[Federal Register Volume 66, Number 203 (Friday, October 19, 2001)]
[Proposed Rules]
[Pages 53288-53311]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-26234]
[[Page 53287]]
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Part II
Department of Transportation
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Federal Highway Administration
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23 CFR Part 627 et al.
Design-Build Contracting; Proposed Rule
Federal Register / Vol. 66 , No. 203 / Friday, October 19, 2001 /
Proposed Rules
[[Page 53288]]
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DEPARTMENT OF TRANSPORTATION
Federal Highway Administration
23 CFR Parts 627, 635, 636, 637 and 710
[FHWA Docket No. FHWA-2000-7790]
RIN 2125-AE79
Design-Build Contracting
AGENCY: Federal Highway Administration (FHWA), DOT.
ACTION: Notice of proposed rulemaking (NPRM); request for comments.
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SUMMARY: The FHWA is proposing to implement regulations for design-
build contracting as mandated by section 1307(c) of the Transportation
Equity Act for the 21st Century (TEA-21), enacted on June 9, 1998. The
TEA-21 requires the Secretary of Transportation (Secretary) to issue
regulations to allow design-build contracting for selected projects.
The regulations list the criteria and procedures that will be used by
the FHWA in approving the use of design-build contracting by State
Transportation Departments (STDs).
The regulation would not require the use of design-build
contracting, but allows STDs to use it as an optional technique in
addition to traditional contracting methods. The FHWA is soliciting
comments on its proposed regulation which would establish prescribed
policies and procedures for utilizing the design-build contracting
technique on Federal-aid highway projects.
DATES: Written comments must be received on or before December 18,
2001.
ADDRESSES: Mail or hand deliver comments to the U.S. Department of
Transportation, Dockets Management Facility, Room PL-401, 400 Seventh
Street, SW., Washington, DC 20590-0001, or submit electronically at
http://dmses.dot.gov/submit. All comments should include the docket
number that appears in the heading of this document. All comments
received will be available for examination and copying at the above
address from 9 a.m. to 5 p.m., e.t., Monday through Friday, except
Federal holidays. Those desiring notification of receipt of comments
must include a self-addressed, stamped envelope or postcard or you may
print the acknowledgment page that appears after submitting comments
electronically.
FOR FURTHER INFORMATION CONTACT: For technical information: Mr. Gerald
Yakowenko, Office of Program Administration (HIPA), (202) 366-1562. For
legal information: Mr. Harold Aikens, Office of the Chief Counsel (HCC-
32), (202) 366-1373, Federal Highway Administration, 400 Seventh
Street, SW., Washington, D.C. 20590-0001. Office hours are from 8 a.m.
to 4:30 p.m., e.t., Monday through Friday, except Federal holidays.
SUPPLEMENTARY INFORMATION:
Electronic Access and Filing
You may submit or retrieve comments online through the Document
Management System (DMS) at: http://dmses.dot.gov/submit. Acceptable
formats include: MS Word (versions 95 to 97), MS Word for Mac (versions
6 to 8), Rich Text File (RTF), American Standard Code Information
Interchange (ASCII)(TXT), Portable Document Format (PDF), and
WordPerfect (versions 7 to 8). The DMS is available 24 hours each day,
365 days each year. Electronic submission and retrieval help and
guidelines are available under the help section of the web site.
An electronic copy of this document may also be downloaded by using
a computer, modem and suitable communications software from the
Government Printing Office's Electronic Bulletin Board Service at (202)
512-1661. Internet users may also reach the Office of the Federal
Register's home page at: http://www.nara.gov/fedreg and the Government
Printing Office's web page at: http://www.access.gpo.gov/nara.
Background
Section 112(b)(1) of title 23, United States Code, requires highway
construction contracts to be awarded competitively to the lowest
responsive bidder. A State must use competitive bidding procedures,
unless it demonstrates that some other method is more cost effective or
that an emergency exists. Similarly, 23 U.S.C. 112(b)(2) requires
engineering service contracts to be awarded using qualifications-based
selection procedures. Under the ``design-build contracting method,''
one entity (known as the design-builder) performs both engineering and
construction of a project under a single contract with the owner. Prior
to the TEA-21 (Public Law 105-178, 112 Stat. 107 (1998)), the design-
build contracting method did not fully comply with existing statutes;
however, the FHWA allowed the States to evaluate the design-build
method on an experimental basis under Special Experimental Projects
Number 14 (SEP-14)--Innovative Contracting.\1\ Under SEP-14, twenty-
four States and several local public agencies evaluated the design-
build contracting technique.
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\1\ Information concerning Special Experimental Project No. 14
(SEP-14), ``Innovative Contracting Practices,'' is available on
FHWA's home page: http://www.fhwa.dot.gov. Additional information
may be obtained from the FHWA Division Administrator in each State.
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Transportation Equity Act for the 21st Century
Section 1307 of the TEA-21 defines the term ``design-build
contract'' as ``an agreement that provides for design and construction
of a project by a contractor, regardless of whether the agreement is in
the form of a design-build contract, a franchise agreement, or any
other form of contract approved by the Secretary.'' In addition,
section 1307 amends 23 U.S.C. 112 to allow the design-build contracting
method after the FHWA promulgates a regulation prescribing the policies
and procedures for utilizing the design-build contracting method on
qualified Federal-aid highway projects. The TEA-21 defined qualified
projects as projects that comply with the criteria in this regulation
and whose total costs are estimated to exceed: (1) $5 million for
intelligent transportation system projects, and (2) $50 million for any
other project. It also provides certain key requirements that the FHWA
must address in the development of these regulations. These
requirements include, but are not limited to, the following:
Prior to initiating the rulemaking process, the FHWA must
consult with representatives from the American Association of State
Highway and Transportation Officials (AASHTO) and representatives from
other affected industries;
The FHWA must complete the rulemaking process within three
years of the date of TEA-21 enactment, or by June 9, 2001; and
The regulation must: (1) Identify the criteria to be used
by the Secretary in approving design-build projects, and (2) establish
the procedures to be followed by Federal-aid recipients in seeking the
FHWA's approval.
In addition, section 1307 modifies FHWA's statutes with several
other key provisions regarding the use of the design-build contracting
method, including the following:
In general, an FHWA recipient may award a design-build
contract for a ``qualified'' project using any procurement process
permitted by applicable State and local law;
Section 112(e)(2) of title 23, U.S.C., Standardized
Contract Clause
[[Page 53289]]
Concerning Site Conditions, does not apply to design-build contracts;
Final design under a design-build contract shall not
commence before compliance with section 102 of the National
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.); and
Prior to the final rule and for projects outside of the
qualified project limits, the FHWA may continue experimental evaluation
and approval procedures under Special Experimental Project No. 14 (SEP-
14)--Innovative Contracting.
Report to Congress
Section 1307(f) of the TEA-21, ``Report to Congress,'' requires the
FHWA to assess the impacts of design-build contracting by June 9, 2003.
Specifically, the FHWA is required to report on the following items:
An assessment of the effect of design-build contracting on
project quality, project cost, and timeliness of project delivery;
Recommendations on the appropriate level of design for
design-build procurements;
An assessment of the impact of design-build contracting on
small businesses;
An assessment of the subjectivity used in design-build
contracting; and
Such recommendations concerning design-build contracting
procedures as the Secretary determines to be appropriate.
Presently the FHWA has little data available concerning the cost-
effectiveness of design-build contracting in the transportation
industry. Transportation Research Record No. 1351, titled ``Final
Evaluation of the Florida Department of Transportation's Pilot Design/
Build Program,' \2\ documents the Florida DOT's (FDOT) early experience
with eleven State-funded design-build projects. This study was
performed by the University of Florida, Gainesville, FL in 1992.
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\2\ R. D. Ellis, Jr. and A. Kumar, ``Final Evaluation of the
Florida Department of Transportation's Pilot Design/Build Program,''
1992, pp. 94-105 of the Transportation Research Record No. 1351,
Transportation Research Board (TRB). This publication is out of
print, but a photocopy may be purchased from the TRB Publications
Sales Office at Lockbox 289, Washington, DC 20055. Telephone (202)
334-3213. See TRB web site at URL: http://nationalacademies.org/trb.
A copy is in the file for FHWA Docket No. 2000-7790.
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In a comparison with FDOT's traditional design-bid-build projects,
the researchers found that the average design-build direct cost was
4.59 percent greater than the average design-bid-build cost. However,
the statistical analysis of the data did not confirm the difference in
means (because of the small sample size and the data variability, the
direct cost comparison was inconclusive). However, the average design-
build construction time was 21.1 percent less than the average for
design-bid-build projects. Also, the researchers noted significant
differences in the average increases for contract cost. The design-
build projects had an average cost increase of 4.09 percent versus
FDOT's 1990 design-bid-build project average cost increase of 8.78
percent.
By the time the report to Congress is developed, the FHWA
anticipates that there will be more experience with the design-build
contracting technique. The FHWA will be in a better position to assess
the true impacts of design-build contracting on the transportation
industry.
The FHWA welcomes comments on this subject. The agency invites
recommendations concerning how we might assess the cost effectiveness
of design-build contracting. Also, we invite comment on what techniques
and procedures should be used in assessing the issues identified by
Congress in section 1307(f).
Pre-Rule Workshop and Outreach
Throughout 1998, 1999, and 2000, the FHWA representatives met with
representatives from the AASHTO and other affected industries. During
these meetings, the FHWA, the AASHTO and industry discussed issues
relating to design-build contracting. The FHWA was invited to attend
numerous association annual meetings and also met individually at the
request of some industry representatives. The FHWA employees attended
the following meetings:
The American Consulting Engineer's Council (ACEC), March
5, 1999, Washington, DC;
The Associated General Contractors of America (AGC), March
23, 1999, Las Vegas, NV;
The American Road Builders and Transportation Association
(ARTBA), March 24, 1999, Las Vegas, NV;
The Design-Build Institute of America (DBIA), March 25,
1999, Las Vegas, NV;
AASHTO's Standing Committee on Highways, April 17, 1999,
Little Rock, AR;
AASHTO's Subcommittee on Design, June 22, 1999, Dewey
Beach DE;
AASHTO's Value Engineering Conference, July 14, 1999,
Branson, MO; and
AASHTO's Subcommittee on Construction, August 2, 1999, New
Orleans, LA.
In 1999, employees from the FHWA's Fort Worth, Texas office
performed a field review of existing design-build projects. This team
interviewed engineers and administrators who are involved with design-
build projects in seven States: Arizona, California, Colorado, Florida,
Michigan, Ohio, and Utah. Representatives from construction
contractors, design consultants, the STDs, toll road agencies and other
individuals were interviewed to share experiences and capture the
lessons learned regarding the design-build contracting technique.
The FHWA representatives attended outreach sessions related to the
design-build rulemaking effort at two national conferences. The first
annual ``Design-Build for Transportation Conference'' was held April
21-23, 1999, in Salt Lake City, UT. This conference was sponsored by
the Design-Build Institute of America, the American Society of Civil
Engineers, and the FHWA. A special two-hour outreach session was
sponsored by the FHWA to seek comments and suggestions concerning our
development of this regulation. The second annual ``Design-Build for
Transportation Conference'' was held March 29-31, 2000, in Tampa, FL.
This conference was sponsored by the Design-Build Institute of America,
the AASHTO, and the FHWA. An FHWA representative presented an update on
the status of the rulemaking effort and several members of the audience
expressed their recommendations for items that should be considered in
the rulemaking process.
In addition, on December 16, 1999, the FHWA sponsored a one-day
pre-rule workshop for the design-build regulation in Washington, D.C.
More than 100 registrants from 26 States, Puerto Rico, and the District
of Columbia attended. They represented 13 STDs, 1 county, 3 Federal
agencies, 2 construction organizations, 12 construction companies, 16
engineering firms, and 1 engineering organization. Representatives from
law firms, auditing agencies, insurance companies, and the media also
attended the December 16 workshop. Representatives from the AASHTO and
each of the major industry associations presented their viewpoints on
issues that should be considered in the rulemaking process.
Many of the comments received at these meetings have been
incorporated into this document. A summary of the minutes from the
December 16, 1999 meeting is available on the FHWA's web page at the
following address: http://www.fhwa.dot.gov/infrastructure/progadmin/contracts/d_build.htm.
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Section-by-Section Analysis
This section includes a section-by-section analysis of the proposed
requirements and incorporates summary information regarding comments
received during the FHWA's pre-rule workshop and outreach sessions. The
comments are, of necessity, summarized in each of the relevant sections
of the proposed rule and are intended to provide an overall perspective
on the comments submitted to the FHWA concerning design-build
contracting.
General Comments
During the pre-rule workship, many individuals and associations
recommended that the FHWA keep the rules simple and flexible. It is
apparent that States which have evaluated design-build under SEP-14
have their own unique needs and preferences. Each would like to
maintain that flexibility and not be limited by any regulation which
might hinder project delivery, innovation, or cost savings. The
industry associations, on the other hand, raised specific issues
concerning the procurement process and the importance of minimizing
subjectivity in the selection process. Position papers for the AASHTO
and the major industry associations, which participated in the December
16, 1999, pre-rule workshop meeting are posted on the FHWA's web site
at: http://www.fhwa.dot.gov/infrastructure/progadmin/contracts/d_build.htm.
In general terms, the AASHTO expressed the need for a simple, yet
flexible rule which will create a framework for encouraging the
development of a design-build process in each State. The rule should
not impede project delivery, innovation, or cost savings. The AASHTO
encouraged the FHWA to develop a rule which would foster the
mainstreaming of the design-build process into the transportation
arena. Finally, the AASHTO asserted that a rule cannot be written to
ensure complete fairness in the procurement process, but AASHTO noted
that STDs must make every reasonable effort to provide an open and
understandable process.
The construction industry was represented at the pre-rule workshop
meeting by the Associated General Contractors of America (AGC) and the
American Road and Transportation Builders Association (ARTBA). They
echoed similar comments and reservations regarding issues that should
be considered in the proposed rule. The ARTBA stated that there is no
clear industry consensus regarding the design-build contracting method.
Construction firms often have different opinions depending on such
factors as their size and culture. Both the ARTBA and the AGC stated
that the traditional ``design-bid-build'' \3\ system is the preferred
delivery system for publicly financed transportation construction
projects and should be used whenever possible. The AGC said that States
should demonstrate how a specific project would benefit from the use of
the design-build method before a delivery system is chosen. Both
associations are concerned with the potential for subjectivity in the
selection process and the need for a fair, equitable, and consistent
procurement process.
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\3\ Design-bid-build'' means the traditional delivery method
where design and construction are sequential steps in the project
development process.
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The ACEC recommended that the proposed rule be crafted in a manner
to allow the STDs to evaluate and select the project delivery system
which will represent the best value for a specific project. The
proposed rule should promote a best value/value-based selection process
that evaluates cost, technical qualifications, technical approach, and
quality. In broad terms, the ACEC recommended a process which would
encourage innovation in addition to design and construction
flexibility.
The Design-Build Institute of America (DBIA) illustrated the
positive aspects of the design-build process and hoped that the FHWA's
proposed rule would provide STDs and local agencies with maximum
flexibility in structuring their procurement processes. The DBIA
strongly supports the use of a best value selection process in
procurement. It blends the attributes of price, qualifications and
other technical properties to arrive at the best value for the project
owner.
Based on a review of all of the comments received during the pre-
rule workshop process, the FHWA proposes to give Federal-aid recipients
as much flexibility as possible in the selection of the appropriate
form of design-build contracting for their individual projects. We have
developed the proposed regulation with two goals in mind:
Continue the flexibility that exists under the current
SEP-14 design-build program, and
Develop a model for the appropriate use of the design-
build process in each State.
This proposed rule would provide a general framework for the
procurement of design-build projects, ranging from simple projects
which may be awarded on a low-bid basis to complex projects, which may
utilize a best-value selection process through competitive negotiation.
