[Federal Register Volume 86, Number 97 (Friday, May 21, 2021)]
[Notices]
[Pages 27672-27675]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-10797]


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DEPARTMENT OF TRANSPORTATION

Federal Transit Administration


Equitable Economic Recovery and Workforce Development Through 
Construction Hiring Pilot Program

AGENCY: Federal Transit Administration (FTA), Department of 
Transportation (DOT).

ACTION: Notice.

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SUMMARY: The Federal Transit Administration (FTA) is announcing an 
initiative to permit FTA recipients and subrecipients to utilize 
geographic, economic, or other hiring preferences on FTA-funded 
construction projects. This initiative will be carried out as a pilot 
program for a period of four years (unless extended) under authority 
provided in the Consolidated Appropriations Act, 2021, the Federal 
grants management regulation, and a recent Office of Management and 
Budget Memorandum (March 19, 2021). The purpose of this pilot program 
is to provide flexibility to utilize hiring preferences to promote 
equitable creation of employment opportunities and workforce 
development activities, particularly for economically or socially 
disadvantaged workers, while evaluating the impact of such preferences 
on full and open competition and project delivery.

DATES: This pilot program is effective May 21, 2021. This pilot program 
will end May 21, 2025, unless it is extended.

FOR FURTHER INFORMATION CONTACT: Dana Nifosi, Deputy Chief Counsel, 
Federal Transit Administration, 1200 New Jersey Ave. SE, Washington, DC 
20590, 202-366-4011.

SUPPLEMENTARY INFORMATION:

Electronic Access

    An electronic copy of this document may also be downloaded from the 
Office of the Federal Register's website at www.FederalRegister.gov and 
the Government Publishing Office's website at www.GovInfo.gov.

Background

    FTA advances the mission of improving public transportation for 
America's communities, in part, by providing funding for the 
construction of public transportation facilities and the training and 
development of the public transportation workforce. These activities 
provide opportunities and access to construction careers, including for 
disadvantaged and under-represented individuals.
    Today, FTA is announcing a new initiative, which will be conducted 
as a pilot program, to permit FTA recipients and subrecipients to 
utilize geographic, economic, or other hiring preferences on FTA-funded 
construction projects. This initiative implements a provision in the 
Consolidated Appropriations Act, 2021 (Pub. L. 116-260, Dec. 27, 2020, 
134 Stat 1182), which has been included in prior Appropriations Acts 
since Fiscal Year (FY) 2016, that authorizes the Secretary to permit 
States and local governments to implement geographic, economic, or 
other hiring preferences not otherwise authorized by law, subject to 
certain mandatory certifications that the recipient must make. Through 
this pilot program, FTA also will exercise flexibility recently granted 
to Federal agencies by the Office of Management and Budget (OMB) to 
support recipients and subrecipients in achieving equitable economic 
recovery from the COVID-19 public health emergency. Additionally, the 
pilot program advances Executive Order (E.O.) 13985, ``Executive Order 
on Advancing Racial Equity and Support for Underserved Communities 
Through the Federal Government,'' issued on January 20, 2021, by 
supporting workers in overcoming barriers to obtaining successful, long 
term careers in the transit construction industry.

Job Opportunity, Equity, and Workforce Development

    FTA supports equity in workforce development through several 
programs pursuant to 49 U.S.C. 5314(b). It funds human resource and 
training activities, including outreach programs to increase employment 
for veterans, women, individuals with disabilities, and minorities in 
public transportation activities. FTA also administers the competitive 
Innovative Public Transportation Frontline Workforce Development 
Program, which requires programs eligible for funding to undertake 
mandatory activities, including development of apprenticeships, on-the-
job training, and instructional training; building partnerships with 
local public transportation operators, unions, workforce development 
boards, and State workforce agencies to identify workforce skill gaps; 
and addressing current and projected workforce shortages by developing 
partnerships with high schools, community colleges, and other community 
organizations. Notwithstanding such workforce training and development 
activities, barriers to employment in the transit construction industry 
remain, particularly for underserved communities.

