Design-Build Contracting, 45329-45338 [07-3959]

Agencies

• Federal Highway Administration
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 72, Number 156 (Tuesday, August 14, 2007)]
[Rules and Regulations]
[Pages 45329-45338]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 07-3959]


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DEPARTMENT OF TRANSPORTATION

Federal Highway Administration

23 CFR Parts 630, 635, and 636

[FHWA Docket No. FHWA-2006-22477]
RIN 2125-AF12


Design-Build Contracting

AGENCY: Federal Highway Administration (FHWA), DOT.

ACTION: Final rule.

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SUMMARY: The FHWA is amending its regulations for design-build 
contracting as mandated by section 1503 of the ``Safe, Accountable, 
Flexible, Efficient Transportation Equity Act: A Legacy for Users' 
(SAFETEA-LU). This rule will allow State transportation departments or 
local transportation agencies to issue request-for-proposal documents, 
award contracts, and issue notices-to-proceed for preliminary design 
work prior to the conclusion of the National Environmental Policy Act 
(NEPA) process.

EFFECTIVE DATE: September 13, 2007.

FOR FURTHER INFORMATION CONTACT: For technical information: Mr. Gerald 
Yakowenko, Office of Program Administration (HIPA), (202) 366-1562. For 
legal information: Mr. Michael Harkins, Office of the Chief Counsel 
(HCC-30), (202) 366-4928, Federal Highway Administration, 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.

SUPPLEMENTARY INFORMATION: 

Electronic Access

    This document and all comments received by the DOT Dockets, Room 
PL-401, may be viewed through the Docket Management System (DMS) at 
https://dms.dot.gov. It is available 24 hours each day, 365 days each 
year. Electronic submission and retrieval help and guidelines are 
available under the help section of this Web site.
    An electronic copy of this document may be downloaded from the 
Federal Register's home page at https://www.archives.gov and the 
Government Printing Office's Web page at https://www.access.gpo.gov/
nara.

Background

    Section 1503 of the SAFETEA-LU (Pub. L. 109-59; August 10, 2005, 
119 Stat. 1144) revises the definition of a design-build ``qualified 
project'' (23 U.S.C. 112(b)(3)). This change removes a previous 
monetary threshold for design-build projects, thus eliminating the 
requirement to approve Federal-aid design-build projects exceeding 
certain dollar thresholds under Special Experimental Project No. 14 
(SEP-14).\1\ When appropriate, the FHWA will continue to make SEP-14 
available for projects that do not conform to the requirements of 23 
CFR part 636.
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    \1\ Information concerning Special Experimental Project No. 14 
(SEP-14), ``Innovative Contracting Practices,'' is available on 
FHWA's home page: https://www.fhwa.dot.gov. Additional information 
may be obtained from the FHWA Division Administrator in each State.
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    Section 1503 also requires the Secretary of Transportation to make 
certain changes to the design-build regulations at 23 CFR part 636. 
Generally, section 1503 requires the Secretary to amend the design-
build rule to permit a State transportation department to release 
requests for proposals and award design-build contracts prior to the 
completion of the NEPA process, but preclude a contractor from 
proceeding with final design or construction before NEPA is complete.

Notice of Proposed Rulemaking (NPRM)

    The FHWA published a NPRM on May 25, 2006, (71 FR 30100) proposing 
certain changes to comply with section 1503 of SAFETEA-LU. All comments 
received in response to the NPRM have been considered in drafting this 
final rule. We received 36 comments. The commenters include: one 
private individual, one Federal agency, the Governor of the State of 
Indiana, 18 State departments of transportation (State DOTs), 3 local 
public agencies, 8 industry organizations, and 4 firms that provide 
engineering and construction services. We classified the American 
Association of State Highway and Transportation Officials (AASHTO) as a 
State DOT, because it represents State DOT interests. It is noted that 
the State DOTs of Idaho, Montana, North Dakota, and South Dakota 
submitted a combined comment. It is also noted that these State DOTs, 
as well as the Wyoming Department of Transportation, simply commented 
that they support the comments submitted by AASHTO. Additionally, an 
organization known as the E-470 Public Highway Authority simply 
commented that it supports the comments submitted by the Texas 
Department of Transportation (TxDOT). Lastly, the FHWA notes that the 
Southern California Association of Governments (SCAG) submitted its 
comments on the design-build NPRM to the docket for the FHWA's planning 
NPRM (Docket No. FHWA-2005-22986). The FHWA considered SCAG's comments 
along with all other comments submitted to the rulemaking docket for 
the design-build NPRM in developing this final rule.

General

    The following discussion summarizes the major comments submitted to 
the docket by the commenters on the NPRM, notes where and why changes 
have been made to the rule, and, where relevant, states why particular 
recommendations or suggestions have

[[Page 45330]]

not been incorporated into the final rule.

Analysis of NPRM Comments and FHWA Response by Section

Section 630.106 Authorization to proceed

    The Virginia Department of Transportation (VDOT), Utah Department 
of Transportation (UDOT), TxDOT, Associated General Contractors (AGC) 
of America, Design-Build Institute of America (DBIA), and Bechtel 
Infrastructure Corporation (Bechtel) each commented on the changes 
proposed for this section. Bechtel commented that the project agreement 
for a design-build project should be executed prior to the completion 
of the NEPA process. The FHWA disagrees with this comment to the extent 
that Bechtel is requesting that the project agreement cover final 
design and physical construction. The execution of the project 
agreement for a project constitutes an obligation of Federal funds to 
the project, and the FHWA is precluded under 40 CFR 1508.18 and 23 CFR 
771.109 and 771.113 from funding final design or physical construction. 
However, the FHWA agrees that project agreements may be executed for 
preliminary engineering, preliminary design, and other preconstruction 
activities for design-build projects. Accordingly, we have amended the 
final regulatory text in section 630.106(a)(3) to clarify that only 
project agreements for final design and physical construction must wait 
until the conclusion of the NEPA process.
    AGC of America commented that there is no definition of preliminary 
engineering, while preliminary design is defined in section 636.103. 
Preliminary design is defined because the amendments to 23 U.S.C. 
112(b)(3) in section 1503 of SAFETEA-LU make a distinction between 
preliminary design and final design. Under these amendments, a design-
builder may proceed to conduct preliminary design, but not final 
design. There is nothing in the SAFETEA-LU amendments to preclude 
preliminary engineering, which generally consists of those activities 
necessary for the analysis of a project or project alternatives, 
including environmental impacts, as necessary to complete the NEPA 
process. As such, preliminary engineering may continue to be authorized 
prior to the completion of the NEPA process as it has been prior to the 
SAFETEA-LU amendments. Thus, the FHWA does not believe that a separate 
definition of preliminary engineering is necessary.
    TxDOT, UDOT, and DBIA were each concerned that the language would 
preclude authorization for activities which may be carried out prior to 
the completion of the NEPA process other than preliminary engineering. 
Similarly, VDOT commented that the proposed regulatory change would 
preclude authorization for preconstruction activities that may not 
necessarily be preliminary engineering. The FHWA agrees with these 
comments and has amended the final regulation to include the term 
``preliminary design'' as defined in section 636.103. It is not FHWA's 
intent to preclude Federal participation in preliminary engineering or 
other activities that can be carried out consistent with NEPA.

