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28 public records laws, 2) issues relating to ownership of the ATCs, 3) procurement-related issues, and 4) design liability considerations. The synthesis con- cludes that â[There is] no existing case law that specifically addresses ATCs. Consequently, before [an] agency can develop its own ATC program, it may choose to look carefully at its local restrictions and legal framework, and then determine how to apply such restrictions and framework to a pro- curement using ATCs.â This conclusion was con- firmed by the case law review conducted for this digest. It is further discussed in Section VI. NCHRP Synthesis 455 referenced industry lit- erature indicating that contractor design input contributes to an effective design and reduces errors and omissions through the input of construc- tion knowledge. It stated that one reason that the Massachusetts Department of Transportation chose to implement ATCs was âto avoid delays and potential conflicts in the design.â111 As a result, the synthesis found that: [I]implementing ATCs with confidential one-on-one meet- ings effectively provides a new level of design quality con- trol through the involvement of the contractor in reviewing the solicitation and design documents and identifying errors, omissions, and ambiguities. The literature indicated that contractor design input contributes to an effective design and reduces errors and omissions through the input of construction knowledge.112 Consistent with the above finding, the synthesis cited many examples of the confidentiality associ- ated with ATCs. Public agencies voice frequent con- cern about how confidentiality is to be administered under âsunshineâ laws and other situations. Although it is beyond the scope of this digest to delve into this topic in detail, readers should note that FHWAâs designâbuild rule states that disclosure of ATCs may be legally required under some circum- stances. For example, if an ATC is proposed that pro- vides a feasible solution that avoids the need for a Section 4(f) approval, the agency is required by law to implement that solution. Organizational conflicts of interest may also present issues of concern during the ATC process, if an ATC is submitted based on information gained by a proposer team member through its previous work for the procuring agency and not available to the other proposers. V. RIGHT-OF-WAY AND DESIGNâBUILD PROCESSES Even in the best of circumstances, the interplay among all of the components of a complex project presents myriad daunting challenges for the devel- opment of transportation projects, particularly when federal funding is involved. Numerous deci- sion points affect project quality, cost, and schedule. The construction processes require coordination of suppliers, subcontractors, labor, utility relocations, maintenance of traffic, and numerous other ele- ments to ensure that the work proceeds efficiently, complies with applicable requirements, and is com- pleted on schedule. That schedule, of course, depends upon the availability of access to the prop- erty on which preconstruction services and con- struction work will be performed. The challenges associated with right-of-way acquisition become even more significant for projects using a designâ build delivery methodology. The rules governing acquisition of real property rights needed for public works contracts are com- plex, the acquisition process is time-consuming, and many factors outside the acquiring agencyâs control impact voluntary transfers. As a conse- quence, understanding the available options and timing for right-of-way acquisition, and their asso- ciated costs and risks, is essential in structuring an effective project schedule and allocating responsi- bilities and risks between the procuring agency and the designâbuilder. The timing of different alternatives is especially important when involun- tary acquisition (i.e., use of the power of eminent domain) becomes necessary. This section explores the complications associ- ated with right-of-way acquisitions for designâ build projects. It will first provide introductory information about the right-of-way acquisition pro- cess and describe some of the unique risks associ- ated with acquisitions for designâbuild projects. It will then discuss how risks may be allocated between the procuring agency and its designâbuild contractor, along with strategies to mitigate risk. Finally, it will discuss proposed changes to the fed- eral regulations regarding real property acquisi- tions and how those changes may affect the acqui- sition process and alleviate related risks in the context of designâbuild projects. A. Overview of Process for Acquiring Right-of-Way In general, right-of-way acquisition for federally funded projects must comply with the Uniform Relo- cation Assistance and Real Property Acquisition Policies Act of 1970 (the Uniform Act)113 and meet applicable state law requirements. The require- ments of the Uniform Act and implementing 111 Id. at 33. 112 Id. 113 42 U.S.C. §§ 4601â4655.
29 regulations apply to any project that uses federal funding, regardless of the amount of funds used and regardless of whether federal funds are used to acquire real property for the project.114 The steps that are typically followed in property acquisitions, consistent with requirements of the Uniform Act, are described below. 1. Preparation of Right-of-Way Plans The first step in the acquisition process is to define the project boundaries, survey the impacted parcels, and prepare right-of-way legal descriptions and plat maps. This step also entails: 1) ordering title reports for impacted properties to ensure that negotiations proceed with the person who holds title to the prop- erty; 2) identifying any encumbrances that need to be cleared from the property (e.g., liens, easements, leases, or other interests); and 3) preparing draft acquisition documents, including purchase agree- ments and deeds conveying title. These activities may be conducted concurrently with the NEPA envi- ronmental review process115 and comparable state laws (discussed further in Section V.2.B, Relation- ships Among Right-of-Way Acquisition, the Environ- mental Review Process, and DesignâBuild Projects), although in most cases negotiation and other formal acquisition efforts must be deferred until after envi- ronmental approvals are obtained. This first step may take 4 months or more depending upon the number of parcels and complexity of title issues. 2. Appraisal Process After the right-of-way planning concludes, the next step is the appraisal process. Although the acquiring agency may hold meetings and have infor- mal contact with a landowner about the proposed project earlier in the processâfor example, to con- duct a feasibility study or analyze potential environ- mental issuesâthe next official step is preparation of appraisals and analysis of the appraisals by a review appraiser. The first formal expression of interest in the property typically involves sending the landowner a written âNotice of Intent to Appraise.