[Federal Register Volume 61, Number 131 (Monday, July 8, 1996)]
[Rules and Regulations]
[Pages 35629-35633]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-17232]
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DEPARTMENT OF TRANSPORTATION
Federal Highway Administration
23 CFR Part 630
[FHWA Docket No. 94-30]
RIN 2125-AD43
Federal-Aid Project Authorization
AGENCY: Federal Highway Administration (FHWA), DOT.
ACTION: Final rule.
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SUMMARY: The FHWA is amending its regulation on Federal-aid program
approval and project authorization. In light of changes made by the
Intermodal Surface Transportation Efficiency Act of 1991, in the area
of statewide planning and transportation improvement programs, and the
joint FHWA/Federal Transit Administration (FTA) regulations
implementing those changes, this regulation removes the obsolete
project programming provisions from this part. This regulation provides
more flexible funding arrangements and a more flexible Federal-aid
authorization process. Changes contained in related laws are included.
EFFECTIVE DATE: This final rule is effective August 7, 1996.
FOR FURTHER INFORMATION CONTACT: Mr. Jack Wasley, Office of
Engineering, 202-366-4658, or Wilbert Baccus, Office of the Chief
Counsel, 202-366-0780, FHWA, 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 amendments in this final rule are based
primarily on the notice of proposed rulemaking (NPRM) published in the
February 17, 1995, Federal Register at 60 FR 9306 (FHWA Docket No. 94-
30). All comments received in response to this NPRM have been
considered in adopting these amendments.
The initiation of work for transportation projects funded under the
Federal-aid highway program is a two-step process. First, the State, in
cooperation and consultation with local officials, as appropriate,
through the metropolitan and statewide planning process, determines
activities which will be advanced with Federal funds made available
under title 23, United States Code, and the Federal Transit Act (49
U.S.C. 5301-5338) and develops a Statewide program of projects for
these activities. Prior to passage of the Intermodal Surface
Transportation Efficiency Act of 1991 (Pub. L. 102-240, 105 Stat. 1914)
(ISTEA), the requirements for developing the program of projects were
found in 23 U.S.C. 105 and the implementing regulations in 23 CFR part
630, subpart A. With passage of the ISTEA, title 23, U.S.C., was
modified and the new requirements concerning development of a program
of projects, now referred to as the Statewide transportation
improvement program, are contained in 23 U.S.C. 135. The implementing
regulation for this section is in 23 CFR part 450 and was initiated
through previous rulemaking actions.
Accordingly, those requirements pertaining to a program of projects
in 23 CFR part 630, subpart A, no longer need to be retained. This
final rule therefore eliminates these programming references.
The second step in initiation of work is the project authorization
process. The State highway agency (SHA) requests FHWA authorization to
proceed with a proposed Federal-aid highway project. The FHWA
authorization commits the Federal government to participate in the
funding of a project, except in those instances where the State
requests FHWA authorization without the commitment of Federal funds. In
addition, FHWA authorization also establishes a point in time after
which costs incurred on a project are eligible for Federal
participation. The requirements covering project authorization are
contained in this final rule. The following is a section-by-section
analysis of the amendments
[[Page 35630]]
made by this final rule to the present regulations.
Section-by-Section Analysis
Section 630.102 Purpose
The statement of purpose is revised to eliminate the reference to
programming of projects since this activity is eliminated from this
subpart.
Section 630.104 Applicability
The existing Sec. 630.104, Definitions, is replaced by a new
section identifying the types of projects that are covered by this
subpart. FHWA planning and research funds, as defined in 23 CFR
420.103, are authorized using the procedures in the regulations dealing
specifically with these types of funded projects. Projects utilizing
special funding may have unique authorization requirements, and these
types of projects will be authorized as set out in implementing
instructions or regulations.
Section 630.106 Authorization to Proceed
The current Sec. 630.106, Policy, is removed. A new Sec. 630.106,
Authorization to proceed, is redesignated from current Sec. 630.114,
covering the authorization process, and it retains many of the basic
principles set forth in existing Sec. 630.114. Modifications were made
to provide greater flexibility in some funding areas, and other
additions were made for clarification. The following discussion breaks
down new Sec. 630.106 by individual paragraph.
Paragraph (a) retains the requirement that FHWA authorization to
proceed with a Federal-aid project will only be given in response to a
request from the SHA, and then only if the applicable requirements in
law have been satisfied for the project.
