DEPARTMENT OF TRANSPORTATION 4910-9X				

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. 

SUMMARY: The DOT proposes to amend its regulations in 2 CFR Part 1201 

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 [INSERT 30 DAYS AFTER DATE 

OF PUBLICATION IN THE FEDERAL REGISTER]. 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. 
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 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 nonFederal 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 

																																																								

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 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. 
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and was found in the DOT’s implementation of the prior version of OMB’s Common 

Rule (49 CFR 18.36(c)(2) (2014)). 

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 No. 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-

																																																								

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 
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funded project in FY 2015, Congress has diminished the legal effectiveness of this 

provision. 

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 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 

																																																																																																																																																																					 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). 
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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. 
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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. 60l612), 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 
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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 
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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. 

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 
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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

2 CFR Part 1201 
10 

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 amended as follows: 

PART 1201 -- UNIFORM ADMINISTRATIVE REQUIREMENTS, COST 

PRINCIPLES, AND AUDIT REQUIREMENTS FOR FEDERAL AWARDS 

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

Authority: 49 U.S.C. § 322 

2. Add new section 1201.319 to read as follows: 

§ 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.