Federal agencies, which contract directly with the private sector for
goods and services, currently have such standards in the Federal
Acquisition Regulations (FAR). These regulations define the standards
for contracting in direct Federal procurement, including design-build
and competitive negotiation. Specifically, the concepts in 48 CFR Part
15, Contracting by Negotiation, provide standards which have been
tested by numerous contracting agencies and the courts.
The FHWA proposes to adopt a modified version of the FAR
provisions. We believe our proposed rule would satisfy both of the
above mentioned goals. Accordingly, the STDs will then have the same
degree of flexibility in procurement as other Federal agencies which
procure directly for contract services. Also, industry representatives
who contract in both the direct Federal and Federal-aid transportation
markets will be subject to the same standards of fairness in
competitive negotiation.
Specific Comments
Part 627--Value Engineering
It is necessary to amend the existing value engineering regulations
in 23 CFR 627 to clarify how the FHWA's value engineering policies
apply to design-build projects.
During the pre-rule workshop process, both the AASHTO and the AGC
provided recommendations on this subject. The AASHTO believes that the
STDs should have the flexibility to use value engineering clauses where
appropriate. The AGC stated that value engineering proposals should not
be permitted during the proposal stage of design-build procurement, but
the AGC believes that post-award value engineering proposals may be
acceptable.
The FHWA believes that flexibility is appropriate for this issue.
New paragraph (e) in Sec. 627.5 would provide several options for
meeting the value engineering provision of Sec. 627.1(a). This
provision requires States to perform a value engineering analysis on
all National Highway System (NHS) projects with an estimated cost of
$25 million or more. The first option noted in the proposed rule would
allow STDs to perform a value engineering analysis prior to the
initiation of the procurement process. In lieu of this, STDs may
require the design-builder or other parties to perform a value
engineering analysis at other points in the project development
process. Also,
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in keeping with the FHWA's existing philosophy regarding value
engineering change proposal clauses, these provisions may be used at
the STD's discretion, but are not required, for design-build projects.
Part 635--Construction and Maintenance
Section 635.102 Definitions
It is necessary to amend the existing regulations to clarify how
the FHWA's requirements for Federal-aid construction contracts will
apply to design-build projects. A definition is added for ``design-
build project.''
The term ``certification acceptance'' is removed. Section 1604 of
the TEA-21, which replaced 23 U.S.C. 117 (formerly titled
``Certification Acceptance''), removed this term and replaced it with
the new program ``High Priority Projects Program.''
Section 635.104 Method of Construction
New paragraph (c) would be added to provide a reference to new part
636 and the contracting provisions for Federal-aid design-build
projects.
Section 635.107 Participation by Disadvantaged Business Enterprise
During the design-build pre-rule workshop process, the AASHTO
recommended that specific Disadvantaged Business Enterprise (DBE)
commitments should not be mandated at the time of award. The AGC stated
its belief that DBE requirements should be the same as for traditional
projects; however, where STDs are meeting goals through race neutral
means, contractual goals should not be stated in the Request for
Proposals document. The AGC also stated that DBE utilization should not
be a weighted factor in selecting the successful offeror.
The DBE program requirements under the U.S. DOT's DBE regulation in
49 CFR part 26 are applicable to FHWA design-build projects. The STDs
may establish an overall DBE contract goal for design-build projects.
The design-builder in turn may establish appropriate goals for the
subcontracts it lets to meet the overall design-build contract goal.
The STDs are to maintain oversight of the design-builder's activities
to ensure compliance with the provisions of 49 CFR part 26.
We are proposing several different changes to Sec. 635.107. First,
we are proposing to change the title from ``Small and disadvantaged
business participation'' to ``Participation by disadvantaged business
enterprise.'' This is being done to be consistent with the terminology
in the U.S. DOT's DBE program in 49 CFR part 26. Paragraph (a) would
also be modified to provide the correct reference to 49 CFR part 26.
Second, we are proposing to add new paragraph (b) to clarify how
DBE requirements will apply to design-build projects. These provisions
would state that offerors do not need to furnish the specific
commitment information required by 49 CFR 26.53(b)(2) prior to the
award of a contract. However, the design-builder must indicate that it
can obtain the necessary DBE commitments. If the design-builder cannot
obtain the necessary commitments, it must document to the STD its good
faith efforts, as described in 49 CFR 26.53. Under 49 CFR 26.53(e), the
STD or contracting agency must maintain oversight to ensure contractual
requirements are met throughout the life of the contract. Lastly, the
proposed rule would prohibit STDs from providing additional credit
during the proposal evaluation process for offerors who indicate that
they will attain DBE participation above the contract goal. The DBE
program requirements are one of many contractual requirements which are
binding on the design-builder; however, STDs must not give preferences
to offerors who exceed the DBE contract goals.
Section 635.109 Standardized changed condition clauses
Section 1307(b) of TEA-21 modified 23 U.S.C. 112(e)(2) such that
the FHWA's requirement to utilize standardized changed condition
clauses on all Federal-aid construction projects will not apply to
design-build projects. However, depending on the level of risk sharing
between the STD and the design-builder, modified versions of these
clauses may be appropriate in certain circumstances.
During the pre-rule meeting with the AASHTO and industry, the AGC
stated that the proposed rule should require the use of a changed
condition clause in design-build contracts. The AGC asserted that such
clauses will limit litigation and reduce overall project cost by
precluding the need to include contingencies in prices for unknown
conditions or for undertaking extensive pre-proposal geologic studies.
The ACEC addressed this issue indirectly in recommending that the
preliminary design should be advanced to the point where risks, such as
differing site conditions, are identified and properly allocated. The
other associations did not comment on this issue.
The FHWA believes that certain elements of the standardized changed
condition clauses may be appropriate for certain design-build projects.
Others may be included at the discretion of the contracting agency
depending on the risk allocation for a given project. Specifically, the
differing site conditions clause (or a modified version of the clause
in 23 CFR 635.109(a)(1)) may be specified by an owner depending on the
specific risks and responsibilities which are being allocated to the
design-builder.
The ``Suspensions of Work Ordered by the Engineer'' clause is
appropriate in any situation where the contracting agency suspends or
delays the work for an unreasonable time period. Therefore, the FHWA is
requiring its use on all design-build contracts.
The intent of the ``Significant Changes in the Character of Work''
clause in 23 CFR 635.109(a)(3) is to provide equitable adjustments for
changes in quantities and other alterations in the work (designed by
the owner) as necessary to complete the project. In the case of a
design-build project, the STD may have delegated this responsibility to
the design-builder and it may not be appropriate to include such change
clauses in a design-build contract. In addition, the ``lump sum
payment'' structure of most design-build contracts does not correlate
with the ``unit price payment'' structure of traditional design-bid-
build contracts. In other cases, an owner may believe that it is
appropriate to include provisions similar to the ``significant changes
in the character of work'' clause in a design-build contract. However,
such use would be optional under this proposed rule.
New paragraph (c) would be added to require the use of the
standardized suspensions of work ordered by the engineer clause (23 CFR
635.109(a)(2)) for all design-build projects. However, the STDs would
be encouraged to consider using differing site condition clauses and
significant changes in the character of work clauses which are
appropriate for the risk and responsibilities that are shared with the
design-builder.
Section 635.110 Licensing and Qualification of Contractors
The FHWA proposes to amend this section to clarify how the
requirements for licensing and qualification of contractors would apply
to design-build contracts. During the pre-rule workshop process there
were several comments on this issue.
The AASHTO recommended that contracting agencies be permitted to
require contractor prequalification and licensed engineers in
accordance with
[[Page 53292]]
the owner's requirements or State and local statutes. The ACEC
recommended that flexibility be provided in prequalification and
licensing requirements to allow a design firm to lead the design-build
team. While the AGC did not specifically comment on this issue, it
indicated that prequalification is a necessary element in the design-
build process to limit the number of design-builders that will incur
the expense of preparing proposals.
The ARTBA suggested that contracting agencies should use some type
of screening process which might be based on prequalification, a surety
bond system, or merely a demonstration of understanding technical
requirements. However, the ARTBA recommended against a short listing
process as it believes that anyone who is qualified to perform the work
should be allowed to submit a proposal. The DBIA stated that
prequalification is essential for effective design-build contracting.
The DBIA recommended that the proposed rules provide that design-
builders must clearly demonstrate their ability to become licensed or
to practice professionally in the State in which the project is
located.
In consideration of all of these comments, the FHWA has proposed to
allow States to require certain prequalification requirements if
required by their own statutes or procedures. Prequalification may be
required as a condition of a proposal submission if it is required by
State statute or policy; however, the STD must allow adequate time
between project advertisement and the opening of cost/technical
proposals for proposers to become prequalified.
In addition, new paragraph (f) would be added to allow the STDs to
use their own bonding, insurance, licensing and qualification
procedures for any phase of design-build procurement. Geographic
preferences are prohibited. The STDs may require offerors to
demonstrate their ability to become licensed; however, licensing
procedures may not serve as a barrier for the consideration of
otherwise responsive proposals.
Section 635.112 Advertising for Bids
During the pre-rule workshop process, the AASHTO recommended that
the FHWA authorization should take place prior to offering the project
for advertisement. The AASHTO suggested that this authorization should
carry through the rest of the project's development.
We are proposing two changes to this section. First, this section
would be retitled to read ``Advertising for bids and proposals.'' We
prefer the term ``proposal'' rather than ``bids'' for design-build
contracting. The term ``bid'' is usually associated with an invitation
for bids under the design-bid-build method of contracting. The term
``proposal'' is usually associated with the design-build contracting
method.
Second, we are proposing to add new paragraph (i). Paragraph (i)
would amend the requirements of this section for a design-build
project. The FHWA Division Administrator's approval of the Request for
Proposals (RFP) document will constitute the FHWA's project
authorization and the FHWA's approval of the STD's request to release
the RFP document. The STD may decide the appropriate solicitation
schedule for the project advertising, release of the request for
proposals, and proposal submission deadlines.
Section 635.113 Bid Opening and Bid Tabulations
New paragraph (c) would be added to allow STDs to use their own
procedures for the process of receiving, reviewing and processing
design-build proposals. The STD will submit a tabulation of proposal
costs to the FHWA Division Administrator as is presently done for
traditional design-bid-build projects.
Section 635.114 Award of Contract and Concurrence in Award
New paragraph (k) would provide a reference to the design-build
contracting requirements of part 636.
Section 635.116 Subcontracting and Contractor Responsibilities
The FHWA's current subcontracting provision requires the prime
contractor to perform at least 30 percent of the work (less specialty
items). During the pre-rule workshop process, the AASHTO recommended
that the States be allowed to determine the required percentage of work
to be performed by the design-builder and/or its subcontractors. The
DBIA recommended that the FHWA not establish a requirement, but leave
this issue to the discretion of the design-builder. The ACEC
recommended flexibility in all procurement policies to allow the
situation where a design firm serves as the leader on a design-build
team. The AGC recommended no change in the existing requirement. The
other associations did not provide comments on this issue.
The FHWA proposes to provide greater flexibility in this area for
design-build contracts. We believe that the contract agency is in the
best position to establish minimum percentages of work that must be
accomplished by the design-builder. Therefore, the proposed rule would
not apply the existing 30 percent requirement to design-build projects.
At their discretion, STDs may establish minimum percentages of the work
which would be accomplished by the design-builder.
Accordingly, we propose to add new paragraph (d). Paragraph (d)
would allow the STDs to determine the minimum amount of work which must
be accomplished by the design-builder. In addition, the FHWA has also
included a prohibition on any procedure, requirement, or preference
which imposes minimum subcontracting requirements or goals (other than
those necessary to meet the Disadvantaged Business Enterprise program
requirements of 49 CFR part 26). Subcontracting goals may serve as a
local contracting preference, thereby presenting an artificial
contractual barrier to the design-builder's ability to manage an
efficient contract. Therefore, we are proposing to prohibit
subcontracting goals.
Section 635.122 Participation in Progress Payments
The proposed rule would add paragraph (c) which would require STDs
to specify how progress payments will be made in the RFP document on
lump sum design-build contracts.
Section 635.309 Authorization
This proposed rule would define the RFP document approval as the
key point in the Division Administrator's authorization of a design-
build project. The Division Administrator's approval of the RFP
document would constitute the FHWA's authorization of the project. This
includes approval to proceed with the advertisement /release of the RFP
document and, subject to concurrence-in-award, proceed with the design
and construction of the project. The requirements for authorization of
a design-build project are added in a new paragraph (p).
Section 635.411 Material or Product Selection
In general, the associations supported the concept of applying the
existing restrictions for proprietary products to design-build
projects. The current requirement for traditional design-bid-build
construction projects generally prohibits the STDs from specifying
proprietary products in the plan and specifications, unless the
proprietary product is: (1) Bid competitively with equally suitable
unpatented products, (2) used for research, or (3) necessary for
synchronization purposes. For design-
[[Page 53293]]
build projects, the prohibition on specifying proprietary products
would apply to the requirements in the RFP document. The design-builder
would be free to use a proprietary product if it met the requirements
of the design-build contract.
The AASHTO stated that the proprietary product restrictions should
be in accordance with current requirements. Any allowable exceptions
should be clearly defined in the contract documents. The AGC stated
that the specification of proprietary products in the RFP should be
strongly discouraged. The AGC believed that specifying proprietary
products undermines the design-builder's creativity in developing a
proposal to meet the owner's needs. The DBIA stated the current
prohibition for specifying proprietary products in the contract
documents should be continued. The STDs employing design-build should
be using performance specifications seeking quality end results in lieu
of means and methods prescriptive specifications. The FHWA concurs with
the recommendations of the associations and this proposed rule would
extend the current requirements to the design-build RFP document. The
requirements for material or product selection in design-build
contracts are added in paragraph (f).
Section 635.413 Warranty Clauses
There was a difference of opinion among the associations regarding
the use of warranty clauses on design-build projects. Some, but not
all, of the associations elected to comment on the warranty issue. The
AASHTO stated that the use of warranties should be at the owner's
discretion. If an owner believes that warranties are desirable, they
should carefully consider and clearly communicate the requirements in
the RFP document. The ACEC expressed concern over any attempt to extend
uninsurable warranty provisions to professional engineering services.
The AGC stated that warranty requirements should not be addressed in
the proposed rule. The AGC believes that this is a significant issue
that should be addressed separately. The DBIA indirectly addressed this
issue in the subject of risk allocation. The DBIA supports the concept
of appropriate risk delegation by including warranty provisions only
where certain design and construction features are within the control
of the design-builder.
The FHWA recognizes the significant concern regarding warranty
issues and agrees with the AASHTO that STDs should have the discretion
to use warranties where appropriate. The proposed rule would not amend
the current warranty regulation in 23 CFR 635.413 which limits the
application of warranties to specific products or construction features
on NHS projects. The STDs would continue to use their own warranty
procedures on non-NHS projects.
Part 636--Design-Build Contracting
This part would provide new requirements for Federal-aid design-
build projects. The agency believes it is necessary to provide
additional explanation for certain new requirements which are not self-
explanatory. Specific comments on these new provisions follow.
Section 636.102 Does This Part Apply to Me?
This part is written in the plain-language format. The pronoun
``you'' refers to the STD, the primary recipient of Federal-aid funds
in a State. Where the STD has an agreement with a local public agency
(or other governmental agency) to administer a Federal-aid design-build
project, the term ``you'' will also apply to that contracting agency.
Section 636.103 What Are the Definitions of Terms Used in This Part?
Many of the definitions used in this section are taken from the
DBIA's ``Design-Build Manual of Practice,'' \4\ Document Number 103.
Modifications are made to certain terms to agree with the actual use in
the Federal-aid highway program. Other definitions, such as the
definition of a ``qualified project,'' are taken from section 1307 of
the TEA-21.
---------------------------------------------------------------------------
\4\ The Design-Build Manual of Practice,'' Document Number 103
(Design-Build Definitions), is available for purchase from the
Design-Build Institute of America, 1010 Massachusetts Avenue, N.W.,
Suite 350, Washington, D.C. 20001 ($9 for DBIA members; $12
nonmembers). Online publication information is available at URL:
http://www.dbia.org/pubs.
---------------------------------------------------------------------------
Section 636.106 What Type of Projects May Be Used With Design-Build
Contracting?
