Procurement, Management, and Administration of Engineering and Design Related Services |
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Victor M. Mendez
Federal Highway Administration
September 4, 2012
[Federal Register Volume 77, Number 171 (Tuesday, September 4, 2012)]
[Proposed Rules]
[Pages 53802-53814]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-21520]
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DEPARTMENT OF TRANSPORTATION
Federal Highway Administration
23 CFR Part 172
[FHWA Docket No. FHWA-2012-0043]
RIN 2125-AF44
Procurement, Management, and Administration of Engineering and
Design Related Services
AGENCY: Federal Highway Administration (FHWA), U.S. Department of
Transportation (DOT).
ACTION: Notice of proposed rulemaking (NPRM); request for comments.
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SUMMARY: The FHWA proposes to update the regulations governing the
procurement, management, and administration of engineering and design
related services directly related to a highway construction project and
reimbursed with Federal-aid highway program (FAHP) funding. The intent
is to make the regulations consistent with prior changes in legislation
and other applicable regulations. These revisions also address certain
findings and recommendations for the oversight of consultant services
contained in national review and audit reports.
DATES: Comments must be received on or before November 5, 2012. Late
comments will be considered to the extent practicable.
ADDRESSES: Mail or hand deliver comments to the U.S. Department of
Transportation, Dockets Management Facility, Room W12-140, 1200 New
Jersey Avenue SE., Washington, DC 20590, or submit electronically at
http://www.regulations.gov or fax comments to (202) 493-2251. All
comments should include the docket number that appears in the heading
of this document. All comments received will be available for
examination and copying at the above address from 9 a.m. to 5 p.m.,
e.t., Monday through Friday, except Federal holidays. Those desiring
notification of receipt of comments must include a self-addressed,
stamped postcard or you may print the acknowledgment page that appears
after submitting comments electronically. You may review DOT's complete
Privacy Act Statement in the Federal Register published on April 11,
2000 (Volume 65, Number 70, Page 19477-78), or you may visit http://dms.dot.gov.
FOR FURTHER INFORMATION CONTACT: Mr. Jon Obenberger, Preconstruction
Team Leader, FHWA Office of Program Administration, (202) 366-2221, or
via email at jon.obenberger@dot.gov, or Mr. Steven Rochlis, Attorney
Advisor, FHWA Office of the Chief Counsel, (202) 366-1395, or via email
at steve.rochlis@dot.gov. Office hours for the FHWA are from 8 a.m. to
4:30 p.m., e.t., Monday through Friday, except Federal holidays.
SUPPLEMENTARY INFORMATION:
Electronic Access and Filing
This document and all comments received may be viewed online
through the Federal eRulemaking portal at: http://www.regulations.gov.
The Web site is available 24 hours each day, 366 days this year. Please
follow the instructions. Electronic submission and retrieval help and
guidelines are available under the help section of the Web site.
An electronic copy of this document may also be downloaded by
accessing the Office of the Federal Register's home page at: http://www.archives.gov/federal-register/, or the Government Printing Office's
Web page at: http://www.gpo.gov/fdsys.
Background
The FHWA proposes to modify existing regulations for the
administration of engineering and design related service contracts to
ensure consistency and compliance with prior changes in authorizing
[[Page 53803]]
legislation codified in 23 U.S.C. 112(b)(2) and changes in other
applicable Federal regulations. Proposed revisions will also address
certain findings contained in a 2008 U.S. Government Accountability
Office (GAO) review report (http://www.gao.gov/products/GAO-08-198)
regarding increased reliance on consulting firms by State
transportation agencies (STAs) and a 2009 DOT Office of Inspector
General (OIG) audit report (http://www.oig.dot.gov/library-item/4710)
regarding oversight of engineering consulting firms' indirect costs
claimed on Federal-aid grants. This rulemaking does not otherwise
impose any new burdens on States, local public agencies, or other
grantees and subgrantees.
The primary authority for the procurement, management, and
administration of engineering and design related services directly
related to a highway construction project and reimbursed with FAHP
funding is codified in 23 U.S.C. 112(b)(2). On November 30, 2005, the
Transportation, Treasury, Housing and Urban Development, the Judiciary,
the District of Columbia, and Independent Agencies Appropriations Act,
2006 (Pub. L. 109-115, 119 Stat. 2396, HR 3058), commonly referred to
as the ``2006 Appropriations Act,'' was signed into law. Section 174 of
this Act amended 23 U.S.C. 112(b)(2) by removing the provisions that
permitted States to use ``alternative'' or ``equivalent'' State
qualifications-based selection procedures and other procedures for
acceptance and application of consultant indirect cost rates that were
enacted into State law prior to June 9, 1998.
Effective on the date of enactment of the ``2006 Appropriations
Act,'' States and local public agencies could no longer use alternative
or equivalent procedures. States and local public agencies are required
to procure engineering and design related services in accordance with
the qualifications-based selection procedures prescribed in the Brooks
Act (40 U.S.C. 1101 et seq.) and to accept and apply consultant
indirect cost rates established by a cognizant Federal or State agency
in accordance with the Federal Acquisition Regulation (FAR) cost
principles (48 CFR part 31). To comply with the amendments to 23 U.S.C.
112(b)(2), this proposed rulemaking will remove all references to
alternative or equivalent procedures.
In addition, the Civilian Agency Acquisition Council and the
Defense Acquisition Regulations Council published a final rule in the
Federal Register of August 30, 2010 (75 FR 53129), and effective on
October 1, 2010, raising the Federal simplified acquisition threshold
established in 48 CFR 2.101 of the FAR from $100,000 to $150,000 to
account for inflation using the Consumer Price Index as required in
statute. The FHWA proposes to revise the small purchase procedures
section to reflect this increase in the Federal threshold.
The proposed revisions will also address certain findings and
recommendations contained in the aforementioned GAO review and OIG
audit reports, clarify existing requirements to enhance consistency and
compliance with Federal laws and regulations, and address evolutions in
industry practices regarding the procurement, management, and
administration of consultant services.
Specific proposed revisions are described in the section-by-section
analysis below.
Section-by-Section Discussion of the Proposals
The FHWA proposes to revise 23 CFR part 172--Administration of
Engineering and Design Related Service Contracts as follows:
Title--Administration of Engineering and Design Related Services
Contracts
The title of this part would be changed to Procurement, Management,
and Administration of Engineering and Design Related Services to
reflect the range of requirements and Federal interests associated with
the procurement, management, and administration of engineering and
design related services addressed within this part.
Section 172.1--Purpose and Applicability
Section 172.1 would be amended to clarify the applicability of the
requirements of this part for the procurement, management, and
administration of engineering and design related services and the
requirements of the common grant rule (49 CFR part 18) for procurement
of these and other consultant services reimbursed with FAHP funding.
Section 172.3--Definitions
Section 172.3 would be amended to clarify the definitions of
``audit'' and ``cognizant agency'' to provide consistency with the FAR
cost principles (48 CFR part 31) and with industry guidance established
in the American Association of State Highway and Transportation
Officials (AASHTO) Uniform Audit and Accounting Guide, 2010 Edition
(http://audit.transportation.org/Documents/2010_Uniform_Audit_and_Accounting_Guide.pdf). The definition of ``competitive negotiation''
would be amended to remove references to State alternative or
equivalent procedures prohibited by sec. 174 of the ``2006
Appropriations Act.'' The definitions of ``contracting agencies'' and
``one-year applicable accounting period'' would be amended to provide
consistency with other terminology of this part. The definition of
``engineering and design related services'' would be amended to also
include professional services of an architectural or engineering nature
as defined by State law, consistent with the Brooks Act and common
grant rule requirements. Definitions would be added for the terms
``contract,'' ``contract modification,'' ``Federal cost principles,''
``fixed fee,'' ``scope of work,'' and ``State transportation agency
(STA)'' to clarify the meaning of each within the context of the
regulation. A definition would also be added for ``management role'' to
clarify the types of services and roles performed by consultants that
require FHWA or direct grantee approval.
Section 172.5--Methods of Procurement
This section would be redesignated as sec. 172.7 and revised. The
title would be changed to Procurement Methods and Procedures, to
reflect the proposed content which would address not only methods of
procurement, but also the procurement requirements associated with
these methods.
The title of paragraph (a) would be changed from procurement to
procurement methods, and would be revised to specify the three
currently allowable procurement methods: Competitive negotiation
(qualifications-based selection), small purchases, and noncompetitive.
The provisions of subparagraph (a)(1) would be amended to remove
references to State alternative or equivalent procedures prohibited by
sec. 174 of the ``2006 Appropriations Act.'' Additional provisions
would be added to clarify the requirements and expectations for
solicitation; request for proposal; evaluation factors; evaluation,
ranking, and selection; and negotiation to ensure consistency and
compliance with the provisions of the Brooks Act as required by 23
U.S.C. 112(b)(2)(A).
