SIC 1611

This industry covers general and special trade contractors primarily engaged in the construction of roads, streets, alleys, public sidewalks, guardrails, parkways, and airports. Special trade contractors primarily engaged in the construction of private driveways and sidewalks are classified in SIC 1771: Concrete Work.

NAICS Code(s)

234110 (Highway and Street Construction)

Industry Snapshot

In 2001 the United States maintained 3.95 million miles of highways, the vast majority of which were under the control of local entities. Highway-user revenues totaled $128.7 billion. In 2001 highway systems were also helped by federal aid amounting to $26.5 billion from the highway trust fund and $7.6 billion from the Federal Transportation Administration. According to the U.S. Census Bureau's Statistical Abstract of the United States, in 2001 there were 10,889 contractors involved in highway and street construction that employed over 265,000 workers. The value of new construction put in place during 2001 totaled $54 billion.

Three-quarters of highway construction is for roads, called flatwork. In 1998 the Transportation Equity Act for the 21st Century (TEA-21) was signed into law, allowing nearly $200 billion for highway construction and maintenance from 1998 to 2003. Most of the money for federally subsidized highway and airport projects comes from excise taxes on fuel, airplane fares, trucks, and related products. Americans also spend more than $1 billion annually on tolls. In 2003 the Bush administration was working with Congress to develop a replacement package for TEA-21, which expired in September 2003.

These numbers reflect the significant impact the industry has on the nation's economy. For instance, the U.S. Department of Commerce estimates that every $1 spent on construction results in $2.23 generated in the economy on a short-term basis. In terms of the specific contribution to the economy from investment in road construction, each $1 million generates 63 jobs (13 at job sites, 13 by suppliers, and 37 through related service industry jobs created).

The total impact of the highway and street construction industry ranks it as one of the major industries in the country. According to the American Road & Transportation Builders Association (ARTBA), in 2002 the industry generated more than $200 billion annually in U.S. economic activity and provided jobs for approximately 2.2 million workers.

Organization and Structure

There are a number of different categories of independent contractors that make up the highway and street construction industry. Each of these specializes in a different facet of the industry. The employment change for highway maintenance workers was expected to decline into 2006, but employment prospects were expected to grow rapidly. The total number of highway and street construction employees is estimated at more than 302,100. There are more than 100,000 firms in the construction industry, a figure that far outnumbers the total aggregate of firms in all other manufacturing sectors.

Despite the vast number of firms, the average size of most firms is relatively small. Many of these, in fact, are comprised of only one individual performing a specialized task in the construction project. Although there are a number of exceptions to this, the overwhelming majority of contract construction firms have no employees at all, except for the self-employed owner and operator of the firm. Despite this, small firms in the industry account for only 6 percent of the industry's total volume, according to available statistics. Most of the construction activity in the industry, about two-thirds, is carried out by small to medium-size contracting firms having less than 100 employees.

Construction contractors typically limit their activity to a specific, local jurisdiction. These are, more often than not, the states in which they are located. In fact, only one out of eight contractors performs out-of-state work.

The construction contracting business can be a precarious one. Contractors hire employees on an ad hoc basis after securing contracts; very rarely are two contracting jobs the same, and contractors have to meet the labor and material requirements of each job and its particular specifications. Also, contractors have very little control over the development of new business or increased demand for their services. The industry and nature of the work also demand that contractors adhere to strict completion schedules. The nature of the industry mandates that contractors and the heavy construction machinery they need to do the job must be mobile. Each contracting firm must be able to restructure and equip his organization according to the requirements of the contract, and transport crew and materials to the construction site. Inevitably, this leads to increased management problems and expense, and requires specific organizational skills on the part of the contractor.

Of the contracting businesses that fail, the most common reason is that individual contractors have to cover the cost of labor and machinery rentals—usually within 10 to 30 days. This leaves most contractors operating with a minimum of working capital. As a result, most contractors show a lower profit margin than other major industries. Because of the risk involved in under-writing the construction project, most general contractors subcontract different aspects of the project to specialty contractors. This minimizes their investment and risk, and increases the likelihood they will earn a reasonable profit from each job. Street and highway construction contractors, however, use their own equipment and underwrite the job when they can, thus maximizing the profit margin, although this increases the financial risk of the project.

