Case Study: Cost Overrun from Material Price Escalation During Hoover Dam Bypass Construction (Nevada, 2013)

Project Overview
• Name: Hoover Dam Bypass (Mike O’Callaghan–Pat Tillman Memorial Bridge)
• Location: Nevada-Arizona border
• Year: 2013
• Project Size: $240 million
• Scope: Construction of a new bypass bridge adjacent to Hoover Dam
• Lead Agencies/Contractors: Nevada Department of Transportation, Arizona Department of Transportation /

Category of the Issue, Problem, or Challenge
• Materials
• Cost Management

Summary of the Issue, Problem, or Challenge
Unexpected spikes in steel and concrete prices during construction led to substantial cost overruns, impacting the project’s budget and requiring reallocation of funds.

Root Cause Analysis

• Global Commodity Price Fluctuations: Steel and cement prices increased significantly due to market conditions.
• Contract Terms: Fixed-price contracts without material escalation clauses limited flexibility.
• Procurement Timing: Delays in procurement led to purchases during peak price periods.
• Budget Contingency: Insufficient contingency funds to cover material price volatility.

Impacts Due to the Issue, Problem, or Challenge

• Material cost overruns of 15–20%.
• Budget reallocations impacting other project components.
• Need for additional funding approvals and stakeholder negotiations.

Corrective Actions Taken

1. Adoption of procurement strategies with price escalation clauses.
2. Improved market monitoring to time material purchases better.
3. Increased contingency budgeting for commodity price risks.
4. Collaboration with suppliers for fixed-price bulk purchase agreements.

Lessons Learned

• Material price volatility must be actively managed through contract and procurement strategies.
• Early procurement can mitigate exposure to price spikes.
• Adequate contingency funds are critical for commodity risks.

Audit & Prevention: Project Control Questions to Ask on Future Projects to Help Control the Situation

• Are material price escalation risks identified and mitigated contractually?
• Is procurement timed strategically to avoid price peaks?
• Does the budget include contingencies for commodity price fluctuations?