Indefinite Delivery and Indefinite Quantity Contracts for Federal-Aid Construction |
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Nicole R. Nason
Federal Highway Administration
16 November 2020
[Federal Register Volume 85, Number 221 (Monday, November 16, 2020)]
[Rules and Regulations]
[Pages 72919-72934]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-23675]
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DEPARTMENT OF TRANSPORTATION
Federal Highway Administration
23 CFR Part 635
[FHWA Docket No. FHWA-2018-0017]
RIN 2125-AF83
Indefinite Delivery and Indefinite Quantity Contracts for
Federal-Aid Construction
AGENCY: Federal Highway Administration (FHWA), U.S. Department of
Transportation (DOT).
ACTION: Interim Final Rule (IFR); request for comments.
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SUMMARY: This action allows States to use the Indefinite Delivery and
Indefinite Quantity (ID/IQ) method of contracting, including job order
[[Page 72920]]
contracting (JOC), on Federal-aid highway projects, under certain
circumstances, on a permanent basis.
DATES: This interim final rule is effective as of November 16, 2020.
Comments must be received on or before January 15, 2021. Late-filed
comments will be considered to the extent practicable.
FOR FURTHER INFORMATION CONTACT: Mr. James DeSanto, Office of
Preconstruction, Construction, and Pavements, (614) 357-8515, or Mr.
Patrick Smith, Office of the Chief Counsel, (202) 366-1345, Federal
Highway Administration, 1200 New Jersey Avenue SE, Washington, DC
20590. Office hours are from 8 a.m. to 4:30 p.m., EST, Monday through
Friday, except Federal holidays.
SUPPLEMENTARY INFORMATION:
Electronic Access and Filing
This document, as well as the advance notice of proposed rulemaking
(ANPRM), supporting materials, and all comments received may be viewed
online through the Federal eRulemaking portal at: http://www.regulations.gov. An electronic copy of this document may also be
downloaded from the Office of the Federal Register's home page at:
http://www.archives.gov/federal-register and the Government Publishing
Office's web page at: http://www.gpo.gov/fdsys.
Executive Summary
The FHWA is adding a new subpart F under 23 CFR part 635 to allow
States to useproje the ID/IQ method of contracting, including JOC, on
Federal-aid highway projects, under certain circumstances, on a
permanent basis. Currently, this contracting technique is only
authorized on an experimental basis under FHWA's Special Experimental
Project No. 14 (SEP-14). Allowing ID/IQ contracting on a permanent
basis provides benefits to State departments of transportation (State
DOT) and other contracting agencies, including expediting project
delivery, increasing administrative efficiency, reducing project costs,
and increasing flexibility for State DOTs to use Federal-aid funds on
certain projects.
The FHWA is issuing this IFR pursuant to 5 U.S.C. 553(b)(3)(B) to
allow States to realize immediately the benefits and cost savings
associated with the ID/IQ method of contracting. The FHWA has conducted
a preliminary cost-benefit analysis on this rulemaking and anticipates
a cost savings of $3.4 million per year at a 7 percent discount rate.
Background
The ID/IQ method of contracting allows an IQ of supplies or
services for a fixed time. The Federal Government uses this method when
agencies cannot determine, above a specified minimum, the precise
quantities of supplies or services that the Government will require
during the contract period. For construction ID/IQ contracts,
contractors bid unit prices for estimated quantities of standard work
items, and work orders are used to define the location and quantities
for specific work. The ID/IQ contracts may be awarded to the lowest
responsive bidder based on an invitation for bids or the best-value
proposer based on responses to Requests for Proposals. Contracting
agencies use other names for these types of contracts, including JOC
contracts, master contracts, on-call contracts, area-wide contracts,
continuing contracts, design-build push-button contracts, push-button
contracts, stand-by contracts, and task order contracts. The JOC method
is a form of ID/IQ contracting that uses a unit price book with pre-
priced work item descriptions in the solicitation. Contract awards
under this method use the bidder's adjustment factors or multipliers to
establish contract prices. The contract is awarded to the lowest
responsive bidder determined by their rates.
Although ID/IQ contracts are specifically authorized in the Federal
procurement process (48 CFR subpart 16.5) and for the contracting of
architecture and engineering services in the Federal-aid highway
program (FAHP) (23 CFR part 172), FAHP authorization and procurement
laws for construction do not address the possible use of ID/IQ
contracts. The FAHP construction procurement statute, 23 U.S.C.
112(b)(1), requires contracts to be awarded by a competitive bidding
process to the lowest responsive bidder (traditional design-bid-build
project delivery method based upon the premise of a 100 percent-
complete design and a well-defined scope of work). Typically, ID/IQ
contracts are awarded based upon a general, but not completely defined,
scope of work for a geographic area and limited time period (but not
specific locations, designs, or quantities) and are often awarded based
upon specific evaluation criteria.
A. Experience Under Special Experimental Project Number 14 (SEP-14)
The FHWA used its authority in 23 U.S.C. 502(b)(1) to test the use
of ID/IQ contracts for the construction of FAHP projects through the
SEP-14 Program for innovative contracting techniques under authority of
23 U.S.C. 502(b)(2). Under the SEP-14 Program, contracting agencies
interested in testing an innovative contracting technique submit
project-specific (or programmatic) work plans to FHWA for
implementation. The FHWA Division Office evaluates the work plan,
coordinates with FHWA Headquarters, and, if it finds the work plan to
be acceptable, FHWA approves the use of the technique on a temporary
basis for a project or group of pilot projects. Over time, FHWA
Headquarters staff assess the initiative to determine if it is a
technique that should be operationalized for the FAHP on a permanent
basis without the need for individual requests, work plans, and
evaluation reports. More information on SEP-14 can be found at https://www.fhwa.dot.gov/construction/cqit/sep14.cfm.
From 2007 to the present, FHWA, State DOTs, and Local Public
Agencies (LPA) through the State DOTs, have experimented with the use
of ID/IQ and JOC contracts for construction. The FHWA has approved the
use of this contracting method under SEP-14 for 19 different State DOTs
and 6 LPAs. Evaluation reports indicate that ID/IQ and JOC contracts
allow for cost-effective contracting for small value contracts and
preventive maintenance programs. Specifically, the reports indicate
that these contracts eliminate the need for contracting agencies to
advertise and award numerous small contracts and provide contracting
agencies with wide flexibility in programming and addressing preventive
maintenance needs.
Having evaluated the use of ID/IQ and JOC contracts for
construction in the FAHP for over a decade, FHWA determined that they
were suitable for operationalization. This is consistent with Senate
report language accompanying fiscal years 2017 and 2018 appropriations
to operationalize JOC. See S. Rept. No. 114-243, 43 (April 21, 2016);
S. Rept. No. 115-138, 52 (July 27, 2017). The approach is also
consistent with the U.S. Department of Justice Office of Legal Counsel
opinion regarding competition and contracting requirements, which found
that ``FHWA may reasonably conclude, consistent with 23 U.S.C. 112,
that certain state or local requirements [that may have the effect of
reducing the number of potential bidders for a particular contract
still] promote the efficient and effective use of federal funds or
protect the integrity of the competitive bidding process.'' See
Competitive Bidding Requirements Under the Federal-Aid Highway Program,
23 U.S.C. 112 (Aug.
[[Page 72921]]
23, 2013), at 24.\1\ As discussed further below, including in relation
to provisions on securing competition and selection of contractors, ID/
IQ and JOC contracts are consistent with the opinion because they
promote ``the efficient and effective use of federal funds.''
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\1\ See https://www.justice.gov/file/21816/download.
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B. Steps for Operationalizing ID/IQ Contracting and JOC for
Construction in the FAHP
The FHWA is proceeding with two phases to operationalize ID/IQ
contracting and JOC for construction in the FAHP. The first phase was
the issuance of an FHWA Notice \2\ on how FHWA will allow ID/IQ and JOC
contracts for low-cost construction contracts in the FAHP without the
need for project-specific work plans from contracting agencies. The
second phase was the initiation of this rulemaking.
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\2\ 83 FR 19393 (May 2, 2018).
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Under the first phase, FHWA published a Federal Register Notice
requesting public comment on allowing contracting agencies to establish
ID/IQ contracting and JOC for low-cost construction contracts at 83 FR
19393 on May 2, 2018, and subsequently published FHWA Notice N5060.2,
titled ``Indefinite Delivery/Indefinite Quantity Contracting for Low-
Cost Federal-Aid Construction Contracts,'' on January 18, 2019.\3\
Notice N5060.2 set forth FHWA's policy for the use of ID/IQ contracting
for low-cost FAHP construction contracts and clarified under what
conditions ID/IQ contracts are allowed for Federal-aid construction.
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\3\ See https://www.fhwa.dot.gov/legsregs/directives/notices/n5060-2.cfm.
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Under Notice N5060.2, an ID/IQ contract not requiring advance
approval under the SEP-14 Program should satisfy certain conditions,
including that the contract be: Low-cost (the total value of task or
work orders may not exceed $2,000,000 per year on average over the
contract term); short-term (a base contract of 1 to 2 years); awarded
by competitive bidding to the lowest responsive bidder; a single-award
contract; qualified for a National Environmental Policy Act (NEPA)
categorical exclusion listed under 23 CFR 771.117; awarded and
performed in compliance with applicable Disadvantaged Business
Enterprise (DBE) provisions of 49 CFR part 26; and compliant with
certain other laws and regulations related to Federal-aid construction.
Additional details can be found in FHWA Notice N5060.2. Although Notice
N5060.2 allows ID/IQ contracting without advance SEP-14 Program
approval on a project-by-project basis, the contracts continue to be
administered under the SEP-14 Program on an experimental basis. The ID/
IQ contracts not meeting the conditions of Notice N5060.2, such as
multiple-award contracts, continue to require advance approval under
the SEP-14 Program.
After the publication of this Interim Final Rule, Notice N5060.2,
Indefinite Delivery/Indefinite Quantity Contracting for Low-Cost
Federal-aid Construction Contracts, January 18, 2019, will expire
effective November 16, 2021.
Under the second phase of operationalizing ID/IQ contracting and
JOC for construction in the FAHP, FHWA published the ANPRM titled,
``Indefinite Delivery and Indefinite Quantity Contracts for Federal-Aid
Construction,'' at 83 FR 29713 on June 26, 2018. The ANPRM sought
comment on how to expand ID/IQ contracting and allow it on a permanent
basis. The FHWA received 11 comments to the docket, 9 of which were
responsive to the questions posed in the ANPRM. Comments were provided
by six State DOTs, two municipalities, one business, and two
individuals who responded to the wrong Federal Register notice. The
comments are available for examination in the docket (FHWA-2018-0017)
at http://www.regulations.gov.
