|FHWA > Engineering > Construction > Contract Admin > I-81 Public Private Transportation Act (PPTA) Proposals|
May 6, 2003
Malcolm T. Kerley, P.E.
Subject: I-81 Public Private Transportation Act (PPTA) Proposals
Dear Mr. Kerley:
We have reviewed the series of questions regarding the I-81 PPTA proposals that were submitted with your March 7 letter. One additional question was added (as #G13) as a result of discussions at the March 19, 2003 Commonwealth Transportation Board workshop.
We have coordinated the enclosed responses with our Headquarters office, which included a review by our Office of the Chief Counsel. If any other questions arise, please feel free to contact me.
/s/ Roberto Fonseca-Martinez
VDOT Questions Regarding I-81 PPTA Proposals
G1. Is there a national precedent in which a construction contractor completed a NEPA document, which was then passed through the SHA to FHWA for approval? What methods were employed by the SHA to ensure objectivity?
FHWA Response: At the outset, FHWA wants to emphasize that completing a NEPA document is not simply an analytical exercise. Intertwined in the process of preparing a NEPA document are key public sector decision points and interactions with Federal and state agencies. For example, early in the NEPA process, it is essential to involve other Federal and state agencies in scoping, to identify the full range of potential environmental impacts for analysis and establish the purpose and need for the project, the range of alternatives to be analyzed, and analytical methodologies to be used (e.g., the extent of analysis for secondary and cumulative impacts). For a major highway project, these are not simply analytical exercises that a private entity can undertake on its own.
For this reason, the SHA must provide direction and oversight over any actual NEPA document. As a general rule, construction contractors are free to provide information and analyses which the SHA can consider using in the NEPA document. FHWA is aware of several cases where a highway construction contractor has submitted extensive environmental analysis to a SHA that, in turn, was used by the SHA in finalizing its independent NEPA document. The SHA can ensure objectivity by carefully documenting that the SHA's in-house experts, or consultant advisers retained by or on behalf of the State, have directed and maintained oversight over the preparation of the actual NEPA document. The work of such consultant advisors must be controlled by the State rather than the entity seeking to construct the project, and otherwise be in accord with 40 C.F.R. §1506.5(c), as modified by 23 U.S.C. §112(g).
G2. Will FHWA allow a contractor to complete both NEPA and the design for a project?
FHWA Response: No and yes. As noted above, a private sector entity cannot simply complete the NEPA document on its own. However, a consultant may work on the NEPA documentation and also do follow-up design work. This can be done under separate contracts for NEPA and design work (the State and FHWA Division Office may agree that this is the preferred approach) or under a single contract. Section 112(g), 23 U.S.C., allows a State to procure, under a single contract, the services of a consultant to prepare environmental documents for a project as well as subsequent engineering and design work on the project. The State must, however, comply with the standards of participation and review detailed above in G1 prior to submission to FHWA for approval.
What conditions will FHWA place on this approach?
FHWA Response: To comply with §112(g), the State must conduct a review assessing the objectivity of the environmental documentation prior to submission for approval.
G3. Will FHWA allow a contractor to complete NEPA and construct a project? What conditions will FHWA place on this approach?
FHWA Response: A contractor may provide substantial environmental input to a State for a NEPA document, but a contractor (with or without a construction interest) may not "complete NEPA." The State must manage and be accountable for the environmental document.
With regard to a contractor providing substantial environmental input as well as having a design or construction interest, 40 C.F.R. §1506.5(c) states, "Contractors shall execute a disclosure statement prepared by the lead agency, or where appropriate the cooperating agency, specifying that they have no financial or other interest in the outcome of the project." Prior court cases placed this issue in context and held that a contractor may have an interest in the project, but such an interest must be fully disclosed and the responsible agency must take an independent, "hard look" at the environmental consequences to ensure that the "integrity and objectivity" of the process is protected. While enacting §112(g), the Congress has determined that a financial interest in future design work is not sufficient to disqualify a consultant from doing NEPA work; a financial interest in future construction work by a potential construction contractor was not specifically addressed in the statute. The State DOT's contract with the environmental consultant must be separate from the contract for the PPTA proposer team. This will ensure State control as specified in the response to G1.
