The predominance of costs associated with highway construction projects are related to equipment and materials. Thus, highway projects are more susceptible to difficulties in successful completion and possible litigations caused by price fluctuations of certain commodities such as oil, steel and cement. The predominant use of unit price contracting allows for little flexibility when addressing dramatic price fluctuations of construction materials. In order to reduce the risk of exposure to significant changes in material costs for contractors, State Highway Agencies (SHAs) have begun implementing price adjustment indices. However, most of these indices, at this stage, still are ill-defined because there are no reliable benchmarks available to measure possible benefits since the optimal extent of usage of these indices has not been studied. In this paper, the use of the Producer Price Index (PPI) is analyzed as a price adjustment index for application to highway projects in comparison to the use of fuel index by the Florida Department of Transportation (FDOT).
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