â The appraisal process generally takes at least 2 months, but can take much longer depending upon the number of parcels involved, the level of analysis required for the valuation, and the resources available to conduct the appraisals. In most cases, once the appraisal is finished, it must be reviewed by a qualified review appraiser. This pro- cess may take another month or more. 3. Offer and Negotiation After obtaining the appraisal, the agency makes a written offer to purchase the property for what it determines is âjust compensation,â116 based upon the appraisal (typically the amount of the appraisal and never an amount less than the appraisal). Absent unusual circumstances, this step cannot proceed until after receipt of environmental approv- als.117 The landowner has a right to receive a sum- mary of how the offer was determined. In some states, the owner may have the right to obtain the entire appraisal report or an independent appraisal at the agencyâs expense. Thus, the schedule for acquisitions must allow enough time for the acquir- ing entity to provide an offer to the landowner, negotiate terms of the acquisition, secure signa- tures on agreements, clear title, and either close the transaction or conduct formal condemnation efforts. Allowing adequate time for negotiations in the initial schedule (several months or more if acquisition will result in displacement of a resident or business) may reduce the risk that condemna- tion will be required. 4. Condemnation If a negotiated settlement cannot be reached with the landowner, the agencyâs next step is to move for- ward with a condemnation action using its power of eminent domain, (i.e., the power to take or âcondemnâ property for âpublic useâ), without the landownerâs consent. Under the Fifth Amendment to the U.S. 114 See 49 C.F.R. pt. 24 (rules adopted by the United States Department of Transportation (USDOT) as the des- ignated federal lead agency for the Uniform Act). See also 23 C.F.R. pt. 710 for FHWAâs primary regulations dealing with real property interests, reimbursement, and manage- ment; 23 C.F.R. § 635.309 for FHWA regulations addressing right-of-way certification; and 23 § C.F.R. 710.313 for right- of-way procedures specifically applicable to federal-aid designâbuild projects. For FRA rules, see 49 C.F.R § 24.2 (a) (1)(iii); see Presentations of Uniform Act Final Rule Imple- mentation (Feb. 24, 2005), retrieved at http://www.fhwa.dot. gov/real_estate/uniform_act/policy_and_guidance/ urahudbc022405.cfm (last visited Aug. 2015). 115 FHWA regulations provide that NEPA approvals must be issued before specified actions are taken relating to right-of-way acquisition. See 23 C.F.R. pt. 710.203(a)(3). 116 See discussion in § V. A. 4. Condemnation. 117 There are a few situations in which the agency is allowed to proceed with the formal acquisition process prior to obtaining environmental approvals. For example, an agency may acquire property at the request of the property owner to alleviate hardship, and an agency may engage in protective buying to prevent imminent devel- opment of property that would materially increase costs or limit the choice of project alternatives. (See 23 C.F.R. 710.503(b) (Protective Buying) and 23 C.F.R. 710.503(c) (Hardship Acquisitions)).
30 Constitution, the government may exercise this power only upon paying âjust compensation.â118 In addition to complying with statutory and regulatory procedures, each agency, in using its eminent domain power, must ensure compliance with both federal and state constitutional and statutory requirements concerning âpublic use and necessityâ and principles of âjust compensation.â Compliance requires careful analysis of the appropriate actions to be taken, because the federal definition of âjust compensationâ does not always coincide with the definitions of the term that apply in the various states. As just one example, some states require the condemning agency to compensate affected business owners for lost busi- ness goodwill,119 although the federal rules do not permit recovery for goodwill losses.120 Every stateâs process is unique, but generally the acquiring agency holds a public hearing before making a formal decision to condemn, allowing due process to the landowner in the form of prior notice of the acquisi- tion and an opportunity to be heard.121 In California, the acquiring agency usually must adopt a âResolution of Necessityâ at a public hearing, which requires a determination that: 1) the project is necessary and in the public interest; 2) the project is located in a man- ner that provides the greatest public good and least private injury; and 3) the property is necessary for the project.122 Once the agency adopts the resolution, the California agency can commence an eminent domain action in Superior Court. In contrast, Texas condemna- tion actions are initiated with a Petition for Condem- nation,123 after which the court appoints three Special Commissionersâreal property landowners appointed by the courtâto preside over proceedings to determine just compensation.124 In New York, the burden lies with the landowner to sue the agency if it believes it has not been offered just compensation.125 Although landowners have the right to oppose the governmentâs right to take their property, chal- lenging the right to take is expensive, and in most cases the best the landowner can hope to achieve is to delay the taking. Of course, where projects are on a tight schedule and face potential loss of project funding or significant construction delays if access cannot be obtained, hold-out landowners who under- stand the situation may have tremendous leverage to obtain an inflated price. Tactical right-to-take challenges can create real pressure on the agency to settle to avoid delay, even if the challenge cannot ultimately stop the agency from condemning. 5. Relocation and Assistance The Uniform Act provides protections and assis- tance for people displaced by federally assisted proj- ects. The U.S. Department of Transportation, as the designated federal lead agency for the Uniform Act, has adopted implementation regulations126 that apply in addition to rules adopted by its subsidiary transpor- tation administrations (e.g., FHWA)127 or other federal agencies (e.g., the Department of Housing and Urban Development). In addition, each federal agency main- tains its own set of internal guidelines to assist in implementing the regulations. Acquisitions must also comply with applicable requirements of state law.128 118 See u.s. consT. amend. V [ânor shall private prop- erty be taken for public use, without just compensationâ]. See also, e.g., cAl. consT. art. I, § 19 [âPrivate property may be taken or damaged for a public use and only when just compensation, ascertained by a jury unless waived, has first been paid to, or into court for, the owner.â]; ohio consT. art. I, § 19 [âPrivate property shall ever be held inviolate, but subservient to the public welfare. [W]here private property shall be taken for public use, a compen- sation therefor shall first be madeâ¦.â]; N.Y. consT. art. I, § 7(a) [âPrivate property shall not be taken for public use without just compensation.â]. 119 See, e.g., cAl. coDe civ. proc., § 1263.510. 