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Procurement, Management, and Administration of Engineering and Design Related Services - Questions and Answers

VIII. Conflicts of Interest

  1. What are the conflict of interest related laws and regulations applicable to engineering and design related consultant services funded with FAHP funding? (Posted 7-20-11 Revised 3-2-12)
  2. May a contract be awarded to a single consulting engineering firm to provide both preliminary design and final design engineering services on a single FAHP funded project? (Posted 7-20-11)
  3. May a contract be awarded to a single consulting engineering firm for the preparation of relevant environmental documents and associated analyses as well as both the preliminary and final design engineering services on a single FAHP funded project? (Posted 7-20-11)
  4. May a contract be awarded for final design services to a consulting engineering firm, prime or sub-consultant, which provided services during the environmental review and preliminary design engineering phase of the project? (Posted 7-20-11)
  5. May a consulting engineering firm that performed design services on a FAHP funded project be procured to perform subsequent construction engineering/management and/or inspection services on the project? (Posted 7-20-11 Revised 3-2-12)
  6. What are the controls necessary to mitigate the potential for conflicts of interest with consultants providing services on subsequent phases of a project or serving in management roles? (Posted 7-20-11 Revised 3-2-12)

1. What are the conflict of interest related laws and regulations applicable to engineering and design related consultant services funded with FAHP funding? (Posted 7-20-11, Revised 3-2-12)

In satisfying the requirements for the delivery and administration of the FAHP, State DOTs and their subgrantees may engage the services of consulting firms to the extent necessary or desirable. However, State DOTs and their subgrantees must have adequate powers and be suitably equipped and organized to fulfill the requirements of the FAHP (as specified in 23 U.S.C. 302(a) and 23 U.S.C. 106(g)(4)). This includes providing and maintaining: adequate staffing accountable and responsible for projects, adequate delivery and administration systems for projects, and sufficient accounting controls to properly manage Federal funds to protect the public's interest against fraud, waste, and abuse of taxpayer resources.

It is important to understand that conflicts of interest may be direct or indirect (e.g., as result of a personal or business relationship). Additionally, the appearance of a conflict of interest should be avoided as an apparent conflict may undermine public trust if not sufficiently mitigated.

Conflict of interest requirements include:

  • The requirement that no contracting agency employee who participates in the procurement, management, or administration of FAHP funded contracts or subcontracts shall have, directly or indirectly, any financial or other personal interest in connection with such contract or subcontract (as specified in 23 CFR 1.33);
  • The requirement that no person or entity performing services for a contracting agency in connection with a FAHP funded project shall have, directly or indirectly, any financial or other personal interest, other than employment or retention by the contracting agency, in any contract or subcontract in connection with such project (as specified in 23 CFR 1.33);
  • The requirement that no person or entity performing services for a contracting agency in connection with a FAHP funded project shall have, directly or indirectly, any financial or other personal interest in any real property acquired for the project (as specified in 23 CFR 1.33);
  • The requirement for non-State direct grantees and subgrantees of these direct grantees to develop and maintain a written code of conduct governing the performance of its employees engaged in the award and administration of FAHP contracts (as specified in 49 CFR 18.36(b)(3)); and
  • The requirement for organizational conflicts of interest provisions which address allowable roles and responsibilities associated with the procurement, management, and administration of design-build contracts (as specified in 23 CFR 636.116 and 636.117).

Additional conflict of interest considerations include:

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2. May a contract be awarded to a single consulting engineering firm to provide both preliminary design and final design engineering services on a single FAHP funded project? (Posted 7-20-11)

Yes, provided appropriate provisions are included in the solicitation and contract to indicate that the contracting agency is not obligated to proceed with final design for any alternative, that all reasonable alternatives will be evaluated and given appropriate consideration, and that the firm may not proceed with final design until the relevant NEPA decision documents have been issued (e.g., CE, FONSI, or ROD).

