[Federal Register Volume 70, Number 131 (Monday, July 11, 2005)]
[Proposed Rules]
[Pages 39692-39695]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-13514]


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DEPARTMENT OF TRANSPORTATION

Federal Highway Administration

23 CFR Part 630

[FHWA Docket No. FHWA-2005-20764]
RIN 2125--AF05


Project Authorization and Agreements

AGENCY: Federal Highway Administration (FHWA), DOT.

ACTION: Notice of proposed rulemaking (NPRM); request for comments.

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SUMMARY: The FHWA proposes to revise its regulations relating to 
project authorization and agreements and the effect on obligations of 
Federal-aid highway funds under these requirements. The proposed 
changes would: (1) Require the deobligation of Federal funds that 
remain committed to inactive projects as well as the deobligation of 
unneeded or excess project funding; (2) reduce the occurrences where 
Federal funds are committed to inactive projects or where an obligation 
is in excess of the amount needed to complete the project; (3) 
establish a project completion date that would be annotated in all new 
project agreements and modifications to existing project agreements; 
and (4) require States to assure that third party contracts and 
agreements are processed and billed promptly when the work is 
completed. These proposed changes would also assist the States and the 
FHWA in monitoring Federal-aid highway projects and provide better 
assurance that the Federal funds obligated reflect the current 
estimated costs of the project. Federal funds deobligated may then be 
obligated for new or other active projects needing additional funding 
to the extent permitted by law. The proposed changes would have no 
effect on obligated funds that are needed for projects that are 
congressionally mandated.

DATES: Comments must be received on or before September 9, 2005.

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 or fax comments to (202) 493-2251. 
Alternatively, comments may be submitted via the eRulemaking Portal at 
http://www.regulations.gov. 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 postcard or you may print the 
acknowledgment page that appears after submitting comments 
electronically. Anyone is able to search the electronic form on all 
documents received into any of our dockets by the name of the 
individual submitting the comment (or signing the comment, if submitted 
on behalf of an association, business, labor union, etc.). You may 
review DOT's complete Privacy Act Statement in the Federal Register 
published on April 11, 2000 (Volume 65, Number 70, Pages 19477-78) or 
you may visit http://dms.dot.gov.

FOR FURTHER INFORMATION CONTACT: Mr. Dale Gray, Federal-aid Financial 
Management Division, (202) 366-0978, or Mr. Steven Rochlis, Office of 
the Chief Counsel, (202) 366-1395, Federal Highway Administration, 400 
Seventh Street SW., Washington, DC 20590. Office hours are from 7:45 
a.m. to 4:15 p.m., e.t., Monday through Friday, except Federal 
holidays.

SUPPLEMENTARY INFORMATION:

Electronic Access

    You may submit or retrieve comments online through the Document 
Management System (DMS) at: http://dmses.dot.gov/submit. Acceptable 
formats include: MS Word, MS Word for Mac, Rich Text File (RTF), 
American Standard Code Information Interchange (ASCII)(TXT), Portable 
Document Format (PDF), and WordPerfect. 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 
the internet to reach the Office of the Federal Register's home page 
at: http://www.archives.gov and the Government Printing Office's Web 
page at: http://www.access.gpo.gov/nara.

Background

    The State and FHWA must enter into a formal project agreement for 
each Federal-aid highway project that the State requests an 
authorization of work to be performed (23 CFR 630.106(a)(2)). The 
project agreement includes the work to be undertaken, project costs, 
and other conditions related to the project, and its execution 
constitutes a contractual obligation of the Federal government under 
Section 106 of Title 23 United States Code (see also 31 U.S.C. 
1501(a)(5)(B); 23 CFR 630.106(c)).
    The amount of Federal funds obligated on a Federal-aid highway 
project is based on a cost estimate. In some cases, as work progresses, 
the amount of Federal funds obligated is not revised to reflect a 
change in the cost estimate or to reflect an adjustment in the cost of 
the project. In other cases, an amount remains obligated on a project 
although no longer needed, sometimes for a substantial period of time 
after a project has been completed, and in some cases, where a project 
has been cancelled.
    The FHWA and the States have monitored inactive projects for a 
number of years to identify projects where the amounts obligated could 
be reduced. During this time, the FHWA has issued additional guidance, 
and identified best practices to help validate the amounts 
obligated.\1\ Notwithstanding these practices and actions, it is 
apparent that inactive projects with excess obligations have not been 
addressed in a timely fashion.
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    \1\ Examples of FHWA policies and guidance are available in the 
docket. (See: Federal Highway Administration National Quality 
Financial Management Initiative, Project Funds Management, March 
1999; Financial Management Improvement Program; Project Funds 
Management Process Improvement Review, December 2002).
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    In March 2004, the Inspector General of the Department of 
Transportation issued a report on inactive obligations.\2\ The results 
of the Inspector General audit revealed that some amounts obligated 
were unneeded, primarily

