Additional Guidance on 23 CFR 635 A
Formerly Federal-aid Policy Guide Non-Regulatory Supplement 23 CFR 635A,
December 9, 1991, Transmittal 1
See Order 1321.1C FHWA Directives Management
- Supervising Agency (23 CFR 635.105). To the maximum extent practicable, State highway agency general provisions, specifications, regulations, qualification requirements, contract forms and inspection procedures should be used. Other documents and procedures may be used when conditions warrant, provided they are first approved by the State highway agency and the Division Administrator.
- Differing Site Conditions (23 CFR 635.109)
- The Title 23 Code of Federal Regulations (CFR 635.109) contains policies, requirements, and procedures for standardized "changed conditions" clauses for Federal aid highway projects. In summary, unless prohibited by State law, part 635 requires that a "differing site condition" clause shall be made part of and incorporated into each highway project approved under Title 23.
- Geotechnical Engineering Guideline #15 provides information on geotechnical aspects of differing site conditions, adequate site investigation, disclosure and presentation of subsurface information by highway agencies, and the use of such information in mitigating or resolving contractor claims of differing site conditions. Recommendations are provided for disclosure of factual, qualified and interpretive geotechnical information. The uses of geotechnical design summary reports are described and a typical report outline is provided in the appendices. This guideline is available from the Office of Engineering (HNG-31).
- Licensing and Qualification of Contractors (23 CFR 635.110)
- Contractors may be prequalified for an annual or other period of time. When this is done, the status of each contractor so qualified should be reviewed, to whatever extent is necessary to ascertain whether conditions since the prequalification date have changed, including volume of work, which may have affected his/her current qualifications to undertake additional work.
- The Division Administrator shall maintain a current record and summary of any laws, regulations, and specifications regarding the State's requirements, practices and procedures with respect to advertising for bids, qualifying and licensing contractors and awarding of contracts. Any revisions thereof are to be transmitted promptly and directly to the regional office and Washington Headquarters.
- Advertising for Bids (23 CFR 635.112)
- Advertising periods longer than 3 weeks are desirable for large, complicated projects that will require considerable time for study and developing of cost data before realistic bids can be prepared.
- For the noncollusion statement, the lobbying certification and the suspension and debarment certification, the State highway agency may require a separate signature for each or establish a format whereby the bidder certifies compliance by submission of the signed bid. All statements/certifications furnished by the bidder shall be retained by the State highway agency with the project records pursuant to 49 CFR Part 18.
- Changes and Extra Work (23 CFR 635.120)
- The Division Administrator is responsible for final approval of all requests for changes or extra work. If the change or extra work involves an amount that might result in the final cost of the project exceeding the project agreement amount, the Division Administrator may approve the change or extra work order as to thework involved. The Division Administrator shall concurrently advise the State that Federal participation in any such work, the cost of which cannot be met from Federal-aid funds provided under the then effective project agreement, will be contingent upon additional Federal-aid funds being made available for the project by a modified project agreement. The modified agreement will be executed prior to or at the final voucher stage. In any case involving questionable or unusual features, the advice and concurrence of the regional administrator, and in the more important cases, the Washington Headquarters, should be obtained before the change or extra work is approved.
- Equipment Rental Rates (23 CFR 635.120)
- Actual costs, rate guides, and rate schedules. Federal policy requires that actual costs be used to determine extra work payments; however, actual equipment costs are not readily available. Therefore, the FHWA permits SHA's to specify in their construction contract specifications the use of predetermined rate guides as well as equipment rate schedules developed by SHA's which are in conformance with the Federal cost principles and the FHWA's policy contained herein. The Federal cost principles applicable to rental rates for contractor furnished equipment are contained in 48 CFR, Part 31. The provisions in OMB Circular A-87 apply when State-owned equipment is used.
