[Federal Register Volume 59, Number 166 (Monday, August 29, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-21243]


[[Page Unknown]]

[Federal Register: August 29, 1994]


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Part VI





Department of Transportation





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Federal Highway Administration



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Intelligent Vehicle-Highway Systems (IVHS): Procurement 
Recommendations; Agency Response; Notice
DEPARTMENT OF TRANSPORTATION

Federal Highway Administration
[FHWA Docket No. 94-2]

 

Department of Transportation's Response to IVHS AMERICA's 
Procurement Recommendations

agency: Federal Highway Administration (FHWA), DOT.

action: Notice.

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summary: The Department of Transportation (the Department) requested 
that IVHS AMERICA, as part of its function as a utilized Federal 
Advisory Committee, provide recommendations on procurement issues 
pertaining to the national Intelligent Vehicle Highway Systems (IVHS) 
program. IVHS AMERICA replied by submitting an October 1993 paper, 
``Procurement Issues in IVHS Development and Deployment.'' This notice 
sets forth the Department of Transportation's response to IVHS 
AMERICA's procurement recommendations.

for further information contact: Beverly Russell, Joint Intelligent 
Vehicle-Highway Systems Program Office, HVH-10, (202) 366-2202, Fax: 
(202) 366-8712, or Julie Dingle, Office of the Chief Counsel, HCC-32, 
Federal Highway Administration, 400 Seventh Street, SW., Washington, DC 
20590, (202) 366-1394. To obtain a copy of IVHS AMERICA's paper, 
``Procurement Issues in IVHS Development and Deployment,'' contact IVHS 
AMERICA, 400 Virginia Avenue, SW., suite 800, Washington, DC 20024-
2730, (202) 484-4847, Fax: (202) 484-3483.

supplementary information: The objective of the national IVHS program 
is to apply advanced technology in the areas of information processing, 
communications, traffic control, and electronics to improve safety, 
reduce congestion, increase mobility, reduce the energy and 
environmental harm caused by transportation, and increase economic 
productivity. The IVHS also incorporates the use of strategic planning 
and innovative management practices at all levels of government to 
implement those initiatives which enhance our national surface 
transportation system, strengthen our economy, and benefit a broad 
range of users.
    The Department requested that IVHS AMERICA provide recommendations 
on procurement in response to both public and private sector concerns 
that existing Federal and State procurement laws could serve as a 
constraint to IVHS deployment. The Department published a Report to 
Congress on Nontechnical Constraints and Barriers to Implementation of 
Intelligent Vehicle-Highway System (June 1994) which discussed several 
of the procurement issues raised by IVHS AMERICA relating to IVHS 
development and deployment.
    In addition, the Department drafted a formal response to IVHS 
AMERICA's recommendations. The text of the letter to Mr. James 
Costantino, Executive Director, IVHS AMERICA, from the FHWA dated June 
3, 1994, presenting the Department's response is set forth below:

Dear Mr. Costantino:
    In further response to my November 22 letter, I am forwarding a 
detailed response to IVHS AMERICA's recommendations on IVHS procurement 
issues. We also plan to publish the response in the Federal Register. 
Once again, I would like to thank IVHS AMERICA's Board of Directors, 
the Coordinating Council, and the Procurement Task Force for their 
efforts.

Sincerely yours,
E. Dean Carlson,
Executive Director.

Enclosure

Department of Transportation's Response to IVHS AMERICA's Procurement 
Recommendations

    Note: The problem statements and recommendations are taken 
directly from the October 1993 paper, ``Procurement Issues in IVHS 
Development and Deployment,'' forwarded by IVHS AMERICA in its role 
as an advisory committee to the Department of Transportation. The 
Department's responses are in italics.

