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Survey Reveals ‘Staggering’ Costs of Congestion

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Traffic congestion and the delays it causes are costing the nation’s construction firms an estimated $23 billion each year, according to a new analysis released by the Associated General Contractors of America.

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There is no relief from traffic in sight, association officials warned, as Congress is months late in passing six-year federal transportation legislation, prompting more pain for the hard-hit construction industry.

“Traffic tie ups nationwide are sapping productivity, delaying construction projects and raising costs for construction firms of all types,” says Stephen E. Sandherr, the association’s CEO. “Given the hardships they are facing, the last thing contractors need is to burn time, fuel and money stuck in traffic.”

Sandherr says the new analysis was based on responses from nearly 1,200 construction firms the association surveyed in late April and May. He notes that a “staggering” 93% of firms reported that traffic and congestion were affecting their operations. Meanwhile, nearly two-thirds of firms lose at least one day of productivity per worker per year due to traffic congestion, equaling 3.7 million days of lost productivity industry-wide each year.

Construction firms also report that traffic tie-ups delay the average construction project at least one day, while one in three firms report traffic adds a minimum of three days to the length of the average project. As a result, Sandherr says that three-quarters of contractors say congestion adds more than 1% to their total costs, and one in 10 report that traffic adds 11% or more to their cost of doing business.

Given current construction spending levels, that amounts to $23 billion lost to traffic each year, Sandherr says, equal to Google’s total revenue in 2009. “Try as they might, contractors can only do so much to avoid the added costs associated with traffic congestion,” the association head adds during remarks at a Minneapolis-area construction equipment plant operated by CAT Global Paving.

Traffic’s toll on the construction industry is even more severe in Minnesota, Sandherr says, where 94% of construction firms report traffic adds to their total cost of doing business. And more Minnesota firms, 18%, report that congestion adds 11% or more to their cost of doing business than in any other state. All told, Minnesota contractors lose $150 million a year to traffic congestion and 77,000 days in lost worker productivity.

The construction industry, and the rest of the economy, is unlikely to get any relief from traffic until Congress acts on long-delayed legislation that sets national surface transportation policy and funding levels over the next six years, the AGC says. That legislation is crucial for allowing states to plan complex, long-term highway and transit projects designed to cut congestion.

“As larger projects get put on the backburner, traffic stagnates, construction firms have less work and equipment plants see orders drop,” Sandherr says. “It is hard to think of a better way to undermine the stimulus than failing to pass a surface transportation bill.”

According to the association’s industry survey, two-thirds of transportation contractors report states are issuing an average of 17 fewer bid lettings this year worth 30% less than last year because of the lack of the transportation bill. As a result, 60% of those firms report they are buying an average of $2.95 million less in equipment this year. Meanwhile, 70% of firms are making an average of 26% less in revenue, and 63% of transportation construction firms report they are hiring an average of 77 fewer workers this year because of the lack of a six-year bill.

The lack of a surface transportation bill is having a particularly severe impact on Minnesota firms, Sandherr notes. He says that 89% of the state’s transportation contractors report fewer bid lettings, 67% are buying less equipment and 78% report they plan to hire fewer workers because of the lack of a transportation bill.

Sandherr says the solution to the nation’s costly traffic woes was for Congress and the Administration to act quickly to pass new surface transportation legislation this summer. Noting that the program relies on self-funding user-fees, he says Washington officials could cut traffic and boost economic activity without adding to the deficit.

“In today’s political environment where voters are worried about jobs and the deficit, passing legislation that creates construction jobs, boosts our economy and doesn’t add one cent to the deficit ought to be a no-brainer,” Sandherr adds.

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