While the words “Contract” and “Agreement” are generally used interchangeably, in the future the department will make a distinction. “Contracts” will be used when referring to the legal document achieved as a result of a competitive procurement process. “Agreements” will be used when referring to the legal document achieved as the result of a non-competitive negotiation process. Since many of the current department policies and procedures still discuss a “negotiated contract”, upcoming updates to the various department manuals will replace those references with the phrase “negotiated agreement”.
Eligibility for federal aid
In 2007, WisDOT reviewed all future LFA projects to ensure they were eligible for Federal-aid funding under the following dual criteria of: (1) being on the Federal-aid system and (2) following state law and program policies. Future LFA projects will only include improvements that meet both criteria. The only exceptions to using federal funds off the Federal-aid highway system are for bridge or safety (hazard elimination) projects.
Local unit not allowed to work on another
local unit’s system
To perform federal-aid LFA work, the local unit must be adequately staffed and suitably equipped. If the local unit requires assistance from another local unit then, by definition, they do not have adequate forces or equipment to complete the work. Local units cannot use Federal-aid funds to have another local unit perform construction work on their own system.
The small Highway Safety Improvement Program (HSIP) has been discussed and there will be no change to the existing policy at this time – local units cannot use Federal-aid funds to have another local unit perform construction work on their own system. WisDOT continues to explore solutions to make this a viable program for units of governments without LFA capabilities.
All project work to be included in
A “project” is a segment of highway with logical termini that has “independent utility” (be usable and be a reasonable expenditure even if no additional transportation improvements in the area are made). Some components of the project may be let using the state process. Some components of the project may be let locally and entirely locally funded. Local unit forces may construct some components of the project. If any component of the project is federally funded and constructed with local unit forces, all components of the project must be identified.
To assure that the complete project (as defined by the project scope and the environmental document) will be constructed, all components of the project must be included in the State/Municipal Agreement (SMA). Using local funds to contract out portions of the project work may be the best way to handle work that cannot be completed by the local unit. However, the contracted work must be included in the
Prequalification for LFA work
To perform work under an LFA Agreement, the local unit is required to be “adequately staffed and suitably equipped”. To assure that a local unit has capable staff and needed equipment to perform certain work activities, the local unit must submit a Prequalification Form for consideration by the department. The various work types a local unit could request to be prequalified for include:
Grading and gravel
The presence of qualified individuals will determine if a local unit is qualified to perform the first two work types (design engineering and construction inspection). This would be documented on the Prequalification Form.
To perform Design Engineering, the local unit must have at least one staff person that is registered as a professional engineer. Holding a current Certificate of Authorization to practice professional engineering in the state of Wisconsin (per. s.s. 443.08) is satisfactory evidence of professional engineering registration. Local unit would be responsible for the development of project plans and specifications including following the appropriate statutory requirements, policy, procedural requirements, and guidance for the improvement of county or municipal street/highway systems eligible for federal-aid highway funds.
To perform Construction Inspection, the local unit must have past experience in inspecting the construction work and be certified as part of the Highway Technician Certification Program for inspecting the construction materials. The local unit would support the WisDOT engineer who is responsible for and has the delegated authority for obtaining work that fulfills requirements of the contract. Under direction of the WisDOT engineer, local unit staff would supplement the field administration of the contract, enforce the terms of the contract, and determine the amount of work performed and materials furnished.
Once prequalified for Design Engineering or Construction Inspection work types, a local unit would indicate their desire to provide those services on a particular project by submitting a "Letter of Interest". That letter would state their desire to provide the services, discuss the staff available for the project, detail the staff's experience in either highway design or inspection of the particular type of construction associated with the project, estimate the time each of the staff would be needed, and request approval to provide the services. WisDOT would review the "Letter of Interest" to be sure the correct number of staff are planned to be used, that the staff are available for the correct time, and that the staff are qualified for the work type. If that were in order, the local unit would be authorized to provide the requested services.
For the latter six work types, a local unit of government must own or control suitable equipment, have staff capable of properly operating the equipment, have financial and organizational ability, and have prior experience in the construction of one or more of the work types. This would be documented in the Prequalification Form. When evaluating the submitted form, the department may review the existing inventory of owned equipment and determine the presence of sufficiently trained operators. (The term “owned” equipment also applies to local unit equipment procured under a long (at least one year) lease for use on other projects the local unit undertakes.) Jointly owned equipment (where each local unit has a 50% ownership share) will be considered “owned” by each local unit. The department will also consider the local unit’s performance on similar projects in the past.
Once prequalified for any of the latter six work types, a local unit would indicate their desire to provide construction services on a particular project by submitting a Cost Effectiveness Finding as outlined in FDM 3-20-12.
LFA projects for construction in calendar year 2009 and beyond must meet the following requirements:
The submitted form may include requests for more than one work type.
