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DOT LogoMemorandum
U.S. Department of Transportation
Federal Highway Administration

INFORMATION: Project Authorization/Project Agreement
Section 1305 of the TEA-21 Implementing Guidance
October 29, 1998
Chief, Federal-Aid and Design Division


Division Administrators


Section 1305 of the Transportation Equity Act for the 21st Century (TEA-21) amended 23 U.S.C. 106(a) and combined authorization of work and execution of the project agreement for a Federal-aid project into a single action.

Prior to passage of TEA-21, the FHWA's approval of the plans, specifications and estimates submitted by a State for a Federal-aid highway project was considered a contractual obligation by the Federal Government to pay its proportional share of project costs (23 U.S.C. 106(a) prior to TEA-21). This step was referred to as project authorization and the FHWA's approval action was documented in written form commonly referred to as a letter of authorization. This first step was then followed by a second step in which a formal project agreement was executed between the FHWA and a State for the Federal-aid project (23 U.S.C. 110(a) prior to TEA-21). It was common for States to process Federal-aid projects with project authorization and project agreement being done as separate steps although the FHWA regulations (23 CFR 630.303(c)) did allow these two steps to be combined into a single action.

The TEA-21 has eliminated the project agreement requirements from 23 U.S.C. 110 and incorporated these requirements into amended 23 U.S.C. 106. Specifically, 23 U.S.C. 106(a) now establishes FHWA's execution of the project agreement as being the Federal Government's contractual obligation to pay the Federal share of a project. In other words, project authorization, project agreement, and obligation of funds have now, by statute, become a combined action.


The State and FHWA division office should begin handling all project authorizations/project agreements as a single action through execution of the project agreement. This single action must incorporate the requirements for a project authorization set forth in 23 CFR 630, Subpart A, and the requirements for a project agreement set forth in 23 U.S.C. 630, Subject C. The FHWA approval of a project's plans, specifications and estimates, authorization to proceed with work, and obligation of Federal-aid funds (for an exception, see discussion on advanced constructed projects) all occur with execution of the project agreement.


The Division Administrator and the State should agree on a format for the "Project Agreement" document. Generally, the project agreement format previously being used should be adequate provided it is revised to include information on the Federal share of eligible project costs.

For illustrative purposes, a sample "Project Agreement" is attached. The State may also use an electronic version of the project agreement. Questions concerning use of an electronic format should be directed to Minnie Baskerville, Finance Division, HFS-20, (202-366-2924).


When the FHWA acts on the project agreement, the Federal share of eligible project costs must be established, either as a pro rata or lump sum amount, following the requirements in 23 CFR 630.106(f).

There are instances when States may increase the effective Federal share of projects based on other provisions in Title 23, such as application of toll credits approved under 23 U.S.C. 120(j). When this occurs, it is suggested a comment to this regard be included on the project agreement, for example, under the "Other" section of the attached sample project agreement.

Likewise, if other arrangements effecting Federal funding or non-Federal matching provisions, including tapered share or donations or use of other Federal agency funds as permitted under Title 23 are known at the time the project agreement is executed, it is suggested these also be noted on the agreement.


An advance construction project should be processed in the same manner as a regular Federal-aid project, with a project agreement being executed at the time the State is authorized to proceed with the advance construction project. The only exception is that the FHWA authorization does not constitute a commitment of Federal funds on the project, and this should appropriately be stated on the project agreement.


Modification of project agreements should continue to be processed in accordance with the requirements in 23 CFR 630, Subpart C. A sample Modification of Federal-Aid Project Agreement form is contained in the Federal-Aid Policy Guide (NS 23 CFR 630C). A State may use an electronic modification of project agreement format.

At some future point, FHWA Headquarters will initiate the rulemaking process to combine the requirements for project authorizations and project agreements found in 23 CFR 630, Subpart A and C. In the interim, the above guidance should be followed.

Questions on this memorandum may be directed to Jack Wasley (202-366-4658) or Jim Overton (202-366-4653) of my office.

Signed by
Dwight A. Horne

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