Public-Private Partnership Pilot Program, 2583-2591 [E7-651]

Agencies

• Federal Transit Administration
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 72, Number 12 (Friday, January 19, 2007)]
[Notices]
[Pages 2583-2591]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-651]


-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION

Federal Transit Administration

[Docket No: FTA-2006-23697]


Public-Private Partnership Pilot Program

AGENCY: Federal Transit Administration (FTA), DOT.

ACTION: Notice of establishment of Public-Private Partnership Pilot 
Program; solicitation of applications.

-----------------------------------------------------------------------

SUMMARY: Section 3011(c) of the Safe, Accountable, Flexible, Efficient 
Transportation Equity Act: A Legacy for Users (``SAFETEA-LU'') 
authorizes the U.S. Secretary of Transportation to establish and 
implement a pilot program to demonstrate the advantages and 
disadvantages of public-private partnerships for certain new fixed 
guideway capital projects (the ``Pilot Program''). This notice 
establishes and sets forth the definitive terms of the Pilot Program. 
By separate notice to be published in the Federal Register not later 
than March 31, 2007, FTA will summarize and respond to comments 
solicited by FTA by notice published in the Federal Register on March 
22, 2006, at 71 FR 14568. This notice is not a ``binding obligation'' 
as defined at 49 U.S.C. 5334(l)(2). This notice is organized into three 
sections: (1) ``Background;'' (2) ``Overview of Pilot Program;'' and 
(3) ``Definitive Terms.''

DATES: To be considered in FTA's first quarterly review of applications 
to the Pilot Program, applications must be received by FTA on or before 
March 31, 2007. Applications received by FTA between March 31, 2007, 
and July 1, 2007, will be reviewed in FTA's second quarterly review of 
applications to the Pilot Program. See ``Applications'' at section 3(f) 
of this notice.

ADDRESSES: Applications should be submitted by U.S. Post or express 
mail to the Federal Transit Administration, c/o the Chief Counsel, 
Office of Chief Counsel, Room 9328, 400 Seventh Street, SW., 
Washington, DC 20590. Please note that due to security procedures in 
effect since October 2001 regarding mail deliveries, mail received 
through the U.S. Postal Service may be subject to delays. Parties 
making applications to the Pilot Program should consider using an 
express mail service to ensure the prompt filing of any applications 
not filed by express mail.

FOR FURTHER INFORMATION CONTACT: Questions concerning the Pilot Program 
should be addressed to David B. Horner, Esq., Chief Counsel, Federal 
Transit Administration, by e-mail at David.Horner@dot.gov or by 
telephone at (202) 689-4464. To read materials on the DOT docket 
responsive to FTA's notice published in the Federal Register on March 
22, 2006, at 71 FR 14568, please go to https://dms.dot.gov at any time 
or to the Docket Management System.

SUPPLEMENTARY INFORMATION:

1. Background

    (a) Objective. The Public-Private Partnership Pilot Program (the 
``Pilot Program'') is intended to demonstrate the advantages and 
disadvantages of public-private partnerships (``PPPs'') for certain new 
fixed guideway capital projects funded by the Federal Transit 
Administration (``FTA''). In particular, the Pilot Program is intended 
to study whether, in comparison to conventional procurements, PPPs 
better reduce and allocate risks associated with new construction, 
accelerate project delivery, improve the reliability of projections of 
project costs and benefits, and enhance project performance. The Pilot 
Program will accordingly study projects that, among other things, 
utilize methods of procurement that integrate risk-sharing and 
streamline project development, engineering, construction,\1\ 
operation, and maintenance.\2\ The amount and terms of private 
investment to be made in such projects will be a significant 
consideration in selecting projects to participate in the Pilot 
Program.
---------------------------------------------------------------------------

    \1\ Safe, Accountable, Flexible, Efficient Transportation Equity 
Act: A Legacy for Users H.R. REP. NO. 109-203, at 936-37 (2005), 
reprinted in 2005 U.S.C.C.A.N. 452.
    \2\ Section 5309(c)(4)(A), which permits the Secretary to 
approve an application to the Pilot Program if ``State and local 
laws permit public-private agreements for all phases of project 
development, construction and operation of the project'' (emphasis 
added) indicates that the Pilot Program is intended to demonstrate 
the advantages and disadvantages of PPPs for all aspects certain new 
fixed guideway capital projects, including their operation and 
maintenance.
---------------------------------------------------------------------------

    (b) PPPs in General. As the growth in traditional transportation 
revenue sources, such as gasoline taxes, continues to decline and 
transportation operation, maintenance, replacement, and expansion needs 
and costs increase, transportation agencies are experiencing 
significant pressure to find ways to

[[Page 2584]]

manage their costs and find new sources of revenue. One of the most 
successful methods to control costs and generate revenues employed by 
other infrastructure sectors is the use of PPPs. This success has led 
transportation agencies, including several transit agencies, to pursue 
opportunities for applying PPPs to deliver major capital projects.
    PPPs are essentially a form of procurement. Unlike conventional 
methods of contracting for new construction (e.g., ``design-bid-
build''), in which discrete functions are divided and procured through 
separate solicitations, PPPs contemplate a single private entity, 
typically a consortium of private companies (a ``private partner''), 
being responsible and financially liable for performing all or a 
significant number of functions in connection with a project. In 
transferring responsibility and risk for multiple project elements to 
the private partner, the project sponsor relaxes its control of the 
procurement, and the private partner receives the opportunity to earn a 
financial return commensurate with the risks it has assumed.
    Structured in multiple forms, PPPs vary generally according to the 
scope of responsibility and degree of risk assumed by the private 
partner with respect to the project. In each case, the private partner 
assumes financial risk in some form--for example, through an equity 
investment, liability for indebtedness, a fixed priced contract, a 
long-term warranty or a combination thereof.
    In recent years transit agencies have increasingly turned to PPP 
project delivery approaches in order to procure new or expanded transit 
services. Agencies have used PPP delivery approaches in an attempt to 
obtain time savings, cost savings, and more innovative, higher quality 
projects with reduced risks. The principal forms of project delivery 
PPPs (and their respective benefits) include the following:
    Design-Build. Unlike design-bid-build procurements, in which the 
design and construction of projects is procured under at least two 
separate contracts with little or no overlap in the respective project 
work phases,\3\ the design-build (``DB'') delivery approach combines 
the design and construction phases into one, fixed-fee contract. Under 
a DB contract, the design-builder, not the project sponsor, assumes the 
risk that the drawings and specifications are free from error. While 
the design and construction phases are performed under one contract, it 
is important to note that the design-builder may be one company or a 
team of companies working together. The DB selection process may be 
based on a negotiation with one or more contractors or a competitive 
process based on some combination of price, duration, and 
qualifications. Increasingly, DB contracts are being awarded on the 
basis of best value, considering each of these factors. Since the late 
1990s, five transit New Starts projects have been procured using a DB 
approach, including: the Denver RTD Southeast Corridor LRT; the South 
Florida Commuter Rail Upgrades; the Minneapolis Hiawatha LRT Line; the 
BART Extension to the San Francisco International Airport; and the 
WMATA Largo Metrorail Extension. In addition there is one non-New Start 
transit project built in part with Federal funds that has been 
delivered using a DB approach: The Portland MAX Airport Extension.
---------------------------------------------------------------------------

