[Federal Register Volume 79, Number 29 (Wednesday, February 12, 2014)]
[Rules and Regulations]
[Pages 8263-8266]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-03034]



Federal Highway Administration

23 CFR Part 636

[FHWA Docket No. FHWA-2013-0043]
RIN 2125-AF58

Design-Build Contracting

AGENCY: Federal Highway Administration (FHWA), Department of 
Transportation (DOT).

ACTION: Final rule.


SUMMARY: The FHWA is revising its regulations related to the use of 
alternative technical concepts (ATC) in design-build project delivery 
of highway construction. This final rule eliminates the requirement to 
submit a base proposal when a contracting agency allows design-build 
proposers to submit ATCs in their technical and price proposals.

DATES: Effective March 14, 2014.

FOR FURTHER INFORMATION CONTACT: For technical information: Mr. Gerald 
Yakowenko, FHWA Office of Program Administration, Federal Highway 
Administration, 1200 New Jersey Avenue SE., Washington, DC 20590, 202-
366-1562, [email protected]. For legal information: Ms. Janet 
Myers, Office of the Chief Counsel, 202-366-2019, Federal Highway 
Administration, 1200 New Jersey Avenue SE., Washington, DC 20590. 
Office hours are from 8:00 a.m. to 4:30 p.m., e.t., Monday through 
Friday, except Federal holidays.


Electronic Access

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    The FHWA's current regulatory policy in part 636 allows contracting 
agencies to use ATCs in their procurement process subject to two 
conditions: (1) the ATC must not conflict with the criteria agreed upon 
in the environmental decisionmaking process, and (2) the contracting 
agency must require proposers to submit a base proposal in addition to 
supplemental ATC-based proposals. Specifically, 23 CFR 636.209(b) 
states: ``At your discretion, you may allow proposers to submit 
alternate technical concepts in their proposals as long as these 
alternate concepts do not conflict with criteria agreed upon in the 
environmental decision making process. Alternate technical concept 
proposals may supplement, but not substitute for base

[[Page 8264]]

proposals that respond to the Request for Proposal requirements.''
    Thus, the current policy allows proposers to submit proposals based 
on an approved ATC, but not as a substitute for the base proposal.
    The requirement for a base proposal and a supplemental ATC-based 
proposal was founded on the perception that it would allow for a fair 
comparison of proposals. When FHWA released the final rule implementing 
design-build contracting on December 10, 2002, the Agency believed that 
the requirement would provide contracting agencies with information on 
quality and price for comparison. In addition, contracting agencies 
could evaluate ATC-based proposals from firms desiring to submit 
innovative concepts. The underlying principle in the existing policy is 
to ensure fairness and open competition by making certain that all 
proposers are competing for the same project.

Notice of Proposed Rulemaking (NPRM)

    The FHWA published an NPRM on August 1, 2013 (78 FR 46546), 
proposing to eliminate the base proposal requirement when a contracting 
agency allows design-build proposers to submit ATCs in their technical 
and price proposals. All comments received in response to the NPRM have 
been considered in adopting this final rule. Comments were received 
from 10 entities. The commenters include: four State departments of 
transportation (State DOTs), one local public agency, and five industry 

Analysis of NPRM Comments and FHWA Response

    The following discussion summarizes the major comments submitted to 
the docket on the NPRM, notes where and why changes have been made to 
the rule, and states why particular recommendations or suggestions have 
not been incorporated into the final rule.

General Discussion of Comments

    In general, most of the commenters expressed support for the 
revisions and concurred that a fair and transparent procurement process 
can be achieved as long as the request for proposal (RFP) document 
clearly describes the contracting agency's requirements for ATC 
content, submission, and review; procedures for confidential meeting; 
and methods for evaluating the ATC in the proposal review process. None 
of the commenters disagreed with ending the base proposal requirement 
when a contracting agency allows design-build proposers to submit ATCs 
in the technical and price proposals. However, a few commenters raised 
issues concerning confidentiality and the implementation of design-
build contracting.
    Several of the contracting agencies noted the benefits of using 
ATCs in design-build project delivery and concurred that the 
requirement to prepare base proposals is not cost effective. In 
particular, the Orange County Transportation Authority (OCTA) noted 
that ``ATCs have been proven to provide numerous benefits including the 
increased efficiency, the reduction of project risks, and the 
acceleration of project delivery. Requiring proposers to prepare and 
submit multiple proposals requires the expenditure of additional funds 
and man hours that discourages proposers from developing ATCs. OCTA 
believes that by removing this requirement, design-build proposers will 
instead be encouraged to explore and develop ATCs and include them in 
their design-build proposals.''