In its recommendations to the FHWA, the AASHTO stated that the
proposed rules for design-build should not limit a State's ability to
gain maximum benefit from the process. States should not be prohibited
from using the most effective selection process for each individual
project. Similarly, the ACEC recommended that owners should be provided
with the flexibility to adopt the project delivery method that offers
the best value, given the unique opportunities, constraints, risks, and
demands of a particular project. The DBIA strongly supported a process
which will encourage the use of design-build. On the other hand, both
the ARTBA and the AGC expressed reservations with the design-build
method and recommended that the traditional design-bid-build method
remain the preferred method of contracting. The AGC stated that design-
build should only be allowed for use on Federal-aid projects where it
can be demonstrated that traditional contracting methods are not
appropriate or where there are unique problems or circumstances
associated with a particular project. The ARTBA recognized that there
may be certain projects that will lend themselves to design-build
including projects incorporating innovative financing arrangements
(certainty in price and/or scheduling), and projects incorporating
specific technical challenges. The ARTBA, however, believes that
design-build should only be used where it would provide the public with
a real advantage which is not readily provided by the traditional
design-bid-build method. The ARTBA also recommended that the estimated
contract amount should not be a determining factor in an owner's
criteria to use design-build.
Considering the sharp division of comments offered by the
associations, and the congressional mandate of section 1307, we propose
providing broad discretion to the States regarding project selection
criteria. We have not set specific criteria which limit the type of
projects which are suitable for design-build contracting. This is a
subject which is better addressed in non-regulatory guidance.
Under SEP-14, the States have evaluated more than 140 design-build
projects since 1991. These projects include various types of surface
transportation projects, including the following: simple roadway
resurfacing, bridge replacements, interchange modifications,
intelligent transportation system installation, roadways on new
alignment, vehicle emission inspection stations, ferry boats, tunnel
reconstruction and mega-construction projects, such as the I-15
reconstruction in Utah. Based on the FHWA's experience with the SEP-14
program, we do not believe that it is necessary or appropriate to limit
the design-build contracting technique to projects with a certain type
of work or contract size. Federal-aid recipients will be given the
flexibility to choose the correct contracting method which is
appropriate for the project objectives based on project delivery time,
cost, construction schedule and/or quality.
[[Page 53294]]
Section 636.107 Does the Definition of a ``Qualified Project'' Limit
the Use of Design-Build Contracting?
The TEA-21 requires the FHWA to establish the procedures to be
followed by an owner for obtaining the Secretary's approval for the use
of design-build contracting. The procedures for obtaining the FHWA's
approval for traditional project authorization are established and well
known by the STDs. The procedures for requesting the FHWA authorization
of Federal-aid design-build projects would be the same as any other
project funded by the FHWA. However, after the effective date of the
final rule, design-build projects which do not meet the TEA-21
definition of a ``qualified project'' must follow SEP-14 procedures.
The AASHTO recommended that all design-build projects be exempt
from the SEP-14 process once a final rule is developed. If this is not
possible, the AASHTO recommended that the FHWA Division Offices be
granted approval authority for the SEP-14 program because they have a
better understanding of State and local needs. The AASHTO also
advocates a simplification of the SEP-14 process and a change in the
``qualified project'' limit from $50 million to $10 million.
The FHWA agrees with many of the AASHTO's recommendations; however,
the definition of a ``qualified project'' is a statutory requirement
which the FHWA cannot change. Under the proposed rule, the FHWA
Division Offices would use the provisions of the final rule in
approving ``non-qualified'' projects for inclusion under SEP-14.
Projects which do not comply with the provisions of the final rule will
be referred to the FHWA Headquarters for concept approval under SEP-14.
Section 636.108 How Does the Definition of a ``Qualified Project''
Apply to ITS Projects?
The AASHTO recommended that an ITS design-build project be defined
as one that applies information and control technologies to improve the
safety, efficiency, and operation of the transportation system.
In defining a ``qualified project'' in section 1307 of the TEA-21,
the Congress did not provide additional guidance on the $5 million
limitation for ITS projects. For this reason, the FHWA is reluctant to
provide further clarification in the proposed rule. However, we believe
that for eligibility purposes, a design-build project with an estimated
cost of $5 million or more, which is primarily for ITS technology
purposes, complies with the definition of a ``qualified project.''
Section 636.109 How Does the NEPA Review Process Relate to the Design-
Build Procurement Process?
Several of the associations provided comments regarding the
application of the FHWA's National Environmental Policy Act of 1969
(NEPA) (42 U.S.C. 4321 et seq.) requirements to design-build projects.
The following are the views of the industry associations concerning the
relationship of the NEPA process and the design-build procurement
process.
The AASHTO recommended that the NEPA process be completed prior to
the award of a design-build project to ensure that all environmental
concerns and remedial measures are sufficiently detailed for the
design-builder. However, in cases where environmental impacts are
expected to be minimal and the outcome of the NEPA review appears
certain, the AASHTO believes the RFP document could be released after
approval of the final environmental impact statement. The AASHTO stated
that the responsibility for obtaining environmental approval rests with
the owner. Also, the AASHTO recommended that the public's perception of
the NEPA process and its relation to the design-build procurement
process should be carefully considered. Additionally, the AASHTO
suggested that the NEPA and design-build project delivery issues are
best addressed by the individual project owner in consultation with the
FHWA Division Office.
The AGC indicated that the NEPA process should be complete prior to
the selection of the design-builder. The AGC supports the concept of
the owner being responsible for all necessary environmental permits.
The ACEC was concerned about the potential adverse public
perception where the design-build procurement process is initiated
prior to the conclusion of the NEPA process. The ACEC recommended that
the FHWA discourage owners from releasing the RFP document prior to the
completion of the NEPA process. However, the ACEC suggested the
solicitation of qualifications should be allowed at the discretion of
the owner.
The FHWA agrees with many of the recommendations provided by the
associations. Section 1307(a)(3)(B) of the TEA-21 states the following:
``Final design under a design-build contract referred to in
subparagraph (A) shall not commence before compliance with section 102
of the National Environmental Policy Act of 1969 (42 U.S.C. 4332).''
The FHWA believes the congressional intent of this provision was to
ensure full compliance with NEPA for all design-build projects. To
ensure a complete unbiased NEPA process, it is imperative that the STDs
perform a level of design and environmental review which is necessary
to fully evaluate the range of reasonable alternatives chosen to meet
project goals and avoid adverse environmental impact. Project design
activities beyond this stage involve a certain level of risk.
The FHWA's NEPA review process was developed to ensure that
environmental impact information for any federally funded action is
available to public officials and citizens before decisions are made
and before actions are taken. The success of the NEPA process is based
on the assumption that there will be an objective and unbiased review
of all reasonable alternatives that address project needs and are
prudent in terms of avoiding potential environmental effects. Moreover,
the public perception of the NEPA review process is very important to
the FHWA and STDs. The perception of an unbiased review process should
not be compromised by a decision to release the design-build RFP prior
to the conclusion of the NEPA review process. Therefore, the NEPA
review process should be complete (an approval received for a
Categorical Exclusion, Finding of No Significant Impact, or a Record of
Decision as defined in 23 CFR 771.113(a)) prior to releasing the RFP
document.
The FHWA's environmental regulations require the evaluation of
alternatives, their environmental consequences, and the incorporation
of mitigation measures (avoidance, minimization, and compensation)
prior to proceeding with an action. Project activities beyond those
necessary to answer environmental questions during the NEPA review
process (for example: final design, right-of-way acquisition, and
construction) are not permitted prior to the conclusion of the NEPA
review process.
The FHWA also agrees with the association recommendations to ensure
that the RFP document address all environmental commitments and
mitigation measures. Due to the nature of the design-build process,
proposers often expend significant effort preparing technical and cost
proposals in response to an RFP. Therefore, STDs have a responsibility
to: (1) Ensure that the RFP scope of work includes the details related
to all environmental commitments and (2) assure proposers that the
scope will not change as a result of the environmental review process.
[[Page 53295]]
This will minimize the need for proposers to include contingencies in
their cost proposals.
The proposed rule would allow the request for qualifications (RFQ)
solicitation to proceed prior to the conclusion of the NEPA process.
However, the RFP should not be released prior to the conclusion of the
NEPA process.
Section 636.110 What Procedures May Be Used for Solicitations and
Receipt of Proposals?
Rather than adopting a modification of FAR provisions for this
subject, the FHWA has elected to allow the States to use their own
procedures for the solicitation and receipt of proposals.
Section 636.111 Can Oral Presentations Be Used During the Procurement
Process?
The proposed language in this section is a modified version of the
requirement in 48 CFR 15.102, Oral Presentations. The modifications
provide flexibility for State procurement officials.
Section 636.112 May Stipends Be Used?
All of the associations which provided comments to the FHWA during
the pre-rule workshop meeting supported both the owner's use of
stipends and Federal-aid participation in the cost of stipends. The
AASHTO indicated that the payment of stipends to firms submitting
competitive proposals should be at the owner's discretion. The AGC
recommended that the stipend be based on some formula related to the
value of the project and not selected arbitrarily. The AASHTO also
stated that owners should have full rights to retain and use ideas from
proposals when stipends are accepted by the offerors. The DBIA said
that stipends are an effective means for encouraging competition. When
used in combination with short listing or prequalification procedures,
the contracting agency will benefit from a cost effective procurement
process.
Based on our preliminary experience with SEP-14 design-build
projects, the FHWA agrees that stipends appear to be cost effective on
large projects where offerors may be required to incur significant
costs to submit a proposal. The use of stipends in such cases should:
(1) Offset costs incurred by the offerors for their substantial efforts
and thereby ensure a minimum level of competition through the end of
the procurement process, (2) ensure that smaller companies are not put
at a significant competitive disadvantage, and (3) send a message to
potential offerors that the owner is serious about awarding a contract
and receiving a quality proposal.
Section 636.113 Is the Stipend Amount Eligible for Federal
Participation?
The cost of stipends is eligible for Federal-aid participation. The
FHWA has listed a range of costs based on the estimated proposal
development costs. In addition, the proposed rule states that STDs may
retain the right to use ideas from unsuccessful offerors if State law
provides for this.
Section 636.114 What Factors Should Be Considered in Risk Allocation?
The AASHTO recommended that the assignment of risk be determined by
the owner and clearly defined in the procurement and contract
documents. The ACEC stated that the RFP document should clearly define
the owner's requirements and assign risk to the party who is best able
to manage it. The AGC cautioned against the temptation to shift all
project related risk to the design-builder. The AGC recommended that
contracts incorporate standardized change condition clauses to reduce
the offeror's need to cover contingencies through increased project
costs. The AGC also supports the concept of incentive and disincentive
provisions to reduce the actual construction time and reduce impacts to
the traveling public. The DBIA noted that an unfair allocation of risks
to offerors may lead to increased bid prices, change order disputes,
and litigation costs. According to the DBIA, studies have shown that
the risk best belongs to the party who is best able to evaluate,
control, and bear the cost of the risk. Many risks and liabilities are
best shared. Every risk has an associated and unavoidable cost, which
must be assumed somewhere in the process.
The FHWA concurs with the recommendations of the Associations.
Section 636.114 would encourage STDs to identify, consider, and
allocate risks in the procurement documents.
Section 636.115 May I Meet With Industry To Gather Information
Concerning the Appropriate Risk Allocation Strategies?
The proposed requirements of this section are modified from 48 CFR
15.201, Exchanges with Industry Before Receipt of Proposals. This
section will encourage the STDs to gather the appropriate information
concerning risk allocation prior to the initiation of the procurement
process. The FHWA is proposing modifications to the FAR provisions to
give the STDs the necessary flexibility in procurement.
Section 636.116 What Organizational Conflict of Interest Requirements
Apply to Design-Build Projects?
The organizational conflict of interest subject generated
significant comments from many associations. Several commenters
requested that owners be required to list specific conflict of interest
provisions in all solicitations for design-build projects. Most of the
associations believed that the owner's consultant or sub-consultant
(who was involved in the development or preparation of the RFP
document) should be excluded from the proposal process because this may
present a real or an apparent conflict of interest. In addition, the
AASHTO recommended that consultants or sub-consultants who participate
as offerors should not be involved in the evaluation of proposals or
the administration of design-build contracts. However, the AASHTO
suggested that, at the option of the owner, a consultant should be
allowed to join multiple proposal teams.
The AGC recommended that the regulation should not prohibit
consultants from working for more than one bidder or from participating
on the successful design-build team if the consultant worked with a
different firm during the proposal stage.
The ACEC is concerned about the potential for conflict of interest
when an owner's consultant joins one of the prospective offerors.
However, it identified cases where it may be appropriate to allow the
owner's sub-consultants to participate in the proposal process. One
example might be where the sub-consultant provides limited information
in the project development process and this information is provided to
all offerors (such as a geotechnical engineering firm).
The DBIA stated that, as an overall guideline, relationships
between owner's consultants and design-build team members should be
avoided. Owner's consultants should not be permitted to participate on
design-build proposal teams. However, an exception may be made for
certain consultants who assisted the owner with project development
activities on very large projects with multiple designers, provided
that the information prepared by these consultants is available to all
offerors.
We incorporated many of these recommendations in the proposed rule;
however, we also recognize that it is not practical to address every
specific instance where the appearance of a
[[Page 53296]]
conflict, or an actual conflict of interest may arise. State statutes
and practices in this area will govern. The proposed rule provides
flexibility by requiring the apparent successful offerors to submit
certifications regarding actual or apparent organizational conflicts of
interest. The owners will then have the ability to make a determination
regarding actual or apparent conflicts and take the appropriate action
in accordance with State standards prior to the award of the contract.
Section 636.117 What Conflict of Interest Standards Apply to
Individuals Who Serve as Selection Team Members for the Owner?
The ACEC recommended that members of the selection team sign non-
disclosure statements, non-conflict-of-interest statements, and
agreements not to become an employee, agent, or consultant to the
successful designer-builder for the duration of the project.
The proposed rule provides flexibility for States to use their own
standards regarding personal conflicts of interest; however, in the
absence of such State provisions, the requirements of Title 48 CFR Part
3, Improper Business Practices and Personal Conflicts of Interest, will
apply to selection team members.
Section 636.118 Is Team Switching Allowed After Contract Award?
The AASHTO recommended that successful offerors be allowed to add
members to their teams after project award with approval of the owner.
In addition, the AASHTO said that State rules related to changes in
team members or changes in personnel within teams should be explicitly
stated by the owner in the project advertisement. On the other hand,
the ACEC recommended that the proposed rule prevent the switching of
team members after selection. This recommendation was based on the
ACEC's belief that if an owner uses qualifications and technical
capabilities as a factor in the selection process, then steps need to
be taken to prevent the restructuring of the team after project award.
In general, FHWA agrees with the ACEC recommendation. However, some
flexibility is appropriate to provide owners with the ability to review
team changes or team enhancements on a case-by-case basis. Accordingly,
the FHWA believes the proposed rule provides the necessary flexibility.
Section 636.119 How Does This Part Apply to a Project Developed Under
a Public-Private Partnership?
Under the proposed rule, the FHWA is making a distinction between:
(1) Public-private partnership projects utilizing traditional Federal-
aid funding and (2) public-private partnership projects utilizing some
form of loan assistance from FHWA.
The FHWA recognizes the significant risks and responsibilities
accepted by private entities in a public-private partnership agreement.
Private entities must often consider the risks associated with
financing, planning, designing, constructing, maintaining and operating
public facilities for long time periods. In some situations, the FHWA's
participation in such projects may be limited to a loan, loan
assistance (guarantee), line of credit or other means of credit
assistance. At the end of the loan period, the Federal investment in
the project may be zero.
In the first case, the FHWA's procurement policies would apply to
any project that utilizes traditional Federal-aid funding. If an owner
utilizes traditional Federal-aid funding in the cost of work done under
a public-private franchise agreement, then the FHWA procurement
policies apply to the procurement of the franchise. If an owner elects
to utilize traditional Federal-aid funding in only a portion of the
work done under a franchise agreement (such as a design-build contract
under the franchise agreement), then the FHWA procurement policies
would only apply to that particular contract. The FHWA procurement
policies include qualification-based-selection procedures for
engineering service contracts, competitive bidding requirements for
construction contracts, and the requirements of this part for design-
build contracts.
