Construction Manager/General Contractor Contracting, 36939-36953 [2015-15617]

Agencies

• Federal Highway Administration
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 80, Number 124 (Monday, June 29, 2015)]
[Proposed Rules]
[Pages 36939-36953]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-15617]


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DEPARTMENT OF TRANSPORTATION

Federal Highway Administration

23 CFR Parts 630 and 635

[Docket No. FHWA-2015-0009; FHWA RIN 2125-AF61


Construction Manager/General Contractor Contracting

AGENCY: Federal Highway Administration, DOT.

ACTION: Notice of proposed rulemaking (NPRM); request for comments.

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SUMMARY: Section 1303 of the Moving Ahead for Progress in the 21st 
Century Act (MAP-21) amends 23 U.S.C. 112 to require the Secretary of 
Transportation to promulgate regulations as necessary to implement the 
Construction Manager/General Contractor (CM/GC) contracting method. 
This NPRM initiates the formal rulemaking process to fulfill the 
legislative requirement and establish such regulations as are necessary 
for the FHWA's approval of projects using the CM/GC method of 
contracting.

DATES: Comments must be received on or before August 28, 2015.

ADDRESSES: To ensure that you do not duplicate your docket submissions, 
please submit them by only one of the following means:
     Federal eRulemaking Portal: Go to https://www.regulations.gov and follow the online instructions for submitting 
comments.
     Mail: Docket Management Facility, U.S. Department of 
Transportation, 1200 New Jersey Ave. SE., West Building Ground Floor 
Room W12-140, Washington, DC 20590-0001;
     Hand Delivery: West Building Ground Floor, Room W12-140, 
1200 New Jersey Ave. SE., between 9 a.m. 5 p.m., Monday through Friday, 
except Federal holidays. The telephone number is (202) 366-9329;
     Instructions: You must include the agency name and docket 
number DOT-FHWA-or the Regulatory Identification Number (RIN) for the 
rulemaking at the beginning of your comments. All comments received 
will be posted without change to https://www.regulations.gov, including 
any personal information provided.

FOR FURTHER INFORMATION CONTACT: Mr. Gerald Yakowenko, Contract 
Administration Team Leader, Office of Program Administration, (202) 
366-1562, or Ms. Janet Myers, Office of the Chief Counsel, (202) 366-
2019, Federal Highway Administration, 1200 New Jersey Avenue SE., 
Washington, DC 20590. Office hours are from 8 a.m. to 4:30 p.m., E.T., 
Monday through Friday, except Federal holidays.

SUPPLEMENTARY INFORMATION: 

Summary

    This regulatory action is undertaken to fulfill the statutory 
requirement in Section 1303(b) of MAP-21 requiring the Secretary to 
promulgate a regulation to implement the CM/GC method of contracting. 
The CM/GC is a contracting method that allows a contracting agency to 
use a single procurement to secure pre-construction and construction 
services. In the pre-construction services phase, a contracting agency 
procures the services of a construction contractor early in the design 
phase of a project in order to obtain the contractor's input on 
constructability issues that may be affected by the project design. A 
CM/GC contractor does not provide any preliminary or final design 
services. As part of the preconstruction services phase of a CM/GC 
contract, the CM/GC contractor provides information for consideration 
in the design and environmental review processes on construction-
related aspects of a project, including the potential effects of design 
elements on

[[Page 36940]]

construction costs, schedule and quality. The second phase, for 
construction services, may begin once environmental review is complete 
and risks are adequately defined. If the contracting agency and the CM/
GC contractor are able to agree on a price for a given scope and 
schedule for construction, the CM/GC contractor and the contracting 
agency may execute contract commitments for the construction services 
phase of the project or a portion of the project.\1\ The CM/GC method 
has proven to be an effective method of project delivery through its 
limited deployment in the FHWA's Special Experimental Project Number 14 
(SEP-14) Program. Utilizing the contractor's unique construction 
expertise in the design phase can offer innovations, best practices, 
reduced costs, and reduced schedule risks.
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    \1\ After NEPA is complete, early work packages may be used and 
can be awarded while final design for the project is being 
completed, as described in the Section-by-Section analysis for 
sections 635.504 and 635.506(d).
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    The major provisions of these proposed regulations include: (1) 
establish the minimum standards that contracting agencies' CM/GC 
procurement procedures must follow, (2) establish the FHWA's role in 
reviewing contracting agencies' CM/GC procurement procedures and other 
FHWA approval requirements, (3) establish the procedures for 
authorizing Federal funds for CM/GC projects, and 4) establish rules 
regarding the relationship between the procurement of CM/GC project and 
the environmental review process required under the National 
Environmental Policy Act (NEPA) of 1969. The rule would apply to State 
transportation agencies (STA) that contract for CM/GC services, and any 
State or local government agency, public-private partnership, or Indian 
tribe (as defined in 2 CFR 200.54) that is acting under the supervision 
of the STA and is awarding or administering a CM/GC contract.
    (1) The CM/GC Procurement Procedures: The proposed regulations 
provide that CM/GC contracts must be procured through competitive 
selection procedures providing for free and open competition. This 
section also establishes procedural options for a contracting agency to 
utilize in procuring CM/GC projects, the minimum information required 
to be included in a CM/GC solicitation document, rules regarding the 
use of interviews, and the basis on which CM/GC contracts are to be 
awarded.
    (2) The FHWA Concurrence in CM/GC Procedures, Contract Documents, 
and Contract Awards: These proposed regulations provide that 
contracting agencies must submit their CM/GC procurement procedures to 
FHWA for approval to fulfill FHWA responsibilities to ensure that the 
procedures comply with Federal requirements. The proposed rule also 
provides that certain documents or actions relating to CM/GC 
contracting, such as contract solicitation documents, contracts, 
contract prices, and contract price analyses, require FHWA approval 
prior to award. While the proposed regulation would reserve the 
approval of the State's CM/GC procedures to FHWA, it would permit 
States to assume all other CM/GC approvals through the FHWA-State 
Stewardship and Oversight Agreements in accordance with 23 U.S.C. 
106(c) and related FHWA guidance (see https://www.fhwa.dot.gov/federalaid/stewardship/140328.cfm). If an STA assumes responsibility 
for CM/GC approvals under 23 U.S.C. 106(c), the STA would be required 
to include documentation in the project file regarding actions taken 
for assumed responsibilities. The documentation must be sufficient to 
substantiate the approval or determination and, if applicable, to 
support project authorization. In such cases, the STA will provide FHWA 
with the documentation upon request. Note that the authority for State 
assumption does not extend to eligibility determinations or project 
authorizations.
    (3) Authorization: These proposed regulations provide that FHWA 
must approve contracting agencies' price estimate for the entire CM/GC 
project before the authorization of construction services. Also, these 
proposed regulations provide that FHWA must approve contracting 
agencies' price or cost analyses, performed in accordance with 2 CFR 
200.323(a), for preconstruction and constructions services before the 
authorization of either of those activities. These approvals would be 
subject to STA assumption of responsibilities under 23 U.S.C. 106(c). 
When authorizing construction services, FHWA will rely on the agreed 
price and scope of services or, if no agreement is reached between the 
contracting agency and the CM/GC contractor, on the price established 
through competitive bidding.
    (4) Relationship to NEPA: These proposed regulations also establish 
the relationship of the procurement of CM/GC projects to the NEPA 
process to ensure that the CM/GC process may be used on projects 
involving all potential NEPA reviews--a categorical exclusion, 
environmental assessment (EA), or environmental impact statement (EIS). 
One area in which CM/GC projects are similar to design-build projects 
is that both types of projects may be awarded to a contractor before 
the completion of NEPA. As such, these proposed regulations incorporate 
many of the provisions regarding this relationship from the design-
build regulations at 23 CFR 636.109, such as ensuring that alternatives 
will be evaluated and fairly considered when a project involves an EA 
or EIS, including a provision in the CM/GC contract that allows 
termination in the event the environmental review process does not 
result in the selection of a build alternative, and permitting Federal 
authorization of preliminary design activities. These proposed 
regulations also establish the rules and conditions under which Federal 
funds may participate, through reimbursement after the completion of 
the NEPA process, in eligible costs of final design activities that the 
contracting agency undertook at its own expense before completion of 
the NEPA process.

Background

    Section 1303 of MAP-21 amended 23 U.S.C. 112(b) by adding paragraph 
(4) to authorize the use of the CM/GC method of contracting for 
projects carried out by, or under the supervision of, an STA.
    While the term CM/GC is not used in Section 1303 of MAP-21, the 
statute allows contracting agencies to award a two-phase contract to a 
``construction manager or general contractor'' for the provision of 
construction-related services during both the preconstruction and 
construction phases of a project. State statutes authorizing this 
method of contracting use different titles including: CM/GC, 
Construction Manager at-Risk, and General Contractor/Construction 
Manager. Regardless of the terminology used by grantees and 
subgrantees, FHWA has elected to use the term ``construction manager/
general contractor,'' or ``CM/GC,'' in reference to two-phase contracts 
that provide for construction-related services in the preconstruction 
and construction phases of a project.
    The CM/GC contracting method allows a contracting agency to receive 
a contractor's constructability recommendations during the design 
process. A number of States, including Utah, Colorado, and Arizona, 
have used the CM/GC project delivery method on a number of Federal-aid 
highway projects under FHWA's SEP-14 program with great success. These 
projects have shown that early contractor involvement through the CM/GC 
method has the potential to improve the quality, performance, and cost 
of the project while ensuring that construction issues

