[Federal Register Volume 60, Number 165 (Friday, August 25, 1995)]
[Rules and Regulations]
[Pages 44271-44274]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-21115]
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DEPARTMENT OF TRANSPORTATION
Federal Highway Administration
23 CFR Part 635
[FHWA Docket 95-21]
RIN 2125-AD61
General Material Requirements; Warranty Clauses
AGENCY: Federal Highway Administration (FHWA), DOT.
ACTION: Interim final rule; request for comments.
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SUMMARY: The FHWA is revising its regulation that generally prohibits
the use of guaranty and warranty clauses on Federal-aid highway
construction contracts. This action will permit greater use of
warranties in Federal-aid highway construction contracts within
prescribed limits.
DATES: This interim final rule is effective August 25, 1995. Written
comments must be received on or before October 24, 1995.
ADDRESSES: Submit signed, written comments to FHWA Docket No. 95-21,
Federal Highway Administration, Room 4232, HCC-10, 400 Seventh Street,
SW., Washington, DC 20590. All comments
[[Page 44272]]
received will be available for examination at the above address from
8:30 a.m. to 3:30 p.m., e.t., Monday through Friday, except Federal
holidays. Those desiring notification of receipt of comments must
include a self-addressed, stamped postcard.
FOR FURTHER INFORMATION CONTACT: Mr. James Daves, Office of
Engineering, (202) 366-0355 or Mr. Wilbert Baccus, Office of the Chief
Counsel, (202) 366-0780, Federal Highway Administration, 400 Seventh
Street, SW., Washington, DC 20590.
SUPPLEMENTARY INFORMATION:
Background
The current regulation pertaining to warranty clauses, found at 23
CFR 635.413, generally prohibits their use on Federal-aid highway
construction contracts, with limited exceptions. There is no statutory
mandate requiring this prohibition. This regulation was issued in 1976
and is a formulation of a longstanding FHWA policy against the use of
warranties. The rationale for the prohibition is that warranty
provisions can indirectly result in Federal-aid participation in
maintenance costs. Prior to 1991, maintenance was a Federal-aid non-
participating item. However, the Intermodal Surface Transportation
Efficiency Act of 1991 (ISTEA), Pub. L. 102-240, 105 Stat. 1914,
amended 23 U.S.C. 119 to include an interstate maintenance funding
category. Section 1009 of the ISTEA revised 23 U.S.C. 119 to include
preventive maintenance on existing interstate routes as an eligible
item. Preventive maintenance activities are eligible for Federal-aid
highway funds when a State highway agency (SHA) can demonstrate,
through its pavement management system, that such activities are a
cost-effective means of extending interstate pavement life.
In addition, over the past 5 years, the FHWA has gained experience
with warranty clauses through its efforts with Special Experimental
Project No. 14 (SEP 14) ``Innovative Contracting Practices.'' The June
1995 FHWA publication entitled ``Rebuilding America: Partnership for
Investment, Innovative Contracting Practices,'' gives an overview of
and discusses SEP 14. It identifies applications where warranties may
enhance the quality of a Federal-aid construction project. That
publication has been placed on the docket and is available for
inspection at the above address.
For the above reasons, the FHWA is revising the current warranty
clause regulation to permit SHAs to include warranty provisions
covering specific construction products or features in National Highway
System (NHS) Federal-aid contracts, but maintenance items not eligible
for Federal-aid funds cannot be included. As already permitted,
pursuant to section 1016 of the ISTEA, the SHAs may continue to follow
their own procedures regarding the inclusion of warranties in non-NHS
Federal-aid contracts.
In 1981, a notice of proposed rulemaking (NPRM) (46 FR 9642) was
issued by the FHWA which would have revised the warranty regulations to
provide that States may specify warranty requirements where the FHWA
agrees that such provisions are consistent with the State's
responsibility to maintain the completed project in accordance with 23
U.S.C. 116. Four comments were received; one supported, two opposed,
and one asked for clarification of the proposed regulation. Due to a
lack of consensus, this action was not finalized.
In 1985, the FHWA issued an advance notice of proposed rulemaking
(50 FR 4234) to request information on how warranty clauses might
affect the quality of construction and competition on Federal-aid
construction projects. While a number of specialty contractors (e.g.,
signing and joint sealant) favored the expanded use of warranty
provisions, comments received from the trade associations and general
contractors generally opposed any change in policy. Due to a lack of
favorable documentation and strong support for a change, no revision
was made to the regulations.