Section 635.112 Advertising for bids and proposals

    Bechtel and the National Council for Public Private Partnerships 
(NCPPP) both commented on the proposed changes to this section. In 
general, both suggested that the FHWA should extend the FHWA's 
concurrence to the selection of the proposer and execute a project 
agreement. The FHWA disagrees with these comments. First, the FHWA 
cannot commit funds to a project before the NEPA process is complete. 
The execution of a project agreement for a design-build project would 
result in the obligation of Federal funds for the construction of the 
project prior to the completion of the NEPA process. Second, section 
1503 of SAFETEA-LU amended 23 U.S.C. 112(b)(3) to expressly require the 
Secretary's concurrence prior to issuing a request for proposals (RFP), 
awarding a design-build contract, and issuing notices to proceed with 
preliminary design. Bechtel and NCPPP's comments would result in the 
Secretary only concurring in the RFP.

Section 635.309 Authorization

    The FHWA is making a technical, conforming amendment to the 
regulation at section 635.309(p)(1). Specifically, the FHWA is deleting 
the parenthetical providing that the States' authority to advertise or 
release a request for proposals document may not be granted until the 
NEPA review process has been concluded. In place of the parenthetical, 
the FHWA has inserted the words ``for final design and physical 
construction.'' This amendment is necessary to ensure that there is no 
confusion in the regulations concerning whether an request for 
proposals document may be released, or a design-build contract may be 
awarded, in accordance with 23 U.S.C. 112(b)(3)(D). However, this 
section would continue to preclude project authorization for final 
design and physical construction of a design-build project until after 
the NEPA review process is complete.
    The substance of this amendment, which is to allow the release of a 
request for proposals document prior to the completion of the NEPA 
process, was addressed in the NPRM. Specifically, the proposed changes 
to sections 635.112 and 636.109 both expressly dealt with the 
advertising and release of a request for proposals document for a 
design-build project prior to the conclusion of the NEPA process. 
Additionally, the decision to prohibit project authorization for the 
final design and physical construction of a design-build project were 
proposed in sections 630.106 and 636.109 of the NPRM.

Section 635.413 Guaranty and warranty clauses

    Bechtel and NCPPP commented on the proposed amendments to this 
section. In general, Bechtel and NCPPP commented that this section 
should be revised to allow for additional warranties beyond the normal 
construction/contractor warranties of 1-2 years. The FHWA disagrees 
with these comments. The FHWA's funding authority is generally limited 
to participation in construction and preventive maintenance. The FHWA 
will authorize the use of Federal funding to procure a warranty, if the 
warranty is for a construction or preventative maintenance project. The 
proposed regulatory language does not preclude the contracting agency 
from procuring warranties for projects other than construction and 
preventative maintenance with its own funds.

Section 636.103 What are the definitions of terms used in this part?

    We received several comments on the proposed definitions under this 
section in the NPRM. These comments are discussed under each respective 
definition below.
``Developer''
    VDOT, UDOT, TxDOT, AASHTO, and DBIA each commented on the proposed 
definition of ``developer.'' These comments generally stated that the 
distinction between developer and design-builder is unclear and that 
the definition duplicates the language in the proposed definition of 
public-private agreement. The FHWA agrees with these comments and has 
decided to strike the definition of developer from the final rule. 
Since the FHWA has struck the changes to 636.119, as discussed below,

[[Page 45331]]

the term developer no longer has any significance to the regulations.
``Final Design''
    TxDOT, UDOT, Maryland State Highway Administration (MdSHA), 
Pennsylvania Department of Transportation (PennDOT), Missouri 
Department of Transportation (MoDOT), New Jersey Department of 
Transportation (NJDOT), Louisiana Department of Transportation and 
Development (LDOTD), Indiana Governor Mitch Daniels, AASHTO, AGC of 
America, DBIA, Jacobs Civil, Inc. (JCI), and the Nossaman, Guthner, 
Knox, and Elliott LLP law firm/The Ferguson Group LLC (Nossaman) each 
commented on this proposed definition. In general, the comments stated 
that the definition is too restrictive and that the definition should 
be limited to work directly associated with the preparation of final 
construction plans and detailed technical specifications. The comments 
arguing that the definition is too restrictive are based on the 
comments to the proposed definition of preliminary design, which are 
discussed below. As explained below, the proposed definition of 
preliminary design has been broadened in the final rule. Thus, the 
language in the definition of final design stating that final design 
includes any design activities following preliminary design has been 
retained and the language concerning any design activities not 
necessary to complete the NEPA process has been stricken. Moreover, 
since a number of commenters stated that final design includes work 
directly related to the preparation of final construction plans and 
detailed specifications, these activities have been expressly included 
in the definition of final design.
``Preliminary Design''
    All of the commenters substantially commented on the proposed 
definition of ``preliminary design.'' Specifically, LDOTD, Georgia 
Department of Transportation (GDOT), Indiana Governor Mitch Daniels, 
NJDOT, MoDOT, PennDOT, Knik Arm Bridge and Toll Authority (KABATA), 
California Department of Transportation (Caltrans), VDOT, Ohio 
Department of Transportation (OhDOT), Oregon Department of 
Transportation (OrDOT), UDOT, Minnesota Department of Transportation 
(Mn/DOT), Florida Department of Transportation (FDOT), MdSHA, TxDOT, 
AASHTO, AGC of America, American Council of Engineering Companies 
(ACEC), NCPPP, Nossaman, Bechtel, Washington Group International (WGI), 
JCI, Michael T. McGuire, Professional Engineers in California 
Government, and SCAG all commented on this proposed definition.
    Michael T. McGuire commented that allowing a design-builder to 
proceed with preliminary design prior to NEPA is a conflict of 
interest. The FHWA disagrees with this comment. So long as the design-
builder does not prepare the NEPA documents, the conflict of interest 
provision in the Council on Environmental Quality (CEQ) regulation, 40 
CFR 1506.5(c), is met.
    The Professional Engineers in California Government commented that 
they agreed with the proposed definition of ``preliminary design.'' All 
other commenters felt that the proposed definition is too narrow. In 
general, these commenters were concerned that the definition would 
exclude activities needed to comply with other environmental laws and 
omit activities that have been traditionally considered preliminary 
engineering, that do not materially affect the consideration of 
alternatives in the NEPA analysis, and that work to advance the design 
of the preferred alternative as permitted in 23 U.S.C. 139(f)(4)(D), 
which was added by section 6002 of SAFETEA-LU. Several commenters also 
listed specific activities that have traditionally been allowed to 
proceed during the NEPA review process. After considering these 
comments, the FHWA agrees that the proposed definition is too narrow. 
It is not the FHWA's intent to preclude the States from conducting 
preliminary engineering and other pre-decisional project-related 
activities consistent with NEPA when a request for proposals is issued 
or design-build contract is awarded, prior to the completion of the 
NEPA process. Accordingly, the FHWA has revised the definition of 
preliminary design to mean activities undertaken to define the general 
project location and design concepts. The FHWA has also specified some 
general activities that may be conducted as preliminary design that 
typically do not compromise the objectivity of the NEPA process. These 
activities were specifically identified by VDOT, OhDOT, MdSHA, TxDOT, 
UDOT, AASHTO, DBIA, and Nossaman. The activities specified in this 
definition are not intended to be an exhaustive list of activities that 
may be considered preliminary design. However, any activity, regardless 
of its inclusion in the definition of preliminary design, must not 
materially affect the object consideration of alternatives in the NEPA 
review process.
``Public-Private Agreement''
    UDOT, TxDOT, AASHTO, and DBIA each submitted comments on the 
proposed definition of ``public-private agreement.'' In general, these 
comments stated that the definition is overly broad and makes the 
distinction between design-build contracts and public-private 
agreements unclear. The FHWA agrees with these comments and has adopted 
a modified version of the language suggested by UDOT, TxDOT, and DBIA 
to the definition of public-private agreement in the final rule.
``Qualified Project''
    The AGC of Texas, NJDOT, and GDOT each commented on the proposed 
definition of ``qualified project.'' GDOT commented that it agrees with 
the definition. NJDOT asked whether FHWA approval is needed to award 
any design-build contract, even if it has limited scope and low total 
project cost. Pursuant to 23 CFR 636.109(c), FHWA approval is needed 
before awarding any design-build contract funded under title 23, United 
States Code. AGC of Texas commented that the regulation should retain 
the $50 million general project and $5 million Intelligent 
Transportation System (ITS) project thresholds in the final rule. Since 
Congress specifically amended 23 U.S.C. 112(b)(3)(C) in section 1503 of 
SAFETEA-LU to abolish these monetary thresholds, the FHWA does not 
believe that retaining them in the final rule is appropriate.

