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Agency engineers warn construction costs and bid volatility have cut buying power for projects
Summary
The Agency of Transportation reported large recent increases in construction-input costs and sharply higher bid volatility, saying those changes have reduced buying power and complicated project delivery and budgeting.
Jeremy Reid, chief engineer for the Agency of Transportation, briefed the Senate Transportation Committee on recent inflationary impacts to construction projects and the resulting bid volatility.
Reid presented national and Vermont-specific data showing sharp input-price increases since 2020 and higher volatility in contractor bids. "From the Q4 of 2020 to today, there's been 54% increase in that 3 year period in construction costs," he said, citing Federal Highway and industry indices.
He highlighted material-specific jumps in 2021–22: asphalt rose about 48%, iron and steel roughly 42%, and concrete about 10%. Reid said those materials are heavily used in AOT projects and disproportionately drive cost growth.
Vermont bid data tabled for the committee showed sample increases and volatility: common excavation rose about 36% from 2018 to 2023 with a roughly 119% increase in standard deviation; traffic signs rose about 66% with a roughly 400% increase in standard deviation. Reid said the higher standard deviation reflects greater unpredictability in bids and impairs accurate estimating and project planning.
Reid described the practical impact on the current construction program: from July 2024 to January 2025 AOT advertised and awarded 23 contracts with an aggregate estimated value of $98 million; actual award amounts aggregated to roughly $107 million. He said that pattern shows persistent underestimation relative to market-winning bids rather than a return to pre-pandemic pricing.
The chief engineer said the agency has adjusted estimating practices and hired a chief estimator to monitor producer-price indices and refine forward-looking price factors. Reid also noted that some cost items (for example, asphalt and fuel) are subject to contract price indexing on major paving projects, which reduces contractor risk and improves estimating accuracy for those elements.
Committee members raised supply-chain and labor questions; Reid pointed to broad labor and material availability issues following the pandemic as contributors to volatility and said larger firms may have more capacity to absorb or shift resources than smaller local contractors.
Reid estimated a substantial loss in buying power since passage of the federal infrastructure act: "we have probably seen price increases somewhere in the 40 to 45% range ... we have seen probably a reduction of 20 to 25 percent in our buying power since the IIJA passed," he told the committee.
Ending: Committee members asked AOT to provide additional historical comparisons and geographic breakdowns of bidding patterns and to quantify how much of the volatility is concentrated in specific material categories or regions. The agency agreed to produce follow-up data showing multi-year volatility and bidder counts by project type and region to aid legislative budgeting decisions.