    \3\ Design-bid-build (``DBB'') is the traditional form of 
project delivery where the design and construction of the facility 
are awarded separately to private sector engineering and contracting 
firms. As a result, the DBB process is divided into a two-step 
delivery process involving separate phases for design and 
construction. In the design phase, the project sponsor either 
performs the work in-house or contracts with multiple engineering 
and design firms to prepare the preliminary engineering plans and 
environmental clearance, which results in a project plan, and the 
final drawings and specifications for the project. Once the design 
phase is complete, the project sponsor separately contracts with 
private construction firms through a competitive bidding process. 
Under a DBB contract, the project sponsor, not the construction 
contractors, is solely responsible for the financing, operation, and 
maintenance of the facility and assumes the risk that the drawings 
and specifications are complete and free from error.
---------------------------------------------------------------------------

    In comparison to traditional design-bid-build delivery, the primary 
benefits that have been associated with DB delivery approaches (and 
other PPP delivery approaches that incorporate DB delivery) include:
     Time savings. The potential for time savings results from 
early contractor involvement in the design phase, which increases the 
constructability of the design plans; the ability to work concurrently 
on the design and construction phases for portions of the project; and 
the elimination of the bidding process between the design and 
construction phases that is required of traditional DBB project 
delivery.
     Cost savings. The potential for cost savings results from 
continued communication between design, engineering, and construction 
team members throughout the delivery; reduced inspection requirements 
by the project sponsor because these activities are the responsibility 
of the design-builder; reduced change orders due to early involvement 
of the construction contractors in the design phase; and shortened 
project timeline.
     Shared risks. Since the potential project risks are shared 
among the public and private sectors, the risks may be assigned to the 
party best able to handle them. For example, the private sector may be 
better equipped to handle the risks associated with design quality, 
construction costs, and delivery schedule adherence since they are 
responsible for both the design and construction of the facility; while 
the public sector may be better able to manage the public risks of 
environmental clearance, permitting, and right-of-way acquisition.
     Improved quality. The potential for improved quality 
results from the involvement of the design team through project 
development and opportunities to incorporate project innovations and 
new technology that may arise based on project needs and contractor 
capabilities.
    It is important to note, however, that design-build project 
delivery increasingly includes a variety of structures and combinations 
that results in private participation not only in the design and 
construction phases but also in operations, maintenance, and project 
financing. These advancements based on the DB delivery approach (and 
that incorporate the benefits of the DB approach) include the 
following:
    Design-Build with a Warranty. Under the design-build with a 
warranty approach, the design-builder guarantees to meet material, 
workmanship, and/or performance measures for a specified period after 
the project has been delivered. The warranties may last five to twenty 
years. The potential benefits of the DB with a warranty approach 
include the assigning of additional risk to the design-builder and 
reducing the project sponsor's need for inspections and testing during 
project delivery.
    Construction Manager at Risk. Construction manager at risk 
(``CMR'') utilizes a separate contract for a construction manager 
(``CM''). The CM begins work on the project during the design phase to 
provide constructability, pricing, and sequencing analysis of the 
design. The project sponsor generally holds a separate contract with 
the design team through these initial phases of the CM contract. The CM 
becomes the design-build contractor when a guaranteed maximum price is 
agreed upon by the project sponsor and CM. The benefits associated with 
CMR delivery may include the continued advancement of the project 
during price negotiations and the potential for more optimal teaming 
because the CM can negotiate

[[Page 2585]]

with all firms, rather than having to select from a limited number 
under DB delivery.
    Design-Build-Operate-Maintain. Under a design-build-operate-
maintain (``DBOM'') delivery approach, the selected contractor is 
responsible for the design, construction, operation, and maintenance of 
the facility for a specified time. The contractor must meet all agreed 
upon performance standards relating to physical condition, capacity, 
congestion, and/or ride quality. The potential benefits of the DBOM 
approach are the increased incentives for the delivery of a higher 
quality plan and project because the design-builder is responsible for 
the performance of the facility for a specified period of time after 
construction. Since the late 1990s, three transit projects have been 
procured as DBOMs: the New Jersey Transit Hudson-Bergen LRT MOS-1 and 
MOS-2 and the JFK Airtrain.
    Design-Build-Finance-Operate. The design-build-finance-operate 
(``DBFO'') delivery approach is a variation of the DBOM approach. The 
major difference is that in addition to the design, construction, and 
operation of the project, the contractor is also responsible for all or 
a major part of the project's financing. The potential benefits for the 
DBFO approach are the same as those under the DBOM approach and also 
include the transfer of the financial risks to the design-builder 
during the contract period. While the project sponsor retains ownership 
of the facility, the DBFO approach attracts private financing for the 
project that can be repaid with revenues generated during the 
facility's operation. As of the publication of this notice, BART is 
expected to solicit proposals to design, build, operate, and finance 
the Oakland Airport Connector.
    Build-Operate-Transfer. Build-operate-transfer (``BOT'') is similar 
to the DBFO approach whereby the contract team is responsible for the 
design, construction, and operation of the facility for a specified 
time, after which the ownership and operation of the project are 
returned to the project sponsor. Under a BOT approach, the project 
sponsor retains ownership of the facility as well as the operating 
revenue risk and any surplus operating revenues. The potential benefits 
of using a BOT approach are similar to the benefits associated with 
using a DBOM contract: increased incentives for the delivery of a 
higher quality plan and project because the contractor is responsible 
for the operation of the facility for a specified time period after 
construction.
    Build-Own-Operate. Under a build-own-operate (``BOO'') delivery 
approach, the design, construction, operation, and maintenance of a 
facility is the responsibility of the contractor. The major difference 
between BOO and DBOM, DBFO, or BOT approaches is that ownership of the 
facility remains with the private contractor. As a result, the 
potential benefits associated with a BOO approach are that the 
contractor is assigned all operating revenue risk and any surplus 
revenues for the life of the facility.
    Full Delivery or Program Management. With a full delivery or 
program management (``Full Delivery'') approach, the construction 
contractor provides a wide variety of services beyond construction to 
the project sponsor. These services generally begin during the design 
phase and may continue through the operation and maintenance of the 
facility. The potential benefit of the Full Delivery approach is that 
it allows the project sponsor to leverage its resources throughout the 
design, construction, and operation of the facility.

