Iowa, Kansas, Nebraska, and Northwestern Missouri 2006

In recent years, project owners have gotten a big bang for their construction bucks due to fierce competition and costs that were at least somewhat predictable if not always stable. That big bang was muffled by natural disasters and market factors in 2005.

The big story in 2006 will be the

significant increase in bid amounts submitted by contractors who too often had to bite the bullet last year when the costs of fuel and most materials soared to levels higher than could have reasonably been anticipated. Construction spending in Iowa, Kansas, Missouri, and Nebraska will be up in 2006, but construction put in place will not keep pace.

Midwest Contractor forecasts an 11-percent increase in overall construction spending for 2006, with an increase of 8 percent in transportation construction and maintenance.

Heavy Construction

In heavy and building construction in the four states, Midwest Contractor predicts double digit increases in nearly every category, with power/utility construction leading the way, up 15 percent over 2005 levels. Water/sewer construction will increase about 12.5 percent and general building will be up 11 percent.

With continued strength and growth in the economy, increases are also forecast in most non-residential building categories. Construction of education (15 percent), health care (13 percent) and religious buildings (8 percent) has been steady throughout the region and will continue to be strong in 2006. Lodging and amusement/recreation construction will also grow, at about 12 percent and 10 percent respectively.

Commercial/retail construction will continue steady growth through the year. Office and manufacturing construction have shown little growth over the past two years, but should pick up this year as long as the economy stays strong.

Increased tax revenues resulting from a strong economy should also result in a resurgence of public safety and governmental building construction that has been on hold due to lagging state and local government revenues.

Highway Construction

Among the four states, highway construction and maintenance programs will be healthiest in Missouri and Kansas, where transportation investment will be significantly increased in 2006. Transportation programs in Iowa and Nebraska will remain virtually unchanged from 2005 spending levels.

Last year, bolstered by the passage of Amendment 3 in November 2004, the Missouri Transportation Commission approved the largest construction program in the state's history, an investment of more than $7.3 billion over the next five years. The Missouri Department of Transportation (MoDOT) plans to increase its spending on construction and maintenance, from about $980 million in FY 2005 to more than $1.1 billion in FY 2006. MoDOT has programmed a significant increase in spending on bridges, from $128 million in FY 2005 to $240 million in FY 2006. That increase is much needed considering that the state ranks fourth in the nation in the percentage of structurally deficient bridges.

The Kansas Department of Transportation (KDOT) continues work under the 10-year Comprehensive Transportation Program (CTP) that began in 1999. The $13.2-billion CTP is the largest public works program in state history and spending for highway construction and maintenance will increase 19 percent in 2006, up from about $504 million last year to $600 million. Major modification, substantial maintenance and priority bridge expenditures remain near 2005 levels but system enhancement will increase more than 80 percent, from $85 million to more than $152 million. A system enhancement project let in September — interchange construction and related improvements at Interstate 435 and Antioch Road in Overland Park — is the largest project KDOT has ever let at nearly $92 million.

The Iowa Department of Transportation spent $628 million on construction and maintenance in FY 2005 and anticipates spending for FY 2006 to remain at the same level. Last fall, the department let its largest project ever, a $93-million contract that continues the multi-year reconstruction of Interstate 235 through Des Moines and includes more than $70 million in concrete pavement replacement, six bridge replacements and one new bridge.

The Nebraska Department of Roads (NDOR) expects a slight decrease in spending on construction and maintenance, from $372 million in FY 2005 to $370 million for FY 2006. NDOR's 2006 construction program includes $145 million in highways, $99 million on expressways and $64 million for interstate work.

Protecting the Bottom Line

As mentioned previously, we expect contractors to submit higher bids this year, mostly as a defense mechanism to protect the bottom line in the face of unpredictable costs, especially for fuel and materials. Competition for projects will remain strong and contractors will need to continue to seek ways of doing their work more efficiently. Particularly in a climate of high bids, those contractors who can get the most out of their employees, equipment and experience will have a successful 2006.

Estimated Expenditures	2005	2006
Transportation	2,500,000,000	2,700,000,000
Water/Sewer	1,600,000,000	1,800,000,000
Building	8,200,000,000	9,100,000,000
Power/Utility	1,300,000,000	1,500,000,000
Military	330,000,000	380,000,000
Civil	408,000,000	448,000,000
TOTAL	14,338,000,000	15,928,000,000