94-17908. State Planning and Research Program Administration; Final Rule DEPARTMENT OF TRANSPORTATION  

  • [Federal Register Volume 59, Number 140 (Friday, July 22, 1994)]
    [Unknown Section]
    [Page 0]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 94-17908]
    
    
    [[Page Unknown]]
    
    [Federal Register: July 22, 1994]
    
    
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    Part III
    
    
    
    
    
    Department of Transportation
    
    
    
    
    
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    Federal Highway Administration
    
    
    
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    23 CFR Parts 420 and 511
    
    
    
    
    State Planning and Research Program Administration; Final Rule
    DEPARTMENT OF TRANSPORTATION
    
    Federal Highway Administration
    
    23 CFR Parts 420 and 511
    
    [FHWA Docket No. 93-18]
    RIN 2125-AD21
    
     
    State Planning and Research Program Administration
    
    AGENCY: Federal Highway Administration (FHWA), DOT.
    
    ACTION: Final rule.
    
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    SUMMARY: With the restructuring of the Federal-aid highway program due 
    to enactment of the Intermodal Surface Transportation Efficiency Act 
    (ISTEA) of 1991 (Pub. L. 102-240, 105 Stat. 1914), regulations for the 
    administration and management of activities undertaken with FHWA 
    planning and research funds are updated to reflect the revised sources 
    of, and activities eligible for, such funds. In addition, the ISTEA 
    allows the States more flexibility in managing and directing federally 
    funded research, development, and technology transfer (RD&T) 
    activities. This final rule includes the ISTEA revisions and grants 
    States this greater responsibility and flexibility for the management 
    and oversight of their RD&T initiatives funded with FHWA planning and 
    research funds.
    
    EFFECTIVE DATE: This rule is effective on August 22, 1994.
    
    FOR FURTHER INFORMATION CONTACT: Mr. Tony Solury (202-366-5003), Office 
    of Environment and Planning, Federal Highway Administration, 400 
    Seventh Street, SW., Washington, D.C. 20590, for 23 CFR part 420, 
    subpart A; Mr. Charles W. Niessner (703-285-2100), Office of Research 
    and Development, Federal Highway Administration, Turner-Fairbank 
    Highway Research Center, 6300 Georgetown Pike, McLean, VA 22101-2296, 
    for 23 CFR part 420, subpart B; or Mr. Wilbert Baccus (202-366-0780), 
    Office of the Chief Counsel, Federal Highway Administration, 400 
    Seventh Street, SW., Washington, D.C. 20590. Office hours are from 7:45 
    a.m. to 4:15 p.m., e.t., Monday through Friday, except Federal 
    holidays.
    
    SUPPLEMENTARY INFORMATION: On December 21, 1993, a notice of proposed 
    rulemaking (NPRM) was published by the FHWA in the Federal Register (58 
    FR 67510) to obtain comments from interested persons on proposed 
    revisions to regulations for program approval and authorization; 
    conduct; and reporting of planning, research, development, and 
    technology transfer activities undertaken by States and their 
    subrecipients, including metropolitan planning organizations (MPOs), 
    with FHWA planning and research funds. The proposed revisions were 
    necessary to reflect changes to Title 23, United States Code, Highways, 
    that resulted from enactment of the ISTEA. In addition, the FHWA 
    proposed that States establish a process for management of RD&T 
    activities undertaken with FHWA planning and research funds that would 
    enable States to exercise greater authority over such activities.
        With respect to administration of FHWA planning and research funded 
    RD&T activities, the final rule reflects the FHWA's belief that its 
    stewardship role should be one of concentrating more on the policies 
    and procedures by which States implement such activities than on 
    project-specific approvals and oversight. This philosophy parallels the 
    administrative oversight procedures adopted for FHWA planning and 
    research funded transportation planning activities in earlier revisions 
    to 23 CFR part 420, subpart A in 1985 and 1990.
        The ISTEA instituted a number of substantive changes pertinent to 
    transportation planning and RD&T programs. In addition to retitling it 
    from Highway Planning and Research to State Planning and Research 
    (SPR), the ISTEA: (1) increased the set-aside of funds apportioned to 
    States for SPR activities from 1.5 percent to 2 percent; (2) included 
    planning and RD&T as eligible activities under the National Highway 
    System (NHS) program and Surface Transportation Program (STP); (3) 
    permitted the use of certain funds made available under title 23, 
    U.S.C., for intermodal transportation planning and RD&T; and (4) 
    required the expenditure of 25 percent of a State's annual SPR funds 
    for RD&T activities, unless the State certifies that it will use more 
    than 75 percent for planning and the Secretary of Transportation (the 
    Secretary) accepts the certification. These legislative provisions are 
    reflected in this rule.
        Thirty-one sets of comments were submitted to the docket in 
    response to the NPRM; 28 from State transportation departments/
    agencies, 1 from a regional planning agency, 1 from a professional 
    association, and 1 from a Federal agency. The overwhelming majority of 
    comments were in support of the proposed revisions and the increased 
    flexibility for State management of RD&T activities. However, there 
    were some concerns regarding some of the specific revisions and the 
    short deadline for compliance. Many of these concerns were due to 
    misunderstandings about existing requirements and not the proposed 
    revisions. A summary of the comments, their disposition, and the 
    changes made to the rule follow.
    
    Subpart A--Administration of FHWA Planning and Research Funds
    
    General Comments and Responses
    
        Comment: One State, in which most research is conducted for the 
    State by higher education institutions, stated that the proposed 
    regulation does not pertain to universities as subrecipients and 
    recommended citing Office of Management and Budget (OMB) Circular A-
    110, ``Uniform Administrative Requirements for Grants and Agreements 
    with Institutions of Higher Education, Hospitals, and Other Non-Profit 
    Organizations,'' November, 19, 1993, for universities as subrecipients.
        Response: While the State is the recipient of FHWA planning and 
    research funds, Part 420 also applies to subawards to all categories of 
    subrecipients, including institutions of higher education. In 
    accordance with standard OMB requirements, subawards are to be 
    administered in accordance with the procedures in the OMB Circular and 
    corresponding agency implementing regulations that apply to the type of 
    agency receiving the subaward, whether or not specifically stated in 
    the regulation. To clarify what applies to administration of subawards 
    to institutions of higher education, a new paragraph (o) has been added 
    to Sec. 420.121 as discussed under the section-by-section analysis.
        Comment: One commenter suggested that the term ``State highway 
    agency'' be changed to ``State transportation agency'' to maintain 
    consistent nomenclature and reflect reality.
        Response: Since most of the State agencies to which Federal-aid 
    highway program funds are apportioned are no longer single purpose 
    highway agencies, the FHWA agrees that use of the term ``State 
    transportation agency'' is more appropriate and has made this change. 
    However, 23 U.S.C. 302 requires that a State desiring to avail itself 
    of the provisions of title 23, U.S.C., have a suitably equipped and 
    organized State highway department and has been interpreted by the FHWA 
    to restrict reimbursement of a State highway department's indirect 
    costs. Therefore, a definition of State transportation agency (STA) has 
    been added to Sec. 420.103, as discussed below under the section-by-
    section analysis, to distinguish a State highway department from other 
    State transportation agencies in order to determine whether the 
    agency's indirect costs are allowable under 23 U.S.C. 302.
        Comment: One State commented that it is using a significant portion 
    of its SPR funds for training, ``since the ISTEA language which was 
    supposed to have covered training was inadvertently left out of that 
    Legislation.''
        Response: The ISTEA in fact continued the funding provisions (23 
    U.S.C. 321) for training of State personnel although at a reduced level 
    of funding. With the exception of a specific type of training cited in 
    23 U.S.C. 307(c), FHWA planning and research funds may only be used for 
    transportation planning or RD&T related training if the cost of the 
    training is necessary, reasonable, and it benefits the purposes of the 
    grant or subgrant. General training of employees who are not working on 
    grant funded activities is not an allowable cost. This is consistent 
    with OMB cost principles which are applicable to FHWA planning and 
    research fund grants and subgrants.
        Comment: One State questioned the estimate of 2,100 burden hours, 
    shown under the heading Paperwork Reduction Act in the NPRM, for the 50 
    States to comply with the regulation and stated that it will take much 
    more time to develop a procedures manual; procedures for tracking 
    activities, schedules, accomplishment, and fiscal commitments; and 
    procedures to determine the effectiveness of the implementation 
    process, and the utilizations of the RD&T output. The commenter 
    indicated that the State has many of the elements in place, but did not 
    know if the FHWA Division office would accept them or require revisions 
    in content or format.
        Response: The estimate of 2,100 burden-hours (40 hours per 
    respondent) is for the one-time preparation by each State, the District 
    of Columbia, and the Commonwealth of Puerto Rico of the new 
    certification required by subpart B of the regulation. Many of the 
    other activities cited by the commenter are either required already 
    (e.g., progress reports) and are covered by the cited existing OMB 
    clearances or are standard management practices that the State should 
    already have in place. An updated burden estimate has been prepared. It 
    is estimated that the average one-time burden for preparation of RD&T 
    management process documentation and certification statements is 480 
    burden-hours (12 weeks x 40 hours per week) per State.
    
