[Federal Register Volume 71, Number 98 (Monday, May 22, 2006)]
[Notices]
[Pages 29382-29388]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-7781]



[[Page 29382]]

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DEPARTMENT OF TRANSPORTATION

Federal Transit Administration

[Docket Number: FTA-2006-23636]


Notice of Availability of Final Guidance on New Starts Policies 
and Procedures, Updated Reporting Instructions and New Starts Rating 
and Evaluation Process

AGENCY: Federal Transit Administration, DOT.

ACTION: Notice of availability.

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SUMMARY: This notice announces the availability of the Federal Transit 
Administration's (FTA) Final Guidance on New Starts Policies and 
Procedures which was initially issued for comment on January 19, 2006. 
This final Policy Guidance updates procedures for project planning and 
development to receive New Starts funding, in accordance with the Safe, 
Accountable, Flexible, Efficient Transportation Equity Act: A Legacy 
for Users (SAFETEA-LU) [Pub. L. 109-59, August 10, 2005]. The guidance 
explains changes to the New Starts program that will become effective 
on May 22, 2006. This notice also announces the availability of updated 
Reporting Instructions for the Section 5309 New Starts Criteria, which 
should be followed when reporting New Starts information for evaluation 
during the fiscal year (FY) 2008 project rating cycle, as well as any 
requests to enter into preliminary engineering, final design or a full 
funding grant agreement, and a detailed description of the FY 2008 
Evaluation and Rating Process, which is an appendix to the Reporting 
Instructions. Finally, this notice provides the schedule for reporting 
of information for FTA's FY 2008 evaluations. FTA finds that there is 
good cause to make this guidance effective upon publication of this 
notice because sponsors of projects seeking New Starts funding must 
have adequate time to prepare information that FTA will use to evaluate 
projects for inclusion in the President's FY 2008 budget request to 
Congress.

DATES: Effective Date: These policies and procedures will take effect 
on May 22, 2006.

FOR FURTHER INFORMATION CONTACT: Ron Fisher, Office of Planning and 
Environment, telephone (202) 366-4033, Federal Transit Administration, 
U.S. Department of Transportation, 400 Seventh Street, SW., Washington, 
DC 20590 or [email protected].

SUPPLEMENTARY INFORMATION:

1. Availability of the Final Guidance and Comments

    A copy of the proposed and Final Policy Guidance and comments and 
material received from the public, as well as the updated Reporting 
Instructions and Evaluation and Rating Process for the Section 5309 New 
Starts Criteria, are part of docket FTA-2006-23636 and are available 
for inspection or copying at the Docket Management Facility, U.S. 
Department of Transportation, Room PL-401 on the plaza level of the 
Nassif Building, 400 Seventh Street, SW., Washington, DC between 9 a.m. 
and 5 p.m., Monday through Friday, except Federal holidays. You may 
retrieve the guidance and comments online through the Document 
Management System (DMS) at: http://dms.dot.gov. Enter docket number 
23636 in the search field. The DMS is available 24 hours each day, 365 
days each year. Electronic submission and retrieval help and guidelines 
are available under the help section of the Web site. An electronic 
copy of this document may also be downloaded by using a computer, modem 
and suitable communications software from the Government Printing 
Office's Electronic Bulletin Board Service at (202) 512-1661. Internet 
users may also reach the Office of the Federal Register's home page at: 
http://www.nara.gov/fedreg and the Government Printing Office's Web 
page at: http://www.gpoaccess.gov/fr/index.html.

2. Background

    On August 10, 2005, President Bush signed the Safe, Accountable, 
Flexible, Efficient Transportation Equity Act: A Legacy for Users 
(SAFETEA-LU). Section 3011 of SAFETEA-LU made a number of changes to 49 
U.S.C. 5309, which authorizes the Federal Transit Administration's 
(FTA's) fixed guideway capital investment program known as ``New 
Starts.'' On January 19, 2006, FTA published a Notice of Availability 
of Guidance on New Starts Policies and Procedures and Request for 
Comments in the Federal Register (71 FR 3149). The guidance explained 
proposed changes to the New Starts program that were proposed to become 
effective April 30, 2006, as well as longer-term changes to the New 
Starts program that FTA plans to be the subject of rulemaking in the 
future. FTA requested--and received--comments on both aspects of the 
guidance in the January notice. The immediate changes discussed in more 
detail below apply to all New Starts submittals received after May 22, 
2006. FTA finds that there is good cause to make this guidance 
effective upon publication of this notice because sponsors of projects 
seeking New Starts funding must have adequate time to prepare 
information that FTA will use to evaluate projects for inclusion in the 
President's FY 2008 budget request to Congress. As proposed in the 
January 19, 2006 Notice, the longer term changes will be covered in a 
subsequent rulemaking and comments on those issues will be summarized 
as part of the forthcoming Notice of Proposed Rulemaking. Accordingly, 
this notice announces the availability of FTA's Final Guidance on New 
Starts Policies and Procedures. This notice also announces the 
availability of Reporting Instructions for the Section 5309 New Starts 
Criteria for the submittal of New Starts information to be evaluated 
and reported in the FY 2008 Annual Report on New Starts, as well as for 
all requests to enter preliminary engineering and final design 
throughout the remainder of calendar year 2006 and 2007 or until FTA 
releases a revised set of instructions. The Reporting Instructions 
include as an appendix a detailed description of the New Starts 
Evaluation and Rating Process. These documents are available in the 
docket, which can be accessed by going to http://dms.dot.gov, or on 
FTA's Web site for New Starts Planning and Project Development at 
http://www.fta.dot.gov/15052_ENG_HTML.htm.

