Companion Guide to Video August 2012

www.fhwa.dot.gov/federal-aidessentials

Federal-aid project development and delivery 

normally rely on the use of engineering 

judgment and best practices to make project 

decisions that are guided by the general concept 

of free and open competition. Congress has 

recognized that there are times when decisions 

have to be made using factors other than the 

norm. 

The Federal-aid program regulations allow 

project-level design and construction operational 

decisions through two other means to justify 

deviating from the standard practices. They are 

cost-effective determinations and public-interest 

findings. 

However, using these requires obtaining 

concurrence from your oversight agency as a

second party to the decision. While there are 

other instances in the Federal-aid program 

regulations that allow deviations from the 

requirements based on a cost-effectiveness 

determination or finding of public interest, for the 

purposes of this discussion, we will only focus 

on the regulations that can affect project-specific 

design decisions or administration of your 

construction project. 

What are cost-effectiveness 

determinations and public-interest 

findings?

A cost-effectiveness determination is a decision 

based solely on an economic analysis. You 

determine the lowest overall cost using projectspecific data. 

Project Development

Required Approvals

Cost Effectiveness Determinations and 

Public-interest findings

Federal-aid regulations specifically allow deviation from some 

standard practices through a public-interest finding or a 

determination of cost effectiveness
Federal-aid Essentials for Local Public Agencies

A public-interest finding, or PIF, is a conclusion 

that a situation is unique and the public interest 

is best served by allowing an exception to 

existing procurement or contracting policies. 

The decision should be supported by both a cost

evaluation and an engineering analysis of the 

issues that may include environmental, life-cycle 

cost, safety, and operational considerations on a 

Federal-aid project.

Simply stated, cost-effectiveness determinations 

are decisions based only on cost; whereas PIFs 

are based on a broader spectrum of issues, 

including cost. 

You will need to prepare a document to request 

concurrence by the oversight agency when it is 

indicated that a public-interest finding or costeffectiveness determination is justified within the 

Federal-aid regulation.

When should you use a costeffectiveness determination or 

public-interest finding?

You must submit a request for a costeffectiveness determination to use noncompetitive methods of construction for a 

project. Negotiated contracts or use of public 

agency employees under force account 

procedures are two examples of non-competitive 

work procurement. Emergency work within the 

Federal-aid Emergency Relief Program has a 

regulatory exception for determining cost 

effectiveness. The use of publicly owned 

equipment by contractors requires a costeffectiveness determination. Contractor use of 

public equipment is usually limited to the use of 

“specialty” equipment that is not generally 

available for lease or purchase in the open 

market.

There are several allowances in the Federal-aid 

regulations that specifically address the choice 

of material used to construct a project. 

Patented or proprietary products that are 

required as a sole source in contract documents 

must be approved using a PIF when other 

suitable alternatives are available since open 

competition among products is the normal 

expectation.

Agency-furnished material or products that will 

be installed by a contractor using Federal-aid 

funds must be justified using a PIF since this 

limits the potential for open and free-market 

competition. Reasons often cited are cost 

effectiveness or there is a long lead time for 

ordering materials, such as structural beams or 

specialty items.

Mandatory use of local natural material sources 

or disposal sites for projects requires a PIF since 

this restricts a contractor’s option of material 

selection and operational efficiencies. 

Sometimes an agency may need to determine 

disposal sites in advance of letting contracts for 

environmental commitments.

The Buy America provisions for steel or iron 

products include an option for justifying a waiver 

for the use of foreign material using a PIF. The 

Federal Highway Administration (FHWA) rarely 

grants a Buy America waiver using a PIF. 

FHWA Headquarters applies a higher level of 

scrutiny using a public comment process for 

these waivers, so substantial justification must 

be provided. Cost cannot be one of the 

determining factors of a PIF for Buy America 

waivers. 

To show how this process works, let’s consider 

this example.

A local public agency (LPA) has agreed to a 

stipulation in the project environmental 

document that requires protection of critical 

wildlife habitat in the project area. Building an 

embankment for the project requires additional 

local natural material, or fill dirt. Opening a new 

borrow site near the project area would 

jeopardize the wildlife habitat. However, there is 

an existing State-owned borrow site close to the 

project area. The solution: use a State-owned 

borrow pit near the project. 
Federal-aid Essentials for Local Public Agencies

To do so, the LPA prepares a request for a 

public-interest finding for consideration by the 

State department of transportation, or State 

DOT, as the oversight agency. As justification, 

the request cites the environmental commitment 

and the proposed solution to require the use of 

the State-owned borrow site to build 

embankments on the project. 

A report on the potential effects on the wildlife in 

the area is provided as support for the publicinterest finding. An overlay map of the habitat 

and potential borrow shows alternatives to the 

proposed site. An analysis of the alternatives 

and potential costs to the project shows that 

developing and reclaiming new borrow sites or 

hauling material from other existing contractor 

borrow pits to the project is five times the cost of 

using the State-owned borrow site. The LPA 

concludes that it is not feasible to allow 

contractors to develop new borrow sites in the 

project area.

The State DOT agrees with the recommendation 

to restrict the contractors to the use of the Stateowned borrow pit and concurs that it is in the 

best interest of the public. The response letter 

from the State DOT notes that this finding is only 

applicable for completion of this one project and

does not require reevaluation. The project 

manager then places the letter in the permanent 

project records. The LPA includes a “notice to 

bidders” in the bidding instructions requiring that 

all borrow material for the project must originate 

from the State-owned pit.

FHWA recognizes that there are times when 

economic efficiency or other reasons may lead 

to a decision to deviate from free and open 

competition on a Federal-aid project. Federal-aid 

regulations specifically allow such decisions to 

be made using a public-interest finding or a 

determination of cost effectiveness. The process 

requires explicit concurrence in the decisions by 

the oversight agency that approve of the 

deviation from normal requirements.
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

DTFH63-12-F-00025 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. 

Web Resources

• FHWA guidance on public-interest findings

http://www.fhwa.dot.gov/construction/cqit/findings.cfm

• FHWA guidance (found in Items 17-21) on public-interest findings and other 

certifications

http://www.fhwa.dot.gov/programadmin/contracts/011106qa.cfm

• Regulation for public-interest findings in Federal-aid construction program 

material and product selection

http://www.ecfr.gov/cgi/t/text/textidx?c=ecfr&rgn=div5&view=text&node=23:1.0.1.7.23&idno=23#23:1.0.1.7.2

3.4.1.7

• Section of core curriculum manual covering public-interest and costeffectiveness findings. Go to Section 2, subsection C,3

http://www.fhwa.dot.gov/programadmin/contracts/coretoc.cfm

• Examples of FHWA approved public-interest findings and product 

certifications

http://www.fhwa.dot.gov/construction/contracts/pnpapprovals/index.cfm

• FHWA guidlelines for evaluating public-interest fundings for sign sheeting

http://safety.fhwa.dot.gov/roadway_dept/night_visib/policy_guide/memo_retr

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