Comments on the Confidentiality Requirement

    Several commenters expressed differing viewpoints regarding 
confidentiality issues in the ATC submission and review process. While 
the Design-Build Institute of America (DBIA) agreed with the proposed 
deletion of the base submission requirement, they expressed concerns 
regarding the exception to confidentiality in proposed section 
636.209(b)(2). Specifically, DBIA stated that ``confidentiality is 
essential to the success of the ATC process and there should not be any 
exceptions to maintaining that confidentiality. DBIA believes that 
breaking confidentiality impedes design-builders from distinguishing 
the benefits of their ATC proposal from other proposals. Not only does 
breaking confidentiality discourage design-builders from submitting 
ATCs; it may have the opposite effect. In the example given in the 
proposed rule, a design-builder concerned about an addendum may choose 
to not bring forth an alternative to avoid a 4(f) property. The owner 
never learns of this and the 4(f) is not avoided, thus depriving the 
owner of the benefits of ATCs.'' Similarly, the American Road and 
Transportation Builders Association believed that contracting agencies 
have two primary responsibilities in administering an ATC process: ``1. 
Any willingness or acknowledgement for changing the project scope of 
work or requirements first set out in the RFP must be conveyed to all 
design-build teams so that no single team attains an unfair advantage. 
2. Strict confidentiality must be maintained relative to intellectual 
property and ideas presented by each design-build team during the ATC 
    On the other hand, two of the contracting agencies agreed with the 
proposed language regarding confidentiality. The Washington State DOT 
noted that confidentiality is ``essential for encouraging use of 
ATCs,'' but ``there are circumstances under which the agency would be 
compelled, in the interest of fairness, to reveal certain basic 
configuration changes to other proposers as a result of the inquiries 
associated with or consequent to a proposed ATC.'' In addition, New 
York DOT commented that experience ``with a proposed ATC avoiding 4(f) 
impacts and right-of-way acquisition'' demonstrated the need for the 
exceptions to the confidentiality requirement.
    The FHWA shares the DBIA's belief that confidentiality is 
important, but also agrees with the contracting agency representatives 
regarding the necessity for the exception to confidentiality. It is 
important that contracting agencies provide a transparent and level 
playing field for all proposers. When a contracting agency makes a 
determination that there is no feasible and prudent alternative that 
avoids the use of Section 4(f) property, that agency is making a 
statement regarding the basic configuration for the project. If it 
later becomes apparent that there is a prudent and feasible approach to 
avoid the taking of Section 4(f) property, then, in the interest of 
fairness, it is incumbent upon the contracting agency to amend the RFP 
basic configuration/design criteria and inform all proposers of a 
modification. The FHWA revised the language in the final rule to 
indicate that when disclosure is necessary, the contracting agency must 
revise the RFP documents by releasing the minimal amount of information 
necessary to: (1) ensure compliance with Federal or State permitting 
and other legal requirements; and (2) ensure that all proposers are 
aware of the revised RFP requirements.