General Discussion of Comments
After consideration of the responsive comments, and based on its
ongoing experience with ID/IQ contracting under the SEP-14 Program,
FHWA is authorizing ID/IQ contracting on Federal-aid highway projects
on a permanent basis as set forth in this IFR. The FHWA believes that
this approach will benefit State DOTs by expediting project delivery,
increasing administrative efficiency, reducing project costs, and
increasing flexibility for State DOTs to use Federal-aid funds on
certain projects. The FHWA considered responsive comments related to
the benefits of ID/IQ contracting and other topics in developing the
regulation set forth in this IFR.
A. Expedited Project Delivery/Administrative Efficiency
Commenters argued ID/IQ contracting expedites the delivery of
highway construction projects and increases administrative efficiency.
In making this argument, commenters cited as reasons the reduced time
necessary to prepare, advertise, and procure highway construction
projects; the ability to consolidate design assignments; the reduced
time and resources necessary to administer highway construction
projects; and the reduced administrative burden in working with fewer
contractors and on fewer contracts.
For example, one State DOT indicated that, based on its experience
under the SEP-14 Program, ID/IQ contracting reduces the time necessary
to prepare projects for construction and reduces the administrative
burden associated with advertising projects. Another State DOT
indicated that ID/IQ contracting allows States to quickly obligate
Federal funds for needed work, consolidate design assignments, and
reduce their administrative burden in administering projects by working
with fewer contractors. This commenter indicated that ID/IQ contracts
reduce procurement time for each work order by approximately 8 weeks.
Another State DOT argued that ID/IQ contracting reduces the time and
resources necessary to administer individual work orders. This
commenter also explained that ID/IQ contracts reduce the administrative
burden associated with pre-qualification procedures because quality is
accounted for in the initial award. Another State DOT noted that
certain tasks can be completed more quickly using ID/IQ contracting
compared to its traditional reliance on in-house resources.
The FHWA agrees with the commenters and believes that ID/IQ
contracting is likely to expedite project delivery of certain highway
projects and increase administrative efficiency.
B. Reduced Project Costs
Commenters also said that ID/IQ contracting reduces the overall
costs of certain highway projects and work orders. Commenters cited as
reasons reduced costs associated with expedited project delivery;
reduced costs associated with gains in administrative efficiency; the
reduced time and resources that contactors must spend on bid
preparation, which results in reduced costs for States; increased
competition for larger contracts, which can reduce overall cost; and
reduced costs on emergency maintenance contracts because prices are
established in advance.
For example, one State DOT stated that ID/IQ contracting reduces
overall construction costs. This commenter said that because ID/IQ
contracting reduces the time and resources that contactors must spend
on bid preparation, it also reduces contract prices and the overall
costs incurred by States. Another State DOT indicated that under the
SEP-14 Program it received twice as many bids
[[Page 72922]]
for tasks relative to traditional design-bid-build contracting. The
increased competition resulted in lower prices. This commenter also
reported that its contractors are highly satisfied with ID/IQ
contracting under the SEP-14 Program. Another State DOT stated that it
anticipates cost savings on emergency maintenance contracts because
predetermined prices will be in place.
The only business that commented provided several examples of the
efficiency and effectiveness of JOC contracts used by States,
municipalities, and other government agencies, mostly at educational
facilities. The examples indicated that JOC can reduce overall project
costs by 5 to 10 percent.
The FHWA agrees with the commenters and believes that ID/IQ
contracting is likely to reduce the overall cost of certain highway
projects.
C. Increased Flexibility
Commenters also argued that operationalizing ID/IQ contracting will
increase flexibility for State DOTs by allowing them to use ID/IQ
contracting on a broader range of projects and on a permanent basis. As
discussed above, the added flexibility provided to States by
operationalizing ID/IQ through rulemaking may also provide associated
gains in expedited project delivery, administrative efficiency, and
reduced project costs. One State DOT indicated that experimenting with
ID/IQ contracts under the SEP-14 Program allowed for competitive
bidding on projects that otherwise would have been awarded non-
competitively under State emergency procedures.
Considering the comments, FHWA believes that ID/IQ contracting
increases flexibility for State DOTs and that expanding ID/IQ
contracting and allowing it on a permanent basis provides needed
flexibility to the States to manage Federal financial assistance under
23 U.S.C. 145.
D. Annual Expenditure Cap
A common theme in several comments was that FHWA should raise or
eliminate the annual expenditure cap of $2 million existing under
Notice N5060.2.
Commenters in favor of eliminating the cap, including multiple
State DOTs, argued that a $2 million cap would limit their flexibility
and reduce the benefits of ID/IQ contracting. For example, one State
DOT argued that a $2 million cap would limit the usability of ID/IQ
contracting. Eliminating the cap, it argued, would expand opportunity
to use this method and realize its benefits on a broader scale. Another
State DOT argued that a $2 million cap would quickly limit the ability
of State DOTs to use the best contractors, which would create
inefficiency and result in awards to less competitive contractors.
Another State DOT argued that eliminating the cap or making it
significantly higher would maximize flexibility for State DOTs to use
and realize the benefits of ID/IQ contracting. Another commenter argued
that States should be allowed the flexibility to set their own caps.
This commenter also argued that setting a cap in this context would be
inconsistent with the practices and regulations of certain other
Federal agencies.
No commenters supported retaining the annual expenditure cap of $2
million existing under Notice N5060.2. The FHWA agrees with the
arguments put forth by the commenters opposing a cap and is not
establishing an annual expenditure cap for contracts authorized under
this regulation. Section G below discusses a 12-month phase-out period
for authorizing low-cost ID/IQ contracts under Notice N5060.2, as well
as ID/IQ contracts authorized under an approved SEP-14 work plan.
E. On-Ramp and Off-Ramp Procedures
Commenters also addressed whether ``on-ramp'' procedures should be
used to allow new contractors to be considered for the award pool after
the initial award of an ID/IQ and ``off-ramp'' procedures be used to
discontinue the use of contractors who are not performing
satisfactorily.
One State DOT agreed that such procedures should be used. It
further stated that it already uses on-ramp procedures under the SEP-14
Program. The commenter argued that these procedures give contracting
agencies flexibility to expand the pool of contractors when necessary
as well as the ability to remove unresponsive, non-competitive
contractors. This tool motivates contractors to be and remain
competitive. This commenter is in the process of developing off-ramp
criteria for its State.
A municipality opposed on-ramp procedures outside of a competitive
process and recommends new contractors be added via new procurements.
This commenter recommended using termination clauses for convenience or
default to remove contractors. Another commenter opposed on-ramp
procedures because, it argued, they undermine the initial competitive
process. This commenter recommended using existing processes to address
non-performing contractors.
Contracting agencies may use appropriate methods to address
contractor performance by removing contractors through State DOT ``off-
ramp'' or contract termination procedures. The FHWA believes that
procedures introducing new contractors into an existing ID/IQ contract
after the initial solicitation and award could undermine the
competitive process required by statute and the regulation.
Accordingly, FHWA has not established ``on-ramp'' procedures in this
rulemaking, nor is FHWA establishing additional contract termination
procedures.
F. Clarification of Terms
Two commenters also recommended clarifying some of the language
that FHWA uses in referring to ID/IQ contracts in this rulemaking. As
discussed above, one commenter suggested that FHWA align its
terminology about contract extensions with the industry standard, using
``contract extension'' or ``contract renewal'' instead of ``time
extension.'' The same commenter recommended using terminology
consistent with industry standards for contractor ``adjustment
factors'' in JOC. In the ANPRM, FHWA referred to ``mark-up rates.''
Relative to the meaning of a unit price book or construction task
catalog used by JOC, the same commenter recommended changing the phrase
``with pre-priced work item descriptions'' from the ANPRM to ``which
includes a list of defined construction tasks, and for each task,
includes a unit of measure and a preset unit price.''
Another commenter observed that it is unclear how time limits for
contract length are defined--calendar year, Federal fiscal year, or
start of work. The same commenter also observed that it is unclear how
$2 million annual contract limit applies--estimated work, scheduled or
planned work, or invoiced work. Another State DOT recommended
clarifying whether the maximum contract limit is total contract value
or Federal funds only.
The FHWA has attempted to address these comments in this
regulation. The comments regarding the annual contract value limit no
longer apply because such a limit is not provided in the regulation.
G. Additional Comments
Some commenters also recommended clarifying certain elements of ID/
IQ procedures. For example, one State DOT recommended minimizing
reporting requirements and focusing on critical areas. Another
commenter recommended clarifying what contracting agencies must do to
use ID/IQ or JOC beyond providing assurances
[[Page 72923]]
to FHWA regarding implementation and reporting. It suggested that FHWA
align reporting requirements for ID/IQ with other standard contracting
techniques. Regarding comments concerning reporting requirements, as
this IFR operationalizes the ID/IQ method, FHWA intends to cancel
Notice N5060.2 and FHWA is not establishing reporting requirements for
contracts authorized under this regulation.
To provide flexibility to State DOTs and ease of transition, during
a period of no more than 12 months following publication of this IFR,
FHWA Division Administrators may continue to concur in the use of ID/IQ
for low-cost contracts per the terms of the Notice and other ID/IQ
contracts authorized under an approved SEP-14 work plan. Division
Administrators may continue to allow extensions of contracts authorized
under the Notice or applicable SEP-14 work plan for the duration of
these contracts. For low-cost contracts authorized under the Notice or
ID/IQ contracts authorized under an approved SEP-14 work plan, State
DOTs may continue to administer the contracts per the requirements of
the Notice or applicable SEP-14 work plan for the duration of these
contracts. However, the reporting requirements described in Question
and Answer No. 9 of the Notice or applicable SEP-14 work plan would no
longer apply to these projects after the effective date of this IFR.
The FHWA may continue to use SEP-14 to authorize and evaluate
contracting methods that are outside the scope of this regulation.
Another commenter proposed using ``Fixed Price/Variable Scope or
Fixed Budget/Best Value contracts,'' an alternative contracting method.
Another commenter referred to certain best practices including
partnering, use of software to promote transparency, training, use of a
task catalog tailored to the specific contracting agency, detailed
scopes of work, and transparent proposal review process. As discussed
above, FHWA believes that sufficient benefits will result if ID/IQ
contracting is operationalized under this rulemaking on a permanent
basis. The FHWA is not considering other alternative contracting
methods in the context of this rulemaking.
