Design-Build Contracting |
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Gregory G. Nadeau
Federal Highway Administration
February 12, 2014
[Federal Register Volume 79, Number 29 (Wednesday, February 12, 2014)]
[Rules and Regulations]
[Pages 8263-8266]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-03034]
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DEPARTMENT OF TRANSPORTATION
Federal Highway Administration
23 CFR Part 636
[FHWA Docket No. FHWA-2013-0043]
RIN 2125-AF58
Design-Build Contracting
AGENCY: Federal Highway Administration (FHWA), Department of
Transportation (DOT).
ACTION: Final rule.
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SUMMARY: The FHWA is revising its regulations related to the use of
alternative technical concepts (ATC) in design-build project delivery
of highway construction. This final rule eliminates the requirement to
submit a base proposal when a contracting agency allows design-build
proposers to submit ATCs in their technical and price proposals.
DATES: Effective March 14, 2014.
FOR FURTHER INFORMATION CONTACT: For technical information: Mr. Gerald
Yakowenko, FHWA Office of Program Administration, Federal Highway
Administration, 1200 New Jersey Avenue SE., Washington, DC 20590, 202-
366-1562, gerald.yakowenko@dot.gov. For legal information: Ms. Janet
Myers, Office of the Chief Counsel, 202-366-2019, Federal Highway
Administration, 1200 New Jersey Avenue SE., Washington, DC 20590.
Office hours are from 8:00 a.m. to 4:30 p.m., e.t., Monday through
Friday, except Federal holidays.
SUPPLEMENTARY INFORMATION:
Electronic Access
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, 365 days each year.
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, http://www.federalregister.gov, or the Government
Printing Office's Federal Digital System, http://www.gpo.gov/fdsys.
Background
The FHWA's current regulatory policy in part 636 allows contracting
agencies to use ATCs in their procurement process subject to two
conditions: (1) the ATC must not conflict with the criteria agreed upon
in the environmental decisionmaking process, and (2) the contracting
agency must require proposers to submit a base proposal in addition to
supplemental ATC-based proposals. Specifically, 23 CFR 636.209(b)
states: ``At your discretion, you may allow proposers to submit
alternate technical concepts in their proposals as long as these
alternate concepts do not conflict with criteria agreed upon in the
environmental decision making process. Alternate technical concept
proposals may supplement, but not substitute for base
[[Page 8264]]
proposals that respond to the Request for Proposal requirements.''
Thus, the current policy allows proposers to submit proposals based
on an approved ATC, but not as a substitute for the base proposal.
The requirement for a base proposal and a supplemental ATC-based
proposal was founded on the perception that it would allow for a fair
comparison of proposals. When FHWA released the final rule implementing
design-build contracting on December 10, 2002, the Agency believed that
the requirement would provide contracting agencies with information on
quality and price for comparison. In addition, contracting agencies
could evaluate ATC-based proposals from firms desiring to submit
innovative concepts. The underlying principle in the existing policy is
to ensure fairness and open competition by making certain that all
proposers are competing for the same project.
Notice of Proposed Rulemaking (NPRM)
The FHWA published an NPRM on August 1, 2013 (78 FR 46546),
proposing to eliminate the base proposal requirement when a contracting
agency allows design-build proposers to submit ATCs in their technical
and price proposals. All comments received in response to the NPRM have
been considered in adopting this final rule. Comments were received
from 10 entities. The commenters include: four State departments of
transportation (State DOTs), one local public agency, and five industry
associations.
Analysis of NPRM Comments and FHWA Response
The following discussion summarizes the major comments submitted to
the docket on the NPRM, notes where and why changes have been made to
the rule, and states why particular recommendations or suggestions have
not been incorporated into the final rule.
General Discussion of Comments
In general, most of the commenters expressed support for the
revisions and concurred that a fair and transparent procurement process
can be achieved as long as the request for proposal (RFP) document
clearly describes the contracting agency's requirements for ATC
content, submission, and review; procedures for confidential meeting;
and methods for evaluating the ATC in the proposal review process. None
of the commenters disagreed with ending the base proposal requirement
when a contracting agency allows design-build proposers to submit ATCs
in the technical and price proposals. However, a few commenters raised
issues concerning confidentiality and the implementation of design-
build contracting.