    1. Problem Statement: Contractors feel that the government insists 
upon receiving more intellectual property rights than are necessary for 
government purposes and does not pay the full value of such rights, 
reducing the contractor's ability to offset its development costs 
through sales to other government and private sector buyers.
    First Recommendation--Government should only seek those 
intellectual property rights necessary for their portion of an IVHS 
system.
    Department's Response: The Intermodal Surface Transportation 
Efficiency Act (ISTEA) of 1991 states that one of the goals of the 
national IVHS Program is to support the development and promotion of an 
IVHS industry. Balancing competing interests in intellectual property 
rights in a manner that will promote, rather than constrain, the 
development and availability of IVHS technologies presents a challenge. 
The Department of Transportation (the Department) is addressing this 
challenge through its research and development and operational testing 
activities. Partnership agreements, which serve as the contractual 
mechanism for IVHS operational tests, clearly state the Department's 
objective on intellectual property. Consistent with the federal patent 
policy, non-federal participants in operational tests retain title to 
the subject inventions as an incentive to develop technological 
innovations. The Department retains the minimum license necessary to 
meet the Federal government's needs, leaving contractors and partners 
with the necessary rights to encourage private sector investment in the 
development of commercial products.
    Second Recommendation--Government should create a uniform specific 
policy about what property rights will be sought, and also develop 
specific publicized methods for seeking waivers of the usual public-
private allocation and be willing to negotiate these issues before a 
contract is awarded.
    Department's Response: As noted above, the Department's current 
policy is to provide its partners and contractors with title to subject 
inventions developed as part of the IVHS program. The Department 
maintains only an irrevocable license. This is a minimum right which 
cannot be ``negotiated away.'' However, the Department strongly 
supports U.S. IVHS product development and would not take action which 
would infringe on its commercial viability. The Department is therefore 
committed to not only outlining this policy in its contracts and 
partnership agreements, but to also, developing a set of principles and 
guidelines which will be published within calendar year 1994.
    Third Recommendation--Government should utilize the experience from 
other IVHS procurements and other federal agencies to address this 
issue.
    Department's Response: We agree that the Department can learn from 
other agencies which have developed innovative procurement mechanisms. 
The Department reviewed other Federal agencies' policies before 
developing the standard partnership agreement which is used for IVHS 
operational tests. The agreement has been slightly refined and modified 
based on experiences gained throughout the life of the Program. The 
Department has also begun using other procurement mechanisms to solicit 
IVHS projects (e.g., the broad agency announcement for the automated 
highway system) and will continue to seek guidance on innovative means 
to facilitate procurement.
    2. Problem Statement: The development and deployment of IVHS 
systems will frequently entail coordination of overlapping governmental 
requirements, either of different levels (federal, state, etc.) or of 
regional groups (e.g., EZ PASS), and nationwide deployment efforts will 
involve applications of similar systems in varying state and local 
jurisdictions. Coordination of these overlapping and sometimes 
conflicting requirements will require time and resources as well as 
present potential obstacles.
    Recommendation--The federal government should spearhead efforts to 
coordinate requirements, through demonstration/model rules for IVHS 
procurements, seeking revisions to ISTEA authority to allow interstate 
compacts so that regional requirements can be conformed, and through 
providing information to the IVHS community about the scope and 
existence of conflicting rules.
    Department's Response: The Department recognizes the complexity and 
cost involved in complying with procurement regulations that will vary 
among jurisdictions and levels of government. Several efforts are 
planned or underway to respond to the concerns of the IVHS community.
    Adherence to multiple requirements, of course, will take time, but 
the Department will seek to reduce unnecessary delays caused by 
conflicts which may arise late in the course of IVHS projects. The 
Department will encourage jurisdictions to involve their procurement 
representatives early in the process of project formation so that they 
are aware of project goals and can immediately set out to identify and 
resolve potential conflicts. By involving procurement specialists early 
in the project, jurisdictions may find that some procedures can be 
established that will be satisfactory to all parties, eliminating 
duplication of procedures.
