Enhancing Highway Workforce Development Opportunities Contracting Initiative |
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Thomas D. Everett
Federal Highway Administration
21 May 2021
[Federal Register Volume 86, Number 97 (Friday, May 21, 2021)]
[Notices]
[Pages 27667-27671]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-10785]
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DEPARTMENT OF TRANSPORTATION
Federal Highway Administration
Enhancing Highway Workforce Development Opportunities Contracting
Initiative
AGENCY: Federal Highway Administration (FHWA), U.S. Department of
Transportation (DOT).
ACTION: Notice.
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SUMMARY: The FHWA is announcing an initiative to permit, on an
experimental basis, recipients and subrecipients of Federal funds for
Federal-aid highway projects to utilize geographic, economic, or other
hiring preferences or innovative contracting approaches not otherwise
authorized by law that have the potential to enhance workforce
development opportunities in the transportation construction industry,
including for low-income communities. This initiative will be carried
out as a pilot program for a period of 4 years (unless extended) under
FHWA's existing experimental contracting authority and the legal
authority in the Consolidated Appropriations Act, 2021. The purpose of
this pilot program is to provide flexibility to utilize hiring
preferences and innovative contracting approaches while evaluating the
efficacy and equitable impact of such requirements on workforce
development and employment opportunities, as well as their impact on
competition and project delivery.
DATES: This pilot program is effective May 21, 2021. This pilot program
will end May 21, 2025, unless it is extended.
FOR FURTHER INFORMATION CONTACT: For technical information: Mr. James
DeSanto, Office of Preconstruction, Construction and Pavements, (614)
357-8515, James.DeSanto@dot.gov, or Mr. Patrick Smith, Office of Chief
Counsel, (202) 366-1345, Patrick.C.Smith@dot.gov, Federal Highway
Administration, 1200 New Jersey Avenue SE, Washington, DC 20590.
SUPPLEMENTARY INFORMATION:
Electronic Access
An electronic copy of this document may be downloaded from the
Office of the Federal Register's website at www.FederalRegister.gov and
the Government Publishing Office's website at www.GovInfo.gov.
Background
The Federal-aid highway program, administered by FHWA, supports
State and local governments in the design, construction, and
maintenance of the Nation's highway system and Federal-aid eligible
public roadways. The program has helped to create and sustain long-
term, good-paying jobs in the transportation construction industry.
People of color, women, and other underserved groups, however, have
historically experienced significant barriers to entry into the
transportation construction industry. Further, FHWA-funded projects
have prohibited local employment-preferences or workforce development
opportunities for individuals residing in economically depressed
communities in which projects are often located. While this prohibition
was based upon maintaining competition in contract bidding, the
consequence was that the workforce on federally-funded projects was
often not necessarily representative of all communities where projects
were located.
On January 20, 2021, President Biden issued Executive Order (E.O.)
13985, ``Advancing Racial Equity and Support for Underserved
Communities Through the Federal Government.'' This E.O. provides that
the Federal Government should pursue a comprehensive approach to
advancing equity for all, including people of color and others who have
been historically underserved, marginalized, and adversely affected by
persistent poverty and inequality. Accordingly, FHWA is now committed
to work to redress inequities that resulted from barriers to equal
opportunity by announcing an initiative that could result in increased
employment and workforce development opportunities for those who have
historically been excluded from participation on federally-funded
transportation projects.
In the past, FHWA has received requests from States and local
agencies to allow the inclusion of local hiring contract requirements
in their projects with the goal of improving workforce development and
employment opportunities for their residents. As discussed in more
detail below, FHWA historically disallowed such requirements out of
concern for their
[[Page 27668]]
potential impact on competition. Generally, Federal law requires
Federal-aid highway and roadway projects (apart from a few exceptions)
to be awarded on the basis of competitive bidding. However, from 2015
to 2017, DOT conducted a contracting initiative with FHWA and the
Federal Transit Administration (FTA) to evaluate the potential impacts
to competition from local hiring contracting requirements, as discussed
further below.
Today, FHWA announces this initiative to permit and evaluate
geographic, economic, or other hiring preferences or innovative
contracting approaches not otherwise authorized by law that have the
potential to enhance workforce development opportunities in the
transportation construction industry, including for low-income
communities. This initiative can support programs that provide funding
for existing training and registered apprenticeship programs, such as
FHWA's On-the-Job Training (OJT) programs, authorized under 23 U.S.C.
