Bureau and FHWA to estimate total 

Federal, state, and local expenditures between 1995 and 2005. We measured the 

effects of the increase of highway construction costs on expenditures by 

comparing nominal expenditures to real expenditures calculated using both the 

FHWA BPI and the BHWY PPI to measure inflation. 

Drivers of Highway Construction Costs 

We identified the drivers of highway construction costs by first examining the 

components included in the indices mentioned above. The national FHWA BPI 

and the state indices are based on bid data and track the installed price of the 

commodity inputs. This not only includes the costs of raw materials, but also the 

costs of labor, transportation, overhead, and a margin for profit. We identified 

additional elements of highway construction costs by consulting experts from the 

Federal Highway Administration, the American Road and Transportation Builders 

Association (ARTBA), the Associated General Contractors of America, and state 

departments of transportation. We investigated the growth in raw material prices, 

wages, insurance and engineering costs, and highway construction companies’ 

profit margins. We compared the non-commodity inputs’ price fluctuations to the 

BHWY PPI, which tracks the price level of highway construction commodity 

inputs from the producer’s perspective and does not include any costs related to 

the installation of raw materials. The specific measures used for each component 

of highway construction we investigated can be found below. 

 

16 The ENR CCI was created to monitor the costs of general construction in the economy by tracking the price of a 

fixed set of inputs chosen in 1921. The CCI weights labor at 81 percent and includes lumber, which is not a major 

input to highway construction. 17 FHWA also maintains individual state bid price indices (BPIs) to monitor regional price variations in highway 

construction costs. However, given the data quality weaknesses discussed in the data reliability section below, we 

were not confident of the BPIs accuracy at the state-level and instead relied on construction cost indices maintained 

by states. 18 In regions 3 and 5, none of the respondents to our survey that were provided in time to be included in our analysis 

maintained a construction cost index. Therefore, region 3, the mid-Atlantic region, and region 5, the eastern upper 

Midwest region, were not represented in our sample. We selected two states in two other regions to compare 

intraregional commodity input price movements. 
18

Exhibit A. Scope and Methodology 

We collected national and state wage data for highway and street construction 

workers from the Bureau of Labor Statistics. To measure profits of the highway 

construction industry we collected gross and net profit margins, return-on-equity, 

and return-on-assets data from the Certified Financial Managers Association and 

the Internal Revenue Service. We supplemented the profit data with interviews 

with financial analysts that cover publicly traded heavy and highway construction 

and engineering firms. In addition to comparing the national wage data and profit 

data to the BHWY PPI, we compared state wage data to the composite state 

construction cost indices. 

We also gathered data on the other components tracked implicitly by the FHWA 

BPI and state CCIs. These components were equipment and elements of 

overhead; that is, group health insurance, worker’s compensation insurance, and 

liability insurance. We used producer price indices for each of these items as 

proxies to measure price fluctuations.19 

Following our analysis of inputs tracked by the indices in our review, we needed 

to determine whether other costs of highway construction not tracked by the 

indices may have contributed to the recent cost increases. We attempted to 

conduct a trend analysis of the percentage of highway construction costs not 

accounted for by state CCIs. However, we did not have data from a sufficient 

sample of states to draw a conclusion and the data we did have did not show any 

discernable pattern. Based on the information obtained from our interviews of 

experts discussed above, we identified two main cost items for highway 

construction not tracked by the indices, engineering and right-of-way acquisition 

costs. We used the PPI for non-building related engineering services to measure 

engineering price fluctuations. We compared the price levels of the engineering 

PPI to commodity price levels using the BHWY PPI. Data on right-of-way costs 

were not readily available. Consequently, we were not able to estimate the extent 

to which right-of-way costs contributed to the increase in highway construction 

costs. 

