Early Impact of IIJA on Roads

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February 22, 2023

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What Is IIJA?

When President Eisenhower signed legislation appropriating funds to build the U.S. Interstate Highway System of roads, bridges, and tunnels that greatly increased the ease of traveling from one state to another, coast to coast throughout the nation. Officially known as the Dwight D. Eisenhower National System of Interstate and Defense Highways, one of its purposes was to facilitate quick mobilization and movement of military troops and equipment when necessary. By the early 1990s, there were nearly 45,000 miles of interstate highway, giving people unprecedented mobility and spurring the growth of interstate commerce.

However, nobody expected the highway system to last forever. The money appropriated for maintaining it ran out in 1972, and since then funding has relied on a gasoline tax. Over the decades, it became increasingly apparent that the nation’s highways were falling into disrepair. That was made abundantly clear by the 2007 collapse of a section of a bridge on I-35 outside of Minneapolis collapsed into the Mississippi River, killing 13 people and injuring another 145.

Still, legislative efforts to fund highway improvements–along with other needed infrastructure upgrades–were limited until President Biden signed the bipartisan Infrastructure Investment and Jobs Act into law on November 15, 2021. IIJA authorized $1.2 trillion to repair, upgrade, and replace aging and inadequate transportation and infrastructure systems in every state and all U.S. territories.

Road and Bridge Infrastructure Projects

The Department of Transportation and Federal Highway Administration committed about $120 billion for improvements to highways and bridges for the 2022 and 2023 fiscal years. And as of this writing, more than 2,800 bridge projects are underway. (Official federal counts of the number of IIJA-funded projects do not include those still in the planning stage or “shovel ready” but not yet launched.)

One new program established by IIJA, the Safe Streets and Roads for All program, provides up to $6 billion over a five-year period in the form of grants for regional, local, and tribal entities to implement measures to prevent injuries and deaths on roadways.

Guidelines released by the Federal Highway Administration in 2021 urge states to concentrate on repairing existing roads rather than building new ones. But ultimately, it’s up to the states to allocate grant funds as they see fit.

According to the American Road & Transportation Builders Association, as of the end of Q3 2022, the five top roadway projects in terms of funding are:

Expansion of Loop 1604 on I-10 in San Antonio, Texas
The 635 East project in Dallas
Roadway widening on the I-17 split in Arizona
I-35 widening in Travis County, Texas
Van Wyck Expressway capacity and access improvements to and from JFL International Airport in New York

Construction Opportunities

Federal funds authorized under IIJA are distributed through a combination of formula grants and competitive grants. Formula grant amounts are based on such factors as state size and population, while cities, towns, and municipalities obtain competitive grants through bidding on them or applying for them directly. The state and local entities receiving IIJA grant money become project owners and select contractors to carry out the work. State and local grant programs create opportunities for construction companies with the desire and capacity to tackle the challenge of repairing and improving roadways.

Construction Bonds for IIJA-Funded Road Projects

Publicly funded construction projects require contractors to obtain certain surety bonds for the financial protection of the project owner. The construction bonds most commonly required for roadwork projects are bid bonds, performance bonds, and payment bonds. Performance and payment bonds are mandatory for public works projects. In 2021, the Federal Miller Act was amended to require performance and payment bonding on federally financed infrastructure projects, including state-level projects that are public/private partnerships.

Bid bonds are not required under the Miller Act, but may be required by the project owner to provide financial protection in the event that the winning bidder declines the job or is unable to qualify for the necessary performance and payment bonds. The project owner can submit a claim and be compensated for the cost of having to re-advertise a job and go through the competitive bidding process again.
A performance bond is the contractor’s guarantee to complete the job according to the contract. In the event of default for insolvency or any other reason, the project owner can be compensated for the resulting financial loss, such as the expense of bringing in another contractor or implementing other measures to get the work completed.
A payment bond legally obligates the contractor to pay all subcontractors, suppliers, and laborers according to the terms of the construction contract. If they fail to do so, injured parties can file a claim against the bond and be compensated accordingly.

Contractors interested in taking advantage of the opportunities created by IIJA should anticipate such bonding requirements and establish the necessary bonding capacity.