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Inflation is driving up the cost of materials like fuel, asphalt and other resources common to infrastructure projects in Virginia, leading agencies to analyze ongoing impacts to their active bids and contracts.

The Virginia Department of Transportation has already taken measures to ensure local projects are financially supported by increasing maintenance and financial assistance reserves more than $129 million.

VDOT’s spokesman Marshall Herman said these reserves will address immediate concerns like the cost of diesel fuel, but officials are still determining how initial cost estimates may be affected.

“The use of these reserves will be determined after the completion of the paving season in early 2023,” Herman said.

VDOT’s Chief Financial Officer Laura Farmer said the agency is in the process of reviewing all projects going out for bids in the upcoming year to determine the impacts of the cost of fuel and other commodities.

“Based on what we knew in April and May with diesel approaching $5 a gallon,” Farmer said, “the department needed to size up appropriate reserves to meet the commitments of our paving schedules.”

Throughout this year, the U.S. has faced unprecedented price hikes to the cost of goods and services related to gas, rent and groceries.

The hikes are being driven by a variety of factors, including worldwide supply chain issues, increased consumer and business spending, Russia’s invasion of Ukraine and more.

Consumer prices were up 9.1% compared to a year ago in June — the largest increase in 40 years, according to the U.S. Bureau of Labor Statistics.

The Federal Reserve last week raised its benchmark interest rate by three-quarters of a point for a second straight time, part of an aggressive drive to tame high inflation.

As people struggle with record high inflation rates, price hikes are also affecting the cost of doing business when it comes to improving roads, bridges and highways.

Prices paid to U.S. manufacturers of asphalt paving and tar mixtures were up 14% in May compared to last year, according to data measured by the Federal Reserve Bank of St. Louis.

Steel plates commonly used in bridges were up 23%, and ductile iron pipes and fittings used by water systems were nearly 25% higher.

Farmer said it’s difficult to tell how projects in the commonwealth have been impacted across the board since VDOT’s engineers review bids on a project-by-project basis.

VDOT contracts also have components that offer contractors flexibility should there be price adjustments, and the agency’s engineers have discussions with contractors about the impacts inflation has had on the industry.

Groups like the Virginia Asphalt Association and the Virginia Transportation Construction Alliance are working with VDOT to decipher the cost drivers in the industry,” Farmer said. “Our engineering leadership is with them all the time to try to understand what’s happening in the industry.”

The price hikes are already diminishing the value of a $1 trillion infrastructure plan of President Joe Biden. That law had included roughly a 25% increase in regular highway program funding for states, funding that’s dwindling quickly.

“Those dollars are essentially evaporating,” said Jim Tymon, executive director of the American Association of State Highway and Transportation Officials. “The cost of those projects is going up by 20%, by 30%, and just wiping out that increase from the federal government that they were so excited about earlier in the year.”

Localities in Virginia are no exception to these cost estimates. Henrico County, for example, is planning more than 100 active transportation projects, with a cost projection of $423 million over the course of the next six years.

Unlike other counties in the commonwealth, Henrico does not have state-maintained secondary roads and highways. Instead, the county maintains its own just as a city would. Arlington County operates under the same model.

Henrico Director of Public Works Terrell Hughes said that throughout the county’s scheduled maintenance and capital improvement bids this year, the price of doing business has certainly gone up. Hughes has worked for the county since 2020 and previously served as the assistant planning director and assistant division administrator for VDOT’s Transportation and Mobility Planning Division.

“There are some areas where we’re seeing some uptick in prices,” Hughes said. “I mean, we’ve seen prices as much as 30% higher than previous years.”

Hughes said materials that are critical to any project like steel pipes and asphalt have seen slight upticks, but not outside the county’s projections. However, the compounding effects of higher fuel prices, material cost and supply chain issues are something to keep in mind.

J. Ward Best, chairman of the Virginia Trucking Association, said the combination of those issues are causing trucking companies a lot of distress when it comes to obtaining bids and finances.

“It’s been a heck of a roller coaster for us,” Best said. “For a lot of small carriers, the increased cost of fuel, equipment and labor they’re feeling that pain directly.”

With over 50 years of experience in industry, Best said carriers throughout the state are experiencing the pitfalls of high prices on diesel fuel.

Angelique Temple, an owner-operator of her own carrier company, said she often has had to turn down contracts that lowball fuel expenses.

“The rate’s just aren’t matching our fuel prices,” said Temple, who has been hauling for more than 20 years.

The American Automobile Association records the national average for diesel fuel at around $5.32 per gallon in the U.S. as of Friday. Temple said prices have certainly gone down, but not enough to be profitable with every haul.

“I think most of us expect our pockets to get hit when it comes to gas, but sometimes I’m spending $3,000 on gas alone,” Temple said.

Ron Orr, a driver who’s been on the road since 2013, said his stress and anxiety have been affected as prices continue to peak.

“Driving isn’t what everyone thinks it is,” Orr said. “Expenses are high, and we don’t always make money from the loads we do, but if we don’t do what we’re doing, nobody can get anything.”

Ron Orr, who made a delivery in Ashland on Friday, is feeling the stress as inflation has made truck driving a less profitable profession. The chain reaction of high prices for diesel fuel, labor and materials can spread capital improvement projects out overtime.

The chain reaction of high prices for diesel fuel, labor and materials can often spread projects out overtime.

Communities like Henrico will not feel the real brunt of inflationary cost initially, but people like Hughes said that once the county renegotiates its long-term contracts, some pricing is likely to change.

For now, costs have not hindered the county’s vision for its capital improvements and maintenance needs, but that could always change, according to Hughes.

“Those are the things we have to anticipate when we start renewing our contracts,” he said. “There’s enough time between the budget cycle to plan ... for now, we haven’t had to sacrifice.”

The Associated Press contributed to this report.

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Ron Orr, who made a delivery in Ashland on Friday, is feeling the stress as inflation has made truck driving a less profitable profession. The chain reaction of high prices for diesel fuel, labor and materials can spread capital improvement projects out overtime.

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