G4. FHWA is required to perform an independent review of NEPA documents prepared by SHAs prior to approving them. Please describe exactly what the VA Division does in this review. Could VDOT apply the same standards of review to contractor-prepared documents to ensure objectivity?
FHWA Response: NEPA indicates that a state agency or official with statewide jurisdiction may prepare an environmental impact statement for a federal agency provided that, among other things, the responsible federal official independently evaluates the environmental impact statement prior to its approval and adoption. The FHWA Virginia Division takes an unbiased, objective, hard look at all facets of VDOT's environmental impact statement preparation, including purpose and need, alternatives including the no-action alternative, impacts, and mitigation. FHWA does not have a preconceived notion regarding the best solution to the identified problems and independently considers the proposal with regard to reasonable alternatives, impact reduction, costs, level of service provided, and meeting the intended purpose and need for the proposal. VDOT should indeed independently review any studies and conclusions reached by consultants before their inclusion into a NEPA document.
G5. Will the FHWA Virginia Division work directly with a consultant hired by the Department to prepare NEPA documents?
FHWA Response: Not without appropriate VDOT involvement. VDOT is responsible for the preparation of the NEPA document that is submitted to the FHWA Virginia Division according to established procedures. VDOT may hire a consultant to conduct environmental studies, analysis, or documentation. This consultant may provide substantial input, but VDOT retains responsibility for the content and accuracy of all studies and analyses and for the submission of the document with the appropriate recommendation to FHWA Virginia Division. FHWA will work with VDOT to assist in the preparation of the document, and VDOT will be FHWA's primary point of contact for this effort. FHWA would not be willing to work directly with the contractor without the presence of VDOT. That being said, consultants retained by a State routinely participate in meetings between the State and FHWA regarding the form and content of an EIS.
G6. Will the FHWA Virginia Division work directly with a consultant hired by the PPTA contractor to prepare NEPA documents?
FHWA Response: See G5. VDOT will be FHWA's primary point of contact for this effort. FHWA would not be willing to work directly with the consultant without the presence of VDOT. However, the consultant can and should be available to participate in working meetings between VDOT and FHWA as the NEPA document is being developed.
G7. Will the FHWA Virginia Division work directly with a consultant hired by the PPTA contractor to complete NEPA if the draft and final documents are reviewed by and passed through VDOT?
G8. How will the FHWA Virginia Division ensure that their NEPA approval (ROD, FONSI, or CE) remains valid throughout the life of the project?
FHWA Response: Although lacking in specific details, both proposers include positive commitments to ensure compliance with environmental requirements and describe organizational structures and include team members with expertise in the environmental area. FHWA would expect any contracts that VDOT would enter with the successful proposer to include specific references to the approved environmental documents. As with any project, proposed changes subsequent to the NEPA approval would need to be considered and environmental reevaluations completed by VDOT as necessary to keep the NEPA documentation valid. The Virginia Division, as a partner in this effort will provide necessary staff to provide advice in the development of any needed reevaluations and take appropriate approval actions.
G9. What methods will the FHWA Virginia Division employ to ensure compliance with commitments contained in their NEPA approval (ROD, FONSI, or CE)?
FHWA Response: In addition to our response to G8, the contracts VDOT enters to implement the project should make specific references to any environmental commitments made in the NEPA and subsequent permitting process. FHWA's environmental regulations at 23 C.F.R. §771.109 indicate that "It shall be the responsibility of the applicant, in cooperation with the Administration, to implement those mitigation measures stated as commitments in the environmental documents prepared pursuant to this regulation. The FHWA will assure that this is accomplished as a part of its program management responsibilities..." and that "it shall be the responsibility of the State highway agency to ensure that the project is constructed in accordance with and incorporates all committed environmental impact mitigation measures listed in approved environmental documents..." The Division would have involvement in the oversight of the project and would assist VDOT in various elements of project implementation, including ensuring timely implementation of environmental commitments. The Division will take necessary actions to ensure commitments are being implemented as appropriate. The Division will consult with VDOT prior to commencement of construction regarding our degree of oversight.
G10. Can a solicited proposal received prior to issuance of FHWA's final rule on design build be "grand fathered" to avoid the requirements of the design build regulations?