    Several efforts are underway at the Department to gather 
information on multiple, conflicting requirements that inhibit the 
progress of IVHS projects. The Department completed a study in 
September 1993, investigating multi-jurisdictional issues encountered 
by six metropolitan areas implementing varying scales of traffic 
management projects. The Department has also completed case studies of 
several IVHS operational tests involving multiple jurisdictions, 
including Advance, HELP, Transcom/Transmit, and Advantage I-75, and 
preparations are underway to monitor additional tests. Program-wide 
evaluations of operational tests will yield more information on 
specific problems encountered in multi-jurisdictional IVHS 
procurements, and the Department will share evaluation results with the 
public and the IVHS community.
    Regional operational authorities may be an appropriate, efficient 
mechanism for coordinating IVHS systems across jurisdictional 
boundaries and reducing multiple requirements. The merits of 
recommending legislative changes to permit the formation of interstate 
compacts for deployment of IVHS are under consideration by the 
Department. It should be recognized, however, that many communities, 
municipalities, and states believe it is in the best interest of their 
constituencies to retain operational and oversight authority over their 
traffic management systems. The Department will, in any event, pursue 
policies that will promote the successful coordination of IVHS across 
jurisdictional lines.
    3. Problem Statement: Many of the private and public sector 
entities that will be involved in the procurement of IVHS systems are 
inexperienced in high technology procurements, leading to delays, 
missteps, and less effective competition.
    Recommendation--Provide, support, expand, or publicize training 
sessions on high technology procurement issues for state and local 
procurement personnel and for businesses.
    Department's Response: The Department strongly endorses developing 
and promoting training on high technology procurement. The Department 
is in the midst of its effort to provide support to State and local 
governments and the private sector on high technology procurement 
issues. The effort began in January 1993 with a conference on Public/
Private Partnerships: Managing the Legal Issues. The conference 
included sessions on forming partnerships, defining project objectives, 
intellectual property, and cost accounting. In January 1994, the 
Department and IVHS AMERICA jointly sponsored a conference on 
intellectual property rights under public/partnership agreements. As 
part of its Fiscal Year 1994 activities, the Department is developing 
two projects on procurement--an IVHS contracting course and a 
procurement research project. The objective of the former is to cover 
various aspects of contracting, including drafting specifications, 
allocation of intellectual property rights, ways to minimize or avoid 
protests and claims, and alternative funding mechanisms. The objectives 
of the latter is to provide recommendations for improving the 
efficiency of the procurement process and developing alternative models 
for procurement of IVHS technology. The focus of the procurement 
research project will be on developing methods to work within existing 
organizational structures. The Department will continue to work closely 
with IVHS AMERICA and other interested organizations in developing and 
implementing procurement research, training, and informational efforts 
which address all governmental levels (Federal, state, and local) and 
the private sector.
    4. Problem Statement: Cost accounting, auditing, and cost and price 
certification requirements create an expensive burden on potential IVHS 
contractors, increase the costs to the taxpayers of IVHS deployment, 
and reduce the pool of effective competitors.
    Recommendation--Minimize the procurements in which these 
requirements are applied to those where the goals of the rules are 
applicable.
    Department's Response: In addressing cost accounting, cost 
certification, and auditing requirements, it is important to 
distinguish between direct Federal procurements and contracts under 
Federal grants and cooperative agreements. Most government IVHS 
procurement will be conducted by State and local [agencies] rather than 
Federal government agencies. For these procurements, the Federal 
requirements for cost accounting, cost certification and auditing of 
commercial contractors are limited. IVHS procurements funded by Federal 
grants and cooperative agreements to State transportation agencies 
(which is the typical scenario) are subject to the Uniform 
Administrative Requirements for Grants and Cooperative Agreements with 
State and Local Governments (OMB Circular A-102, known as the ``common 
rule''), codified by the Department of Transportation at 49 CFR Part 18 
and the requirements of Title 23, U.S. Code. The common rule reflects 
the doctrine of federalism, under which States are given the maximum 
administrative discretion possible with respect to the national 
programs they administer. When procuring property and services under a 
grant or cooperative agreement, a State follows the same policies and 
