Design

Non-Regulatory Supplement on CFR 645A

Formerly FAPG 23 CFR 645A, Non-Regulatory Supplement
September 8, 1992, Transmittal 14
See Order 1321.1C FHWA Directives Management

1. UTILITY COST SHARING PROPOSALS (23 CFR 645.107 (a) AND (d))
   1. The principle of utility cost sharing applies to both mandatory and voluntary contributions which might be made by a utility. Any funds provided by the utility are to be deducted from the total overall costs, and FHWA will participate only in its pro rata share of the remaining balance. Additionally, the principle is also applied on State projects regardless of whether the utility is privately owned or owned by a local political subdivision of the State.
   2. If the utility is owned by the local entity itself and the utility adjustment costs are eligible for Federal reimbursement, the FHWA will reimburse for all the funds paid from that particular political subdivision for the utility adjustment, including those funds from the locally owned utility (see section 23 CFR 645.107(d)). The basic approach is to accept all of the local funding sources as representing the local fund expenditure on a project.
2. APPLICABILITY OF SECTION 202(d) OF THE UNIFORM ACT TO UTILITY RELOCATIONS NECESSITATED BY HIGHWAY CONSTRUCTION (23 CFR 645.107). Section 202(d) does not apply to utility adjustments on Federal-aid highway projects. Hence, payments for public utility relocations on Federal-aid highway projects have been and will continue to be in accordance with 23 U.S.C. 123 and FHWA's implementing regulations.
3. UTILITY ADJUSTMENTS ON HIGHWAY RIGHT-OF WAY ACQUIRED BY A STATE FROM ANOTHER PUBLIC ENTITY (23 CFR 645.107(f))
   1. When a State acquires highway right-of-way from another public entity, it is expected that in regard to existing utility use or occupancy agreements (permits),the State will assume the position held by the public entity.
   2. Federal reimbursement for the adjustment of existingutility facilities on land acquired from other public entities will vary depending on the conditions imposed by the existing permits and by the utility reimbursement statutes under which the State operates. For example, if the existing utility/public entity permit establishes an obligation for the public entity to pay for needed adjustments of the utility facilities, the State, in taking the public entity's position, would assume this responsibility and such utility adjustment costs would be eligible for Federal participation. Conversely, if the existing utility/public entity permit either specifically assigned responsibility for these adjustment costs to the utility or was silent on this matter, then as the State assumes the public entity's position, Federal funds would only participate in utility adjustment costs made by the state pursuant to a State statute authorizing such payment.
   3. This would apply to State acquired right-of-way from political subdivisions of a State, such as a city or county, as well as right-of-way acquired from the Federal Government.
4. APPLICABILITY OF THE UNIFORM ACT TO RIGHT-OF-WAY ACQUISITIONS FOR UTILITY RELOCATIONS NECESSITATED BY HIGHWAY CONSTRUCTION (23 CFR 645.111). Both the State and utility may purchase replacement right-of-way for utility adjustments. If Federal funds are being used for the utility adjustment and if the State or a political subdivision performs the right-of-way acquisition, then the requirements of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (Uniform Act, 42 U.S.C. 4601(1)) apply. However, if Federal funds are not being used for the utility adjustments or if the acquisition is performed by the utility, the Uniform Act requirements do not apply.
5. USE OF FIXED AMOUNT (LUMP SUM) PAYMENTS TO UTILITIES (23 CFR 645.113(f)). See Attachment to this supplement for further guidance.
6. APPLICABILITY OF WAGE RATE, EQUAL EMPLOYMENT OPPORTUNITY (EEO), CLEAN AIR, MINORITY BUSINESS (MBE), AND OTHER CONTRACT PROVISIONS TO UTILITY LET CONTACTS (23 CFR 645.115). The following requirements are not applicable to utility-let contracts:
   1. Wage rate (23 U.S.C. 113)
   2. EEO (23 CFR 230)
   3. MBE (49 CFR 23) for reimbursable utility work on Federal-aid projects.
   4. Required contract provisions (23 CFR 633).
   5. Other Federal laws applying to recipients of Federal assistance. (However, a utility or its contractor is not relieved from complying with any aspects of such requirements which would apply regardless of whether or not Federal assistance is involved.)
7. LOSS OF REVENUE (23 CFR 654.117). A utility's claim that it should be reimbursed for "loss of revenue" during its relocation shutdowns to accommodate construction of a highway project is not eligible for Federal-aid participation. This item is not considered to represent costs expended by the utility and is not a charge properly attributable to the utility relocation.
8. INCOME TAX COSTS (23 CFR 645.117). See Guidance on Reimbursement for Tax Liability Incurred by a Utility for Relocation issued 09/05/2019
9. REIMBURSEMENT TO ADJUST UTILITIES IMPROPERLY INSTALLED ON HIGHWAY RIGHT-OF-WAY (23 CFR 645.107(a))
   1. There are two situations in which the FHWA has authority to make a determination that Federal funds should not be used to pay for adjustment of utility facilities:
      1. where a State, by permit, has allowed a utility use of highway right-of-way to occur which is not in conformance with its approved policy and the FHWA has not approved the exception to the policy, and
      2. where it is clearly evident that an unauthorized use of highway right-of-way has occurred.
10. INTEREST COSTS (23 CFR 645.117). Utility interest expenses on funds borrowed for the relocation of utility facilities necessitated by highway construction are not eligible for Federal-aid reimbursement. (Re: Federal Management Circular 74-4)

FAPG 23 CFR 645A, Use of Fixed Amount (Lump Sum) Payments to Utilities

October 5, 1995

USE OF FIXED AMOUNT (LUMP SUM) PAYMENTS TO UTILITIES (PARAGRAPH 5, NS 23 CFR 645A)

Occasionally on Federal-aid highway projects the States consider proposals which involve the use of fixed amount (lump sum) payments to utilities either as reimbursement for needed adjustments to accommodate construction of the highway project or as compensation for facilities taken.