Structural Versus Transitory Change 

Once we identified commodity cost growth as the main driver of highway project 

costs over the past few years, we set out to determine whether the price increases 

for highway commodity inputs were a result of transitory factors or indicative of 

structural change. Since the rapid acceleration of prices for highway commodity 

inputs had only begun in 2003, there was insufficient data to support a statistical 

analysis. Instead, we selected and interviewed a group of experts for each major 

 

19 The producer price indices used as proxies for the other non-commodity components of highway construction were 

not specific to the highway construction industry. Where possible, we used PPIs for industry that may be similar to 

highway construction such as general construction. 
19

Exhibit A. Scope and Methodology 

grouping of commodity inputs to highway construction. These groupings were: 

cement, steel, aggregate, and asphalt. We also interviewed petroleum industry 

experts, as the price of petroleum heavily affects the costs of the commodity 

inputs. We selected at least three groups of experts for each commodity grouping 

based on recommendations from government sources or industry associations and 

our own research. For instance, for petroleum we interviewed analysts at the 

Energy Information Administration of the U.S. Department of Energy, who then 

recommended a diverse group of experts from reputable research firms and a 

forecasting firm. Exhibit C provides a complete list of interviewees. 

Highway Construction Cost Variation Across States 

We found that the make-up of composite state CCIs varied too substantially to 

allow for meaningful cross-state comparisons. We also found, however, that some 

individual commodity components of state indices (for example, asphalt, structural 

steel, etc.) were comparable across some states. We determined this by collecting 

detailed technical information from states on the specific items tracked for each 

component and having our in-house engineer examine their comparability. This 

was necessary because the specific items tracked under any given commodity 

label, such as structural steel, varied. We compared the cost growth for 

components that were determined to be comparable to examine the extent of price 

variation across states for highway input commodities. 

Data Reliability 

This section discusses the data series we used for this report, as well as the 

limitations of some major data series we decided not to use. We did not 

systematically audit or validate the data used for this report. However, we 

conducted checks of the data to assess reasonableness and comprehensiveness. 

Moreover, we did not rely on any one series to draw our conclusions; instead, we 

looked for patterns across the various data series and supplemented those with 

information gathered through interviews with various industry experts. We 

concluded that any shortcomings with the data did not materially affect the type of 

analyses we conducted or our ability to draw conclusions based on the data. 

Federal Highway Administration 

Bid Price Index 

Data for the FHWA indices on highway construction costs came from state reports 

of statistics on all Federal-aid primary, urban, and interstate highway projects. 

Respondents were required to report the quantities and the costs for six highway 

construction items—common roadway excavation, Portland cement concrete 
20

Exhibit A. Scope and Methodology 

pavement, bituminous concrete pavement, reinforcing steel, structural steel, and 

structural concrete. Based on this data, FHWA calculated national and state level 

Bid Price Indices (BPI) and indices for each of the highway construction items. It 

published these indices in the quarterly publication Price Trends for Federal-Aid 

Highway Construction. 

The quality of the data underlying these indices was criticized in a 2003 

Government Accountability Office (GAO) report.20 GAO found that FHWA had 

no systematic error-checking of reported data, data were substantially 

underreported by some states, and FHWA reported some data in a year subsequent 

to that which it applied. GAO also noted that FHWA had not disclosed the 

limitations of the data of which it was aware. FHWA had not made any changes 

to the FHWA BPI or its data collection methodology to address the 

recommendations outlined in the 2003 GAO report before discontinuing it on 

May 22, 2007. 

Bidders Data 

Data on the number of bidders on Federal-aid highway construction contracts of 

more than one million dollars used to be required to be reported to FHWA within 

two weeks of the awarding of each highway contract. That requirement was 

recently discontinued by FHWA. Our analysis of this bidders data indicated that 

there may be a degree of underreporting. Consequently, we did not rely on FHWA 

bid tab data in our analyses. 

Expenditure Data 

Federal Expenditures

The figures we used for Federal expenditures on highway construction were 

obtained from FHWA’s Highway Statistics series. FHWA collects data on direct 

expenditures by Federal agencies for highway construction. The bulk of these 

Federal direct expenditures are expended by FHWA. 

State and Local Expenditures 

FHWA collects data from states and local governments on highway construction 

expenditures; however, we did not use this data because we do not consider it to 

be as reliable as similar information provided by the Census Bureau. FHWA relies 

on state transportation departments to abide by FHWA guidelines for reporting 

highway-related expenditures and does not formally test whether states are 

complying with those guidelines. In some instances, state transportation 

departments are required to sample local governments to estimate highway 

expenditures. The sampling methodology varies from state to state and FHWA 

 

20 Comparison of States’ Highway Construction Costs, U.S. Government Accountability Office, GAO-04-113R, 

Washington, DC, November 3, 2003. 
21

Exhibit A. Scope and Methodology 

does not review these sampling procedures. FHWA depends on its staff to 

recognize errors and anomalies and to follow-up with state transportation 

departments to investigate the errors. 