Section 636.106 Is the FHWA's Special Experimental Project No. 14--
``Innovative Contracting'' (SEP-14) approval necessary for a design-
build project?

    MoDOT, PennDOT, and Mn/DOT each commented on the changes proposed 
for this section. MoDOT pointed out that the preamble to the NPRM 
mentioned a monetary threshold while the proposed regulation did not. 
To clarify this apparent inconsistency, the proposed regulation was 
intended to abolish the monetary threshold for SEP-14 approval. Since 
Congress amended 23 U.S.C.112 to eliminate the design-build contracting 
monetary thresholds, SEP-14 approval is no longer needed for design-
build projects below a certain monetary threshold. After considering 
this comment, the FHWA has decided that it is not necessary to 
expressly include SEP-14 as part of the final regulations, since it 
appears that SEP-14 is no longer needed. However, SEP-14 will continue 
to be available on a case-by-case basis as new innovative approaches to 
delivering design-build projects are proposed.
    PennDOT requested clarification that the reporting requirements are 
no longer necessary. To answer this question,

[[Page 45332]]

there are no reporting requirements contained in this final rule. Mn/
DOT asked whether this rule replaces the SEP-15 program. The answer to 
the question is ``no.'' SEP-15 continues to be available on a case-by-
case basis consistent with the parameters of the program. (For more 
information, see 69 FR 59983, October 6, 2004.)

Section 636.107 May contracting agencies use geographic preference in 
Federal-aid design-build or public-private partnership projects?

    TxDOT, UDOT, MoDOT, DBIA, and AGC of America each commented on the 
proposed changes to this section. AGC of America supports the 
prohibition on geographic preferences. MoDOT suggested deleting the 
parenthetical contained in the proposed language in order to avoid 
future misinterpretation that would exclude non-geographic based 
incentives. This section only applies to geographic preferences and the 
parenthetical is merely intended to clarify that all means of such 
preferences are prohibited. Thus, the FHWA has retained the 
parenthetical in the final language.
    TxDOT, UDOT, and DBIA suggested eliminating the word ``prohibit'' 
and making other minor revisions because they felt that this language 
implies that the contract documents must affirmatively address these 
issues. The FHWA agrees with these comments and has revised the final 
rule to incorporate the suggested language.

Section 636.109 How does the NEPA process relate to the design-build 
procurement process?

