Source: http://www.fhwa.dot.gov/programadmin/23cfr172.cfm
Timestamp: 2013-12-07 20:22:44
Document Index: 629190823

Matched Legal Cases: ['art 172', 'art 172', 'art 172', 'art 31', 'art 31', 'art 31', 'art 31', 'art 31', 'art 26', 'art 18']

23 CFR 172--Administration of Engineering and Design Related Service Contracts -
Engineering and Design Services - Federal Aid Program Administration - FHWA
Federal-aid Program Administration > Consultant Services > 23 CFR 172--Administration of Engineering and Design Related Service Contracts
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23 CFR 172--Administration of Engineering and Design Related Service Contracts
DEPARTMENT OF TRANSPORTATIONFederal Highway Administration23 CFR Part 172
[FHWA Docket No. FHWA-98-4350] RIN 2125-AE45Administration of Engineering and Design Related Services Contracts
AGENCY: Federal Highway Administration (FHWA), DOT.ACTION: Final rule.
[Federal Register: June 12, 2002 (Volume 67, Number 113)][Rules and Regulations][Page 40149-40157]From the Federal Register Online via GPO Access [wais.access.gpo.gov][DOCID:fr12jn02-5]
Mr. Gary E. Moss, Office of Program Administration, (HIPA-10), (202) 366-4654, or Mr. Steven Rochlis, Office of the Chief Counsel, (HCC-30), (202) 366-1395, FHWA, 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.
Internet users may access all comments received by the U.S. DOT Docket Facility, Room PL-401, by using the URL: http://dms.dot.gov/. It is available 24 hours each day, 365 days each year. Please follow the instructions online for more information and help.
An electronic copy of this document may be downloaded by using a computer, modem and suitable communications software from the Government Printing Office's Electronic Bulletin Board at (202) 512- 1661. Internet users may reach the Office of the Federal Register's home page at http://www.archives.gov/ and the Government Printing Office's web site at: http://www.gpoaccess.gov/nara/.
The changes made to 23 U.S.C. 112(b) by these two laws, as well as provisions in 23 U.S.C. 106(c) relating to the assumption by the State of responsibilities of the Secretary for project design and construction, require the FHWA to modify 23 CFR part 172, subpart A-- Procurement Procedures. In addition, the FHWA adds several new terms to the definition section to clarify existing terms used in the regulation.
The references to Certification Acceptance (CA), and Sec. 172.15, Alternate Procedures, which were incorporated into 23 CFR part 172 to implement Certification Acceptance, are removed since Certification Acceptance was repealed by section 1601 of the TEA-21.
172.1 Purpose and Applicability
Section 172.3 Definitions
The Texas DOT requested that the term "private sector engineer and design firms" be removed from the definition section since the term is not used in the regulation. The FHWA agrees with the comment and the regulation has been modified accordingly.
Several comments requested the retention of definitions for "fixed fee" and "prenegotiation audit." Although still allowed, the regulation no longer specifies requirements for the use of "fixed fee" contracts or the use of a "prenegotiation audit," but instead refers to State procedures. Since these terms are no longer used in the final rule, they were removed.
The New York DOT suggested that in the definition of "cognizant agency," the term "State agency" is too broad and that the term "State Highway/Transportation Agency" would be preferred. The generic definition of "cognizant agency" is "Federal or State agency." Some States may have audit divisions that are not part of the State Highway/ Transportation Agency, therefore the FHWA prefers a broader concept.
Several commenters requested that the definition of "cognizant agency" as well as the procedure to get a cognizant agency audit should be set forth in greater detail in the regulation. Many commenters suggested that the FHWA should adopt the procedure and definition approved by the American Association of State Highway and Transportation Officials (AASHTO) Audit Subcommittee. The AASHTO Audit Subcommittee stated the following:
A "cognizant agency" is any one of the following:
The Home State reviews the CPA's working papers and the Home State issues a letter of concurrence with the audit report.
A Non-Home State reviews the CPA's working papers and issues a letter of concurrence with the CPA's report which is then accepted by the Home State. If the Home State does not accept the Non-Home State review, the Home State will have 180 days from receipt to complete a review of the CPA audit report and either concur with it, modify it, or reject it due to a material error requiring re-submittal; otherwise the CPA audit report with which the Non-Home State has concurred will be cognizant for the 1 year applicable accounting period.
