FHWA Indirect Cost Allocation Dispute Resolution Process
A) Final decisions in disputes.
(a) FHWA will promptly issue final decisions in disputes which relate to indirect cost allocation plans or rate determinations associated with a State DOT. However, final decisions adverse to the State DOT are not issued until it is clear that the matter cannot be resolved through informal dispute resolution involving an exchange of information and views.
(b) 2 CFR 225 Appendix E, paragraph (F)(4) provides that disputes related to indirect cost allocation between the State DOT, as appellant, and FHWA, as respondent and cognizant Federal agency, are to be resolved in accordance with the appeals process of the cognizant agency. Paragraphs (c) and (d) of this section set forth the standards FHWA expects its Division Offices to meet in issuing a final decision related to indirect cost allocation issues in a given State.
(c) The indirect cost determination decision may be brief but must contain:
(1) A complete statement of the background and basis of the Division's decision, including reference to the pertinent statutes, regulations, or other governing documents; and
(2) Enough information to enable the appellant to understand the issues and the position of FHWA as the cognizant Federal agency.
(d) The following or similar language must appear at the end of the decision: "This is the final decision of the Division Office, as cognizant Federal agency for indirect cost allocation. It shall be the final decision of the FHWA unless, within 30 days after receiving this decision, you deliver or mail (you should use registered or certified mail or a receipt from a private overnight carrier to establish the date received by FHWA Headquarters) a written notice of appeal to Director, Office of Financial Management, Office of Chief Financial Officer, Federal Highway Administration, 1200 New Jersey Avenue SE, Room E64-304, Washington, DC 20590. You should attach to the notice a copy of this decision, note that you intend an appeal, specifying the amount in dispute, and briefly state why you think that this decision is wrong. You will be notified of further appeal procedures."
(e) State DOTs, as grantees responsible for negotiating and/or monitoring a sub-recipient's (Local Public Agency, or LPA) indirect cost allocation plan (2 CFR 225 Appendix E, paragraph D(1)(b)), are responsible for final decisions related to such plans. In accordance with 49 CFR 18.37, States shall follow State law and procedures when awarding and administering subgrants (whether on a cost reimbursement or fixed amount basis) of financial assistance to local and Indian tribal governments. As in the case of FHWA Division Offices, a State DOT should abstain from issuing an adverse decision related to an LPA indirect cost plan until it is clear that the matter cannot be resolved through informal dispute resolution involving an exchange of information and views. As noted in sub-paragraph (b) above, 2 CFR 225 Appendix E, paragraph (F)(4), such disputes between a State DOT, acting as cognizant agency, and LPA, as sub-recipient, are to be resolved in accordance with the appeals process of the cognizant agency. In unusual or unique circumstances, an LPA wishing to appeal a final decision of a State DOT with respect to its indirect cost allocation/rate determinations may request a review and FHWA may, but is not required, to accept such appeal. In the event the appeal is accepted, the Chief Financial Officer's (CFO) review will generally be restricted to determining whether the decision of the State DOT was clearly erroneous, the record was inadequate, or the procedures under which the record was developed were determined to be unfair. In such cases, the procedures identified below will be exercised, replacing "State DOT" with "LPA" and "FHWA Division Office" with "State DOT".
B) Purpose of Procedures.
This document contains guidelines and procedures applicable to disputes arising from negotiations related to indirect cost allocation between a State DOT and the FHWA Division Office that is responsible for providing oversight of the State DOT. The CFO reviews final written decisions in disputes which may ultimately affect grants and other revenues provided by other Federal and non-Federal entities, because they involve cost allocation plans or rate determinations. These include decisions related to cost allocation plans negotiated with State or local governments and negotiated rates such as indirect cost rates, fringe benefit rates, fleet rates, materials laboratory rates, and other special rates.
These procedures are designed to provide a fair, impartial, quick and flexible process for appeal from written final decisions.
C) Summary of Procedures.
The CFO, as designated appeals officer for indirect cost allocation issues, reviews the written administrative record (which the State DOT (appellant) and the FHWA Division Office (respondent) are provided an ample opportunity to develop), consisting of relevant documents and statements submitted by both parties (see section G). In addition, the CFO may hold an informal conference (see section I). The informal conference primarily involves questioning of the participants by the CFO or representative(s). Conferences may be conducted by telephone conference call, web or video conference. Where the amount in dispute is $25,000 or less, there are special expedited procedures (see section K) to arrive at a final agency decision. In all cases, the CFO may modify procedures to ensure fundamental fairness, to avoid delay, and to accommodate the unique or special needs of a particular case. The CFO makes maximum feasible use of preliminary informal steps to refine issues and to encourage resolution by the parties.