    There were several comments on the changes to this proposed section 
in the NPRM. These comments are discussed under each respective 
subsection below.
Section 636.109(a)
    PennDOT, UDOT, TxDOT, DBIA, and WGI each commented on the proposed 
changes to section 636.109(a). WGI commented that it supports these 
changes. PennDOT commented that it needs clarification that the FHWA 
will grant concurrence to proceed with the activities outlined in 
section 636.109(a), so long as the conditions outlined in the proposed 
rule are met. The FHWA assumes that PennDOT's comments are based on the 
preamble to the NPRM, where the FHWA stated that contracting agencies 
need FHWA concurrence prior to proceeding with any of the activities 
specified in the proposed subsection. To clarify this issue, a 
contracting agency does not need FHWA concurrence to issue a request 
for qualifications at any point in the process. However, FHWA 
concurrence for the other activities specified in this subsection is 
required. FHWA intends to concur with the activities outlined in 
section 636.109(a), (such as issuing an RFP, awarding a contract, 
proceeding with preliminary design, etc.), provided all applicable 
Federal requirements are met.
    UDOT, TxDOT, and DBIA stated that some minor changes are needed in 
order to clarify the intent in the first paragraph under section 
636.109 as well as section 636.109(a)(1). The FHWA agrees to add the 
language suggested by UDOT, TxDOT, and DBIA in section 636.109(a)(1) 
concerning the protection of contracting agencies in the first 
paragraph of section 636.109, but does not agree to strike the language 
concerning the protection of design-build proposers in the first 
paragraph. The FHWA believes that this section protects the interests 
of both contracting agencies and design-build proposers. Additionally, 
UDOT, TxDOT, and DBIA requested that language be added to clarify that 
a design-builder can proceed with final design and construction for 
projects that have already obtained final NEPA approval. An example to 
amplify these comments would be a project that is being conducted under 
a tiered NEPA analysis. At any given point, tier 2 NEPA approvals could 
be given at different times for any portions with independent utility 
and logical termini within the tier 1 NEPA document. The FHWA agrees 
with these comments and has added a new paragraph (6) to section 
636.109(a) to clarify this issue.
Section 636.109(b)
    MdSHA, FDOT, Mn/DOT, UDOT, VDOT, TxDOT, Caltrans, MoDOT, Indiana 
Governor Mitch Daniels, AASHTO, DBIA, ACEC, NCPPP, Bechtel, Wilbur 
Smith Associates, Nossaman, and the Environmental Protection Agency 
(EPA) each commented on proposed 636.109(b). First, UDOT, TxDOT, and 
DBIA commented that the language should be clarified to ensure that a 
design-builder can proceed with final design and construction on 
projects that have already obtained NEPA approval. The FHWA agrees that 
a design-builder should be allowed to proceed with such work on 
projects for which NEPA approval has been obtained and intends that 
design-builders be allowed to do so under these regulations. However, 
the FHWA does not believe that additional language is needed to clarify 
this intent.
    Second, MdSHA, FDOT, Mn/DOT, UDOT, Indiana Governor Mitch Daniels, 
AASHTO, ACEC, NCPPP, and Nossaman each commented that the contracting 
agencies and design-builders should be allowed to proceed with final 
design activities at risk. In general, States can proceed with final 
design activities under the design-bid-build method of contracting so 
long as those activities include no Federal funding and the State 
understands that its preferred alternative could ultimately be rejected 
by the FHWA. See, e.g., Burkholder v. Wykle, 268 F. Supp. 2d 835 (N.D. 
Ohio 2002). However, the amendment to 23 U.S.C. 112(b)(3)(D)(iii) in 
section 1503 of SAFETEA-LU expressly requires the design-build 
regulations to ``preclude the design-build contractor from proceeding 
with final design or construction of any permanent improvement prior to 
the completion of the process of such section 102.'' In other words, 
Congress has directed that the regulations must preclude the design-
build contractor from proceeding with either final design or 
construction. Therefore, the FHWA is unable to permit the design-
builder to proceed with final design, regardless of whether these 
activities are funded by the FHWA, the State, or the contractor itself.
    Third, FDOT, UDOT, TxDOT, VDOT, Caltrans, Indiana Governor Mitch 
Daniels, AASHTO, DBIA, and ACEC each commented on whether the design-
builder is precluded from preparing the NEPA decision document or any 
NEPA document. In general, these comments pointed out an inconsistency 
between the preamble to the NPRM, which refers to NEPA documents, and 
the proposed regulatory text in sections 636.109(b)(4) and (5), which 
uses the term ``NEPA decision document.'' To clarify this issue, the 
FHWA intends for the regulations to preclude a design-builder from 
preparing not only the NEPA decision documents (i.e. Categorical 
Exclusion (CE), Finding of No Significant Impact (FONSI), and Record of 
Decision (ROD)), but also the NEPA analysis documents (i.e. 
Environmental Assessment (EA) and Environmental Impact Statement 
(EIS)). The CEQ conflict of interest regulation at 40 CFR 1506.5(c) 
expressly prohibits a contractor, who has an interest in the outcome of 
the NEPA process, from preparing an EIS. Additionally, this regulation 
has also been applied to EAs. See, e.g., Burkholder v. Peters, 58 Fed. 
Appx. 94 (6th Cir. 2003). Thus, the final regulations at section 
636.109(b)(6) and (7) have been amended to clarify that the design-
builder is precluded from preparing all NEPA documents, rather than 
just the NEPA decision documents. However, while the design-builder 
cannot prepare the NEPA documents, the FHWA notes that there is nothing 
in

[[Page 45333]]

the final regulations that would prohibit a design-builder from 
financing the preparation of the NEPA documents, so long as the 
criteria in section 636.109(b)(7) are met.
    Fourth, UDOT, TxDOT, and DBIA suggested some minor clarifications 
to proposed section 636.109(b)(6) to ensure that the States can 
consider any work provided by the design-builder in the NEPA analysis. 
The FHWA agrees with these comments and has revised section 
636.109(b)(8) to incorporate UDOT, TxDOT, and DBIA's suggested 
language.
    Fifth, Wilbur Smith Associates commented that barring consultants 
who are participating in the preparation of the NEPA documents from 
joining a design-build team will result in less economical projects. 
Although the FHWA appreciates eliminating unnecessary costs, FHWA notes 
that the CEQ regulations at 40 CFR 1506.5(c) prohibit such consultants 
from having a financial or other interest in the outcome of the project 
to avoid either the reality or the appearance of a conflict, thereby 
maintaining the credibility of the environmental review process. Sixth, 
the EPA had several general comments on section 636.109(b). The EPA 
states that it is supportive of the provisions in the proposed rule 
intended to ensure an adequate review process and supports the 
prohibition on the design-builder from having any decisionmaking 
responsibility on the NEPA process. The EPA further commented that 
avoiding conflicts of interest and premature commitments to a 
particular alternative are difficult to ensure in practice. As such, 
the EPA suggested that the FHWA provide examples of appropriate 
contract provisions that would ensure that the merits of all 
alternatives are evaluated. An example of one such provision would be 
one precluding the commitment of significant financial resources to any 
particular alternative. Another example would be a provision that 
clearly allows the State to decide not to move forward with the project 
in the event the no-build alternative is selected, while allowing the 
design-build contractor to receive a reasonable reimbursement of 
certain costs the contractor may have incurred in advancing the 
project. The FHWA is committed to work with the States to develop any 
such provisions to also ensure the integrity of the NEPA process is 
maintained.
    The EPA also expressed a concern about using financial incentives 
linked to milestones that could result in contractor reluctance to 
revise the NEPA analysis when appropriate. While the FHWA is not aware 
of any specific problems in this area, the FHWA shares the EPA's 
concern and will discourage the use of any timeline-based incentives 
that may have an undue influence on the NEPA process. Additionally, the 
EPA commented on how appropriate oversight will be maintained under the 
surface transportation project delivery pilot program at 23 U.S.C. 327. 
Since this pilot program is limited only to the States' assumption of 
the Secretary's environmental responsibilities, the FHWA will retain 
full oversight over the contracting process. Moreover, the pilot 
program requires a memorandum of understanding to be executed between 
the State and the FHWA whenever a State assumes any of the Secretary's 
responsibilities under the pilot program. Appropriate oversight 
provisions will be specified in these MOUs.
    Lastly, the FHWA is adding two new provisions at sections 
636.109(b)(1) and (2). Section 636.109(b)(1) is intended to clarify 
that the design-builder may proceed with preliminary design under a 
design-build contract. Section 636.109(b)(2) is intended to clarify 
that the States may permit any design and engineering activities to be 
undertaken for the purposes of defining the project alternatives and 
completing the NEPA alternatives analysis and review process; complying 
with other related environmental laws and regulations; supporting 
agency coordination, public involvement, permit applications, or 
development of mitigation plans; or developing the design of the 
preferred alternative to a higher level of detail when the lead 
agencies agree that it is warranted in accordance with 23 U.S.C. 
139(f)(4)(D). As previously discussed, several comments on the proposed 
definition of preliminary design expressed the concern that the States 
would not be able to conduct activities needed to comply with other 
related environmental laws or advance the design of the preferred 
alternative as permitted in 23 U.S.C. 139(f)(4)(D). The addition of 
section 636.109(b)(2) clarifies that the States may conduct these types 
of activities.
Section 636.109(c) and (d)
    UDOT, TxDOT, MdSHA, DBIA, Association of Engineering Employees of 
Oregon, and Profession Engineers in California Government each 
commented on the proposed changes in section 636.109(c) and (d). The 
Association of Engineering Employees of Oregon and Professional 
Engineers in California Government commented that section 639.109(c) 
does not go far enough in protecting the integrity of the NEPA process. 
Section 636.109(c) would require certain FHWA approvals during the 
project development process and would clarify that any such approval is 
not a commitment of Federal funds. The FHWA believes that not 
committing any Federal funds until after the NEPA process is complete, 
in conjunction with the various FHWA approvals during the project 
development process as well as the requirements in section 636.109(b), 
adequately protect the integrity of the NEPA process.
    UDOT, TxDOT, MdSHA, and DBIA questioned why the FHWA is requiring 
concurrence in the issuance of a notice to proceed with preliminary 
design. Section 1503 of SAFETEA-LU amended 23 U.S.C. 112(b)(3)(D)(ii) 
to require the States to receive concurrence from the Secretary prior 
to carrying-out any activity specified in 23 U.S.C. (b)(3)(D)(i), which 
includes the issuance of notices to proceed with preliminary design 
work. Thus, the States must receive FHWA concurrence prior to issuing a 
notice to proceed with preliminary design work.

