Stewardship and Oversight Agreement for Arizona

Introduction

Guiding Legislation

This Agreement outlines the roles and responsibilities of both the Federal Highway Administration (FHWA) Arizona Division and the Arizona Department of Transportation (ADOT) in the oversight and administration of the federal-aid highway program (FAHP) in Arizona.

Since 1991, federal transportation legislation has provided flexibility in delegating certain FAHP program and project-level responsibilities to states. The Intermodal Surface Transportation Efficiency Act (ISTEA) of 1991, the Transportation Equity Act for the 21^st Century (TEA-21) of 1998, and the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) of 2005 provided flexibility to FHWA and the states in ensuring project actions are carried out in accordance with applicable laws, regulations, and policies. TEA-21, Section 1305 (a), required that FHWA and the state enter into an agreement showing the extent of the state's assumption of responsibilities of the Secretary of Transportation. These laws allowed the states to assume greater program and project responsibilities, and accountability in the management of the FAHP. With the passage of SAFETEA-LU, greater flexibility was granted for FHWA and the states to enter into a more comprehensive agreement that covers all aspects of the FAHP and mechanisms to effectively and efficiently execute the federal-aid program relating to program and project delivery, including financial integrity.

Pursuant to 23 USC 106(c), only certain project-level actions and authorities, as further defined in this Agreement, can be delegated; these involve: design, plans, specifications, estimates, contract awards, and inspections of projects. However, actions under the following non-Title 23 authorities cannot be delegated: National Environmental Policy Act (excepted as permitted under Title 23); Uniform Relocation Assistance & Real Property Acquisitions Act; Civil Rights Act of 1964 and Clean Air Act. Also, the non-Title 23 requirements apply to all projects. In those situations where ADOT has assumed responsibility for project oversight through the delegations provided in Title 23 USC 106, ADOT is responsible acting in the relative role of FHWA and is expected to provide judgment on behalf of FHWA. FHWA and ADOT further understand that nothing contained herein shall relieve them from ultimate accountability for compliance with federal and state laws, and regulations with respect to the expenditure of FAHP funds in the State of Arizona, including those funds passed through to local governments. This Agreement does not preclude the FHWA access to, and review of, federal-aid projects at any time, and does not replace the provisions of Title 23. While federal law allows a state to assume certain project responsibilities, FHWA is ultimately accountable for assuring that the FAHP is delivered consistent with established requirements. Delegation authority to the state can be withdrawn at anytime if the state operates in a manner which violates federal laws or regulations.

23 USC 106(b) also permits states to approve, on a project-by-project basis, plans, specifications, and estimates for projects to resurface, restore, and rehabilitate highways on the National Highway System (NHS), and further permits the states to request that the Secretary no longer review and approve highway projects on the NHS (including the Interstate) with an estimated construction cost of less than $1,000,000.

FHWA recognizes there are some projects on the Interstate System that are routine and inherently low risk that are generally non-controversial and in which the state DOTs have a high-level of experience and documented procedures and processes in place for ensuring compliance with federal requirements. It is also mutually desirable for the FHWA to streamline the approval process of these routine and inherently low-risk projects. For that reason, the FHWA issued guidance on February 22, 2007, that allows for evaluation and revision of the $ 1,000,000 threshold and the shifting of responsibilities to the states for inherently low-risk projects on the Interstate.

Accordingly, this Agreement incorporates inherently low-risk projects on the Interstate System on the basis of the following:

1. Inherently low-risk oversight projects include those that are routine, low-risk projects and generally non-controversial in which the state DOTs have a high-level of experience and documented procedures and processes in place for ensuring compliance with federal requirements. These projects would not include complex or unique engineering features, would not traditionally involve major changes in scope or cost, would satisfy design standards, and would not jeopardize the safety or operation of the Interstate System. Complex projects that are classified as "major projects," involve new partners (public/private partnerships), or new, innovative contracting methods are viewed as high risk, are not considered inherently low-risk oversight projects. For purposes of this agreement, inherently low-risk oversight projects include all Interstate projects under $75,000,000 in the Phoenix metropolitan area and $25,000,000 for the rest of the state. In addition, the following class of Interstate projects is considered to be inherently low-risk for oversight purposes: 3R (resurfacing, restoration, and rehabilitation).
2. For the projects listed in paragraph 1, FHWA is granting its approval, in advance of the actual delivery of the projects, for the state DOT to approve these projects' designs, plans, specifications, estimates, contract awards, contract administration, and inspections. These advance approvals are not deemed to occur until after the completion of the National Environmental Policy Act (NEPA) process and the satisfaction of other related environmental laws and procedures.
3. For the projects listed in paragraph 1, FHWA's oversight will be satisfied by a risk management framework and process/program reviews. It is understood that FHWA's approval of funds for these projects at either the preconstruction or construction phase constitutes a determination that the project in question is eligible for the federal-aid funding and that the appropriate federal requirements have been met to date or defined steps are to be taken to ensure that requirements will be met. Notwithstanding this determination, FHWA continues to retain overall responsibility for all aspects of federal-aid programs and, as such, shall be granted full access to review any aspect or record of a federal-aid project at any time.

