By: Dr. Kumudu Gunasekera and Brad Ship
Until 2004 (Q2), highway construction cost escalation followed general inflation as measured by the Consumer Price Index (CPI). Since then, the variance between Parsons Brinckerhoff’s Highway Construction Cost Index (PBI) and CPI has significantly increased. The variance between the two indexes peaked in September 2008, largely (but not entirely) due to volatile growth in key commodity prices, particularly asphalt (a derivative of crude oil) and steel.
After reaching a peak of 202 points in September 2009, in the ensuing 5 months the PB Highway Construction Cost Index (PB HCCI) dropped 22% to reach 158 (February 2009). Since then, PB HCCI has increased with a monthly average growth of 0.67% to 170.80 (March 2010).
B HCCI comprises the following six cost components: construction labor, construction equipment, steel, asphalt and asphalt binder, aggregate and concrete. The resulting index represents average highway construction costs for the U.S. as a whole. Cost inflation for specific regions, capital programs and projects will vary from this index, depending on project types and work mix, as well as the regional or local construction market (including local contractor and material supplier markets).
About The Author: Gunasekera (gunasekera@pbworld?.com) and Ship (ship@pbworld?.com) are members of the Strategic Consulting group at Parsons Brinckerhoff (www.pbworld?.com). They provide economic and strategic services to infrastructure clients worldwide.
