Analysis of the Variability of Submitted Unit Price Bids for Asphalt Line Items in Highway Projects

Abstract

Highway construction costs are subject to significant variations from project to project and over time. Variations in construction cost disrupt transportation agencies in making right investment decisions and estimating accurate construction costs for projects. A wide range of variables has been proposed in different studies to explain variations in construction cost. There is value in conducting a research study that attempts to consider a comprehensive list of variables with potentials to explain the variations. The study needs to simultaneously take into account all possible explanatory variables to examine their relations with construction costs. The objective of this research is to assess the relations of several potential variables to explain variations in submitted unit price bids for major asphalt line items in highway projects. The primary contribution of this paper to the body of knowledge is the creation of a random parameters model to explain variations in submitted unit price bids for asphalt line items in highway projects. The identified variables used to build the random parameters model were classified into two major tiers. Tier 1 represents project-specific categories, including project characteristics, major supply sources for critical materials, and price adjustment clauses. Tier 2 represents global and external categories, consisting of the level of activities in local highway construction market, construction market conditions, macroeconomic conditions, and energy market conditions. It is expected that the findings of this paper will contribute to the current practice of cost estimation and investment decision making by helping transportation agencies develop more accurate budgets and contractors prepare more accurate bids for highway projects.