BPD Local Project staff (with assistance from the WisDOT Region Operations Section and possibly other WisDOT staff) will review the Prequalification Form and either approve the form or request additional information.
The department review of the Prequalification Form is expected to take less than 45 days.
The Local Project Delivery Section will notify the local unit after final prequalification approval.
Prequalification approval is good for three years from the date of approval.
If conditions change that would eliminate or reduce the prequalification status, the local unit shall immediately notify WisDOT so that the prequalification can be re-evaluated.
A local unit must be prequalified for a particular work type prior submitting a Letter of Interest or a Cost Effectiveness Findings to
Requests for approval of additional work types or modification of already approved work types may be submitted at any time.
Subcontracting as part of an LFA no longer
In June 2007 the department distributed a memo to all Local Units of Government on the above topic. The memo stated:
“The department recognizes that a change in WisDOT policy regarding subcontracting to conform to Federal regulations is appropriate. As a result, effective with the August 2007 quarterly PS&E transmittals (for projects in the November 2007, December 2007 and January 2008 schedule), LFA contracts may no longer include any subcontracted work unless (1) the subcontracted work is 100% locally funded or (2) the subcontracted work is awarded as part of a competitively let project.”
Another memo in March of 2008 clarified several points in the original memo.
1. The “subcontracting” discussed in the June 2007 memo is defined as contracting for services/work from private industry. Contracting for private services/work under an LFA is no longer allowed. However, the term “subcontracting” does not include contracting for purchase of materials – materials purchases are allowed under an LFA.
2. In lieu of contracting as part of an LFA, a local unit may contract separately for services/work from private industry to do a portion of a project. The resulting contract would not be part of the LFA.
3. Services/work that are needed to complement the LFA work could be procured using one of two methods:
Contracts obtained using a state letting (meeting Federal-aid contracting requirements)
This could be one contract for each project or one contract that would combine work from several of projects
The threshold for these contracts is a minimum of $50,000
Contracts obtained using a local letting and 100% locally funded
Locally funded contract work may follow the local unit’s own letting process, subject to applicable statutes
Discussion of the third method of obtaining contracts to supplement LFA projects – using a local letting meeting Federal-aid contracting requirements (and therefore eligible for federal funds) – will be part of a future broader discussion of local unit certification and the potential ability of local units to conduct their own lettings that would be eligible for federal funding. Until that discussion occurs, a local letting eligible for using federal funds is not allowed.
Limited use of rental equipment
To perform LFA work, the local unit must be suitably equipped (as determined in the prequalification process). However, the limited rental of some specialized equipment may be appropriate as part of a LFA agreement. It would not be appropriate to rent a paving machine if the agreement is for paving, but it is appropriate to rent a pavement marking machine (with operator if necessary) for painting the lines once the paving portion of the agreement is complete. Specialized equipment is defined as equipment not listed in the prequalification for a particular work type.
Specialized equipment may be rented up to a maximum of $25,000 or 25% of the LFA agreement amount, which ever is less, for all rental equipment used on a LFA agreement. Equipment rental would be limited to only those pieces of equipment that are incidental to the primary work being performed. The rental could be from a private or public entity.
An exception is allowed if a piece of county owned equipment breaks down unexpectedly and renting a replacement is needed to keep a project on schedule. The municipality must notify the consultant responsible for project oversight, in writing, immediately if this occurs.
LFA project oversight
Under the WisDOT/FHWA Oversight Agreement, it is the department’s responsibility to oversee the expenditure of federal funds. In the case of LFA agreements, the department will be fulfilling this responsibility by assuring that the proper level of oversight is occurring. During the design and construction phases of a project, the oversight will be similar to our oversight of projects that will be let. The department’s current process is to use Region Management Consultants to achieve the proper oversight. The mechanism for using department staff for the oversight is still being discussed.
In the past some local units performed the construction engineering (CE) on LFA projects where they were also performing the construction work. While some local units are capable of performing the CE, there is a need to ensure that someone is independently representing the Federal interest and to ensure there are adequate controls in place that reduce the possibility for improprieties to occur. Therefore, WisDOT will select a consultant to perform construction oversight of all LFA agreements. To reduce construction oversight costs, some LFA projects may be packaged with another nearby LFA project or a nearby let project. The mechanism for using department staff for the oversight is still being discussed.
Construction oversight of locally funded / locally let components will be limited to projects that were developed using the DOT/DNR Cooperative Agreement. The oversight needs to be sufficient to assure the construction activities comply with the terms of that Agreement.
Only local units that are prequalified may provide inspection staff for an LFA. The inspection staff would be under the responsible charge of the consultant.
Payment of small tools and
Field small tools are any small tools purchased or built for use on multiple field projects and which cost less than $5000. The local unit may uniformly charge a percentage for field small tools to all field labor (wages plus benefits). The percentage shall be calculated annually by the local unit and is effective for one year. Rates are set to the nearest tenth of one percent, and are calculated by dividing the prior calendar year cost for field small tools, plus or minus any under or over reported costs from the prior year, by the total field labor costs of the prior year. Effective immediately, there is no longer a minimum 1% charge for small tools to be used by any local unit not providing actual cost information or when the actual cost provided is calculated to be less than 1%.
