Companion Guide to Video August 2012

www.fhwa.dot.gov/federal-aidessentials

Project Development

Required Approvals

Selecting the Method of Construction: Contract or 

Force Account

At some point prior to the physical 

construction of a Federal-aid highway 

project, a decision is needed regarding how 

to complete the construction work in the 

most efficient and cost-effective way. 

Federal law requires that Federal-aid 

contracts be awarded using a competitive 

contracting method with allowances for 

other options only in special circumstances. 

Since Federal-aid projects can be 

constructed with a limited variety of 

contracting methods, making this decision 

early during project design will ensure your 

project doesn't encounter unnecessary 

delays.

Since the beginning of the Federal-aid 

highway program competitive low bid 

awards have been the required method of 

engaging contractor services. One of the 

most basic tenets of Federal-aid contracting 

is that construction contracts are to be 

awarded using fair and open competition to 

a responsible contractor who submits the 

lowest responsive bid. 

A responsible contractor is one who has the 

capability, both financially and physically, to 

undertake and complete the contract. A 

responsive bid is one that meets all the 

requirements of the advertisement that 

invited contractors to bid. 

Since the early 1990s, other innovative 

competitive contracting methods, such as 

design-build, alternate bid, and warranty 

contracts have also been used to secure 

contractor services. 

Any construction contracting method other than “competitive low 

bid” must be approved by the oversight agency
Federal-aid Essentials for Local Public Agencies

The Federal Highway Administration 

(FHWA) has evaluated many alternative 

contracting methods and now considers 

these three to be acceptable for Federal-aid

highway projects.

All methods of construction other than

competitive low bid contract awards must 

have project-specific approval by the State 

department of transportation (State DOTs)

or FHWA as the oversight agency prior to 

use in a Federal-aid project. Design-build 

contracts, however, do not require costeffectiveness justification. Normally, with the 

exception of design-build, evaluation of 

such a request will consider a costeffectiveness finding and any special 

circumstances noted by the local public 

agency. Since the approval procedures vary 

from State to State, you are encouraged to 

refer to the stewardship and oversight 

agreement between the State DOT and 

FHWA for clarifications.

Competitive bidding is the preferred method 

used to award Federal-aid contracts. 

However, there are occurrences when 

construction can be completed using 

methods other than competitive contracting 

and the project remains eligible for Federalaid reimbursement. In certain situations the 

competitive bidding requirement for Federalaid contracts can be waived by the 

oversight agency.

Two alternative methods to the bidding 

requirement are negotiated contracts and 

agency force account.

Negotiated contracts are an option that 

should be considered only in very rare 

circumstances, such as during the time of a 

natural disaster. Getting work started 

immediately to save lives or to protect the 

infrastructure from impending damage may 

be reasons to negotiate with a contractor to 

perform work without having a competitively 

awarded contract in place.

Under certain circumstances, projects can 

be completed using agency force account 

procedures. This means that the 

construction work is performed using the 

labor, equipment, materials, and supplies 

that are under your control, without the use 

of a private contractor. Possible reasons to 

consider this method of construction are 

when there is a lack of competition within a 

bidding process or unacceptable bids have 

been received. This method also might be 

used when it is more cost-effective to do the 

work using agency personnel and for 

emergency situations. 

If you choose to use agency force account 

procedures, submit documentation to the 

oversight agency that supports your 

agency's ability to satisfactorily complete 

the proposed construction work. The 

purpose of the documentation is to show:

• Evidence of satisfactory completion of 

similar work

• The personnel or other resources are 

available to do the work

• The personnel can achieve the 

acceptable quality that is normally 

expected within the Federal-aid

Highway Program

• The work can be completed within a 

reasonable time frame

• The cost effectiveness of using agency 

forces

All agency force account work is still 

expected to meet the standards of quality 

and workmanship of normal contracting 

methods. Remember, get the approval of 
Federal-aid Essentials for Local Public Agencies

the oversight agency prior to performing 

construction work using agency personnel. 

Emergency repair work can often be 

completed by using either of these noncompetitive methods. The waiver of 

competitive bidding would only cover the 

short-term temporary work for the 

immediate event. Contracts for permanent 

repairs must be considered and awarded 

through a competitive process. Check with 

your State DOT for the detailed procedures 

related to emergency project administration 

and the FHWA Emergency Relief Program. 

During the design phase of your project, 

select either a competitive or noncompetitive method of construction that best 

suits your Federal-aid project. 

Get concurrence from your oversight 

agency on the selected method of 

construction. Your choice of the method of 

construction will affect the plans, 

construction specifications, and cost 

estimate package that must be approved 

prior to advancing to construction. The 

method of construction you choose will also 

determine whether the project's construction 

costs are eligible for Federal-aid funding. 

Federal-aid projects may be constructed 

with a limited variety of competitive or noncompetitive methods. Any method of 

construction other than low bid competitive 

bidding must be approved by the oversight 

agency. Your State DOT provides guidance 

and is responsible for the oversight of your 

agency's program. If you need assistance,

the State DOT can assist you with selecting 

an appropriate method of construction for 

your project. 
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

DTFH63-11-D-00066 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 

• Regulations highlighting use of agency force account requiring approval 

prior to authorization of construction

http://www.ecfr.gov/cgi/t/text/textidx?c=ecfr&sid=1acd433207cb4a4218ef66a86d024b5a&rgn=div5&view=te

xt&node=23:1.0.1.7.23&idno=23#23:1.0.1.7.23.1.1.4

• Clarification for when agency force account is permitted under law and 

regulation

http://www.fhwa.dot.gov/legsregs/directives/orders/50601.htm

• Text of law requiring contract awards to the lowest responsible bidder

http://us-code.vlex.com/vid/sec-letting-contracts-19205136

• Guidance on use of non-traditional construction contracting methods in 

emergency situations

http://staffnet.fhwa.dot.gov/PGC/results.cfm?id=2368

• FHWA contract administration core curriculum Item #A3 discussing method 

of construction rule

http://www.fhwa.dot.gov/programadmin/contracts/core03.cfm