|FHWA > Engineering > Construction > Contract Admin > CACC Manual & Reference Guide > Section I|
Contract Administration Core Curriculum
|2004 for all units of Government||$ (billion)||%|
|Administration and Research||12.7||8.6|
|Highway Law Enforcement and Safety||14.3||9.7|
|Interest on Debt||5.8||4.1|
Although highway capital improvements attract most of the public and political attention, they represent only about half of the total outlay for highways. In most States, non-capital expenses have first claim on available revenue.
In 2004, the most recent year for which data is available, the $28.5 billion available in Federal-aid funding accounted for about 40 percent of all capital outlays by all units over government but only 19 percent of total disbursements.
State highway programs in many States must share some percentage of their road-user tax revenues with local governments. Although the local agencies carry out the same basic functions, spending patterns vary between localities. At the national level, capital spending by local governments represents 34 percent of their total highway spending. Of all functional classifications, local roads require the highest level of spending per unit of travel.
The national highway expenditure database does not include private sector contributions. Most new roadways added to the inventory are property access roads and streets built by private land developers. In addition, several States require private developers to pay for any capital improvements required by their development activities adjacent to existing roads. The construction costs for these roads or improvements are then absorbed by the purchasers of homes and offices within the developments. Following construction, these roads are turned over to the State or local government for operation and maintenance.
The Federal-aid highway program was designed to be a jointly administered and funded program. With few exceptions, FHWA does not provide full funding. Each funding category has an established funding ratio which defines the Federal share of the project cost. The remaining funding comes from the State or local agency. State and local funds may come from a variety of sources including toll credits, private donations, fair market value of any donated right-of-way for the project, and in some cases, may include Federal funds from another agency when permitted by that agency.
While the legal term for the Federal-aid highway program is a "grant program," no cash is actually disbursed at the time of project authorization. Federal-aid construction projects are authorized, funds are obligated, and then the FHWA makes payments to the States for actual costs as they are incurred. (See figure 4). Typically the billing and reimbursement are done electronically. Usually the U.S. Treasury credits the State's account within three days after the State submits a voucher. The apportionments discussed earlier are actually lines of credit against which the STA may draw as it administers the Federal-aid highway program.
Figure 4: Reimbursement Process
Prior to TEA-21, FHWA reimbursed the STA the Federal share of project costs for each progress payment. Section 1302 of TEA-21 amended 23 U.S.C. 121 such that FHWA may reimburse the STA for 100% of the eligible project costs on each progress payment up to the participation limit in the project agreement and adjust the amount when the final costs are known. STAs interested in evaluating the tapered match financing provisions should review the eligibility criteria in Mr. Wright's July 7, 1999 memo.
For many years, FHWA approved certain standards and had direct stewardship responsibilities for the Federal-aid program. However, the 1991 ISTEA and the 1998 TEA-21 provided significant changes in these areas. Section 1016 of the ISTEA defined certain standards for NHS and non-NHS projects. It also provided for State approval of plans, specification and estimates (PS&E) for certain projects in-lieu-of FHWA's approval. TEA-21 further expanded the STA's role in project administration in-lieu-of FHWA approval.
ISTEA Section 1016 modified Title 23 U.S.C. Section 109-Standards. This revision required state-developed / FHWA-approved standards for NHS projects. It also specified that non-NHS projects be designed, constructed, operated and maintained in accordance with State laws, regulations and directives. FHWA interpreted this section to mean that States would follow their own laws and procedures for the design, construction and maintenance of non-NHS projects as they would for State-funded projects. Mr. Carlson's March 11, 1992 memo (Appendix A-129), provided further guidance on this subject. Certain Federal-aid requirements would continue to apply to all Federal-aid projects. These requirements include non-Title 23 requirements (NEPA, Uniform Act, etc.) and general Title 23 requirements pertaining to contracts and procurement procedures (competitive bidding, bid proposal content, Davis-Bacon, Disadvantaged Business Enterprise, Brooks Act, etc.).