- Rental Rate Guides. A State may, subject to the FHWA's concurrence, adopt the Dataquest Rental Rate Blue Book (Blue Book) or another industry rate guide, or it may develop its own guide. The State must make the determination that the equipment rental rates developed or adopted fairly estimate a contractor's actual cost to own and operate the equipment. It is the FHWA's responsibility to review each State's rates for compliance with the policy.
- Adjustment Factors. Equipment is not expected to operate for 12 consecutive months. Maps at the beginning of each Blue Book equipment section indicate adjustment factors based on climate and regional costs. Rate adjustment tables indicate adjustment factors based on equipment age. The adjustment factors in the maps and tables are to be applied when determining the eligible rate.
- Maximum Rate. The Blue Book adjusted rates cover all eligible equipment related costs. Therefore, they are considered to be the maximum eligible rates for Federal-aid participation purposes.
- Hourly Rates. The developer of the Blue Book accumulates all contractor costs for owning a piece of equipment on an hourly basis. The monthly rate displayed in the rental guide is determined by multiplying the hourly accumulated costs by the monthly standard of 176 hours. Therefore, for periods of equipment use less than the standard 176 hours per month, Federal-aid participation shall be limited to the hourly rate obtained by dividing the monthly rate by 176. Premium rates contained in the rate guides shall not be used.
- Standby Equipment Rates. The contractor continues to incur certain ownership costs when equipment is required to be on standby. The use of a standby rate is appropriate when equipment has been ordered to be available for force account work but is idle for reasons which are not the fault of the contractor. While an industry standard does not exist for standby rates, it has been the normal practice of the courts to reduce published ownership rental guide rates by 50 percent for standby rate usage. Therefore, the FHWA will accept use of 50 percent of the ownership rental rates of an approved guide as the standby rate in lieu of a contractor's actual standby costs. There should be no operating costs included in the rate used and standby time should not exceed 8 hours per day, 40 hours per week, or the annual usage hours as established by the rate guide.
- Mobilization. The costs required to mobilize and demobilize equipment not available on the project is eligible for reimbursement. Standby rates should be used for equipment while being hauled to and from the project. This will be in addition to applicable rates for the hauling equipment. All costs associated with the assembly and disassembly of the equipment for transport should also be considered in the mobilization costs.
- Overhead. Equipment overhead includes such items as insurance, property taxes, storage, licenses and recordkeeping. The Blue Book rates include all equipment overhead costs. Therefore, if a project or home office overhead rate is proposed to be applied to a Blue Book rate, the State must ensure that it contains no equipment overhead cost factors. The reasonableness of such a rate shall be determined by the Division Administrator.
- Profit. Profit on equipment rental is not provided for in the approved rate guides. There is no Federal regulation which prevents the addition of an amount for profit. If a State has a policy for the payment of profit, it should be followed on Federal-aid contracts. If a profit amount is to be used, the reasonableness must be determined by the Division Administrator based on experience.
- Contractor Leased Equipment. When a contractor obtains equipment through a third party rental agreement for use in a force account situation, the cost will normally be the invoice cost. The Associated Equipment Distributors (AED) Rental Rate and Specifications may be used to evaluate the costs for such equipment rental. [The AED Book is not acceptable as a rate guide for contractor owned equipment. The AED rates are based on national averages of rates charged by equipment distributors and do not reflect the contractor's c cost of owning and operating the equipment.] Since rental agreements vary, the specific operating costs included in the rental agreement may need to be determined. There may be additional eligible operating costs not covered by the agreement which the contractor incurs and should be reimbursed (i.e., fuel, lubrication, field repairs, etc.).
- Contract Time and Contract Time Extensions (23 CFR 635.121)
- Contract time should be based on a full evaluation of all factors involved. In computing the length of time that would be required to complete the work with the typical contractor organization likely to bid on the work, appropriate consideration should be given to the local field and weather conditions, complexity of the work, sequence of construction, and method of handling traffic. The urgency of completion of the facility is an added consideration that may affect the final contract time assigned to a contract.
