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Tools & Programs:
Federal-aid Fund Management Tools

Advance Construction and Partial Conversion of Advance Construction

Overview and Process

Overview

Advance construction (AC) allows states to begin a project even in the absence of sufficient Federal-aid obligation authority to cover the Federal share of project costs. It is codified in Title 23, Section 115. 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.

There is no obligation or guarantee on either side. If Federal funds are not available, the state will not be able to convert the project to a Federal-aid project. In some cases, the state may choose not to convert the project, if state funds are sufficient.

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. PCAC is used in conjunction with GARVEE bonds when Federal funds are obligated for debt service payments over a period of time.

Increased advance construction flexibility was provided in Section 308 of the NHS Act (1995). 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).

Process

An AC project application may only be approved if it is included in a state's transportation improvement program (23 U.S.C. 115(c)). The AC approval process includes the following steps:

  1. State identifies project(s) and requests AC designation.
  2. FHWA Division Office ensures state meets financial preconditions for AC.
  3. FHWA reviews and approves AC designation for project. Project agreement executed.
  4. State constructs project following Federal-aid requirements.
  5. State requests conversion to Federal-aid project full or partial and project agreement is modified.
  6. FHWA obligates Federal-aid funds per modified project agreement.
  7. State requests reimbursement for costs incurred full or partial as needed.
  8. FHWA reimburses Federal-aid share of costs of state.