Section 636.116 What organizational conflict of interest requirements 
apply to design-build projects?

    TxDOT, UDOT, VDOT, PennDOT, DBIA, ACEC each commented on the 
proposed changes to section 636.116. ACEC supports the proposed changes 
to section 636.116, because it believes that firms have been unfairly 
eliminated from competing for design-build contracts merely by virtue 
of providing some technical work on a NEPA document. ACEC further 
suggests that the language be revised to preclude the States from 
disallowing such firms to compete for design-build contracts. In 
contrast to ACEC's comments, PennDOT commented that it is concerned 
about the conflict of interest that may arise if the State subsequently 
needs the firm to provide additional input or work on the NEPA analysis 
for the project. The FHWA agrees with both ACEC and PennDOT. The FHWA 
has accommodated ACEC's concern in the final rule by giving the States 
the flexibility to allow such firms to compete for design-build 
contracts. The FHWA has also accommodated PennDOT's concern by making 
the changes discretionary on the part of the States rather than 
mandatory as requested by ACEC.
    VDOT, TxDOT, UDOT, and DBIA all supported the proposed changes to 
section 636.116. However, TxDOT, UDOT, and DBIA further commented that 
the contracting agency should have the flexibility to release a 
subconsultant to the consultant responsible for preparing the NEPA 
documents from further NEPA responsibilities and allow

[[Page 45334]]

such firm to compete for a design-build contract. The FHWA supports 
giving the States this flexibility and has added a new subsection (d) 
to section 636.116 in the final rule.

Section 636.119 How does this Part apply to public-private agreements?

    TxDOT, FDOT, UDOT, MdSHA, Indiana Governor Mitch Daniels, AGC of 
America, NCPPP, WGI, and Bechtel each commented on this proposed 
section. WGI commented that it supports making public-private agreement 
procurements subject to State law. SCAG, Bechtel, and NCPPP were 
concerned that the numerous approvals required under this proposed 
section would add time and cost to the project delivery process. AGC of 
America commented that it supports the oversight provisions in the 
proposed section. TxDOT, UDOT, Indiana Governor Mitch Daniels, and SCAG 
commented that it is inappropriate for the FHWA to assert approval 
rights over State procedures. TxDOT, UDOT, and MdSHA commented that it 
is unnecessary for the FHWA to concur in requests for qualifications. 
TxDOT and UDOT further commented that some provisions of this proposed 
section were unclear, and FDOT commented that public-private agreement 
requirements should be an entirely separate part in the Code of Federal 
Regulations.
    After considering these comments, the FHWA agrees that some further 
revisions may be necessary and that it is more appropriate for these 
requirements to be contained in a separate part in the Code of Federal 
Regulations. Accordingly, the FHWA has struck the proposed changes to 
section 636.119 and will consider whether a future rulemaking for these 
requirements is necessary. Minor revisions have been made to section 
636.119(b) to define the FHWA's requirements for preserving Federal-aid 
eligibility in any procurement actions under a public-private 
partnership.

Section 636.302 Are there any limitations on the selection and use of 
proposal evaluation factors?

    TxDOT, UDOT, PennDOT, DBIA, Professional Engineers in California 
Government, and Association of Engineering Employees of Oregon each 
commented on the proposed changes to section 636.302. Professional 
Engineers in California Government and Association of Engineering 
Employees of Oregon commented that the price evaluation requirements 
should continue. The FHWA shares the concern about eliminating the 
price evaluation requirement. After considering these comments and 
taking a closer look at the proposed regulation, the FHWA has decided 
to add a new subparagraph to section 636.302(a)(1)(ii) to require that 
price be considered to the extent that the contract requires payment 
from the contracting agency utilizing Federal-aid highway funds to the 
design-builder for any services to be provided prior to final design or 
construction. The FHWA is adding this requirement, because the FHWA 
believes that the consideration of price will ensure that a project 
does not incur unreasonable costs. This provision will ensure that, to 
the extent the State must make any payments to the design-builder, the 
price to be paid for these services is one of the factors that States 
must consider.
    The FHWA has also added language to section 636.302(a)(1)(iv) to 
clarify that the price reasonableness requirement only applies to the 
extent that the contracting agency wishes to use Federal funds for 
final design or construction. These provisions also respond to the 
comments made by TxDOT, UDOT, and DBIA who were concerned that some 
public-private agreements may not require any payment to be made to the 
design-builder. However, whenever a contract is awarded prior to the 
completion of the NEPA process, it is impossible to consider the price 
of the total contract because an alternative has not yet been selected 
and final design has not yet been completed. Thus, a contracting agency 
will be able to consider price only to a certain extent.
    PennDOT commented that the proposed procedures in section 
636.302(a)(1) would be very complex and hard to implement. Since the 
statute now permits States to award contracts prior to the conclusion 
of the NEPA process, which will require the costs for final design and 
construction to be negotiated later, the States and FHWA must find a 
way to control the costs under the contract and ensure that the public 
gets a fair price for these services. Thus, the State will need to 
develop methodologies through which the State can determine whether the 
final fixed price for the project is reasonable. An open-book 
negotiation method through which both the contractor and the State 
share supporting data on the prices of the items being negotiated can 
be an effective way to make this determination. While the FHWA 
recognizes the difficulties in ensuring that the public gets the best 
price whenever a design-build contract is awarded prior to the 
conclusion of the NEPA process, we believe that a price reasonableness 
standard for these costs will be the most effective approach. The FHWA 
will provide appropriate guidance and support to the States in 
implementing this standard.
    Finally, TxDOT, UDOT, and DBIA each commented that the FHWA should 
not concur in the States' price reasonableness determination, but 
rather only the methodologies the States use to make that 
determination. The FHWA disagrees with this comment. The FHWA is the 
steward of all Federal funds that are used in highway projects. Since 
total contract price cannot be considered during the competition to 
award a contract prior to the conclusion of the NEPA process, the FHWA 
must have some mechanism to ensure that price for the project for which 
Federal funds proposed to be used is reasonable.