[[Page 39693]]

because they were associated with cancelled, reduced scope, or 
completed projects. The report stated, ``the success of efforts by FHWA 
to ensure obligated amounts continue to represent valid liabilities is 
a critical measure of the effectiveness of its financial management 
practices. When unneeded obligations for grants are identified, the 
funds should be deobligated and reapplied to other projects.''
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    \2\ The DOT Inspector General Report, Report Number FI-2004-039, 
entitled ``Inactive Obligations, Federal Highway Administration,'' 
dated March 31, 2004, is available at the following URL: http://www.oig.dot.gov/show_pdf.php?id=1282.
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    The purpose of this NPRM is to revise the FHWA's regulations on 
project agreements, 23 CFR 630, establish a systematic process that 
will assist the States and the FHWA to monitor projects, provide 
greater assurance that the amount of Federal funds obligated on a 
project reflects the current cost estimate, and that funds no longer 
needed are timely deobligated and reapplied to other eligible projects.
    The FHWA also proposes to reduce amounts obligated on inactive 
projects when it determines that the project is not advancing or the 
amount of Federal funds obligated exceeds the amount needed to complete 
the project. A project is considered inactive when no expenditures have 
been charged against Federal funds during the previous twelve months.
    The FHWA proposes to require a project completion date in all new 
project agreements and modifications of existing projects agreements. 
The project completion date may be revised by the State with adequate 
written justification for the extension. When the project completion 
date occurs, the State will be required to close the project and 
release any unexpended obligations. If the State fails to close the 
project within 90 days, the FHWA shall take appropriate action to 
assure that the amount obligated is properly adjusted. The 90-day 
period is consistent with the closeout requirements in section 18.50(b) 
of 49 CFR Part 18, Uniform Administrative Requirements for Grants and 
Cooperative Agreements to State and Local Governments which requires a 
grantee to submit all financial reports within 90 days after the 
expiration or termination of a grant.
    When a State enters into a contract or agreement with a third party 
to conduct certain types of work on a project, the third party must 
submit a billing or claim to the State as the work progresses. The 
State cannot receive reimbursement of Federal funds until the third 
party submits a billing or claim to the State for payment. Therefore, 
the FHWA proposes to require States to assure that third party billings 
are submitted and processed promptly when the work is completed.

Proposed Changes

    The FHWA proposes to revise its regulation as it relates to the 
project agreements and the effect on obligation of Federal funds.
    In Sec.  630.106, we propose to add paragraph (a)(3) that would 
require a State to (1) adjust the Federal funds obligated on any 
project, active or inactive, when the estimated costs decrease by more 
than 10 percent or $100,000, and (2) adjust the Federal funds obligated 
on an inactive project when no activity is expected in the next year or 
the amount obligated is in excess of the funds needed to complete the 
project based on the estimated cost of the project as documented. An 
inactive project means that no expenditures were charged against 
Federal funds during the previous twelve months. We also propose to add 
paragraph (a)(4) that would allow the FHWA to revise the obligations or 
take other actions if a State fails to take prompt actions to reduce 
Federal obligations.
    In Sec.  630.108, we propose to add paragraph (b)(9) that would 
require a project completion date be included in the project agreement 
for project costs billed to FHWA. When the project completion date 
occurs, the State will be required to close the project and release any 
unexpended obligations with 90 days. A project completion date will 
ensure that the States engage in prompt billing and timely processing 
of claims of work done by a third party. We also propose to add 
paragraph (b)(10) that would require FHWA to reduce the Federal 
obligation to the amount expended unless justification is provided by 
the State for maintaining a certain amount of unexpended obligation 
necessary to complete the project .
    In Sec.  630.108, we propose to add paragraph (e) that would 
outline the States responsibility relating to third party contracts and 
agreements when inactive projects involve work done by a third party. 
The State is responsible for ensuring that the third party processes 
and submits a claim for reimbursement to the State for the work it has 
done in a timely manner. A delay in receiving or processing of billings 
or claims is not a valid reason for the State to request an extension 
of the project completion date.
    In Sec.  630.110, we propose to add paragraph (d) that would advise 
States to provide support that the remaining unexpended obligations are 
still needed if a revision to the project completion date is requested.