3. Response to Comments and New Starts Program Changes To Be Effective 
May 22, 2006

    The purpose of this notice is to announce the availability of the 
Final Policy Guidance on New Starts Policies and Procedures and the FY 
2008 Reporting Instructions and Evaluation and Rating Process for the 
Section 5309 New Starts program, reflecting the changes implemented as 
a result of comments received on the January 19, 2006 Notice of 
Availability. FTA will issue a Notice of Proposed Rulemaking (NPRM) 
later this calendar year to address the remainder of the issues 
discussed in the draft Policy Guidance made available by that Notice.

Reporting Instructions and Rating and Evaluation Process for the FY 
2008 Section 5309 New Starts Submission

    FTA adopts as final the proposal made in the Notice that, for the 
FY 2008 New Starts submissions, there be no change from the approach 
used for the FY 2007 New Starts submissions in the framework and 
methodology for evaluating and rating New Starts projects, and the 
decision rules that support it.

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    Comments: FTA received no comments on the proposal to continue the 
same approach used for the FY 2007 New Starts submissions for 
evaluating and rating New Starts projects for the FY 2008 New Starts 
submissions.
    FTA Response: Accordingly, FTA will not change the current 
framework and methodology for evaluating and rating New Starts 
projects, and the decision rules that support it. All of the measures 
and their weights for developing New Starts ratings remain consistent 
with the process spelled out in the Major Capital Investment Projects 
Final Rule issued in December 2000, as modified in 2005 to incorporate 
SAFETEA-LU changes which could be accommodated prior to rulemaking. FTA 
further encourages New Starts project sponsors to submit information on 
anticipated economic development of their proposed investments as an 
``other factor.'' The FY 2008 Reporting Instructions for the Section 
5309 New Starts Criteria include, as an appendix, a description of the 
New Starts evaluation and rating process.
    As in past years, modest changes are incorporated into the 
Reporting Instructions, including: (1) Updated breakpoints for the 
rating of project cost effectiveness, using the Gross Domestic Product 
Deflator, as was described in FTA's April 29, 2005 Dear Colleague 
Letter; (2) clarifying guidance, including ``guiding principles'' for 
the development of the ``Baseline'' alternative against which the 
incremental benefits of proposed New Starts are measured; and (3) a 
revised Certification of Technical Methods and Planning Assumptions. In 
addition, the Standard Cost Categories for reporting capital costs have 
been updated and the templates for reporting the New Starts criteria 
have been linked to reduce data entry requirements.
    FTA notes that the deadline for formally reporting information on 
the New Starts project justification and local financial commitment 
criteria--i.e., the New Starts ``templates'' and supporting land use 
and financial information--for evaluation in the FY 2008 Annual Report 
on New Starts is August 18, 2006. In addition, FTA requests, for 
projects already in the New Starts ``pipeline'' (projects in 
preliminary engineering and final design), that information related to 
travel forecasts, operating and maintenance cost methodologies, capital 
costs (constant dollar and annualized, as reported in the Standardized 
Cost Category worksheets), and service annualization factors be 
submitted by July 14, 2006 if this information is different from what 
was submitted last year. This advanced submission of information helps 
FTA staff to understand the information underlying the New Starts 
project justification criteria, and helps to ensure that the 
information reported in the formal New Starts templates is sufficient 
for FTA's evaluation and rating of candidate projects. Both the 
``advanced'' and formal submission of information should be sent to the 
FTA Office of Planning and Environment (TPE), Room 9413, 400 Seventh 
Street, SW., Washington, DC 20590. In addition, FTA's consultants for 
financial and land use reviews will be contacting sponsors of projects 
in the pipeline in mid-August 2006 to provide additional direction on 
transmitting specific information to them for these reviews.
    For sponsors who hope to have their project approved into 
preliminary engineering in time for inclusion in the FY 2008 Annual 
Report, a complete request (with previously FTA-accepted travel 
forecasts, baseline alternative, build and baseline capital costs, and 
achievement of other project readiness requirements) must be submitted 
to FTA no later than August 18, 2006. FTA encourages sponsors of such 
projects to contact FTA as soon as possible to assess their readiness 
for preliminary engineering and to prepare their request for 
advancement. Projects supported by incomplete or premature requests 
will not be considered for inclusion in the FY 2008 Annual Report.
    FTA encourages sponsors of candidate New Starts projects to follow 
the Reporting Instructions closely, and to submit complete information 
according to the deadlines established above. FTA's period for 
completing its FY 2008 budget evaluations is very short. FTA staff is 
committed to working closely with project sponsors to resolve any 
questions or issues with their submittals, but cannot guarantee the 
acceptance and inclusion of any revised or updated information after 
September 30, 2006 in time for the FY 2008 evaluation. Project sponsors 
should contact the FTA Office of Planning and Environment, or their FTA 
Regional Office, if they have any questions regarding the submission of 
information for evaluation, or the process for developing such 
information.
    Significant changes made to accommodate policy changes incorporated 
in the final Policy Guidance are described below.

