Federal Register / Vol. 72, No. 156 / Tuesday, August 14, 2007 / Rules and Regulations 45329 

1 Information concerning Special Experimental 

Project No. 14 (SEP–14), ‘‘Innovative Contracting 

Practices,’’ is available on FHWA’s home page: 

http://www.fhwa.dot.gov. Additional information 

may be obtained from the FHWA Division 

Administrator in each State. 

additive regulations to provide for the 

safe use of D&C Black No. 3 (bone black, 

subject to FDA batch certification) as a 

color additive in the following 

cosmetics: Eyeliner, eye shadow, 

mascara, and face powder. 

DATES: Effective date confirmed: July 20, 

2007. 

FOR FURTHER INFORMATION CONTACT: 

Judith Kidwell, Center for Food Safety 

and Applied Nutrition (HFS–265), Food 

and Drug Administration, 5100 Paint 

Branch Pkwy., College Park, MD 20740–

3835, 301–436–1071. 

SUPPLEMENTARY INFORMATION: In the 

Federal Register of June 19, 2007 (72 FR 

33664), FDA amended the color additive 

regulations to add § 74.2053 (21 CFR 

74.2053) to provide for the safe use of 

D&C Black No. 3 as a color additive in 

the following cosmetics: Eyeliner, eye 

shadow, mascara, and face powder. 

FDA gave interested persons until 

July 19, 2007, to file objections or 

requests for a hearing. The agency 

received no objections or requests for a 

hearing on the final rule. Therefore, 

FDA finds that the effective date of the 

final rule that published in the Federal 

Register of June 19, 2007, should be 

confirmed. 

List of Subjects in 21 CFR Part 74 

Color additives, Cosmetics, Drugs. 

Therefore, under the Federal Food, 

Drug, and Cosmetic Act (21 U.S.C. 321, 

341, 342, 343, 348, 351, 352, 355, 361, 

362, 371, 379e) and under authority 

delegated to the Commissioner of Food 

and Drugs (1410.10 of the FDA Staff 

Manual Guide), notice is given that no 

objections or requests for a hearing were 

filed in response to the June 19, 2007, 

final rule. Accordingly, the amendments 

issued thereby became effective July 20, 

2007. 

Dated: August 7, 2007. 

Jeffrey Shuren, 

Assistant Commissioner for Policy. 

[FR Doc. E7–15831 Filed 8–13–07; 8:45 am] 

BILLING CODE 4160–01–S 

DEPARTMENT OF TRANSPORTATION 

Federal Highway Administration 

23 CFR Parts 630, 635, and 636 

[FHWA Docket No. FHWA–2006–22477] 

RIN 2125–AF12 

Design-Build Contracting 

AGENCY: Federal Highway 

Administration (FHWA), DOT. 

ACTION: Final rule. 

SUMMARY: The FHWA is amending its 

regulations for design-build contracting 

as mandated by section 1503 of the 

‘‘Safe, Accountable, Flexible, Efficient 

Transportation Equity Act: A Legacy for 

Users’ (SAFETEA–LU). This rule will 

allow State transportation departments 

or local transportation agencies to issue 

request-for-proposal documents, award 

contracts, and issue notices-to-proceed 

for preliminary design work prior to the 

conclusion of the National 

Environmental Policy Act (NEPA) 

process. 

EFFECTIVE DATE: September 13, 2007. 

FOR FURTHER INFORMATION CONTACT: For 

technical information: Mr. Gerald 

Yakowenko, Office of Program 

Administration (HIPA), (202) 366–1562. 

For legal information: Mr. Michael 

Harkins, Office of the Chief Counsel 

(HCC–30), (202) 366–4928, Federal 

Highway Administration, 1200 New 

Jersey Avenue, SE., Washington, DC 

20590. Office hours are from 7:45 a.m. 

to 4:15 p.m., e.t., Monday through 

Friday, except Federal holidays. 

SUPPLEMENTARY INFORMATION: 

Electronic Access 

This document and all comments 

received by the DOT Dockets, Room PL–

401, may be viewed through the Docket 

Management System (DMS) at http:// 

dms.dot.gov. It is available 24 hours 

each day, 365 days each year. Electronic 

submission and retrieval help and 

guidelines are available under the help 

section of this Web site. 

An electronic copy of this document 

may be downloaded from the Federal 

Register’s home page at http:// 

www.archives.gov and the Government 

Printing Office’s Web page at http:// 

www.access.gpo.gov/nara. 

Background 

Section 1503 of the SAFETEA–LU 

(Pub. L. 109–59; August 10, 2005, 119 

Stat. 1144) revises the definition of a 

design-build ‘‘qualified project’’ (23 

U.S.C. 112(b)(3)). This change removes 

a previous monetary threshold for 

design-build projects, thus eliminating 

the requirement to approve Federal-aid 

design-build projects exceeding certain 

dollar thresholds under Special 

Experimental Project No. 14 (SEP–14).1

When appropriate, the FHWA will 

continue to make SEP–14 available for 

projects that do not conform to the 

requirements of 23 CFR part 636. 

Section 1503 also requires the 

Secretary of Transportation to make 

certain changes to the design-build 

regulations at 23 CFR part 636. 

Generally, section 1503 requires the 

Secretary to amend the design-build 

rule to permit a State transportation 

department to release requests for 

proposals and award design-build 

contracts prior to the completion of the 

NEPA process, but preclude a contractor 

from proceeding with final design or 

construction before NEPA is complete. 

Notice of Proposed Rulemaking 

(NPRM) 

The FHWA published a NPRM on 

May 25, 2006, (71 FR 30100) proposing 

certain changes to comply with section 

1503 of SAFETEA–LU. All comments 

received in response to the NPRM have 

been considered in drafting this final 

rule. We received 36 comments. The 

commenters include: one private 

individual, one Federal agency, the 

Governor of the State of Indiana, 18 

State departments of transportation 

(State DOTs), 3 local public agencies, 8 

industry organizations, and 4 firms that 

provide engineering and construction 

services. We classified the American 

Association of State Highway and 

Transportation Officials (AASHTO) as a 

State DOT, because it represents State 

DOT interests. It is noted that the State 

DOTs of Idaho, Montana, North Dakota, 

and South Dakota submitted a combined 

comment. It is also noted that these 

State DOTs, as well as the Wyoming 

Department of Transportation, simply 

commented that they support the 

comments submitted by AASHTO. 

Additionally, an organization known as 

the E–470 Public Highway Authority 

simply commented that it supports the 

comments submitted by the Texas 

Department of Transportation (TxDOT). 

Lastly, the FHWA notes that the 

Southern California Association of 

Governments (SCAG) submitted its 

comments on the design-build NPRM to 

the docket for the FHWA’s planning 

NPRM (Docket No. FHWA–2005–

22986). The FHWA considered SCAG’s 

comments along with all other 

comments submitted to the rulemaking 

docket for the design-build NPRM in 

developing this final rule. 

General 

The following discussion summarizes 

the major comments submitted to the 

docket by the commenters on the 

NPRM, notes where and why changes 

have been made to the rule, and, where 

relevant, states why particular 

recommendations or suggestions have 


sroberts on PROD1PC70 with RULES
45330 Federal Register / Vol. 72, No. 156 / Tuesday, August 14, 2007 / Rules and Regulations 

not been incorporated into the final 

rule. 

Analysis of NPRM Comments and 

FHWA Response by Section 

Section 630.106 Authorization to 

proceed 

The Virginia Department of 

Transportation (VDOT), Utah 

Department of Transportation (UDOT), 

TxDOT, Associated General Contractors 

(AGC) of America, Design-Build 

Institute of America (DBIA), and Bechtel 

Infrastructure Corporation (Bechtel) 

each commented on the changes 

proposed for this section. Bechtel 

commented that the project agreement 

for a design-build project should be 

executed prior to the completion of the 

NEPA process. The FHWA disagrees 

with this comment to the extent that 

Bechtel is requesting that the project 

agreement cover final design and 

physical construction. The execution of 

the project agreement for a project 

constitutes an obligation of Federal 

funds to the project, and the FHWA is 

precluded under 40 CFR 1508.18 and 23 

CFR 771.109 and 771.113 from funding 

final design or physical construction. 