120 See, e.g., United States v. General Motors Corp., 323 U.S. 373, 379 , 65 S. Ct. 357, 360, 89 L. Ed. 311, 319 (1944). See also, e.g., United States v. 1.377 Acres of Land, 352 F.3d 1259, n. 5 (9th Cir. 2003) [â[T]his panel would not be entitled to reverse well-established Supreme Court prec- edent which makes clear that the loss of goodwill is not compensable in federal condemnation actions.â]. 121 See nichols on eminenT DomAin, ch. 4, § 4.103, at 4-80 to 4-120 (Matthew Bender, 3d ed.). 122 See cAl. coDe civ. proc., § 1245.230. 123 See Tex. prop. coDe § 21.012. 124 See Tex. prop. coDe § 21.014. 125 See n.y. em. Dom. proc. lAw § 503. 126 49 C.F.R. pt. 24. 127 FTA guidance is found in Circular 5010.1D, Nov. 1, 2008, Rev. 1, Aug. 27, 2012. For FHWA rules, see 23 C.F.R. pt. 710 for FHWAâs primary regulations dealing with real prop- erty interests, reimbursement, and management; 23 C.F.R. § 635.309 for FHWA regulations addressing right-of-way certification; and 23 C.F.R. § 710.313 for right-of-way pro- cedures specifically applicable to federal-aid designâbuild projects. For Federal Railroad Administration (FRA) rules, see 49 C.F.R § 24.2 (a)(1)(iii); see Presentations of Uniform Act Final Rule Implementation (Jan. 5, 2005), retrieved at http://www.fhwa.dot.gov/real_estate/uniform_act/policy_ and_guidance/urahudbc022405.cfm (last visited Aug. 2015). 128 See, e.g., FHWAâs Real Estate Acquisition Guide for Local Public Agencies, retrieved at http://www.fhwa.dot. gov/real_estate/uniform_act/program_administration/lpa_ guide/ch02.cfm (last visited June 29, 2015) [âBecause of the variations in eminent domain laws among the States, it is extremely important that agencies and individuals dealing with the acquisition of private property for federally assisted projects be familiar with applicable Federal and State laws and regulations.â], Iowa Right of Way Information Packet, at vi (June 2007), available at http://www.iowadot.gov/lpamanual/ infopak.pdf (last visited June 29, 2015), at vi [âEven if there is no federal or state funding in the acquisition of right-of- way, these procedures must be followed if any federal-aid is used in the project, and State Law applies to all projects.â].
31 The Uniform Actâs purposes are to: 1) provide uni- form, fair, and equitable treatment of persons whose real property is acquired or who are displaced in connection with federally funded projects; 2) ensure relocation assistance is provided to displaced per- sons to lessen the emotional and financial impact of displacement; 3) ensure no individual or family is displaced unless decent, safe, and sanitary housing is available within the displaced personâs financial means; 4) help improve housing conditions of dis- placed persons living in substandard housing; and 5) encourage and expedite acquisition by agreement and without coercion.129 Under the Uniform Act, if the acquisition will dis- place a residential tenant, owner occupant, busi- ness, farm, or nonprofit organization, the agency must, among other obligations, provide relocation advisory services to the person displaced. It must also provide a minimum of 90 daysâ written notice to vacate prior to taking possession. If forced to move, the displaced person is entitled to reasonable costs to relocate, including actual costs and business âreestablishment expenses,â such as the cost of printing new stationery and business cards. A per- son who feels he or she has not been treated fairly may file an administrative appeal, and then a law- suit seeking relocation expenses.130 Although the statute appears straightforward, implementation of the Uniform Act requirements can be highly complicated depending on the particu- lar facts of individual situations. For example, the time required to locate comparable housing for a person with a disability may far exceed the required minimum advance notice. In addition, if a project requires numerous residential relocations, the agency may encounter housing shortages in the sur- rounding area due to the number of people moving at the same time. The agency is required to assist in locating a comparable replacement dwelling for all residential tenants before forcing them to move, even if the time far exceeds the minimum notice periods.131 For businesses, lack of available reloca- tion sites can result in payments for lost business goodwill in those (relatively few) states that provide for such recovery. Under the Uniform Act, the range of relocation services the agency must offer differs depending on whether the acquisition qualifies as âvoluntaryâ or âinvoluntary.â Only âinvoluntaryâ acquisitions trigger the full range of requirements and benefits under 49 C.F.R. Part 24, Subpart B. For agencies lacking the power of eminent domain, acquisitions are generally deemed âvoluntary,â though the agency must still follow certain proce- dures, including offering relocation assistance to dis- placed tenants. For agencies that possess the power of eminent domain, the inquiry is more complicated. To qualify as a âvoluntaryâ acquisition when the agency has the power of eminent domain, the acqui- sition must meet all of the following criteria: ⢠No specific site is needed and any of several properties could be acquired for project purposes. ⢠The property is not part of an intended, planned, or designated project area where other properties will be acquired within specific time limits. ⢠The agency informs the owner in writing of the propertyâs market value. ⢠The agency also informs the owner in writing that the property will not be acquired through con- demnation if negotiations do not reach an amicable agreement. ⢠If tenants are displaced, the tenants are pro- vided relocation assistance.132 6. Obtaining Possession and Title The final steps in the acquisition process include obtaining title to and possession of the property. The rules for securing possession differ dramatically from state to state, and different agencies in the same state may be subject to different requirements. Some agencies have âquick-takeâ authority, pursu- ant to which the government may take control of and use property prior to completion of condemna- tion, usually by posting a bond or depositing the funds with the court or state treasurer so the land- owner is guaranteed access to the money. For example, in California (a âquick-takeâ state), if the acquiring agency wishes to take possession of the property before the condemnation lawsuit ends, it must deposit the probable amount of compensa- tion with the county or state treasurer and serve the property owner with a motion for possession. The motion will not be heard by a court until several months after filing.133 A quick-take process is also available in Illinois. There, the acquiring agency must file a motion pro- viding a formally adopted project schedule or plan 129 FHWAâs Real Estate Acquisition Guide for Local Public Agencies, retrieved at http://www.fhwa.dot.gov/ real_estate/uniform_act/program_administration/lpa_ guide/ch02.cfm (last visited June 29, 2015) 130 49 C.F.R. § 24.10; 5 U.S.C. § 704. 131 See 49 C.F.R § 24.204. 132 See U.S. Depât of Housing and Urban Dev., Voluntary Acquisition vs. Involuntary Acquisition of Property, avail- able at http://portal.hud.gov/hudportal/HUD?src=/program_ offices/comm_planning/affordablehousing/training/web/ relocation/acquisition (last visited June 29, 2015). 133 See cAl. coDe civ. proc. § 1255.410.
