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IIJA Expires September 2026 - What Bonded Contractors Need to Know Now

Posted on May 26, 2026 by Kirk Chester

IIJA Expires September 2026 - What Bonded Contractors Need to Know Now

Author: Grit Insurance Group | Published: April 2026 | National

The largest federal infrastructure investment in a generation hits its expiration date on September 30, 2026. The Infrastructure Investment and Jobs Act - signed into law in November 2021 with $1.2 trillion in total funding and $550 billion in new investment - has funded over 68,000 projects across every state in the country. For bonded contractors, the next five months are not a time to sit back and wait. They are a window to act.

Whether you are a highway contractor chasing state DOT lettings, a subcontractor bidding bonded public work, or a general contractor building your surety program, the IIJA expiration affects your pipeline, your bonding capacity, and your business plan for 2027 and beyond. Here is what is happening, what it means, and what you should do about it right now.

What the IIJA Actually Funded

The IIJA reauthorized federal surface transportation programs with a 34% increase over previous funding levels. It directed roughly $500 billion toward highway, bridge, transit, and safety programs alone. The rest went to energy grid upgrades, broadband, water systems, and environmental resilience.

By the law's third anniversary in November 2024, $568 billion had been allocated to more than 68,000 projects nationwide - about 47% of total IIJA funds. As of January 2026, 72.6% of DOT-administered funding has been obligated, with 43% already spent on active construction (U.S. DOT IIJA Funding Status, January 2026).

For the surety market, the effect has been significant. Direct surety premiums grew more than 40% since 2021, driven largely by the surge in bonded public construction. Surety underwriting profits exceeded $2 billion for a third consecutive year in 2024, and the industry's direct incurred loss ratio dropped to 20.5% through Q3 2025 (AM Best, January 2026).

In plain terms: the IIJA created the strongest surety market in a decade. The question now is what happens when the law behind it expires.

What Happens on September 30, 2026

When the IIJA expires, the mechanisms that keep new projects entering the pipeline - annual formula funding allocations to states, discretionary grant programs, and multi-year competitive awards - all stop unless Congress passes a new surface transportation reauthorization bill.

Here is the breakdown by project status:

  • Projects already under construction with funding obligated: These are relatively secure. The federal government has committed the dollars, and contractors can expect to finish the work and get paid.
  • Projects awarded but not yet fully funded: These carry real uncertainty. If funding has not been formally obligated before September 30, parts of the project budget may not materialize without congressional action.
  • Projects depending on new discretionary grants: These are speculative. New competitive grant rounds will not launch without reauthorization.
  • Formula programs (highways, bridges, transit): Without a new bill, funding reverts to pre-IIJA baseline levels - dramatically lower than the amounts state DOTs have built their current project pipelines around (Construction Owners Association, February 2026).

The Federal Highway Administration's budget request for FY2026 is $72.6 billion. Maintaining IIJA-level spending after expiration would require more than $102 billion annually - a $58 billion gap the Highway Trust Fund cannot cover. The gas tax, unchanged since 1993 at 18 cents per gallon, brings in roughly $44 billion per year. The math does not work without new legislation (EPIC for America, Highway Bill Reauthorization Analysis).

Will Congress Pass a New Bill in Time?

The short answer: probably not on time. Maybe not at all in 2026.

Transportation for America, which has tracked surface transportation reauthorization since 1991, points out that Congress has operated on short-term extensions of expired transportation laws for roughly a third of that time. The last two surface transportation bills both required multiple extensions before final passage (Transportation for America, July 2025).

The House Transportation and Infrastructure Committee has been holding hearings since January 2025 on the next reauthorization bill. Chairman Sam Graves has called it a top priority. But several factors make 2026 harder than past cycles:

  • The Highway Trust Fund faces projected insolvency by FY2028, requiring an estimated $329 billion in general fund transfers over the next decade to maintain current spending.
  • The bipartisan coalition that passed the original IIJA is under strain, with the current administration having already rescinded over $2.3 billion in IIJA allocations.
  • Budget hawks in Congress see the IIJA's spending levels as a one-time event, not a baseline to continue.
  • The Congressional Budget Office assumes IIJA spending levels will continue beyond 2026, which means a bill that simply maintains current levels could be labeled "budget neutral" - but that framing is politically contested.

The most likely scenario: a short-term extension of current programs while Congress works on a longer bill, with funding levels and program structure unresolved into 2027. For contractors, that means a period where new project awards slow down even if the money does not completely dry up.

What This Means for the Surety Market

The surety market enters this transition from a position of strength but with eyes wide open. Capacity remains ample, competition among carriers is healthy, and the industry benefits from decades of conservative underwriting discipline. But the landscape is shifting.

Tighter underwriting, not less capacity. Surety carriers are not pulling back on capacity. They are increasing selectivity. Loss emergence from 2023-2024 showed that some of the aggressive underwriting during the infrastructure boom was based on optimistic assumptions about labor availability, schedule predictability, and margin durability. Carriers are now scrutinizing those assumptions more carefully (TSIB 2026 Surety & Construction Forecast).

Backlog concentration matters. Construction backlog sits at roughly 8 months nationally, but that number masks a split. Contractors working on data center projects report 12-month backlogs. Infrastructure contractors report 10-month backlogs. Smaller contractors without exposure to those sectors have seen backlog decline to four-year lows (Construction Dive, February 2026). Sureties are paying attention to what kind of work is in your backlog, not just how much.