However, the FHWA agrees that project 

agreements may be executed for 

preliminary engineering, preliminary 

design, and other preconstruction 

activities for design-build projects. 

Accordingly, we have amended the final 

regulatory text in section 630.106(a)(3) 

to clarify that only project agreements 

for final design and physical 

construction must wait until the 

conclusion of the NEPA process. 

AGC of America commented that 

there is no definition of preliminary 

engineering, while preliminary design is 

defined in section 636.103. Preliminary 

design is defined because the 

amendments to 23 U.S.C. 112(b)(3) in 

section 1503 of SAFETEA–LU make a 

distinction between preliminary design 

and final design. Under these 

amendments, a design-builder may 

proceed to conduct preliminary design, 

but not final design. There is nothing in 

the SAFETEA–LU amendments to 

preclude preliminary engineering, 

which generally consists of those 

activities necessary for the analysis of a 

project or project alternatives, including 

environmental impacts, as necessary to 

complete the NEPA process. As such, 

preliminary engineering may continue 

to be authorized prior to the completion 

of the NEPA process as it has been prior 

to the SAFETEA–LU amendments. 

Thus, the FHWA does not believe that 

a separate definition of preliminary 

engineering is necessary. 

TxDOT, UDOT, and DBIA were each 

concerned that the language would 

preclude authorization for activities 

which may be carried out prior to the 

completion of the NEPA process other 

than preliminary engineering. Similarly, 

VDOT commented that the proposed 

regulatory change would preclude 

authorization for preconstruction 

activities that may not necessarily be 

preliminary engineering. The FHWA 

agrees with these comments and has 

amended the final regulation to include 

the term ‘‘preliminary design’’ as 

defined in section 636.103. It is not 

FHWA’s intent to preclude Federal 

participation in preliminary engineering 

or other activities that can be carried out 

consistent with NEPA. 

Section 635.112 Advertising for bids 

and proposals 

Bechtel and the National Council for 

Public Private Partnerships (NCPPP) 

both commented on the proposed 

changes to this section. In general, both 

suggested that the FHWA should extend 

the FHWA’s concurrence to the 

selection of the proposer and execute a 

project agreement. The FHWA disagrees 

with these comments. First, the FHWA 

cannot commit funds to a project before 

the NEPA process is complete. The 

execution of a project agreement for a 

design-build project would result in the 

obligation of Federal funds for the 

construction of the project prior to the 

completion of the NEPA process. 

Second, section 1503 of SAFETEA–LU 

amended 23 U.S.C. 112(b)(3) to 

expressly require the Secretary’s 

concurrence prior to issuing a request 

for proposals (RFP), awarding a designbuild contract, and issuing notices to 

proceed with preliminary design. 

Bechtel and NCPPP’s comments would 

result in the Secretary only concurring 

in the RFP. 

Section 635.309 Authorization 

The FHWA is making a technical, 

conforming amendment to the 

regulation at section 635.309(p)(1). 

Specifically, the FHWA is deleting the 

parenthetical providing that the States’

authority to advertise or release a 

request for proposals document may not 

be granted until the NEPA review 

process has been concluded. In place of 

the parenthetical, the FHWA has 

inserted the words ‘‘for final design and 

physical construction.’’ This 

amendment is necessary to ensure that 

there is no confusion in the regulations 

concerning whether an request for 

proposals document may be released, or 

a design-build contract may be awarded, 

in accordance with 23 U.S.C. 

112(b)(3)(D). However, this section 

would continue to preclude project 

authorization for final design and 

physical construction of a design-build 

project until after the NEPA review 

process is complete. 

The substance of this amendment, 

which is to allow the release of a request 

for proposals document prior to the 

completion of the NEPA process, was 

addressed in the NPRM. Specifically, 

the proposed changes to sections 

635.112 and 636.109 both expressly 

dealt with the advertising and release of 

a request for proposals document for a 

design-build project prior to the 

conclusion of the NEPA process. 

Additionally, the decision to prohibit 

project authorization for the final design 

and physical construction of a designbuild project were proposed in sections 

630.106 and 636.109 of the NPRM. 

Section 635.413 Guaranty and 

warranty clauses 

Bechtel and NCPPP commented on 

the proposed amendments to this 

section. In general, Bechtel and NCPPP 

commented that this section should be 

revised to allow for additional 

warranties beyond the normal 

construction/contractor warranties of 1–

2 years. The FHWA disagrees with these 

comments. The FHWA’s funding 

authority is generally limited to 

participation in construction and 

preventive maintenance. The FHWA 

will authorize the use of Federal 

funding to procure a warranty, if the 

warranty is for a construction or 

preventative maintenance project. The 

proposed regulatory language does not 

preclude the contracting agency from 

procuring warranties for projects other 

than construction and preventative 

maintenance with its own funds. 

Section 636.103 What are the 

definitions of terms used in this part? 

We received several comments on the 

proposed definitions under this section 

in the NPRM. These comments are 

discussed under each respective 

definition below. 

‘‘Developer’’

VDOT, UDOT, TxDOT, AASHTO, and 

DBIA each commented on the proposed 

definition of ‘‘developer.’’ These 

comments generally stated that the 

distinction between developer and 

design-builder is unclear and that the 

definition duplicates the language in the 

proposed definition of public-private 

agreement. The FHWA agrees with these 

comments and has decided to strike the 

definition of developer from the final 

rule. Since the FHWA has struck the 

changes to 636.119, as discussed below, 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 72, No. 156 / Tuesday, August 14, 2007 / Rules and Regulations 45331 

the term developer no longer has any 

significance to the regulations. 

‘‘Final Design’’

TxDOT, UDOT, Maryland State 

Highway Administration (MdSHA), 

Pennsylvania Department of 

Transportation (PennDOT), Missouri 

Department of Transportation (MoDOT), 

New Jersey Department of 

Transportation (NJDOT), Louisiana 

Department of Transportation and 

Development (LDOTD), Indiana 

Governor Mitch Daniels, AASHTO, AGC 

of America, DBIA, Jacobs Civil, Inc. 

(JCI), and the Nossaman, Guthner, Knox, 

and Elliott LLP law firm/The Ferguson 

Group LLC (Nossaman) each 

commented on this proposed definition. 

In general, the comments stated that the 

definition is too restrictive and that the 

definition should be limited to work 

directly associated with the preparation 

of final construction plans and detailed 

technical specifications. The comments 

arguing that the definition is too 

restrictive are based on the comments to 

the proposed definition of preliminary 

design, which are discussed below. As 

explained below, the proposed 

definition of preliminary design has 

been broadened in the final rule. Thus, 

the language in the definition of final 

design stating that final design includes 

any design activities following 

preliminary design has been retained 

and the language concerning any design 

activities not necessary to complete the 

NEPA process has been stricken. 

Moreover, since a number of 

commenters stated that final design 

includes work directly related to the 

preparation of final construction plans 

and detailed specifications, these 

activities have been expressly included 

in the definition of final design. 

‘‘Preliminary Design’’

All of the commenters substantially 

commented on the proposed definition 

of ‘‘preliminary design.’’ Specifically, 

LDOTD, Georgia Department of 

Transportation (GDOT), Indiana 

Governor Mitch Daniels, NJDOT, 

MoDOT, PennDOT, Knik Arm Bridge 

and Toll Authority (KABATA), 

California Department of Transportation 

(Caltrans), VDOT, Ohio Department of 

Transportation (OhDOT), Oregon 

Department of Transportation (OrDOT), 

UDOT, Minnesota Department of 

Transportation (Mn/DOT), Florida 

Department of Transportation (FDOT), 

MdSHA, TxDOT, AASHTO, AGC of 

America, American Council of 

Engineering Companies (ACEC), NCPPP, 

Nossaman, Bechtel, Washington Group 

International (WGI), JCI, Michael T. 

McGuire, Professional Engineers in 

California Government, and SCAG all 

commented on this proposed definition. 

Michael T. McGuire commented that 

allowing a design-builder to proceed 

with preliminary design prior to NEPA 

is a conflict of interest. The FHWA 

disagrees with this comment. So long as 

the design-builder does not prepare the 

NEPA documents, the conflict of 

interest provision in the Council on 

Environmental Quality (CEQ) 

regulation, 40 CFR 1506.5(c), is met. 