General Prohibition on Exclusionary or Discriminatory Preferences in 
Contracting

    In general, Federal law prohibits recipients and subrecipients of 
Federal funds, including under Chapter 53 of Title 49 of the United 
States Code, from using certain contracting provisions that do not 
directly relate to the bidder's performance of work in a competent and 
responsible manner. Specifically, 49 U.S.C. 5325(a) and 5323(h)(3), 
respectively, require FTA recipients to conduct all federally funded 
procurements in a manner that provides full and open competition as 
determined by the Secretary, and prohibit FTA grant funds from being 
used to support a procurement that uses an exclusionary or 
discriminatory specification. These provisions are similar to 23 U.S.C. 
112(a), which requires FHWA to ensure that plans, specifications, and 
methods of bidding for highway construction undertaken or overseen by 
state transportation department must be effective in securing 
competition.
    In addition, the Federal grants management regulation, 2 CFR 
200.319, prohibits the use of statutorily or administratively imposed 
state, local, or tribal geographical preferences in the evaluation of 
bids or proposals, except in those cases where applicable Federal 
statutes expressly mandate or encourage geographic preference. Examples 
of such provisions include local and other geographic-based labor 
hiring preferences.

Interpretation of Competition Mandate

    DOT historically has prohibited recipients and subrecipients from 
using certain contracting provisions that do not directly relate to the 
bidder's performance of work in a competent and responsible manner, due 
to concern that such provisions unduly restrict competition. In August 
2013, at DOT's request, the Department of Justice,

[[Page 27673]]

Office of Legal Counsel (OLC) issued a memorandum opinion interpreting 
23 U.S.C. 112 (Section 112). See Competitive Bidding Requirements Under 
the Federal-Aid Highway Program, 37 Op. OLC 33 (2013) (2013 OLC 
opinion). The 2013 OLC opinion is available at http://www.justice.gov/olc/opinions. The 2013 OLC opinion clarified that Section 112, which as 
discussed above, is analogous to 49 U.S.C. 5325(a), does not compel 
DOT's historic position with respect to contracting requirements that 
do not directly relate to the bidder's performance of work. Rather OLC 
concluded that Section 112 provides the Secretary with discretion to 
permit other types of State or local requirements if they do not 
``unduly limit competition.'' OLC explained that FHWA may reasonably 
determine that a State or local contracting provision does not unduly 
limit competition under Section 112 even if it may have the incidental 
effect of reducing the number of eligible bidders if it imposes 
reasonable requirements related to performance of the necessary work. 
2013 OLC opinion, at 35.
    Thus, DOT has discretion under 23 U.S.C. 112--and by extension 49 
U.S.C. 5325(a)--to evaluate whether a State or local law or policy is 
compatible with the competitive bidding requirements of these statutes. 
The process used to evaluate whether State and local requirements 
satisfy statutory competition requirements is a matter of agency 
discretion. 2013 OLC opinion, at 54.

Prior DOT Contracting Initiative Pilot Program

    On March 6, 2015, DOT announced in the Federal Register (80 FR 
12257) an initiative to permit, on an experimental basis, FHWA and FTA 
recipients and subrecipients to utilize various contracting 
requirements that generally have been disallowed due to concerns about 
adverse impacts on competition. This initiative was carried out as a 
pilot program, the purpose of which was to evaluate whether local or 
other geographic labor hiring preferences, economic-based labor hiring 
preferences (i.e., low-income workers), and labor hiring preferences 
for veterans unduly limit competition. For FTA, this pilot program 
applied to rolling stock procurements as well as contracting for 
construction projects.
    DOT extended the pilot program on March 17, 2016 (81 FR 14524) and 
January 18, 2017 (82 FR 5645). With the extension notices, DOT also 
amended the pilot program by adding certifications from participants, 
as required in the FY 2016 and FY 2017 DOT Appropriations Acts, see 
Public Law 114-113, Dec. 18, 2015, 129 Stat 2242, at Sec. 192; and 
Public Law 115-31, May 5, 2017, 131 Stat 135, at Sec. 191.
    On October 6, 2017, DOT published a notice in the Federal Register 
(2017 Notice) rescinding the pilot program, and announced the 
withdrawal of a related Notice of Proposed Rulemaking published on 
March 6, 2015 (80 FR 12092).
    FTA received only one application under this pilot program, from 
the Los Angeles County Metropolitan Transportation Authority, for four 
rolling stock procurements. FTA granted that application with 
modifications. FTA received no applications with respect to 
construction projects because the DOT Appropriations Acts for FY 2015 
and FY 2016 included a provision prohibiting FTA from enforcing the 
Federal regulatory prohibition on geographical preferences in 
procurements for construction hiring. See Public Law 113-235, Dec. 16, 
2014, 128 Stat 2130, at Sec. 418; Public Law 114-113, Dec. 18, 2015, 
129 Stat 2242, at Sec. 415. Thus, FTA recipients could utilize 
geographic preferences for construction hiring without obtaining FTA 
approval.

