33288 Federal Register / Vol. 83, No. 137 / Tuesday, July 17, 2018 / Notices 

presentations and breakout sessions 

during which participants can provide 

input to FHWA and DOT 

representatives. The National Dialogue 

meetings began on June 26 and will 

continue through the end of 2018. 

DATE AND TIME: The FHWA will hold the 

public meetings in approximately five 

locations across the country. A tentative 

schedule is outlined below and is 

subject to change. Meeting information 

will be updated and made available on 

the FHWA National Dialogue on 

Highway Automation website: https://

ops.fhwa.dot.gov/automationdialogue/ 

index.htm. 

Tentative meetings include the 

following: 

• Week of July 30, 2018: National 

Workshop 2: Data and Digital 

Infrastructure (Seattle, Washington) 

• September 2018: National Workshop 

3: Freight (Chicago, Illinois) 

• October 24–25, 2018: National 

Workshop 4: Operations (Phoenix, 

Arizona) 

• November 14–15, 2018: National 

Workshop 5: Infrastructure and MultiModal Safety (Austin, Texas) 

FOR FURTHER INFORMATION CONTACT: If 

you have questions about the public 

meeting, please contact John Corbin at 

john.corbin@dot.gov or 

highwayautomation@dot.gov. 

SUPPLEMENTARY INFORMATION: 

Registration is necessary for all 

attendees. Registration information will 

be available at https://ops.fhwa.dot.gov/ 

automationdialogue/index.htm. Inperson attendance will be limited, so 

advance registration is required for all 

attendees. Should it be necessary to 

cancel the meeting due to inclement 

weather or other emergency, FHWA will 

take all available measures to notify 

registered participants beforehand. 

Background 

Automated vehicles have the 

potential to significantly transform the 

Nation’s roadways. They could help 

save lives, expand access to 

transportation, and improve the 

convenience of travel. However, even as 

these technologies offer new 

opportunities, they may introduce new 

challenges for the agencies responsible 

for the planning, design, construction, 

operation, and maintenance of the 

Nation’s roadway infrastructure. As a 

result, FHWA is interested in better 

understanding the implications of 

highway automation. 

This National Dialogue on Highway 

Automation is an opportunity to engage 

the public and broader stakeholder 

community to understand their key 

areas of interest. These stakeholders will 

include original equipment 

manufacturers, technology suppliers, 

transportation network companies, 

associations, and public sector partners. 

The National Dialogue will help inform 

national research, policy, and 

implementation assistance activities to 

support automation readiness. 

Meeting Format 

The National Dialogue meetings are 

designed to support significant 

interaction among participants. 

Workshops will include discussions 

with government and industry leaders, 

breakout sessions, listening sessions, 

and opportunities to collaborate with 

meeting participants. Each workshop 

will run from 1 to 1.5 days and will 

have opportunities for general and 

topic-specific input. Focus areas 

identified include policy and planning, 

data and digital infrastructure, freight, 

operations, safety, infrastructure, and 

multi-modal safety. 

Authority: 49 U.S.C. 1.25a. 

Issued on: July 6, 2018. 

Brandye L. Hendrickson, 

Acting Administrator, Federal Highway 

Administration. 

[FR Doc. 2018–15232 Filed 7–16–18; 8:45 am] 

BILLING CODE 4910–22–P 

DEPARTMENT OF TRANSPORTATION 

Federal Highway Administration 

[FHWA Docket No. FHWA–2017–0023] 

Proposed Guidance on Safe Harbor 

Rate Streamlining for Engineering and 

Design Services Consultant Contracts 

AGENCY: Federal Highway 

Administration (FHWA), U.S. 

Department of Transportation (DOT). 

ACTION: Notice; request for comment. 

SUMMARY: The FHWA is soliciting 

comments regarding proposed guidance 

on implementation of a Safe Harbor 

indirect cost rate for certain engineering 

design service firms that find 

establishing such rates to be costly and 

a barrier to participating in engineering 

and design service contracts reimbursed 

with Federal-aid Highway Program 

(FAHP) Funds. The FHWA seeks 

comment on its proposed 

implementation of a Safe Harbor 

indirect cost rate and its intention to 

notify all contracting agencies receiving 

FAHP funds that an agency-developed 

Safe Harbor indirect cost rate for eligible 

consulting firms may be used as a 

component of a risk-based oversight 

process to provide reasonable assurance 

to FHWA that consultant costs on 

FAHP-funded contracts are allowable in 

accordance with the Federal regulations. 