procedures it uses for procurements from its non-Federal funds. 
Although such procurements are State administered, the Department has a 
role in the IVHS program in providing technical assistance in the 
development of State and local procurement laws and procedures. As 
noted above, the Department is developing two projects on procurement. 
The Department is also studying procurement issues as they arise in 
IVHS operational test projects and will develop projects to address 
those issues as appropriate.
    Direct Departmental IVHS contracting efforts are focused primarily 
at research and development and program support and are governed by the 
Federal Acquisition Regulation (FAR). The FAR contains provisions for 
exemptions from or waiver of submission of certified cost or pricing 
data for negotiated contracts. FAR 15.804-3. A proposed rule was 
published on March 28, 1994, to ``address unnecessarily requiring the 
submission of cost or pricing data'' and to clarify when adequate price 
competition exists. 59 FR 14458. The proposed rule states that when 
there is a reasonable expectation that adequate price competition will 
result on a particular procurement, ``the contracting officer should 
rarely have a need to require the submission or certification of cost 
or pricing data, regardless of the contract type.''
    Current regulations provide that the contracting officer shall not 
require submission or certification of cost or pricing data when prices 
are (1) based on adequate price competition, (2) based on established 
catalog or market prices of commercial items sold in substantial 
quantities to the general public, or (3) set by law or regulation. 
Price competition exists if (1) offers are solicited, (2) two or more 
responsible offerors that can satisfy the Government's requirements 
submit priced offers responsive to the solicitation's expressed 
requirements, and (3) these offers compete independently for a contract 
to be awarded to the responsible offeror submitting the lowest 
evaluated price.
    At the recommendation of industry, the proposed rule clarifies the 
third condition for price competition by revising it to read: ``Award 
will be made to a responsible offeror whose proposal is either (A) the 
lowest price: or (B) Offers the greatest value (see 15.605(c)) to the 
Government and price is a stated substantial factor in source 
selection.'' Thus, agencies have flexibility to waive cost and pricing 
data in a best value, negotiated procurement of the type generally used 
for Federal IVHS procurements. The Department will give closer 
consideration to the application of the cost and pricing requirements 
in its IVHS procurements.
    5. Problem Statement: With respect to procurement issues, the 
potential for large products liability expenses may deter potential 
IVHS vendors from participating in government procurements and, thus, 
reduce competition and increase prices.
    Recommendation--The government can seek statutory authority to 
indemnify contractors, can take actions necessary to enable contractors 
to invoke the government contract immunity doctrine, and can assist in 
ensuring that reasonably-priced insurance is available to reduce the 
uncertainties of potential product liability exposure.
    Department's Response: The Department of Transportation, as well as 
the Department of Justice, does not believe there has been a 
demonstrated need for protectionist legislation to minimize potential 
products liability expenses on the part of IVHS designers, developers, 
or manufacturers. There has been no showing that liability concerns 
have indeed inhibited investment in or development of IVHS 
technologies. It is too early, accordingly, to consider the merits of 
legislation or other actions to protect developers or operators from 
liability risks. Additionally, no sufficient basis has been advanced 
for the Department to pursue legislation regarding Federal 
indemnification at this time. Such legislative proposals have budgetary 
implications and need very strong demonstrated justification in order 
to be considered by both the Departments of Transportation and Justice.
    More specifically, with regard to the driver and traffic management 
information systems, for example, the liability exposure of 
participants in the automated traffic management systems (ATMS) and 
automated traffic information systems (ATIS) does not appear to be 
unique. It could be avoided, in any event, by the application of sound 
engineering principles. The advanced vehicle control systems (AVCS) 
carry the potential for enormous safety benefits. Their attendant risks 
of liability correlate to the degree of safe engineering practices; the 
National Highway Traffic Safety Administration and other organizations 
are engaged in extensive testing and analyses of these systems. The 
automated highway system (AHS), which poses the potentially greatest 
safety benefits, also carries risks of system malfunctions. This 
program, through, is still in its early stages of design and 
development. Extensive testing and assessment will be accomplished 
through the planned AHS consortium, and liability constraints will be 
carefully analyzed within that context. Additionally, the high level of 
