[Federal Register Volume 79, Number 172 (Friday, September 5, 2014)]
[Rules and Regulations]
[Pages 52972-52977]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-21020]


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DEPARTMENT OF TRANSPORTATION

Federal Highway Administration

23 CFR Part 627

[FHWA Docket No. FHWA-2013-0039]
RIN 2125-AF64


Value Engineering

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

ACTION: Final rule.

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SUMMARY: The FHWA is updating the existing value engineering (VE) 
regulations to make them consistent with the statutory changes in the 
Moving Ahead for Progress in the 21st Century Act (MAP-21) and to make 
other non-substantive changes for clarity.

DATES: This final rule is effective October 6, 2014.

FOR FURTHER INFORMATION CONTACT: For technical information: Mr. Ken 
Leuderalbert, FHWA Utilities and Value Engineering Program Manager, 
FHWA Office of Program Administration, 317-226-5351, or via email at 
ken.leuderalbert@dot.gov. For legal questions, please contact Mr. 
William Winne, FHWA Office of the Chief Counsel, 202-366-1397, or via 
email at william.winne@dot.gov. Office hours for the FHWA are from 8:00 
a.m. to 4:30 p.m., e.t., Monday through Friday, except Federal 
holidays.

SUPPLEMENTARY INFORMATION:

Electronic Access and Filing

    This document, the notice of proposed rulemaking (NPRM), and all 
comments received may be viewed online through the Federal eRulemaking 
portal at: http://www.regulations.gov. The Web site is available 24 
hours each day, 365 days each year. Please follow the instructions. An 
electronic copy of this document may also be downloaded by accessing 
the Office of the Federal Register's Web site at http://www.archives.gov or the Government Printing Office's Web site at http://www.gpo.gov/fdsys/.

Background

    This final rule modifies the regulations that govern VE analyses in 
the planning and development of highway improvement projects due to 
recent changes to section 106(e) of title 23, United States Code. On 
July 6, 2012, MAP-21 (Pub. L. 112-141) was signed into law. Section 
1503(a)(3) of MAP-21 amended 23 U.S.C. 106(e) by increasing the project 
monetary thresholds that trigger a VE analysis; eliminating the VE 
analysis requirement for design-build projects; and defining the 
requirements for a State Transportation Agency (STA) to establish and 
sustain a VE program.
    The National Highway System Designation Act of 1995 directed the 
Secretary to establish a program that required States to carry out a VE 
analysis for all Federal-aid highway projects on the National Highway 
System (NHS) costing $25 million or more. On February 14, 1997, FHWA 
established the FHWA VE program and the requirement that STAs create 
and sustain a VE program at title 23, Code of Federal Regulations, part 
627 (23 CFR 627). Section 1904 of the Safe, Accountable, Flexible, 
Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) 
(Pub. L. 109-59) required that a VE analysis be conducted for bridge 
projects with an estimated total cost of $20 million or more and any 
other projects as determined by the Secretary of Transportation.
    Section 1503(a)(3) of MAP-21 amends 23 U.S.C. 106(e) to modify the 
requirements for the value engineering program and raise the VE 
analysis requirement threshold to $50,000,000 or more for projects on 
the NHS that use Federal-aid Highway Program Funding assistance, and 
$40,000,000 or more for bridge projects on the NHS that receive Federal 
assistance. Section 1503(a)(3) removed the VE analysis requirement for 
design-build projects. In addition, MAP-21 defined the requirements for 
an STA to establish and sustain a VE program under which VE analyses 
are conducted on all applicable projects, consistent with the current 
regulations pertaining to STA VE Programs (as specified in 23 CFR 
627.9).

[[Page 52973]]

    In fiscal year 2011, STAs performed VE analyses on 378 Federal-aid 
highway projects and approved and implemented a total of 1,224 VE 
recommendations, resulting in a construction cost savings of $1 
billion. In addition, approved construction VE change proposals 
(VECPs), submitted by contractors and accepted by STAs, saved $38.3 
million.
    The STA VE programs, the VE analyses conducted on applicable 
projects, and VECPs saved an annual average of $1.7 billion from 2002 
through 2011. Additional information on STA, local authority, and FHWA 
VE programs and practices is available at: http://www.fhwa.dot.gov/ve.

