[Federal Register Volume 71, Number 101 (Thursday, May 25, 2006)]
[Proposed Rules]
[Pages 30100-30106]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-8002]


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DEPARTMENT OF TRANSPORTATION

Federal Highway Administration

23 CFR Parts 630, 635 and 636

[FHWA Docket No. FHWA-2005-22477]
RIN 2125-AF12


Design-Build Contracting

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 for design-build 
contracting as mandated by section 1503 of the ``Safe, Accountable, 
Flexible, Efficient Transportation Equity Act: A Legacy for Users'' 
(SAFETEA-LU). The primary revision would involve a statutory 
requirement that FHWA not preclude State transportation departments or 
local transportation agencies from issuing request-for-proposal 
documents, awarding contracts, and issuing notices-to-proceed for 
preliminary design work prior to the conclusion of the National 
Environmental Policy Act (NEPA) process. The FHWA also proposes to 
revise certain provisions in 23 CFR part 636 to facilitate the use of 
public-private partnerships.

DATES: Comments must be received on or before July 24, 2006.

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. Gerald Yakowenko, Office of 
Program Administration, (202) 366-1562, or Mr. Michael Harkins, Office 
of the Chief Counsel, (202) 366-4928, 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. 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 or the Government 
Printing Office's Web page at: http://www.access.gpo.gov/nara.

Background

    Section 1503 of the SAFETEA-LU (Pub. L. 109-59; August 10, 2005, 
119 Stat. 1144) revises the definition of a design-build ``qualified 
project'' in 23 U.S.C. 112(b)(3). Formerly, ``qualified projects'' 
included design-build projects approved by FHWA with total costs 
estimated to exceed $50,000,000 or intelligent transportation system 
projects exceeding $5,000,000. This statutory definition limited 
Federal-aid participation to design-build projects that met this 
monetary threshold. The revision required by Section 1503 removes the 
monetary threshold and defines a qualified project as ``* * * a project 
under this chapter (including intermodal projects) for which the 
Secretary has approved the use of design-build contracting under 
criteria specified in regulations issued by the Secretary.'' These 
regulations are found in 23 CFR part 636. Thus, it is no longer 
necessary for the FHWA to approve design-build projects exceeding 
certain dollar thresholds under Special Experimental Project No. 14 
(SEP-14).\1\ When appropriate, the FHWA will continue to make SEP-14 
available for

[[Page 30101]]

projects that do not conform to the requirements of 23 CFR part 636.
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    \1\ Information concerning Special Experimental Project No. 14 
(SEP-14), ``Innovative Contracting Practices,'' is available on 
FHWA's home page: http://www.fhwa.dot.gov. Additional information 
may be obtained from the FHWA Division Administrator in each State.
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    Section 1503 also requires the Secretary of Transportation 
(hereinafter the Federal Highway Administrator for the purpose of this 
rule) to issue revised design-build regulations 90 days after the 
enactment of SAFETEA-LU. This NPRM proposes to make changes required by 
SAFETEA-LU. Section 1503 specifically states that the revised 
regulations must not preclude a State transportation department (or 
local transportation agency) from: (a) Issuing requests for proposals; 
(b) proceeding with awards of design-build contracts; or (c) issuing 
notices to proceed with preliminary design work under design-build 
contracts prior to the completion of section 102 of NEPA.\2\ However, 
the State or local transportation agency must receive concurrence from 
the FHWA before carrying out any of the activities outlined in (a)-(c) 
above. Moreover, the design-build contractor must not proceed with 
final design activities or construction activities prior to completion 
of the NEPA process.
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    \2\ Section 102 of the NEPA established a mandate for Federal 
agencies to consider the potential environmental consequences of 
their proposals, document the analysis, and make this information 
available to the public for comment prior to implementation.
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    The FHWA also proposes to revise certain sections of 23 CFR part 
636 to clarify its policies concerning the FHWA's approval of projects 
developed under public-private partnerships. In December 2002 when the 
FHWA issued the final rule for design-build contracting,\3\ there was 
little experience with public-private partnerships. Since that time, 
several State DOTs have initiated public-private partnership programs. 
In addition, on October 6, 2004, the FHWA established a new Special 
Experimental Project (SEP-15) to encourage tests and experimentation 
with the use of public-private partnerships in developing 
transportation projects.\4\ SEP-15 was initiated to evaluate the issues 
associated with increased project management flexibility, innovation, 
improved efficiency, timely project implementation, and new revenue 
streams.
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    \3\ The FHWA published the final rule on design-build 
contracting in the Federal Register on December 10, 2002, at 67 FR 
75902.
    \4\ The notice announcing this new SEP-15 program was published 
in the Federal Register on October 6, 2004, at 69 FR 59983. For more 
information on SEP-15, go to http://www.fhwa.dot.gov/ppp/sep15.htm.
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Proposed Changes

