1. Selection Processes and Administrative Qualification
Camille Thomason PEPS Center of Excellence Manager October 18, 2014

2. Agenda Topics 1 Rules Changes – Alignment with FHWA Requirements 2
Overview of Administrative Qualification 3
Preparing for the Federal Process 4
Other Processes 5
Questions

3. February 2013 Rule Changes – Align with FHWA Requirements
Texas Administrative Code Title 43, Part I, Chapter 9, Subchapter C
Applicable to advertisements posted after February 21, 2013
Revised the administrative qualifications process to align with federal requirements
Separated federal from non-federal process:
Federal Process
Other processes

4. For contracts subject to 23CFR Part 172
Federal Process
For contracts subject to 23CFR Part 172
Required for the procurement of an engineering or design related service contract that is both:
Directly related to a highway construction project, and
Reimbursed with federal-aid highway program (FAHP) funding

5. Applicable to the prime and subproviders
Federal Process
Firms providing engineering and design related services must be administratively qualified with an effective rate by the SOQ deadline; (modified August 2013) or be determined eligible by the TxDOT Audit Office, to use the federal safe harbor rate, by the SOQ deadline.
Applicable to the prime and subproviders

6. Federal Definition per FHWA
CFR Title 23, Part 172 Engineering and design related services means program management, construction management, feasibility studies, preliminary engineering, design, engineering, surveying, mapping, or architectural related services with respect to a construction project subject to 23 U.S.C. 112(a).

7. Process Type and Administrative Qualification
Federal Process: Administrative qualification is required for firms providing engineering and design related services on applicable projects.
Other Processes: Administrative qualification is not required to compete.
Comprehensive
Streamlined
Accelerated
Projected Contracts List will identify the process type to expect

8. Agenda Topics 1 Rules Changes – Alignment with FHWA Requirements 2
Overview of Administrative Qualification 3
Preparing for the Federal Process 4
Other Processes 5
Questions

9. Administrative Qualification
Defined in the TAC
A single process used by the department to verify that a provider:
Has a Federal Acquisition Regulation (FAR) compliant indirect cost rate that meets department requirements
Has a job cost accounting system adequate for segregating direct and indirect costs, and
Is aware of federal cost eligibility and documentation requirements
Refer to rule 9.34 for specific requirements, as needed
Two options for becoming administratively qualified

10. Option 1 – Qualification by Audit
Requires the preparation of a FAR compliant audit report by:
A qualified public accountant or
Acceptable federal, state, or local agency
More typical for medium to large firms
Preparation time varies by firm size and availability of a CPA
Cost can range from $10,000 to $15,000

11. Option 2 – Qualification by Self-Certification
Option made available with February 2013 TAC rule changes
Requires the completion of a specific report by the firm
Resulting rate is FAR compliant, if completed correctly
Has become option of choice for most small and some medium firms
Preparation time controlled by the firm
Cost to complete is significantly less

12. Administrative Qualification
Not a process where TxDOT audits a firm’s indirect costs
TxDOT merely reviews the information and indirect cost rate development process for compliance purposes
If elements are in conflict with requirements, adjustments will be made for approval purposes
Any adjustments are discussed with the firm for clarification purposes

13. FAR Compliant - Indirect Cost Rate
As approved by PEPS Admin Qual Group
Becomes effective:
Six months after the end of the provider’s fiscal year, or
Immediately, if filed more than six months after the end of the provider’s fiscal year
Effective no more than 12 months
Expires 18 months after the end of the fiscal year upon which it was based

14. A Firm’s Administrative Qualification Status
TxDOT maintains a list, posted externally
Firms listed with date range of effective status
If the date range shown is not inclusive of the current date, then the firm is not currently administratively qualified
An administratively qualified firm has an effective indirect cost rate according to TAC rule 9.34 (a FAR compliant rate)
Rates are maintained confidentially by the PEPS Admin Qual Group

15. Posted List – Administrative Qualification Status

16. FAR Compliant Rate
The firm’s actual indirect cost rate for the firm’s last fiscal year
Assumed to be the most representative rate of the firm’s indirect costs
Used for cost development purposes when selected

17. Administrative Qualficiation
Not required for every firm
Requirements vary by selection process
Federal Process most restrictive
Comprehensive, Streamlined, and Accelerated processes offer more flexibility

18. Agenda Topics 1 Rules Changes – Alignment with FHWA Requirements 2
Overview of Administrative Qualification 3
Preparing for the Federal Process 4
Other Processes 5
Questions

19. Preparing for the Federal Process
Firms providing engineering and design related services must be administratively qualified with an effective rate by the SOQ deadline; (modified August 2013) or be determined eligible by the TxDOT Audit Office, to use the federal safe harbor rate, by the SOQ deadline.