National Environmental Policy Act (NEPA) Scoping Prior to Entry Into 
Preliminary Engineering

    FTA adopts a requirement that NEPA Scoping be completed prior to 
FTA approval of entry into preliminary engineering (PE). This 
requirement is in effect for any request to enter PE that is submitted 
after the effective date of this Notice.
    Conduct of NEPA Scoping prior to PE approval already occurs in 
situations where an alternatives analysis (AA) study is undertaken as 
part of a draft environmental impact statement (DEIS). For AA studies 
performed prior to initiation of the NEPA process--with the expectation 
that subsequent environmental work be limited to the preferred 
alternative emerging from the AA study--FTA would simply require that 
normal NEPA Scoping be performed at the outset of the NEPA process, 
prior to consideration of advancement of the project into PE. By 
proposing this requirement FTA expected to produce more efficient and 
mutually-supported NEPA and New Starts reviews, which share the similar 
objective of informed decision-making. This requirement was intended to 
foster earlier interaction and, ideally, general consensus among the 
scoping participants about the alternatives to be considered during 
NEPA review. Scoping prior to PE allows for resolution of these issues 
during the planning process instead of discovering them in PE and 
having to do additional planning analyses to address them. To the 
extent that planning issues are resolved prior to PE, FTA expected this 
change would shorten the time that a project remains in PE.
    Comments: Comments were evenly distributed between those who 
supported and opposed this proposal, and those who desired more 
guidance or clarification of the issue. Specific comments included 
concerns that this requirement would prolong the project development 
schedule, resulting in increased costs for consultant services and 
construction, and that it is difficult to achieve buy-in and 
understanding of the planning process by local elected officials and 
the public.
    FTA Response: Rather than lengthening the project development 
schedule, it is FTA's belief that confirmation of a locally preferred 
alternative through NEPA Scoping strengthens the local planning 
decision and mitigates against situations where another alternative 
emerges during PE, potentially causing project development delays. 
Further, FTA believes that obtaining local consensus is a key component 
to streamlining the project development process. Accordingly, FTA will 
require that project sponsors submit the results of the NEPA Scoping 
process as part of the information submitted to FTA for requests to 
enter into PE. FTA

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recognizes that the scoping process can take 3 to 4 months to complete. 
Project sponsors should build this step into the schedule, recognizing 
that scoping can occur while FTA is reviewing the ridership, cost, and 
financial information that support the request to enter into PE. 
Sponsors who are contemplating a request to enter into PE in the next 
few months should contact FTA immediately about beginning the scoping 
process.

Include New Starts Evaluation Information in NEPA Documents

    FTA adopts a requirement that all environmental documents for a New 
Starts project include key information related to ratings under the New 
Starts criteria, standard language that describes the New Starts 
process, and the latest available New Starts rating for the project. 
However, FTA will not require a project sponsor to submit additional 
information for rating purposes at the time the environmental document 
is ready to be issued. The most recent rating and, if necessary, an 
explanation of any information that may change the rating, will 
suffice.
    The Council on Environmental Quality's (CEQ) NEPA regulations (40 
CFR 1502.23) state that ``an environmental impact statement should at 
least indicate those considerations, including factors not related to 
environmental quality, which are likely to be relevant and important to 
a decision.'' FTA proposed this requirement because it considered the 
New Starts rating information and evaluation process information to be 
``relevant and important to a decision'' because it indicates the 
likelihood of funding from the New Starts program.
    Comments: The majority of comments were opposed to this proposal as 
described in the January 19, 2006 Notice. Some thought that the 
inclusion of the New Starts rating information would compromise the 
NEPA process and expose FTA to litigation risks based on the 
information, causing unnecessary delay. Some thought that the 
information would confuse the audience for NEPA documents as the 
information is unknown to them. Others thought that the proposal should 
be part of a formal rulemaking process and/or that additional time for 
consideration should be provided prior to adoption by FTA.
    FTA Response: In the 1980's and early 1990's, New Starts rating 
information was routinely included in environmental documents, similar 
to other types of technical information found in these documents. This 
information was produced for all of the alternatives. Descriptions of 
the relevance of the information related to project merit along with a 
brief description of how it is used for FTA's ratings minimizes any 
misunderstanding of its significance. FTA legal counsel believes that 
by including this information in environmental documents, FTA would not 
be subject to any additional risk than we currently are under the 
Administrative Procedure Act, which enables a plaintiff to contest any 
government decision that they believe is arbitrary and capricious. FTA 
also does not believe that this provision, which follows good planning 
practice and CEQ requirements, needs to be cited in a regulation. 
Furthermore, FTA is convinced that by providing full disclosure as part 
of the NEPA document, downstream challenges to the project will be 
reduced.
    For environmental documents prepared prior to entry into PE, FTA 
will require that information relating to the New Starts criteria be 
presented along with a brief description of how the information is used 
for FTA's ratings. For projects which have received an FTA rating, the 
actual rating would also be presented. This policy applies specifically 
to the locally preferred alternative (i.e. the proposed New Starts 
project); however, in cases where the DEIS is prepared during the 
alternatives analysis phase of project development, FTA strongly 
encourages (but will not require) that information in support of the 
New Starts rating process be developed and reported for all studied 
alternatives, as a means of enhancing local stakeholders' understanding 
of the potential competitiveness of the alternatives for New Starts 
funding. In response to the comments received, which indicated concerns 
about which documents would be covered by this requirement, and the 
difficulty in crafting appropriate language for inclusion in the 
environmental documents, FTA wishes to make clear that the proposal 
applies to all NEPA documents, both environmental assessments (EAs) and 
environmental impact statements (EISs), and that standard language, 
which is available from FTA, would accompany the New Starts rating to 
provide context for the New Starts rating and process. Further, FTA 
notes that by making clear that the requirement is reporting of only 
the most recent New Starts rating rather than a new rating by FTA 
(which some comments felt was implied by the draft Guidance), there 
should be no delay in the development of the environmental documents in 
order to await development of an updated rating by FTA.

