Companion Guide to Video August 2012

www.fhwa.dot.gov/federal-aidessentials

The Statewide Transportation Improvement 

Program, or STIP, identifies all transportation 

projects that are eligible for Federal funds. As a 

result, some agencies have used advance 

construction, or AC. However, as priorities change 

and competition for limited resources increase, 

projects may be delayed. This fund management 

tool allows agencies to incur costs on a project 

and submit the full or partial amount later for 

Federal reimbursement if the project is approved 

for funding. 

Advance construction can be used to fund 

emergency relief efforts and for any project listed 

in the STIP, including surface transportation, 

interstate, bridge, and safety projects. As with any 

Federal-aid project, to remain eligible for 

reimbursement, the agency must be able to meet 

project funding requirements to complete the 

project and follow all other Federal requirements 

as the project advances. 

Let’s look at how advance 

construction is used to fund a 

Federal-aid transportation project,

as well as possible risks associated 

with it, such as Federal funds not 

being available for your project.

To initiate the advance construction process, your 

State department of transportation, or State DOT, 

needs authorization from the Federal Highway 

Administration, the FHWA. If FHWA approves, the 

project costs incurred from this point on become 

eligible for Federal funding provided Federal-aid 

funds become available.

After authorization, the work begins and agencies 

start to incur costs.

Finance

Project Funding

Advance Construction

This mechanism allows projects to be funded with Federal-aid 

dollars at a later date
Federal-aid Essentials for Local Public Agencies

At some point, your State DOT will request that 

FHWA fund the full or a partial amount of the 

advance construction balance. If FHWA approves 

the request, it converts the advance construction 

from eligible for funding to an obligation to fund 

and reimburse. Only then can agencies seek 

reimbursement for costs they incurred up to the 

obligated amount.

To help illustrate the advance 

construction process, let’s follow a 

project to widen an intersection. 

During the planning phase, the local 

public agency (LPA) discovers it

needs to acquire a parcel of land for 

right-of-way.

The real estate team is ready to move forward, but 

the Federal funds—some $240,000, or 80 percent

of the total costs—are not currently available. 

A consultation in July with the State DOT results in 

an LPA funding plan that uses advance 

construction and the State DOT immediately 

requests authorization for $240,000 in advance 

construction for the right-of-way work phase.

The plan outlines a future request to convert 

advance construction to Federal funds for $140,000 

in November and the remaining $100,000 in 

January. The process will convert the $240,000 in 

cost from a State or local obligation to a Federal 

obligation. 

As planned, in July the State DOT receives 

authorization from FHWA that it approves the 

project for advance construction. This authorization 

means that while the agency can incur costs of up 

to $300,000, none of it is billable until the State 

DOT requests that the funds be converted and 

FHWA approves the funds as a Federal obligation.

With authorization in place, the real estate staff 

begins to acquire the needed parcels of land and to 

relocate the owners. By October, the LPA has 

incurred $25,000 in costs and intends to meet this 

obligation with its own funds until such time the 

costs are converted to a Federal obligation.

As planned, in November, the State DOT makes its

request and FHWA converts $140,000 from 

advance construction to a Federal obligation. The 

LPA is now able to invoice up to $140,000—

provided it do not exceed the 80 percent matching 

limit. 
Federal-aid Essentials for Local Public Agencies

By now, the initial $25,000 in costs has grown to 

$100,000. Applying the 80-percent matching limit, 

the finance department calculates an invoice 

amount of $80,000 and submits it for 

reimbursement. 

The project and plans for advance construction 

continue and the LPA submits invoices in 

accordance with matching and other Federal 

requirements. If there are any unspent funds at the 

conclusion of the right-of-way phase, the LPA 

must obtain authorization before applying those 

funds to construction phase activities or any other 

activities.

As we have just learned, advance 

construction allows agencies to 

manage funds and accelerate work 

on projects. However, FHWA does 

not view advance construction as 

an obligation for Federal funds or 

reimbursement.

This means that if planned Federal funds fail to 

become available, agencies must either use nonFederal funds to complete projects or suspend 

work on the projects. Therefore, it's essential that 

agencies carefully assess their risks before using 

this technique. 

Each State DOT has an established approach to 

funding and financing projects. The staff can 

describe how it has successfully used advance 

construction, as well as the steps taken to manage 

the associated risks. 

If your agency uses advance construction to 

manage cash flow and accelerate project delivery, 

it's expected to comply with all Federal 

requirements. 
Federal-aid Essentials for Local Public Agencies

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• Federal-aid fund management tools provide overview of advance 

construction

http://www.fhwa.dot.gov/ipd/finance/tools_programs/federal_aid/ac_pcac/

• AASHTO briefing paper on advance construction

https://bookstore.transportation.org/item_details.aspx?ID=1770