[Federal Register Volume 59, Number 241 (Friday, December 16, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-30964]


[[Page Unknown]]

[Federal Register: December 16, 1994]


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DEPARTMENT OF TRANSPORTATION
Federal Highway Administration

23 CFR Part 172

[FHWA Docket No. 92-26]
RIN 2125-AD03

 

Administration of Engineering and Design Related Services 
Contracts; Private Sector Involvement Program

AGENCY: Federal Highway Administration (FHWA), DOT.

ACTION: Final rule.

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SUMMARY: This document amends the current regulation on the 
administration of engineering and design services contracts in order to 
establish a private sector involvement program, in accordance with 
section 1060 of the Intermodal Surface Transportation Efficiency Act 
(ISTEA) of 1991 (Pub. L. 102-240). The objective of the private sector 
involvement program is to encourage State highway agencies (SHA's), 
when using Federal-aid highway funds under the grant-in-aid process, to 
increase their use of contracts with private sector consulting firms 
for engineering and design-related services when it would be cost-
effective to do so. Upon appropriation of funds to be allocated and 
solicitation of applications, each SHA may submit a request for funding 
under the new private sector involvement program together with required 
documentation, as specified in this final rule.

EFFECTIVE DATE: January 17, 1995.

FOR FURTHER INFORMATION CONTACT: Donald J. Marttila, Office of 
Engineering, 202-366-4637, or Wilbert Baccus, (HCC-32), Office of the 
Chief Counsel, 202-366-1396, Federal Highway Administration, 400 
Seventh Street, SW., Washington, D.C. 20590. Office hours are from 7:45 
a.m. to 4:15 p.m., e.t., Monday through Friday, except Federal 
holidays.

SUPPLEMENTARY INFORMATION: The FHWA published a notice of proposed 
rulemaking (NPRM) in which the FHWA requested comments on its proposal 
to add a new subpart, subpart B, to 23 CFR part 172, Administration of 
Engineering and Design Related Services Contracts, on November 12, 1992 
(57 FR 53631). Subpart B describes the procedures and criteria that the 
FHWA would use to evaluate applications from States for the purposes of 
selecting States to receive funds under the private sector involvement 
program.
    Part 172 describes the acceptable procurement methods contracting 
agencies are permitted to use when acquiring engineering and design 
services using Federal-aid highway funds. Subpart A retains the 
existing procurement methods with a technical correction and an 
addition to the Definition section. Subpart B has been added to 
establish the private sector involvement program and the procedures to 
be used to implement the provisions of section 1060 of the ISTEA.
    Section 1060 authorizes $5 million per year for this program to 
fund engineering and design services contracts for program management, 
construction management, feasibility studies, preliminary engineering, 
design engineering, surveying, mapping, or architectural related 
services as described in 23 U.S.C. 112(b). The authorized funds are to 
be appropriated for this program through fiscal year 1997. Funds for 
the program were not appropriated by the Congress for fiscal years 1992 
through 1995. Funds appropriated are to remain available for use until 
expended. The FHWA will allocate these funds annually, after the funds 
are appropriated, to at least three States which the FHWA determines 
have implemented the most effective programs for increasing the 
percentage of funds they have expended for contracting with private 
sector consulting firms for engineering and design services to carry 
out Federal-aid highway projects. These private consulting firms 
include small business firms and small business firms owned and 
controlled by socially and economically disadvantaged individuals as 
defined in 49 CFR part 23.
    The program established in subpart B of part 172 sets forth the 
procedures and criteria used in soliciting applications from States and 
in evaluating the States' engineering and design programs for purposes 
of allocating funds under the private sector involvement program.
    Funds received by a State under this program shall be used only for 
awarding contracts for engineering and design services in accordance 
with the provisions of subpart A of 23 CFR part 172 and on projects and 
activities for which Federal-aid highway funds may be obligated under 
title 23, United States Code.
    These amendments will implement the new private sector involvement 
program while retaining all the needed requirements of 23 U.S.C. 
112(b). This rule describes the various steps the FHWA will use to 
evaluate, select, and annually allocate funds to not less than three 
SHA's under the private sector involvement program.