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3. May a contract be awarded to a single consulting engineering firm for the preparation of relevant environmental documents and associated analyses as well as both the preliminary and final design engineering services on a single FAHP funded project? (Posted 7-20-11)

Yes, provided appropriate provisions are included in the solicitation and contract to indicate that the contracting agency is not obligated to proceed with final design for any alternative, that all reasonable alternatives will be evaluated and given appropriate consideration, and that the firm may not proceed with final design until the relevant NEPA decision documents have been issued (e.g., CE, FONSI, or ROD).

A contracting agency may procure, under a single contract, the services of a consulting firm to prepare any environmental impact assessments or analyses required for a project as well as subsequent engineering and design work on the project provided the contracting agency assesses the objectivity of the environmental documentation prior to its submission to FHWA (as specified in 23 U.S.C. 112(f)).

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4. May a contract be awarded for final design services to a consulting engineering firm, prime or sub-consultant, which provided services during the environmental review and preliminary design engineering phase of the project? (Posted 7-20-11)

Yes, provided a NEPA decision document has been issued or if the NEPA process is still underway, appropriate provisions are included in the solicitation and contract to indicate that the contracting agency is not obligated to proceed with final design for any alternative, that all reasonable alternatives will be evaluated and given appropriate consideration, and that the firm may not proceed with final design until the relevant NEPA decision documents have been issued (e.g., CE, FONSI, or ROD).

If the final design services are to be accomplished through a design-build contract, the conflict of interest provisions as specified in 23 CFR 636.116 and 636.117 would apply.

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5. May a consulting engineering firm that performed design services on a FAHP funded project be procured to perform subsequent construction engineering/management and/or inspection services on the project? (Posted 7-20-11, Revised 3-2-12)

Yes, Federal requirements and FHWA policies do not expressly prohibit the same consulting firm from providing services on subsequent phases (e.g., design and construction engineering/management and/or inspection) of a project that utilizes FAHP funding. This may be permissible provided contracting agencies have established the necessary controls and provide sufficient oversight to ensure that a conflict of interest does not exist or have approved procedures to mitigate any conflict or potential for a conflict. While not expressly prohibited under Federal requirements, this practice may be prohibited under State law or contracting agency policies and procedures. Prior to allowing a firm to provide services on multiple phases of a project, contracting agencies need to evaluate and demonstrate that their policies, procedures, and practices associated with the procurement, management, and administration of engineering consultant services comply with Federal and State laws and FHWA requirements. (See Conflicts of Interest Question & Answer Nos. 1 and 6)

A firm performing construction engineering/management and/or inspection services on the same project on which the firm also performed design services provides the firm an opportunity to influence or affect project decisions on scope changes, design changes, construction revisions, contract change orders, and other related issues. This can result in project delivery efficiencies, as the firm that designed the project is well-suited to verify that the project is being constructed in accordance with the design and can resolve issues related to the design on behalf of the contracting agency. However, this scenario may also pose a potential conflict of interest if the firm has a vested financial interest in failing to disclose deficiencies in its design work product and seeks to insulate itself from pecuniary liability in subsequent phases of the project, such as minimizing or ignoring design errors and omissions, rather than serving the best interests of the contracting agency and the public. Procuring a different firm from the design firm to provide the necessary construction engineering/management and/or inspection services provides another level of review and reduces the risk of, or potential for, a conflict of interest.

Contracting agencies are responsible for ensuring the public interest is maintained throughout the life of a project and that a conflict of interest, direct or indirect, does not occur or is sufficiently mitigated by appropriate public agency controls. Contract documentation which clearly defines each contracting party's roles, responsibilities, and duties for a project is essential to the protection of the interest of all stakeholders. Prior to allowing a consulting firm to provide services on subsequent phases of the same project, the contracting agency must establish appropriate compensating controls in the form of policies, procedures, practices, and other safeguards to ensure a conflict of interest does not occur in the procurement, management, and administration of consultant services. In general, qualified agency staff serving in responsible charge of a project, coupled with comprehensive policies, procedures, and contract documentation, will mitigate the potential for conflicts. (See Conflicts of Interest Question & Answer No. 6)

Provided the necessary contracting agency controls and oversight practices are established, a consultant may be procured to provide both design and construction phase services for a project under a single solicitation. However, consideration should be given to the project scope and complexity, estimated duration of the preconstruction phase, objectivity of environmental analyses if also included within the scope of services (as specified in 23 U.S.C. 112(f)), and the need to provide fair and open competition.