    Section-by-Section Analysis
    
        The authority citation has been amended from the NPRM to include 23 
    U.S.C. 303(g) which allows the use of NHS, STP, and highway bridge 
    replacement and rehabilitation (HBRR) funds for development and 
    establishment of the management and monitoring systems required under 
    23 U.S.C. 303. In addition, section 149(b) has been deleted since this 
    regulation does not apply to funds made available under this section of 
    title 23, U.S.C.
    Section 420.101  Purpose
        This section states the purpose of this regulation. It indicates 
    that the provisions of this part apply to subrecipients of States, 
    including MPOs. Language has been added to indicate that it also 
    applies to activities undertaken with NHS, STP, and Highway Bridge 
    Replacement and Rehabilitation Program (HBRRP) funds for development, 
    establishment, and implementation of the management and monitoring 
    systems required by 23 U.S.C. 303 and 23 CFR part 500. Use of NHS and 
    STP funds for such purposes was included in the NPRM definition of FHWA 
    planning and research funds; the use of HBRRP funds is being added to 
    the definition as discussed below. A reference to the additional 
    requirements for RD&T programs and studies in subpart B of this part is 
    included.
    Section 420.103  Definitions
        This section includes the terms defined in 23 U.S.C. 101(a) and 
    contains additional definitions for terms used in this part.
        The term ``FHWA planning and research funds'' includes SPR funds, 
    metropolitan planning (PL) funds, and the optional use of NHS, STP, and 
    Minimum Allocation (MA) funds for planning and RD&T purposes. It also 
    includes the use of NHS, STP, and HBRRP funds for development, 
    establishment, and implementation of the management and monitoring 
    systems required by 23 U.S.C. 303. The definition has been amended from 
    the NPRM to include funds apportioned under 23 U.S.C. 144 for the HBRRP 
    when such funds are used for development, establishment, and 
    implementation of the bridge management system required by 23 U.S.C. 
    303. This category was inadvertently not included in the NPRM.
        Although this rulemaking does not change the definition of grant, 
    one commenter believed that new readers may not be familiar with the 
    difference between a contract and a grant and, therefore, suggested 
    that a definition of grant be included to reduce confusion.
        The FHWA agrees and has added definitions of ``grant agreement'' 
    and ``procurement contract.'' These mechanisms for agencies to make 
    awards to recipients are adaptations of definitions in Chapter 63, 
    Using Procurement Contracts and Grant and Cooperative Agreements, of 
    title 31, CFR.
        A ``grant agreement'' is defined as a legal instrument between an 
    awarding agency and recipient where the principal purpose is to provide 
    funds to the recipient to carry out a public purpose of support or 
    stimulation authorized by law.
        A ``procurement contract'' is defined as a legal instrument between 
    an awarding agency and recipient where the principal purpose is to 
    acquire (by purchase, lease, or barter) property or services for the 
    direct benefit or use of the awarding agency.
        For administrative purposes, it is important to note that the 
    purpose of the award determines whether the award is a grant or a 
    procurement action. The administrative procedures for grants are 
    governed by OMB Circulars A-102 and A-110 and agency implementing 
    regulations. The administrative procedures for procurement contracts 
    are governed by the Federal Acquisition Regulations (48 CFR Part 31) or 
    State procedures if the recipient is a State.
        Since FHWA planning and research funds may be pooled for planning, 
    as well as RD&T, studies or activities of national or regional 
    significance, the definitions of national and regional pooled-fund 
    studies have been moved from Sec. 420.203 to Sec. 420.103. In addition, 
    both definitions have been modified to indicate: that MPOs, as well as 
    States, may contribute to pooled-fund studies; that national studies 
    are usually administered by the FHWA headquarters office; that regional 
    studies are usually administered by an FHWA regional office in 
    cooperation with a lead State or MPO; and that the funds may be pooled 
    with or without matching. While any of the categories of funds included 
    in the definition of ``FHWA planning and research funds'' may be 
    pooled, the matching requirement can only be waived for SPR or PL 
    funds. Such waiver must be approved by FHWA headquarters for both 
    national and regional studies in accordance with the provisions of 
    Sec. 420.119(d).
        As discussed under the general comments and responses, a definition 
    of State transportation agency has been added. ``State transportation 
    agency (STA)'' is defined as the State highway department, 
    transportation department, or other State transportation agency to 
    which Federal-aid highway funds are apportioned.
    Section 420.105  Policy
        This section continues the FHWA's previous policy of allowing 
    States maximum possible flexibility in determining which eligible 
    activities may be undertaken with FHWA planning and research funds, as 
    long as planning activities of national significance, as identified in 
    paragraph (b) of this section, are being adequately addressed. Under 
    the provisions of this section, the FHWA may withhold or withdraw 
    authorization of FHWA planning and research funds if planning 
    activities of national significance are not being performed by a State. 
    As discussed in the preamble to the NPRM, this policy also applies to 
    State subrecipients. Paragraphs (a)(1) through (4) in the NPRM have 
    been rewritten and consolidated for clarity into paragraphs (a)(1) and 
    (2) in the rule without changing the substance of the policy.
        One commenter expressed concern about the potential involvement in 
    long range data reporting requirements that would make unexpected 
    demands on its manpower in order to provide data that support FHWA 
    responsibilities as specified in Sec. 420.105(b). The commenter 
    indicated that clarification was needed on this requirement. Another 
    commenter indicated that States should have the right to question the 
    need for particular data requests from the FHWA if the cost of 
    providing such data becomes high.
        This provision has been in the regulation since 1986. The major 
    data bases that are referenced in Sec. 420.105(b) are the FHWA's 
    Highway Performance Monitoring System (HPMS) and statistical reports 
    provided by the States for inclusion in the annual publication 
    ``Highway Statistics.'' Both of these data collection activities have 
    been approved by the OMB and are resubmitted for approval every three 
    years. Occasionally, information not included in these ongoing data 
    bases is needed due to special circumstances and enactment of 
    legislation, such as, designation of a National Highway System in 
    accordance the provisions of the ISTEA. With each update of the HPMS 
    and highway statistics reporting requirements and with each special 
    request, the FHWA will continue to make every effort possible to limit 
    the burden to the States while still receiving the information 
    essential to guide the national transportation program.
    Section 420.107  SPR Minimum Research, Development, and Technology 
    Transfer Expenditure
        This section reflects the requirement in 23 U.S.C. 307(c) that not 
    less than 25 percent of a State's annual SPR funds be expended for RD&T 
    activities unless the State certifies that it will expend more than 75 
    percent of such funds for transportation planning under 23 U.S.C. 134 
    and 135. It includes specific procedures and criteria for FHWA approval 
    of a State's certification that were in the FHWA Executive Director's 
    June 25, 1992, memorandum to the FHWA Regional Administrators. (This 
    memorandum is available for review and copying in the file for FHWA 
    docket number 93-18 at the address specified above under the caption 
    FOR FURTHER INFORMATION CONTACT.) The certification must be submitted 
    annually with the work program or with the request for authorization of 
    funds for the second year of a biennial work program. Except for 
    rephrasing of the considerations in paragraphs (c)(1) to (6) to change 
    them from questions to statements, this section is unchanged from the 
    NPRM.
        Several commenters expressed concern over the criteria and 
    procedures in Sec. 420.107 for waiver of the requirement for use of 25 
    percent of a State's annual apportionment of SPR funds. One commenter 
    stated that the proposed rules go far beyond what should be necessary 
    to support such a certification and that it appears that the FHWA is 
    unduly striving to discourage this option. This commenter recommended 
    that the requirements be reduced to an assurance that the State's RD&T 
    needs are being adequately addressed. Similarly, other commenters 
    stated that the requirements for submitting an exception to the use of 
    25 percent of SPR fund for research are onerous and effectively 
    prohibit exceptions as they are currently written or that the proposed 
    rule indicates that the FHWA will be reluctant to grant exceptions.
        While 23 U.S.C. 307(c)(2) requires that a State certify to the 
    Secretary that its total expenditures for transportation planning under 
    23 U.S.C. 134 and 135 for the fiscal year will exceed 75 percent, it 
    also requires that the certification be accepted by the Secretary. 
    Based on the extensive provisions and emphasis on transportation RD&T 
    in the ISTEA, the FHWA strongly believes that the Congress intended 
    that the States have effective transportation RD&T programs. Therefore, 
    the criteria for approving an exception are being retained.
    Section 420.109  Distribution of PL Funds
        This section reflects the requirements in 23 U.S.C. 104 that a 
    State must make apportioned PL funds available to MPOs and that the 
    funds must be distributed by the State to MPOs in the State based on a 
    formula, approved by the Secretary (approval authority has been 
    delegated to the FHWA), that considers population, status of planning, 
    attainment of national ambient air quality standards, and other factors 
    necessary to provide for an appropriate distribution of funds to carry 
    out the requirements of 23 U.S.C. 134 and other applicable requirements 
    of Federal law. The FHWA's longstanding interpretation, that the 
    legislative requirement that States make PL funds available to MPOs 
    precludes the use of such funds by the State for administration of PL 
    grants or subgrants, is included in paragraph (a). It is FHWA policy to 
    consult with the appropriate Federal Transit Administration (FTA) 
    regional office prior to approval of a State's PL formula.
        One State commented that the requirement in paragraph (a) that 
    ``the State shall not use any PL funds for grant or subgrant 
    administration'' is too restrictive and should be changed to permit a 
    reasonable amount for administration. Another State commented that 
    under the ISTEA, a State DOT's role in administering and participating 
    in MPO planning activities funded with PL funds has increased 
    significantly and that there should be a provision which permits the 
    State DOT to retain a certain percentage of PL funds for its costs in 
    administering and participating in PL funded programs. Another State 
    commented: that the cost for grant administration historically has been 
    included as part of the funding package of the MPO planning work 
    program; that this new provision may unfairly restrict the use of PL 
    funds to only direct program activity and not permit the State or MPO 
    to use PL funds for organization administration costs; and that by not 
    allowing the use of PL funds for grant or subgrant administration, the 
    FHWA will be placing an unfair economic burden on the various parties 
    concerned.
        These comments imply a misunderstanding of both the legislation and 
    regulation. Before responding to these comments, a distinction needs to 
    be made between ``grant or subgrant administration'' and ``general 
    planning process administrative activities.'' ``Grant or subgrant 
    administration'' includes activities such as processing or preparing PL 
    grant agreements between the FHWA and the State, subgrant agreements 
    between the State and the MPOs, fiscal documents, progress reports, and 
    audits. ``General planning process administrative activities'' may 
    include conducting MPO meetings, preparation of planning work programs, 
    and salaries of an MPO executive director and other administrative 
    support staff.
        The legislation has always specified that PL funds are to be made 
    available to the MPOs by the State. The FHWA historically has 
    interpreted this to mean that a State cannot unilaterally retain PL 
    funds for any purpose; all PL funds must be made available to the MPOs. 
    If an individual MPO chooses to include activities (e.g., development 
    of a long range plan, traffic counting) to be performed with its PL 
    funds by the State for the MPO in its work program, it may do so. If 
    the required State PL fund distribution formula, developed in 
    consultation with the MPOs, allows for State retainage of PL funds, it 
    may be approved by the FHWA if the retained funds will be used by the 
    State for technical activities in support of metropolitan planning or 
    for making discretionary subgrants to MPOs for special studies.
        In no instance may PL funds (either in an MPO's work program or 
    retained under an approved formula) be used by a State for PL fund 
    ``grant or subgrant administration'' as indicated in subparagraph (a). 
    Such State grant or subgrant administrative activities are eligible for 
    SPR funding. ``General planning process administrative activities'' 
    performed by MPOs are eligible for PL funds. Such general 
    administrative activities performed by a State for an MPO are eligible 
    for SPR funds and would be eligible for PL funds if included in the 
    MPO's work program.
        One State commented that it would be concerned if the regulation is 
    administratively construed to require a specific formula for 
    distribution, or require reconsideration of its policy on PL funds.
        The requirement that funds be distributed by a State by a formula 
    that considers specific factors has existed since the enactment of the 
    PL funding in 1973. The ISTEA added the additional factor of attainment 
    of the national ambient air quality standards. In developing the 
    formula, the State must consult with the MPOs and must consider the 
    legislatively mandated factors, but all of the factors do not need to 
    be included in the formula. In accordance with paragraph (f), any 
    formula that does not meet these requirements must be brought into 
    conformance as soon as possible, but not later than in time for 
    distribution of PL funds apportioned to the State for the first Federal 
    fiscal year beginning after the effective date of the regulation.
    Section 420.111  Work Program
        This section includes requirements for State and subrecipient work 
    programs that serve as the application for FHWA planning and research 
    funds. References to 23 CFR part 450 and subpart B of this part are 
    cited for additional information on metropolitan area unified planning 
    work programs and RD&T work programs, respectively. Except for 
    correcting citations to 23 CFR part 450 and changing the first word in 
    paragraph (a) from ``expenditure'' to ``proposed use,'' this section is 
    unchanged from the NPRM. The work program in essence is a statement of 
    work that identifies the proposed use of the funds; expenditure of the 
    funds is documented in the financial and progress reports.
        One commenter stated that the requirement to submit work program 
    documents creates duplicate paperwork for agencies. The commenter 
    stated that the same information is available in work plans for 
    individual studies, and, if FHWA review of individual study work plans 
    is no longer required, submission of a work program is not appropriate.
        A work program has always been required for both planning and RD&T 
    activities. The work program is the ``grant application'' for FHWA 
    planning and research funds and is necessary for the FHWA to determine 
    if the proposed work is eligible. A work program may consist of a 
    listing of proposed studies and activities and other appropriate 
    information, such as cost of the activity and performing agency, with 
    sufficient description for the FHWA to determine eligibility of the 
    work. ``Work plans'' that included details on need, purpose, approach, 
    etc., for individual RD&T studies are no longer required. Therefore, 
    there is no duplication.
        One State commented that while a biennial work program is allowed, 
    it requires a projection of available Federal funds which may be 
    difficult to make on a biennial basis.
        Historically, the amount of FHWA planning and research funds 
    available to a State is consistent from year to year over the period 
    covered by authorizing legislation (e.g., the ISTEA). In any case, if a 
    State's or subrecipient's transportation planning is a continuation of 
    the same activities with minimal change in activities over an extended 
    period, use of a 2-year work program should result in a significant 
    reduction in paperwork since draft and final work programs would not 
    need to be prepared and submitted for review and approval in the second 
    year unless significant changes are necessary in the description of 
    work. The initial work program would describe the activities 
    anticipated to be accomplished over the 2-year period along with an 
    estimate of funds for each year. The FHWA would approve the 2-year work 
    program and authorize the first year's work subject to availability of 
    funds. Prior to the beginning of the second year, when the actual 
    amount of funds that will be available is known, the State would only 
    need to submit a request to revise the budget to reflect the actual 
    funds available (and if necessary any significant amendments in the 
    description of work to be accomplished) for the second year and request 
    the FHWA's authorization to proceed with the second year's work.
    Section 420.113  Eligibility of Costs
        This section includes general criteria and incorporates by 
    reference other regulations and OMB Circulars for determining 
    eligibility of transportation planning and RD&T activities and 
    allowability of items of cost (e.g., salaries, travel) within such 
    activities that are proposed for FHWA planning and research funds. 
    Administrative procedures that must be followed for costs to be 
    eligible for reimbursement are also included.
        One commenter requested that a list of examples of transportation 
    planning and RD&T activities that are eligible for FHWA planning and 
    research funds be included in the final rule. Appropriate sections of 
    title 23, U.S.C., that include information on broad categories of 
    eligible activities are included by reference. The FHWA believes that 
    any attempt to provide a more specific listing could be misinterpreted 
    since all eligible activities could not possibly be listed. The 
    longstanding practice of allowing the FHWA field offices to determine 
    eligible activities, in consultation with the headquarters office if 
    necessary, has worked well in the past and will be continued. In 
    addition, the FHWA headquarters office will continue to issue 
    appropriate guidance when necessary on the eligibility of specific 
    types of activities. For example, in response to several inquiries 
