The organization reports that federal reviews for several major transportation projects—including corridor and transit programs in high-population regions such as New York and Chicago—remain paused or slowed as environmental, grant-administration and compliance staff return to work.

In California, federal coordination on the $2.3-billion SR-71/SR-57 interchange reconstruction is resuming after being suspended, and in New York, portions of the review work for the Interborough Express are restarting. The interruptions come as states finalize 2026 letting schedules and prepare next year’s procurement cycles.

Backlog Tightens the Clock on IIJA Funding Windows

The loss of federal labor-market data also compounds the disruption. Construction firms, state agencies and policymakers rely on the U.S. Labor Dept.’s monthly releases to gauge labor availability, wage pressures and regional demand—core elements in bid pricing and staffing plans.

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With the Bureau of Labor Statistics halting data collection during the shutdown, the White House warns certain October jobs and inflation reports may never be released. September’s report is expected, but missing indicators leave heavy-civil sectors without benchmarks typically used to forecast delivery capacity heading into the construction season.

The shutdown’s fallout intensifies concerns in IIJA implementation. A July 2025 Government Accountability Office audit found DOT had obligated only 59% of the roughly $438 billion in IIJA grant funding available for fiscal years 2022 through 2025, with outlays at about half of those obligations. 

In the audit, GAO noted that “as of April 2025, DOT has obligated 59% of its available IIJA grant funding and outlaid over half of that funding to recipients and awardees,” but also found that the department “has not communicated discretionary and formula grant funding amounts in a timely manner,” complicating congressional oversight and risk planning.

GAO also identified specific challenges slowing the department’s ability to move projects into agreement. Surveyed awardees from the fiscal 2022 discretionary funding round most frequently cited inflation, budget definition, schedule definition, NEPA reviews and Build America, Buy America compliance as moderate or major obstacles. 

These challenges proved interrelated: GAO found that 82% of awardees that reported NEPA reviews as a significant hurdle also reported severe inflation impacts. 

The audit further documented that approximately 23% of selected fiscal 2022 discretionary awardees still lacked a signed grant agreement when surveyed in early 2025, leaving those projects unable to obligate funding well before the shutdown introduced additional delays.

GAO concluded that DOT has not “comprehensively identified risks, fully assessed their likelihood and impact, and monitored them,” and noted that the agency’s current project-level reviews fall short of a portfolio-wide approach needed to manage the hundreds of IIJA programs now competing for limited administrative bandwidth.

Those unobligated balances now carry added urgency. The earliest IIJA highway apportionments—issued in fiscal 2022—reached the end of their obligation window on Sept. 30, and any portions not obligated have since lapsed.

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Remaining formula funds will lose availability when the law sunsets on Sept. 30, 2026, unless Congress extends or expands the surface transportation title. Delays in federal reviews and grant processes further shorten the time left for states to obligate the remaining funds.

Discretionary programs face even stricter deadlines. Competitive grants for bridge, resilience and multimodal projects rely on appropriated budget authority that expires if not obligated within defined windows.

The GAO found that DOT had not fully assessed the risks in these accounts, either, raising the likelihood that Congress will need to extend specific obligation periods or reprogram unobligated balances in the next surface transportation bill.

For agencies and contractors planning multi-year capital programs, uncertainty over the availability of IIJA funds beyond 2026 is becoming a central concern.

Uneven Advancement

Independent analysis by the Urban Institute finds that much of IIJA’s apparent spending growth has been eroded by construction inflation, with transit and rail capital investment flatlining even as early highway spending gains declined in 2024 and 2025. 

The findings underscore how states with heavier transit and rail portfolios face even tighter pressure to advance remaining projects before the law’s authority expires.

States continue to show uneven progress. For example, California’s major capacity projects awaiting federal environmental clearance now face additional schedule pressure, while Pennsylvania advances bridge-replacement packages that have already been designed and scoped. 

Texas—one of the fastest-moving states on IIJA lettings—is evaluating potential adjustments to sequencing on several corridor projects as federal reviews resume, including federally reviewed segments of the I-35 Capital Express North widening in the Austin region.

Industry data reflect a similar pattern. ARTBA reports that as of late August, states have committed about $230 billion in IIJA highway and bridge formula funds to more than 105,000 projects—a substantial volume but one that still leaves significant funding uncommitted.

The shutdown has added weeks of delay to federal actions needed to obligate the next round of formula funds and finalize competitive grant agreements.

Jake Scott, a litigation partner at Smith Currie Oles LLP who has represented federal contractors nationwide, continues to track the shutdown’s implications for government contractors and has urged contractors to track shutdown-related delays and costs, even now that the government has reopened.

“Restarting the government is going to take some time, and it’s likely that contractors will continue to suffer the effects of the shutdown for some time after reopening,” Scott said in an email.

While Congress begins shaping the next surface transportation authorization—set to replace IIJA’s highway and transit title before it expires—the combined effects of the shutdown and lagging federal obligations will influence early debate. 

The next several weeks will be critical for determining how quickly postponed federal actions are integrated into 2026 schedules and whether IIJA’s remaining funding can advance into construction before the law’s authority expires.