The boom’s echo

Back in December, Maine taxpayers and lawmakers were hit with a triple whammy of proof that good times come at a price. Three major public construction projects — the redesign and consolidation of the state prison system, the renovation of a Vassalboro school into a police academy and the installation of a new State House computer system — were underway, with cost overruns in the 20 percent range, for a total increase of up to a $30 million.

The explanation given was that the booming economy had driven up the cost of contractor services and materials substantially between the time the project consultants prepared their estimates and when preliminary bids were recieved. Although the methods by which consultants develop estimates remain open to question, there now is solid evidence that the marketplace does in fact enforce the law of supply and demand.

According to data compiled by both state and federal labor agencies, construction expenses have spiked considerably in the last two years. Nationally, the cost of an office building has shot up from an average of $69.80 per square-foot in January 1998 to $81.94 today, a hike of 15 percent. Schools cost 14 percent more, jails 19 percent.

Wages in the construction trades have increased significantly — the average hourly pay for masons has gone from $14 to $21 and up, carpenters from the $10 to $12 range to $14 to $16, drywall installers from $12 to $16. Materials are up as well: sheetrock by 20 percent, masonry by 29 percent, duct work by as much as 80 percent. And longer waits for the delivery of materials further drives up costs.

The almost insatiable demand for construction also has had the effect of reducing competition. In 1997, large construction projects in Maine typically attracted five to seven general contractor bids. Last year, two to three was the norm. Although the enormous natural-gas pipeline project skewed the labor/materials numbers, upcoming major projects, such as the turnpike widening and the passenger rail work should keep the pressure on.

It is especially important that the Legislature take these trends into consideration as it evaluates the prison project and the request for an additional appropriation of $17 million. This complete overhaul of Maine’s overcrowded, inefficient and obsolete prison system, which has the second-highest per-inmate costs in the country and is severely lacking facilities for education, counseling and job-training programs, is long overdue. The original estimate was $137 million, the bids recieved last fall on just one component suggested total overruns of $30 million or more. Department of Corrections officials have done well to reduce that by nearly half. Lawmakers should take care that any further cuts they may propose don’t leave Maine with a new version of the same old problems.

The 11-percent overrun now projected for the prison project compares favorably with other public projects awarded during the last year in Maine : three secondary school projects came in 10 percent over budget, a fourth at 28 percent; three University of Maine projects were 30 percent higher; two state boat launches attracted only one bidder, at prices 50 to 100 percent above what was anticipated.

This is not to say that Maine should simply write bigger checks and chalk the whole up to experience. The nation is now in its ninth year of economic expansion. The building boom now seen in the Northeast started rolling up from the South and West years ago. Better modeling by the consultants hired to develop estimates for these projects could not have done much to keep prices down, but they could have lessened the shock.