Summary Discussion of Comments Received in Response to the NPRM

    On August 29, 2013, the FHWA published an NPRM at 78 FR 53380 
soliciting public comments on its proposal to update the regulations. 
The following presents an overview of the comments received in response 
to the NPRM. Seven STAs, three transportation industry organizations, 
and 26 individuals submitted comments.
    The majority of comments focused on three themes: change in the 
required VE analyses thresholds, elimination of the VE analysis 
requirement for design-build projects, and the false perception that 
justification is required for projects falling below the thresholds.

Comments Directed at Specific Sections of the Proposed Revisions to 23 
CFR Part 627

Section 627.1--Purpose and Applicability

    There was one comment received for this section which implied that 
the proposed change in the NPRM would require additional VE analyses 
and/or affect their timing. This change does neither. The change 
clarified that the State VE policies and procedures shall establish the 
State processes for identifying, conducting, and approving VE 
recommendations.
    There also appeared to be some confusion over the definition of 
``approved recommendation''. For this section, ``approved 
recommendation'' means those VE recommendations that were determined by 
the STA to be acceptable for inclusion in the project plans.

Section 627.3--Definitions

    One comment was received requesting that FHWA define the term 
``Construction Manager/General Contractor'' (CM/GC) in this section. 
The FHWA is in the process of preparing an NPRM for the CM/GC process. 
It is more appropriate that the CM/GC process be defined through that 
rulemaking.
    A comment was received asking for clarification of 23 CFR 627.3 
(definition of total project costs) and 627.5(a) (timing of VE 
analyses). It was unclear to the commenter if these two sections, taken 
together, would permit advanced utility relocations prior to the 
completion of a VE study. The definition of total project costs (23 CFR 
627.3) is intended to define what costs are used in determining whether 
a project meets the VE analysis requirement threshold (as defined in 23 
CFR 627.5(b)). The definition of total project cost is not intended to 
define the timing of the VE analysis. There is nothing in this section 
that would limit the timing of utility relocations.
    The Tennessee DOT requested that the word ``optimizing'' replace 
``improving'' in the definition of VE analysis in section 627.3. The 
common meaning of the term ``optimizing'' is to improve or develop as 
far as possible and/or to make the most effective use. The FHWA agrees 
that the term ``optimizing'' is a better fit for this definition. The 
definition for VE analysis is modified through this final rule.