Subparagraph (a)(2) would be amended to clarify the requirements
for use of small purchase procedures and reflect the increase in the
Federal simplified acquisition threshold from $100,000 to $150,000 (as
specified in the final rule published in the Federal Register of August
30, 2010 (75 FR 53129)). Additional revisions would
[[Page 53804]]
define the negotiation requirements for small purchase procedures and
clarify the limitations on participation of FAHP funding in contract
costs exceeding the established small purchase threshold.
The provisions of subparagraph (a)(3) would be amended to define
contract negotiation requirements for noncompetitive procurement
procedures and to remove references to State alternative or equivalent
procedures prohibited by sec. 174 of the ``2006 Appropriations Act.''
Subparagraph (a)(4) would be removed, as State alternative or
equivalent procedures are now prohibited.
Paragraph (b) would be redesignated as sec. 172.7(b)(2) and revised
to clarify the methods contracting agencies may use to achieve
Disadvantaged Business Enterprise (DBE) participation on engineering
and design related services contracts in accordance with the
requirements of 49 CFR part 26 and the agency's DBE program approved by
FHWA.
Paragraph (b) of the redesignated sec. 172.7 would be amended to
reference and clarify the applicability of various title 23 and 49
procurement related requirements, including the common grant rule
procurement provisions, verification of suspension and debarment
actions, and prevention of conflicts of interest. A requirement to
develop a written code of conduct governing the performance of
contracting agency employees and consultants is proposed to be included
within contracting agency written policies, procedures, and contract
documents to ensure consistency with the conflict of interest
requirements specified in 23 CFR 1.33 and the common grant rule.
Information in paragraph (c) of the existing sec. 172.5 would be
transferred to paragraph (b) of a new sec. 172.9 titled Contracts and
Administration. The proposed sec. 172.9(b) would clarify the permitted
and prohibited methods of payment and requirements associated with the
use of lump sum and cost reimbursement contract payment methods,
consistent with FAR requirements and industry guidance established in
the AASHTO Guide for Consultant Contracting, 2008 Edition.
Section 172.7--Audits
This section would be redesignated as sec. 172.11 and revised. The
title of this section would be changed to Allowable Costs and
Oversight, and would address requirements for the allowability of
contract cost and for providing assurance of compliance with the
Federal cost principles.
Paragraph (a) of the proposed sec. 172.11 would clarify consultant
requirements for accounting for costs, maintaining adequate records,
and applying the FAR cost principles to determine the allowability of
costs.
Paragraph (b) of the proposed sec. 172.11 would clarify the
requirements for the allowability, acceptance, and application of
elements of contract cost in accordance with the common grant rule, FAR
cost principles, and requirements of 23 U.S.C. 112(b)(2). Subparagraph
(b)(1) of the proposed sec. 172.11 would clarify requirements regarding
cognizance, acceptance, and application of consultant indirect cost
rates consistent with applicable Federal requirements and industry
guidance established in the AASHTO Uniform Audit and Accounting Guide,
2010 Edition. Indirect cost rate requirements are proposed to include
subconsultant rates since the Federal cost principles also apply to
subconsultant costs, the qualifications of subconsultants are
considered under a qualifications-based selection, and subconsultants
may perform a significant portion of the contracted services.
Subparagraph (b)(1)(iii) would clarify the requirement for STAs or
other direct grantees to perform an evaluation of a consultant's or
subconsultant's indirect cost rate prior to acceptance and application
of the rate to a contract when the rate has not been established by a
cognizant agency. This subparagraph would permit STAs and other direct
grantees to follow a risk-based oversight process for the evaluation
performed to provide assurance of indirect cost rate compliance with
the FAR cost principles, as described in proposed subparagraph (c)(2).
Information from paragraphs (b) and (c) of the existing sec. 172.7
would be transferred to subparagraph (b)(1) of the proposed sec. 172.11
and revised to remove references to other State procedures prohibited
by sec. 174 of the ``2006 Appropriations Act.'' Subparagraph (b)(2) of
the proposed sec. 172.11 would clarify requirements for establishment
of consultant direct salary or wage rates on contracts to ensure
compliance with qualifications-based selection procurement requirements
and the reasonableness provisions of the FAR cost principles.
Subparagraph (b)(3) of the proposed sec. 172.11 would clarify
requirements for the determination of fixed fees or profit in
accordance with qualifications-based selection procurement requirements
and industry practices. Subparagraph (b)(4) of the proposed sec. 172.11
would clarify the requirements for determining the allowability of
other direct contract costs in accordance with the Federal cost
principles.
Paragraph (c) of the proposed sec. 172.11 would clarify the
responsibilities for contracting agencies to provide assurance of
consultant cost compliance with the FAR cost principles. Subparagraph
(c)(2) would permit STAs and other direct grantees written procedures
to incorporate a risk-based oversight process for providing assurance
of consultant cost compliance with the Federal cost principles on
contracts administered by the grantee or its subgrantees. This
oversight process would consist of risk assessment, mitigation, and
evaluation procedures in support of the STA or other direct grantee
effectively allocating resources to provide reasonable assurance of
consultant compliance with the FAR cost principles.
Information in paragraph (a) of the existing sec. 172.7,
performance of audits, would be transferred to subparagraph (c)(2) of
sec. 172.11 and revised to remove references to other State procedures
prohibited by sec. 174 of the ``2006 Appropriations Act.'' Audits
performed in accordance with generally accepted government audit
standards to test compliance with the FAR cost principles would be
listed as an evaluation procedure under an established risk-based
oversight process.
Subparagraph (c)(3) of the proposed sec. 172.11 would require
consultants to certify to the contracting agency that costs included
within proposals to establish indirect cost rates are allowable in
accordance with the FAR cost principles prior to contracting agency
acceptance of the indirect cost rates for application to contracts.
Implementation of this cost certification requirement was a
recommendation in the aforementioned 2009 OIG Audit Report, and is
based on FHWA Order 4470.1A, FHWA Policy for Contractor Certification
of Costs in Accordance with FAR to Establish Indirect Cost Rates on
Engineering and Design related Services Contracts (http://www.fhwa.dot.gov/legsregs/directives/orders/44701a.htm).
Subparagraph (c)(4) of the proposed sec. 172.11 would require
contracting agencies to pursue administrative, contractual, or legal
remedies as may be appropriate when consultants knowingly charge
unallowable costs to a FAHP funded contract.
Paragraph (d) of the existing sec. 172.7 would be redesignated as
sec. 172.11(d) and revised to ensure consistency of terminology within
the regulation.
[[Page 53805]]
Section 172.9--Approvals
Information in this section would be transferred to a new sec.
172.5, Program Management and Oversight, a redesignated sec. 172.7,
Procurement Methods and Procedures, and a new sec. 172.9, Contracts and
Administration, and revised for clarification to ensure consistency
with applicable Federal laws and regulations.
Paragraph (a) of the existing sec. 172.9 would be redesignated as
sec. 172.5(c) and revised to clarify the requirements for contracting
agency written procedures to ensure compliance with existing Federal
statutes and regulations. A new paragraph (a) of sec. 172.5 would
clarify STA or other direct grantee responsibilities for management of
consultant services programs and oversight of subgrantees. A new
paragraph (b) of sec. 172.5 would clarify program level
responsibilities of subgrantees. A new paragraph (d) of sec. 172.5
would clarify a contracting agency's ability to adopt direct Federal
Government or other contracting procedures and requirements which are
not in conflict with laws and regulations applicable to the FAHP.
Paragraph (e) of sec. 172.5 proposes a 12-month period from the
effective date of a final rule for contracting agencies to issue or
update current written procedures for review and approval by the
appropriate oversight agency.
Information in subparagraph (a)(5) of the existing sec. 172.9 would
be expanded under a new paragraph (d) of a proposed sec. 172.9 titled
Contracts and Administration. This new paragraph (d) would clarify
requirements for consultant monitoring and oversight which include
providing a qualified, full-time, public employee of the contracting
agency in responsible charge of each contract to ensure compliance with
the requirements of 23 U.S.C. 302(a) and evaluating a consultant's
performance on a contract.
Paragraph (a) of the proposed sec. 172.9, Contracts and
Administration, would define the various contract types and clarify the
requirements associated with the use of on-call or indefinite delivery/
indefinite quantity contracts in a manner that is consistent with
Federal laws and regulations.
Paragraph (c) of the proposed sec. 172.9 would clarify the
provisions required to be incorporated into engineering and design
related services contracts when FAHP funding is used to ensure
consistency and compliance with applicable Federal laws and
regulations.
Paragraph (e) of the proposed sec. 172.9 would clarify the
requirements associated with contract modifications to ensure
modifications are warranted, properly scoped, and in compliance with
applicable Federal procurement requirements.
Paragraph (b) of the existing sec. 172.9 would be redesignated as
paragraph (f) of the proposed sec. 172.9. Paragraph (c) of the existing
sec. 172.9 would be removed since the oversight and approval
responsibility of contracts for major projects, as specified in 23
U.S.C. 106(h), should be defined within the stewardship and oversight
agreements that are established between individual STAs and respective
FHWA division offices.