DATES: Comments must be received on 

or before August 16, 2018. Late-filed 

comments will be considered to the 

extent practicable. 

ADDRESSES: Mail or hand deliver 

comments to the U.S. Department of 

Transportation, Dockets Management 

Facility, Room W12–140, 1200 New 

Jersey Avenue SE, Washington, DC 

20590, or fax comments to (202) 493– 

2251. Alternatively, comments may be 

submitted to the Federal eRulemaking 

portal at: http://www.regulations.gov. 

All comments must include the docket 

number that appears in the heading of 

this document. All comments received 

will be available for examination and 

copying at the above address from 9 

a.m. to 5 p.m., ET, Monday through 

Friday, except Federal holidays. Those 

desiring notifications of receipt of 

comments must include a selfaddressed, stamped postcard, or you 

may print the acknowledgment page 

that appears after submitting comments 

electronically. Anyone can search the 

electronic form of all comments in any 

one of our dockets by the name of the 

individual submitting the comment (or 

signing the comment, if submitted on 

behalf of an association, business, or 

labor union). Anyone may review DOT’s 

complete Privacy Act Statement in the 

Federal Register published on April 11, 

2000 (Volume 65, Number 70, Pages 

19477–78). 

FOR FURTHER INFORMATION CONTACT: For 

questions about the program discussed 

herein, contact John McAvoy, 

Consultant Services Program Manager, 

FHWA Office of Program 

Administration, (202) 853–5593 or via 

email at john.mcavoy@dot.gov. For legal 

questions, please contact Steve Rochlis, 

Office of the Chief Counsel, (202) 366– 

1395, or via email at steve.rochlis@

dot.gov. Office hours are from 8:00 a.m. 

to 4:30 p.m., ET, Monday through 

Friday, except Federal holidays. 

SUPPLEMENTARY INFORMATION: 

Electronic Access and Filing 

You may submit or retrieve comments 

online through the Federal eRulemaking 

portal at: http://www.regulations.gov. 

The website is available 24 hours each 

day, 365 days each year. Please follow 

the instructions. Electronic submission 

and retrieval help and guidelines are 

available under the help section of the 

website. An electronic copy of this 

document may also be downloaded 

from the Office of the Federal Register’s 

home page at: http://www.archives.gov 

and the U.S. Government Publishing 


daltland on DSKBBV9HB2PROD with NOTICES
Federal Register / Vol. 83, No. 137 / Tuesday, July 17, 2018 / Notices 33289 

Office’s web page at: http://

www.access.gpo.gov/nara. 

Purpose of This Notice 

The FHWA is requesting comment on 

its proposed guidance for 

implementation of a Safe Harbor 

indirect cost rate and its intention to 

notify all contracting agencies receiving 

FAHP funds that an agency-developed 

Safe Harbor indirect cost rate for eligible 

consulting firms may be used as a 

component of a risk-based oversight 

process to provide reasonable assurance 

to FHWA that consultant costs on 

FAHP-funded contracts are allowable in 

accordance with the Federal regulations. 

Comments received through this notice 

will be considered by FHWA to assess 

implementation of a Safe Harbor 

indirect cost rate. 

Background 

Consulting firms and contractors 

providing services under a contract 

reimbursed with FAHP funds are 

required to account for, and bill, costs 

in accordance with the Federal cost 

principles of 48 CFR part 31. In 

addition, Federal law and regulations 

for the FAHP require contracting 

agencies to accept indirect cost rates 

developed in accordance with the 

Federal cost principles and to apply 

those rates for the purposes of contract 

estimation, negotiation, administration, 

reporting, and contract payment (as 

specified in 23 U.S.C. 112(b)(2) and 23 

CFR 172.7). As such, consulting firms 

providing engineering and designrelated services to a contracting agency 

under a contract funded by the FAHP 

are required to develop indirect cost 

rates in accordance with the Federal 

cost principles on an annual basis. 

