VTCA and VDOT Agree to Inflation and Escalation Relief

Last week, the Virginia Commonwealth Transportation Board heard a presentation about an adjustment to the state’s fiscal six-year improvement plan, setting aside a reserve fund of $129 million should forecast increases in maintenance costs the rest of the year come to fruition.  This wasn’t just a new idea, but one that has been in the works for months. 

Since late 2021, VTCA has been in talks with VDOT about the impact of inflation costs/escalation costs and possible solutions.  VTCA staff has held several meetings with VDOT on specific options to help the industry cover increasing costs for Contractors on steel prices, Aggregate Producers, Design Consultants and Suppliers.  VDOT’s leadership is committed to industry success and opened discussions in a variety of ways in addition to the reserve fund idea. 

VTCA’s leadership committees then formed subcommittees who worked specifically on these topics knowing VDOT needed viable solutions to ensure work for the remainder of 2022 continues with as little interruption as possible.  Keeping the industry viable is a key component of this success.    

The reserve fund sets aside $81 million for fuel and asphalt, $24 million for fuel and $24.3 million for localities. 

Laura Farmer told the CTB the move is a one-year adjustment at this point, and any future adjustments to the six-year plan will depend on inflation and fuel prices. 

In addition, VTCA has been working on several other options for members: 

For the Design Consultant Community: 

• VDOT will adjust Fixed Billable Rates for Contracts and Term extensions executed between 7/1/21 to 6/30/22 will have the FY22 escalation rate adjusted to 3.5% (adding 2.5%).  This will not alter rates already billed or issued task order budgets.  VDOT is working to determine the mechanism to update FY22 rates. FY23 escalation will be 4.2% 
• VDOT indicated that there were too many variables to try to address in the short term to move to a “flat” escalation rate. VDOT will continue discussion with the industry about determining escalation and the appropriate metrics to use to identify the appropriate escalation on a yearly basis. 
• VDOT plans to release a memo on June 1 with FAQs to try to answer questions. 

For the Aggregate Producers: 

As we reported last month, VTCA, with the assistance of several VTCA aggregate members from the Marketing Committee, has reached an agreement with VDOT Maintenance and VDOT Procurement to permit Aggregate Delivery Contract Holders the ability to adjust their pricing to compensate for the sudden and significant increase in the cost of diesel fuel required for aggregate deliveries made directly to VDOT for maintenance requirements. 
   
This is a one-time adjustment offered by VDOT for aggregate suppliers to cover additional hauling costs due to increased fuel costs. This relief will be offered on all active Aggregate Delivery Contracts.   
 
Discussions around possible solutions on materials on the job site continue.  We are looking at all steel prices which have been the most erratic of items.  VTCA and VDOT are on the same path, yet additional details need to be worked out. 

Stay tuned for additional information.