A huge infusion of transportation construction cash and projects in Northern Virginia in the past several years could have an unintended consequence for Loudoun: more difficulty building big projects like roads and bridges.
In 2013, the state passed legislation that began pouring hundreds of millions of dollars of funding into transportation in Northern Virginia. At the same time, Loudoun launched into an ambitious locally funded road building plan after years without any completed roads by the Virginia Department of Transportation.
Some county leaders worry that has resulted in more construction projects than contractors to build them, pushing up project costs.
“This new infusion of funding for public projects, coupled with robust private sector development activities in NOVA is, in my opinion, saturating the construction market based on the number of contractors in the area,” said Loudoun Department of Transportation and Capital Infrastructure Director Joe Kroboth. The county has seen fewer contractors bidding on county construction projects, and some bids are coming in above the county’s cost projections.
Melissa Tello, Loudoun County’s construction program manager, said those problems tend to be worst in certain niches.
“Our parks are definitely one of those areas where we don’t see as many bidders,” Tello said. “Certainly, traffic signals are another area.” Those projects require specialized expertise, limiting the number of contractors who will bid.
Loudoun is still working through a backlog of road projects that were put on hold because of tight budgets in the recession, as well as trying to catch up to its explosive growth in the past several years. Kroboth said a 2013 study identified 103 missing links in eastern Loudoun’s transportation network, and estimated the county has worked through about 10 percent of them.
The county’s surge of construction projects and the recent boom in private development in the area are also competing against a project of historic proportions.
“There is a tremendous amount of resources that are being committed to the Metrorail project,” Kroboth said. “Let’s face it, it is one of the largest public works projects under construction in the entire country at this point in time.”
The county also faces regulatory headaches, limited staffing, and utility companies that don’t negotiate their construction and relocation fees.
The county’s construction projects often have to go through a battery of other government offices for approval, such as VDOT, the Virginia Department of Environmental Quality, and the Army Corps of Engineers.
“Sometimes it takes an unbelievable amount of time to get plans approved,” Kroboth said.
Road projects in particular have to be pre-approved by VDOT according to their design and whether the contractor the county hires is in good standing with VDOT, because the county has to work to VDOT’s standards and needs VDOT to take over maintenance of the road when it’s finished. The contractors have been authorized by VDOT and follow the appropriate procedures.
“We don’t want to be at the end of the day responsible for a $15 million road project because they didn’t do something appropriate with VDOT, or VDOT won’t accept it because something happened on another job with that contractor,” Kroboth said.
Utility companies can also drive project costs far above expectations.
“It’s not just a cost issue,” Tello said. “We don’t have a lot of negotiation ability. Holding that portion of the work to a schedule is equally as challenging.”
Because the county has no real ability to negotiate the cost or timeline for relocating utility lines, several projects have seen higher costs and delays. Last year, Columbia Gas demanded $1.44 million to relocate a gas pipeline near Mooreview Parkway and $1.7 million to relocate one near Claiborne Parkway. At that time supervisors likened those costs, which were far above what the county expected, to extortion. Board finance committee Chairman Matthew F. Letourneau (R-Dulles) said those kinds of unexpected costs can snowball a project’s cost.
“Columbia Gas had us go dig up and then lay an entirely new gas line across the project, at a cost of like $2 million. And that in turn just spirals it, because you delay the project, which then raises costs more,” Letourneau said.
One of Loudoun’s biggest markets, data, is also one of its most difficult utilities to work around. Kroboth said fiber optic companies will lay a conduit, then lease space in it to 10 other companies, meaning the county has to chase down every company that leases space in that conduit. Sometimes those customers are government agencies with secure facilities, making information difficult to find.
“We hear ‘my client, but we can’t tell you who the client is’ a lot of times,” Tello said.
And it’s a booming market. Kroboth told the story of one developer who tried to build on a lot with two fiber lines running along the front of the property, but fiber development moved faster than permitting.
“By the time they got through their land use approval process and they were ready to start construction, those two fiber lines turned into 53 fiber lines,” Kroboth said.
And the county staff works long hours to keep up with everything in the county’s Capital Improvement Program.
“The manpower that it takes from county staff to put that plan together, manage that plan, then actually make that plan happen and constantly review the plan, keep everything on track, while adhering to the sound fiscal policies that the board has established which give us that AAA rating—that requires a lot of very dedicated staff time,” said Erin McClellan, Loudoun’s director of Management and Budget.
While the county’s needs and budget have grown over the years, the county’s staffing hasn’t kept pace, she said.