Current Pilot Program

I. Legal Authority

    The initiative set forth in this notice is authorized under Section 
199B of the Consolidated Appropriations Act, 2021 (Pub. L. 116-260, 
Dec. 27, 2020, 134 Stat 1182), 2 CFR 200.319, and Office and Management 
Budget Memorandum, ``Promoting Public Trust in the Federal Government 
through Effective Implementation of the American Rescue Plan Act and 
Stewardship of the Taxpayer Resources'' (March 19, 2021) (OMB 
Memorandum) at https://www.whitehouse.gov/wp-content/uploads/2021/03/M_21_20.pdf. Section 199B authorizes DOT-assisted contracts under 
titles 49 and 23 of the United States Code to use geographic, economic, 
or any other hiring preference not otherwise authorized by law only if 
the grant recipient certifies the following:
    (1) That except with respect to apprentices or trainees, a pool of 
readily available but unemployed individuals possessing the knowledge, 
skill, and ability to perform the work that the contract requires 
resides in the jurisdiction;
    (2) that the grant recipient will include appropriate provisions in 
its bid document ensuring that the contractor does not displace any of 
its existing employees in order to satisfy such hiring preference; and
    (3) that any increase in the cost of labor, training, or delays 
resulting from the use of such hiring preference does not delay or 
displace any transportation project in the applicable Statewide 
Transportation Improvement Program or Transportation Improvement 
Program. FTA's Annual Certifications and Assurances for FY 2021 include 
a provision that requires a recipient to make these required 
certifications if it will request that FTA approve the use of 
geographic, economic, or any other hiring preference not otherwise 
authorized by law on any contract or construction project to be 
assisted with an award from FTA. See FY2021 Annual Certifications and 
Assurances for FTA Grants and Cooperative Agreements, Category 19, at 
https://www.transit.dot.gov/sites/fta.dot.gov/files/2021-01/FY21-certifications.pdf.
    By ``expressly . . . encourag[ing] geographic preference,'' Section 
199B authorizes FTA to utilize geographic, economic, or any other 
hiring preference on FTA-assisted construction projects, despite the 
general Federal regulatory prohibition of the use of geographical 
preferences in the evaluation of bids or proposals. See 2 CFR 200.319 
(regulatory prohibition does not apply ``where applicable Federal 
statutes expressly mandate or encourage geographic preference''). 
Similarly, FTA would not consider a hiring preference that complies 
with Section 199B, and therefore, is permissible under 2 CFR 200.319, 
to be ``an exclusionary or discriminatory specification'' prohibited 
under 49 U.S.C. 5323(h)(3). In addition, the OMB Memorandum, which is 
aimed at providing administrative relief to recipients, allows Federal 
awarding agencies to grant certain exceptions to recipients affected by 
the pandemic, as those agencies deem appropriate and to the extent 
permitted by law. The memorandum states that these exceptions apply not 
only to recipients with COVID-19 related Federal financial assistance 
awards, but also to recipients with assistance awards unrelated to 
COVID-19. In Section VII of Appendix 3 to the memorandum, ``Exemption 
of certain procurement requirements'', OMB specifically allows awarding 
agencies to waive the procurement requirements contained in 2 CFR 
200.319(b) regarding geographical preferences, so long as awarding 
agencies require recipients to maintain appropriate records and 
documentation to support the charges against the Federal awards.