2. Overview of Pilot Program

    (a) Overview of Statutory Framework. Section 3011(c) of the Safe, 
Accountable, Flexible, Efficient Transportation Equity Act: A Legacy 
for Users (``SAFETEA-LU'') authorizes the U.S. Secretary of 
Transportation (the ``Secretary'') to establish and implement the Pilot 
Program to demonstrate the advantages and disadvantages of PPPs for 
certain new ``fixed guideway capital projects'' (each, a ``project''). 
Section 3011(c) sets forth generally the terms and conditions of the 
Pilot Program.
     Section 3011(c)(2) authorizes the Secretary to select up 
to three projects to participate in the Pilot Program.
     Section 3011(c)(3) provides that no project is eligible to 
participate in the Pilot Program unless the project sponsor of a 
project submits an application that contains, at a minimum: (i) An 
identification of a project that has not entered into a full funding 
grant agreement or project construction grant agreement with FTA; (ii) 
a schedule and finance plan for the construction and operation of the 
project; and (iii) an analysis of the costs, benefits, and efficiencies 
of the proposed public-private agreement.
     Section 3011(c)(4) provides that the Secretary may approve 
the application of a project to participate in the Pilot Program if the 
Secretary determines that: (i) Applicable State and local laws permit 
public-private agreements for all phases of development, construction, 
and operation of the project; (ii) the recipient is unable to advance 
the project due to fiscal constraints; and (iii) the plan implementing 
the public-private partnership is justified.
     Section 3011(c)(5) requires that applications to the Pilot 
Program be made between the beginning of fiscal year 2006 and the end 
of fiscal year 2009.
    Beyond the terms set forth above, section 3011(c) states no 
operative criteria for implementation of the Pilot Program and is 
notably silent on what benefits, if any, participation in the Pilot 
Program would confer on a project.\4\ However, section 3011(c) affords 
the Secretary broad discretion to devise criteria or approve 
arrangements between a public entity and its private partner setting 
forth incentives and obligations within the framework of section 
3011(c) that would demonstrate the advantages or disadvantages of PPPs 
as applied to projects. In the event that a Pilot Project is a 
candidate for New Starts funding, the Secretary additionally has the 
authority under 49 U.S.C. 5309 (d)(3)(K) to supplement rating criteria 
identified specifically by statute with ``other factors'' that the 
Secretary determines appropriate to carry out the New Starts 
program.\5\
---------------------------------------------------------------------------

    \4\ The statute omits other important information and 
provisions. For example, the statute is silent on whether the Pilot 
Program, if established, would apply solely to candidates for New 
Starts funding. FTA routinely funds new fixed guideway capital 
projects through both its New Starts program and certain formula 
programs. The statute itself states that the Secretary may establish 
the Pilot Program to demonstrate the advantages of PPPs for 
``certain new fixed guideway capital projects'' but does not 
expressly limit such projects to New Starts projects. The first and 
last sentences of the pertinent section of the Conference Report, 
which is not legally binding, make reference to New Starts projects 
but omit words of limitation: ``The Conference is seeking to 
identify cost drivers for critical, complex, and capital intensive 
transit New Starts projects * * * The Committee expects the 
Secretary to initiate the pilot program as soon as practical after 
enactment [of SAFETEA-LU], in order that the benefits of PPPs may be 
understood and potentially applied to other transit New Starts 
projects.'' See H.R. Rep. No. 109-203, at 937 (2005), reprinted in 
2005 U.S.C.C.A.N. 452 (emphasis added). The statute provides no 
definition of the term ``public-private partnership.'' No monies 
have been authorized expressly for the Pilot Program.
    \5\ 49 U.S.C. 5309(d)(3) provides: ``In making the determination 
* * * for a major capital investment grant, the Secretary shall 
analyze, evaluate, and consider * * * (K) other factors that the 
Secretary determines to be appropriate to carry out this 
subsection.''
---------------------------------------------------------------------------

    (b) How the Pilot Program Will Work. FTA will designate as Pilot 
Projects those projects that exhibit high ``demonstration value.'' In 
determining the extent to which a project exhibits demonstration value, 
FTA will consider, among other things: (i) The number of project 
elements for which the private partner is responsible, (ii) the quality 
of

[[Page 2586]]

risk allocation with respect to the cost and ridership of the project, 
as set forth in the public-private agreement, (iii) the extent to which 
equity capital and development proceeds are contributed to the project 
and the terms on which such capital is contributed, (iv) whether the 
project is part of a congestion mitigation plan that incorporates 
system-wide congestion pricing, and (v) the expected effects of the 
foregoing arrangements on (A) The speed of delivery of the project, (B) 
the quality of delivery and performance of the project, and (C) the 
reliability of the projections of costs and benefits associated with 
the project.
    Pilot Projects that are candidates for funding under FTA's New 
Starts program will be evaluated and rated in accordance with the 
rating scheme of the New Starts program, as adjusted to account for 
their ``demonstration value.'' Accordingly, Pilot Projects that receive 
an overall rating of Medium or higher and a cost-effectiveness rating 
of Medium or higher, as adjusted for their demonstration value, will be 
included in the President's Budget to Congress for New Starts funding.
    Pilot Projects that propose to use non-New Starts Federal funds may 
receive certain benefits, such as regulatory relief, as negotiated with 
FTA on a case-by-case basis, after taking into account the 
demonstration value of the project. FTA expects to utilize an opening 
in the Pilot Program for a project receiving non-New Starts Federal 
funds only if the project presents exceptionally high demonstration 
value.
    FTA budget recommendations and other final approvals with respect 
to a Pilot Project--together with any procedural or rating benefits 
received by the project under the Pilot Program prior to a funding 
recommendation--would be conditioned on the project sponsor and the 
private partner having entered into a public-private agreement that, in 
the opinion of FTA, safeguards the ``Federal interest.'' \6\ If the 
parties failed to enter into such an agreement, FTA would rescind the 
procedural and substantive benefits received by the Pilot Project and 
remove the Pilot Project from the Pilot Program.
---------------------------------------------------------------------------

