SELECTION PROCESSES
AND ADMINISTRATIVE
QUALIFICATION
Camille Thomason
PEPS Center of Excellence Manager
October 18, 2014
Professional Engineering Procurement Services (PEPS)
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
Professional Engineering Procurement Services (PEPS)
2
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
Professional Engineering Procurement Services (PEPS)
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
Professional Engineering Procurement Services (PEPS)
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
Professional Engineering Procurement Services (PEPS)
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).
Professional Engineering Procurement Services (PEPS)
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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
Professional Engineering Procurement Services (PEPS)
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
Professional Engineering Procurement Services (PEPS)
8
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
Professional Engineering Procurement Services (PEPS)
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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
Professional Engineering Procurement Services (PEPS)
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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
Professional Engineering Procurement Services (PEPS)
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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
Professional Engineering Procurement Services (PEPS)
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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
Professional Engineering Procurement Services (PEPS)
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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
Professional Engineering Procurement Services (PEPS)
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Posted List – Administrative Qualification Status
Professional Engineering Procurement Services (PEPS)
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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
Professional Engineering Procurement Services (PEPS)
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Administrative Qualficiation
 Not required for every firm
 Requirements vary by selection process
– Federal Process most restrictive
– Comprehensive, Streamlined, and Accelerated processes offer more
flexibility
Professional Engineering Procurement Services (PEPS)
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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
Professional Engineering Procurement Services (PEPS)
18
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.
Professional Engineering Procurement Services (PEPS)
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
Professional Engineering Procurement Services (PEPS)
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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
Professional Engineering Procurement Services (PEPS)
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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
Professional Engineering Procurement Services (PEPS)
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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.
Professional Engineering Procurement Services (PEPS)
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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
Professional Engineering Procurement Services (PEPS)
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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.
Professional Engineering Procurement Services (PEPS)
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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.
Professional Engineering Procurement Services (PEPS)
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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.
Professional Engineering Procurement Services (PEPS)
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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
Professional Engineering Procurement Services (PEPS)
28
Other Processes
 The majority of TxDOT solicitations
 Administrative Qualification is not required to compete
 So what rates will TxDOT use for a selected team?
Professional Engineering Procurement Services (PEPS)
Other Process
 For a selected team:
A. A firm may be administratively qualified
B. Non-engineering firms are exempt
C. Engineering services that are exempt:
•
•
•
•
•
•
Bridge Inspection
Materials Inspection and Testing
Geotechnical Engineering
Surveying and Mapping
Subsurface Utility Engineering
Architecture
D. 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
Professional Engineering Procurement Services (PEPS)
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
Professional Engineering Procurement Services (PEPS)
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
Professional Engineering Procurement Services (PEPS)
32
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) 416-2315
Professional Engineering Procurement Services (PEPS)
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Thank you - Questions?
Camille Thomason
PEPS Division – Center of Excellence
512-416-2263
camille.thomason@txdot.gov
Professional Engineering Procurement Services (PEPS)