General Comments

    The FHWA received comments from fifteen State highway agencies, six 
professional organizations, and seven private sector firms. General 
comments were provided by five State highway agencies, six professional 
organizations, and seven private sector firms in support of the private 
sector involvement program as proposed in the NPRM.
    The five State highway agencies supported the additional funds to 
be provided under the program. Each indicated that the additional $5 
million per fiscal year to be allocated to at least three States would 
be an incentive for a State to consider applying for an allocation. 
Also, these States noted that contracting for engineering and design 
services was in transition and use of consultants was expanding to 
handle workload peaks.
    Five of the SHA's, three professional organizations, and four 
private sector firms offered comments and suggestions regarding the 
consideration of cost effectiveness in contracting for engineering and 
design services and in the selection of States to receive allocations 
under the private sector involvement program. One State asked that cost 
effectiveness be defined, two other States asked for an indication of 
the meaning of cost effectiveness, and two other States suggested that 
the cost effectiveness of States' use of private sector firms be 
considered in selecting States to receive allocations under the 
program. Other commenters offered observations, opinions, and 
information generally supporting the use of private sector firms for 
engineering and design services as productive and effective means to 
provide service.
    Numerous factors are considered in a State's decision to use 
consultants for engineering and design services and all relate to cost 
effectiveness considerations. Factors such as quality of work, 
timeliness, nature of engineering services needed, complexity of the 
undertaking, available expertise and resources, and current and long 
term program requirements are all relative cost considerations which 
may apply in deciding whether States choose to contract for engineering 
and design services with private sector firms. Use of these factors in 
decisionmaking varies from State to State. The intent of Congress in 
authorizing the program was to encourage the use of consultants when 
the SHA's find it to be cost effective. The Congress did not intend 
that the FHWA specifically apply cost-effectiveness as a criterion in 
selecting SHA's to receive an allocation of funds under the private 
sector program. Therefore, the FHWA has not included cost-effectiveness 
as a criterion in considering applications and will leave the 
determination of cost-effectiveness of using consultants in a 
particular State to the SHA.

Section-by-Section Analysis

Section 172.3  Definitions

    This section amends the definition of engineering and design 
services to reflect the wording used in 23 U.S.C. 112(b)(2)(A) and adds 
a definition of private sector engineering and design firms.
    One professional organization requested that the definition of 
engineering and design services be modified to cite the statutory 
definition of ``architectural and engineering services'' in 40 U.S.C. 
541, as amended. Two State highway agencies requested that the 
definition specifically include ``environmental studies'' and 
``construction engineering.'' These requests were not adopted in the 
final regulation as the modifications were not considered warranted or 
necessary. The FHWA has retained the revised definition of engineering 
and design services as proposed in the NPRM; this definition includes 
the contracted services as specified in 23 U.S.C. 112(b)(2)(A), and 
environmental studies and construction engineering would be permitted 
under this definition. The definition is intentionally broad and is not 
intended to list every specific assignment for which States may choose 
to contract with private sector firms for engineering and design 
services.
    A technical correction is made to the definition to replace the 
word ``and'' with the word ``or'' before the phrase ``architectural 
related services'' so that the definition reads the same as 23 U.S.C 
112(b)(2)(A).

Section 172.21  Purpose and Applicability

    This section defines the purpose and applicability of subpart B, 
which implements the private sector involvement program and is 
applicable to all States using Federal-aid highway funds.
    One professional organization suggested that this section be 
expanded to include a policy statement consistent with the policy in 
OMB Circular A-76 and Section 306 of the Federal-aid Highway Act of 
1958 (Pub. L 85-381, 72 Stat. 89) to require States to utilize the 
private sector for services such as surveying and photogrammetric 
mapping services, whenever practicable. The proposed change is not 
necessary and FHWA did not include the suggested policy statement 
because the intent of the private sector program is to encourage States 
to use private sector firms for engineering and design services which 
by definition include mapping and surveying services.
    In a second comment, relating to paragraph (b) of Sec. 172.21, the 
same professional organization suggested revising the applicability of 
the rule to include ``all engineering and design services contracts 
financed with Federal-aid highway funds or other non-Federal 
resources.'' We agree. For purposes of soliciting applicants and 
selecting States to receive allocations, the rule described in 
Sec. 172.23 allows applicants to supplement the information on the 
extent consultant services have been used on Federal-aid highway 
projects with the same information on non-federally funded consultant 
contracted services on projects ultimately to be built with Federal-aid 
highway funds. Section 172.23 is retained as shown in the proposed rule 
since the mandate of the program in the legislation is to encourage 
contracting with private firms ``in carrying out Federal-aid highway 
projects.''