Section 627.5--Applicable Projects

    The Portland Cement Association agreed with the use of life cycle 
cost analysis in sections 627.5 and 627.9.
    The FHWA received three comments from individuals that the 
definition of ``applicable project'' should not be limited to the NHS. 
Their reasoning was that Federal-aid funds, whether used for projects 
on or off the NHS, should require a VE analysis in order to provide the 
best use of funds. Congress, through MAP-21, established when VE 
analyses are required for federally funded projects. The VE 
requirements of $50 million for highways and $40 million for bridges 
are limited to the NHS.
    The FHWA received 22 comments from individuals disagreeing with the 
proposed change to increase the thresholds. The commenters stated that 
projects of all sizes and scopes can benefit measurably from the 
application of the value methodology. Further, they expressed a 
perception that the increase in thresholds would result in missed 
opportunities for value enhancements. The FHWA agrees that projects 
below the MAP-21 thresholds may benefit from VE analyses. Therefore, 
the regulation is modified to include language to encourage VE analyses 
below the thresholds.
    The FHWA received comments from two individuals and three STAs 
agreeing with the proposed change to increase the thresholds. The 
commenters stated that this change updates the program in accordance 
with the construction cost index growth. Also, they believe that VE 
concentration on higher cost projects yields better program results.
    There were five comments from individuals that perceived a 
requirement that STAs must first justify conducting a VE analysis for 
projects falling below the thresholds of a required project. There is 
no requirement to justify VE analyses on projects falling below the 
thresholds. STAs have the flexibility to conduct a VE analysis on any 
project.
    The American Association of State Highway and Transportation 
Officials' Value Engineering Technical Committee requested that the 
final rule clearly state that VE analyses are federally reimbursable. 
Value engineering is an engineering practice and is thus eligible for 
Federal reimbursement. This is made clear through the definition found 
under 23 CFR 1.11(a); thus no further modifications in this regulation 
is needed.
    One comment was received opposing the requirement to identify in 
STA policies and procedures when additional VE analyses should be 
considered under 627.5(d). The commenter stated that there is no such 
requirement in MAP-21. Section 106(e)(2)(C) of title 23, United States 
Code, explicitly authorizes the Secretary to require additional VE 
analyses as deemed appropriate. Section 627.5(d) does not require an 
STA to conduct additional VE analyses, rather it encourages that the 
policies and procedures consider additional VE analyses as the STA 
determines appropriate. To clarify, this section has been revised to 
replace ``shall'' with ``should''.
    The FHWA received 11 comments from individuals disagreeing with the 
proposed change to remove the VE analysis requirement for design-build 
projects. The commenters stated that they have seen significant value 
enhancements for design-build projects that have undergone VE analysis. 
There were comments from three STAs and two associations supporting the 
proposal to exclude the VE analysis requirement for design-build 
projects. Congress, through MAP-21, established that VE analyses are 
not required for design-build projects. However, the regulation will 
encourage STAs to conduct VE analyses on design-build projects.

[[Page 52974]]

    One comment was received from an individual that stated sections 
627.5(e) and 627.5(b)(5) might be interpreted to conflict with each 
other. The FHWA does not believe these sections are in conflict. 
Section 627.5(e) states that a VE analysis is not required for projects 
delivered using the design-build method of construction. Section 
627.5(b)(5) states that a VE analysis may be required on any Federal-
aid highway program funded project the FHWA deems appropriate. 
Accordingly, FHWA would not require a design build project excepted 
from a VE analysis under section 627.5(e) to conduct a VE analysis 
under section 627.5(b)(5).

Section 627.9--Conducting a VE Analysis

    One comment was received from an individual regarding the timing of 
VE analyses. The commenter appeared to imply that the language in the 
regulation did not allow for early VE analysis during the planning or 
environmental phases of a project. Section 627.9(a) provides the 
greatest flexibility for an STA to conduct a VE analysis. The section 
defines FHWA's intent that the VE analysis is to occur ``as early as 
practicable in the planning or development of a project.'' Therefore 
the VE analysis may be completed anytime during the planning, 
environmental, or design phases of a project as long as there is enough 
project information to conduct an effective VE analysis. The decision 
on the timing of VE analyses is left to the STA's discretion as long as 
the VE analysis is conducted prior to the completion of the plans, 
specifications, and estimates package approval.
    The American Road and Transportation Builders Association (ARTBA) 
requested that FHWA develop guidance on the opportune time to conduct a 
VE analysis. The FHWA has developed an order that provides more in-
depth guidance to STAs on the timing of the VE analysis. The VE Order 
can be found at http://www.fhwa.dot.gov/legsregs/directives/orders/13111b.cfm. The optimum timing of a VE analysis is dependent on the 
type or scope of the transportation project. Because of this, FHWA has 
provided the greatest level of flexibility for the STAs to administer 
their VE programs.
    ARTBA and the Maine DOT commented that the CM/GC process should 
also be covered under the exemption for design-build projects. Two 
commenters stated CM/GC is a different contracting method than design-
build and therefore a VE analysis should be required. The CM/GC is a 
different type of construction delivery method than design-build. In a 
CM/GC project, the STA is responsible for the development of the design 
package and the CM/GC is responsible for providing pre-construction 
coordination and construction of the transportation facility. Design-
build, however, authorizes the design-build firm to design and 
construct the project. Regardless, Congress provided an exemption for 
design-build but did not do so for CM/GC. To maximize contractor input, 
VE analysis for a CM/GC project allows the CM to be a part of the VE 
analysis. The FHWA agrees that the CM/GC contracting method provides a 
greater opportunity for contractor input during the design phase of a 
project. Since CM/GC is fairly new to the transportation industry and 
STAs are still learning the nuances of this delivery method, the 
requirement for a VE analysis provides the greatest opportunity for the 
designer, contractor, and owner to work together to identify value 
improvement opportunities for the project. Realizing the differences in 
the CM/GC contracting method, FHWA included VE analysis guidance for 
CM/GC delivered projects in the VE Order.

