- Briefing Room
U.S. Department of Transportation
Federal Highway Administration
1200 New Jersey Avenue, SE
Washington, DC 20590
FHWA Order 5020.2
|Stewardship and Oversight of Federal-Aid Projects Administered by Local Public Agencies (LPA)|
|Classification Code||Date||Office of Primary Interest|
|5020.2||August 14, 2014||HIPA-40|
Background Guidance on State Transportation Agency (STA) Oversight Roles and Responsibilities Relating to Local Public Agency (LPA) Administered Federal-Aid Projects
As the recipient (grantee) of Federal-aid funds for the State, the STA is responsible for ensuring that Federal-aid funds are expended in accordance with applicable laws and regulations. The STA is not relieved of this responsibility when the project development and implementation authority are passed to another State agency, LPA, metropolitan planning organization (MPO), university, or non-profit entity (where such entity is an eligible subrecipient under State law). The following information provides guidance in defining the roles and responsibilities of the STA in its stewardship and oversight of the LPA in administering Federal-aid projects consistent with current statutory and regulatory authority.
Statutory and Regulatory Authority*
As specified in 23 CFR 630.112(a), when an STA signs a project agreement, the STA "agrees to comply with the applicable terms and conditions set forth in Title 23, U.S.C., the regulations issued pursuant thereto, the policies and procedures promulgated by the FHWA relative to the designated project covered by the agreement, and all other applicable Federal laws and regulations." These laws and regulations affirm that the STAs are responsible for ensuring that LPAs are aware of all the applicable Federal-aid program requirements. These requirements are generally the same as those imposed on the STAs for their STA-administered Federal-aid projects. Further, STAs are responsible for monitoring and oversight to ensure LPA compliance with Federal requirements.
The FHWA is responsible for ensuring that the STAs meet their responsibilities by making certain that:
The laws and regulations related to oversight of LPA-administered projects include but are not limited to:
This part establishes principles and standards for determining costs for Federal awards carried out through grants, cost reimbursement contracts, and other agreements with State and local governments and federally-recognized Indian tribal governments (governmental units).
This part establishes principles and standards to provide a uniform approach for determining costs and to promote effective program delivery, efficiency, and better relationships between governmental units and the Federal Government. The principles are for determining allowable costs only. They are not intended to identify the circumstances or to dictate the extent of Federal and governmental unit participation in the financing of a particular Federal award. Provision for profit or other increment above cost is outside the scope of this part.
(a) Written procedures. The contracting agency shall prepare written procedures for each method of procurement it proposes to utilize. These written procedures and all revisions shall be approved by the FHWA for recipients of federal funds. Recipients shall approve the written procedures and all revisions for their subrecipients. These procedures shall, as appropriate to the particular method of procurement, cover the following steps:
(1) In preparing a scope of work, evaluation factors and cost estimate for selecting a consultant;
(2) In soliciting proposals from prospective consultants;
(3) In the evaluation of proposals and the ranking/selection of a consultant;
(4) In negotiation of the reimbursement to be paid to the selected consultant;
(5) In monitoring the consultant's work and in preparing a consultant's performance evaluation when completed; and
(6) In determining the extent to which the consultant, who is responsible for the professional quality, technical accuracy, and coordination of services, may be reasonably liable for costs resulting from errors or deficiencies in design furnished under its contract.
(b) Contracts. Contracts and contract settlements involving design services for projects that have not been delegated to the State under 23 U.S.C. 106(c), that do not fall under the small purchase procedures in §172.5(a)(2), shall be subject to the prior approval by FHWA, unless an alternate approval procedure has been approved by FHWA.
(c) Major projects. Any contract, revision of a contract or settlement of a contract for design services for a project that is expected to fall under 23 U.S.C. 106(h) shall be submitted to the FHWA for approval.
(d) Consultant services in management roles. When Federal-aid highway funds participate in the contract, the contracting agency shall receive approval from the FHWA before hiring a consultant to act in a management role for the contracting agency.