[[Page 36941]]

are addressed and resolved early in the project development process. 
The CM/GC contractor's constructability input during the design process 
is used to supplement, but not replace or duplicate, the engineering or 
design services provided by the contracting agency or its consultant. 
More information about the CM/GC project delivery method can be found 
on the FHWA's Every Day Counts Web page at https://www.fhwa.dot.gov/everydaycounts/edctwo/2012/cmgc.cfm.
    The following procedures are typically included in the CM/GC 
contracting method: (1) The contracting agency enters into an agreement 
for pre-construction services with a construction contractor who 
provides advice regarding constructability, price, construction 
scheduling, and other information related to the construction of the 
project; (2) the contracting agency may use this information in the 
preliminary and final design phases of the project; (3) at a certain 
stage in the design process where risks are adequately identified and 
the scope of work is defined sufficiently for the contracting agency 
and the CM/GC contractor to reasonably determine price, the contracting 
agency may receive a price proposal from the CM/GC contractor (or 
negotiate a price) for the defined scope and schedule for the project 
or a portion of the project (such as an early work package); and (4) if 
the price is reasonable, the contracting agency awards a construction 
contract for the project or portion of the project. If the contracting 
agency is not able to reach an agreement regarding price, scope, and 
schedule, it may complete the design and let a traditional construction 
contract by competitive bidding in accordance with Part 635. Given the 
advanced stage of design at the conclusion of the preconstruction phase 
of a CM/GC project, it is unlikely that a contracting agency would 
convert the project to a design-build project; however, in such cases, 
the contracting agency must comply with FHWA's design-build procurement 
and other requirements in Part 636.
    Services provided by the selected CM/GC contractor during the 
preconstruction phase generally shall be limited to providing advice on 
construction scheduling, sequencing, cost estimation, constructability, 
material pricing, risk identification, and other construction related-
factors or issues (as defined in 23 U.S.C. 112(b)(4)(A)(ii)). During 
the construction phase of the contract, the CM/GC contractor is 
responsible for the physical construction of the project, or portion of 
the project, for the agreed scope, schedule, and price.
    The selected CM/GC contractor must not provide or conduct 
engineering and design related services (as defined in 23 U.S.C. 
112(b)(2) and 23 CFR part 172) under the contract. During the 
construction phase of a CM/GC project, the CM/GC contractor may provide 
incidental engineering related services typically performed by general 
construction contractors, such as the preparation of falsework plans, 
shop drawings, etc., which are identified within the request for 
proposal and in the final plans and specifications for the project. 
These services are not engineering and design related services as 
defined in 23 CFR 172.3. Engineering and design related services for a 
project utilizing a CM/GC contract would still be procured under a 
separate contract in accordance with 23 CFR part 172.
    Section 1303(b) of MAP-21 requires FHWA, acting on behalf of the 
Secretary of Transportation, to promulgate regulations as necessary to 
implement the CM/GC method of contracting. This NPRM is intended to 
address the legislative requirement and establish procedures for FHWA's 
approval of the CM/GC method of contracting in the Federal-aid highway 
program.

Section-by-Section Discussion of the Proposed Changes

General Conforming Amendments in 23 CFR Parts 630 and 635

    The FHWA proposes several amendments in 23 CFR part 630 and 635 to 
account for the particular application of various Federal requirements 
to CM/GC projects.

Section 630.106

    The FHWA proposes to amend 23 CFR 630.106(a)(8) to provide for the 
execution of the project agreement for CM/GC projects. This amendment 
is similar to the existing language for design-build projects at Sec.  
630.106(a)(7) in that this proposed amendment makes clear that FHWA 
execution of a project agreement for preconstruction services 
associated with final design and for construction shall not occur until 
after the completion of the NEPA process. This language implements 23 
U.S.C. 112(b)(4)(C)(ii), which prohibits the contracting agency from 
awarding the construction services phase of a CM/GC contract until 
after completion of the NEPA process.

Section 635.102

    The FHWA proposes to amend the definitions in 23 CFR 635.102 by 
adding a definition of CM/GC project. This definition incorporates the 
language at 23 U.S.C. 112(b)(4)(A)(i) authorizing contracting agencies 
to award 2-phase contracts to a construction manager or general 
contractor for preconstruction and construction services.

Section 635.104

    The FHWA proposes to amend 23 CFR 635.104 to state that the 
applicable regulations pertaining to the CM/GC contracting process, 
which are proposed in this rule, apply to CM/GC projects.

Section 635.107

    The FHWA proposes to amend 23 CFR 635.107 to clarify that the 
disadvantaged business enterprise program requirement will also apply 
to CM/GC projects.

Section 635.109

    The FHWA proposes to amend 23 CFR 635.109 to clarify that the 
standardized changed condition clauses would also apply to construction 
services agreements of CM/GC projects.

Section 635.110

    The FHWA proposes to amend 23 CFR 635.110 to clarify that STAs may 
use their own bonding, insurance, licensing, qualification or 
prequalification procedure for any phase of design-build or CM/GC 
procurement.

Section 635.112

    The FHWA proposes to amend 23 CFR 635.112 to indicate that the FHWA 
Division Administrator's approval of the solicitation document 
constitutes FHWA's approval to use the CM/GC contracting method and 
approval to release the solicitation document.

Section 635.113

    The FHWA proposes to amend 23 CFR 635.113 to make clear that the 
requirements for bid opening and tabulation do not apply to CM/GC 
projects because the requirements in this section are only appropriate 
for projects delivered under the traditional design-bid-build method.

Section 635.114

    The FHWA proposes to amend 23 CFR 635.114 to make clear that the 
award of a contract for a CM/GC project and the FHWA's concurrence in 
such award are subject to the proposed requirements in 23 CFR part 635 
subpart E.

Section 635.122

    The FHWA proposes to amend 23 CFR 635.122 to require contracting 
agencies to define their procedures for making progress payments for 
CM/GC

[[Page 36942]]

projects in the appropriate solicitation and contract documents.

Section 635.309

    The FHWA proposes to amend 23 CFR 635.309(p) to make clear what 
certification is required as a prerequisite to FHWA authorization of 
physical construction and final design activities. Since both CM/GC and 
design-build contracts are similar in that both types of contracts may 
be awarded before the completion of the NEPA process, FHWA believes 
that the certification requirements applicable to design-build 
contracts should be equally applicable to CM/GC contracts.

CM/GC Procedures and Requirements

    The FHWA proposes to add a new subpart E to 23 CFR part 635 to 
provide the policies, requirements, and procedures relating to the use 
of CM/GC contracting. As previously discussed, with the exception of 
approval of STA CM/GC procedures, all FHWA approval requirements 
proposed in this new subpart would be subject to assumption by the STA 
in accordance with 23 U.S.C. 106(c).

Section 635.501--Purpose

    In 23 CFR 635.501, we propose to add a paragraph describing that 
the general purpose of subpart E is to prescribe the policies, 
requirements, and procedures for the use of the CM/GC contracting 
method.

Section 635.502--Definitions

    In 23 CFR 635.502, we propose the definitions for certain terms 
utilized in subpart E.
    First, FHWA proposes to define the term agreed price to mean the 
price agreed to by the CM/GC contractor and the contracting agency for 
construction services.
    Second, FHWA proposes to define the term CM/GC contractor to mean 
the entity that has been awarded a CM/GC contract and is responsible 
for providing preconstruction services under the first phase and, if a 
price agreement is reached, construction services under the second 
phase of such contract.
    Third, FHWA proposes to define the term CM/GC project to mean a 
project delivered using a 2-phase contract for preconstruction and 
construction services. This definition is the same as the definition 
proposed for section 635.102.
    Fourth, FHWA proposes to define the term construction services as 
the physical construction work undertaken by a CM/GC contractor to 
construct a project or a portion of the project (including early work 
packages). Construction services may be authorized as a single contract 
for the project, or through a combination of contracts covering 
portions of the project. If a combination of contracts is used for the 
CM/GC project construction phase, procurement and authorization 
procedures are the same for every construction services contract.
    Fifth, FHWA proposes to define the term contracting agency as the 
STA and any State or local government agency, public-private 
partnership, or Indian tribe (as defined in 2 CFR 200.54) that is 
acting under the supervision of the STA. This definition is consistent 
with the grant structure reflected in 23 U.S.C. 112(a), (b)(1), and 
(d). Those provisions set forth requirements and authorities applicable 
to STAs as the recipients of title 23 funds. The requirements include 
STA responsibility for overseeing compliance with applicable Federal 
requirements by STA contractors and subrecipients. In the proposed 
rule, the definition of ``contracting agency'' explicitly acknowledges 
that both public and private entities may serve as subrecipients of 
title 23 funds. This is consistent with 2 CFR 200.330, which guides 
determinations on whether a non-Federal entity is receiving funds as a 
subrecipient or as a contractor.
    Sixth, FHWA proposes to define the term Division Administrator as 
the chief FHWA official assigned to conduct business in a particular 
State.
    Seventh, FHWA proposes to define the term early work package as a 
portion or phase of construction work (including material acquired for 
a construction phase) that is procured before all design work for the 
project is complete. Under the proposed rule, once NEPA is complete, 
early work packages would allow contracting agencies to acquire long-
lead items or start a particular phase of construction for which the 
risks are adequately identified and the scope of work is defined 
sufficiently for the contracting agency and the CM/GC contractor to 
reasonably determine price. If the authorized early work ultimately is 
not needed or used for the project, Federal-aid funding participation 
would be determined in a manner similar to FHWA's long-established test 
for participation in the cost of corrective work necessitated by 
engineering errors (see FHWA guidance at https://www.fhwa.dot.gov/programadmin/contracts/071263.cfm and https://www.fhwa.dot.gov/programadmin/contracts/090878.cfm). The FHWA would determine, on a 
case-by-case basis, whether the excess costs were incurred based on the 
reasonable exercise of diligence and judgment by the contracting 
agency, in which case participation is permissible. If carelessness, 
negligence, or incompetence on the part of the contracting agency or 
those working on its behalf led to the excess costs, then Federal-aid 
participation will be denied. Although there is some financial risk to 
the contracting agency associated with using early work packages, in 
certain instances, the use of early work packages may provide for 
schedule acceleration, overall risk mitigation, and cost savings 
related to inflation. The use of an early work package as a phase of a 
project is consistent with 23 U.S.C. 112(b)(4)(A)(iii)-(iv).
    Eighth, FHWA proposes to define the term final design as having the 
same meaning as defined in 23 CFR 636.103. The FHWA intends for the 
definition of final design to be as uniform as possible for all project 
delivery methods.
    Ninth, FHWA proposes to define the term NEPA process to make clear 
that this is the environmental review required under the National 
Environmental Policy Act of 1969, the applicable portions of the CEQ 
Regulations Implementing NEPA (40 CFR parts 1500-1508), and the FHWA 
regulations implementing NEPA at 23 CFR part 771.
    Tenth, FHWA proposes to define the term preconstruction services as 
consulting to provide a contracting agency and its designer with 
information regarding the impacts of design on the physical 
construction of the project. The ability of a contracting agency to 
obtain this information from the CM/GC contractor early in the process 
is the key component of a CM/GC contract and is what makes this project 
delivery method beneficial. Under the preconstruction services phase of 
a CM/GC contract, the CM/GC contractor may provide such information 
during both preliminary and final design phases. However, while 
preconstruction services includes constructability input from a CM/GC 
contractor, these services must not constitute design and engineering 
related services as defined in 23 CFR 172.3. Any procurement of design 
and engineering related services must follow the procedures required 
under 23 CFR part 172.
    Eleventh, FHWA proposes to define the term preliminary design as 
having the same meaning defined in 23 CFR 636.103. The FHWA intends for 
the definition of preliminary design to be as uniform as possible for 
all project delivery methods.
    Twelfth, FHWA proposes to define the term solicitation document as 
the document used by a contracting agency

