Note: Guidance Updated on 1/19/07

U.S. Department of Transportation Federal Highway Administration

MEMORANDUM

Background

On August 10, 2005, the President signed into law the new surface transportation act, the "Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users" (SAFETEA-LU) (Pub.L. 109-59, 119 Stat. 1144). The requirement for the Project Management Plan and an Annual Financial Plan are contained in section 1904(a) of SAFETEA-LU. This provision amends 23 U.S.C. 106(h), as follows:

8. "MAJOR PROJECTS.-
   1. IN GENERAL.-Notwithstanding any other provision of this section, a recipient of Federal financial assistance for a project under this title with an estimated total cost of $500,000,000 or more, and recipients for such other projects as may be identified by the Secretary, shall submit to the Secretary for each project-
      1. a project management plan; and
      2. an annual financial plan.
   2. PROJECT MANAGEMENT PLAN.-A project management plan shall document-
      1. the procedures and processes that are in effect to provide timely information to the project decision makers to effectively manage the scope, costs, schedules, and quality of, and the Federal requirements applicable to, the project; and
      2. the role of the agency leadership and management team in the delivery of the project.
   3. FINANCIAL PLAN.-A financial plan shall-
      1. be based on detailed estimates of the cost to complete the project; and
      2. provide for the annual submission of updates to the Secretary that are based on reasonable assumptions, as determined by the Secretary, of future increases in the cost to complete the project...."

Issuance of Interim Guidance

In response to the enactment of this new law, the Federal Highway Administration (FHWA) is issuing this interim guidance on the requirements for major projects over $500,000,000. The information in this interim guidance is based on current perspectives on the new law and its administration. As experience with the application of the law provides new insights or presents new issues, the FHWA will update this guidance.

This material is intended to be a tool to assist FHWA field offices in fulfilling current law. This guidance was developed in close consultation with several FHWA Division Offices to ensure it was informed by the knowledge and experience of those who are most familiar with these day-to-day responsibilities.

We appreciate the feedback that many of you provided. It has assisted FHWA to expand our role beyond the traditional oversight to ensure that the organization is well positioned to make certain Major Projects are delivered in a manner that captures the public's trust and confidence in the State and Federal transportation agencies' ability to effectively and efficiently deliver a quality product. The public must perceive that the finished product was a wise investment of the very substantial amount of public resources.

We characterize this guidance as "interim" because we expect to initiate a rulemaking to develop regulations for these requirements.

We hope this interim guidance is helpful. We encourage you to review it carefully, and then meet with your States to discuss it.

In the first attachment you will find the guidance document, followed by the checklist of Major Projects questions, the December 8, 2005 Financial Plan Requirements memorandum, Template for Reporting Planning Cost Estimates, and finally Highway Planning and Project Development Processes Chart.

Again, we hope this information is helpful. Should you have any questions, please feel free to contact Dwight Horne (202-366-5530), Rodney Barry (202-366-1561), or Gloria Shepherd (202-366-0106).

Attachments:

• Interim FHWA Major Project Guidance
• Checklist of Major Projects Questions
• December 8, 2005 Financial Plan Requirements memorandum
• Template for Reporting Planning Cost Estimates
• Highway Planning and Project Development Processes Chart

cc:

• Associate Administrators
• Directors of Field Services
• Gloria Shepherd
• Dwight Horne
• Rodney Barry

Interim FHWA Major Project Guidance

The Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) made several significant changes to the requirements for Major Projects. The monetary threshold for classification as a Major Project was lowered from an estimated total cost of $1 billion to $500 million or greater and a Project Management Plan (PMP) is now also required for all Major Projects. The lower monetary threshold is likely to more than double the number of both active and future major projects requiring us to step up our oversight responsibility. We are implementing a new paradigm for working with our stakeholder as these projects are advanced through the project process.

The Federal Highway Administration (FHWA) has expanded its role of traditional oversight to optimize its positive influence in the management of major projects. FHWA is emplacing a management organization that efficiently learns and networks information and experiences to ensure that all major projects benefit from the experiences of others. There must be a method of formally institutionalizing best management practices.

FHWA is not limiting its major project management role to one of tracking progress and ensuring Title 23 compliance. FHWA is making a much more positive difference by focusing its skills, talents and experiences to strengthen the State transportation agency's (STA) specific Major Project management team's ability to forecast challenges and proactively manage the project, so that decisionmakers will have the ability to recognize the need for (and then act upon) meaningful and timely changes, when necessary. This role adjustment requires an application of risk assessment techniques to focus resources on the most important stewardship management activities.

FHWA is organized for centralized coordination and decentralized control and execution. FHWA must be a "rapid learning" organization due to the certain frequent encounters of cutting edge concepts that must be effectively understood and employed. Division Administrators are responsible for effective cradle-to-grave stewardship management of major projects just as they are responsible for all other highway matters that have Federal interest. However, due to the fact that Major Projects require more project-focused effort, Division Administrators in States with Major Projects are required to establish a Project Oversight Manager (POM) position. Therefore, the Division Administrators may assign the routine oversight duties to the POM, but not delegate the ultimate responsibility. The POM may provide primary oversight for a single project or, in the case of multiple projects, may coordinate the oversight of several projects utilizing other Division Office resources. There are emerging areas that will require special adaptations and continuous communications between Headquarters and the Division, i.e., Public Private Partnerships, delegation of NEPA responsibilities, etc.