When design and construction phase services are procured under a single solicitation, the selection of the consulting firm must be based on the overall qualifications to provide both design and construction phase services, which require different skill sets, experience, and resources. Procuring these services under different solicitations may result in selection of a more qualified firm to perform services in each phase, as the most qualified firm to perform design phase services may not be the most qualified firm to provide construction phase services. Similarly, the qualifications and capacity of a firm may change over time. As such, it may not be appropriate to contract with a consulting firm to provide construction phase services at the outset of a design phase, knowing that these services may not be needed for an extended period of time until the preconstruction phase of the project is complete and construction funding authorized.

The contract with a consulting firm providing design phase services on a project may not be amended to include construction phase services unless the desired construction phase services were included within the original advertised scope of services and evaluation criteria of the solicitation from which a qualifications based selection was conducted. (See Competitive Negotiation Question & Answer No. 11)

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6. What are the controls necessary to mitigate the potential for conflicts of interest with consultants providing services on subsequent phases of a project or serving in management roles? (Posted 7-20-11, Revised 3-2-12)

Examples of the controls necessary to consider allowing a consulting firm to provide services on subsequent phases of a project or in serving in management roles (See Other Considerations Question & Answer No. 3 ) for a contracting agency on projects utilizing FAHP funding include, but are not limited to:

  • Consultant Services Procurement Procedures Manual (developed and approved as specified in 23 CFR 172.9(a)) which includes/addresses:
    • Conflict of interest guidance, policies, or procedures for consulting firms serving in roles as prime or sub-consultant on projects/contracts and associated impacts to a firm's ability to participate in other roles, project phases, or contracts;
    • Conflict of interest identification, disclosure, and mitigation plans and procedures for both contracting agency and consultant staff throughout all stages of project development and delivery;
    • Consultant errors and omissions policies and procedures (See NCHRP Project 20-7, Task 225 Final Report: Best Practices in the Management of Design Errors and Omissions (March 2009) (.pdf));
    • Policies and procedures (provided statutory framework permits) for a contracting agency to pursue a range of civil actions and penalties including fines, suspension, or debarment associated with fraud, waste, abuse, and identified conflicts of interest which were not disclosed; and
    • Provision for Hotline Complaints to the U.S. DOT Office of Inspector General (OIG).
  • Contract documentation which clearly defines each contracting party's roles, responsibilities, and duties for a project.
  • Providing necessary resources and guidance to support management and oversight of conflict of interest concerns at a program and project level, such as providing a full-time contracting agency employee to serve in responsible charge of a Federal-aid construction project (as specified in 23 CFR 635.105). (See FHWA Memo: Responsible Charge (08/04/11))
  • Monitoring, evaluation, and reporting on compliance with Federal and State laws and regulations and approved policies and procedures with respect to conflicts of interest. To ensure overall compliance and no conflicts of interest exist, this oversight and quality assurance should include regular sampling and evaluation of contracts and be documented by reports which identify any remedial actions to address findings.
  • Training requirements/programs for contracting agency and consultant staff on contract management, ethics, conflicts of interest, laws and regulations, and approved policies and procedures.
  • Periodic review and discussion of contracting agency conflict of interest policies with representatives of the consultant engineering industry.

Additionally, FHWA, or a State DOT providing oversight of a subgrantee, may identify a project as a high risk project, warranting special oversight and additional approval actions, as appropriate based on cost and risk thresholds (as specified in 49 CFR 18.12).

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Contacts

Danial Parker
Office of the Chief Financial Officer
720-963-3216
E-mail Danial

 
 
Updated: 03/05/2012
 

FHWA
United States Department of Transportation - Federal Highway Administration