The Professional Engineers in 

California Government commented that 

they agreed with the proposed 

definition of ‘‘preliminary design.’’ All 

other commenters felt that the proposed 

definition is too narrow. In general, 

these commenters were concerned that 

the definition would exclude activities 

needed to comply with other 

environmental laws and omit activities 

that have been traditionally considered 

preliminary engineering, that do not 

materially affect the consideration of 

alternatives in the NEPA analysis, and 

that work to advance the design of the 

preferred alternative as permitted in 23 

U.S.C. 139(f)(4)(D), which was added by 

section 6002 of SAFETEA–LU. Several 

commenters also listed specific 

activities that have traditionally been 

allowed to proceed during the NEPA 

review process. After considering these 

comments, the FHWA agrees that the 

proposed definition is too narrow. It is 

not the FHWA’s intent to preclude the 

States from conducting preliminary 

engineering and other pre-decisional 

project-related activities consistent with 

NEPA when a request for proposals is 

issued or design-build contract is 

awarded, prior to the completion of the 

NEPA process. Accordingly, the FHWA 

has revised the definition of preliminary 

design to mean activities undertaken to 

define the general project location and 

design concepts. The FHWA has also 

specified some general activities that 

may be conducted as preliminary design 

that typically do not compromise the 

objectivity of the NEPA process. These 

activities were specifically identified by 

VDOT, OhDOT, MdSHA, TxDOT, 

UDOT, AASHTO, DBIA, and Nossaman. 

The activities specified in this 

definition are not intended to be an 

exhaustive list of activities that may be 

considered preliminary design. 

However, any activity, regardless of its 

inclusion in the definition of 

preliminary design, must not materially 

affect the object consideration of 

alternatives in the NEPA review 

process. 

‘‘Public-Private Agreement’’

UDOT, TxDOT, AASHTO, and DBIA 

each submitted comments on the 

proposed definition of ‘‘public-private 

agreement.’’ In general, these comments 

stated that the definition is overly broad 

and makes the distinction between 

design-build contracts and publicprivate agreements unclear. The FHWA 

agrees with these comments and has 

adopted a modified version of the 

language suggested by UDOT, TxDOT, 

and DBIA to the definition of publicprivate agreement in the final rule. 

‘‘Qualified Project’’

The AGC of Texas, NJDOT, and GDOT 

each commented on the proposed 

definition of ‘‘qualified project.’’ GDOT 

commented that it agrees with the 

definition. NJDOT asked whether 

FHWA approval is needed to award any 

design-build contract, even if it has 

limited scope and low total project cost. 

Pursuant to 23 CFR 636.109(c), FHWA 

approval is needed before awarding any 

design-build contract funded under title 

23, United States Code. AGC of Texas 

commented that the regulation should 

retain the $50 million general project 

and $5 million Intelligent 

Transportation System (ITS) project 

thresholds in the final rule. Since 

Congress specifically amended 23 

U.S.C. 112(b)(3)(C) in section 1503 of 

SAFETEA–LU to abolish these monetary 

thresholds, the FHWA does not believe 

that retaining them in the final rule is 

appropriate. 

Section 636.106 Is the FHWA’s Special 

Experimental Project No. 14—

‘‘Innovative Contracting’’ (SEP–14) 

approval necessary for a design-build 

project? 

MoDOT, PennDOT, and Mn/DOT 

each commented on the changes 

proposed for this section. MoDOT 

pointed out that the preamble to the 

NPRM mentioned a monetary threshold 

while the proposed regulation did not. 

To clarify this apparent inconsistency, 

the proposed regulation was intended to 

abolish the monetary threshold for SEP–

14 approval. Since Congress amended 

23 U.S.C.112 to eliminate the designbuild contracting monetary thresholds, 

SEP–14 approval is no longer needed for 

design-build projects below a certain 

monetary threshold. After considering 

this comment, the FHWA has decided 

that it is not necessary to expressly 

include SEP–14 as part of the final 

regulations, since it appears that SEP–14 

is no longer needed. However, SEP–14 

will continue to be available on a caseby-case basis as new innovative 

approaches to delivering design-build 

projects are proposed. 

PennDOT requested clarification that 

the reporting requirements are no longer 

necessary. To answer this question, 


sroberts on PROD1PC70 with RULES
45332 Federal Register / Vol. 72, No. 156 / Tuesday, August 14, 2007 / Rules and Regulations 

there are no reporting requirements 

contained in this final rule. Mn/DOT 

asked whether this rule replaces the 

SEP–15 program. The answer to the 

question is ‘‘no.’’ SEP–15 continues to 

be available on a case-by-case basis 

consistent with the parameters of the 

program. (For more information, see 69 

FR 59983, October 6, 2004.) 

Section 636.107 May contracting 

agencies use geographic preference in 

Federal-aid design-build or publicprivate partnership projects? 

TxDOT, UDOT, MoDOT, DBIA, and 

AGC of America each commented on 

the proposed changes to this section. 

AGC of America supports the 

prohibition on geographic preferences. 

MoDOT suggested deleting the 

parenthetical contained in the proposed 

language in order to avoid future 

misinterpretation that would exclude 

non-geographic based incentives. This 

section only applies to geographic 

preferences and the parenthetical is 

merely intended to clarify that all means 

of such preferences are prohibited. 

Thus, the FHWA has retained the 

parenthetical in the final language. 

TxDOT, UDOT, and DBIA suggested 

eliminating the word ‘‘prohibit’’ and 

making other minor revisions because 

they felt that this language implies that 

the contract documents must 

affirmatively address these issues. The 

FHWA agrees with these comments and 

has revised the final rule to incorporate 

the suggested language. 

Section 636.109 How does the NEPA 

process relate to the design-build 

procurement process? 

There were several comments on the 

changes to this proposed section in the 

NPRM. These comments are discussed 

under each respective subsection below. 

Section 636.109(a) 

PennDOT, UDOT, TxDOT, DBIA, and 

WGI each commented on the proposed 

changes to section 636.109(a). WGI 

commented that it supports these 

changes. PennDOT commented that it 

needs clarification that the FHWA will 

grant concurrence to proceed with the 

activities outlined in section 636.109(a), 

so long as the conditions outlined in the 

proposed rule are met. The FHWA 

assumes that PennDOT’s comments are 

based on the preamble to the NPRM, 

where the FHWA stated that contracting 

agencies need FHWA concurrence prior 

to proceeding with any of the activities 

specified in the proposed subsection. To 

clarify this issue, a contracting agency 

does not need FHWA concurrence to 

issue a request for qualifications at any 

point in the process. However, FHWA 

concurrence for the other activities 

specified in this subsection is required. 

FHWA intends to concur with the 

activities outlined in section 636.109(a), 

(such as issuing an RFP, awarding a 

contract, proceeding with preliminary 

design, etc.), provided all applicable 

Federal requirements are met. 

UDOT, TxDOT, and DBIA stated that 

some minor changes are needed in order 

to clarify the intent in the first 

paragraph under section 636.109 as well 

as section 636.109(a)(1). The FHWA 

agrees to add the language suggested by 

UDOT, TxDOT, and DBIA in section 

636.109(a)(1) concerning the protection 

of contracting agencies in the first 

paragraph of section 636.109, but does 

not agree to strike the language 

concerning the protection of designbuild proposers in the first paragraph. 

The FHWA believes that this section 

protects the interests of both contracting 

agencies and design-build proposers. 

Additionally, UDOT, TxDOT, and DBIA 

requested that language be added to 

clarify that a design-builder can proceed 

with final design and construction for 

projects that have already obtained final 

NEPA approval. An example to amplify 

these comments would be a project that 

is being conducted under a tiered NEPA 

analysis. At any given point, tier 2 

NEPA approvals could be given at 

different times for any portions with 

independent utility and logical termini 

within the tier 1 NEPA document. The 

FHWA agrees with these comments and 

has added a new paragraph (6) to 

section 636.109(a) to clarify this issue. 