Require a New Starts Project To Achieve an Acceptable New Starts Rating 
Before the FEIS, ROD, or FONSI Is Signed

    FTA does not adopt a requirement that a proposed New Starts project 
must receive a rating of ``medium'' or better before it will sign a 
final EIS (FEIS), record of decision (ROD), or finding of no 
significant impact (FONSI). However, when it is clear that FTA will 
need to issue a supplemental environmental document in order to 
accommodate scope changes needed to justify a ``medium'' or better 
rating, FTA will not issue a FEIS or ROD until this supplemental 
document is completed. For projects not perceived as requiring a 
supplemental document, FTA will include a statement in the FEIS, ROD or 
FONSI as to how a New Starts rating of less than ``medium'' may affect 
the ability of the project to advance to implementation.
    This policy was designed to minimize the need for additional 
environmental reviews due to subsequent changes in a project's scope 
needed to improve the New Starts ratings. The policy would not have 
eliminated all supplemental NEPA reviews, but it would have minimized 
the need for duplicative reviews in cases where it is known that the 
project must be changed to make it acceptable for New Starts funding. 
This policy was also designed to ensure that the FEIS provided the 
affected public with an accurate description of a project that is 
acceptable for New Starts funding.
    Comments: There was significant opposition to the original proposal 
to require a project to receive a ``medium'' or better rating before 
the environmental document would be signed. Some respondents were 
concerned that preventing the issuance of a NEPA determination could 
interfere with project funding support from other sources. Others 
thought that if other Federal funding sources are being used for a 
project, the withholding of a NEPA determination solely due to the New 
Starts rating would prevent further project development with non-New 
Starts funding. Some thought that this requirement could prejudice the 
NEPA process by encouraging project sponsors to minimize costs by 
removing environmental or community benefits whose affects cannot be 
measured quantitatively to achieve a New Starts cost effectiveness 
figure that results in a ``medium'' or better New Starts rating. A few 
commenters noted that delaying a NEPA determination due to the New 
Starts rating would prevent a project

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sponsor from acquiring right-of-way, and could result in property cost 
escalation if the NEPA determination milestone is delayed. One 
suggestion was that if a project's New Starts rating is less than a 
``medium,'' then measures to improve the rating should be included in 
the NEPA determination. Others thought that this requirement should be 
part of a formal rulemaking process and/or that additional time for 
consideration should be provided prior to adoption by FTA due to the 
extent of the proposed changes.
    FTA Response: While FTA continues to believe that the requirement 
for achieving an acceptable New Starts rating prior to a NEPA 
determination is justifiable, many of the comments raised equally 
reasonable issues that suggested that additional and more detailed 
parameters for case by case flexibility were needed to determine when 
and how the New Starts rating would delay the issuance of a NEPA 
determination. Furthermore, one comment proposed a solution that 
addressed FTA's concerns as well as the concerns of the commenters. 
Therefore, except where it is absolutely clear that FTA will need to 
issue a supplemental FONSI, FEIS, or ROD in order to accommodate scope 
changes needed to justify a ``medium'' or better rating, FTA will issue 
such a document but include in it a statement as to how the New Starts 
process may affect the ability of the project to advance to 
implementation. This allows the environmental process to be completed. 
It allows the project sponsor to begin necessary land acquisition with 
its own funds. At the same time it puts the public as well as local 
decision-makers on notice of the possibility that the project may not 
ultimately receive New Starts funding. Standard language that will be 
included in the FEIS, FONSI, or ROD is available from FTA. For a 
multimodal project (highway and transit) in which the transit component 
does not advance without a supplemental document, but the environmental 
process for the highway component may be finalized, the highway 
component could be included in a stand-alone environmental document.

