State DOT strains drive up project costs, study finds

Lack of capacity at state transportation departments share some of the blame for infamously high infrastructure costs in the U.S. compared to other countries.

On the other hand, procurement practices that increase competition among contractors help bring down costs, said Will Nober, an economics doctoral student at Columbia University, Zachary Liscow, a professor at Yale University and Cailin Slattery, an assistant professor of business and public policy at University of California-Berkley, authors of a study titled "Procurement and infrastructure costs" presented Wednesday at Brookings 13th annual Municipal Finance Conference.

"The capacity of a state DOT is a huge driver of project-level costs," said Nober, who is also a staff economist for the White House Council of Economic Advisors, as he presented the paper at the conference. He added, federal data confirms that state DOT workforces have been shrinking over the last 10 to 20 years.

The paper is the latest attempt to answer the persistent question of why the U.S. spends much more than other countries on infrastructure projects.

The cost to build a mile of interstate in the U.S., for example, tripled between 1960 and 1980, according to a 2019 paper by Liscow and George Washington University's Leah Brooks, who discussed Nober's paper at the conference Wednesday.

The reasons behind the high costs range from a protracted permitting process, citizen lawsuits, lack of innovation and political pressures. The latest study finds state DOT workforce shortages force outsourcing and the hiring of pricey consultants.

The authors gathered some of their data by surveying 50 state DOT officials and construction contractors to determine state-specific highway procurement rules and practices.

"They're very concerned about state DOT capacity and say they're understaffed," Nober said.

Both state officials and contractors agreed consultant fees drive up costs, Noble said. In the past, that work was often done by in-house experienced engineers and is now contracted out.

State DOTs that maintain procurement practices, like releasing detailed project plans and price estimates, saw a decrease in costs compared to other states, the paper found. Extensive bidder outreach to construction contractors also lowered costs.

The paper is "attacking a really important question," Brooks said. The question of why the country faces higher infrastructure costs "remains a pretty big unknown. And we want to know why because we want to know what policy changes can lower costs."

What "really seems to matter," Brooks said, is the ability to "manage and execute" well. "The underlying core issue is implementation ? how we do it well and how we speak to these really important questions about management."