Comments on an ``Equal or Better'' Requirement

    The Washington State DOT was concerned that the proposed regulatory 
language did not include an ``equal or better'' provision that is 
present in many State DOT ATC contract provisions. The Washington State 
DOT believed that this omission might ``open the door to scope 
reductions disguised as ATCs and upset the `level playing field' 
concept that FHWA has worked so hard to establish and maintain.'' The 

[[Page 8265]]

shares the State's concern that this omission might result in 
undesirable scope reductions. The ``Background'' section of the August 
1, 2013, NPRM noted that ATCs are based on the concept of ``equal or 
better'' solutions. However, the FHWA is reluctant to provide a 
regulatory definition for an ATC. Many State DOTs currently have their 
own definitions in contract language. Instead of defining ATC, we are 
including the ``equal or better'' requirement in the revised 23 CFR 

Comments on Evaluation Factors

    The Council on Federal Procurement of Architectural and Engineering 
Services (COFPAES) did not comment directly on the proposed revision to 
Section 636.209, but provided a general comment on FHWA's design-build 
policy in part 636. The COFPAES urged that two-phase design-build 
contracts under 23 U.S.C. 112(b)(3) and 41 U.S.C. 3309 should comply 
with the requirements of the Brooks Act (40 U.S.C. 1101, et seq.) such 
that in phase one of a design-build process, ``cost related or price-
related evaluation factors are not permitted.'' The FHWA notes that 
COFPAES submitted a similar comment in response to the FHWA's October 
19, 2001, NPRM for design-build contracting (66 FR 53288). In the 
preamble to the December 10, 2002, final rule implementing design-build 
contracting (67 FR 75902), the FHWA stated: ``Design-build contracts 
are not contracts strictly for the procurement of architectural or 
engineering services and, therefore, they are not subject to the 
requirement to use qualifications-based selection procedures. In many 
design-build contracts, the engineering or architectural services 
comprise a relatively small percent of the total contract amount. The 
FHWA recognizes the importance of architectural and engineering 
services in reducing the life-cycle cost of projects. However, design-
build contracts are not architectural and engineering contracts and the 
provisions of 23 U.S.C. 112(b)(2) do not apply to design-build 

Additional Changes From the Proposed Rule

    The FHWA is substituting the term ``alternative technical 
concept,'' in the final rule, for ``alternate technical concept,'' in 
the proposed rule, because the word ``alternative'' is more appropriate 
for the ATC process used by many contracting agencies where proposers 
are allowed to submit multiple technical concepts for the same project. 
Although there are some instances of the use of the word ``alternate,'' 
most contracting agencies use ``alternative'' in their ATC process. 
Therefore, the FHWA is using ``alternative'' in the final rule.

Rulemaking Analyses and Notices

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

    The FHWA has determined that this action will not be a significant 
regulatory action within the meaning of Executive Order 12866, or 
within the meaning of DOT's regulatory policies and procedures.
    The economic impact of this rulemaking will be minimal and 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 rule will not affect the total Federal 
funding available to the State DOTs under the Federal-aid highway 
program. Therefore, an increased use of design-build delivery method 
will not yield significant economic impacts to the Federal-aid highway 
program. Additionally, this rule will not interfere with any action 
taken or planned by another agency and not materially alter the 
budgetary impact of any entitlements, grants, user fees, or loan 

Regulatory Flexibility Act

    In compliance with the Regulatory Flexibility Act (RFA) (5 U.S.C. 
601- 612), FHWA has evaluated the effects of this action and has 
determined that the action will not have a significant economic impact 
on a substantial number of small entities. The rule provides procedures 
for use of ATCs in design-build project delivery of highway 
construction. As such, it primarily affects States, which are not 
included in the definition of small entity set forth in 5 U.S.C. 601. 
Therefore, States do not meet the definition of a small entity and the 
RFA does not apply. The FHWA further 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 rule will not impose unfunded mandates as defined by the 
Unfunded Mandates Reform Act of 1995 (UMRA). Section 202 of the UMRA (2 
U.S.C. 1531-1538) requires Federal agencies to prepare a written 
assessment of proposed Federal mandates likely to result in the 
expenditure by State, local, or tribal governments, in the aggregate, 
or by the private sector, of more than $100 million in any one year. 
This rule will not result in the expenditure by State, local, or tribal 
governments, or by the private sector, of more than $100 million 

Executive Order 13132 (Federalism)

    Executive Order 13132 requires agencies to assure meaningful and 
timely input by State and local officials in the development of 
regulatory policies that may have a substantial direct effect on the 
States, the relationship between the national government and the 
States, or the distribution of power and responsibilities among the 
various levels of government. The FHWA has analyzed this action in 
accordance with the principles and criteria contained in Executive 
Order 13132 and determined that it will not have a substantial direct 
effect or sufficient federalism implications on the States. The FHWA 
has also determined that this action will 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. The FHWA did not 
receive any comments on the intergovernmental review analysis.