Preservation of Information for Before and After Study

    To ensure that required information is identified and preserved 
during project planning and development, FTA adopts a requirement that 
project sponsors provide initial documentation of the information 
produced during alternatives analysis when they apply to begin PE, and 
to provide updated information and an analysis of any changes from the 
previous phase of project development, when applying to enter FD and 
before receiving an FFGA.
    In its December 2000 Final Rule on Major Capital Investment 
Projects, FTA required that project sponsors seeking full funding grant 
agreements (FFGAs) submit to FTA, before approval of an FFGA, a 
complete plan for the collection and analysis of information to 
identify the impacts of their projects and the accuracy of the 
forecasts prepared during project planning and development. SAFETEA-LU 
amended section 5309(g)(2)(c) to codify this regulatory requirement and 
now requires that project sponsors, as a condition of receiving a FFGA, 
assemble information on five key project characteristics generated 
during project planning and development: (1) Project scope; (2) transit 
service levels; (3) capital costs; (4) operating and maintenance costs; 
and (5) ridership patterns and revenues. SAFETEA-LU now requires FTA to 
use this information in preparing an annual report to Congress on the 
results of any before and after studies completed during that year.
    Comments: Comments were generally supportive of this proposal. Some 
requested that more guidance and training on conducting a before and 
after study and data collection methods be provided before this 
requirement is set forth, and that the cost of conducting the study be 
an eligible New Starts expense. Some agencies supported the inclusion 
of land use and economic development measures in the before and after 
study. Other commenters believed that this proposal should be the 
subject of rulemaking.
    FTA Response: Preliminary guidance on before and after studies and 
a model before and after study plan are currently available from the 
FTA Office of Planning and Environment. The guidance makes clear that 
the costs of the study are an eligible FFGA expense. The guidance 
further reflects the proposed data and analysis submission 
requirements. The five factors proposed for inclusion in the before and 
after study are those specified in SAFETEA-LU. FTA agrees that land use 
and economic development analyses could provide useful information 
about the forecast and actual performance of projects, and encourages 
their inclusion in the studies, but will not require them at this time.
    This proposal is a refinement of FTA's existing regulation based on 
the SAFETEA-LU requirement that FTA report on this information at each 
stage in the process. It does not result in any additional effort--only 
the timing of the effort. FTA does not believe it is necessary that it 
be implemented through the rulemaking process.

Certification of Technical Methods, Planning Assumptions, and Project 
Development Procedures

    FTA does not adopt a requirement that all individuals responsible 
for developing information critical for evaluation of New Starts 
certify that the information has been developed in accordance with FTA 
guidance and best professional practice. Rather FTA has enhanced the 
sponsoring agency's Chief Executive Officer's (CEO's) certification to 
include key assumptions that must be followed in developing the New 
Starts information. The revised certification can be found in the 
Reporting Instructions for the FY 2008 New Starts Criteria.
    Currently, FTA requires that the General Manager or CEO of a 
project sponsor agency certify that the data and assumptions used to 
develop information for evaluating projects seeking New Starts funding 
have been developed according to a number of rules described in the 
certification statement. Despite this certification, which has been in 
effect for several years, FTA has found that information has been 
produced that is inconsistent with FTA guidelines. FTA's oversight has 
also revealed that best professional practices that have been routinely 
followed for decades are not always applied during project development. 
By assigning responsibility to an individual for his/her technical 
work, FTA hoped that accountability would be better recognized, thus 
ensuring more accurate information for decision-makers, both locally 
and at the Federal level. In addition, the certifications were intended 
to help FTA in identifying who was responsible for preparing cost and 
ridership estimates, information that is needed in order for FTA to 
prepare an accurate and fair Contractor Performance Assessment Report 
as required by SAFETEA-LU.
    Comments: There was significant opposition to this proposal. Some 
stated that since information is often developed by multiple agencies 
and consultants, no individual can be identified as responsible for the 
work. Some expressed concerns about professional liability and Federal 
prosecution. Others stated that there are no industry-accepted 
standards or conventions to certify to and that FTA should only hold 
individuals responsible for adhering to definable standards described 
in FTA guidance. Others commented that FTA reviews

[[Page 29386]]

obviate the need for additional certifications.
    FTA Response: FTA acknowledges that information is developed by 
various agencies and the resulting difficulty of a single individual 
certification. In response to the question of liability, the comments 
raise a legitimate concern which would require an in-depth legal 
analysis to adequately address. While states and some agencies have 
documented standards, there is no clear uniform definition of best 
professional practice across the country. Nonetheless, FTA does have 
established standards that are quite detailed. While FTA does review 
information from grantees, it is impossible to ensure that every aspect 
of a forecast has been performed correctly. Placing the responsibility 
for reliable forecasts on project sponsors better accomplishes the goal 
of credible project costs and benefits.
    FTA believes that the requirement for accountability in the 
development of information is legitimate. While FTA could limit the 
certification to explicit pre-established standards, drawing on our 
existing guidance, the requirement may still be viewed as a reflection 
of a lack of trust by FTA rather than a true measure of accountability. 
Therefore, rather than requiring a certification by each of the 
individuals responsible for preparing the information, FTA is 
continuing the past requirement for a CEO's certification in the FY 
2008 Reporting Instructions, but has expanded the scope of technical 
procedures and assumptions that is covered by the certification. The 
CEO can then decide how to assure him/herself that the underlying 
information is valid. The Certification of Technical Methods, Planning 
Assumptions, and Project Development Procedures is included in the FY 
2008 Reporting Instructions.