The FHWA regulations have long treated utility facilities impacted by highway construction as essential public services which must be maintained if the need for the services continues to exist. Where services must be maintained, the FHWA should reimburse the State based upon necessary costs to restore the essential services in the most economical method. This is usually done by paying for construction of a replacement facility. Where the utility and the highway agency agree that existing facilities do not need to be replaced, then the FHWA should pay for the utility facilities as a right-of-way acquisition matter. The FHWA policy and use of fixed amount (lump sum) payments are discussed below.

Case I - Operational Capabilities are to be Functionally Restored

The FHWA's regulations covering reimbursement for utility work on Federal-aid highway projects are contained in 23 CFR 645, Subpart A. The basic concept incorporated into these regulations is that FHWA is willing to reimburse actual costs incurred to functionally restore a utility's existing operating facilities which existed prior to undertaking a highway project. It is intended that a utility's financial and productive situation be maintained as if the adjustment needed for the highway project had not occurred. This does not mean that a replica facility is required, rather that the utility is to be made whole by restoring the existing functions of the impacted facilities.

Typically, a utility uses its own forces or lets a contract to accomplish the needed adjustments to its facilities. Records of actual costs incurred then form the basis for FHWA reimbursementto the State. For work performed by a utility with its own forces, or for work performed by contract, FHWA regulations allow a fixed amount final payment based on an estimate of costs prior to construction. This is commonly known as the lump sum payment method. For utility work, FHWA's lump sum payment regulation is 23 CFR 645.113(f).

Provisions for lump sum payments for utility relocation work were first addressed by the FHWA in Policy and Procedure Memorandum 30-4 (PPM 30-4) dated December 31, 1957. These provisions pertained to very minor work estimated to cost less than $2,500, work that normally would be performed by a utility with its own forces. There was no apparent intent, however, in PPM 30-4 or any subsequent FHWA guidance or regulation, to preclude lump sum payments for work performed by a contractor under a utility-let contract. If the utility uses an existing continuing contractor, payment should be by the method the utility has previously established with the contractor. If the continuing contract establishes a lump sum payment for certain types of work, this payment method can be used for the Federal-aid project if the State highway agency feels the cost is reasonable. If the utility lets a contract, payment should be based on the methods that are customary and acceptable for the work involved, which could potentially include the lump sum payment method.

The lump sum payment method should only be used where the end product, in this case the utility adjustment, can be clearly and concisely defined. The cost estimate in support of the lump sum agreement must be accurate, comprehensive, verifiable, and in sufficient detail to give a clear picture of the work involved and the cost of the individual items. A principal benefit of using the lump sum payment method is that it should reduce administrative and record keeping costs associated with documenting payment for completed work. However, these savings may be offset by inaccuracies in the cost estimating process. In recognition of this, the regulation establishes a $100,000 ceiling for use of the lump sum payment method.

The utility regulation also contains a mechanism for approving lump sum amounts in excess of $100,000 where this is found to be in the public interest. Approval of proposals to exceed the $100,000 ceiling should be a relatively rare occurrence. Two situations where this may be justified are as follows:

Where the estimated cost of the eligible adjustment work slightly exceeds, say by no more than a few thousand dollars,the $100,000 ceiling. In this case the ceiling is not being treated as an inviolable barrier and some flexibility is allowed.

Where the cost of the utility work eligible for Federal-aid participation represents only a small portion of the overall cost for all the utility work that is being performed in conjunction with the construction of the highway project. For example, a utility may be undertaking a major upgrading of its facilities in an area where a highway project occurs, and the portion of the work eligible for Federal-aid participation may be relatively small in comparison, say $150,000 out of a $2,000,000 effort. In this case, it may make sense for the highway agency to agree to a fixed payment to represent its share of the overall work being accomplished, thus simplifying administration of the project.

In either of the above situations the lump sum payment method should only be used where the work can be clearly defined and the costs accurately estimated. Also, whenever a lump sum payment is used, the highway agency must still verify that the eligible work has been satisfactorily completed in accordance with the approved agreement, plans, and specifications before reimbursement can be approved.

The FHWA's approval authority for a State's proposal for a lump sum payment for work in excess of the established ceiling was delegated to the Regional Administrators in 1985 when the utility regulations were rewritten.

Case II - Operational Capabilities Need Not be Functionally Restored

Where the utility determines that its existing facilities do not need to be replaced to maintain its operational capabilities, then payment for the utility facilities needed to accommodate construction of the highway project should be handled as a right-of-way acquisition matter. The fixed amount (lump sum) payment

for the real property interest of the utility to be acquired would be based on the fair market value of its existing facilities developed in accordance with approved State right-of-way appraisal and acquisition procedures.

Any administration settlement over and above the fair market value must be supported in accordance with 49 CFR 24.102(i). Various means, such as appraisals, recent court awards, estimated trial costs, or valuation problems are recognized as providingsupport for a settlement value.

Case III - Payment for Nonoperational Facilities

Instances can arise where a highway project may require the acquisition of a portion of a utility's property or facilities which are not directly a part of the company's physical plant providing the service (e.g., an office housing marketing and billing operations). In these cases, the fixed payment to the utility should always be based on applicable right-of-way procedures.