Bureau of Labor Statistics 

Producer Price Indices (PPIs) 

The Bureau of Labor Statistics (BLS) constructs producer price indices to track the 

change over time in the prices quoted by producers of goods and services in the 

United States. The data for these indices are collected through voluntary surveys 

submitted by thousands of reporters in establishments across the United States. 

The data is obtained by sampling virtually every industry in the mining and 

manufacturing sectors of the U.S. economy. The indices published by the BLS are 

a popular and widely trusted source of price data. 

The PPIs used in our analysis were the PPI for the highway and street construction 

sector and individual PPIs for commodities used in highway and street 

construction, and for engineering and various types of insurance. We selected the 

individual producer price indices based on research by ARTBA and the American 

General Contractors Association and interviews with other experts. 

Wage Data 

We used data from the BLS Quarterly Census of Employment and Wages 

(QCEW) to determine wages for highway and street construction workers at both 

national and state levels. The QCEW is a cooperative program between BLS and 

state employment agencies to assemble employment and wage information for all 

workers covered by state and Federal unemployment laws.21 Because of the 

ubiquitous nature of the unemployment insurance laws, the QCEW program 

serves as a near census of monthly employment and quarterly wages and is 

considered to be a reliable source for wage data. 

State Data 

State Construction Cost Indices (CCIs) 

Generally, the states in our sample did not have a formal process to review the 

data on which their CCIs were based. Personnel responsible for maintaining state 

CCIs collect data directly from the database that houses bid data. These databases 

 

21 In 1994, the most recent year data were available, over 96 percent of the total wage and salary civilian workforce 

was covered under either state or Federal unemployment insurance. Workers not covered by unemployment 

compensation laws consist mostly of agricultural workers, self-employed farmers, some domestic workers, and 

unpaid family workers. 
22

Exhibit A. Scope and Methodology 

generally have mechanisms to filter out erroneous data, such as negative dollar 

figures or quantities, that exceed a predetermined range. In all states, personnel 

review the index data with each update and flag any anomalous data. In addition, 

some states publish construction cost index data publicly, which may increase the 

level of scrutiny of data quality. 

State Bidders Data 

Not all of the states in our sample had sufficient historical data on the number of 

bidders on highway projects readily available. Instead, we were able to collect 

bidders data from Iowa, Nebraska, New Hampshire, North Carolina, South 

Dakota, Texas, Utah, Virginia, Washington, and Wisconsin. 

The Census Bureau 

Expenditure Data 

We used data from the United States Census Bureau for estimates of highway 

construction expenditures by state and local governments. The Census Bureau 

obtains the data through annual surveys of state and local government entities, 

where local government entities include counties, municipalities, townships, 

special districts, and school districts. The data for states represent actual annual 

expenditures of all 50 state governments. For non-school local governments, a 

sample survey of 13,000 non-school governments is conducted annually except for 

census years when data from all 87,000 local governments are obtained. The 

Census Bureau collects annual financial reports electronically from states. Further, 

Census Bureau staff code the expenditure items according to Census Bureau rules 

and guidance. 

Other Data Sources 

Highway Construction Industry Profit 

We collected data from three sources on the profitability of the highway 

construction industry. The first source was the Construction Financial 

Management Association (CFMA), which is a nonprofit organization geared 

towards accountants and other financial professionals working in the construction 

industry. The CFMA conducts an annual "Construction Industry Financial 

Survey" that provides comprehensive financial data for construction companies, 

including highway construction firms. In these survey reports, CFMA provides 
23

Exhibit A. Scope and Methodology 

breakdowns of financial data by construction sector and region. We collected its 

national and regional data for the heavy and highway construction sector.22 

CFMA’s 2006 Annual Financial Survey states that the survey is not intended to be 

statistically representative and only about 60 to 70 percent of survey respondents 

overlap from year to year. Despite these limitations, CFMA survey data are the 

only source of data that we are aware of that provide detailed financial information 

for the highway construction sector for recent years. 