[[Page 36943]]

to advertise a CM/GC project and request expressions of interest, 
statements of qualifications, proposals or offers.
    Lastly, FHWA proposes to define the term State transportation 
agency as having the same meaning as the term State transportation 
department under section 635.102.

Section 635.503--Applicability

    In 23 CFR 635.503, FHWA proposes to add a general statement of the 
applicability regarding the requirements for this subpart. The 
requirements apply to all CM/GC Federal-aid projects within the right-
of-way of a public highway or projects which are linked to a Federal-
aid project within the right-of way of a public highway. The 
determination whether a project is ``linked'' is based on proximity, 
dependency, or impact (i.e., the non-highway construction project would 
not exist without the public highway, or exists to fulfill a separate 
requirement of another highway project). Where the applicable law 
requires that projects be treated as a project on a Federal-aid 
highway, the provisions of this subpart will apply regardless of the 
location of the project. The terms ``Federal-aid highway'' and 
``highway,'' as used in this NPRM, are defined in 23 U.S.C. 101(a)(6) 
and (11), respectively. The proposed language for this rule is similar 
to applicability language used in the design-build contracting 
regulation (23 CFR 636.104). The applicability provision is intended to 
distinguish between projects that are subject to the provisions of 23 
CFR parts 635 and 636, and projects where the contracting agency may 
follow State-approved procedures and requirements. Parts 635 and 636 
are applicable to Federal-aid construction projects that are located 
within the right-of-way of a public highway. For projects neither 
within a right-of-way of a public highway, nor linked to a project 
within a right-of way of a public highway, contracting agencies may 
follow their own State-approved procurement procedures consistent with 
2 CFR part 200. These distinctions in procurement requirements are 
discussed in the June 26, 2008, FHWA guidance ``Procurement of Federal-
aid Construction Contracts,'' available online at https://www.fhwa.dot.gov/construction/080625.cfm.

Section 635.504--CM/GC Requirements

    In section 635.504(a), FHWA proposes to make clear that contracting 
agencies may award a 2-phase contract for preconstruction and 
construction services, as provided in 23 U.S.C. 112(b)(4)(A). The two 
phases shall be the preconstruction and construction phases, 
respectively. Subject to applicable procurement requirements, the 
contracting agency has flexibility in determining how to structure the 
award and contract documents that flow from the single competitive 
procurement of the CM/GC contractor authorized in 23 U.S.C. 
112(b)(4)(A), enacted by MAP-21. For example, the contracting agency 
may elect to use a single contract document that makes firm commitments 
for the preconstruction services at the time the contract is executed, 
but conditions commitments for construction services on actions that 
occur in the future (e.g., a negotiated agreement on construction 
price). Alternatively, the contracting agency may choose to structure 
the commitments by using separate agreements for the preconstruction 
and construction services phases. In this latter scenario, the 
contracting agency may treat the contract award as occurring in two 
phases. The construction services phase may occur under one contract or 
under multiple contracts covering portions of the project, including 
early work packages.
    The FHWA believes these contracting flexibilities are consistent 
with the contracting efficiency purposes underlying 23 U.S.C. 
112(b)(4), and with contracting practices used by participants in the 
CM/GC SEP-14 experiments approved by FHWA. The language in 23 U.S.C. 
112(b)(4) is ambiguous with respect to whether there is any limitation 
on the number of contracts that may be used to carry out the 2-phase 
CM/GC process. Section 112(b)(4) of Title 23, U.S.C. references the use 
of ``a 2-phase contract'' (23 U.S.C. 112(b)(4)(A)(i)), which could be 
interpreted as limiting CM/GC contracting agencies to the use of a 
single contract. However, 23 U.S.C. 112(b)(4)(C)(ii) references ``the 
award of the construction services phase of a contract.'' This could be 
read as calling for the use of two contracts. The ``award'' of a public 
contract typically is the contracting agency's decision to accept an 
offer for performance of the specified work. In the normal course of 
business, an award is followed by the execution of a contract between 
the contracting agency and the successful offeror. Based on its 
experience with CM/GC contracting, FHWA concluded requiring the use of 
a single contract would create legal and administrative barriers to the 
use of CM/GC contracting. For example, procurement laws in some States 
require the use of separate contracts for preconstruction and 
construction services. In addition, it could be administratively 
challenging to develop adequate construction contract documents at the 
time of the selection of the CM/GC contractor. Much of the relevant 
construction information is not available until well into the 
preconstruction phase. The FHWA concluded it is important to provide 
contracting agencies with the flexibility to use either a single 
contract or multiple contracts for CM/GC projects. This will facilitate 
the use of the CM/GC method of procurement and further the statutory 
purpose of more efficient contracting.
    In section 635.504(b), FHWA proposes several requirements that 
apply to contracting agencies' CM/GC procedures. First, consistent with 
23 U.S.C. 112(a) and the new provisions in 23 U.S.C. 112(b)(4)(B), FHWA 
proposes that all CM/GC contracts be procured utilizing competitive 
selection procedures providing for free and open competition. The 
requirement for free and open competition is a fundamental principle 
under 23 U.S.C. 112 for the procurement of all Federal-aid highway 
projects.
    Second, FHWA proposes to allow contracting agencies to procure the 
services of a CM/GC contractor using any of the following solicitation 
options: Letters of interest, requests for qualifications, interviews, 
request for proposals, or other solicitation procedures permitted by 
applicable State law, regulation, or policy that promote a fair and 
transparent procurement process.
    Third, FHWA proposes to require contracting agencies to provide the 
following minimum information in their solicitation documents for CM/GC 
preconstruction services to ensure fairness and transparency: (1) A 
clearly defined scope of services; (2) a list of evaluation factors and 
significant subfactors, including their relative weight of importance 
that will be used in evaluating proposals; (3) a list of required 
deliverables; (4) an indication of whether interviews will be conducted 
before establishing the final rank; and (5) a sample contract form(s). 
In FHWA's experience, this information is needed, at a minimum, to have 
an effective, fair, and transparent procurement process. In addition, 
this information is typical of what many of the contracting agencies 
that have utilized CM/GC under SEP-14 have included in their 
solicitation documents.
    Fourth, FHWA proposes to require contracting agencies to offer the 
opportunity for an interview to all short listed firms if the 
contracting agency

[[Page 36944]]