The applicability of various FHWA requirements depends on the specific statutory language for each requirement. The following applicability terms will be used in this manual:
For all projects, FHWA Headquarters' approval is necessary for any construction contracting technique which falls within the competitive bidding framework of 23 U.S.C. 112 but does not fully comply with the law. Any construction contract that utilizes a basis for award other than the lowest responsive bid shall be evaluated under FHWA's Special Experimental Project No 14 (SEP 14) - Innovative Contracting (Headquarter's approval required with the exception of the A+B bidding, lane rental, warranty and design-build concepts which are operational).
Most sections in this manual contain a subheading titled "Applicability" which provides more specific guidance for the policy discussed.
ISTEA Section 1016(b)(1) allowed States to approve PS&E's for certain NHS projects (in-lieu-of FHWA's approval) if certain standards are met. Section 1016(b)(2) allowed States to approve PS&E's on non-NHS and certain low-cost NHS projects in-lieu-of FHWA's approval. Note that ISTEA only provided for the State's approval of PS&E documents in-lieu-of FHWA's approval. For the purposes of this manual, projects which were formerly labeled as "exempt projects" or "State-approved" are now labeled as "delegated".
The 1998 TEA-21 provided additional changes in FHWA's project oversight role in the Federal-aid program. TEA-21 Section 1601 replaced existing Title 23-Section 117 - Certification Acceptance (CA) with the High Priority Project Program, thus eliminating CA. TEA-21 Section 1305 provided further modifications to 23 U.S.C. Section 106. It provided that the States may assume FHWA's responsibilities for non-Interstate NHS projects for design, PS&E approval, contract award and inspection unless the State or the Secretary determines that such assumption is not appropriate. For non-NHS projects, the State shall assume FHWA's responsibilities unless the State determines that such assumption is not appropriate.
TEA-21 also requires that FHWA and the State to enter into an agreement documenting the types and classifications of projects for which the State will assume the responsibilities under Title 23 (Appendix A-141). This State-specific agreement, generally referred to as the 'stewardship' or 'oversight' agreement, forms the basis for FHWA's project level and program level oversight activities.
While the ISTEA and TEA-21 provided for changes in the applicability of certain standards and approval responsibilities, Title 23 U.S.C. Section 114(a) continues to require that Federal-aid highway construction projects are "... subject to the inspection and approval of the FHWA." When project approval authority has been delegated to the STA, any deviations from FHWA policy or regulations must be documented in the project file. Deviations from statutory requirements are not permitted.
Since the FHWA continues to have oversight and stewardship responsibilities for all FHWA programs, the changes to 23 U.S.C. Section 106 do not preclude FHWA from reviewing any Federal-aid highway project under State responsibility. FHWA will be conducting program level oversight of all FHWA programs regardless of which agency has project approval authority. Randomly selected projects administered by the STA will be included in program reviews.
Full project level review requires FHWA participation in all major decisions, from project initiation to design and construction, and to FHWA final acceptance and voucher payment. Unless the STA/FHWA agreement differs, full FHWA involvement projects will tend to be new construction or reconstruction projects on Interstate routes with an estimated value greater than $1 million.
Figures 5 and 6 illustrate the typical planning and project development processes. Individual STAs may vary in the details of this process, but all should include these steps in their process. For a more detailed explanation of the special contract administration planning process and procedures for planning and research projects, please refer to the FHWA "Planning and Research Administration" course manual.
Figure 5: Planning Process
Figure 6: Project Development Process
Title 23 U.S.C. 106 requires that the STA enter into an agreement with FHWA for each Federal-aid highway project. This agreement, normally referred to as the "project agreement", is a formal contract between the State and the Federal government defining the scope of work and other project-related commitments. The project agreement assures FHWA that the project will be constructed by the State in accordance with Federal requirements. More important, the project agreement is the document which constitutes the Federal governments obligation to pay its share of the project costs. The amount of Federal funds obligated on a project should reflect the current cost estimate, and ensure that funds no longer needed are de-obligated in a timely manner. This requirement is consistent with Federal appropriation law principles requiring Federal obligations to be based on a documented cost estimate, and revised if the estimate changes. States must monitor all projects and (1) de-obligate Federal funds when the amount obligated exceeds the current cost estimate by $250,000 or more, and (2) re-evaluate cost estimates on inactive projects and release unneeded funds. The FHWA will revise the Federal obligation amount if the State fails to take action as required by the regulation.
