No. 29182 (Amendment): R907-66. Administration, Architecture/Engineering Services Procurement, Consultant Services -- Eligibility of Costs for Reimbursement --Bonuses or Incentive Compensation

DAR File No.: 29182
Filed: 11/01/2006, 11:55
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

The amendment is proposed to implement a federal statutory change requiring use of certain federal regulations in the calculation of contract costs.

Summary of the rule or change:

The amendment incorporates a section of the Code of Federal Regulations and deletes part of the current rule that the federal law now disallows.

State statutory or constitutional authorization for this rule:

Section 72-1-201

This rule or change incorporates by reference the following material:

48 CFR Part 1, 2006 Edition

Anticipated cost or savings to:

the state budget:

There will be an increase in the budget because the new federal regulation requires the state to allow the payment of executive pay bonuses. However, it is impossible to say how much budgets will increase because it depends on the amount of bonus requested, earned, and which contractor gets a particular project.

local governments:

There will be an increase in the budget because the new federal regulation requires the state to allow the payment of executive pay bonuses. However, it is impossible to say how much budgets will increase because it depends on the amount of bonus requested, earned, and which contractor gets a particular project. Some of the monies for payment of bonuses may come out of a local match.

other persons:

There should be no costs or savings to any other persons because no other persons are affected by it. In other words, only the department administers transportation contracts. Private individuals who contract with the department will only see their income go up because they can now get bonuses paid. They will not have to pay anything for the department to use the federal regulations.

Compliance costs for affected persons:

There will be no compliance costs for private individuals or companies. However, as noted above, there will probably be an increase in costs to state and local budgets.

Comments by the department head on the fiscal impact the rule may have on businesses:

There will be no fiscal impact on businesses except those that obtain contracts and get to recoup their bonuses. John R. Njord, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Transportation
Administration
CALVIN L RAMPTON COMPLEX
4501 S 2700 W
SALT LAKE CITY UT 84119-5998

Direct questions regarding this rule to:

James Beadles at the above address, by phone at 801-965-4168, by FAX at 801-965-4796, or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

12/15/2006

This rule may become effective on:

12/22/2006

Authorized by:

John R. Njord, Executive Director

RULE TEXT

R907. Transportation, Administration.

R907-66. [Administration, Architecture/Engineering Services Procurement, Consultant Services -- Eligibility of Costs for Reimbursement -- Bonuses or Incentive Compensation.]Incorporation and Use of Federal Acquisition Regulations on Federal-Aid and State-Financed Transportation Projects.

[R907-66-1. Purpose.

This rule establishes whether bonuses or incentive compensation allowed as costs incurred in cost-reimbursable contracts with consultant engineering firms and are, therefore, eligible for reimbursement by UDOT.

 

R907-66-2. Authority.

The provisions of this rule are authorized by Title 63, Chapter 46a, Utah Administrative Rulemaking Act; Utah Code Ann. Section 63-56-13; and Utah Code Ann. Section 72-1-201.

 

R907-66-3. Definitions.

(1) "FAR" means the Federal Acquisition Regulations contained in Title 48 of the Code of Federal Regulations.

(2) Key management officers means:

(a) owners, presidents, chief executive officers, or other individuals who act in a similar management capacity;

(b) the four most highly compensated individuals in senior management (non-ownership) positions; and

(c) the five most highly paid individuals in senior management positions at each intermediate home office or branch if the consultant firm is organizationally subdivided into intermediate home offices or branch offices and their normal compensation, without including the bonus or incentive compensation, falls within the top 5 percent of all employees in the company.

 

R907-66-4. Bonus/Incentive Cost Limitation For Consultant Architecture/Engineering.

(1) Bonuses or incentive compensation for key management officers are not eligible for reimbursement.

(2) Bonuses or incentive compensation for non-key management officers and employees may be eligible for reimbursement if:

(a) the consultant enters into an agreement with its employees pursuant to an established plan or policy before the services are rendered;

(b) the agreement establishes the terms by which the consultant pays bonuses or incentive compensation to employees;

(c) the basis for payment of bonuses or incentive compensation is supported and documented; and

(d) the bonuses or incentive compensation are reasonable.

(3) UDOT will remove ineligible bonus/incentive compensation from the overhead cost pool when developing the allowable overhead/indirect cost rate. The consultant firm shall submit annual audit reports to verify that it indirect costs and overhead rates comply with Section 31 of FAR and UDOT's own administrative rules, policies, or contractual provisions.]

R907-66-1. Reason for Incorporation - Federal-Aid Projects and State Projects.

(1) 23 U.S.C. 112 requires States to use the Federal Acquisition Regulations (FAR), contained in 48 CFR Part 1 to calculate appropriate contract costs in all Federal-Aid transportation projects. Previously, federal law allowed States to develop their own cost principles and procedures in Federal-Aid projects.

(2) Consequently, the Department adopts and incorporates 48 CFR Part 1 for use in Federal-Aid transportation projects.

(3) Because many transportation projects that the Department administers receive federal aid, the Department believes it is generally most efficient to also use FAR when calculating contract cost principles and procedures in transportation projects financed solely with state funds. Therefore, the Departments also adopts and incorporates 48 CFR Part 1 for use in most state-financed transportation projects.

 

R907-66-[5]2. Financial Screening.

(1) To verify that the calculated overhead and hourly billing rates comply with FAR, UDOT conducts an initial financial screening and approval of consultants desiring to submit a Statement of Qualification (SOQ) for architecture and engineering service contracts.

(2) Consultants shall update their financial screening information by submitting a new completed financial screening application and related information to the Consultant Services Division. The consultant shall file the updated applications annually, on the anniversary date of the initial filing.

 

R907-66-[6]3. Contract Negotiations.

(1) UDOT negotiates consultant contracts with the firm it considers most qualified to provide such services, using guidelines developed by the Consultant Services Division. UDOT prepares independent estimates of the value of such services for use in negotiations.

(2) Negotiations follow state and federal procurement procedures and are based on compensation that UDOT considers fair and reasonable. Negotiations will end when UDOT decides that it cannot agree on terms with the first most qualified firm. UDOT will then begin negotiations with the next most qualified firm. This process continues until either mutually agreeable terms are negotiated or UDOT chooses to begin the selection process again to identify other firms qualified to provide such services.

(3) The guidelines for both selection and negotiations are public information and can be obtained by contacting the Consultant Services Division.

 

R907-66-[7]4. Award of Contracts.

UDOT awards the contract to the best qualified consultant with which it can negotiate a fair and reasonable cost as required by state rules and FAR and in accordance with UDOT selection procedures and guidelines.

 

R907-66-[8]5. Execution of Contracts.

UDOT considers no contract effective until funding has been approved and all signature lines have been filled in with the appropriate officer's signature.

 

KEY: transportation, contracts, reimbursement, bonuses

Date of Enactment or Last Substantive Amendment: [December 18, 2001]2006

Authorizing, and Implemented or Interpreted Law: 63-56-13; 72-1-201