140(b) and 23 CFR part 230, subpart A, or other similar programs. This
initiative is needed to support local and other workers in overcoming
barriers to obtaining successful, long term careers in the
transportation construction industry.
Job Opportunity and Workforce Development
Despite training efforts by the States and industry, a survey
conducted by the Associated General Contractors of America (AGC) of its
members in 2015 found that more than 60 percent of construction firms
across the country were struggling to fill open positions. See FHWA,
Office of Innovative Program Delivery, Center for Accelerating
Innovation, Every Day Counts, EDC-6 Innovations. (2021). Strategic
Workforce Development. https://www.fhwa.dot.gov/innovation/everydaycounts/edc_6/strategic_workforce_development.cfm. A follow-up
survey in 2018 by AGC provided similar results, with 80 percent of
contractors reporting difficulty finding qualified craft workers to
hire. Id.
FHWA has historically supported States' construction workforce
development efforts through OJT programs authorized by 23 U.S.C.
140(b), and other training and education programs. FHWA requires full
utilization of all available training and skill-improvement
opportunities to assure the increased participation of minority groups
and disadvantaged persons and women in all phases of the transportation
construction industry. 23 CFR 230.107(b). FHWA also encourages States
to provide supportive services to increase the effectiveness of OJT
programs. Id. at 230.113.
In addition to OJT efforts, FHWA supports innovative and cost-
effective means of leveraging relationships between project sponsors
and State or local workforce development boards, where applicable, to
improve training and skill-improvement opportunities and outcomes for
all groups, including low-income communities and other under-
represented individuals or populations. For example, FHWA's Every Day
Counts (EDC) initiative encourages States to collaborate with the
construction industry, workforce boards, educational entities, and
others to identify, train, and place a skilled transportation
construction workforce. See https://www.fhwa.dot.gov/innovation/everydaycounts/edc_6/strategic_workforce_development.cfm. States can
leverage FHWA OJT Supportive Services funds with existing local
programs to incorporate training that focuses on construction skills in
which there are current or anticipated future workforce gaps.
FHWA has also supported innovative contracting approaches to
workforce development, such as authorizing the Michigan Department of
Transportation (MDOT), through Special Experimental Project No. 14
(SEP-14), to implement an OJT Voluntary Incentive Program.
Participating contractors in southeastern Michigan that exceed their
OJT goals earn bid incentives to be used when competing for future work
on designated projects. See MDOT's SEP-14 work plan, available at
www.fhwa.dot.gov/programadmin/contracts/sep14mi171106.pdf. MDOT staff
emphasized to FHWA the importance of coordinating their program with
members of Michigan's construction industry and attributed that
coordination to program successes. MDOT reports the pilot program
resulted in increases in apprenticeships, increases in program
graduates, increased Equal Employment Opportunity compliance, and
increases in contractor participation. MDOT is currently evaluating
potential impacts to competitive bidding.
Based on the AGC surveys mentioned above, however, FHWA believes
more can be done to further increase workforce development
opportunities, by building from existing programs, such as OJT, or
exploring new approaches, to improve fulfillment of successful, long-
term careers in the transportation construction industry.
Legal Authority
The initiative set forth in this notice is authorized under Section
199B of the Consolidated Appropriations Act, 2021, Public Law 116-260,
Dec. 27, 2020, 134 Stat 1182. Section 199B expressly authorizes DOT-
assisted contracts under titles 49 and 23 of the U.S.C. to use
geographic, economic, or any other hiring preference not otherwise
authorized by law, provided that the grant recipient certifies the
following:
(1) That except with respect to apprentices or trainees, a pool of
readily available but unemployed individuals possessing the knowledge,
skill, and ability to perform the work that the contract requires
resides in the jurisdiction;
(2) that the grant recipient will include appropriate provisions in
its bid document ensuring that the contractor does not displace any of
its existing employees in order to satisfy such hiring preference; and
(3) that any increase in the cost of labor, training, or delays
resulting from the use of such hiring preference does not delay or
displace any transportation project in the applicable Statewide
Transportation Improvement Program or Transportation Improvement
Program.
Accordingly, recipients and subrecipients using the application
process for a pilot program described in this notice below must also
include in their applications these required certifications from
Section 199B of the FY 2021 Consolidated Appropriations Act.
