Price volatility in wages, materials, and equipment has a significant impact on highway construction costs. As the construction market and economy have experienced dynamic changes in prices, the price volatility becomes less predictable. In addition, various levels of the price volatility in different market locations aggravate the prediction. Thus, in developing highway construction costs, transportation agencies should consider geographical location of construction projects and market conditions of the locations. Transportation agencies face significant uncertainties in price volatility across different geographical locations. This volatility may not be uniformly distributed across different geographical locations due to changes in the availability of local contractors, materials, equipment, and labor. The objective of this research is to develop statistical models that are capable to explain spatial variations in submitted unit prices for asphalt line items in highway projects considering local market condition factors. Historical bid data used in this research consist of resurfacing and widening projects let in the state of Georgia, the United States, between 2008 and 2015. The methodology of this research is a spatial regression analysis to explain the spatial variation in the submitted unit prices for asphalt line items. The findings of this research indicate that volatility in submitted bid prices is not uniformly distributed across different geographical locations within the same transportation agency. The contribution to the body of knowledge of this research is an improved understanding of the role of local construction market and macroeconomic conditions to explain geographic variability in construction costs.