intends to interview any contractor during the procurement process. If 
an interview is conducted, the opportunity for an interview must be 
offered to all shortlisted firms (or firms that submitted responsive 
proposals, if a short list is not used). Also, in conducting 
interviews, contracting agencies must not engage in conduct that favors 
one offeror over another and must not disclose one contractor's 
proposal to another. The FHWA feels that interviews could aid a 
contracting agency in evaluating its selection of a contractor for a 
CM/GC project. If interviews are conducted, then it is important that 
they be done in a fair and transparent manner.
    Fifth, FHWA proposes to permit contracting agencies to award CM/GC 
contracts based on qualifications, experience, best value, or any other 
combination of factors considered appropriate by the contracting agency 
as provided in 23 U.S.C. 112(b)(4)(B) and allowed by State law.
    Lastly, FHWA proposes that contracting agencies follow the 
traditional competitive bidding process required under 23 CFR part 635 
subpart A in situations where they are unable to agree on a price with 
the CM/GC contractor for the construction of the project. In such 
cases, it is proposed that the contracting agency must notify the FHWA 
Division Administrator of this decision and request FHWA's approval 
before advertising for the receipt of competitive bids pursuant to 23 
CFR 635 Subpart A if Federal-aid funding is desired in the cost of 
construction. Once the contracting agency advertises for bids or 
proposals for the project or a portion of the project, the contracting 
agency no longer can use the CM/GC agreed price procedures under this 
regulation.
    Where contracting agencies bid the construction of the project 
after being unable to reach a price agreement with the CM/GC 
contractor, there is an inherent risk that the CM/GC contractor may 
have (or be perceived as having) an unfair advantage if permitted to 
competitively bid for project construction work. Under the proposed 
rule, the contracting agency may follow State or local procurement 
policies in determining if there is a real or apparent conflict of 
interest and it is necessary to preclude the CM/GC contractor from 
competitive bidding. For example, the contracting agency may determine 
that the CM/GC contractor that performed preconstruction services does 
not have an inherent advantage over other potential bidders/proposers 
because the same information is available to all bidders/proposers. In 
other cases, the contracting agency may preclude the CM/GC contractor 
from competing with other firms due to State or local conflict of 
interest policies, or a belief that the firm has knowledge or 
information that other potential bidders/proposers do not have.
    In section 635.504(c), FHWA proposes several standards governing 
the FHWA's approval of an STA's CM/GC procedures.
    First, FHWA proposes that STAs must submit their proposed CM/GC 
procurement procedures to the FHWA Division Administrator for review 
and approval. This review and approval is consistent with 23 U.S.C. 
112(a), and is necessary to facilitate efficient administrative 
oversight of an STA's CM/GC procurement process for compliance with 
Federal requirements. The FHWA's approval of the STA's process will 
eliminate the need for FHWA to review and evaluate the STA's CM/GC 
procurement process on a project-by-project basis. Also, this review 
and approval is consistent with other project delivery methods. The 
FHWA also proposes that other contracting agencies be allowed to either 
follow the FHWA-approved STA procedures or their own local procedures 
if such local procedures are approved by both the STA and FHWA.
    Second, FHWA proposes to establish the parameters for the Division 
Administrator's approval of the STA's CM/GC procedures. Under the 
proposed rule, the Division Administrator would be required to review 
an STA's CM/GC procedures to verify that the procedures conform to the 
requirements of applicable Federal regulations and do not operate to 
restrict competition.
    The Division Administrator's approval of CM/GC procurement 
procedures is a program-level action and may not be delegated or 
assigned to the STA.
    In 23 CFR 635.504(d), FHWA proposes to include language that makes 
it clear the 30 percent minimum self-performance requirement by the 
general contractor in 23 CFR 635.116(a) applies to all agreements for 
construction services. In CM/GC contracting, the contractor's role in 
the construction phase of the contract is very similar to a general 
contractor's role in traditional bid-build contracting. Therefore, it 
is reasonable to require the same minimum self-performance requirements 
for the construction phase of CM/GC projects. Contracting agencies may 
continue to use higher self-performance requirements if required by 
applicable State law, regulation or policy. Also, FHWA proposes to 
allow contracting agencies to require the CM/GC contractor to award 
subcontracts for construction services on a low bid basis if required 
by State law, regulation, or policy.
    In 23 CFR 635.504(e), FHWA proposes to specify the payment methods 
that may be used for CM/GC projects. For preconstruction services, the 
method of payment may be lump sum, cost plus fixed fee, cost per unit 
of work, specific rates of compensation, or any other comparable 
payment method permitted under State law. Since preconstruction 
services are essentially services for consulting, the payment methods 
for these services should be similar to other methods used for 
consulting. However, the cost plus a percentage of cost and other 
percentage of cost methods of payment must not be used, since these 
methods are highly susceptible to abuse and, as a result, generally 
prohibited in any type of Federal contracting. For construction 
services, the method of payment may include any method of payment 
authorized by State law (including, but not limited to; lump sum, unit 
price, and target price); however, when compensation is based on actual 
costs, an approved indirect cost rate must be used. See proposed 
section 635.507.

Section 635.505--Relationship to the NEPA Process

    In section 635.505, FHWA proposes the requirements to establish the 
relationship between the CM/GC procurement process and the NEPA 
process. The requirements in this section are designed to protect the 
integrity of the NEPA decisionmaking process, since the solicitation 
and award of a CM/GC project will often occur before the completion of 
the NEPA process. In this section, FHWA not only incorporates the 
specific statutory requirements in 23 U.S.C. 112(b)(4)(C), but also 
substantially follows the requirements that have already been 
established for design-build projects in 23 CFR 636.109 for 
consistency. The design-build requirements were established to protect 
the integrity of the NEPA decisionmaking process in situations where 
design-build contracts are awarded before the completion of the NEPA 
process.
    First, in section 635.505(a), FHWA incorporates the provision of 23 
U.S.C. 112(b)(4)(C)(i), providing that before the completion of the 
NEPA process a contracting agency may: (a) Issue requests for 
proposals, (b) proceed with the award of a contract for preconstruction 
services, (c) issue notices to proceed to the contractor for 
preconstruction services for preliminary design-related work, and (d) 
issue

[[Page 36945]]

notices to proceed to a design firm for the preliminary design of the 
project and any work related to preliminary design, to the extent that 
those actions do not limit any reasonable range of alternatives. The 
FHWA interprets the statutory condition in 23 U.S.C. 
112(b)(4)(C)(i)(III), which appears in section 635.505(a)(4) of the 
proposed regulation, as intended to ensure that performance of 
preliminary design work will not bias or influence the environmental 
review of the project, and that all reasonable alternatives will be 
fairly considered when a project involves an EIS or EA.
    Second, in section 635.505(b), FHWA proposes to implement the 
provisions of revised 23 U.S.C. 112(b)(4)(C)(ii), by prohibiting 
contracting agencies from proceeding with the award of an agreement for 
construction services (including early work packages such as advanced 
material acquisition or site work) before the completion of the NEPA 
review process.
    Third, in section 635.505(c), FHWA proposes to implement the 
provisions of revised 23 U.S.C. 112(b)(4)(C)(ii) and (iv), by allowing 
contracting agencies to proceed, solely at their own risk and expense, 
with final design activities for a CM/GC project before completion of 
the NEPA review process without affecting subsequent approvals required 
for the project. If the contracting agency wishes to use the CM/GC 
contractor for advice in connection with at-risk final design 
activities, it may do so if it has a procedure for segregating the 
costs of the CM/GC contractor's at-risk final design work from other 
work. This is to ensure that the costs of the CM/GC contractor's at-
risk final design work are not submitted for Federal reimbursement 
until after NEPA is complete. The proposed rule would require the 
contracting agency to notify FHWA of its decision to proceed with at-
risk final design before the completion of the NEPA process. After NEPA 
review of the CM/GC project is completed, contracting agencies may seek 
reimbursement of eligible costs pursuant to proposed section 
635.506(c), including any CM/GC contractor costs for at-risk final 
design-related work. The statute and the proposed regulation create an 
exception to the normal cost eligibility principles under 2 CFR part 
200, subpart E, which exclude costs incurred before Federal 
authorization. The proposed provisions are based on FHWA's 
interpretation of 23 U.S.C. 112(b)(4)(C)(iv), as allowing final design 
work by a contracting agency solely at its own risk, and 23 U.S.C. 
112(b)(4)(C)(ii), as prohibiting FHWA approval or financial support for 
final design and construction-related work before the completion of 
NEPA review for the CM/GC project. The FHWA's proposal is consistent 
with the statutory objective of protecting the integrity of the NEPA 
decisionmaking process, as articulated throughout 23 U.S.C. 
112(b)(4)(C).
    Fourth, in section 635.505(d), FHWA proposes to implement the 
requirement of 23 U.S.C. 112(b)(4)(C)(v), that contracting agencies 
include a contract termination provision in the CM/GC contract in the 
event the NEPA process does not result in the selection of a build 
alternative. This NEPA-related provision is included to help ensure the 
NEPA decisionmaking process is not biased by the existence of the CM/GC 
contract. This provision is in addition to contract clauses relating to 
termination for cause and convenience required by 2 CFR Appendix II to 
Part 200.
    Fifth, in section 635.505(e), FHWA proposes to require contracting 
agencies to include a provision in their CM/GC contracts making it 
clear that the scope of services in the preconstruction phase includes 
all alternatives identified and considered in the NEPA process. It is 
FHWA's belief that unbiased decisionmaking in the NEPA process requires 
the State to maintain the ability to receive preconstruction services 
from the constructor on any alternative identified and evaluated in the 
NEPA process.
    Sixth, in section 635.505(f), FHWA proposes to require contracting 
agencies to include a provision in their CM/GC contracts expressly 
declaring that no commitments are being made to any alternative 
evaluated in the NEPA process and that the comparative merits of the 
alternatives will be evaluated and fairly considered. Similar to 
section 635.505(e), this provision is intended to ensure unbiased 
decisionmaking in the NEPA process.
    Seventh, in section 635.505(g), FHWA proposes to prohibit the CM/GC 
contractor from preparing NEPA documentation or having any 
decisionmaking responsibility with respect to the NEPA process. This 
provision protects the preparation of the NEPA documentation against 
any conflict of interest in the preconstruction services provided by 
the CM/GC contractor. However, information that the CM/GC contractor 
develops in providing preconstruction services may be considered in the 
NEPA analysis and included in the record.
    Lastly, in section 635.505(h), FHWA proposes to require contracting 
agencies to include a provision in all agreements for construction 
services ensuring that all environmental and mitigation measures 
identified in the NEPA documentation and committed to in the NEPA 
determination for the selected alternative will be implemented. Those 
commitments form part of the basis for FHWA decision approving the 
project for funding. Any proposed change to a final commitment made 
during NEPA (regardless whether the review involved a categorical 
exclusion, EA, or EIS) requires FHWA consideration of potential effects 
on the earlier environmental review process.

Section 635.506--Project Approvals and Authorizations

    First, in section 635.506(a)(1), FHWA proposes to provide 
parameters regarding the assumption of specific project approval 
actions by the STA under 23 U.S.C. 106(c). Under the proposed rule, 
FHWA would retain approval of the STA's CM/GC procedures, but all of 
the proposed CM/GC project-level FHWA approval responsibilities may be 
assumed by the STA, in accordance with 23 U.S.C. 106(c). Assumptions by 
the STA would occur through the FHWA/STA Stewardship and Oversight 
Agreement for that State. Section 106(c) provides authority for State 
assumption of a broad range of FHWA project-level actions relating to 
design, plans, specifications, estimates, contract awards and 
inspection of projects. The STAs may not further delegate or assign 
FHWA's responsibilities to approve CM/GC projects to other contracting 
agencies.
    In section 635.506(a)(2), FHWA proposes a requirement for the 
contracting agency to provide a copy of the solicitation documents for 
FHWA review and approval before requesting FHWA's authorization for 
either preconstruction or construction activities.
    Second, in section 635.506(b), FHWA proposes to require contracting 
agencies to request FHWA's authorization of preliminary engineering 
before incurring costs for preconstruction services. Under the proposed 
rule, the Division Administrator must review and approve the 
contracting agency's cost or price analysis for preconstruction 
services, prepared in a manner consistent with 23 CFR 200.323, before 
authorizing preconstruction services for all procurements exceeding the 
simplified acquisition threshold (currently $150,000).
    Third, in section 635.506(c), FHWA proposes the requirements that 
must be met before FHWA can authorize funds to reimburse a contracting 
agency for final design and preconstruction services associated with 
final design for