32 of operation. At the hearing, the agency must prove the necessity of the quick-take.134 In some states, the quick-take authority is lim- ited to certain agencies, types of takings, or jurisdic- tions.135 In one particularly complicated example, the Maryland Constitution contains detailed provi- sions for different quick-take requirements and pro- cedures in different cities and counties within the state, including restrictions precluding any quick- take opportunities in some situations.136 Other alternatives to securing possession through a court action include negotiation of a right-of-entry agreement or a possession and use agreement with the landowners. If an alternative approach is adopted to obtain possession, care must be taken in dealing with the landowner to avoid running afoul of any Uniform Act and state law requirements. The bottom line is that, in formulating the schedule for a designâbuild project, it is crucial for the parties to understand the procedures for acquisitions appli- cable to the particular project being contemplated and to build into the schedule a realistic timetable for obtaining possession of necessary properties, espe- cially where no quick-take authority exists. Schedul- ers should not assume that right-of-entry agreements can be negotiated on all parcels, especially for projects with large numbers of acquisitions. Thus, where no quick-take authority exists, it may well take more than a year to gain access to needed properties. B. Relationships Among Right-of-Way Acquisition, the Environmental Review Process, and DesignâBuild Projects NEPA creates a complex regulatory framework that requires the analysis of the environmental impacts of federally funded projects be undertaken before a fed- eral determination is made authorizing the federal funds grantee (i.e., nonfederal government procuring agency) to proceed with the project. This determination may come in the form of a Finding of No Significant Impact (FONSI) approving an Environmental Assess- ment or issuance of a Record of Decision (ROD) approv- ing an Environmental Impact Statement (EIS).137 In addition to complying with NEPA require- ments, the procuring agency may be required to undertake an environmental analysis under state law.138 For example, public agencies that develop projects in California must prepare an Environmen- tal Impact Report under the California Environ- mental Quality Act, a comprehensive statutory scheme similar to NEPA.139 The environmental review process may take many years to complete; it therefore poses a considerable risk to the schedule for timely acquisition of property not already under public ownership, regardless of the project delivery methodology used. The affected real estate market may change drastically during such an extended time period and thus have a sig- nificant effect on overall project costs. In addition, it is possible that the final design of a project may devi- ate from the project footprint evaluated during the environmental process, in which event the new design will need to be reviewed to determine whether additional impacts require a supplemental environ- mental analysis. A supplemental analysis could also be required if the original analysis failed to account for utility easements necessary for the project. When- ever a supplemental analysis is needed, further delays to the project schedule are likely. The project schedule and scope of work for feder- ally funded designâbuild projects are affected by environmental approval requirements in several important respects. As discussed in Section V.C (FHWA Rules Relevant to DesignâBuild Contracts), if a designâbuild contract is awarded before issuance of a final NEPA decision, the agency must comply with relevant FHWA regulations, including 134 See 735 ill. comp. sTAT. 30, arts. 20 and 25. 135 See, e.g., Johnson v. Wells County Water Resources Board, 410 N.W.2d 525 (N.D. Sup. Ct. 1987) (rejecting an effort by a water resources board to use North Dakotaâs quick-take procedure because the board lacked explicit legislation allowing it to use that procedure). 136 See mD. consT. art. III, § 40A. 137 For a general primer on how the NEPA process works, see fhwA, TrAnsporTATion sAfeTy plAnning, inTe- grATing roAD sAfeTy inTo nepA AnAlysis: A primer for sAfe- Ty AnD environmenTAl professionAls, http://www.fhwa.dot. gov/planning/transportation_safety_planning/resources/ nepa_primer/primer02.cfm (last visited June 29, 2015). 138 At least 17 states currently have their own NEPA equivalent: California (see cAl. pub. res. coDe, §§ 21000â 21177); Connecticut (see conn. gen. sTAT. Ann. §§ 22a- 1â22a-905f); Georgia (see GA. coDe Ann. §§ 12-16-1â12-16- 8); Hawaii (see hAw. rev. sTAT. §§ 343-1â343-8); Indiana (see inD. coDe §§ 13-12-4-1â13-12-4-10); Maryland (see mD. nAT. res. §§ 1-301â305); Massachusetts (see mAss. gen. lAws Ann. ch. 30, §§ 61â62H); Minnesota (see minn. sTAT. Ann. §§ 116D.01â116D.11); Montana (see monT. coDe Ann. §§ 75-1-101â75-1-324); Nevada (nev. rev. sTAT. § 277.200); New Jersey (see NJ Exec. Order No. 215); New York (see n.y. envTl. conserv. §§ 8-0101â8-0117);); North Carolina (see N.C. gen. sTAT. §§ 113A-1â113A-13); South Dakota (see S.D. coDifieD lAws §§ 34A-9-1â34A-9-13); Vir- ginia (see VA. coDe Ann. §§ 10.1-1188â10.1-1192); Wash- ington (see wAsh. sTAT. Ann. §§ 43.21C.010â43.21C.914); and Wisconsin (see wis. sTAT. Ann. § 1.11). For a general discussion of some of these state-equivalents, see Patrick Marchman, âLittle NEPAsâ: State Equivalents to the Na- tional Environmental Policy Act in Indiana, Minnesota and Wisconsin (Sept. 2012), available at http://dukespace. lib.duke.edu/dspace/bitstream/handle/10161/5891/P.%20 Marchman%20Little%20NEPAs_Final_w%20endnotes. pdf?sequence=1 (last visited June 29, 2015). 139 See cAl. pub. res. coDe §§ 21000â12117.