Section-by-Section Discussion of the Changes
General Conforming Amendments in 23 CFR Parts 630 and 635
The FHWA makes several amendments in 23 CFR parts 630 and 635 to
address the application of various Federal requirements to ID/IQ
projects. In addition, FHWA replaces the terms ``State transportation
department'' and ``STD'' with the more commonly used terms ``State
department of transportation'' and ``State DOT'' throughout 23 CFR part
630 and 635. Finally, FHWA also corrects certain outdated citations in
23 CFR parts 630 and 635.
Section 630.106
The FHWA amends 23 CFR 630.106(a)(9) to provide for the execution
and modification of the project agreement for ID/IQ projects. This
amendment is similar to the existing language for design-build projects
at 23 CFR 630.106(a)(7) and Construction Manager/General Contractor
projects at 23 CFR 630.106(a)(8) in that this amendment makes clear
that FHWA execution or modification of a project agreement for final
design or physical construction, and authorization to proceed, shall
not occur until after the completion of the NEPA process. This language
conforms with 23 CFR 771.113(a) regarding the relationship between the
completion of required environmental reviews and the obligation of
funds for final design and construction.
Section 630.112
The FHWA amends 23 CFR 630.112(c)(3) and (4) to correct outdated
citations. The changes to 23 CFR 630.112(c)(3) are intended to update
the drug-free workplace requirements to reflect the new DOT
regulations. The changes to 23 CFR 630.112(c)(4) are intended to update
the suspension and debarment requirements to reflect the new Office of
Management and Budget regulations at 2 CFR part 180, as adopted by the
DOT at 2 CFR part 1200. The requirements of the previous 49 CFR part 29
have been updated and moved to these new regulations. The updates to
these cross references in 23 CFR 630.112(c)(3) and (4) do not impose
any new requirements or burdens under this part.
Section 630.205
The FHWA amends 23 CFR 630.205(e) to provide an exception from the
standard contracting approval process for contracts that conform to the
requirements of the revised 23 CFR part 635 subpart F. In addition,
FHWA amends 23 CFR 630.205(d) by revising the term ``State Highway
Agency'' to conform with the more commonly used term, ``State DOT.''
Section 635.102
The FHWA amends the definitions in 23 CFR 635.102 by adding a
definition for ``ID/IQ project'' and ``State DOT.''
Section 635.104
The FHWA amends 23 CFR 635.104 to state that the applicable
regulations pertaining to the ID/IQ contracting process found in this
rule apply to ID/IQ projects. In addition, no justification of cost
effectiveness is necessary in selecting projects for this method of
construction.
Section 635.107
The FHWA amends 23 CFR 635.107 to clarify that the disadvantaged
business enterprise program requirement will also apply to ID/IQ
projects.
Section 635.109
The FHWA amends 23 CFR 635.109 to provide that State DOTs are
strongly encouraged to use ``suspensions of work ordered by the
engineer'' clauses, and may consider ``differing site condition''
clauses and ``significant changes in the character of work'' clauses,
as appropriate, for contracts for ID/IQ projects.
Commenters addressed what changed conditions clause would be
appropriate for ID/IQ and JOC contracts including for significant
changes in the character of work. One State DOT recommended that the
content of this clause be left to the discretion of the State or local
contracting agency. Another State DOT recommended standard
specifications. Another State DOT stated that changes should be minimal
due to nature of work. It supports use of existing standard changed
conditions clauses with additional specificity left to the States. A
municipality recommended that the nature of any extra work should
relate to a specific work order. It recommended a 10 percent threshold
for higher authority approval. Another municipality provided its local
job order specification, which is tailored for ID/IQ. Another commenter
supported use of the standard changed condition clause of 23 CFR
635.109 and issuing a supplemental job order with pre-established
prices in the contract when changed conditions are encountered.
Finally, another State DOT recommended adjustments related to geography
and changes due to unknown utilities, design ambiguity, and other
factors. This commenter also suggested limiting the amount of changes
in scope from the original contract, such as to 30 percent of the
original contract.
Considering the comments, FHWA is not establishing specific
requirements
[[Page 72924]]
relating to standardized changed conditions clauses. The regulation
amends 23 CFR 635.109 to allow contracting agencies a choice regarding
the inclusion of clauses in that section or clauses developed locally,
as may be appropriate for the ID/IQ method. Consistent with the design-
build project delivery method, the regulation encourages contracting
agencies to incorporate the ``suspensions of work ordered by the
engineer'' clauses.
Section 635.110
The FHWA amends 23 CFR 635.110(f) to clarify that State DOTs may
use their own bonding, insurance, licensing, qualification or
prequalification procedure for any phase of ID/IQ procurement.
Section 635.112
The FHWA amends 23 CFR 635.112 to indicate that the FHWA Division
Administrator's approval of the solicitation document constitutes
FHWA's approval to use the ID/IQ contracting method and approval to
release the solicitation document. The amendment also provides that the
State DOT must obtain the approval of the FHWA Division Administrator
before issuing addenda which result in major changes to the
solicitation document.
Section 635.114
The FHWA amends 23 CFR 635.114 to clarify that the award of a
contract for an ID/IQ project and FHWA's concurrence in such award are
subject to the requirements in 23 CFR part 635 subpart F.
Section 635.309
The FHWA amends 23 CFR 635.309(q) to clarify what certification is
required as a prerequisite to FHWA authorization of physical
construction and final design activities. Since ID/IQ contracts may be
awarded before the completion of the NEPA process, FHWA establishes
specific certification requirements to apply to ID/IQ contracts.
ID/IQ Procedures and Requirements
The FHWA adds a new subpart F to 23 CFR part 635 to provide the
policies, requirements, and procedures relating to the use of ID/IQ
contracting. With the exception of approval of State DOT ID/IQ
procedures, all FHWA approval requirements established in this new
subpart would be subject to assumption by the State DOT in accordance
with 23 U.S.C. 106(c).
Section 635.601--Purpose
In 23 CFR 635.601, FHWA adds a paragraph describing that the
general purpose of subpart F is to prescribe the policies,
requirements, and procedures for the use of the ID/IQ contracting
method.
Section 635.602--Definitions
In 23 CFR 635.602, FHWA establishes definitions for certain terms
used in subpart F. The FHWA has found that contracting agencies and
practitioners use a variety of terms to describe the components of the
ID/IQ contracting method.
For clarity and simplicity of use, FHWA establishes eight
definitions associated with this regulation. Best value selection is
used to describe a process using both price and qualitative components
as a basis of award of contracts. Contracting agency means the State
DOTs, and any State or local government agency, public-private
partnership, or Indian Tribe (as defined in 2 CFR part 200) that is the
acting under the supervision of the State DOT and is awarding and
administering an ID/IQ contract. The term ID/IQ refers to a method of
contracting that allows an IQ of services for a fixed time. An ID/IQ
contract is used to describe the principal contract between the
contracting agency and the contractor under the ID/IQ method of
contracting. The term JOC refers to a specific form of ID/IQ
contracting, distinguished by its use of a unit price book in the
solicitation and the bidder's adjustment factors or multipliers to
establish contract prices. A JOC contract means a type of ID/IQ
contract delivered using the JOC method. The term NEPA process refers
to the applicable environmental reviews and has the same meaning as
defined in Subpart E. Unit price book is used to describe the document
that lists construction tasks, units of measure, and unit prices in the
JOC method of contracting. Work order is used to describe the contract
document issued for a definite scope of work under an ID/IQ contract.
Section 635.603--Applicability
In 23 CFR 635.603, FHWA establishes that the requirements of this
subpart apply to all Federal-aid construction projects except
engineering and design service contracts, to which 23 CFR part 172
applies, and Federal Lands Highway contracts, to which 48 CFR subpart
16.5 applies. The requirements do not apply to other non-construction
activities, such as the procurement of supplies, to which 2 CFR part
200 applies.
Section 635.604--ID/IQ Requirements
In 23 CFR 635.604, FHWA establishes requirements related to ID/IQ
solicitations, contracts, and the ID/IQ procurement process.
1. Provisions Relating to Fairness, Transparency, and Competition
In 23 CFR 635.604(a)(1), FHWA clarifies that the contracting agency
may procure the ID/IQ contract using applicable State or local
competitive selection procurement procedures if those procedures: (i)
Comply with 23 CFR 635.604; (ii) are effective in securing competition;
and (iii) do not conflict with applicable Federal laws and regulations.
The requirement for free and open competition is a fundamental
principle under 23 U.S.C. 112 for the procurement of all Federal-aid
highway projects.
Other requirements that apply to contracting agencies' ID/IQ
procedures are discussed below. Beyond these requirements, FHWA
believes that preserving contracting flexibility for contracting
agencies is consistent with contracting practices used by participants
in the ID/IQ SEP-14 experiments approved by FHWA and provides needed
flexibility to the States to manage Federal financial assistance under
23 U.S.C. 145.
In 23 CFR 635.604(a)(2) through 635.604(a)(4), FHWA establishes
several requirements that apply to contracting agencies' ID/IQ
procedures. In FHWA's experience, the information required under 23 CFR
635.604(a)(2)-(4) is needed to have an effective, fair, and transparent
procurement process. In addition, this information is typical of what
many of the contracting agencies that have utilized ID/IQ under SEP-14
have included in their solicitation documents.
Responding to the ANPRM, commenters suggested procedures to ensure
fairness and transparency in the selection and implementation of
multiple-award ID/IQ contracts. Suggestions related to work order
awards included considering contractor performance and work-load;
requiring secondary bidding (or bidding for individual work orders)
from all contractors in the contract pool; or offering the work order
to the lowest cost contractor, subject to the contractor's
availability.
In addition, commenters recommended the solicitations and contracts
clearly identify the procedures and criteria to be used by the
contracting agency to award work. Commenters also recommended public
posting of solicitations, selection
[[Page 72925]]
criteria, bidder questions and answers, bids, contract awards, and work
order awards.
Commenters also addressed how authorizations to proceed with work
should be given for individual work orders. One commenter recommended
that the process should follow the applicable stewardship and oversight
plan with FHWA. Multiple commenters indicated that in practice they
issue notices to proceed once the work order is authorized. Another
commenter uses a signed contract modification with the work order.
The FHWA believes the provisions established in this rulemaking
enable contracting agencies to ensure fairness and transparency in the
selection and implementation of both single-award and multiple-award
ID/IQ contracts. Section 635.604(a)(2) requires solicitations for ID/IQ
contracts to state the procedures and criteria the contracting agency
will use to award an ID/IQ contract. In addition, 23 CFR 635.604(a)(3)
requires that an ID/IQ contract, and any solicitation for an ID/IQ
contract, include: The period of the contract; whether optional
contract extensions will be used and for what period; the basis for
adjusting prices in optional contract extensions; the estimated minimum
and maximum quantity of services to be acquired; appropriate statements
of work generally describing the services to be acquired; the
procedures and selection criteria to be used to issue work orders; and
the dispute resolution procedures available to awardees in cases where
multiple awards are made.
To further ensure fairness and transparency, 23 CFR
635.604(a)(3)(ii) prohibits the use of Federal-aid funds for negotiated
contract price adjustments on optional contract extensions.
