[Federal Register Volume 77, Number 51 (Thursday, March 15, 2012)]
[Rules and Regulations]
[Pages 15250-15256]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-6244]


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DEPARTMENT OF TRANSPORTATION

Federal Highway Administration

23 CFR Part 627

[FHWA Docket No. FHWA-2011-0046]
RIN 2125-AF40


Value Engineering

AGENCY: Federal Highway Administration (FHWA), DOT.

ACTION: Final rule.

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SUMMARY: This rule updates regulations to enhance the integration of 
value engineering (VE) analysis in the planning and development of 
highway improvement projects. In issuing the final rule, FHWA revises 
the VE regulations to make them consistent with prior changes in 
legislation and regulations. This rulemaking does not otherwise impose 
any new burdens on States, revise the threshold of projects for which a 
VE analysis is required, or change the reporting structure now in 
place.

[[Page 15251]]


DATES: This final rule is effective April 16, 2012.

FOR FURTHER INFORMATION CONTACT: For technical information: Mr. Jon 
Obenberger, Preconstruction Team Leader, FHWA Office of Program 
Administration (HIPA), (202) 366-2221, or via email at 
jon.obenberger@dot.gov. For legal questions, please contact Mr. Michael 
Harkins, FHWA Office of the Chief Counsel, (202) 366-4928, or via email 
at michael.harkins@dot.gov. Office hours for the FHWA are from 8 a.m. 
to 4:30 p.m., e.t., Monday through Friday, except Federal holidays.

SUPPLEMENTARY INFORMATION:

Electronic Access and Filing

    This document, the notice of proposed rulemaking (NPRM), and all 
comments received may be viewed online through the Federal eRulemaking 
portal at: http://www.regulations.gov. The Web site is available 24 
hours each day, 365 days each year. Please follow the instructions. An 
electronic copy of this document may also be downloaded by accessing 
the Office of the Federal Register's home page at http://www.archives.gov or the Government Printing Office's Web page at http://www.gpo.gov/fdsys/.

Background

    This rulemaking modifies existing regulations to make them 
consistent with several changes in applicable laws and regulations and 
to ensure compatibility with 23 U.S.C. 106 and the Office of Management 
and Budget (OMB) Circular A-131 on Value Engineering. These revisions 
also will address certain findings contained in a 2007 Office of 
Inspector General (OIG) report on value engineering in the Federal-aid 
highway program (FAHP) (http://www.oig.dot.gov/sites/dot/files/pdfdocs/mh2007040.pdf) in which the OIG recommended that the FHWA make certain 
changes to the VE policy.
    The regulation is also being revised to enhance the consistency of 
VE analyses that are conducted and to improve FHWA's stewardship and 
oversight of these regulations. Additionally, these revisions will 
advance the integration of VE analysis into the planning and 
development of Federal-aid projects. Furthermore, these revisions will 
facilitate enhancements to the VE analyses agencies conduct and will 
foster the use of innovative technologies and methods while eliminating 
unnecessary and costly design elements, thereby improving the projects' 
performance, value, and quality. The proposed revisions are discussed 
in the section analysis below.
    The VE analyses on Federal-aid highway projects were first 
established by Congress in the Federal-Aid Highway Act of 1970. The 
current requirement to conduct a VE analysis for certain Federal-aid 
highway projects is codified at 23 U.S.C. 106(e). The OMB Circular A-
131 on Value Engineering, which was issued in May 1993 (http://www.whitehouse.gov/omb/circulars_a131), requires all Federal agencies 
to establish and maintain a VE program to improve the quality of their 
programs and acquisition functions. Under the OMB Circular, Federal 
agencies are required to develop and maintain policies and procedures 
to ensure a VE analysis is conducted on appropriate projects and report 
annually on the results and accomplishments of the analyses conducted 
and the program's accomplishments. The FHWA annually collects and 
reports on VE accomplishments achieved within the Federal-aid and 
Federal Lands Highway Programs. For VE studies conducted during the 
planning and development phases of projects, the FHWA tracks the number 
of studies conducted, the number of proposed and implemented 
recommendations, the value of the implemented recommendations, 
information regarding the State transportation agency's (STA's) VE 
program (e.g., policies, procedures, training conducted), and FHWA's 
stewardship and oversight of the VE program. Conducting VE analyses 
continues to be an effective tool in improving the quality and cost 
effectiveness of the FAHP projects. Additional information on STA, 
local authority, and FHWA VE programs and practices is available at: 
http://www.fhwa.dot.gov/ve.

