[Federal Register Volume 80, Number 44 (Friday, March 6, 2015)]
[Proposed Rules]
[Pages 12092-12094]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-05215]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
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 

  Federal Register / Vol. 80, No. 44 / Friday, March 6, 2015 / Proposed 
Rules  

[[Page 12092]]



DEPARTMENT OF TRANSPORTATION

Office of the Secretary

2 CFR Part 1201

[Docket DOT-OST-2015-0013]
RIN 2105-AE38


Geographic-Based Hiring Preferences in Administering Federal 
Awards

AGENCY: Office of the Secretary (OST); U.S. Department of 
Transportation (DOT).

ACTION: Notice of proposed rulemaking.

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SUMMARY: The DOT proposes to amend its regulations implementing the 
Government-wide Uniform Administrative Requirements, Cost Principles, 
and Audit Requirements for Federal Awards to permit recipients and 
subrecipients to impose geographic-based hiring preferences whenever 
not otherwise prohibited by Federal statute.

DATES: Comments must be received on or before April 6, 2015. Late-filed 
comments will be considered to the extent practicable, but the DOT may 
issue a final rule at any time after the close of the comment period.

ADDRESSES: To ensure that you do not duplicate your docket submissions, 
please submit them by only one of the following means:
     Federal eRulemaking Portal: Go to http://www.regulations.gov and follow the online instructions for submitting 
comments.
     Mail: Docket Management Facility, U.S. Department of 
Transportation, 1200 New Jersey Ave. SE., W12-140, Washington, DC 
20590-0001.
     Hand Delivery: West Building Ground Floor, Room W12-140, 
1200 New Jersey Ave. SE., between 9 a.m. and 5 p.m., Monday through 
Friday, except Federal holidays. The telephone number is (202) 366-
9329.
     Instructions: You must include the agency name and docket 
number or the Regulatory Identification Number (RIN) for the rulemaking 
at the beginning of your comments. All comments received will be posted 
without change to http://www.regulations.gov, including any personal 
information provided.

FOR FURTHER INFORMATION CONTACT: Michael Harkins, Deputy Assistant 
General Counsel for General Law (OST-C10), Office of the Secretary, 
Department of Transportation, 1200 New Jersey Avenue SE., Room W83-312, 
Washington, DC 20590, 202-366-0590.

SUPPLEMENTARY INFORMATION: On December 26, 2014, the DOT's regulations 
at 2 CFR part 1201 became effective, which adopted the Office of 
Management and Budget's (OMB) revised Government-wide Uniform 
Administrative Requirements, Cost Principles, and Audit Requirements 
for Federal awards to non-Federal entities at 2 CFR part 200 (Common 
Rule). These requirements at 2 CFR 200.319(b) prohibit the use of in-
state or local geographic preferences in the evaluation of bids or 
proposals except where Federal statute mandates or encourages the use 
of such preferences.\1\ This prohibition extends to the use of 
geographic hiring preferences in contracts that are awarded by 
recipients and subrecipients with Federal financial assistance since 
such preferences could result in a competitive advantage for 
contractors based in the targeted hiring area. This provision in the 
OMB Common Rule is not new and was found in the DOT's implementation of 
the prior version of OMB's Common Rule (49 CFR 18.36(c)(2) (2014)).
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    \1\ For example, 23 U.S.C. 140(d) authorizes the preferential 
employment of Indians living on or near a reservation on projects 
and contracts on Indian reservations roads under the Federal-aid 
Highway Program.
---------------------------------------------------------------------------