The second set of data we collected on the profitability of the highway 

construction industry was compiled from tax filings by the heavy construction 

industry, which we obtained from the Internal Revenue Service’s website. At the 

time of our analysis, the most recent data available covered 2003. This limited the 

data’s usefulness for the purposes of our analysis. 

The third source of profitability data that we collected was ARTBA, which 

assembles a measure of industry profitability based on a voluntary survey of its 

members. However, the survey only asks respondents if their profits have 

increased, stayed the same, or decreased relative to the previous quarter. The 

measure ARTBA publishes indicates whether more respondents experienced an 

increase than a decrease in their profits, or vice versa, when compared with the 

previous quarter. We found it difficult to draw any implications from this series. 

 

22 The heavy and highway construction sector includes companies not directly involved in the construction of 

highways. Since only the overall number of survey respondents for the heavy and highway construction is reported, 

the number of highway construction companies that complete CFMA's survey is unknown. As a result, the financial 

data may be skewed by data from other heavy construction firms. 
24

Exhibit B. States Contacted and Data Obtained 

EXHIBIT B. STATES CONTACTED AND DATA OBTAINED 

FHWA 

Region State 

Contacted 

by OIG 

Has an 

Overall 

CCI 

Has 

Component 

Price Data 

Length of 

Data Series 

Connecticut No 

Maine No 

Massachusetts Yes No 

New Hampshire* Yes Yes Yes 2000 – 2007 

New Jersey No 

New York Yes No 

Rhode Island No 

Vermont Yes No 

1 

Puerto Rico No 

Delaware No 

District of Columbia No 

Maryland Yes No 

Pennsylvania Yes No 

Virginia Yes No 

3 

West Virginia No 

Alabama No 

Florida Yes No 

Georgia* Yes No Yes 1996 – 2006 

Kentucky No 

Mississippi Yes Yes Yes 1988 – 2006 

North Carolina Yes Yes Yes 1995 – 2006 

South Carolina* Yes Yes Yes 1999 – 2006 

4 

Tennessee No 

Illinois Yes Yes Yes N/A 

Indiana No 

Michigan No 

Minnesota No 

Ohio Yes Yes Yes 2005 – 2006 

5 

Wisconsin Yes Yes Yes 1982 – 2006 

Arkansas No 

Louisiana No 

New Mexico No 

Oklahoma No 

6 

Texas* Yes Yes Yes 1999 – 2006 

Iowa Yes Yes Yes 1986 – 2006 

Kansas No 

Missouri No 7 

Nebraska* Yes Yes Yes 1998 – 2006 

Colorado* Yes Yes Yes 1987 – 2006 

Montana No 

North Dakota No 

South Dakota Yes Yes Yes 1987 – 2006 

Utah* Yes Yes Yes 1990 – 2006 

8 

Wyoming No 

 
25

Exhibit B. States Contacted and Data Obtained 

FHWA 

Region State 

Contacted 

by OIG 

Overall 

CCI 

Component 

Price Data 

Length of 

Data Series 

Arizona No 

California* Yes Yes Yes 1987 – 2006 

Hawaii No 9 

Nevada No 

Alaska No 

Idaho No 

Oregon Yes Yes Yes 1987 - 2006 10 

Washington* Yes Yes Yes 1990 - 2006 

*States in our sample. 
26

Exhibit C. Agencies Visited or Contacted 

EXHIBIT C. AGENCIES VISITED OR CONTACTED 

Federal Government 

Department of Transportation 

 Federal Highway Administration 

 Office of Asset Management Washington, DC 

 Office of Chief Financial Officer Washington, DC 

 Office of Policy Information Washington, DC 

 Office of Transportation Policy Studies Washington, DC 

 Office of Program Administration Washington, DC 

Department of Labor 

 Bureau of Labor Statistics Washington, DC 