Summary Discussion of Comments Received in Response to the NPRM

    On June 22, 2011, the FHWA published a Notice of Proposed 
Rulemaking (NPRM) in the Federal Register at 76 FR 36410 soliciting 
public comments on its proposal to update the existing regulations. The 
following presents an overview of the comments received in response to 
the NPRM. Comments were submitted by STAs, industry organizations, and 
individuals. The docket contained comments from nine parties, including 
seven STAs, the American Association of State Highway and 
Transportation Officials (AASHTO), and one individual.
    Overall, the commenters supported the proposed rule, namely to 
enhance the integration of VE analysis in the planning and development 
of highway improvement projects. The FHWA appreciates the feedback the 
commenters provided and has carefully reviewed and analyzed all the 
comments that were submitted.
    The AASHTO and STAs support conducting a VE analysis to improve the 
quality, efficiency, and effectiveness of developing and implementing 
highway improvement projects. While there was support for revising the 
VE regulations to ensure consistency with prior changes in legislation 
and regulations, AASHTO and several STAs commented on issues they 
believe FHWA needs to consider related to the type of projects subject 
to a VE analysis, and when the VE analysis is required to be conducted 
on applicable projects. The AASHTO and STAs also commented on the need 
to clarify definitions, when and what type of projects require a VE 
analysis, how life-cycle costs should be considered and integrated in a 
VE analysis, the expectations of STAs to facilitate VE training, and 
STA VE Program requirements.

Comments Directed at Specific Sections of the Proposed Revisions to 23 
CFR Part 627

Section 627.1--Purpose and Applicability

    The NPRM stated that STAs and local authorities shall establish the 
policies, procedures, functions, and capacity to monitor, assess, and 
report on the performance of the VE program. The AASHTO commented that 
local authorities are obligated to meet all Federal requirements and 
that reference to local authorities is redundant. Local public agencies 
(as specified in 23 CFR 635.105) already are required to meet all 
Federal requirements, which includes the requirement to operate under 
approved VE policies and procedures, when Federal-aid highway program 
funding is utilized on projects. The FHWA agrees with these comments. 
However, there are instances within this regulation where additional 
emphasis is provided to identify specific VE requirements for which 
STAs must ensure that local public agencies meet when administering 
projects utilizing Federal-aid highway program funding. Most references 
to local public agencies have been removed from 23 CFR part 627. The 
term local public agency was used throughout 23 CFR part 627 for 
consistency with 23 CFR 635.105.

Section 627.3--Definitions

    The AASHTO and Wyoming DOT suggested adding a definition for a 
bridge project. The FHWA agreed with this comment, and the definition 
of a bridge project was added to section 627.3.

[[Page 15252]]

