A Year of Uncertainty
Project Delays, Escalating Costs Meant 2022 Was No Return to Normal
For the second time this year, Louisiana transportation officials are evaluating proposals from contractors to construct a new bridge over the Red River in Shreveport and refurbish the existing Jimmie Davis bridge as a park. The Louisiana Dept. of Transportation and Development restarted the RFQ and RFP process in late October after naming in March three shortlisted firms—two of which dropped out.
“Unfortunately, we have very limited teams that compete in that process,” Shawn Wilson, state transportation secretary, told local business leaders in comments broadcast on Shreveport TV station KSLA. “Because we haven’t had the competitive attention that was necessary, we had to go out and re-bid the project.”
Throughout the U.S., 2022 will be remembered as a year when pre-pandemic business normal has morphed into a new inflation-plagued reality. The year will be known for surging costs, worries about recession and for contractors failing to show up to compete for some big projects.
In recent months, transportation officials have had to re-check their funding sources. In Texas they warned that they may scale back or delay projects as inflation devours budgets. A highway project in New Jersey and another connecting Oregon and Washington received new dramatically higher pricetags.
Meanwhile, Meta, the parent company of Facebook, put on hold or scaled back data centers it had planned to construct in Texas, Denmark and other locations.
Ill Winds Blowing?
In another sign of turmoil, Masschusetts officials have turned down an offshore wind energy project developer seeking revised power supply contract terms because its project was not financially viable due to rising costs.
Avangrid, developer of the planned 1.23-GW Commonwealth Wind project off Massachusetts asked state regulators earlier this month to dismiss its 20-year power purchase agreements signed with local utilities in May and allow the estimated $3.7-billion project to be rebid, claiming that current economic gyrations have upended its financing and construction feasibility. Another large state developer filed a supporting motion Dec. 23 for its 400-MW wind project, stressing similar new cost realities.
But in a Dec. 30 ruling, the state utility regulator approved the contracts as "in the public interest,” ruling that the project failed “to justify review of the PPAs.”
Sector analysts noted the potential for future project bids and contract terms on other pending East Coast offshore wind projects to reflect the current elevated price risks.
Along with the notion of a return to normal from the pandemic, the idea is fading that funds from the $1.2 trillion infrastructure act passed last year would produce a surge in construction work.
In November, Chris Daum, CEO of consultant FMI Corp., told an audience at the International Risk Management Institute's construction conference in Las Vegas that price increases to date "will eat up most or all" of any anticipated higher market activity the federal funds might have paid for.
A $1.2 Billion Bridge Increase
The Dec. 12 meeting of the joint Oregon-Washington Legislative Action Committee is indicative of what's gone on.
Gathered on a Zoom call, committee members worked on the long on-again, off-again process of planning to replace the aging bridge crossing the Columbia River that carries Interstate 5 and links the two Pacific Northwest states.
At that meeting, members heard a presentation about why the project price, based on a similar scope, now is likely to be $1.2 billion higher than the $4.8 billion cost foreseen in 2020.
Frank Green, assistant bridge replacement program administrator, told the committee that the new price was modeled on a variety of risk scenarios.
"We’re in a time where we see very high inflation rates, also in a time where there's a lack of workforce, and there will likely be competition with other construction projects," said Green, the Washington State Dept of Transportation's committee representative. He showed a chart noting cost changes of some major material types, but a state legislator asked for more details on which components had increased the most.
Louisiana Bridge Scope Changes
Like the Oregon-Washington I-5 bridge plan, the one for the Jimmie Davis span connecting Bossier City and Shreveport has been kicking around for years. Its cost was pegged at $80 million to $100 million back in 2016. The project core remains the same: a design-build contract to build a new, four-lane steel or concrete bridge while renovating the existing span into a “linear park.”
When state transportation officials relaunched the bid process this fall, they also increased the project's officially predicted cost, raising it to a maximum of $150 million. Previously, a price range of $120 million to $150 million had been listed on the letter of intent issued by the state.
In contrast to a roughly similar scope on the Washington-Oregon bridge replacement, the Louisiana project had one adjustment for the second RFQ and RFP rounds. Under the most recent letter of intent, however, its bike and pedestrian paths that were originally to be incorporated into the new span have been moved to the old bridge as part of the renovation.
The new request for proposals produced another three shortlisted firms: American Bridge Co., Thalle Construction Co. and the James Construction Group, which was also shortlisted in the first round.
The current schedule calls for inking a design-build contract by April.
