Ransford S. McCourt, PE, PTOE Principal, West Coast Region Manager

FAR & Your Business Why are we required to follow Federal rules? What aspects of Federal Rules are important to my business? How does this relate to the conduct of project work with ODOT? Which rules are most relevant to my business?

23 CFR 172 Administration of A&E Contracts Establishes the basis for A&E contracts to follow federal procurement for Federal Aid projects Keys: Methods of Procurement Compensation Methods Audit requirements Qualification Based Selection (Brooks Act) Small Purchase Procedure s100K Cognizant Audits Ability to be flexible in audit approach (small business) Code of Federal Requirments Over arching document Fixed Price (lump Sum) Time and Materials (CPFF) Incentive

Best Web Site References http://www.fhwa.dot.gov/programadmin/172qa.cfm#r17 http://www.fhwa.dot.gov/programadmin/mega/

USC Title 48 Part 36 Contracting Procedures FHWA uses this to guide the procedures in contracting for services Keys: Contracting Procedures Selection Process Evaluation Process Selection Authority Negotiation Process Debriefing Process Performance Evaluation Process 360 review – jointly signed is a desire of ACEC Performance review required above $25K, retain for 6 years, guidelines

Other USC Sections Basis for Audits 23 USC Sec.112 b)(2)(C) – The code under which DOT operates calls for audits and relates them to FAR = 48 CFR Part 31 For firms conducting Federal Aid projects

Best Web Site Reference http://www.fhwa.dot.gov/programadmin/121205_48cfr.cfm

48 CFR The FAR Contract Cost Principles and Procedures Overhead Principles Reasonable Compensation Guides 48CFR31.205-6 (5) (b) Unallowable Costs Marketing Cost Contributions Bad Debt Travel Cost in excess of GSA per diem (31.206-46) Federal Accounting Rules Direct proposal effort vs going to lunch to talk about work Bad Dept – current economy and recent issues of AR going unpaid

Reasonable Compensation OFPP Act Section 39 – 2008 maximum benchmark compensation $612,196 Reasonable Basis: Compare to other firms of same size Compensation practice of industry Compensation in geographic areas Governmental work vs non-governmental work Outside sources of information Balance between well managed firms and those that are not in determining reasonableness – Salary vs performance incentive for compensation style of management Most highly compensated employees for large revenue firms (>$150M/yr) Wages, salary, bonuses, deferred compensation, employer contribution to pension plans

FAR contract clauses Title 48 Section 36.609 Responsibility of Designer Design within funding limit Keys: The value of construction must be stated up front in procurement process Part of negotiation process Not used where performance is overriding consideration, where little design work is needed Not responsible for changes outside control Should define limits in contract – indexes, range

FAR contract clauses Title 48 Section 36.609 Design errors and deficiencies Responsible for necessary corrections at no cost to agency Negotiable Agency does not have to require redesign Avoid vague terms – “inadequacies”

Most Relevant Business Concerns Working for ODOT Selection Process Cost Accounting Auditing Compensation Performance Review Responsibility of Designer 23 CFR Part 172 is the Administration of Engineering and Design Related Service Contracts. 172.5 covers the Methods of Procurement such as competitive negotiation, small purchases, noncompetitive negotiation (sole source, direct appointment, emergency), DBE, Compensation 172.7 covers Audits 172.9 covers Approvals of written procedures for each method of procurement. 23 USC 112(b)(2) covers QBS process Small purchase procedures: The maximum contract amount allowed under small purchase procedures shall be the smaller of either the federal limit, which is currently set in 41 U.S.C. 403(11) at $100,000, or the State's own small purchase limit. 48 CFR Part 36 covers the acquisition of A & E contracts. You must announce and negotiate contracts for A & E services based on the demonstrated competence and qualifications of prospective consultants to perform the services. 36.602 is the selection criteria of the firms such as qualifications, specialized experience and technical competence, capacity, past performance, location to the project. Also covers the evaluation teams, short lists. 36.604 Performance Evaluation 36.605 requires an independent cost analysis 36.606 requires negotiations 36.609-1 Errors and Omissions – Design within funding limitations. Procedure for this is contained in Technical Services Directive TSB07-01(D)

Oregon Department of Transportation External Audits Margaret Cole, External Audit Manager You can type here to add notes.