[[Page 36946]]

a CM/GC project where those costs were incurred at the contracting 
agency's risk before the completion of the NEPA review of the project. 
As discussed under section 635.505(c), 23 U.S.C. 112(b)(4)(C)(ii) and 
(iv), as well as 23 CFR 771.113(a), prohibit FHWA authorization of 
funding or other FHWA approval of these activities until after the 
completion of the NEPA process. However, as provided in 23 U.S.C. 
112(b)(4)(C)(iv), a contracting agency may proceed at its own expense 
with final design and preconstruction services related to final design, 
and seek reimbursement if the NEPA process concludes in the selection 
of a build alternative.
    In cases where contracting agencies proceed at their own risk and 
expense, 23 U.S.C. 112(b)(4)(C)(iv)(II) provides that these activities 
may eventually be eligible for Federal reimbursement.\2\ The FHWA 
proposes to adopt provisions to safeguard the NEPA process and the use 
of Federal funds for these activities by using criteria derived from 
other parts of section 112 that address the NEPA process, and from 
governmentwide NEPA implementing regulations issued by the President's 
Council on Environmental Quality.\3\ Accordingly, FHWA proposes that 
such activities be eligible for post-NEPA reimbursement only if the 
Division Administrator finds the contracting agency's final design-
related activities: (1) Did not limit the identification and fair 
evaluation of a reasonable range of alternatives for the proposed 
project, (2) did not result in an irrevocable commitment by the 
contracting agency to the selection of a particular alternative, (3) 
did not have an adverse environmental impact, and (4) consistent with 
governmentwide cost principles (2 CFR 200.403), are necessary and 
reasonable and are adequately documented. This is an eligibility 
determination, and it cannot be delegated or assigned to the STA. 
However, in the case of projects for which the State is directly 
responsible for NEPA compliance (either under an assignment of 
environmental responsibilities pursuant to 23 U.S.C. 326 or 327, or 
under a programmatic categorical exclusion agreement as authorized by 
section 1318(d) of MAP-21), the Division Administrator may rely on a 
State certification indicating these conditions are satisfied. These 
proposed conditions for reimbursement under 23 U.S.C. 
112(b)(4)(C)(iv)(II) in no way diminish the responsibility of the 
Division Administrator to prevent actions by FHWA and others during the 
NEPA process that would limit the choice of reasonable alternatives or 
have an adverse environmental effect.\4\ If the Division Administrator 
finds that either of those circumstances are present during the NEPA 
review of the CM/GC project, regardless of whether the contracting 
agency plans to seek reimbursement for final design-related activities 
from Federal funds, the Division Administrator shall require the 
contracting agency to take any necessary action to maintain the 
integrity of the NEPA process.
---------------------------------------------------------------------------

    \2\ Note that 23 U.S.C. 112(b)(4)(C)(iv)(II) erroneously 
references 23 U.S.C. 109(r), which cannot be applied to this 
provision.
    \3\ 40 CFR 1506.1(a).
    \4\ 40 CFR 1506.1(a)-(b).
---------------------------------------------------------------------------

    Fourth, section 635.506(d) would address construction approvals and 
authorizations. Under proposed section 635.506(d)(1), FHWA's 
construction contracting requirements will apply to all of the CM/GC 
project's construction contracts if any portion (including an early 
work package) of the CM/GC project construction is funded with title 23 
funds. In section 635.506(d)(2), the proposed rule would require FHWA 
approval of the price estimate for construction costs for the entire 
project before authorization of construction services (including 
authorization for an early work package). This requirement is in the 
statute at 23 U.S.C. 112(b)(4)(C)(iii)(I).
    In section 635.506(d)(3), FHWA proposes to require contracting 
agencies to perform a price analysis for every agreement for 
construction services that establishes or modifies scope, schedule and 
price for the CM/GC project or a portion of the project. This 
requirement is intended to be consistent with price analysis 
requirements under 2 CFR 200.323. The construction services price 
analysis will be a comparison of the agreed price with the contracting 
agency engineer's estimate or an independent cost estimate (if required 
by the agency).
    In section 635.506(d)(4), FHWA proposes to require FHWA approval of 
the contracting agency's price analysis and agreed construction 
services price before FHWA's construction authorization. This paragraph 
would implement 23 U.S.C. 112(b)(4)(C)(iii)(II), which requires FHWA's 
approval of any price agreement with the CM/GC contractor for the 
project or any portion of the project before authorizing construction 
activities.
    Under section 635.506(d)(5) of the proposed rule, FHWA's 
authorization of construction services will be based on the approved 
agreed price for the project or portion of the project. The FHWA 
proposes to allow the construction services authorization for early 
work packages. Early work packages would allow contracting agencies to 
acquire long-lead items, such as materials for the project (consistent 
with 23 CFR 635.122), or start a particular phase of construction for 
which final design is complete. Under the proposed rule, and in 
accordance with 2 CFR part 200 and proposed section 635.507, FHWA may 
deny eligibility for part or all of an early work package if such work 
is not needed or used for the project. For example, if construction 
materials are acquired for a CM/GC project, but not installed in the 
project, the cost of such material would not be eligible for Federal-
aid participation (however, the contracting agency, as owner of the 
excess materials, may propose use of the material on a future Federal-
aid project in accordance with 23 CFR 635.407(a)). In making the cost 
eligibility determination, FHWA would include consideration of the 
kinds of factors described in its long-established guidance on 
participation in the cost of corrective work necessitated by 
engineering errors (see FHWA guidance at https://www.fhwa.dot.gov/programadmin/contracts/071263.cfm and https://www.fhwa.dot.gov/programadmin/contracts/090878.cfm). The FHWA would evaluate, on a case-
by-case basis, whether the excess costs were incurred based on the 
reasonable exercise of diligence and judgment by the contracting 
agency. The FHWA would not participate in excess costs incurred as a 
result of fraud, carelessness, negligence, or incompetence on the part 
of the contracting agency or those working on its behalf. Despite the 
financial risk to the contracting agency, in certain instances the use 
of early work packages may provide for schedule acceleration, overall 
risk mitigation, and cost savings related to inflation. The use of an 
early work package as a phase of a project is consistent with 23 U.S.C. 
112(b)(4)(A)(iii)-(iv).
    Lastly, in section 635.506(e), FHWA proposes to require concurrence 
from the Division Administrator before a contracting agency's award of 
a Federal-aid CM/GC contract, including agreements to proceed to the 
construction services phase or decisions to not proceed with an 
agreement for construction services. Concurrence in the contract award 
constitutes approval of the agreed price, scope, and schedule for the 
work. Under 23 U.S.C. 112(b)(4)(C)(iii)(II), approval of the price 
agreement is a prerequisite to FHWA authorization of preconstruction 
and construction services costs. The documentation supporting a 
contract

[[Page 36947]]

award should include the Disadvantaged Business Enterprise (DBE) 
documentation required by 26 CFR 26.53(b)(2) when there is a contract 
goal. The FHWA's concurrence in contract awards is required by 23 
U.S.C. 112(d), and the concurrence provides FHWA with an opportunity to 
verify that the appropriate contract requirements have been 
incorporated and DBE commitments or good faith efforts have been 
submitted.

Section 635.507--Cost Eligibility

    In this section, FHWA makes clear that the Federal cost principles 
must be satisfied for any costs that are included in negotiated prices, 
as required by 2 CFR part 200, subpart E. Contracting agencies must 
perform a cost or price analysis in connection with every procurement 
action (including contract modifications) in excess of the simplified 
acquisition threshold (currently $150,000).
    In section 635.507(a)(1), for preconstruction services agreements 
where actual costs or cost estimates are included in negotiated prices 
that will be used for cost reimbursement, we propose to require that 
all such costs must comply with the Federal cost principles to be 
eligible for participation. This is consistent with 2 CFR part 200 
subpart E.
    In section 635.507(a)(2), for construction services agreements or 
contracts, FHWA proposes that a price analysis must confirm price 
reasonableness, consistent with 2 CFR 200.320 and 200.323, to satisfy 
cost eligibility requirements. The FHWA will rely on a price analysis 
that is prepared and approved in accordance with section 635.506(d)(3) 
of this proposed rule, when authorizing construction services 
(including early work packages).
    In section 635.507(b), for cost-reimbursement contracts, we propose 
to require that the CM/GC contractor provide an indirect cost rate 
established in accordance with the Federal cost principles. The 
indirect cost rate provisions in 23 U.S.C. 112(b)(2) do not apply to 
CM/GC contracts because they are not agreements for architectural or 
design services. Accordingly, contracting agencies must use an indirect 
cost rate that is consistent with applicable provisions in 2 CFR part 
200.
    In section 635.507(c), we propose to implement a certification 
requirement regarding the use of indirect cost rates for those firms 
who have provided an approved indirect cost rate for use. This proposal 
is consistent with Paragraph 3(d) of FHWA Order 4470.1A, ``FHWA Policy 
for Contractor Certification of Costs in Accordance with Federal 
Acquisition Regulations to Establish Indirect Cost Rates on Engineering 
and Design-related Services Contracts.'' (https://www.fhwa.dot.gov/legsregs/directives/orders/44701a.htm).

Rulemaking Analyses and Notices

    All comments received before the close of business on the comment 
closing date indicated above will be considered and will be available 
for examination in the docket at the above address. Comments received 
after the comment closing date will be filed in the docket and will be 
considered to the extent practicable. In addition to late comments, 
FHWA will continue to file relevant information in the docket as it 
becomes available after the comment period closing date, and interested 
persons should continue to examine the docket for new material. A final 
rule may be published at any time after close of the comment period.