Paragraph (d) of the existing sec. 172.9 would be redesignated as
sec. 172.7(b)(5) and revised to clarify contracting agency
responsibilities associated with participation of FAHP funding for
consultants performing services in a management role. These revisions
would ensure compliance with applicable Federal requirements regarding
oversight, procurement, conflicts of interest, and cost allowability.
For ease of reference, the following distribution table is
provided:
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Old section New section
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172.1..................................... 172.1 Revised.
172.3..................................... 172.3 Revised.
Audit..................................... Revised.
Cognizant agency.......................... Revised.
Competitive negotiation................... Revised.
Contract.................................. Added.
Contracting agencies...................... Revised.
Contract modification..................... Added.
Engineering and design related services... Revised.
Federal cost principles................... Added.
Fixed fee................................. Added.
Management role........................... Added.
One-year applicable accounting period..... Revised.
Scope of work............................. Added.
State transportation agency............... Added.
172.5(a).................................. 172.7(a) Revised.
172.5(a)(1)............................... 172.7(a)(1) Revised.
172.5(a)(2)............................... 172.7(a)(2) Revised.
172.5(a)(3)............................... 172.7(a)(3) Revised.
172.5(a)(4)............................... Removed.
None...................................... 172.7(b) Added.
172.5(b).................................. 172.7(b)(2) Revised.
None...................................... 172.9(a) Added.
172.5(c).................................. 172.9(b)
None...................................... 172.9(c), (d), and (e)
Added.
None...................................... 172.11(a), (b), and (c)
Added.
172.7(a).................................. 172.11(c)(2) Revised.
172.7(b).................................. 172.11(b)(1) Revised.
172.7(c).................................. 172.11(b)(1) Revised.
172.7(d).................................. 172.11(d) Revised.
None...................................... 172.5(a) and (b) Added.
172.9(a).................................. 172.5(c) Revised.
172.9(a)(5)............................... 172.5(c)(11), (12), and
172.9(d) Revised.
None...................................... 172.5(d) and (e) Added.
172.9(b).................................. 172.9(f) Revised.
172.9(c).................................. Removed.
172.9(d).................................. 172.7(b)(5) Revised.
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Rulemaking Analyses and Notices
Executive Order 12866 (Regulatory Planning and Review), Executive Order
13563 (Improving Regulation and Regulatory Review), and DOT Regulatory
Policies and Procedures
The FHWA has determined that this action does not constitute a
significant regulatory action within the meaning of Executive Order
12866 or within the meaning of DOT regulatory policies and procedures.
The proposed amendments clarify and revise requirements for the
procurement, management, and administration of engineering and design
related services using FAHP funding and directly related to a
construction project. Additionally, this action complies with the
principles of Executive Order 13563. The proposed changes to part 172
will provide additional clarification, guidance, and flexibility to
stakeholders implementing these regulations. After evaluating the costs
and benefits of these proposed amendments, the FHWA anticipates that
the economic impact of this rulemaking would be minimal. These changes
are not anticipated to adversely affect, in any material way, any
sector of the economy. In addition, these changes will not create a
serious inconsistency with any other agency's action or materially
alter the budgetary impact of any entitlements, grants, user fees, or
loan programs. It is anticipated that the economic impact of this
rulemaking will be minimal; therefore, a full regulatory evaluation is
not necessary.
Regulatory Flexibility Act
In compliance with the Regulatory Flexibility Act (Pub. L. 96-354,
5 U.S.C. 60l-612), the FHWA has evaluated the effects of this proposed
rule on small entities, such as local governments and businesses. Based
on the evaluation, the FHWA anticipates that this action would not have
a significant economic impact on a substantial number of small
entities. The proposed amendments clarify and revise requirements for
the procurement, management, and administration of engineering and
design related services using FAHP
[[Page 53806]]
funding and directly related to a construction project. After
evaluating the cost of these proposed amendments, as required by
changes in authorizing legislation, other applicable regulations, and
industry practices, the FHWA believes the projected impact upon small
entities which utilize FAHP funding for consultant engineering and
design related services would be negligible. Therefore, I certify that
the proposed action would not have a significant economic impact on a
substantial number of small entities.
Unfunded Mandates Reform Act of 1995
This NPRM would not impose unfunded mandates as defined by the
Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4, March 22, 1995,
109 Stat. 48). The actions proposed in this NPRM would not result in
the expenditure by State, local, and tribal governments, in the
aggregate, or by the private sector, of $143.1 million or more in any
one year (2 U.S.C. 1532). Further, in compliance with the Unfunded
Mandates Reform Act of 1995, FHWA will evaluate any regulatory action
that might be proposed in subsequent stages of the proceeding to assess
the effects on State, local, and Tribal governments and the private
sector. Additionally, the definition of ``Federal Mandate'' in the
Unfunded Mandates Reform Act excludes financial assistance of the type
in which State, local, or tribal governments have authority to adjust
their participation in the program in accordance with changes made in
the program by the Federal Government. The FAHP permits this type of
flexibility.
Executive Order 13132 (Federalism Assessment)
This proposed action has been analyzed in accordance with the
principles and criteria contained in Executive Order 13132, dated
August 4, 1999, and it has been determined that this proposed action
does not have a substantial direct effect or sufficient federalism
implications on States that would limit the policymaking discretion of
the States. Nothing in this proposed rule directly preempts any State
law or regulation or affects the States' ability to discharge
traditional State governmental functions.
Paperwork Reduction Act
Federal agencies must obtain approval from the Office of Management
and Budget for each collection of information they conduct, sponsor, or
require through regulations. This proposed action does not contain a
collection of information requirement for the purpose of the Paperwork
Reduction Act of 1995 (44 U.S.C. 3501, et seq.).
National Environmental Policy Act
The FHWA has analyzed this proposed action for the purpose of the
National Environmental Policy Act (42 U.S.C. 4321 et seq.) and has
determined that this action would not have any effect on the quality of
the human and natural environment because this rule would merely
establish the requirements for the procurement, management, and
administration of engineering and design related services using FAHP
funding and directly related to a construction project.
Executive Order 13175 (Tribal Consultation)
The FHWA has analyzed this proposed action under Executive Order
13175, dated November 6, 2000, and believes that this proposed action
would not have substantial direct effects on one or more Indian Tribes,
would not impose substantial direct compliance costs on Indian Tribal
governments, and would not preempt Tribal law. This proposed rulemaking
merely establishes the requirements for the procurement, management,
and administration of engineering and design related services using
FAHP funding and directly related to a construction project. As such,
this proposed rule would not impose any direct compliance requirements
on Indian Tribal governments nor would it have any economic or other
impacts on the viability of Indian Tribes. Therefore, a Tribal summary
impact statement is not required.
Executive Order 13211 (Energy Effects)
The FHWA has analyzed this proposed action under Executive Order
13211, Actions Concerning Regulations that Significantly Affect Energy
Supply, Distribution, or Use. We have determined that this proposed
action would not be a significant energy action under that order
because any action contemplated would not be likely to have a
significant adverse effect on the supply, distribution, or use of
energy. Therefore, the FHWA certifies that a Statement of Energy
Effects under Executive Order 13211 is not required.
Executive Order 12630 (Taking of Private Property)
The FHWA has analyzed this proposed rule and has determined that
this proposed action would not affect a taking of private property or
otherwise have taking implications under Executive Order 12630,
Governmental Actions and Interference with Constitutionally Protected
Property Rights.
Executive Order 12988 (Civil Justice Reform)
This action meets applicable standards in sections 3(a) and 3(b)(2)
of Executive Order 12988, Civil Justice Reform, to minimize litigation,
eliminate ambiguity, and reduce burden.
Executive Order 13045 (Protection of Children)
The FHWA has analyzed this proposed action under Executive Order
13045, Protection of Children from Environmental Health Risks and
Safety Risks, and certifies that this proposed action would not cause
an environmental risk to health or safety that may disproportionately
affect children.
Regulation Identification Number
A regulation identification number (RIN) is assigned to each
regulatory action listed in the Unified Agenda of Federal Regulations.
The Regulatory Information Service Center publishes the Unified Agenda
in April and October of each year. The RIN number contained in the
heading of this document can be used to cross-reference this action
with the Unified Agenda.
List of Subjects in 23 CFR Part 172
Government procurement, Grant programs-transportation, Highways and
roads.
Issued on: August 24, 2012.
Victor M. Mendez,
Administrator.
In consideration of the foregoing, the FHWA proposes to amend part
172 of title 23, Code of Federal Regulations, as follows:
title 23--highways
1. Revise Part 172 to read as follows:
PART 172-PROCUREMENT, MANAGEMENT, AND ADMINISTRATION OF ENGINEERING
AND DESIGN RELATED SERVICES
Sec.
172.1 Purpose and applicability.
172.3 Definitions.
172.5 Program management and oversight.
172.7 Procurement methods and procedures.
172.9 Contracts and administration.
172.11 Allowable costs and oversight.
Authority: 23 U.S.C. 106, 112, 114(a), 302, 315, and 402; 40
U.S.C. 1101 et seq.; 48 CFR part 31; 49 CFR 1.48(b) and part 18.