Rulemaking Analyses and Notices

Executive Order 12866 (Regulatory Planning and Review) and DOT 
Regulatory Policies and Procedures

    The FHWA has determined that this rule is a significant regulatory 
action within the meaning of Executive Order 12866, and within the 
meaning of the U.S. Department of Transportation's regulatory policies 
and procedures. The Office of Management and Budget (OMB) has reviewed 
this document under E.O. 12866. This rule is significant, because of 
the substantial State, environmental, and industry interest in the 
design-build contracting technique.
    The economic impact of this rulemaking will be minimal and it will 
not adversely affect, in a material way, any sector of the economy. 
This rulemaking merely revises the FHWA's policies concerning the 
design-build contracting technique. The final rule will not affect the 
total Federal funding available to the State DOTs under the Federal-aid 
highway program. Therefore, an increased use of design-build delivery 
method will not yield significant economic impacts to the Federal-aid 
highway program. Additionally, this rule will not interfere with any 
action taken or planned by another agency and will not materially alter 
the budgetary impact of any entitlements, grants, user fees, or loan 
programs. Consequently, a full regulatory evaluation is not required.
    The FHWA does not have sufficient data to quantify the economic 
impacts of this rule. However, the FHWA believes that increased use of 
the design-build contracting method may result in certain efficiencies 
in the cost and time it normally takes to deliver a transportation 
project. We also believe that States will not use the design-build

[[Page 45335]]

contracting technique if using such a technique will increase the cost 
of a project.
    The design-build contracting technique is important to increasing 
the involvement of the private sector in the delivery of transportation 
projects. Insofar as this rule will increase the uses of the design-
build contracting technique, it may result in increased private sector 
financial investment in transportation. The FHWA did not receive any 
comments on the economic impacts analysis in the NPRM.

Regulatory Flexibility Act

    In compliance with the Regulatory Flexibility Act (5 U.S.C. 601-
612), we have evaluated the effects of this action on small entities 
and have determined that the action will not have a significant 
economic impact on a substantial number of small entities. The rule 
addresses the obligation of Federal funds to States for Federal-aid 
highway projects. As such, it affects only States and States are not 
included in the definition of small entity set forth in 5 U.S.C. 601. 
Therefore, the Regulatory Flexibility Act does not apply, and the FHWA 
certifies that the rule will not have a significant economic impact on 
a substantial number of small entities.

Unfunded Mandates Reform Act of 1995

    This rule will not impose unfunded mandates as defined by the 
Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4, 109 Stat. 48, 
March 22, 1995), because it will not result in the expenditure by 
State, local, tribal governments, or by the private sector, of $128.1 
million or more in any 1 year (2 U.S.C. 1532 et seq.). This rule merely 
updates the design-build regulation to reflect the changes made by 
SAFETEA-LU. The design-build regulation allows, but does not require, 
States to use the design-build technique for the delivery of Federal-
aid projects. States use the design-build contracting technique 
because, in some instances, it may reduce the time and cost of 
delivering a project.
    Further, the definition of ``Federal Mandate'' in the Unfunded 
Mandates Reform Act excludes financial assistance of the type in which 
State, local, or tribal governments have authority to adjust their 
participation in the program in accordance with changes made in the 
program by the Federal Government. The Federal-aid highway program 
permits this type of flexibility.

Executive Order 13132 (Federalism)

    This rule 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 rule will not have a substantial 
direct effect or sufficient federalism implications on the States. The 
FHWA has also determined that this final rule will not preempt any 
State law or regulation or affect the States' ability to discharge 
traditional State governmental functions.

Executive Order 12372 (Intergovernmental Review)

    Catalog of Federal Domestic Assistance Program Number 20.205, 
Highway Planning and Construction. The regulations implementing 
Executive Order 12372 regarding intergovernmental consultation on 
Federal programs and activities apply to this program. The FHWA did not 
receive any comments on the intergovernmental review analysis.

Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501, et 
seq.), the FHWA must obtain approval from the OMB for each collection 
of information we conduct, sponsor, or require through regulations. The 
FHWA has determined that this rule does not contain a collection of 
information requirement for purposes of the PRA.

National Environmental Policy Act

    The FHWA has analyzed this rule for the purpose of the National 
Environmental Policy Act of 1969, as amended (42 U.S.C. 4321 et seq.), 
and has determined that this rule will not have any effect on the 
quality of the environment. The promulgation of regulations has been 
identified as a categorical exclusion under 23 CFR 771.117(c)(20). 
However, Federal-aid highway projects on which design-build is used, 
must still comply with the National Environmental Policy Act of 1969, 
as amended.

Executive Order 12630 (Taking of Private Property)

    The FHWA has analyzed this rule under Executive Order 12630, 
Governmental Actions and Interface with Constitutionally Protected 
Property Rights. This rule will not affect a taking of private property 
or otherwise have taking implications under Executive Order 12630.

Executive Order 12988 (Civil Justice Reform)

    This action meets applicable standards in sections 3(a) and 3(b)(2) 
of Executive Order 12988, Civil Justice Reform, to minimize litigation, 
eliminate ambiguity, and reduce burden.

Executive Order 13045 (Protection of Children)

    We have analyzed this rule under Executive Order 13045, Protection 
of Children from Environmental Health Risks and Safety Risks. The FHWA 
certifies that this rule will not cause an environmental risk to health 
or safety that might disproportionately affect children.

Executive Order 13175 (Tribal Consultation)

    The FHWA has analyzed this rule under Executive Order 13175, dated 
November 6, 2000, and believes that the rule will not have substantial 
direct effects on one or more Indian tribes; will not impose 
substantial direct compliance costs on Indian tribal governments; and 
will not preempt tribal laws. The rule addresses obligations of Federal 
funds to States for Federal-aid highway projects and will not impose 
any direct compliance requirements on Indian tribal governments. 
Therefore, a tribal summary impact statement is not required.

