Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance
committees of the Legislature. LFC does not assume responsibility for the accuracy of these reports if they
are used for other purposes.
F I S C A L I M P A C T R E P O R T
SPONSOR Dixon
LAST UPDATED
ORIGINAL DATE 3
/7/2025
SHORT TITLE Advance Purchase Commitments Program
BILL
NUMBER House Bill 524
ANALYST Simon
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT*
(dollars in thousands)
Agency/Program
FY25 FY26
FY27 or Future
Years
3 Year
Total Cost
Recurring or
Nonrecurring
Fund
Affected
$5,120.0 to
$30,720.0
Recurring
State Road
Fund
Parentheses ( ) indicate expenditure decreases.
*Amounts reflect most recent analysis of this legislation.
Relates to House Bill(s) and Senate Bill(s)
Sources of Information
LFC Files
Agency Analysis Received From
General Services Department Attorney General. Agency Analysis was Solicited but Not Received From
Department of Transportation Agency Declined to Respond
Environment Department
SUMMARY
Synopsis of House Bill 524
House Bill 524 (HB524) would require the Department of Transportation (NMDOT) to create a
program for awarding advanced purchase commitments to vendors who agree to provide low-
emission paving materials. To be eligible for the program, a vendor must demonstrate the
product meets proposed federal standards for low-emission paving materials and other technical
requirements set by NMDOT and must provide an environmental product declaration, a
preliminary environmental produce declaration, or a life cycle assessment. The bill requires
NMDOT to prioritize awards based on the amount of greenhouse gas emissions reduced by the
product, the suitability of the product for the intended use, the potential for the award to increase
availability of the product, and product relying on the utilization or mineralization of carbon
dioxide, but only if the use of the product does not lead to positive net carbon emissions.
House Bill 524 – Page 2
FISCAL IMPLICATIONS
HB524 would set up an alternative procurement system for purchasing low-emission paving
materials for the department of transportation, including cement, concrete, asphalt binder, and
asphalt mixtures. NMDOT purchases a wide variety of different types of asphalt, concrete, and
other materials that could be covered by HB524. NMDOT’s unit price list for 2024 indicated the
department purchased 736 thousand tons of “hot mix asphalt SP-IV complete” at an average unit
price of $86.42 per ton, for a total of $63.7 million, while the department purchased smaller
amounts of other types of hot mix asphalt. A review of this, looking for the terms “asphalt,”
“concrete,” or “HMA” (hot mix asphalt), show the department spent at least $128 million in
2024 on these items; however, this list may not cover every potential category that could be
covered by HB524
Possible cost increases from the transition to low-emission concrete and other materials are
uncertain. The Rocky Mountain Institute, and environmental think tank, has estimated cost
increases for the transition to net-zero cement of between 40 percent and 120 percent, but notes
costs would be highly variable. Assuming the current cost of $128 million, a 40 percent increase
would represent additional costs of $51.2 million. At the higher, 120 percent level the additional
costs could be $153.6 million. However, the timeline for transition is currently unknown and it is
unlikely NMDOT would be able to source reduced emission materials for all projects. Assuming
between 10 percent and 20 percent of the materials used would qualify under the program and
costs would increase by between 40 percent and 120 percent, the program could add between
$5.1 million and $30.7 million when it becomes effective. However, as the products become
more widely used, costs could increase above this total.
While HB524 would require NMDOT to develop a program, nothing in the bill requires the
department to use low-emission materials on any particular project. The bill is likely to leave the
department flexibility to continue using traditional materials if costs for the product are too high
to justify. However, were the bill to pass and become law, it would clearly signal a policy
decision to the department, and budget impact listed on page one of this FIR assumes the
department would respond by attempting to purchase low emissions materials, at least in part. It
should be noted the budget impacts listed are highly dependent on how the department would
respond to the program and could be higher or lower, depending on the department’s actions.
Additionally, the use of a binding advance purchase commitment could allow the current
administration to commit a future administration to the future purchase of a product three or
more years in the future.
