U.S. Department of Transportation Federal Highway Administration

MEMORANDUM

The recently enacted Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) made several significant changes to the requirements for developing financial plans on projects funded with federal dollars. Previous legislation had required financial plans for Major Projects and for projects funded with TIFIA funds. A Major Project has been defined as having a total cost of $1 billion or more, and other unusual or complex projects designated by the Secretary. The FHWA Financial Plan Guidance (Guidance) was established in May 2000 and may be located at the Major Projects website.

The SAFETEA-LU lowered the monetary threshold for classification as a Major Project from an estimated total cost of $1 billion to $500 million or greater. Major Projects are now also required to develop a project management plan. Guidance on the SAFETEA-LU changes to project management plans will be provided in a separate memorandum. An additional change in the law requires recipients of funds for a project with an estimated total cost from $100 million to $500 million to prepare an annual financial plan. The current FHWA Financial Plan Guidance will be updated within the next several months to reflect these changes in the financial management of Federal-aid projects. Described below is how FHWA will administer existing/underway projects that now fall into the Major Project or $100-500 million categories.

Major Projects- Greater than $500 million

A recent survey identified that there are about 50 Major Projects in an active status, those that are nearing completion of the environmental phase, are in design, or under construction. More than half of them are defined as Major Projects as a result of the changes made by SAFETEA-LU. For Major Projects that are still in the design and/or right of way phases, the timeline for the approval of the financial plan described in the Guidance should be followed. Of the newly defined Major Projects, the financial plan requirements will be effective immediately for those with less than 50 percent of the estimated construction cost authorized as of the date of this memorandum. Division Administrators should work with their respective State transportation departments to begin the process of developing the required financial plans for those projects that now fall into the major project category. Those plans should be completed and approved by March 17, 2006.

Those projects that have already had their Initial Financial Plan approved should continue to operate under the Guidance and submit the Annual Updates on the established schedule.

Projects $100-500 million

It is anticipated that a significant number of existing projects will fall into this category. For projects that have not yet been authorized for construction, the preparation of the financial plan shall be completed in accordance with the Guidance. An exception to the Guidance is that FHWA will not be approving the financial plan. The FHWA will review them as part of its stewardship and oversight responsibility. The time line would call for the financial plan to be completed prior to initial construction authorization under the design/bid/build methodology of contract administration. For projects advancing under a design/build process, the initial plan should be completed by the issuance of the RFP. The five areas noted in the Guidance (Project Cost Estimate, Implementation Plan, Funding Resources, Cash Flow, and Environmental and Legal status) will need to be addressed at an appropriate level of detail. An initial financial plan will not be required for a project in this category that is currently under construction.

As indicated above, the Guidance will be updated in the future to reflect the changes brought about by SAFETEA-LU. At this time, we do not anticipate that the changes will be materially different from the current Guidance.

Further questions may be directed to Mr. John Broadhurst of the Major Projects Team, at (202) 366-5604 or via E-mail.