Several of the contracting agencies noted the benefits of using
ATCs in design-build project delivery and concurred that the
requirement to prepare base proposals is not cost effective. In
particular, the Orange County Transportation Authority (OCTA) noted
that ``ATCs have been proven to provide numerous benefits including the
increased efficiency, the reduction of project risks, and the
acceleration of project delivery. Requiring proposers to prepare and
submit multiple proposals requires the expenditure of additional funds
and man hours that discourages proposers from developing ATCs. OCTA
believes that by removing this requirement, design-build proposers will
instead be encouraged to explore and develop ATCs and include them in
their design-build proposals.''
Comments on the Confidentiality Requirement
Several commenters expressed differing viewpoints regarding
confidentiality issues in the ATC submission and review process. While
the Design-Build Institute of America (DBIA) agreed with the proposed
deletion of the base submission requirement, they expressed concerns
regarding the exception to confidentiality in proposed section
636.209(b)(2). Specifically, DBIA stated that ``confidentiality is
essential to the success of the ATC process and there should not be any
exceptions to maintaining that confidentiality. DBIA believes that
breaking confidentiality impedes design-builders from distinguishing
the benefits of their ATC proposal from other proposals. Not only does
breaking confidentiality discourage design-builders from submitting
ATCs; it may have the opposite effect. In the example given in the
proposed rule, a design-builder concerned about an addendum may choose
to not bring forth an alternative to avoid a 4(f) property. The owner
never learns of this and the 4(f) is not avoided, thus depriving the
owner of the benefits of ATCs.'' Similarly, the American Road and
Transportation Builders Association believed that contracting agencies
have two primary responsibilities in administering an ATC process: ``1.
Any willingness or acknowledgement for changing the project scope of
work or requirements first set out in the RFP must be conveyed to all
design-build teams so that no single team attains an unfair advantage.
2. Strict confidentiality must be maintained relative to intellectual
property and ideas presented by each design-build team during the ATC
process.''
On the other hand, two of the contracting agencies agreed with the
proposed language regarding confidentiality. The Washington State DOT
noted that confidentiality is ``essential for encouraging use of
ATCs,'' but ``there are circumstances under which the agency would be
compelled, in the interest of fairness, to reveal certain basic
configuration changes to other proposers as a result of the inquiries
associated with or consequent to a proposed ATC.'' In addition, New
York DOT commented that experience ``with a proposed ATC avoiding 4(f)
impacts and right-of-way acquisition'' demonstrated the need for the
exceptions to the confidentiality requirement.
The FHWA shares the DBIA's belief that confidentiality is
important, but also agrees with the contracting agency representatives
regarding the necessity for the exception to confidentiality. It is
important that contracting agencies provide a transparent and level
playing field for all proposers. When a contracting agency makes a
determination that there is no feasible and prudent alternative that
avoids the use of Section 4(f) property, that agency is making a
statement regarding the basic configuration for the project. If it
later becomes apparent that there is a prudent and feasible approach to
avoid the taking of Section 4(f) property, then, in the interest of
fairness, it is incumbent upon the contracting agency to amend the RFP
basic configuration/design criteria and inform all proposers of a
modification. The FHWA revised the language in the final rule to
indicate that when disclosure is necessary, the contracting agency must
revise the RFP documents by releasing the minimal amount of information
necessary to: (1) ensure compliance with Federal or State permitting
and other legal requirements; and (2) ensure that all proposers are
aware of the revised RFP requirements.
Comments on an ``Equal or Better'' Requirement
The Washington State DOT was concerned that the proposed regulatory
language did not include an ``equal or better'' provision that is
present in many State DOT ATC contract provisions. The Washington State
DOT believed that this omission might ``open the door to scope
reductions disguised as ATCs and upset the `level playing field'
concept that FHWA has worked so hard to establish and maintain.'' The
FHWA
[[Page 8265]]
shares the State's concern that this omission might result in
undesirable scope reductions. The ``Background'' section of the August
1, 2013, NPRM noted that ATCs are based on the concept of ``equal or
better'' solutions. However, the FHWA is reluctant to provide a
regulatory definition for an ATC. Many State DOTs currently have their
own definitions in contract language. Instead of defining ATC, we are
including the ``equal or better'' requirement in the revised 23 CFR
636.209(b)(1).