20. What about firms not subject to the requirement?
Federal Process
Administrative qualification is required for firms providing engineering and design related services on applicable projects.
What about firms not subject to the requirement?
They may be administratively qualified (not prohibited)
If not administratively qualified, no indirect cost rate, loaded rates will be negotiated inclusive of base rate, indirect cost, and profit
What about a firm subject to the requirement, but unable to complete the administrative qualification process?
The only option is to establish eligibility to use the federal Safe Harbor Rate

21. August 2013 Rule Changes – Federal Safe Harbor Rate
The Federal Highway Administration is conducting a pilot program to evaluate the use of a “safe harbor rate.” 
The safe harbor rate serves as an indirect cost rate for firms providing engineering and design-related services lacking a Federal Acquisition Regulations (FAR) compliant indirect cost rate. 
The amendment to §9.35, Federal Process, allows the safe harbor rate to be used, which accommodates the department’s participation in the pilot program.
Rule change became effective August 15, 2013

22. Safe Harbor Indirect Cost Rate – Test & Evaluation
Authorized FHWA trial
Part of “Test and Evaluation Project TE-045”
FHWA Financial Management Improvement (FMI) Initiative
Purpose being to remove the potential barrier for certain firms
TxDOT submitted the concept as the lead agency in cooperation with the FHWA Texas Division Office
10 Participating states
Texas
Alabama
California
North Carolina
South Carolina
Michigan
Missouri
North Dakota
Ohio
Washington

23. Safe Harbor Indirect Cost Rate – Test & Evaluation
The safe harbor indirect cost rate for optional use by eligible consulting firms on FAHP funded contracts under the test program is 110%.
Eligibility must be approved by the TxDOT Audit Office prior to the closing date of the solicitation in order to compete.
The test period for use and application of the safe harbor indirect cost rate on new contracts will expire on June 30, 2016.

24. Safe Harbor Indirect Cost Rate
Level of use anticipated is low
Majority of solicitations are non-federal
Small firms are taking full advantage of self-certification
The rate is very low

25. Eligibility Considerations
The firm has not had an indirect cost rate previously accepted by a cognizant agency and lacks previous experience with federally funded contracts for which an indirect cost rate would have been developed
The firm has limited or no federal contracting experience that has resulted in an accounting structure by which development of an indirect cost rate in accordance with Federal Cost Principles would be challenging and likely not result in a representative rate.
The firm lacks the financial resources to hire a certified public accountant (CPA) to conduct a FAR compliant audit.

26. Eligibility Considerations - cont.
The firm lacks the financial sophistication to develop an indirect cost rate through the self-certification process.
The firm is a new or start-up firm without a contract-related history to use as a base for development of an indirect cost rate.
The firm does not have an audited or self-certified actual indirect cost rate developed in accordance with the FAR cost principals.
The firm is not currently administratively qualified, and has not been previously administratively qualified by TxDOT.

27. Additional Guidelines
The firm must complete and submit the internal control questionnaire
The firm must demonstrate that they have, and are utilizing, an acceptable cost accounting system capable of segregating direct and indirect costs.
The safe harbor rate will be applicable for the duration of the contract.
The safe harbor rate is not intended for and will not be used as a field rate for a field-based contract. If needed, a field rate will be negotiated.

28. Agenda Topics 1 Rules Changes – Alignment with FHWA Requirements 2
Overview of Administrative Qualification 3
Preparing for the Federal Process 4
Other Processes 5
Questions

29. Other Processes
The majority of TxDOT solicitations
Administrative Qualification is not required to compete
So what rates will TxDOT use for a selected team?

30. Other Process For a selected team:
A firm may be administratively qualified
Non-engineering firms are exempt
Engineering services that are exempt:
Bridge Inspection
Materials Inspection and Testing
Geotechnical Engineering
Surveying and Mapping
Subsurface Utility Engineering
Architecture
If none of the above, they can accept the TxDOT developed rate
As of August 2014 its 145%
For survey firms, only A or C would apply

31. If not administratively qualified:
Exempt Status
Means TxDOT does not expect a firm to be administratively qualified (although a firm is not prohibited from becoming administratively qualified)
If not administratively qualified:
The firm is not subject to taking the TxDOT developed rate for contracting purposes
Loaded rates will be negotiated inclusive of base rate, indirect cost, and profit

32. Agenda Topics 1 Rules Changes – Alignment with FHWA Requirements 2
Overview of Administrative Qualification 3
Preparing for the Federal Process 4
Other Processes 5
Questions

33. Administrative Qualification Guidance
External web page includes information presented
PEPS Administrative Qualification Group is point of contact for questions
Contact information posted on the web page
Bruce Reed (512)

34. Thank you - Questions?
Camille Thomason
PEPS Division – Center of Excellence