[[Page 53807]]
Sec. 172.1 Purpose and applicability.
This part prescribes the requirements for the procurement,
management, and administration of engineering and design related
services under 23 U.S.C. 112 and as supplemented by the common grant
rule (as specified in 49 CFR part 18). The requirements of the common
grant rule shall apply except where inconsistent with the requirements
of this part and other laws and regulations applicable to the Federal-
aid highway program (FAHP). The requirements herein apply to federally
funded contracts for engineering and design related services for
highway construction projects subject to the provisions of 23 U.S.C.
112(a) and are issued to ensure that a qualified consultant is obtained
through an equitable qualifications-based selection procurement
process, that prescribed work is properly accomplished in a timely
manner, and at fair and reasonable cost.
State transportation agencies (STAs) (or other direct grantees)
shall ensure that subgrantees comply with the requirements of this part
and the common grant rule.
Federally funded contracts for services not defined as engineering
and design related, or for services not in furtherance of a highway
construction project or activity subject to the provisions of 23 U.S.C.
112(a), are not subject to the requirements of this part and shall be
procured and administered under the requirements of the common grant
rule and procedures applicable to such activities.
Sec. 172.3 Definitions.
As used in this part:
Audit means a formal examination, in accordance with professional
standards, of a consultant's accounting systems, incurred cost records,
and other cost presentations to test the reasonableness, allowability,
and allocability of costs in accordance with the Federal cost
principles (as specified in 48 CFR part 31).
Cognizant agency means any agency described below that has
performed an audit in accordance with generally accepted government
auditing standards to test compliance with the requirements of the
Federal cost principles (as specified in 48 CFR part 31) and issued an
audit report of the consultant's indirect cost rate, or any described
agency that has conducted a review of an audit report and related
workpapers prepared by a certified public accountant and issued a
letter of concurrence with the audited indirect cost rate(s). A
cognizant agency may be any of the following:
(1) Federal agency;
(2) State transportation agency of the State where the consultant's
accounting and financial records are located; or
(3) State transportation agency to whom cognizance for the
particular indirect cost rate(s) of a consulting firm has been
delegated or transferred in writing by the State transportation agency
identified in subparagraph (2) of this definition.
Competitive negotiation means qualifications-based selection
procurement procedures complying with 40 U.S.C. 1101-1104, commonly
referred to as the Brooks Act.
Consultant means the individual or firm providing engineering and
design related services as a party to a contract.
Contract means a procurement contract or agreement between a
contracting agency and consultant under a FAHP grant or subgrant and
includes any procurement subcontract under a contract.
Contracting agencies means State transportation agency or a
procuring agency of the State acting in conjunction with and at the
direction of the State transportation agency, other direct grantees,
and all subgrantees that are responsible for the procurement,
management, and administration of engineering and design related
services.
Contract modification means an agreement modifying the terms or
conditions of an original or existing contract.
Engineering and design related services means:
(1) Program management, construction management, feasibility
studies, preliminary engineering, design engineering, surveying,
mapping, or architectural related services with respect to a highway
construction project subject to 23 U.S.C. 112(a) (as defined in 23
U.S.C. 112(b)(2)(A)); and
(2) Professional services of an architectural or engineering
nature, as defined by State law, which are required to or may logically
or justifiably be performed or approved by a person licensed,
registered, or certified to provide the services (as defined in 40
U.S.C. 1102(2)).
Federal cost principles means the cost principles contained in 48
CFR part 31 of the Federal Acquisition Regulations for determination of
allowable costs of commercial, for-profit entities (as specified in 49
CFR 18.22(b)).
Fixed fee means a dollar amount established to cover the
consultant's profit and business expenses not allocable to overhead.
Management role means acting on the contracting agency's behalf,
subject to review and oversight by agency officials, to perform
management services such as a program or project administration role
typically performed by the contracting agency and necessary to fulfill
the duties imposed by title 23 U.S.C., other Federal and State laws,
and applicable regulations.
One-year applicable accounting period means the annual accounting
period for which financial statements are regularly prepared by the
consultant.
Scope of work means all services, work activities, and actions
required of the consultant by the obligations of the contract.
State transportation agency (STA) means that department or agency
maintained in conformity with 23 U.S.C. 302 and charged under State law
with the responsibility for highway construction (as defined in 23
U.S.C. 101); and that is authorized by the laws of the State to make
final decisions in all matters relating to, and to enter into, all
contracts and agreements for projects and activities to fulfill the
duties imposed by title 23 United States Code, title 23 Code of Federal
Regulations, and other applicable Federal laws and regulations.
Sec. 172.5 Program management and oversight.
(a) STA responsibilities. STAs (or other direct grantees) shall
develop and sustain organizational capacity and provide the resources
necessary for the procurement, management, and administration of
engineering and design related consultant services, reimbursed in whole
or in part with FAHP funding (as specified in 23 U.S.C. 302(a)).
Responsibilities shall include the following:
(1) Preparing and maintaining written policies and procedures for
the procurement, management, and administration of engineering and
design related consultant services in accordance with paragraph (c) of
this section;
(2) Establishing a procedure for estimating staffing, resources,
and costs of needed consultant services and associated agency oversight
in support of project authorization requests submitted to FHWA for
approval (as specified in 23 CFR 630.106);
(3) Procuring, managing, and administering engineering and design
related consultant services in accordance with applicable Federal and
State laws, regulations, and approved policies and procedures (as
specified in 23 CFR 1.9(a)); and
(4) Administering subgrants in accordance with State laws and
procedures (as specified in 49 CFR 18.37) and the requirements of 23
U.S.C.
[[Page 53808]]
106(g)(4)). This shall include providing oversight of the procurement,
management, and administration of engineering and design related
consultant services by subgrantees to assure compliance with applicable
Federal and State laws and regulations. Nothing in this part shall be
taken as relieving the STA of its responsibility under laws and
regulations applicable to the FAHP for the work performed under any
consultant agreement or contract entered into by a subgrantee.
(b) Subgrantee responsibilities. Subgrantees shall develop and
sustain organizational capacity and provide the resources necessary for
the procurement, management, and administration of engineering and
design related consultant services, reimbursed in whole or in part with
FAHP funding (as specified in 23 U.S.C. 106(g)(4)(A)). Responsibilities
shall include the following:
(1) Adopting written policies and procedures prescribed by the
awarding STA (or other direct grantee) for the procurement, management,
and administration of engineering and design related consultant
services in accordance with applicable Federal and State laws and
regulations; or when not prescribed, shall include:
(i) Preparing and maintaining its own written policies and
procedures in accordance with paragraph (c) of this section; or
(ii) Submitting documentation associated with each procurement and
subsequent contract to the awarding STA (or other direct grantee) for
review to assess compliance with applicable Federal and State laws,
regulations, and the requirements of this part;
(2) Procuring, managing, and administering engineering and design
related consultant services in accordance with applicable Federal and
State laws, regulations, and approved policies and procedures (as
specified in 23 CFR 1.9(a)).
(c) Written policies and procedures. The contracting agency shall
prepare and maintain written policies and procedures for the
procurement, management, and administration of engineering and design
related consultant services. The STA (or other direct grantee) written
policies and procedures and all revisions shall be approved by the
FHWA. Written policies and procedures prepared by subgrantees shall be
approved by the awarding STA (or other direct grantee). Any deviations
from approved policies and procedures shall require review by FHWA, or
the direct grantee as appropriate, to assess compliance with applicable
requirements. These policies and procedures shall, as appropriate for
each method of procurement a contracting agency proposes to use,
address the following items to assure compliance with Federal and State
laws, regulations, and the requirements of this part:
(1) Preparing a scope of work and evaluation factors for the
ranking/selection of a consultant;
(2) Soliciting proposals from prospective consultants;
(3) Preventing, identifying, and mitigating conflicts of interest
for employees of both the contracting agency and consultants (as
specified in 23 CFR 1.33 and the requirements of this part).
(4) Verifying suspension and debarment actions and eligibility of
consultants (as specified in 49 CFR 18.35 and 2 CFR part 180);
(5) Evaluating proposals and the ranking/selection of a consultant;
(6) Preparing an independent agency estimate for use in negotiation
with the selected consultant;
(7) Selecting appropriate contract type, payment method(s), and
terms and incorporating required contract provisions, assurances, and
certifications in accordance with Sec. 172.9;
(8) Negotiating a contract with the selected consultant;
(9) Establishing elements of contract costs, accepting indirect
cost rate(s) for application to contracts, and assuring consultant
compliance with the Federal cost principles in accordance with Sec.