The highway and road construction industry is labor sensitive and intensive. Most of the costs in other construction fields incur increased material expenses. Because highway and road construction is more labor sensitive, it tends not to be as affected by increased material costs. For instance, where material costs account for 42.9 percent of residential construction, they consume only 32.6 percent of highway and street construction. Overall, 37 cents of every construction dollar is spent on materials, 40 cents on labor, and 23 cents for miscellaneous expenses, such as equipment, services and supplies, rentals, and overhead. Whatever is left after these expenses constitutes profit.

Contractors have had limited success in passing rising labor and material costs on to customers because demand for their product has not kept pace with inflationary trends of labor and material required to manufacture the product. This is especially the case with highway and street construction.

The primary federal agency concerned with this industry is the Department of Transportation's Federal Highway Administration (FHWA). The FHWA administers an annual, multibillion dollar program of financial assistance to the states. The estimated budget for the FHWA in 1999 was $28.7 billion.

The agency is also responsible for the development and distribution of the latest technology to meet the need of federally financed road programs. It serves as the highway design and construction agent for the U.S. federal government, and regulates and enforces federal requirements relating to the safety of operation and equipment of commercial motor carriers engaged in interstate or foreign commerce.

Through cooperation with major financial and developmental institutions, such as the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Export-Import Bank, the United Nations, the Organization of American States, and the Agency for International Development, FHWA provides technical help in highway technology nationally and internationally.

Background and Development

The history of the road and highway construction industry can be traced back to the invention of the automobile in 1892. The number of cars, buses, and trucks escalated quickly, and today there are more than 200 million vehicles on the roads. But it became apparent, even in 1900, that the nation's road system would soon see a period of major expansion.

Road and highway builders organized an association in 1902 that represented them as an industry. It evolved from a bicycle group founded 22 years earlier called the League of American Wheelmen. The history and growth of the American Road and Transportation Builders Association (ARTBA) parallels that of the construction of roads and highways that exploded in the early twentieth century and has continued ever since.

ARTBA, based in Washington, D.C., is a federation of private firms, public agencies, and associations. It is the only national association to represent all sectors of the transportation construction industry to the executive and legislative branches of government as well as federal agencies. Its primary goal is to advocate strong federal investment in transportation infrastructure. Its more than 5,000 members as of 2000 include the chief executive officers of large transportation construction firms in the United States, owners and partners of planning, engineering, and design firms, and heavy equipment purchasing directors with all 50 state departments of transportation, major public works departments, and county transportation departments.

The Office of Road Inquiry, which became the Office of Public Roads, was formed in 1905. With the inception of highway departments in 16 states by 1906, road construction escalated dramatically. The Federal-Aid Road Act of 1916 was the harbinger of voluminous road construction across America. It has fueled transportation construction, from single-lane roads in rural America to the super interstate highways that traverse the nation. The act was officially signed into law by President Woodrow Wilson on July 11, 1916. This made substantial money available for heavy construction of roads and ratified several principles and objectives that have remained in place to the present. The legislation established the federal-state relationship that determined that federal help would be channeled through the states, which were responsible for implementation of heavy construction projects. The act also provided for the institution of a state matching requirement that would operate in tandem with federal contributions to highway and road construction. Finally, the act put forth financial distribution formulas that would determine the distribution of money, based on demographics such as population, area, and road mileage.

Although this program was supposed to promote and support the federal-aid highway program for three years, it was extended for two more years because of the onset of World War I. In 1921 Congress once again set out to create an ambitious highway development program, using the 1916 law as a paradigm that would set the pace and structure for completion of the federal highway program. The pace at which the industry has subsequently developed has been largely determined by the categories of funding established by the 1921 legislation, which established the principle of contract authority; this allowed highway money to be obligated to the states, even if they had not been appropriated. Basically, this meant that construction could begin with the apportionment of money becoming a financial obligation of the federal government. Soon, numerous contractors began major construction projects before the money was in hand, knowing that the federal government would eventually pay for it.

It was only a few years after this revolution in highway legislation, 1925, that the U.S. Numbered Highway System became a reality. The entire street and highway development program leaped forward when Col. H.L. Bowl by, Chief of the War Materials Division of the U.S. Bureau of Public Roads, was elected ARTBA president. This led to further organization of the heavy construction industry, coordinated with the federal government's ambition to build an arterial transportation infrastructure throughout the nation. The creation of the Highway Research Board of the National Academy of Sciences was another watershed event that escalated quality road construction in America.