33 satisfying certain conditions in the procurement doc- uments and complying with limitations on work that may proceed before the NEPA process is complete.140 Although not the subject of this digest, perhaps the most significant impact concerns the possibility that the NEPA process could conclude with a âno projectâ determination, resulting in the need to ter- minate the designâbuild contract. It is also possible that, if the environmental review process has not been completed prior to contract award, the final determination will result in changes in the project, affecting right-of-way acquisitions as well as the scope of the designâbuilderâs work. Even where the final environmental approvals have been obtained prior to contract award, as previously noted, it is possible that the final design will require a supple- mental environmental review, resulting in a sched- ule delay. Finally, in order for project development to proceed expeditiously, any right-of-way acquisitions required for the project will need to proceed concur- rently with the designâbuilderâs work. C. FHWA Rules Relevant to DesignâBuild Contracts FHWA promulgated its designâbuild rule in 2002 and has subsequently modified the rule several times.141 With respect to right-of-way acquisition, the special needs of designâbuild projects are addressed in 23 C.F.R. 710.313. In general, acquisi- tions for designâbuild projects must comply with the Uniform Act, and the agency must submit a right-of- way certification in accordance with 23 C.F.R. 635.309(p) when requesting authorization from FHWA to proceed with final design and construc- tion.142 A number of agencies have raised concerns that relate to the certification process and have asked FHWA to modify the rule to allow greater flexibility in the process.143 The FHWA rule allows agencies to include right- of-way services in the designâbuilderâs scope of work if allowed by state law, provided that the pro- curing agency ensures that the designâbuilder does not commence physical construction on a parcel until appropriate rights in the parcel have been acquired.144 The designâbuild contract may prohibit the start of construction until all property required for the project has been obtained and all relocations have been completed, or it may provide for the acquisition process and construction activities to be phased or segmented, with separate right-of-way certifications for each phase or segment.145 If right- of-way services are included in the designâbuild contract, the procurement documents must require the designâbuild contractor to provide a written relocation plan that includes reasonable time frames for orderly relocation of residents and busi- nesses. The procurement documents must also make it clear that such time frames may not be compressed if other necessary actions preceding right-of-way acquisition are not completed in a timely manner.146 As discussed in Section G to follow, a rulemaking is pending to amend FHWAâs regulations governing the acquisition, management, and disposal of real property for federally funded transportation pro- grams and projects.147 Among other things, the pro- posed amendments address the early action flexibil- ities provided by MAP-21,148 reducing the risks faced by agencies using designâbuild.149 140 23 C.F.R. § 636.109. 141 See 67 Fed. Reg. 75,902 (Dec. 10, 2002). The designâ build rule is primarily codified at 23 C.F.R. pt. 636, with related requirements found in pts. 627, 635, 636, and 710. Provisions concerning right-of-way acquisition are, for the most part, found in 23 C.F.R. pt. 710. 142 23 C.F.R. § 635.309(p)(1) states: (1) The FHWAâs project authorization for final de- sign and physical construction will not be issued until the following conditions have been met: (i) All projects must conform with the statewide and metropolitan transportation planning requirements (23 C.F.R. part 450). (ii) All projects in air quality nonattainment and maintenance areas must meet all transportation con- formity requirements (40 C.F.R. parts 51 and 93). (iii) The NEPA review process has been concluded. (See 23 C.F.R. 636.109). (iv) The Request for Proposals document has been approved. (v) A statement is received from the STD that, either all right-of-way, utility, and railroad work has been com- pleted or that all necessary arrangements will be made for the completion of right-of-way, utility, and railroad work. (vi) If the STD elects to include right-of-way, utility, and/or railroad services as part of the designâbuilderâs scope of work, then the Request for Proposals docu- ment must include: (A) A statement concerning scope and current sta- tus of the required services, and (B) A statement which requires compliance with the Uniform Relocation and Real Property Acquisition Pol- icies Act of 1970, as amended, and 23 C.F.R. pt. 710. 143 Some of these issues are addressed in a Nov. 24, 2014, Notice of Proposed Rulemaking. See 79 Fed. Reg. 69997, 69999 (Nov. 24, 2014). 144 23 C.F.R. § 710.313(a). 145 23 C.F.R. § 710.313(c). 146 23 C.F.R. § 710.313(d)(ii). 147 23 C.F.R. pts 635, 710, and 810. 148 Pub. L. No. 112-141, 126 Stat. 405 (July 6, 2012). 149 See 23 U.S.C. 108, as revised by § 1302 of Pub. L. No. 112-141, 126 Stat. 405 (July 6, 2012).