172.11;
(10) Assuring consultant costs billed are allowable in accordance
with the Federal cost principles and consistent with the contract terms
as well as the acceptability and progress of the consultant's work;
(11) Monitoring the consultant's work and compliance with the
terms, conditions, and specifications of the contract;
(12) Preparing a consultant's performance evaluation when services
are completed and using such performance data in future evaluation and
ranking of consultant to provide similar services;
(13) Closing-out a contract;
(14) Retaining adequate programmatic and contract records (as
specified in 49 CFR 18.42 and the requirements of this part);
(15) Determining the extent to which the consultant, which is
responsible for the professional quality, technical accuracy, and
coordination of services, may be reasonably liable for costs resulting
from errors and omissions in the work furnished under its contract;
(16) Assessing administrative, contractual, or legal remedies in
instances where consultants violate or breach contract terms and
conditions, and providing for such sanctions and penalties as may be
appropriate; and
(17) Resolving disputes in the procurement, management, and
administration of engineering and design related consultant services.
(d) A contracting agency may formally adopt, by statute or within
approved written policies and procedures as specified in paragraph (c)
of this section, any direct Federal Government or other contracting
regulation, standard, or procedure provided its application does not
conflict with the provisions of 23 U.S.C. 112, the requirements of this
part, and other laws and regulations applicable to the FAHP.
(e) Notwithstanding the foregoing, a contracting agency shall have
a reasonable period of time, not to exceed 12 months from the effective
date of this rule unless an extension is granted for unique or
extenuating circumstances, to issue or update current written policies
and procedures for review and approval in accordance with paragraph (c)
of this section and consistent with the requirements of this part.
Sec. 172.7 Procurement methods and procedures.
(a) Procurement methods. The procurement of engineering and design
related services funded by FAHP funds and directly related to a highway
construction project subject to the provisions of 23 U.S.C. 112(a)
shall be conducted in accordance with one of three methods: Competitive
negotiation (qualifications-based selection) procurement, small
purchase procurement for small dollar value contracts, and
noncompetitive procurement where specific conditions exist allowing
solicitation and negotiation to take place with a single consultant.
(1) Competitive negotiation (qualifications-based selection).
Except as provided in (2) and (3) below, contracting agencies shall use
the competitive negotiation method for the procurement of engineering
and design related services when FAHP funds are involved in the
contract (as specified in 23 U.S.C. 112(b)(2)(A)). The solicitation,
evaluation, ranking, selection, and negotiation shall comply with the
qualifications-based selection procurement procedures for architectural
and engineering services codified under 40 U.S.C. 1101-1104, commonly
referred to as the Brooks Act. In accordance with the requirements of
the Brooks Act, the following
[[Page 53809]]
procedures shall apply to the competitive negotiation procurement
method:
(i) Solicitation. The solicitation process shall be by public
announcement, public advertisement, or any other public forum or method
that assures qualified in-State and out-of-State consultants are given
a fair opportunity to be considered for award of the contract.
Procurement procedures may involve a single step process with issuance
of a request for proposal (RFP) to all interested consultants or a
multiphase process with issuance of a request for statements or letters
of interest or qualifications (RFQ) whereby responding consultants are
ranked based on qualifications and request for proposals are then
provided to three or more of the most highly qualified consultants.
Minimum qualifications of consultants to perform services under general
work categories or areas of expertise may also be assessed through a
prequalification process whereby statements of qualifications are
submitted on an annual basis. Regardless of any process utilized for
prequalification of consultants or for an initial assessment of a
consultant's qualifications under an RFQ, a RFP specific to the
project, task, or service is required for evaluation of a consultant's
specific technical approach and qualifications.
(ii) Request for proposal (RFP). The RFP shall provide all
information and requirements necessary for interested consultants to
provide a response to the RFP and compete for the solicited services.
The RFP shall:
(A) Provide a clear, accurate, and detailed description of the
scope of work, technical requirements, and qualifications of
consultants necessary for the services to be rendered. The scope of
work should detail the purpose and description of the project, services
to be performed, deliverables to be provided, estimated schedule for
performance of the work, and applicable standards, specifications, and
policies;
(B) Identify the requirements for any discussions that may be
conducted with three (3) or more of the most highly qualified
consultants following submission and evaluation of proposals;
(C) Identify evaluation factors including their relative weight of
importance in accordance with subparagraph (a)(1)(iii) of this section;
(D) Specify the contract type and method(s) of payment to be
utilized in accordance with Sec. 172.9;
(E) Identify any special provisions or contract requirements
associated with the solicited services;
(F) Require that submission of any requested cost proposals or
elements of cost be in a concealed format and separate from technical/
qualifications proposals as these shall not be considered in the
evaluation, ranking, and selection phase; and
(G) Provide a schedule of key dates for the procurement process and
establish a submittal deadline for responses to the RFP which provides
sufficient time for interested consultants to receive notice, prepare,
and submit a proposal, which except in unusual circumstances shall be
not less than 14 days from the date of issuance of the RFP.
(iii) Evaluation factors. (A) Criteria used for evaluation,
ranking, and selection of consultants to perform engineering and design
related services must assess the demonstrated competence and
qualifications for the type of professional services solicited. These
qualifications-based factors may include, but are not limited to,
technical approach (e.g., project understanding, innovative concepts or
alternatives, quality control procedures), work experience, specialized
expertise, professional licensure, staff capabilities, workload
capacity, and past performance.
(B) Price shall not be used as a factor in the evaluation, ranking,
and selection phase. All price or cost related items which include, but
are not limited to, cost proposals, direct salaries/wage rates,
indirect cost rates, and other direct costs are prohibited from being
used as evaluation criteria.
(C) In-State or local preference shall not be used as a factor in
the evaluation, ranking, and selection phase. State licensing laws are
not preempted by this provision and professional licensure within a
jurisdiction may be established as a requirement which attests to the
minimum qualifications and competence of a consultant to perform the
solicited services.
(D) The following nonqualifications-based evaluation criteria are
permitted under the specified conditions and provided the combined
total of these criteria do not exceed a nominal value of ten percent of
the total evaluation criteria to maintain the integrity of a
qualifications-based selection:
(1) A local presence may be used as a nominal evaluation factor
where appropriate. This criteria shall not be based on political or
jurisdictional boundaries and may be applied on a project-by-project
basis for contracts where a need has been established for a consultant
to provide a local presence, a local presence will add value to the
quality and efficiency of the project, and application of this criteria
leaves an appropriate number of qualified consultants, given the nature
and size of the project. If a consultant outside of the locality area
indicates as part of a proposal that it will satisfy the criteria in
some manner, such as establishing a local project office, that
commitment shall be considered to have satisfied the local presence
criteria.
(2) The participation of qualified and certified Disadvantaged
Business Enterprise (DBE) subconsultants may be used as a nominal
evaluation criteria where appropriate in accordance with 49 CFR part 26
and a contracting agency's FHWA-approved DBE program.
(iv) Evaluation, ranking, and selection. (A) Consultant proposals
shall be evaluated by the contracting agency based on the criteria
established and published within the public solicitation.
(B) While the contract will be with the prime consultant, proposal
evaluations shall consider the qualifications of the prime consultant
and any subconsultants identified within the proposal with respect to
the scope of work and established criteria.
(C) Following submission and evaluation of proposals, the
contracting agency shall conduct interviews or other types of
discussions determined appropriate for the project with at least three
of the most highly qualified consultants to clarify the technical
approach, qualifications, and capabilities provided in response to the
RFP. Discussion requirements shall be specified within the RFP and
should be based on the size and complexity of the project as defined in
contracting agency written policies and procedures (as specified in
Sec. 172.5(c)). Discussions may be written, by telephone, video
conference, or by oral presentation/interview. Discussions following
proposal submission are not required provided proposals contain
sufficient information for evaluation of technical approach and
qualifications to perform the specific project, task, or service with
respect to established criteria.
(D) From the proposal evaluation and any subsequent discussions
which have been conducted, the contracting agency shall rank, in order
of preference, at least three consultants determined most highly
qualified to perform the solicited services based on the established
and published criteria.
(E) Notification must be provided to responding consultants of the
final ranking of the three most highly qualified consultants.
(F) The contracting agency shall retain acceptable documentation of
the solicitation, proposal, evaluation, and selection of the consultant
in
[[Page 53810]]
accordance with the provisions of 49 CFR 18.42.
(v) Negotiation. (A) Independent estimate. Prior to receipt or
review of the most highly qualified consultant's cost proposal, the
contracting agency shall prepare a detailed independent estimate with
an appropriate breakdown of the work or labor hours, types or
classifications of labor required, other direct costs, and consultant's
fixed fee for the defined scope of work. The independent estimate shall
serve as the basis for negotiation and ensuring the consultant services
are obtained at a fair and reasonable cost.
(B) Elements of contract costs (e.g., indirect cost rates, direct
salary or wage rates, fixed fee, and other direct costs) shall be
established separately in accordance with Sec. 172.11.
(C) If concealed cost proposals were submitted in conjunction with
technical/qualifications proposals, only the cost proposal of the
consultant with which negotiations are initiated may be considered.
Concealed cost proposals of consultants with which negotiations are not
initiated should be returned to the respective consultant due to the
confidential nature of this data (as specified in 23 U.S.C.
112(b)(2)(E)).
(D) The contracting agency shall retain documentation of
negotiation activities and resources used in the analysis of costs to
establish elements of the contract in accordance with the provisions of
49 CFR 18.42. This documentation shall include the consultant cost
certification and documentation supporting the acceptance of the
indirect cost rate to be applied to the contract (as specified in Sec.