In the meantime, ARTBA elected J. H. Cranford as president in 1924. This was the first time a contractor had been elected to head the organization and increased the association' sefficacy in promoting and lobbying for work and money from the federal government. ARTBA also established a Manufacturers Division. This was created as the result of affiliation with the Highway Industries Association, today's Construction Industry Manufacturers Association. This and other divisions created by ARTBA served to increase the specialized focus of the group and organized street and highway contractors in a way that increased their credibility and productivity as an industry.

Road construction, similar to most other industrial initiatives, slowed during the Depression era. States began leveraging gas taxes and vehicle registration charges as a way to underwrite the cost of highway construction. Prodded by the industry to use creative means to stimulate the economy, and increase and improve the nation's streets and highways, Congress initiated huge public works programs that included substantial highway construction projects. The industry continued to lobby on Capitol Hill, urging continued highway development projects, even as the Depression abated and the Second World War drained the nation's manpower, and financial and material resources. As the industry argued, a well-constructed and maintained road and highway system was needed to facilitate the nation's war effort.

Highway construction that was needed to move men and material during World War II took precedence over all other heavy construction during the war. It was during this period, however, that more emphasis was placed on road and highway safety, and engineers and designers threw themselves into these efforts with a vengeance.

It became evident by the mid-1950s that an expanded highway construction program was urgently needed. Increased motor traffic and reliance on the automobile as the primary mode of conveyance throughout the United States, civil defense plans during the Cold War, and the deferral of highway construction during the World War II years placed the industry at the center of the nation's economic stage. The industry surged forward after Congress authorized a 40,000-mile national highway network in 1944, named the "Interstate" system three years later. Appropriation of money proved difficult, however, and financing of the bill had to compete with other federal-aid highways at a 50-50 matching ration.

The situation changed drastically, however, in favor of the industry in 1956. This is when the government enacted the federal-aid Highway Act of 1956, which represented a redesign of the interstate system. The Highway Trust Fund was set up to pay for this initiative, and it was decreed that the federal government would pay 90 percent of the cost. This put the industry at the forefront of major government initiatives aimed at mobilizing America. The "Golden Years of Road Building" were at hand.

Building the interstate system took precedence over all other heavy road construction activities and was the primary focus of the highway construction industry for the next 10 years. As the project neared completion, the industry began to focus more on other modes of transportation. Councils were established throughout the country to advise governments and industry on construction of airports, public transit, rail, and highway maintenance and improvement.

Federally funded highway construction and improvement projects, and mass transit programs all felt the impact of the Surface Transportation Assistance Act as the result of a congressional decision made in 1978. Shortly after this, the industry met one of its biggest challenges to date: support of the reauthorization of the federal-aid highway program in 1982. The Reagan administration announced it would support increased highway user fees to back funding for highway construction and maintenance programs, and the jobs they would create. After much congressional debate and negotiations, the bill was finally passed in January 1983. This led to a five cents per gallon increase on the gas tax. One cent of this tax was set aside for funding mass transit programs.

Another battle ensued in 1986 when reauthorization of highway and mass transit programs was addressed by Congress. After an adjournment late in the year, Congress declared the legislation a high priority in January 1987. The industry lobbied heavily, as money for highway and mass transit programs began to dry up. Although Reagan vetoed the measure, he was overridden by Congress, and road building moved into high gear once again.

The federal surface transportation program would be overhauled in 1991, and this consumed the industry's attention in the late 1980s. Completion of the interstate system, coupled with fiscal restraints and tight budgets in government, did not bode well for the road and highway construction industry.

Congress developed the Intermodal Surface Transportation Efficiency Act (ISTEA), and The House Public Works and Transportation Committee recommended a five cents per gallon fuel tax. Debate and lobbying continued, much of which was focused on the prevention of using federal fuel taxes to decrease the federal deficit. In 1991 Congress enacted the massive and complex ISTEA, which changed and rewrote the federal highway law for the first time since 1916. Authorizations of funding equal to $155 billion were provided over the next six years for federal highway and mass transit programs. President George Bush signed ISTEA into law on December 18,1991. In 1997 President Bill Clinton offered the National Economic Crossroads Transportation Efficiency Act (NEXTEA) as a guideline for highway construction spending over the following six years.