Similarly, contracting agencies must 

provide reasonable assurance that 

consulting firm costs claimed under 

FAHP-funded contracts, including both 

direct and indirect costs, are allowable 

in accordance with the Federal cost 

principles. 

Adhering to these accounting 

requirements can place a significant 

burden on some consulting firms and 

may create a barrier for otherwise 

eligible and qualified firms to compete 

for FAHP-funded contracts. For 

example, small firms, including many 

Disadvantaged Business Enterprise 

firms, may lack the financial expertise 

to develop an indirect cost rate that 

would be acceptable to a cognizant 

Federal or State government agency, or 

lack the resources to hire a Certified 

Public Accountant (CPA) to conduct an 

audit to provide assurance as to the 

development of an indirect cost rate 

compliant with Federal requirements. 

Often, a CPA audit is cost-prohibitive 

given the size and scope of the federally 

funded contracts for which the firm 

could compete. In addition, new or 

start-up firms generally do not have a 

contract-related cost history to use as a 

base for development of an indirect cost 

rate. Other well-established firms may 

not have previous experience with 

federally funded contracts for which a 

compliant indirect cost rate could be 

developed. Currently, these firms are 

prohibited from participating in FAHPfunded contracts without the 

development and application of a 

provisional indirect cost rate for the 

specific contract, which is adjusted 

based upon a contracting agency 

conducted final audit at the completion 

of the contract. Even the smallest final 

audit requires a significant commitment 

of contracting agency audit resources. 

To remove these barriers for otherwise 

qualified consulting firms, and to 

enhance contracting agency oversight of 

compliance with Federal cost 

principles, in 2012, the FHWA 

developed the Safe Harbor Indirect Cost 

Rate Test and Evaluation pilot. Ten 

contracting agencies representing a 

diversity of location and size 

participated in the test. Eligible 

consulting firms with whom the 

contracting agencies do business have 

the option of applying a Safe Harbor 

indirect cost rate to contracts in 

instances where the firm does not have 

an established rate for the reasons stated 

above. The selected Safe Harbor indirect 

cost rate is significantly lower than the 

industry average rate, providing an 

incentive for firms to develop an actual 

rate, when able to do so and consistent 

with their cost experience, in 

accordance with the Federal cost 

principles as required in Federal law 

and regulation. 

Test results have shown a reduction 

in the financial management barriers 

that prevented new, small, or 

disadvantaged but qualified consulting 

firms from entering the federally funded 

engineering services market, and 

creation of a framework for these 

consulting firms to establish a cognizant 

agency approved indirect cost rate. 

Contracting agencies report that 17 

consulting firms have graduated from 

the program after developing a cost 

history leading to an approved indirect 

cost rate. In addition, following a riskbased approach allows contracting 

agency oversight and audit resources to 

shift focus from those firms opting to 

apply a Safe Harbor indirect cost rate 

(which are generally employed on fewer 

contracts or on smaller contracts) to 

those firms with multiple, higher dollar 

contracts and more complex accounting 

structures. 

The test and evaluation of the Safe 

Harbor indirect cost rate was conducted 

by the following contracting agencies 

and respective FHWA Division Offices: 

Alabama DOT, California Department of 

Transportation, Michigan DOT, 

Missouri DOT, North Carolina DOT, 

North Dakota DOT, Ohio DOT, South 

Carolina DOT, Texas DOT, and 

Washington State DOT. In these States, 

eligible consulting firms have the option 

of using a Safe Harbor indirect cost rate 

on contracts executed within the 

established test period. A consulting 

firm is considered eligible if it has not 

had an indirect cost rate previously 

accepted by a cognizant agency (i.e., a 

governmental agency that has performed 

or reviewed an audit in accordance with 

generally accepted government auditing 

standards (GAGAS) to test compliance 

with the requirements of the Federal 

cost principles (as specified in 48 CFR 

part 31) and issued an audit report of 

the consultant’s indirect cost rate, as 

described in 23 CFR 172.3). Consulting 

firms with an audited, or otherwise 

accepted, actual indirect cost rate, 

developed in accordance with the 

Federal cost principles, are not 

considered eligible to participate in the 

Safe Harbor Program. Contracting 

agencies are given discretion to 

determine the eligibility of consulting 

firms for a Safe Harbor indirect cost rate 

for use on a case-by-case basis and are 

required to document their decision. 