172.11(c)).
(2) Small purchases. The small purchase method involves procurement
of engineering and design related services where an adequate number of
qualified sources are reviewed and the total contract costs do not
exceed an established simplified acquisition threshold. Contracting
agencies may use the State's small purchase procedures which reflect
applicable State laws and regulations for the procurement of
engineering and design related services provided the total contract
costs do not exceed the Federal simplified acquisition threshold (as
specified in 48 CFR 2.101). When a lower threshold for use of small
purchase procedures is established in State law, regulation, or policy,
the lower threshold shall apply to the use of FAHP funds. The following
additional requirements shall apply to the small purchase procurement
method:
(i) The scope of work, project phases, and contract requirements
shall not be broken down into smaller components merely to permit the
use of small purchase procedures.
(ii) A minimum of three consultants are required to satisfy the
adequate number of qualified sources reviewed.
(iii) Contract costs may be negotiated in accordance with State
small purchase procedures; however, the allowability of costs shall be
determined in accordance with the Federal cost principles.
(iv) The full amount of any contract modification or amendment that
would cause the total contract amount to exceed the established
simplified acquisition threshold would be ineligible for Federal-aid
funding. The FHWA may withdraw all Federal-aid from a contract if it is
modified or amended above the applicable established simplified
acquisition threshold.
(3) Noncompetitive. The noncompetitive method involves procurement
of engineering and design related services when it is not feasible to
award the contract using competitive negotiation or small purchase
procurement methods. The following requirements shall apply to the
noncompetitive procurement method:
(i) Contracting agencies may use their own noncompetitive
procedures which reflect applicable State and local laws and
regulations and conform to applicable Federal requirements.
(ii) Contracting agencies shall establish a process to determine
when noncompetitive procedures will be used and shall submit
justification to, and receive approval from, the FHWA before using this
form of contracting.
(iii) Circumstances under which a contract may be awarded by
noncompetitive procedures are limited to the following:
(A) The service is available only from a single source;
(B) There is an emergency which will not permit the time necessary
to conduct competitive negotiations; or
(C) After solicitation of a number of sources, competition is
determined to be inadequate.
(iv) Contract costs may be negotiated in accordance with
contracting agency noncompetitive procedures; however, the allowability
of costs shall be determined in accordance with the Federal cost
principles.
(b) Additional procurement requirements. (1) Common grant rule. (i)
STAs (or other direct grantees) and their subgrantees must comply with
procurement requirements established in State and local laws,
regulations, policies, and procedures which are not addressed by or in
conflict with applicable Federal laws and regulations (as specified in
49 CFR 18.36).
(ii) When State and local procurement laws, regulations, policies,
or procedures are in conflict with applicable Federal laws and
regulations, contracting agencies must comply with Federal requirements
to be eligible for Federal-aid reimbursement of the associated costs of
the services incurred following FHWA authorization (as specified in 49
CFR 18.4).
(2) Disadvantaged Business Enterprise (DBE) program. (i)
Contracting agencies shall give consideration to DBE consultants in the
procurement of engineering and design related service contracts subject
to 23 U.S.C. 112(b)(2) in accordance with 49 CFR part 26. When DBE
program participation goals cannot be met through race-neutral
measures, additional DBE participation on engineering and design
related services contracts may be achieved in accordance with a
contracting agency's FHWA approved DBE program through either:
(A) Use of an evaluation criterion in the qualifications-based
selection of consultants (as specified in Sec. 172.7(a)(1)(iii)(D));
or
(B) Establishment of a contract participation goal.
(ii) The use of quotas or exclusive set-asides for DBE consultants
is prohibited (as specified in 49 CFR 26.43).
(3) Suspension and debarment. Contracting agencies must verify
suspension and debarment actions and eligibility status of consultants
and subconsultants prior to entering into an agreement or contract in
accordance with 49 CFR 18.35 and 2 CFR part 180.
(4) Conflicts of interest. (i) Contracting agencies shall maintain
a written code of standards of conduct governing the performance of
their employees engaged in the award and administration of engineering
and design related services contracts under this part and governing the
conduct and roles of consultants in the performance of services under
such contracts to prevent, identify, and mitigate conflicts of interest
in accordance with 23 CFR 1.33 and the provisions of this subparagraph.
(ii) No employee, officer, or agent of the contracting agency shall
participate in selection, or in the award or administration of a
contract supported by Federal-aid funds if a conflict of interest, real
or apparent, would be involved. Such a conflict arises when:
(A) The employee, officer, or agent;
(B) Any member of his or her immediate family;
(C) His or her partner; or
(D) An organization which employs or is about to employ, any of the
above, has
[[Page 53811]]
a financial or other interest in the consultant selected for award.
(iii) The contracting agency's officers, employees, or agents shall
neither solicit nor accept gratuities, favors, or anything of monetary
value from consultants, potential consultants, or parties to
subagreements. Contracting agencies may establish dollar thresholds
where the financial interest is not substantial or the gift is an
unsolicited item of nominal value.
(iv) Contracting agencies may provide additional prohibitions
relative to real, apparent, or potential conflicts of interest.
(v) To the extent permitted by State or local law or regulations,
such standards of conduct shall provide for penalties, sanctions, or
other disciplinary actions for violations of such standards by the
contracting agency's officers, employees, or agents, or by consultants
or their agents.
(5) Consultant services in management roles. (i) When FAHP funds
participate in the contract, the contracting agency shall receive
approval from the FHWA, or the direct grantee as appropriate, before
utilizing a consultant to act in a management role for the contracting
agency, unless an alternate approval procedure has been approved. Use
of consultants in management roles does not relieve the contracting
agency of responsibilities associated with the use of FAHP funds (as
specified in 23 U.S.C. 302(a) and 23 U.S.C. 106(g)(4)) and should be
limited to large projects or circumstances where unusual cost or time
constraints exist, unique technical or managerial expertise is
required, and/or an increase in contracting agency staff is not a
viable option.
(ii) Management roles may include, but are not limited to,
providing oversight of an element of a highway program, function, or
service on behalf of the contracting agency or may involve managing or
providing oversight of a project, series of projects, and/or the work
of other consultants and contractors on behalf of the contracting
agency. Contracting agency written policies and procedures (as
specified in Sec. 172.5(c)) may further define allowable management
roles and services a consultant may provide, specific approval
responsibilities, and associated controls necessary to ensure
compliance with Federal requirements.
(iii) Use of consultants in management roles requires appropriate
conflicts of interest standards as specified in subparagraph (b)(4) of
this section and adequate contracting agency staffing to administer and
monitor the management consultant contract (as specified in Sec.
172.9(d)). A consultant serving in a management role shall be precluded
from providing services on projects, activities, or contracts under its
oversight.
(iv) FAHP funds shall not participate in the costs of a consultant
serving in a management role where the consultant was not procured in
accordance with Federal and State requirements (as specified in 23 CFR
1.9(a)).
(v) Where benefiting more than a single Federal-aid project,
allocability of consultant contract costs for services related to a
management role shall be distributed consistent with the cost
principles applicable to the contracting agency (as specified in 49 CFR
18.22(b)).
Sec. 172.9 Contracts and administration.
(a) Contract types. The types of contracts which shall be used are:
(1) Project-specific. A contract between the contracting agency and
consultant for the performance of services and defined scope of work
related to a specific project or projects.
(2) Multiphase. A project-specific contract where the defined scope
of work is divided into phases which may be negotiated and authorized
individually as the project progresses.
(3) On-call or indefinite delivery/indefinite quantity (IDIQ). A
contract for the performance of services for a number of projects,
under task or work orders issued on an as-needed or on-call basis, for
an established contract period. The procurement of services to be
performed under on-call or IDIQ contracts must follow either
competitive negotiation or small purchase procurement procedures (as
specified in Sec. 172.7). The solicitation and contract provisions
must address the following requirements:
(i) Specify a reasonable maximum length of contract period,
including the number and period of any allowable contract extensions,
which shall not exceed 5 years;
(ii) Specify a maximum total contract dollar amount which may be
awarded under a contract;
(iii) Include a statement of work, requirements, specifications, or
other description to define the general scope, complexity, and
professional nature of the services; and
(iv) If multiple consultants are to be selected and multiple on-
call or IDIQ contracts awarded through a single solicitation for
specific services:
(A) Identify the number of consultants that may be selected or
contracts that may be awarded from the solicitation; and
(B) Specify the procedures the contracting agency will use in
competing and awarding task or work orders among the selected,
qualified consultants. Task or work orders shall not be competed and
awarded among the selected, qualified consultants on the basis of costs
under on-call or IDIQ contracts for services procured with competitive
negotiation procedures. Under competitive negotiation procurement, each
specific task or work order shall be awarded to the selected, qualified
consultants:
(1) Through an additional qualifications-based selection procedure;
or
(2) On a regional basis whereby the State is divided into regions
and consultants are selected to provide on-call or IDIQ services for an
assigned region(s) identified within the solicitation.