Identification of Uncertainties in the Development of Costs and 
Ridership Forecasts

    FTA does not adopt a requirement that project sponsors include a 
statement of uncertainties in its submittal at this time. FTA will 
issue guidance at a later point in time with respect to the information 
needed to satisfy several provisions of SAFETEA-LU requiring 
identification of uncertainty but it will be subject to a separate 
Notice and Comment process. Nonetheless, while not a requirement, FTA 
does encourage all project sponsors to describe the nature of 
uncertainties in costs and ridership forecasts. Current FTA guidance 
(Procedures and Technical Methods for Transit Project Planning) on cost 
and ridership uncertainties provides general direction for this until 
more specific guidance is issued.
    Currently, forecasts of project costs and ridership are developed 
as discrete estimates, even though they contain uncertainties which 
diminish as the project is continuously refined in project development. 
Good planning practice and SAFETEA-LU requirements dictate that these 
uncertainties be more explicitly described when the cost and ridership 
forecasts are produced. More explicit representation of uncertainties 
is required by SAFETEA-LU because reliability of forecasts is now a 
factor in project justification. An understanding of uncertainties is 
essential in understanding the cause of forecasts changing during 
project development and operation as required for before and after 
studies and for assessing contractor performance. Further, an 
understanding of uncertainties will provide information to FTA as it 
implements the SAFETEA-LU Cost Incentive provision, which allows FTA to 
provide more New Starts funding at the time a project enters into a 
FFGA, if project costs are no more than 10% above and ridership no less 
than 90% of the estimates made when the project was admitted into PE.
    Comments: Comments were evenly distributed between those who 
supported and opposed this proposal. There were concerns that the 
proposal would be time consuming and costly and would not eliminate 
risk and uncertainty from forecasts. Others thought that FTA should 
delay implementation of the requirement until guidance is issued that 
defines how uncertainties should be characterized. Some thought that 
including uncertainty raises questions about how this uncertainty would 
be addressed in the cost effectiveness measure for projects.
    FTA Response: Rather than seeking to eliminate all project risk and 
uncertainty, FTA proposed that project sponsors report the nature of 
the uncertainty in project cost and ridership forecasts as a result of 
their analysis. This would allow both the project sponsor and FTA to 
use that information as they make decisions to advance the project. 
Current FTA guidance on capital cost estimation and travel forecasting 
discusses the role of uncertainty in forecasts and describes how these 
uncertainties could be reported. However, to ensure that uncertainties 
are being reported consistently by all grantees, further guidance is 
needed. While FTA acknowledges that a more explicit reporting of 
uncertainty may raise questions about the uncertainty in the cost 
effectiveness measure; FTA did not propose to require the project 
sponsor to make multiple calculations of cost effectiveness based on 
the uncertainly analysis.
    FTA continues to believe that such a requirement is necessary to 
satisfy several SAFETEA-LU requirements. Understanding uncertainty will 
allow FTA to better recommend funding among projects with similar costs 
and benefits, but with significant differences in uncertainties. A 
better understanding of uncertainties will facilitate a better 
understanding of why costs and ridership vary from predictions so that 
better approaches to forecasts can be developed for future projects. 
Additionally, because a major purpose of planning and project 
development studies is to disclose information for decision-making, a 
more explicit representation of uncertainties better informs decision-
makers by providing richer information about the nature of project 
benefits and costs. However, the comments raised sufficient issues to 
convince FTA that it needs to provide more detailed guidance in order 
to obtain consistent results. Because of the need to issue this policy 
guidance and the 2008 Reporting Instructions in sufficient time for 
grantees to submit ridership and cost information by July 14, 2006, FTA 
did not have to time to prepare this additional guidance; therefore, 
FTA will consider this issue either as part of the rulemaking process 
and/or under a separate Notice and Comment to address several 
provisions of SAFETEA-LU requiring identification of uncertainties. In 
the meantime FTA strongly encourages project sponsors to describe the 
nature of uncertainties when forecasts of costs and ridership are 
presented to FTA or in planning and project development documents.

Project Development Agreements

    FTA will not require Project Development Agreements (PDAs) for 
specific projects at this time, but will work with any project sponsor 
who requests the use of such an agreement. This requirement may be 
revisited during the rulemaking process. Some projects in the New 
Starts pipeline have been unable to advance through PE and FD, 
primarily because of problems securing funding commitments, problems 
providing satisfactory information about expected project benefits, or 
major changes in project scope and definition. Occasionally, projects 
have experienced significant changes affecting scope and cost after

[[Page 29387]]

approval into PE, and have, consequently, become stalled or 
significantly reconfigured during PE or FD. To remedy this situation, 
FTA proposed to selectively require PDAs with sponsors of projects that 
are experiencing delays advancing through the process, or have 
identified risks which must be addressed and mitigated in order for the 
project to proceed in development. The PDA would have identified 
principal issues to be resolved, products to be completed, and 
schedules for reaching significant milestones during the course of PE 
and FD.
    Comments: Comments indicated some support for this proposal, 
however many stated a need for further guidance or clarification on 
when PDAs would be implemented and what elements they would include. 
Some commenters were concerned that the use of PDAs at FTA's discretion 
``could result in inequitable treatment of some projects against all 
others.'' Others thought that development of PDAs would delay projects 
by adding another layer to the project development process. Others 
stated that the PDA is valuable as a partnering agreement provided that 
it is not required or used in a ``punitive way.'' Some thought FTA 
should use requirements that are already in place, such as the annual 
New Starts submission and PE and FD approval points to fulfill the 
desired goals of the PDA.
    FTA Response: FTA contemplated the PDA as achieving many 
objectives, including establishing milestones for demonstrating 
progress (so that failure in meeting these milestones would result in 
removal of the project from FTA's project development pipeline) as well 
as committing FTA to a scope and timetable of technical services to 
help the sponsor meet the milestones. While PE and FD approval letters 
can be enhanced to include items of importance, ``warnings,'' 
commitments of FTA technical assistance, and other elements which would 
otherwise be covered under a PDA, FTA recognizes the value of PDAs, as 
they improve communication and coordination between FTA and project 
sponsors by clarifying expectations on the part of each. Based on this 
fact and the comments received, FTA will implement PDAs only in cases 
when it is mutually agreed upon by the project sponsor and FTA. In such 
cases, it is expected that the PDA would be a useful tool to guide 
agencies through project development and minimize delays in the 
process. Furthermore, FTA will continue to consider this requirement as 
part of the rulemaking.