    since enactment of the ISTEA, guidance has been provided on the use of 
    FHWA planning and research funds for transportation planning involving 
    modes in addition to highway or transit. As discussed in the preamble 
    to the NPRM, transportation planning studies involving modes in 
    addition to highway or transit are eligible for FHWA planning and 
    research funds when performed as part of the statewide or metropolitan 
    transportation planning processes.
        In response to questions regarding eligibility of travel costs of 
    team members conducting peer reviews of a State's RD&T management 
    process, subpart B has been revised, as discussed below under the 
    responses to comments on subpart B, to specify that such travel costs 
    are eligible for FHWA planning and research funds. While not required 
    by this regulation or 23 CFR part 450, similar peer reviews of 
    statewide and metropolitan transportation planning processes would also 
    be eligible if included in a State or MPO transportation planning work 
    program and it is determined by the FHWA that the costs are necessary, 
    reasonable, and benefit the FHWA planning and research funded 
    transportation planning process.
        Paragraph (b) of this section in the NPRM referenced the provisions 
    of 23 CFR part 140, subpart G on the allowability of indirect costs of 
    STA planning and research units. The allowability of such costs for any 
    STA unit that performs work for development, establishment, and 
    implementation of the management and monitoring systems required under 
    23 U.S.C. 303 was addressed in a May 3, 1994, memorandum to the FHWA 
    and FTA Regional Administrators. (This memorandum is available for 
    review and copying in the file for FHWA docket number 93-18 at the 
    address specified above under the caption FOR FURTHER INFORMATION 
    CONTACT.) To more clearly identify such allowable indirect costs, the 
    reference to 23 CFR part 140, subpart G has been replaced with the 
    specific provisions and information provided in the May 3 memorandum. 
    In accordance with longstanding FHWA interpretation of 23 U.S.C. 302, 
    except as specified in new paragraph (b)(2) of Sec. 420.113, STA 
    indirect costs are not eligible for reimbursement with FHWA planning 
    and research funds. Paragraph (b)(2) specifies that salaries, but not 
    other indirect costs, for services rendered by STA employees generally 
    classified as administrative are eligible for reimbursement for a 
    transportation planning unit, RD&T unit, or other unit performing 
    eligible work with FHWA planning and research funds (including 
    development, establishment, and implementation of the management and 
    monitoring systems required by 23 U.S.C. 303 and 23 CFR part 500). Such 
    STA administrative costs are allowable in the ratio of time spent on 
    the FHWA planning and research funded work in the unit to the total 
    unit's working hours. The FHWA is currently conducting a review of its 
    longstanding policy on eligibility of STA indirect costs and, if 
    necessary based on the results of this review, the provisions in this 
    section will be amended.
    Section 420.115  Approval and Authorization Procedures
        This section includes procedures for approval of work programs or 
    projects, and amendments thereto, and authorization for work to be 
    performed with FHWA planning and research funds. The governmentwide 
    common grant management provisions for prior awarding agency approval 
    of certain budget and programmatic changes are referenced at 49 CFR 
    18.30. While executed project agreements are still necessary, the 
    language in paragraph (c) was revised to eliminate reference to forms 
    PR-2 and PR-2A since these forms are currently being revised and the 
    form numbers may change.
        Several commenters believe that the requirement for prior FHWA 
    approval for budget and programmatic changes as specified in 49 CFR 
    18.30 is contrary to the intent of giving States more responsibility 
    and authority. Some commenters also recommended that, after receiving 
    initial FHWA approval of the work programs, additional FHWA approval 
    should only be sought when a budget revision means additional Federal 
    funds are required. One commenter suggested that FHWA approval be 
    sought only when a budget revision exceeds the limits of $10,000 and 15 
    percent of a research study cost as specified in 23 CFR 511.3(e).
        Most of these comments reflect a misunderstanding of the provisions 
    of 49 CFR 18.30 which are governmentwide common grant management 
    provisions that have been applicable to FHWA planning and research 
    funded work programs since revision of OMB Circular A-102 in 1988 and 
    issuance of 49 CFR part 18. These provisions were included in 23 CFR 
    part 420 in the 1990 update and are unchanged in this final rule.
        The limit of $10,000 and 15 percent under 23 CFR 511.3(e), applies 
    to individual RD&T studies; for example, a cost increase of greater 
    than $15,000 for a $100,000 study would require prior approval. Under 
    the provisions of 49 CFR 18.30(c)(1)(ii), the State may make budget 
    transfers among direct cost categories (e.g., individual RD&T studies) 
    without FHWA prior approval unless the total of such transfers over the 
    period of the work program will, or is expected to, exceed the larger 
    of $100,000 or 10 percent of the total approved (i.e., work program) 
    budget. For example, if an RD&T work program totals $2 million, the 
    State may transfer $200,000 among direct cost line items included in 
    the work program without prior FHWA approval. At the discretion of the 
    FHWA, this prior approval requirement may be waived. Thus the use of 
    the provisions of 49 CFR 18.30 provide more flexibility and authority 
    to the State than the provisions that are being replaced.
        On the other hand, a budget change that involves an increase in the 
    total funds authorized for the work program still requires prior FHWA 
    approval and authorization. Similarly, the programmatic changes (e.g., 
    adding a line item, contracting out) specified in 49 CFR 18.30(d) 
    require prior FHWA approval.
        One commenter interpreted the provisions of paragraphs (b) and (c) 
    of this section to imply that the State can impose obligation 
    limitations on subrecipients of the PL funds and requested that it be 
    clarified to indicate that such limits can indeed be applied.
        The provisions of these paragraphs are not new and are not related 
    to the issue of distribution of available obligation authority within a 
    State. These provisions allow work to proceed and be reimbursed at a 
    later date in situations where sufficient funds or obligation authority 
    are not available at the time authorization is requested for all work 
    in a statewide or metropolitan area work program. Obligation authority 
    is distributed to the States for use by the States as determined in 
    cooperation with the FHWA field offices. In general, neither 
    legislation nor the FHWA specifies categories of funds for which the 
    States must use the obligation authority. States may choose to request 
    authorization of only a portion of the PL funds needed for a work 
    program period, but would then need to ensure that additional funds are 
    requested and authorized prior to the MPO proceeding with the remainder 
    of the work program. Such partial funding necessitates processing of 
    project amendments and additional paperwork. It also could result in an 
    MPO performing work that would be ineligible for reimbursement if the 
    work is performed prior to approval of the amendment. Such partial 
    funding should be avoided if possible.
    Section 420.117  Program Monitoring and Reporting
        This section includes grant monitoring and reporting requirements. 
    The frequency and content of progress and financial reports specified 
    in paragraphs (a) through (d) are identical to those contained in the 
    governmentwide common grant management requirements and 49 CFR 18.40 
    which is referenced in paragraph (a). Paragraph (e) requires FHWA 
    approval prior to publication of reports that document the results of 
    work performed with FHWA planning and research funds. A State may 
    request waiver of this prior approval requirement. The reference to the 
    Federal-aid Project Agreement (Form PR-2) in the first sentence of 
    paragraph (e) has been deleted since Form PR-2 is being revised and the 
    contents of the cited provision for prior approval of reports are 
    included in this paragraph.
        Several commenters believe that these reporting requirements are 
    contrary to the concept of delegation of program management 
    responsibility to the State which should be allowed to determine how to 
    monitor its research program; FHWA review and approval should be 
    limited to assurance that an adequate monitoring process is in place 
    and is being used to guide the State's program; and, if a State truly 
    has responsibility for managing its own program, the State should 
    determine the needed frequency of reporting for adequately monitoring 
    projects. Another commenter recommended that an annual report should be 
    adequate and that the reporting format should be kept simple.
        These grant reporting requirements are not new and are standard 
    governmentwide grant reporting requirements that replaced more 
    comprehensive requirements that were in 23 CFR part 420 prior to 1990. 
    These reports are necessary for the FHWA to perform its grant oversight 
    responsibilities. Progress and financial reports that include the 
    specified information must be submitted at least annually. The FHWA 
    field offices may require more frequent reports, but not more than 
    quarterly, unless the State is determined to be a high-risk grantee in 
    accordance with the provisions of 49 CFR 18.12. The reporting 
    requirements are for the work program (i.e., grant), not for individual 
    ``projects/studies.'' The progress reports previously required in 23 
    CFR part 511 for individual research studies are no longer required. 
    Progress on individual studies would be addressed in the overall work 
    program report. A State may establish additional reporting procedures 
    that meet its needs for individual studies.
        Similarly, another commenter stated that Sec. 420.117 requires an 
    increased level of reporting activity and that the interpretation and 
    administration of this section could produce some very demanding 
    requirements. This commenter also questioned who would establish and 
    approve performance goals, and what level of detail would be required.
        As indicated above, this section is unchanged from the existing 
    regulation and does not require increased reporting. The level of 
    reporting will only be greater for a State or subrecipient if the State 
    or subrecipient was not in compliance with the existing requirements.
        One commenter recommended that the reporting provisions be flexible 
    enough to allow monthly reports if agreed to by the agency and the 
    subrecipient.
        As mentioned above, the FHWA may require more frequent reports, but 
    may not require submission of reports more than quarterly unless a 
    recipient or subrecipient is determined to be a high risk. A State may 
    establish the frequency of progress and financial reports for its 
    subgrantees, but is encouraged not to impose more burdensome 
    requirements than those imposed upon the State by the FHWA.
        One commenter stated that the requirement in Sec. 420.117(c) that 
    reports from subrecipients be submitted no more than 90 days after the 
    end of the reporting period does not allow sufficient time to complete 
    the audit of the work program, especially when the MPO has elected a 2-
    year cycle for the audit to be performed. It was suggested that the 90-
    day requirement be deleted and the timeframe be determined by the State 
    with approval of the FHWA.
        The commenter is confusing grant audit requirements with grant 
    reporting requirements. In accordance with governmentwide common grant 
    management requirements, final progress and financial reports for a 
    grant (i.e., the annual/biennial work program) must be submitted within 
    90 days of the end of the grant period. If the later financial audit, 
    which covers the MPO's fiscal year and typically is not completed until 
    a year after the end of the grant period, necessitates adjustments, the 
    grant may be reopened or adjustment may be made to a current grant, as 
    appropriate. With regard to the statement that an MPO has been 
    operating under a 2-year cycle for financial audits, in accordance with 
    the OMB Circular A-128, Single Audits of State and Local Governments, 
    audits must be performed annually unless a constitutional or statutory 
    requirement for less frequent audit was in effect by January 1, 1987.
        One commenter stated that the requirement that a State must request 
    a waiver of prior approval of report publication is an unnecessary and 
    demeaning retention of FHWA authority; the State should have sole 
    responsibility and authority to publish reports that follow accepted 
    editorial formatting for electronic data base management and retrieval 
    purposes; and the use of a report as evidence of work performed and 
    approval for publication are two separate issues and should not be 
    combined. Another commenter stated that FHWA approval of reports prior 
    to publication is inconsistent with the intent of allowing States 
    flexibility in managing their own programs.
        With respect to ``editorial formatting,'' the FHWA does not review 
    reports for this purpose. The FHWA agrees that the use of a report as 
    evidence of work performed and approval for publication are two 
    separate issues, but does not agree that they should not be combined. 
    This comment implies that the report should be submitted to the FHWA 
    after publication for acceptance as evidence of work performed. In 
    addition to determining if the proposed work that was approved as part 
    of the grant was performed, the FHWA should have an opportunity to 
    determine if the contents of the report are supported by the work 
    performed since the published report will include a credit reference to 
    the FHWA. Also, submission prior to publication allows a State to use 
    FHWA expertise, if desired, to identify any necessary technical 
    corrections prior to publication and distribution. If, based on past 
    performance, an FHWA field office is satisfied that prior review is 
    unnecessary and a State requests a waiver of the prior review 
    requirement, the field office may grant the waiver for all reports or 
    for selected categories (e.g., State planning, MPO planning, all 
    research, or bridge research). A waiver may be granted for an 
    indefinite period of time, annually, or any other appropriate period. 
    Whether or not a waiver is approved, appropriate reports that document 
    work performed with FHWA planning and research funds must be prepared, 
    the reports must include a credit reference and disclaimer statement, 
    and copies must be provided to the FHWA as evidence of work performed.
    Section 420.119  Fiscal Procedures
        This section includes fiscal requirements for administration, 
    matching, and payment for FHWA planning and research funds. Paragraph 
    (c) specifies that the statewide and, if appropriate, metropolitan 
    transportation improvement program provisions of 23 CFR Part 450 need 
    to be met for the use of NHS, STP, MA, or HBRRP funds for planning or 
    RD&T purposes. Paragraph (d) includes provisions for waiver of matching 
    requirements for SPR and PL funds (this option is not applicable for 
    optional use of STP, NHS, MA, or HBRRP funds for planning or RD&T 
    activities). If the FHWA determines that the interests of the Federal-
    aid program would be best served without matching, it may waive the 
    matching requirement for individual activities or regional or national 
    pooled-fund studies.
        Two commenters stated that authority to approve 100 percent Federal 
    funding should be delegated to the FHWA regional offices.
        The approval authority for 100 percent Federal funding will remain 
    with the Associate Administrator for Program Development (for planning 
    activities) and the Associate Administrator for Research and 
    Development (for RD&T activities) since these offices are in the best 
    position to determine whether the interests of the Federal-aid highway 
    program would be best served and whether the proposed work can be more 
    effectively addressed if the matching requirement is waived.
        Several commenters stated that limiting the cost to a minimum of 
    $50,000 for cooperatively (pooled) funded projects and requiring an 
    agency's contribution to be at least $10,000 were inappropriate.
        Due to administrative costs and the time involved in coordinating 
    pooled-fund studies, proposed national studies costing less than 
    $50,000 will not be accepted. In response to the comments, the minimum 
    agency contribution of $10,000 has been deleted. Agencies contributing 
    less than $10,000 to a national pooled-fund study may participate in 
    the technical committee meetings, but will not be reimbursed from the 
    pooled funds for their expenses to attend the meetings. At the 
    discretion of the FHWA regional offices and participating agencies, 
    regional pooled-fund studies of less than $50,000 may be undertaken and 
    travel costs may be reimbursed from the regional pooled funds for 
    expenses for attendance at technical committee meetings of 
    representatives of agencies that contribute less than $10,000.
    Section 420.121  Other Requirements
        This section contains, mostly by cross reference, other legislative 
    or regulatory requirements applicable to FHWA planning and research 
    fund grants. Except as noted below, this section is unchanged from the 
    NPRM.
        With respect to paragraph (d), one commenter stated that it appears 
    that the regulation does not differ from present procedures with 
    respect to the acquisition of research equipment. It was suggested that 
    more latitude be given to the States for the purchase of research 
    equipment with SPR funds when the equipment will clearly be devoted to 
    research at a facility largely supported by SPR funds.
        In accordance with governmentwide grant management procedures and 
    cost principles, equipment is eligible if the cost is necessary, 
    reasonable, and it benefits the grant. Individual items of equipment 
    must be identified in the grant application (i.e., the work program) 
    and will be reviewed for eligibility on a case-by-case basis. In 
    general, if the equipment will be used only for FHWA funded work, all 
    of the cost may be eligible. If the equipment will be used for work 
    funded by other sources, the cost should be shared on an equitable 
    basis or through the establishment of rental/use rates.
        As noted above under the heading General Comments and Responses, 
    paragraph (o) has been added to this section. This new paragraph 
    specifies that subawards to institutions of higher education, 
    hospitals, and other nonprofit organizations will be administered by 
    the State in accordance with the provisions of OMB Circular A-110 (58 
    FR 62992) and the U.S. DOT's implementing regulations, 49 CFR part 19 
    (59 FR 15657). (Copies of OMB Circular A-110 and 49 CFR part 19 are 
    available for review and copying in the file for FHWA docket number 93-
    18 at the address specified above under the caption FOR FURTHER 
    INFORMATION CONTACT.)
        A new paragraph (p) has been added to specify that reports and 
    other documents prepared under FHWA planning and research funded grants 
    or subgrants awarded after the effective date of this regulation must 
    be in metric units.
    
