Recently, at the MITA summer conference, MDOT leadership reported that they are projecting the State construction program for 2008 will be approximately $700 million, down roughly $300 million from the 2007 program, which was $1 billion. In reporting those projections, the MDOT leadership further commented that that program reduction would translate into a one-third reduction in the tons of asphalt and cubic yards of concrete placed in 2008. Pretty gloomy outlook, however, we believe it is too early to tell with any certainty about some of those projections . . . and here is why.
We acknowledge that the overall size (dollar volume) of the 2008 construction program will be significantly smaller than the 2007 construction program as MDOT continues to “repay” the debt that has resulted from the project advancement initiatives of former Governor Engler and Governor Granholm. Reduced revenues are also a major factor in this reduction as consumers continue to conserve fuel.
In terms of the projected reductions of asphalt and concrete that would be placed in 2008, we believe those projections are unsubstantiated at this point. To our knowledge the required life cycle cost analysis has not yet been run on all 2008 projects, thus making those pavement projections somewhat suspect and lacking certainty.
Further, consider the make-up of the $1 billion 2007 construction program. Two significant corridor projects, the Gateway and the M-10 Lodge combined for a total of approximately $300 million of that program, therefore, leaving roughly $700 million for all the other projects let in 2007. Intuitively, one could conclude that a 2008, $700 million construction program should provide similar projects and industry segment opportunities that a 2007, $700 million construction program (the Gateway and Lodge projects withstanding) provided.
Is the MDOT 2008 construction program all doom and gloom? We’d be remiss if we didn’t admit the skies are looking gray and that it could be a difficult year for the MITA members who make their living in the MDOT arena. But we believe it is far too early to give much credence to the MDOT asphalt and concrete volume projections.
As it is our duty and goal to provide you information that is factual and accurate, we will stay engaged with MDOT leadership as they further develop the 2008 construction program. We will also continue to aggressively fight for increased transportation investment, which would help to rectify the situation as well.
We will keep you informed of those developments, as they are made known to us.
If you have any questions don’t hesitate to contact Glenn Bukoski at glennbukoski@mi-ita.com or Doug Needham at douglasneedham@mi-ita.com or by phone at (517) 347-8336.
