Stakeholder Perspectives on Price Adjustment Clauses in US Highway Construction: Benefits, Fairness, and Implementation

Abstract

Price volatility in construction materials introduces uncertainty into highway project delivery, contributing to cost overruns, schedule delays, and contractual disputes. To help manage this risk, state DOTs incorporate price adjustment clauses (PACs) into eligible highway construction contracts. Although PACs are widely used, there is limited research examining their benefits, fairness, and implementation challenges under current market conditions. This study investigates stakeholder perceptions of PACs in terms of their advantages, fairness, and practical concerns within the context of US highway construction. Two national surveys were conducted in 2025: one distributed to 50 state DOTs, yielding responses from 40 agencies, and one distributed to highway contractors, yielding 140 responses from diverse firm sizes and regions. Categorical responses were summarized with frequency distributions, and multioption benefit items used weighted scores. Among state DOT respondents to the adoption item, 97% reported including at least one material PAC, and most contractors reported high interest in PAC inclusion. Across both stakeholder groups, volatility mitigation and facilitation of large or multiyear contracts received the highest benefit ratings, while influence on bidding participation and change-order frequency was lower. State DOT respondents indicated that contractors generally view PACs as fair, and 84% of contractor respondents rated PACs somewhat or very fair. More than 80% of state DOT respondents reported slight or no administrative burden. Implementation concerns centered on the regional applicability and timeliness of price indices, and 53% of state DOT respondents reported at least one prospective refinement, most often related to material coverage or threshold settings. Respondents perceived PACs as most useful for controlling exposure to material price volatility in multiyear work, and greater transparency in price index sourcing and adjustment procedures was associated with more favorable fairness perceptions, while administrative workload was generally described as low. This study provides insights that can assist state DOTs in refining PACs to maintain transparency, support fair risk allocation, and limit administrative complexity within current market conditions.