In the second case, FHWA's procurement policies would not apply to
work done under a public-private partnership agreement if the only form
of FHWA funding is loan assistance. If the procurement process for the
public-private partnership was a competitive process, then the public-
private entity may select consultants, construction contractors or
design-builders in whatever manner it sees fit. However, the public-
private entity must comply with State laws and procedures. This policy
is consistent with the FHWA's May 10, 1996, guidance memorandum
concerning ``Guidance on Section 313(b) of the National Highway System
Act Loan Provisions under Section 129(a)(7) of Title 23'' (see http://www.fhwa.dot.gov/innovativefinance/ifg.htm).
However, all Federal-aid recipients should be aware that general
Title 23, U.S. Code, provisions (environment, right-of-way, etc.) will
apply to all FHWA projects regardless of whether traditional Federal-
aid funding or loan assistance is used. In addition, any construction
or design-build contract which utilizes any form of FHWA funding must
comply with the FHWA's requirements for construction contracts in 23
CFR part 635 including Buy America, Davis-Bacon minimum wage rates, and
others.
Subparts B through F
These subparts propose additional requirements for the design-build
procurement process. As previously noted in the General Comments
section, the FHWA is adopting modified FAR provisions from 48 CFR Part
15, Contracting by Negotiation, and 48 CFR 36.3, Two-Phase Design-Build
Selection Procedures. The industry representatives at the pre-rule
workshop meeting did not voice particular concerns regarding the
individual requirements in these subparts. However, the representatives
did provide general comments regarding the design-build procurement
process.
The AASHTO believes that the procurement process for design-build
projects should be left to each STD's discretion. This will allow each
State to adapt a procurement system to their needs and their
legislative authority. In addition, the AASHTO believes that the
selection criteria and award formulas should clearly be communicated to
offerors in the RFP document.
The ACEC recommended that the FHWA develop rules and regulations
for the design-build procurement process. The process should be
flexible and allow the owners to select an appropriate procurement
vehicle for the size and complexity of the project. However, the
process should maintain a system of checks and balances to guarantee
the integrity of the selection process. The ACEC believes that the
following steps will assist in maintaining integrity:
(1) Develop specific judging rules and a fully pre-defined point
award system that is specified in the Request for Qualifications (RFQ)
and/or RFP documents.
(2) Place significant weight on qualifications and technical
approach. The cost weight may vary from project to project; however, it
should not be over-emphasized at the expense of other important
criteria.
[[Page 53297]]
(3) Assign knowledgeable personnel to the selection team. Enforce
integrity and conflict-of-interest standards to maintain a separation
of interests between the owner and industry representatives.
(4) Require separate qualitative and cost proposal submissions. Do
not open cost proposals until after the completion and publication of
the qualitative scoring.
In addition, the ACEC recommended that the rule not give
preferential treatment to a firm based on its size during the selection
process.
The AGC indicated that the FHWA should define the specific
procurement procedures that States would have to follow in the proposed
rule. They believe STDs should have some administrative flexibility in
developing their own procedures to meet State and local requirements.
According to the AGC, prequalification is a necessary element in the
design-build procurement process. The AGC supports the use of the two-
step selection process. Costs must be a major factor in the selection
process. The separate submission and evaluation of cost and technical
proposals should help to minimize subjectivity. The selection criteria,
and their relative weights, must clearly be presented to all potential
offerors. The AGC believes that best-and-final-offer (BAFO) negotiation
procedures should be prohibited in the regulation.
The ARTBA strongly believes that public owners should have the
maximum flexibility in determining procurement methods. While the ARTBA
recognized the FHWA's duty to ensure the appropriate expenditure of
Federal tax dollars, it hoped that the FHWA would minimize Federal
control and bureaucratic interference in procurement. At the same time
the ARTBA expressed the need for a fair, equitable, and consistent
procurement process which is free from the elements of subjectivity and
favoritism. The ARTBA suggested several ``guiding principles'' which
State and local units of government should consider if they elect to
use design-build. These include the following:
(1) Use a two-step procurement. In the first step, prequalify
offerors based on well-defined, objective, measurable criteria relevant
to the project's size, value, duration, technical features, and
complexity;
(2) Clearly communicate the prequalification criteria (and relative
weights) in the solicitation;
(3) Owners should prequalify, but should not develop a short list
of the most qualified firms. Anyone who is prequalified should be able
to submit a proposal;
(4) Proposal criteria should be as objective as possible; and
(5) Proposal cost should be the most significant factor in the
final selection.
The DBIA recommended that the regulations be structured to provide
owners with maximum flexibility in structuring their procurement
procedures and contracts. It further suggested that the FHWA should not
try to impose its ideas regarding best contracting practices on State
and local agencies. The FHWA should limit the proposed rule to
addressing the TEA-21 requirements and clarifying how certain existing
rules will apply in the context of design-build. The DBIA suggested
that the FHWA produce an advisory guideline to assist the States in
making procurement and contracting decisions. In contrast to the AGC
and the ARTBA, the DBIA stated that low bid is the least desirable way
to select a design-builder. The DBIA recommends best-value selections.
However, the DBIA stated that if an owner requires a low bid selection
system, then the prequalification process must be stringent.
The FHWA weighed the wide range of recommendations provided by the
associations concerning procurement issues. Some of the recommendations
appear to be diametrically opposed. We considered individual comments
and weighed them in relation to the overall goals of maintaining
flexibility and establishing a model for the use of design-build in
each State. In the final analysis, we elected to allow flexibility to
the maximum extent practical and adopt modified FAR provisions for
design-build and competitive acquisition. This will establish an
equitable framework that has been tested by the courts for the use of
design-build contracting in the Federal-aid highway program.
Part 637--Subpart B--Quality Assurance Procedures for Highway
Construction
The AASHTO said that owner oversight should be sufficient to
certify that the project meets the owner's quality control/quality
assurance (QC/QA) plan, as well as any associated Federal regulations.
It was recommended that the design-builder furnish a QC/QA plan for the
owner's approval. The AGC stated that the proposed rule should require
owners to define oversight needs in the RFP. The AGC believes that the
successful design-build team should have an approved QC/QA program and
should do the majority of the acceptance testing and inspection.
The FHWA recognizes the STD's responsibility to ensure that the
final product meets contractual requirements. We also recognize that
the design-build contracting method allows for risk allocation
strategies which are not typical for traditional design-bid-build
contracts. Therefore, it is appropriate for STDs to have the
flexibility to require alternate contractual methods for oversight,
acceptance procedures and verification testing. For this reason, we
have expanded the language in Subpart B, Quality Assurance Procedures
for Construction, to include alternate contractual methods such as
warranties and operational requirements. However, the concept of STD
responsibility for quality assurance procedures remains the same as for
traditional design-bid-build projects. The provisions of
Sec. 637.205(d) requiring verification sampling and testing by the STD,
or its agent, are maintained for design-build projects. The States
should use their own discretion in listing oversight and acceptance
testing procedures in the RFP document.
Part 710--Right-of-Way; Subpart C--Project Development
The AASHTO stated that the determination of who should have the
responsibility for dealing with right-of-way acquisition issues should
be left to the discretion of the STD. Some STDs, however, may believe
that it is in the public interest to delegate this responsibility to
the design-builder. The industry associations, on the other hand, urged
caution or recommended that the STDs keep such responsibility. The ACEC
stated that it is usually advantageous for the STDs to perform right-
of-way acquisition prior to the notice-to-proceed for the design-build
project; however, there may be certain cases where it is appropriate
for the design-builder to carry this responsibility to promote
innovation and cost-effective design alternatives. The ACEC stated that
the RFP document should clearly address all responsibility issues
concerning right-of-way acquisition. The AGC, on the other hand, stated
that right-of-way acquisition should be the responsibility of the STDs.
The FHWA recognizes that there are many and varied concerns
regarding responsibility and risk allocation for right-of-way issues.
We have elected to provide as much flexibility as possible to the STDs
who have the ultimate responsibility for right-of-way acquisition and
ensuring compliance with the Uniform Relocation Assistance
[[Page 53298]]
and Real Property Acquisition Policies Act of 1970, as amended (42
U.S.C. 4601, et seq.). Thus, this proposed rule would provide this
flexibility by requiring that certain responsibility allocation issues
be clarified in the RFP document.
Rulemaking Analyses and Notices
All comments received before the close of business on the comment
closing date shown above will be considered and will be available for
examination using the docket number appearing at the top of this
document in the docket room at the above address. Comments received
after the comment closing date will be filed in the FHWA docket
identified above and will be considered to the extent practicable, but
the FHWA may issue a final rule at any time after the close of the
comment closing period. In addition to late comments, the FHWA will
also continue to file in the docket relevant information that becomes
available after the comment closing date, and interested persons should
continue to examine the docket for new material. A final rule may be
published at any time after the close of the comment period.
Executive Order 12866 (Regulatory Planning and Review) and DOT
Regulatory Policies and Procedures
The FHWA has determined preliminarily that this action would be a
significant regulatory action within the meaning of Executive Order
12866, and within the meaning of the U.S. Department of
Transportation's regulatory policies and procedures. The Office of
Management and Budget has reviewed this document under E.O. 12866. The
FHWA anticipates that the economic impact of this rulemaking would be
minimal. However, this rule is considered to be significant because of
the substantial State and industry interest in the design-build
contracting technique.
The FHWA anticipates that the proposed rule would not adversely
affect, in a material way, any sector of the economy. However, at the
present time the FHWA does not have sufficient data to make a
conclusive statement regarding the economic impacts. Interested parties
are invited to comment on the anticipated economic impact. 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. This rulemaking
merely allows the STDs to utilize the design-build contracting
technique--a contracting method that has only been used on an
experimental basis to date in the Federal-aid highway program. The
proposed rule would not affect the total Federal funding available to
the STDs under the Federal-aid highway program. Therefore, it is
anticipated that an increased use of design-build delivery method will
not yield significant economic impacts to the Federal-aid highway
program. Consequently, a full regulatory evaluation is not required.
The increased usage of the design-build contracting method may
result in certain efficiencies in the cost and/or time it normally
takes to deliver a transportation project. However, as stated above,
the FHWA presently does not have sufficient data to make a conclusive
statement regarding economic impacts.
Regulatory Flexibility Act
In compliance with the Regulatory Flexibility Act (5 U.S.C. 601-
612), the FHWA has evaluated the effects of this proposed action on
small entities and has preliminarily determined that the proposed
action would not have a significant economic impact on a substantial
number of small entities. However, we invite comment on this subject.
By its very nature, design-build contracting is best suited to
large transportation projects. However, several STDs such as
Pennsylvania, Ohio and Michigan have successfully completed several
relatively small design-build contracts (less than $5 million) under
SEP-14. Approximately 50 percent of the projects approved under SEP-14
have been less than $5 million. We expect that this trend will continue
after the final rule is enacted.
Design-build contracts will present subcontracting opportunities
which are similar to or greater than those available under design-bid-
build contracts. In many cases, design-build contractors will
subcontract for design services. Under the traditional design-bid-build
system, owners typically prepare a design with their own staff or will
contract with a design consultant for this work. Based on data provided
by the Pennsylvania Department of Transportation (PennDOT), the average
subcontracting amount for design-build contracts compares favorably
with the average subcontracting amount for design-bid-build projects in
the same contract size range. While the number of PennDOT completed
design-build projects is small, this preliminary data (shown in Table
1) shows that there are comparable subcontracting opportunities for
relatively small design-build projects.
Table 1
----------------------------------------------------------------------------------------------------------------
Design-Build Design-Bid-Build
---------------------------------------------------------------
PennDOT projects Number of Subcontracting Number of Subcontracting
projects percentage projects percentage
----------------------------------------------------------------------------------------------------------------
Contract Size:
$0-5 million................................ 4 20 541 29
$5-10 million............................... 1 39 21 29
$10-20 million.............................. 0 .............. 13 30
>$20 million................................ 0 .............. 10 40
----------------------------------------------------------------------------------------------------------------
Large design-build contracts will present significant
subcontracting opportunities for firms of all sizes. Table 2
illustrates the subcontracting opportunities which have been associated
with medium to large-sized highway design-build contracts.
Table 2
----------------------------------------------------------------------------------------------------------------
Contract size Subcontracting
Project Owner (million) percentages
----------------------------------------------------------------------------------------------------------------
Eastern Toll Road............................. Transportation Corridors Agency, $767 39
CA.
[[Page 53299]]
San Joaquin Hills Toll Road................... Transportation Corridors Agency, 799.7 41
CA.
I-15 Reconstruction........................... Utah DOT........................ 1,318 54
I-17 Reconstruction........................... Arizona DOT..................... 79.7 33
E-470 Segments I and II....................... E-470 Public Highway Authority.. 323.6 90
Southern Connector............................ South Carolina DOT.............. 106.4 87
Conway Bypass................................. South Carolina DOT.............. 386.0 89
----------------------------------------------------------------------------------------------------------------
Thus, from the data available to the FHWA, it appears that the
subcontracting opportunities for small entities will be similar under
both design-build and design-bid-build contracts.
To offset potential adverse impacts on small entities, the proposed
rule would eliminate the FHWA's existing requirement for the prime
contractor to perform 30 percent of all contract work, less specialty
items (see Sec. 635.116). This should provide greater flexibility for
STDs in administering design-build contracts. For design-builders, it
will remove potential barriers regarding the choice of subcontractors,
and most important, it will provide greater subcontracting
opportunities for firms of all sizes. For these reasons and because
this proposed rule is directed to the States and directly affects the
STDs, which are not considered small entities for the purposes of the
Regulatory Flexibility Act, the FHWA is able to preliminarily certify
that the proposed rule will not have a significant economic impact on a
substantial number of small entities.
Unfunded Mandates Reform Act of 1995
This proposed rule would not impose unfunded mandates as defined by
the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4, March 22,
1995, 109 Stat. 48). This proposed rule will not result in the
expenditure by State, local, and tribal governments, in the aggregate,
or by the private sector, of $100 million or more in any one year. (2
U.S.C. 1531 et seq.). This rulemaking proposes to allow STDs to use a
contracting method which has only been used in the Federal-aid highway
program on an experimental basis to date. There is no requirement for a
State to use the design-build contracting technique. It is strictly an
optional contracting method. Therefore, this proposed rule is not
considered an unfunded mandate.
Executive Order 13132 (Federalism)
This proposed action has been analyzed in accordance with the
principles and criteria contained in Executive Order 13132, dated
August 4, 1999, and the FHWA has determined that this action would not
have sufficient federalism implications to warrant the preparation of a
Federal assessment. Nothing in this document directly preempts any
State law or regulation or affects the States' ability to discharge
traditional State governmental functions. Section 1307 of the TEA-21
directs the FHWA to develop regulations which will: (1) Identify
Secretary's approval criteria for design-build contracts, and (2)
establish procedures for obtaining FHWA's approval for design-build
contracts. Throughout the proposed regulation there is an effort to
give the STDs flexibility in deciding where to appropriately use
design-build contracting while keeping administrative burdens to a
minimum.
Executive Order 13175 (Tribal Consultation)
The FHWA has analyzed this proposal under Executive Order 13175,
dated November 6, 2000, and believes that the proposed rule will not
have substantial direct effects on one or more Indian tribes; will not
impose substantial direct compliance costs on Indian tribal
governments; and will not preempt tribal law. The proposed rule does
not address issues which are related to tribal operations. Therefore, a
tribal summary impact statement is not required.
Executive Order 12372 (Intergovernmental Review)
Catalog of Federal Domestic Assistance Program Number 20.205,
Highway planning and construction. The regulations implementing
Executive Order 12372 regarding intergovernmental consultation on
Federal programs and activities apply to this program.
Executive Order 12988 (Civil Justice Reform)
This proposed action would meet applicable standards in sections
3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to
minimize litigation, eliminate ambiguity, and reduce burden.