Several commenters recommended that the term "audit" be defined in the regulation. Some commenters suggested using the definition: "An audit performed in accordance with Governments Auditing Standards promulgated by the United States General Accounting Office." The FHWA added a definition of the term audit to the final rule.
Section 172.5 Methods of Procurement
Section 172.5(a)(1) Competitive Negotiations
The Wisconsin DOT was concerned that a key point of the Brooks Architect-Engineers Act (40 U.S.C. 541-544) was not included in the regulation, i.e., price is not to be a factor in the analysis and selection phase. The FHWA agrees that this is a key point in the Brooks Bill procedure and, as such, is already covered by the Brooks Bill requirements. Due to its importance, and to be clear on this point, we have added a sentence in Sec. 172.5(a)(1) restating that price is not to be a factor in the analysis and selection phase.
The Texas Transportation Commission also recommends a best value approach be taken rather than a strictly qualifications based selection process in the Brooks Bill. In response to these comments, the FHWA maintains that 23 U.S.C. 112 requires that the Brooks Bill method be used in the selection of design consultants when Federal-aid funds are used, except if alternate procedures have been adopted by the State prior to enactment of the TEA-21. Accordingly, no change was made to the regulation, however the Secretary has authority to conduct innovative contracting research under 23 U.S.C. 502(a) on an experimental basis.
The New Jersey DOT recommended that "the rules should provide the flexibility that would allow competitive bids on certain types of fixed scope projects." The FHWA has allowed a simplified small purchases procurement procedure which provides substantial flexibility to the State. Nevertheless, for procurement over the small procurement threshold, the Brooks Act method is required by law, except if a State has adopted an alternative procedure enacted by the State prior to the enactment of the TEA-21, therefore, no change was made in the regulation.
The Michigan DOT requested that we add a section for fixed fees. Its comment states: "The determination of the Fixed Fee shall take into account the size, complexity, duration and degree of risk involved in the work and shall otherwise comply with 41 U.S.C. 254. The establishment of the fixed fee shall be project specific." The FHWA believes that the Brooks Act procedures that require the value of services to be rendered, the scope, the complexity, and the professional nature be considered in the negotiations addresses this issue for fixed fees used in competitive purchase procedures. The material in 41 U.S.C. 254 is intended for Federal contracts rather than purchases by grantees using Federal assistance monies, therefore the FHWA did not add the requested reference to 41 U.S.C. 254.
Section 172.5(a)(2) Small Purchase
The New Jersey DOT suggested that "consideration should be given to raising the $100,000 simplified acquisition threshold to $125,000 to allow for inflation." The FHWA intends to follow the law for small purchase procurement found in 41 U.S.C. 403(11), which currently provides that $100,000 is the maximum amount for small purchase procurement. However, the FHWA did revise the proposed regulation to reference the simplified acquisition threshold in 41 U.S.C. 403(11) rather than just listing the current $100,000 amount. When the amount is revised in 41 U.S.C. 403(11), as it has been in the past, the simplified acquisition threshold in the final rule will also automatically reflect that new limit.
Section 172.5(a)(4) State Statutory Procedures
A comment from the HNTB Corporation questioned the use of the TEA- 21 enactment date of June 9, 1998, throughout the regulation rather than the date of one year after the enactment of the NHS Act of November 28, 1995, to determine when a State could no longer enact legislation allowing it to adopt an alternate procedure whereby the subparagraphs added by section 307 of the NHS Act did not apply.
Section 172.7 Audits
Section 172.7(a) Performance of Audits
Several commenters were concerned about the scope of the FAR audit requirements in Sec. 172.7(a) and the hardships that States may experience from the requirements of numerous audits on contracts and subcontracts. Although the law requires that all contracts and subcontracts procured in accordance with 23 U.S.C. 112(b)(2)(C) be audited in compliance with cost principles contained in the part 31 of the FAR, the FHWA has determined that the State should determine the scope of those audits in their own procedures. The FHWA modified Sec. 172.7 of the final rule to reflect the States' responsibility. The section now says: "When State procedures call for audits of contracts or subcontracts for engineering design services, the audit shall test compliance with the requirements of the cost principles contained in the Federal Acquisition Regulations provided in 48 CFR part 31." Additionally, in many cases consultants selected by the Brooks Act procedure hire other consultants for small specialty jobs with State approval. Since these small subconsultant contracts were not procured in accordance with 23 U.S.C. 112(b)(2)(A), the audit requirements of this section would not apply.