In addition to the general requirements for ID/IQ solicitations and
contracts, additional requirements for JOC solicitations and contracts
are listed in 23 CFR 635.604(a)(4). The FHWA believes these
requirements specific to JOC are necessary to ensure transparency and
consistency.
Regarding authorizations to proceed with work for individual work
orders, the comments responding to the ANPRM exhibited a variety of
locally developed procedures that agencies considered successful during
the SEP-14 Program. Considering this, FHWA is not requiring specific
methodology for the issuance of work orders under the IFR.
2. Provisions Relating to Selection of Contractors
Section 635.604(a)(5) allows a contracting agency's procurement
procedures to include selection of one or multiple contractors based on
competitive low bid or best value selection under a single
solicitation. Other than specifying that price must be included in the
analysis, FHWA neither specifies nor limits the best value factors an
agency may consider. For contracts awarded to multiple contractors
under a single solicitation, the issuance of work orders must be based
on lowest cost or lowest cost-plus time to the Government for the
specified work. The FHWA requires that work orders must not be issued
to contractors on a rotating basis or other non-competitive method.
Several commenters recommended that FHWA should permit multiple
awards under ID/IQ contracts, which is not allowed under Notice
N5060.2. One State DOT commented that multiple awards allow for greater
efficiency and require competition both at contract level and the work
order level, which increases competition overall. This commenter
explained that robust competition existed when it experimented with
this method under the SEP-14 Program. It also explained that multiple-
award contracts provide flexibility to States to use certain innovative
bidding practices. With multiple-award ID/IQ contracts, this commenter
explained that it achieved certain efficiencies in work order
transactions, increased contractor participation and competition, and
completed projects more quickly. Another State DOT also supported
multiple awards based on its experience and success with that method on
an experimental basis under the SEP-14 Program. Another State DOT
supported multiple-award contracts with individual work orders awarded
based on lowest bid using prices in the initial solicitation from
awarded contractors.
Another commenter argued that multiple-award contracts should be
allowed to maximize the flexibility of agencies to address project-
specific needs and requirements. This commenter also argued, however,
that secondary bidding for individual work orders should not be
required since competition on price will have already occurred at time
of initial bid. This commenter argued that secondary bidding would be
redundant, slow project delivery, allow for variance from the contract
pricing structure, and increase administrative burden.
Other commenters supporting multiple-award contracts cited reasons
that FHWA believes could potentially harm competition or violate
requirements of Title 23, U.S.C. For example, one municipality stated
that multiple-award contracts allow for ``spreading work evenly.''
Another municipality referred to the ability to use rotating and round-
robin selection methods under multiple-award contracts. Another
commenter referred to agencies issuing orders on a rotating basis or
equally distributing work to contractors. The FHWA believes these
objectives are inconsistent with the statutory competition requirements
under 23 U.S.C. 112.
Considering the comments, FHWA believes these provisions provide a
balance of allowing flexibility to contracting agencies on procurement
and selection procedures while also requiring contracting agencies to
secure free and open competition. The FHWA is not prohibiting secondary
bidding or bidding on individual work orders on multiple-award
contracts under this IFR, but FHWA agrees it could defeat certain
benefits and efficiencies gained by ID/IQ contracting. The FHWA will
also not require secondary bidding for individual work orders under
multiple-award contracts, provided that another competitive method of
selection is used based on prices and other terms set forth in the
contract.
Although FHWA is allowing multiple-award contracts, they must not
be used in non-competitive ways that are inconsistent with the
requirements of Title 23, U.S.C. When administering multiple-award
contracts, State DOTs and other contracting agencies must continue to
ensure that they comply with the requirement to secure competition
effectively under 23 U.S.C. 112. To address this, the regulation
provides that work orders shall not be issued to contractors on a
rotating basis or other non-competitive method.
In addition to recommending FHWA permit multiple-award ID/IQ
contracts, commenters also addressed whether FHWA should allow best
value considerations in awarding ID/IQ contracts. All responsive
comments supported allowing best value considerations.
Considering the comments, FHWA allows, but does not require, best
value considerations in awarding ID/IQ contracts. Under the IFR,
contracting agencies may determine the appropriate best value factors
or considerations to use in combination with price. The FHWA neither
specifies nor limits the best value factors an agency may consider--
except that price must be
[[Page 72926]]
included. The FHWA also notes that best value considerations must not
restrict competition.
The FHWA is aware that many contracting agencies utilize a method
that monetizes construction completion time and uses that value as a
factor in analyzing and awarding bids, commonly known as ``A+B''
bidding. The FHWA anticipates that this or similar contracting methods
may be used in soliciting and awarding ID/IQ contracts in a manner
consistent with the procedures set forth in the IFR.
3. Provisions Relating to Duration of Contract and Extension Periods
In 23 CFR 635.604(a)(6), FHWA prohibits the sum of the duration of
the initial ID/IQ contract and any optional contract extensions from
exceeding 5 years. The contracting agency may include a provision in
the ID/IQ contract to exercise an option to extend the contract for a
term that does not exceed the initial duration of the ID/IQ contract.
Provided that the duration of the base contract and extension periods
do not exceed 5 years, the ID/IQ contract may include multiple options
and extension periods.
Most commenters argued in favor of allowing base contracts of 1-5
years with various extension options. They believed that longer
contract terms and the availability of extensions allow flexibility and
reduce administrative burden on States. Another State DOT argued that
minimum and maximum contract lengths should not be pre-determined by
regulation, and that States should be allowed to use their own
processes to make those determinations. The FHWA believes the
provisions in this IFR provide a balance of allowing flexibility to
contracting agencies on the length of contract terms and extensions
while also setting reasonable limits to account for risk, inflation,
and transparency.
Section 635.604(a)(6)(i) establishes that, prior to granting a
contract extension, the contracting agency must receive concurrence
from the Division Administrator. The FHWA believes requiring this
concurrence is consistent with the requirements of 23 U.S.C. 112. In
addition, for ID/IQ contracts where prevailing wages apply under 23
U.S.C. 113, 23 CFR 635.604(a)(6)(ii) establishes that the current
prevailing wage rate determination, as determined by the U.S.
Department of Labor (DOL), to be in effect on the date of the execution
of the contract extension shall apply to work covered under the
contract extension. The FHWA believes this provision is necessary to
conform with DOL policy as outlined in its All Agency Memorandum No.
157, as clarified in the Federal Register on November 20, 1998, at 63
FR 64542.
Section 635.604(a)(6)(iii) provides that, for ID/IQ contracts
exceeding 1 year in duration, the contracting agency may use price
escalation methods, such as referring to a published index, to adjust
the payment for items of work in the issuance of work orders. Such
price escalation methods, however, shall not be applied to items of
work when those items are separately covered under commodity price
escalation clauses in the ID/IQ contract. The FHWA believes this
provision is necessary to avoid improper compounding of overlapping
escalation factors. For example, if a contracting agency normally
applies a commodity price escalation clause based upon a published
index for steel and iron items, this index would account for changes in
the material's cost relative to the time the contract was bid. The FHWA
believes it would be improper and duplicative also to apply a price
escalation method based on the duration of the ID/IQ contract or
optional extension to steel and iron items, in this example, because
changes in material costs have already been accounted for.
4. Provisions Relating to Certain Payments Ineligible for Federal-Aid
Participation
Section 635.604(a)(7) clarifies that a contracting agency's payment
to a contractor to satisfy a minimum award provision that is not
supported by eligible work is not eligible for Federal-aid
participation. The FHWA recognizes some State and local procurement
rules may require a minimum award provision. The FHWA anticipates rare
situations where a contracting agency executes an ID/IQ contract but
does not receive work from a contractor and is required to make payment
to the contractor to satisfy the agency's minimum award provision. The
FHWA believes it would be improper for Federal-aid funds to participate
in such a payment if insufficient eligible work is performed to support
the payment.
5. Other Miscellaneous ID/IQ Requirements
Section 635.604(b) clarifies that the requirements of 49 CFR part
26 and the State's approved DBE plan apply to ID/IQ contracts. The ID/
IQ contracting method by its nature is less predictable regarding the
total amount of procured work, as compared to traditional contracting
methods. Thus, FHWA believes the regulation should provide State DOTs
the option of how to apply DBE contract or project goal setting and
goal attainment, either to ID/IQ contracts in their entirety, or to
individual work orders for ID/IQ contracts with single or multiple
awards, or both.
Section 635.604(c) clarifies that, at the option of the State DOT,
the minimum prime contractor participation requirement set forth at 23
CFR 635.116 may be applied over the entirety of the ID/IQ contract or
applied to each individual work order. The solicitation shall specify
the applicable requirements.
Commenters addressed how the 30 percent self-performance
requirement in 23 CFR 635.116(a) would apply to ID/IQ contracts and JOC
contracts. Commenters appear to believe that contracting agencies
should have the discretion to determine how to meet the minimum self-
performance requirement under 23 CFR 635.116(a) in this context. The
FHWA agrees with these comments and establishes that the minimum self-
performance requirement will continue to apply to ID/IQ contracts, but
it may be applied either over the entirety of the ID/IQ contract or to
each individual work order. To ensure transparency, the regulation also
requires the solicitation to specify the applicable requirements
related to satisfying 23 CFR 635.116(a).
In 23 CFR 635.604(d), FHWA requires that when a contracting
agency's processes or procedures use project cost to establish the
assessed rate of liquidated damages under 23 CFR part 635.127, the work
order cost must be used to determine the rate when liquidated damages
are assessed. Since an individual work order is a smaller part of a
larger ID/IQ contract, FHWA believes this clarification is necessary to
reduce confusion and the disproportionate application of liquidated
damages.
In 23 CFR 635.604(e), FHWA clarifies that nothing in this subpart
shall be construed as prohibiting a State DOT from adopting more
restrictive policies and procedures than contained herein regarding ID/
IQ contracts.
Section 635.605--Approvals and Authorizations
Section 635.605 outlines requirements to establish the relationship
between the ID/IQ procurement process and the NEPA process. The
requirements in this section are designed to protect the integrity of
the NEPA decision-making process because the solicitation and award of
an ID/IQ contract will often occur before the completion of the NEPA
process.
Through ID/IQ projects under the SEP-14 process, FHWA found that
the NEPA process often cannot be
[[Page 72927]]
completed until specific work locations are identified. The FHWA
believes certain requirements preclude FHWA from authorizing final
design and construction to proceed, or from obligating funds for final
design and construction work, prior to completing the NEPA decision-
making process; these requirements include 23 U.S.C. 112(c), 23 CFR
630.106, and 23 CFR 771.113(a). The FHWA thus establishes the
requirements set forth in the following sections.
To call attention to the indefinite nature of the ID/IQ contracting
method, 23 CFR 635.605(a)(1) stipulates that the solicitation for an
ID/IQ contract may identify all, some, or none of the specific
locations where construction is to be required under the contract.