Rulemaking Analyses and Notices

    All comments received before close of business on the comment 
closing date indicated above will be considered and will be available 
for examination in the docket at the above address. Comments received 
after the comment closing date will be filed in the docket 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 period. In addition to 
the 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.

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

    The FHWA has determined that this proposed rule would not be a 
significant regulatory action within the meaning of Executive Order 
12866 nor is it significant within the meaning of the Department of 
Transportation regulatory policies and procedures. We anticipate that 
the economic impact of this rulemaking would be minimal. In fact, funds 
released as a result of a deobligation under the proposed rule would be 
credited to the same program category and would be immediately 
available for obligation and expenditure on eligible projects in 
accordance with 23 U.S.C. 118(d).
    These proposed changes would not adversely affect, in a material 
way, any sector of the economy. In addition, these changes will not 
interfere with any action taken or planned by another agency and will 
not materially alter the budgetary impact of any entitlements, grants, 
user fees, or loan programs. Consequently, a full regulatory evaluation 
is not required.

Regulatory Flexibility Act

    In compliance with the Regulatory Flexibility Act (5 U.S.C. 601-
612), we have evaluated the effects of this action on small entities 
and have determined that the action would not have a significant 
economic impact on a substantial number of small entities. The proposed 
amendment addresses obligation of Federal funds to States for Federal-
aid highway projects. As such, it affects only States and States are 
not included in the definition of small entity set forth in 5 U.S.C. 
601. Therefore, the Regulatory Flexibility Act does not apply, and the 
FHWA certifies that the proposed action will not have a significant 
economic impact on a substantial number of small entities.

[[Page 39694]]

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, 109 Stat. 48, 
March 22, 1995) as it will not result in the expenditure by State, 
local, tribal governments, or by the private sector, of $100 million or 
more in any one year (2 U.S.C. 1532 et seq.).
    Further, in compliance with the Unfunded Mandates Reform Act of 
1995, the FHWA will evaluate any regulatory action that might be 
proposed in subsequent stages of the proceeding to assess the affects 
on State, local, and tribal governments and the private sector. 
Additionally, the definition of ``Federal Mandate'' in the Unfunded 
Mandates Reform Act excludes financial assistance of the type in which 
State, local, or tribal governments have authority to adjust their 
participation in the program in accordance with changes made in the 
program by the Federal Government. The Federal-aid highway program 
permits this type of flexibility.

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 proposed action would 
not have a substantial direct effect or sufficient federalism 
implications on the States. The FHWA has also determined that this 
proposed action would not preempt any State law or regulation or affect 
the States' ability to discharge traditional State governmental 
functions.

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

    Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501, et 
seq.), the FHWA must obtain approval from the Office of Management and 
Budget (OMB) for each collection of information we conduct, sponsor, or 
require through regulations. The FHWA has determined that this proposal 
does not contain a collection of information requirement for purposes 
of the PRA.

National Environmental Policy Act

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

Executive Order 12630 (Taking of Private Property)

    The FHWA has analyzed this proposed rule under Executive Order 
12630, Governmental Actions and Interface with Constitutionally 
Protected Property Rights. The FHWA does not anticipate that this 
proposed action would affect a taking of private property or otherwise 
have taking implications under Executive Order 12630.

Executive Order 12988 (Civil Justice Reform)

    This action meets 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 rule under Executive Order 13045, Protection 
of Children from Environmental Health Risks and Safety Risks. The FHWA 
certifies that this proposed action would not cause an environmental 
risk to health or safety that might disproportionately affect children.

