Highway division tells Senate Transportation bids ran about 9% above engineers' estimates since 2021

Jeremy Reed, chief engineer at the highway division, told the Senate Transportation Committee on Feb. 7 that actual contractor bids ran above the division’s engineering estimates across recent years, creating programmatic strain and prompting changes in how the agency forecasts costs.

"Between then and December of 24, we executed $851,000,000 worth of projects. And again, programmatically over the whole, span, we estimated those projects to be about $780,000,000 worth of work. So, obviously, we were off about 9%," Reed said.

Reed showed year-by-year differences and told the committee that calendar year 2022 represented the largest gap: that year the division underestimated bids by roughly 17%. In 2023 the division’s underestimates narrowed to about 6%, and in 2024 they were about 7% below final bid prices.

The discrepancy has operational consequences, committee members were told. Reed said the division converted an existing position into a chief estimator role "so there was not, like, any additional funding," but to provide dedicated capacity to refine estimates. He said staff will combine historical averages with forward-looking indicators such as producer price indexes (Reed cited a PPI of about 3%) when assigning construction funds across a five- to 10-year horizon.

Reed cautioned that some of the gap between estimates and bids could reflect project delays rather than pure inflation. A committee member asked whether a delayed project would show higher bids simply because of timing; Reed said that is possible and that an apples-to-apples comparison would be difficult because "each project is sort of unique."

The presentation also flagged differences by project type: Reed said rail and aviation projects "seem to be underestimated more than highway projects," likely because those projects are more unique and the division’s statistical history for them is less developed.

Members raised how higher costs affect local and grant-supported projects. Reed said the division has seen municipal projects canceled when local sponsors cannot cover cost increases. He noted a $600,000 cap on certain Transportation Alternatives grants and said "numerous projects" have been canceled because towns could not make up the inflationary delta. He added that when towns choose lower‑cost, nongrant-funded approaches they may avoid federal requirements tied to grants — Reed cited that projects not using federal grant funds do not have to go through NEPA, Davis‑Bacon wage rules or Buy America documentation.

Committee members also asked about site-specific construction practices and traffic controls. Reed described the division’s use of automated flagger assist devices (AFADs) at temporary one‑lane conditions and said they act as a "force multiplier" allowing a single flagger to manage traffic at some work zones. Reed and members discussed a longer-running bridge repair where a deck has effectively reduced traffic to one lane for more than a year while steel repairs continue.

Reed said the division will use the new estimator position and improved forecasting to provide more credible schedules and predicted costs for towns and other stakeholders, and to reduce the practice of moving projects year to year in the division’s program book. He offered to provide additional follow-up detail if the committee wanted further breakdowns by project type or locality.

The exchange was discussion only; no formal committee votes or directives were recorded during the presentation.