FHWA Response: VDOT anticipates executing a master agreement that provides for preliminary engineering, construction, operation, and maintenance services on I-81. This type of contract is included in the definition of a "design-build contract" in 23 C.F.R. §636.103. While the FHWA considers this agreement to be included in the definition of a design-build contract, VDOT's PPTA procurement process is considered to be a hybrid process and therefore, portions of the design-build rule are not directly applicable to the Virginia PPTA process. It is our understanding that VDOT issued a request for conceptual proposals in September of 2002 and the Commonwealth Transportation Board voted to advance both conceptual proposals to the next stage of review on March 20, 2003. On face value, this does not comply with the provisions of 23 C.F.R. §636.109. The FHWA supports the VDOT's PPTA program as an experimental contracting program under SEP-14. We fully support Virginia's continued use of the PPTA as long as it is evaluated under SEP-14. However, SEP-14 is not a process for waiving NEPA requirements. NEPA requirements must still be met. The inherent principle that the NEPA process be objective and unbiased is applicable outside of the design-build rule. The FHWA is willing to work with VDOT to coordinate the NEPA evaluation and procurement process to ensure NEPA compliance and eligibility of future Federal-aid participation.
G11. Does tolling affect the determination that an action has logical termini and independent utility?
FHWA Response: FHWA's environmental regulations [23 C.F.R. §771.111(f)] and the Council on Environmental Quality's regulations [40 C.F.R. §1508.25] for implementing NEPA address logical termini and independent utility. Each outlines specific rules for a project to be able to "stand alone" in an individual NEPA document.
VDOT would have to demonstrate that any proposed action meets the above requirements. We believe that tolling does affect the determination that an action has logical termini and independent utility. To propose an action that would be tolled on I-81 that is less than the entire corridor, VDOT would have to demonstrate, among other things, that the action can and would proceed regardless of the outcome of other proposed actions. As the means to fund the action, tolling plays a role. Final approval to toll any portion of I-81 cannot be given until that particular portion has satisfied the requirements of the NEPA process.
G12. If it were determined that an action that is less than the entire length of the project has logical termini and independent utility, would FHWA approve tolling on that section alone if the NEPA work on the other sections were not completed or delayed?
FHWA Response: A State may have multiple independent projects within an approved facility if adequate justification for the independent utility and logical termini is provided. FHWA's approval as a toll pilot project is governed by §1216(b) of TEA-21. This legislation allows up to three facilities, each in a different State, to be permitted. FHWA's guidance allows for a phased approach where we would give a Phase I approval for "provisional" acceptance to the entire length of I-81 as a toll facility prior to the completion of NEPA. The guidance further indicates that in Phase 2, a candidate project will be required to satisfy compliance with the NEPA process prior to obtaining final acceptance as one of the three toll facilities in the §1216(b) pilot program. Although no specific time limits are established for this phase, it is expected the States will accomplish this task in a timely manner. If this does not occur, a candidate's "provisional" acceptance may be withdrawn and offered to another candidate submitted during Phase 1. If any segment of the entire facility proposed to be tolled satisfies the Phase 1 and Phase 2 requirements and has independent utility and logical termini for use as a toll facility, then the FHWA would approve tolling for the facility segment prior to the completion of any other necessary requirements on other sections of the entire proposed toll facility.
G13. Under VA's PPTA, can a comprehensive agreement be entered into prior to the Record of Decision being issued?
FHWA Response: Yes, as long as the agreement documents the risks that are being assumed and does not influence the alternatives analysis required by NEPA. Of course, no construction may occur prior to the ROD [or other final NEPA approval] being issued and FHWA will not provide any final design, right-of-way or construction approvals prior to the ROD's completion. The SHA and/or the PPTA project proposer will need to clearly document in the agreement how the parties will allocate the risks inherent in the outcome of the alternatives analysis (i.e. the risk that the "no build" or another alternative that is not consistent with the terms and conditions of the comprehensive agreement is selected.)
S1. Do the requirements of the new design build regulations apply to the Star proposal?
FHWA Response: See G10 above.
S2. If the DB regulations apply to the Star proposal, can the Department simply readvertise for RFPs after completing NEPA on that proposal?
FHWA Response: See G10 above.
S3. Is there an alternate FHWA process or alternate FHWA funding that would obviate the need to comply with the design build requirements?
FHWA Response: Yes, SEP-14 is still a valid approach. Noting that the inherent principle that the NEPA process be objective and unbiased is applicable outside of the design-build rule.