industry interest in the AHS program suggests that the IVHS community 
is not being unduly chilled by liability concerns at this time. It is, 
accordingly, premature to conclude that liability issues pose 
significant constraints to the deployment of this system.
    It is the best government policy to encourage the safest, most 
effective transportation advancements by maintaining a stimulus for the 
IVHS developers to produce safe products and establish safe services. 
Limiting liability would lessen the incentive for those capable of 
controlling the design and manufacture of the products. Transferring 
liability to the Federal government by, for example, indemnification of 
IVHS manufacturers for a proportion of their liability costs or for 
judgements that exceed available insurance coverage, would result in 
similar safety disincentives. Such measures undermine the function of 
tort liability as a means of causing a manufacturer or designer to act 
with due care.
    The Department is willing to work with IVHS AMERICA in exploring 
the availability of insurance for IVHS development projects. To date, 
to the Department's knowledge, participants in federally funded 
operational tests have not encountered problems with insurance 
coverage. Accordingly, legislation or other actions to ensure coverage 
appear to be premature. Nevertheless, the Department agrees that it is 
useful to include the insurance industry in relevant workshops and 
outreach programs.
    For these reasons, the Department is not disposed to suggest that 
protective legislation is necessary to promote the implementation of 
IVHS technologies at this time. The Department will, however, consider 
the need for legislation, if any, during the course of our evaluations 
of legal issues during the operational tests and the AHS development 
program. The Department will also work with IVHS AMERICA and other 
interested participants to encourage the involvement of the insurance 
industry in public discussion concerning IVHS development.
    6. Problem Statement: The cost of complying with varying 
governmental recordkeeping and administrative requirements will add to 
the cost of deploying IVHS systems at a time when government needs to 
be most efficient.
    Recommendation--Evaluate every administrative requirement that 
differs from traditional commercial practices to determine whether it 
is worth the added cost to the taxpayers and society, and take 
aggressive action to reduce administrative cost of compliance with such 
requirements.
    Department's Response: A number of general procurement reform 
activities are underway within the Government and the private sector, 
and the Department will monitor those activities as they potentially 
impact IVHS procurements. Many of the specific reasons for the higher 
cost of doing business with the government identified in the IVHS 
AMERICA procurement paper do not apply to IVHS procurements because of 
the low dollar amount of these procurements or because of the nature of 
the acquisitions, i.e., research studies rather than products. It 
cannot be assumed, nor has it been demonstrated, that problems 
encountered in large DOD, NASA or other agency systems acquisitions 
apply to Departmental IVHS research and development activities. To the 
extent that specific problems can be identified with State or local 
IVHS procurements, the Department will sponsor research and work with 
the interested parties to recommend solutions.
    7. Problem Statement: Larger IVHS vendors believe they will be 
unfairly excluded from providing the full range of IVHS design and 
implementation services due to organization conflict of interest (OCI) 
limitations at all levels of government.
    Recommendation--Clarify the applicability of OCI rules and preempt 
application of unreasonable OCI rules by State and local governments.
    Department's Response: Again, it is important to distinguish 
between direct Federal procurements and State and local procurements. 
The Federal Acquisition Regulation (FAR) organizational conflict of 
interest provisions do not apply to State and local procurements. 
Accordingly, a contractor would not be restricted from eligibility for 
State and local procurements as a result of the FAR conflict of 
interest rules. States and local governments use their own procurement 
procedures, including conflict of interest rules.
    OCI rules in some form are necessary to provide governments with 
impartial advice and to preserve fair and open competition. The 
Department agrees, however, that the application of those rules to the 
IVHS program should be studied. The Department will consider State and 
local organizational conflict of interest rules as part of its research 
on innovative procurement methods. The Department will make appropriate 
recommendations and provide technical assistance in this area to State 
and local governments in developing necessary laws and regulations for 
acquisition of IVHS systems.
    8. Problem Statement: Uncertainties resulting from public 
procurement policies, political involvement with procurements, and 
delays increase the cost of IVHS development and deployment and 
discourage vendors from participating in this arena.