    \6\ The term ``Federal interest'' typically denotes a range of 
interests of the Federal government in a project, including, for 
example, the interest of the Federal government in the project's 
compliance with applicable Federal law. For purposes of the Pilot 
Program, the term ``Federal interest'' means, with respect to a 
Pilot Project, the interest of the Federal government in having the 
project completed in accordance with the budget, schedule, and 
public-private agreement on the basis of which (i) in the case of a 
Pilot Project that is a candidate for New Starts funding, FTA 
recommends the project in the Annual Report to the U.S. Congress for 
a Full Funding Grant Agreement and (ii) in the case of any other 
Pilot Project, FTA permits non-New Starts Federal funding in support 
of the project. See section 3(b) of this notice.
---------------------------------------------------------------------------

    It follows that the Pilot Program will not focus on innovative 
finance as such but on innovative procurements of major capital 
projects in which private capital is invested. The PPPs to be studied 
in the Pilot Program may be distinguished from other collaborative 
arrangements between public and private sectors that are not 
procurements but instead are mechanisms to provide private capital to 
transit projects. Many transit agencies, for example, are partnering 
with the private sector in order to promote real estate development in 
and around transit facilities, which is often referred to as ``joint 
development.'' These partnerships provide access to additional capital 
and operating revenues for transit agencies through the receipt of 
lease payments, access fees, and increased fare revenues, as well as 
direct private sector funding of capital facilities that promote access 
between transit and private development. The capital-raising function, 
however, is but one element of a PPP.
    (c) Rationale for Pilot Program Terms. FTA is interested in 
understanding the extent to which the private sector's requirement for 
a financial return and agreement to assume risk for costs and benefits 
in major transit system procurements may permit FTA to relax certain 
requirements or accelerate approvals applicable to major capital 
projects funded by FTA. In particular, FTA wishes to study the 
proposition that when risks associated with new construction are 
appropriately allocated between a project sponsor and its private 
partner, FTA may rely on the commercial due diligence, financial 
incentives, and potential liabilities of the private partner to control 
for such risks, rather than evaluate those risks solely or primarily by 
means of FTA's own due diligence.
    Currently, FTA's New Starts program and certain Federal transit 
regulations attempt to safeguard the Federal interest in major transit 
system procurements by means of extensive due diligence. These are 
designed, among other things, to allow FTA to validate the projections 
of project costs, benefits, and financing that, in turn, form the basis 
of FTA's statutorily-required findings of project justification and 
local commitment. FTA believes, however, that determinations of project 
justification and financial commitment may not require the independent 
verification by FTA of estimated project costs, benefits, and financing 
in all cases. FTA wishes to study whether, in some instances, such 
determinations might be reliably based on commercial arrangements 
negotiated between the project sponsor and private partner that are 
typical of PPPs. Such arrangements might include ``design-build'' or 
``design, build, operate, and maintain'' agreements, fixed priced 
contracts, equity investments by private contractors and other risk-
shifting or risk-reducing devices customary in private sector project 
development transactions. The Pilot Program accordingly offers projects 
sponsors incentives--in the form of improved ratings, accelerated 
process and other benefits--to enter into PPPs for project delivery. 
The benefit to the public generally of relying on third-party 
commercial validation of project costs, benefits, and local commitment 
is that, in doing so, FTA may accelerate the review process for New 
Starts, thereby realizing savings for project sponsors and Federal 
taxpayers.
    Similarly, in the case of projects that intend to use non-New 
Starts Federal funds, FTA may relax certain regulations that impose 
additional costs on project sponsors to the extent such regulations are 
redundant with private sector safeguards, incentives, and obligations 
that have the effect of protecting the Federal interest.
    Accordingly, under the Pilot Program, FTA's decision to recommend 
funding or to grant certain regulatory relief will not turn primarily 
on FTA's review of project costs and benefits; it will turn instead on 
whether the commercial terms between project sponsor and private 
partner allocate risks and create the incentives and liabilities in a 
way that safeguards the Federal interest. For this reason, FTA budget 
recommendations and other final approvals with respect to a Pilot 
Project--together with any other benefits received by the project under 
the Pilot Program prior to a funding recommendation or other approval--
will be conditioned on the project sponsor and its private partner 
having entered into a public-private agreement satisfactory to FTA. If 
the parties fail to enter into a satisfactory agreement, FTA will 
rescind the benefits received by the Pilot Project and remove the Pilot 
Project from the Pilot Program.
    (d) Environmental Matters. On several occasions in years past, FTA 
has allowed project sponsors to negotiate and award design-build 
contracts in instances in which the contract did not commit the project 
sponsor or FTA to final design or construction prior to the completion 
of compliance with NEPA, and the entities performing the NEPA studies 
had no financial interest in the outcome of the project under study. 
For

[[Page 2587]]

purposes of the Pilot Program, FTA will observe environmental 
procedures substantially the same as FTA's existing approach on 
environmental matters, as set forth in section 3(l) of this notice.

3. Definitive Terms

    (a) Public-Private Partnership Pilot Program Established. The 
Federal Transit Administration (``FTA''), acting for the Secretary of 
the U.S. Department of Transportation (the ``Secretary'') pursuant to 
section 3011(c)(1) of the Safe, Accountable, Flexible, Efficient 
Transportation Equity Act: A Legacy for Users (``SAFETEA-LU''),\7\ 
establishes a pilot program to demonstrate the advantages and 
disadvantages of public-private partnerships for certain new fixed 
guideway capital projects (the ``Pilot Program''). The Pilot Program 
will be administered by FTA in accordance with the terms and conditions 
set forth in this section 3.
---------------------------------------------------------------------------

    \7\ Unless stated otherwise, all section references in this 
section 3 are references to sections of SAFETEA-LU.
---------------------------------------------------------------------------