Comments on Evaluation Factors
The Council on Federal Procurement of Architectural and Engineering
Services (COFPAES) did not comment directly on the proposed revision to
Section 636.209, but provided a general comment on FHWA's design-build
policy in part 636. The COFPAES urged that two-phase design-build
contracts under 23 U.S.C. 112(b)(3) and 41 U.S.C. 3309 should comply
with the requirements of the Brooks Act (40 U.S.C. 1101, et seq.) such
that in phase one of a design-build process, ``cost related or price-
related evaluation factors are not permitted.'' The FHWA notes that
COFPAES submitted a similar comment in response to the FHWA's October
19, 2001, NPRM for design-build contracting (66 FR 53288). In the
preamble to the December 10, 2002, final rule implementing design-build
contracting (67 FR 75902), the FHWA stated: ``Design-build contracts
are not contracts strictly for the procurement of architectural or
engineering services and, therefore, they are not subject to the
requirement to use qualifications-based selection procedures. In many
design-build contracts, the engineering or architectural services
comprise a relatively small percent of the total contract amount. The
FHWA recognizes the importance of architectural and engineering
services in reducing the life-cycle cost of projects. However, design-
build contracts are not architectural and engineering contracts and the
provisions of 23 U.S.C. 112(b)(2) do not apply to design-build
contracts.''
Additional Changes From the Proposed Rule
The FHWA is substituting the term ``alternative technical
concept,'' in the final rule, for ``alternate technical concept,'' in
the proposed rule, because the word ``alternative'' is more appropriate
for the ATC process used by many contracting agencies where proposers
are allowed to submit multiple technical concepts for the same project.
Although there are some instances of the use of the word ``alternate,''
most contracting agencies use ``alternative'' in their ATC process.
Therefore, the FHWA is using ``alternative'' in the final rule.
Rulemaking Analyses and Notices
Executive Order 12866 (Regulatory Planning and Review) and DOT
Regulatory Policies and Procedures
The FHWA has determined that this action will not be a significant
regulatory action within the meaning of Executive Order 12866, or
within the meaning of DOT's regulatory policies and procedures.
The economic impact of this rulemaking will be minimal and not
adversely affect, in a material way, any sector of the economy. This
rulemaking merely revises the FHWA's policies concerning the design-
build contracting technique. The rule will not affect the total Federal
funding available to the State DOTs under the Federal-aid highway
program. Therefore, an increased use of design-build delivery method
will not yield significant economic impacts to the Federal-aid highway
program. Additionally, this rule will not interfere with any action
taken or planned by another agency and not materially alter the
budgetary impact of any entitlements, grants, user fees, or loan
programs.
Regulatory Flexibility Act
In compliance with the Regulatory Flexibility Act (RFA) (5 U.S.C.
601- 612), FHWA has evaluated the effects of this action and has
determined that the action will not have a significant economic impact
on a substantial number of small entities. The rule provides procedures
for use of ATCs in design-build project delivery of highway
construction. As such, it primarily affects States, which are not
included in the definition of small entity set forth in 5 U.S.C. 601.
Therefore, States do not meet the definition of a small entity and the
RFA does not apply. The FHWA further certifies that the proposed action
will not have a significant economic impact on a substantial number of
small entities.
Unfunded Mandates Reform Act of 1995
This rule will not impose unfunded mandates as defined by the
Unfunded Mandates Reform Act of 1995 (UMRA). Section 202 of the UMRA (2
U.S.C. 1531-1538) requires Federal agencies to prepare a written
assessment of proposed Federal mandates likely to result in the
expenditure by State, local, or tribal governments, in the aggregate,
or by the private sector, of more than $100 million in any one year.
This rule will not result in the expenditure by State, local, or tribal
governments, or by the private sector, of more than $100 million
annually.
Executive Order 13132 (Federalism)
Executive Order 13132 requires agencies to assure meaningful and
timely input by State and local officials in the development of
regulatory policies that may have a substantial direct effect on the
States, the relationship between the national government and the
States, or the distribution of power and responsibilities among the
various levels of government. The FHWA has analyzed this action in
accordance with the principles and criteria contained in Executive
Order 13132 and determined that it will not have a substantial direct
effect or sufficient federalism implications on the States. The FHWA
has also determined that this action will not preempt any State law or
regulation or affect the States' ability to discharge traditional State
governmental functions.
Executive Order 12372 (Intergovernmental Review)
Catalog of Federal Domestic Assistance Program Number 20.205,
Highway Planning and Construction. The regulations implementing
Executive Order 12372 regarding intergovernmental consultation on
Federal programs and activities apply to this program. The FHWA did not
receive any comments on the intergovernmental review analysis.