The post-IIJA funding gap will create uneven pressure. AM Best has noted that IIJA funding winding down could result in a slowdown in public construction spending. But data centers, energy infrastructure, and advanced manufacturing are picking up some of that volume. Contractors who are positioned for both public and private bonded work will have more options. Those dependent entirely on federally funded projects face a tighter runway.

Small contractor access is still strong - but the margin for error has narrowed. Sureties are paying closer attention to cash flow, underbilling trends, and reliance on key employees. Informal financial practices that were overlooked in a forgiving market are now getting questioned. Contractors who invest in financial discipline and build relationships with construction-oriented CPAs will continue to find bonding support.

What Bonded Contractors Should Do in the Next Five Months

The IIJA expiration is not a crisis. It is a transition. And transitions reward preparation. Here is a checklist for contractors who depend on bonded public work:

1. Get Your Financial House in Order Now

Your year-end financial statements are the foundation of your bonding program. If your fiscal year ended in December, your CPA-prepared financials should be in your surety agent's hands by now. If they are not, make that call today. Sureties that see clean, timely financials reward you with faster approvals and higher limits. Sureties that see late or messy financials start asking harder questions.

2. Review Your Backlog and Work-in-Progress

Know exactly what is in your pipeline. Separate projects by funding source: federally funded, state-funded, locally funded, and private. If more than 60% of your backlog depends on federal infrastructure dollars, start diversifying now. State and local projects, private commercial work, and data center-adjacent construction are all growing sectors that require bonds.

3. Lock In Bonded Work Before the Window Closes

States are racing to obligate remaining IIJA funds before September 30. Another $136 billion in federal funding is available for allocation in 2026 (Lance Surety Bonds, IIJA Strategy). That means a surge in bid opportunities over the next two quarters. Contractors who are bonded and ready to bid will capture that work. Those who wait until fall to get their program in order will miss it.

4. Build Your Bonding Capacity Before You Need It

Bonding capacity is not something you request the week before a bid. It is something you build over months through financial positioning, relationship development with your surety, and a track record of completing work profitably. If your current single-job or aggregate limit does not match the size of work coming to bid in your market, talk to your bond agent now about what it takes to increase your program.

5. Strengthen Your Perpetuation Plan

Sureties underwrite the contractor, not just the project. That means they care about who runs the company and what happens if the owner can't. Key person life insurance, an identified successor, and a documented continuity plan are not just nice-to-haves. They are bonding capacity factors. Contractors who demonstrate a perpetuation plan get higher limits. Period.

6. Stay Informed on Reauthorization

The House Transportation and Infrastructure Committee, the American Road and Transportation Builders Association (ARTBA), and the Associated General Contractors (AGC) are all tracking reauthorization progress in real time. If your business depends on federally funded construction, you should know what is happening in Washington before it hits your bid schedule.

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The Bottom Line

The IIJA created the strongest infrastructure construction market in a generation. Its expiration does not erase that work - 68,000 projects do not stop overnight. But the pipeline of new federally funded project awards will slow unless Congress acts. Contractors who treat the next five months as a window to prepare - not a reason to panic - will come out stronger regardless of what Washington does.

Get your financials current. Build your bonding capacity. Diversify your project pipeline. And work with a surety team that understands how federal funding cycles affect your bonding program.

The Grit team works with contractors across all 50 states to build and protect bonding programs through market transitions exactly like this one. If you want a straight assessment of where your bonding program stands heading into 2027, pick up the phone.

Call us: (801) 505-5500
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Frequently Asked Questions

When does the IIJA expire?

The Infrastructure Investment and Jobs Act expires on September 30, 2026. After that date, federal formula funding for highways, bridges, and transit reverts to pre-IIJA authorization levels unless Congress passes a new surface transportation reauthorization bill or a short-term extension.

Will projects already under construction lose their funding?

Projects that are already under construction with funding formally obligated by the federal government are relatively secure. The risk is concentrated on projects that have been awarded but not yet fully funded, and on new projects that depend on future grant rounds or formula allocations that will not happen without reauthorization.

How does the IIJA expiration affect surety bonds and bonding capacity?

The surety market remains strong heading into the transition, with ample capacity and healthy competition among carriers. However, if the volume of new federally funded projects declines after September 2026, competition for remaining bonded work will increase. Sureties are already applying tighter underwriting standards and paying closer attention to contractor financials, backlog quality, and cash flow management.

What should contractors do to prepare for the IIJA expiration?

Start now. Get your financial statements current and into your surety agent's hands. Review your backlog by funding source and begin diversifying if you are heavily dependent on federal dollars. Bid aggressively on available IIJA-funded work before September. Build your bonding capacity before you need it - not the week before a bid. And strengthen your perpetuation plan, because sureties reward contractors who plan for continuity.

Will Congress pass a new infrastructure bill before September 2026?

Congressional committees are actively working on reauthorization, but history suggests the new bill is unlikely to pass before the deadline. The last two surface transportation laws both required multiple short-term extensions. The most likely scenario is a temporary extension of current programs while Congress negotiates a longer-term bill, potentially stretching into 2027.

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