Lure of work in oil fields might impact the cost of construction for Minnesota
WILLMAR — Just when oil prices had finally gone down and Kandiyohi County officials hoped to catch a break on road construction costs, there is concern that the oil boom in western North Dakota could be to blame for driving up highway construction costs again in central Minnesota.
That reality hit the Kandiyohi County Commissioners at their meeting Tuesday when they approved a combined bid of $272,241 from Duininck Inc. for two bridge replacement projects near Lake Lillian — a bid 17 percent over the estimate.
The bid from Quam Construction was 68 percent higher than the estimate and bids from other contractors were 27 to 37 percent over the estimate.
In August the County Board of Commissioners rejected bids for the same projects when the total cost was about 23 percent higher than what engineers estimated.
Waiting until December to rebid the project lowered the cost a little, but the results from the six competing contractors “weren’t much better,” said Gary Danielson, Kandiyohi County Public Works Director.
He said the high bids are a simple fact of supply and demand.
Danielson said several large contractors from this region have moved some of their employees and equipment to build infrastructure in the area of the Bakken oil field or other areas in North Dakota where there’s work and a vacuum left by North Dakota companies that headed farther west.
“It’s the suction factor,” said Danielson.
All that has left a smaller labor pool of highway contractors in central Minnesota. Businesses that typically bid on county highway projects can command higher prices, said Danielson.
The demand for labor in North Dakota, combined with a “clear shortage of infrastructure dollars” in Minnesota, has resulted in a “double-edged sword” that he predicts will mean higher road construction prices next year.
Danielson said the county will advertise early for highway projects in 2014 in hopes of catching a financial break.
Commissioner Roger Imdieke said the same vacuum that is drawing businesses away from Minnesota will also open up opportunities for smaller companies to expand here.
Danielson said that may be true for earth-moving companies, but concrete and bituminous road construction usually takes bigger operations.
Chairman Harlan Madsen said some contractors also reduced staff during the economic downturn and those skilled workers went elsewhere and it will take time to regenerate that workforce here again.
Meanwhile, the county will likely have fewer road construction dollars to spend next year because the county will be over-budget with snow removal this year.
The county typically spends $500,000 to $600,000 a year.
With the long winter season that extended to May of this year, and the early start to winter now, Danielson estimates the county will spend $750,000 to $900,000 to clear snow and ice from roads before the year is over.
He said that will affect the county’s road construction priorities for 2014.