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 for each collection of information we conduct, sponsor, or 
require through regulations. The FHWA has determined that this rule 
does not contain a collection of information requirement for purposes 
of the PRA.

National Environmental Policy Act

    The FHWA has analyzed this rule for the purpose of the National 
Environmental Policy Act of 1969 (NEPA), as amended (42 U.S.C. 4321 et 
seq.), and determined that it will not have any effect on the quality 
of the environment and meets the criteria for the categorical exclusion 
at 23 CFR 771.117(c)(20). However, Federal-aid highway projects on 
which design-build is used must still comply with the NEPA, as amended.

[[Page 8266]]

Executive Order 12630 (Taking of Private Property)

    The FHWA has analyzed this rule under Executive Order 12630, 
Governmental Actions and Interference with Constitutionally Protected 
Property Rights. This rule will not 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)

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

Executive Order 13175 (Tribal Consultation)

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

Executive Order 13211 (Energy Effects)

    The FHWA has analyzed this action under Executive Order 13211, 
Actions Concerning Regulations that Significantly Affect Energy Supply, 
Distribution, or Use. The FHWA has determined that this rule is not a 
significant energy action because it is not a significant regulatory 
action under Executive Order 12866 and is not likely to have a 
significant adverse effect on the supply, distribution, or use of 
energy. Therefore, a Statement of Energy Effects is not required.

Executive Order 12898 (Environmental Justice)

    Executive Order 12898 requires that each Federal agency make 
achieving environmental justice part of its mission by identifying and 
addressing, as appropriate, disproportionately high and adverse human 
health or environmental effects of its programs, policies, and 
activities on minorities and low-income populations. The FHWA has 
determined that this rule does not raise any environmental justice 

Regulation Identification Number

    A regulation identification number (RIN) is assigned to each 
regulatory action listed in the Unified Agenda of Federal Regulations. 
The Regulatory Information Service Center publishes the Unified Agenda 
in April and October of each year. The RIN number contained in the 
heading of this document can be used to cross-reference this action 
with the Unified Agenda.

List of Subjects in 23 CFR Part 636

    Construction, Construction manager, General contractor, Grant 
programs, Transportation, Highways, and Roads.

    Issued on: January 31, 2014.
Gregory G. Nadeau,
Deputy Administrator, Federal Highway Administration.

    In consideration of the foregoing, FHWA amends title 23, Code of 
Federal Regulations, part 636 as follows:


1. The authority citation for part 636 continues to read as follows:

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

2. Amend Sec.  636.209 by revising paragraph (b) to read as follows:

Sec.  636.209  What items must be included in a phase-two solicitation?

* * * * *
    (b)(1) At your discretion, you may allow proposers to submit 
alternative technical concepts (ATCs) in their proposals if:
    (i) The ATCs:
    (A) Provide an equal or better solution; and
    (B) Do not conflict with criteria agreed upon in the environmental 
decisionmaking process; and
    (ii) The RFP document clearly describes your:
    (A) Requirements for ATC content, submission, and review;
    (B) Procedures for confidential meetings (if used); and
    (C) Methods for evaluating ATCs in the proposal review process.
    (2) You must maintain the confidentiality of ATCs, except to the 
extent that disclosure is necessary to maintain compliance with Federal 
or State permitting and other legal requirements necessary for the 
delivery of the project. When disclosure is necessary, you must revise 
the RFP documents by releasing the minimal amount of information 
necessary to ensure:
    (i) Compliance with Federal or State permitting and other legal 
requirements; and
    (ii) All proposers are aware of the revised RFP requirements.

[FR Doc. 2014-03034 Filed 2-11-14; 8:45 am]