Prior to 1997, the project agreement was the PR-2 form. However, the FHWA's current regulations for Project Authorization and Agreements in 23 CFR 630A provide more flexibility and allow the States to use their own format for this purpose. The regulations allow electronic submission of the project agreement and modifications, provided the format is compatible with the FHWA's Fiscal Management Information System (FMIS).
The STA must still prepare a modification to the project agreement as changes occur in the project development phase. As with the project agreement, the STA may use its own format for providing the required information about the modification.
In a continuing effort to improve FHWA's management of the Federal Highway Trust Fund, FHWA recently revised its regulations related to project authorizations and agreements (contained in 23 CFR 630A). The revised regulations require STA to monitor on-going Federal-aid projects with the goal of insuring that the actual Federal funds obligated for any given project reflect the current estimated cost of the project. When a project becomes 'inactive' as defined in the new regulations, the STA is required to de-obligate any funds no longer needed for that project in a timely manner. The de-obligated funds will then be available for other projects to the extent permitted by law.
Title 23 U.S.C. Section 145 provides the statutory authority that allows STAs to select projects for the Federal-aid highway program. If a STA uses Federal funds for early phases of project development (preliminary engineering, environmental documentation, right-of-way, etc.) there is no requirement to use Federal funds for construction. If the STA chooses to use only State funds for construction, Federal requirements such as the use of form "FHWA-1273 Required Contract Provisions Federal-aid Construction Contracts" would not be required.
The court cases on de-federalizing a project have focused primarily on the relationship between the environmental clearance process and Federal funding. In one case a State had proceeded through preliminary engineering using Federal funds, and was beginning right-of-way acquisition when a suit was brought against the State for failure to prepare an Environmental Impact Statement. At that point the State decided to de-federalize the project and pay back all Federal funds used in the preliminary engineering phase, but the court ruled that the State's seeking and receiving Federal approval at various stages of the project made the project a Federal project that required compliance with Federal environmental laws.
If the STA has used federal funds for preliminary engineering or environmental phases of the project development, and now wants to use State funds for construction, this would not free them from compliance with federal environmental requirements, such as NEPA & 4(f). However, if the STA was in compliance with federal environmental law and was choosing to use State funds for construction for another reason, that is their right under 23 U.S.C. 145, and, if they do so, compliance with Federal requirements for construction projects, such as the form FHWA-1273 requirements would not be required.
If, conversely, the STA used state funds for preliminary engineering, environmental reviews and right-of-way acquisition but now chooses to use Federal-aid funds for the actual construction, it is not precluded from doing so provided that all the Federal requirements have been met.
If federal funds have been obligated for construction and the STA, for whatever reason, wants the project to revert to a state-funded only project, the issue of de-obligation / re-obligation under Federal appropriation law comes into play. Under the Principles of Federal Appropriations Law, "a proper and unliquidated obligation should not be de-obligated unless there is a valid reason for doing so." Absent a valid reason (reduction of costs, correction of recorded estimates, initial obligation determined to be invalid, cancellation of project) funds cannot be de-obligated to free the funds up to be used for new obligations. To avoid Federal requirements for construction projects is not a valid reason for de-obligating the funds. If the STA decides not to use federal funds for construction, that decision should be made before authorizing the construction project.
On occasion an STA or local agency will want to tie two or more construction projects into one contract with the goal of creating a single construction contract that is either more attractive to the contracting community due to its size or because it simplifies traffic control. This can be problematic if one of the construction projects contains Federal-aid funds but the other projects are purely state or locally funded. Since some federal requirements apply on the "contract" rather than "project" level, tying a Federal-aid project to a state- or locally-funded project will cause those federal requirements, such as Davis-Bacon wage rates, to apply to the contract as a whole.