Executive Order 13045 (Protection of Children)
We have analyzed this action under Executive Order 13045,
Protection of Children from Environmental Health Risks and Safety
Risks. This proposed rule is not economically significant and does not
concern an environmental risk to health or safety that may
disproportionately affect children.
Executive Order 12630 (Taking of Private Property)
This proposed rule would not effect a taking of private property or
otherwise have taking implications under Executive Order 12630,
Governmental Actions and Interference with Constitutionally Protected
Property Rights.
Paperwork Reduction Act
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501,
et. seq.), Federal agencies must obtain approval from the Office of
Management and Budget (OMB) for each collection of information they
conduct, sponsor, or require through regulations. The FHWA has reviewed
this proposal and determined that it does not contain collection of
information requirements for the purposes of the PRA.
Since 1990 the FHWA has been allowing the STDs to evaluate design-
build contracting on an experimental basis through Special Experimental
Project No. 14 (SEP-14). To receive the FHWA's approval, STDs were
requested to prepare experimental project work plans and evaluation
reports for all design-build projects.
Under the proposed rule, the STDs will no longer be required to
develop workplans or evaluation reports for ``qualified projects.''
However, because of the ``qualified project'' definition in section
1307 of TEA-21, the FHWA will continue to approve ``non-qualified''
design-build projects under SEP-14. Therefore, a SEP-14 workplan and
evaluation will continue to be necessary for these projects. The
evaluation reports will document the lessons
[[Page 53300]]
learned through design-build contracting and this information will be
shared with others in the highway industry. The collection of SEP-14
information does not entail the reporting of information in response to
identical questions. The SEP-14 design-build evaluation reports do not
involve answering specific questions; they address issues relating to
competitive acquisition. Each is a one of a kind document which relates
to the lessons learned on a particular project.
We invite comments on this analysis.
National Environmental Policy Act
The agency has analyzed this proposed action for the purposes of
the National Environmental Policy Act of 1969 (NEPA), as amended (42
U.S.C. 4321 et seq.), and has preliminarily determined that this
proposed action would not have any effect on the quality of the
environment. Design-build projects must comply with NEPA requirements
and the proposed rule includes guidance concerning compliance with NEPA
in relation to the release of the Request for Proposals document.
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 contained in the heading of
this document can be used to cross reference this proposed action with
the Unified Agenda.
List of Subjects
23 CFR Part 627
Government procurement, Grant programs-transportation, Highways and
roads.
23 CFR Part 635
Grant programs-transportation, Highways and roads, Reporting and
recordkeeping requirements.
23 CFR Part 636
Design-build, Grant programs-transportation, Highways and roads.
23 CFR Part 637
Construction inspection and approval; Highways and roads.
23 CFR 710
Grant programs-transportation, Highway and roads, Real property
acquisition, Rights-of-way, Reporting and recordkeeping requirements.
Issued on: October 12, 2001.
Mary E. Peters,
Administrator.
For reasons set forth in the preamble, the FHWA proposes to amend
Chapter I of title 23, Code of Federal Regulations, by adding part 636
and by revising parts 627, 635, 637 and 710 as set forth below:
PART 627--VALUE ENGINEERING
1. Revise the authority citation for part 627 to read as follows:
Authority: 23 U.S.C. 106(d), 106(f), 112(b), 302, 307, and 315;
49 CFR 18.
2. In part 627 revise all references to ``State highway agencies''
to read ``State transportation departments''; and revise the acronyms
``SHA'' and ``SHAs'' to read ``STD'' and ``STDs'', respectively.
3. In Sec. 627.5, add paragraph (e) to read as follows:
Sec. 627.5 General principles and procedures.
* * * * *
(e) In the case of a Federal-aid design-build project meeting the
project criteria in 23 CFR 627.1(a), the STDs shall fulfill the value
engineering requirements by:
(1) Performing their own value engineering analysis of the concepts
in the Request for Proposals document prior to the initiation of the
design-build procurement process; or
(2) Requiring a value engineering analysis at other key points in
the project development process. Value engineering reviews are
generally not recommended as part of the design-build proposal process.
At the STD's discretion, value engineering change proposal clauses may
be used in design-build contracts.
PART 635--CONSTRUCTION AND MAINTENANCE
4. Revise the authority citation for part 635 to read as follows:
Authority: 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
1.48(b).
5. In part 635 revise all references to ``State highway agencies''
to read ``State transportation departments''; and revise the acronyms
``SHA'' and ``SHAs'' to read ``STD'' and ``STDs'', respectively.
6. Amend Sec. 635.102 by placing all definitions in alphabetical
order, removing the definition of ``certification acceptance,'' and by
adding the definition of ``design-build project'' to read as follows:
Sec. 635.102 Definitions.
* * * * *
Design-build project means a project which utilizes a single
contract to provide for design and construction.
* * * * *
7. Amend Sec. 635.104 by adding paragraph (c) to read as follows:
Sec. 635.104 Method of construction.
* * * * *
(c) In the case of a design-build project, the requirements of part
636 and the appropriate provisions pertaining to design-build
contracting in this part will apply.
8. Revise Sec. 635.107 to read as follows:
Sec. 635.107 Participation by disadvantaged business enterprises.
(a) The STD shall schedule contract lettings in a balanced program
providing contracts of such size and character as to assure an
opportunity for all sizes of contracting organizations to compete. In
accordance with Title VI of the Civil Rights Act of 1964, subsequent
Federal-aid Highway Acts, and 49 CFR part 26, the STD shall ensure
equal opportunity for disadvantaged business enterprises (DBEs)
participating in the highway construction program.
(b) In the case of a design-build project funded with title 23
funds, the requirements of 49 CFR part 26 and the following provisions
apply.
(1) The STDs may establish specific DBE goals in the request for
proposal document, however, offerors do not have to furnish the
information required by 49 CFR 26.53(b)(2) prior to the award of
contract. The STDs may determine when this information must be
submitted.
(2) If a DBE contract goal is established, the STD must require
offerors to make a commitment to meet the goal or provide good faith
efforts, as described in 49 CFR 26.53.
(3) During the proposal evaluation process, the STD will make a
fair and reasonable judgment whether a proposer, that did not meet the
goal, made adequate good faith efforts as described in 49 CFR 26.53.
(4) During the proposal evaluation process, DBE commitments above
the contractual requirements must not be used as a proposal evaluation
factor in determining the successful offeror.
(5) The STD must maintain oversight of the design-builder's DBE
commitments during the project to ensure that contract requirements are
met.
9. Amend Sec. 635.109 by adding paragraph (c) to read as follows:
Sec. 635.109 Standardized changed condition clauses.
* * * * *
[[Page 53301]]
(c) In the case of a design-build project, only the requirements of
section (a)(2) of this section are applicable. However, STDs may
consider using ``differing site condition clauses'' and ``significant
changes in the character of work clauses'' which are appropriate for
the risk and responsibilities that are shared with the design-builder.
10. Amend Sec. 635.110 by adding paragraph (f) to read as follows:
Sec. 635.110 Licensing and qualification of contractors.
* * * * *
(f) In the case of a design-build project, the STDs may use their
own bonding, insurance, licensing, qualification or prequalification
procedure for any phase of design-build procurement.
(1) The STDs may not impose statutory or administrative
requirements which provide an in-State or local geographical preference
in the solicitation, licensing, qualification, pre-qualification, short
listing or selection process. The geographic location of a firm's
office may not be a selection criteria. However, the STDs may require
the successful design-builder to establish a local office after the
award of contract.
(2) If required by State statute, local statute, or administrative
policy, the STDs may require prequalification for construction
contractors. The STDs may require offerors to demonstrate the ability
of their engineering staff to become licensed in that State as a
condition of responsiveness; however, licensing procedures may not
serve as a barrier for the consideration of otherwise responsive
proposals. The STDs may require compliance with State licensing
practices as a condition of contract award.
11. Amend Sec. 635.112 by revising the section heading and by
adding paragraph (i) to read as follows:
Sec. 635.112 Advertising for bids and proposals.
* * * * *
(i) In the case of a design-build project, the requirements of this
section are modified by the following:
(1) The FHWA Division Administrator's approval of the Request for
Proposals document will constitute the FHWA's project authorization and
the FHWA's approval of the STD's request to release the document. This
approval will carry the same significance as plan, specification and
estimate approval on a design-bid-build Federal-aid project.
(2) The STD may decide the appropriate solicitation schedule for
all design-build requests. This includes all project advertising, the
release of the Request for Qualifications document, the release of the
Request for Proposals document and all deadlines for the receipt of
qualification statements and proposals. Typical advertising periods
range from six to ten weeks and can be longer for large, complicated
projects.
(3) The STD shall obtain the approval of the Division Administrator
prior to issuing addenda which result in major changes to the Request
for Proposals document. Minor addenda need not receive prior approval
but may be identified by the STD at the time of or prior to requesting
the FHWA's concurrence in award. The STD shall provide assurance that
all offerors have received all issued addenda.
12. Amend Sec. 635.113 by adding paragraph (c) to read as follows:
Sec. 635.113 Bid opening and bid tabulations.
* * * * *
(c) In the case of a design-build project, the requirements of this
section are modified by the following:
(1) All proposals received shall be opened and reviewed in
accordance with the terms of the solicitation. The STD shall use its
own procedures for the following:
(i) The process of handling proposals and information;
(ii) The review and evaluation of proposals;
(iii) The submission, modification, revision and withdrawal of
proposals; and
(iv) The announcement of the successful offeror.
(2) The STD shall submit a tabulation of proposal costs to the FHWA
Division Administrator. The tabulation of price proposal information
may include detailed pricing information when available or lump sum
price information if itemized costs are not used.
13. Amend Sec. 635.114 by adding paragraph (k) to read as follows:
Sec. 635.114 Award of contract and concurrence in award.
* * * * *
(k) In the case of a design-build project, the requirements of this
section are modified by the following sentence: Design-build contracts
shall be awarded on the basis of the criteria specified in the Request
for Proposals document. See Part 636, Design-build Contracting, for
details.
14. Amend Sec. 635.116 by adding paragraph (d) to read as follows:
Sec. 635.116 Subcontracting and contractor responsibilities.
* * * * *
(d) In the case of a design-build project, the requirements of this
section are modified by the following:
(1) The provisions of paragraph (a) of this section are not
applicable to design-build contracts;
(2) At their discretion, the STDs may establish a minimum
percentage of work which must be done by the design-builder;
(3) No procedure, requirement or preference shall be imposed which
prescribes minimum subcontracting requirements or goals (other than
those necessary to meet the Disadvantaged Business Enterprise program
requirements of 49 CFR part 26).
15. Amend Sec. 635.122 by adding paragraph (c) to read as follows:
Sec. 635.122 Participation in progress payments.
* * * * *
(c) In the case of a design-build project, the STD shall define its
procedures for making progress payments on lump sum contracts in the
Request for Proposal document.
16. Amend Sec. 635.309 by adding paragraph (p) to read as follows:
Sec. 635.309 Authorization.
* * * * *
(p) In the case of a design-build project, the requirements of this
section are supplemented with the following:
(1) The FHWA's project authorization (authorization to advertise or
release the Request for Proposals document) will not be issued until
the following conditions have been met:
(i) All projects must conform with the statewide and metropolitan
transportation planning requirements (23 CFR part 450).
(ii) All projects in air quality nonattainment and maintenance
areas must meet all transportation conformity requirements (40 CFR
parts 51 and 93).
(iii) The NEPA review process has been concluded. (see
Sec. 636.109).
(iv) The Request for Proposals document has been approved.
(v) A statement is received from the STD that either all right-of-
way, utility, and railroad work has been completed or that all
necessary arrangements have been made for it to be undertaken and
completed as required for proper coordination with the design-builder's
construction schedule.
(vi) If the STD elects to include right-of-way, utility, and/or
railroad services as part of the design-builder's scope of work, then
the Request for Proposals document must include:
(A) A statement concerning scope and current status of the required
services, and
[[Page 53302]]
(B) A statement which requires compliance with the Uniform
Relocation and Real Property Acquisition Policies Act of 1970, as
amended, and 23 CFR part 710.
(2) During a conformity lapse, a design-build project (including
right-of-way acquisition activities) may continue if the FHWA
authorized the design-build contract prior to the lapse and the project
met transportation conformity requirements (40 CFR parts 51 and 93);
whether the right-of-way authorization comes before the design-build
authorization, or is part of such an authorization.
(3) Changes to the design-build project concept and scope may
require a modification of the transportation plan and transportation
improvement program. The project sponsor must comply with the
metropolitan and statewide transportation planning requirements in 23
CFR part 450 and provide appropriate approval notification to the
design-builder for such changes.
17. Amend Sec. 635.411 by adding paragraph (f) to read as follows:
Sec. 635.411 Material or product selection.
* * * * *
(f) In the case of a design-build project, the requirements of this
section are supplemented with the following:
Federal funds shall not participate, directly or indirectly, in
payment for any premium or royalty on any patented or proprietary
material, specification, or process specifically set forth in the
Request for Proposals document unless the conditions of paragraph (a)
of this section are applicable.
18. Add Part 636 to read as follows:
PART 636--DESIGN-BUILD CONTRACTING
Subpart A--General
Sec.
636.101 What does this part do?
636.102 Does this part apply to me?
636.103 What are the definitions of terms used in this part?
636.104 Does this part apply to all Federal-aid design-build
projects?
636.105 Is the FHWA requiring the use of design-build?
636.106 What type of projects may be used with design-build
contracting?
636.107 Does the definition of a qualified project limit the use
of design-build contracting?
636.108 How does the definition of a qualified project apply to
ITS projects?
636.109 How does the NEPA review process relate to the design-
build procurement process?
636.110 What procedures may be used for solicitations and receipt
of proposals?
636.111 Can oral presentations be used during the procurement
process?
636.112 May stipends be used?
636.113 Is the stipend amount eligible for Federal participation?
636.114 What factors should be considered in risk allocation?
636.115 May I meet with industry to gather information concerning
the appropriate risk allocation strategies?
636.116 What organizational conflict of interest requirements
apply to design-build projects?
636.117 What conflict of interest standards apply to individuals
who serve as selection team members for the owner?
636.118 Is team switching allowed after contract award?
636.119 How does this part apply to a project developed under a
public-private partnership?
Subpart B--Selection Procedures, Award Criteria
636.201 What selection procedures and award criteria may be used?
636.202 When are two-phase design-build selection procedures
appropriate?
636.203 What are the elements of two-phase selection procedures
for competitive proposals?
636.204 What items may be included in a phase-one solicitation?
636.205 Can past performance be used as an evaluation criteria?
636.206 How do I evaluate offerors who do not have a record of
relevant past performance?
636.207 Is there a limit on short listed firms?
636.208 May I use my existing prequalification procedures with
design-build contracts?
636.209 What items must be included in a phase-two solicitation?
636.210 What requirements apply to projects which use the modified
design-build procedure?
636.211 When and how should tradeoffs be used?
636.212 To what extent must tradeoff decisions be documented?
Subpart C--Proposal Evaluation Factors
636.301 How should proposal evaluation factors be selected?
636.302 Are there any limitations on the selection and use of
proposal evaluation factors?
636.303 May pre-qualification standards be used as proposal
evaluation criteria in the RFP?
636.304 What process may be used to rate and score proposals?
636.305 Can price information be provided to analysts who are
reviewing technical proposals?
Subpart D--Exchanges
636.401 What types of information exchange may take place during
the procurement process?
636.402 What information may be exchanged with a clarification?
636.403 Can a competitive range be used to limit competition?
636.404 After developing a short list, can I still establish a
competitive range?
636.405 Are communications allowed prior to establishing the
competitive range?
636.406 Am I limited in holding communications with certain firms?
636.407 Can communications be used to cure proposal deficiencies?
636.408 Can offerors revise their proposals during communications?
Subpart E--Discussions, Proposal Revisions and Source Selection
636.501 What issues may be addressed in discussions?
636.502 Why should I use discussions?
636.503 Must I notify offerors of my intent to use/not use
discussions?
