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Transportation Funding & Financing

Advance Construction Authority

Overview

AC and Partial Conversion of Advance Construction (PCAC) allows a state to begin a project even if the state does not currently have sufficient Federal-aid obligation authority to cover the Federal share of project costs. It is codified in Title 23, Section 115 Advance Construction. Advance construction eliminates the need to set aside full obligational authority before starting projects. As a result, a state can undertake a greater number of concurrent projects than would otherwise be possible. In addition, advance construction helps facilitate construction of large projects, while maintaining obligational authority for smaller ones. At some future date when the state does have sufficient obligation authority, it may convert an advance-constructed project to a Federal-aid project by obligating the permissible share of its Federal-aid funds and receiving subsequent reimbursements. Advance construction allows a state to conserve obligation authority and maintain flexibility in its transportation funding program. For transit facilities, a "letter of no prejudice" follows similar procedures to advance construction, but also applies to non-construction-related activities (e.g., vehicle procurement).

Partial conversion of advance construction (PCAC) is a somewhat different approach in which the state converts, obligates, and receives reimbursement for only a portion of the Federal share of project costs. This removes any requirement to wait until the full amount of obligational authority is available. The state can therefore convert an advance-constructed project to a Federal-aid project in stages, based on cash flow requirements and availability of obligational authority, rather than all at once on a single future date. This flexibility enables a state to begin some projects earlier, delivering the benefits to the public sooner.

Increased advance construction flexibility was provided in Section 308 of the NHS Act. FHWA can approve construction for reimbursement after the final year of an authorization period, provided the project is on the state's transportation improvement program (STIP).

Resources

Briefing Paper: Use of Advance Construction in Financing Transportation Projects (PDF 2.0 MB)

Through this briefing paper, Use of Advance Construction in Financing Transportation Projects, the AASHTO Transportation Finance Clearinghouse (CEPF) seeks to provide transportation industry professionals with a synthesis of practices across the country relating to the use of the Advance Construction (AC) technique. The use of AC across states varies widely - from consistent and aggressive use that is an integral part of a state's financial management to more selective or sporadic use. This briefing paper presents historical trends in AC usage, identifies current practices, benefits, and challenges, and provides observations regarding future use and administration of the AC technique.

FHWA Guidance on Section 308 of the NHS Act: Advance Construction of Federal-aid Projects

The FHWA Guidance section on "Eligible Projects" has been superseded by a SAFETEA-LU amendment to Section 115 of Title 23 and the subsequent change in FHWA regulations. All categories of Federal-aid highway funds are now eligible for advance construction. Additionally, the restriction that a state must obligate all of its allocated or apportioned funds, or demonstrate that it will use all obligation authority allocated to it for Federal-aid highways and highway safety construction, prior to the approval of advance construction projects, has been eliminated. This clarification was announced in the Federal Register (Docket No. FHWA-2007-0020) on August 26, 2008.

Advance Construction Authority at the Massachusetts Bay Transportation Authority (Boston) (PDF 380 KB)