The Oregon DOT, along with others, commented that 48 CFR part 31 (FAR 31) does not provide enough guidance. It is not the intent of this regulation to clarify the audit procedures in the FAR. However, additional guidance on the FAR may be obtained at the following internet site http://www.arnet.gov/.
The Oregon DOT also commented that in Sec. 172.7(a), audits are performed to standards rather than to principles. The Oregon DOT comment states: "This clause requires that audits comply with the cost principals contained in the FARs. Audits comply with audit standards rather than cost principles. Audits, while complying with audit standards, determine the level at which costs comply with cost principles. Changing the wording to read, '* * * the audit shall determine compliance with the cost principles * * *' (or some similar wording) would correct this discrepancy." The FHWA agrees with the Oregon DOT's comment and has made minor wording changes in the regulation to reflect that audits are preformed "to test" compliance with the cost principles rather than "to" compliance with the cost principles.
Section 172.7(b) Audits for Indirect Cost Rate
Several commenters were concerned about the requirements that the audit for the overhead rate could last for only one year. The Texas DOT commented that it does not believe it would be prudent to require an audit each year for a multi-year consulting contract if the audited indirect rate is acceptable to both contracting parties at the time of contract negotiation and execution. The FAR in 48 CFR 31.203(e) states that "* * *, the base period for allocating indirect costs will normally be the contractor's fiscal year* * *. When a contract is performed over an extended period, as many base periods shall be used as are required to represent the period of contract performance."
The FHWA agrees there are many reasons why an overhead rate for a firm may be unusually high for a short period of time. In such cases, a firm may believe that it would be in its best interest to offer a lower rate. The FHWA agrees that a consultant should be free to offer a lower overhead rate than the one determined by a cognizant Federal or State government agency, and that the contracting agency should be free to accept it provided such rate is offered voluntarily by the consultant. Under no circumstances, however, shall a contracting agency require a lowering of the overhead rate. We have added language to Sec. 172.7(b) to address this comment.
There were several comments concerning the procedure used to arrive at a cognizant agency audit. Many comments requested that the procedure passed by the AASHTO Subcommittee on Audits, in conjunction with the American Consultant Engineers Council (ACEC), be used. The FHWA issued an interim procedure to obtain a cognizant agency audit on December 10, 1997, in the form of a question and answer memorandum which can be viewed at the FHWA web site at: http://www.fhwa.dot.gov/programadmin/consultant.cfm. The FHWA believes that the AASHTO Audit Subcommittee procedures have merit, but the FHWA has determined that these procedures should be thoroughly tested under implementing guidance to be disseminated to the States. Therefore the Audit Subcommittee's proposed definition and procedure is not included in the final regulation.
Section 172.7(c) Disputed Audits
The FHWA received several comments raising a concern that disputed audits were not well defined. The FHWA clarifies Sec. 172.7(c) of the final rule to address these comments in Sec. 172.7(c) as follows: "Only the consultant and the parties involved in performing the indirect cost audit may dispute the established indirect cost rate. If an error is discovered in the established indirect cost rate, the rate may be disputed by any prospective user."
Section 172.7(d) Prenotification; Confidentiality of Data
The Wisconsin DOT was concerned about with whom the State may share indirect cost and rate data. The Wisconsin DOT believes that the requirement for permission only applies exclusively to the release of information to other firms and government agencies. Request for information from the press or ordinary citizens will be in accordance with State statutes.
However when such audit information is sought by a firm or a government agency (when the government agency is seeking the information for a purpose unrelated to compliance with this regulation), the cost data shall not be provided except by written permission of the audited firm. Moreover, as pointed out by the Wisconsin DOT, the plain language of the law did not exclude ordinary citizens or the press from obtaining this data. The FHWA's position concerning requests from the press or private citizens for this data is that State and Federal information accessibility statutes, as applicable, will control such release consistent with 23 U.S.C. 112(b)(2)(F) which provides: "If prohibited by law, such cost and rate data shall not be disclosed under any circumstances." The regulation was modified at Sec. 172.7(d) to address this issue by adding language that prohibits the release of this information if prohibited by law; however, should a release be required by law, or court order, the final rule states that such release shall make note of the confidential nature of the data.