Paragraph (b) retains the longstanding requirement that Federal-aid
funds will only participate in costs incurred after the date the FHWA
has authorized the State to proceed with the project. However,
exceptions to this requirement are allowed under a process set forth in
23 CFR 1.9(b). For informational purposes, wording has been included in
paragraph (b) to identify and cross reference the exception process.
Paragraphs (c), (d), and (e) retain the requirement that, at the
time a Federal-aid project is authorized, the total amount of
appropriate Federal funds for the project must be available. Four
general categories of exceptions to this rule are retained from the
existing regulation. A fifth category of exceptions in the existing
regulation, related to bond issue projects under 23 U.S.C. 122, has
been eliminated. Section 311 of the National Highway System Designation
Act of 1995 (Pub. L. 104-59, 109 Stat. 568)(NHS Act), enacted November
28, 1995, significantly revised 23 U.S.C. 122. Previously, section 122
allowed certain types of projects to be approved as bond issue
projects. Similar to advance construction, these projects were advanced
as Federal-aid projects without any commitment of Federal funds until
the bonds matured and the State converted the projects to regular
Federal-aid. As amended, section 122 makes bond related costs eligible
for Federal reimbursement on any Federal-aid project; however, the
process of converting bond issue projects similar to advance
construction projects is no longer set forth in the section. As a
result, paragraph (c) of Sec. 630.106 has dropped bond issue projects
from the listing of exceptions.
Paragraph (f) is added for purposes of clarification. The FHWA
authorization represents a contractual action by the FHWA, and the
Federal share of eligible costs must be agreed upon when the
authorization occurs. The Federal share may be in the form of a
specified percentage of eligible costs or a lump sum amount. Use of the
lump sum share is intended to accommodate those instances where there
is a desire to commit a fixed amount of Federal funds to a project. The
lump sum amount may not exceed the legal pro rata share for the Federal
funds involved; this may require downward adjustment of the lump sum
amount when costs of eligible work on a project are less than the
initial estimates at the time of FHWA authorization.
The Federal share agreed to at the time of FHWA authorization is to
continue through the life of the project. Manipulation of funding
levels of individual projects to accommodate program funding changes or
needs is not allowed. However, adjustments to the Federal share are
permitted for projects where bid prices are significantly different
from the estimates at the time of FHWA authorization and should be made
prior to, or shortly after, contract award.
In addition, Federal participation is based on eligible costs
incurred by the State. The Federal share of such costs cannot exceed
the maximum share permitted by legislation.
Paragraph (g) incorporates into the regulation the provision in 23
U.S.C. 120(i) that allows a State to contribute more than the normal
State match on a Federal-aid project. This provision has been
interpreted to mean that a State may overmatch and not be tied to a
mandatory Federal share. However, project financing proposals that
result in the Federal share representing only a minor percentage of
eligible work should be avoided unless they are based on sound project
management decisions.
Discussion of Comments
Interested persons were invited to participate in the development
of this final rule by submitting written comments on the NPRM to FHWA
Docket No. 94-30 on or before April 18, 1995. There were 10 commenters
to this docket, all representing State transportation agencies.
Three State transportation agencies specifically endorsed the
proposed rewrite of the regulation. The other State agencies raised
several issues for consideration, which have been grouped into the
following categories: (1) Third party (private) cash donations; (2)
token financing; (3) the relationship of this rulemaking to FHWA's
innovative financing test and evaluation project; and (4) establishing
a project's Federal share.
Third Party Cash Donations
This issue received the most comments. The NPRM proposed to include
a new provision in the regulation that would clearly set forth the cost
sharing principles for Federal-aid highway projects, including the
requirement at the time the NPRM was issued that a third party cash
contribution to a specific project could not be applied to the required
State matching share but instead had to be applied to reduce the
overall project cost. The commenters felt the requirement on third
party donations was overly restrictive, diminished the incentive for
States to seek third party contributions, and could adversely affect
the advancement of certain projects. Although these points are well
taken, the requirement on third party cash contributions, as stated in
the NPRM, reflected a legal interpretation consistent with title 23 as
it existed at that time.
A significant change has occurred in Federal highway law related to
third party donations since the NPRM was issued. The NHS Act amended 23
U.S.C. 322 to allow the value of third party funds, materials, or
services donated to a specific Federal-aid project to be applied to the
State's matching share. Thus, Congress has provided legislative relief
on this matter.