The highway administration costs include the activities that support the other major operational areas by providing an organizational structure and related support services. Administration is considered the cost required to support an organization, regardless of work performed by the organization. The nature of the individual’s work, and not the location of an employee’s office, should govern the allocation of costs. The local unit may uniformly charge an amount for administrative support provided by the local unit. The local unit shall certify that the administrative costs reported are eligible for reimbursement under OMB Circular A-87.
For counties, the administrative fee for 2010 construction is 4.04% of the total amounts invoiced under the annual agreement for labor (including fringe benefits and patrol supervision), machinery, and materials. The percentage for administrative fees will be reviewed annually.
For local units other than counties, the municipality will have to prepare and submit a cost allocation plan in accordance with OMB Circular A-87. This plan will be submitted to WisDOT for review and approval on an annual basis. In lieu of a full cost allocation plan, a municipality may submit an "only fringe benefit cost allocation plan” for reimbursement. If equipment costs are to be reimbursed, the municipality will be required to invoice using industry standard "Blue Book" rates. Equipment rate reimbursement using Chapter 5.55 (WisDOT Highway Maintenance Manual) rates may be approved on a case-by-case basis.
Cost Effectiveness Findings
In the future, there will be several changes to the cost effectiveness finding process.
1. First, CEFs for LFA projects will still be prepared by the LPAs. The department has revised the section in the FDM to detail more specifically how a CEF is to be prepared and how CEFs are reviewed for approval.
2. The CEF will include a section dedicated to clearly state the reason the LPA is requesting to perform the work by use of local forces.
3. The FDM will detail how the bid prices are to be determined for private contact cost comparison. Regional prices for state let bid items should be used for projects of similar size, project scope and estimated quantities. These prices are maintained in a database and can easily be researched. The LPA may also use their own average bid prices for let items (based on historical data) if that information is provided to the department at the time of the CEF submittal. The LPA will also provide their own historical unit costs for performance of the work (based on similar project size, project scope and similar quantities).
4. If the project’s final cost estimate at the time of the PS & E is more than 10% greater than the cost estimate in the initial CEF, a revised CEF will need to be prepared to assure that the project is still cost effective. The Regional Local Program Project Manager has the approval authority for any revised CEF’s.
5. As part of the final PS&E submittal, a contract time for completion chart will be required to be submitted for review.
6. When the project is completed, the final payment requests will be reviewed and compared to the CEF and final cost estimate. If the final payment requests are found to be in excess of the original agreement cost, the locals cost for performing the work will be evaluated.
7. Periodic evaluations of CEFs will be included in the routine review and evaluation of the LFA program.
Method of Payment
The Department will use Trns*port’s FieldManager for all LFA agreements over $25,000. For agreements under $25,000, when only a single reimbursement is anticipated after the construction work is completed, paper methods may be used (FieldManager is optional).
Also, final actual costs by the municipality under an LFA agreement must be properly documented. A new Construction and Materials Manual Chapter will discuss the needed documentation for LFA Agreements:
It is preferred that reimbursement to a municipality for performance of work under a LFA agreement be based on the actual costs incurred for labor, equipment and materials. It is allowable, however, to use estimated quantities and the “unit” costs for intermediate payments (following the process described in C&M Manual 2.36.2). The “unit” costs come from the total cost estimate included in a Local Force Account Agreement and are based on a detailed cost analysis.
The final reimbursement to a municipality for performance of the work item under a LFA agreement will be based on the actual costs for labor, materials, incidentals, and established rental rates incurred. The actual costs must be verified by appropriate attachments. The municipality is required to submit detailed statements, including receipted invoices for all materials and rental equipment used. For labor, show the classification of the staff used on the project, the hours worked on the project, the hourly rate for each classification and the resultant total dollar amount. The staff and hours should be itemized for each day worked. For equipment, show the type of equipment used, the hours the equipment was used, the hourly equipment rate based on the current Machinery Agreement, and the resultant total dollar amount. The equipment and hours should be itemized for each day worked.
Each final statement of actual costs will be reviewed by the project leader to ensure that labor classifications and equipment designations are correct.
Nonconforming Materials Allowed to Remain
Similar to a let project, materials being incorporated into LFA projects are expected to meet contract specifications. However, the project leader may choose to approve nonconforming materials, allow them to remain in place, and reduce the amount the local unit is reimbursed to reflect the possible reduced service life and increased maintenance costs for the project. The guidance in C&MM 8.10.5 and 8.10.6 will be used to determine the reduction. In addition, a local unit that has systemic problems with producing or incorporating conforming materials may have their prequalification reduced or rescinded.
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