Procurement and Infrastructure Costs

Abstract

Why is building and maintaining infrastructure so expensive in the United States? We collect new project-level data on infrastructure spending and new survey data on how the states procure these projects. This allows us to document variation in costs between states, and then correlate these costs with potential cost drivers. We find that two important inputs in the procurement process appear to particularly drive costs: (1) the capacity of the DOT procuring the project and (2) the lack of competition in the market for government construction contracts. We quantify the role of capacity with administrative data that links individual personnel with infrastructure contracts in California. We show that higher quality engineers deliver projects at a lower cost, while retirement shocks slow project timelines and increase costs.

Keywords: infrastructure costs; procurement; bidding

JEL Classification: R42, L38, D44, H54, H57, L91, O18, K40, H83