    Recommendation--Engage in aggressive information exchange to reduce 
delays due to unrealistic scheduling and lack of advance planning, 
including seeking information from and distributing information to 
State and local entities and the private sector.
    Department's Response: The IVHS AMERICA paper addresses a number of 
concerns on project uncertainties including procurement policies and 
potential Congressional involvement in the management of the IVHS 
program. The Department has some control over its own procurement 
policies to improve multi-jurisdictional, multi-partner contracts. 
However, the Department has little or no control over Congressional 
earmarking, except to explain the negative impacts on the Program. 
Congress has not interfered with the Department's implementation and 
management of IVHS projects. Therefore, this should not be a great 
concern for those interested in forming IVHS partnerships.
    The primary problem with uncertainties in the government's 
contracting process is largely due to lack of communication, 
particularly in the early stages of a project. The Department 
recognizes this problem and is beginning to aggressively examine means 
to address this issue. As part of its Fiscal Year 1994 program, the 
Department will test and examine the benefits of a voluntary pre-
agreement conference for early deployment and operational test 
participants. The objective of the project is to examine the benefits 
of a pre-negotiation process. The project's aim is to provide early and 
greater involvement by subgrantees and contractors in the development 
of the project and the negotiation of the partnership agreement. The 
results of this project will be used to develop mechanisms to 
facilitate multi-jurisdictional, multi-partner cooperation.
    The Department will also include [a] representative of its 
contracting offices in the early stages of a project so that advance 
procurement planning can [be] facilitated.
    As noted in the response under #2, the Department is also 
continuing its effort to track and examine institutional issues in U.S. 
operational tests. The objectives of the operational test case studies 
is to examine institutional and legal impediments encountered, and how 
they were addressed. The ``lessons learned'' emphasis of the studies 
will be beneficial for future multi-jurisdictional, multi-partner 
efforts.
    The Department will continue to work with its partners, including 
IVHS AMERICA, in its efforts to make IVHS procurement policies and 
contractual agreements consistent and comprehendible.
    9. Problem Statement: The lack of broad agreement on the definition 
of public-private partnerships for IVHS and the methods by which they 
should be implemented create uncertainty over applicable procurement 
rules.
    Recommendation--The Department should consult with the IVHS-
community and promulgate specific regulations or guidelines addressing 
the use of public-private partnerships in IVHS development and 
deployment in order to provide a definite framework for their 
implementation and to ensure that full and open competition 
requirements are not undermined inappropriately.
    Department's Response: The Department disagrees that specific 
regulations or guidelines are needed to address the use of public-
private partnerships in IVHS development and deployment. An IVHS 
``partnership'' escapes a clear definition because it may mean 
something very different depending on the objectives of a particular 
endeavor or the area of emphasis--research, development, operational 
testing, deployment, or commercial product development. Consequently, 
the opportunities for innovation and flexibility associated with 
public-private partnerships should not be constrained within Federal 
guidelines or regulations.
    The role of the Federal Government in IVHS public-private 
partnership is as a provider of information on the different means of 
structuring public-private partnership. A good start was the January 
1994 conference, IVHS Public-Private Partnerships: Managing the Legal 
Issues. The Federal Government also serves as a trend setter by using 
its research and testing program to experiment with new contractual 
mechanisms. IVHS AMERICA also plays a critical role in broadening the 
use of public-private partnerships through its role as clearinghouse of 
ideas on new contractual mechanisms for all levels of government and 
the private sector. As the Federal IVHS institutional issues program is 
further developed, the Federal Government will look more aggressively 
towards providing outreach to State and local governments and the 
private sector on IVHS public-private partnerships. In turn, the 
Federal Government will continue its learning process by researching 
and, where appropriate, applying innovative partnership arrangements 
developed by other Federal agencies, States, local governments, and the 
private sector.

    Authority: 23 U.S.C. 315; 49 CFR 1.48; Pub. L. 102-240, Secs. 
6051-6059, 105 Stat. 1914, 2189-2195.

    Issued on: August 22, 1994.
Rodney E. Slater,
Federal Highway Administrator.
[FR Doc. 94-21243 Filed 8-26-94; 8:45 am]
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