    The FHWA proposes to revise its regulation for design-build 
contracting in 23 CFR 636 as well as related regulations in 23 CFR 
630.106(a) and 23 CFR 635.112(i).
    For 23 CFR 630.106(a), we propose to include a provision for 
design-build projects such that the execution of the project agreement 
and the authorization to proceed will not occur until after the 
completion of the NEPA process.
    For 23 CFR 635.112(i), we propose to revise our policy for 
advertising for bids and proposals to indicate that where the request 
for proposals document is issued prior to the completion of the NEPA 
process, the FHWA's approval will only constitute the FHWA's approval 
of the contracting agency's request to release the document.
    For 23 CFR 636.103, we propose to revise the definition of a 
qualified project to be consistent with section 1503 and define several 
new terms to clearly indicate how the FHWA will implement the section 
1503 requirements concerning the Request for Proposals (RFP) release, 
contract award and notice-to-proceed with preliminary design.
    We propose to define the term ``preliminary design'' as ``all 
design activities necessary to complete the NEPA alternatives analysis 
and review process as outlined in 23 CFR 771.105, 771.111, and 
771.113.'' We specifically request comment on this proposed definition.
    We propose to define the term ``final design'' as ``any design 
activities following preliminary design as outlined in 23 CFR part 
771.'' Final design activities are not necessary to complete the NEPA 
process.
    We also propose to add new definitions for the terms ``developer'' 
and ``public-private agreement'' to clarify the eligibility of projects 
developed under a public-private partnership as described in 23 CFR 
636.119.
    In 23 CFR 636.106, we propose to add a sentence to indicate that 
there is no longer a monetary threshold that invokes Special 
Experimental Project No. 14--``Innovative Contracting,'' however, SEP-
14 is still available for the experimental evaluation of contracting 
techniques that do not meet the requirement of part 636. When 
appropriate, the FHWA will consider submittals for approval under SEP-
14.
    In 23 CFR 636.107, we propose to amend this section as it is no 
longer necessary as a result of the statutory revision of the 
definition of a ``qualified project.'' We propose to substitute a new 
section to clarify the FHWA policy of not allowing local or geographic 
preferences on design-build projects. This is consistent with the 
FHWA's traditional policy for construction contracts administered under 
23 CFR part 635.\5\ We propose to prohibit geographic preferences 
(including contractual provisions, preferences or incentives for 
hiring, contracting, proposing or bidding) except where mandated by 
Federal statutes.
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    \5\ See 23 CFR 635.117(b) and the FHWA's Chief Counsel's April 
20, 1994, memorandum titled: ``Local Hiring Preferences,'' which is 
available on the FHWA's home page: http://www.fhwa.dot.gov/programadmin/contracts/042094.htm.
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    In 23 CFR 636.108, we propose to revise and reserve this section as 
it is no longer necessary as a result of the statutory revision of the 
definition of a ``qualified project.''
    In 23 CFR 636.109(a), we propose to implement the section 1503 
requirements that allow contracting agencies to issue request-for-
proposal documents, award design-build contracts, and issue notices-to-
proceed for preliminary design work prior to the conclusion of the NEPA 
process. Contracting agencies would be required to receive the FHWA's 
concurrence prior to proceeding with any of the above activities. 
Consistent with the requirements of section 1503, final design 
activities or construction activities are prohibited prior to the 
completion of the NEPA process.
    In 23 CFR 636.109(b), we propose to state the Federal-aid 
requirements associated with a decision by the contracting agency to 
award a design-build contract prior to the conclusion of the NEPA 
process. If a contracting agency elects to do this, it would be 
required to implement project development procedures and incorporate 
design-build contract provisions that: (a) Prevent the design-builder 
(or developer) from proceeding with final design activities and 
physical construction prior to the completion of the NEPA process; (b) 
ensure that no commitment is made to any alternative under evaluation 
in the NEPA process; (c) ensure that the comparative merits of all 
alternatives presented in the NEPA document, including the no-build 
alternative, will be evaluated; (d) ensure that all environmental and 
mitigation measures identified in the NEPA decision document will be 
implemented; and (e) include contract termination provisions in the 
event that the no-build alternative is selected.
    It is noted that the provisions of revised 23 U.S.C. 112 
(b)(3)(D)(iii) preclude the design-builder from proceeding with final 
design or construction prior to the conclusion of the NEPA process. 
Thus, it is unacceptable to allow the design-builder to proceed with 
final design