In summary, generally speaking, FHWA's construction contract requirements will apply when the Division authorizes any type of Federal-aid funding - traditional, loan or credit assistance - for a specific construction contract. The requirements will apply to that specific contract regardless of the level of Federal investment, and may apply to any non-Federal work that is tied to that contract. See Mr. Gribbin's August 3, 2004 memorandum for additional discussion.
The Office of Inspector General works within the Department of Transportation to promote effectiveness and head off, or stop, waste, fraud and abuse in departmental programs. The OIG Office of Investigations is responsible for investigating fraudulent activities involving federal funds. Between October 2000 and June 2005, the USDOT/OIG's investigations resulted in 298 indictments, 242 convictions, $ 138.3 million in fines and restitution, and judicial sentences of 1204 years jail, probation and community service. Appendix A-1 to A-4 provides a list of potential fraud indicators as published by the USDOT/OIG and a list of USDOT/OIG Regional Office locations.
When any fraudulent activities are suspected, either based on suspicion or actual evidence, they should be reported to the nearest USDOT/OIG Regional Investigative Office and the local FHWA Division Office. Individuals concerned about reprisals from their employers should know that there are five separate laws which protect "whistle blowers" from reprisals such as removal or reassignment: the Civil Service Reform Act of 1978, the Military Whistleblower Protection Act of 1984, the Whistleblower Protection Act of 1989, the Federal Acquisition Streamlining Act of 1994 and the IG Act. Also, phone or letter inquiries can be anonymous, or confidential with contact information not divulged.
The USDOT/OIG may be contacted by:
The Directives System Handbook, which was originally issued in 1980 and has been subsequently revised, is the primary source document for information contained in this section. The handbook was furnished to the field offices under (FHWA) Order H1321.1A, dated December 5, 1980. The latest revision came with Order H1321.1A, Change No. 3, dated December 9, 1991. All Division Offices should have this document and its subsequent revisions.
The directives system is used to prescribe or establish policy, organizational makeup, methods, procedures, requirements, guidelines, and delegations of authority.
Directives convey information essential to the administration or operation of the FHWA. Directives are not intended for FHWA personnel only, but also for personnel working for the STAs, the Governors' Highway Safety Representatives (GHSR), metropolitan planning organizations (MPOs) and other collaborating agencies. Figure 7 illustrates how non-regulatory directives are developed.
The objectives of directives are to:
Figure 7: Policy Development Process
Directives are produced in several formats:
Simply put, the rulemaking process is the process all Federal agencies must use to adopt, revise or clarify regulations; or adopt emergency procedures. It is not unusual for the process to take a year or more for a low priority issue. Issues that are highly controversial may take several years to complete the process. Figure 8 shows the typical rulemaking process.
The primary objective of the rulemaking process is to ensure adequate public participation in the development of new or modified regulations. To accomplish this, a Federal agency publishes notices of its rulemaking actions in the Federal Register. As the daily publication of Government proceedings, the Federal Register is an integral component of the rulemaking process. The Federal Register is available through the Government Printing Office (GPO), by subscription, through Federal depository libraries around the country, or on the Internet at http://www.gpoaccess.gov/nara/.
Figure 8: Regulatory Development Process
Regulations are the only directives subject to the rulemaking process. Codified in the CFR, regulations are the rules, policies, procedures, and other requirements needed to carry out Federal programs. These regulations apply to Federal, State, and local agencies, as well as the public. Regulations have the force of law. Detailed technical or housekeeping procedures for carrying out specific actions, unless they affect the substantive rights of grant recipients or the public, are not normally included in the CFR.
The FHWA is primarily involved with 23 CFR and 49 CFR, which contain regulations issued by the FHWA and the Department of Transportation (DOT), respectively. Other CFR sections which may affect the Federal-aid highway program are 28 CFR (Judicial Administration), 29 CFR (Labor), 40 CFR (Protection of Environment), and 41 CFR (Public Contracts and Property Management).
The CFR includes:
Regulations are classified based on their economic or operational impact.