    (b) Certain Definitions. As used in this section 3,
    ``Administrator'' means the Administrator of FTA.
    ``Alternatives analysis'' has the meaning provided in 49 CFR 
611.7(a).
    ``business improvement district'' means an association (i) 
Organized voluntarily by its members for the purpose of financing a 
project by means of self-assessments, (ii) managed by its members or by 
a non-governmental entity under the direction of a board elected by its 
members, and (iii) whose members are located within a defined 
geographic area.
    ``Demonstration value'' has the meaning provided in section 3(h) of 
this notice.
    ``Department'' means the U.S. Department of Transportation.
    ``development proceeds'' means cash contributed by a governmental 
entity to the project company raised through the sale or lease to a 
non-governmental for-profit entity of rights to develop, control, 
occupy, enter, or otherwise use for commercial purposes any real 
property (or the space above the physical surface of real property) 
adjacent or proximate to any part of a Pilot Project.
    ``Equity capital'' means the amount equal to the sum of: (i) Cash 
paid into the project company by a non-governmental entity in exchange 
for shares of capital stock, membership interest, partnership interest 
or another interest therein that entitles the holder thereof to (A) 
Vote on the selection of directors, managers, or general partners of 
the project company, as the case may be, and (B) receive distributions 
of profits of the project company with respect to such interest (an 
``equity interest''); (ii) the amount represented by a letter of credit 
made in favor of senior lenders of the project company by the holder of 
an equity interest in lieu of cash payments for an equity interest; 
(iii) cash loaned to the project company by the holder of an equity 
interest in exchange for the unsecured subordinated obligation of the 
project company to repay indebtedness; and (iv) cash contributed to the 
project company by a business improvement district (as defined above). 
For avoidance of doubt, ``equity capital'' shall not include proceeds 
raised by tax increment financing.
    ``Federal transit law'' means 49 U.S.C. 5301 et seq.
    ``Federal interest'' means, with respect to a Pilot Project, the 
interest of the Federal government in having the project completed in 
accordance with the budget, schedule, and public-private agreement on 
the basis of which (i) in the case of a Pilot Project that is a 
candidate for New Starts funding, FTA recommends the project in the 
Annual Report to the U.S. Congress for a full funding grant agreement 
or project construction grant agreement and (ii) in the case of any 
other Pilot Project, FTA consents to non-New Starts Federal funding in 
support of the project.
    ``Final design'' for purposes of section 3(l) of this notice, means 
any design activities following preliminary design and includes the 
preparation of final construction plans and detailed specifications for 
the performance of construction work, and for all other purposes, shall 
have the meaning provided in 49 CFR 611.7(b).
    ``Fixed guideway capital project'' means a ``capital project,'' as 
defined at 49 U.S.C. 5302(a)(1), that is a ``fixed guideway,'' as 
defined at 49 U.S.C. 5302(a)(4).
    ``NEPA'' means the National Environmental Policy Act of 1969, as 
amended, at 42 U.S.C. 4321 et seq.
    ``New Starts program'' means the capital investment programs 
authorized at 49 U.S.C. 5309(d) and (e).
    ``Non-New Starts Federal funding'' means any grants provided 
pursuant to 5309(b)(2) or (3) (and, for avoidance of doubt, shall 
exclude grants provided pursuant to 49 U.S.C. 5309(d) or (e)).
    ``Pilot Program'' has the meaning provided in section 3(a) of this 
notice.
    ``Pilot Project'' means a project designated by FTA as Pilot 
Project pursuant to the definitive terms of the Pilot Program.
    ``Preliminary design'' means, for purposes of section 3(l) of this 
notice only, all design and engineering activities undertaken for the 
purposes of: (a) Defining the project alternatives and completing the 
NEPA review process; (b) complying with other related environmental 
laws and regulations; (c) supporting agency coordination, public 
involvement, permit applications and development of mitigation plans; 
or (d) advancing the design development of the preferred alternative 
when authorized by the lead Federal agency in accordance with 23 U.S.C. 
139(f)(4)(D) or as necessitated by 49 U.S.C. 5309. Preliminary design 
expressly includes, but is not limited to, preliminary engineering and 
other pre-construction activities such as environmental assessments, 
topographic surveys, metes and bounds surveys, geotechnical 
investigations, hydrologic analysis, hydraulic analysis, utility 
engineering, traffic studies, financial plans, revenue estimates, 
hazardous materials assessments, and other work that does not 
materially affect the consideration of alternatives in the NEPA review 
process. Preliminary design specifically excludes any activity that 
would constitute an irreversible or irretrievable commitment of 
resources that has the effect of foreclosing the formulation or 
implementation of any reasonable and prudent alternatives.
    ``Preliminary engineering'' has the meaning provided in 49 CFR 
611.7(b).
    ``Private partner'' means any corporation, general partnership, 
limited liability company, limited partnership, joint venture, business 
trust, or other business entity that has entered into a public-private 
agreement with respect to a Pilot Project.
    ``Program income'' has the meaning provided in 49 CFR 18.25.
    ``Project'' means a new, or extension to an existing, fixed 
guideway capital project.
    ``Project company'' means the company that will own or lease a 
Pilot Project pursuant to a public-private agreement.
    ``Public-private agreement'' means a definitive agreement with 
respect to the development, design, construction, financing, 
maintenance, or operation of a Pilot Project made by and between the 
project sponsor of such project and its private partner.
    ``Project sponsor'' means, with respect to any project, the public 
entity that procures the project.
    ``RFP'' means request for proposal.
    ``RFQ'' means request for qualifications.
    ``Urban Partnership Program'' means the program established by the

[[Page 2588]]

Department to demonstrate strategies with a combined track record of 
effectiveness in reducing traffic congestion, as further described in 
the Department's notice published in the Federal Register on December 
8, 2006 (see Applications for Urban Partnership Agreements as Part of 
Congestion Initiative, 71 FR 71231-36, Dec. 8, 2006).
    (c) No Obligation to Establish Pilot Program or to Designate Pilot 
Projects. FTA is under no legal obligation to establish the Pilot 
Program or to designate Pilot Projects under the Pilot Program once 
established. The Pilot Program and its terms and conditions (other than 
the terms and conditions set forth in sections 3011(c)(2), (3), (4) and 
(5)), are established by FTA in its discretion pursuant to section 
3011(c).\8\ At any time, FTA may (i) Terminate the Pilot Program or 
(ii) amend or wave any of its terms or conditions.
---------------------------------------------------------------------------

    \8\ Neither section 3011(c) nor related sections of the 
conference report directs the Secretary to establish the Pilot 
Program. (See Sec.  3011(c) of SAFETEA-LU: ``The Secretary may 
establish and implement a pilot program to demonstrate the 
advantages and disadvantages of public-private partnerships for 
certain new fixed guideway capital projects.'' (emphasis added); 
H.R. Rep. No. 109-203, at 937 (2005), reprinted in 2005 U.S.C.C.A.N. 
452: ``The Committee expects the Secretary to initiate the pilot 
program as soon as practicable after enactment [of SAFETEA-LU], in 
order that the benefits of PPPs may be understood and potentially 
applied to other transit New Starts projects.'' Section 3011(c)(4) 
clearly implies that the Secretary has broad discretion to devise 
and apply additional criteria for determining whether a project will 
be approved as Pilot Project. In particular, by providing that the 
Secretary ``may'' approve a project as a Pilot Project if it meets 
the statutory criteria, the statute implies that the Secretary has 
the authority to require projects to satisfy additional criteria 
(beyond what is required by statute) developed on an administrative 
basis in order to become Pilot Projects. In addition, FTA believes 
that the research value of the Pilot Program would be compromised if 
FTA did not develop and apply additional criteria for the selection 
of Pilot Projects.
---------------------------------------------------------------------------