Through collaboration with the test 

contracting agencies, FHWA’s test and 

evaluation pilot used a nationwide Safe 

Harbor indirect cost rate of 110 percent 

of a firm’s direct salary rate. The test 

contracting agencies agreed that this rate 

was conservative and significantly 

lower than the industry average of 

typically claimed indirect cost rates. As 

such, while still providing for 

reimbursement of a significant portion 

of basic overhead costs, the use of this 

conservative rate incentivized 

consulting firms to develop an actual 

indirect cost rate when able to do so. 

The Safe Harbor indirect cost rate also 

provided a minimal risk to contracting 

agencies for overpayment to those 

consulting firms participating in the 

program. Based on FHWA’s experience 

with this pilot, FHWA is proposing to 

expand the use of the Safe Harbor 

indirect cost rate, beyond the 10 pilot 

States, to allow eligible consulting firms 

to use a State contracting agency– 

developed indirect cost rate. 

A Safe Harbor indirect cost rate is not 

intended for use on field-based 

contracts involving field overhead rates. 

Other direct costs that are not 


daltland on DSKBBV9HB2PROD with NOTICES
33290 Federal Register / Vol. 83, No. 137 / Tuesday, July 17, 2018 / Notices 

considered to be included within the 

Safe Harbor Program include: Travel 

costs (airfare, rental car, mileage, 

lodging, per diem, etc.), external 

printing and reproduction costs, mailing 

and shipping costs, equipment rental 

fees, sub-consultants, and other direct 

costs as appropriate to the contracted 

services. 

A Safe Harbor indirect cost rate is 

applied to new contracts executed with 

a contracting agency, or subrecipient. 

Once applied to a contract, the Safe 

Harbor indirect cost rate should be used 

for the duration of the contract. It is not 

uncommon for new or start-up firms to 

show large fluctuations in an indirect 

cost rate in the initial years of operation, 

before contract workload normalizes. 

Using the Safe Harbor indirect cost rate 

for the duration of a contract provides 

cost certainty in estimating the total 

contract amount and helps reduce the 

risk of costly contract modifications, 

necessary due to a significant 

fluctuation of an indirect cost rate. 

Similarly, a Safe Harbor indirect cost 

rate may be used in the determination 

of the fixed fee portion of the contract, 

which would not be subject to 

adjustment unless warranted by changes 

to the scope of work or duration of the 

contract. 

Eligible consulting firms that use the 

Safe Harbor indirect cost rate, and do 

not have established salaries or wage 

rates for employees or classes of 

employees, use negotiated, fixed hourly 

labor rates for the direct labor portion of 

the contracted services. The negotiated 

direct labor rate should meet the 

reasonableness provisions as set forth in 

2 CFR 200.404, considering the nature 

of the services to be provided. Where 

appropriate for the scope of services 

under contract, a ‘‘fully loaded’’ hourly 

rate could be established utilizing a 

reasonable hourly direct labor rate, a 

Safe Harbor indirect cost rate as the 

overhead rate component, and an 

appropriate amount of fixed fee that 

considers the complexity and risk 

involved. 

The Safe Harbor indirect cost rate is 

intended to be a component of a 

contracting agency’s risk-based 

oversight process. Contracting agencies 

using the Safe Harbor indirect cost rate 

must first develop written risk-based 

oversight procedures designed to 

provide reasonable assurance of 

consultant compliance with the Federal 

cost principles in accordance with 23 

CFR 172.11(c)(2). The use of the Safe 

Harbor indirect cost rate is voluntary for 

both the contracting agency and for 

eligible firms. In reviewing the 

eligibility of a consulting firm opting to 

use the Safe Harbor indirect cost rate, it 

may be necessary to contact the State 

department of transportation in the 

home State of the consulting firm to 

verify the audit history of the firm and 

ensure the firm does not have an 

audited or otherwise accepted indirect 

cost rate developed in accordance with 

the Federal cost principles. Use and 

application of the Safe Harbor indirect 

cost rate by eligible firms is one 

component of this risk-based oversight 

process. Some evaluation of the 

accounting system of the consulting 

firms choosing to use the Safe Harbor 

indirect cost rate may be necessary to 

verify the capability of accumulating 

and tracking direct labor for applying 

the Safe Harbor indirect cost rate, as 

well as for billing other direct costs by 

contract, segregating indirect costs, etc. 

