Inflation and higher demand nationwide for contractors has nearly tripled the estimated cost of Soo Locks renovations to more than $3 billion.
The U.S. Army Corps of Engineers (USACE) is now seeking additional money for the project that will add a third functioning lock to a facility known as “the linchpin of the Great Lakes.”
“There are a few [factors] that rise to the top and can account for most of our cost increases,” said USACE project manager Mollie Mahoney. “The first one is inflation.”
In 2018, the Army Corps estimated that the project would cost $1.031 billion. Lawmakers allotted that sum from various sources. Some came from the 2021 infrastructure law, President Joe Biden’s 2022 budget, additional Congressional appropriations and investment from the state of Michigan.
But in May of this year, as contractors were dredging to a depth of 30 feet to facilitate the entry of ships into what would be the new lock, the Army Corps briefed Congress with an eye-popping new estimate: $3.189 billion.
In June, Congress reauthorized the project with a spending limit of $1.411 billion and the Army Corps of Engineers awarded a contract of more than $1 billion to a consortium of regional construction firms. The Army Corps is looking for future allotments of funds to finish the project.
Construction materials have sharply increased in price, owing to global supply chain disruption and a restart of projects delayed by the Covid-19 pandemic. The cost of raw steel was particularly harmful to the Soo Locks project. The price per pound more than tripled, from 46 cents to $1.50, from the time of the first estimate through the present.
When the Army Corps made the first projections, gasoline hovered below $3 a gallon. At some points this year, the national average exceeded $5 a gallon, which alone upped the estimated cost by $70 million, said Mahoney. Prices have since fallen below the $4-per-gallon level in many states.
For some contracts, the Army Corps is including a flexibility contingency that reduces or increases the cost of the contract depending on commodity prices as a way to counter these fluctuations.
The project must also contend with a labor market in which contractors are in high demand. The project is, in a way, a victim of the infrastructure bill that helped birth it: The $1.2 trillion law created a glut of work for the companies that contract for these large federal projects. Some firms are opting not to pursue long-term projects such as the Soo Locks upgrades.
“It’s a lot harder to entice contractors up to Sault Ste. Marie, Michigan, for a seven-year mega project when contractors have the ability to work on much more straightforward projects that have warmer climates,” Mahoney said. “We really believe that this surplus of projects has impacted the market in a way that impacted our cost.”
The new lock is being built on the side of the facility next to an island, which will serve as the construction area. To access it, contractors will have to pass through a busy navigational channel traversed by more than 7,000 ships a year. This would be the routine every time equipment, materials or even workers are brought to the site.
This all means that the Army Corps of Engineers will have to offer up more money to the contractors and subcontractors they need, increasing the cost of the project.
First constructed in 1855 to connect the Great Lakes to the Atlantic Ocean, via the newly built Erie Canal, the Soo Locks sit on the St. Marys River between lakes Superior and Huron. Due to their strategic location, the locks have since been considered a vital national security and economic asset. The system now consists of two working locks, the MacArthur and larger Poe. The new lock will have a chamber of 1,200 by 110 feet and will be built in an area that is now the site of two defunct locks.
Advocates have stressed the need for an additional lock able to handle 1,000-foot vessels should the Poe Lock break down. The idea is not new: Congress authorized such a project in 1986 but the work never got done. The infrastructure bill passed last fall got funding to several projects that had long sat on the shelf.
If it is sufficiently funded by Congress, Mahoney said the new lock will still be ready for ship traffic by its initial target date of 2030.