    (d) Withdrawal; Removal; Automatic Termination; Completion.
    (i) At any time, by written notice to the Administrator, a project 
sponsor may withdraw its Pilot Project from the Pilot Program for any 
reason. In the event that a Pilot Project so withdrawn is a New Starts 
project, the Pilot Project (A) Shall not be removed from the New Starts 
program solely because of its withdrawal from the Pilot Program and (B) 
shall not be eligible to reapply to the Pilot Program.
    (ii) At any time, FTA may remove a Pilot Project from the Pilot 
Program for any reason, including, without limitation, the failure of 
the project sponsor and its private partner to enter into a public-
private agreement satisfactory to FTA.
    (iii) The participation of a Pilot Project in the Pilot Program 
shall terminate automatically and without further action by FTA upon 
the second anniversary of the project's designation as a Pilot Project 
unless the Administrator determines otherwise in writing.
    (iv) A Pilot Project will have completed its participation in the 
Pilot Program when its project sponsor and private partner have entered 
into a public-private agreement that, in the opinion of FTA, provides 
for the risk allocation, obligations, and incentives necessary to 
safeguard the Federal interest in the project. Completion of a Pilot 
Project's participation in the Pilot Program will not open a position 
in the Pilot Program for another project.
    (v) No rights, obligations or benefits afforded a Pilot Project 
hereunder shall survive its withdrawal, removal, or termination as a 
Pilot Project in accordance with sections 3(d)(i), (ii), or (iii) of 
this notice, respectively. FTA will post any written notice of 
withdrawal, removal, termination, or completion of a Pilot Project on 
the Department's docket within thirty calendar days after such 
withdrawal, removal, termination, or completion.
    (e) Number of Pilot Projects; Term of Pilot Program. At any time 
during the term of the Pilot Program, no more than three projects will 
be designated as Pilot Projects.\9\ The term of the Pilot Program will 
begin on the date of publication of this notice in the Federal Register 
and continue for so long as any Pilot Project has not been withdrawn, 
removed, terminated, or completed as a Pilot Project in accordance with 
section 3(d) of this notice. FTA will post notice of the designation of 
a project as a Pilot Project on the Department's docket within thirty 
calendar days after FTA advises the project sponsor of such designation 
in writing.
---------------------------------------------------------------------------

    \9\ Section 3011(c)(2): ``The Secretary may permit the 
establishment of 3 [sic] public-private partnerships for new fixed 
guideway capital projects.''
---------------------------------------------------------------------------

    (f) Applications.
    (i) An application for designation as a Pilot Project must be (A) 
Signed by the General Manager, Chief Executive Officer, or similar 
officer of the project sponsor and (B) include information that 
establishes the eligibility of the project under the criteria set forth 
in section 3(g) of this notice. An application to the Pilot Program may 
not exceed twenty pages (excluding appendices, if any). In its 
application, a project sponsor should (A) Describe the proposed 
project, (B) the project's demonstration value (as defined in section 
3(h) of this notice) and (C) the regulatory relief and procedural and/
or rating benefits it is seeking for the project under the Pilot 
Program, including those benefits listed in section 3(i) of this 
notice, if any. An application should be submitted by U.S. Post or 
express mail to the Federal Transit Administration, c/o the Chief 
Counsel, Office of Chief Counsel, Room 9328, 400 Seventh Street, SW., 
Washington, DC 20590.
    (ii) FTA will review applications to the Pilot Program quarterly on 
a rolling-basis for so long as at least one position in the Pilot 
Program is available. The deadline for submission of applications for 
FTA's first quarterly review of proposals will be March 31, 2007. 
Applications received by FTA between March 31, 2007 and July 1, 2007 
will be reviewed in FTA's second quarterly review of applications to 
the Pilot Program. No application for designation as a Pilot Project 
will be approved by FTA after September 30, 2009.\10\ The withdrawal, 
removal, or termination of a Pilot Project in accordance with sections 
3(d)(i), (ii), or (iii) of this notice, respectively, will open a 
position in the Pilot Program for another project. FTA will solicit 
applications to fill the opening by means of a notice in the Federal 
Register. FTA will evaluate applications for eligible projects on the 
basis of their absolute merit under the criteria described in section 
3(h) of this notice, and not on the basis of their merit in relation to 
other applications for eligible projects then pending.
---------------------------------------------------------------------------

    \10\ Section 3011(c)(5): ``Program Term.--The Secretary may 
approve an application of a recipient for a public-private 
partnership for fiscal years 2006 through 2009.''
---------------------------------------------------------------------------

    (g) Eligibility. A project will be eligible to participate in the 
Pilot Program if:
    (i) All or part of the project is a new fixed guideway capital 
project and, with respect to the project, the project sponsor has not 
entered into a full funding grant agreement or project construction 
grant agreement with FTA; \11\
---------------------------------------------------------------------------

    \11\ Section 3011(c)(3)(A).
---------------------------------------------------------------------------

    (ii) The project sponsor has developed, and has submitted with its 
application to the Pilot Program, a schedule and finance plan for the 
construction and operation of the project; \12\
---------------------------------------------------------------------------

    \12\ Section 3011(c)(3)(B).
---------------------------------------------------------------------------

    (iii) The project sponsor has developed, and has submitted to FTA 
with its application to the Pilot Program, an analysis of the costs, 
benefits, and efficiencies of the public-private agreement proposed for 
the project; \13\
---------------------------------------------------------------------------

    \13\ Section 3011(c)(3)(C).