Overview

Stewardship and oversight, as outlined in this Agreement, are exercised through program management and project level activities. Stewardship and oversight are defined as follows:

Stewardship is the efficient and effective management of the public funds that have been entrusted to the FHWA. Stewardship is a joint responsibility for the development and implementation of the FAHP. It involves all the FHWA activities in delivering the FAHP such as leadership, technology deployment, technical assistance, problem solving, program administration and oversight. Stewardship activities include continuous process improvement initiatives, technology assistance, technology deployment, performance measurement, project involvement activities, and sharing best practices. Stewardship can be considered "how" we meet program goals.

Oversight is the act of ensuring that the Federal-aid program is delivered in accordance with applicable laws, regulations, and policies. Oversight is the compliance or verification component of the FHWA stewardship activities. Narrowly focused, oversight activities ensure that the implementation of the FAHP is done in accordance with the applicable laws, regulations, and policies. Broadly focused, oversight activities enable both agencies to ensure the effective delivery and operation of the transportation system envisioned in our governing laws and regulations. Oversight activities include process reviews, program evaluation, program management activities, and project involvement activities.

This Agreement outlines a consistent risk-based approach for the FHWA to effectively and efficiently manage public funds and to ensure the FAHP is delivered in accordance with applicable laws, regulations, policies, and consistent with good business practices. It includes stewardship responsibilities for program and project level actions. The Agreement takes into account the FHWA and ADOT resources and capabilities, and the federal requirements where FHWA has a mandated role in the oversight process. It also forms the principal basis for monitoring and evaluating the quality of ADOT's federal-aid program, and the continued disbursement of federal funds based upon ADOT policies, practices, and staffing resources.

The Agreement can be modified when needed to incorporate additional legislation, additional processes, or other changes to improve program and project delivery in the State of Arizona. It serves as a continuing plan of program and project oversight responsibilities for each agency covering the following functional program areas:

Program management ensures federal program requirements are met while proactively seeking opportunities to add value during routine program actions. Program management can include on-site project visits, participation on joint program or project committees and task forces, joint quality improvement teams, providing technical assistance, and assisting transportation stakeholders in the overall delivery of the FAHP.

FHWA's stewardship and oversight of specific projects, where applicable, will include early involvement in project decisions combined with an assessment of the quality of the products produced during the project development process. ADOT will follow its project development process to ensure proper communication and coordination occurs between ADOT and FHWA.

FHWA will use a variety of techniques, including project (on-site visits) and program reviews, to manage, monitor, and assess performance of those projects where ADOT has assumed responsibilities, as well as evaluate the fulfillment of the responsibilities outlined in this Agreement.

• Program Oversight Initiatives (POI) - Annual outline of the Division's risk-based strategies for addressing oversight of the Federal-aid program. The POI is a single, comprehensive oversight document that reflects all of the proposed oversight initiatives for the coming fiscal year at the project and program level. The POI enables the Division to better respond to reviews and audits, explain current oversight activities, and to further demonstrate that the level of oversight is reasonable. The POI also promotes greater consistency in program oversight across Divisions.
• Project Reviews - Project reviews are generally project-specific, comprising those elements shown in the enclosed Project Responsibility Chart (Table 3), and may involve on-site field visits and inspections.
• Program Reviews and Assessments - Program reviews are a thorough analysis of key functional program processes and procedures used by the state to manage the program. The reviews are conducted to ensure compliance with federal requirements and identify opportunities for process improvements and highlight exemplary practices. Program assessments includes a variety of techniques such as joint risk assessments, self-assessments and program evaluations, to identify strengths, weaknesses, opportunities and best practices - all aimed at continuous improvement of the program.

Program Level Oversight

FHWA and ADOT will work collaboratively to manage the FAHP, and review, monitor, and approve activities as necessary in the designated areas of responsibility to comply with applicable laws, regulations, directives, and standards. The FHWA Program Responsibility Chart (Table 1) identifies the functional program areas, including the various approval actions specified in federal regulation, notification and approval requirements.