Public investment in the nation's network of roads and bridges has been declining steadily, according to an analysis by Apogee Research, Inc., of Bethesda, Maryland. Investment that was 1.4 percent of the gross national product in 1958 had declined to 0.7 percent in 1988.

The fiscal health of the Highway Trust Fund could meet the need of an immediate requirement for highway improvement expenditures. The balance in the federal Highway Trust Fund at the end of fiscal year 1987 was $9.4 billion. Revenue accruing to the Highway Trust Fund during that fiscal year totaled $12.7 billion, and expenditures equaled $12.8 billion. Federally aided highway program obligations totaled $12.9 billion during fiscal year 1987.

Several states have committed themselves to substantial road building programs, despite the fact that total state government spending on road construction has increased only slightly faster than the inflation rate. Voters in California approved a relatively large gasoline tax to pay for billions of dollars in road improvements. The California legislature, in the meantime, approved the implementation of four toll roads. The state suffered a tremendous blow in January 1994, however, when a massive earthquake crippled the highway system of Los Angeles, its most populous city. Repairs to the area's highways and bridges cost billions of dollars and took years to complete.

The Highway Bill, passed in December 1992, provided more money for highway maintenance. Industry skeptics were discouraged by the fact that the allotment was to be spent over a five-year period. Moreover, the bill had no incremental spending built into it. Nevertheless, industry was encouraged by the aspect of the bill that allows states and municipalities to own stretches of road and bridges they build and to collect tolls for their use. It was hoped that this may inspire the issuance of tax-free bonds to initially finance construction of local roads and highways, given that revenue would be generated from their construction and use.

About 25 percent of highway construction in 1992 was in the areas of bridge construction, overpasses, and tunnels. Flatwork (primarily roads) accounted for the remaining 75 percent of the work. Analysts believe bridge work will grow faster than road work in the coming years, mainly because of the need to replace aging, unsafe bridges. Federal Highway Administration reports indicate that 23 percent of the highway bridges in the United States were structurally deficient, and an additional 21 percent were functionally or structurally obsolete in 1990. This will naturally require that the industry put a great deal of work into repairing and rebuilding these structures.

Due to the limited lifespan of most highways and roads, maintenance and repair expenditures have continued to grow since the 1970s. This reflects the increase in the number of these structures as well as their age.

According to President Bill Clinton's statement of March 12, 1997, concerning NEXTEA, there were approximately 12 million people employed in transportation and transportation-related industries. One million of those jobs had been created since 1994. This represented just over 10 percent of the total civilian workforce. The NEXTEA program proposed about $175 billion be spent between 1998 and 2003 for the improvement of bridges, highways, and transit systems. NEXTEA authorized an 11 percent increase over the Intermodal Surface Transportation Efficiency Act (ISTEA) of 1991. It concentrated on improving border crossings and developing major trade corridors within the United States. According to President Clinton, this bill would create tens of thousands of jobs. From another angle, an analysis by the ARTBA found that Clinton's 1998-2002 transportation budget would "throw 106,000 transportation construction industry employees out of work over the next five years."

On June 9, 1998, the Transportation Act for the 21st Century (TEA-21) was signed into law. Nearly $200 billion was allocated for highway construction and maintenance from 1998-2003, picking up where ISTEA left off.

Although spending on operations and maintenance has remained relatively stable since completion of the interstate system, there has been a steady trend toward disinvestment on the part of the federal government. Although capital investment has been declining, highway use in this country has increased dramatically, according to the report. In 1962 the United States spent $42 for every 1,000 vehicle miles traveled (VMT) on highway infrastructure. Expenditures leveled off at around $16 per 1,000 VMT in the mid-1990s.

From 1970 to 1990, VMT averaged a growth of 3.3 percent compounded annually. But for the first five years of the 1990s, growth slowed to 2.3 percent. A statement issued by the U.S. Department of Transportation in May 1996 found lower growth rates consistent with Highway Performance Monitoring System forecasts, which showed nationally 2.37 percent compound annual growth over the next 20 years. The report reasoned that vehicle ownership rates may have reached a saturation point, with ownership at one vehicle for personal use per household driver in 1990.