Executive Order 12866 (Regulatory Planning and Review), Executive Order 
13563 (Improving Regulation and Regulatory Review), and DOT Regulatory 
Policies and Procedures

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). The FHWA 
has determined preliminarily that this action would not be a 
significant regulatory action within the meaning of Executive Order 
12866, nor within the meaning of the U.S. Department of 
Transportation's regulatory policies and procedures. Executive Order 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
The FHWA anticipates that the economic impact of this rulemaking would 
be minimal. The FHWA anticipates that the proposed rule would not 
adversely affect, in a material way, any sector of the economy. As 
mandated by Section 1303 of MAP-21, this rulemaking provides a 
regulatory framework for the CM/GC contracting method, which is a 
process that has already been deployed and used under the authority of 
the FHWA's SEP-14 Program. In addition, these changes would not 
interfere with any action taken or planned by another agency and would 
not materially alter the budgetary impact of any entitlements, grants, 
user fees, or loan programs. Consequently, a full regulatory evaluation 
is not required.

Regulatory Flexibility Act

    In compliance with the Regulatory Flexibility Act (Pub. L. 96-354, 
5 U.S.C. 601-612), the FHWA has evaluated the effects of this action on 
small entities and anticipates that the action would not have a 
significant economic impact on a substantial number of small entities. 
The proposed amendment provides procedures for approving CM/GC projects 
in the Federal-aid highway program. As such, it primarily affects 
States and States are not included in the definition of small entity 
set forth in 5 U.S.C. 601.

Unfunded Mandates Reform Act of 1995

    This proposed rule would not impose unfunded mandates as defined by 
the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4, 109 Stat. 48, 
March 22, 1995) as it will not result in the expenditure by State, 
local, tribal governments, in the aggregate, or by the private sector, 
of $148.1 million or more in any one year (2 U.S.C. 1532). Further, in 
compliance with the Unfunded Mandates Reform Act of 1995, the agency 
will evaluate any regulatory action that might be proposed in 
subsequent stages of the proceeding to assess the effects on State, 
local, and tribal governments and the private sector.

Executive Order 13132 (Federalism Assessment)

    Executive Order 13132 requires agencies to assure meaningful and 
timely input by State and local officials in the development of 
regulatory policies that may have a substantial, direct effect on the 
States, on the relationship between the national government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. This proposed action has been analyzed in 
accordance with the principles and criteria contained in Executive 
Order 13132 dated August 4, 1999, and FHWA has determined that this 
proposed action would not have a substantial direct effect or 
sufficient federalism implications on the States. The FHWA has also 
determined that this proposed action would not preempt any State law or 
regulation or affect the States' ability to discharge traditional State 
governmental functions.

[[Page 36948]]

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.

Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501, et 
seq.), Federal agencies must obtain approval from the Office of 
Management and Budget for each collection of information they conduct, 
sponsor, or require through regulations. The FHWA has analyzed this 
proposed rule under the PRA and has determined preliminarily that this 
proposal does not contain collection of information requirements for 
the purposes of the PRA.

National Environmental Policy Act

    The FHWA has analyzed this action for the purpose of the NEPA, as 
amended (42 U.S.C. 4321 et seq.). Agencies are required to adopt 
implementing procedures for NEPA that establish specific criteria for, 
and identification of, three classes of actions: Those that normally 
require preparation of an EIS; those that normally require preparation 
of an EA; and those that are categorically excluded from further NEPA 
review (40 CFR 1507.3(b)). The proposed action is the adoption of 
regulations that provide the policies, procedures, and requirements for 
implementing the CM/GC contracting method pursuant to 23 U.S.C. 
112(b)(4). This proposed action qualifies for categorical exclusions 
under 23 CFR 771.117(c)(20) (promulgation of rules, regulations, and 
directives). The FHWA has evaluated whether the proposed action would 
involve unusual circumstances or extraordinary circumstances and has 
determined that this proposed rulemaking action would not involve such 
circumstances. As a result, FHWA finds that this proposed rulemaking 
would not result in significant impacts on the human environment.

Executive Order 12630 (Taking of Private Property)

    The FHWA has analyzed this proposed rule under Executive Order 
12630, Governmental Actions and Interference with Constitutionally 
Protected Property Rights. The FHWA does not anticipate that this 
proposed action would affect a taking of private property or otherwise 
have taking implications under Executive Order 12630.

Executive Order 12898 (Environmental Justice)

    Executive Order 12898, Federal Actions to Address Environmental 
Justice in Minority Populations and Low-Income Populations, and DOT 
Order 5610.2(a) (the DOT Order), 91 FR 27534 (May 10, 2012) (available 
online at www.fhwa.dot.gov/enviornment/environmental_justice/ej_at_dot/order_56102a/index.cfm), require DOT agencies to achieve environmental 
justice (EJ) as part of their mission by identifying and addressing, as 
appropriate, disproportionately high and adverse human health or 
environmental effects, including interrelated social and economic 
effects, of their programs, policies, and activities on minority 
populations and low-income populations in the United States. The DOT 
Order requires DOT agencies to address compliance with Executive Order 
12898 and the DOT Order in all rulemaking activities. In addition, FHWA 
has issued additional documents relating to administration of Executive 
Order 12898 and the DOT Order. On June 14, 2012, FHWA issued an update 
to its EJ order, FHWA Order 6640.23A, FHWA Actions to Address 
Environmental Justice in Minority Populations and Low Income 
Populations (the FHWA Order) (available online at www.fhwa.dot.gov/legsregs/directives/orders/664023a.htm).
    The FHWA has evaluated this proposed rule under the Executive 
Order, the DOT Order, and the FHWA Order. The FHWA has determined that 
the proposed regulations would not cause disproportionately high and 
adverse human health and environmental effects on minority or low 
income populations.

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 action would not cause an environmental risk to 
health or safety that might disproportionately affect children.

Executive Order 13175 (Tribal Consultation)

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

Executive Order 13211 (Energy Effects)

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

Regulation Identifier Number

    A 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.

List of Subjects

23 CFR Part 630

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

23 CFR Part 635

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

    Issued on: June 19, 2015.
Gregory G. Nadeau,
Acting Administrator, Federal Highway Administration.

    In consideration of the foregoing, FHWA proposes to amend title 23, 
Code of Federal Regulations, parts 630 and 635 as follows:

[[Page 36949]]

PART 630--PRECONSTRUCTION PROCEDURES

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

    Authority:  23 U.S.C. 106, 109, 112, 115, 315, 320, and 402(a); 
Sec. 1501 and 1503 of Public Law 109-59, 119 Stat. 1144; Public Law 
105-178, 112 Stat. 193; Public Law 104-59, 109 Stat. 582; Public Law 
97-424, 96 Stat. 2106; Public Law 90-495, 82 Stat. 828; Public Law 
85-767, 72 Stat. 896; Public Law 84-627, 70 Stat. 380; 23 CFR 1.32 
and 49 CFR 1.48(b), and Pub. L. 112-141, 126 Stat. 405, section 
1303.

0
2. Amend Sec.  630.106 by adding a new paragraph (a)(8) to read as 
follows:


Sec.  630.106  Authorization to proceed.

    (a) * * *
    (8) For Construction Manager/General Contractor projects, the 
execution or modification of the project agreement for preconstruction 
services associated with final design and construction services, and 
authorization to proceed with such services, shall not occur until 
after the completion of the NEPA process. However, preconstruction 
services associated with preliminary design 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:  Sections 1525 and 1303 of Pub.L. 112-141, 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 1.85(a)(1).

0
4. Amend Sec.  635.102 by adding, in alphabetical order, the definition 
of ``Construction Manager/General Contractor (CM/GC) project'' to read 
as follows:


Sec.  635.102  Definitions.

* * * * *
    Construction Manager/General Contractor (CM/GC) project means a 
project to be delivered using a two-phase contract with a construction 
manager or general contractor for services during both the 
preconstruction and construction phases of a project.
* * * * *
0
5. Amend Sec.  635.104 by adding paragraph (d) to read as follows:


Sec.  635.104  Method of construction.

* * * * *
    (d) In the case of a CM/GC project, the requirements of subpart E 
of this part and the appropriate provisions pertaining to the CM/GC 
method of contracting in this part will apply. However, no 
justification of cost effectiveness is necessary in selecting projects 
for the CM/GC delivery method.
0
6. Amend Sec.  635.107 by revising the first sentence of paragraph (b) 
to read as follows:


Sec.  635.107  Participation by disadvantaged business enterprises.

* * * * *
    (b) In the case of a design-build or CM/GC project funded with 
title 23 funds, the requirements of 49 CFR part 26 and the State's 
approved DBE plan apply. * * *
0
7. Amend Sec.  635.109 by revising paragraph (a) introductory text to 
read as follows:


Sec.  635.109  Standardized changed condition clauses.

    (a) Except as provided in paragraph (b) of this section, the 
following changed conditions contract clauses shall be made part of, 
and incorporated in, each highway construction project, including 
construction services agreements of CM/GC projects, approved under 23 
U.S.C. 106:
* * * * *
0
8. Amend Sec.  635.110 by revising paragraph (f) introductory text to 
read as follows:


Sec.  635.110  Licensing and qualification of contractors.

* * * * *
    (f) In the case of a design-build and CM/GC project, the STDs may 
use their own bonding, insurance, licensing, qualification or 
prequalification procedure for any phase of procurement.
* * * * *
0
9. Amend Sec.  635.112 by adding paragraph (j) to read as follows:


Sec.  635.112  Advertising for bids and proposals.

* * * * *
    (j) In the case of a CM/GC project, the FHWA Division 
Administrator's approval of the solicitation document will constitute 
the FHWA's approval to use the CM/GC contracting method and approval to 
release the solicitation document. The STD must obtain the approval of 
the FHWA Division Administrator before issuing addenda which result in 
major changes to the solicitation document.
0
10. Amend Sec.  635.113 by adding paragraph (d) to read as follows:


Sec.  635.113  Bid opening and bid tabulation.

* * * * *
    (d) In the case of a CM/GC project, the requirements of this 
section do not apply. See subpart E of this part for approval 
procedures.
0
11. Amend Sec.  635.114 by adding paragraph (l) to read as follows:


Sec.  635.114  Award of contract and concurrence in award.

* * * * *
    (l) In the case of a CM/GC project, the CM/GC contract shall be 
awarded in accordance with the solicitation document. See subpart E of 
this part for CM/GC project approval procedures.
0
12. Amend Sec.  635.122 by adding paragraph (d) to read as follows:


Sec.  635.122  Participation in progress payments.