Executive Order 13211 (Energy Effects)

    The FHWA has analyzed this action under Executive Order 13211, 
Actions Concerning Regulations That Significantly Affect Energy Supply, 
Distribution, or Use dated May 18, 2001. We have determined that it is 
not a significant energy action under that order, because, although it 
is a significant regulatory action under Executive Order 12866, it will 
not have a significant adverse effect on the supply, distribution, or 
use of energy. Therefore, a Statement of Energy Effects is not 
required.

Regulation Identification Number

    A regulation identification number (RIN) is assigned to each 
regulatory action listed in the Unified Agenda of Federal Regulations. 
The Regulatory Information Service Center publishes the Unified Agenda 
in April and October of each year. The RIN number contained in the 
heading of this document can be used to cross-reference this action 
with the Unified Agenda.

[[Page 45336]]

List of Subjects

23 CFR Part 630

    Bonds, Government contracts, Grant programs--transportation, 
Highways and roads, Reporting and recordkeeping requirements.

23 CFR Part 635

    Construction and maintenance, Grant programs--transportation, 
Highways and roads, Reporting and recordkeeping requirements.

23 CFR Part 636

    Design-build, Grant programs--transportation, Highways and roads.

    Issued on: August 7, 2007.
J. Richard Capka,
FHWA Administrator.

0
In consideration of the foregoing, the FHWA amends parts 630, 635, and 
636 of title 23, Code of Federal Regulations, as follows:

PART 630--PRECONSTRUCTION PROCEDURES

0
1. Revise the authority citation for part 630 to read as follows:

    Authority: Sec. 1503 of Pub. L. 109-59, 119 Stat.1144; 23 U.S.C. 
106, 109, 112, 115, 315, 320, and 402(a); 23 CFR 1.32 and 49 CFR 
1.48(b).


0
2. Amend Sec.  630.106 by revising the section heading and adding 
paragraph (a)(7) to read as follows:


Sec.  630.106  Authorization to proceed.

    (a) * * *
    (7) For design-build projects, the execution or modification of the 
project agreement for final design and physical construction, and 
authorization to proceed, shall not occur until after the completion of 
the NEPA process. However, preliminary design (as defined in 23 CFR 
636.103) and preliminary engineering may be authorized in accordance 
with this section.
* * * * *

PART 635--CONSTRUCTION AND MAINTENANCE

0
3. Revise the authority citation for part 635 to read as follows:

    Authority: Sec. 1503 of Pub. L. 109-59, 119 Stat.1144; 23 U.S.C. 
101 (note), 109, 112, 113, 114, 116, 119, 128, and 315; 31 U.S.C. 
6505; 42 U.S.C. 3334, 4601 et seq.; Sec. 1041 (a), Pub. L. 102-240, 
105 Stat. 1914; 23 CFR 1.32; 49 CFR 1.48(b).


0
4. Amend Sec.  635.112 by revising paragraph (i)(1); by redesignating 
paragraphs (i)(2) and (i)(3) as (i)(3) and (i)(4), respectively; and by 
adding a new paragraph (i)(2) to read as follows:


Sec.  635.112  Advertising for bids and proposals.

* * * * *
    (i) * * *
    (1) When a Request for Proposals document is issued after the NEPA 
process is complete, the FHWA Division Administrator's approval of the 
Request for Proposals document will constitute the FHWA's project 
authorization and the FHWA's approval of the STD's request to release 
the document. This approval will carry the same significance as plan, 
specification and estimate approval on a design-bid-build Federal-aid 
project.
    (2) Where a Request for Proposals document is issued prior to the 
completion of the NEPA process, the FHWA's approval of the document 
will only constitute the FHWA's approval of the STD's request to 
release the document.
* * * * *

0
5. Revise Sec.  635.309(p)(1) introductory text to read as follows:


Sec.  635.309  Authorization.

* * * * *
    (p) * * *
    (1) The FHWA's project authorization for final design and physical 
construction will not be issued until the following conditions have 
been met:
* * * * *

0
6. Revise Sec.  635.413(e)(1)(i) to read as follows:


Sec.  635.413  Guaranty and warranty clauses.

* * * * *
    (e) * * *
    (1) * * *
    (i) The term of the warranty is short (generally one to two years); 
however, projects developed under a public-private agreement may 
include warranties that are appropriate for the term of the contract or 
agreement.
* * * * *

PART 636--DESIGN-BUILD CONTRACTING

0
7. Revise the authority citation for part 636 to read as follows:

    Authority: Sec. 1503 of Pub. L. 109-59, 119 Stat. 1144; Sec. 
1307 of Pub. L. 105-178, 112 Stat. 107; 23 U.S.C. 101, 109, 112, 
113, 114, 115, 119, 128, and 315; 49 CFR 1.48(b).

Subpart A--General

0
8. Amend Sec.  636.103 by adding in alphabetical order the definitions 
of ``final design,'' ``preliminary design,'' ``price reasonableness,'' 
and ``public-private agreement,'' and by revising the definition of a 
``qualified project'' as follows:


Sec.  636.103  What are the definitions of terms used in this Part?

* * * * *
    Final design means any design activities following preliminary 
design and expressly includes the preparation of final construction 
plans and detailed specifications for the performance of construction 
work.
* * * * *
    Preliminary design defines the general project location and design 
concepts. It includes, but is not limited to, preliminary engineering 
and other activities and analyses, 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, general estimates of the types and 
quantities of materials, and other work needed to establish parameters 
for the final design. Prior to completion of the NEPA review process, 
any such preliminary engineering and other activities and analyses must 
not materially affect the objective consideration of alternatives in 
the NEPA review process.
* * * * *
    Price reasonableness means the determination that the price of the 
work for any project or series of projects is not excessive and is a 
fair and reasonable price for the services to be performed.
* * * * *
    Public-private agreement means an agreement between a public agency 
and a private party involving design and construction of transportation 
improvements by the private party to be paid for in whole or in part by 
Federal-aid highway funds. The agreement may also provide for project 
financing, at-risk equity investment, operations, or maintenance of the 
project.
* * * * *
    Qualified project means any design-build project (including 
intermodal projects) funded under Title 23, United States Code, which 
meets the requirements of this Part and for which the contracting 
agency deems to be appropriate on the basis of project delivery time, 
cost, construction schedule, or quality.
* * * * *


Sec.  636.106  [Removed]

0
9. Remove and reserve Sec.  636.106.

0
10. Revise Sec.  636.107 to read as follows:

[[Page 45337]]

Sec.  636.107  May contracting agencies use geographic preference in 
Federal-aid design-build or public-private partnership projects?

    No. Contracting agencies must not use geographic preferences 
(including contractual provisions, preferences or incentives for 
hiring, contracting, proposing, or bidding) on Federal-aid highway 
projects, even though the contracting agency may be subject to 
statutorily or administratively imposed in-State or local geographical 
preferences in the evaluation and award of such projects.