(b) Payment methods. (1) The method of payment to the consultant
shall be set forth in the original solicitation, contract, and in any
contract modification thereto. The methods of payment shall be: Lump
sum, cost plus fixed fee, cost per unit of work, or specific rates of
compensation. A single contract may contain different payment methods
as appropriate for compensation of different elements of work.
(2) The cost plus a percentage of cost and percentage of
construction cost methods of payment shall not be used.
(3) The lump sum payment method shall only be used when the
contracting agency has established the extent, scope, complexity,
character, and duration of the work to be required to a degree that
fair and reasonable compensation, including a fixed fee, can be
determined at the time of negotiation.
(4) When the method of payment is other than lump sum, the contract
shall specify a maximum amount payable which shall not be exceeded
unless adjusted by a contract modification.
(5) The specific rates of compensation payment method provides for
reimbursement on the basis of direct labor hours at specified fixed
hourly rates (including direct labor costs, indirect costs, and fee or
profit) plus any other direct expenses or costs, subject to an
agreement maximum amount. This payment method shall only be used when
it is not possible at the time of procurement to estimate the extent or
duration of the work or to estimate costs with any reasonable degree of
accuracy and should be limited to contracts or components of contracts
for specialized or support type services where the consultant is not in
direct control of the number of hours worked, such as construction
engineering and inspection. Use of this payment method
[[Page 53812]]
requires contracting agency management and monitoring of the
consultant's level of effort and classification of employees used to
perform the contracted services.
(6) Contracting agencies may withhold retainage from payments in
accordance with prompt pay requirements (as specified in 49 CFR 26.29).
When retainage is used, the terms and conditions of the contract must
clearly define agency requirements, including periodic reduction in
retention and the conditions for release of retention.
(c) Contract provisions. Contracts must include the following
provisions:
(1) Administrative, contractual, or legal remedies in instances
where consultants violate or breach contract terms and conditions, and
provide for such sanctions and penalties as may be appropriate (all
contracts and subcontracts);
(2) Termination for cause and for convenience by the contracting
agency including the manner by which it will be effected and the basis
for settlement (all contracts and subcontracts in excess of $10,000);
(3) Notice of contracting agency requirements and regulations
pertaining to reporting (all contracts and subcontracts);
(4) Contracting agency requirements and regulations pertaining to
copyrights and rights in data (all contracts and subcontracts);
(5) Access by grantee, the subgrantee, the FHWA, the U.S.
Department of Transportation's Inspector General, the Comptroller
General of the United States, or any of their duly authorized
representatives to any books, documents, papers, and records of the
consultant which are directly pertinent to that specific contract for
the purpose of making audit, examination, excerpts, and transcriptions
(all contracts and subcontracts);
(6) Retention of all required records for not less than 3 years
after the contracting agency makes final payment and all other pending
matters are closed (all contracts and subcontracts);
(7) Lobbying certification and disclosure (as specified in 49 CFR
part 20) (all contracts and subcontracts exceeding $100,000);
(8) Standard DOT Title VI Assurances (DOT Order 1050.2) (all
contracts and subcontracts);
(9) Disadvantaged Business Enterprise (DBE) assurance (as specified
in 49 CFR 26.13(b)) (all contracts and subcontracts);
(10) Prompt pay requirements (as specified in 49 CFR 26.29) (all
contracts and subcontracts);
(11) Determination of allowable costs in accordance with the
Federal cost principles (all contracts and subcontracts);
(12) Contracting agency requirements pertaining to consultant
errors and omissions (all contracts and subcontracts); and
(13) Contracting agency requirements pertaining to conflicts of
interest (as specified in 23 CFR 1.33 and the requirements of this
part) (all contracts and subcontracts).
(d) Contract administration and monitoring. (1) Responsible charge.
A full-time, public employee of the contracting agency qualified to
ensure that the work delivered under contract is complete, accurate,
and consistent with the terms, conditions, and specifications of the
contract shall be in responsible charge of each contract or project.
While an independent consultant may be procured to serve in a program
or project management role (as specified in Sec. 172.7(b)(5)) or to
provide technical assistance in review and acceptance of engineering
and design related services performed and products developed by other
consultants, a full-time, public employee must be designated by the
contracting agency as being in responsible charge. A public employee
may serve in responsible charge of multiple projects and contracting
agencies may use multiple public employees to fulfill monitoring
responsibilities. The public employee's responsibilities shall include:
(i) Administering inherently governmental activities including, but
not limited to, contract negotiation, contract payment, and evaluation
of compliance, performance, and quality of services provided by
consultant;
(ii) Being familiar with the contract requirements, scope of
services to be performed, and products to be produced by the
consultant;
(iii) Being familiar with the qualifications and responsibilities
of the consultant's staff and evaluating any requested changes in key
personnel;
(iv) Scheduling and attending progress and project review meetings,
commensurate with the magnitude, complexity, and type of work, to
ensure the work is progressing in accordance with established scope of
work and schedule milestones;
(v) Assuring consultant costs billed are allowable in accordance
with the Federal cost principles and consistent with the contract terms
as well as the acceptability and progress of the consultant's work;
(vi) Evaluating and participating in decisions for contract
modifications; and
(vii) Documenting contract monitoring activities and maintaining
adequate contract records (as specified in 49 CFR 18.42).
(2) Performance evaluation. The contracting agency shall prepare a
final evaluation report of the consultant's performance on a contract.
The report should include, but not be limited to, an evaluation of the
timely completion of work, adherence to contract scope and budget, and
quality of the work. The consultant shall be provided a copy of the
report and shall be provided an opportunity to provide written comments
to be attached to the report. Additional interim performance
evaluations should be considered based on the scope, complexity, and
size of the contract as a means to provide feedback, foster
communication, and achieve desired changes or improvements. Completed
performance evaluations should be archived for consideration as an
element of past performance in the future evaluation of the consultant
to provide similar services.
(e) Contract modification. (1) Contract modifications are required
for any amendments to the terms of the existing contract that change
the cost of the contract; significantly change the character, scope,
complexity, or duration of the work; or significantly change the
conditions under which the work is required to be performed.
(2) A contract modification shall clearly define and document the
changes made to the contract, establish the method of payment for any
adjustments in contract costs, and be in compliance with the terms and
conditions of the contract and original procurement.
(3) Contract modifications shall be negotiated following the same
procedures as the negotiation of the original contract.
(4) Only the type of services and work included within the scope of
services of the original solicitation from which a qualifications-based
selection was made may be added to a contract. Services outside of the
scope of work established in the original request for proposal must be
procured under a new solicitation, performed by contracting agency
staff, or performed under a different contract established for the
services desired.
(5) Overruns in the costs of the work shall not automatically
warrant an increase in the fixed fee portion of a cost plus fixed fee
reimbursed contract. Permitted changes to the scope of work or duration
may warrant consideration
[[Page 53813]]
for adjustment of the fixed fee portion of cost plus fixed fee or lump
sum reimbursed contracts.
(f) Contracts. Contracts and contract settlements involving
engineering and design related services for projects that have not been
assumed by the State under 23 U.S.C. 106(c), that do not fall under the
small purchase procedures (as specified in Sec. 172.7(a)(2)), shall be
subject to the prior approval by FHWA, unless an alternate approval
procedure has been approved by FHWA.
Sec. 172.11 Allowable costs and oversight.
(a) Allowable costs. (1) Costs or prices based on estimated costs
for contracts shall be eligible for Federal-aid reimbursement only to
the extent that costs incurred or cost estimates included in negotiated
prices are allowable in accordance with the Federal cost principles.
(2) Consultants shall be responsible for accounting for costs
appropriately and for maintaining records, including supporting
documentation, adequate to demonstrate that costs claimed have been
incurred, are allocable to the contract, and comply with Federal cost
principles.
(b) Elements of contract costs. The following requirements shall
apply to the establishment of the specified elements of contract costs:
(1) Indirect cost rates. (i) Indirect cost rates shall be updated
on an annual basis in accordance with the consultant's annual
accounting period and in compliance with the Federal cost principles.
(ii) Contracting agencies shall accept a consultant's or
subconsultant's indirect cost rate(s) established for a 1-year
applicable accounting period by a cognizant agency that has:
(A) Performed an audit in accordance with generally accepted
government auditing standards to test compliance with the requirements
of the Federal cost principles and issued an audit report of the
consultant's indirect cost rate(s); or
(B) Conducted a review of an audit report and related workpapers
prepared by a certified public accountant and issued a letter of
concurrence with the related audited indirect cost rate(s).
