A Modeling Approach to Indexing the Cost of Highway Construction and Maintenance Projects to A Responsive Highway User Fee Using Bid Items Data

Abstract

Multiple variables affect the cost of highway projects and associated bid item prices. Such variables constantly change according to factors on the project, state, and national levels. In most states, the funding of highway construction projects is dependent on a fixed fuel tax per gallons of fuel sold. Such a mechanism does not link the actual funding cost of highway projects to fees collected from the highway users. In order to establish a link between the highway user fee and the actual cost of highway projects, this research aims to: 1) establish a methodology to identify highly significant and influential bid items, 2) quantify the factors impacting the cost of highway projects, 3) develop a bid item price estimation model, and 4) calculate a highway construction cost index. Such an index can then be used to influence change in the fuel taxes to better mirror the actual cost of highway projects. The research identifies significant bid line items and models the relationships between bid item prices and multiple variables using Multiple Linear Regression and Time Series Analysis. The Fisher Price Index is used to calculate a Highway Construction Cost Index to represent the link between the cost of highway projects and a Highway User Fee. The modeling process identifies the relationships between bid item prices and the selected independent variables and identified bid items. The selected variables and modeled relationships represent the factors controlling the change in bid item prices and highway project costs. These modeled relationships enable transportation agencies to understand the factors affecting the costs of the highway projects and the ability to influence such an effect. Using the developed Cost Index and Tennessee highway projects, a Highway Construction Cost Index is calculated and compared to the Federal Highway Administration (FHWA) National Highway Construction Cost Index (NHCCI). As a result, the research develops a modeling and indexing approach to link the actual cost of highway projects to a highway user fee using selected bid items and modeled relationships to identified variables of significance.