    The AASHTO and several STAs provided comments regarding how final 
design is referenced with regard to the need to conduct a VE analysis 
(as specified in section 627.5). The FHWA agreed with these comments, 
and a definition of final design was added to section 627.3 by 
referencing its current definition in 23 CFR 636.103.
    The AASHTO and several STAs commented on the need to consistently 
use one term when referencing a VE study or analysis. Currently, 
several terms are used interchangeably in practice to describe the VE 
process and analysis that is conducted. The FHWA agreed that one term 
should be used in this regulation. Part 627 has been changed to use the 
term ``VE analysis'' for consistency with the provisions in 23 U.S.C. 
106(e).
    The AASHTO and several STAs expressed concern with the lowest 
overall life-cycle cost (LCCA) being the primary factor to consider 
when evaluating and selecting VE recommendations. Under 23 U.S.C. 
106(e) and (f), LCCA is required to be conducted during a VE analysis. 
The FHWA agreed with this comment and has modified the definition of VE 
analysis in section 627.3(e), by eliminating the use of ``lowest'' when 
used with LCCA, and has clarified that LCCA should be a consideration 
along with other factors, such as quality, environment, safety, and 
operational efficiency, in determining whether a VE recommendation is 
viable. The FHWA has made similar changes in other sections of this 
regulation where LCCA is referenced.
    The Washington State DOT recommended FHWA require STAs to follow 
the guidance developed by SAVE International for a VE Job Plan, which 
would better align with the State's practices. The SAVE International 
guidance fits, in principle, with the particular requirements 
applicable to the FAHP, but not in its entirety. Thus, FHWA agreed and 
changed the definition of a VE Job Plan to outline the intent without 
replicating the SAVE International guidance in Section 627.3(f).
    The AASHTO and four STAs commented that the proposed step in the VE 
Job Plan to evaluate and track the implemented VE recommendations would 
be a burden. The intent of FHWA was to track VE recommendations to 
ensure they are either approved or rejected and incorporated into the 
design of the project(s). The intent was not to evaluate the 
implementation of these recommendations in the construction phase. The 
FHWA recognizes that tracking VE recommendations into the construction 
phase would be a burden for STAs and has clarified the definition of 
the VE Job Plan to require the implementation of approved 
recommendations during the design phase.
    The AASHTO and several STAs stated that as proposed, the VE Job 
Plan was too burdensome and that all the steps should not be required 
for every VE analysis. Specifically, smaller projects should have the 
ability to eliminate some of the steps in the VE Job Plan. The VE Job 
Plan identifies the phases to be followed in conducting a VE analysis. 
The VE Job Plan does not specify the analysis that is to be performed, 
level of effort expended, or how the VE analysis should be conducted. 
Thus, the VE Job Plan and the analysis that is actually conducted are 
scalable to meet the needs of each project. The changes described above 
that FHWA has made to the definition of a VE Job Plan identified only 
the phases to be followed in conducting a VE analysis. The changes do 
not specify the level of effort and analysis to be conducted, which 
should be determined by the STAs based on the specific conditions of 
each project. Section 627.3(f) was modified to clarify the intent and 
purpose of the VE Job Plan.
    The Montana DOT stated that it would be beneficial to define what 
is included in the determination of total project costs. The FHWA 
agreed with this comment and added a definition for total project 
costs, which specifies that it includes all the costs associated with 
the environmental, design, right-of-way, utilities, and construction 
phases of a project.

Section 627.5--Applicable Projects

    The AASHTO and several STAs stated that the requirements in 
sections 627.5(b)(4) were too restrictive because projects with 
completed designs should not require a VE analysis if their costs 
exceed the threshold due to construction cost escalation. Also, several 
STAs stated that after the final design of a project has been 
completed, a scope or design change should be the trigger to require a 
VE analysis, and not a 3 year delay. The FHWA agreed with these 
comments, and revisions were made to section 627.5 to clarify when a VE 
analysis is required.
    The requirement to conduct VE analyses on projects that exceed the 
thresholds for applicable projects must be satisfied (as specified in 
23 U.S.C. 106(e)), and FHWA does not have the authority to change these 
thresholds. A VE analysis is not required for projects with a total 
project cost that is under the thresholds established for applicable 
projects at the completion of final design if there is no scope or 
design change prior to the letting and the construction costs have 
escalated to where the project is over these thresholds. However, a VE 
analysis is required for a project that is under the thresholds 
established for applicable projects at the completion of final design, 
but a change made to the project's scope or design prior to the letting 
causes the total project cost to exceed these thresholds. By 
definition, if a scope or design change is made to a final set of 
plans, the project has gone back to the design phase where a VE 
analysis is required if these changes result in the project exceeding 
the thresholds established for applicable projects.
    The AASHTO and the Kansas and Wyoming STAs recommended that FHWA 
reinsert the current provision (as specified in 23 CFR 627.5(d)) which 
states that VE analysis is an activity that is eligible for 
reimbursement from the Federal-aid highway program. This provision was 
removed since Federal eligibility for engineering services is defined 
in 23 CFR 1.11. Value engineering analysis is an engineering service 
and is therefore an expense that is eligible for reimbursement from the 
Federal-aid highway program funding. Accordingly, specifically 
identifying this cost as eligible in part 627 is redundant.
    The AASHTO and several STAs commented that the proposed section 
627.5 was confusing because it addressed two issues: FHWA-directed 
additional VE analysis, and the need for a STA's VE Policy to identify 
when it may be appropriate to conduct additional VE analyses. Some STAs 
stated that they should be solely responsible for identifying when 
additional studies are required while others felt that it should be a 
determination made in collaboration between the STA and FHWA. These two 
issues have been separated for clarification. Section 627.5(b)(5) 
specifies that FHWA may direct an additional VE analysis when 
appropriate, and section 627.5(d) was revised to address the single 
issue of the STA VE Policy identifying, on a programmatic basis, when 
any additional VE analysis should be considered or conducted in the 
planning and development of transportation projects. Additionally, this 
section was modified to clarify that when a VE analysis is required, it 
must be conducted prior to completing the final design of the project 
and prior to the release of the final request for proposals or other 
applicable VE