Section 636.109(b) 

MdSHA, FDOT, Mn/DOT, UDOT, 

VDOT, TxDOT, Caltrans, MoDOT, 

Indiana Governor Mitch Daniels, 

AASHTO, DBIA, ACEC, NCPPP, 

Bechtel, Wilbur Smith Associates, 

Nossaman, and the Environmental 

Protection Agency (EPA) each 

commented on proposed 636.109(b). 

First, UDOT, TxDOT, and DBIA 

commented that the language should be 

clarified to ensure that a design-builder 

can proceed with final design and 

construction on projects that have 

already obtained NEPA approval. The 

FHWA agrees that a design-builder 

should be allowed to proceed with such 

work on projects for which NEPA 

approval has been obtained and intends 

that design-builders be allowed to do so 

under these regulations. However, the 

FHWA does not believe that additional 

language is needed to clarify this intent. 

Second, MdSHA, FDOT, Mn/DOT, 

UDOT, Indiana Governor Mitch Daniels, 

AASHTO, ACEC, NCPPP, and 

Nossaman each commented that the 

contracting agencies and designbuilders should be allowed to proceed 

with final design activities at risk. In 

general, States can proceed with final 

design activities under the design-bidbuild method of contracting so long as 

those activities include no Federal 

funding and the State understands that 

its preferred alternative could ultimately 

be rejected by the FHWA. See, e.g., 

Burkholder v. Wykle, 268 F. Supp. 2d 

835 (N.D. Ohio 2002). However, the 

amendment to 23 U.S.C. 112(b)(3)(D)(iii) 

in section 1503 of SAFETEA-LU 

expressly requires the design-build 

regulations to ‘‘preclude the designbuild contractor from proceeding with 

final design or construction of any 

permanent improvement prior to the 

completion of the process of such 

section 102.’’ In other words, Congress 

has directed that the regulations must 

preclude the design-build contractor 

from proceeding with either final design 

or construction. Therefore, the FHWA is 

unable to permit the design-builder to 

proceed with final design, regardless of 

whether these activities are funded by 

the FHWA, the State, or the contractor 

itself. 

Third, FDOT, UDOT, TxDOT, VDOT, 

Caltrans, Indiana Governor Mitch 

Daniels, AASHTO, DBIA, and ACEC 

each commented on whether the designbuilder is precluded from preparing the 

NEPA decision document or any NEPA 

document. In general, these comments 

pointed out an inconsistency between 

the preamble to the NPRM, which refers 

to NEPA documents, and the proposed 

regulatory text in sections 636.109(b)(4) 

and (5), which uses the term ‘‘NEPA 

decision document.’’ To clarify this 

issue, the FHWA intends for the 

regulations to preclude a design-builder 

from preparing not only the NEPA 

decision documents (i.e. Categorical 

Exclusion (CE), Finding of No 

Significant Impact (FONSI), and Record 

of Decision (ROD)), but also the NEPA 

analysis documents (i.e. Environmental 

Assessment (EA) and Environmental 

Impact Statement (EIS)). The CEQ 

conflict of interest regulation at 40 CFR 

1506.5(c) expressly prohibits a 

contractor, who has an interest in the 

outcome of the NEPA process, from 

preparing an EIS. Additionally, this 

regulation has also been applied to EAs. 

See, e.g., Burkholder v. Peters, 58 Fed. 

Appx. 94 (6th Cir. 2003). Thus, the final 

regulations at section 636.109(b)(6) and 

(7) have been amended to clarify that 

the design-builder is precluded from 

preparing all NEPA documents, rather 

than just the NEPA decision documents. 

However, while the design-builder 

cannot prepare the NEPA documents, 

the FHWA notes that there is nothing in 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 72, No. 156 / Tuesday, August 14, 2007 / Rules and Regulations 45333 

the final regulations that would prohibit 

a design-builder from financing the 

preparation of the NEPA documents, so 

long as the criteria in section 

636.109(b)(7) are met. 

Fourth, UDOT, TxDOT, and DBIA 

suggested some minor clarifications to 

proposed section 636.109(b)(6) to ensure 

that the States can consider any work 

provided by the design-builder in the 

NEPA analysis. The FHWA agrees with 

these comments and has revised section 

636.109(b)(8) to incorporate UDOT, 

TxDOT, and DBIA’s suggested language. 

Fifth, Wilbur Smith Associates 

commented that barring consultants 

who are participating in the preparation 

of the NEPA documents from joining a 

design-build team will result in less 

economical projects. Although the 

FHWA appreciates eliminating 

unnecessary costs, FHWA notes that the 

CEQ regulations at 40 CFR 1506.5(c) 

prohibit such consultants from having a 

financial or other interest in the 

outcome of the project to avoid either 

the reality or the appearance of a 

conflict, thereby maintaining the 

credibility of the environmental review 

process. Sixth, the EPA had several 

general comments on section 

636.109(b). The EPA states that it is 

supportive of the provisions in the 

proposed rule intended to ensure an 

adequate review process and supports 

the prohibition on the design-builder 

from having any decisionmaking 

responsibility on the NEPA process. The 

EPA further commented that avoiding 

conflicts of interest and premature 

commitments to a particular alternative 

are difficult to ensure in practice. As 

such, the EPA suggested that the FHWA 

provide examples of appropriate 

contract provisions that would ensure 

that the merits of all alternatives are 

evaluated. An example of one such 

provision would be one precluding the 

commitment of significant financial 

resources to any particular alternative. 

Another example would be a provision 

that clearly allows the State to decide 

not to move forward with the project in 

the event the no-build alternative is 

selected, while allowing the designbuild contractor to receive a reasonable 

reimbursement of certain costs the 

contractor may have incurred in 

advancing the project. The FHWA is 

committed to work with the States to 

develop any such provisions to also 

ensure the integrity of the NEPA process 

is maintained. 

The EPA also expressed a concern 

about using financial incentives linked 

to milestones that could result in 

contractor reluctance to revise the NEPA 

analysis when appropriate. While the 

FHWA is not aware of any specific 

problems in this area, the FHWA shares 

the EPA’s concern and will discourage 

the use of any timeline-based incentives 

that may have an undue influence on 

the NEPA process. Additionally, the 

EPA commented on how appropriate 

oversight will be maintained under the 

surface transportation project delivery 

pilot program at 23 U.S.C. 327. Since 

this pilot program is limited only to the 

States’ assumption of the Secretary’s 

environmental responsibilities, the 

FHWA will retain full oversight over the 

contracting process. Moreover, the pilot 

program requires a memorandum of 

understanding to be executed between 

the State and the FHWA whenever a 

State assumes any of the Secretary’s 

responsibilities under the pilot program. 

Appropriate oversight provisions will be 

specified in these MOUs. 

Lastly, the FHWA is adding two new 

provisions at sections 636.109(b)(1) and 

(2). Section 636.109(b)(1) is intended to 

clarify that the design-builder may 

proceed with preliminary design under 

a design-build contract. Section 

636.109(b)(2) is intended to clarify that 

the States may permit any design and 

engineering activities to be undertaken 

for the purposes of defining the project 

alternatives and completing the NEPA 

alternatives analysis and review 

process; complying with other related 

environmental laws and regulations; 

supporting agency coordination, public 

involvement, permit applications, or 

development of mitigation plans; or 

developing the design of the preferred 

alternative to a higher level of detail 

when the lead agencies agree that it is 

warranted in accordance with 23 U.S.C. 

139(f)(4)(D). As previously discussed, 

several comments on the proposed 

definition of preliminary design 

expressed the concern that the States 

would not be able to conduct activities 

needed to comply with other related 

environmental laws or advance the 

design of the preferred alternative as 

permitted in 23 U.S.C. 139(f)(4)(D). The 

addition of section 636.109(b)(2) 

clarifies that the States may conduct 

these types of activities. 

Section 636.109(c) and (d) 

UDOT, TxDOT, MdSHA, DBIA, 

Association of Engineering Employees 

of Oregon, and Profession Engineers in 

California Government each commented 

on the proposed changes in section 

636.109(c) and (d). The Association of 

Engineering Employees of Oregon and 

Professional Engineers in California 

Government commented that section 

639.109(c) does not go far enough in 

protecting the integrity of the NEPA 

process. Section 636.109(c) would 

require certain FHWA approvals during 

the project development process and 

would clarify that any such approval is 

not a commitment of Federal funds. The 

FHWA believes that not committing any 

Federal funds until after the NEPA 

process is complete, in conjunction with 

the various FHWA approvals during the 

project development process as well as 

the requirements in section 636.109(b), 

adequately protect the integrity of the 

NEPA process. 