New Starts Funding Level Set at Final Design (FD) Approval

    FTA adopts a requirement that the amount of New Starts funding be 
set at the time the project is approved for entry into FD. To do so, 
FTA is broadening the scope of eligible PE activities for New Starts 
projects. To clarify the distinct nature of the activities which must 
be completed prior to entry into FD, FTA will refer to this stage of 
project development as ``New Starts Preliminary Engineering.'' To 
address concerns raised regarding cost increases, FTA will entertain 
requests for higher levels of New Starts funding when, during FD but 
prior to execution of the Full Funding Grant Agreement, FTA determines 
that the increase in costs is beyond the grantee's control. In 
addition, once the project has been approved for entry into FD, the 
project would not be subject to any changes in New Starts policy, 
guidance and procedures.
    Certain language in SAFETEA-LU indicates a desire by Congress to 
minimize, to the extent possible, project cost increases between the 
various stages of project development. FTA agrees and feels that the 
products of PE should include the final project scope and a highly 
accurate and conservative cost estimate that addresses all major 
project uncertainties. To encourage project sponsors to develop 
reliable and accurate cost estimates during PE, FTA proposed to cap the 
New Starts funding amount for a project as the amount requested when 
the project is approved to enter FD.
    Comments: Comments on this proposal were evenly distributed between 
those who supported and those who opposed it, as well as those who 
neither supported nor opposed it, but offered concerns and 
alternatives. Some asked FTA to allow for some exceptions due to 
genuine, unavoidable and unforeseen inflation in commodity or 
construction prices. Others suggested that rather than cap the New 
Starts funding amount at the point of entry into FD, FTA should cap 
funding of a project at greater than some percentage over the PE cost 
estimates. Another suggestion was that if the cap is implemented, the 
point of entry into FD should coincide with the start of FFGA 
negotiations and that FTA should expedite those negotiations, and that 
a project approved for entry into FD should not be subject to any 
changes in New Starts policy guidance and/or requirements. Several 
commenters felt that this approach could impact or inhibit the use of 
innovative contracting procedures such as design build and public 
private partnerships. However, another commenter stated the opposite, 
that this approach could present a problem for project sponsors using 
the traditional design, bid, and construct method. Finally, some 
comments asked that this change be subject to rulemaking.
    FTA Response: FTA believes that the concerns expressed in the 
comments about recent cost increases have merit and thus has been 
studying ways to account for unavoidable, unexpected, and unforeseen 
circumstances such as the impact of natural disasters or other world 
events on commodity and construction prices. A specific policy paper on 
how FTA will treat these costs is under development. FTA plans to 
incorporate the outcome of that policy development process as part of 
this adopted policy.
    FTA believes that adopting the suggestion of allowing costs (and 
the corresponding New Starts dollar amount) to rise some percentage 
over the PE estimate would remove any incentive for project sponsors to 
develop accurate cost estimates earlier in the project development 
process. With respect to concerns about the time between approval to 
enter into FD and the negotiation of a FFGA, FTA believes that the FD 
process will be shortened because by its definition the newly-defined 
New Starts PE process will require the project sponsor to develop 
information that has previously been deferred until FD in order to 
arrive at a sufficiently accurate and reliable cost estimate that a 
project sponsor and FTA will feel comfortable in locking in the New 
Starts funding level. Consequently, it is very likely that FTA could 
begin negotiations on an FFGA shortly after a project enters FD as some 
commenters suggested. By adopting the recommendation that projects not 
be subject to changes in New Starts policy, guidance, and procedures 
once the project is in FD, FTA is creating a process that provides more 
stability for grantees at this phase but allows FTA to proceed with 
desired policy/guidance changes without having to account for any 
negative impact on existing projects that are far along in the 
development process. It should be noted that this policy would not 
exempt a project from new statutory or regulatory guidelines, as it is 
outside FTA's authority to do so.
    FTA does not believe this policy would inhibit the use of 
innovative contracting procedures. The policy has already been 
informally applied to most projects over the last several years and no 
grantees have indicated it poses this problem. Finally, FTA does not 
believe that completion of the rulemaking