(a) The STA has responsibility for the construction of all Federal-aid projects, and is not relieved of such responsibility by authorizing performance of the work by a local public agency or other Federal agency. The STA shall be responsible for insuring that such projects receive adequate supervision and inspection to insure that projects are completed in conformance with approved plans and specifications.
(c) When a project is located on a street or highway over which the STA does not have legal jurisdiction, or when special conditions warrant, the STA, while not relieved of overall project responsibility, may arrange for the local public agency having jurisdiction over such street or highway to perform the work with its own forces or by contract; provided the following conditions are met and the Division Administrator approves the arrangements in advance.
(3) The local public agency is adequately staffed and suitably equipped to undertake and satisfactorily complete the work; and
(4) In those instances where a local public agency elects to use consultants for construction engineering services, the local public agency shall provide a full-time employee of the agency to be in responsible charge of the project.
For all projects, copies of payrolls and statements of wages paid, filed with the State as set forth in the required contract provisions for the project, are to be retained by the STA for the time period pursuant to 49 CFR part 18 for review as needed by the Federal Highway Administration, the Department of Labor, the General Accounting Office, or other agencies.
(a) Following authorization to proceed with a project, all major changes in the plans and contract provisions and all major extra work shall have formal approval by the Division Administrator in advance of their effective dates. However, when emergency or unusual conditions justify, the Division Administrator may give tentative advance approval orally to such changes or extra work and ratify such approval with formal approval as soon thereafter as practicable.
(b) For non-major changes and non-major extra work, formal approval is necessary but such approval may be given retroactively at the discretion of the Division Administrator. The STA should establish and document with the Division Administrator's concurrence specific parameters as to what constitutes a non-major change and non-major extra work.
(c) Changes in contract time, as related to contract changes or extra work should be submitted at the same time as the respective work change for approval by the Division Administrator.
(d) In establishing the method of payment for contract changes or extra work orders, force account procedures shall only be used when strictly necessary, such as when agreement cannot be reached with the contractor on the price of a new work item, or when the extent of work is unknown or is of such character that a price cannot be determined to a reasonable degree of accuracy. The reason or reasons for using force account procedures shall be documented.
(e) The STA shall perform and adequately document a cost analysis of each negotiated contract change or negotiated extra work order. The method and degree of the cost analysis shall be subject to the approval of the Division Administrator.
(f) Proposed changes and extra work involved in nonparticipating operations that may affect the design or participating construction features of a project, shall be subject to review and concurrence by the Division Administrator.
(a) Federal funds will participate in the costs to the STA of construction accomplished as the work progresses, based on a request for reimbursement submitted by State transportation departments. When the contract provisions provide for payment for stockpiled materials, the amount of the reimbursement request upon which participation is based may include the appropriate value of approved specification materials delivered by the contractor at the project site or at another designated location in the vicinity of such construction, provided that:
(1) The material conforms with the requirements of the plans and specifications.
(2) The material is supported by a paid invoice or a receipt for delivery of materials. If supported by a receipt of delivery of materials, the contractor must furnish the paid invoice within a reasonable time after receiving payment from the STD; and
(3) The quantity of a stockpiled material eligible for Federal participation in any case shall not exceed the total estimated quantity required to complete the project. The value of the stockpiled material shall not exceed the appropriate portion of the value of the contract item or items in which such materials are to be incorporated.
(b) The materials may be stockpiled by the contractor at a location not in the vicinity of the project, if the STA determines that because of required fabrication at an off-site location, it is not feasible or practicable to stockpile the materials in the vicinity of the project.
(c) In the case of a design-build project, the STA must define its procedures for making progress payments on lump sum contracts in the Request for Proposal document.
(a) The STA shall have procedures in effect which will provide adequate assurance that the quantities of completed work are determined accurately and on a uniform basis throughout the State. All such determinations and all related source documents upon which payment is based shall be made a matter of record.
(b) Initial source documents pertaining to the determination of pay quantities are among those records and documents which must be retained pursuant to 49 CFR part 18.