SIGNIFICANT ISSUES
HB524 would require NMDOT to create a program for “advanced purchase commitments,” a
type of purchase that attempts to incentivize investments in emerging technologies. Sometimes
called “advanced market commitments,” these have been used in medical and technology fields
to effectively guarantee investors in an emerging technology that there will be a market for that
product once it is developed or brought to scale. Notably, to respond to the Covid-19 outbreak in
2020, the federal government negotiated agreements with five drug manufacturers to develop
Covid-19 vaccines. The federal government agreed to pay for these vaccines while the drugs
were still in development, although payments were dependent on when and if the drug received
approval from the federal Food and Drug Administration. House Bill 524 – Page 3
Analysis from the General Services Department (GSD) notes the risk involved in advance
purchase commitments:
The long-term nature of the commitment may expose both buyers (the state) and sellers
to price volatility in materials, labor, and energy costs, which could lead to financial and
procurement challenges if the costs of low-emission materials increase unexpectedly over
time. Advance purchases could negatively impact the state general fund and create legal
challenges in complying with procurement requirements. Requests for appropriation
would need to be increased for purchases in advance. Increase in individual costs in
outline years for goods and services. Additionally, the state may face fiscal difficulties if
the needs or projects change over the course of several years, but they are locked into
long-term agreements. This could lead to wasted resources if material specifications
change, or projects are delayed.
GSD further notes:
Long-term purchase commitments could distort market pricing for low-emission
materials, especially if large contracts are awarded to a few producers. This could reduce
competition and potentially lead to higher prices in the absence of competitive bidding,
which could lead to suppliers going out of business and the state without products.
Additionally, the program might be negatively impacted and legally challenged by
changing environmental, tax, or trade policies. New regulations could alter the economics
of low-emission materials, making long-term agreements less favorable.
Analysis from the Office of the Attorney General notes the bill could conflict with provisions of
the Procurement Code:
In general, a government body’s purchase of goods or services under the Procurement
Code must proceed in one of two ways: (1) solicitation of competitive sealed bids (see
Section 13-1-102 NMSA 1978); or (2) an invitation for sealed proposals (see Section 13-
1-111 NMSA 1978). The default rule is that all procurements must take place through
competitive sealed bids. HB524 does not describe whether the applicants and awards are
subject to the Procurement Code.
ADMINISTRATIVE IMPLICATIONS
GSD notes managing and tracking long-term contracts could be administratively complex for
agencies. This program could be require additional administrative costs, particularly due to
requirements to ensure environmental standards and material suitability for a specific purpose.
GSD notes the potential for some companies to engage in “greenwashing,” where companies
falsely claim to produce an environmentally friendly material. Additionally, the department notes
the state may find it difficult to enforce long-term agreements with private companies as those
businesses face changes to market conditions, mergers and acquisitions, or shifts in their market
strategy. To limit risk, the state may choose to limit purchases to larger, more viable companies.
TECHNICAL ISSUES
House Bill 524 would require vendors to meet standards established under “Section 458(i)(2) of
the Federal Energy Independence and Security Act of 2007.” However, that section does not
appear to exist. Federal legislation proposed during the 118
th
Congress (2023-2024) would have
created the Concrete and Asphalt Innovation Act of 2023 and would have added the section cited
to the federal law. However, that bill did not pass. House Bill 524 – Page 4
OTHER SUBSTANT IVE ISSUES
H.R. 9136 from the 118
th
Congress (2023-2024) was introduced to authorize the federal secretary
of transportation to establish a similar advance purchase commitment program at the federal
level. The program proposed by that resolution largely reflect the requirements outlined in
HB524. That bill was not acted upon by the House and the Congressional Budget Office did not
produce a cost estimate.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
Several bills have been introduced to limit or reduce carbon emissions, particularly in the
transportation sector, including:
Senate Bill 4, which would set statewide greenhouse gas emission reductions, based on
2005 levels; and
Senate Bill 83, which would create the innovation in state government fund for agencies
to develop master plans to achieve net-zero emissions.
JWS/hj/SL2