[[Page 29388]]

process is necessary to continue to implement this policy. Because this 
is a discretionary program, it is not unreasonable that FTA would set 
some policy parameters on how it decides how much funding each project 
will receive. However, applying the policy now does not preclude FTA 
from raising this policy to a regulatory requirement as part of future 
rulemaking.
    Accordingly, FTA adopts this policy but notes that we intend to 
entertain exceptions, consistent with a separate policy under 
development by FTA, on changes to cost beyond the grantees control that 
are identified during FD but prior to executing an FFGA. These cost 
increases are expected to be limited to unforeseen inflationary 
increases due to unusual occurrences (i.e. Hurricane Katrina, large 
commodity market fluctuations such as steel and concrete, etc.). FTA 
will decide on a case by case basis whether these circumstances apply 
to a given project and what dollar amount is attributable to these 
occurrences. FTA would then propose to provide its proportional share, 
based on the previously agreed to percentage 5309 federal share. 
Further, to assure that projects do not have to respond to changes in 
FTA policy, guidance, or procedures late in the project development 
process, projects will not be subject to changes in New Starts policy, 
guidance, and procedures once the projects are in FD.
    Finally, FTA is developing ``exit criteria'' which will define in 
greater detail the conditions that must be met at the completion of New 
Starts PE. FTA understands that these expectations for New Starts PE 
may be different from the commonly accepted definition of PE (which 
often relates to completion of a certain portion of overall design 
efforts, or which relates to other project development milestones, such 
as completion of the NEPA process or other local permitting 
requirements). Therefore, to clarify that there are certain additional 
steps which must occur prior to approval to enter FD (particularly with 
respect to development of firmer cost estimates), FTA will now refer to 
this phase of project development as ``New Starts Preliminary 
Engineering.'' FTA believes that the ``exit criteria'' together with 
this more precise terminology will go a long way towards clarifying 
when a New Starts project is ready to move from one step to the next.

Possible Rules for Mode Specific Constants

    Due to the complexities of calculating a standard value, FTA will 
not adopt a change in the way that project sponsors currently use mode 
specific constants at this time. FTA will continue to analyze options 
with the possibility of proposing a set of standard modal constants in 
the future.
    FTA has long been aware of a technical issue related to the 
representation of unmeasured attributes of various transit modes in the 
mode-choice components of travel forecasting models. Current FTA policy 
on this issue effectively disadvantages New Starts projects proposed by 
metropolitan areas that currently have no fixed-guideway transit 
facilities. In response to this problem, FTA has been considering ways 
to permit project sponsors to represent the benefits of improvements in 
these unmeasured attributes (convenience, comfort, safety, and others) 
that are introduced by New Starts projects in a way that treats all 
projects fairly in competition for New Starts funding. Traditionally, 
these attributes have been represented by lump-sum ``constants'' in 
local models that predict the choice of mode by travelers. The need to 
preserve a level playing field for all project sponsors suggests that 
FTA will have to specify values of guideway constants for use in the 
forecasts. Several approaches are possible: (1) A standard guideway 
constant for all new guideway modes, (2) a set of constants that 
includes a different value for each guideway mode, or (3) a set of 
constants tied to the unmeasured attributes of guideways.
    Comments: Comments were generally supportive of the assertion of 
modal constants in ridership forecasts, but with several concerns. 
Opinions on which of the three options suggested by FTA were also 
varied, with option 2 receiving the most support, followed by option 3, 
and finally, option 1. Some comments stated that locally derived mode-
specific factors should be used in areas where those modes already 
exist and that regions that do have a validated constant should be 
allowed to use it. Others wanted more information on the values being 
suggested for use as modal constants before they could provide comment. 
One comment suggested that a panel of experts be assembled to make 
recommendations regarding these proposed changes and to establish 
constant values and permanent guidance.
    FTA Response: Through intensive technical reviews of local travel 
forecasting models over the past four years, FTA and project sponsors 
have developed local forecasting models that derive constants that are 
more representative of the unmeasured attributes and less necessary as 
error-correction factors. Commonalities in the constants--a relatively 
narrow range of 10-15 minutes of equivalent travel time--that have 
resulted from model improvement in several metropolitan areas have led 
FTA to conclude that the unaccounted attributes have a real impact that 
should be represented. All of the constants still have some role as 
correction factors, however. Consequently, an even-handed evaluation of 
competing projects nationally can be done only through a consistent 
framework that assigns the same mode-specific constants to projects in 
different locations that have the same characteristics. No hard 
conclusions on the proposed values are possible, by the transit 
industry or by FTA. This issue concerns the prediction of traveler 
responses to attributes of transit systems that are difficult--or 
impossible--to quantify. Its very nature leads to best-guess solutions. 
It has become evident that FTA's current handling of the issue puts a 
starter-line New Starts proposal at a disadvantage compared to 
proposals that would expand or extend existing guideway systems.
    FTA is attempting to address that disparity in a way that treats 
all proposals consistently within a technical area that is subject to 
large unknowns. Whatever strategy emerges will be far from a hard 
conclusion but should, at a minimum, be fair to all competing 
proposals. FTA will ensure that the proposed approach, or a set of 
alternative approaches, is evaluated by professional experts in the 
field of transit ridership forecasting. An initial review of options 
will be on the agenda for an FTA technical workshop in June 2006 on 
ridership forecasting for New Starts. At this point, it has not been 
possible to test, review, and implement any approach in time for this 
guidance or for inclusion in the FY 2008 Reporting Instructions for the 
New Starts Criteria. Consequently, FTA will continue to refine 
alternative approaches to this problem and work towards implementation 
of a specific approach in the future. Any such changes will be subject 
to a separate Notice and Comment.

    Issued in Washington, DC, this 16th day of May, 2006.
Sandra K. Bushue,
Deputy Administrator.
 [FR Doc. E6-7781 Filed 5-19-06; 8:45 am]
BILLING CODE 4910-57-P