UDOT, TxDOT, MdSHA, and DBIA 

questioned why the FHWA is requiring 

concurrence in the issuance of a notice 

to proceed with preliminary design. 

Section 1503 of SAFETEA-LU amended 

23 U.S.C. 112(b)(3)(D)(ii) to require the 

States to receive concurrence from the 

Secretary prior to carrying-out any 

activity specified in 23 U.S.C. 

(b)(3)(D)(i), which includes the issuance 

of notices to proceed with preliminary 

design work. Thus, the States must 

receive FHWA concurrence prior to 

issuing a notice to proceed with 

preliminary design work. 

Section 636.116 What organizational 

conflict of interest requirements apply 

to design-build projects? 

TxDOT, UDOT, VDOT, PennDOT, 

DBIA, ACEC each commented on the 

proposed changes to section 636.116. 

ACEC supports the proposed changes to 

section 636.116, because it believes that 

firms have been unfairly eliminated 

from competing for design-build 

contracts merely by virtue of providing 

some technical work on a NEPA 

document. ACEC further suggests that 

the language be revised to preclude the 

States from disallowing such firms to 

compete for design-build contracts. In 

contrast to ACEC’s comments, PennDOT 

commented that it is concerned about 

the conflict of interest that may arise if 

the State subsequently needs the firm to 

provide additional input or work on the 

NEPA analysis for the project. The 

FHWA agrees with both ACEC and 

PennDOT. The FHWA has 

accommodated ACEC’s concern in the 

final rule by giving the States the 

flexibility to allow such firms to 

compete for design-build contracts. The 

FHWA has also accommodated 

PennDOT’s concern by making the 

changes discretionary on the part of the 

States rather than mandatory as 

requested by ACEC. 

VDOT, TxDOT, UDOT, and DBIA all 

supported the proposed changes to 

section 636.116. However, TxDOT, 

UDOT, and DBIA further commented 

that the contracting agency should have 

the flexibility to release a subconsultant 

to the consultant responsible for 

preparing the NEPA documents from 

further NEPA responsibilities and allow 


sroberts on PROD1PC70 with RULES
45334 Federal Register / Vol. 72, No. 156 / Tuesday, August 14, 2007 / Rules and Regulations 

such firm to compete for a design-build 

contract. The FHWA supports giving the 

States this flexibility and has added a 

new subsection (d) to section 636.116 in 

the final rule. 

Section 636.119 How does this Part 

apply to public-private agreements? 

TxDOT, FDOT, UDOT, MdSHA, 

Indiana Governor Mitch Daniels, AGC of 

America, NCPPP, WGI, and Bechtel 

each commented on this proposed 

section. WGI commented that it 

supports making public-private 

agreement procurements subject to State 

law. SCAG, Bechtel, and NCPPP were 

concerned that the numerous approvals 

required under this proposed section 

would add time and cost to the project 

delivery process. AGC of America 

commented that it supports the 

oversight provisions in the proposed 

section. TxDOT, UDOT, Indiana 

Governor Mitch Daniels, and SCAG 

commented that it is inappropriate for 

the FHWA to assert approval rights over 

State procedures. TxDOT, UDOT, and 

MdSHA commented that it is 

unnecessary for the FHWA to concur in 

requests for qualifications. TxDOT and 

UDOT further commented that some 

provisions of this proposed section were 

unclear, and FDOT commented that 

public-private agreement requirements 

should be an entirely separate part in 

the Code of Federal Regulations. 

After considering these comments, the 

FHWA agrees that some further 

revisions may be necessary and that it 

is more appropriate for these 

requirements to be contained in a 

separate part in the Code of Federal 

Regulations. Accordingly, the FHWA 

has struck the proposed changes to 

section 636.119 and will consider 

whether a future rulemaking for these 

requirements is necessary. Minor 

revisions have been made to section 

636.119(b) to define the FHWA’s 

requirements for preserving Federal-aid 

eligibility in any procurement actions 

under a public-private partnership. 

Section 636.302 Are there any 

limitations on the selection and use of 

proposal evaluation factors? 

TxDOT, UDOT, PennDOT, DBIA, 

Professional Engineers in California 

Government, and Association of 

Engineering Employees of Oregon each 

commented on the proposed changes to 

section 636.302. Professional Engineers 

in California Government and 

Association of Engineering Employees 

of Oregon commented that the price 

evaluation requirements should 

continue. The FHWA shares the concern 

about eliminating the price evaluation 

requirement. After considering these 

comments and taking a closer look at 

the proposed regulation, the FHWA has 

decided to add a new subparagraph to 

section 636.302(a)(1)(ii) to require that 

price be considered to the extent that 

the contract requires payment from the 

contracting agency utilizing Federal-aid 

highway funds to the design-builder for 

any services to be provided prior to final 

design or construction. The FHWA is 

adding this requirement, because the 

FHWA believes that the consideration of 

price will ensure that a project does not 

incur unreasonable costs. This provision 

will ensure that, to the extent the State 

must make any payments to the designbuilder, the price to be paid for these 

services is one of the factors that States 

must consider. 

The FHWA has also added language 

to section 636.302(a)(1)(iv) to clarify 

that the price reasonableness 

requirement only applies to the extent 

that the contracting agency wishes to 

use Federal funds for final design or 

construction. These provisions also 

respond to the comments made by 

TxDOT, UDOT, and DBIA who were 

concerned that some public-private 

agreements may not require any 

payment to be made to the designbuilder. However, whenever a contract 

is awarded prior to the completion of 

the NEPA process, it is impossible to 

consider the price of the total contract 

because an alternative has not yet been 

selected and final design has not yet 

been completed. Thus, a contracting 

agency will be able to consider price 

only to a certain extent. 

PennDOT commented that the 

proposed procedures in section 

636.302(a)(1) would be very complex 

and hard to implement. Since the 

statute now permits States to award 

contracts prior to the conclusion of the 

NEPA process, which will require the 

costs for final design and construction 

to be negotiated later, the States and 

FHWA must find a way to control the 

costs under the contract and ensure that 

the public gets a fair price for these 

services. Thus, the State will need to 

develop methodologies through which 

the State can determine whether the 

final fixed price for the project is 

reasonable. An open-book negotiation 

method through which both the 

contractor and the State share 

supporting data on the prices of the 

items being negotiated can be an 

effective way to make this 

determination. While the FHWA 

recognizes the difficulties in ensuring 

that the public gets the best price 

whenever a design-build contract is 

awarded prior to the conclusion of the 

NEPA process, we believe that a price 

reasonableness standard for these costs 

will be the most effective approach. The 

FHWA will provide appropriate 

guidance and support to the States in 

implementing this standard. 

Finally, TxDOT, UDOT, and DBIA 

each commented that the FHWA should 

not concur in the States’ price 

reasonableness determination, but 

rather only the methodologies the States 

use to make that determination. The 

FHWA disagrees with this comment. 

The FHWA is the steward of all Federal 

funds that are used in highway projects. 

Since total contract price cannot be 

considered during the competition to 

award a contract prior to the conclusion 

of the NEPA process, the FHWA must 

have some mechanism to ensure that 

price for the project for which Federal 

funds proposed to be used is reasonable. 

Rulemaking Analyses and Notices 

Executive Order 12866 (Regulatory 

Planning and Review) and DOT 

Regulatory Policies and Procedures 

The FHWA has determined that this 

rule is a significant regulatory action 

within the meaning of Executive Order 

12866, and within the meaning of the 

U.S. Department of Transportation’s 

regulatory policies and procedures. The 

Office of Management and Budget 

(OMB) has reviewed this document 

under E.O. 12866. This rule is 

significant, because of the substantial 

State, environmental, and industry 

interest in the design-build contracting 

technique. 

The economic impact of this 

rulemaking will be minimal and it will 

not adversely affect, in a material way, 

any sector of the economy. This 

rulemaking merely revises the FHWA’s 

policies concerning the design-build 

contracting technique. The final rule 

will not affect the total Federal funding 

available to the State DOTs under the 

Federal-aid highway program. 

