States Can Get Good Deals on Infrastructure, Road Projects

The New York Times reports:

Construction companies, hungry for work in the dismal economy, have slashed their prices to try to win the first round of public works projects being paid for by the federal stimulus package.

Pennsylvania officials said contractors competing for their first round of road and bridge projects had offered bids 15 percent lower than the state had expected. Utah officials said some of their bids were coming in 25 percent lower than expected. And a bid to build a 4.7-mile extension of Interstate 49 from Shreveport, La., toward the Arkansas state line came in at $31.1 million, about $4.7 million less than the Louisiana Department of Transportation and Development had estimated the project would cost.

“The bids are coming in lower than we would have imagined,” Transportation Secretary Ray LaHood said in an interview, adding that the low bids should provide good value to taxpayers. “I think there’s a huge appetite for these projects, and people are raring to go. There’s pent-up demand for people to get these bids and get the work.”

Several states are wisely using design/build which minimizes the risk of cost overruns and helps guarantee the cost of the project. States should be careful to minimize their exposure to “change orders” that drive up the costs.