Contractors dodge Sept. 30 funding cliff, but Dec. 11 looms

Congress extended federal surface transportation programs under the Infrastructure Investment and Jobs Act through Dec. 11, but it left some of the money behind.

"It's not a clean extension," Michael Clark, partner at Atlanta-based construction law firm Smith Currie Oles, told Construction Dive. "The deadline moved, but not all of the money moved with it."

President Donald Trump signed the Continuing Appropriations and Extensions Act on Sept. 2, averting a Sept. 30 expiration that had many construction firms on edge. The roughly 10-week reprieve falls well short of the multiyear funding certainty contractors wanted, according to construction trade associations.

The stakes are high. Infrastructure work remains one of the few reliable sources of construction activity outside data center projects.

State DOTs already pulled back

Some state transportation departments began scaling back bid openings earlier this summer, said Alex Etchen, vice president of construction advocacy and risk management at the Associated General Contractors of America.

"One short-term extension, it's not a long period of time," Etchen told Construction Dive. "We heard from some of our chapters that their state DOTs were pulling back on lettings out of concerns of the IIJA expiring and having some doubts that Congress was going to be able to get a longer-term bill done in time."

Short-term extensions carry real costs. Beyond delayed lettings — the process where an agency solicits competitive bids — agencies may phase projects into smaller pieces, Clark said.

"When that happens, costs increase," Clark said. "From a legal perspective, contract clauses that are typically already in the contract documents, for instance involving contingencies, termination, suspension, conditional payment and delay or suspension are activated."

Construction firms make workforce, equipment, bonding and subcontractor decisions well before a project reaches advertisement, said Josh Leonard, senior manager of legislative affairs at Associated Builders and Contractors.

"A multiyear authorization gives state transportation departments more visibility into federal funding and helps them maintain more predictable schedules," Leonard told Construction Dive. "A roughly 10-week extension preserves the current framework but does not provide the same planning horizon."

The money left behind

The IIJA used a unique funding structure, according to Etchen. Historically, the Highway Trust Fund has financed road and bridge work, fed by revenue streams including the gas tax, the diesel tax and the federal excise tax on heavy trucks. For roughly the last 20 years, Congress has made general fund transfers into the HTF to meet the system's needs. The IIJA kept those historic revenue streams but added "advance appropriations."

Congress did not include those advance appropriations in the extension, said Clark.

The omission has raised particular concern among precast producers supplying bridge construction, said Nick Rhoad, CEO and president of the National Precast Concrete Association.

"Without congressional action, bridge funding will cease immediately, limiting states' ability to plan, bid and begin new projects," Rhoad said. "They have failed to provide the multiyear certainty states need to plan and deliver critical transportation projects."

The $1.2 trillion IIJA included $5.5 billion for the Bridge Formula Program, a federal bridge rehabilitation initiative. The absence of additional advance appropriations will affect contractors waiting for states to put new projects out to bid, Rhoad said.

"These projects take years to plan and bid, and without certainty that funding will be available, new work will come to a complete halt immediately," Rhoad told Construction Dive. "We need to lock in surface transportation reauthorization for the long-term, not just extensions."

The long-term bill

The industry is now looking to BUILD America 250, the proposed multiyear surface transportation reauthorization. The House Transportation and Infrastructure Committee approved the legislation 62 to 2 in May, but the House has yet to vote on it. The Senate has not released its highway reauthorization proposal, said Leonard.

Etchen added that the House Ways and Means Committee still needs to provide the tax title before the bill moves to the full House floor.

Paying for it could be another headwind, said Clark. BUILD America 250 attempts to address that with a fee on electric and hybrid vehicles — what would be the first new revenue stream into the HTF in 30 years, according to Etchen.

"Ultimately we would have preferred that they get a long-term bill complete, but we are appreciative that they did pass a short-term extension to keep that funding going until December 11," Etchen told Construction Dive. "We're hopeful that they can get this wrapped up in the lame-duck session of Congress."