Department of Commerce 

 Census Bureau 

 Governments Division Suitland, MD 

 Manufacturing Construction Division Suitland, MD 

Department of Energy 

Energy Information Administration Washington, DC 

Department of the Interior 

 Geological Survey Reston, VA 

State Departments of Transportation 

California South Carolina 

Colorado South Dakota 

Florida Ohio 

Georgia Oregon 

Illinois Pennsylvania 

Iowa Texas 

Maryland Utah 

Massachusetts Vermont 

Mississippi Virginia 

New York Washington 

Nebraska Wisconsin 

North Carolina 
27

Exhibit C. Agencies Visited or Contacted 

Industry Associations 

American Road and Transportation Builders Association, Washington, DC 

Association of State and Highway Transportation Officials, Washington, DC 

Associated General Contractors of America, Rosslyn, VA 

Construction Financial Management Association, Princeton, NJ 

National Stone, Sand and Gravel Association, Alexandria, VA 

Portland Cement Association, Skokie, IL 

Steel Manufacturers Association, Washington, DC 

The Asphalt Institute, Lexington, KY 

Research Firms and Other Organizations (Grouped by Subject) 

Aggregate 

Vulcan Materials Company , Birmingham, AL 

Asphalt 

Argus Media Group, Houston, TX 

Poten & Partners, New York, NY 

Construction Industry 

Credit Suisse, New York, NY 

Goldman Sachs, New York, NY 

Morgan Joseph, New York, NY 

Energy 

Deutsche Bank, Washington, DC 

Global Insight, Washington, DC 

Steel 

Bradford Research, New York, NY 

Metal Strategies, West Chester, PA 
28

Exhibit D. Major Contributors to This Report 

EXHIBIT D. MAJOR CONTRIBUTORS TO THIS REPORT 

THE FOLLOWING INDIVIDUALS CONTRIBUTED TO THIS REPORT.

Name Title 

David Tornquist Assistant Inspector General for 

Competition and Economic 

Analysis 

Mitchell Behm Program Director 

Betty Krier Supervisory Economist/Project 

Manager 

Jovanny Roque Economist 

Keith Klindworth Economist 

Aron Wedekind Engineer 

Harriet Lambert Writer-Editor 
The following pages contain textual versions of the graphs and charts found in this 

document. These pages were not in the original document but have been added 

here to accommodate assistive technology. 
Growth in Highway Construction and Maintenance Costs

508 Compliant Presentation 

Figure 1. National Highway Construction 

and Maintenance Cost Indices

FHWA BPI BHWY PPI 

1990 108.5 110.7

1991 107.5 110.6

1992 105.1 110.0

1993 108.3 111.7

1994 115.1 114.3

1995 121.9 118.4

1996 120.2 122.1

1997 130.6 124.6

1998 126.9 123.5

1999 136.5 126.6

2000 145.6 136.5

2001 144.8 137.0

2002 147.9 133.7

2003 149.8 136.6

2004 154.4 148.2

2005 183.6 166.8

2006 221.3 184.8

Figure 2. Growth in Commodity Input Costs for 

Highway Construction in Washington State

Crushed 

Surfacing 

(Aggregate) 

Structural 

Concrete 

(Cement) 

Hot Mix 

Asphalt 

(Asphalt)

Steel 

Reinforcing 

Bar (Steel) 

1990 100.0 100.0 100.0 100.0

1991 112.1 139.4 87.2 100.0

1992 113.3 100.2 80.7 97.8

1993 89.2 114.7 83.0 93.3

1994 90.6 107.5 84.8 91.1

1995 108.2 123.1 86.2 97.8

1996 112.4 131.8 85.5 108.9

1997 120.0 135.3 95.5 113.3

1998 126.8 119.8 94.8 108.9

1999 130.7 139.9 87.0 100.0

2000 134.8 120.9 96.6 113.3

2001 129.1 155.2 97.5 91.1

2002 121.8 141.0 102.1 120.0

2003 119.6 164.5 106.0 111.1

2004 150.6 141.7 123.7 191.1

2005 149.4 181.1 129.9 202.2

2006 145.6 205.6 174.0 217.8
Growth in Highway Construction and Maintenance Costs