Section 172.23 Evaluation and Selection

    This section outlines the procedures and criteria that would be 
used in the evaluation of State engineering and design programs for the 
purpose of allocating funds under the new private sector involvement 
program.
    Comments on the procedures and criteria to be used in the annual 
evaluation and selection of not less than three States to receive 
allocations under the private sector involvement program were received 
from five State highway agencies, two professional organizations, and 
seven private sector firms. One professional organization referenced a 
study in the ``Professional Services Management Journal'' which 
indicates that the ``percent of engineering contracted out'' was the 
only variable that correlated with the effectiveness of a State's 
program of using consultants. Three States suggested that improvements 
resulting from new, ambitious, non-traditional, and innovative 
practices which increased the use of consultant programs should be 
given weight in the selection process. Two States suggested that the 
size of a State's highway program should be considered in the 
evaluation of applications. Another State suggested that a State's past 
commitments to increasing the use of consultants should be considered. 
Most States supported the inclusion of State and local agency funding 
information to give a full picture of the use of consultants in all 
States. One professional organization suggested that several evaluation 
factors, such as quality, cost effectiveness, liability, and consultant 
selection process, be considered rather than the percentage of work 
contracted out to consultants.
    We have concluded that the intent of the program is to encourage 
the use of private sector firms. The FHWA recognizes that most States 
have not established a specific formal program to encourage the use of 
consultants, but may nevertheless have been effective in obtaining 
increased use of private sector firms. Recognizing the different 
decisionmaking processes used by SHA's, the evaluation process adopted 
for the private sector program will use as its primary basis of 
measurement, in determining which States have the most effective 
program for increasing the percentage of funds expended for contracting 
with private firms, the results of a comparison of all States' programs 
for the preceding year and the year-to-year results of each State's 
program for the preceding five years. The evaluation will focus on 
results rather than an evaluation of individual programs or processes. 
A State process or program that encourages the use of private sector 
firms would be consistent with the intent of this program; however, the 
FHWA is not in a position to objectively evaluate and compare different 
State approaches. Instead, the FHWA agrees with the suggestion that the 
evaluation process be confined to verifiable measures consistent with 
the intent of the program. The procedures will primarily consider the 
relative size of the State's highway program and the extent to which 
the State has contracted for private sector services in the preceding 
year and in the preceding five years, but will also consider any 
information which describes State efforts to encourage the use of 
private sector firms.

Section 172.25 Funding

    This section provides that the funds received by a State may only 
be used for awarding contracts for engineering and design services to 
carry out projects and activities eligible for Federal-aid funding and 
the Federal share shall be the same as the Federal-aid share applicable 
to the type of work or project being developed or the system on which 
the project is located.

Rulemaking Analyses and Notices

Executive Order 12866 (Regulatory Planning and Review) and DOT 
Regulatory Policies and Procedures

    The FHWA has determined that this is not a significant regulatory 
action within the meaning of Executive Order 12866 or a significant 
regulation under the regulatory policies and procedures of the 
Department of Transportation. This regulation implements section 1060 
of the ISTEA which expressly requires the FHWA to issue regulations to 
carry out the private sector involvement program. The program enables 
State highway agencies to apply for Federal-aid highway funds which may 
only be used to contract for engineering and design services with the 
private sector. When funds are appropriated, the $5 million authorized 
for the program will be made available to at least three States.

Regulatory Flexibility Act

    In compliance with the Regulatory Flexibility Act (5 U.S.C. 601-
612), the FHWA has evaluated the effects of this rule on small 
entities. This rule sets forth the criteria under which the FHWA would 
select three or more States to receive grants for engineering and 
design services. States, however, are not included within the 
definition of ``small entity'' set forth in 5 U.S.C. 601(6). Therefore, 
the FHWA hereby certifies that this action will not have a significant 
economic impact on a substantial number of small entities.

Executive Order 12612 (Federalism Assessment)

    This action has been analyzed in accordance with the principles and 
criteria contained in Executive Order 12612, and it has been determined 
that this action does not have sufficient federalism implications to 
warrant the preparation of a separate federalism assessment.

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.

Paperwork Reduction Act

    This action does not contain a collection of information 
requirement for purposes of the Paperwork Reduction Act of 1980, 44 
U.S.C. 3501-3520.

National Environmental Policy Act

    The FHWA has analyzed this action for the purpose of the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) and has 
determined that this action would not have any effect on the quality of 
the environment.

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 action with the 
Unified Agenda.

List of Subjects in 23 CFR Part 172

    Government procurement, Grant programs--transportation, Highways 
and roads.

    Issued on: December 7, 1994.
Rodney E. Slater,
Federal Highway Administrator.