[[Page 30102]]

activities for a specific alternative, even on an ``at-risk/non-
participating basis.''
    In this section, we also propose to prohibit the design-builder 
from preparing the NEPA document or from having any decisionmaking 
responsibility with respect to the NEPA process. However, preliminary 
design work performed by the design-builder may be used in the NEPA 
analysis. This is consistent with the Council on Environmental 
Quality's conflict of interest policies found at 40 CFR 1506.5(c). This 
regulation requires the contactor preparing the NEPA document to 
execute a disclosure statement specifying that it has no financial or 
other interest in the outcome of the project. However, as explained 
below, a proposer is not precluded from submitting a proposal for a 
design-build contract when NEPA has been completed before the issuance 
of the RFP, even though that proposer may have prepared or assisted in 
the preparation of the NEPA document.
    In 23 CFR 636.109(c), we propose to implement the section 1503 
requirement that contracting agencies receive the FHWA's concurrence 
prior to issuing the RFP, proceeding with preliminary design, and 
awarding a design-build contract.
    In 23 CFR 636.109(d), we propose to clarify that the FHWA's 
authorization and obligation of preliminary engineering funds prior to 
the conclusion of the NEPA process is limited to preliminary design 
activities. This includes the preliminary design work performed by the 
contracting agency in preparing the NEPA document or the work necessary 
to prepare the Request for Qualifications (RFQ) and RFP solicitations.
    In 23 CFR 636.116 we propose to add 116(c) to clarify that in those 
situations where the NEPA document has been completed prior to the 
issuance of the RFP, the contracting agency may allow a consultant and/
or subconsultant who assisted them in the preparation of the NEPA 
document to participate as an offeror or join a team submitting a 
proposal in response to the RFP. This is consistent with guidance 
issued by the Council on Environmental Quality (CEQ).\6\ We propose to 
revise 23 CFR 636.119 in its entirety. Over the past three years, 
several State DOTs and the FHWA have gained experience with public-
private partnerships. The FHWA has approved several waivers of our 
contracting requirements under SEP-15 for each of the public-private 
partnership projects that we have reviewed. At this point in time, we 
propose to revise our current contracting policies to reflect the 
experiences learned under the SEP-15.
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    \6\ See CEQ's ``NEPA's 40 Most Asked Questions'', specifically 
question 17 available at the following URL: http://ceq.eh.doe.gov/nepa/regs/40/40p3.htm.
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    For all of the SEP-15 projects approved to date, the contracting 
agency and the FHWA have determined that it is appropriate to initiate 
the procurement of the developer for a public-private partnership prior 
to the conclusion of the NEPA process. The developer is available to 
assist with the definition of the project scope and to provide 
preliminary design information. The benefits associated with having a 
developer on-board during the early stages of project development also 
include: value engineering assistance, constructability expertise and 
price information concerning various project alternatives.
    Based on our recent experience with SEP-15, it is apparent that 
many of the Part 636 requirements are not appropriate for the 
procurement of the developer under a public-private partnership. In 
most cases, the developer acts as an ``agent-of-the-owner.'' In such 
cases, it is more appropriate to allow contracting agencies to use 
State-approved procurement procedures (or State-approved local 
procedures) for the selection of the developer than to continue to 
approve waivers of part 636 requirements under SEP-15.
    In 23 CFR 636.119(a), we propose to allow contracting agencies to 
use State-approved procurement procedures to procure the services of 
the developer under a public private agreement (i.e., the requirements 
of 23 CFR 636.201 through 23 CFR 636.514 would not apply). However, the 
use of State-approved procedures will be subject to the FHWA's review 
and approval of procurement procedures including the RFQ and RFP 
documents and the public-private agreement. All solicitation and 
procurement procedures must be fair and transparent to all proposers.
    In 23 CFR 636.119(b) we propose to implement a procedure that 
provides for a determination of price reasonableness for any Federal-
aid project that the developer proposes to accomplish with its own 
forces. If the contracting agency and the FHWA cannot concur in a 
determination of price reasonableness, the contracting agency must 
comply with the procurement procedures of 23 CFR Part 172, 635 or 636.
    In 23 CFR 636.202(a)(1) we propose to revise the evaluation and 
award criteria that may be used for design-build contracts that are 
awarded prior to the conclusion of the NEPA process. The scope of work 
for such projects is usually in a very preliminary stage of 
development, and therefore, it would not be appropriate to use total 
contract price as a proposal evaluation factor. The evaluation and 
award criteria for such contracts may be based on qualitative 
considerations. The subsequent approval of final design and 
construction activities will be contingent upon a determination of 
price reasonableness by the contracting agency and the FHWA.

