1. O h i o D e p a r t m e n t o f T r a n s p o r t a t i o n Ohio Construction Cost Indices and Inflation Forecasts TEA Conference October 6, 2007 Prepared by: Bid Analysis and Review Team

2. O h i o D e p a r t m e n t o f T r a n s p o r t a t i o n ODOT In-Place Construction Cost Index: Conceptual Description  Select a basket of items to represent an item class.  Base Year: SFY04-SFY05 (State Fiscal Year Begins July 1)  Exclude items: Miscellaneous, As-Per-Plan, Warranty, & Difficult Units of Measure  Exclude items not represented well over time.  Calculate expected prices for each basket item.  12 month weighted average price.  Regression analysis  Interpolation  Trend line

3. O h i o D e p a r t m e n t o f T r a n s p o r t a t i o n Conceptual Description (cont.)  Calculate the composite price weighted by base year expenditures.  FY04-FY05.

4. O h i o D e p a r t m e n t o f T r a n s p o r t a t i o n Current Inflation

5. O h i o D e p a r t m e n t o f T r a n s p o r t a t i o n

6. ODOT Semi-Annual Inflation Forecast: Conceptual Description  Data Collection  Monitor construction publications  Compare recent inflation trends with our predictions  ODOT Cost Index vs. Selected Federal Indexes vs. Turner Cost Index  Consider long-term price trends for critical construction goods and services  A group consensus determines the final inflation forecast

7. O h i o D e p a r t m e n t o f T r a n s p o r t a t i o n Causes for Change  Commodity Steel  Increases in world-wide demand  Worldwide consolidation of manufacturers  Regionalization and supply control  Local consolidation  Higher input costs: energy, scrap, & iron ore  Fewer steel owners are better able to pass increased costs to customers.  Plants shut down rather than produce below cost

8. O h i o D e p a r t m e n t o f T r a n s p o r t a t i o n Causes for Change  Energy  Significantly reduced predictions for future daily oil output and increased future consumption will create a supply and demand squeeze as early as 2012*  Medium-term outlook on refined oil product production is static** * International Energy Agency, July 2007, Medium-Term Oil Market Report, p5. ** Based on information provided by the Marathon Petroleum Company

9. O h i o D e p a r t m e n t o f T r a n s p o r t a t i o n Predicted Cost Inflation FY08-FY12: July 2007 1.The predictions in the Table are based upon our experience and understanding of the changes affecting the construction industry in Ohio. BART sourced information from its own ODOT construction cost index and from outside construction analysts whom it believed had relevant information to contribute to developing these predictions. 2.We believe that the most important cost drivers of construction cost inflation for the next five years will be energy, steel, and cement. Unlike many other construction materials, these items are impacted by international influences which are difficult to predict. FY08FY09FY10FY11FY12 High14.5%14%13%10%8% Most Likely10% 8%6%5% Low7%6.5%5%4%3% Inflationary Compounded Growth 10%21%31%39%45% Most Likely

10. O h i o D e p a r t m e n t o f T r a n s p o r t a t i o n  Actual inflation –based on ODOT derived formulae  FY2003 - 3.1%  FY2004 - 3.5%  FY2005 - 8.5%  FY2006 - 12.3%  FY2007 - 11.6% (forecast at 11.5%)  ODOT Inflation Forecast  FY2008 - 10%  FY2009 - 10%  FY2010 - 8%  FY2011 - 6%  FY2012 - 5%

11. O h i o D e p a r t m e n t o f T r a n s p o r t a t i o n Predicted Cost Inflation FY07-FY11: Calendar Year 2006 FY07FY08FY09FY10FY11 High14.0%7.0%6.0%5.5% Most Likely11.5%6.0%4.5%4.0% Low8.0%4.0%3.5%3.0% Predicted Cost Inflation FY07-FY11: July 2006 Predicted Cost Inflation CY06-CY10: January 2006 CY06CY07CY08CY09CY10 High12.0%7.0%6.0% 5.0% Most Likely8.5%5.5%5.0%4.0% Low7.0%4.5%4.0%3.0% 1.Predictions are based upon our experience and understanding of the changes affecting the construction industry in Ohio. Forecasting information comes analyzing ODOT data along with data from third-party analysts and experts. 2.We believe that the most important cost drivers of construction cost inflation for the next five years will be energy, steel, and cement.

12. O h i o D e p a r t m e n t o f T r a n s p o r t a t i o n CY07CY08CY09CY10CY11 High10.5%9.5%7.0%5.0% Most Likely6.0%5.5%5.0%4.0% Low4.0%3.5% 3.0% Predicted Cost Inflation CY07-CY11: January 2007 FY08FY09FY10FY11FY12 High14.5%14.0%13.0%10.0%8.0% Most Likely10.0% 8.0%6.0%5.0% Low7.0%6.5%5.0%4.0%3.0% Predicted Cost Inflation FY08-FY12: July 2007 Predicted Cost Inflation FY07-FY11: Calendar Year 2007 1.Predictions are based upon our experience and understanding of the changes affecting the construction industry in Ohio. Forecasting information comes analyzing ODOT data along with data from third-party analysts and experts. 2.We believe that the most important cost drivers of construction cost inflation for the next five years will be energy, steel, and cement.