FHWA’s Implementation of the US DOT Contracting Initiative Pilot Program Thursday, June 18, 2015

2015 Contracting Initiative Pilot Program and Notice of Proposed Rule Making March 6, 2015 – “Contracting Initiative” Pilot Program Federal Register Notice Specifically allows labor hiring preferences for: local or other geographic hiring, economic-based hiring, and veterans. March 6, 2015 –Notice of Proposed Rule Making – “Geographic-Based Hiring Preferences in Administering Federal Awards”

Steps Taken To Date 2015 Contracting Initiative Pilot Program March 3, 2015 – Initial conference call with all Division Offices March 23, 2015 – SEP-14 Construction Program Guide Page posted: May 4, 2015 Webinar for State DOTs and FHWA Division Offices May 27, 2015 US DOT revised the May 2, 2015 Questions and Answers : dated_QAs_PilotProgram_ pdf dated_QAs_PilotProgram_ pdf

Agenda August 23, 2013 Office of Legal Counsel Opinion (Rochlis) March 6, 2015 Notice Contracting Initiative (Harkins) March 6, 2015 NPRM (Harkins) Overview of selected FHWA Q&As (Yakowenko)

DOJ August 23, 2013 Office of Legal Counsel Opinion In response to a DOT OGC request to reexamine the scope of the competition requirements in 23 U.S.C. § 112, the Department of Justice Office of Legal Counsel (OLC) issued a memorandum opinion on the statute’s competitive bidding requirements on August 23, 2013 at: reqs.pdf reqs.pdf An earlier 1986 OLC opinion (10 Op. OLC. 101 (1986)) concluded that NYC Local Law 19, which allowed bidders which do not make the lowest bid to be awarded contracts in cases where the lowest responsive bidder had not signed an anti-apartheid certificate, was incompatible with § 112, where NYC failed to demonstrate that departure from competitive bidding requirements was justified as cost effective.

OLC 2013 Opinion OLC agreed with OGC that in circumstances where state or local bidding requirements have an incidental effect on the the pool of potential bidders for Federal-aid highway projects, but would efficiently use federal funds, that such incidental effect does not compel FHWA to reject every state or local bidding requirement as contrary to § 112's competition requirements. The 2013 opinion clarifies that section 112 does not compel DOT’s position with respect to contracting requirements that do no directly relate to the bidder’s performance of work, but rather provides the Secretary with discretion to permit other types of state or local requirements as long as they do not “unduly limit competition.”

OLC 2013 Opinion In assessing whether a requirement promotes the efficient and effective use of federal funds, the agency “may take into account whether the requirement promotes such efficiency in connection with the letting of a particular contract and also whether it more generally furthers the efficient and effective use of federal funds in the long run or protects the integrity of the competitive bidding process itself.” FHWA may establish a regulatory process to determine whether particular State or local bidding restrictions, whether considered as a class, or case-by-case, satisfy the competitive bidding requirements of section 112. Thus, the pilot contracting initiative.

DOT Contracting Initiative Pilot Program Announced in the March 6, 2015 Federal Register, 80 FR Initiative to permit, on an experimental basis, FHWA and FTA recipients and subrecipients to utilize various contracting requirements that generally have been disallowed due to concerns about adverse impacts on competition. Not limited to local and geographic hire. Any requirement that has been disallowed due to concerns about competition may be considered. Other requirements include pay-to-play, equal benefits for domestic partnerships, and veteran hire preferences.

DOT Contracting Initiative Pilot Program Objective is to enable DOT to determine which types of requirements may be used consistently with the 2013 OLC Opinion by promoting efficiency in connection with the letting of a particular contract, furthering the efficient and effective use of federal funds in the long run, or protecting the integrity of the competitive bidding process

DOT Contracting Initiative Pilot program open for 1 year, unless extended. Contract must be advertised within this 1-year period.

2 CFR (b) “The non-Federal entity must conduct procurements in a manner that prohibits the use of statutorily or administratively imposed state, local, or tribal geographical preferences in the evaluation of bids or proposals, except in those cases where applicable Federal statutes expressly mandate or encourage geographic preference.”

NPRM Proposed Regulation:§ Competition. Notwithstanding 2 CFR , non-Federal entities may utilize geographic hiring preferences (including local hiring preferences) pertaining to the use of labor on a project consistent with such non-Federal entities’ policies and procedures, when not otherwise prohibited by Federal statute or regulation.

NPRM Comment period open through May 6. Submit comments to the rulemaking docket at regulations.gov to Docket# “DOT-OST ”.

