Highway and Street Construction
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Industry Overview
The US highway and street construction industry includes about 11,000 companies with combined annual revenue of about $75 billion. Large companies include divisions of large construction companies such as Bechtel Group, Fluor, Jacobs Engineering, and KBR. The industry is highly fragmented: the 50 largest companies account for about 15 percent of industry revenue.
Competitive Landscape
Demand is largely driven by the availability of government roadbuilding funds. The profitability of individual companies depends on operating efficiencies and the ability to correctly estimate costs. Big companies have the resources and engineering skills necessary for large construction jobs. Small companies can compete effectively by bidding for smaller projects or by working as subcontractors on large projects. The work is labor-intensive: annual revenue per employee is about $200,000.
Products, Operations & Technology
The US has about 2.5 million miles of paved roads and 1.5 million miles of unpaved roads. New street and highway construction can involve complicated engineering, and skilled operations like earthmoving, grading, and bridge, curb, sidewalk, and water drainage system construction. The typical small construction company does light new construction work and concentrates mainly on reconstruction and maintenance. Engineering design work is important for new construction. The typical large construction company designs and constructs complex road and highway projects.
Streets and highways consist of several different layers of materials, earth and various grades of gravel on the bottom. Paved roads have cement or asphalt on the top. The typical street or highway has a gravel base and several layers of asphalt. (An asphalt street is officially called a "bituminous roadway.") A minimum pavement thickness of either a 4-inch full depth asphalt or 3-inch asphaltic concrete over a granular base is recommended for most roads. A heavily used highway, like the Capital Beltway encircling Washington DC, has 5 to 6 inches of asphalt concrete lying on a concrete slab 8 to 9 inches thick.
Asphalt is a mixture of sand, gravel, or rock, asphalt cement, and various additives. Sand and gravel (called "aggregate") make up over 90 percent of the asphalt. Asphalt cement (AC - sometimes called bituminous cement) is the black substance left over when crude oil is distilled into gasoline and other liquid products. Asphalt is made up as "hot mix asphalt" (HMA) in a special mixing facility where the paving aggregates are dried and heated, and then mixed with melted asphalt cement. The HMA is transferred to silos for short-term storage and delivered by truck to the worksite. Some construction companies operate their own HMA facilities, but most buy their asphalt from independent operators.
Most construction jobs specify the type and amount of aggregate and asphalt cement to be used. (The federal system for specifying asphalt quality is called Superpave.) At the worksite, HMA is loaded into a paving machine that actually lays down the surface. Rollers then smooth and compact the surface as the HMA cools. The prices for construction materials such as asphalt and oil are volatile and subject to sudden fluctuations.
Reconstruction of asphalt roads involves grinding off the top layer and replacing it. The ground up old pavement, called reclaimed asphalt pavement (RAP), can be added to HMA to form new asphalt, usually for the coarse bottom layers, where it may constitute as much as 30 percent of the asphalt. By recycling RAP, 25 to 35 percent of old pavement can be reused for new projects.
Construction companies may own some core pieces of heavy equipment (trucks, backhoes, paving machines, and rollers) and may lease other pieces as needed from third party suppliers, depending on the type of work. Construction companies rely on suppliers to provide equipment in a timely manner for successful completion of a project. Many companies also do other kinds of construction work such as driveways, parking lots, sidewalks, foundations, concrete and masonry work to efficiently use their assets and skills.
