I-70 Floyd Hill project faces cost pressures amid high inflation

Soaring inflation, supply chain disruptions and labor shortages already are complicating Colorado’s next big highway undertaking.

The Colorado Department of Transportation plans to get started next year on several years of reconstruction and widening, including the extension of a westbound toll lane to eliminate a bottleneck, as part of the $700 million Floyd Hill project.

Make that more than $800 million — that’s the recent “rough estimate” by the newly hired contractor, Kraemer North America, as design work continues. The figure includes the pricing out of all components sketched out by CDOT officials just two years ago, along with contingencies for price spikes and other emerging risks, said Kurt Kionka, CDOT’s Floyd Hill project director.

CDOT now faces the prospect of winnowing down its plans to meet the original budget, which Kionka says is still the target.

The combination of inflation and supply-chain delays has pushed the cost of concrete and some other materials to record or near-record levels, experts say, just as the $1 trillion infrastructure bill is about to unleash a wave of big projects. That’s a source CDOT also hopes to tap.

“You’re trying to find out where the (price) dip is and where the spike is, and that’s the real challenge for project managers across the country,” said Zac Rogers, an assistant professor of supply chain management at Colorado State University. He sees inflation as a lingering concern, even if it backs off recent 40-year highs; the federal consumer-price index hit 8.5% in March, compared to a year earlier.

“The problem is, they’re not going to adjust the infrastructure bill for inflation,” Rogers said. “If you don’t have a crystal ball, that can be pretty difficult.”

Materials prices have been a moving target since the start of the pandemic. The Fed’s producer price index for construction materials has risen by 34% since January, and it’s up nearly 48% in the last two years. Driving that are concrete, steel and petroleum-based products, including asphalt.

Rogers points out that a factor in all material prices — the cost of transporting them — has increased along with the price of diesel fuel, thanks in part to pandemic fluctuations and the market havoc wreaked by Russia’s invasion of Ukraine.

CDOT and contractors are working on design

During a recent Colorado Transportation Commission briefing on the Floyd Hill project, several members raised cost-control pressures as “an elephant” of a challenge, in one member’s words.

But Kionka told The Denver Post in an interview that he was not too worried — not yet.

“What gives me confidence is (that) I think we’re identifying all these risks early on in the project,” Kionka said. “And so I think we have the opportunity to figure out what our risks are and figure out an approach to them now. I think that gives us an ability to work through the challenges.”

The biggest help is that the project’s complex design is still in the early stages. He said that would allow CDOT, Kraemer and the lead designer, Atkins, to scale back or modify some major components well before construction begins on the first section in early 2023.

Unlike a traditional contracting model, in which construction contractors bid on a final design, CDOT chose a different method. Kraemer, a large Wisconsin-based contractor with experience in the I-70 mountain corridor, will serve as both construction manager and general contractor, weighing in while Atkins completes the design.

That setup is controversial among some Colorado lawmakers because it has favored large construction companies on big projects. But it provides more design flexibility before a project breaks ground.

“The fact that they’re using that, I think, really does help them in this project,” said Christofer Harper, an associate professor at CSU who serves as the heavy construction management chair. “CDOT, in my mind, has taken the right approach to this project — albeit, they’re still going to run into issues. That’s just the nature of what’s happening out there.”

But some dynamics affecting the construction industry at large may not affect the Floyd Hill project as strongly, argues Christopher Senseney, a civil engineering professor at the University of Colorado Boulder. Labor shortages are more acute for building construction than for road construction, which doesn’t rely as heavily on skilled trades, he said.

And Colorado has readier access to some locally sourced road-construction materials, such as rock and aggregate, that haven’t seen prices surge as much.

“The industries in Colorado are well situated to meet the demands for infrastructure projects,” Senseney said.

CDOT executive director Shoshana Lew agreed, making a distinction between a project near the Front Range, as Floyd Hill is, and one that’s in a more remote location.

“It’s a hard moment in history to say exactly what things will be like a year from now,” she said, “but just in terms of trajectories across the program, the variabilities have been higher in areas farther out in the state.”

Project through canyon is a complex undertaking

The Floyd Hill project, at least as it’s envisioned, is a complex undertaking: CDOT plans to add the third westbound lane right where I-70 barrels down a steep grade on Floyd Hill and replace aging bridges at the bottom. It will raise the highway on viaducts as it curves into and through Clear Creek Canyon, allowing smoother turns that keep traffic flowing faster all the way to the Veterans Memorial Tunnels.

As it studied the project, CDOT eliminated a tunnel at the bottom of Floyd Hill from consideration because of the costs and challenges involved.

Canyon work includes blasting along some walls and a “saddle cut” at one point, cutting into a hill to reroute the highway over it where I-70 now makes a sharp curve around it. The project also includes rerouting Clear Creek in places, along with extending frontage roads and a recreation path through the canyon.

To reel in the expanding budget, Kionka told the commission, CDOT could keep the eastbound lanes at ground level in some parts of the project zone, rather than building a viaduct for that side. The saddle cut is another big cost that could be prime for modifications.

CDOT recently applied for $240 million for Floyd Hill under a U.S. Department of Transportation program funded by the infrastructure bill. That would augment $460 million in state funding sources CDOT has pinned down, including dedicated bridge funding and the potential use of new toll revenue.

In the application, Lew pressed her case that the project deserves federal support because of I-70’s importance to the transportation network both in Colorado and nationally. The submission even includes a photo of Transportation Secretary Pete Buttigieg speaking at the base of Floyd Hill during a press event in February.

“Without this grant,” the application’s cover letter says, “the project is only partially funded, which could lead to inefficient bifurcation of construction into multiple projects, causing prolonged and fractured construction delay and unnecessary waste of resources.”

Lew and other state officials have expressed confidence they will receive a large grant. And they’re preparing to start several associated smaller projects later this year, including the building of wildlife crossings outside the project zone, near the Genesee and Empire exits, and roundabouts on side roads.

But the main event is set to begin early next year, with the project split into three sections. Work would start on the eastern downhill section, with the west section near the Veterans tunnels following later in 2023. The central section, which involves the most blasting and viaducts, would begin in early 2024.

Much of the work, at least under the preliminary design, would occur off the highway as new raised structures are built. CDOT’s project schedule calls for construction to wrap up in mid- to late-2027.

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