Short answer: The federal surface transportation authority created by the Infrastructure Investment and Jobs Act (IIJA) expires on September 30, 2026. Congress has a replacement in progress but not yet enacted, and a short-term extension is widely expected. At the same time, construction input costs rose 7.1% in the year to July 2026 and construction wages 5.2%. For California contractors, that means pricing risk carefully, leaning on stable state-funded work, and keeping every certification and compliance record in order.
What expires on September 30, 2026
The IIJA provided $550 billion in new federal infrastructure investment over fiscal years 2022 through 2026, according to Caltrans. Its surface transportation programmes, the money behind much federal-aid highway, transit and safety work, are authorised only through September 30, 2026. Caltrans and the California State Transportation Agency spent early 2026 building consensus principles for what should come next, finalised in April 2026.
What Congress is doing
On May 22, 2026, the House Transportation and Infrastructure Committee approved the BUILD America 250 Act (H.R. 8870) by a 62–2 vote. It is a five-year, $580 billion surface transportation reauthorisation with roughly $474 billion in contract authority for states and local governments. As of the latest public reporting we reviewed, the Senate had not released its own bill, and industry observers expected a short-term extension of current programmes if negotiations run past the deadline. An extension would keep programmes running at current levels but provide no new authorisation.
What that means for California work
- State money is steadier than federal money right now. California’s SB 1 invests an estimated $5 billion a year in transportation, independent of the federal timeline. State-funded work is where California small business preferences apply, so SB and SB-PW certification matter more, not less.
- Federal-aid work may slow at the margins. Uncertainty tends to delay new federal-aid awards while agencies wait for clarity on multi-year funding.
- DBE goals are already on hold. While Caltrans reevaluates every certified DBE, agencies cannot set DBE contract goals. Firms that keep their certification through the reevaluation will be positioned when goals return under a new bill.
Costs are rising faster than many bids assume
The producer price index for nonresidential construction inputs rose 7.1% between July 2025 and July 2026, according to the Associated General Contractors of America. Some items rose far faster: liquid asphalt 45.2%, diesel 44.2%, aluminum mill shapes 40.5%, steel mill products 22.5%, copper and brass 18.4%, and lumber and plywood 9.9%. AGC attributes the increases to tariffs, reaching 50% on some materials, and geopolitical factors.
On a fixed-price public contract, that gap comes straight out of margin. A bid priced on last year’s asphalt or steel numbers can turn a winning job into a losing one.
Labor is the other squeeze
Associated Builders and Contractors estimates the industry must attract about 349,000 additional workers in 2026. AGC reports construction wages up 5.2% year over year, against 3.2% for the private sector overall. On public works, higher wages flow through prevailing wage and certified payroll obligations, and apprenticeship requirements apply on contracts of $30,000 or more.
Five moves for California contractors this quarter
- Price the risk. Read each solicitation for price adjustment or escalation terms. Many public contracts don’t offer them, so build realistic material assumptions and a clear contingency into the bid.
- Win more state-funded work. If you are not yet SB or SB-PW certified, apply. It is free and gives a 5% preference (up to $50,000 per bid) on state solicitations. See SB-PW or DBE: which helps more in 2026.
- Protect your DBE status. File or complete your Caltrans reevaluation so you are eligible when federal goals return.
- Tighten compliance. Rising wages make certified payroll errors more expensive. Get eCPR submissions and apprenticeship forms right the first time.
- Build prime relationships now. When new federal money arrives, primes will need certified subcontractors quickly. Be on their lists before then. Our guide to bidding public works in California covers the basics.
What this means for owners and investors
Public infrastructure demand in California rests on two supports: stable state funding such as SB 1, and federal funding whose next chapter is still being written. Costs for materials and labor are rising faster than general inflation. In that environment, firms with current certifications, clean compliance records and disciplined bidding are better placed than firms that compete on price alone. This is general economic analysis, not investment advice.
Frequently asked questions
When does the IIJA expire?
The IIJA’s surface transportation authorisations run through September 30, 2026.
What is the BUILD America 250 Act?
A five-year, $580 billion surface transportation reauthorisation bill (H.R. 8870) approved by the House Transportation and Infrastructure Committee on May 22, 2026 by a 62–2 vote. It had not been enacted as of our most recent review.
Will federal highway funding stop on October 1, 2026?
Not necessarily. Congress has historically passed short-term extensions when reauthorisation runs late, which keep programmes running at current levels. Watch for an extension or a final bill before September 30.
How much have construction costs risen?
AGC reports the producer price index for nonresidential construction inputs rose 7.1% from July 2025 to July 2026, with steel mill products up 22.5% and aluminum up 40.5%.
How much does California’s SB 1 provide?
SB 1 invests an estimated $5 billion a year in California transportation.
Checked September 2026 against Caltrans, the International Economic Development Council, AGC, ABC and build.ca.gov. Legislative status can change quickly; confirm the latest before making decisions.
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GERC is a woman-owned firm based in San Bernardino, certified by the State of California as a Small Business (Micro) and Small Business for Public Works. Follow Global Economic Research Consulting on LinkedIn for weekly analysis.