One downside of a strong economy: High demand is driving up costs for materials and construction

Planning for the long-running Boones Ferry Road project is nearing the finish line, but City officials say the final price tag for "Phase 1" of the project will likely be several million dollars more than what was initially budgeted.

SHUMAt a City Council meeting in January, project lead Crystal Shum said the estimated cost for Phase 1, which includes the portion of Boones Ferry Road between the Madrona Street and Oakridge Road intersections, is now $32.2 million — up from $27.5 million in the original budget.

Some of the increase is an inevitable result of the design process, City Manager Scott Lazenby says. The project is primarily funded by the Lake Grove Urban Renewal District, but the district was created before the project was designed, so planners had to rely on their best estimates to determine the district's size and spending limits.

The current cost estimate also includes some unrelated work items on nearby sewer lines and other utilities that were added to the project because of Lake Oswego's "dig once" policy, Lazenby says; those items will be covered by money from other City departments.

But the biggest culprits, according to Shum and Lazenby, are a strong economy and a booming construction market. With a huge number of capital projects underway in the region, a shortage of contractors is driving up prices.

"All the other jurisdictions are finding the costs are coming in high these days," Lazenby told The Review. "It's a good sign for the economy, but it's bad news for us."

Shum says the shortage also extends to materials — all those projects eat up available supplies of concrete, asphalt and other raw goods, making all of them more expensive. And last summer's spate of hurricanes and other natural disasters has driven demand up even further nationwide, she says.

The high demand also means cities are receiving fewer competing bids on new projects, Lazenby says, leaving officials with less room to find the best deal. In fact, some of Lake Oswego's current smaller projects haven't received any bids at all — a pair of pathway projects are currently being re-advertised after getting no responses the first time.

"We've got some other bids that we'll be opening at the end of this month for D Avenue and other projects, and we're holding our breath for those," Lazenby says.

He and Shum both say they're confident that the Boones Ferry Road project is large enough to attract bids, and Lazenby added that projects advertised in the winter tend to have a better shot at getting bids because contractors usually have more time to research and draft proposals.

"We're not necessarily worried about getting contractors to bid," Shum says. "It's the cost that we're a little worried about."

There's still some work that has to be done before the project can reach the bid stage. The City is currently awaiting the latest design documents (the project is nearly 95 percent designed), which will have to be reviewed and approved by the Oregon Department of Transportation.

Property acquisition for the expanded right-of-way is still wrapping up, and another ODOT review will be needed after the design reaches 100 percent. Shum says it will likely take at least two months after that before the City can move forward on a bid.

If there happens to be a market downturn during that timeframe, the City could catch a lucky break and face lower costs. That's what happened in 2009, Lazenby says — the City was able to take advantage of lower prices brought on by the recession when it solicited bids for the Lake Oswego Interceptor Sewer project.

If the bids for Boones Ferry turn out to be prohibitively expensive, he says, the City could opt to delay the project — but that would mean gambling that prices will drop at some point in the future.

"That's one of the options, to ride it out," he says. "There's always cycles, (but) then it becomes a question of what are the chances of prices actually dropping? If they just level off, waiting doesn't do you any good."

The Boones Ferry project does have some flexibility in terms of cost increases. The Lake Grove Urban Renewal District was intended to raise enough money to fund both phases of the project, so there's more than enough funding on hand to absorb the cost increases, City officials say — but they might have to do some work to close the gap when Phase 2 starts up.

"When they hit that decision, there's a number of options to change the scope of some of the projects in the plan, to extend the district, to seek other grant funding, things like that," Lazenby says.

The project was originally split into the two phases in order to make it more affordable, Shum says, and many of the biggest work items were front-loaded into Phase 1, including all of the new signalized intersections.

Phase 2 includes the portion of Boones Ferry Road between the Oakridge Road and Kruse Way intersections. It will likely add improvements at the existing intersections in the area, Shum says, but won't add any new signals.

For the time being, officials say, the City can only keep moving forward with the design work and right-of-way acquisitions and wait to see what the actual bids say. If things go well, Shum estimates that the project could break ground in the late fall of this year.

"We know there's going to need to be a lot of outreach during the project, but I think it's been shaping up well, and I think the council agrees that the final design is pretty much what was envisioned when the process got started," Lazenby says. "So we're hoping to just get into it and get it done."

Contact Lake Oswego Review reporter Anthony Macuk at 503-636-1281 or This email address is being protected from spambots. You need JavaScript enabled to view it..

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