* * * * *
    (d) In the case of a CM/GC project, the STD must define its 
procedures for making progress payments pursuant to the selected 
payment method in the appropriate solicitation and contract documents.
0
13. Amend Sec.  635.309 by revising paragraphs (p) introductory text, 
(p)(1)(vi) introductory text, and (p)(3) to read as follows:


Sec.  635.309  Authorization.

* * * * *
    (p) In the case of a design-build or CM/GC project, the following 
certification requirements apply:
    (1) * * *
    (vi) If the STD elects to include right-of-way, utility, and/or 
railroad services as part of the design-builder's (or CM/GC 
contractor's) scope of work, then the Request for Proposals document 
must include:
* * * * *
    (3) Changes to the design-build or CM/GC project concept and scope 
may require a modification of the transportation plan and 
transportation improvement program. The project sponsor must comply 
with the metropolitan and statewide transportation planning 
requirements in 23 CFR part 450 and the transportation conformity 
requirements (40 CFR parts 51 and 93) in air quality nonattainment and 
maintenance areas, and provide appropriate approval notification to the 
design builder (or the CM/GC contractor) for such changes.
0
14. Add subpart E to read as follows:
Subpart E--Construction Manager/General Contractor (CM/GC) Contracting
Sec.
635.501 Purpose.
635.502 Definitions.
635.503 Applicability.
635.504 CM/GC requirements.
635.505 Relationship to the NEPA process.
635.506 Project approvals and authorizations.

[[Page 36950]]

635.507 Cost eligibility.

Subpart E--Construction Manager/General Contractor (CM/GC) 
Contracting


Sec.  635.501  Purpose.

    The regulations in this subpart prescribe policies, requirements, 
and procedures relating to the use of the CM/GC method of contracting 
on Federal-aid projects.


Sec.  635.502  Definitions.

    As used in this subpart:
    Agreed price means the price agreed to by the Construction Manager/
General Contractor (CM/GC) contractor and the contracting agency to 
provide construction services for a specific scope and schedule.
    CM/GC contractor means the entity that has been awarded a two-phase 
contract for a CM/GC project and is responsible for providing 
preconstruction services under the first phase and, if a price 
agreement is reached, construction services under the second phase of 
such contract.
    CM/GC project means a project to be delivered using a two-phase 
contract with a CM/GC contractor for services during the 
preconstruction and construction phases of a project.
    Construction services means the physical construction work 
undertaken by a CM/GC contractor to construct a project or a portion of 
the project (including early work packages). Construction services may 
be authorized as a single contract for the project, or through a 
combination of contracts covering portions of the CM/GC project. 
Procurement and authorization procedures are the same for every 
contract for construction services.
    Contracting agency means the State Transportation Agency (STA), and 
any State or local government agency, public-private partnership, or 
Indian tribe (as defined in 2 CFR 200.54) that is the acting under the 
supervision of the STA and is awarding and administering a CM/GC 
contract.
    Division Administrator means the chief FHWA official assigned to 
conduct business in a particular State.
    Early work package means a portion or phase of physical 
construction work (including material acquired for a construction 
phase) that is procured after NEPA is complete but before all design 
work for the project is complete. Contracting agencies may procure an 
early work package only when the risks of the work are adequately 
identified and the scope of work is defined sufficiently for the 
contracting agency and the CM/GC contractor to reasonably determine 
price. The requirements in Sec.  635.506 and Sec.  635.507 apply to 
procuring an early work package and FHWA authorization for an early 
work package.
    Final design has the same meaning as defined in Sec.  636.103 of 
this chapter.
    NEPA process means the environmental review required under the 
National Environmental Policy Act (NEPA) of 1969 (42 U.S.C. 4321 et 
seq.), applicable portions of the NEPA implementing regulations at 40 
CFR parts 1500-1508, and part 771 of this chapter.
    Preconstruction services means consulting to provide a contracting 
agency and its designer with information regarding the impacts of 
design on the physical construction of the project, including 
scheduling, work sequencing, cost engineering, constructability, cost 
estimating, and risk identification. Under an agreement for 
preconstruction services, the CM/GC contractor may provide consulting 
services during both preliminary and final design. Such services do not 
include design and engineering-related services as defined in Sec.  
172.3 of this chapter.
    Preliminary design has the same meaning as defined in Sec.  636.103 
of this chapter.
    Solicitation document means the document used by the contracting 
agency to advertise the CM/GC project and request expressions of 
interest, statements of qualifications, proposals, or offers.
    State transportation agency (STA) has the same meaning as the term 
State transportation department under Sec.  635.102 of this chapter.


Sec.  635.503  Applicability.

    The provisions of this subpart apply to all Federal-aid projects 
within the right-of-way of a public highway, those projects required by 
law to be treated as if located on a Federal-aid highway, and other 
projects which are linked to such projects (i.e., the project would not 
exist without another Federal-aid highway project) that are to be 
delivered using the CM/GC contractor method.


Sec.  635.504  CM/GC requirements.

    (a) In general. A contracting agency may award a two-phase contract 
to a CM/GC contractor for preconstruction and construction services. 
The first phase of this contract is the preconstruction services phase. 
The second phase is the construction services phase. The construction 
services phase may occur under one contract or under multiple contracts 
covering portions of the project, including early work packages.
    (b) Procurement requirements. (1) The contracting agency shall 
procure the CM/GC contract using competitive selection procurement 
procedures providing for free and open competition.
    (2) Contracting agency procedures may use any of the following 
solicitation options in procuring a CM/GC contract: Letters of 
interest, requests for qualifications, interviews, request for 
proposals or other solicitation procedures provided by applicable State 
law, regulation or policy. Single-phase or multiple-phase selection 
procedures may also be used.
    (3) Contracting agency procedures shall require, at a minimum, that 
a CM/GC contract be advertised through solicitation documents that:
    (i) Clearly define the scope of services being requested;
    (ii) List evaluation factors and significant subfactors and their 
relative importance in evaluating proposals;
    (iii) List all required deliverables;
    (iv) Identify whether interviews will be conducted before 
establishing the final rank; and
    (v) Include or reference sample contract form(s).
    (4) If interviews are used in the selection process, the 
contracting agency must offer the opportunity for an interview to all 
short listed firms (or firms that submitted responsive proposals, if a 
short list is not used). Also, if interviews are used, then the 
contracting agency must not engage in conduct that favors one firm over 
another and must not disclose a firm's offer to another firm.
    (5) A contracting agency may award a CM/GC contract based on 
qualifications, experience, best value, or any other combination of 
factors considered appropriate by the contracting agency and the 
Division Administrator and which are clearly specified in the 
solicitation documents.
    (6) In the event that the contracting agency is unwilling or unable 
to enter into an agreement with the CM/GC contractor for the 
construction services phase of the project (including any early work 
package), after notification to the Division Administrator, the 
contracting agency may initiate a new procurement process meeting the 
requirements of subpart A of this part. If FHWA participation is being 
requested in the cost of construction, the contracting agency must 
request FHWA's approval before advertising for bids or proposals in 
accordance with Sec.  635.112. Once the contracting agency advertises 
for bids or proposals for the project or a portion of

[[Page 36951]]

the project, the contracting agency no longer can use the agreed price 
procedures under this CM/GC regulation. When the contracting agency 
makes a decision to initiate a new procurement, the contracting agency 
may determine that there is an apparent conflict of interest and not 
allow the CM/GC contractor to submit competitive bids.
    (c) FHWA approval of CM/GC procedures. (1) The STA must submit its 
proposed CM/GC procurement procedures to the FHWA Division 
Administrator for review and approval. Any changes in approved 
procedures and requirements shall also be subject to approval by the 
Division Administrator. Other contracting agencies may follow STA 
approved procedures or their own procedures if approved by the both the 
STA and FHWA.
    (2) The Division Administrator may approve procedures that conform 
to the requirements of this subpart and which do not, in the opinion of 
the Division Administrator, operate to restrict competition. The 
Division Administrator's approval of CM/GC procurement procedures may 
not be delegated or assigned to the STA.
    (d) Subcontracting. Consistent with Sec.  635.116(a), agreements 
for construction services must specify a minimum percentage of work (no 
less than 30 percent of the total cost of the agreement for 
construction services, excluding specialty work) that a contractor must 
perform with its own forces. If required by State law, regulation, or 
administrative policy, the contracting agency may require the CM/GC 
contractor to competitively let and award subcontracts for construction 
services to the lowest responsive bidder.
    (e) Payment methods. (1) The method of payment to the CM/GC 
contractor shall be set forth in the original solicitation documents, 
contract, and any contract modification or change order thereto. A 
single contract may contain different payment methods as appropriate 
for compensation of different elements of work.
    (2) The methods of payment for preconstruction services shall be: 
Lump sum, cost plus fixed fee, cost per unit of work, specific rates of 
compensation, or other comparable payment method permitted in State law 
and regulation. The cost plus a percentage of cost and percentage of 
construction cost methods of payment shall not be used.
    (3) The method of payment for construction services may include any 
method of payment authorized by State law (including, but not limited 
to, lump sum, unit price and target price); however, when compensation 
is based on actual costs, an approved indirect cost rate must be used.


Sec.  635.505  Relationship to the NEPA process.

