Inflation, shortages could delay Georgia road projects

May 3 2022 Sandy Springs - Aerial photo shows construction site of I-285 interchange at Ga. 400 in Sandy Springs on Tuesday, May 3, 2022. (Hyosub Shin / Hyosub.Shin@ajc.com)

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May 3 2022 Sandy Springs - Aerial photo shows construction site of I-285 interchange at Ga. 400 in Sandy Springs on Tuesday, May 3, 2022. (Hyosub Shin / Hyosub.Shin@ajc.com)

Inflation, labor shortages and supply-chain backups have depleted Americans’ wallets. Now they’re affecting their commutes — and not just at the gas pump.

The rising price of construction materials and shortages of workers and some materials are affecting road construction in Georgia and across the nation. They’ve already contributed to delays in some major projects — including the ongoing reconstruction of the I-285 interchange at Ga. 400. And they could lead to delays in some road resurfacing projects this summer.

State transportation officials say money from the bipartisan infrastructure law that Congress approved in the fall will backfill much of the hundreds of millions of dollars of additional costs they could incur — as long as the problems are resolved soon.

ExploreWhat’s in the $1.2 trillion infrastructure bill for Georgia

“Our collective hope is this is something that fades — I’d like to hope by the end of the year,” said Marc Mastronardi, deputy chief engineer for the Georgia Department of Transportation. “But if I were really good at (predicting) that, I probably would have picked six lottery numbers by now.”

Experts say numerous factors have fueled price spikes and shortages of labor and materials over the past two years. The COVID-19 pandemic played havoc with supply chains, contributing to price hikes for goods such as automobiles and lumber. The virus itself took a toll, forcing sick or exposed workers to stay at home, while others quit their jobs.

Critics say a federal spending binge in response to the pandemic also has contributed to inflation. More recently, the war in Ukraine has contributed to rising gasoline and steel prices.

The construction industry has not been immune to such pressures. According to a recent report by the industry group Associated General Contractors, the cost of diesel fuel has more than tripled over the past 22 months, while the cost of steel mill products has more than doubled.

More broadly, goods and services needed for nonresidential construction are up 21% over the past year, according to the report. Highway contractors are feeling the squeeze.

“We’re experiencing the same things that every other industry and Americans are experiencing,” said David Moellering, president of the Georgia Highway Contractors Association.

That means higher prices for road work. Though prices vary by project and location, Mastronardi said GDOT has seen a 15% to 20% increase in prices overall.

Mastronardi said uncertainty about prices may make contractors hesitant to bid on road work — especially major multiyear projects that require a big investment. Companies might craft a bid based on current prices, only to see costs skyrocket once construction has begun, leaving them on the hook for the extra cost.

That uncertainty, Mastronardi said, may have been a factor last summer when GDOT received only one responsive bid when it solicited contractors to build toll lanes on Ga. 400 in Fulton and Forsyth counties. GDOT has not released details, but the bid was so much higher than expected that the State Transportation Board rejected it last summer. Now GDOT is rebidding the project, offering the successful bidder a chance to set and collect toll revenue on the new lanes for 50 years.

Combined ShapeCaption
May 3 2022 Sandy Springs - Aerial photo shows construction site of I-285 interchange at Ga. 400 in Sandy Springs on Tuesday, May 3, 2022. (Hyosub Shin / Hyosub.Shin@ajc.com)

Credit: HYOSUB SHIN / AJC

May 3 2022 Sandy Springs - Aerial photo shows construction site of I-285 interchange at Ga. 400 in Sandy Springs on Tuesday, May 3, 2022. (Hyosub Shin / Hyosub.Shin@ajc.com)

Credit: HYOSUB SHIN / AJC

Combined ShapeCaption
May 3 2022 Sandy Springs - Aerial photo shows construction site of I-285 interchange at Ga. 400 in Sandy Springs on Tuesday, May 3, 2022. (Hyosub Shin / Hyosub.Shin@ajc.com)

Credit: HYOSUB SHIN / AJC

Credit: HYOSUB SHIN / AJC

COVID-related labor shortages and supply-chain problems also were a factor in last summer’s decision to extend the deadline for completion of the I-285 interchange at Ga. 400. The project was supposed to be finished last year. Now it won’t be done until early 2023.

Smaller projects also may be affected. GDOT is considering postponing some resurfacing projects for a few months this summer to see whether the price of crude oil — which is converted to asphalt — come down further.

Mastronardi said GDOT has few options to address such problems. It can postpone construction on new projects. It can extend the construction time for projects where contractors are having a hard time getting supplies. And it can agree to assume some of the risk of rising prices in some circumstances.

That’s what it’s doing with asphalt prices. In some contracts GDOT will share in the additional cost if prices rise more than 5%. It will also share in the savings if prices fall more than 5%.

But more tough decisions may lie ahead if shortages and price hikes continue. If that happens, Mastronardi said GDOT will prioritize projects that improve the safety of Georgia roads.

“There will be projects that the schedule will be pushed back,” he said. “I don’t see any project not getting completed.”