34 D. Assessment of Right-of-Way Risks As discussed previously, 1) access rights must be obtained before construction may start on a particu- lar parcel, and 2) in most cases, acquisition activities cannot occur until after the project receives certifi- cation that it has complied with federal and state environmental laws.150 Because the decision to use designâbuild is frequently interrelated with a desire to accelerate project completion, at least some right- of-way acquisition will occur during the designâ build contract term.151 Simply speaking, this means that the property acquisition process can affect the construction schedule. Agencies may approach right-of-way risks and responsibilities in a variety of ways, depending on bud- getary constraints, objectives regarding cost certainty, and appetite for schedule risk, as well as the types, locations, uses, and ownership of parcels to be acquired and the difficulties these present in valuing and acquiring parcels. For some projects, it may be possible for the agency to avoid schedule-related right-of-way risk by acquiring all of the required parcels before issuing a notice to proceed to the designâbuilder. This is more likely to be an option for smaller projects that require minimal property acquisitions or for projects where the rights-of-way are already owned by the agency, such as projects that add high-occupancy vehi- cle lanes. However, on most projects this will not be a real option for the agency. As a consequence, it might consider alternative risk-reducing scenarios, such as: ⢠Retaining cost and schedule risk for right-of- way acquisitions by promising to provide property access to the designâbuilder by a specific date. ⢠Delegating responsibility for right-of-way acquisi- tion to the designâbuilder, but retaining the responsi- bility to pay the acquisition price and relocation costs. ⢠Delegating to the designâbuilder both the responsibility to acquire the right-of-way and the responsibility for payment of the acquisition cost and relocation expenses. The chart set forth in Appendix A provides infor- mation regarding the approaches adopted for vari- ous projects. 1. Relationship between Right-of-Way and Design Flexibility Project owners that employ the designâbuild deliv- ery methodology generally want to allow the designâ builder substantial flexibility in the design process, so as to take advantage of private sector innovation and efficiency in project delivery. Innovations may have positive effects on right-of-way acquisitions. As one example, the agency may wish to encourage the designâbuilder to consider how to reduce acquisitions, thus reducing costs in areas with high property val- ues, or how to reduce impacts on environmentally sen- sitive areas. On an interchange project in Utah, one of the proposers submitted a pre-proposal ATC to use a âdiverging diamondâ configuration.152 This approach saved significant construction costs and reduced the ownerâs property acquisition costs for the project. Design solutions may also require acquisition of additional property. In general, the project owner gains the greatest benefits in terms of flexibility by awarding a contract early in the environmental analysis process, though this may create complica- tions for right-of-way acquisitions, as described in this section. In all cases, the level of design flexibil- ity for public works projects is necessarily con- strained by the fact that the environmental approval process requires property impacts to be evaluated. If a designâbuild contract is to be awarded after the environmental analysis is concluded, or is awarded late in the environmental process, the agency will typically identify the project boundaries in the contract documents and require the designâ builder to design the project within those limits. This âproject envelopeâ may be narrowly defined, limiting design flexibility but allowing right-of-way acquisition to proceed without the need to wait for final design to be completed.153 150 See, e.g., 23 C.F.R. 710.305. 151 This is not always the case. Depending on a number of factors, an agency may be precluded from awarding a con- tract to the designâbuilder until after issuance of right-of- way certification. In other words, the agency may have to acquire the necessary right-of-way before it hires a contrac- tor that will complete the projectâs design. In addition, many funding sources contain deadlines by which the agency must acquire the right-of-way in order to secure the funding. If the agency fails to obtain the right-of-way in a timely man- ner, funds may be reallocated, going to a different project. 152 As discussed infra, ATCs provide an opportunity for designâbuild proposers to obtain approval from the procur- ing agency to incorporate innovative concepts into their proposals. The âdiverging diamondâ example is discussed in Del Walker and Steve Haines, True Pioneer, roADs AnD briDges, Mar. 2010, at 23, available at http://www.roads- bridges.com/sites/default/files/22_DDI%20in%20Utah. indd.pdf (last visited June 29, 2015). See also slide presenta- tion entitled, âDiverging Diamond Interchange I-15/Ameri- can Fork Main Street,â available at http://www.slideshare. net/UtahDOT/parsons-ddi (last visited June 29, 2015). 153 The basic requirements for acquisitions by eminent domain are that the agency must establish the âpublic useâ and ânecessityâ for the taking. (U.S. consT. amends. 5 and 14; See, e.g., cAl. DepâT of TrAnsp., righT of wAy mAnuAl, § 9.01.00.00â901.15.00, Eminent Domain, for procedures regarding adoption of a Resolution of Necessity to condemn highway right-of-way in California.) Where the projectâs design is complete, or the project envelope is highly con- strained, these hurdles should be relatively easy to meet.