D) How the Appeals Office operates.
(a) The CFO will generally involve professional staff from the Office of CFO with expertise in the area of indirect cost, as well as an appropriate representative(s) from the Office of Chief Counsel, and any other staff that are appropriate to resolution of the dispute.
(b) The CFO will assign lead responsibility for each case by naming a "presiding appeals staff officer". The presiding appeals staff officer will conduct the informal conference if one is held. Each decision, upon review and approval by the CFO, is issued by the presiding appeals staff officer and any other professional staff that may be assigned to adjudicate the appeal.
(c) The other assigned staff assist the presiding appeals staff officer, and may request information from the parties; conduct telephone conference calls to request information, to clarify issues, or to schedule events; and assist in developing decisions and other documents in a case.
(d) The CFO will assure that no staff member will participate in a case where his or her impartiality could reasonably be questioned.
(e) The CFO's powers and responsibilities related to appeals of indirect cost allocation and/or indirect cost rate issues are set forth in section L.
E) Who represents the parties?
The State DOT's notice of appeal, or the first subsequent submission to the CFO, should specify the name, address and telephone number of the appellant's representative. In its first submission to the CFO and the appellant, the respondent (i.e., the FHWA Division Office acting as cognizant Federal agency in the appeal) should specify the name, address and telephone number of the respondent's representative.
F) The first steps in the appeal process: The notice of appeal and the CFO's response.
(a) A prospective appellant should submit a notice of appeal to the CFO within 30 days after receiving the final decision of the FHWA Division Office. The notice of appeal should include a copy of the final decision, a statement of the amount in dispute in the appeal, and a brief statement explaining why the State DOT believes the decision is incorrect.
(b) The CFO determines whether an appeal should be considered under this Process. The CFO will request the written opinion of the FHWA Division Office that issued the decision. Unless the CFO determines that the opinion is clearly erroneous, the CFO will be bound by the opinion.
(1) If the FHWA Division Office does not respond within a time set by the CFO, or cannot determine whether the CFO clearly does or does not have jurisdiction, the CFO will take the appeal.
(2) In limited circumstances, an LPA may wish to present an appeal of a State DOT indirect cost determination. Generally, the CFO's review will be restricted to whether the decision of the State DOT was clearly erroneous. But if the CFO determines that the record is inadequate, or that the procedures under which the record was developed in a given instance were unfair, the CFO will not be restricted this way.
(c) Within ten days after receiving the notice of appeal, the CFO will send an acknowledgment of receipt, enclose a copy of these procedures, and advise the appellant of the next steps. The CFO will also send a copy of the notice of appeal, its attachments, and the CFO's acknowledgment to the respondent FHWA Division Office. In both sets of correspondence, the CFO will assign a docket number for the particular appeal to be considered. If the CFO has determined that the appeal does not meet the conditions of section C or if further information is needed to make this determination, the CFO will notify the parties at this point.
G) The next step in the appeal process: Preparation of an appeal file and written argument.
Except in expedited cases (generally those of $25,000 or less; see section K for details), the appellant and the respondent each participate in developing an appeal file for the CFO to review. Each also submits written argument in support of its position. The responsibilities of each are as follows:
(a) The appellant's responsibility. Within 30 days after receiving the acknowledgment of the appeal, the State DOT as appellant should submit the following to the CFO and provide a copy to the FHWA Division Office (respondent):
(1) An appeal file containing the documents supporting the claim, tabbed and organized chronologically and accompanied by an indexed list identifying each document. The appellant should include only those documents deemed necessary to the CFO's decision on the issues in the case.
(2) A written statement of the appellant's argument concerning why the respondent's final decision is wrong (appellant's brief).
(b) The respondent's responsibility. Within 30 days after receiving the appellant's submission under paragraph (a) of this section, the respondent should submit the following to the CFO (with a copy to the appellant):
(1) A supplement to the appeal file containing any additional documents supporting the respondent's position, organized and indexed as indicated under paragraph (a) of this section. The respondent should avoid submitting duplicates of documents submitted by the appellant.
(2) A written statement (respondent's brief) responding to the appellant's brief.
(c) The appellant's reply. Within 15 days after receiving the respondent's submission, the appellant may submit a short reply. The appellant should avoid repeating arguments already made.
(d) Cooperative efforts. Whenever possible, the parties should try to develop a joint appeal file, agree to preparation of the file by one of them, agree to facts to eliminate the need for some documents, or agree that one party will submit documents identified by the other.