508 Compliant Presentation 

Figure 3. State Construction Cost Indices

California Colorado Nebraska Washington

1997 100.0 100.0 100.0 100.0

1998 103.0 113.3 121.3 83.5

1999 111.5 114.0 128.2 86.3

2000 117.2 122.3 120.9 92.1

2001 123.5 112.3 119.9 92.8

2002 113.9 107.5 127.3 100.0

2003 119.1 110.6 123.1 104.3

2004 173.2 120.3 139.3 123.0

2005 214.9 182.8 152.3 126.6

2006 224.8 183.0 167.7 164.0

Figure 4. State Construction Cost Indices

New Hampshire South Carolina Texas 

2000 100.0 100.0 100.0

2001 143.4 94.6 109.4

2002 128.3 95.6 104.3

2003 117.0 103.5 113.9

2004 154.2 116.2 122.4

2005 164.5 133.7 140.4

2006 176.4 149.0 180.9

Figure 5. Percent Changes in Measures 

of General Inflation and Highway Costs 

Between 2003 and 2006

2003 - 2006 

National Measures of General Inflation 

CPI-U 9.6%

PPI – All Commodities 19.3%

National Measures of Highway Construction Costs

FHWA BPI 47.7%

BHWY PPI 35.3%

State Measures of Highway Construction Costs 

New Hampshire 50.8%

South Carolina 44.0%

Texas 72.4%

Nebraska 36.2%

Colorado 65.5%

California 88.8%

Washington 57.2%
Growth in Highway Construction and Maintenance Costs

508 Compliant Presentation 

Figure 6. Federal, State, and Local Government 

Highway Construction Expenditures ($ millions) 

Nominal 

Deflated using 

the FHWA BPI 

Deflated using 

the BHWY PPI 

1995 $ 37,465 $ 37,465 $ 37,465 

1996 $ 38,427 $ 38,970 $ 37,262 

1997 $ 40,351 $ 37,663 $ 38,343 

1998 $ 42,789 $ 41,103 $ 41,022 

1999 $ 46,231 $ 41,286 $ 43,236 

2000 $ 50,619 $ 42,379 $ 43,907 

2001 $ 54,177 $ 45,609 $ 46,822 

2002 $ 59,579 $ 49,105 $ 52,761 

2003 $ 58,603 $ 47,689 $ 50,795 

2004 $ 59,548 $ 47,014 $ 47,574 

2005 $ 61,969 $ 41,144 $ 43,987 

Figure 7. Commodity Input Cost Inflation Nationally

Construction 

sand, gravel, 

& crushed 

stone 

Readymixed 

concrete 

Hot rolled 

bars, plates, 

& structural 

shape 

Paving 

mixtures 

and blocks 

1990 125.4 111.9 105.1 101.2 

1991 128.6 114.7 101.5 103.2 

1992 130.6 115.3 98.6 100.2 

1993 134.0 118.8 101.9 102.0 

1994 137.9 123.8 108.1 103.2 

1995 142.3 129.0 114.4 105.8 

1996 145.6 133.1 112.5 107.6 

1997 148.2 135.6 112.1 113.2 

1998 152.8 139.7 111.8 112.5 

1999 157.2 143.2 99.1 112.9 

2000 163.1 147.1 100.5 130.4 

2001 168.8 150.3 95.1 134.6 

2002 173.0 150.2 95.1 136.2 

2003 177.1 150.8 99.3 142.6 

2004 183.3 158.7 143.8 144.9 

2005 195.8 177.7 159.8 156.9 

2006 213.9 198.6 170.7 200.5 
Growth in Highway Construction and Maintenance Costs

508 Compliant Presentation 

Figure 8. Commodity Input Cost Inflation in New Hampshire

Crushed 

Material 

(Aggregate) 

Structural 

Steel 

(Steel) 

Rebar 

(Steel) 

Hot Mix 

Asphalt 

(Asphalt) 

Structural 

Concrete 

(Cement) 

2000 100.0 100.0 100.0 100.0 100.0

2001 140.7 247.9 173.3 100.5 150.1

2002 146.6 79.5 101.4 103.2 147.2

2003 133.6 80.8 104.6 112.3 104.8

2004 157.9 183.3 177.2 118.7 161.1

2005 184.1 131.4 151.6 128.0 131.4

2006 203.8 94.7 160.8 164.8 187.6

Figure 9. Commodity Input Cost Inflation in South Carolina

Graded 

Aggregate 

Base 

(Aggregate) 

Structural 

Concrete 

(Cement) 

Hot Mix Asphalt 

Surface Course 

(Asphalt) 