636.504 If the solicitation indicated my intent was to award
contract without discussions, but circumstances change, may I still
hold discussions?
636.505 Must a contracting agency establish a competitive range if
it intends to have discussions with offerors?
636.506 What issues must be covered in discussions?
636.507 What subjects are prohibited in discussions,
communications and clarifications with offerors?
636.508 Can price or cost be an issue in discussions?
636.509 Can offerors revise their proposals as a result of
discussions?
636.510 Can the competitive range be further defined once
discussions have begun?
636.511 Can there be more than one round of discussions?
636.512 What is the basis for the source selection decision?
Subpart F--Notifications and Debriefings
636.601 When must notification be provided to unsuccessful
offerors?
636.602 What issues must be provided in the written notification
of contract award to unsuccessful offerors?
636.603 How may I notify the successful offeror?
636.604 Can offerors request preaward or postaward debriefings?
636.605 What issues must be discussed at preaward debriefings?
636.606 What issues must not be discussed at preaward debriefings?
636.607 What issues must be discussed at postaward debriefings?
636.608 What issues must not be discussed at postaward
debriefings?
Authority: Sec. 1307 of Pub. L. 105-178, 112 Stat. 107, at 229
(1998); 23 U.S.C. 101, 109, 112, 113, 114, 115, 119, 128, and 315;
49 CFR 1.48(b).
Subpart A--General
Sec. 636.101 What does this part do?
This part describes the FHWA's policies and procedures for
approving design-build projects financed under title 23, United States
Code (U.S.C.). This part satisfies the requirement of section 1307(c)
of the Transportation Equity Act for the 21st Century (TEA-21), enacted
on June 9, 1998. The contracting procedures of this part
[[Page 53303]]
apply to all design-build project funded under title 23, U.S.C.
Sec. 636.102 Does this part apply to me?
(a) This part uses a plain language format to make the rule easier
for the general public and business community to use. The section
headings and text, often in the form of questions and answers, must be
read together.
(b) Unless otherwise noted, the pronoun ``you'' means the primary
recipient of Federal-aid highway funds, the State Transportation
Department (STD). Where the STD has an agreement with a local public
agency (or other governmental agency) to administer a Federal-aid
design-build project, the term ``you'' will also apply to that
contracting agency.
Sec. 636.103 What are the definitions of terms used in this part?
Unless otherwise specified in this part, the definitions in 23
U.S.C. 101(a) are applicable to this part. Also, the following
definitions are used:
Adjusted low bid means a form of best value selection in which
qualitative aspects are scored on a 0 to 100 scale expressed as a
decimal; cost is then divided by qualitative score to yield an
``adjusted bid'' or ``cost per quality point.'' Award is made to
offeror with the lowest adjusted bid.
Best value selection means any selection process in which proposals
contain both cost and qualitative components and award is based upon a
combination of cost and qualitative considerations.
Clarifications means a written or oral exchange of information
which takes place after the receipt of proposals when award without
discussions is contemplated. The purpose of clarifications is to
address minor or clerical revisions in a proposal.
Competitive range means a list of the most highly rated proposals
based on the initial proposal rankings. It is based on the rating of
each proposal against all evaluation criteria.
Communications are exchanges, between the contracting agency and
offerors, after receipt of proposals, which lead to the establishment
of the competitive range.
Contracting agency means the agency which represents the owner for
the design-build project.
Competitive acquisition means an acquisition process which is
designed to foster an impartial and comprehensive evaluation of
offerors' proposals, leading to the selection of the proposal
representing the best value to the contracting agency.
Deficiency means a material failure of a proposal to meet a
contracting agency requirement or a combination of significant
weaknesses in a proposal that increases the risk of unsuccessful
contract performance to an unacceptable level.
Design-bid-build means the traditional project delivery method
where design and construction are sequential steps in the project
development process.
Design-build contract means a single contract which provides for
design and construction services.
Design-builder means the entity contractually responsible for
delivering the project design and construction.
Discussions mean written or oral exchanges that take place after
the establishment of the competitive range with the intent of allowing
the offeror to revise its proposal.
Fixed price/best design means a form of best value selection in
which contract price is established by the owner and stated in the
Request for Proposals document. Design proposals and management plan
are evaluated and scored, with award going to the firm offering the
best qualitative proposal for the established price.
Intelligent Transportation System (ITS) services--means services
which provide for the acquisition of technologies or systems of
technologies (e.g., computer hardware or software, traffic control
devices, communications link, fare payment system, automatic vehicle
location system, etc.) that provide or contribute to the provision of
one or more ITS user services as defined in the National ITS
Architecture.
Modified design-build means a variation of design-build in which
the contracting agency furnishes offerors with partially complete plans
(generally 30 to 35 percent complete). The design-builders role is
generally limited to the completion of the design and construction of
the project.
Organizational conflict of interest means that because of other
activities or relationships with other persons, a person is unable or
potentially unable to render impartial assistance or advice to the
owner, or the person's objectivity in performing the contract work is
or might be otherwise impaired, or a person has an unfair competitive
advantage.
Prequalification means the contracting agency's process for
determining whether a firm is fundamentally qualified to compete for a
certain project or class of projects. The prequalification process may
be based on financial, management and other types of qualitative data.
Prequalification should be distinguished from short listing.
Price proposal means the price submitted by the offeror to provide
the required design and construction services.
Proposal modification means a change made to a proposal before the
solicitation closing date and time, or made in response to an
amendment, or made to correct a mistake at any time before award.
Proposal revision means a change to a proposal made after the
solicitation closing date, at the request of or as allowed by a
contracting officer, as the result of negotiations.
Qualified project means any design-build project with a total
estimated cost greater than $50,000,000.00 or an intelligent
transportation system project greater than $5,000,000. (23 U.S.C. 112
(b)(3)(C)).
Request for Proposals (RFP) means the document that describes the
procurement process, forms the basis for the final proposals and may
potentially become an element in the contract.
Request for Qualification (RFQ) means the document issued by the
owner in Phase I of the two-phased selection process. It typically
describes the project in enough detail to let potential offerors
determine if they wish to compete and forms the basis for requesting
qualifications submissions from which the most highly qualified firms
can be identified.
Single-phase selection process means a procurement process where
cost and/or technical proposals are submitted in response to an RFP.
Short listing is not used.
Short listing means the narrowing of the field of offerors through
the selection of the most qualified offerors who have responded to an
RFQ.
Solicitation means a public notification of an owner's need for
information, qualifications, or proposals related to identified
services.
Stipend means a monetary amount sometimes paid to the most highly
qualified unsuccessful offerors.
Technical proposals means that portion of a design-build proposal
which contains design factors, layout, aesthetics and specifications
for materials.
Tradeoff means a method of source selection which allows you to
select the source which represents the best value. This process permits
an exchange between cost and non-cost factors and allows you to accept
other than the lowest priced proposal.
Two-phase selection process means a procurement process in which
the first phase consists of short listing (based on qualifications
submitted in response to an RFQ) and the second phase consists
[[Page 53304]]
of the submission of cost and technical proposals in response to an
RFP.
Weakness means a flaw in the proposal that increases the risk of
unsuccessful contract performance. A significant weakness in the
proposal is a flaw that appreciably increases the risk of unsuccessful
contract performance.
Weighted criteria process means a form of best value selection in
which maximum point values are preestablished for qualitative and cost
components, and award is based upon high total points earned by the
offerors.
Sec. 636.104 Does this part apply to all Federal-aid design-build
projects?
The provisions of this part apply to all Federal-aid design-build
projects on the National Highway System (NHS) and non-NHS projects
which are located within the highway right-of-way. Projects which are
not located within the highway right-of-way, and not linked to a
Federal-aid highway project (i.e., the project would not exist without
the Federal-aid highway) may utilize State procedures.
Sec. 636.105 Is the FHWA requiring the use of design-build?
No, the FHWA is neither requiring nor promoting the use of the
design-build contracting method. The design-build contracting technique
is optional.
Sec. 636.106 What type of projects may be used with design-build
contracting?
You may use the design-build contracting technique for any
qualified or non-qualified project which you deem to be appropriate on
the basis of project delivery time, cost, construction schedule and/or
quality.
Sec. 636.107 Does the definition of a qualified project limit the use
of design-build contracting?
(a) No, the use of the term ``qualified project'' does not limit
the use of design-build contracting. It merely determines the FHWA's
procedures for approval. The FHWA Division Administrator may approve
the design-build method for ``qualified projects'' which meet the
requirements of this part.
(b) The FHWA Division Administrator may also approve other design-
build projects (which do not meet the ``qualified projects''
definition) by using Special Experimental Projects No. 14 (SEP-14),
``Innovative Contracting Practices,'' \1\ provided the project meets
the requirements of this part. Projects which do not meet the
requirements of this part must be submitted to the FHWA Headquarter's
for concept approval.
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\1\ Information concerning Special Experimental Project No. 14
(SEP-14), ``Innovative Contracting Practices,'' is available on
FHWA's home page: http://www.fhwa.dot.gov. Additional information
may be obtained from the FHWA Division Administrator in each State.
---------------------------------------------------------------------------
Sec. 636.108 How does the definition of a qualified project apply to
ITS projects?
For the purpose of this rule, a Federal-aid ITS design-build
project meets the criteria of a ``qualified project'' if:
(a) A majority of the scope of services provides ITS services (at
least 50 percent of the scope of work is related to ITS services); and
(b) The estimated contract value exceeds $5 million.
Sec. 636.109 How does the NEPA review process relate to the design-
build procurement process?
In terms of the design-build procurement process:
(a) The RFQ solicitation may be released prior to the conclusion of
the NEPA review process as long as the RFQ solicitation informs
proposers of the general status of the NEPA process.
(b) The RFP should not be released prior to the conclusion of the
NEPA process. The NEPA review process is concluded with either a
Categorical Exclusion classification, an approved Finding of No
Significant Impact, or an approved Record of Decision as defined in 23
CFR 771.113(a).
(c) The RFP must address how environmental commitments and
mitigation measures identified during the NEPA process will be
implemented.
Sec. 636.110 What procedures may be used for solicitations and receipt
of proposals?
You may use your own procedures for the solicitation and receipt of
proposals and information including the following:
(a) Exchanges with industry before receipt of proposals;
(b) RFQ, RFP and contract format;
(c) Solicitation schedules;
(d) Lists of forms, documents, exhibits, and other attachments;
(e) Representations and instructions;
(f) Advertisement and amendments;
(g) Handling proposals and information; and
(h) Submission, modification, revisions and withdrawal of
proposals.
Sec. 636.111 Can oral presentations be used during the procurement
process?
(a) Yes, the use of oral presentations as a substitute for portions
of a written proposal can be effective in streamlining the source
selection process. Oral presentations may occur at any time in the
acquisition process, however, you must comply with the appropriate
State procurement integrity standards.
(b) Oral presentations may substitute for, or augment, written
information. You must maintain a record of oral presentations to
document what information you relied upon in making the source
selection decision. You may decide the appropriate method and level of
detail for the record (e.g., videotaping, audio tape recording, written
record, contracting agency notes, copies of offeror briefing slides or
presentation notes). A copy of the record should be placed in the
contract file and may be provided to offerors upon request.
Sec. 636.112 May stipends be used?
At your discretion, you may elect to pay a stipend to the most
highly ranked unsuccessful offerors who have submitted responsive
proposals. The decision to do so should be based on your analysis of
the estimated proposal development costs and the anticipated degree of
competition during the procurement process.
Sec. 636.113 Is the stipend amount eligible for Federal participation?
(a) Yes, stipends are eligible for Federal-aid participation.
Stipends are recommended on large projects where there is substantial
opportunity for innovation and the cost of submitting a proposal is
significant. On such projects, stipends are used to:
(1) Encourage competition;
(2) Compensate unsuccessful offerors for a portion of their costs
(usually one-third to one-half of the estimated proposal development
cost); and
(3) Ensure that smaller companies are not put at a competitive
disadvantage.
(b) If provided by State law, you may retain the right to use ideas
from unsuccessful offerors if they accept stipends. If stipends are
used, the RFP should describe the process for distributing the stipend
to qualifying offerors.
Sec. 636.114 What factors should be considered in risk allocation?
(a) You may consider, identify, and allocate the risks in the RFP
document and define these risks in the contract. Risk should be
allocated with consideration given to the party who is in the best
position to manage and control a given risk.
(b) Risk allocation will vary according to the type of project and
location, however, the following factors should be considered:
(1) Governmental risks, including the potential for delays,
modifications,
[[Page 53305]]
withdrawal, scope changes, or additions that result from multi-level
Federal, State, and local participation and sponsorship;
(2) Regulatory compliance risks, including environmental and third-
party issues, such as permitting, railroad, and utility company risks;
(3) Construction phase risks, including differing site conditions,
traffic control, interim drainage, public access, weather issues, and
schedule;
(4) Post-construction risks, including public liability and meeting
stipulated performance standards; and
(5) Right-of-way risks including acquisition costs, appraisals,
relocation delays, condemnation proceedings, including court costs and
others.
Sec. 636.115 May I meet with industry to gather information concerning
the appropriate risk allocation strategies?
(a) Yes, information exchange at an early project stage is
encouraged if it facilitates your understanding of the capabilities of
potential offerors. However, any exchange of information must be
consistent with State procurement integrity requirements. Interested
parties include potential offerors, end users, acquisition and
supporting personnel, and others involved in the conduct or outcome of
the acquisition.
(b) The purpose of exchanging information is to improve the
understanding of your requirements and industry capabilities, thereby
allowing potential offerors to judge whether or how they can satisfy
your requirements, and enhancing your ability to obtain quality
supplies and services, including construction, at reasonable prices,
and increase efficiency in proposal preparation, proposal evaluation,
negotiation, and contract award.
(c) An early exchange of information can identify and resolve
concerns regarding the acquisition strategy, including proposed
contract type, terms and conditions, and acquisition planning
schedules. This also includes the feasibility of the requirement,
including performance requirements, statements of work, and data
requirements; the suitability of the proposal instructions and
evaluation criteria, including the approach for assessing past
performance information; the availability of reference documents; and
any other industry concerns or questions. Some techniques to promote
early exchanges of information are as follows:
(1) Industry or small business conferences;
(2) Public hearings;
(3) Market research;
(4) One-on-one meetings with potential offerors (any meetings that
are substantially involved with potential contract terms and conditions
should include the contracting officer; also see paragraph (e) of this
section regarding restrictions on disclosure of information);
(5) Presolicitation notices;
(6) Draft RFPs;
(7) Request for Information (RFI) ;
(8) Presolicitation or preproposal conferences; and
(9) Site visits.
(d) RFIs may be used when you do not intend to award a contract,
but want to obtain price, delivery, other market information, or
capabilities for planning purposes. Responses to these notices are not
offers and cannot be accepted to form a binding contract. There is no
required format for an RFI.
(e) When specific information about a proposed acquisition that
would be necessary for the preparation of proposals is disclosed to one
or more potential offerors, that information shall be made available to
the public as soon as practicable, but no later than the next general
release of information, in order to avoid creating an unfair
competitive advantage. Information provided to a particular offeror in
response to that offeror's request shall not be disclosed if doing so
would reveal the potential offeror's confidential business strategy.
When a presolicitation or preproposal conference is conducted,
materials distributed at the conference should be made available to all
potential offerors, upon request.
Sec. 636.116 What organizational conflict of interest requirements
apply to design-build projects?
(a) State statutes or policies concerning organizational conflict
of interest should be specified or referenced in the design-build RFQ
or RFP document as well as any contract for engineering services,
inspection or technical support in the administration of the design-
build contract. All design-build solicitations should address the
following situations as appropriate:
(1) Consultants and/or sub-consultants who assist the owner in the
preparation of a RFP document will not be allowed to participate as an
offeror or join a team proposing on that project. However, a State may
determine there is not an organizational conflict of interest for a
sub-consultant where:
(i) The sub-consultant or registered design professional provides
only preliminary design services, or
(ii) The sub-consultant has had no involvement with this design-
build procurement process, or
(iii) Where all information generated by the sub-consultant is
provided to all offerors.