    Subpart B--Research, Development, and Technology Transfer Program 
    Management
    
    General Comments and Responses
    
        Comment: Several commenters requested clarification concerning 
    various aspects of the peer review process, including the purpose and 
    use of the results of the reviews, funding of travel for review team 
    members, and frequency of the reviews.
        Response: It is the State's responsibility to initiate a peer 
    review of its RD&T management process. An initial peer review should be 
    undertaken sometime during the first three years after the State's 
    management process has been approved by the FHWA Division Office.
        The peer review is intended to review a State's management process, 
    not the content of its RD&T program. It will not be used for compliance 
    or certification. Peer reviews should help in identifying, reinforcing, 
    and conveying effective program approaches across the country and 
    enable a nationwide sharing of successful practices and policies. The 
    purpose of providing the peer review report and a written response to 
    the report findings to the FHWA Division Administrator is primarily to 
    keep the Division Administrator informed of the status of the State's 
    program and what efforts are being taken to improve the program.
        The members of the peer review team will be selected by the State. 
    The FHWA will establish criteria for team members and will develop and 
    maintain a list of qualified individuals who will be available to serve 
    on the teams. At least two members of the peer review team must be 
    selected from this list.
        A State may include a line item in its work program to pay for the 
    peer review of its RD&T program with FHWA planning and research funds. 
    The FHWA will consider establishing a national pooled-fund project if 
    there is sufficient interest from the States and if it would expedite 
    the peer review process.
        The ``periodic basis'' for conducting peer reviews has been 
    determined by the FHWA to be once every three years. After experience 
    has been gained operating under the new procedures, consideration will 
    be given to extending the time period between reviews.
        Comment: Comments were mixed on whether the proposed rule should be 
    mandatory for all States or whether a State could continue to submit 
    individual RD&T studies for Federal approval.
        Response: The option to submit individual studies for Federal 
    approval (i.e., to continue operating under current procedures) has not 
    been included in the final rule. The regulations are mandatory for all 
    States. The final regulation provides a State with considerable 
    latitude in developing and managing its RD&T activities and supports 
    the intent of ISTEA to move the decisionmaking process to the State 
    level.
        The FHWA is available, at a State's request, to assist in reviewing 
    any RD&T activities that are highly technical or require special 
    expertise.
        Comment: One commenter stated that the FHWA's intent concerning the 
    degree of RD&T program interaction within State agencies should be more 
    clearly stated. Specifically, expectations regarding the degree of 
    management involvement at various organizational levels should be 
    disclosed.
        Response: Due to the different organizational structures of the 
    States, it is not possible to be specific concerning the degree of 
    management involvement. Each State should involve those management 
    levels that are necessary to develop and implement an RD&T program that 
    addresses high priority transportation issues.
        Comment: One commenter stated that the NPRM implies that the FHWA 
    is going to require a uniform format for State work programs since the 
    information will be entered into a national data base.
        Response: There is no intent to require a uniform work program 
    format. The FHWA will encourage the States to include summary sheets 
    listing all studies and costs followed by more detailed information on 
    individual studies in their work programs. Also, as part of its 
    management process, each State is required to use the Transportation 
    Research Board's Transportation Research Information Services (TRIS) 
    for reporting its active RD&T activities. It will be the State's 
    responsibility to enter its new RD&T activities into the TRIS data 
    base. Since uniform entries will be required for the data base, it 
    could reasonably result in the States' work programs becoming more 
    uniform to simplify data entry.
        Comment: Several commenters expressed concern about the requirement 
    that each State implement a program of RD&T activities for planning, 
    design, construction, and maintenance of highways, public 
    transportation, and intermodal transportation systems. The concerns 
    were that the budgets for the smaller States are not sufficient to 
    support activities in all of these areas; the FHWA is requiring the 
    States to set up separate groups of funding for highway, transit, and 
    intermodal research; and the term ``program of RD&T activities'' is not 
    defined.
        Response: The ISTEA allows the use of FHWA planning and research 
    funds for RD&T activities noted in Sec. 420.207. The regulation 
    reflects the types of activities that may be conducted, but does not 
    mandate that particular types be conducted. Each State is to develop a 
    program that addresses its highest priority transportation research 
    needs. The priorities will vary from State to State depending on such 
    factors as the size of the State, its population, and the size and 
    number of urban areas. This regulation does not establish separate 
    groups of funds for highway, transit, or intermodal research.
        Comment: One commenter stated that the conditions for grant 
    approval appear to require more paperwork than currently required.
        Response: Initially, for some States, it may require additional 
    effort to document the State's RD&T management process. Once the 
    management process has been documented and approved by the FHWA the 
    amount of paperwork between the State and the FHWA should be reduced 
    substantially. Paperwork on individual RD&T activities essentially will 
    be eliminated.
        Comment: One commenter was concerned that without additional 
    explanation each FHWA Division Office would have a different 
    interpretation of the requirement that a State have procedures to 
    determine the effectiveness of its RD&T program.
        Response: Guidelines for implementing subpart B are being 
    developed. These guidelines will expand on the requirements in 
    Sec. 420.207. As a minimum, a State should develop a follow-up 
    procedure to determine if the RD&T results have been incorporated into 
    the State's standard plans, specifications, practices, or procedures. A 
    more detailed process could involve benefit/cost ratios or other 
    effectiveness measures.
        Comment: One commenter stated that to list individual studies in 
    the work program reduced the State's ability to be responsive to 
    research needs as they arise during the year. According to the 
    commenter this will cause a delay in the start of new research by 
    having to wait for the next program approval or for approval of an 
    amended program.
        Response: A listing of individual studies in the work program is 
    necessary for the FHWA Division Office to determine if the items are 
    eligible for FHWA planning and research funds. Addition or deletion of 
    individual studies is a programmatic change that requires prior FHWA 
    approval. Such prior approval may be waived by the FHWA division 
    office; however, the total FHWA planning and research funds authorized 
    for the work program cannot be exceeded without FHWA prior 
    authorization. It is anticipated that once a State has demonstrated 
    that it has an adequate RD&T management process that meets the 
    requirements of this rule, the FHWA Division Office would consider a 
    request for waiver of prior approval of programmatic changes in the 
    work program.
    