The initiative described in this notice is also based on FHWA's
authority for special experimental projects. In 1988, a Transportation
Research Board (TRB) task force, comprising representatives from all
segments of the highway industry, was formed to evaluate innovative
contracting practices. This TRB task force requested that FHWA
establish a project to evaluate and validate certain findings of the
task force regarding innovative contracting practices, which are
documented in Transportation Research Circular Number 386, titled,
``Innovative Contracting Practices,'' dated December 1991. In response,
FHWA initiated SEP-14 pursuant to the authority granted to the
Secretary, which now is codified at 23 U.S.C. 502(b)(2). Under SEP-14,
FHWA has the flexibility to experiment with innovative approaches to
contracting. FHWA continues to use this program to test and evaluate
experimental contracting practices.
Interpretation of Competition Mandate
DOT has historically prohibited recipients and subrecipients from
using
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certain contracting provisions that do not directly relate to the
bidder's performance of work in a competent and responsible manner. In
August 2013, at DOT's request, the U.S. Department of Justice, Office
of Legal Counsel (OLC) issued a memorandum opinion interpreting 23
U.S.C. 112. See Competitive Bidding Requirements Under the Federal-Aid
Highway Program, 37 Op. OLC 33 (2013) (``2013 OLC opinion''). The 2013
OLC opinion is available at http://www.justice.gov/olc/opinions. The
2013 OLC opinion clarified that section 112 does not compel DOT's
historic position with respect to contracting requirements that do not
directly relate to the bidder's performance of work. Rather OLC
concluded that section 112 provides the Secretary with discretion to
permit other types of State or local requirements if they do not
``unduly limit competition.'' OLC explained that FHWA may reasonably
determine that a State or local contracting provision does not unduly
limit competition under Section 112 even if it may have the incidental
effect of reducing the number of eligible bidders if it imposes
reasonable requirements related to performance of the necessary work.
OLC opinion, at 35.
Thus, DOT has discretion under 23 U.S.C. 112 to evaluate whether a
State or local law or policy is compatible with the competitive bidding
requirement under the statute. The process used to evaluate whether
State and local requirements satisfy section 112's requirements is a
matter of Agency discretion. OLC opinion, at 54.
Prior Contracting Initiative Pilot Program
On March 6, 2015, DOT published a notice in the Federal Register
(March 6, 2015 Notice) announcing a pilot program allowing FHWA and FTA
to permit recipients and subrecipients to utilize various contracting
requirements that generally have been disallowed due to concerns about
adverse impacts on competition. 80 FR 12257. The initiative was to be
carried out as a pilot program for a period of 1 year using the
experimental authorities of the respective agencies. The DOT stated it
was interested in contracts that utilize a local or other geographic
labor hiring preferences, economic-based labor hiring preferences
(i.e., low-income workers), and labor hiring preferences for veterans.
Id., at 12258. The purpose of this pilot program was to determine
whether the use of such requirements ``unduly limit competition,'' as
provided in the 2013 OLC opinion.
The DOT extended the pilot program on March 17, 2016 (81 FR 14524)
and January 18, 2017 (82 FR 5645). With the extension notices, DOT also
amended the pilot program by adding certifications from participants as
required in the 2016 and 2017 DOT Appropriations Acts. See Public Law
114-113, Dec. 18, 2015, 129 Stat 2242, at Sec. 192; and Public Law 115-
31, May 5, 2017, 131 Stat 135, at Sec. 191.
On October 6, 2017, DOT published a notice in the Federal Register
(2017 Notice) rescinding the pilot program announced in the March 6,
2015 Notice as well as a related FHWA and U.S. Department of Housing
and Urban Development (HUD) Livability Local Hire Initiative. See 82 FR
46716. The 2017 notice also announced the withdrawal of a related
Notice of Proposed Rulemaking (NPRM) published on March 6, 2015 (80 FR
12092).
During the two and a half years the Local Labor Hire Pilot Program
(LLHPP) was in effect, FHWA approved SEP-14 workplans from 11 State and
local agencies, encompassing 18 construction projects. Participants in
the LLHPP committed to evaluating and reporting on the effects of the
relevant contracting requirements on competitive bidding, effectiveness
and efficiency of Federal funds, and integrity of the competitive
bidding process. However, only half the participants provided reports
to FHWA prior to program termination. From those reports, FHWA was
unable to draw conclusions about the impacts of the local contracting
requirements on these criteria.
