Absence of Highway Bill Taking Its Toll

By Bill Wilson, Roads & Bridges | December 15, 2014
Absence of Highway Bill Taking Its Toll

As Larry Gescher tries to end a game of communication hopscotch in the state of Oregon, he is tossing more than one pebble out into the construction marketplace.

His new firm would probably prefer to work out of the square holding bridge construction and rehab, but he’ll also take more unique jobs as a landing spot. HP Civil is in the process of building six radio towers throughout Oregon for the department of transportation. According to Gescher, currently emergency services throughout the state cannot communicate from one end of Oregon to the other, creating a “hopscotch” effect.

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“They have to go through different agencies to get connection [to communicate], so the governor mandated that they get this worked out,” Gescher said. “Competition [for tower work] is not as fierce. You don’t have to bang your head against the wall....”

The road and bridge industry is still feeling woozy these days, and the culprits are many. The lack of a long-term federal highway bill, tight budgets at the state and local level, and a crowded bidding landscape are just a few of them, and even though over 69 percent of Roads & Bridges readers say 2014 has been either a “good” or “very good” year, many are surviving because they are throwing out a much bigger net in the hopes of snagging work.

“Now that the general economy and general construction is starting to pick up, that is helping some of these companies,” said Alison Premo Black, chief economist for the American Road and Transportation Builders Association (ARTBA). “My feeling is the federal uncertainty is really still having an impact on the market. Seeing some of the recovery in the general economy I would think we would expect to see more of an uptick in [road and bridge] activity than we have seen overall.”

According to the latest ARTBA data, one can barely make out a tick at all. Last year, bridgework, although still operating at a record-breaking pace, took a slight hit. ARTBA is predicting a slight decrease in contract awards compared to 2013 ($30.75 billion in 2014 versus $30.85 billion in ’13). Pavement construction is showing some signs of life, accounting for $47.2 billion in work this year compared to $45.8 billion in ’13, but activity is still way below the high water mark set in 2008-09, when contractors were cranking out over $57 billion worth. In fact, Black said what is most alarming about the road and bridge market is contract awards were down 16 percent through October.

“We know that state and local governments have a lot of financial commitments and they pull back, and back in the ’80s it wasn’t until the gas-tax increase at the federal level that we really started to see market recovery.”

The next year still shows an industry feeling a bit under the weather. ARTBA is calling for 2 percent growth in pavement work and 1.5 percent growth in bridge activity, accounting for an overall mark of just under 2 percent. States like California, New York, Indiana, Kentucky, Louisiana, Minnesota, Oregon, Tennessee and Virginia have seen road and bridge construction either level off or subside in 2014 compared to 2013.

Still, a majority of respondents have a solid footing, most likely because those who survived the recession learned to adapt like Gescher. Over 59 percent of respondents forecast 2015 to be a “good” or “very good” year, even though 57.1 percent say the market is currently “very competitive,” 81.8 percent believe material prices will go up over the next 12 months, and a little over 63 percent describe the state they live in as either “fair” or “poor” when it comes to generating money for road and bridge construction.

“It is positive news that we are seeing an increase in the pavements and that the bridge market is holding steady at record levels, but putting it in perspective it is still a challenging market,” said Black. “I think the market is under-performing compared to where it should be.”

Going elsewhere

The road and bridge industry is still in a good place for Gescher and his two partners, who saw enough promise to start HP Civil in March. The firm won its first bridge job—on Highway 26 near Seaside, Ore.—just four days after it came into the transportation world, and currently HP Civil is working on a $17 million rehab job on two bridges in Astoria. Earlier in the construction season, Gescher’s venture executed a contract in Tillamook County that called for the repair of five short-span bridges. The spans were supported by a wood structure and had a concrete superstructure. HP Civil replaced the concrete caps and some of the stringers. In total, HP Civil, which currently employs nine but hopes to have as many as 20 by mid-2015, brought in $4 million worth of work in 2014. Partnering with other firms proved to be a key, and business could double over the next 12 months.

Yet the state of Oregon could be staring down the mouth of a major crisis in 2015. According to a pair of reports, Oregon needs to generate $5.1 billion to conduct seismic retrofits of several major bridges that would collapse during a major earthquake, and a growing debt service and other factors will reduce the state’s transportation funds in the near future.

“Right now I know the director of ODOT has pulled back a lot of projects because of the uncertainty of the federal funding,” said Gescher. “It’s always great to have state money as well, but everybody has their eyes on the federal dollars, too.”

It’s been several decades since D.A. Collins introduced itself to the road and bridge industry, but the Albany, N.Y.-based company is reading off the same page as newcomer HP Civil. D.A. Collins is leaving all options open, and the third-generation contractor went back to its roots this year by taking on large subdivision work. D.A. Collins owns two quarries, and with intense competition continuing to take up space in the road and bridge market there needed to be an outlet for all of the rock produced.

“This year has been an interesting year,” Dave Collins, principal owner and vice president at D.A. Collins, said. “We have looked in many ways to rebrand ourselves and try to find some different markets to go after.”

Even if those markets lie outside their coverage area. D.A. Collins has been serving about a 200-mile area around Albany, but it is considering branching out into Pennsylvania, Ohio, Connecticut, New Hampshire and North Carolina: “anywhere right now where our core strengths can leverage themselves to give us a good opportunity of a mid-size job,” said Collins.

Collins estimated that his company handled 40 jobs in 2014, but gross revenue and man-hours are down 10 percent compared to 2013.

“We have had more seconds [in the bidding process] than I even want to discuss,” said Collins. “You are in single-digit margins right now, so it’s a pretty competitive marketplace.”

As for 2015, the New York state legislature could either ignite a promising year, or completely douse it. Lawmakers will look to generate another five-year transportation funding plan. The one that is expiring at the end of December favors the transit industry, which broke tradition. According to Collins, the transit and highway sectors always received an equal share of the money, so the hope is more will be directed to the New York State Department of Transportation for 2015. Design-build legislation also is expiring at the end of 2014, and one of the areas D.A. Collins has invested in is accelerated bridge construction. However, without the backing from the state capital the business could be in jeopardy.

“Within the last few weeks alone there has been a series of design-build projects coming out all at once,” said Collins. “I can in theory have $150 million worth of work out there and not know where I stand on any of it.”