The FHWA has issued implementing guidance on 23 U.S.C. 322 and the
application of third party donations of
[[Page 35631]]
funds, materials, or services towards the State's matching share. That
guidance is available for review in FHWA Docket No. 94-30 in the FHWA
Docket Room at the address listed above. Accordingly, the matter of
third party contributions will not be addressed in this regulation.
Token Financing
Several commenters expressed concern about the NPRM provision on
``token financing'' and the accompanying preamble discussion which
suggested that, as a general rule of thumb, Federal funding for a
specific project should represent at least 50 percent of eligible
project costs. It was pointed out that the phrase ``token financing''
is vague and not clearly defined in the regulation. Further, the NPRM
preamble discussion that suggested a project have at least a target
Federal funding level of ``50 percent'' was interpreted as being too
inflexible. Several commenters recommended a lower percentage threshold
or a minimum dollar figure.
Section 630.106(g) of the final rule adds a new provision to
implement 23 U.S.C. 120(i) which allows the State to contribute more
than the normal State match on a project. The phrase ``token
financing'' has not been used in the regulation. Instead, the concept
of ``token financing'' has been expressed in the phrase, ``project
financing proposals that result in the Federal share representing only
a minor percentage of eligible work should be avoided.'' The phrase
``minor percentage'' has not been defined, by a specific value or a
general target value, in either the regulation or this preamble and
considerable flexibility is intended. As expressed in Sec. 630.106(g),
this provision is to be applied based on sound project management
decisions. For example, it would make little sense to place small
amounts of Federal funds in a large number of projects. This could
overburden the FHWA and would unnecessarily Federalize a large number
of projects. It is expected that a State and FHWA division office will
reach agreement on a reasonable implementation of this requirement
based on project circumstances.
Relationship of This Rulemaking to FHWA's Innovative Financing Test
and Evaluation Project
In 1994, the FHWA established a nationwide innovative financing
test and evaluation project, known as TE-045, to evaluate new financing
concepts to increase investment or reduce public agency costs on
Federal-aid highway projects. Under TE-045, numerous concepts are
currently being evaluated. Two of these concepts, ``phased funding''
and ``tapered share,'' were mentioned by commenters on the NPRM as
issues that could be addressed in this regulation.
When the FHWA authorizes a State to proceed with a Federal-aid
highway project, the FHWA is required to obligate Federal funds for the
full Federal share of the cost of the work being authorized. Phased
funding is an exception to this requirement. Under phased funding, the
FHWA obligates an amount of Federal funds for each year a project is
under construction, the annual amount obligated being equal to the
estimated project construction expenditures expected in the year. Thus,
phased funding is a financing technique that can accelerate project
advancement because a State can proceed with project construction
before the full Federal share of the cost of the work is available to
the State.
Previously, under Sec. 630.114(h)(5), the FHWA Administrator had
the authority, in special cases, to allow a project to proceed without
the full Federal share of costs being available to a State. This
authority had been used to approve phased funding on a small number of
very costly Interstate projects. Early on, TE-045 accepted proposals to
experiment further with the phased funding concept; however, no
additional proposals are planned for testing. This is because of the
FHWA's 1995 revision of its policy on advance construction projects
that now allows an advance construction project to be converted to a
regular Federal-aid project in increments over time. Partial conversion
of advance construction projects can accomplish much of the same
flexibility that phased funding provides a State. As a result, the FHWA
has decided there is no need at this time to modify the phased funding
authority the Administrator has under this regulation. The provision
that allows the Administrator to approve special case exceptions for
phased funding is retained as Sec. 630.106(c)(4).
Tapered share is an alternate means of making project reimbursement
to a State. Under the tapered share concept, the Federal share of costs
incurred can vary as reimbursement is provided to a State, as long as
the overall Federal funding provided to the State does not exceed the
amount of Federal funds obligated when the project was authorized. For
example, on a project that is being cost shared at 80 percent Federal,
20 percent State, the State's billings to the FHWA are normally
reimbursed with Federal funds at 80 percent of the billed amount.
However, the tapered share concept could be applied to allow a State to
receive 100 percent Federal funds on early billings with the Federal
share tapering off on later billings.