    Section-by-Section Analysis
    
    Section 420.201  Purpose and Applicability
        This section states the purpose of subpart B. It indicates that the 
    requirements are applicable to RD&T activities performed by the States 
    and their subrecipients with FHWA planning and research funds. It 
    references the provisions of subpart A. This section is unchanged from 
    that proposed in the NPRM.
    Section 420.203  Definitions
        This section includes the definitions in 23 U.S.C. 101(a) and 
    subpart A and provides additional definitions for terms used in this 
    subpart.
        Several commenters stated that the definition of ``peer review'' in 
    the NPRM could be misinterpreted to require participation of 
    representatives of specific organizations listed in the definition and 
    that the definition should be revised to clearly state what is 
    intended. The definition has been revised to indicate that a ``peer 
    review'' is a review of a State's RD&T program conducted by persons who 
    are knowledgeable in RD&T management and operation and to clarify that 
    the peer review team may include, and is not limited to, 
    representatives of another State, the FHWA, the American Association of 
    State Highway and Transportation Officials, the Transportation Research 
    Board, universities, or the private sector.
        Commenters suggested that definitions of the terms ``RD&T 
    activity'' and ``intermodal RD&T'' be included to provide an indication 
    of individual or categories of activities that are included in these 
    terms that are used in other sections of the rule.
        The FHWA has added definitions of these two terms.
    Section 420.205  Policy
        This section explains the FHWA's intent to allow States maximum 
    flexibility and discretion in managing and directing their FHWA 
    planning and research funded RD&T activities while ensuring proper 
    utilization of Federal funds and avoiding unnecessary duplication of 
    effort.
        Except for removal of paragraph (h), this section is unchanged from 
    the NPRM. Paragraph (h) includes the nondiscrimination provisions of 
    title VI of the Civil Rights Act of 1964 and DOT and FHWA implementing 
    regulations. Most of this paragraph was redundant of Sec. 420.121(m), 
    which applies to RD&T as well as planning programs. The citation to 23 
    CFR part 200 that was in this paragraph has been moved to 
    Sec. 420.121(m).
    Section 420.207  Conditions for Grant Approval
        This section outlines the conditions that a State must meet for 
    approval of FHWA planning and research funds for its RD&T activities.
        Paragraph (b) has been revised to indicate that a State's work 
    program ``may'' include a line item for the costs associated with a 
    peer review of its RD&T program.
        The FHWA will establish criteria and develop and maintain a list of 
    qualified individuals who will be available to serve on peer review 
    teams. A requirement has been added to paragraph (b) providing that at 
    least two members of the peer review team must be selected from the 
    FHWA list.
        The last sentence in paragraph (c) has been rewritten to eliminate 
    the impression that the peer review team is under the direction of the 
    FHWA.
    Section 420.209   RD&T Work Program
        This section outlines the items that must be included in a State's 
    work program and incorporates by reference Sec. 420.115 for approval 
    and authorization procedures. The title of this section has been 
    changed from ``State work program'' to ``RD&T work program'' since it 
    includes provisions applicable to the RD&T program. A requirement to 
    include a summary, listing the major items and estimated cost, has been 
    added to this section. The summary will provide a quick overview of the 
    content of a State's RD&T program.
    Section 420.211  Eligibility of Costs
        This section indicates eligible costs for FHWA participation in 
    RD&T activities and references Sec. 420.113 for other eligible costs. 
    Paragraph (c) was revised to conform with Sec. 420.113(b).
    Section 420.213  Certification Requirements
        This section provides the format for a State's certification 
    indicating (1) State compliance with the requirements of this subpart; 
    (2) the condition under which a new certification is required; and (3) 
    the due date for the initial certification.
        Several commenters noted that some States may not be able to comply 
    with the proposed January 1, 1995, certification date. The date for 
    certification has been changed to June 30, 1995. In addition, a 
    provision has been added that allows the FHWA Division Administrator to 
    grant conditional approval of a State's RD&T management process for a 
    State unable to achieve full compliance by June 30, 1995. A conditional 
    approval would cite those areas of the State's management process that 
    are deficient and that all deficiencies would need to be corrected by 
    January 1, 1996.
        Questions were asked on how often a certification needs to be 
    submitted and if a State could begin operating under the new procedures 
    prior to proposed date of January 1, 1995. The certification is a one-
    time submittal, unless a State significantly changes its RD&T 
    management process. A copy of the State's certification is to be 
    submitted with its work program. A State may begin operating under 
    these procedures as soon as its RD&T management process is approved by 
    the FHWA.
    Section 420.215  Procedure for Withdrawal of Approval
        This section outlines the procedures used and penalties imposed if 
    a State is not complying with the requirements of this subpart or is 
    not performing in accordance with its RD&T management process.
        Paragraph (d) in the NPRM proposed that, for any State not in 
    compliance, the FHWA would withdraw the State's ability to approve RD&T 
    activities and require the State to submit individual studies for FHWA 
    approval. This approval requirement is similar to current procedures 
    and would have provided little incentive for a State to correct 
    deficiencies in its program. Therefore, paragraph (d) has been revised 
    to indicate that an adverse decision shall result in the immediate 
    withdrawal of FHWA planning and research funding for the State's RD&T 
    activities until the State is in full compliance.
    
    Rulemaking Analyses and Notices
    
    Executive Order 12866 (Regulatory Planning and Review) and DOT 
    Regulatory Policies and Procedures
    
        The FHWA has determined that this rulemaking is not a significant 
    regulatory action within the meaning of Executive Order 12866 or a 
    significant regulation under the regulatory policies and procedures of 
    the Department of Transportation. This action amends requirements for 
    administration of FHWA planning and research funds to be consistent 
    with legislative changes made by the ISTEA. Also, this rulemaking 
    establishes a mandatory State certification process and a Federal and 
    peer review process to determine annually whether each State complies 
    with the standards for State RD&T management in subpart B. The economic 
    costs of this rulemaking will be insignificant and will consist only of 
    the costs associated with preparation of the grant applications and 
    State development of procedures for RD&T management. The cost savings 
    that will be realized by the States due to the reduction in time to 
    initiate and conduct RD&T activities under the State RD&T management 
    provisions will more than offset the one-time cost of development of 
    the procedures.
    
    Regulatory Flexibility Act
    
        In compliance with the Regulatory Flexibility Act (5 U.S.C. 601-
    612), the FHWA has evaluated the effects of this rule on small 
    entities. This rule addresses the administrative procedures and 
    requirements that States must comply with when using FHWA planning and 
    research funds provided under title 23, U.S.C. This rule does not 
    impose any direct requirement on small entities that would result in 
    increased economic costs. Based on this evaluation, the FHWA certifies 
    that this rule will 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. Although this rule relates 
    to requirements that States must meet to be eligible for FHWA planning 
    and research funds, federalism implications, though unavoidable, would 
    be minimized. Nothing in this rule preempts any State law or 
    regulation. The rule provides States increased authority and 
    flexibility to manage their federally assisted State planning and 
    research programs. This increase in authority and flexibility is in 
    concert with the principles and criteria contained in Executive Order 
    12612 for the implementation of express statutory provisions. 
    Accordingly, the FHWA certifies that this rule does not have sufficient 
    Federalism implications to warrant the preparation of a full Federalism 
    Assessment under the principles and criteria contained in Executive 
    Order 12612.
    
    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 of 
    Federal programs and activities apply to this program.
    
    Paperwork Reduction Act
    
        The information collection requirements referenced in 
    Sec. 420.105(b) have been approved by the OMB under the provisions of 
    the Paperwork Reduction Act of 1980 (44 U.S.C. 3501-3520) and have been 
    assigned OMB control numbers 2125-0028 and 2125-0032. The information 
    collection requirements in Secs. 420.111 (a), (b), and (c), and 420.117 
    (b) and (c) for metropolitan planning areas have been approved by the 
    OMB and assigned control number 2132-0529. The information collection 
    requirements in Secs. 420.111 (a), (b), and (c), 420.117 (b) and (c), 
    and 420.213 (a) and (b) for State planning and RD&T activities have 
    been submitted to the OMB for approval.
    
    National Environmental Policy Act
    
        The agency has analyzed this action for the purpose of the National 
    Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) and has 
    determined that this action would not have any effect on the quality of 
    the environment.
    
    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.
        For the reasons set out in the preamble, and under the authority of 
    23 U.S.C. 315 and 49 CFR 1.48, title 23, Code of Federal Regulations, 
    is revised as set forth below.
    
    List of Subjects in 23 CFR Parts 420 and 511
    
        Accounting, Grant programs--transportation, Highways and roads, 
    Planning, Reporting and recordkeeping requirements, Research.
    
        Issued on: July 18, 1994.
    Rodney E. Slater,
    Federal Highway Administrator.
    
        In consideration of the foregoing, the FHWA amends Chapter I of 
    title 23, Code of Federal Regulations, by revising the heading of 
    subchapter E, by revising part 420, and by removing and reserving part 
    511 as set forth below.
    
    SUBCHAPTER E--PLANNING AND RESEARCH
    
        1. The heading of subchapter E is revised as set forth above.
        2. Part 420 is revised to read as follows:
    
    PART 420--PLANNING AND RESEARCH PROGRAM ADMINISTRATION
    
    Subpart A--Administration of FHWA Planning and Research Funds
    
    Sec.
    420.101  Purpose and applicability.
    420.103  Definitions.
    420.105  Policy.
    420.107  SPR minimum research, development, and technology transfer 
    expenditure.
    420.109  Distribution of PL funds.
    420.111  Work program.
    420.113  Eligibility of costs.
    420.115  Approval and authorization procedures.
    420.117  Program monitoring and reporting.
    420.119  Fiscal procedures.
    420.121  Other requirements.
    
    Subpart B--Research, Development and Technology Transfer Program 
    Management
    
    Sec.
    420.201  Purpose and applicability.
    420.203  Definitions.
    420.205  Policy.
    420.207  Conditions for grant approval.
    420.209  State work program.
    420.211  Eligibility of costs.
    420.213  Certification requirements.
    420.215  Procedure for withdrawal of approval.
    
        Authority: 23 U.S.C. 103(i), 104(f), 115, 120, 133(b), 134(n), 
    157(c), 303(g), 307, and 315; and 49 CFR 1.48(b).
    
    Subpart A--Administration of FHWA Planning and Research
    
    
    Sec. 420.101  Purpose and applicability.
    
        This part prescribes the Federal Highway Administration (FHWA) 
    policies and procedures for the administration of activities undertaken 
    by States and their subrecipients, including Metropolitan Planning 
    Organizations (MPOs), with FHWA planning and research funds. It applies 
    to activities and studies funded as part of a recipient's or 
    subrecipient's work program or as separate Federal-aid projects that 
    are not included in a work program. This subpart also is applicable to 
    the approval and authorization of research, development, and technology 
    transfer (RD&T) work programs; additional policies and procedures 
    regarding administration of RD&T programs are contained in subpart B of 
    this part. The requirements in this part supplement those in 49 CFR 
    Part 18 which are applicable to administration of these funds.
    
    
    Sec. 420.103  Definitions.
    