To expedite project delivery, 23 CFR 635.605(a)(2) and (a)(3) allow
a contracting agency to solicit and award an ID/IQ contract prior to
completion of the NEPA process or processes, as applicable. In
addition, FHWA requires prior concurrence of the Division Administrator
for these actions, which FHWA believes is consistent with other project
delivery methods and is necessary to conform with the requirements of
23 U.S.C. 112.
To protect the NEPA decision-making process, 23 CFR 635.605(a)(4)
prohibits the execution of an authorization to proceed and formal
project agreement under 23 CFR 630.106 for final design and
construction for the portion of an ID/IQ contract for work until the
NEPA process has been completed for said work.
The FHWA anticipates that, through the duration of an ID/IQ
contract, additional work locations will be identified by the
contracting agency and the NEPA process will be completed for these
locations. To address this, 23 CFR 635.605(a)(5) allows for
modifications to the formal project agreement to accommodate the
additional work.
In the ANPRM, FHWA solicited input regarding the agreement
estimates required under 23 CFR 635.115, which must be submitted to
FHWA Division Offices for use in the preparation of project agreements.
The FHWA asked whether the estimate should be of the minimum value
provided under the contract, the estimate for the base contract, or the
estimated maximum value under the contract including contract
extensions.
The FHWA considered the widely varied responses the commenters
provided as well as the requirements of 23 CFR 771.113(a) regarding the
relationship between the completion of required environmental reviews
and the obligation of funds for final design and construction. Section
635.605(a)(6) establishes that the agreement estimate for final design
or physical construction of an ID/IQ contract must not exceed the
actual or best estimated costs of items necessary to complete the scope
of work considered in applicable work orders and in the completed NEPA
processes since the estimate serves as the basis for the obligation of
funds pursuant to 23 CFR 630.106(a)(3), and to satisfy the requirements
of 23 CFR 771.113(a). The estimate also must be adjusted as necessary
as set forth under 23 CFR 630.106(a)(4).
The FHWA recognizes that a contracting agency may use a project
estimate developed for planning purposes under 23 CFR part 450 as it
develops its ID/IQ solicitation. However, for projects to which NEPA
applies, the allowable amount of an agreement estimate for final design
or physical construction of an ID/IQ contract is determined after the
NEPA process is complete.
In 23 CFR 635.605(b)(1), subject to the requirements in subpart F,
the contracting agency may request Federal participation in the costs
associated with an ID/IQ contract, or portion of a contract. In such
cases, FHWA's construction contracting requirements will apply to all
ID/IQ contract work orders if any ID/IQ contract work orders are funded
with Title 23, U.S.C. funds. This provision is consistent with other
project delivery methods. The FHWA believes this provision is necessary
to ensure the ID/IQ contract is compliant with applicable Federal
requirements, even if some portion of that contract's expenses are
funded with non-Federal-aid funds. Further, any expenses incurred
before FHWA authorization shall not be eligible for reimbursement
except as may be determined in accordance with 23 CFR 1.9.
The FHWA anticipates contracting agencies may use an ID/IQ contract
for multiple purposes during the contract period, such as for both
planned work and emergency work. These situations may include separate
Federal funding sources with differing Federal share payable
requirements. Section 635.605(b)(2) permits contracting agencies such
flexibility while also requiring the applicable Federal share
requirements for each work order be specified in the relevant project
agreements.
Section 635.606--ID/IQ procedures
In 23 CFR 635.606(a), a State DOT must submit its proposed ID/IQ
procurement procedures to the Division Administrator for review and
approval. Following approval by the Division Administrator, any
subsequent changes in procedures and requirements are also subject to
approval by the Division Administrator before they are implemented.
This review and approval is consistent with 23 U.S.C. 112(a), and is
necessary to facilitate efficient administrative oversight of a State
DOT's ID/IQ procurement process for compliance with Federal
requirements. The FHWA's approval of the State DOT's process will
eliminate the need for FHWA to review and evaluate the State DOT's ID/
IQ procurement process on a project-by-project basis, subject to the
terms of the Stewardship and Oversight Agreement between FHWA and the
State DOT. This review and approval is consistent with other project
delivery methods. Other contracting agencies may follow approved State
DOT procedures in their State or their own procedures if approved by
both the State DOT and FHWA. The Division Administrator's approval of
ID/IQ procurement procedures is a program-level action and may not be
delegated or assigned to the State DOT.
The FHWA establishes the parameters for the Division
Administrator's approval of the State DOT's ID/IQ procedures. Under 23
CFR 635.606(b), the Division Administrator would be required to review
a State DOT's ID/IQ procedures to verify that the procedures do not
operate to restrict competition and conform to the requirements of
applicable Federal regulations.
In 23 CFR 635.606(c), FHWA requires that ID/IQ procurement
procedures document several procedures and responsibilities. The
procedures and responsibilities listed relate to changes in this
regulation and have been identified by FHWA as being sufficiently
different under ID/IQ procurement when compared to other project
delivery methods. As such, FHWA believes these procedures and
responsibilities warrant having a documented and approved process to
ensure compliance with applicable Federal requirements.
The FHWA is aware that some agencies combine the design-build
contracting method with ID/IQ contracting. One commenter recommended
that FHWA should allow a small percentage of design work to be
performed under ID/IQ contracts when needed. In 23 CFR 635.606(d), FHWA
clarifies that, subject to the approval of the Division Administrator
as described in 23 CFR 635.606(a), contracting agencies may incorporate
the design-build contracting method with ID/IQ contracts. In addition
to the requirements of subpart F, the contracting agency must include
[[Page 72928]]
procedures as needed to ensure compliance with 23 CFR part 636 and
related requirements.
Request for Comments on Specific Issues
Amendments to FHWA's current policies for reviewing and approving
ID/IQ projects are necessary to allow this contracting technique on a
permanent basis. To assist the Agency in this effort, FHWA seeks public
comments on the following specific questions in addition to comments on
its attempt to quantify cost savings from the regulation and the
regulatory text:
1. Section 635.604(a)(3)(iii): To ensure transparency and effective
competition, should FHWA require contracting agencies to provide
estimated minimum and maximum quantities of services in both ID/IQ
solicitations and contracts? Or should FHWA require such estimates for
any other reason?
2. Section 635.604(a)(3)(iii): Should FHWA require contracting
agencies to specify in ID/IQ solicitations and contracts the estimated
maximum or minimum quantities that may be expected under each work
order?
3. Section 635.604(a)(5): When using multiple-award contracts, what
criteria should, or should not be used, to issue work orders?
4. Section 635.604(a)(5): When using multiple-award contracts, are
typical cause and convenience termination clauses sufficient to remove
contractors from the pool of those to be considered when issuing work
orders, when those contractors are not meeting the terms of the
contract?
5. Section 635.605: What procedures can be implemented to review
efficiently and approve small, preventive maintenance projects that
provide for a very limited scope of work at numerous locations (e.g.,
impact attenuator repair, guardrail repair, pavement marking projects,
etc.)?
6. Section 635.606(d): When using ID/IQ procedures within a design-
build contract, what procedures should be in place to ensure compliance
with this subpart, 23 CFR part 636, and related requirements?
7. In this IFR, FHWA attempted to quantify cost savings resulting
from increasing administrative efficiency but lacked sufficient data to
quantify cost savings based on: (a) Expediting project delivery; and
(b) reducing project or construction costs. Compared to a baseline
scenario under which ID/IQ contracting is not allowed, and apart from
cost savings based on increasing administrative efficiency (as
addressed in this IFR), do you expect State DOTs to achieve additional
cost savings based on (a) or (b)? If so, how much? What is your
estimate based on? What data, if any, is available and may be used to
support and quantify any such cost savings?
8. Assuming ID/IQ contracting was not allowed (either
experimentally or operationally), approximately how many traditional
construction contracts would a State DOT process in a typical year? Of
those contracts, what percentage do you anticipate the State DOT in
your State would process using the ID/IQ contracting method if allowed
in the form required by this IFR?
9. Approximately how long does it take State DOTs to administer a
traditional contract as discussed in Question 8?
10. Approximately how long does it take to administer an ID/IQ
contract as discussed in Question 8?
Rulemaking Analyses and Notices
All comments received before the close of business on the comment
closing date indicated above will be considered and will be available
for examination in the docket at the above address. Comments received
after the closing date will be filed in the docket and will be
considered to the extent practicable, but FHWA may issue a final rule
at any time after the close of the comment period. In addition to late
comments, FHWA will also continue to file relevant information in the
docket as it becomes available after the comment closing date, and
interested persons should continue to examine the docket for new
material.
The FHWA has determined that prior notice and opportunity for
comment are unnecessary under 5 U.S.C. 553(b)(3)(B) because this IFR
does not impose any new obligation or requirement on the States or
highway contractors. Instead it simply enables ID/IQ contracting for
Federal-aid highway construction on a permanent basis and thus provides
benefits to State DOTs and other contracting agencies including
expediting project delivery, increasing administrative efficiency,
reducing project costs, and increasing flexibility for State DOTs to
use Federal-aid funds on certain projects. Furthermore, prior notice
and an opportunity for public comment is contrary to the public
interest because allowing States DOTs to utilize this method of
contracting as soon as possible would promote economic recovery.
Because of the Coronavirus Disease (COVID-19) public health emergency,
and in response to E.O. 13924, ``Regulatory Relief to Support Economic
Recovery'' (issued on May 22, 2020), FHWA believes this IFR would
promote job creation and economic growth. Many State DOTs and Local
Public Agencies are already familiar with this method of contracting
and could begin using it in a very short period of time. ID/IQ
contracting also offers an opportunity to streamline procurement
through bundling similar-type projects, which reduces the contracting
agencies' administrative overhead by having fewer contracts to prepare,
advertise, and award. In addition, ID/IQ would provide more flexibility
to States that are struggling with reduced budgets and programming of
projects due to COVID-19 issues.
For these reasons, FHWA finds good cause to forgo further
procedures for notice and opportunity for comment under 5 U.S.C.
553(b)(3)(B). For these same reasons, this IFR is effective upon its
date of publication under 5 U.S.C. 553(d)(3) and, therefore, is exempt
from the 30-day delayed effective date requirement of that section for
these same reasons. Nonetheless, this IFR includes a 60-day comment
period. The FHWA will consider and address any submitted comments in a
final rule that will follow this IFR.