Major Projects must be delivered in a manner that captures the public's trust and confidence in the State and Federal transportation agencies' ability to effectively and efficiently deliver a quality product. The public must perceive that the finished product was a wise investment of the very substantial amount of public resources. In order to insure major project success, it is imperative that good project management principles are used beginning early in the planning stage of a project. As the Major Project becomes more defined, the PMP and the Finance Plan become the tools by which the project will be effectively managed. The PMP is a bridging document that assures major highway projects are managed as a continuum rather than by phases. This memorandum provides the Policy and Guidance for implementing the Major Project requirements under the SAFETEA-LU.

Major Project Definition

Major Projects are: those projects receiving Federal financial assistance 1) with an estimated cost of $500 million or more (low Federal dollar investment is not a principal consideration; if a project is deemed Federal, then it requires Federal oversight) or 2) that has been identified by the Secretary as being "Major" as a result of special interest. Such other projects include: 1) those receiving Federal financial assistance, as designated by FHWA, that require a substantial amount of a STA's program resources or have a high level of public or congressional attention and 2) those that have extraordinary implications for the national transportation system. For the purposes of determining whether a project costs $500 million or more, FHWA will look to the project and its cost as set forth in the ROD or final environmental determination. The project scope defined in a ROD or final environmental determination will provide the cost basis that will be used for Major Project determination. An exception may exist if the "NEPA-defined" project scope is comprised of distinct and operationally independent elements. FHWA may determine that each separate, operationally independent and non-concurrent phase of construction be defined as separate "projects" for the purpose of assigning Major Project status. This determination will require careful judgment and an appreciation for how NEPA commitments will be delivered during the delivery of the NEPA-defined project scope. Such a determination will be made in consultation with the Major Project Team. (Non-concurrent in this context means the phases of work will not be constructed at the same time, and the phase or phases that are scheduled for construction are not functionally dependent on those that have received NEPA approval but may or may not be constructed.)

Project Management Plans

SAFETEA-LU established a new requirement for PMPs on all Major Projects. The PMP serves as a "roadmap" to help the project delivery team maintain a constant focus toward delivering the Major Project in an efficient and effective manner. The ultimate purpose of the PMP is to clearly define the roles, responsibilities, processes, and activities, which will result in the Major Project being completed on time, within budget, with the highest degree of quality and safety, and in a manner in which the public trust, support and confidence in the project will be maintained. The aforementioned statement represents both the objective and measure of success for the PMP.

The preparation of an initial PMP prior to initiating the project's environmental study is critical to ensure that the project is delivered in an efficient and effective manner. The initial PMP shall be prepared by the STA and submitted to the FHWA Division Office. Either the Division or Headquarters Offices may request FHWA Headquarters review and concurrence prior to the Division's approval of the PMP and any subsequent revisions. The PMP is to be a living document in which revisions will be issued as the project progresses in order to add, modify, or delete provisions that will result in the most effectively managed project. These revisions and updates to the PMP will occur prior to issuing the environmental decision, prior to authorization of Federal-aid funds for right of way acquisition, and prior to authorization of Federal-aid funds for construction.

Implementation of the PMP requirements is immediately effective using the current PMP guidance posted on the FHWA Major Project Web site. This guidance will be updated in the future to fully reflect further refinements and the elements of this memorandum. If a project has proceeded beyond the planning and environmental stages, then the State has 6 months to develop and submit the PMP for Division Office approval. Any Major Project that has entered the construction phase at the time this guidance is issued is exempt from developing a full scale PMP. However, the current plans for managing such project shall be reviewed, and appropriate adjustments made, to ensure optimum opportunity for success during the remaining period of construction and transition to operations.

Finance Plans

Finance Plans have been required for Major Projects since the enactment of TEA-21. FHWA issued Financial Plan Guidance in May 2000 implementing the TEA-21 requirements. This guidance will be updated in the near future to reflect changes made by SAFETEA-LU; however, we do not anticipate that the changes will be materially different from the current guidance. Finance Plans for Major Projects shall continue to be developed by the STA and submitted to the FHWA Division Office. The Division will approve finance plans prior to authorization of Federal-aid funds for construction. FHWA Headquarters does not have to sign-off on every financial plan, but does reserve the right to do so if deemed necessary. Either the Division or Headquarters Offices may request FHWA Headquarters review and concurrence prior to the Division's approval of the Finance Plan and annual updates. A memorandum was issued on December 8, 2005, Project Financial Plan Requirements under SAFETEA-LU, which provided details for implementing the Finance Plan requirements (see attachments).