Sec.  636.108  [Removed]

0
11. Remove and reserve Sec.  636.108.
0
12. Revise Sec.  636.109 to read as follows:


Sec.  636.109  How does the NEPA process relate to the design-build 
procurement process?

    The purpose of this section is to ensure that there is an objective 
NEPA process, that public officials and citizens have the necessary 
environmental impact information for federally funded actions before 
actions are taken, and that design-build proposers do not assume an 
unnecessary amount of risk in the event the NEPA process results in a 
significant change in the proposal, and that the amount payable by the 
contracting agency to the design-builder does not include significant 
contingency as the result of risk placed on the design-builder 
associated with significant changes in the project definition arising 
out of the NEPA process. Therefore, with respect to the design-build 
procurement process:
    (a) The contracting agency may:
    (1) 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;
    (2) Issue an RFP after the conclusion of the NEPA process;
    (3) 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;
    (4) Proceed with the award of a design-build contract prior to the 
conclusion of the NEPA process;
    (5) Issue notice to proceed with preliminary design pursuant to a 
design-build contract that has been awarded prior to the completion of 
the NEPA process; and
    (6) Allow a design-builder to proceed with final design and 
construction for any projects, or portions thereof, for which the NEPA 
process has been completed.
    (b) If the contracting agency proceeds to award a design-build 
contract prior to the conclusion of the NEPA process, then:
    (1) The contracting agency may permit the design-builder to proceed 
with preliminary design;
    (2) The contracting agency may permit any design and engineering 
activities to be undertaken for the purposes of defining the project 
alternatives and completing the NEPA alternatives analysis and review 
process; complying with other related environmental laws and 
regulations; supporting agency coordination, public involvement, permit 
applications, or development of mitigation plans; or developing the 
design of the preferred alternative to a higher level of detail when 
the lead agencies agree that it is warranted in accordance with 23 
U.S.C. 139(f)(4)(D);
    (3) 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 (contract hold points or another method of issuing multi-
step approvals must be used);
    (4) The design-build contract must include appropriate provisions 
ensuring that no commitments are 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 and fairly considered;
    (5) The design-build contract must include appropriate provisions 
ensuring that all environmental and mitigation measures identified in 
the NEPA document will be implemented;
    (6) The design-builder must not prepare the NEPA document or have 
any decisionmaking responsibility with respect to the NEPA process;
    (7) Any consultants who prepare the NEPA document must be selected 
by and subject to the exclusive direction and control of the 
contracting agency;
    (8) The design-builder may be requested to provide information 
about the project and possible mitigation actions, and its work product 
may be considered in the NEPA analysis and included in the record; and
    (9) The design-build contract must include termination provisions 
in the event that the no-build alternative is selected.
    (c) The contracting agency must receive prior FHWA concurrence 
before issuing the RFP, awarding a design-build contract and proceeding 
with preliminary design work under the design-build contract. Should 
the contracting agency proceed with any of the activities specified in 
this section before the completion of the NEPA process (with the 
exception of preliminary design, as provided in paragraph (d) of this 
section), the FHWA's concurrence merely constitutes the FHWA approval 
that any such activities complies with Federal requirements and does 
not constitute project authorization or obligate Federal funds.
    (d) The FHWA's authorization and obligation of preliminary 
engineering and other preconstruction funds prior to the completion of 
the NEPA process is limited to preliminary design and such additional 
activities as may be necessary to complete the NEPA process. After the 
completion of the NEPA process, the FHWA may issue an authorization to 
proceed with final design and construction and obligate Federal funds 
for such purposes.

0
13. Amend Sec.  636.116 by adding paragraphs (c) and (d) to read as 
follows:


Sec.  636.116  What organizational conflict of interest requirements 
apply to design-build projects?

* * * * *
    (c) If the NEPA process has been completed prior to issuing the 
RFP, the contracting agency may allow a consultant or subconsultant who 
prepared the NEPA document to submit a proposal in response to the RFP.
    (d) If the NEPA process has not been completed prior to issuing the 
RFP, the contracting agency may allow a subconsultant to the preparer 
of the NEPA document to participate as an offeror or join a team 
submitting a proposal in response to the RFP only if the contracting 
agency releases such subconsultant from further responsibilities with 
respect to the preparation of the NEPA document.

0
14. Revise Sec.  636.119(b)(1) and (2) to read as follows:


Sec.  636.119  How does this part apply to a project developed under a 
public-private partnership?

* * * * *
    (b) * * *
    (1) If the public-private agreement establishes price, then all 
subsequent contracts executed by the developer are considered to be 
subcontracts and are not subject to Federal-aid procurement 
requirements.
    (2) If the public-private agreement does not establish price, the 
developer is considered to be an agent of the

[[Page 45338]]

owner, and the developer must follow the appropriate Federal-aid 
procurement requirements (23 CFR part 172 for engineering service 
contracts, 23 CFR part 635 for construction contracts and the 
requirements of this part for design-build contracts) for all prime 
contracts (not subcontracts).
* * * * *

0
15. Revise Sec.  636.302(a)(1) to read as follows:


Sec.  636.302  Are there any limitations on the selection and use of 
proposal evaluation factors?

    (a) * * *
    (1) You must evaluate price in every source selection where 
construction is a significant component of the scope of work. However, 
where the contracting agency elects to release the final RFP and award 
the design-build contract before the conclusion of the NEPA process 
(see Sec.  636.109), then the following requirements apply:
    (i) It is not necessary to evaluate the total contract price;
    (ii) Price must be considered to the extent the contract requires 
the contracting agency to make any payments to the design-builder for 
any work performed prior to the completion of the NEPA process and the 
contracting agency wishes to use Federal-aid highway funds for those 
activities;
    (iii) The evaluation of proposals and award of the contract may be 
based on qualitative considerations;
    (iv) If the contracting agency wishes to use Federal-aid highway 
funds for final design and construction, the subsequent approval of 
final design and construction activities will be contingent upon a 
finding of price reasonableness by the contracting agency;
    (v) The determination of price reasonableness for any design-build 
project funded with Federal-aid highway funds shall be based on at 
least one of the following methods:
    (A) Compliance with the applicable procurement requirements for 
part 172, 635, or 636, where the contractor providing the final design 
or construction services, or both, is a person or entity other than the 
design-builder;
    (B) A negotiated price determined on an open-book basis by both the 
design-builder and contracting agency; or
    (C) An independent estimate by the contracting agency based on the 
price of similar work;
    (vi) The contracting agency's finding of price reasonableness is 
subject to FHWA concurrence.
* * * * *
[FR Doc. 07-3959 Filed 8-9-07; 3:55 pm]
BILLING CODE 4910-22-P