Clarifications

    Other non-substantive edits were made to clarify the regulatory 
text. Such edits were made in sections 627.5(b)(4) (``construction'' 
was added before ``letting''); 627.5(c) (the last clause was revised to 
state ``or programming multiple design or construction projects''); and 
627.9(b) (added language to clarify ``the project's scope or 
schedule'').
    Although no comments were received regarding the definition of the 
term ``project,'' we have clarified the definition in this final rule 
to align with the definition of the term ``project'' as found under 23 
U.S.C. 101(a)(18). Additionally, the second sentence of the definition 
of a ``project'' was modified to better define the limits of a 
``project.'' These clarifications do not change the scope of projects 
required to be accompanied by a VE analysis.

Rulemaking Analyses and Notices

Executive Order 12866 (Regulatory Planning and Review), Executive Order 
13563 (Improving Regulation and Regulatory Review), and DOT Regulatory 
Policies and Procedures

    The FHWA has determined that this rule is not an economically 
significant rulemaking action within the meaning of Executive Order 
12866 and DOT regulatory policies and procedures. Additionally, this 
action complies with the principles of Executive Order 13563 by 
fostering the use of innovative technologies and methods while 
eliminating unnecessary and costly design elements. This rule 
establishes revised requirements for conducting VE analyses and it is 
anticipated that the economic impact of this rulemaking will be 
minimal. In addition, these changes will not interfere with any action 
taken or planned by another agency and will not materially alter the 
budgetary impact of any entitlements, grants, user fees, or loan 
programs.

Regulatory Flexibility Act

    In compliance with the Regulatory Flexibility Act (RFA) (Pub. L. 
96-354, 5 U.S.C. 601-612), the FHWA has evaluated the effects of this 
rule on small entities. The FHWA has determined that this action does 
not have a significant economic impact on a substantial number of small 
entities. The regulation addresses VE studies performed by STAs on 
certain projects using Federal-aid highway funds. 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 RFA does not apply, 
and the FHWA certifies that this action will not have a significant 
economic impact on a substantial number of small entities.

Unfunded Mandates Reform Act of 1995

    This final rule does not impose unfunded mandates as defined by the 
Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). Furthermore, in 
compliance with the Unfunded Mandates Reform Act of 1995, FHWA 
evaluated this rule to assess the effects on State, local, and Tribal 
governments and the private sector. This rule does not result in the 
expenditure by State, local, and Tribal governments, in the aggregate, 
or by the private sector, of $140.8 million or more in any one year (2 
U.S.C. 1532). 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 Assessment)

    This rule has been analyzed in accordance with the principles and 
criteria contained in Executive Order 13132. The FHWA determined that 
this rule will not have a substantial direct

[[Page 52975]]

effect or sufficient federalism implications to warrant preparation of 
a federalism assessment. The FHWA has also determined that this rule 
does not preempt any State law or regulation or affect the States' 
ability to discharge traditional State governmental functions.

Executive Order 12372 (Intergovernmental Review)

    Catalog of Federal Domestic Assistance Program Number 20.205, 
Highway Planning and Construction. The regulations implementing 
Executive Order 12372 regarding intergovernmental consultation on 
Federal programs and activities apply to this program.

Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), 
Federal agencies must obtain approval from the Office of Management and 
Budget for each collection of information they conduct, sponsor, or 
require through regulations.
    The FHWA has determined that this rule contains a requirement for 
data and information to be collected and maintained in support of 
compiling the results of the VE analyses that are conducted annually. 
The FHWA published a Notice of Proposed Rulemaking in the Federal 
Register on August 29, 2013 at 78 FR 53380 which solicited public 
comments regarding this information collection requirement. The FHWA 
received no comments.
    It will take approximately 200 burden hours to compile the results 
of the VE analyses annually (400 analyses at 30 minutes each). It will 
take approximately 156 burden hours to compile the results of all of 
the VE analyses that are conducted annually by each State DOT, the 
District of Columbia, and Puerto Rico and to submit these results to 
FHWA (52 analyses at 3 hours each). The estimated total burden to 
provide the additional information to attain full compliance with the 
final rule is 356 hours.

National Environmental Policy Act

    The FHWA has analyzed this rule for the purpose of the National 
Environmental Policy Act (42 U.S.C. 4321 et seq.). The FHWA determined 
that this rule will not have any effect on the quality of the human and 
natural environment because it only establishes the requirements that 
apply to VE analyses whenever an applicable Federal-aid highway project 
is to be constructed. The promulgation of this regulation has been 
determined to be a categorical exclusion under 23 CFR 771.117(c)(20).

Executive Order 13175 (Tribal Consultation)

    The FHWA has analyzed this action under Executive Order 13175. The 
FHWA believes that this rule does not have substantial direct effects 
on one or more Indian Tribes; does not impose substantial direct 
compliance costs on Indian Tribal governments; and does not preempt 
Tribal law. This rule establishes the requirements that apply to VE 
analyses whenever an applicable Federal-aid highway project is to be 
constructed and does not impose any direct compliance requirements on 
Indian Tribal governments, nor does it have any economic or other 
impacts on the viability of Indian Tribes. Therefore, a Tribal summary 
impact statement is not required.

Executive Order 13211 (Energy Effects)

    The FHWA has analyzed this rule under Executive Order 13211. The 
FHWA determined that this rule does not constitute a significant energy 
action under that order since it will not have a significant adverse 
effect on the supply, distribution, or use of energy. Therefore, the 
FHWA certifies that 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 
issues.

Executive Order 12630 (Taking of Private Property)

    The FHWA has analyzed this rule under Executive Order 12630. The 
FHWA determined that this rule does not effect 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 to minimize litigation, eliminate ambiguity, 
and reduce burden.

Executive Order 13045 (Protection of Children)

    The FHWA has analyzed this rule under Executive Order 13045. The 
FHWA certifies that this rule does not cause an environmental risk to 
health or safety that may disproportionately affect children.

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 627

    Grant programs-transportation, Highways and roads.

    Issued on: August 27, 2014.
Gregory G. Nadeau,
Acting Administrator, Federal Highway Administration.

    In consideration of the foregoing, the FHWA revises 23 CFR part 627 
to read as follows:

PART 627--VALUE ENGINEERING

Sec.
627.1 Purpose and applicability.
627.3 Definitions.
627.5 Applicable projects.
627.7 VE programs.
627.9 Conducting a VE analysis.

    Authority:  23 U.S.C. 106(e), 106(g), 106(h), 112(a) and (b), 
302, 315; and 49 CFR part 18.


Sec.  627.1  Purpose and applicability.

    (a) The purpose of this part is to prescribe the programs, policies 
and procedures for the integration of value engineering (VE) into the 
planning and development of all applicable Federal-aid highway 
projects.
    (b) Each State transportation agency (STA) shall establish and 
sustain a VE program. This program shall establish the policies and 
procedures under which VE analyses are identified, conducted and 
approved VE recommendations implemented on applicable projects (as 
defined in Sec.  627.5 of this part). These policies and procedures 
should also identify when a VE analysis is encouraged on all other 
projects where there is a high potential to realize the benefits of a 
VE analysis.
    (c) The STAs shall establish the policies, procedures, functions, 
and capacity to monitor, assess, and report on the performance of the 
VE program, along with the VE analyses that are conducted and Value 
Engineering

[[Page 52976]]

Change Proposals (VECP) that are accepted. The STAs shall ensure that 
its sub-recipients conduct VE analyses in compliance with this part.