---------------------------------------------------------------------------

[[Page 2589]]

    (iv) Applicable State and local laws (together with the charter or 
other organizational document of the project sponsor) permit public-
private agreements for all phases of project development, construction, 
and operation of the project; \14\
---------------------------------------------------------------------------

    \14\ Section 3011(c)(4)(A).
---------------------------------------------------------------------------

    (v) The project is not a Pilot Project previously withdrawn, 
removed, or terminated under the Pilot Program;
    (vi) The recipient cannot advance the project due to fiscal 
constraints;
    (vii) An opinion of counsel of the project sponsor, addressed to 
FTA in form and substance satisfactory to FTA, that each of the 
conditions set forth in sections 2(g)(i) through (v) of this notice has 
been satisfied in all material respects; and
    (viii) If the project is a candidate for New Starts funding, the 
project shall have completed alternatives analysis.
    (h) Selection Criteria. Section 3011(c)(4) provides that the 
Secretary may approve the application for the designation of a project 
as a Pilot Project if ``(A) State and local laws permit public-private 
agreements for all phases of project development, construction, and 
operation of the project; (B) the recipient is unable to advance the 
project due to fiscal constraints; and (C) the plan implementing the 
public-private partnership is justified.''
    With respect to the condition set forth in subsection (A) of 
section 3011(c)(4), FTA will rely on the opinion of project sponsor's 
counsel submitted with its application to the Pilot Program to 
determine whether ``State and local laws permit public-private 
agreements for all phases of project development, construction, and 
operation of the project.''
    With respect to the condition set forth in subsection (B) of 
section 3011(c)(4), FTA will find that ``the recipient is unable to 
advance the project due to fiscal constraints'' if its project sponsor 
submits an application to the Pilot Program for the project.
    With respect to the condition set forth in subsection (C) of 
section 3011(c)(4), projects that exhibit the highest degree of 
``demonstration value'' will be deemed ``justified.'' In determining 
the degree of a project's demonstration value, FTA shall take into 
account the following, among other factors:
    (i) The number and type of project elements for which the private 
partner is responsible;
    (ii) Whether the project utilizes procurements that integrate risk 
sharing and streamline project development, engineering, construction, 
operations, and maintenance; \15\
---------------------------------------------------------------------------

    \15\ The statutory selection criterion that requires that 
``State and local laws permit public-private agreements for all 
phases of project development, construction and operation of the 
project'' indicates that the Pilot Program is intended to study not 
only study PPPs with respect to the delivery of fixed guideway 
capital projects but also their operation.
---------------------------------------------------------------------------

    (iii) The risk allocation with respect to the project's costs set 
forth in the public-private agreement;
    (iv) The risk allocation with respect to the project's revenues 
generated by ridership set forth in the public-private agreement;
    (v) The extent to which the risk allocation set forth in the 
public-private agreement increases the reliability of projections of 
the project's capital and operating costs;
    (vi) The terms on and extent to which equity capital is contributed 
to project;
    (vii) The terms on and extent to which development proceeds are 
contributed to the project;
    (viii) The sequence in which Federal, State, local, and private 
funds are contributed to the project;
    (ix) The experience of the management of the project sponsor and 
the private partner in (A) negotiating and overseeing major system 
procurements and (B) designing, building, operating and maintaining the 
mode of transportation contemplated for the project;
    (x) The extent to which the project is part of a congestion 
mitigation plan that incorporates system-wide congestion pricing 
consistent with the Department's Urban Partnership Program; and
    (xi) The expected effects of the foregoing arrangements on (A) the 
quality of delivery and performance of the project, (B) the speed of 
delivery of the project, and (C) the reliability of projections of 
costs and benefits with respect to the project.
    (i) Benefits.
    (i) New Starts Projects. A Pilot Project that is a candidate for 
funding under the New Starts program may receive some or all of the 
following benefits:
    (A) An adjustment in the Pilot Project's ``cost-effectiveness'' 
rating, calculated by excluding from the computation of cost-
effectiveness 100% of the costs of the Pilot Project to be paid for by 
equity capital and/or 50% of the costs of the Pilot Project to be paid 
for by development proceeds (subject to approval by the U.S. Office of 
Management and Budget);
    (B) An adjustment in the Pilot Project's ``project justification'' 
rating, determined by (x) assigning a weighting of 20% to the status of 
the project as Pilot Project (as an ``other factor'' pursuant to 49 
U.S.C. 5309(e)(3)(K)) and (y) assigning weightings of 50% and 30% to 
cost-effectiveness and land-use ratings, respectively, in the 
development of the Pilot Project's project justification rating 
(subject to approval by the U.S. Office of Management and Budget);
    (C) Concurrent approvals of the Pilot Project into Preliminary 
Engineering and Final Design;
    (D) Elimination or limitation of certain risk assessments from the 
rating process, as negotiated with FTA on a case-by-case basis, 
including the elimination or limitation of FTA risk assessments 
conducted during preliminary engineering and prior to entering into a 
full funding grant agreement; \16\
---------------------------------------------------------------------------

    \16\ Depending on the degree to which the private sector entity 
has assumed management, construction, and financial risks, FTA may 
also alter the scope and content of the Project Management and 
Financial Management Oversight reviews as appropriate.
---------------------------------------------------------------------------

    (E) Elimination or limitation of certain reviews of the projections 
of transportation user benefits, as negotiated with FTA on a case-by-
case basis, including FTA's accepting, without further review, 
projections of transportation user benefits on the basis of which cost-
effectiveness and mobility measures for the Pilot Project's rating will 
be developed, subject to the private partner's assuming levels of risk 
with respect to such benefits on terms satisfactory to FTA;
    (F) Issuance of a Letter of Intent by FTA setting forth FTA's 
intention to obligate a specified amount of New Starts funds for the 
Pilot Project from future available budget authority specified in law 
and subject to the availability of appropriations;
    (G) Early issuance by FTA of Letters of No Prejudice (or other 
assurances) to accelerate commencement of pre-construction services and 
planning;
    (H) Flexible uses of program income, as permitted by agreement with 
FTA pursuant to 49 CFR 18.25(g); and
    (I) Certain incentives for the benefit of contractors to enter into 
public-private agreements or other commitments for construction prior 
to the award of a full funding grant agreement, as negotiated with FTA 
on a case-by-case basis, including significant streamlining of the 
project development process resulting in an earlier Federal funding 
commitment (subject to the availability of appropriations), and the 
opportunity to earn higher returns in exchange for assuming the risk 
associated with achieving the cost estimates and/or ridership 
projections.