        Unless otherwise specified in this part, the definitions in 23 
    U.S.C. 101(a) are applicable to this part. As used in this part:
        Grant agreement means a legal instrument between an awarding agency 
    and recipient where the principal purpose is to provide funds to the 
    recipient to carry out a public purpose of support or stimulation 
    authorized by law.
        FHWA planning and research funds means:
        (1) State planning and research (SPR) funds (the 2 percent funds 
    authorized under 23 U.S.C. 307(c)(1));
        (2) Metropolitan planning (PL) funds (the 1 percent funds 
    authorized under 23 U.S.C. 104(f) to carry out the provisions of 23 
    U.S.C. 134(a));
        (3) National highway system (NHS) funds authorized under 23 U.S.C. 
    104(b)(1) used for transportation planning in accordance with 23 U.S.C. 
    134 and 135, highway research and planning in accordance with 23 U.S.C. 
    307, highway-related technology transfer activities, or development and 
    establishment of management systems under 23 U.S.C. 303;
        (4) Surface transportation program (STP) funds authorized under 23 
    U.S.C. 104(b)(3) used for highway and transit research and development 
    and technology transfer programs, surface transportation planning 
    programs, or development and establishment of management systems under 
    23 U.S.C. 303; and
        (5) Minimum allocation funds authorized under 23 U.S.C. 157(c) used 
    for carrying out, respectively, the provisions of 23 U.S.C. 307(c)(1) 
    (up to 1\1/2\ percent) and 23 U.S.C. 134(a) (up to \1/2\ percent).
        Metropolitan planning area means the geographic area in which the 
    metropolitan transportation planning process required by 23 U.S.C. 134 
    and section 8 of the Federal Transit Act (49 U.S.C. app. 1607) must be 
    carried out.
        Metropolitan planning organization (MPO) means the forum for 
    cooperative transportation decisionmaking for a metropolitan planning 
    area.
        National pooled-fund study means a planning or RD&T study or 
    activity expected to solve problems of national significance, usually 
    administered by the FHWA headquarters office in cooperation with States 
    and/or MPOs, that is funded by State and/or MPO contributions of FHWA 
    planning and research funds, with or without matching funds.
        Procurement contract means a legal instrument between an awarding 
    agency and recipient where the principal purpose is to acquire (by 
    purchase, lease, or barter) property or services for the direct benefit 
    or use of the awarding agency.
        Regional pooled-fund study means a planning or RD&T study expected 
    to solve problems of regional significance, usually administered by an 
    FHWA region office in cooperation with a lead State and/or MPO, that is 
    funded by State and/or MPO contributions of FHWA planning and research 
    funds, with or without matching funds.
        State transportation agency (STA) means the State highway 
    department, transportation department, or other State transportation 
    agency to which Federal-aid highway funds are apportioned.
        Work program means a periodic statement of proposed work and 
    estimated costs that document the eligible activities to be undertaken 
    with FHWA planning and research funds during the next 1 or 2-year 
    period by STAs and/or their subrecipients.
    
    
    Sec. 420.105  Policy.
    
        (a) Within the limitations of available funding and with the 
    understanding that planning activities of national significance, 
    identified in paragraph (b) of this section, and the requirements of 23 
    U.S.C. 134, 135, 303, and 307(c) are being adequately addressed, the 
    FHWA will allow STAs and their subrecipients:
        (1) Maximum possible flexibility in the use of FHWA planning and 
    research funds to meet highway and multimodal transportation planning 
    and RD&T needs at the national, State, and local levels while ensuring 
    legal use of such funds and avoiding unnecessary duplication of 
    efforts; and
        (2) To determine which eligible planning and RD&T activities they 
    desire to support with FHWA planning and research funds and at what 
    funding level.
        (b) The STAs shall provide data that support the FHWA's 
    responsibilities to the Congress and to the public. These data include, 
    but are not limited to, information required for: Preparing proposed 
    legislation and reports to the Congress; evaluating the extent, 
    performance, condition, and use of the Nation's transportation systems; 
    analyzing existing and proposed Federal-aid funding methods and levels 
    and the assignment of user cost responsibility; maintaining a critical 
    information base on fuel availability, use, and revenues generated; and 
    calculating apportionment factors.
    
    (The information collection requirements in paragraph (b) of 
    Sec. 420.105 have been approved by the Office of Management and 
    Budget (OMB) under control numbers 2125-0028 and 2125-0032.)
    
    
    Sec. 420.107  SPR minimum research, development, and technology 
    transfer expenditure.
    
        (a) In accordance with the provisions of 23 U.S.C. 307(c), not less 
    than 25 percent of the SPR funds apportioned to a State for a fiscal 
    year shall be expended for RD&T activities relating to highway, public 
    transportation, and intermodal transportation systems, unless the State 
    certifies, and the FHWA accepts the State's certification, that total 
    expenditures by the State during the fiscal year for transportation 
    planning under 23 U.S.C. 134 and 135 will exceed 75 percent of the 
    amount apportioned for the fiscal year.
        (b) Prior to submitting a request for an exception to the 25 
    percent requirement, the State shall ensure that:
        (1) The additional planning activities are essential and there are 
    no other reasonable options available for funding these planning 
    activities (including the use of National Highway System, Surface 
    Transportation Program, or Federal Transit Administration Section 
    26(a)(2) funds or by deferment of lower priority planning activities);
        (2) The planning activities have a higher priority than RD&T 
    activities in overall needs of the State for a given year; and
        (3) The total level of effort by the State in RD&T (using both 
    Federal and State funds) is adequate.
        (c) If the State chooses to pursue an exception, the request, along 
    with supporting justification, shall be sent to the FHWA Division 
    Administrator for action by the FHWA Associate Administrator for 
    Research and Development. The Associate Administrator's decision shall 
    be based upon the following considerations:
        (1) Whether the State has a process for identifying RD&T needs and 
    for implementing a viable RD&T program.
        (2) Whether the State is contributing to cooperative RD&T programs 
    or activities, such as the National Cooperative Highway Research 
    Program, the Transportation Research Board, the implementation of 
    products of the Strategic Highway Research Program, and pooled-fund 
    studies.
        (3) Whether the State is using SPR funds for technology transfer 
    and for transit or intermodal research and development to help meet the 
    25 percent minimum requirement.
        (4) The percentage or amount of the State's FHWA planning and 
    research funds that were used for RD&T prior to enactment of the 25 
    percent requirement and whether the percentage or amount will increase 
    if the exception is approved.
        (5) If an exception is approved for the fiscal year, whether the 
    State can demonstrate that it will meet the requirement or 
    substantially increase its RD&T expenditures over a multi-year period.
        (6) Whether the amount of Federal funds needed for planning for the 
    program period exceeds the total of the 75 percent limit for the fiscal 
    year and any unexpended (including unused funds that can be released 
    from completed projects) funds for planning from previous 
    apportionments.
        (d) If the State's request for an exception is approved, the 
    exception will be valid only for the fiscal year in which the exception 
    is approved. A new request must be submitted in subsequent fiscal 
    years.
    
    
    Sec. 420.109  Distribution of PL funds.
    
        (a) States shall make all PL funds authorized by 23 U.S.C. 104(f) 
    available to the MPOs in accordance with a formula developed by the 
    State, in consultation with the MPOs, and approved by the FHWA. The 
    State shall not use any PL funds for grant or subgrant administration.
        (b) In developing the formula for distributing PL funds, the State 
    shall consider population, status of planning, attainment of air 
    quality standards, metropolitan area transportation needs, and other 
    factors necessary to provide for an appropriate distribution of funds 
    to carry out the requirements of 23 U.S.C. 134 and other applicable 
    requirements of Federal law.
        (c) As soon as practicable after PL funds have been apportioned by 
    the FHWA to the States, the STAs shall inform the MPOs and the FHWA of 
    the amounts allocated to each MPO.
        (d) If the STA, in a State receiving the minimum apportionment of 
    PL funds under the provisions of 23 U.S.C. 104(f)(2), determines that 
    the share of funds to be allocated to any MPO results in the MPO 
    receiving more funds than necessary to carry out the provisions of 23 
    U.S.C. 134(a), the STA may, after considering the views of the affected 
    MPOs and with the approval of the FHWA, use these funds to finance 
    transportation planning outside of metropolitan planning areas.
        (e) In accordance with the provisions of 23 U.S.C. 134(n), any PL 
    funds not needed for carrying out the metropolitan planning provisions 
    of 23 U.S.C. 134 may be made available by the MPOs to the State for 
    funding statewide planning activities under 23 U.S.C. 135, subject to 
    approval by the FHWA.
        (f) Any State PL fund distribution formula that does not meet the 
    requirements of paragraphs (a) or (b) of this section shall be brought 
    into conformance with such requirements as soon as possible, but no 
    later than in time for distribution of PL funds apportioned to the 
    State for the first Federal fiscal year beginning after August 22, 
    1994.
    
    
    Sec. 420.111  Work program.
    
        (a) Proposed use of FHWA planning and research funds shall be 
    documented by the STAs and subrecipients in a work program(s) 
    acceptable to the FHWA. Statewide, metropolitan, other transportation 
    planning activities, and transportation RD&T activities may be 
    administered as separate programs, paired in various combinations, or 
    brought together as a single work program. Similarly, these 
    transportation planning and RD&T activities may be authorized for 
    fiscal purposes as one combined Federal-aid project or as separate 
    Federal-aid projects. The expenditure of PL funds for transportation 
    planning outside of metropolitan planning areas under Sec. 420.109(d) 
    may be included in the work program for statewide transportation 
    planning activities or in a separate work program submitted by the STA.
        (b) Work program(s) that document transportation planning 
    activities shall include a description of work to be accomplished and 
    cost estimates for each activity. Additional information on 
    metropolitan planning area work programs is contained in 23 CFR 
    450.314. Additional information on research, development, and 
    technology transfer work program content and format is contained in 
    subpart B of this part.
        (c) The STAs that use separate Federal-aid projects in accordance 
    with Sec. 420.111(a) shall submit, in addition to the financial 
    information specified below for each program, one overall summary 
    showing the funding for the entire FHWA funded planning, research, 
    development, and technology transfer effort. Each work program shall 
    include a financial summary that shows:
        (1) Federal share by type of fund;
        (2) Matching rate by type of fund;
        (3) State and/or local matching share; and
        (4) Other State or local funds.
        (d) The STAs and MPOs also are encouraged to include cost estimates 
    for transportation planning, research, development, and technology 
    transfer related activities funded with other Federal or State and/or 
    local funds; particularly for producing the FHWA-required data 
    specified in paragraph (b) of Sec. 420.105, for planning for other 
    transportation modes, and for air quality planning activities in areas 
    designated as nonattainment for transportation-related pollutants in 
    their work programs. The MPOs in Transportation Management Areas shall 
    include such information in their work programs in accordance with the 
    provisions of 23 CFR part 450.
    
    (The information collection requirements in Secs. 420.111(a), (b), 
    and (c), and 420.117(b) and (c) for metropolitan planning areas have 
    been approved by the OMB and assigned control number 2132-0529.)
    
    
    Sec. 420.113  Eligibility of costs.
    