(b) Subgrantees. State or local governments, as those terms are defined for purposes of the Single Audit Act Amendments of 1996, that provide Federal awards to a subgrantee, which expends $300,000 or more (or other amount as specified by OMB) in Federal awards in a fiscal year, shall:
(1) Determine whether State or local subgrantees have met the audit requirements of the Act and whether subgrantees covered by OMB Circular A-110, "Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations," have met the audit requirements of the Act. Commercial contractors (private for-profit and private and governmental organizations) providing goods and services to State and local governments are not required to have a single audit performed. State and local governments should use their own procedures to ensure that the contractor has complied with laws and regulations affecting the expenditure of Federal funds;
(2) Determine whether the subgrantee spent Federal assistance funds provided in accordance with applicable laws and regulations. This may be accomplished by reviewing an audit of the subgrantee made in accordance with the Act, Circular A-110, or through other means (e.g., program reviews) if the subgrantee has not had such an audit;
Grantee means the government to which a grant is awarded and which is accountable for the use of the funds provided.
Sub grantee means the government or other legal entity to which a subgrant is awarded and which is accountable to the grantee for the use of the funds provided.
(a) States. States shall follow state law and procedures when awarding and administering subgrants (whether on a cost reimbursement or fixed amount basis) of financial assistance to local and Indian tribal governments. States shall:
(1) Ensure that every subgrant includes any clauses required by Federal statute and executive orders and their implementing regulations;
(2) Ensure that subgrantees are aware of requirements imposed upon them by Federal statute and regulation;
(a) Monitoring by grantees. Grantees are responsible for managing the day-to-day operations of grant and subgrant supported activities. Grantees must monitor grant and subgrant supported activities to assure compliance with applicable Federal requirements and that performance goals are being achieved. Grantee monitoring must cover each program, function or activity.
(1) This section applies to all financial and programmatic records, supporting documents, statistical records, and other records of grantees or subgrantees which are:
(i) Required to be maintained by the terms of this part, program regulations or the grant agreement, or
(ii) Otherwise reasonably considered as pertinent to program regulations or the grant agreement.
(2) This section does not apply to records maintained by contractors or subcontractors. For a requirement to place a provision concerning records in certain kinds of contracts, see §18.36(i)(10).
(b) Length of retention period.
(1) Except as otherwise provided, records must be retained for three years from the starting date specified in paragraph (c) of this section.
(2) If any litigation, claim, negotiation, audit or other action involving the records has been started before the expiration of the 3-year period, the records must be retained until completion of the action and resolution of all issues which arise from it, or until the end of the regular 3-year period, whichever is later.
(3) To avoid duplicate recordkeeping, awarding agencies may make special arrangements with grantees and subgrantees to retain any records which are continuously needed for joint use. The awarding agency will request transfer of records to its custody when it determines that the records possess long-term retention value. When the records are transferred to or maintained by the Federal agency, the 3-year retention requirement is not applicable to the grantee or subgrantee.
(c) Starting date of retention period
(1) General. When grant support is continued or renewed at annual or other intervals, the retention period for the records of each funding period starts on the day the grantee or subgrantee submits to the awarding agency its single or last expenditure report for that period. However, if grant support is continued or renewed quarterly, the retention period for each year's records starts on the day the grantee submits its expenditure report for the last quarter of the Federal fiscal year. In all other cases, the retention period starts on the day the grantee submits its final expenditure report. If an expenditure report has been waived, the retention period starts on the day the report would have been due.
(2) Real property and equipment records. The retention period for real property and equipment records starts from the date of the disposition or replacement or transfer at the direction of the awarding agency.
(3) Records for income transactions after grant or subgrant support. In some cases grantees must report income after the period of grant support. Where there is such a requirement, the retention period for the records pertaining to the earning of the income starts from the end of the grantee's fiscal year in which the income is earned.