Oversight Guidance

As previously mentioned, Major Projects require that good project management principles be used beginning early in the planning stage of a project and carried through to final completion. The following Major Project Management Framework provides the guidance for insuring that Major Projects are managed effectively throughout the project continuum. Independent verification is an important part of the costs estimates for major projects. This function can either be done by an independent agency, separate and distinct from the STA/DOT, with the relevant expertise to perform audit functions or by resources made available by FHWA.

Major Project Management Framework

• FHWA Division becomes aware the state is contemplating a Major Project
  • Division Administrator (DA) uses the "FHWA Checklist of Major Project Questions" (see attached) to do an initial assessment of issues and develop initial oversight strategy for the Major Project.
  • This should occur at the earliest point the Division becomes aware of the Major Project, before the State or MPO initiates any formal public action.
• State/MPO adds Major Project to the Metropolitan Long Range Plan or identifies Major Project in a Feasibility or Corridor Study (initial point for public expectation)
  • DA revisits the "FHWA Checklist of Major Project Questions" to update oversight strategy.
  • Division works with State/MPO to ensure the first, planning-level cost estimate is a cost range (not a point estimate), using the "FHWA Template for Reporting Planning Cost Estimates." See Interim FHWA/FTA Guidance on Fiscal Constraint for STIPs, TIPs and Metro Plans at www.fhwa.dot.gov/planning/fcindex.htm
  • Major Project Team (MPT) and the Office of Planning, Environment and Realty (HEP) assist by providing Major Projects policy guidance; and cost estimating and project management technical assistance.
• Initiation of the NEPA Process (Tier 1 type EIS, Standard Environmental Impact Statement, or Environmental Assessment
  • DA revisits the "FHWA Checklist of Major Project Questions" to update oversight strategy.
  • Prior to initiating the environmental study, the State/MPO develops an initial PMP. (The PMP should generate and report an annual update of the cost estimate until a Finance Plan is approved.) The Division Office approves the initial PMP.
  • Division Office Environment staff will review and Divisions will approve the initial PMP prior to issuing the Notice of Intent.
  • HEP and MPT will provide review and concur in the initial PMP as appropriate.
  • HEP and MPT provide technical assistance for PMP during NEPA stage.
• DEIS
  • Costs shall be re-evaluated and updated if necessary.
• Final EIS
  • State/MPO develops and performs an independent validation of the cost estimate for the preferred alternative, pursuant to FHWA parameters for consistent, reliable cost estimates at the FEIS stage. The independent validation is performed by a team, which has not been involved in the project.
  • Division Office reviews the State/MPO preferred alternative cost estimate to ensure that it meets the FHWA standard for cost estimates and accepts the cost estimate based on an independent review of the estimate and the State's independent validation.
  • The HEP and MPT provide prior concurrence in the Division's acceptance of the cost estimate as appropriate.
  • The cost estimate is published in the FEIS.
• ROD, FONSI, or Final Environment Determination, etc.
  • Prior to issuing the ROD or FONSI, the State/MPO updates the PMP.
  • Division Office reviews and approves updated PMP.
  • MPT provides advance concurrence for Division's approval of updated PMP as appropriate.
• STIP and TIP
  • Divisions validate the Major Project cost estimate the first time the Major Project appears in the STIP and TIP, and also each time the State/MPO update their STIP/TIP. Pursuant to fiscal constraint requirements for STIPs and TIPs, Divisions ensure that (a) the Major Project cost estimate is current and valid; (b) funding is available and committed for the entire program of projects in the first 2 years of the TIP in nonattainment or maintenance areas; and (c) funding is "reasonably available" for all subsequent years of the TIP and for the STIP.
• R/W Acquisition
• Prior to authorization of Federal-aid funds for R/W Acquisition, the State should develop and receive approvals of an updated PMP and initial Finance Plan.
  • Division Office reviews and approves the updated PMP and initial Finance Plan, including a determination that all cost estimates in the initial Finance Plan meet the FHWA standard for cost estimates.
  • MPT provides prior concurrence for Division's approval of the updated PMP and initial Finance Plan as appropriate.
  • MPT provides technical assistance for Finance Plans.
• Construction Authorization
  • Prior to authorization of Federal-aid funds for Construction, the State develops and receives approvals of an updated PMP and initial Finance Plan. The State also provides FHWA an independent validation of the cost estimate.
  • Division Office reviews and approves the updated PMP and initial Finance Plan, including a determination that all cost estimates in the initial Finance Plan meet the FHWA standard for cost estimates.
  • MPT provides prior concurrence for Division's approvals of initial Finance Plan and updated PMP as appropriate.
  • MPT provides technical assistance for Finance Plans.
• Construction
• State continues to update for the Finance Plan Annual Updates and the PMP and receives approvals for such updates. The State provides FHWA an independent validation of the cost estimate anytime the annual update shows a cost increase of more than 5 percent, schedule slippage of more than 6 months or significant scope change from the previous Finance Plan update.
  • Division Office reviews and approves Finance Plan Annual Updates and any updated PMPs.
  • MPT provides prior concurrence for Division's approvals of Finance Plan Annual Updates and any updated PMPs as appropriate.