        (a) Costs will be eligible for FHWA participation provided that the 
    costs:
        (1) Are for work performed for activities eligible under the 
    section of title 23, U.S.C., applicable to the class of funds used for 
    the activities;
        (2) Are verifiable from the STA's or the subrecipient's records;
        (3) Are necessary and reasonable for proper and efficient 
    accomplishment of project objectives and meet the other criteria for 
    allowable costs in the applicable cost principles cited in 49 CFR 
    18.22;
        (4) Are included in the approved budget, or amendment thereto; and
        (5) Were not incurred prior to FHWA authorization.
        (b)(1) Except as specified in paragraph (b)(2) of this section, 
    indirect costs of an STA are not eligible for reimbursement with FHWA 
    planning and research funds.
        (2) Salaries for services rendered by STA employees who are 
    generally classified as administrative are eligible for reimbursement 
    for a transportation planning unit, RD&T unit, or other unit performing 
    eligible work with FHWA planning and research funds (including 
    development, establishment, and implementation of the management and 
    monitoring systems required by 23 U.S.C. 303 and 23 CFR part 500) in 
    the ratio of time spent on the participating portion of work in the 
    unit to the total unit's working hours.
        (c) Indirect costs of MPOs and local governments are allowable if 
    supported by a cost allocation plan and indirect cost proposal approved 
    in accordance with the provisions of OMB Circular A-87. An initial plan 
    and proposal must be submitted to the Federal cognizant or oversight 
    agency for negotiation and approval prior to recovering any indirect 
    costs. The cost allocation plan and indirect cost proposal shall be 
    updated annually and retained by the MPO or local government, unless 
    requested to be resubmitted by the Federal cognizant or oversight 
    agency, for review at the time of the audit required in accordance with 
    49 CFR Part 90. If the MPO or local government's indirect cost rate 
    varies significantly from the rate approved for the previous year, or 
    if the MPO or local government changes its accounting system and 
    affects the previously approved indirect cost allocation plan and 
    proposal or rate and its basis of application, the indirect cost 
    allocation plan and proposal shall be resubmitted for negotiation and 
    approval. In either case, a rate shall be negotiated and approved for 
    billing purposes until a new plan and proposal are approved.
        (d) Indirect costs of other STA subrecipients, including other 
    State agencies, are allowable if supported by a cost allocation plan 
    and indirect cost proposal prepared, submitted, and approved by the 
    cognizant or oversight agency in accordance with the OMB requirements 
    applicable to the subrecipient.
    
    
    Sec. 420.115  Approval and authorization procedures.
    
        (a) The STA and its subrecipients shall obtain work program 
    approval and authorization to proceed prior to beginning work on 
    activities in the work program. Such approvals and authorizations 
    should be based on final work program documents. The STA and its 
    subrecipients also shall obtain prior approval for budget and 
    programmatic changes as specified in 49 CFR 18.30 and for those items 
    of allowable costs which require prior approval in accordance with the 
    applicable cost principles specified in 49 CFR 18.22.
        (b) Except for advance construction, authorization to proceed with 
    the work program(s) in whole or in part shall be deemed a contractual 
    obligation of the Federal Government pursuant to 23 U.S.C. 106 and 
    shall require that appropriate funds be available for the full Federal 
    share of the cost of work authorized. Those STAs that do not have 
    sufficient FHWA planning and research funds or obligation authority 
    available to obligate the full Federal share of the entire work 
    program(s) may utilize the advance construction provisions of 23 U.S.C. 
    115(a) in accordance with the requirements of 23 CFR Part 630, subpart 
    G. The STAs that do not meet the advance construction provisions, or do 
    not wish to utilize them, may request authorization to proceed with 
    that portion of the work program(s) for which FHWA planning and 
    research funds are available. In the latter case, authorization to 
    proceed may be given for either selected work activities or for a 
    portion of the program period, but such authorization shall not 
    constitute a commitment by the FHWA to fund the remaining portion of 
    the work program(s) should additional funds become available.
        (c) A project agreement shall be executed by the STA and FHWA 
    Division Office for each statewide transportation planning, 
    metropolitan planning area transportation planning, or RD&T work 
    program, individual activity or study, or any combination administered 
    as a single Federal-aid project. The project agreement shall be 
    executed after the authorization has been given by the FHWA to proceed 
    with the work in whole or in part. In the event that the project 
    agreement is executed for only part of the work program, the project 
    agreement shall be amended when authorization is given to proceed with 
    additional work.
    
    
    Sec. 420.117  Program monitoring and reporting.
    
        (a) In accordance with 49 CFR 18.40, the STA shall monitor all 
    activities, including those of its subrecipients, supported by FHWA 
    planning and research funds to assure that the work is being managed 
    and performed satisfactorily and that time schedules are being met.
        (b)(1) The STA shall submit performance and expenditure reports, 
    including a report from each subrecipient, that contain as a minimum:
        (i) Comparison of actual performance with established goals;
        (ii) Progress in meeting schedules;
        (iii) Status of expenditures in a format compatible with the work 
    program, including a comparison of budgeted (approved) amounts and 
    actual costs incurred;
        (iv) Cost overruns or underruns;
        (v) Approved work program revisions; and
        (vi) Other pertinent supporting data.
        (2) Additional information on reporting requirements for individual 
    RD&T studies is contained in subpart B of this part.
        (c) The frequency of reports required by paragraph (b) of this 
    section shall be annual unless more frequent reporting is determined to 
    be necessary by the FHWA; but in no case will reports be required more 
    frequently than quarterly. These reports are due 90 days after the end 
    of the reporting period for annual and final reports and no later than 
    30 days after the end of the reporting period for other reports.
        (d) Events that have significant impact on the work program(s) 
    shall be reported as soon as they become known. The type of events or 
    conditions that require reporting include: problems, delays, or adverse 
    conditions that will materially affect the ability to attain program 
    objectives. This disclosure shall be accompanied by a statement of the 
    action taken, or contemplated, and any Federal assistance needed to 
    resolve the situation.
        (e) A provision of the Federal-Aid Project Agreement requires both 
    the preparation of suitable reports to document the results of 
    activities performed with FHWA planning and research funds and FHWA 
    approval prior to publishing such reports. The STA may request a waiver 
    of the requirement for prior approval. The FHWA's approval constitutes 
    acceptance of such reports as evidence of work performed but does not 
    imply endorsement of a report's findings or recommendations. Reports 
    prepared for FHWA funded work shall include appropriate credit 
    references and disclaimer statements.
    
    (The information collection requirements in Secs. 420.117(b) and (c) 
    for metropolitan planning areas have been approved by the OMB and 
    assigned control number 2132-0529.)
    
    
    Sec. 420.119  Fiscal procedures.
    
        (a) SPR funds shall be administered and accounted for as a single 
    fund regardless of the category of Federal-aid highway funds from which 
    they are derived.
        (b) PL funds shall be administered and accounted for as a single 
    fund.
        (c) Optional funds authorized under 23 U.S.C. 104(b)(1), 104(b)(3), 
    and 157(c) used for eligible planning and RD&T purposes shall be 
    identified separately in the work program(s) and shall be administered 
    and accounted for separately for fiscal purposes. The statewide and, if 
    appropriate, metropolitan transportation improvement program provisions 
    of 23 CFR Part 450 must be met for the use of NHS, STP, or minimum 
    allocation funds for planning or RD&T purposes.
        (d) The maximum rate of Federal participation with funds identified 
    in paragraphs (a) through (c) of this section shall be as prescribed in 
    title 23, U.S.C., for the specific class of funds; unless, for funds 
    identified under paragraph (a) or (b) of this section, the FHWA 
    determines that the interests of the Federal-aid highway program would 
    be best served without such match in accordance with 23 U.S.C. 
    307(c)(3) or 23 U.S.C. 104(f)(3). The FHWA also may waive the 
    requirement for matching funds if national or regional high priority 
    planning or RD&T problems can be more effectively addressed if several 
    States and/or MPOs pool their funds. Requests for 100 percent Federal 
    funding must be submitted to the FHWA Division Office for approval by 
    the Associate Administrator for Program Development (for planning 
    activities) or the Associate Administrator Research and Development 
    (for RD&T activities).
        (e) The provisions of 49 CFR 18.24 are applicable to any necessary 
    matching of FHWA planning and research funds.
        (f) Payment shall be made in accordance with the provisions of 49 
    CFR 18.21.
    
    
    Sec. 420.121  Other requirements.
    
        (a) The financial management systems of the STAs and their 
    subrecipients shall be in accordance with the provisions of 49 CFR 
    18.20(a).
        (b) Program income, as defined in 49 CFR 18.25(b), shall be shown 
    and deducted to determine the net costs on which the FHWA share will be 
    based, unless an alternative method for using program income is 
    specified in the Federal-Aid Project Agreement.
        (c) Audits shall be performed in accordance with 49 CFR 18.26 and 
    49 CFR Part 90.
        (d) Acquisition, use, and disposition of equipment purchased by the 
    STAs and their subrecipients with FHWA planning and research funds 
    shall be in accordance with 49 CFR 18.32(b).
        (e) Acquisition and disposition of supplies acquired by the STAs 
    and their subrecipients with FHWA planning and research funds shall be 
    in accordance with 49 CFR 18.33.
        (f) In accordance with 49 CFR 18.34, STAs and their subrecipients 
    may copyright any books, publications, or other copyrightable materials 
    developed in the course of the FHWA planning and research funded 
    project. The FHWA reserves a royalty-free, nonexclusive and irrevocable 
    right to reproduce, publish, or otherwise use, and to authorize others 
    to use, the work for Government purposes.
        (g) Procedures for the procurement of property and services with 
    FHWA planning and research funds by the STAs and their subrecipients 
    shall be in accordance with 49 CFR 18.36(a) and, if applicable, 
    18.36(t). The STAs and their subrecipients shall not use FHWA funds for 
    procurements from persons (as defined in 49 CFR 29.105) who have been 
    debarred or suspended in accordance with the provisions of 49 CFR Part 
    29, subparts A through E.
        (h) The STAs shall follow State laws and procedures when awarding 
    and administering subgrants to MPOs and local governments and shall 
    ensure that the requirements of 49 CFR 18.37(a) have been satisfied. 
    STAs shall have primary responsibility for administering FHWA planning 
    and research funds passed through to subrecipients, for ensuring that 
    such funds are expended for eligible activities, and for ensuring that 
    the funds are administered in accordance with this part, 49 CFR Part 
    18, and applicable cost principles.
        (i) Recordkeeping and retention requirements shall be in accordance 
    with 49 CFR 18.42.
        (j) The STAs and their subrecipients are subject to the provisions 
    of 37 CFR Part 401 governing patents and inventions and shall include, 
    or incorporate by reference, the standard patent rights clause at 37 
    CFR 401.14, except for Sec. 401.14(g), in all subgrants or contracts. 
    In addition, STAs and their subrecipients shall include the following 
    clause, suitably modified to identify the parties, in all subgrants or 
    contracts, regardless of tier, for experimental, developmental or 
    research work: ``The subgrantee or contractor will retain all rights 
    provided for the State in this clause, and the State will not, as part 
    of the consideration for awarding the subgrant or contract, obtain 
    rights in the subgrantee's or contractor's subject inventions.''
        (k) In accordance with the provisions of 49 CFR Part 29, subpart F, 
    STAs shall certify to the FHWA that they will provide a drug free 
    workplace. This requirement can be satisfied through the annual 
    certification for the Federal-aid highway program.
        (l) The provisions of 49 CFR Part 20 regarding restrictions on 
    influencing certain Federal activities are applicable to all tiers of 
    recipients of FHWA planning and research funds.
        (m) The nondiscrimination provisions of 23 CFR Parts 200 and 230 
    and 49 CFR Part 21, with respect to Title VI of the Civil Rights Act of 
    1964 and the Civil Rights Restoration Act of 1987, apply to all 
    programs and activities of recipients, subrecipients, and contractors 
    receiving FHWA planning and research funds whether or not those 
    programs or activities are federally funded.
        (n) The STAs shall administer the transportation planning and RD&T 
    program(s) consistent with their overall efforts to implement section 
    1003(b) of the Intermodal Surface Transportation Efficiency Act of 1991 
    (Pub. L. 102-240, 105 Stat. 1914) and 49 CFR Part 23 regarding 
    disadvantaged business enterprises.
        (o) States and their subrecipients shall administer subgrants to 
    universities, hospitals, and other non-profit organizations in 
    accordance with the administrative requirements of OMB Circular A-110 
    as implemented by the U.S. DOT in 49 CFR Part 19, Uniform 
    Administrative Requirements for Grants and Agreements with Institutions 
    of Higher Education, Hospitals, and Other Non-Profit Organizations.
        (p) Reports and other documents prepared under FHWA planning and 
    research funded grants or subgrants awarded after August 22, 1994, must 
    be in metric units.
    