[[Page 15253]]

solicitation documents for design-build projects or other alternative 
project delivery methods.
    The AASHTO and several STAs stated that the thresholds for 
applicable projects should be increased since it has been a number of 
years since the thresholds were established. The FHWA does not have the 
authority to increase the thresholds, as they are specified in the 
enabling legislation and codified in Federal law at 23 U.S.C. 106(e).

Section 627.7--VE Programs

    The AASHTO and several STAs stated that the requirement to conduct 
the VE analysis prior to initiating final design will limit the ability 
of STAs to effectively manage their VE program. The FHWA agreed with 
these comments. This section was modified to clarify that when a VE 
analysis is required, it must be conducted prior to completing the 
final design of a project. For design-build projects, the VE analysis 
must be completed prior to the release of the final request for 
proposals or other applicable solicitation documents for alternative 
project delivery methods.
    The AASHTO and several STAs stated that the term ``capacity 
building initiative'' needed more clarification. The FHWA agreed with 
these comments. This section was modified to clarify the need for STAs' 
VE programs to facilitate training in place of the originally proposed 
capacity building initiative.

Section 627.9--Conducting a VE Analysis

    The AASHTO and Wyoming STA commented that the statement ``a 
consideration of combining or eliminating inefficient use of the 
existing facility'' in section 627.9(b) was unclear as written. The 
FHWA agreed with these comments. This sentence has been deleted from 
this section.
    The AASHTO and several STAs stated that a VE analysis is only 
required on substructures and expressed concern over the inclusion of 
superstructure in the required VE analysis to be conducted on bridges. 
The STAs are required to consider the substructure requirements of a 
bridge (as specified in 23 U.S.C. 106(e)(4)(A)); however, this 
provision does not limit the VE analysis to only the substructure. The 
VE analysis conducted for bridges must ``be evaluated on engineering 
and economic basis, taking into consideration acceptable designs for 
bridges'' (as specified in 23 U.S.C. 106(e)(4)(B)). This consideration 
would include all bridge elements, substructure, superstructure, 
approaches, and any other design elements in the contract. Therefore, 
the FHWA determined that this section did not require any revisions.
    The AASHTO and several STAs stated that the reference to conflict 
of interest in section 627.9(f) was unclear. The FHWA agrees with this 
comment and this section was modified to include a reference to FHWA's 
existing provisions at 23 CFR 1.33.

Rulemaking Analyses and Notices

Executive Order 12866 (Regulatory Planning and Review), Executive Order 
13563 (Improving Regulation and Regulatory Review), and DOT Regulatory 
Policies and Procedures

    The FHWA has determined that this rule is not an economically 
significant rulemaking action within the meaning of Executive Order 
12866 and is not a significant rulemaking action within the meaning of 
the U.S. Department of Transportation regulatory policies and 
procedures. Additionally, this action complies with the principles of 
Executive Order 13563 by fostering the use of innovative technologies 
and methods while eliminating unnecessary and costly design elements. 
This rule establishes revised requirements for conducting VE analyses 
and it is anticipated that the economic impact of this rulemaking will 
be minimal. In addition, these changes will not interfere with any 
action taken or planned by another agency and will not materially alter 
the budgetary impact of any entitlements, grants, user fees, or loan 
programs.

Regulatory Flexibility Act

    In compliance with the Regulatory Flexibility Act (RFA) (Pub. L. 
96-354, 5 U.S.C. 60l-612), the FHWA has evaluated the effects of this 
rule on small entities. The FHWA has determined that this action does 
not have a significant economic impact on a substantial number of small 
entities. The proposed amendment addresses VE studies performed by STAs 
on certain projects using Federal-aid highway funds. As such, it 
affects only States, and States are not included in the definition of 
small entity set forth in 5 U.S.C. 601. Therefore, the RFA does not 
apply, and the FHWA certifies that this action will not have a 
significant economic impact on a substantial number of small entities.