A significant regulation is one that may result in a significant impact and consequently requires a regulatory analysis. A significant regulation is one that:
EXAMPLE: DBE regulations are significant regulations because they affect everyone who procures goods or services with Federal funds. When implemented, the regulations caused a substantial change in current policy and consequently had a substantial effect on state and local governments.
An emergency regulation is one that would ordinarily be published for comment, but circumstances warrant that it be issued without notice and opportunity for comment. Frequently an agency will issue emergency regulations in response to a change in law.
EXAMPLE: The 1984 Highway Act eliminated "cement" from the Buy America provisions of the 1982 Surface Transportation Assistance Act (STAA). The regulations were changed very rapidly to correct the CFR using the emergency regulation procedures. The revision was simply published as a final rule because the change was required to comply with the new law.
Lastly, a nonsignificant regulation is simply one that does not fit into the significant or emergency classes.
EXAMPLE: Form FHWA 1273 was deleted from the regulations but kept by reference. Nothing really changed since the requirements remained in force.
The process has six basic phases:
An internal decision that some regulatory action is needed. The needed action may be that an existing regulation needs to be modified, or there is a new legislative requirement. This phase includes in-house coordination to avoid conflicts and duplications. The proposed regulation is classified as a significant regulation, an emergency regulation, or a non-significant regulation.
A "regulatory analysis" is required for each proposed regulation that will:
Following internal review and coordination, the proposed rule is subjected to "external" coordination. By this time the proposed regulation has cleared the FHWA; however, it has not yet been released to the public. Other Federal agencies that have an interest or concern with the proposed regulation are given the opportunity to review and comment.
The Internet now hosts a variety of Web sites with useful information. The following sites are just a sampling:
|http://www.fhwa.dot.gov/||FHWA's home page contains general information such as the organizational chart, field office info, and a breakdown of the major program areas; and specific information about pertinent legislation, regulations, policy, publications and statistics. Also hotlinks to other transportation-related sites such as AASHTO and STAs.|
|http://www.fhwa.dot.gov/programadmin/contracts/||FHWA Contract Administration homepage includes information on Buy America, innovative contracting, etc.|
|http://thomas.loc.gov/||Library of Congress search engine for legislation. This site includes information about members of Congress; the Congressional Record; and hot links to other government sites.|
|http://www.access.gpo.gov/||Government Printing Office Searchable database for Federal Registers back to 1994, and some other government documents. W/hotlink to the Superintendent of Documents for purchasing government publications.|
|http://www.epls.gov/||General Services Administration's list of excluded parties. This site allows you to search the suspended and debarred parties, or to download the most current listing for reference. Free service.|
|http://www.dol.gov/esa/whd/||Department of Labor's Wage and Hour Division homepage|
|http://www.asce.org/||American Society of Civil Engineers. Has links to a variety of resources, and copies of all policy statements|
|http://www.cerf.org/hitec/||Highway Innovative Technology Evaluation Center|
|http://www.transportation.org/||American Association of State Highway and Transportation Officials; includes the AASHTO Metric Clearinghouse|
|http://www.artba.org/||American Road & Transportation Builders Association. Headquarters|
|http://www.ite.org/||Institute of Transportation Engineers|
|http://www.nas.edu/trb/||Transportation Research Board|
|http://epw.senate.gov/||Senate Environment & Public Works Committee; contains the committee membership; legislative calendar; and copies of some legislation|
|http://www.house.gov/transportation/||House Transportation & Infrastructure Committee; contains the committee membership; legislative calendar; and agenda|
|http://wzsafety.tamu.edu/||Work zone safety information clearinghouse developed by FHWA and ARTBA; maintained by TTI. Information includes design guidance, research reports, public awareness campaigns, laws, enforcement campaigns, and safety products.|
|http://www.nibs.org/projcmc.html||Construction Metrication Council, includes copies of all their newsletters and hot-links to other metric sites.|
|http://trisonline.bts.gov/search.cfm||Transportation Research Information Services is an online transportation research library.|
|http://www.ic.usu.edu/||Utah State University, Technology Transfer Center, Innovative Contracting Web Site|
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