Speeding Road Construction: Efficient Contract Design Can Lead to Faster Repairs, Fewer Delays, and Lower Commuter Costs

Residents of Minnesota often joke that the state has two seasons, winter and road construction. The joke has more than a grain of truth: Harsh winters take a high toll on our state’s highways, and the warm months are consequently filled with an intense burst of road construction and repair. This second season also exacts a high toll, and the price is paid by Minnesota motorists who suffer painful delays as lanes are closed, stretches of highway are shut down, and detours are endured. The delays not only cause stress and frustration, they also rob commuters of time that could be spent on other things, such as work or leisure activities with family and friends. Economists refer to the cost of such delays as “user costs.” Careful empirical research by the Minnesota Department of Transportation (MnDOT) computes the individual user cost of construction delays at $12 per hour, which is approximately half the mean hourly wage in Minnesota.1 These user costs can mount quickly. Suppose, for example, that MnDOT awards a $1 million contract for repair of Interstate 35W and gives the contractor 15 days to complete the