Unfunded Mandates Reform Act of 1995

    This final rule does not impose unfunded mandates as defined by the 
Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4, March 22, 1995, 
109 Stat. 48). Furthermore, in compliance with the Unfunded Mandates 
Reform Act of 1995, FHWA evaluated this rule to assess the effects on 
State, local, and Tribal governments and the private sector. This rule 
does not result in the expenditure by State, local, and Tribal 
governments, in the aggregate, or by the private sector, of $140.8 
million or more in any one year (2 U.S.C. 1532). Additionally, the 
definition of ``Federal Mandate'' in the Unfunded Mandates Reform Act 
excludes financial assistance of the type in which State, local, or 
Tribal governments have authority to adjust their participation in the 
program in accordance with changes made in the program by the Federal 
Government. The Federal-aid highway program permits this type of 
flexibility.

Executive Order 13132 (Federalism Assessment)

    This rule has been analyzed in accordance with the principles and 
criteria contained in Executive Order 13132, dated August 4, 1999, and 
the FHWA has determined that this rule will not have a substantial 
direct effect or sufficient federalism implications to warrant 
preparation of a federalism assessment. The FHWA has also determined 
that this rule does not preempt any State law or regulation or affect 
the States' ability to discharge traditional State governmental 
functions.

Executive Order 12372 (Intergovernmental Review)

    Catalog of Federal Domestic Assistance Program Number 20.205, 
Highway Planning and Construction. The regulations implementing 
Executive Order 12372 regarding intergovernmental consultation on 
Federal programs and activities apply to this program.

Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et. 
seq.), Federal agencies must obtain approval from the OMB for each 
collection of information they conduct, sponsor, or require through 
regulations.
    The FHWA has determined that this rule contains a requirement for 
data and information to be collected and maintained in support of 
compiling the results of the VE analyses that are conducted annually. 
The FHWA received no comments to this information collection.
    It will take approximately 200 burden hours to compile the results 
of the VE analyses annually (400 analyses at 30 minutes each). It will 
take approximately 156 burden hours to

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compile the results of all of the VE analyses that are conducted 
annually in each State DOT, the District of Columbia, and Puerto Rico 
and to submit these results to FHWA (52 analyses at 3 hours each). The 
estimated total burden to provide the additional information to attain 
full compliance with the final rule is 356 hours.

National Environmental Policy Act

    The FHWA has analyzed this rule for the purpose of the National 
Environmental Policy Act (42 U.S.C. 4321 et seq.) and has determined it 
will not have any effect on the quality of the human and natural 
environment, because this rule merely establishes the requirements that 
apply to VE analyses whenever an applicable Federal-aid highway project 
is to be constructed. The promulgation of this regulation has been 
determined to be a categorical exclusion under 23 CFR 771.117(c)(20).

Executive Order 13175 (Tribal Consultation)

    The FHWA has analyzed this action under Executive Order 13175, 
dated November 6, 2000, and believes that this rule does not have 
substantial direct effects on one or more Indian Tribes; does not 
impose substantial direct compliance costs on Indian Tribal 
governments; and does not preempt Tribal law. This rule establishes the 
requirements that apply to VE analyses whenever an applicable Federal-
aid highway project is to be constructed and does not impose any direct 
compliance requirements on Indian Tribal governments, nor does it have 
any economic or other impacts on the viability of Indian Tribes. 
Therefore, a Tribal summary impact statement is not required.

Executive Order 13211 (Energy Effects)

    The FHWA has analyzed this rule under Executive Order 13211, 
Actions Concerning Regulations that Significantly Affect Energy Supply, 
Distribution or Use. We have determined that this rule does not 
constitute a significant energy action under that order since it will 
not have a significant adverse effect on the supply, distribution, or 
use of energy. Therefore, the FHWA certifies that a Statement of Energy 
Effects under Executive Order 13211 is not required.