35 In some cases, most often for so-called âgreenfieldâ projects, the project envelope may be based on the foot- print analyzed in the environmental documents and, therefore, be larger than needed for construction of the project improvements. This approach is often coupled with use of a âbasic configurationâ concept, giving the designâbuilder flexibility to make changes to the align- ment included in the agencyâs conceptual design, so long as the new design conforms to contract require- ments and remains within the specified envelope.154 One downside to this approach is that it may be difficult for the agency to rely on the project envelope as the basis for eminent domain proceedings, as the landowner may be able to argue that the area includes property not necessary for a public use because of the possibility that the final design may not incorporate the property in question.155 For these types of proj- ects, right-of-way acquisition is necessarily inter- twined with the final design process, making it diffi- cult for the agency to provide a schedule for acquisitions in the procurement package. In order to allow the proposers to develop a construction sched- ule for purposes of pricing the project, contract docu- ments for some projects include specific time frames for the agency to provide access after receipt of speci- fied documents and information from the designâ builder. As an alternative, the project owner might want to transfer greater responsibility for acquisi- tions to the designâbuilder, as discussed in Section V.E.4 (Transfer Responsibility to DesignâBuilder). 2. Scheduling Right-of-Way Acquisitions Requirements of the Uniform Act and applicable state laws make it difficult for agencies to negotiate property acquisitions on an expedited basis. If numerous parcels need to be acquired, it is likely that the right-of-way acquisition process will be on the critical path for construction of the project. As a result, a delay in the acquisition process will affect the designâbuilderâs ability to meet the completion deadlines for the project. If an agency is negotiating with a landowner will- ing to sell at the appraised value, the acquisition process can conclude relatively quickly. In many cases, however, the seller either disputes the appraised value or simply prefers not to sell. In those cases, it may be necessary for the project owner to file an eminent domain action. As discussed in Section V.A (Overview of Process for Acquiring Right-of-Way), if an eminent domain action is required, the timeline for an acquisition can be protracted, and agencies with quick-take authority have an advantage over agencies that are unable to obtain access to property before a judg- ment is issued. Lack of quick-take authority is par- ticularly problematic in places where the court sys- tem is overburdened, making it difficult to get trial dates for the condemnation action. Agencies may also have limited legal resources to undertake multiple condemnation actions simultaneously. Although the agency may be able to contract with outside lawyers for at least some of the acquisi- tions,156 a decision to adopt that approach should be made early enough to allow the agency to go through a procurement process to engage outside counsel. The uncertainty associated with acquisitions presents a dilemma for an agency that opts to retain responsibility and risk for right-of-way acquisitions. If the schedule included in the documents is overly pessimistic regarding the number of parcels that will have to go to litigation, the designâbuilder will inevitably propose a longer construction schedule. This extended construction period costs the designâ builder more money in project overhead, which will be reflected in its proposal price. On the other hand, if the schedule is overly optimistic, the agency may find that it has to extend the time for completion and pay delay damages to the designâbuilder. 3. Risks Increase as More Parcels Need To Be Acquired As the number of parcels required for the project increases, the likelihood that something might go wrong also increases. For this reason, some state right-of-way policies and procedures manuals spe- cifically discourage designâbuild as a procurement method when the proposed project requires signifi- cant numbers of new parcel acquisitions. For exam- ple, FDOTâs Project Management Handbook indi- cates that the types of projects usually selected for designâbuild consideration include those that ârequire minimum right-of-way acquisition and 154 See, e.g., UDOTâs I-15 CORE designâbuild contract, discussed at § V.E.2. 155 One of the fundamental characteristics of a âpublic useâ finding is that the agency show that the property will in fact be put to a public use. With the projectâs design not finalized and uncertainty as to whether any particular property will ultimately be used in the final design, the agency may not be able to make this finding, which could defeat the agencyâs ability to condemn the property. Simi- larly, the landowner may argue that the agency cannot establish any necessity for the taking because the agency cannot say with certainty that the property will be neces- sary for the projectâs ultimate design. How can the agency make a legitimate finding that the property is ânecessaryâ when it cannot say with any certainty that it will even be included in the final project design? 156 Note that some agencies have policies that restrict the use of outside counsel for right-of-way acquisitions. Project planners should ensure at the outset that the use of outside counsel is permitted before crafting a schedule that relies on outside counsel to acquire right-of-way in a timely manner.
36 builderâs work.161 This can be further complicated where the remediation technique necessary for the proposed project is more complicated or expensive than any remediation the landowner would have needed to perform absent the proposed project. A wide divergence exists in the various states con- cerning how deductions from fair market value, if any, are applied when the government condemns contaminated property.162 The specific require- ments applicable to the jurisdiction need to be accounted for in budgeting for a project that involves acquisition of contaminated properties.163 ⢠Inability to exercise eminent domain authority. In certain situations, an agency that has general con- demnation authority may not be able to exercise that authority over all of the properties that need to be acquired for the project. This can occur, for example, when needed property lies outside the territorial boundaries of the acquiring agency,164 or property is owned by an entity over whom the agency lacks emi- utility involvement,â157 and âdo not require complex environmental permitting.â158 Nevertheless, even though a project may require acquisition of a large number of parcels, the agency may determine that the benefits of using a designâ build procurement outweigh the risks. In some cases, the schedule risk may be relatively low even if there are large numbers of parcels. This is the case if the agency already owns a significant portion of the property required for the project, or if it has pre- viously negotiated agreements with landowners allowing work to start prior to transfer of title.159 In these situations, the designâbuilder has the ability to perform a significant amount of work on property already in hand, pending provision of access to the remaining parcels. 