Executive Order 13175 (Tribal Consultation)

    The FHWA has analyzed this action under Executive Order 13175, 
dated November 6, 2000, and believes that the proposed action would not 
have substantial direct effects on one or more Indian tribes; would not 
impose substantial direct compliance costs on Indian tribal 
governments; and would not preempt tribal laws. The proposed rulemaking 
addresses obligations of Federal funds to States for Federal-aid 
highway projects and would not impose any direct compliance 
requirements on Indian tribal governments. Therefore, a tribal summary 
impact statement is not required.

Executive Order 13211 (Energy Effects)

    We have analyzed this action under Executive Order 13211, Actions 
Concerning Regulations That Significantly Affect Energy Supply, 
Distribution, or Use dated May 18, 2001. We have determined that it is 
not a significant energy action under that order since it is not a 
significant regulatory action under Executive Order 12866 and is not 
likely to have a significant adverse effect on the supply, 
distribution, or use of energy. Therefore, a Statement of Energy 
Effects is not required.

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 number 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

    Reimbursement, Grant Programs-transportation, Highways and roads.

    Issued on: July 1, 2005.
Mary E. Peters,
Federal Highway Administrator.
    In consideration of the foregoing, the FHWA proposes to amend part 
630 of title 23, Code of Federal Regulations, as follows:

PART 630--PRECONSTRUCTION PROCEDURES

Subpart A--Project Authorization and Agreements

    1. The authority citation for part 630 continues to read as 
follows:

    Authority: 23 U.S.C. 106, 109, 115, 315, 320, and 402(a); 31 
U.S.C. 1501(a)(5)(B); 23 CFR 1.32; and 49 CFR 1.48(b).

    2. Amend Sec.  630.106 by adding paragraphs (a)(3) and (4) to read 
as follows:


Sec.  630.106  Authorization to proceed.

    (a) * * *
    (3) The State shall monitor all projects and shall promptly revise 
the Federal funds obligated for a project when the cost estimate has 
decreased by more than ten percent or $100,000. For inactive projects 
(for purposes of this subpart an ``inactive project'' means a project 
in which no expenditures have been charged against Federal funds during 
the past twelve consecutive months), the State shall promptly revise 
the Federal funds obligated for the project to reflect the amount of 
Federal funds expended on the project or the Federal share of the 
current documented cost estimate if:
    (i) The project is unlikely to be advanced within the next twelve 
months; or

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    (ii) The amount obligated for the project exceeds the current 
estimated cost of the project.
    (4) If the State fails to take prompt action to reduce Federal 
obligations as required in paragraph (a)(3) of this section, then FHWA 
shall revise the obligations or take such other action as authorized by 
23 CFR 1.36.
* * * * *
    3. Amend Sec.  630.108 by adding paragraphs (b)(9) and (10) and (e) 
to read as follows:


Sec.  630.108  Preparation of agreement.

    (b) * * *
    (9) The agreement shall specify a project completion date. The 
project completion date will be the date when work on the project is 
expected to be completed. Within 90 days after the project completion 
date, the State shall submit a request to FHWA to close the project and 
release any unexpended obligations on the project.
    (10) If the State does not close the project within 90 days after 
the project completion date, then the FHWA shall reduce the Federal 
obligation to the amount expended unless justification is provided by 
the State for maintaining a certain amount of unexpended obligation 
necessary to complete the project.
* * * * *
    (e) The State is responsible for assuring that third party 
contracts and agreements provide for the timely billing and processing 
of final claims following the completion of work by the third party. A 
delay in receiving or processing third party claims will not be 
justification for extending the project completion date as permitted in 
Sec. 630.110(d) of this subpart unless the delay is the result of an 
unusual circumstance beyond the control of the State and the third 
party.
    4. Amend Sec. 630.110 by adding paragraph (d) to read as follows:


Sec.  630.110  Modification of the original agreement.

* * * * *
    (d) The modification may include a revised project completion date 
provided the State submits a revised project schedule and support that 
the remaining unexpended obligation amount is still needed.

[FR Doc. 05-13514 Filed 7-8-05; 8:45 am]
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