Therefore, an increased use of designbuild delivery method will not yield 

significant economic impacts to the 

Federal-aid highway program. 

Additionally, this rule will not interfere 

with any action taken or planned by 

another agency and will not materially 

alter the budgetary impact of any 

entitlements, grants, user fees, or loan 

programs. Consequently, a full 

regulatory evaluation is not required. 

The FHWA does not have sufficient 

data to quantify the economic impacts 

of this rule. However, the FHWA 

believes that increased use of the 

design-build contracting method may 

result in certain efficiencies in the cost 

and time it normally takes to deliver a 

transportation project. We also believe 

that States will not use the design-build 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 72, No. 156 / Tuesday, August 14, 2007 / Rules and Regulations 45335 

contracting technique if using such a 

technique will increase the cost of a 

project. 

The design-build contracting 

technique is important to increasing the 

involvement of the private sector in the 

delivery of transportation projects. 

Insofar as this rule will increase the uses 

of the design-build contracting 

technique, it may result in increased 

private sector financial investment in 

transportation. The FHWA did not 

receive any comments on the economic 

impacts analysis in the NPRM. 

Regulatory Flexibility Act 

In compliance with the Regulatory 

Flexibility Act (5 U.S.C. 601–612), we 

have evaluated the effects of this action 

on small entities and have determined 

that the action will not have a 

significant economic impact on a 

substantial number of small entities. 

The rule addresses the obligation of 

Federal funds to States for Federal-aid 

highway projects. 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 

Regulatory Flexibility Act does not 

apply, and the FHWA certifies that the 

rule will not have a significant 

economic impact on a substantial 

number of small entities. 

Unfunded Mandates Reform Act of 

1995 

This rule will not impose unfunded 

mandates as defined by the Unfunded 

Mandates Reform Act of 1995 (Pub. L. 

104–4, 109 Stat. 48, March 22, 1995), 

because it will not result in the 

expenditure by State, local, tribal 

governments, or by the private sector, of 

$128.1 million or more in any 1 year (2 

U.S.C. 1532 et seq.). This rule merely 

updates the design-build regulation to 

reflect the changes made by SAFETEA–

LU. The design-build regulation allows, 

but does not require, States to use the 

design-build technique for the delivery 

of Federal-aid projects. States use the 

design-build contracting technique 

because, in some instances, it may 

reduce the time and cost of delivering 

a project. 

Further, 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) 

This rule has been analyzed in 

accordance with the principles and 

criteria contained in Executive Order 

13132 dated August 4, 1999, and the 

FHWA has determined that this rule 

will not have a substantial direct effect 

or sufficient federalism implications on 

the States. The FHWA has also 

determined that this final rule will not 

preempt any State law or regulation or 

affect the States’ ability to discharge 

traditional State governmental 

functions. 

Executive Order 12372 

(Intergovernmental Review) 

Catalog of Federal Domestic 

Assistance Program Number 20.205, 

Highway Planning and Construction. 

The regulations implementing Executive 

Order 12372 regarding 

intergovernmental consultation on 

Federal programs and activities apply to 

this program. The FHWA did not 

receive any comments on the 

intergovernmental review analysis. 

Paperwork Reduction Act 

Under the Paperwork Reduction Act 

of 1995 (PRA) (44 U.S.C. 3501, et seq.), 

the FHWA must obtain approval from 

the OMB for each collection of 

information we conduct, sponsor, or 

require through regulations. The FHWA 

has determined that this rule does not 

contain a collection of information 

requirement for purposes of the PRA. 

National Environmental Policy Act 

The FHWA has analyzed this rule for 

the purpose of the National 

Environmental Policy Act of 1969, as 

amended (42 U.S.C. 4321 et seq.), and 

has determined that this rule will not 

have any effect on the quality of the 

environment. The promulgation of 

regulations has been identified as a 

categorical exclusion under 23 CFR 

771.117(c)(20). However, Federal-aid 

highway projects on which design-build 

is used, must still comply with the 

National Environmental Policy Act of 

1969, as amended. 

Executive Order 12630 (Taking of 

Private Property) 

The FHWA has analyzed this rule 

under Executive Order 12630, 

Governmental Actions and Interface 

with Constitutionally Protected Property 

Rights. This rule will not affect a taking 

of private property or otherwise have 

taking implications under Executive 

Order 12630. 

Executive Order 12988 (Civil Justice 

Reform) 

This action meets applicable 

standards in sections 3(a) and 3(b)(2) of 

Executive Order 12988, Civil Justice 

Reform, to minimize litigation, 

eliminate ambiguity, and reduce 

burden. 

Executive Order 13045 (Protection of 

Children) 

We have analyzed this rule under 

Executive Order 13045, Protection of 

Children from Environmental Health 

Risks and Safety Risks. The FHWA 

certifies that this rule will not cause an 

environmental risk to health or safety 

that might disproportionately affect 

children. 

Executive Order 13175 (Tribal 

Consultation) 

The FHWA has analyzed this rule 

under Executive Order 13175, dated 

November 6, 2000, and believes that the 

rule will not have substantial direct 

effects on one or more Indian tribes; will 

not impose substantial direct 

compliance costs on Indian tribal 

governments; and will not preempt 

tribal laws. The rule addresses 

obligations of Federal funds to States for 

Federal-aid highway projects and will 

not impose any direct compliance 

requirements on Indian tribal 

governments. Therefore, a tribal 

summary impact statement is not 

required. 

Executive Order 13211 (Energy Effects) 

The FHWA has analyzed this action 

under Executive Order 13211, Actions 

Concerning Regulations That 

Significantly Affect Energy Supply, 

Distribution, or Use dated May 18, 2001. 

We have determined that it is not a 

significant energy action under that 

order, because, although it is a 

significant regulatory action under 

Executive Order 12866, it will not have 

a significant adverse effect on the 

supply, distribution, or use of energy. 

Therefore, a Statement of Energy Effects 

is not required. 

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. 


sroberts on PROD1PC70 with RULES
45336 Federal Register / Vol. 72, No. 156 / Tuesday, August 14, 2007 / Rules and Regulations 

List of Subjects 

23 CFR Part 630 

Bonds, Government contracts, Grant 

programs—transportation, Highways 

and roads, Reporting and recordkeeping 

requirements. 

23 CFR Part 635 

Construction and maintenance, Grant 

programs—transportation, Highways 

and roads, Reporting and recordkeeping 

requirements. 

23 CFR Part 636 

Design-build, Grant programs—

transportation, Highways and roads. 

Issued on: August 7, 2007. 

J. Richard Capka, 

FHWA Administrator. 

■ In consideration of the foregoing, the 

FHWA amends parts 630, 635, and 636 

of title 23, Code of Federal Regulations, 

as follows: 

PART 630—PRECONSTRUCTION 

PROCEDURES 

■ 1. Revise the authority citation for part 

630 to read as follows: 

Authority: Sec. 1503 of Pub. L. 109–59, 119 

Stat.1144; 23 U.S.C. 106, 109, 112, 115, 315, 

320, and 402(a); 23 CFR 1.32 and 49 CFR 

1.48(b). 

■ 2. Amend § 630.106 by revising the 

section heading and adding paragraph 

(a)(7) to read as follows: 

§ 630.106 Authorization to proceed. 

(a) * * * 

(7) For design-build projects, the 

execution or modification of the project 

agreement for final design and physical 

construction, and authorization to 

proceed, shall not occur until after the 

completion of the NEPA process. 

However, preliminary design (as 

defined in 23 CFR 636.103) and 

preliminary engineering may be 

authorized in accordance with this 

section. 

* * * * * 

PART 635—CONSTRUCTION AND 

MAINTENANCE 

■ 3. Revise the authority citation for part 

635 to read as follows: 

Authority: Sec. 1503 of Pub. L. 109–59, 119 

Stat.1144; 23 U.S.C. 101 (note), 109, 112, 113, 

114, 116, 119, 128, and 315; 31 U.S.C. 6505; 

42 U.S.C. 3334, 4601 et seq.; Sec. 1041 (a), 

Pub. L. 102–240, 105 Stat. 1914; 23 CFR 1.32; 

49 CFR 1.48(b). 

■ 4. Amend § 635.112 by revising 

paragraph (i)(1); by redesignating 

paragraphs (i)(2) and (i)(3) as (i)(3) and 

(i)(4), respectively; and by adding a new 

paragraph (i)(2) to read as follows: 

§ 635.112 Advertising for bids and 

proposals. 