The Internal Control Questionnaire 

provided in Appendix B of the 

AASHTO Uniform Audit and 

Accounting Guide (2016 Edition) may be 

used by contracting agencies as a tool 

for assessing the accounting system 

capabilities of firms opting to use the 

Safe Harbor indirect cost rate. A 

contracting agency may wish to conduct 

post contract audits or other evaluations 

to verify accurate accumulation and 

billing of direct contract costs. However, 

an audit of indirect costs is not 

necessary for Safe Harbor indirect cost 

rate contracts, as the rate should be 

applied for the duration of the contract, 

and retroactive adjustments to indirect 

costs incurred on these contracts is not 

necessary. 

If a contracting agency elects to use a 

Safe Harbor indirect cost rate program 

as an element of a risk-based oversight 

process in compliance with 23 CFR 

172.11(c)(2), the agency shall prepare 

and maintain written policies and 

procedures establishing the program in 

accordance with 23 CFR 172.5(c)(10). In 

conjunction with the development of 

written risk-based oversight procedures, 

the contracting agency should consider 

any actions necessary to comply with 

State regulation, policy, and/or 

procedures, as well as any revisions 

needed in boilerplate contract language 

or cost certifications on contracts 

applying the Safe Harbor indirect cost 

rate. 

The FHWA Division Office will serve 

as the primary point of contact and 

liaison for the contracting agency. The 

FHWA Division Offices also will 

monitor the respective contracting 

agency’s use of the Safe Harbor indirect 

cost rate in accordance with the 

approved, written risk-based oversight 

procedures. 

Request for Comment 

Federal regulations require 

contracting agencies to provide 

reasonable assurance to the FHWA that 

consultant costs on contracts 

reimbursed with FAHP funding are 

allowable in accordance with the 

Federal cost principles. The FHWA is 

seeking public comment on expanding 

the use of the Safe Harbor indirect cost 

rate, beyond the 10 pilot States, to allow 

other interested contracting agencies to 

use a self-administered Safe Harbor 

Program, under a risk-based approach 

compliant with 23 CFR 172.11(c), to 

provide that reasonable assurance. A 

self-administered Safe Harbor Program 

would involve, but not be limited to, the 

following: 

(1) A contracting agency developed 

risk-based analysis compliant with 23 

CFR 172.11(c)(2); 

(2) Written policies and procedures 

(Work Plan) consistent with the pilot 

program detailed above; and 

(3) Approval from the FHWA Division 

Office in the relevant State. 

The workplan used in the test 

evaluation has been posted on the 

docket as an example of the elements 

that should be included in a risk-based 

oversight procedure submitted to FHWA 

for approval. 

Commenters are encouraged to 

address any or all the areas listed above. 

The FHWA encourages commenters to 

submit any information or data 

demonstrating the benefits, costs, and 

cost-savings of this program. For 

example, FHWA would be interested in 

receiving quantifiable estimates of the 

burden associated with the annual 

development of an indirect cost rate, 

hiring a CPA to conduct necessary 

audits, and any other costs that would 

be avoided by a consulting firm or 

contracting agency in utilizing this Safe 

Harbor indirect cost rate. Commenters 

are also encouraged to focus on matters 

within the control of FHWA. The 

FHWA will consider public comment 

before adopting its final guidance on the 

application of a Safe Harbor indirect 

cost rate under a risk-based stewardship 

approach. 

Authority: 23 U.S.C. 112, 145 and 315; 23 

CFR 1.32, and 172; 49 CFR 1.85. 

Issued on: July 9, 2018. 

Brandye L. Hendrickson, 

Acting Administrator, Federal Highway 

Administration. 

[FR Doc. 2018–15231 Filed 7–16–18; 8:45 am] 

BILLING CODE 4910–22–P 


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