    Many recipients and subrecipients at the local governmental level 
have local hiring provisions that they otherwise apply to procurements 
that do not involve Federal funding. Such provisions are intended to 
ensure that the communities in which the projects are located benefit 
from the jobs that result from their investment of their funds, 
particularly for workers in low income areas. Transportation plays a 
critical role in connecting Americans and communities to economic 
opportunity. The choices that are made regarding transportation 
infrastructure can strengthen communities, create pathways to jobs and 
improve the quality of life for all Americans. Transportation 
investments and policies can improve access to jobs, education, and 
goods movement, while providing construction and operations jobs. As 
such, the DOT believes that local and other geographic-based hiring 
preferences are essential to promoting Ladders of Opportunity for the 
workers in these communities by ensuring that they participate in, and 
benefit from, the economic opportunities such projects present.
    Additionally, Section 418 of the Consolidated and Further 
Continuing Appropriations Act, 2015, Public Law 113-235 (FY 2015 
Appropriations Act), prohibits the Federal Transit Administration from 
using fiscal year (FY) 2015 funds to implement, administer, or enforce 
49 CFR 18.36(c)(2), for construction hiring. Section 18.36(c)(2) 
prohibits the use of statutorily or administratively imposed in-State 
or local geographical preferences in the evaluation of bids or 
proposals.\2\ Thus, at least for FTA-funded project in FY 2015, 
Congress has diminished the legal effectiveness of this provision.
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    \2\ Effective December 26, 2014, 49 CFR part 18 will apply only 
to grants obligated on or before December 25, 2014. Grants obligated 
on or after December 26, 2014 will be subject to 2 CFR part 200. 
This provision (18.36(c)(2)) has been recodified at 2 CFR 200.319(b) 
and is substantively the same as 18.36(c)(2). Although Congress did 
not address the change in codification in section 418, FTA intends 
to apply section 418 to grants obligated on or after December 26, 
2014 and subject to 2 CFR 200.319(b).
---------------------------------------------------------------------------

    Therefore, the DOT is proposing to amend Part 1201 by promulgating 
a provision to deviate from the OMB guidance by making clear that 
geographic hiring preferences may be used in DOT grant programs. With 
this deviation, local communities will be in a better position to 
leverage Federal and State and local funds into local jobs and economic 
growth. However, this deviation would only apply to the extent that 
such geographic hiring preferences are not otherwise prohibited by 
Federal statute or regulation. For example, the Federal statutory 
provision at 23 U.S.C. 112 requires full and open competition in the 
award of contracts under the Federal-aid highway program. The Federal 
Highway Administration has traditionally interpreted this provision as 
prohibiting the use of geographic hiring preferences and reinforced 
this interpretation in 23 CFR 635.117(b). Under a 2013 Opinion from

[[Page 12093]]

the Office of Legal Counsel (OLC), OLC clarified that section 112 does 
not compel the DOT from prohibiting recipients and subrecipients under 
the Federal-aid Highway Program from imposing contract requirements 
that do not directly relate to the performance of work. Rather, the OLC 
opinion states that the Secretary has discretion to permit such 
requirements as long as they do not ``unduly limit competition.'' (See 
Competitive Bidding Requirements Under the Federal-Aid Highway Program, 
23 U.S.C. 112, (Aug. 23, 2013)).
    In order to determine whether contracting requirements may be used 
consistent with the 2013 OLC opinion, the DOT has established a pilot 
program under which such geographic-based hiring requirements may be 
used on an experimental basis. This program, which is published in 
today's Federal Register, allows recipients and subrecipients of 
Federal Highway Administration and Federal Transit Administration funds 
to use such requirements pursuant to the experimental authorities of 
those agencies. For any such projects, the DOT will monitor and 
evaluate whether the contracting requirements approved for use under 
the pilot program have an undue restriction on competition.

Regulatory Analyses and Notices

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

    The DOT has preliminarily determined that this action would not be 
a significant regulatory action within the meaning of Executive Order 
12866 and would not be significant within the meaning of DOT regulatory 
policies and procedures. It is anticipated that the economic impact of 
this rulemaking would be minimal. These proposed changes would not 
adversely affect, in a material way, any sector of the economy. In 
addition, these 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. 
Consequently, a full regulatory evaluation is not required.
    Allowing local geographic preferences in hiring, where none 
currently exist, may result in additional local hiring and in non-local 
workers not obtaining jobs they otherwise might get. To the extent this 
occurs this would be an economic transfer from non-local workers to 
local workers and not a cost.
    To the extent local labor markets are tight this could increase 
labor costs for the DOT-Grant funded projects if all hiring is local. 
Similarly, if local supply of labor in the skilled trades is low, 
productivity on DOT-Grant funded project could decrease and project 
costs could increase if all hiring is local. However, the proposed rule 
is not forcing local governments to hire locally; it is only saying 
that they may use geographic hiring preferences. They will only 
exercise this option if they feel it is net beneficial to their 
communities to do so.

Regulatory Flexibility Act

    In compliance with the Regulatory Flexibility Act (Pub. L. 96-354, 
5 U.S.C. 601-612), the DOT has evaluated the effects of this proposed 
action on small entities and has determined that the proposed action 
would not have a significant economic impact on a substantial number of 
small entities. This proposed action does not affect any funding 
distributed under any of the programs administered by the DOT. For 
these reasons, I hereby certify that this action would 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). 
This proposed rule will not result in the expenditure by State, local, 
and tribal governments, in the aggregate, or by the private sector, of 
$128.1 million or more in any one year (2 U.S.C. 1532). Further, in 
compliance with the Unfunded Mandates Reform Act of 1995, the DOT will 
evaluate any regulatory action that might be proposed in subsequent 
stages of the proceeding to assess the effects on State, local, tribal 
governments and the private sector.