    Subpart B--Research, Development and Technology Transfer Program 
    Management
    
    
    Sec. 420.201  Purpose and applicability.
    
        The purpose of this subpart is to implement the provisions of 23 
    U.S.C. 307 and to prescribe Federal assistance requirements for 
    research, development, and technology transfer (RD&T) activities, 
    programs, and studies undertaken by States with FHWA planning and 
    research funds. The requirements of this subpart and subpart A of this 
    part are applicable to work performed by the States and their 
    subrecipients with FHWA planning and research funds.
    
    
    Sec. 420.203  Definitions.
    
        Unless otherwise specified in this part, the definitions in 23 
    U.S.C. 101(a) and Part 420, subpart A, are applicable to this subpart. 
    As used in this subpart:
        Applied research means the study of phenomena relating to a 
    specific known need in connection with the functional characteristics 
    of a system; the primary purpose of this kind of research is to answer 
    a question or solve a problem.
        Basic research means the study of phenomena whose specific 
    application has not been identified; the primary purpose of this kind 
    of research is to increase knowledge.
        Cooperatively funded study means an RD&T study or activity, 
    administered by the FHWA, a lead State, or other agency, that is funded 
    by some combination of a State's contribution of FHWA planning and 
    research funds, FHWA administrative contract funds, 100 percent State 
    funds, or funds from other Federal agencies.
        Development means the translation of basic or applied research 
    results into prototype materials, devices, techniques, or procedures 
    for the practical solution of a specific problem in transportation.
        Final report means a report documenting a completed RD&T study or 
    activity.
        Intermodal RD&T means research, development, and technology 
    transfer activities involving more than one mode of transportation 
    including transfer facilities between modes.
        National Cooperative Highway Research Program (NCHRP) means the 
    cooperative RD&T program directed toward solving problems of national 
    or regional significance identified by States and the FHWA, and 
    administered by the Transportation Research Board, National Academy of 
    Sciences.
        Peer review means a review conducted by persons who are 
    knowledgeable of the management and operation of RD&T programs. This 
    may include but is not limited to representatives of another State, the 
    FHWA, American Association of State Highway and Transportation 
    Officials, Transportation Research Board (TRB), universities or the 
    private sector.
        RD&T activity means a basic or applied research, development, or 
    technology transfer project or study.
        Research means a systematic controlled inquiry involving analytical 
    and experimental activities which primarily seek to increase the 
    understanding of underlying phenomena. Research can be basic or 
    applied.
        Technology transfer means those activities that lead to the 
    adoption of a new technique or product by users and involves 
    dissemination, demonstration, training, and other activities that lead 
    to eventual innovation.
        Transportation Research Information Services (TRIS) means the TRB-
    maintained computerized storage and retrieval system for abstracts of 
    ongoing and completed RD&T activities, including abstracts of RD&T 
    reports and articles.
    
    
    Sec. 420.205  Policy.
    
        (a) It is the FHWA's policy to administer the RD&T program 
    activities utilizing FHWA planning and research funds consistent with 
    the policy specified in Sec. 420.105 and the following general 
    principles in paragraphs (b) through (g) of this section.
        (b) State transportation agencies shall provide information 
    necessary for peer reviews.
        (c) States are encouraged to develop, establish, and implement an 
    RD&T program, funded with Federal and State resources, that anticipates 
    and addresses transportation concerns before they become critical 
    problems. To promote effective utilization of available resources, 
    States are encouraged to cooperate with other States, the FHWA, and 
    other appropriate agencies to achieve RD&T objectives established at 
    the national level and to develop a technology transfer program to 
    promote and use those results.
        (d) States will be allowed the authority and flexibility to manage 
    and direct their RD&T activities as presented in their work programs, 
    and to initiate RD&T activities supported by FHWA planning and research 
    funds, subject to the limitation of Federal funds and to compliance 
    with program conditions set forth in subpart A of this part and 
    Sec. 420.207.
        (e) States will have primary responsibility for managing RD&T 
    activities supported with FHWA planning and research funds carried out 
    by other State agencies and organizations and for ensuring that such 
    funds are expended for purposes consistent with this subpart.
        (f) Each State shall develop, establish, and implement a management 
    process that ensures effective use of available FHWA planning and 
    research funds for RD&T activities on a statewide basis. Each State is 
    permitted to tailor its management process to meet State or local 
    needs; however, the process must comply with the minimum requirements 
    and conditions of this subpart.
        (g) States are encouraged to make effective use of the FHWA 
    Division, Regional, and Headquarters office expertise in developing and 
    carrying out their RD&T activities. Participation of the FHWA on 
    advisory panels and in program review meetings is encouraged.
    
    
    Sec. 420.207  Conditions for grant approval.
    
        (a) As a condition for approval of FHWA planning and research funds 
    for RD&T activities, a State shall implement a program of RD&T 
    activities for planning, design, construction, and maintenance of 
    highways, public transportation, and intermodal transportation systems. 
    Not less than 25 percent of the State's apportioned SPR funds shall be 
    spent on such activities, unless waived by the FHWA, in accordance with 
    the provisions of Sec. 420.107. In addition the State shall develop, 
    establish, and implement a management process that identifies and 
    implements RD&T activities expected to address highest priority 
    transportation issues, and includes:
        (1) An interactive process for identification and prioritization of 
    RD&T activities for inclusion in an RD&T work program;
        (2) Utilization, to the maximum extent possible, of all FHWA 
    planning and research funds set aside for RD&T activities either 
    internally or for participation in national, regional pooled, or 
    cooperatively funded studies;
        (3) Procedures for tracking program activities, schedules, 
    accomplishments, and fiscal commitments;
        (4) Support and use of the TRIS database for program development, 
    reporting of active RD&T activities, and input of the final report 
    information;
        (5) Procedures to determine the effectiveness of the State's 
    management process in implementing the RD&T program, to determine the 
    utilization of the State's RD&T outputs, and to facilitate peer reviews 
    of its RD&T Program on a periodic basis and;
        (6) Procedures for documenting RD&T activities through the 
    preparation of final reports. As a minimum, the documentation shall 
    include the data collected, analyses performed, conclusions, and 
    recommendations. The State shall actively implement appropriate 
    research findings and should document benefits.
        (b) Each State shall conduct peer reviews of its RD&T program and 
    should participate in the review of other States' programs on a 
    periodic basis. To assist peer reviewers in completing a quality and 
    performance effectiveness review, the State shall disclose to them 
    information and documentation required to be collected and maintained 
    under this subpart. Travel and other costs associated with peer reviews 
    of the State's program may be identified as a line item in the State 
    work program and will be eligible for 100 percent Federal funding. At 
    least two members of the peer review team shall be selected from the 
    FHWA list of qualified peer reviewers. The peer review team shall 
    provide a written report of its findings to the State. The State shall 
    forward a copy of the report to the FHWA Division Administrator with a 
    written response to the peer review findings.
        (c) Documentation that describes the management process and the 
    procedures for selecting and implementing RD&T activities shall be 
    developed and maintained by the State. The documentation shall be 
    submitted by the State to the FHWA Division office for FHWA approval. 
    Significant changes in the management process also shall be submitted 
    by the State for FHWA approval. The State shall make the documentation 
    available, as necessary, to facilitate peer reviews.
    
    
    Sec. 420.209  RD&T work program.
    
        (a) The State's RD&T work program shall, as a minimum, consist of 
    an annual or biennial description of activities and individual RD&T 
    activities to be accomplished during the program period, estimated 
    costs for each eligible activity, and a description of any 
    cooperatively funded activities that are part of a national or regional 
    pooled study including the NCHRP contribution. The State's work program 
    should include a list of the major items with a cost estimate for each 
    item.
        (b) The State's RD&T work program shall include financial summaries 
    showing the funding levels and share (Federal, State, and other 
    sources) for RD&T activities for the program year. States are 
    encouraged to include any activity funded 100 percent with State or 
    other funds.
        (c) Approval and authorization procedures in Sec. 420.115 are 
    applicable to the State's RD&T work program.
    
    
    Sec. 420.211  Eligibility of costs.
    
        (a) Unless otherwise specified in this section, the eligible costs 
    for Federal participation in Sec. 420.113 are applicable to this part.
        (b) Costs for implementation of RD&T activities in conformity with 
    the requirements and conditions set forth in this subpart are eligible 
    for Federal participation.
        (c) Indirect costs of a State transportation agency RD&T unit are 
    allowable to the extent specified in Sec. 420.113(b).
        (d) Indirect costs of other State agencies and organizations are 
    allowable if supported by a cost allocation plan and indirect cost 
    proposal in accordance with OMB requirements.
    
    
    Sec. 420.213  Certification requirements.
    
        (a) Each State shall certify to the FHWA Division Administrator 
    before June 30, 1995, that it is complying with the requirements of 
    this subpart. For those States unable to meet full compliance by June 
    30, 1995, the FHWA Division Administrator may grant conditional 
    approval of the State's RD&T management process. A conditional approval 
    shall cite those areas of the State's management process that are 
    deficient. All deficiencies must be corrected by January 1, 1996. A 
    copy of the certification shall be submitted with each work program. A 
    new certification will be required if the State significantly revises 
    its management process for the RD&T program.
        (b) The certification shall consist of a statement signed by the 
    Administrator, or an official designated by the Administrator, of the 
    State transportation agency certifying as follows: I (name of 
    certifying official), (position title), of the State (Commonwealth) of 
    ________, do hereby certify that the State (Commonwealth) is in 
    compliance with all requirements of 23 U.S.C. 307 and its implementing 
    regulations with respect to the research, development and technology 
    transfer program, and contemplate no changes in statutes, regulations, 
    or administrative procedures which would affect such compliance.
        (c) The FHWA Division Administrator shall determine if the State is 
    in compliance with the requirements of this subpart.
    
    
    Sec. 420.215  Procedure for withdrawal of approval.
    
        (a) If a State is not complying with the requirements of this 
    subpart, or is not performing in accordance with its RD&T management 
    process, the FHWA Division Administrator shall issue a written notice 
    of proposed determination of noncompliance to the State. The notice 
    shall set forth the reasons for the proposed determination and inform 
    the State that it may reply in writing within 30 calendar days from the 
    date of the notice. The State's reply should address the deficiencies 
    cited in the notice and provide documentation as necessary.
        (b) If the State and Division Administrator cannot resolve the 
    differences set forth in the determination of nonconformity, the State 
    may appeal to the Federal Highway Administrator.
        (c) The Federal Highway Administrator's action shall constitute the 
    final decision of the FHWA.
        (d) An adverse decision shall result in immediate withdrawal of 
    approval of FHWA planning and research funds for the State's RD&T 
    activities until the State is in full compliance.
    
    PART 511--RESEARCH AND DEVELOPMENT (R&D) STUDIES AND PROGRAMS; 
    GENERAL [REMOVED]
    
        3. Chapter I of title 23, CFR, is amended by removing and reserving 
    part 511.
    
    [FR Doc. 94-17908 Filed 7-21-94; 8:45 am]
    BILLING CODE 4910-22-P
    
    
    

Document Information

Effective Date:
8/22/1994
Published:
07/22/1994
Entry Type:
Uncategorized Document
Action:
Final rule.
Document Number:
94-17908
Dates:
This rule is effective on August 22, 1994.
Pages:
0-0 (1 pages)
Docket Numbers:
Federal Register: July 22, 1994
CFR: (38)
23 CFR 420.105(b)
23 CFR 420.121(m)
23 CFR 420.103
23 CFR 420.105
23 CFR 420.107
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