Executive Order 12866 (Regulatory Planning and Review), Executive Order
13563 (Improving Regulation and Regulatory Review), Executive Order
13771 (Reducing Regulations and Controlling Regulatory Costs), and DOT
Policies and Procedures for Rulemaking (49 CFR Part 5, Subpart B)
The FHWA has determined that this action would not be a significant
regulatory action within the meaning of Executive Order (E.O.) 12866,
and within the meaning of DOT's Policies and Procedures for Rulemaking
(49 CFR part 5, subpart B). This action complies with EOs 12866, 13563,
and 13771 to improve regulation. The FHWA anticipates that the economic
impact of this rulemaking would be minimal. The FHWA anticipates that
the rule would not adversely affect, in a material way, any sector of
the economy. In addition, these changes would not interfere with any
action taken or planned by another agency and would not materially
alter the budgetary impact of any entitlements, grants, user fees, or
loan programs.
Although FHWA has determined that this action would not be a
significant regulatory action, this action is expected to be an E.O.
13771 deregulatory action because it would generate cost savings. These
cost savings, measured in 2019 dollars and discounted at 7 percent, are
expected to be $3.4 million per year. These cost savings are generated
by allowing ID/IQ contracting on a permanent basis. States' experience
[[Page 72929]]
shows that ID/IQ contracting can lead to cost savings due to increased
administrative efficiency, faster project delivery, and reduced project
costs. By granting States the flexibility to use ID/IQ contracting,
they can achieve the associated cost savings.
Currently, as explained in more detail above, there are two methods
available to approve ID/IQ contracts for use on Federal-aid highway
construction projects:
1. Special Experimental Project Number 14: Under the SEP-14
Program, contracting agencies interested in testing an innovative
contracting technique submit project-specific (or programmatic) work
plans to FHWA for their implementation. The FHWA Division Office
evaluates the work plan, coordinates with FHWA Headquarters, and, if it
finds the work plan to be acceptable, FHWA approves the use of the
technique on a temporary basis for a project or group of pilot
projects.
2. FHWA Notice N5060.2: Under Notice N5060.2, an ID/IQ contract not
requiring advance approval under the SEP-14 Program must satisfy
certain conditions, including that the contract must be: Low-cost (the
total value of task or work orders may not exceed $2,000,000 per year
on average over the contract term); short-term (a base contract of 1 to
2 years); awarded by competitive bidding to the lowest responsive
bidder; a single-award contract; qualified for a NEPA categorical
exclusion listed under 23 CFR 771.117; and compliant with certain other
laws and regulations related to Federal-aid construction. Additional
requirements are detailed in FHWA Notice 5060.2.
These approval methods are only authorized experimentally and on a
temporary basis. To estimate the cost savings from operationalizing ID/
IQ contracting on a permanent basis, FHWA compared a baseline scenario
under which ID/IQ contracting is undertaken for 32 contracts per year
under the SEP-14 Program, based on the historical record, with the
scenario established by the rule. The SEP-14 Program historical average
assumes that approximately two to three States actively use ID/IQ
contracting each year. Some States have also sought approval for
individual contracts.\4\
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\4\ The survey responses in Appendix A of NCHRP Synthesis 473
were averaged to determine that each State surveyed undertakes
approximately 10.5 contracts per year. FHWA assumes this average was
consistent for States undertaking ID/IQ using the SEP-14 Program.
The full listing of ID/IQ SEP-14 Program projects can be found at:
https://www.fhwa.dot.gov/programadmin/contracts/sep14list.cfm.
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To conduct the analysis, FHWA used the evaluations of ID/IQ
contracts required under the SEP-14 Program, ANPRM comments, and
responses to NCHRP Synthesis 473: Indefinite Delivery/Indefinite
Quality Contracting Practices. The estimates used within the analysis
are based on this small sample of data. The FHWA welcomes additional
feedback on potential impacts of using ID/IQ contracts.
The FHWA estimated cost savings over an 11-year analysis period,
with year one modeled as an implementation year, assuming lower than
normal contracting volume as contracting processes take time to plan
and initiate in general, and two 5-year contract cycles. Elapsed
contracting times, based on agency estimates, were converted to labor
hours, assuming a standard 40-hour work week. These labor hours were
monetized using a mix of State employee wage rates.\5\ To account for
the cost of employer provided benefits, wage rates were multiplied by a
factor of 1.43.\6\
---------------------------------------------------------------------------
\5\ BLS May 2018 National Industry-Specific Occupational
Employment and Wage Estimates NAICS 999200--State Government,
excluding schools and hospitals (OES Designation). Three employees
are expected to work on the contracts: Buyers and Purchasing Agents
(13-1020), Purchasing Manager (11-3061), and Procurement Clerk (43-
3061). The weighted average wage rate is $26.65.
\6\ BLS Employer Costs for Employee Compensation, December 2018,
Table 5 (page 9) State and Local Government, Management,
Professional, and Related Occupations. For this group, 70.0 percent
of employee compensation is wages and the remainder is the cost of
benefits, which suggests factoring wages by 1.43 (100%/70%) to
estimate the total cost of compensation. The adjusted weighted
average wage rate is $38.12.
\6\ The survey responses to question 8, catalogued in Appendix A
of NCHRP Synthesis 473 were averaged to determine that each State
surveyed undertakes approximately 10.5 contracts per year.
---------------------------------------------------------------------------
The NCHRP Synthesis 473 included survey responses for how many new
ID/IQ contracts are awarded each year by each State agency. The average
of these responses was multiplied by 50 States, assuming all States
will implement ID/IQ contracting using the rule.\7\ One major advantage
of ID/IQ contracting is the ability to issue a work order instead of
making a separate, time-intensive traditional contract. The average
number of work orders per contract (9) reported by agencies was
multiplied by expected domestic ID/IQ contracts annually to estimate
total work orders issued per year. Based on data presented within NCHRP
Synthesis 473, approximately 4 percent of work orders will be processed
separately using ID/IQ, rather than with traditional contracts.\8\
Furthermore, the number of work orders was further scaled down by 30
percent because FHWA assumes smaller work orders would not have been
done as traditional contracts. The cost savings associated with avoided
traditional contracts was monetized using this conversion rate, and the
estimated elapsed time difference between issuing a work order versus a
new traditional contract. The estimate incorporates a modest assumed
growth rate of 1 percent for contracts and work orders per contract
annually.
---------------------------------------------------------------------------
\7\ The survey responses to question 8, catalogued in Appendix A
of NCHRP Synthesis 473 were averaged to determine that each State
surveyed undertakes approximately 10.5 contracts per year.
\8\ Minnesota DOT reports that 1 of 24 work orders (4 percent)
would be eligible for ID/IQ.
---------------------------------------------------------------------------
The FHWA estimates that an average traditional contract takes 911
hours to complete, whereas an ID/IQ contract takes 272 hours, leading
to total time savings of 639 hours per contract. The FHWA assumes
administrative time savings from this action will account for
approximately 25 percent, or 160 hours (639 hours x 0.25), of the
shortened contract time. In addition to the administrative savings per
contract, a small amount of time savings is estimated to avoid the need
for new contracts altogether, based on having ID/IQ contracts in place.
The FHWA estimates administrative time savings of approximately 25
percent of the traditional contract time, or 228 hours saved per
avoided contract (911 hours x 0.25).
The per contract time savings were multiplied by the number of
contracts and wage rates to determine total savings. For example, in
2021, FHWA assumes 499 ID/IQ contracts will lead to 79,695 hours saved
(499 contracts x 160 hours) and 57 avoided traditional contracts will
lead to 12,980 hours saved (57 contracts x 228 hours), for total
administrative time savings of 92,675 hours (79,695 hours + 12,980
hours). Dollars saved were calculated in a similar manner by applying
wage rates to the administrative time savings. In 2021 this led to
approximately $3.0 million in savings generated by using ID/IQ
contracts and $505,000 in savings, leading to total 2021 cost savings
of approximately $3.5 million. In future years FHWA assume the number
of contracts will grow by approximately 1 percent.
Aggregating over the 11-year analysis period leads to total time
savings of approximately 1.0 million hours from the use of ID/IQ
contracts. This leads to total undiscounted cost saving of $38.8
million. When discounted at 7 percent and 3 percent present value, the
cost savings equal approximately $25.8 million and $32.3 million,
respectively.
[[Page 72930]]
Table 1 shows these costs savings for the analysis period.
Table 1--ID/IQ Administrative Cost Savings
--------------------------------------------------------------------------------------------------------------------------------------------------------
Expected Total cost Total cost
Expected new traditional Total cost savings savings
Year ID/IQ contracts Hours saved savings (discounted (discounted
contracts avoided (undiscounted) at 7%) at 3%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2020.................................................... 231 26 42,818 $1,632,031 $1,525,263 $1,584,496
2021.................................................... 499 57 92,675 3,532,317 3,085,263 3,329,548
2022.................................................... 504 58 93,733 3,572,637 2,916,336 3,269,469
2023.................................................... 509 59 94,804 3,613,461 2,756,692 3,210,513
2024.................................................... 514 61 95,888 3,654,796 2,605,819 3,152,659
2025.................................................... 519 62 96,986 3,696,648 2,463,233 3,095,884
2026.................................................... 524 63 98,098 3,739,025 2,328,477 3,040,170
2027.................................................... 530 64 99,224 3,781,935 2,201,121 2,985,495
2028.................................................... 535 66 100,364 3,825,385 2,080,756 2,931,839
2029.................................................... 540 67 101,518 3,869,383 1,966,998 2,879,184
2030.................................................... 546 68 102,687 3,913,936 1,859,483 2,827,511
-----------------------------------------------------------------------------------------------
Total............................................... 5,452 651 1,018,794 38,831,555 25,789,440 32,306,768
--------------------------------------------------------------------------------------------------------------------------------------------------------
In addition to the cost savings that have been quantified here,
there may be additional positive impacts from the rulemaking related to
allowing ID/IQ contracts. Many of the SEP-14 evaluations claim that,
along with administrative savings, the agencies saw savings in the
construction phase, getting lower prices than they were quoted with
traditional contracting. These construction cost savings were not
quantified but are likely to be significant and will lead to increased
efficiency and quickened construction timelines.
Although FHWA has undertaken various efforts to grant States the
flexibility to use ID/IQ contracts, specifically through the SEP-14
Program, to the extent that the current rules and guidance discourage
their use, this rule removes those barriers.
Regulatory Flexibility Act
In compliance with the Regulatory Flexibility Act (Pub. L. 96-354,
5 U.S.C. 601-612), FHWA has evaluated the effects of this action on
small entities and has determined that the action is not anticipated to
have a significant economic impact on a substantial number of small
entities. The amendment addresses obligation of Federal funds to States
for Federal-aid highway projects. As such, it affects only States and
States are not included in the definition of small entity set forth in
5 U.S.C. 601. Therefore, FHWA certifies that the action will not have a
significant economic impact on a substantial number of small entities.