S4. What specific federal actions does FHWA anticipate for the Star proposal as currently presented?
FHWA Response: There are four actions that FHWA would have to take on the Star proposal in order for it to be constructed: 1) approval of funding the proposal; 2) approval of a toll pilot project for I-81 in Virginia; 3) approval of I-81 interchange modifications; and 4) approval of design exceptions on I-81. These approvals would require NEPA compliance; in addition, it is our expectation that all applicable federal regulations, including design standards, will be met.
S5. Is there an opportunity to split the Star proposal into separate projects with independent utility and logical termini to satisfy NEPA?
FHWA Response: While the opportunity exists to develop separate projects within the overall corridor upgrade plan for NEPA review purposes, no justification for individual projects sections with independent utility and logical termini has been presented to date. Therefore, at this time we cannot agree with the proposer's assumptions as specified in the conceptual proposal regarding the independent utility or the schedule of 4 (or more) sections with independent utility.
S6. What level of environmental document do you anticipate for the Star proposal?
FHWA Response: Based on our understanding of the project, which is to reconstruct 325 miles of Interstate highway and conversion to a toll facility, an Environmental Impact Statement (EIS) appears to be the appropriate document to demonstrate compliance with NEPA. [A proposed approach to NEPA compliance has not been provided. Such an approach could provide reasoning and justification of logical termini and independent utility of distinct sections and the development of more than one NEPA document within the 325-mile corridor. The rationale for determining the appropriate level of environmental document necessary for the independent sections must be provided and reviewed by FHWA before proceeding with this approach. FHWA would consider such proposed strategies if provided.]
S7. Can the Star proposers hire a contractor to complete NEPA then turn the document over to VDOT for adoption? If so, what specifically would VDOT have to do with the document before providing it to FHWA?
FHWA Response: No. As noted in G1 and G5, completing NEPA is not simply an analytical exercise in preparing a document. VDOT will have to participate in key decision points in the NEPA process and VDOT will be required to take a hard look at the environmental consequences of the project, demonstrate that it has independently and extensively reviewed the consultant's analysis, and be able to show that it directed and oversaw the technical services provided by the consultant. VDOT will be held responsible for protecting the integrity and objectivity of the process and for demonstrating how they protected the integrity and objectivity of the process. This standard of review will not be met if a consultant, without significant guidance from VDOT, performs research and analysis and then just turns over the document to VDOT at the end of process.
S8. Can the Star proposers fund a NEPA study to be independently managed and submitted by the Department?
S9. Based on the details contained in the Star proposal, what approach to NEPA does FHWA recommend?
FHWA Response: For any proposal on this project, we believe that it would be in VDOT's interest to have the proposers prepare an approach outlining NEPA compliance. The NEPA phase of the project will have a substantial influence on the overall project schedule. VDOT's and FHWA's management of this phase will likely be highly scrutinized by those interested in the project. Any approach to NEPA should include the reasoning and justification related to any determinations of logical termini and independent utility of the proposed sections that are less than the entire corridor length, including recommendations and reasoning regarding the level of documentation considered appropriate for these sections. The proposer should also indicate whether or not a tiered EIS would be considered for determining the logical and independent sections and level of documentation for subsequent tier 2 studies. An extremely important aspect of any NEPA proposal must include a schedule with realistic time frames. We would also recommend that this NEPA approach be accepted by VDOT and FHWA prior to the development of any detailed proposals.
S10. What normal delegation of authority procedures for decision making apply to this proposal?
FHWA Response: Normal delegation of authority procedures would apply to this proposal. The FHWA Virginia Division would be the primary decision-maker for the project. Decisions to be made by FHWA Headquarters would be the potential approval of I-81 as a toll pilot and the use of SEP-14. The FHWA Virginia Division may request prior concurrence from FHWA Headquarters on some aspects of the NEPA prior to taking a final action. Under Mega project procedures (for projects costing more than $1 billion), the Division would consult with Headquarters prior to our formal acceptance of the finance plan for the project.
F1. Do the requirements of the new design build regulations apply to the Fluor proposal?
FHWA Response: See G10.
F2. What specific federal actions does FHWA anticipate for the Fluor proposal?