Overview of Selected Posted Q&A’s

5. What types of projects can be included in the pilot? Any project funded by FTA or FHWA can be considered for the pilot program. This includes construction projects, as well as rolling stock procurements. This 1-year period is for contracts that will be advertised during this period.

13. The Notice says that US DOT is interested in evaluating the use of local or other geographic labor hiring preferences, economic-based labor hiring preferences (i.e., low-income workers), and labor hiring preferences for veterans. How does DOT define these terms? Under the pilot program, DOT considers the following approaches to be included within those terms. Example approaches include, but are not limited to the following: Geographic boundaries based on factors such as: state, county, city, or other public boundaries; zip code limits; census tracts; or other geographically-defined borders. Economically defined areas based on factors such as: per capita income levels, unemployment rates, or other criteria that delineate areas of economic disadvantage. Veterans for purpose of the pilot program are defined by 5 U.S.C

14. Does the pilot program allow testing of preferences for state or local minority business enterprises? No. Pilot programs that may conflict with the administration of Disadvantaged Business Enterprise Program requirements will not be considered. The Notice specifically states that the DOT will not approve pilots for which recipients wish to alter the requirements of the Disadvantaged Business Enterprise Program.

15. Can contracting agencies propose other types of contracting requirements? Yes. The pilot program is not limited to hiring preferences. Examples of other types of contracting specifications that contracting agencies may apply to use include pay-to-play provisions and domestic partnership benefits. The use of other contract requirements may be approved after coordination with the DOT Office of General Counsel.

20. What is the process for submitting a SEP-14 request? State DOTs may submit a SEP-14 workplan to their respective Division Office for local hiring preferences. Local public agencies should submit all proposed work plans to their State DOT. State DOTs should review and provide appropriate recommendations to their Division Office for consideration. State DOTs or local public agencies may also submit a separate SEP-14 workplan for other contracting requirements that have previously been prohibited by FHWA as described in Q&A No. 7. These requests will need to be coordinated with the DOT Office of General Counsel. Division Offices should forward the work plans to HIPA-30 for review and approval (contact: John Huyer, (651) , HIPA-30 will coordinate the review/approval of work plans, and post the workplans and evaluations on FHWA’s web site.

21. How may an FHWA recipient or subrecipient participate in the pilot program? State and local recipients and subrecipients should request prior approval from the FHWA to use a specific contracting requirement under SEP-14. In order to receive SEP-14 approval, States and local recipients and subrecipients would follow the normal process that includes submitting work plans to the appropriate FHWA division office. The work plan should include the following information: 1)Describe the project(s), including the amount of FHWA funding involved in the as well as the estimated total project cost. 2)Describe the proposed contracting requirement that may otherwise be found to be inconsistent with the general requirement for full and open competition. 3)Describe how the applicant will evaluate the effects of relevant contracting requirements on competitive bidding. In doing so, the applicant should, at a minimum, provide comparisons of bids received for the projects utilizing the relevant contract requirements to other projects of similar size and scope and in the same geographic area not utilizing such requirements. If a reduction in the pool of bidders is evident, explain the potential offsetting benefits resulting from the use of the requirement. 4)Describe and quantify how the proposed contracting requirement would lead to increases in the effectiveness and efficiency of Federal funding for the project(s). 5)Describe and quantify how the proposed experimental contracting technique would protect the integrity of the competitive bidding process either in connection with the particular contract or when considered over the long term for that agency’s program. 6)Describe whether or not the proposed contracting requirement has been the subject of litigation or whether litigation surrounding the use of the requirement has been threatened.

22. Does the FHWA have any criteria or requirements for project selection for the pilot program? No. Contracting agencies may propose to evaluate labor hiring preferences on any Federal-aid construction project funded under Title 23.

41. Can contracting agencies propose to use preferences or requirements for State or local contractors under the Pilot Program? No, a requirement or preference for the use of State or local contractors is likely to create more than an incidental effect on the pool of potential bidders for Federal-aid highway or transit projects and thus would not fit within the scope of the Office of Legal Counsel opinion. Those kinds of contracting preferences may unduly limit competition by excluding a certain class (out of State contractors).

42. Does the pilot program allow for FHWA and FTA to consider the use of labor hiring preferences on architectural or engineering service contracts? The Pilot Program is focused primarily on generating economic opportunity associated with construction employment. If a contracting agency has a project that would generate significant job or training opportunities, the USDOT encourages agencies to submit such requests for review.

Who may I contact for assistance in submitting an SEP-14 workplan? To obtain a list of State DOT and FHWA Division Office LLHP Coordinators, contact: Norm Stoner, , To inquire about the status of SEP-14 workplan approvals: John Huyer, , Jerry Yakowenko, ,

Questions?