* * * * * 

(i) * * * 

(1) When a Request for Proposals 

document is issued after the NEPA 

process is complete, the FHWA Division 

Administrator’s approval of the Request 

for Proposals document will constitute 

the FHWA’s project authorization and 

the FHWA’s approval of the STD’s 

request to release the document. This 

approval will carry the same 

significance as plan, specification and 

estimate approval on a design-bid-build 

Federal-aid project. 

(2) Where a Request for Proposals 

document is issued prior to the 

completion of the NEPA process, the 

FHWA’s approval of the document will 

only constitute the FHWA’s approval of 

the STD’s request to release the 

document. 

* * * * * 

■ 5. Revise § 635.309(p)(1) introductory 

text to read as follows: 

§ 635.309 Authorization. 

* * * * * 

(p) * * * 

(1) The FHWA’s project authorization 

for final design and physical 

construction will not be issued until the 

following conditions have been met: 

* * * * * 

■ 6. Revise § 635.413(e)(1)(i) to read as 

follows: 

§ 635.413 Guaranty and warranty clauses. 

* * * * * 

(e) * * * 

(1) * * * 

(i) The term of the warranty is short 

(generally one to two years); however, 

projects developed under a publicprivate agreement may include 

warranties that are appropriate for the 

term of the contract or agreement. 

* * * * * 

PART 636—DESIGN-BUILD 

CONTRACTING 

■ 7. Revise the authority citation for part 

636 to read as follows: 

Authority: Sec. 1503 of Pub. L. 109–59, 119 

Stat. 1144; Sec. 1307 of Pub. L. 105–178, 112 

Stat. 107; 23 U.S.C. 101, 109, 112, 113, 114, 

115, 119, 128, and 315; 49 CFR 1.48(b). 

Subpart A—General 

■ 8. Amend § 636.103 by adding in 

alphabetical order the definitions of 

‘‘final design,’’ ‘‘preliminary design,’’

‘‘price reasonableness,’’ and ‘‘publicprivate agreement,’’ and by revising the 

definition of a ‘‘qualified project’’ as 

follows: 

§ 636.103 What are the definitions of terms 

used in this Part? 

* * * * * 

Final design means any design 

activities following preliminary design 

and expressly includes the preparation 

of final construction plans and detailed 

specifications for the performance of 

construction work. 

* * * * * 

Preliminary design defines the general 

project location and design concepts. It 

includes, but is not limited to, 

preliminary engineering and other 

activities and analyses, such as 

environmental assessments, topographic 

surveys, metes and bounds surveys, 

geotechnical investigations, hydrologic 

analysis, hydraulic analysis, utility 

engineering, traffic studies, financial 

plans, revenue estimates, hazardous 

materials assessments, general estimates 

of the types and quantities of materials, 

and other work needed to establish 

parameters for the final design. Prior to 

completion of the NEPA review process, 

any such preliminary engineering and 

other activities and analyses must not 

materially affect the objective 

consideration of alternatives in the 

NEPA review process. 

* * * * * 

Price reasonableness means the 

determination that the price of the work 

for any project or series of projects is not 

excessive and is a fair and reasonable 

price for the services to be performed. 

* * * * * 

Public-private agreement means an 

agreement between a public agency and 

a private party involving design and 

construction of transportation 

improvements by the private party to be 

paid for in whole or in part by Federalaid highway funds. The agreement may 

also provide for project financing, atrisk equity investment, operations, or 

maintenance of the project. 

* * * * * 

Qualified project means any designbuild project (including intermodal 

projects) funded under Title 23, United 

States Code, which meets the 

requirements of this Part and for which 

the contracting agency deems to be 

appropriate on the basis of project 

delivery time, cost, construction 

schedule, or quality. 

* * * * * 

§ 636.106 [Removed] 

■ 9. Remove and reserve § 636.106. 

■ 10. Revise § 636.107 to read as 

follows: 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 72, No. 156 / Tuesday, August 14, 2007 / Rules and Regulations 45337 

§ 636.107 May contracting agencies use 

geographic preference in Federal-aid 

design-build or public-private partnership 

projects? 

No. Contracting agencies must not use 

geographic preferences (including 

contractual provisions, preferences or 

incentives for hiring, contracting, 

proposing, or bidding) on Federal-aid 

highway projects, even though the 

contracting agency may be subject to 

statutorily or administratively imposed 

in-State or local geographical 

preferences in the evaluation and award 

of such projects. 

§ 636.108 [Removed] 

■ 11. Remove and reserve § 636.108. 

■ 12. Revise § 636.109 to read as 

follows: 

§ 636.109 How does the NEPA process 

relate to the design-build procurement 

process? 

The purpose of this section is to 

ensure that there is an objective NEPA 

process, that public officials and 

citizens have the necessary 

environmental impact information for 

federally funded actions before actions 

are taken, and that design-build 

proposers do not assume an 

unnecessary amount of risk in the event 

the NEPA process results in a significant 

change in the proposal, and that the 

amount payable by the contracting 

agency to the design-builder does not 

include significant contingency as the 

result of risk placed on the designbuilder associated with significant 

changes in the project definition arising 

out of the NEPA process. Therefore, 

with respect to the design-build 

procurement process: 

(a) The contracting agency may: 

(1) Issue an RFQ prior to the 

conclusion of the NEPA process as long 

as the RFQ informs proposers of the 

general status of NEPA review; 

(2) Issue an RFP after the conclusion 

of the NEPA process; 

(3) Issue an RFP prior to the 

conclusion of the NEPA process as long 

as the RFP informs proposers of the 

general status of the NEPA process and 

that no commitment will be made as to 

any alternative under evaluation in the 

NEPA process, including the no-build 

alternative; 

(4) Proceed with the award of a 

design-build contract prior to the 

conclusion of the NEPA process; 

(5) Issue notice to proceed with 

preliminary design pursuant to a designbuild contract that has been awarded 

prior to the completion of the NEPA 

process; and 

(6) Allow a design-builder to proceed 

with final design and construction for 

any projects, or portions thereof, for 

which the NEPA process has been 

completed. 

(b) If the contracting agency proceeds 

to award a design-build contract prior to 

the conclusion of the NEPA process, 

then: 

(1) The contracting agency may 

permit the design-builder to proceed 

with preliminary design; 

(2) The contracting agency may 

permit any design and engineering 

activities to be undertaken for the 

purposes of defining the project 

alternatives and completing the NEPA 

alternatives analysis and review 

process; complying with other related 

environmental laws and regulations; 

supporting agency coordination, public 

involvement, permit applications, or 

development of mitigation plans; or 

developing the design of the preferred 

alternative to a higher level of detail 

when the lead agencies agree that it is 

warranted in accordance with 23 U.S.C. 

139(f)(4)(D); 

(3) The design-build contract must 

include appropriate provisions 

preventing the design-builder from 

proceeding with final design activities 

and physical construction prior to the 

completion of the NEPA process 

(contract hold points or another method 

of issuing multi-step approvals must be 

used); 

(4) The design-build contract must 

include appropriate provisions ensuring 

that no commitments are made to any 

alternative being evaluated in the NEPA 

process and that the comparative merits 

of all alternatives presented in the 

NEPA document, including the no-build 

alternative, will be evaluated and fairly 

considered; 

(5) The design-build contract must 

include appropriate provisions ensuring 

that all environmental and mitigation 

measures identified in the NEPA 

document will be implemented; 

(6) The design-builder must not 

prepare the NEPA document or have 

any decisionmaking responsibility with 

respect to the NEPA process; 

(7) Any consultants who prepare the 

NEPA document must be selected by 

and subject to the exclusive direction 

and control of the contracting agency; 

(8) The design-builder may be 

requested to provide information about 

the project and possible mitigation 

actions, and its work product may be 

considered in the NEPA analysis and 

included in the record; and 

(9) The design-build contract must 

include termination provisions in the 

event that the no-build alternative is 

selected. 