[[Page 27674]]

    Pursuant to these authorities, FTA is establishing this pilot 
program to monitor and evaluate recipients and subrecipients of FTA 
financial assistance that utilize geographic, economic, or any other 
preference for construction hiring that traditionally has been 
prohibited on the basis that such preference would restrict 
competition. Under this pilot program, FTA will consider hiring 
preferences only in relation to construction contracts. It will not 
consider hiring preferences for rolling stock procurements.

II. Objective

    FTA's objective is to permit recipients and subrecipients of FTA 
financial assistance to utilize geographic, economic, or other hiring 
preferences for construction contracts that will contribute to 
equitable economic recovery from the COVID-19 pandemic and create 
employment opportunities and promote workforce development on transit 
construction projects, particularly for economically or socially 
disadvantaged workers who may otherwise have significant barriers to 
entry to the transit construction industry. Through receipt of post-
contract award reports from participants, described below, FTA will 
monitor and evaluate the extent to which approved hiring preferences 
result in equitable construction hiring and positively impact workforce 
development for disadvantaged workers. FTA also will assess what impact 
the preferences have on competition and project delivery.
    Examples of hiring preferences that FTA will consider under this 
pilot program include local or other geographic labor hiring 
preferences, economic-based labor hiring preferences (e.g., for low-
income workers or economically disadvantaged communities), and other 
labor hiring preferences. The Appropriations Act certifications 
discussed above preclude FTA from approving proposals with requirements 
that would cause a contractor to displace its existing employees to 
satisfy the local contracting requirements.
    FTA will not approve proposals to alter the requirements of a 
state's approved Disadvantaged Business Enterprise (DBE) program or in 
any way require DBE firms to have any specific geographic location. 
Additionally, we note that even though hiring preferences may be 
utilized under this pilot program, State and local contracting agencies 
are responsible for ensuring that the establishment and implementation 
of their hiring preference are otherwise consistent with applicable 
Federal, State, and local laws.

III. Duration

    FTA plans to carry out this pilot program for a period of four 
years from the date of publication of this notice. FTA will consider 
proposals relating only to procurements that will be advertised during 
this time frame. FTA may extend or terminate the pilot program at its 
discretion after public notice.

IV. Participation in Pilot Program

    Recipients and subrecipients that intend to utilize geographic 
labor hiring preferences, economic-based labor hiring preferences, and 
other labor hiring preferences for construction contracts must receive 
approval from their FTA Regional Office prior to advertising contracts 
that include specifications with such preferences. Interested 
recipients and subrecipients must submit to their FTA Regional Office 
an application that addresses certain project specific factors that 
will help FTA evaluate the use of the particular hiring preference for 
the proposed project. These factors include, but are not limited to:
    (1) Description of the construction project, including the type of 
transit facility that will be constructed, the estimated schedule for 
completion, the estimated total project cost, and the Federal share of 
funding.
    (2) Description of the construction contracting opportunity, 
including the procurement method to be utilized and procurement 
schedule through contract award, the anticipated number and types of 
jobs that will be created by the contracting opportunity, and whether 
apprenticeships, including registered apprenticeships, and/or on-the-
job training will be associated with the contracting opportunity.
    (3) Description of the hiring preference proposed for the 
construction contracting opportunity. For example, is the hiring 
preference an incentive or mandatory? Does it apply to all labor on the 
project, or only to new hires? Will it apply to subcontractors?
    (4) Description of the employment opportunities and impacts on 
workforce development the hiring preferences are anticipated to have, 
and how the recipient will evaluate the actual impact the approved 
hiring preferences have on equitable construction hiring and workforce 
development, particularly for disadvantaged workers. Include one or 
more numeric goals of success, and describe what data will be collected 
to measure performance in achieving the goal(s).
    (5) Description of how the applicant will evaluate the effects of 
relevant contracting requirements on competition and project delivery. 
In doing so, the evaluation should include, at a minimum, comparisons 
of bids and unit prices received for the projects utilizing the 
relevant contract requirements to other projects of similar size and 
scope and in the same geographic area that do not utilize such 
requirements. If a reduction in the pool of bidders or an increase in 
unit prices is evident, explain the potential offsetting benefits 
resulting from the use of the requirement.
    (6) Description and quantification of how the hiring preferences 
would promote the efficient and effective use of Federal funds in 
connection with the particular contract, when considered over the long 
term for the recipient or subrecipient's program, or by serving to 
protect the integrity of the competitive bidding process.
    (7) Description of how the applicant will evaluate the effects of 
relevant contracting requirements on participation by DBE contractors 
and subcontractors (for example, evaluating whether DBE project goals 
were attained and whether the requirements acted as a barrier to DBE 
firms based on the composition of DBE firms' workforce).
    (8) Description of whether the proposed contracting requirement has 
been the subject of litigation or whether litigation surrounding the 
use of the requirement has been threatened.
    (9) Certify that the proposed contracting requirement complies with 
all applicable state and local laws.
    (10) Provide the required certifications from Section 199B of the 
Consolidated Appropriations Act, 2021, Public Law 116-260.
    Within fifteen business days of receipt of an application, FTA will 
conduct a preliminary review and advise the applicant regarding whether 
the application is complete or if additional information must be 
submitted. Within thirty days of receipt of a complete application, FTA 
will inform the applicant in writing whether the application is 
approved, approved with modifications, or denied. FTA approval will 
include reporting requirements, as addressed in Section V below.