Section 172.9 Approvals
Section 172.9(a) Written Procedures
It is not the FHWA's intent to review all county and city procedures for State subgrants. Although 49 CFR 18.37 addresses subgrants and requires the State ensure that subgrants meet State and Federal requirements, the FHWA felt it was necessary to cover the topic in the final rule. The FHWA added a new sentence to Sec. 172.1 which states, "Recipients of Federal funds shall ensure that their subrecipients comply with Federal regulations" and made minor revisions to Sec. 172.9(a) of the final rule.
Old SectionNew Section
172.1(a)172.1 Revised.
172.1(b)172.1 Revised and 172.5(a)(4) Revised.
172.3172.3 Revised.
AuditAdded.
Cognizant agencyAdded.
Competitive negotiationRevised.
Contract modificationRemoved.
Extra workRemoved.
Fixed feeRemoved.
One-year applicability accounting periodAdded.
Prenegotiation auditRemoved.
Scope of workRemoved.
172.5(a)172.9(d) Revised.
172.5(b)172.9(a). Revised.
172.5(c)Removed.
172.5(d)172.1 Revised.
172.5(e)172.5(b) Revised.
172.5(f)172.9(b) Revised.
172.7 introductory paragraph172.5 introductory paragraph revised and 172.5(a)(1) Revised. 172.7(a)172.5(a)(1) Revised.
172.7(a)(3)(ii)(B)172.5(a)(4) Revised.
172.7(b)172.5(a)(2) Revised.
172.7(c)172.5(a)(3) Revised.
172.7(c)(1)172.5(a)(3) Revised.
172.7(c)(1)(i)172.5(a)(3)(i). No change.
172.7(c)(1)(ii)172.5(a)(3)(ii). No change.
172.7(c)(1)(iii)172.5(a)(3)(iii). No change.
172.7(c)(2)Removed.
172.9(a)172.7(a) Revised.
None172.7(b) Added.
None172.7(c) Added.
None172.7(d) Added.
172.9(b)Removed.
172.9(c)2172.5(c) Revised.
172.9(c)(1), (3), (4)Removed.
172.9(d)Removed.
None172.9(b) and (c) Added.
172.11Removed.
172.13Removed.
172.15Removed.
172.21, 172.23 and 172.25Removed.
Section 172.1 Purpose and Applicability
The statement of purpose and applicability was revised to remove the references to the Certification Acceptance Plans that were repealed by the TEA-21; to remove an obsolete reference to the Secondary Road Plans; and to remove the reference to Combined Road Plans because the Secondary and Combined Road programs are no longer being funded. A new sentence is added requiring recipients of Federal funds to ensure that their subrecipients comply with Federal regulations. Additionally, paragraph (b) was revised to limit the use of State statutes for an alternate procedure to those enacted into law before June 9, 1998 (the date the TEA-21 was enacted), and redesignated as Sec. 172.5(a)(4).
The term "audit" is added to the list of definitions as a review to test the contractor's compliance with the requirements of cost principles contained in 48 CFR part 31.
The term "cognizant agency" is added to the list of definitions and is defined as any Federal or State agency that has conducted and issued an audit report of the consultant's indirect cost rate that has been developed in accordance with the requirements of the cost principles contained in 48 CFR part 31.
The term "One-year applicable accounting period" is added to the list of definitions and is defined as the accounting period for which annual financial statements are regularly prepared for the consultant.
The term "competitive negotiation" is revised to permit the use of procurement procedures enacted into State law prior to the enactment of TEA-21 (June 9, 1998).
The terms "contract modification," "extra work," "fixed fee," "prenegotiation audit," "scope of work" and "private sector engineering and design firms" were removed since they are not used in the new regulation.
Section 172.5 General Principles
This section is removed from the regulation. Most of the material was re-organized and moved to other sections. The provisions of paragraph (a), the consultant services in management roles, are revised and moved to Sec. 172.9(d).