“If you look at how big our CIP was 10 years ago and now, it’s just surprising that we’ve been able to make that jump with the staff that we have,” McClellan said. “We’ve gotten some additions over the years, but I don’t believe it’s keeping pace with the workload.”
Projects cost more when they take longer to start or finish because of delays when the county can’t find a suitably affordable and responsible bidder, because of delays to relocate utilities, or because of regulatory hold ups. The county estimates costs go up by 4 percent a year—which means even without any other complicating factors, delaying a project makes it more expensive.
Kroboth used the example of the Loudoun County courthouse expansion in Leesburg, an ongoing $65 million project. By that estimate, every month the project is delayed cost the county $217,000.
Projects that fall behind can also be forced to redesign if regulations change before they are built, further snowballing escalating costs. The county has only so much ability to pay for capital projects, and if costs get out of control, projects could be pushed back, threatening the county’s plan to keep up with its own growth.
But county leaders say they see the problem and it can be addressed.
Contractors Say Market is Mixed
“I think the problem you’ve got is that the contractors only have so many resources, and so they can only bid so many opportunities,” said Supervisor Ralph M. Buona (R-Ashburn). “…Right now they’re being more selective because there’s so many opportunities for them to be bidding on.”
Dave Speed, vice president of William A. Hazel Inc., said the government market is heating up.
“I see there’s a lot of growth in the transportation market in Loudoun County, potentially,” Speed said. “We’ve experienced it, but we’re on the tip of the iceberg now with Metrorail coming out there. It’s just going to keep growing and growing and growing.”
William A. Hazel Inc., based in Chantilly, is a frequent bidder on county contracts, and holds the $4.3 million contract to extend Mooreview Parkway from Croson Lane to Old Ryan Road, among others.
Robert Phillips, manager of Phillips Construction LLC, agreed that government contracting “has been more brisk during 2016 than it was for several years.” Phillips, based in Kentucky, is another frequent bidder on county projects, and holds a $7.5 million contract to construct Tall Cedars Parkway between Gum Spring Road and Pinebrook Road—a bid that came in above the county’s estimates.
Speed said although public works projects are still growing, they constitute only a comparatively small part of what his company does, and the private market might be slowing.
“The last 20 years, Loudoun really grew exponentially, and there were always multiple master plan communities,” Speed said. “[Now] we just don’t see it. Maybe they’re out there, but we don’t see them in 2018, or maybe even 2019.” Speed said now the only large subdivision community still under construction in Loudoun is Willowsford.
Looking ahead, he added, the company will have to adapt to a changing market.
“We see that the market is steady,” Speed said. “And you know, I see that probably 2017 will be steady. But further out, 2018, 2019, it’s not so clear that it’s going to remain this way. The county has increased their construction, but the developers, I think, are slowing down.”
Staying on Top
But Buona said the county is addressing the problem before it gets out of control, and is taking steps to make sure it doesn’t pose a threat to the county’s Capital Improvement Program, which outlines the county’s construction projects over the next six years. For one thing, the county has been reaching out to more contractors.
“We’re trying to build up our bidders list,” Buona said. “We’re trying to get a large cadre of potential bidders on this. … We’re advertising more aggressively than we traditionally did.”
County staff members say they are also getting better at anticipating costs, including utility costs, as they get more years of experience building roads under their belts. Staff members have also asked the board to fund a new position whose job will be to understand and coordinate with utility companies and their costs.
The county has also begun to build bigger contingency funds into its budget, allowing for major unexpected costs.
Major Metrorail construction in Loudoun is expected to wrap up before 2020, further freeing up resources, and contractors report a slowing private development market after years of building multiple major developments at once.
“In a couple of years we may be over the hump and we may not be having as many problems with this, but the large amount of construction underway today is manifesting itself in a lot of different ways,” Letourneau said.
And the county is streamlining the process to obtain right-of-way for transportation projects in an effort to avoid a negotiating tactic by landowners hoping to negotiate higher prices though delays.
“What we’ve had is repeatedly, as a tactic, landowners and their attorneys have delayed the right-of-way acquisition process with the county,” Letourneau said. “And they know that time is on their side, because the more they can drag it out, the more the costs goes up, and the more pressure the board is under to get it done.”
The county will instead begin acquiring right-of-way earlier in the design process for a project, and using eminent domain when that process does not produce timely results. In that way the county would gain control of a right-of-way sooner, and the price could be negotiated or settled by a court later.
County leaders believe as a community with growing revenues and a flawless credit rating, Loudoun has flexibility to adapt its Capital Improvement Program to address problems as they come up.
“I think we’ve recognized it proactively,” Buona said, “so I think we’re in a position to work the issues so that it doesn’t become a problem for us.”