(c) The contracting agency must 

receive prior FHWA concurrence before 

issuing the RFP, awarding a designbuild contract and proceeding with 

preliminary design work under the 

design-build contract. Should the 

contracting agency proceed with any of 

the activities specified in this section 

before the completion of the NEPA 

process (with the exception of 

preliminary design, as provided in 

paragraph (d) of this section), the 

FHWA’s concurrence merely constitutes 

the FHWA approval that any such 

activities complies with Federal 

requirements and does not constitute 

project authorization or obligate Federal 

funds. 

(d) The FHWA’s authorization and 

obligation of preliminary engineering 

and other preconstruction funds prior to 

the completion of the NEPA process is 

limited to preliminary design and such 

additional activities as may be necessary 

to complete the NEPA process. After the 

completion of the NEPA process, the 

FHWA may issue an authorization to 

proceed with final design and 

construction and obligate Federal funds 

for such purposes. 

■ 13. Amend § 636.116 by adding 

paragraphs (c) and (d) to read as follows: 

§ 636.116 What organizational conflict of 

interest requirements apply to design-build 

projects? 

* * * * * 

(c) If the NEPA process has been 

completed prior to issuing the RFP, the 

contracting agency may allow a 

consultant or subconsultant who 

prepared the NEPA document to submit 

a proposal in response to the RFP. 

(d) If the NEPA process has not been 

completed prior to issuing the RFP, the 

contracting agency may allow a 

subconsultant to the preparer of the 

NEPA document to participate as an 

offeror or join a team submitting a 

proposal in response to the RFP only if 

the contracting agency releases such 

subconsultant from further 

responsibilities with respect to the 

preparation of the NEPA document. 

■ 14. Revise § 636.119(b)(1) and (2) to 

read as follows: 

§ 636.119 How does this part apply to a 

project developed under a public-private 

partnership? 

* * * * * 

(b) * * * 

(1) If the public-private agreement 

establishes price, then all subsequent 

contracts executed by the developer are 

considered to be subcontracts and are 

not subject to Federal-aid procurement 

requirements. 

(2) If the public-private agreement 

does not establish price, the developer 

is considered to be an agent of the 


sroberts on PROD1PC70 with RULES
45338 Federal Register / Vol. 72, No. 156 / Tuesday, August 14, 2007 / Rules and Regulations 

owner, and the developer must follow 

the appropriate Federal-aid 

procurement requirements (23 CFR part 

172 for engineering service contracts, 23 

CFR part 635 for construction contracts 

and the requirements of this part for 

design-build contracts) for all prime 

contracts (not subcontracts). 

* * * * * 

■ 15. Revise § 636.302(a)(1) to read as 

follows: 

§ 636.302 Are there any limitations on the 

selection and use of proposal evaluation 

factors? 

(a) * * * 

(1) You must evaluate price in every 

source selection where construction is a 

significant component of the scope of 

work. However, where the contracting 

agency elects to release the final RFP 

and award the design-build contract 

before the conclusion of the NEPA 

process (see § 636.109), then the 

following requirements apply: 

(i) It is not necessary to evaluate the 

total contract price; 

(ii) Price must be considered to the 

extent the contract requires the 

contracting agency to make any 

payments to the design-builder for any 

work performed prior to the completion 

of the NEPA process and the contracting 

agency wishes to use Federal-aid 

highway funds for those activities; 

(iii) The evaluation of proposals and 

award of the contract may be based on 

qualitative considerations; 

(iv) If the contracting agency wishes 

to use Federal-aid highway funds for 

final design and construction, the 

subsequent approval of final design and 

construction activities will be 

contingent upon a finding of price 

reasonableness by the contracting 

agency; 

(v) The determination of price 

reasonableness for any design-build 

project funded with Federal-aid 

highway funds shall be based on at least 

one of the following methods: 

(A) Compliance with the applicable 

procurement requirements for part 172, 

635, or 636, where the contractor 

providing the final design or 

construction services, or both, is a 

person or entity other than the designbuilder; 

(B) A negotiated price determined on 

an open-book basis by both the designbuilder and contracting agency; or 

(C) An independent estimate by the 

contracting agency based on the price of 

similar work; 

(vi) The contracting agency’s finding 

of price reasonableness is subject to 

FHWA concurrence. 

* * * * * 

[FR Doc. 07–3959 Filed 8–9–07; 3:55 pm] 

BILLING CODE 4910–22–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Parts 1 and 602 

[TD 9354] 

RIN 1545–BB86 

Expenses for Household and 

Dependent Care Services Necessary 

for Gainful Employment 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final regulations. 

SUMMARY: This document contains final 

regulations regarding the credit for 

expenses for household and dependent 

care services necessary for gainful 

employment. The regulations reflect 

statutory amendments under the Deficit 

Reduction Act of 1984, the Tax Reform 

Act of 1986, the Omnibus Budget 

Reconciliation Act of 1987, the Family 

Support Act of 1988, the Small Business 

Job Protection Act of 1996, the 

Economic Growth and Tax Relief 

Reconciliation Act of 2001, the Job 

Creation and Worker Assistance Act of 

2002, the Working Families Tax Relief 

Act of 2004, and the Gulf Opportunity 

Zone Act of 2005. The regulations affect 

taxpayers who claim the credit for 

expenses for household and dependent 

care services, and dependent care 

providers. 

DATES: Effective Date: These regulations 

are effective August 14, 2007. 

Applicability Date: For date of 

applicability, see § 1.21–1(l). 

FOR FURTHER INFORMATION CONTACT: 

Amy Pfalzgraf, (202) 622–4960 (not a 

toll-free number). 

SUPPLEMENTARY INFORMATION: 

Background 

This document contains final 

amendments to the Income Tax 

Regulations, 26 CFR part 1, relating to 

the credit for expenses for household 

and dependent care services necessary 

for gainful employment (the credit) 

under section 21 of the Internal Revenue 

Code (Code). 

On May 24, 2006, a notice of 

proposed rulemaking (REG–139059–02) 

regarding the credit was published in 

the Federal Register (71 FR 29847). 

Written and electronic comments 

responding to the notice of proposed 

rulemaking were received. No public 

hearing was requested or held. After 

consideration of all the comments, the 

proposed regulations are adopted as 

amended by this Treasury decision. The 

comments and revisions are discussed 

in the preamble. 

Explanation of Provisions and 

Summary of Comments 

1. Time of Payment and Performance of 

Services 

Section 21(b)(2) provides, in part, that 

employment-related expenses are 

amounts paid to enable a taxpayer to be 

gainfully employed for a period for 

which there are one or more qualifying 

individuals with respect to a taxpayer. 

The proposed regulations provide that a 

taxpayer may take expenses into 

account under section 21 only in the 

later of the taxable year the services are 

performed or the taxable year the 

expenses are paid. The proposed 

regulations also provide that the status 

of an individual as a qualifying 

individual is determined on a daily 

basis, that a taxpayer may take into 

account only expenses that qualify 

before a disqualifying event, such as a 

child turning 13, and that the 

requirements of section 21 and the 

regulations are applied at the time the 

services are performed, regardless of 

when the expenses are paid. 

A verbal comment inquired whether, 

to be creditable, expenses must be paid 

and services must be performed before 

a disqualifying event. 

The determination of whether 

expenses qualify as employment-related 

expenses, including whether an 

individual is a qualifying individual, 

can be made only at the time services 

are performed. Only expenses for the 

care of a qualifying individual that are 

for the purpose of enabling the taxpayer 

to be gainfully employed qualify for the 

credit. Therefore, services must be 

performed prior to a disqualifying event 

and at a time when the purpose is to 

enable the taxpayer to be gainfully 

employed. For purposes of determining 

whether expenses are employmentrelated expenses, the time of payment is 

irrelevant, although payment must be 

made before the credit is claimed. The 

final regulations provide examples to 

illustrate these rules. 

2. Care of Qualifying Individual and 

Household Services 

Under section 21(b)(2)(A), expenses 

are employment-related only if the 

expenses are primarily for household 

services or for the care of a qualifying 


sroberts on PROD1PC70 with RULES