Companion Guide to Video August 2012

www.fhwa.dot.gov/federal-aidessentials

Federal-aid Program Overview 

Consultant Services

Consultant Services Overview

When Federal-aid funds are used to hire a 

consultant to provide engineering and designrelated services, certain Federal requirements 

apply. These requirements address how to hire

the consultant and how to manage and 

administer the contract. The hiring process for a 

consultant firm is fundamentally different from 

selecting a construction contractor based on a 

lowest bid price. The following information will 

help you understand and comply with these 

requirements when using Federal funds for 

engineering and design-related consultant 

services.

First, the Federal Highway Administration, or 

FHWA, defines engineering and design-related 

services as program management, construction 

management, preliminary engineering, 

engineering, design, surveying and mapping, 

and architectural-related services. 

However, if your State provides a broader 

definition of engineering services in law or 

regulations, the broader definition applies, and 

these additional services are subject to Federal 

requirements.

Consultant procurement requirements affect 

how you solicit, evaluate, select and contract 

with a firm. Any agency using Federal-aid funds 

for engineering and design-related consultant 

services must have written procurement policies 

and procedures. Some State departments of 

transportation, or State DOTs, provide and 

require the use of policies and procedures 

specifically developed for local public agencies 

using Federal funds. 

The required written policies and procedures 

must address:

• Preparing a scope of work and cost estimate 

for selecting a consultant

• The solicitation, evaluation, ranking, and 

selection of consultants

• Negotiation of consultant reimbursement

• Monitoring a consultant’s work

• Consultant errors and omissions.

Certain Federal requirements apply to engineering and designrelated consultant services contracts
Federal-aid Essentials for Local Public Agencies

Depending on the circumstances, one of three 

procurement methods may be used to hire a 

consultant to provide engineering and designrelated services:

• Competitive negotiation

• Small purchase

• Noncompetitive 

procurement

Competitive negotiation 

procedures generally apply 

when the engineering and 

design-related services you 

need directly relate to a 

construction project. We 

commonly refer to these as 

“qualifications-based selection” procedures. The 

requirements that apply to competitive 

negotiation procedures are defined within a 

Federal law known as the Brooks Act.

Unlike low-bid contracting, the Brooks Act 

requires the selection of a consultant based on 

its qualifications to provide the needed services. 

The Brooks Act also requires basing the contract 

amount on a fair and reasonable cost that is 

negotiated by the agency and the selected firm.

Under competitive negotiation procedures, the 

goal is to determine and agree to contract terms 

for “fair and reasonable” compensation, 

considering the scope and complexity of the 

work. Agencies are required to develop an 

independent cost estimate to serve as a basis 

for negotiations with the selected consultant.

One item that cannot be negotiated is the 

consulting 

firm’s 

indirect cost 

rates. These 

rates are 

either 

established 

by or submitted to a Federal agency or State 

DOT for approval of compliance with the Federal 

Acquisition Regulation, or FAR, cost principles. 

FAR is the principle set of requirements used to 

determine allowable costs on consultant 

services contracts when Federal funds are used.

An accepted and approved indirect cost rate 

must be used for purposes of contract 

estimation, negotiation, and administration and it 

cannot be negotiated or arbitrarily capped. You 

may need to contact your State DOT to verify 

that any indirect cost rate a consultant proposed 

is in compliance with the FAR cost principles.

Small purchase procedures 

are relatively simple and less 

formal than competitive 

negotiation procedures, and 

the specific requirements will 

vary from State to State. 

These procedures apply when 

total contract costs will not exceed the Federal 

simplified acquisition threshold of $150,000. If a 

State has an established threshold lower than 

the Federal $150,000 threshold, the lower State 

threshold will apply to the use of Federal-aid

funds. If the total contract costs are below the 

established threshold, applicable State smallpurchase procedures may be used to procure 

engineering and design-related consultant 

services.

Noncompetitive procurement 

refers to situations where the 

use of a competitive process 

is not feasible. This method 

may be used in limited 

circumstances where the 

service is available only from a 

single source, an emergency exists, or where 

competition is determined to be inadequate after 

a solicitation has been made. You must obtain 

approval from FHWA for each use of this 

procurement method.

Remember, competitive negotiation, small 

purchase or noncompetitive procedures apply to 

engineering or design- related consultant 

services that directly relate to the construction of 

a project. If your needed consultant services are 

not determined to be engineering or design 

related, then simply follow your State or local 

procedural requirements.

Once an agreement is executed, the 

consultant’s work must be monitored for the life 

of the contract for services. Agencies must be 

adequately staffed to oversee this work, and at a 

minimum must provide at least one full-time 

agency employee in responsible charge of the 

consultant’s work. The agency should monitor 

the consultant’s work for quality and 

completeness, and invoices must be consistent 

with the contract terms and the FAR cost 

principles.
Federal-aid Essentials for Local Public Agencies

When a consultant services contract is 

completed, you are required to evaluate the 

consultant’s performance of the contract scope 

of work. This evaluation should be retained and 

used in the assessment of past performance of 

the consultant when competing for future work.

All records pertaining to your Federal-aid 

consultant services contract are required to be 

kept on file a minimum of three years following 

submittal of your final voucher to FHWA by your 

State DOT. Record retention will help you 

demonstrate compliance with all requirements 

just covered.

Any agency that uses Federal-aid funds to hire 

consultants for engineering and design-related 

services accepts the responsibility to follow the 

requirements just outlined. 

Make sure to establish and follow written 

policies and procedures that detail how a 

consultant is hired and how the subsequent 

contract will be administered and monitored. 

Each State DOT has the oversight responsibility 

for consultant services procurement and 

administration activities in that State. As such, 

the State DOT can help answer any questions 

prior to contracting with a consultant using 

Federal-aid funds so you can meet all applicable 

Federal and State laws and regulations.
Federal-aid Essentials for Local Public Agencies

The content of this 

document is not a 

substitute for 

information obtained 

from State departments 

of transportation, 

appropriate FHWA 

Division Offices, and 

applicable laws. 

Scenarios have been 

simplified for emphasis 

and do not necessarily 

reflect the actual range of 

requirements applicable 

to the scenario or this 

topic. This document was 

created under contract 

number DTFH61-11-D00024 by the Federal 

Highway Administration, 

U.S. Department of 

Transportation, and is 

offered to the public to 

heighten and focus 

awareness of Federal-aid 

requirements within the 

local public agencies 

community and 

reinforces the 

importance of these 

necessary policies, 

procedures, and 

practices.

This companion resource 

is the script content for 

the video production of 

the same name. 

Additional Resources

• Information on FHWA’s consultant services policy and guidance

http://www.fhwa.dot.gov/programadmin/consultant.cfm

• Additional regulation on administration of engineering and design-related service 

contracts

http://www.ecfr.gov/cgi/t/text/textidx?c=ecfr&sid=88df046e4fbccfb189a147f0e13d2e15&rgn=div5&view=text&nod

e=23:1.0.1.2.3&idno=23

• Federal regulations on administration of engineering and design-related service 

contracts

http://www.ecfr.gov/cgi/t/text/textidx?c=ecfr&sid=2d0307d68fc3ad4e117788370d178f2e&rgn=div5&view=text&no

de=48:1.0.1.5.30&idno=48

• Information on consultant services in Q & A format

http://www.fhwa.dot.gov/programadmin/172qa.cfm