    (a) In procuring a CM/GC contract before the completion of the NEPA 
process, the contracting agency may:
    (1) Issue solicitation documents;
    (2) Proceed with the award of a CM/GC contract providing for 
preconstruction services and an option to enter into a future agreement 
for construction services once the NEPA review process is complete;
    (3) Issue notices to proceed to the CM/GC contractor for 
preconstruction services, excluding final design-related activities; 
and
    (4) Issue a notice-to-proceed to a consultant design firm for the 
preliminary design and any work related to preliminary design of the 
project to the extent that those actions do not limit any reasonable 
range of alternatives.
    (b) The contracting agency shall not proceed with the award of an 
agreement for the construction services phase of a CM/GC contract 
(including early work packages such as advanced material acquisition or 
site work) and, except as provided in paragraph (c) of this section, 
shall not proceed, or permit any consultant or contractor to proceed, 
with construction until the completion of the NEPA process for the 
project.
    (c) A contracting agency may proceed, solely at the risk and 
expense of the contracting agency, with design activities at any level 
of detail, including final design and preconstruction services 
associated with final design, for a CM/GC project before completion of 
the NEPA process without affecting subsequent approvals required for 
the project. However, FHWA shall not authorize final design activities 
and preconstruction services associated with final design, and such 
activities shall not be eligible for Federal funding as provided in 
Sec.  635.506(c), until after the completion the NEPA process. A 
contracting agency may use a CM/GC contractor for preconstruction 
services associated with at-risk final design only if the contracting 
agency has a procedure for segregating the costs of the CM/GC 
contractor's at-risk work from preconstruction services eligible for 
reimbursement during the NEPA process. If a contracting agency decides 
to perform at-risk final design, it must notify FHWA of its decision to 
do so before undertaking such activities.
    (d) The CM/GC contract must include termination provisions in the 
event the environmental review process does not result in the selection 
of a build alternative. This termination provision is in addition to 
the termination for cause or convenience clause required by 2 CFR part 
200, Appendix II.
    (e) The CM/GC contract must include a provision providing that the 
scope of services in the preconstruction phase includes all 
alternatives identified and considered in the NEPA process.
    (f) The CM/GC contract must include appropriate provisions ensuring 
no commitments are made to any alternative during the NEPA process, and 
that the comparative merits of all alternatives identified and 
considered during the NEPA process, including the no-build alternative, 
will be evaluated and fairly considered.
    (g) The CM/GC contractor must not prepare NEPA documentation or 
have any decisionmaking responsibility with respect to the NEPA 
process. However, the CM/GC contractor may be requested to provide 
information about the project and possible mitigation actions, 
including constructability information, and its work product may be 
considered in the NEPA analysis and included in the record.
    (h) Any agreement for construction services under a CM/GC contract 
must include appropriate provisions ensuring that all environmental and 
mitigation measures identified in the NEPA documentation and committed 
to in the NEPA determination for the selected alternative will be 
implemented.


Sec.  635.506  Project approvals and authorizations.

    (a) In general. (1) Under 23 U.S.C. 106(c), the States may assume 
certain FHWA responsibilities for project design, plans, 
specifications, estimates, contract awards, and inspections. Any 
individual State's assumption of FHWA responsibilities for approvals 
and determinations for CM/GC projects, as described in this subpart, 
will be addressed in the State's FHWA/STA Stewardship and Oversight 
Agreement. The State may not further delegate or assign those 
responsibilities. If an STA assumes responsibility for an FHWA approval 
or determination contained in this subpart, the STA will include 
documentation in the project file sufficient to substantiate its 
actions and to support any request for authorization. The STA will 
provide FHWA with the documentation upon request.
    (2) Before requesting the authorization for either preconstruction 
or construction activities, the contracting agency must submit its 
solicitation document for CM/GC services to the Division Administrator 
for approval.

[[Page 36952]]

    (b) Preconstruction services approvals and authorization. (1) If 
the contracting agency wishes Federal participation in the cost of the 
CM/GC contractor's preconstruction services, it must request FHWA's 
authorization of preliminary engineering before incurring such costs.
    (2) Before authorizing pre-construction services by the CM/GC 
contractor, the Division Administrator must review and approve the 
contracting agency's cost or price analysis for every procurement 
(including contract modifications). A cost or price analysis is 
encouraged but not required for procurements less than the simplified 
acquisition threshold (currently $150,000).
    (c) Final design during NEPA process. (1) If the contracting agency 
proceeds with final design activities, including preconstruction 
services associated with final design activities, at its own expense 
before the completion of the NEPA process, then those activities for 
the selected alternative may be eligible for Federal reimbursement 
after the completion of the NEPA process so long as the Division 
Administrator finds that the contracting agency's final design-related 
activities:
    (i) Did not limit the identification and fair evaluation of a 
reasonable range of alternatives for the proposed project,
    (ii) Did not result in an irrevocable commitment by the contracting 
agency to the selection of a particular alternative,
    (iii) Did not have an adverse environmental impact, and
    (iv) Are necessary and reasonable and adequately documented.
    (2) If, during the NEPA process, the Division Administrator finds 
the final design work limits the fair evaluation of alternatives, 
irrevocably commits the contracting agency to the selection of any 
alternative, or causes an adverse environmental impact, then the 
Division Administrator shall require the contracting agency to take any 
necessary action to ensure the integrity of the NEPA process regardless 
of whether the contracting agency wishes to receive Federal 
reimbursement for such activities.
    (d) Construction services approvals and authorizations. (1) Subject 
to the requirements in Sec.  635.505, the contracting agency may 
request Federal participation in the construction services costs 
associated with a CM/GC construction project, or portion of a project 
(including an early work package). In such cases, FHWA's construction 
contracting requirements will apply to all of the CM/GC project's 
construction contracts if any portion (including an early work package) 
of the CM/GC project construction is funded with title 23 funds. Any 
expenses incurred for construction services before FHWA authorization 
shall not be eligible for reimbursement except as may be determined in 
accordance with Sec.  1.9 of this chapter.
    (2) The FHWA must approve the price estimate for construction costs 
for the entire project before authorization of construction services 
(including authorization of an early work package).
    (3) The contracting agency must perform a price analysis for any 
agreement (or contract modification) that establishes or revises the 
scope, schedule or price for the construction of the CM/GC project or a 
portion of the project (including an early work package). The price 
analysis must compare the agreed price with the contracting agency's 
engineer's estimate or an independent cost estimate (if required by the 
contracting agency). A price analysis is encouraged but not required 
for procurements less than the simplified acquisition threshold 
(currently $150,000).
    (4) The Division Administrator must review and approve the 
contracting agency's price analysis and agreed price for the 
construction services of a CM/GC project or a portion of the project 
(including an early work package) before authorization of construction 
services.
    (5) Where the contracting agency and the CM/GC contractor agree on 
a price for construction services, FHWA's authorization of construction 
services will be based on the approved agreed price for the project or 
portion of the project. The authorization may include authorization of 
an early work package, including the advanced acquisition of materials 
consistent with Sec.  635.122. In the event that construction materials 
are acquired for a CM/GC project but not installed in the CM/GC 
project, the cost of such material will not be eligible for Federal-aid 
participation. In accordance with Sec.  635.507 and 2 CFR part 200, 
FHWA may deny eligibility for part or all of an early work package if 
such work is not needed for, or used for, the project.
    (e) Contract award. Award of Federal-aid CM/GC contracts for 
preconstruction and construction services requires prior concurrence 
from the Division Administrator. The concurrence is a prerequisite to 
the authorization of preconstruction and construction services 
(including authorization for an early work package). Concurrence in the 
contract award constitutes approval of the agreed price, scope, and 
schedule for the work. The documentation supporting a contract award 
should include the Disadvantaged Business Enterprise documentation 
required by 26 CFR 26.53(b)(2) when there is a contract goal. A copy of 
the executed contract between the contracting agency and the CM/GC 
contractor, including any agreement for construction services, shall be 
furnished to the Division Administrator as soon as practical after 
execution. If the contracting agency decides not to proceed with the 
award of a CM/GC construction services contract, then it must notify 
the FHWA Division Administrator as provided in Sec.  635.504(b)(6).


Sec.  635.507  Cost eligibility.

    (a) Costs, or prices based on estimated costs, for agreements under 
a CM/GC contract shall be eligible for Federal-aid reimbursement only 
to the extent that costs incurred, or cost estimates included in 
negotiated prices, are allowable in accordance with the Federal cost 
principles (as specified in 2 CFR part 200, subpart E). Contracting 
agencies must perform a cost or price analysis in connection with 
procurement actions, including contract modifications, in accordance 
with 2 CFR 200.323(a) and this subpart.
    (1) For preconstruction services, to the extent that actual costs 
or cost estimates are included in negotiated prices that will be used 
for cost reimbursement, the costs must comply with the Federal cost 
principles to be eligible for participation.
    (2) For construction services, the price analysis must confirm the 
agreed price is reasonable in order to satisfy cost eligibility 
requirements (see Sec.  635.506(d)(3)). The FHWA will rely on an 
approved price analysis when authorizing funds for construction.
    (b) Indirect cost rates. Where contract terms and payment are 
negotiated based on individual elements of costs, the CM/GC contractor 
must provide an indirect cost rate established in accordance with the 
Federal cost principles (as specified in 2 CFR part 200, subpart E).
    (c) Cost certification. (1) If the CM/GC contractor presents an 
indirect cost rate established in accordance with the Federal cost 
principles (as specified in 2 CFR part 200, subpart E), it shall 
include a certification by an official of the CM/GC contractor that all 
costs are allowable in accordance with the Federal cost principles.
    (2) An official of the CM/GC contractor shall be an individual 
executive or financial officer of the CM/GC contractor's organization, 
at a level no lower than a Vice President or Chief Financial Officer, 
or equivalent, who has the authority to make representations about the 
financial

[[Page 36953]]

information utilized to establish the indirect cost rate proposal 
submitted.
    (3) The certification of final indirect costs shall read as 
follows:

Certificate of Final Indirect Costs

    This is to certify that I have reviewed this proposal to establish 
final indirect cost rates and to the best of my knowledge and belief:
    1. All costs included in this proposal (identify proposal and date) 
to establish final indirect cost rates for (identify period covered by 
rate) are allowable in accordance with the cost principles of the 
Federal Acquisition Regulation (FAR) of title 48, Code of Federal 
Regulations (CFR), part 31; and
    2. This proposal does not include any costs which are expressly 
unallowable under applicable cost principles of the FAR of 48 CFR part 
31.


Firm:

Signature:

Name of Certifying Official:

Title:

Date of Execution:

[FR Doc. 2015-15617 Filed 6-26-15; 8:45 am]
 BILLING CODE 4910-22-P