(e) Voluminous documentation. Where submission of all relevant documents would lead to a voluminous appeal file (for example where review of a disputed process review or audit finding of inadequate documentation might involve thousands of receipts), the CFO will consult with the parties about how to reduce the size of the file.
H) How the CFO will promote development of the record.
The CFO may, upon acknowledgement of an appeal or at any appropriate later point, request either additional documents or other information; or request a briefing on issues in the case. In addition, the CFO may issue orders to show cause why a proposed finding or decision of the CFO should not become final; or hold preliminary conferences (generally by telephone) to establish schedules and refine issues; as well as take such other steps as the CFO determines appropriate to develop a prompt, sound decision.
I) Using a conference.
(a) Once the CFO has reviewed the appeal file, the CFO may, on the CFO's volition, or in response to a party's request, schedule an informal conference. The conference will be conducted by the presiding appeals staff officer. The purposes of the conference are to give the parties an opportunity to make an oral presentation and the CFO an opportunity to clarify issues and question both parties about matters that the CFO may not yet fully understand from the record.
(b) If the CFO has decided to hold a conference, the CFO will consult or correspond with the parties to schedule the conference, identify issues, and discuss procedures. The CFO will identify the persons who will be allowed to participate, along with the parties' representatives, in the conference. The parties can submit with their briefs under section G a list of persons who might participate with them, indicating how each person is involved in the matter. If the parties wish, they may also suggest questions or areas of inquiry that the CFO may wish to pursue with each participant.
(c) Unless the parties and the CFO otherwise agree, the following procedures apply:
(1) Conferences will be recorded at FHWA expense. On request, a party will be sent one copy of the transcript. The presiding appeals staff officer will insure an orderly transcript by controlling the sequence and identification of speakers.
(2) Only in exceptional circumstances will documents be received at a conference. Inquiry will focus on material in the appeal file. If a party finds that further documents should be in the record for the conference, the party should supplement the appeal file, submitting a supplementary index and copies of the documents to the CFO and the other party not less than ten days prior to the conference.
(3) Each party's representative may make an oral presentation. Generally, the only oral communications of other participants will consist of statements requested by the CFO or responses to the CFO's questions. The CFO will allow reply comment, and may allow short closing statements. On request, the CFO may allow the participants to question each other.
(4) There will be no post-conference submissions, unless the CFO determines they would be helpful to resolve the case. The CFO may require or allow the parties to submit proposed findings and conclusions.
K) The expedited process.
(a) Applicability. Where the amount in dispute is $25,000 or less, the CFO will use these expedited procedures, unless the CFO determines otherwise under paragraph (b) of this section. If the CFO and the parties agree, the CFO may use these procedures in cases of more than $25,000.
(b) Exceptions. If there are unique or unusually complex issues involved, or other exceptional circumstances, the CFO may use additional procedures.
(c) Regular expedited procedures. (1) Within 30 days after receiving the CFO's acknowledgment of the appeal (see section F), each party should submit to the CFO and the other party any relevant background documents (organized as required under section G), with a cover letter (generally not to exceed ten pages) containing any arguments the party wishes to make.
(2) Promptly after receiving the parties' submissions, the presiding appeals staff officer will arrange a telephone conference call to receive the parties' oral comments in response to each other's submissions. After notice to the parties, the CFO will record the call. The presiding appeals staff officer will advise the parties whether any opportunities for further briefing, submissions or oral presentations will be established. Cooperative efforts will be encouraged (see section G).
(3) The CFO may require the parties to submit proposed findings and conclusions.
L) Powers and responsibilities.
In addition to powers specified elsewhere in these procedures, the CFO has the power to issue orders (including "show cause" orders); to examine witnesses; to take all steps necessary for the conduct of an orderly appeal; to rule on requests and motions, including motions to dismiss; to grant extensions of time for good reasons; to dismiss for failure to meet deadlines and other guidelines; to close or suspend cases which are not ready for review; to order or assist the parties to submit relevant information; to remand a case for further action by the respondent; to waive or modify these procedures in a specific case with notice to the parties; to reconsider a CFO decision where a party promptly alleges a clear error of fact or law; and to take any other action necessary to resolve disputes in accordance with the objectives of these procedures.
M) How CFO review is limited.
The CFO shall be bound by all applicable laws and regulations including the cost principles applicable to the agency or entity appealing.
N) Failure to follow Dispute Resolution Procedures.