External Audits Who we are, What we do, Why we do it Schedule of Indirect Cost Rate/Overhead Rate The Process, What we look for Cognizance

Introduction Oregon Department of Transportation’s External Audit section is comprised of Margaret Cole, Audit Manager, Ruth Wu, CPA and Inna Cutting, Senior Auditors. Our work is performed in accordance with Generally Accepted Government Auditing Standards (GAGAS) as issued by the U.S. Government Accountability Office (GAO). Federal law 23 USC Sec.112 (b) (2) (C) requires audits to be in compliance with the cost principles in Federal Acquisition Regulations (FARs) part 31. Our objective is to provide audits and reviews to ensure costs charged to ODOT by external entities are accurate, reasonable and in compliance with federal and state regulations. The engagements are performed to ensure that consultant contract pricing is based on actual costs incurred.

Overhead Rates A Schedule of Indirect Costs is often referred to as an Overhead Rate.

The Process Audit Services: Desk Review Independent CPA Working Paper Review What do we look for? We look at whether or not costs are allocable, allowable, and reasonable by using the Federal Acquisition Regulations System 48 Chapter 1 Part 31 (FARS), Cost Accounting Standards (CAS), AASHTO Audit and Accounting Guide, DCAA Contract Audit Manual, Independent Survey data etc. Request additional information from the consultant Work with the consultant on a professional basis to ascertain the allowabliliy of any questioned costs. The consultant will be kept informed of our process at all times. Adjustments to the overhead rate may be required A recommendation is made to the procurement office A cost is allocable if it is assignable or chargeable to one or more cost objectives or cost centers on the basis of relative benefits received or some other equitable relationship. A cost must be distributed in some reasonable proportion to the benefits derived. A cost is allocable to a govt contract if it is: 1. is incurred specifically for the contract 2. benefits both the contract and other work, and can be distributed to them in a reasonable proportion to the benefits received or 3. is necessary to the overall operation of the business, although a direct relationship to any particular cost objective cannot be shown.

Cognizance Cognizance is a term created by the National Highway System (NHS) Act – Section 307. The purpose of the act was to remove caps on overhead rates and to avoid duplication of audit work. A cognizant audit is an audit by a federal or state agency of the indirect cost rate conducted in accordance with FAR part 31. The cognizant agency will issue either an audit report or a letter of concurrence.

Websites ODOT’s Billing Rate Policy: http://www.oregon.gov/ODOT/CS/OPO/docs/aepage/AGR0601.pdf#brpolicy AASHTO Audit and Accounting Guide: http://www.transportation.org/?siteid=43 FAR part 31: http://www.access.gpo.gov/nara/cfr/waisidx_04/48cfr31_04.html DCAA Contract Audit Manual: http://www.dcaa.mil/ 23 CFR 172--Administration of Engineering and Design Related Service Contracts Q & A: http://www.fhwa.dot.gov/programadmin/172qa.cfm

Where to go for Questions Give Us a Call or Check our Website: http://www.oregon.gov/ODOT/CS/EXTERNALAUDITS/ Margaret Cole External Audit Manager (503) 986-3213 Marlene Hartinger Chief of Audit Services (503) 986-4177

Oregon Department of Transportation ODOT Procurement Office Donnell Fowler, CPPB – Procurement Operations Liaison Michelle Remmy – Chief Procurement Officer You can type here to add notes.

What is the issue with Billing Rates? Billing Rate Update What is the issue with Billing Rates? 4.5% Escalation Fee – What does this mean? What do I need to submit for rate increase/decrease? The issue is that depending on when your contract was executed and how many contracts you have – you could have several different rates. The rate schedules are inconsistent and outdated. OPO has been in the process of gaining consistency and standardizing rate schedules. The 4.5% Escalation fee was a way to capture estimate costs of project if the project extends over more than 1 year. 4.5% does not represent an automatic increase in your salary. You are still required to request salary adjustments and provide documentation of the increases. This is especially important in the current economic state. When you submit a request – you need to include a new rate schedule, justification for the increase in the form of a written request. That will first go to the project manager and then to OPO for processing.

Profit Fee Worksheet Profit Worksheet is a TOOL Independently fill out the form Both parties bring to the table for discussion Analysis and Instructions The intent of the Profit Worksheet was to provide a tool that would help in the discussion of the project. The bottom line fee is also not held in stone. You may negotiate up or down depending on the outcome of your discussions. Profit or Fee is the total dollar amount paid to a consultant for performance over and above allowable costs. You must fill out these forms independently. Consultants can use whatever form they would like to use. You need to be prepared to discuss if your fee is different then what ODOT PM has. Analysis and Instruction guideline helps a PM who may have never filled out a Profit Fee worksheet before. It provides examples, ranges, definitions of what categories mean.