Sec.  627.3  Definitions.

    The following terms used in this part are defined as follows:
    (a) Bridge project. A bridge project shall include any project 
where the primary purpose is to construct, reconstruct, rehabilitate, 
resurface, or restore a bridge.
    (b) Final design. Any design activities following preliminary 
design and expressly includes the preparation of final construction 
plans and detailed specifications for the performance of construction 
work.
    (c) Project. The term ``project'' means any undertaking eligible 
for assistance under title 23 of the United States Code. The limits of 
a project are defined as the logical termini in the environmental 
document and may consist of several contracts, or phases of a project 
or contract, which may be implemented over several years.
    (d) Total project costs. The estimated costs of all work to be 
conducted on a project including the environment, design, right-of-way, 
utilities and construction phases.
    (e) Value Engineering (VE) analysis. The systematic process of 
reviewing and assessing a project by a multidisciplinary team not 
directly involved in the planning and development phases of a specific 
project that follows the VE Job Plan and is conducted to provide 
recommendations for:
    (1) Providing the needed functions, considering community and 
environmental commitments, safety, reliability, efficiency, and overall 
life-cycle cost (as defined in 23 U.S.C. 106(f)(2));
    (2) Optimizing the value and quality of the project; and
    (3) Reducing the time to develop and deliver the project.
    (f) Value Engineering (VE) Job Plan. A systematic and structured 
action plan for conducting and documenting the results of the VE 
analysis. While each VE analysis shall address each phase in the VE Job 
Plan, the level of analysis conducted and effort expended for each 
phase may be scaled to meet the needs of each individual project. The 
VE Job Plan shall include and document the following seven phases:
    (1) Information Phase: Gather project information including project 
commitments and constraints.
    (2) Function Analysis Phase: Analyze the project to understand the 
required functions.
    (3) Creative Phase: Generate ideas on ways to accomplish the 
required functions which improve the project's performance, enhance its 
quality, and lower project costs.
    (4) Evaluation Phase: Evaluate and select feasible ideas for 
development.
    (5) Development Phase: Develop the selected alternatives into fully 
supported recommendations.
    (6) Presentation Phase: Present the VE recommendation to the 
project stakeholders.
    (7) Resolution Phase: Evaluate, resolve, document and implement all 
approved recommendations.
    (g) Value Engineering Change Proposal (VECP). A construction 
contract change proposal submitted by the construction contractor based 
on a VECP provision in the contract. These proposals may improve the 
project's performance, value and/or quality, lower construction costs, 
or shorten the delivery time, while considering their impacts on the 
project's overall life-cycle cost and other applicable factors.


Sec.  627.5  Applicable projects.