    For the reasons set out above, 23 CFR part 172, is amended as set 
forth below.

PART 172--ADMINISTRATION OF ENGINEERING AND DESIGN RELATED SERVICES 
CONTRACTS

    1. The authority citation for part 172 is revised to read as 
follows:

    Authority: 23 U.S.C. 112(b), 114(a), 302, 315, and 402; 49 CFR 
1.48(b) and 18; 48 CFR 12 and 31; 41 U.S.C. 253 and 259; and sec. 
1060, Pub. L. 102-240, 105 Stat. 1914, 2003 (1991).

    2. Section 172.3 is amended by adding introductory text to the 
section, removing the paragraph designations for all the definitions, 
placing the definitions in alphabetical order, revising the definition 
for ``engineering and design services'', and adding the definition for 
``private sector engineering and design firms'', as follows:


Sec. 172.3  Definitions

    As used in this part:
* * * * *
    Engineering and design services. Program management, construction 
management, feasibility studies, preliminary engineering, design, 
engineering, surveying, mapping, or architectural related services.
* * * * *
    Private sector engineering and design firms. Any individual or 
private firm (including small business concerns and small businesses 
owned and controlled by socially and economically disadvantaged 
individuals as defined in 49 CFR part 23) contracting with a State to 
provide engineering and design services.
* * * * *
    3. Part 172 is amended by designating Secs. 172.1 through 172.15 as 
Subpart A--Procurement Procedures.

Subpart B--[Added]

    4. Part 172 is amended by adding subpart B to read as follows:

Subpart B--Private Sector Involvement Program

Sec.
172.21  Purpose and applicability.
172.23  Evaluation and selection.
172.25  Funding.


Sec. 172.21  Purpose and applicability.

    (a) The purpose of this subpart is to implement a program to 
encourage States to contract for engineering and design services with 
the private sector whenever such contracts would be cost effective.
    (b) This subpart applies to all engineering and design services 
contracts financed with Federal-aid highway funds.


Sec. 172.23  Evaluation and selection.

    (a) When funds are appropriated for this program, the FHWA will 
invite States to submit applications to participate in the program. The 
FHWA will use the applications to make the program allocations under 
the program.
    (b) The FHWA will make a comparison of the applicants based on the 
amount of Federal-aid highway funds each State has expended on 
contracts for engineering and design services. In assessing the amount 
of funds a State spent in procuring engineering and design services, 
the FHWA will also consider the amounts expended by States on 100 
percent State-funded engineering and design services contracts 
involving projects to be constructed with Federal-aid highway funds to 
the extent the State provides such information with its application.
    (c) The FHWA will select not less than three States each fiscal 
year to receive funds under this program.
    (1) Selection of the States to receive funding under this program 
will be made by determining which States were the most effective in 
increasing the percentage of funds expended on engineering and design 
services contracts in the year preceding the fiscal year in which funds 
are to be allocated. In the selection process, the FHWA will evaluate 
each State's program of contracting for engineering and design 
services. The evaluation will primarily consider such information as 
the amount and percentage of Federal-aid highway funds and State funds 
expended on engineering and design services contracts, the number of 
contracts awarded for such services, the relative size of the State's 
Federal-aid highway program and the increases in use of private sector 
firms during the preceding year and the preceding five years.
    (2) Upon the FHWA's request for applications, each State interested 
in being considered should submit its application through its 
appropriate FHWA Division Office. The application may be in letter form 
and should include current information on the extent of the State's use 
of consultants for engineering and design on Federal-aid highway 
projects. In addition, the State may provide data on the amount of 100 
percent State-funded engineering and design services contracts 
involving projects to be built with Federal-aid highway funds and any 
other information demonstrating the State's effectiveness in increasing 
the percentage of funds expended on engineering and design services 
contracts in the past five years.


Sec. 172.25  Funding.

    (a) Funds received by a State under this program may only be used 
for awarding engineering and design services contracts with the private 
sector. These contracts shall carry out services and activities 
eligible for Federal-aid funding under title 23, United States Code.
    (b) The Federal share of any project obligated with funds allocated 
under this program shall be the same as the Federal share applicable to 
the type of work or project being developed or the system on which the 
project is located. Funds allocated under this program shall remain 
available until expended.
    (c) Funds will be allocated to the States each fiscal year from 
1995 through 1997 to the extent funds are appropriated.

[FR Doc. 94-30964 Filed 12-15-94; 8:45 am]
BILLING CODE 4910-22-P