V. Report Following Contract Award

    No later than 120 days after contract award, unless an extension is 
granted in writing by the applicable FTA Regional Office, the recipient 
or subrecipient must submit to the FTA Regional Office a report that 
evaluates the effects of the

[[Page 27675]]

approved contracting requirement on competitive bidding and project 
delivery. This report should, at a minimum: (1) Provide comparisons of 
bids received for the projects utilizing the relevant contract 
requirements to other projects of similar size and scope and in the 
same geographic area that are not utilizing such requirements; (2) If a 
reduction in the pool of bidders was evident, explain the potential 
offsetting benefits resulting from the use of the requirement; (3) 
Describe how the approved contracting requirement lead to an increase 
in the effectiveness and efficiency of Federal funds for the project; 
and (4) Describe and quantify how the approved contracting requirement 
promoted the efficient and effective use of Federal funds in connection 
with the contract, when considered over the long term for the recipient 
or subrecipient's program, or by serving to protect the integrity of 
the competitive bidding process.
    The recipient or subrecipient also must submit to the FTA Regional 
Office a report that evaluates the effects of the approved contracting 
requirement on job creation, equitable hiring, and workforce 
development. This report should, at a minimum: (1) Quantify total 
number of jobs created, by job category; (2) Summarize general 
statistics regarding where workers reside, including how many workers 
reside within same county as project; (3) Evaluate the actual impact 
the approved contracting requirement had on equitable construction 
hiring and workforce development, particularly for economically or 
socially disadvantaged workers; and (4) Evaluate the effects of 
relevant contracting requirements on participation by DBE contractors 
and subcontractors (for example, evaluating whether DBE project goals 
were attained and whether the requirements acted as a barrier to DBE 
firms based on the composition of DBE firms' workforce). Prior to 
approving the application, FTA will consult with the recipient or 
subrecipient to establish the deadline for this report, based on the 
size and complexity of the project. FTA will include the deadline for 
this report in the written approval. In general, the report will be due 
no later than three years after issuance of the Notice to Proceed for 
the contract, unless the recipient or subrecipient demonstrates that 
relevant data necessary for the required evaluations will not be 
available within the three-year timeframe.
    A review committee comprised of FTA staff will evaluate the reports 
and reserves the right to seek clarification from any recipient about 
any statement that is made in a report. FTA also may request additional 
documentation or information to be considered during the review 
process. FTA or DOT may use information received from pilot program 
participants through these reports to support future regulatory 
changes, guidance and/or policies relating to utilization of hiring 
preferences in contracting.

    Authority:  Section 199B of the Consolidated Appropriation Act, 
2021; 2 CFR 200.319.

Nuria I. Fernandez,
Deputy Administrator.
[FR Doc. 2021-10797 Filed 5-20-21; 8:45 am]
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