(2) All solicitations for design-build contracts, including related
contracts for inspection, administration or auditing services, must
include a provision which:
(i) Directs offerors attention to this subpart;
(ii) States the nature of the potential conflict as seen by the
owner;
(iii) States the nature of the proposed restraint or restrictions
(and duration) upon future contracting activities, if appropriate;
(iv) Depending on the nature of the acquisition, states whether or
not the terms of any proposed clause and the application of this
subpart to the contract are subject to negotiation; and
(v) Requires the apparent successful offeror to provide information
concerning potential organizational conflicts of interest prior to the
award of contract. The apparent successful offerors must disclose all
relevant facts concerning any past, present or currently planned
interests which may present an organizational conflict of interest.
Such firms must state how their interests, or those of their chief
executives, directors, key project personnel, or any proposed
consultant, contractor or subcontractor may result, or could be viewed
as, an organizational conflict of interest. The information may be in
the form of a disclosure statement or a certification.
(3) Based upon a review of the information submitted, the owner
should make a written determination of whether the offeror's interests
create an actual or potential organizational conflict of interest and
identify any actions that must be taken to avoid, neutralize, or
mitigate such conflict. The owner should award the contract to the
apparent successful offeror unless an organizational conflict of
interest is determined to exist that cannot be avoided, neutralized, or
mitigated.
(b) The organizational conflict of interest provisions in this
subpart provide minimum standards for STDs to identify, mitigate or
eliminate apparent or actual organizational conflicts of interest. To
the extent that State-developed organizational conflict of interest
standards are more stringent than that contained in the rule, the State
standards prevail.
Sec. 636.117 What conflict of interest standards apply to individuals
who serve as selection team members for the owner?
State laws and procedures governing improper business practices and
personal conflicts of interest will apply
[[Page 53306]]
to the owner's selection team members. In the absence of such State
provisions, the requirements of 48 CFR Part 3, Improper Business
Practices and Personal Conflicts of Interest, will apply to selection
team members.
Sec. 636.118 Is team switching allowed after contract award?
Where the offeror's qualifications are a major factor in the
selection of the successful design-builder, team member switching
(adding or switching team members) is discouraged after contract award.
However, the owner may use its discretion in reviewing team changes or
team enhancement requests on a case-by-case basis. Specific project
rules related to changes in team members or changes in personnel within
teams should be explicitly stated by the STD in all project
solicitations.
Sec. 636.119 How does this part apply to a project developed under a
public-private partnership?
(a) When an owner utilizes traditional Federal-aid funds for work
done under a public-private partnership agreement (or a portion of the
work under a public-private agreement), the provisions of 23 U.S.C. 112
apply to the contracts funded with Federal-aid funds. In such
instances, the procurement of engineering service contracts,
construction contracts and design-build contracts must follow the
appropriate Federal-aid requirements (Brooks Architect-Engineers Act,
40 U.S.C. 541 et seq; competitive bidding procedures for construction
contracts, 23 U.S.C. 112; and the design-build requirements of this
part). If an owner is only requesting traditional Federal-aid funding
for one particular contract under a franchise agreement, then Federal-
aid procurement procedures will only apply to the work under that
particular Federal-aid contract and not to the selection of the public-
private entity.
(b) For projects developed under public-private partnership
agreements where the only FHWA funding is in the form of a loan, a loan
guarantee, a line of credit, or some other form of loan assistance, the
requirements of this part do not apply. In such cases, the public-
private entity may select consultants, construction contractors or
design-builders in whatever manner it sees fit provided:
(1) The procurement process for the selection of the public-private
entity is a competitive process; and
(2) The selection process follows State laws and procedures.
(c) Except as noted above, the State must ensure such public-
private partnership projects comply with all other 23 U. S. Code
provisions, regardless of the form of the FHWA funding (traditional
Federal-aid funding or loan assistance). This includes compliance with
all FHWA policies such as environmental and right-of-way requirements
and compliance with construction contracting requirements, such as Buy
America, Davis-Bacon minimum wage rate requirements, etc., for
federally funded construction or design-build contracts under the
franchise agreement.
Subpart B--Selection Procedures, Award Criteria
Sec. 636.201 What selection procedures and award criteria may be used?
You should consider using two-phase selection procedures for all
design-build projects. However, if you do not believe two-phase
selection procedures are appropriate for your project (based on the
criteria in Sec. 636.202), you may use a single phase selection
procedure or the modified-design-build contracting method. The
following procedures are available:
------------------------------------------------------------------------
Criteria for using a Award criteria
Selection procedure selection procedure options
------------------------------------------------------------------------
(a) Two-Phase Selection Sec. 636.202....... Lowest Cost,
Procedures (RFQ followed by Adjusted low-bid
RFP). (cost per quality
point), meets
criteria/low bid,
weighted criteria
process, fixed
price/best design,
best value,
tradeoff.
(b) Single Phase (RFP)...... Project not meeting All of the award
the criteria in criteria in item
Sec. 636.202. (a) above.
(c) Modified Design-Build Projects with Lowest price
(may be one or two phases). relatively simple technically
scope.\2\. acceptable.
------------------------------------------------------------------------
\2\ The modified design-build contracting technique, as defined above,
should be reserved for projects which are relatively simple in scope
(such as pavement resurfacing, simple pavement rehabilitation, or
other projects) where the design-builder's role is primarily limited
to completing the design and constructing the project.
Sec. 636.202 When are two-phase design-build selection procedures
appropriate?
You may consider the following criteria in deciding whether two-
phase selection procedures are appropriate. A negative response may
indicate that two-phase selection procedures are not appropriate.
(a) Are three or more offers anticipated?
(b) Will offerors be expected to perform substantial design work
before developing price or cost proposals?
(c) Will offerors incur a substantial expense in preparing
proposals?
(d) Have you identified and analyzed other contributing factors,
including:
(1) The extent to which you have defined the project requirements?
(2) The time constraints for delivery of the project?
(3) The capability and experience of potential contractors?
(4) Your capability to manage the two-phase selection process?
(5) Other criteria that you may consider appropriate?
Sec. 636.203 What are the elements of two-phase selection procedures
for competitive proposals?
The first phase consists of short listing based on a RFQ. The
second phase consists of the receipt and evaluation of cost and
technical proposals in response to a RFP.
Sec. 636.204 What items may be included in a phase-one solicitation?
You may consider including the following items in any phase-one
solicitation:
(a) The scope of work;
(b) The phase-one evaluation factors and their relative weights,
including:
(1) Technical approach (but not detailed design or technical
information);
(2) Technical qualifications, such as--
(i) Specialized experience and technical competence;
(ii) Capability to perform (including key personnel); and
(iii) Past performance of the members of the offeror's team
(including the architect-engineer and construction members);
(3) Other appropriate factors (excluding cost or price related
factors, which are not permitted in phase-one);
(c) Phase-two evaluation factors; and
(d) A statement of the maximum number of offerors that will be
short listed to submit phase-two proposals.
[[Page 53307]]
Sec. 636.205 Can past performance be used as an evaluation criteria?
(a) Yes, past performance information is one indicator of an
offeror's ability to perform the contract successfully. Past
performance information may be used as an evaluation criteria in either
phase-one or phase-two solicitations. If you elect to use past
performance criteria, the currency and relevance of the information,
source of the information, context of the data, and general trends in
contractor's performance may be considered.
(b) Describe your approach for evaluating past performance in the
solicitation, including your policy for evaluating offerors with no
relevant performance history. You should provide offerors an
opportunity to identify past or current contracts (including Federal,
State, and local government and private) for efforts similar to the
current solicitation.
(c) If you elect to request past performance information, the
solicitation should also authorize offerors to provide information on
problems encountered on the identified contracts and the offeror's
corrective actions. You may consider this information, as well as
information obtained from any other sources, when evaluating the
offeror's past performance. You may use your discretion in determining
the relevance of similar past performance information.
(d) The evaluation should take into account past performance
information regarding predecessor companies, key personnel who have
relevant experience, or subcontractors that will perform major or
critical aspects of the requirement when such information is relevant
to the current acquisition.
Sec. 636.206 How do I evaluate offerors who do not have a record of
relevant past performance?
In the case of an offeror without a record of relevant past
performance or for whom information on past performance is not
available, the offeror may not be evaluated favorably or unfavorably on
past performance.
Sec. 636.207 Is there a limit on short listed firms?
Normally, three to five firms are short listed, however, the
maximum number specified shall not exceed five unless you determine,
for that particular solicitation, that a number greater than five is in
your interest and is consistent with the purposes and objectives of
two-phase design-build contracting.
Sec. 636.208 May I use my existing prequalification procedures with
design-build contracts?
Yes, you may use your existing prequalification procedures for
either construction or engineering design firms as a supplement to the
procedures in this part.
Sec. 636.209 What items must be included in a phase-two solicitation?
You must include the requirements for technical proposals and price
proposals in the phase-two solicitation. All factors and significant
subfactors that will affect contract award and their relative
importance must be stated clearly in the solicitation. Use your own
procedures for the solicitation as long as it complies the requirements
of this part.
Sec. 636.210 What requirements apply to projects which use the
modified design-build procedure?
(a) Modified design-build selection procedures (lowest price
technically acceptable source selection process) may be used for
projects which are relatively simple in scope.
(b) The solicitation must clearly state the following:
(1) The identification of evaluation factors and significant
subfactors that establish the requirements of acceptability.
(2) That award will be made on the basis of the lowest evaluated
price of proposals meeting or exceeding the acceptability standards for
non-cost factors.
(c) The contracting agency may forgo a short listing process and
advertise for the receipt of proposals from all responsible offerors.
The contract is then awarded to the lowest responsive bidder.
(d) Tradeoffs are not permitted, however, you may incorporate cost-
plus-time bidding procedures (A+B bidding), lane rental, or other cost-
based provisions in such contracts.
(e) Proposals are evaluated for acceptability but not ranked using
the non-cost/price factors.
(f) Exchanges may occur (see subpart D of this part).
Sec. 636.211 When and how should tradeoffs be used?
(a) At your discretion, you may consider a tradeoff process when it
is desirable to award to other than the lowest priced offeror or other
than the highest technically rated offeror.
(b) If you use a tradeoff process, the following apply:
(1) All evaluation factors and significant subfactors that will
affect contract award and their relative importance must be clearly
stated in the solicitation; and
(2) The solicitation shall also state, at a minimum, whether all
evaluation factors other than cost or price, when combined, are--
(i) Significantly less important than cost or price; or
(ii) Approximately equal to cost or price. As a minimum, cost or
price must have a weight of at least 50 percent in the award criteria.
Sec. 636.212 To what extent must tradeoff decisions be documented?
When tradeoffs are performed, the source selection records shall
include the following:
(a) An assessment of each offeror's ability to accomplish the
technical requirements; and
(b) A summary, matrix, or quantitative ranking, along with
appropriate supporting narrative, of each technical proposal using the
evaluation factors.
Subpart C--Proposal Evaluation Factors
Sec. 636.301 How should proposal evaluation factors be selected?
(a) The proposal evaluation factors and significant subfactors
should be tailored to the acquisition.
(b) Evaluation factors and significant subfactors should:
(1) Represent the key areas of importance and emphasis to be
considered in the source selection decision; and
(2) Support meaningful comparison and discrimination between and
among competing proposals.
Sec. 636.302 Are there any limitations on the selection and use of
proposal evaluation factors?
(a) The selection of the evaluation factors, significant subfactors
and their relative importance are within your broad discretion subject
to the following requirements:
(1) You must evaluate cost or price in every source selection. As a
minimum, cost or price must have a weight of at least 50 percent in the
award criteria. (Cost is assumed to have a weight of at least 50
percent under the ``adjusted low-bid'' and the ``fixed price/best
design'' award criteria.)
(2) You must evaluate the quality of the product or service through
consideration of one or more non-cost evaluation factors. These factors
may include (but are not limited to) such criteria as:
(i) Compliance with solicitation requirements;
(ii) Completion schedule (contractual incentives and disincentives
for early
[[Page 53308]]
completion may be used where appropriate); or
(iii) Technical solutions.
(3) At your discretion, you may evaluate past performance and
management experience (subject to Sec. 636.303(b)).
(b) All factors and significant subfactors that will affect
contract award and their relative importance must be stated clearly in
the solicitation.
Sec. 636.303 May pre-qualification standards be used as proposal
evaluation criteria in the RFP?
(a) If you use a prequalification procedure or a two-phase
selection procedure to develop a short list of qualified offerors, then
pre-qualification criteria should not be included as proposal
evaluation criteria.
(b) The proposal evaluation criteria should be limited to the
quality, quantity, value and timeliness of the product or service being
proposed. However, there may be circumstances where it is appropriate
to include prequalification standards as proposal evaluation criteria.
Such instances include situations where:
(1) The scope of work involves very specialized technical
expertise, and
(2) Where prequalification procedures or two-phase selection
procedures are not used (short listing is not performed).
Sec. 636.304 What process may be used to rate and score proposals?
(a) Proposal evaluation is an assessment of the offeror's proposal
and ability to perform the prospective contract successfully. You must
evaluate proposals solely on the factors and subfactors specified in
the solicitation.
(b) You may conduct evaluations using any rating method or
combination of methods including color or adjectival ratings, numerical
weights, and ordinal rankings. The relative strengths, deficiencies,
significant weaknesses, and risks supporting proposal evaluation must
be documented in the contract file.
Sec. 636.305 Can price information be provided to analysts who are
reviewing technical proposals?
Normally, technical and price proposals are reviewed independently
by separate evaluation teams. However, there may be occasions where the
same experts needed to review the technical proposals are also needed
in the review of the price proposals. This may occur where a limited
amount of technical expertise is available to review proposals. Price
information may be provided to such technical experts in accordance
with your procedures.
Subpart D--Exchanges
Sec. 636.401 What types of information exchange may take place during
the procurement process?
Certain types of information exchange may be desirable at different
points in the procurement process. The following table summarizes the
types of communications that will be discussed in this subpart. These
communication methods are optional.
----------------------------------------------------------------------------------------------------------------
Type of information exchange When Purpose Parties involved
----------------------------------------------------------------------------------------------------------------
(a) Clarifications................... After receipt of Used when award without Any offeror whose
proposals. discussions proposal is not clear
contemplated. to the contracting
agency.
Used to clarify certain
aspects of a proposal
(resolve minor errors,
clerical errors,
obtain additional past
performance
information, etc.).
(b) Communications................... After receipt of Used to address issues Any offeror whose
proposals, prior to which might prevent a exclusion from, or
the establishment of proposal from being inclusion in, the
the competitive range. placed in the competitive range is
competitive range. uncertain.
All offerors whose past
performance
information is the
determining factor
preventing them from
being placed in the
competitive range.
(c) Discussions (see Subpart E of After receipt of Enhance contracting Must be held with all
this part). proposals and after agency understanding offerors in the
the determination of of proposals and competitive range.
the competitive range. offerors understanding
of scope of work.
Facilitate the
evaluation process.
----------------------------------------------------------------------------------------------------------------
Sec. 636.402 What information may be exchanged with a clarification?
You may wish to clarify any aspect of proposals which would enhance
your understanding of an offeror's proposal. This includes such
information as an offeror's past performance, or information regarding
adverse past performance to which the offeror has not previously had an
opportunity to respond. Clarification exchanges are discretionary. They
do not have to be held with any specific number of offerors and do not
have to address specific issues.
Sec. 636.403 Can a competitive range be used to limit competition?
If the solicitation notifies offerors that the competitive range
can be limited for purposes of efficiency, you may limit the number of
proposals to the greatest number that will permit an efficient
competition. However, you must provide written notice to any offeror
whose proposal is no longer considered to be included in the
competitive range. Offerors excluded or otherwise eliminated from the
competitive range may request a debriefing. Debriefings may be
conducted in accordance with your procedures as long as you comply with
the provisions of Subpart F, Notifications and Debriefings.
Sec. 636.404 After developing a short list, can I still establish a
competitive range?