    (a) A VE analysis shall be conducted prior to the completion of 
final design on each applicable project that utilizes Federal-aid 
highway funding, and all approved recommendations shall be included in 
the project's plans, specifications and estimates prior to authorizing 
the project for construction (as specified in 23 CFR 630.205).
    (b) Applicable projects requiring a VE analysis shall include the 
following:
    (1) Each project located on the National Highway System (NHS) (as 
specified in 23 U.S.C. 103) with an estimated total project cost of $50 
million or more that utilizes Federal-aid highway funding;
    (2) Each bridge project located on the NHS with an estimated total 
project cost of $40 million or more that utilizes Federal-aid highway 
funding;
    (3) Any major project (as defined in 23 U.S.C. 106(h)), located on 
or off of the NHS, that utilizes Federal-aid highway funding in any 
contract or phase comprising the major project;
    (4) Any project where a VE analysis has not been conducted and a 
change is made to the project's scope or design between the final 
design and the construction letting which results in an increase in the 
project's total cost exceeding the thresholds identified in paragraphs 
(b)(1), (2) or (3) of this section; and
    (5) Any other project FHWA determines to be appropriate that 
utilizes Federal-aid highway program funding.
    (c) An additional VE analysis is not required if, after conducting 
a VE analysis required under this part, the project is subsequently 
split into smaller projects in the design phase or the project is 
programmed to be completed by the letting of multiple construction 
projects. However, the STA may not avoid the requirement to conduct a 
VE analysis on an applicable project by splitting the project into 
smaller projects, or programming multiple design or construction 
projects.
    (d) The STA's VE Program's policies and procedures should identify 
when VE analyses are to be considered or conducted for projects falling 
below the required thresholds identified in paragraph (b) of this 
section in the planning and development of transportation projects 
where there is a high potential for the project to benefit from a VE 
analysis. While not required, FHWA encourages STAs to consider the 
following projects that may benefit from a VE analysis:
    (1) Complex projects on or off the NHS that have a total project 
cost of $25 million or more;
    (2) Complex Bridge Projects on or off the NHS with an estimated 
total project cost of $20 million or more;
    (3) Design-build projects on or off the NHS with an estimated cost 
of $25 million or more; and
    (4) Any other complex, difficult or high cost project as determined 
by the STA.
    (e) A VE analysis is not required for projects delivered using the 
design-build method of construction. While not required, FHWA 
encourages STAs and local public authorities to conduct a VE analysis 
on design-build projects that meet the requirements identified in 
paragraph (b) of this section.
    (f) A VE analysis is required on projects delivered using the 
Construction Manager/General Contractor (CM/GC) method of contracting, 
if the project meets the requirements identified in paragraph (b) of 
this section.


Sec.  627.7  VE programs.

    (a) The STA shall establish and sustain a VE program under which VE 
analyses are identified, conducted and approved VE recommendations 
implemented on all applicable projects (as defined in Sec.  627.5). The 
STA's VE program shall:
    (1) Establish and document VE program policies and procedures that 
ensure the required VE analysis is conducted on all applicable 
projects, and encourage conducting VE analyses on other projects that 
have the potential to benefit from this analysis;
    (2) Ensure the VE analysis is conducted and all approved

[[Page 52977]]

recommendations are implemented and documented in a final VE report 
prior to the project being authorized to proceed to a construction 
letting;
    (3) Monitor and assess the VE Program, and disseminate an annual 
report to the FHWA consisting of a summary of all approved 
recommendations implemented on applicable projects requiring a VE 
analysis, the accepted VECPs, and VE program functions and activities;
    (4) Establish and document policies, procedures, and contract 
provisions that identify when VECP's may be used; identify the 
analysis, documentation, basis, and process for evaluating and 
accepting a VECP; and determine how the net savings of each VECP may be 
shared between the agency and contractor;
    (5) Establish and document policies, procedures, and controls to 
ensure a VE analysis is conducted and all approved recommendations are 
implemented for all applicable projects administered by local public 
agencies; and ensure the results of these analyses are included in the 
VE program monitoring and reporting; and
    (6) Provide for the review of any project where a delay occurs 
between when the final plans are completed and the project advances to 
a letting for construction to determine if a change has occurred to the 
project's scope or design where a VE analysis would be required to be 
conducted (as specified in Sec.  625.5(b)).
    (b) STAs shall ensure the required VE analysis has been performed 
on each applicable project including those administered by 
subrecipients, and shall ensure approved recommendations are 
implemented into the project's plans, specifications, and estimates 
prior to the project being authorized for construction (as specified in 
23 CFR 630.205).
    (c) STAs shall designate a VE Program Coordinator to promote and 
advance VE program activities and functions. The VE Coordinator's 
responsibilities should include establishing and maintaining the STA's 
VE policies and procedures; facilitating VE training; ensuring VE 
analyses are conducted on applicable projects; monitoring, assessing, 
and reporting on the VE analyses conducted and VE program; 
participating in periodic VE program and project reviews; submitting 
the required annual VE report to the FHWA; and supporting the other 
elements of the VE program.


