Federal-aid project development and delivery
normally rely on the use of engineering judgment and best practices to make
project decisions that are guided by the general concept of free and open
competition.
Congress has recognized that there are times
when decisions have to be made using factors other than the norm.
The Federal-aid program regulations allow project-level design and
construction operational decisions through two other means
to justify deviating from the standard practices.
They are cost-effective determinations
and public-interest findings.
However, using these requires obtaining concurrence from your oversight agency
as a second party to the decision.
While there are other instances in the Federal-aid highway program regulations
that allow deviations from the requirements
based on a cost-effectiveness determination or finding a public-interest,
for the purposes of this discussion,
we will only focus on the regulations that can affect project-specific design
decisions or administration of your construction project.
What are cost-effectiveness determinations and public-interest
findings?
A cost-effectiveness determination is a decision based solely on an economic
analysis.
You determine the lowest overall cost using project-specific data.
A public-interest finding, or PIF, is a conclusion that a situation is unique
and the public-interest is best served by allowing an exception to existing
procurement or contracting policies.
The decision should be supported by both a cost evaluation and an engineering
analysis of the issues
that may include environmental,
life-cycle cost, safety,
and operational considerations on a Federal-aid project.
Simply stated,
cost-effectiveness determinations are decisions based only on cost;
whereas PIFs are based on a broader spectrum of issues, including cost.
You will need to prepare a document to request concurrence by the oversight
agency
when it is indicated by the public-interest finding or cost-effectiveness
determination is justified within the Federal-aid regulation.
When should you use a cost-effectiveness determination or public-interest finding?
You must submit a request for cost- effectiveness determination to use
non-competitive methods of construction for a project.
Negotiated contracts or use of public agency employees under force account
procedures
are two examples of non-competitive work procurement.
Emergency work within the Federal-aid Emergency Relief Program
has a regulatory exception for determining cost-effectiveness.
The use of publicly owned equipment by contractors requires a
cost-effectiveness determination.
Contractor use of public equipment is usually limited to the use of "specialty"
equipment that is not generally available for lease or purchase in the
open market.
There are several allowances in the Federal-aid regulations that
specifically address the choice of material used to construct a project.
Patented or proprietary products that are required as a sole source in
contract documents must be approved using a PIF when other suitable
alternatives are available
since open competition among products is the normal expectation.
Agency-furnished material or products that will be installed by a contractor
using Federal-aid funds must be justified using a PIF
since this limits the potential for open and free-market competition.
Reasons often cited are cost-effectiveness or
there is a long lead time for ordering materials,
such as structural beams or specialty items.
Mandatory use of local natural materials sources or disposal sites for projects
requires a PIF
since this restricts a contractor's option of material selection and
operational efficiencies.
Sometimes an agency may need to determine disposal sites in advance of
letting contracts for environmental commitments.
The Buy America provisions for steel or iron products include an option for
justifying a waiver for the use of foreign material using a PIF.
The FHWA rarely grants a Buy America waiver using a PIF.
FHWA Headquarters applies a higher level of scrutiny
using a public comment process for these waivers, so substantial justification
must be provided.
Cost cannot be one of the determining factors of a PIF or Buy America waivers.
To show how this process works, let's consider this example.
A local agency has agreed to a stipulation in the project environmental
document that requires protection of critical wildlife habitat in the project
area.
Building an embankment for the project requires additional local natural
material, or fill dirt. Opening a new borrow site near the project area would
jeopardize the wildlife habitat.
However, there is an existing State owned borrow site close to the project area. The
solution-
use a State-owned borrow pit near the project.
To do so,
the local public agency, or LPA, prepares a request for a public-interest
finding for consideration by the State department of transportation, or
State DOT,
as the oversight agency.
As justification, the request cites the environmental commitment and the
proposed solution to require the use of the State-owned borrow site to build
embankments on the project.
A report on the potential effects on the wildlife in the area is provided
as support for the public-interest finding.
An overlay map of the habitat and potential borrow sites shows
alternatives to the proposed site.
An analysis of the alternatives and potential costs to the project
shows that developing and reclaiming new borrow sites
or hauling material from other existing contractor borrow pits to the project
is five times the cost of using the State-owned borrow site.
The LPA concludes that it is not feasible to allow contractors to develop
new borrow sites in the project area.
The State DOT agrees with the recommendation to restrict the
contractors to the use of the State- owned borrow pit
and concurs that it is in the best interest of the public.
The response letter from the State DOT
notes that this finding is only applicable for completion of this one
project and does not require reevaluation.
The project manager then places the letter in the permanent project records.
The LPA includes a "notice to bidders" in the bidding instructions requiring that
all borrow material for the project must originate from the State-owned pit.
FHWA recognizes that there are times when economic efficiency or other
reasons
may lead to a decision to deviate from free and open competition on a Federal-
aid project.
Federal-aid regulation specifically allows such decisions to be made
using a public-interest finding or a determination of cost-effectiveness.
The project requires explicit concurrence in the decisions by the
oversight agency that approve of the deviation from normal requirements.