Reinforcing 

Steel (Steel) 

2000 100.0 100.0 100.0 100.0

2001 99.7 134.2 95.6 133.1

2002 96.0 139.1 98.1 115.0

2003 95.7 122.3 107.3 124.8

2004 87.6 139.1 126.4 153.2

2005 128.3 161.4 133.6 177.0

2006 157.1 174.4 146.3 177.8

Figure 10 - Commodity Input Cost Inflation in California

Aggregate 

Base 

(Aggregate) 

Class "A" 

Portland 

Cement 

Concrete 

(Cement) 

Bar 

Reinforcing 

Steel 

(Steel) 

Asphalt 

Concrete 

Pavement 

(Asphalt) 

Structural 

Steel "2" 

(Steel) 

Portland 

Cement 

Concrete 

Pavement 

(Cement) 

1990 100.0 100.0 100.0 100.0 100.0 100.0

1991 83.6 100.0 91.9 108.6 103.4 90.9

1992 81.0 89.9 89.3 105.5 139.1 96.9

1993 82.1 82.6 98.9 115.1 122.5 96.9

1994 86.2 94.1 116.6 120.7 105.7 96.4

1995 84.5 101.2 106.4 114.7 102.6 92.6

1996 80.8 109.0 109.2 122.4 98.3 95.6

1997 85.4 104.5 105.8 117.2 105.8 113.9

1998 95.9 108.4 117.9 126.0 117.5 110.1

1999 106.7 108.8 111.1 130.5 145.5 113.1

2000 92.4 123.2 108.1 146.6 124.7 113.4

2001 121.0 144.0 130.5 142.6 176.8 109.9
Growth in Highway Construction and Maintenance Costs

508 Compliant Presentation 

Figure 10 - Commodity Input Cost Inflation in California (cont’d)

2002 103.1 123.1 108.3 159.2 147.0 107.6

2003 124.9 122.9 127.9 157.1 77.4 159.5

2004 140.8 135.4 201.9 174.0 244.0 197.2

2005 171.0 192.2 206.4 246.1 120.7 248.4

2006 168.1 213.4 221.5 279.6 169.0 260.7

Table 2 – Wages for Heavy and Highway Construction Versus 

Highway Cost Indices Percent Changes from 2003 through 

2005

Wages 

Highway Cost 

Indices 

National: 6.5 N/A 

FHWA-BPI N/A 22.6 

BHWY PPI N/A 26.4 

State: N/A N/A 

California 7.7 80.6 

Colorado 3.0 65.3 

Nebraska 7.2 39.0 

New Hampshire 2.6 40.6 

South Carolina 8.1 48.2 

Texas 7.8 47.2 

Washington 9.1 21.4 

Figure 11 - Comparison of Growth in Commodities and 

Other Major Costs

Commodities Engineering

Liability 

Insurance

Worker's 

Comp 

Group 

Health 

2003 2.17% 3.09% 3.54% 3.49% N/A 

2004 8.49% 1.74% 2.68% 4.03% 6.40% 

2005 12.55% 1.09% 1.26% 1.71% 4.62% 

2006 10.79% 2.45% 0.98% 1.77% 3.50% 
Growth in Highway Construction and Maintenance Costs