Sec.  627.9  Conducting a VE analysis.

    (a) A VE analysis should be conducted as early as practicable in 
the planning or development of a project, preferably before the 
completion of the project's preliminary design. At a minimum, the VE 
analysis shall be conducted prior to completing the project's final 
design.
    (b) The VE analysis should be closely coordinated with other 
project development activities to minimize the impact approved 
recommendations might have on previous agency, community, or 
environmental commitments; the project's scope or schedule; and the use 
of innovative technologies, materials, methods, plans or construction 
provisions.
    (c) When the STA or local public agency chooses to conduct a VE 
analysis for a project utilizing the design-build project delivery 
method, the VE analysis should be performed prior to the release of the 
final Request for Proposals or other applicable solicitation documents.
    (d) For projects delivered using the CM/GC contracting method, a VE 
analysis is not required prior to the preparation and release of the 
RFP for the CM/GC contract. The VE analysis is required to be completed 
and approved recommendations incorporated into the project plans prior 
to requesting a construction price proposal from the CM/GC contractor.
    (e) STAs shall ensure the VE analysis meets the following 
requirements:
    (1) Uses a multidisciplinary team not directly involved in the 
planning or design of the project, with at least one individual who has 
training and experience with leading VE analyses;
    (2) Develops and implements the VE Job Plan;
    (3) Produces a formal written report outlining, at a minimum:
    (i) Project information;
    (ii) Identification of the VE analysis team;
    (iii) Background and supporting documentation, such as information 
obtained from other analyses conducted on the project (e.g., 
environmental, safety, traffic operations, constructability);
    (iv) Documentation of the stages of the VE Job Plan which would 
include documentation of the life-cycle costs that were analyzed;
    (v) Summarization of the analysis conducted;
    (vi) Documentation of the proposed recommendations and approvals 
received at the time the report is finalized; and
    (vii) The formal written report shall be retained for at least 3 
years after the completion of the project.
    (f) For bridge projects, in addition to the requirements in 
subsection (e), the VE analyses shall:
    (1) Include bridge substructure and superstructure requirements 
that consider alternative construction materials; and
    (2) Be conducted based on:
    (i) An engineering and economic assessment, taking into 
consideration acceptable designs for bridges; and
    (ii) An analysis of life-cycle costs and duration of project 
construction.
    (g) STAs and local public agencies may employ qualified consultants 
(as defined in 23 CFR 172.3) to conduct a VE analysis. The consultant 
shall possess training and experience with leading VE analyses. A 
consulting firm or individual shall not be used to conduct or support a 
VE analysis if they have a conflict of interest (as specified in 23 CFR 
1.33).
    (h) STAs, and local public agencies are encouraged to use a VECP 
clause (or other such clauses under a different name) in an applicable 
project's contract, allowing the construction contractor to propose 
changes to the project's plans, specifications, or other contract 
documents. Whenever such clauses are used, the STA and local authority 
will consider changes that could improve the project's performance, 
value and quality, shorten the delivery time, or lower construction 
costs, while considering impacts on the project's overall life-cycle 
cost and other applicable factors. The basis for a STA or local 
authority to consider a VECP is the analysis and documentation 
supporting the proposed benefits that would result from implementing 
the proposed change in the project's contract or project plans.
    (i) Proposals to accelerate construction after the award of the 
contract will not be considered a VECP and will not be eligible for 
Federal-aid highway program funding participation. Where it is 
necessary to accelerate construction, STAs and local public agencies 
are encouraged to use the appropriate incentive or disincentive clauses 
so that all proposers will take this into account when preparing their 
bids or price proposals.

[FR Doc. 2014-21020 Filed 9-4-14; 8:45 am]
BILLING CODE 4910-22-P