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U.S. Department of Transportation
Federal Highway Administration

Subject: INFORMATION: Federal Cost Principles and CMAQ Alternative Fuel Vehicles Projects

April Marchese, Director
Office of Natural and Human Environment

FHWA Division Administrators
Attention of Division Planning, Air Quality, and Financial Management Staff

Date: April 06, 2011

Reply to: Michael Koontz

The purpose of this message is to clarify an issue that Congressional Staffs raised related to the application of Federal, government-wide cost principles and the obligation and expenditure of Congestion Mitigation and Air Quality Improvement (CMAQ) funds for alternative fuel vehicles (AFVs). The applicable principles (2 CFR 225) require that costs be equitably allocated to benefiting cost objectives. The question at hand relates to eligibility for police cruisers designed and powered for flexible fuel. It is important that we are consistent in our interpretation on this issue.

Title 23 funds cannot be used to fund general government operations, including the acquisition of vehicles that perform such general functions, e.g. police and firefighting. Cost allocation is required between the environmental elements in which we can participate and costs of state and local governments that are not eligible for FAHP funding. In the matter first brought to our attention, the project sponsor was proposing to use full Federal share for CMAQ costs, as provided by the Energy Independence and Security Act of 2007, to purchase police cruisers designed and powered for flexible fuel use. While FHWA supports the use of alternative fuels and vehicles, we can only participate in the pro-rata share that benefits air quality. See 2 CFR 225 App. B. Selected Item of Cost, 19a(5), relating to General Government Expenses. Police and fire equipment are called out as explicit examples in this provision.

To accommodate States and other sponsors intending to avail themselves of CMAQ funds for alternative fuel efforts consistent with the Federal cost principles, FHWA may participate in the eligible portion of such vehicle purchases, limited to the marginal emissions-reducing elements of the project, e.g. the incremental cost difference between standard and AFV, the expected emissions reduction projected form AFV use, or other methodology for allocating costs to CMAQ eligible portions of the purchase. Staff is available to assist project sponsors in developing an appropriate level of eligible cost share that can be tied to an air quality benefit, and thus, allocated to the CMAQ award.

For public fleet AFVs that provide a dominant transportation function, the full vehicle is eligible for participation. These types include transit buses, paratransit, freeway courtesy vans/tow trucks, incident management patrol vehicles, and others. While these types of acquisitions could be eligible for full participation, the 100 percent CMAQ cost sharing under the Energy Act is optional at the discretion of the State DOT.

Should your State DOT or other local project sponsor develop a cost sharing approach, we are available for review and discussion. Please consult with Michael Koontz, CMAQ program manager on my staff, or David Bruce in the Office of the Chief Financial Officer. Mr. Koontz can be reached via email at or phone at (202) 366-2076 and Mr. Bruce at or (802) 828-4567.

Updated: 1/31/2017
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