Driver licensing rates have approached saturation, as men are at 93 percent and women at 83 percent of the driving age population. Women have closed this gap since the 1970s and are near men's licensing rates in the high driving age groups. Also, the age structure of the population had a great effect on travel with the baby boom generation entering the high driving age groups during the late 1970s and 1980s. A decline in the number of new drivers is evident now that the baby boom phenomena has passed.

The highway and street construction industry was also hurt by the recession at the beginning of the 1990s. Federal and local governments, burdened with tightened budgets and swelling deficits, had difficulty maintaining existing highway, airport, and street construction projects; new street construction initiatives were sparse as well.

Despite this, road and bridge construction increased slightly during 1992. The demand for improvement of essential arterial transportation systems necessitated work on major roads and highways, and this helped to keep contractors working. New construction suffered, as money was directed toward highway maintenance and repair.

Current Conditions

For financial year 2001 under TEA-21, federal investment in highways exceeded $30 billion for the first time, reaching $30.4 billion. This marks a 5.7 percent increase from 2000's $28.8 billion. A large part of this increase is the result of higher-than-expected gas tax revenues that contribute money to the Highway Trust Fund (HTF). Core highway spending in this plan was $872 million for 2001, an increase of 3.2 percent over the previous year.

TEA-21 doled out $31.8 billion in 2002 and is set to expire on September 30, 2003. However, the TEA-21 mathematical formula includes the "revenue-aligned budget authority" (RABA). Because TEA-21 expenditures are linked to the HTF's Highway Account, the actual money available through TEA-21 depends on the amount of funding states receive from incoming highway user fees. Because of the economic recession of the early 2000s, revenues were down, causing the RABA formula to dictate an $8.6 billion decrease in TEA-21 funding. Compromise among Congress, the Bush administration, and industry advocates led to a $4.4 billion reduction in highway funding in 2002.

In April 2003 the Bush administration proposed the Safe and Flexible Transportation Efficiency Act of 2003 (SAFETEA) to replace TEA-21. Whereas TEA-21 authorized $218 billion over six years, SAFETEA would provide a modest increase to $247 billion. SAFETEA would also contain adjustments to the RABA formula to prevent large swings in funding. At the same time the Senate Budget Committee was proposing a spending level of $311.5 billion, and the House Transportation and Infrastructure Committee was looking at an even higher appropriation of $375 billion. In May the new highway funding plan was worked out to approximately $320 billion, which becomes effective in October 2003.

Industry Leaders

Street and highway construction leaders in 2002 included Kiewit Construction Group, Inc., of Omaha, Nebraska, with $3.7 billion in revenue and 15,000 employees, and Granite Construction Inc., of Watsonville, California, with $1.8 billion in revenue and 5,000 employees.


According to the U.S. Department of Labor, Bureau of Labor Statistics, the street and highway construction industry employed nearly 320,000 people in 2001. Operating engineers and other construction equipment operators, totaling 51,680, earned a mean annual salary of $40,760; construction laborers, totaling over 77,000, earned a mean annual salary of $31,870; and paving and surface workers, totaling 22,390, earned a mean annual salary of $33,960.

America and the World

The U.S. highway and road system has not kept pace with those of competitors throughout the world. Highway capital investment relative to the economies in Japan, Korea, and Germany, for instance, has been significantly higher over recent years than similar investment in America. In 1988, for example, Japan spent more than 1.8 percent of its Gross National Product (GNP) on highway infrastructure. That's almost triple the amount that the United States invested in highways, 0.7 percent of its GNP.

Comparing capital spending per vehicle miles traveled (VMT), it is obvious Japan is substantially outspending other nations in highway development and maintenance. In 1988 Japan invested $150 for every 1,000 VMT—nine times the U.S. investment. In the same year, Korea spent $95 per 1,000 VMT, and Germany expended $30 per 1,000 VMT. The U.S. spent only $16 per 1,000 VMT.

Despite lagging investment, America's road building technology remains strong. In fact, although the United States comes up short in terms of highway infrastructure investment, it continues to export highway technology to other nations through the Department of Transportation's FHWA.