Conclusion

    In conclusion, the FHWA is proposing to revise its regulations for 
design-build contracting as mandated by section 1503 of the SAFETEA-LU. 
The primary revision would allow contracting agencies to issue request-
for-proposal documents, award design-build contracts, and issue 
notices-to-proceed for preliminary design work prior to the conclusion 
of NEPA. The FHWA also proposes to revise certain provisions in 23 CFR 
part 636 to facilitate the use of public-private partnerships.

Rulemaking Analyses and Notices

    All comments received before the 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 preliminarily that this action would be a 
significant regulatory action within the meaning of Executive Order 
12866, and within the meaning of the U.S. Department of 
Transportation's regulatory policies and procedures. The Office of 
Management and Budget has reviewed this document under E.O. 12866. The 
FHWA anticipates that the economic impact of this rulemaking would be 
minimal. However, this rule is considered to be significant because of 
the substantial State, environmental and industry interest in the 
design-build contracting technique. The FHWA anticipates that the 
proposed rule would

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not adversely affect, in a material way, any sector of the economy. 
This rulemaking merely revises the FHWA's policies concerning the 
design-build contracting technique. The proposed rule would not affect 
the total Federal funding available to the State DOTs under the 
Federal-aid highway program. Therefore, it is anticipated that an 
increased use of design-build delivery method will not yield 
significant economic impacts to the Federal-aid highway program. 
Consequently, a full regulatory evaluation is not required. The 
increased usage of the design-build contracting method may result in 
certain efficiencies in the cost and/or time it normally takes to 
deliver a transportation project. However, the FHWA does not have 
sufficient data to make a conclusive statement regarding the economic 
impacts. Interested parties are invited to comment on the anticipated 
economic impact. In addition, these proposed changes would not 
interfere with any action taken or planned by another agency and would 
not materially alter the budgetary impact of any entitlements, grants, 
user fees, or loan programs.

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 the 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.

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. Accordingly, the 
FHWA solicits comments on this issue.

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 proposed 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 proposed 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 proposed 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 proposed 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 because, although it 
is a significant regulatory action under Executive Order 12866, it 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

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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

23 CFR Part 630

    Bonds, Government contracts, Grant programs--transportation, 
Highways and roads, Reporting and recordkeeping requirements.

23 CFR Part 635

    Construction and maintenance, Grant programs--transportation, 
Highways and roads, Reporting and recordkeeping requirements.

23 CFR Part 636

    Design--build, Grant programs-transportation, Highways and roads.

    Issued on: May 19, 2006.
J. Richard Capka,
Acting Federal Highway Administrator.

    In consideration of the foregoing, the FHWA proposes to amend parts 
630, 635, and 636 of title 23, Code of Federal Regulations, as follows:

PART 630--PRECONSTRUCTION PROCEDURES

    1. Revise the authority citation for part 630 to read as follows:

    Authority: Sec. 1503 of Public Law 109-59, 119 Stat. 1144; 23 
U.S.C. 106, 109, 115, 315, 320, and 402(a); 23 CFR 1.32 and 49 CFR 
1.48(b).

    2. Amend 23 CFR 630.106 by adding paragraph (a)(7) to read as 
follows:


Sec.  630.106  Authorization to proceed.