Paragraph (b), written procedures, is redesignated as Sec. 172.9(a).
The provisions of paragraph (c), Prenegotiation audits is removed. The FHWA received several comments expressing concern over the removal of the requirements for prenegotiation audits. These comments indicate that prenegotiation reviews may not be allowed or not be eligible for Federal-aid funds which may prevent the State from being able to assure that the consultant has the proper procedures and an adequate accounting system to meet Federal requirements. The FHWA never intended to prevent the performance of prenegotiation audits and reviews, but wanted to give the States greater control over when they are used. With the required use of cognizant audits for overhead rates, the need for prenegotiation audits and reviews may be greatly reduced. However, prenegotiation audits are appropriate because the Brooks Act clearly requires agencies to negotiate contracts at a compensation determined to be "fair and reasonable to the Government." Also, a prenegotiation audit may be the best way to obtain detailed cost information to determine the validity of a firm's cost proposal, and to assure that the consultant has adequate knowledge of cost eligibles and documentation requirements. The expenses for prenegotiation audits and reviews would be eligible for Federal-aid funds under 23 U.S.C. 121 and 23 CFR 1.11.
The provisions of paragraph (d), State responsibility in local agency contracts, were reduced and included as part of Sec. 172.1.
The requirements of paragraph (e), the Disadvantaged Business Enterprise program, are specified under 49 CFR Part 26. Section Sec. 172.5(e), is redesignated as Sec. 172.5(b).
The requirements of paragraph (f), Contractual responsibilities, are revised and moved to Sec. 172.9(b). The section is revised to be consistent with 49 CFR 18.36(a) which requires States to use the same procurement procedures as if they were procuring with State funds, except where such procedures are inconsistent with Federal statutory requirements (see 49 CFR 18.4). Because States would be responsible for approving contracts and settlements, provided such contracts and settlements follow the same policies and procedures as the State would follow using State funds, there is a reduced requirement that such settlements be approved by the FHWA.
Section 172.7 Methods of Procurement
This section is redesignated as Sec. 172.5 and revised. Generally, this section covers the methods that can be used for procurement of design engineering services. The same methods are still in the regulations, but have been simplified. The small purchase section is revised by raising the maximum amount for procurement by small purchase procedures from $25,000 to $100,000 and indexing the amount to conform to the simplified acquisition threshold set in 41 U.S.C. 403(11) and 49 CFR 18.36(d). In a memorandum to the FHWA Regional Administrators, dated June 26, 1996, the Director of the FHWA Office of Engineering raised the threshold from $25,000 to $100,000. This memo was issued to implement the change in the final rule, published on April 19, 1995 (60 FR 19646), concerning 49 CFR part 18 and the change to 41 U.S.C. 403(11), which defines the "simplified acquisition threshold" to mean $100,000.
Section 172.9 Compensation
The information in paragraph (a) of this section is transferred to a new paragraph (a) in Sec. 172.7, Audits, and revised to prohibit procedures enacted into State law after June 9, 1998. Paragraphs (b), (c), and (d) are removed.
Section 172.11 Contract Modification
Section 172.13 Monitoring the Contract Work
Section 172.15 Alternate Procedures
Subpart B, Private sector involvement program, is removed. This section was developed to meet the requirements of the Intermodel Surface Transportation Efficiency Act of 1991 (ISTEA), Public law 102- 240, 105 Stat. 1914, section 1060, Private sector involvement program, but it has never been funded.
In compliance with the Regulatory Flexibility Act (5 U.S.C. 601- 612), the FHWA has evaluated the anticipated effects of this rule on small entities, such as local governments and businesses. Based on the evaluation, the FHWA hereby certifies that this action will not have a significant economic impact on a substantial number of small entities.
The action 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 action does not have a substantial direct affect or sufficient federalism implications on States that would limit the policymaking discretion of the States. Nothing in this document directly preempts any State law or regulation.
Government procurement, Grant programs-transportation, Highways and roads.
Issued on: June 5, 2002Mary E. PetersAdministrator, Federal Highway Administration.
Contacts Michael Matzke
Office of Chief Counsel 202-366-1395 E-mail Steve
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