FHWA Response: There are two actions that FHWA would have to take on the Fluor proposal as presented in order for it to be constructed: 1) approval of a toll pilot project for I-81 in Virginia; and 2) approval of design exceptions on I-81. These approvals would require NEPA compliance; in addition, it is our expectation that all applicable federal regulations, including design standards, will be met. [The Fluor proposal indicates that neither federal funding nor I-81 interchange modifications would be necessary.]
F3. Is there an opportunity to split the Fluor proposal into separate projects with independent utility and logical termini to satisfy NEPA?
FHWA Response: Yes - See S5.
F4. What level of document do you anticipate for the Fluor proposal?
FHWA Response: Without any justification otherwise, an EIS - See S6.
F5. What specifically would a document for FHWA's approval to toll the interstate include?
FHWA Response: FHWA's published guidance on the toll pilot program (64 FR 6735-6736) addresses NEPA responsibilities as part of FHWA's interstate toll approval. It states, "A pilot project, regardless of whether Federal-aid funds are to be used in subsequent reconstruction or rehabilitation activities, must satisfy the requirements of the NEPA process before final approval is given to the project. The analysis of the project must take into account not only the impacts of the proposed reconstruction or rehabilitation activities but also consider impacts associated with converting the free facility to a toll facility." Later, it states, "It is recognized that the NEPA impacts of a proposed pilot project under this program, not only involve those associated with the proposed reconstruction/rehabilitation activities themselves but also those associated with converting a free interstate facility to a toll facility, such as potential changes in travel patterns, construction of toll collection facilities, and economic equity impacts." The final document signifying FHWA's final approval to toll the Interstate is a formal toll agreement between the State and FHWA providing for audits and toll revenue use limitations as specified in §1216(b)(5) of TEA-21.
F5a. What would be the need for the action?
FHWA Response: Since VDOT has not approached FHWA with a specific proposal, a formal purpose and need statement has not been developed. It would be VDOT's responsibility to prepare the purpose and need statement for solving identified problems in the I-81 corridor for NEPA purposes. The purpose and need would be related to correcting current and future transportation problems on I-81 and not simply related to the need to implement tolls, which is merely the means to fund the needed improvements.
F5b. What should be considered as a range of alternatives?
FHWA Response: The study must include all reasonable alternatives, which are based on meeting the identified purpose and need for the proposal, including the no-build.
F6. What level of environmental document would be required to support FHWA's interstate access approval?
FHWA Response: Fluor's proposal indicates that Interstate access approval will not be necessary, however, see the response to F4. Should any access approvals or interchange modifications become necessary they should be considered in the project's overall NEPA document and not separately.
F7. Can the Fluor proposers hire a contractor to complete NEPA then turn the document over to VDOT for adoption? If so, what specifically would VDOT have to do with the document before providing it to FHWA?
F8. Can the Fluor proposers fund a NEPA study to be independently managed and submitted by the Department?
F9. If another federal agency serves as the lead agency for NEPA, will FHWA's design build regulations apply?
FHWA Response: See G10.
F10. If another federal agency serves as the lead agency for NEPA and allows the contractor to prepare the NEPA document on their behalf will FHWA be able to adopt the document?
FHWA Response: While we wouldn't expect another federal agency to take the lead role on an Interstate upgrade project, the CEQ regulations do provide for adoption of NEPA documents by an agency when that document has been prepared by another agency. FHWA would review the document and determine its appropriateness in meeting FHWA environmental requirements.
Will conflict of interest statements be required?
FHWA Response: We are not aware of any Federal agencies that have an exception to CEQ's requirements under 40 C.F.R. §1506.5(c) that indicates, "Contractors shall execute a disclosure statement..." In addition, if the VDOT anticipates using Federal-aid funding in this contract, the organizational conflict of interest provisions of 23 C.F.R. §636.116 apply.
F11. Based on the details contained in the Fluor proposal, what approach to NEPA does FHWA recommend?
FHWA Response: Although few details are provided other than Flour expects VDOT to perform the NEPA studies, see full response to Star question S9.
F12. Will the action's physical construction impacts (wetlands, noise, etc.) have to be evaluated in the environmental document?
FHWA Response: Yes. See F5.
F13. What normal delegation of authority procedures for decision making apply to this proposal?
FHWA Response: Normal delegation of authority will apply - See S10.