    (a) * * *
    (7) For design-build projects, the execution of the project 
agreement and authorization to proceed shall not occur until after the 
completion of the NEPA process. However, preliminary engineering 
activities may be authorized in accordance with this section.
* * * * *

PART 635--CONSTRUCTION AND MAINTENANCE

    3. Revise the authority citation for part 635 to read as follows:

    Authority: Sec. 1503 of Public Law 109-59, 119 Stat. 1144; 23 
U.S.C. 101 (note), 109, 112, 113, 114, 116, 119, 128, and 315; 31 
U.S.C. 6505; 42 U.S.C. 3334, 4601 et seq.; Sec. 1041(a), Public Law 
102-240, 105 Stat. 1914; 23 CFR 1.32; 49 CFR 1.48(b).

    4. Amend 23 CFR 635.112(i) by revising paragraph (i)(1); by 
redesignating paragraphs (i)(2) and (i)(3) as (i)(3) and (i)(4), 
respectively; and by adding a new paragraph (i)(2) to read as follows:


Sec.  635.112  Advertising for bids and proposals.

* * * * *
    (i) * * *
    (1) When a Request for Proposals document is issued after the NEPA 
process is complete, the FHWA Division Administrator's approval of the 
Request for Proposals document will constitute the FHWA's project 
authorization and the FHWA's approval of the STD's request to release 
the document. This approval will carry the same significance as plan, 
specification and estimate approval on a design-bid-build Federal-aid 
project.
    (2) Where a Request for Proposals document is issued prior to the 
completion of the NEPA process, the FHWA's approval of the document 
will only constitute the FHWA's approval of the STD's request to 
release the document.
* * * * *
    5. Revise Sec.  635.413(e)(1)(i) to read as follows:


Sec.  635.413  Guaranty and warranty clauses.

* * * * *
    (e) * * *
    (1) * * *
    (i) The term of the warranty is short (generally one to two years); 
however, projects developed under a public-private agreement may 
include warranties that are appropriate for the term of the contract or 
agreement.
* * * * *

PART 636--DESIGN-BUILD CONTRACTING

    6. Revise the authority citation for part 636 to read as follows:

    Authority: Sec. 1503 of Public Law 109-59, 119 Stat. 1144; Sec. 
1307 of Public Law 105-178, 112 Stat. 107; 23 U.S.C. 101, 109, 112, 
113, 114, 115, 119, 128, and 315; 49 CFR 1.48(b).

Subpart A--General

    7. Amend Sec.  636.103 by placing all definitions in alphabetical 
order, by adding the definitions of ``developer,'' ``final design,'' 
``preliminary design,'' ``price reasonableness,'' and ``public-private 
agreement,'' and by revising the definition of ``qualified project'' as 
follows:


Sec.  636.103  What are the definitions of terms used in this part?

* * * * *
    Developer means each entity with whom the contracting agency has 
executed a public-private agreement for the development, design, 
construction, financing, operation, and maintenance of one or more 
projects under a public-private partnership. Depending on the context 
of the public-private agreement, the term ``developer'' may include 
affiliated entities of the developer.
* * * * *
    Final design means any design activities following preliminary 
design. Final design activities are not necessary to complete the NEPA 
process as outlined in 23 CFR 771.
* * * * *
    Preliminary design means all design activities necessary to 
complete the NEPA alternatives analysis and review process as outlined 
in 23 CFR 771.105, 771.111, and 771.113.
* * * * *
    Price reasonableness means the determination that the price of the 
work for any project or series of projects is not excessive and is a 
fair and reasonable price for the services to be performed.
* * * * *
    Public-private agreement means an agreement between a public agency 
and a private party under which the private party shares in the 
responsibilities, risks and benefits of constructing a project. Such 
agreement may involve an at-risk equity investment by the private party 
in the project.
    Qualified project means any design-build project (including 
intermodal projects) funded under Title 23 U.S.C. which meets the 
requirements of this Part and for which the contracting agency deems to 
be appropriate on the basis of project delivery time, cost, 
construction schedule and/or quality.
* * * * *
    8. Revise Sec.  636.106 to read as follows:


Sec.  636.106  Is the FHWA's Special Experimental Project No. 14--
``Innovative Contracting'' (SEP-14) approval necessary for a design-
build project?