In 1990, the FHWA initiated SEP 14 to evaluate innovative
contracting practices. The intent of SEP 14 is to develop a data base
for use in making future decisions regarding the applicability of
nontraditional contracting practices to Federal-aid highway
construction projects. The use of warranty provisions is an innovative
practice which has been evaluated by eight SHAs. Under SEP 14, the FHWA
has approved warranty concepts with the objective of improving quality
and increasing contractor accountability without shifting the
maintenance burden to the contractor. Ordinary wear and tear damage
caused by normal usage and routine service maintenance have remained
the responsibility of the SHAs.
The 1990 European Asphalt Study Tour and the 1992 European Concrete
Study Tour, both jointly sponsored by the FHWA and AASHTO (American
Association of State Highway and Transportation Officials) and
participated in by Federal, State, and private industry
representatives, reported that many European countries provide
contractors great latitude in the selection of materials and designs.
Warranties, varying from 1 to 5 years, are used to hold contractors
accountable for their decisions. The 1993 FHWA Contract Administration
Techniques for Quality Enhancement Study Tour (CATQEST), also
participated in by representatives from all segments of the United
States highway community, visited four European countries and examined
their use of warranties. The CATQEST team concluded that ``a wide
divergence of opinion appears to exist across country boundaries and
within individual countries regarding the value of warranty
requirements. Some believe they have a positive, decisive influence on
sustained high quality. Others seem convinced that quality would not be
diminished if warranty requirements were eliminated.''
In 1991, the Congress directed the General Accounting Office (GAO)
to conduct a study on means to improve the quality of Federal-aid
highways. The GAO report, ``Highway Infrastructure: Quality
Improvements Would Safeguard Billions of Dollars Already Invested'' was
published in September 1994. The report concluded that, while the SHAs
that have utilized warranty clauses have generally been satisfied with
the results, the SHAs' limited experiences with warranties make it
difficult to assess their costs and benefits.
The SEP 14 has provided valuable information to the FHWA regarding
the use of warranties. The SEP 14 currently includes 23 projects with
warranty provisions in eight States. Warranties for asphaltic concrete
pavement, bridge painting, bridge expansion joints and pavement
markings have been included. Durations have varied from 1 to 5 years.
The GAO in its 1994 report stated:
With few exceptions, state officials told us (GAO) that they
have generally been satisfied with their experiences, on the basis
of preliminary observations or final results from 23 of the 33
warranted projects undertaken to date. These officials' satisfaction
resulted from both the initial quality of the workmanship and the
opportunity to obtain remedial action when necessary.
One SHA official commenting on two bridge painting projects with
warranties stated ``These warranted projects are of the highest quality
ever obtained in this State for bridge painting.'' Another SHA engineer
commented about an asphaltic concrete pavement project with a warranty.
On this project the pavement developed distress only 3 months after
construction, and the contractor was ordered to repair it under
warranty. The engineer felt that notifying the contractor to do the
repairs, without
[[Page 44273]]
using SHA funding for the repairs, was an effective use of public
funds. The evaluation, reporting, and feedback procedures included in
SEP 14 have provided the FHWA with an impetus to revise the existing
warranty regulation, and give SHAs more flexibility to use warranties
in Federal-aid contracts.
Rulemaking Analyses and Notices
All comments received before the close of business on the comment
closing date indicated above will be considered and will be available
for examination in the docket at the above address. Comments received
after the comment closing date will be filed in the docket and will be
considered to the extent practicable, but the FHWA may issue a final
rule at anytime after the close of the comment period. In addition to
late comments, the FHWA will also continue to file relevant information
in the docket as it becomes available after the comment closing date,
and interested persons should continue to examine the docket for new
material.
The FHWA has determined that prior notice and opportunity for
comment are unnecessary under 5 U.S.C. 553(b)(3)(B) because this
interim final rule, in amending the FHWA's regulation on guaranty and
warranty clauses in Federal-aid highway construction contracts to
permit States to include such clauses, does not impose any new
obligation or requirement on the States or highway contractors.
Instead, it simply enables any State to include warranty clauses in
Federal-aid highway construction contracts if the State determines that
such clauses would be beneficial. In addition, to the extent that
warranty clauses have been found to enhance the quality of highway
construction projects, prior notice and opportunity for comment are
contrary to the public interest under 5 U.S.C. 553(b)(3)(B) because
this action of lifting the general prohibition against their use gives
States the flexibility to include these potentially beneficial clauses
in their construction contracts. For these same reasons, the FHWA has
determined that prior notice and opportunity for comment are not
required under the Department of Transportation's regulatory policies
and procedures, as it is not anticipated that such action would result
in the receipt of useful information.