(a) Since one of the objectives of administrative dispute resolution is to provide a timely decision consistent with fundamental fairness, the CFO will not allow parties to delay the process without cause. The CFO may grant extensions of time limits specified, but only if the party provides information to the CFO's satisfaction that the reason for the delay is justified.
(b) If the appellant fails to follow the dispute resolution procedures, or other procedures established by the CFO, the CFO may dismiss the appeal, may issue an order requiring the party to show cause why the appeal should not be dismissed, or may take other action the CFO considers appropriate.
(c) If the respondent fails to follow the dispute resolution procedures, the CFO may issue a decision based on the record submitted to that point or take such other measures as the CFO considers appropriate.
O) Parties to the appeal.
(a) The only parties to the appeal are the appellant (State DOT) and the respondent (FHWA Division Office).
(b) The CFO may also allow other participation, in the manner and by the deadlines established by the CFO, where the CFO decides that the intervenor has a clearly identifiable and substantial interest in the outcome of the dispute, that participation would sharpen issues or otherwise be helpful in resolution of the dispute, and that participation would not result in substantial delay.
P) Ex parte communications (communications outside the record).
(a) A party should not communicate with the CFO or staff member about matters involved in an appeal without notice to the other party. If such communication occurs, the CFO will disclose it to the other party and make it part of the record after the other party has an opportunity to comment.
Neither the CFO, nor staff assigned to adjudicate the appeal, shall consider any information outside the record (see section S) about matters involved in an appeal.
(b) The above does not apply to the following: Communications among the CFO and staff assigned to adjudicate the appeal; communications concerning the CFO's administrative functions or procedures; communications on matters not related to the appeal; requests from the CFO to a party for a document (although the material submitted in response also must be given to the other party); and material which the CFO includes in the record after notice and an opportunity to comment.
Q) How to calculate deadlines.
In counting days, include Saturdays, Sundays, and holidays; but if a due date would fall on a Saturday, Sunday or Federal holiday, then the due date is the next Federal working day.
R) How to submit material to the CFO.
(a) All submissions should be addressed as follows: Director, Office of Financial Management, Federal Highway Administration 1200 New Jersey Avenue, SE., Room E64-304, Washington, DC 20590.
(b) All submissions after the notice of appeal should identify the CFO's docket number (the CFO's acknowledgement under section F will specify the docket number).
(c) Unless the CFO otherwise specifies, parties should submit to the CFO an original and two copies of all materials. Each submission other than the notice of appeal, must include a statement that one copy of the materials has been sent to the other party, identifying when and to whom the copy was sent.
(d) Unless hand delivered, all materials should be sent to the CFO and the other party by certified or registered mail, return receipt requested.
(e) The CFO considers material to be submitted on the date when it is postmarked or hand delivered to the CFO.
S) Record and decisions.
(a) Each decision is issued by the presiding appeals staff officer and other staff assigned to adjudicate the appeal, after approval by the CFO (see section D). The decision is based on a record consisting of the appeal file; other submissions of the parties; transcripts or other records of any meetings or conferences conducted by the CFO; written statements resulting from conferences; and orders and other documents issued by the CFO. In addition, the CFO may include other materials (such as evidence submitted in another appeal) after the parties are given notice and an opportunity to comment.
(b) The CFO will promptly notify the parties in writing of any disposition of a case and the basis for the disposition.
T) The effect of an appeal.
(a) General. Until the CFO disposes of an appeal, the respondent should take no action to implement the final decision appealed.
(b) Exceptions. The respondent may—
(1) Suspend funding related to the decision under appeal;
(2) Defer or disallow other claims questioned for reasons also disputed in the pending appeal;
(3) Take other action to recover, withhold, or offset funds if specifically authorized by statute or regulation.
U) How long an appeal takes.
The CFO has established general goals for its consideration of cases, as follows (measured from the point when the CFO receives the first submission after the notice of appeal):
—For regular review based on a written record under section G, 120 days. When a conference under section I is held, the goal remains at 120 days unless a requirement for post-conference briefing in a particular case renders the goal unrealistic.
—For the expedited process under section K, 60 days.
These are goals, but are not rigid requirements. The paramount concern of the CFO is to take the time needed to review a record fairly and adequately in order to produce a sound decision. Factors that are beyond the CFO's direct control, such as unforeseen delays due to the parties' negotiations or requests for extensions, how many cases are filed and pending, and CFO resources. On the other hand, the parties may agree to steps which may shorten review by the CFO; for example, by waiving the right to submit a brief, by agreeing to shorten submission schedules, or by electing the expedited process.