The tapered share concept is a reimbursement or payment issue, not
an authorization issue. Because this regulation covers authorization
requirements, the tapered share concept will not be addressed in this
regulation. The FHWA continues to evaluate the tapered share concept
under TE-045 and it is expected that any proposals to allow this
concept, including recommendations on needed statutory changes, will
emerge from TE-045.
Establishing a Project's Federal Share
In the NPRM, Sec. 630.106(f) was proposed to clarify that the
Federal share could be established either as a percentage of eligible
project costs or as a lump sum amount, provided the lump sum amount did
not exceed the maximum legal percentage allowed for the Federal-aid
funding being used on the project.
One commenter suggested another alternative, i.e., that the
authorization would specify a percentage with a maximum amount of
Federal funds also specified. If a State establishes Federal share as a
percentage, any decision to further impose an upper limit on additional
Federal funds it will provide to a project, should overruns occur, is a
State decision. This decision has no impact on the amount of Federal
funds being obligated on the project when the FHWA initially authorizes
the work because the amount of Federal funds obligated would still be
determined based on the specified Federal share percentage.
Consequently, this proposed alternative has not been incorporated into
the regulation. If a State desires to set an upper limit for Federal
funding on a project where Federal share has been established by
percentage and desires to alert all parties involved with the project
of the limit, one means of accomplishing this is with an appropriate
note on the Federal-aid project agreement.
Several comments were received concerning the adjustment of Federal
share during the life of a project. The authorization of a project,
with the accompanying obligation of Federal funds, is a contractual
action by the FHWA, which has been viewed as fixing or establishing the
Federal share of the project. The FHWA's longstanding position has been
that Federal share could not be adjusted after the initial project
authorization. Recognizing that some flexibility is desirable,
particularly in situations involving construction work where bid prices
are significantly
[[Page 35632]]
different from the engineer's estimate on which the initial
authorization of construction is based, the NPRM proposed to allow the
Federal share to be adjusted after authorization to reflect bids
received.
One commenter suggested eliminating the provision that Federal
share is established at authorization and replacing it with a
requirement that Federal share be established when the Federal-aid
project agreement is executed, after which it could not be adjusted.
This suggestion is not being implemented. The timing of when a Federal-
aid project agreement is executed for a project can vary considerably,
with it sometimes being combined directly with the authorization and
sometimes following the authorization by several weeks. Keeping in mind
that the FHWA's authorization is a legally binding action on the
agency's part, it is at this point that the Federal share being
committed to the project needs to be clearly defined.
Other commenters suggested that a State be allowed to continue to
make adjustments to Federal share throughout the life of a project.
Allowing these adjustments raises several concerns. How many times
could changes be made? Would changes be allowed after construction is
physically completed? Could changes be retroactive and applied to costs
already incurred? What are the Federal fiscal implications of
unrestricted changes? At this time, the decision has been made not to
expand flexibility for adjusting Federal share beyond that proposed in
the NPRM, namely, that Federal share could be adjusted based on the
bids received. The final rule has added clarifying language to indicate
that any such adjustment should occur before or shortly after award of
the contract.
Another comment concerned Federal shares for various project
activities. The commenter appears to be interpreting the word
``project'' to include all work phases of a project, such as design,
right-of-way, and construction. The commenter was concerned that if a
specific Federal share was established for design work, a State would
be locked into using that same Federal share on all subsequent
activities, such as the construction work. This is not the intent of
the regulation. The term ``project'' is intended to mean that
particular activity or phase of work for which Federal funds are being
authorized. Federal share is established for each individual
authorization. Design work could be authorized at one Federal share and
construction work later authorized at a different Federal share.
Executive Order 12866 (Regulatory Planning and Review) and DOT
Regulatory Policies and Procedures
The FHWA has determined that this action is not a significant
regulatory action within the meaning of Executive Order 12866 or
significant within the meaning of Department of Transportation
regulatory policies and procedures. The amendments would simply make
minor changes to update the Federal-aid project authorization
regulations to conform to recent laws, regulations, and guidance, and
to clarify existing policies. It is anticipated that the economic
impact of this rulemaking will be minimal because the amendments would
only clarify or simplify procedures presently being used by SHAs.
Therefore, a full regulatory evaluation is not required.
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. Based on the evaluation, the FHWA certifies that this action
would not have a significant economic impact on a substantial number of
small entities. The proposed amendments would only clarify or simplify
procedures used by SHA's in accordance with existing laws, regulations,
or guidance.