Research and Technology

New technology in highway construction and maintenance offers significant opportunities to the industry in terms of the ability to meet safety concerns, energy concerns, and other transportation challenges. Computerization has already changed the automobile and promises to revolutionize the mechanical and physical aspects of the car as we know it. Computerization and telecommunications, industry visionaries say, may result in completely automated vehicles traveling automated highways. This would result in improved travel-time, energy conservation, lower operating costs, reduced environmental pollution, and improved highway safety.

Addressing the subject of technology, and highway construction and administration, Thomas D. Larson, U.S. Federal Highway Administrator, said "The research and technology component of a potential future highway program will provide the expanded level of funding necessary to support a long-term aggressive commitment to improving highway productivity through the development, demonstration, and deployment of available and evolving technology for both operations and construction."

Proposed legislation envisions a program with the following components:

The highway construction industry has already instituted high-tech methods of dealing with traffic management and safety throughout the United States. One example of this approach is the INFORM system on Long Island, New York. Conceived as an FHWA research and development project, the system features variable message signs that inform motorists of unusual congestion, and also implements ramp metering and signal control on affected freeways and arterials.

The Smart Corridor in California is a 12.3 mile stretch of the Santa Monica Freeway that features coordinated traffic data and management strategies with the California Department of Transportation, the California Highway Patrol, the City of Los Angeles Department of Transportation, and the City of Los Angeles Police Department. By linking traffic control centers and developing a common database of information, the coordination of strategies, such as ramp metering policies, parking enforcement, signal timing, and detours around congested areas will be possible.

In Philadelphia, I-95 is being transformed into a hightech, traffic management superhighway. An elaborate traffic management plan with advanced technologies, such as integrated ramp metering and signal control, will be used to alleviate traffic congestion, integrate public transit and automobile traffic, and mitigate air and noise pollution.

A new technology to highway construction in 1996 was the use of rubberized asphalt. Roads made with recycled tire chips showed less frost heave than conventional roads. Tire chips also proved much better than soil as an insulator, limiting the depth of frost and therefore the damage of winter. Using rubber in retaining walls reduced the pressure on those walls, allowing them to be lighter, thinner, and less expensive.

Studies by FHWA and university research programs in 1995 aimed to use robotics in highway construction. These included the development of an Automatic Pavement Crack-Sealing Machine and a Pothole-Repairing Machine. Another area of research was directed at improving work zone safety and minimizing traffic congestion with the use of robotic aids.

One of the most environmentally sound research strategies in the highway construction industry was for the use of waste materials and by-products in place of conventional asphalt. In 1994 research was done to help implement materials, such as blast furnace and steel slags, carpet fibers, coal ash by-products, including fly ash and bottom ash, glass, municipal solid waste combustion ash, recycled plastic, roofing shingle wastes, and rubber tires into roads and highways.

Further Reading

American Road & Transportation Builders Association. Analysis of the President's Proposed Transportation Budget FY 2001-2005, 10 March 2000. Available from .

——. Special Report: An Analysis of the Proposed $8.6 Billion Cut in the Federal Highway Program Contained in the President's FY 2003 Budget, 2002. Available from .

"American Road & Transportation Builders." Business Researchers Network, May 2002, 13.

"Highway, Street Construction to Dip in 2002, Says FMI." Pit & Quarry, March 2002, 63.

Ostroff, Jim. "Massive New Transit Bill Will Give States a Break." Kiplinger Business Forecasts, 9 April 2003.

Schulz, John D. " 'Blind Devotion': Highway Interests Win Congressional Support to Restore Proposed $8.6 Billion Cut in Funding." Traffic World, 18 February 2002, 12-13.

Tirschwell, Peter. "The Road Ahead." JoC Week, 4 March 2002, 10.

"Transportation Groups Have Complained that the Bush Administration's Proposed Fiscal 2004 Budget Offers Inadequate Funding for Roads and Bridges." Public Works, March 2003, 8.

U.S. Census Bureau. Statistical Abstract of the United States: 2002. Available from .

U.S. Department of Labor, Bureau of Labor Statistics. 2001 National Industry-Specific Occupational Employment and Wage Estimates. Available from .

U.S. Department of Transportation, Bureau of Transportation Statistics. Highway Profile, 2003. Available from .

White, Melissa. "Administration's TEA 21 Plan Falls Short of Congressional Funding Targets." Nation's Cities Weekly, 7 April 2003, 3-4.

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