Executive Order 12630 (Taking of Private Property)

    The FHWA has analyzed this rule under Executive Order 12630, 
Governmental Actions and Interference with Constitutionally Protected 
Property Rights. The FHWA has determined that this rule does not effect 
a taking of private property or otherwise have taking implications 
under Executive Order 12630.

Executive Order 12988 (Civil Justice Reform)

    This action meets applicable standards in sections 3(a) and 3(b)(2) 
of Executive Order 12988, Civil Justice Reform, to minimize litigation, 
eliminate ambiguity and reduce burden.

Executive Order 13045 (Protection of Children)

    The FHWA has analyzed this rule under Executive Order 13045, 
Protection of Children from Environmental Health Risks and Safety 
Risks. The FHWA certifies that this rule does not cause an 
environmental risk to health or safety that may disproportionately 
affect children.

Regulation Identification Number

    A regulation identification number (RIN) is assigned to each 
regulatory action listed in the Unified Agenda of Federal Regulations. 
The Regulatory Information Service Center publishes the Unified Agenda 
in April and October of each year. The RIN number contained in the 
heading of this document can be used to cross-reference this action 
with the Unified Agenda.

List of Subjects in 23 CFR Part 627

    Grant programs--transportation, Highways and roads.

    Issued on: January 27, 2012.
Victor M. Mendez,
Administrator.

    In consideration of the foregoing, the FHWA amends title 23 of the 
Code of Federal Regulations by revising part 627 to read as follows:

PART 627--VALUE ENGINEERING

Sec.
627.1 Purpose and applicability.
627.3 Definitions.
627.5 Applicable projects.
627.7 VE programs.
627.9 Conducting a VE analysis.

    Authority:  23 U.S.C. 106(e), 106(g), 106(h), 112(a) and (b), 
302, 315; and 49 CFR part 18.


Sec.  627.1  Purpose and applicability.

    (a) The purpose of this part is to prescribe the programs, policies 
and procedures for the integration of value engineering (VE) into the 
planning and development of all applicable Federal-aid highway 
projects.
    (b) Each State transportation agency (STA) shall establish and 
sustain a VE program. This program shall establish the policies and 
procedures identifying when a VE analysis is required. These policies 
and procedures should also identify when a VE analysis is encouraged on 
all other projects where there is a high potential to realize the 
benefits of a VE analysis.
    (c) The STAs shall establish the policies, procedures, functions, 
and capacity to monitor, assess, and report on the performance of the 
VE program, along with the VE analyses that are conducted and Value 
Engineering Change Proposals (VECP) that are accepted. The STAs shall 
ensure that its subrecipients conduct VE analyses in compliance with 
this part.


Sec.  627.3  Definitions.

    The following terms used in this part are defined as follows:
    Bridge Project. A bridge project shall include any project where 
the primary purpose is to construct, reconstruct, rehabilitate, 
resurface, or restore a bridge.
    Final Design. Final design has the same meaning as defined in 23 
CFR 636.103.
    Project. A portion of a highway that a STA or public authority 
proposes to construct, reconstruct, or improve as described in the 
preliminary design report or applicable environmental document. A 
project is defined as the logical termini in the environmental document 
and may consist of several contracts, or phases of a project or 
contract, which are implemented over several years.
    Total Project Costs. The costs of all phases of a project including 
environment, design, right-of-way, utilities and construction.
    Value Engineering (VE) Analysis. The systematic process of 
reviewing and assessing a project by a multidisciplinary team not 
directly involved in the planning and development phases of a specific 
project that follows the VE Job Plan and is conducted to provide 
recommendations for:
    (1) Providing the needed functions, considering community and 
environmental commitments, safety, reliability, efficiency, and overall 
life-cycle cost (as defined in 23 U.S.C. 106(f)(2));
    (2) Improving the value and quality of the project; and
    (3) Reducing the time to develop and deliver the project.
    Value Engineering (VE) Job Plan. A systematic and structured action 
plan for conducting and documenting the results of the VE analysis. 
While each VE analysis shall address each phase in the VE Job Plan, the 
level of analysis conducted and effort expended for each