    No, if a design-build project meets the requirements of this part, 
SEP-14 approval is not required. However, when the FHWA believes it is 
appropriate, SEP-14 is available for the experimental evaluation of 
techniques that do not meet the requirement of this part.
    9. Revise Sec.  636.107 to read as follows:


Sec.  636.107  May contracting agencies use geographic preference in 
Federal-aid design-build or public-private partnership projects?

    No. Contracting agencies must not use geographic preferences 
(including contractual provisions, preferences or incentives for 
hiring, contracting, proposing or bidding) on Federal-aid highway 
projects. Contracting agencies

[[Page 30105]]

shall conduct procurements in a manner that prohibits the use of 
statutorily or administratively imposed in-State or local geographical 
preferences in the evaluation and award of projects.


Sec.  636.108  [Removed and Reserved]

    10. Remove and reserve Sec.  636.108.
    11. Revise Sec.  636.109 to read as follows:


Sec.  636.109  How does the NEPA process relate to the design-build 
procurement process?

    The purpose of this section is to ensure that there is an objective 
NEPA process, that public officials and citizens have the necessary 
environmental impact information for federally funded actions before 
actions are taken, and that design-build proposers do not assume an 
unnecessary amount of risk in the event the NEPA process results in a 
significant change in the proposal. Therefore, with respect to the 
design-build procurement process:
    (a) The contracting agency may:
    (1) Issue an RFQ solicitation prior to the conclusion of the NEPA 
process as long as the RFQ solicitation informs proposers of the 
general status of NEPA review;
    (2) Issue an RFP after the conclusion of the NEPA process;
    (3) Issue an RFP prior to the conclusion of the NEPA process as 
long as the RFP informs proposers of the general status of the NEPA 
process and that no commitment will be made as to any alternative under 
evaluation in the NEPA process, including the no-build alternative;
    (4) Proceed with the award of a design-build contract prior to the 
conclusion of the NEPA process; and
    (5) Issue notice to proceed with preliminary design pursuant to a 
design-build contract that has been awarded prior to the completion of 
the NEPA process.
    (b) If the contracting agency proceeds to award a design-build 
contract prior to the conclusion of the NEPA process, then:
    (1) The design-build contract must include appropriate provisions 
preventing the design-builder (or developer) from proceeding with final 
design activities and physical construction prior to the completion of 
the NEPA process (contract hold points or another method of issuing 
multi-step approvals must be used);
    (2) The design-build contract must include appropriate provisions 
ensuring that no commitment is made to any alternative being evaluated 
in the NEPA process and that the comparative merits of all alternatives 
presented in the NEPA document, including the no-build alternative, 
will be evaluated;
    (3) The design-build contract must include appropriate provisions 
ensuring that all environmental and mitigation measures identified in 
the NEPA decision document will be implemented;
    (4) The design-builder (or developer) must not prepare the NEPA 
decision document or have any decisionmaking responsibility with 
respect to the NEPA process;
    (5) Any consultant who prepares the NEPA decision document must be 
selected by and subject to the exclusive direction and control of the 
contracting agency;
    (6) Preliminary design work performed by the design-builder (or 
developer) may be used in the NEPA analysis; and
    (7) The design-build contract must include termination provisions 
in the event that the no-build alternative is selected.
    (c) The contracting agency must receive prior FHWA concurrence 
before issuing the RFP, awarding a design-build contract and proceeding 
with preliminary design work under the design-build contract. Should 
the contracting agency proceed with any of the activities specified in 
this section before the completion of the NEPA process (with the 
exception of preliminary design, as provided in paragraph (d) of this 
section), the FHWA's concurrence merely constitutes the FHWA 
acquiescence that any such activities complies with Federal 
requirements and does not constitute project authorization or obligate 
Federal funds.
    (d) The FHWA's authorization and obligation of preliminary 
engineering funds prior to the completion of the NEPA process is 
limited to preliminary design activities. After the completion of the 
NEPA process, the FHWA may issue an authorization to proceed with final 
design and construction and obligate Federal funds for such purposes.
    12. Amend Sec.  636.116 by adding paragraph (c) to read as follows:


Sec.  636.116  What organizational conflict of interest requirements 
apply to design-build projects?

* * * * *
    (c) If the NEPA process has been completed prior to issuing the 
RFP, the contracting agency may allow a consultant and/or subconsultant 
who prepared the NEPA document to submit a proposal in response to the 
RFP.
    13. Revise Sec.  636.119 to read as follows:


Sec.  636.119  How does this Part apply to public-private agreements?