This interim final rule is effective upon its date of publication.
Because this action removes the prohibition against the use of guaranty
and warranty clauses on Federal-aid highway construction contracts, it
``relieves a restriction'' in accordance with 5 U.S.C. 553(d)(1) and,
therefore, is exempt from the 30-day delayed effective date requirement
of that section. Executive Order 12866 (Regulatory Planning and Review)
and DOT Regulatory Policies and Procedures.
The FHWA has determined that this action is not a significant
regulatory action within the meaning of Executive Order 12866 or
significant within the meaning of Department of Transportation
regulatory policies and procedures. The FHWA, at 23 CFR part 635,
currently has regulations regarding guaranty and warranty clauses. The
interim revisions would merely accommodate expanded use of warranty
clauses on Federal-aid construction contracts. Therefore, it is
anticipated that the economic impact of this rulemaking will be minimal
and a full regulatory evaluation is not required.
Regulatory Flexibility Act
In compliance with the Regulatory Flexibility Act (5 U.S.C. 601-
612), the FHWA has evaluated the effects of this interim final rule on
small entities. The FHWA concluded that this action would have no
effect on small entities. The FHWA concludes that warranties will have
little or no effect on the bonding capacity of small contractors, and
that any additional cost associated with warranties will be minimal.
Therefore, the FHWA hereby certifies that this rulemaking would not
have a significant economic impact on a substantial number of small
entities.
Executive Order 12612 (Federalism Assessment)
This action has been analyzed in accordance with the principles and
criteria contained in Executive Order 12612 and it has been determined
that this interim final rule does not have sufficient federalism
implications to warrant the preparation of a separate Federalism
assessment. Nothing in this document preempts any State law or
regulation, and no new requirements or obligations are imposed on
States or local governments by this action. Instead, this interim final
rule provides States with additional discretion to determine for
themselves whether to include warranty clauses in Federal-aid highway
construction contracts for projects on the National Highway System.
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
This action does not contain a collection of information
requirement for purposes of the Paperwork Reduction Act of 1980, 44
U.S.C. 3501-3520.
National Environmental Policy Act
This rulemaking does not have any effect on the environment. It
does not constitute a major action having a significant effect on the
environment, and therefore does not require the preparation of an
environmental impact statement pursuant to the National Environmental
Policy Act of 1969 (42 U.S.C. 4321 et seq.).
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 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 635
Government contracts, Grant programs--transportation, Highways and
roads.
Issued on: August 18, 1995.
Rodney E. Slater,
Federal Highway Administrator.
In consideration of the foregoing, the FHWA amends Title 23, Code
of Federal Regulations, part 635 by revising Sec. 635.413 as set forth
below:
PART 635--CONSTRUCTION AND MAINTENANCE [AMENDED]
Subpart D--General Material Requirements
1. The authority citation for part 635 is revised to read as
follows and all other authority citations which appear throughout part
635 are removed:
Authority: 23 U.S.C. 109, 112, 113, 114, 116, 117, 119, 128, and
315; 31 U.S.C. 6505; 42 U.S.C. 3334, 4601 et seq.; 49 CFR 1.48(b);
Secs. 635.410 and 635.417 are also issued under secs. 1019, 1041(a)
and 1048, Pub. L. 102-240, 105 Stat. 1914; sec. 10, Pub. L. 98-229,
98 Stat. 55; sec. 165, Pub. L. 97-424, 96 Stat. 2136; sec. 112, Pub.
L. 100-17, 101 Stat. 132.
2. Section 635.413 is revised to read as follows:
[[Page 44274]]
Sec. 635.413 Warranty clauses.
The SHA may include warranty provisions in National Highway System
(NHS) construction contracts in accordance with the following:
(a) Warranty provisions shall be for a specific construction
product or feature. Items of maintenance not eligible for Federal
participation shall not be covered.
(b) All warranty requirements and subsequent revisions shall be
submitted to the Division Administrator for advance approval.
(c) No warranty requirement shall be approved which, in the
judgment of the Division Administrator, may place an undue obligation
on the contractor for items over which the contractor has no control.
(d) A SHA may follow its own procedures regarding the inclusion of
warranty provisions in non-NHS Federal-aid contracts.
[FR Doc. 95-21115 Filed 8-24-95; 8:45 am]
BILLING CODE 4910-22-P
