Congress bought infrastructure contractors more time, but it didn’t buy them much certainty.
Lawmakers extended federal surface transportation programs under the Infrastructure Investment and Jobs Act through Dec. 11, averting a Sept. 30 expiration that had many construction firms on edge. The Continuing Appropriations and Extensions Act, signed by President Donald Trump on Sept. 2, enacted the short-term extension.
The funds are key for the construction industry, especially since infrastructure work remains one of the few reliable sources of construction activity outside data center projects.
But the roughly 10-week reprieve falls well short of the multiyear funding certainty contractors hoped for, according to construction trade associations. Some state transportation departments had already begun scaling back on 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.”
The price of the extension
In addition to a delay in lettings, the process where an agency solicits competitive bids, short-term extensions also can cause agencies to phase projects into smaller pieces, said Michael Clark, partner at Smith Currie Oles, an Atlanta-headquartered law firm specializing in construction.
“When that happens, costs increase,” Clark told Construction Dive. “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. With a long-term agreement in place, state agencies have a clearer funding baseline for programming, and that visibility flows through the entire construction market, he said.
“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 extension also doesn’t cover all funding from the IIJA.
The money left behind
The IIJA used a unique funding structure, said Etchen. Historically, the Highway Trust Fund funds road and bridge work.
Various revenue streams feed into the HTF, including the gas tax, the diesel tax and the federal excise tax on heavy trucks, he said. For the last 20 years or so, Congress has done a general fund transfer into the HTF to ensure they’re meeting the needs of the system. The IIJA kept up those historic revenue streams, but also included what was called “advance appropriations,” said Etchen.
Congress, this time around however, did not include those advance appropriations in the extension, said Clark.
“It’s not a clean extension,” Clark told Construction Dive. “The deadline moved, but not all of the money moved with it.”
The omission has raised particular concern among precast producers that supply bridge construction projects, Nick Rhoad, CEO and president of the National Precast Concrete Association, told Construction Dive.
“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.”
For example, the $1.2 trillion IIJA included $5.5 billion for the Bridge Formula Program, a federal initiative on bridge rehabilitation, said Rhoad. The absence of additional advance appropriations will affect contractors waiting for states to put new projects out to bid, he 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 need for a long-term bill
The construction 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. Still, the House has yet to vote on it. The Senate, on the other hand, has not released its highway reauthorization proposal, Leonard said.
Etchen added the House Ways and Means Committee also needs to provide the tax title for the bill before it moves to the full House floor for a vote.
Paying for it could be another headwind, said Clark.
BUILD America 250 attempts to address that problem with a fee on electric and hybrid vehicles, Etchen said. The measure would provide the first new revenue stream into the HTF in 30 years, he added.
“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.”
