The reason was higher-than-expected bid costs, Kumar said. Missouri City had budgeted $2.5 million for the Sienna Parkway project; the only bid the city received was worth $4.85 million, according to agenda documents. The bid for the parks and maintenance facility project, meanwhile, came in about $2.2 million over budget, with the lowest of seven bids coming in at $7.1 million.
Rising bid costs are not unique to Missouri City, officials said, as entities such as Missouri City grapple with rising construction costs.
“Across the board, I think most entities are seeing a 20% cost increase,” Kumar said in an interview with Community Impact. “I've been talking to architects and design engineers, and they have said the same.”
Soaring prices
Eventually, Missouri City came to a solution Oct. 3 for the Sienna Parkway project through an interlocal agreement that City Council unanimously approved among the city, Fort Bend County and the Sienna Management District. It will allow the management district to bid and administer the construction phase of the project to allow for better bidding flexibility, according to Missouri City officials.
This joins efforts the city has made to value engineer the project, a process that lowers the cost of goods, products and services with a tolerable loss of performance or functionality.
Despite these measures, entities such as Missouri City face increased costs in the materials contractors are using for their projects, Kumar said.
“What is being faced across the market is inflation and construction costs increasing, mostly attributed to the fuel prices when the project was bid,” he said.
When the Sienna Parkway project was bid in April, the average retail price of gasoline in the U.S. was $4.21 per gallon, according to data collected by the U.S. Energy Information Administration. By June, that average price had soared to $5.03 per gallon.
Though fuel prices have decreased, they still remain high at $3.82 per gallon as of September.
For entities that have fuel prices as a large part of their budget, such as the Metropolitan Transit Authority of Harris County, those costs add up quickly.
At the time the agency’s board approved the fiscal year 2022-23 budget, METRO’s operating budget saw a nearly 20% increase due to the effects of inflation on fuel, cost of living and materials, said Phil Brenner, METRO director of management and budget, at a Sept. 15 METRO Finance and Audit Committee meeting.
However, further affecting bid costs is the cost of concrete and cement, Kumar said.
“We have heard about a shortage of concrete. Cement specifically,” Kumar said. “Contractors are being rationed in terms of what they get in the daily supply of concrete.”
The producer price index for concrete and cement, a measure in the average change over time in the selling prices received by domestic producers for their output, has increased by 14.5% over the last year, according to Federal Reserve economic data.
Aside from value engineering, Kumar said Missouri City may be able to time the construction market when prices are lower, like in early 2023, in an effort to lower bid costs.
“What the architects and engineering communities are telling us is that inflation will be there in the near future, but not to the extent that we saw in the summer,” Kumar said. “So some of these projects, we're going to be bidding in the coming months.”
“What the architects and engineering communities are telling us is that inflation will be there in the near future, but not to the extent that we saw in the summer,” Kumar said. “So some of these projects, we're going to be bidding in the coming months.”