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 federalism assessment. This action merely
conforms the Federal-aid project authorization regulations to recent
laws, regulations, and guidance; clarifies these regulations; and gives
the SHAs more flexibility in implementing them.
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 1995, 44
U.S.C. 3501-3520.
National Environmental Policy Act
The Agency 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 630
Government contracts, Grant programs--transportation, Highways and
roads, Project authorization.
Issued on: June 26, 1996.
Rodney E. Slater,
Federal Highway Administrator.
In consideration of the foregoing, the FHWA is amending title 23,
Code of Federal Regulations, by revising part 630, subpart A to read as
follows:
PART 630--PRECONSTRUCTION PROCEDURES
Subpart A--Federal-Aid Project Authorization
Sec.
630.102 Purpose.
630.104 Applicability.
630.106 Authorization to proceed.
Authority: 23 U.S.C. 106, 118, 120, and 315; 49 CFR 1.48(b).
Subpart A--Federal-Aid Project Authorization
Sec. 630.102 Purpose.
The purpose of this subpart is to prescribe policies for
authorizing Federal-aid projects.
Sec. 630.104 Applicability.
(a) This regulation is applicable to all Federal-aid projects
unless specifically exempted.
(b) Projects financed with FHWA planning and research funds, as
defined in 23 CFR 420.103 are not covered by this subpart. These
projects are to be handled in accordance with 23 CFR parts 420 and 450.
(c) Other projects which involve special procedures shall be
authorized as set out in the implementing instructions for those
projects.
Sec. 630.106 Authorization to proceed.
(a) The FHWA issuance of an authorization to proceed with a
Federal-
[[Page 35633]]
aid project shall be in response to a written request from the State
highway agency (SHA). Authorization can be given only after applicable
prerequisite requirements of Federal laws and implementing regulations
and directives have been satisfied.
(b) Federal funds shall not participate in costs incurred prior to
the date of authorization to proceed except as provided by 23 CFR
1.9(b).
(c) Authorization of a Federal-aid project shall be deemed a
contractual obligation of the Federal government under 23 U.S.C. 106
and shall require that appropriate funds be available at the time of
authorization for the total agreed Federal share, either pro rata or
lump sum, of the cost of eligible work to be incurred by the State,
except as follows:
(1) Advance construction projects authorized under 23 U.S.C. 115.
(2) Projects for preliminary studies for the portion of the
preliminary engineering and right-of-way (ROW) phase(s) through the
selection of a location.
(3) Projects for ROW acquisition in hardship and protective buying
situations through the selection of a particular location. This
includes ROW acquisitions within a potential highway corridor under
consideration where necessary to preserve the corridor for future
highway purposes. Authorization of work under this paragraph shall be
in accordance with the provisions of 23 CFR part 712.
(4) In special cases where the Federal Highway Administrator
determines it to be in the best interest of the Federal-aid highway
program.
(d) The authorization to proceed with a project under 23 CFR
630.106(c)(1) through (c)(4) shall contain the following statement:
``Authorization to proceed shall not constitute any commitment of
Federal funds, nor shall it be construed as creating in any manner any
obligation on the part of the Federal government to provide Federal
funds for that portion of the undertaking not fully funded herein.''
(e) When a project has received an authorization under 23 CFR
630.106(c)(2) and (c)(3), subsequent authorizations beyond the location
stage shall not be given until appropriate available funds have been
obligated to cover eligible costs of the work covered by the previous
authorization.
(f)(1) The Federal-aid share of eligible project costs shall be
established at the time of project authorization in one of the
following manners:
(i) Pro rata, with the authorization stating the Federal share as a
specified percentage, or
(ii) Lump sum, with the authorization stating that Federal funds
are limited to a specified dollar amount not to exceed the legal pro
rata.
(2) The pro-rata or lump sum share may be adjusted before or
shortly after contract award to reflect any substantive change in the
bids received as compared to the SHA's estimated cost of the project at
the time of FHWA authorization, provided that Federal funds are
available.
(3) Federal participation is limited to the agreed Federal share of
eligible costs incurred by the State, not to exceed the maximum
permitted by enabling legislation.
(g) The State may contribute more than the normal non-Federal share
of title 23, U.S.C., projects. In general, financing proposals that
result in only minimal amounts of Federal funds in projects should be
avoided unless they are based on sound project management decisions.
[FR Doc. 96-17232 Filed 7-5-96; 8:45 am]
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