Yes, if you have developed a short list of firms, you may still
establish a competitive range. The short list is based on
qualifications criteria. The competitive range is based on the rating
of technical and price proposals.
Sec. 636.405 Are communications allowed prior to establishing the
competitive range?
Yes, prior to establishing the competitive range, you may conduct
communications to:
(a) Enhance your understanding of proposals;
(b) Allow reasonable interpretation of the proposal; or
(c) Facilitate your evaluation process.
Sec. 636.406 Am I limited in holding communications with certain
firms?
Yes, if you establish a competitive range, you must do the
following:
[[Page 53309]]
(a) Hold communications with offerors whose past performance
information is the determining factor preventing them from being placed
within the competitive range;
(b) Address adverse past performance information to which an
offeror has not had a prior opportunity to respond; and
(c) Hold communications only with those offerors whose exclusion
from, or inclusion in, the competitive range is uncertain.
Sec. 636.407 Can communications be used to cure proposal deficiencies?
(a) No, communications must not be used to:
(1) Cure proposal deficiencies or material omissions;
(2) Materially alter the technical or cost elements of the
proposal; and/or
(3) Otherwise revise the proposal.
(b) Communications may be considered in rating proposals for the
purpose of establishing the competitive range.
Sec. 636.408 Can offerors revise their proposals during
communications?
(a) No. Communications shall not provide an opportunity for an
offeror to revise its proposal, but may address the following:
(1) Ambiguities in the proposal or other concerns (e.g., perceived
deficiencies, weaknesses, errors, omissions, or mistakes); and
(2) Information relating to relevant past performance.
(b) Communications must address adverse past performance
information to which the offeror has not previously had an opportunity
to comment.
Subpart E--Discussions, Proposal Revisions and Source Selection
Sec. 636.501 What issues may be addressed in discussions?
In a competitive acquisition, discussions may include bargaining.
The term bargaining may include: persuasion, alteration of assumptions
and positions, give-and-take, and may apply to price, schedule,
technical requirements, type of contract, or other terms of a proposed
contract.
Sec. 636.502 Why should I use discussions?
You should use discussions to maximize your ability to obtain the
best value, based on the requirements and the evaluation factors set
forth in the solicitation.
Sec. 636.503 Must I notify offerors of my intent to use/not use
discussions?
Yes, in competitive acquisitions, the solicitation must notify
offerors of your intent. You should either:
(a) Notify offerors that discussions may or may not be held
depending on the quality of the proposals received (except
clarifications may be used as described in Sec. 636.401). Therefore,
the offeror's initial proposal should contain the offeror's best terms
from a cost or price and technical standpoint; or
(b) Notify offerors of your intention to establish a competitive
range and hold discussions.
Sec. 636.504 If the solicitation indicated my intent was to award
contract without discussions, but circumstances change, may I still
hold discussions?
Yes, you may still elect to hold discussions when circumstances
dictate, as long as the rationale for doing so is documented in the
contract file. Such circumstances might include situations where all
proposals received have deficiencies, when fair and reasonable prices
are not offered, or when the cost or price offered is not affordable.
Sec. 636.505 Must a contracting agency establish a competitive range
if it intends to have discussions with offerors?
Yes, if discussions are held, they must be conducted with all
offerors in the competitive range. If you wish to hold discussions and
do not formally establish a competitive range, then you must hold
discussions with all responsive offerors.
Sec. 636.506 What issues must be covered in discussions?
(a) Discussions should be tailored to each offeror's proposal.
Discussions must cover significant weaknesses, deficiencies, and other
aspects of a proposal (such as cost or price, technical approach, past
performance, and terms and conditions) that could be altered or
explained to enhance materially the proposal's potential for award. You
may use your judgment in setting limits for the scope and extent of
discussions.
(b) In situations where the solicitation stated that evaluation
credit would be given for technical solutions exceeding any mandatory
minimums, you may hold discussions regarding increased performance
beyond any mandatory minimums, and you may suggest to offerors that
have exceeded any mandatory minimums (in ways that are not integral to
the design), that their proposals would be more competitive if the
excesses were removed and the offered price decreased.
Sec. 636.507 What subjects are prohibited in discussions,
communications and clarifications with offerors?
You may not engage in conduct that:
(a) Favors one offeror over another;
(b) Reveals an offeror's technical solution, including unique
technology, innovative and unique uses of commercial items, or any
information that would compromise an offeror's intellectual property to
another offeror;
(c) Reveals an offerors price without that offeror's permission;
(d) Reveals the names of individuals providing reference
information about an offeror's past performance; or
(e) Knowingly furnish source selection information which could be
in violation of State procurement integrity standards.
Sec. 636.508 Can price or cost be an issue in discussions?
You may inform an offeror that its price is considered to be too
high, or too low, and reveal the results of the analysis supporting
that conclusion. At your discretion, you may indicate to all offerors
your estimated cost for the project.
Sec. 636.509 Can offerors revise their proposals as a result of
discussions?
(a) Yes, you may request or allow proposal revisions to clarify and
document understandings reached during discussions. At the conclusion
of discussions, each offeror shall be given an opportunity to submit a
final proposal revision.
(b) You must establish a common cut-off date only for receipt of
final proposal revisions. Requests for final proposal revisions shall
advise offerors that the final proposal revisions shall be in writing
and that the contracting agency intends to make award without obtaining
further revisions.
Sec. 636.510 Can the competitive range be further defined once
discussions have begun?
Yes, you may further narrow the competitive range if an offeror
originally in the competitive range is no longer considered to be among
the most highly rated offerors being considered for award. That offeror
may be eliminated from the competitive range whether or not all
material aspects of the proposal have been discussed, or whether or not
the offeror has been afforded an opportunity to submit a proposal
revision. You must provide an offeror excluded from the competitive
range with a written determination and notice that proposal revisions
will not be considered.
Sec. 636.511 Can there be more than one round of discussions?
Yes, but only at the conclusion of discussions will the offerors be
requested to submit a final proposal revision. Thus, regardless of the
length
[[Page 53310]]
or number of discussions, there will be only one request for a revised
proposal (i.e., only one best and final offer).
Sec. 636.512 What is the basis for the source selection decision?
(a) You must base the source selection decision on a comparative
assessment of proposals against all selection criteria in the
solicitation. While you may use reports and analyses prepared by
others, the source selection decision shall represent your independent
judgment.
(b) The source selection decision shall be documented, and the
documentation shall include the rationale for any business judgments
and tradeoffs made or relied on, including benefits associated with
additional costs. Although the rationale for the selection decision
must be documented, that documentation need not quantify the tradeoffs
that led to the decision.
Subpart F--Notifications and Debriefings
Sec. 636.601 When must notification be provided to unsuccessful
offerors?
You must provide written notification to unsuccessful offerors, as
follows:
(a) Preaward notification. When you exclude an offeror from the
competitive range or otherwise eliminate an offeror from competition
prior to the award of contract, you must provide a written notification
to the offeror. The notification shall state the basis for the
determination and that a proposal revision will not be considered.
(b) Postaward notification. You must provide written notification
of contract award within three working days to:
(1) Each offeror whose proposal was in the competitive range, but
did not receive award; and
(2) Offerors who did not receive a preaward notification.
Sec. 636.602 What issues must be provided in the written notification
of contract award to unsuccessful offerors?
(a) The written notification must include:
(1) The number of offerors solicited;
(2) The number of proposals received;
(3) The name and address of each offeror receiving an award;
(4) The items, quantities, and unit prices of awarded contracts,
except where it its impractical to furnish unit prices, the total
contract price may be furnished; and
(5) In general terms, the reason(s) the offeror's proposal was not
accepted, unless the price information readily reveals the reason.
(b) The notification must not reveal an offeror's cost breakdown,
profit, overhead rates, trade secrets, manufacturing processes and
techniques, or other confidential business information to any other
offeror.
Sec. 636.603 How may I notify the successful offeror?
You may notify the successful offeror in accordance with your own
procedures.
Sec. 636.604 Can offerors request preaward or postaward debriefings?
(a) Yes, any offeror may request a debriefing. You may provide oral
or written debriefings.
(b) Offerors who have been excluded from the competitive range or
otherwise excluded from the competition before award may request a
debriefing before award by submitting a written request within three
days after receipt of a notice of exclusion from further consideration.
You should provide the debriefing as soon as practicable. However, at
your discretion, you may delay the debriefing until after contract
award.
(c) If the offeror does not submit a timely request, the offeror
need not be given either a preaward or a postaward debriefing. Offerors
are entitled to no more than one debriefing for each proposal.
(d) An official summary of the preaward or postaward debriefing
shall be included in the contract file.
Sec. 636.605 What issues must be discussed at preaward debriefings?
At a minimum, preaward debriefings shall include:
(a) The agency's evaluation of significant elements in the
offeror's proposal;
(b) A summary of the rationale for eliminating the offeror from the
competition; and
(c) Reasonable responses to relevant questions about whether source
selection procedures contained in the solicitation, applicable
regulations, and other applicable authorities were followed in the
process of eliminating the offeror from the competition.
Sec. 636.606 What issues must not be discussed at preaward
debriefings?
You must not disclose:
(a) The number of offerors;
(b) The identity of other offerors;
(c) The content of other offerors' proposals;
(d) The ranking of other offerors;
(e) The evaluation of other offerors; or
(f) Any of the information prohibited in Sec. 636.608.
Sec. 636.607 What issues must be discussed at postaward debriefings?
At a minimum, the debriefing information shall include the
following:
(a) Your agency's evaluation of the significant weaknesses or
deficiencies in the offeror's proposal, if applicable;
(b) The overall evaluated cost or price (including unit prices) and
technical rating, if applicable, of the successful offeror and the
debriefed offeror, and past performance information on the debriefed
offeror;
(c) The overall ranking of all offerors, when any ranking was
developed by your agency during the source selection;
(d) A summary of the rationale for award; and
(e) Reasonable responses to relevant questions about whether source
selection procedures contained in the solicitation, applicable
regulations, and other applicable authorities were followed.
Sec. 636.608 What issues must not be discussed at postaward
debriefings?
(a) The debriefing shall not include point-by-point comparisons of
the debriefed offeror's proposal with those of other offerors.
(b) The debriefing shall not reveal any information prohibited from
disclosure under the Freedom of Information Act (5 U.S.C. 552)
including the following:
(1) Trade secrets;
(2) Privileged or confidential manufacturing processes and
techniques;
(3) Commercial and financial information that is privileged or
confidential, including cost breakdowns, profit, indirect cost rates,
and similar information; and
(4) The names of individuals providing reference information about
an offeror's past performance.
PART 637--CONSTRUCTION INSPECTION AND APPROVAL
19. The authority citation for part 637 is revised to read as
follows:
Authority: Sec. 1307, Pub. L. 105-178, 112 Stat. 107, at 229
(1998); 23 U.S.C. 109, 114, and 315; 49 CFR 1.48(b).
PART 637--[AMENDED]
20. In part 637 revise all references to ``State highway agency's''
to read ``State transportation department's''; revise the acronyms
``SHA'' and ``SHAs'' to read ``STD'' and ``STDs'', respectively; and
revise the references to ``non-SHA'' to read ``non-STD''.
21. Amend Sec. 637.207 by adding paragraph (a)(1)(iv) and paragraph
(b) to read as follows:
[[Page 53311]]
Sec. 637.207 Quality assurance program.
(a) * * *
(1) * * *
(iv) In the case of a design-build project on the National Highway
System, warranties may be used where appropriate. Warranties which are
limited in scope or duration may be supplemented by quality control and
verification sampling and testing. Warranty provisions shall generally
be for a specific product or feature.
* * * * *
(b) In the case of a design-build project funded under title 23,
U.S. Code, the STD's quality assurance program should consider the
specific contractual needs of the design-build project. All provisions
of Sec. 637.207(a) are applicable to design-build projects. In
addition, the quality assurance program may include the following:
(1) Reliance on a combination of contractual provisions and
acceptance methods;
(2) Reliance on quality control sampling and testing as part of the
acceptance decision, provided that adequate verification of the design-
builder's quality control sampling and testing is performed to ensure
that the design-builder is providing the quality of materials and
construction required by the contract documents.
(3) Contractual provisions which require the operation of the
completed facility for a specific time period.
PART 710--RIGHT-OF-WAY AND REAL ESTATE
22. The authority citation for part 710 is revised to read as
follows:
Authority: Sec. 1307, Pub. L. 105-178, 112 Stat. 107, at 229
(1998); 23 U.S.C. 101(a), 107, 108, 111, 114, 133, 142(f), 156, 204,
210, 308, 315, 317, and 323; 42 U.S.C. 2000d et seq., 4633, 4651-
4655; 49 CFR 1.48(b) and (cc), 18.31, and parts 21 and 24; 23 CFR
1.32.
23. Amend part 710 by adding Sec. 710.313 to subpart C to read as
follows:
Sec. 710.313 Design-build projects.
(a) In the case of a design-build project, right-of-way must be
acquired and cleared in accordance with the Uniform Relocation
Assistance and Real Property Acquisition Policies Act of 1970, as
amended, and STD right-of-way procedures. The procedures in
Sec. 710.311 regarding responsibility for the review and approval of
right-of-way availability statements and certifications also apply to
design-build projects.
(b) The decision to advance a right-of-way segment to the
construction stage shall not impair the safety or in anyway be coercive
in the context of 49 CFR 24.102(h) with respect to unacquired or
occupied properties on the same or adjacent segments of project right-
of-way.
(c) Certain right-of-way acquisition and clearance services may be
incorporated into the design-build contract if allowed under State law.
The contract may include language that provides that construction will
not commence until all property is acquired and relocations have been
completed. In situations where large, multi-year construction projects
are undertaken, the construction could be phased or segmented to allow
right-of-way activities to be completed in phases, thereby allowing
certification for each section.
(d) If the STD elects to include right-of-way services in the
design-build contract, the following provisions must be addressed in
the request for proposals document:
(1)(i) The design-builder must submit written acquisition and
relocation procedures to the STD for approval prior to commencing
right-of-way activities. These procedures should contain a prioritized
appraisal, acquisition, and relocation strategy as well as check points
for STD approval, such as approval of just compensation, replacement
housing payment calculations, replacement housing payment and moving
cost claims, appraisals, administrative and stipulated settlements that
exceed determined thresholds based on a risk management analysis, etc.
(ii) The written relocation plan must provide reasonable time
frames for the orderly relocation of residents and businesses on the
project. It should be understood that these time frames will be based
on best estimates of the time it will take to acquire the right-of-way
and relocate families in accordance with certain legal requirements and
time frames which may not be violated. Accordingly, the time frames
estimated for right-of-way acquisition will not be compressed in the
event other necessary actions preceding right-of-way acquisition miss
their assigned due dates.
(2)(i) The design-builder must establish a project tracking system
and quality control system. This system must show the appraisal,
acquisition and relocation status of all parcels.
(ii) The quality control system may be administered by an
independent consultant with the necessary expertise in appraisal,
acquisition and relocation policies and procedures, who can make
periodic reviews and reports to the design-builder and the STD.
(3) The STD may consider the establishment of a hold off zone
around all occupied properties to ensure compliance with right-of-way
procedures prior to starting construction activities in affected areas.
The limits of this zone should be established by the STD prior to the
design-builder entering on the property. There should be no
construction related activity within the hold off zone until the
property is vacated. The design-builder must have written notification
of vacancy from the right-of-way quality control consultant or STD
prior to entering the hold off zone.
(4) Adequate access shall be provided to all occupied properties to
insure emergency and personal vehicle access.
(5) Utility service must be available to all occupied properties at
all times prior to and until relocation is completed.
(6) Open burning should not occur within 305 meters (1,000 feet) of
an occupied dwelling.
(7) The STD will provide a right-of-way project manager who will
serve as the first point of contact for all right-of-way issues.
(e) If the STD elects to perform all right-of-way services relating
to the design-build contract, the provisions in Sec. 710.311 will
apply. The STD will notify potential offerors of the status of all
right-of-way issues in the request for proposal document.
[FR Doc. 01-26234 Filed 10-18-01; 8:45 am]
BILLING CODE 4910-22-P