In the LLHPP workplans submitted to FHWA, agencies proposed a range
of local contracting requirements. In 11 projects, the agencies
mandated the use of local labor, or making good faith efforts to do so,
and in 3 of these cases agencies offered an hourly payment to the
contractor for local labor hours. In the other seven projects, agencies
offered financial incentives to the contractor rather than mandating
local hiring. Half of the projects applied local contracting goals on
the total number of contract labor hours, while the other half applied
the requirements or goals only to newly hired employees. Goals or
thresholds set by the agencies varied by whether the target was based
on total contract labor hours (ranging from 10% to 20%) or based on new
hiring (ranging from 20% to 75%). Agencies proposed hourly payments to
contractors ranging from $3.50 to $20.00 per local labor hour, with
total incentive not to exceed amounts ranging between $15,000 and
$500,000, depending on project size.
At the time the LLHPP was rescinded, FHWA had received information
from 5 of the 18 pilot projects about the impacts of the local-hiring
contracting requirements on workforce outcomes. On four of the
projects, agencies reported the number of local hires made by
contractors were zero, two, six, and nine, respectively. In addition,
one agency reported the impact as a percentage, reporting 17.4 percent
of total contract labor hours were by local residents at the time of
the report. In each of these cases, the outcomes reported to FHWA
appeared to fall short of the numeric project goals. However, other
benefits were realized from these collaborative efforts. For example,
on Colorado's Central 70 project, a total of 156 employees were placed
or received services through the employment platform created by the
project partners.
In another case, based on a recently submitted report from
Minnesota DOT (MnDOT), contractors reported the geographic and
economic-based incentives on their projects improved job opportunities
for local residents. However, one of the contractor participants
cautioned that the MnDOT program could incentivize hiring for a single
job and promote short-term work opportunities rather than a career.
MnDOT concluded that planning, communication, marketing, education, and
training are all critical for program success.
The reports FHWA received emphasized the importance of planning and
coordination between project sponsor and stakeholders, such as
workforce development agencies, pre-apprenticeship and registered
apprenticeship programs, construction contractors, contractor
associations, trade unions, community outreach groups, and others to
achieve buy-in, participation, and success at meeting project goals.
In addition, sponsors identified best practices and challenges in
project selection. Some sponsors found that goals on smaller contracts
and subcontracts offered limited hiring opportunities due to the short
duration of work. Two sponsors mentioned challenges union contractors
faced meeting local hiring goals due to their inability to select
workers based on the workers' residency. One sponsor found they needed
to revise the geographic scope of their targeted area to ensure that a
sufficient pool of workers would be available to meet their goal.
Based on this experience, FHWA is interested in additional data and
information to assess the use of such requirements on job and workforce
development opportunities that build
[[Page 27670]]
sustainable, long-term career success for target populations, and to
assess potential impacts on competition and project delivery. In
addition, while some States may be reluctant to incorporate geographic-
based local preferences, many States may be interested in proposing
other innovative methods to promote workforce development
opportunities.
Current Pilot Program
FHWA is interested in permitting State and local recipients of FHWA
financial assistance to utilize geographic, economic, or other hiring
preferences or innovative contracting approaches not otherwise
authorized by law that have the potential to enhance workforce
development opportunities in the transportation construction industry.
FHWA's objective is to assess how such hiring preferences or
innovative contracting approaches are used to support job opportunities
and workforce development for those who may otherwise have significant
barriers to entry while also assessing how the preferences or
contracting approaches may affect competition and project delivery.
Assessing impacts on competition may include assessing whether the
hiring preferences or contracting approaches promote efficiency in
connection with the letting of a particular contract, further the
efficient and effective use of Federal funds in the long run, or
protect the integrity of the competitive bidding process. FHWA is
interested in obtaining this data and information for potential long-
term use of contracting requirements under this initiative.
Examples of hiring preferences that may be utilized under this
pilot program include local or other geographic labor hiring
preferences, economic-based labor hiring preferences (e.g., for low-
income workers or economically disadvantaged communities), and other
labor hiring preferences. Hiring preferences or contracting approaches
may work in coordination with existing authorities designed to enhance
workforce development, such as 23 U.S.C. 114(d) (requiring recipients,
to the extent practicable, to encourage contractors to make a best
faith effort to hire veterans on Federal-aid highway projects), 23
U.S.C. 140(d) (authorizing States to implement a preference for
employment of Indians on projects near Indian reservations), and FHWA
OJT programs that focus on the recruitment of minorities, women, and
other disadvantaged groups. See 23 CFR 230.107, 230.111, and 230.113.
Appropriations Act certifications, as discussed above, preclude FHWA
from approving projects with requirements that would cause a contractor
to displace its existing employees to satisfy the local contracting
requirements.