Paperwork Reduction Act
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501, et
seq.), the FHWA must obtain approval from the Office of Management and
Budget for each collection of information we conduct, sponsor, or
require through regulations. The FHWA has determined that this rule
does not contain a collection of information requirement for purposes
of the PRA.
National Environmental Policy Act
The FHWA has analyzed this rule for the purpose of the National
Environmental Policy Act of 1969 (NEPA), as amended (42 U.S.C. 4321 et
seq.), and determined that it will not have any effect on the quality
of the environment and meets the criteria for the categorical exclusion
at 23 CFR 771.117(c)(20). However, Federal-aid highway projects on
which design-build is used must still comply with the NEPA, as amended.
[[Page 8266]]
Executive Order 12630 (Taking of Private Property)
The FHWA has analyzed this rule under Executive Order 12630,
Governmental Actions and Interference with Constitutionally Protected
Property Rights. This rule will not affect a taking of private property
or otherwise have taking implications under Executive Order 12630.
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 rule under Executive Order 13045,
Protection of Children from Environmental Health Risks and Safety
Risks. The FHWA certifies that this rule will not cause an
environmental risk to health or safety that might disproportionately
affect children.
Executive Order 13175 (Tribal Consultation)
The FHWA has analyzed this rule under Executive Order 13175 and
believes that it will not have substantial direct effects on one or
more Indian tribes; will not impose substantial direct compliance costs
on Indian tribal governments; and will not preempt tribal laws. This
rule addresses obligations of Federal funds to States for Federal-aid
highway projects and will not impose any direct compliance requirements
on Indian tribal governments. Therefore, a tribal summary impact
statement is not required.
Executive Order 13211 (Energy Effects)
The FHWA has analyzed this action under Executive Order 13211,
Actions Concerning Regulations that Significantly Affect Energy Supply,
Distribution, or Use. The FHWA has determined that this rule is not a
significant energy action because it is not a significant regulatory
action under Executive Order 12866 and is not likely to have a
significant adverse effect on the supply, distribution, or use of
energy. Therefore, a Statement of Energy Effects is not required.
Executive Order 12898 (Environmental Justice)
Executive Order 12898 requires that each Federal agency make
achieving environmental justice part of its mission by identifying and
addressing, as appropriate, disproportionately high and adverse human
health or environmental effects of its programs, policies, and
activities on minorities and low-income populations. The FHWA has
determined that this rule does not raise any environmental justice
issues.
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 636
Construction, Construction manager, General contractor, Grant
programs, Transportation, Highways, and Roads.
Issued on: January 31, 2014.
Gregory G. Nadeau,
Deputy Administrator, Federal Highway Administration.
In consideration of the foregoing, FHWA amends title 23, Code of
Federal Regulations, part 636 as follows:
PART 636--DESIGN-BUILD CONTRACTING
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1. The authority citation for part 636 continues to read as follows:
Authority: Sec. 1503 of Pub. L. 109-59, 119 Stat. 1144; Sec.
1307 of Pub. L. 105-178, 112 Stat. 107; 23 U.S.C. 101, 109, 112,
113, 114, 115, 119, 128, and 315; 49 CFR 1.48(b).
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2. Amend Sec. 636.209 by revising paragraph (b) to read as follows:
Sec. 636.209 What items must be included in a phase-two solicitation?
* * * * *
(b)(1) At your discretion, you may allow proposers to submit
alternative technical concepts (ATCs) in their proposals if:
(i) The ATCs:
(A) Provide an equal or better solution; and
(B) Do not conflict with criteria agreed upon in the environmental
decisionmaking process; and
(ii) The RFP document clearly describes your:
(A) Requirements for ATC content, submission, and review;
(B) Procedures for confidential meetings (if used); and
(C) Methods for evaluating ATCs in the proposal review process.
(2) You must maintain the confidentiality of ATCs, except to the
extent that disclosure is necessary to maintain compliance with Federal
or State permitting and other legal requirements necessary for the
delivery of the project. When disclosure is necessary, you must revise
the RFP documents by releasing the minimal amount of information
necessary to ensure:
(i) Compliance with Federal or State permitting and other legal
requirements; and
(ii) All proposers are aware of the revised RFP requirements.
[FR Doc. 2014-03034 Filed 2-11-14; 8:45 am]
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