(iii) When the indirect cost rate has not been established by a
cognizant agency in accordance with subparagraph (1)(ii) herein, a STA
(or other direct grantee) shall perform an evaluation of a consultant's
or subconsultant's indirect cost rate prior to acceptance and
application of the rate to contracts administered by the grantee or its
subgrantees. The evaluation performed by STAs (or other direct
grantees) to establish or accept an indirect cost rate(s) shall provide
assurance of compliance with the Federal cost principles and may
consist of the following:
(A) Performing an audit in accordance with generally accepted
government auditing standards and issuing an audit report;
(B) Reviewing and accepting an audit report and related workpapers
prepared by a certified public accountant or another STA;
(C) Establishing a provisional indirect cost rate for the specific
contract and adjusting contract costs based upon an audited final rate;
or
(D) Conducting other evaluations in accordance with a risk-based
oversight process as specified in subparagraph (c)(2) of this section
and within the agency's approved written policies and procedures (as
specified in Sec. 172.5(c)).
(iv) A lower indirect cost rate may be accepted for use on a
contract if submitted voluntarily by a consultant; however, the
consultant's offer of a lower indirect cost rate shall not be a
condition or qualification to be considered for the work or contract
award.
(v) Once accepted in accordance with subparagraphs (1)(ii)-(iv)
herein, contracting agencies shall apply such indirect cost rate(s) for
the purposes of contract estimation, negotiation, administration,
reporting, and contract payment and the indirect cost rate(s) shall not
be limited by administrative or de facto ceilings of any kind.
(vi) A consultant's accepted indirect cost rate for its 1-year
applicable accounting period shall be applied to contracts; however,
once an indirect cost rate is established for a contract, it may be
extended beyond the 1-year applicable period, through the duration of
the specific contract, provided all concerned parties agree. Agreement
to the extension of the 1-year applicable period shall not be a
condition or qualification to be considered for the work or contract
award.
(vii) Disputed rates. If an indirect cost rate established by a
cognizant agency in subparagraph (1)(ii) herein is in dispute, the
contracting agency does not have to accept the rate. A contracting
agency may perform its own audit or other evaluation of the
consultant's indirect cost rate for application to the specific
contract, until or unless the dispute is resolved. A contracting agency
may alternatively negotiate a provisional indirect cost rate for the
specific contract and adjust contract costs based upon an audited final
rate. Only the consultant and the parties involved in performing the
indirect cost audit may dispute the established indirect cost rate. If
an error is discovered in the established indirect cost rate, the rate
may be disputed by any prospective contracting agency.
(2) Direct salary or wage rates. (i) Compensation for each employee
or classification of employee must be reasonable for the work performed
in accordance with the Federal cost principles.
(ii) To provide for fair and reasonable compensation, considering
the classification, experience, and responsibility of employees
necessary to provide the desired engineering and design related
services, contracting agencies may establish consultant direct salary
or wage rate limitations or ``benchmarks'' based upon an objective
assessment of the reasonableness of proposed rates performed in
accordance with the reasonableness provisions of the Federal cost
principles.
(iii) When an assessment of reasonableness in accordance with the
Federal cost principles has not been performed, contracting agencies
shall use and apply the consultant's actual direct salary or wage rates
for estimation, negotiation, administration, and payment of contracts
and contract modifications.
(3) Fixed fee. (i) The determination of the amount of fixed fee
shall consider the scope, complexity, contract duration, degree of risk
borne by the consultant, amount of subcontracting, and professional
nature of the services as well as the size and type of contract.
(ii) The establishment of fixed fee shall be project or task order
specific.
(iii) Fixed fees in excess of 15 percent of the total direct labor
and indirect costs of the contract may be justified only when
exceptional circumstances exist.
(4) Other direct costs. The Federal cost principles shall be used
in determining the reasonableness, allowability, and allocability of
other direct contract costs.
(c) Oversight. (1) Agency controls. Contracting agencies shall
provide reasonable assurance that consultant costs on contracts
reimbursed in whole or in part with FAHP funding are allowable in
accordance with the Federal cost principles and consistent with the
contract terms considering the contract type and payment method(s).
Contracting agency written policies, procedures, contract documents,
and other controls (as specified in Sec. 172.5(c) and Sec. 172.9)
shall address the establishment, acceptance, and administration of
contract costs to assure compliance with the Federal cost
[[Page 53814]]
principles and requirements of this section.
(2) Risk-based analysis. The STAs (or other direct grantees) may
employ a risk-based oversight process to provide reasonable assurance
of consultant compliance with Federal cost principles on FAHP funded
contracts administered by the grantee or its subgrantees. If employed,
this risk-based oversight process shall be incorporated into STA (or
other direct grantee) written policies and procedures (as specified in
Sec. 172.5(c)). In addition to ensuring allowability of direct
contract costs, the risk-based oversight process shall address the
evaluation and acceptance of consultant and subconsultant indirect cost
rates for application to contracts. A risk-based oversight process
shall consist of the following:
(i) Risk assessments. Conducting and documenting an annual
assessment of risks of noncompliance with the Federal cost principles
per consultant doing business with the agency, considering the
following factors:
(A) Consultant's contract volume within the State;
(B) Number of States in which the consultant operates;
(C) Experience of consultant with FAHP contracts;
(D) History and professional reputation of consultant;
(E) Audit history of consultant;
(F) Type and complexity of consultant accounting system;
(G) Size (number of employees and/or annual revenues) of
consultant;
(H) Relevant experience of certified public accountant performing
audit of consultant;
(I) Assessment of consultant's internal controls;
(J) Changes in consultant organizational structure; and
(K) Other factors as appropriate.
(ii) Risk mitigation and evaluation procedures. Allocating
resources, as considered necessary based on the results of the annual
risk assessment, to provide reasonable assurance of compliance with the
Federal cost principles through application of the following types of
risk mitigation and evaluation procedures appropriate to the consultant
and circumstances:
(A) Audits performed in accordance with generally accepted
government audit standards to test compliance with the requirements of
the Federal cost principles;
(B) Certified public accountant or other STA workpaper reviews;
(C) Desk reviews;
(D) Other analytical procedures;
(E) Consultant cost certifications in accordance with subparagraph
(c)(3) herein; and
(F) Training on the Federal cost principles.
(iii) Documentation. Maintaining adequate documentation of the
risk-based analysis procedures performed to support the allowability
and acceptance of consultant costs on FAHP funded contracts.
(3) Consultant cost certification. (i) Indirect cost rate proposals
for the consultant's 1-year applicable accounting period shall not be
accepted and no agreement shall be made by a contracting agency to
establish final indirect cost rates, unless the costs have been
certified by an official of the consultant as being allowable in
accordance with the Federal cost principles. The certification
requirement shall apply to all indirect cost rate proposals submitted
by prime and subconsultants for acceptance by a STA (or other direct
grantee).
(ii) Consultant official shall be an individual executive or
financial officer of the consultant's organization at a level no lower
than a Vice President or Chief Financial Officer, or equivalent, who
has the authority to represent the financial information utilized to
establish the indirect cost rate proposal submitted for acceptance.
(iii) The certification of final indirect costs shall read as
follows:
Certificate of Final Indirect Costs
This is to certify that I have reviewed this proposal to establish
final indirect cost rates and to the best of my knowledge and belief:
1. All costs included in this proposal (identify proposal and date)
to establish final indirect cost rates for (identify period covered by
rate) are allowable in accordance with the cost principles of the
Federal Acquisition Regulation (FAR) of title 48, Code of Federal
Regulations (CFR), part 31; and
2. This proposal does not include any costs which are expressly
unallowable under applicable cost principles of the FAR of 48 CFR part
31.
Firm:------------------------------------------------------------------
Signature:-------------------------------------------------------------
Name of Certifying Official:-------------------------------------------
Title:-----------------------------------------------------------------
Date of Execution:-----------------------------------------------------
(4) Sanctions and penalties. Contracting agency written policies,
procedures, and contract documents (as specified in Sec. 172.5(c) and
Sec. 172.9(c)) shall address the range of administrative, contractual,
or legal remedies that may be assessed in accordance with Federal and
State laws and regulations where consultants violate or breach contract
terms and conditions. Where consultants knowingly charge unallowable
costs to a FAHP funded contract:
(i) Contracting agencies shall pursue administrative, contractual,
or legal remedies and provide for such sanctions and penalties as may
be appropriate; and
(ii) Consultants are subject to suspension and debarment actions
(as specified in 2 CFR part 180), potential cause of action under the
False Claims Act (as specified in 32 U.S.C. 3729-3733), and prosecution
for making a false statement (as specified in 18 U.S.C. 1020).
(d) Prenotification; confidentiality of data. The FHWA, grantees,
and subgrantees of FAHP funds may share audit information in complying
with the grantee's or subgrantee's acceptance of a consultant's
indirect cost rates pursuant to 23 U.S.C. 112 and this part provided
that the consultant is given notice of each use and transfer. Audit
information shall not be provided to other consultants or any other
government agency not sharing the cost data, or to any firm or
government agency for purposes other than complying with the grantee's
or subgrantee's acceptance of a consultant's indirect cost rates
pursuant to 23 U.S.C. 112 and this part without the written permission
of the affected consultants. If prohibited by law, such cost and rate
data shall not be disclosed under any circumstance; however, should a
release be required by law or court order, such release shall make note
of the confidential nature of the data.
[FR Doc. 2012-21520 Filed 8-31-12; 8:45 am]
BILLING CODE 4910-22-P