[[Page 2590]]

    Pilot Projects that receive an overall rating of Medium or higher 
and a cost-effectiveness rating of Medium or higher, as adjusted, will 
be included in the President's Budget to Congress for New Starts 
funding.
    (ii) Project Receiving Formula Funds. Pilot Projects that propose 
to utilize non-New Starts Federal funding may receive certain 
procedural and substantive benefits, as negotiated with FTA on a case-
by-case basis.
    (j) Public-Private Agreement. No Pilot Project will be approved for 
funding by FTA unless the project sponsor and its private partner enter 
into a binding public-private agreement that, in the opinion of FTA, 
provides for the risk allocation and incentives necessary to safeguard 
the Federal interest. In reviewing the public-private agreement 
proposed by the project sponsor and its private partner, FTA may 
consider the following, among other factors:
    (i) The type of economic interest the private partner will have in 
the Pilot Project;
    (ii) Which party to the agreement will assume responsibility for 
which elements of the Pilot Project and the timing of the assumption of 
responsibility for such elements;
    (iii) If and the extent to which the private partner is liable for 
non-performance under the private partner under the agreement;
    (iv) If and how the agreement provides for the assignment, 
subcontracting or other delegation of responsibilities to third parties 
by the project sponsor and the private partner;
    (v) If and how the parties to the agreement will share management 
of the risks of the Pilot Project;
    (vi) If and how the parties to the agreement will share the costs 
of development of the Pilot Project;
    (vii) If and how the parties to the agreement will allocate 
financial liability for cost overruns;
    (viii) If and the extent to which the private partner is subject to 
liability for non-performance under the agreement;
    (ix) If and the extent to which the private partner is incented to 
perform under the agreement;
    (x) Whether the agreement provides for accounting and auditing 
standards for measuring the progress of the Pilot Project and the 
quality of such standards; and
    (xi) The grounds for termination of the agreement by the project 
sponsor or the private partner.
    (k) Memorandum of Understanding. In connection with a project's 
designation of as a Pilot Project, FTA and the project sponsor will 
enter into a non-binding memorandum of understanding that identifies 
the benefits for the project being sought under the Pilot Program.
    (l) Certain Environmental Matters.\17\ With respect to the design-
build elements of a Pilot Project's procurement:
    (i) The project sponsor may:
    (A) Issue an RFQ prior to the conclusion of the NEPA process as 
long as the RFQ informs proposers of the general status of NEPA review;
    (B) Issue an RFP after the conclusion of the NEPA process;
    (C) Issue an RFP prior to the conclusion of the NEPA process as 
long as the RFP informs proposers of the general status of the NEPA 
process and that no commitment will be made as to any alternative under 
evaluation in the NEPA process, including the no-build alternative;
    (D) Proceed with the award of a design-build contract prior to the 
conclusion of the NEPA process;
    (E) Issue notice to proceed with preliminary engineering pursuant 
to a design-build contract that has been awarded prior to the 
completion of the NEPA process; and
---------------------------------------------------------------------------

    \17\ Please note FTA has not adopted a requirement that a 
proposed New Starts project must receive a rating of ``Medium'' or 
better before FTA will execute a final environmental impact 
statement (``FEIS''), record of decision (``ROD''), or finding of no 
significant impact (``FONSI''). However, when it is clear that FTA 
will need to issue a supplemental environmental document in order to 
accommodate scope changes needed to justify a ``medium'' or better 
rating, FTA will not issue a FEIS or ROD until this supplemental 
document is completed. For projects not perceived as requiring a 
supplemental document, FTA will include a statement in the FEIS, ROD 
or FONSI as to how a New Starts rating of less than ``medium'' may 
affect the ability of the project to advance to implementation. See 
``Notice of Availability of Final Guidance on New Starts Policies 
and Procedures, Updated Reporting Instructions and New Starts Rating 
and Evaluation Process (May 22, 2006) at: https://
a257.g.akamaitech.net/7/257/2422/01jan20061800/
edocket.access.gpo.gov/2006/E6-7781.htm.
---------------------------------------------------------------------------

    (F) Allow a design-builder to proceed with final design and 
construction for any projects, or segments thereof, for which the NEPA 
process has been completed.
    (ii) If the project sponsor proceeds to award a design-build 
contract prior to the conclusion of the NEPA process, then:
    (A) The design-build contract must include appropriate provisions 
preventing the design-builder from proceeding with final design 
activities and physical construction prior to the completion of the 
NEPA process (e.g., contract hold points or another method of issuing 
multi-step approvals must be used);
    (B) The design-build contract must include appropriate provisions 
ensuring that no commitment is made to any alternative being evaluated 
in the NEPA process and that the comparative merits of all alternatives 
presented in the NEPA document, including the no-build alternative, 
will be evaluated;
    (C) The design-build contract must include appropriate provisions 
ensuring that all environmental and mitigation measures identified in 
the NEPA document will be implemented;
    (D) The design-builder may not prepare the NEPA document or have 
any decision-making responsibility with respect to the NEPA process;
    (E) Any consultants who prepare the NEPA document must be selected 
by and subject to the exclusive direction and control of the project 
sponsor, but this shall not preclude a sub-consultant on the design-
builder/developer team from preparing the NEPA decision document, 
provided that such sub-consultant does not have a financial or other 
interest in the outcome of the project (except as otherwise permitted 
by FTA in its sole discretion) and provided further that the services 
of the sub-consultant relating to the preparation of the NEPA decision 
document shall at all times be subject to the exclusive direction and 
control of the project sponsor;
    (F) The design-builder's work product may be considered in the NEPA 
analysis and included in the record; and
    (G) The design-build contract must include termination provisions 
in the event that the no-build alternative is selected.
    (iii) The project sponsor must receive prior FTA concurrence (A) 
Before issuing the RFP and (B) awarding a design-build contract. Should 
the project sponsor proceed with any of the activities specified in 
this section before the completion of the NEPA process, FTA's 
concurrence merely constitutes FTA's acquiescence that any such 
activities complies with Federal requirements and does not constitute 
project authorization or obligate Federal funds, unless otherwise 
provided by FTA.
    In addition, if the NEPA process has been completed prior to 
issuing the RFP, the project sponsor may allow a consultant and/or sub-
consultant who acted as preparer of the NEPA document to submit a 
proposal in response to the RFP.
    If the NEPA process has not been completed prior to issuing the 
RFP, the project sponsor may allow a sub-consultant to the preparer of 
the NEPA document to submit a proposal in response to the RFP only if 
the project sponsor releases such sub-consultant from further 
responsibilities with

[[Page 2591]]

respect to the preparation of the NEPA document.
    (m) Reservation of Rights. All rights of FTA not expressly provided 
herein are hereby reserved by FTA.

    Issued this 12th day of January, 2007.
James S. Simpson,
Administrator.
[FR Doc. E7-651 Filed 1-18-07; 8:45 am]
BILLING CODE 4910-57-P