[[Page 15255]]

phase should be scaled to meet the needs of each individual project. 
The VE Job Plan shall include and document the following seven phases:
    (1) Information Phase Gather project information including project 
commitments and constraints.
    (2) Function Analysis Phase Analyze the project to understand the 
required functions.
    (3) Creative Phase Generate ideas on ways to accomplish the 
required functions which improve the project's performance, enhance its 
quality, and lower project costs.
    (4) Evaluation Phase Evaluate and select feasible ideas for 
development.
    (5) Development Phase Develop the selected alternatives into fully 
supported recommendations.
    (6) Presentation Phase Present the VE recommendation to the project 
stakeholders.
    (7) Resolution Phase: Evaluate, resolve, document and implement all 
approved recommendations.
    (g) Value Engineering Change Proposal (VECP). A construction 
contract change proposal submitted by the construction contractor based 
on a VECP provision in the contract. These proposals may improve the 
project's performance, value and/or quality, lower construction costs, 
or shorten the delivery time, while considering their impacts on the 
project's overall life-cycle cost and other applicable factors.


Sec.  627.5  Applicable projects.

    (a) A VE analysis shall be conducted prior to the completion of 
final design on each applicable project that utilizes Federal-aid 
highway funding, and all approved recommendations shall be included in 
the project's plans, specifications and estimates.
    (b) Applicable projects shall include the following:
    (1) Each project located on the National Highway System (NHS) (as 
specified in 23 U.S.C. 103) where the estimated total project cost is 
$25 million or more that utilizes Federal-aid highway funding;
    (2) Each bridge project located on or off of the NHS where the 
estimated total project cost is $20 million or more that utilizes 
Federal-aid highway funding;
    (3) Any major project (as defined in 23 U.S.C. 106(h)), on or off 
of the NHS, that utilizes Federal-aid highway funding in any contract 
or phase comprising the major project;
    (4) Any project for which a VE analysis has not been conducted and 
a change is made to the project's scope or design between the final 
design and the letting which results in an increase in the project's 
total cost exceeding the thresholds identified in paragraphs (b)(1), 
(2) or (3) of this section; and
    (5) Any other Federal-aid project the FHWA determines to be 
appropriate.
    (c) An additional VE analysis is not required if, after conducting 
the VE analysis required under this part for any project meeting the 
criteria of paragraph (b) of this section, the project is subsequently 
split into smaller projects in the design phase or if the project is 
programmed to be completed by the letting of multiple construction 
projects. However, the STA may not avoid the requirement to conduct a 
VE analysis on an applicable project by splitting the project into 
smaller projects, or multiple construction projects.
    (d) The STA's VE Program's policies and procedures shall identify 
when any additional VE analysis should be considered or conducted in 
the planning and development of transportation projects.
    (e) For projects utilizing design-build and other alternative 
project delivery methods for which final design is not complete prior 
to the release of the final request for proposals or other applicable 
solicitation documents, the estimated total cost for purposes of the 
thresholds identified in paragraphs (b)(1) and (2) of this section, 
shall be based on the best estimate of the cost to construct the 
project.


Sec.  627.7  VE programs.

    (a) The STA shall establish and sustain a VE program under which VE 
analyses are conducted for all applicable projects. The STA's VE 
program shall:
    (1) Establish and document VE program policies and procedures that 
ensure the required VE analysis is conducted on all applicable 
projects, and encourage conducting VE analyses on other projects that 
have the potential to benefit from this analysis;
    (2) Ensure the VE analysis is conducted and all approved 
recommendations are implemented and documented in a final VE report 
prior to the project being authorized to proceed to a construction 
letting;
    (3) Monitor and assess the VE Program, and disseminate an annual 
report to the FHWA consisting of a summary of all approved 
recommendations implemented on applicable projects requiring a VE 
analysis, the accepted VECPs, and VE program functions and activities;
    (4) Establish and document policies, procedures, and contract 
provisions that identify when VECP's may be used; identify the 
analysis, documentation, basis, and process for evaluating and 
accepting a VECP; and determine how the net savings of each VECP may be 
shared between the agency and contractor;
    (5) Establish and document policies, procedures, and controls to 
ensure a VE analysis is conducted and all approved recommendations are 
implemented for all applicable projects administered by local public 
agencies; and ensure the results of these analyses are included in the 
VE program monitoring and reporting; and
    (6) Provide for the review of any project where a delay occurs 
between when the final plans are completed and the project advances to 
a letting for construction to determine if a change has occurred to the 
project's scope or design where a VE analysis would be required to be 
conducted (as specified in 23 CFR 627.5(b)).
    (b) STAs shall ensure the required VE analysis has been performed 
on each applicable project including those administered by 
subrecipients, and shall ensure approved recommendations are 
implemented into the project's plans, specifications, and estimate.
    (c) STAs shall designate a VE Program Coordinator to promote and 
advance VE program activities and functions. The VE Coordinator's 
responsibilities should include establishing and maintaining the STA's 
VE policies and procedures; facilitating VE training; ensuring VE 
analyses are conducted on applicable projects; monitoring, assessing, 
and reporting on the VE analyses conducted and VE program; 
participating in periodic VE program and project reviews; submitting 
the required annual VE report to the FHWA; and supporting the other 
elements of the VE program.