Executive Order 13132 (Federalism Assessment)

    This proposed action has been analyzed in accordance with the 
principles and criteria contained in Executive Order 13132, and the DOT 
has determined preliminarily that this proposed action would not have 
sufficient federalism implications to warrant the preparation of a 
federalism assessment. The DOT has also determined that this proposed 
action would not preempt any State law or State regulation or affect 
the States' ability to discharge traditional State governmental 
functions.

Executive Order 13211 (Energy Effects)

    We have analyzed this action under Executive Order 13211, Actions 
Concerning Regulations That Significantly Affect Energy Supply, 
Distribution, or Use, dated May 18, 2001. We have determined that it is 
not a significant energy action under that order since it is not 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 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 
DOT solicits comments on this issue.

Paperwork Reduction Act

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

Executive Order 12988 (Civil Justice Reform)

    This action meets applicable standards in sections 3(a) and 3(b)(2) 
of Executive Order 12988, Civil Justice Reform, to minimize litigation, 
eliminate ambiguity, and reduce burden.

Executive Order 13045 (Protection of Children)

    We have analyzed this rule under Executive Order 13045, Protection 
of Children from Environmental Health Risks and Safety Risks. The DOT 
certifies that this proposed action would not cause any environmental 
risk to health or safety that might disproportionately affect children.

Executive Order 12630 (Taking of Private Property)

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

[[Page 12094]]

National Environmental Policy Act

    The DOT has analyzed the environmental impacts of this proposed 
action pursuant to the National Environmental Policy Act of 1969 (NEPA) 
(42 U.S.C. 4321 et seq.) and has determined that it is categorically 
excluded pursuant to DOT Order 5610.1C, Procedures for Considering 
Environmental Impacts (44 FR 56420, Oct. 1, 1979). Categorical 
exclusions are actions identified in an agency's NEPA implementing 
procedures that do not normally have a significant impact on the 
environment and therefore do not require either an environmental 
assessment (EA) or environmental impact statement (EIS). See 40 CFR 
1508.4. In analyzing the applicability of a categorical exclusion, the 
agency must also consider whether extraordinary circumstances are 
present that would warrant the preparation of an EA or EIS. Id. 
Paragraph 3.c.5 of DOT Order 5610.1C incorporates by reference the 
categorical exclusions for all DOT Operating Administrations. This 
action is covered by the categorical exclusion listed in the Federal 
Highway Administration's implementing procedures, ``[p]romulgation of 
rules, regulations, and directives.'' 23 CFR 771.117(c)(20). The 
purpose of this rulemaking is to permit recipients and subrecipients to 
impose geographic-based hiring preferences whenever not otherwise 
prohibited by Federal statute. The agency does not anticipate any 
environmental impacts, and there are no extraordinary circumstances 
present in connection with this rulemaking.

Regulation Identifier Number

    A regulation identifier 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 contained in the heading of 
this document can be used to cross reference this action with the 
Unified Agenda.

List of Subjects in 2 CFR Part 1201

    Uniform administrative requirements, Cost principles, and audit 
requirements for Federal awards.

    Issued in Washington, DC, on February 24, 2015.
Anthony R. Foxx,
Secretary of Transportation.

    For the reasons set forth in the preamble, part 1201 of title 2 of 
the Code of Federal Regulations is proposed to be amended as follows:

PART 1201--UNIFORM ADMINISTRATIVE REQUIREMENTS, COST PRINCIPLES, 
AND AUDIT REQUIREMENTS FOR FEDERAL AWARDS

0
1. The authority citation for part 1201 continues to read:

    Authority: 49 U.S.C. 322.

0
2. Add Sec.  1201.319 to read as follows:


Sec.  1201.319  Competition.

    Notwithstanding 2 CFR 200.319, non-Federal entities may utilize 
geographic hiring preferences (including local hiring preferences) 
pertaining to the use of labor on a project consistent with such non-
Federal entities' policies and procedures, when not otherwise 
prohibited by Federal statute or regulation.

[FR Doc. 2015-05215 Filed 3-5-15; 8:45 am]
BILLING CODE 4910-9X-P