Unfunded Mandates Reform Act of 1995
This rule would not impose unfunded mandates as defined by the
Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4, 109 Stat. 48,
March 22, 1995) as it will not result in the expenditure by State,
local, Tribal governments, in the aggregate, or by the private sector,
of $155 million or more in any 1 year (2 U.S.C. 1532 et seq.). In
addition, 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 Federal-aid highway program
permits this type of flexibility.
Executive Order 13132 (Federalism)
This action has been analyzed in accordance with the principles and
criteria contained in E.O. 13132 dated August 4, 1999, and FHWA has
determined that this action would not have a substantial direct effect
or sufficient federalism implications on the States. The FHWA has also
determined that this action would 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 E.O.
12372 regarding intergovernmental consultation on Federal programs and
activities apply to this program. Local entities should refer to the
Catalog of Federal Domestic Assistance Program Number 20.205, Highway
Planning and Construction, for further information.
Paperwork Reduction Act
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501,
et. seq.), Federal agencies must obtain approval from OMB for each
collection of information they conduct, sponsor, or require through
regulations. The FHWA has determined that the rule does not contain
collection of information requirements for the purposes of the PRA.
National Environmental Policy Act
The FHWA has analyzed this action for the purpose of the National
Environmental Policy Act of 1969, as amended (42 U.S.C. 4321 et seq.),
and has determined that this action would 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).
Executive Order 13175 (Tribal Consultation)
The FHWA has analyzed this action under E.O. 13175, dated November
6, 2000, and believes that the action would not impose substantial
direct compliance costs on Indian Tribal governments; and would not
preempt Tribal laws. The rulemaking addresses obligations of Federal
funds to States for Federal-aid highway projects and would not impose
any direct compliance requirements on Indian Tribal governments. To the
extent that Tribes utilize these regulations, they would be expected to
derive the same benefits identified above. Therefore, a Tribal summary
impact statement is not required.
[[Page 72931]]
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
23 CFR part 630
Government contracts, grant programs-transportation, highway
safety, highways and roads, reporting and recordkeeping requirements,
traffic regulations.
23 CFR part 635
Grant programs-transportation, highways and roads, reporting and
recordkeeping requirements.
Nicole R. Nason,
Administrator, Federal Highway Administration.
For the reasons stated in the preamble, FHWA amends title 23, Code
of Federal Regulations, parts 630 and 635 as follows:
PART 630--PRECONSTRUCTION PROCEDURES
0
1. Revise the authority citation for part 630 to read as follows:
Authority: 23 U.S.C. 106, 109, 112, 115, 315, 320, and 402(a);
Sec. 1303 of Pub. L. 112-141, 126 Stat. 405; Sec. 1501 and 1503 of
Pub. L. 109-59, 119 Stat. 1144; Pub. L. 105-178, 112 Stat. 193; Pub.
L. 104-59, 109 Stat. 582; Pub. L. 97-424, 96 Stat. 2106; Pub. L. 90-
495, 82 Stat. 828; Pub. L. 85-767, 72 Stat. 896; Pub. L. 84-627, 70
Stat. 380; 23 CFR 1.32 and 49 CFR 1.85.
Subpart A--[Amended]
0
2. In subpart A, revise all references to ``STD'' to read ``State
DOT''.
0
3. Amend Sec. 630.106 by revising the first sentence of paragraph
(a)(1) and adding paragraph (a)(9) to read as follows:
Sec. 630.106 Authorization to proceed.
(a)(1) The State Department of Transportation (State DOT) must
obtain an authorization to proceed from the FHWA before beginning work
on any Federal-aid project. * * *
* * * * *
(9) For Indefinite Delivery/Indefinite Quantity projects, the
execution or modification of the project agreement for final design or
physical construction, and authorization to proceed, shall not occur
until after the completion of the NEPA process.
* * * * *
0
4. Amend Sec. 630.112 by revising paragraphs (c)(3) and (4) to read as
follows:
Sec. 630.112 Agreement provisions.
* * * * *
(c) * * *
(3) Drug-free workplace. By signing the project agreement, the
State DOT agrees to maintain a drug-free workplace, identify all known
workplaces under Federal awards, and fulfill other responsibilities
required by 49 CFR part 32.
(4) Suspension and debarment verification. By signing the project
agreement, the State DOT agrees to verify that contractors are not
excluded through suspension or debarment, as required by 2 CFR parts
180, subpart C, and 1200.
* * * * *
Subpart B--Plans, Specifications, and Estimates
0
5. Amend Sec. 630.205 by revising paragraphs (d) and (e) to read as
follows:
Sec. 630.205 Preparation, submission, and approval.
* * * * *
(d) The State DOT shall be advised of approval of the PS&E by the
FHWA.
(e) No project or part thereof for actual construction shall be
advertised for contract nor work commenced by force account until the
PS&E has been approved by the FHWA and the State DOT has been so
notified, except in the case of an Indefinite Delivery/Indefinite
Quantity project conforming to the requirements of 23 CFR part 635
subpart F.
PART 635--CONSTRUCTION AND MAINTENANCE
0
6. The authority citation for part 635 continues to read as follows:
Authority: Sections 1525 and 1303 of Pub. L. 112-141, Sec. 1503
of Pub. L. 109-59, 119 Stat. 1144; 23 U.S.C. 101 (note), 109, 112,
113, 114, 116, 119, 128, and 315; 31 U.S.C. 6505; 42 U.S.C. 3334,
4601 et seq.; Sec. 1041(a), Pub. L. 102-240, 105 Stat. 1914; 23 CFR
1.32; 49 CFR 1.85(a)(1).
0
7. In part 635, revise all references to ``STD'' to read ``State DOT''.
Subpart A--Contract Procedures
0
8. Amend Sec. 635.102, by adding in alphabetical order the definition
of ``Indefinite Delivery/Indefinite Quantity (ID/IQ) Project'' and
revising the definition of ``State Department of Transportation (State
DOT)'' to read as follows:
Sec. 635.102 Definitions.
* * * * *
Indefinite Delivery/Indefinite Quantity (ID/IQ) Project means a
project to be developed using one or more ID/IQ contracts.
* * * * *
State department of transportation (State DOT) means that
department, commission, board, or official of any State charged by its
laws with the responsibility for highway construction. The term
``State'' should be considered equivalent to State DOT if the context
so implies. In addition, State Highway Agency (SHA), State
Transportation Agency (STA), State Transportation Department, or other
similar terms should be considered equivalent to State DOT if the
context so implies.
* * * * *
0
9. Amend Sec. 635.104 by adding a new paragraph (e) to read as
follows:
Sec. 635.104 Method of construction.
* * * * *
(e) In the case of an ID/IQ project, the requirements of subpart F
of this part and the appropriate provisions pertaining to the ID/IQ
method of contracting in this part will apply. However, no
justification of cost effectiveness is necessary in selecting projects
for the ID/IQ delivery method.
0
10. Amend Sec. 635.107 by revising paragraph (b) to read as follows:
Sec. 635.107 Participation by disadvantaged business enterprises.
* * * * *
(b) In the case of a design-build, a CM/GC, or an ID/IQ project
funded with title 23 funds, the requirements of 49 CFR part 26 and the
State's approved DBE plan apply.
0
11. Amend Sec. 635.109 by adding paragraph (d) to read as follows:
Sec. 635.109 Standardized changed condition clauses.
* * * * *
(d) For ID/IQ projects, State DOTs are strongly encouraged to use
``suspensions of work ordered by the engineer'' clauses, and may
consider ``differing site condition'' clauses and ``significant changes
in the character of work'' clauses, as appropriate.
0
12. Amend Sec. 635.110 by revising paragraph (e) and the first
sentence of paragraph (f) to read as follows:
Sec. 635.110 Licensing and qualification of contractors.
* * * * *
[[Page 72932]]
(e) Contractors who are currently suspended, debarred or
voluntarily excluded under 2 CFR parts 180 and 1200, or otherwise
determined to be ineligible, shall be prohibited from participating in
the Federal-aid highway program.
(f) In the case of design-build, CM/GC, and ID/IQ projects, the
State DOTs may use their own bonding, insurance, licensing,
qualification or prequalification procedure for any phase of
procurement.
* * * * *
0
13. Amend Sec. 635.112 by revising paragraph (g) and adding paragraph
(k) to read as follows:
Sec. 635.112 Advertising for bids and proposals.
* * * * *
(g) The State DOT shall include the lobbying certification
requirement pursuant to 49 CFR part 20 and the requirements of 2 CFR
parts 180 and 1200 regarding suspension and debarment certification in
the bidding documents.
* * * * *
(k) In the case of an ID/IQ project, the FHWA Division
Administrator's approval of the solicitation document will constitute
FHWA's approval to use the ID/IQ contracting method and approval to
release the solicitation document. The State DOT must obtain the
approval of the FHWA Division Administrator before issuing addenda
which result in major changes to the solicitation document.
0
14. Amend Sec. 635.114 by adding paragraph (m) to read as follows:
Sec. 635.114 Award of contract and concurrence in award.
* * * * *
(m) In the case of an ID/IQ project, the ID/IQ contract shall be
awarded in accordance with the solicitation document. See subpart F of
this part for ID/IQ project approval procedures.
Sec. 635.118 [Amended]
0
15. Amend Sec. 635.118 by removing ``49 CFR part 18'' and adding in
its place ``2 CFR 200.333''.
Sec. 635.123 [Amended]
0
16. Amend Sec. 635.123(b) by removing ``49 CFR part 18'' and adding in
its place ``2 CFR 200.333''.
Subpart C--Physical Construction Authorization
0
17. Amend Sec. 635.309 by adding paragraph (q) to read as follows:
Sec. 635.309 Authorization.
* * * * *
(q) In the case of an ID/IQ project, FHWA may authorize
advertisement of the solicitation document prior to approving the PS&E.
However, FHWA's project authorization for final design and physical
construction will not be issued until the following conditions have
been met:
(1) All projects must conform with the statewide and metropolitan
transportation planning requirements (23 CFR part 450).
(2) All projects in air quality nonattainment and maintenance areas
must meet all transportation conformity requirements (40 CFR parts 51
and 93).
(3) The NEPA process has been concluded as described in Sec.
635.605.
(4) A statement is received from the State that either all ROW,
utility, and railroad work has been completed or that all necessary
arrangements will be made for the completion of ROW, utility, and
railroad work.
0
18. Add subpart F, consisting of Sec. Sec. 635.601--635.606, to read
as follows:
Subpart F--Indefinite Delivery/Indefinite Quantity (ID/IQ)
Contracting
Sec.
635.601 Purpose.
635.602 Definitions.
635.603 Applicability.
635.604 ID/IQ Requirements.
635.605 Approvals and authorizations.
635.606 ID/IQ procedures.
Sec. 635.601 Purpose.
The regulations in this subpart prescribe policies, requirements,
and procedures relating to the use of the ID/IQ method of contracting
on Federal-aid construction projects.