- The Division Administrator should, throughout the progress of construction of a Federal-aid project, keep currently informed regarding the time consumed in relation to the work accomplished and regarding the working conditions encountered that are beyond the contractor's control and that detrimentally affect the progress of the work. At the time such conditions occur, or as soon thereafter as it is practicable to make a determination, agreement should be reached between the Division Administrator and the SHA as to any adjustments in contract time that may be appropriate on account thereof. The SHA should have adequate written procedures to assure uniform treatment of time extensions.
- Approval of time extensions due to delays in delivery of materials is generally inconsistent with FHWA policy, unless some unusual market condition such as an industry-wide strike, natural disaster or areawide shortage arises after bids are taken and prevents procurement of materials within the allowable time limitation.
- The pertinent requirements of 23 CFR 635.307 are intended to preclude almost without exception FHWA approval of time extensions related to utility, railroad, and right-of-way clearance delays. However, it is recognized that occasionally very unusual circumstances may justify granting an exception to this rule. As a minimum, exceptions to the above-stated rule should not be granted unless it can be shown that:
- the construction work was actually delayed by the right-of-way, railroad, or utility difficulty,
- the contractor did everything required of him/her by the contract to minimize the delay, and
- the State was unable to exercise effective control of the situation despite its best efforts.
- Determination and Documentation of Pay Quantities (23 CFR 635.123)
- Source documents such as handwritten haul tickets should be validated both at the point of loading and at the point of delivery by State highway agency representatives unless pay quantities are documented by some alternative procedure approved by the Division Administrator. When automatic digital printout haul tickets are used in lieu of handwritten haul tickets an alternative procedure for validating these haul tickets at the point of loading may also be approved by the Division Administrator.
- The State highway agency may establish a procedure subject to approval of the Division Administrator wherein a lesser amount of documentation may be permitted for miscellaneous material items and small quantities. Such a procedure would have particular application to small quantities of intermittently delivered material on large projects and for contracts covering safety, control of junk yards, and other small projects.
- The Division Administrator may approve a procedure under which small quantities of material may be accepted by the project engineer on the basis of weights determined and placed on the delivery ticket by the contractor or supplier. Such a procedure should provide that the State highway agency representative who observes receipt of the material and obtains the delivery ticket inspect the load and indicate on the ticket, that the quantity of material delivered appears reasonably in accord with the weight shown on the ticket before accepting the material for incorporation in the work.
- The following examples suggest approximate maximum quantities of material which may be accepted on thebasis of weights supplied by the contractor or supplier and which should be sufficient to cover the quantities required by most small contracts:
- Aggregates - Not to exceed approximately 100 tons per day nor more than approximately 500 tons per project.
- Bituminous Mixtures - Not to exceed approximately 50 tons per day nor more than approximately 250 tons per project.
- In cases where records pertaining to the determination of pay quantities are destroyed by an act of God or by other causes not involving negligence or acts of commission on the part of the State, the Federal Highway Administration under the authority granted in 23 CFR 1.9 may allow Federal-aid participation in the claimed quantities, provided the remaining project records and measured data indicates the reasonableness of these quantities which can be verified, thus providing a basis for accepting the claimed quantities.
- Participation in Contract Claim Awards and Settlements (23 CFR 635.124)
- The Division Administrator may approve SHA requests for participation in settlement of claims. Explanations will be provided to the SHA in those cases where claims have been rejected.
- Specific implementation procedures for handling of claims whether under C.A. or not, should be jointly developed by each SHA and FHWA division that will respond to the circumstances in the particular State. However, negotiated settlements, such as between a contractor and a resident engineer or a district construction engineer, or any other less formalized methods, that fall short of arbitration, court judgment, or administrative board review, should be handled under regular change order procedures for Federal-aid projects.
- A decision to waive the audit requirement will be made by the Division Administrator on a case-by-case basis.
- To reduce the incidence of contract claims, attention should be given to the elimination of ambiguities in contract language. The American Association of State Highway and Transportation Officials Guide Specifications for Construction contains suggested contract language that can be adopted or used as an example.
Office of Program Administration