(4) Indirect cost rate proposals, cost allocations plans, etc. This paragraph applies to the following types of documents, and their supporting records: indirect cost rate computations or proposals, cost allocation plans, and any similar accounting computations of the rate at which a particular group of costs is chargeable (such as computer usage chargeback rates or composite fringe benefit rates).
(i)If submitted for negotiation. If the proposal, plan, or other computation is required to be submitted to the Federal Government (or to the grantee) to form the basis for negotiation of the rate, then the 3-year retention period for its supporting records starts from the date of such submission.
(ii) If not submitted for negotiation. If the proposal, plan, or other computation is not required to be submitted to the Federal Government (or to the grantee) for negotiation purposes, then the 3-year retention period for the proposal plan, or computation and its supporting records starts from the end of the fiscal year (or other accounting period) covered by the proposal, plan, or other computation.
(d) Substitution of microfilm. Copies made by microfilming, photocopying, or similar methods may be substituted for the original records.
(e) Access to records
(1) Records of grantees and subgrantees. The awarding agency and the Comptroller General of the United States, or any of their authorized representatives, shall have the right of access to any pertinent books, documents, papers, or other records of grantees and subgrantees which are pertinent to the grant, in order to make audits, examinations, excerpts, and transcripts.
(2) Expiration of right of access. The right of access in this section must not be limited to the required retention period but shall last as long as the records are retained.
(f) Restrictions on public access. The Federal Freedom of Information Act (5 U.S.C. 552) does not apply to records unless required by Federal, State, or local law, grantees and subgrantees are not required to permit public access to their records.
Stewardship and Oversight (S&O) Agreement
Federal law requires that the STA be responsible for the oversight of LPA-administered Federal-aid projects. Further, STA's are required to provide adequate oversight of subrecipients, including oversight of any STA responsibilities the STA permits to be carried out by an LPA. See the March 28, 2014 FHWA Stewardship and Oversight Agreement Implementation Guidance, particularly item IV. Program Oversight (23 U.S.C. 106(g)): Section 3. Projects for Which Responsibilities Are Assumed by the State DOT for Projects Locally Administered (State Assumed/Locally Administered. This portion of the S&O guidance addresses the role of the STA in communicating, educating, and validating the Federal requirements with LPAs in terms of various programmatic level requirements.
* The cost principles and requirements in 49 CFR Part 18 will be superseded by the implementation of 2 CFR 200 Subpart E by USDOT on or before December 26, 2014. The regulation 2 CFR 200–Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards took effect for all Federal agencies in December 2013. These new regulations have not significantly changed the regulations cited above, but note should be taken of any applicable revisions.
Specifically, 2 CFR 200.331–Requirements for pass-through entities, aims to create more transparency by requiring the direct recipient of the Federal funds (in FHWA's case, the STA) to identify elements in order to properly award a project and analyze the inherent risks in letting the LPA carry out Federal requirements. Essentially, agreements between the State and subrecipient need the same detail as agreements between FHWA and the State.
** Being superseded by 2 CFR 200.331, 2 CFR Subpart F – especially 2 CFR 503(b) and 521(c) (OMB Circular A-133 has been incorporated into 2 CFR 200 Subpart F, Audit requirements (referred to as the "Supercircular"), which will apply to audits of fiscal years beginning after December 26, 2014 (see 2 CFR 200.110(b)).
*** Being superseded by 2 CFR 200.501. (In 2 CFR 200, "auditee" is defined as any non-Federal entity that expends Federal awards that must be audited under Subpart F. 2 CFR 200 supersedes, consolidates and streamlines OMB Circular A-110 (see 78 FR 78590 (December 26, 2013)).
**** Being superseded by 2 CFR 200.86, 200.93 and 200.330 (Grantee and Sub grantee removed as definitions and replaced with recipient and subrecipient:
***** Being superseded by 2 CFR 200.331 and 200.92 (Term subgrant has been replaced with subaward.)
****** Being superseded by 2 CFR 200.331(d) (Parallel responsibility language for recipient in 23 U.S.C. 106(g).)