508 Compliant Presentation 

Figure 12 - Bituminous Concrete Pavement Costs

Georgia Utah California Washington 

1997 100.0 100.0 100.0 100.0 

1998 105.3 86.5 107.5 99.2 

1999 116.0 94.0 111.3 91.0 

2000 127.4 113.3 125.1 101.1 

2001 146.6 120.2 121.7 102.1 

2002 117.7 105.2 135.8 106.9 

2003 120.1 115.2 134.0 110.9 

2004 152.2 128.5 148.5 129.5 

2005 154.0 155.5 209.9 136.0 

2006 232.6 206.0 238.5 182.2 

Figure 13 - Reinforcing Steel Costs 

Georgia Nebraska Colorado Utah California Washington

1997 100.0 100.0 100.0 100.0 100.0 100.0

1998 104.9 104.4 111.1 103.2 111.5 96.1

1999 136.6 102.7 120.0 104.8 105.0 88.2

2000 139.0 102.5 104.4 104.8 102.2 100.0

2001 134.1 101.5 111.1 104.8 123.4 80.4

2002 141.5 102.9 111.1 98.4 102.4 105.9

2003 131.7 101.2 122.2 100.0 121.0 98.0

2004 185.4 136.7 184.4 162.9 190.9 168.6

2005 209.8 138.4 213.3 171.0 195.2 178.4

2006 231.7 138.2 204.4 164.5 209.5 192.2

Figure 14 - Structural Concrete Costs

Georgia Nebraska Colorado Utah California Washington 

1997 100.0 100.0 100.0 100.0 100.0 100.0

1998 83.7 112.4 114.9 99.7 103.7 88.5

1999 131.5 129.9 126.1 107.3 104.1 103.4

2000 124.9 133.7 140.8 98.5 117.8 89.4

2001 118.3 138.6 123.1 110.0 137.8 114.7

2002 125.3 120.5 115.9 109.5 117.8 104.2

2003 125.8 122.7 117.5 114.4 117.6 121.6

2004 132.2 118.3 131.3 112.0 129.5 104.7

2005 131.0 139.0 206.6 201.2 183.9 133.8

2006 192.6 125.5 174.7 192.2 204.2 151.9
Growth in Highway Construction and Maintenance Costs

508 Compliant Presentation 

Exhibit B. States Contacted and Data Obtained

FHWA 

Region State 

Contacted 

by OIG 

Has an 

Overall 

CCI 

Has 

Component 

Price Data 

Length of 

Data Series 

Connecticut No N/A N/A N/A

Maine No N/A N/A N/A

Massachusetts Yes No N/A N/A

New Hampshire* Yes Yes Yes 2000 – 2007 

New Jersey No N/A N/A N/A

New York Yes No N/A N/A

Rhode Island No N/A N/A N/A

Vermont Yes No N/A N/A

1 

Puerto Rico No N/A N/A N/A

Delaware No N/A N/A N/A

District of Columbia No N/A N/A N/A

Maryland Yes No N/A N/A

Pennsylvania Yes No N/A N/A

Virginia Yes No N/A N/A

3 

West Virginia No N/A N/A N/A

Alabama No N/A N/A N/A

Florida Yes No N/A N/A

Georgia* Yes No Yes 1996 – 2006 

Kentucky No N/A N/A N/A

Mississippi Yes Yes Yes 1988 – 2006 

North Carolina Yes Yes Yes 1995 – 2006 

South Carolina* Yes Yes Yes 1999 – 2006 

4 

Tennessee No N/A N/A N/A

Illinois Yes Yes Yes N/A 

Indiana No N/A N/A N/A

Michigan No N/A N/A N/A

Minnesota No N/A N/A N/A

Ohio Yes Yes Yes 2005 – 2006 

5 

Wisconsin Yes Yes Yes 1982 – 2006 

Arkansas No N/A N/A N/A

Louisiana No N/A N/A N/A

New Mexico No N/A N/A N/A

Oklahoma No N/A N/A N/A

6 

Texas* Yes Yes Yes 1999 – 2006 

Iowa Yes Yes Yes 1986 – 2006 

Kansas No N/A N/A N/A

Missouri No N/A N/A N/A 7 

Nebraska* Yes Yes Yes 1998 – 2006 

Colorado* Yes Yes Yes 1987 – 2006 

Montana No N/A N/A N/A

North Dakota No N/A N/A N/A

South Dakota Yes Yes Yes 1987 – 2006 

Utah* Yes Yes Yes 1990 – 2006 

8 

Wyoming No N/A N/A N/A
Growth in Highway Construction and Maintenance Costs

508 Compliant Presentation 

Exhibit B. States Contacted and Data Obtained (cont’d)

FHWA 

Region State 

Contacted 

by OIG 

Overall 

CCI 

Component 

Price Data 

Length of 

Data Series 

Arizona No N/A N/A N/A

California* Yes Yes Yes 1987 – 2006 

Hawaii No N/A N/A N/A 9 

Nevada No N/A N/A N/A

Alaska No N/A N/A N/A

Idaho No N/A N/A N/A

Oregon Yes Yes Yes 1987 - 2006 10 

Washington* Yes Yes Yes 1990 - 2006 

*States in our sample.