    (a)(1) For public-private agreements, the contracting agency may 
use State-approved procurement procedures to procure the services of 
the developer and the requirements of 23 CFR 636.201 through 23 CFR 
636.514 are optional. The use of State-approved procedures for the 
procurement of the developer is contingent upon the following:
    (i) The State's procedures are approved by the FHWA,
    (ii) The RFQ or RFP solicitations must be submitted to the FHWA for 
review and approval,
    (iii) The procedures must be fair and transparent to all proposers,
    (iv) If an unsolicited proposal is received, the contracting agency 
must offer adequate public notice and advertisement for competing 
proposals before considering an individual proposal for award,
    (v) The appropriate RFQ or RFP document must clearly describe the 
contracting agency's conditions and procedures for sharing any 
proposer's ideas with other proposers during any phase of the 
negotiation process and whether a proposer's ideas may be incorporated 
into the project, even though that proposer was unsuccessful in 
obtaining the contract;
    (vi) The selection of a developer is made on the basis of a best 
value selection, except that price does not have to be a consideration. 
Evaluation and selection criteria may include, but are not limited to, 
the degree and scope of work to be performed, services to be provided, 
ability to perform such work or services, responsibilities or risks 
that are to be shared, and the equity or total investment that may be 
contributed; and
    (vii) The contracting agency submits the public-private agreement 
to FHWA for concurrence along with a timetable showing the major steps 
in the procurement process, a summary of the rationale for the 
selection, and a description of any major changes made during any 
negotiations.
    (2) No procedure or requirement shall be approved under paragraph 
(a)(1) of this section which, in the judgment of the FHWA, may operate 
to unnecessarily restrict competition, is unfair, or may result in a 
process that is not transparent.
    (b) For any public-private agreement that provides for the 
possibility of the physical construction of one or more projects by the 
developer, the public-private agreement must include a provision 
requiring the contracting agency to review the price reasonableness of 
the estimate provided by the developer to provide final design

[[Page 30106]]

services and/or physically construct any project involving Federal 
funds.
    (1) The price reasonableness determination shall be made pursuant 
to a process provided for in the public-private agreement that includes 
a comparison of the developer's estimate to an estimate prepared by the 
contracting agency. Both parties may meet to discuss the differences in 
the estimates and make appropriate revisions. The estimates prepared 
under this paragraph shall be prepared on an open-book basis with 
respect to both the contracting agency and the developer.
    (2) The contracting agency's determination of price reasonableness 
shall be submitted to the FHWA for concurrence.
    (3) If the contracting agency cannot reach an agreement on price 
reasonableness with the developer, or if the FHWA does not concur, then 
the contracting agency shall proceed to procure the work with another 
firm pursuant to parts 172, 635, and 636 of this title, as appropriate.
    (c) The contracting agency must ensure Federal-aid projects 
developed under a public-private partnership comply with all non-
procurement requirements of 23 U.S. Code, regardless of the form of the 
FHWA funding (traditional Federal-aid funding or credit assistance). 
This includes compliance with all FHWA policies and requirements, such 
as environmental and right-of-way requirements and compliance with all 
applicable construction contracting requirements such as Buy America, 
Davis-Bacon prevailing wage rate requirements, etc.
    12. Revise Sec.  636.302(a)(1) to read as follows:


Sec.  636.302  Are there any limitations on the selection and use of 
proposal evaluation factors?

    (a) * * *
    (1) You must evaluate price in every source selection where 
construction is a significant component of the scope of work. However, 
where the contracting agency elects to release the final RFP and award 
the design-build contract before the conclusion of the NEPA process 
(see Sec.  636.109), then the following requirements apply:
    (i) It is not necessary to evaluate total contract price;
    (ii) The evaluation of proposals and award of the contract may be 
based on qualitative considerations;
    (iii) The subsequent approval of final design and construction 
activities will be contingent upon a finding of price reasonableness by 
the contracting agency;
    (iv) In determining price reasonableness, the contracting agency 
and design-builder may negotiate the price, which shall be done on an 
open-book basis by both the design-builder and contracting agency; and
    (v) The contracting agency's finding of price reasonableness is 
subject to FHWA concurrence.
* * * * *
 [FR Doc. E6-8002 Filed 5-24-06; 8:45 am]
BILLING CODE 4910-22-P