Sec.  627.9  Conducting a VE analysis.

    (a) A VE analysis should be conducted as early as practicable in 
the planning or development of a project, preferably before the 
completion of the project's preliminary design. At a minimum, the VE 
analysis shall be conducted prior to completing the project's final 
design.
    (b) The VE analysis should be closely coordinated with other 
project development activities to minimize the impact approved 
recommendations might have on previous agency, community, or 
environmental commitments; the project's scope; and the use of 
innovative technologies, materials, methods, plans or construction 
provisions.
    (c) For projects utilizing design-build and other alternative 
project delivery methods that will be advertised prior to the 
completion of final design, the STA or local public agency shall 
conduct a VE analysis prior to the release of the

[[Page 15256]]

final Request for Proposals or other applicable solicitation documents.
    (d) STAs shall ensure the VE analysis meets the following 
requirements:
    (1) Uses a multidisciplinary team not directly involved in the 
planning or design of the project, with at least one individual who has 
the training and experience with leading a VE analysis;
    (2) Develops and implements the VE Job Plan;
    (3) Produces a formal written report outlining, at a minimum:
    (i) Project information;
    (ii) Identification of the VE analysis team;
    (iii) Background and supporting documentation, such as information 
obtained from other analyses conducted on the project (e.g., 
environmental, safety, traffic operations, constructability);
    (iv) Documentation of the stages of the VE Job Plan which would 
include documentation of the life-cycle costs that were analyzed;
    (v) Summarization of the analysis conducted;
    (vi) Documentation of the proposed recommendations and approvals 
received at the time the report is finalized; and
    (vii) The formal written report shall be retained for at least 3 
years after the completion of the project (as specified in 49 CFR 
18.42).
    (e) For bridge projects, in addition to the requirements in 
paragraph (d) of this section, the VE analyses shall:
    (1) Include bridge substructure and superstructure requirements 
that consider alternative construction materials; and
    (2) Be conducted based on:
    (i) An engineering and economic assessment, taking into 
consideration acceptable designs for bridges; and
    (ii) An analysis of life-cycle costs and duration of project 
construction.
    (f) STAs and local public agencies may employ qualified consultants 
(as defined in 23 CFR 172) to conduct a VE analysis. The consultant 
shall possess the training and experience required to lead the VE 
analysis. A consulting firm or individual shall not be used to conduct 
or support a VE analysis if they have a conflict of interest (as 
specified in 23 CFR 1.33).
    (g) VECPs, STAs, and local public agencies are encouraged to use a 
VECP clause (or other such clauses under a different name) in an 
applicable project's contract, allowing the construction contractor to 
propose changes in the project's plans, specifications, or other 
contract documents. Whenever such clauses are used, the STA and local 
authority will consider changes that could improve the project's 
performance, value and quality, shorten the delivery time, or lower 
construction costs, while considering impacts on the project's overall 
life-cycle cost and other applicable factors. The basis for a STA or 
local authority to consider a VECP is the analysis and documentation 
supporting the proposed benefits that would result from implementing 
the proposed change in the project's contract or project plans.
    (h) Proposals to accelerate construction after the award of the 
contract will not be considered a VECP and will not be eligible for 
Federal-aid highway program funding participation. Where it is 
necessary to accelerate construction, STAs and local public agencies 
are encouraged to use the appropriate incentive or disincentive clauses 
so that all proposers will take this into account when preparing their 
bids or price proposals.

[FR Doc. 2012-6244 Filed 3-14-12; 8:45 am]
BILLING CODE 4910-22-P