FHWA will not approve projects for which recipients wish to alter
the requirements of the State's approved Disadvantaged Business
Enterprise (DBE) Program or in any way require DBE firms to have any
specific geographic location. In addition, we note that even though
hiring preferences may be utilized under this pilot program, State and
local contracting agencies are responsible for ensuring that the
establishment and implementation of its hiring preference is otherwise
consistent with applicable Federal, State, and local laws.
This pilot program will be carried out for a period of 4 years from
the date of publication of this notice. As such, FHWA is only
interested in contracts that will be advertised during this time frame.
Requests to participate in this pilot program should be made no more
than 12 months prior to advertisement for bids.
Based upon receiving timely reports from participants, FHWA will
monitor and evaluate whether hiring preferences or innovative
contracting approaches positively impact workforce development and
employment opportunities. FHWA will also assess what impact the
requirements may have on competition and project delivery. While FHWA's
current plan is to conduct this pilot program for 4 years, FHWA may
extend or terminate this period at its discretion.
Pilot Program Requests
For contracts to be funded by FHWA, State and local recipients and
subrecipients must request prior approval from FHWA to use a specific
contracting requirement under SEP-14. To receive SEP-14 approval,
States and local recipients and subrecipients would follow the normal
process that includes submitting work plans to the appropriate FHWA
Division Office. For more information on the SEP-14 process, please
see: http://www.fhwa.dot.gov/programadmin/contracts/sep_a.cfm.
In developing requests to FHWA to use contracting requirements
under SEP-14, recipients and subrecipients should address certain
project specific factors that will help FHWA evaluate the use of the
particular hiring preference for the proposed project. These factors
include, but are not limited to, the following:
(1) Describe the project(s), including the amount of FHWA funding
involved as well as the estimated total cost of the project(s).
(2) Describe the hiring preference or innovative contracting
approach not otherwise authorized by law. For example, is the
requirement an incentive or mandatory? Does it apply to all labor on
the project, or only to new hires, and how will the preference comply
with the certifications required by Section 199B of the FY 2021
Consolidated Appropriations Act? Does it apply to subcontractors? What
is the estimated cost of applying the requirement?
(3) Describe how the project will or will not work as part of the
recipient's or subrecipient's current FHWA-approved OJT Program, if
applicable.
(4) Describe how the hiring preferences or innovative contracting
approaches will impact workforce development and employment
opportunities, and how this will be monitored and evaluated. Include
one or more numeric goals of success, and describe what data will be
collected to measure performance in achieving the goal(s).
(5) Describe how they will evaluate the effects of relevant
contracting requirements on competition and project delivery. In doing
so, the recipient or subrecipient should, at a minimum, explain how it
will provide comparisons of bids and unit prices received for the
projects utilizing the relevant contract requirements to other projects
of similar size and scope and in the same geographic area not utilizing
such requirements. Also explain the potential offsetting benefits
resulting from the use of the requirement, which may be relevant if a
reduction in the pool of bidders or an increase in unit prices becomes
evident.
(6) Describe and quantify how the experimental contracting
technique would promote the efficient and effective use of Federal
funds in connection with the particular contract, when considered over
the long-term for that agency's program, or by serving to protect the
integrity of the competitive bidding process.
(7) Describe how recipients and subrecipients will evaluate the
effects of relevant contracting requirements on participation by DBE
contractors and subcontractors (for example, evaluating whether DBE
project goals were attained and whether the requirements acted as a
barrier to DBE firms based on the composition of DBE firms' workforce).
(8) Describe whether the proposed contracting requirement has been
the subject of litigation or whether litigation surrounding the use of
the requirement has been threatened.
[[Page 27671]]
(9) Provide the required certifications from Section 199B of the
Consolidated Appropriations Act, 2021, Public Law 116-260.
FHWA requests previous SEP-14 LLHPP participants that intend to
participate in this program conduct the evaluations and complete the
reporting for earlier projects they committed to do in their previously
approved SEP-14 LLHPP workplan.
For contracts involving the use of local and other preferences as
described above, FHWA may approve, at the request of the recipient or
subrecipient, the use of such requirements for a specific contract, a
specific group of contracts, or on a more general programmatic basis.
Authority: 23 U.S.C. 502(b); Section 199B of the Consolidated
Appropriation Act, 2021.
Issued in Washington, DC, on May 18, 2021.
Thomas D. Everett,
Executive Director, Federal Highway Administration.
[FR Doc. 2021-10785 Filed 5-20-21; 8:45 am]
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