U.S. Department of Transportation
Federal Highway Administration
1200 New Jersey Avenue, SE
Washington, DC 20590
Overview – The National Highway Construction Cost Index (NHCCI) is a quarterly price index intended to measure the average changes in the prices of highway construction costs over time and to convert current-dollar highway construction expenditures to real dollar expenditures. The FHWA uses data on State web-postings of winning bids submitted on highway construction contracts. The data represent a detailed universe of prices and quantities of pay items for those winning contracts. A pay item is a unit of work, construction material, labor, or service for which price and quantity is provided in the contract. The NHCCI covers the universe of the nation’s highway projects and arrive at an average cost index for all highway construction. Please refer to the Description of the National Highway Construction Cost Index (NHCCI) 2.0 for more information about the methodology and data.
Need for Revision – In 2014, as part of its periodic review process, the FHWA conducted a diagnostic review of the index and software program to identify and explore any potential issues with the calculation and results of the index. This effort addressed the stagnant or declining trend in index values over the last several years, particularly beginning with the second quarter of 2009. This trend was not consistent with the price changes exhibited by other national level price indicators, such as the Producer Price Index (PPI), the Producer Price Index for paving mixtures and blocks, and the Producer Price Index for construction materials.
The FHWA initiated a research study in 2015 to conduct a comprehensive and critical review of the estimation methodology and input data. This effort unveiled issues in the data inputs, and identified areas of enhancements in the estimation methodology. After addressing the issues in the input data and estimation methodology, the FHWA prepared a revised quarterly NHCCI for the years starting from 2003. This is the first major revision since the FHWA started publishing the NHCCI index in 2009.
Changes in Methodology – The changes in methodology of estimation involve application of improved statistical methods that more closely reflects or approximates observed price changes in highway construction costs over time, and allow utilization of more input data in the calculation of the index. The methodology changed in several ways:
Figure 1 presents a comparison of the NHCCI 2.0 and old NHCCI estimates. The NHCCI 2.0 is consistently higher than the old index. The NHCCI 2.0 grew by approximately 4.4 percent per year from 1.0 in 2003 to 1.68 in 2015. In comparison, the old index grew by 0.92 percent per year from 1.0 in 2003 to 1.12 in 2015.
Sources: Federal Highway Administration (FHWA), National Highway Construction Cost Index (NHCCI).
Figure 2 provides a comparison of the NHCCI 2.0 with the Producer Price Index (PPI) that is published by the Bureau of Labor Statistics (BLS). As shown in Figure 2, the trend in the NHCCI 2.0, despite its faster growth, is consistent with that of the PPI that measures the average changes in the selling prices received by domestic producers for all commodities. During the 2003-2016, the NHCCI 2.0 grew by 3.9 percent annually, and the PPI rose by 2.3 percent annually.
Sources: NHCCI2.0: Federal Highway Administration (FHWA), National Highway Construction Cost Index (NHCCI).
PPI: Bureau of Labor Statistics (BLS), Producer Price Indexes, PPI Databases, available at https://www.bls.gov/ppi/data.htm as of July 2017.
Figure 3 presents the PPI for major construction materials. The figure illustrates that the producer prices of major highway construction inputs experienced much faster growth rates than the overall producer price index (PPI) for all commodities during the period. The PPI for paving mixtures and blocks, concrete products, and fabricated structural metal grew by approximately 5.7 percent, 3.7 percent, and 2.9 percent per year, respectively between 2003 and 2016. These inputs account for a large share of the total value of construction items included in the calculation of FHWA’s NHCCI 2.0.
Notes: Paving mixture and blocks consists of emulsified asphalt, other liquid asphalt and tar paving materials including cut-backs; and asphalt and tar paving mixtures (excluding liquid)
Source: Bureau of Labor Statistics (BLS), Producer Price Indexes, PPI Databases, available at https://www.bls.gov/ppi/data.htm as of July 2017.
Future Data Release and Revision Schedule
Release Schedule – As with its predecessor, the NHCCI 2.0 will be released on a quarterly basis with a time lag of three months.
Revisions to Quarterly Index: FHWA will release preliminary NHCCI estimates for a new quarter using preliminary BidTab data from Oman Systems, Inc. Since the input data for the new quarter are preliminary, they are subject to revisions in later quarters as more complete data become available. Along with the new quarter data, Oman System, Inc will provide FHWA with updated data for the previous quarters. Correspondingly, FHWA will produce revised estimates for the previous quarters besides the preliminary index for the new quarter.
Review and Revisions – The FHWA will update the crosswalks as necessary and review quarterly estimates. Additionally, the FHWA will periodically review the performance of NHCCI 2.0 to identify potential data or methodology revisions.