Improving Mid-Term, Intermediate, and Long-Range Cost Forecasting: Guidance for State Departments of Transportation

The ability to create accurate forecasts of project costs is a core competency for state departments of transportation (DOTs). Cost forecasting is used by state DOTs to develop and update transportation plans; program projects; manage transportation improvement programs; administer the bid-letting process; and oversee contracts. Forecasts are used to demonstrate fiscal constraint and to track performance measures of on-time, within budget delivery. Reliable and accurate cost estimates help agencies improve decision making and transparency, and build trust by supporting reliable program delivery. Forecasts have a range of time horizons, from short-term construction project estimates (1 to 2 years), mid-term State Transportation Improvement Programs (STIPs; 3 to 5 years), intermediate-range plans (up to 10 years), to Long-Range Transportation Plans (LRTPs; 20 years). However, forecasting costs over long time horizons poses serious challenges: the longer the time horizon, the greater the risk and uncertainty.  The sources of uncertainty include but are not limited to: (1) Cost forecasting approaches: (a) Variation in the quality and quantity of historical data available for forecasting; (b) State DOT capacity for forecasting analysis; (c) Use of inappropriate cost estimation indices; (2) State DOT program and project delivery: (d) Variation in materials, labor, and other costs; (e) Geographic differences within a state or region; (f) Evolution of scope and design during project development; (g) Project size and complexity; (h) Availability, amount, and timing of federal, state, and local funding; (3) Contracting and wider economic forces: (i) Contracting methods and requirements that affect cost and cost development; (j) Timing of bid release and lead time to the construction season; (k) Market conditions (e.g., “thin” contracting markets with few firms and little competition; year-to-year variability in the size of the program); and (l) Variation in short-term and long-term inflation (or deflation) rates and volatility of economic conditions. A number of recent studies have addressed aspects of uncertainty in cost forecasting.  For example, Wisconsin DOT developed an approach using a chained Fisher index with over 90 cost items to better incorporate historical data into cost estimates (see: ). The Montana DOT is implementing a cost estimation method that uses a dynamic basket of items in a multidimensional index, to better reflect the granularity of the construction market and differences across project types (see: ). The Federal Highway Administration recently developed an improved methodology for project cost estimates (draft final report available on request from These efforts have focused on project cost estimates for relatively short time horizons. This project will build on this recent work by focusing on potential improvements to cost forecasting for longer time horizons, which are needed for planning, programming, and other purposes. The objective of this research is to provide guidance for state DOTs to improve forecasting for mid-term, intermediate, and long-range time horizons to better account for cost variability, economic volatility, and risk. The project will build upon existing research and current practices in cost forecasting, serving as a resource for state DOTs to augment their forecasting approaches.


  • English


  • Status: Proposed
  • Contract Numbers:

    Project 10-101

  • Sponsor Organizations:

    National Cooperative Highway Research Program

    Transportation Research Board
    500 Fifth Street, NW
    Washington, DC  United States  20001

    American Association of State Highway and Transportation Officials (AASHTO)

    444 North Capitol Street, NW
    Washington, DC  United States  20001

    Federal Highway Administration

    1200 New Jersey Avenue, SE
    Washington, DC  United States  20590
  • Project Managers:

    Hartell, Ann

  • Start Date: 20171205
  • Expected Completion Date: 0
  • Actual Completion Date: 0
  • Source Data: RiP Project 41631

Subject/Index Terms

Filing Info

  • Accession Number: 01634936
  • Record Type: Research project
  • Source Agency: Transportation Research Board
  • Contract Numbers: Project 10-101
  • Files: TRB, RiP
  • Created Date: May 18 2017 1:00AM