Sec. 635.602 Definitions.
As used in this subpart:
Best value selection means any selection process in which proposals
contain both price and qualitative components and award of the contract
is based upon a combination of price and qualitative considerations.
Qualitative considerations may include past performance, timeliness,
reliability, experience, work quality, safety, or other considerations.
Contracting agency means the State department of transportation
(State DOT), and any State or local government agency, public-private
partnership, or Indian tribe (as defined in 2 CFR part 200) that is the
acting under the supervision of the State DOT and is awarding and
administering an Indefinite Delivery/Indefinite Quantity (ID/IQ)
contract.
ID/IQ means a method of contracting that allows an indefinite
quantity of services for a fixed time. This method is used when a
contracting agency anticipates a recurring need but has not determined,
above a specified minimum, the precise quantities of services that it
will require during the contract period. Contractors bid unit prices
for estimated quantities of standard work items, and work orders are
used to define the location and quantities for specific work.
ID/IQ contract means the principal contract between the contracting
agency and the contractor. Contracting agencies may use other names for
ID/IQ contracts including job order contracting (JOC) contracts, master
contracts, on-call contracts, push-button contracts, design-build ID/IQ
contracts, design-build push button contracts, stand-by contracts, or
task order contracts.
JOC, or Job order contracting, means a form of ID/IQ contracting
that uses a unit price book in the solicitation and the bidder's
adjustment factors or multipliers to establish contract prices.
JOC contract means a type of ID/IQ contract delivered using the JOC
method. Requirements for ID/IQ contracts apply to JOC contracts unless
otherwise specified in this subpart.
NEPA process has the same meaning as defined in Sec. 635.502 of
this part.
Unit price book means a book, guide, list, or similar document
which includes defined construction tasks, and for each task, includes
a unit of measure and a preset unit price.
Work order means the contract document issued for a definite scope
of work under an ID/IQ contract. It defines the location, time, and
scope of work required by the contracting agency. It also defines
required pay items, quantities, and unit prices, as applicable.
Contracting agencies may use other names for work orders including job
orders, service orders, task orders, or task work orders.
Sec. 635.603 Applicability.
(a) Except as provided in paragraph (b) of this section, the
provisions of this subpart apply to all Federal-aid construction
projects.
(b) This subpart does not apply to engineering and design service
contracts, to which 23 CFR part 172 applies, or Federal Lands Highway
contracts, to which 48 CFR subpart 16.5 applies.
Sec. 635.604 ID/IQ Requirements.
(a) Procurement requirements.
(1) The contracting agency may procure the ID/IQ contract using
applicable State or local competitive selection procurement procedures
if those procedures:
[[Page 72933]]
(i) Comply with this section;
(ii) Are effective in securing competition; and
(iii) Do not conflict with applicable Federal laws and regulations.
(2) The solicitation for an ID/IQ contract shall state the
procedures and criteria the contracting agency will use to award the
ID/IQ contract.
(3) In addition to the requirements set forth under (a)(2), the ID/
IQ contract, and any solicitation for an ID/IQ contract, must:
(i) Specify the period of the contract, including the number of
optional contract extensions and the period for which the contracting
agency may extend the contract under each optional extension.
(ii) Specify the basis, such as a published index, and procedure to
be used for adjusting prices for optional contract extensions when
optional contract extensions are included. Negotiated contract price
adjustments for optional contract extensions are not eligible for
Federal-aid participation.
(iii) Specify the estimated minimum and maximum quantity of
services the contracting agency will acquire under the contract. The
ID/IQ contract may also specify estimated minimum or maximum quantities
that the contracting agency may order under each work order.
(iv) Include appropriate statements of work, specifications, or
other descriptions that reasonably and accurately describe the general
scope, nature, complexity, and purpose of the services the contracting
agency will acquire under the contract.
(v) State the procedures that the contracting agency will use in
issuing work orders, and, if multiple awards may be made, state the
procedures and selection criteria that the contracting agency will use
to provide awardees a fair opportunity to be considered for each work
order.
(vi) Include the contracting agency's dispute resolution procedures
available to awardees if multiple awards may be made.
(4) In addition to the requirements set forth under (a)(3), a JOC
contract shall:
(i) Use a unit price book to contain or reference the information
described under (a)(3)(iv).
(ii) Include the unit price book both in the contract and the
solicitation.
(iii) Include prices adjusted by the contractor's adjustment
factors or multipliers for each item in the unit price book.
(5) The contracting agency's procurement procedures may include
selection of one or multiple contractors based on competitive low bid
or best value selection under a single solicitation. For contracts
awarded to multiple contractors under a single solicitation, the
issuance of work orders must be based on lowest cost or lowest cost
plus time to the government for the specified work. Work orders shall
not be issued to contractors on a rotating basis or other non-
competitive method.
(6) The sum of the duration of the initial ID/IQ contract and any
optional contract extensions shall not exceed five years. The
contracting agency may include a provision in the ID/IQ contract to
exercise an option or options to extend the contract for a term or
terms such that the duration of each optional contract extension does
not exceed the initial duration of the ID/IQ contract.
(i) Prior to granting a contract extension, the contracting agency
must receive concurrence from the Division Administrator.
(ii) For ID/IQ contracts where prevailing wages apply under 23
U.S.C. 113, the current prevailing wage rate determination as
determined by the U.S. Department of Labor in effect on the date of the
execution of the contract extension shall apply to work covered under
the contract extension.
(iii) For ID/IQ contracts exceeding one year in duration, the
contracting agency may use price escalation methods, such as referring
to a published index, to adjust the payment for items of work in the
issuance of work orders. Such price escalation methods, however, shall
not be applied to items of work when those items are separately covered
under commodity price escalation clauses in the ID/IQ contract.
(7) Contracting agency payment to a contractor to satisfy a minimum
award provision that is not supported by eligible work is not eligible
for Federal-aid participation.
(b) Participation by disadvantaged business enterprises. The
requirements of 49 CFR part 26 and the State's approved Disadvantaged
Business Enterprise (DBE) plan apply to ID/IQ contracts. At the option
of the State DOT, DBE contract or project goal setting and goal
attainment may apply to ID/IQ contracts in their entirety, or to
individual work orders for ID/IQ contracts with single or multiple
awards, or both. The solicitation for ID/IQ contracts shall specify the
applicable requirements.
(c) Subcontracting. At the option of the State DOT, the minimum
prime contractor participation requirement set forth at Sec. 635.116
may be applied over the entirety of the ID/IQ contract or applied to
each individual work order. The solicitation shall specify the
applicable requirements.
(d) Liquidated damages. When a contracting agency's processes or
procedures use project cost to establish the assessed rate of
liquidated damages under Sec. 635.127, the work order cost shall be
used to determine the rate when liquidated damages are assessed.
(e) Applicable State procedures. Nothing in this subpart shall be
construed as prohibiting a State DOT from adopting more restrictive
policies and procedures than contained herein regarding ID/IQ
contracts.
Sec. 635.605 Approvals and authorizations.
(a) Advertisement, award, and the relationship to NEPA.
(1) The solicitation for an ID/IQ contract may identify all, some,
or none of the specific locations where construction is to be required
under the ID/IQ contract.
(2) With prior concurrence of the Division Administrator, the
contracting agency may advertise the solicitation for an ID/IQ contract
prior to the completion of the NEPA process.
(3) With prior concurrence of the Division Administrator, the
contracting agency may award an ID/IQ contract prior to the completion
of the NEPA process.
(4) An authorization to proceed, or formal project agreement under
Sec. 630.106 of this chapter for an ID/IQ contract, shall not be
issued or executed for final design or physical construction for work
until the NEPA process has been completed for said work. An
authorization or agreement under this paragraph may apply to work in
multiple locations.
(5) With the approval of the Division Administrator, the formal
project agreement under Sec. 630.106 of this chapter for final design
or physical construction under an ID/IQ contract may be amended as
necessary as additional work locations are identified and the NEPA
process is completed for the additional work locations.
(6) The agreement estimate for final design or physical
construction required for an ID/IQ contract under Sec. 635.115 shall
not exceed the actual or best estimated costs of items necessary to
complete the scope of work considered in applicable work orders and in
the completed NEPA processes as described in paragraphs (4) and (5) of
this subsection. The estimate shall be adjusted as necessary as set
forth under Sec. 630.106(a)(4) of this chapter.
(b) Federal participation.
(1) Subject to the requirements in this subpart, the contracting
agency may request Federal participation in the
[[Page 72934]]
costs associated with an ID/IQ contract, or portion of a contract. In
such cases, FHWA's construction contracting requirements will apply to
all ID/IQ contract work orders if any ID/IQ contract work orders are
funded with Title 23, U.S.C. funds. Any expenses incurred before FHWA
authorization shall not be eligible for reimbursement except as may be
determined in accordance with Sec. 1.9 of this chapter.
(2) The applicable Federal share for each work order shall be
specified in the relevant project agreement.
Sec. 635.606 ID/IQ procedures.
(a) FHWA approval. The State DOT shall submit its proposed ID/IQ
procurement procedures to the Division Administrator for review and
approval. Following approval by the Division Administrator, any
subsequent changes in procedures and requirements shall also be subject
to approval by the Division Administrator before they are implemented.
Other contracting agencies may follow approved State DOT procedures in
their State or their own procedures if approved by both the State DOT
and FHWA. The Division Administrator's approval of ID/IQ procurement
procedures may not be delegated or assigned to the State DOT.
(b) Competition. ID/IQ procurement procedures shall effectively
secure competition in the judgment of the Division Administrator.
(c) Procurement requirements. ID/IQ procurement procedures shall
include the following procedures and responsibilities:
(1) Review and approval of ID/IQ solicitations;
(2) Review and approval of work item descriptions and
specifications;
(3) Approval to advertise solicitations;
(4) Concurrence with ID/IQ contract awards to single or multiple
contractors;
(5) Approval of and amendments to formal project agreements and
authorizations to proceed pursuant to Sec. 630.106 of this chapter;
(6) Issuance of work orders;
(7) Approval of and amendments to agreement estimates pursuant to
Sec. 635.115;
(8) Changed conditions clauses;
(9) Approval of contract changes and extra work pursuant to Sec.
635.120; and
(10) Other procedures as needed to ensure compliance with other
requirements in this subpart and under Title 23, U.S.C. and its
implementing regulations and 49 CFR part 26.
(d) Design-build and ID/IQ. Subject to the approval of the Division
Administrator, as described in Sec. 635.606(a), contracting agencies
may incorporate the design-build contracting method with ID/IQ
contracts. In addition to the requirements of this section, the
contracting agency shall include procedures as needed to ensure
compliance with part 636 of this chapter and related requirements.
[FR Doc. 2020-23675 Filed 11-13-20; 8:45 am]
BILLING CODE 4910-22-P