4. Special Circumstances that May Delay Acquisitions A number of circumstances must be considered in assessing the risk of delay associated with specific parcels being acquired. These include: ⢠Occupied property. If the property is occupied, the Uniform Act requires the agency to pay for relocation costs and allow the occupants sufficient time to move. As discussed in more detail in Section 5.A.5 (Relocation and Assistance), this requirement further increases the risk of schedule delay and the uncertainty of costs associated with right-of-way acquisition. ⢠Agricultural property. Special rules apply when acquiring agricultural property, including an obligation to pay for lost income if the prop- erty includes standing crops or other agricultural commodities.160 In some cases, it may be appro- priate to delay the acquisition until crops can be harvested. ⢠Contaminated property. Where the property being acquired is contaminated by hazardous materials, delays may occur as the parties sort out who is paying for needed environmental remedia- tion, how that remediation will be accomplished, and whether the agency will require cleanup be- fore transfer of title, undertake the cleanup itself, or include the cleanup in the scope of the designâ 157 FDOT, proJecT mAnAgemenT hAnDbook, Pt. 2âPhase Specific Project Management Issues, ch. 6, DesignâBuild Project Management, at 4, revised May 31, 2012, available at http://www.dot.state.fl.us/projectmanagementoffice/PM Handbook/P2_Ch06.pdf (last visited June 29, 2015). 158 Id. 159 Several examples of such projects are identified in the chart set forth in App. A. 160 See 42 U.S.C. § 4622 (a)(2), which provides for com- pensation for loss of tangible personal property. Standing crops are generally considered personal property for pur- poses of the Uniform Act. 161 Note that there may be both federal (see, e.g., Com- prehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. §§ 9601â9628; Resource Conservation and Recovery Act (RCRA), 42 U.S.C. §§ 6901â6992, and state (see, e.g., cAl. heAlTh & sAfeTy coDe, §§ 25403â26204 New York State Navigation Law, Article 12; Oil Spill Prevention, Control, and Com- pensation) laws that impact the agencyâs options with re- spect to clean up of contamination. 162 Compare, e.g., Mobil Oil Co. v. City of N.Y., 12 A.D. 3d 77, 783 N.Y.S.2d 75 (2004) and Depât of Transp. v. Parr, 259 Ill. App. 3d 602, 633 N.E.2d 19 (1994) (rejecting an effort by the condemning agency to deduct the cost of remediation from the award of just compensation), with Finkelstein v. Depât of Transp., 656 So. 2d 921 (Fla. 1995) and Redevelop- ment Agency v. Thrifty Oil Co., 4 Cal. App. 4th 469, 5 Cal. Rptr. 2d 687 (1992). 163 For a broader discussion of these issues, see Orell Anderson, Jerry English, Keith McCullough, John Schepisi & Stephen Valdez, The Intersection of Eminent Domain and Environmental Contamination (May 19, 2011), Am. Bar Assân Litigation Sect., http://apps.americanbar.org/ litigation/committees/environmental/articles/051911- eminent-domain.html (last visited June 29, 2015). 164 Some agencies lack any authority over property out- side of their territorial limits. When this is the case, the agency may need to rely on a neighboring agencyâs use of its eminent domain power to acquire the needed prop- erty. In some states, the agency might be able to enter into a joint powers agreement with the neighboring agency, allowing direct use of the broader eminent domain power. The parties will need to carefully navigate rules limiting the uses to which a condemned property may be put to ensure that the property acquired by the neighboring agency can be used for the project. Some agencies, howev- er, do possess limited authority to perform extraterritorial condemnations. In order to avoid delays to projects requir- ing acquisition of parcels outside of an agencyâs jurisdic- tion, the agency should consider the applicable limitations and make arrangements, before proceeding with a designâ build procurement, to enable the acquisitions to occur.
37 acquired. The risk of a major change in alignment at that point in the development process is quite low, as political preferences and public input would have been considered through the environmental approval and design and property acquisition processes. Fur- thermore, a decision to change the alignment after award of the construction contract would result in sig- nificant liability for the procuring agency, which would bear the risk of any necessary redesign, changes in the scope of the construction work, and project delays, as well as being responsible for determining which parcels are needed and acquiring the property. In contrast, for designâbuild projects, the contract is awarded at a relatively low level of design and usu- ally before all of the right-of-way is acquired. It is pos- sible that reasons for changing the alignment will become apparent as the design proceeds, or that issues relating to site conditions or property acquisitions will result in a decision to move the alignment to avoid problems. The risk of an alignment change following contract award is therefore higher for designâbuild contracts than for designâbidâbuild contracts. The risk of an alignment change is somewhat higher when a designâbuild contract is awarded early in the environmental review process. Early contract award, which is specifically permitted by FHWA reg- ulations,168 allows the decision-makers to obtain the benefit of input from the designâbuilder in analyzing the alternatives. For these projects, the risk of an alignment change is highest during the initial phase of the project, with a reduced risk after the final envi- ronmental approval is obtained. Fortunately, even though designâbuild projects involve a higher risk of a change in alignment, the impacts of an alignment change may be reduced by the designâbuilderâs abil- ity to manage both the design and construction pro- cesses. This enables the designâbuilder to take steps to reduce the impacts of any alignment change. As discussed later in this digest, New Jersey Transitâs HudsonâBergen Light Rail Transit Project provides an example of an alignment change that had a rela- tively low impact on the designâbuilderâs work. E. Allocation of Risk and Responsibility As can be seen from the chart in Appendix A, differ- ent agencies have used different approaches to right- of-way acquisition risk allocation. Consistent with best practices for designâbuild projects (and with guidance provided in FHWAâs designâbuild rule), it is advisable to consider which of the parties âis in the best position to manage and control a given risk or the impact of a given risk.â169 The following discussion relates to dif- ferent approaches to allocation of right-of-way risk and nent domain authority or who is otherwise not subject to condemnation.165 In some states, the government does not have the power of eminent domain with re- spect to cemeteries.166 If critical properties fall into this category, and the agency is unable to obtain access rights prior to award of the designâbuild contract, the agency should, before proceeding with the contract award, carefully consider whether it should postpone the award or include provisions in the contract that address the possibility of further delay or failure to obtain access. 5. Right-of-Way Acquisition Costs As is the case for all projects that require property acquisitions, designâbuild projects face the risk of real estate market conditions. If acquisition is delayed, there is a risk that property values may change from the contract bid date until acquisition actually occurs. The FHWA rule permits agencies to pass the risk of fluctuating property values to the designâbuilder.167 Some designâbuilders may not be willing to accept this risk, and, if they do, they will factor it into the bid price. Market values may also decline after property is acquired. Declining property values would impair the agencyâs ability to recoup the full value of funds expended for property acquired in advance that is not incorporated into the final project right-of-way. It would also affect the potential value to be gained from alternative design concepts and value engineering (VE) change proposals. 6. Political Risk of a Change in Alignment Following Award For designâbidâbuild projects, the normal order of planning and development means that the construc- tion contract is awarded only after environmental approvals have been obtained, the design of the proj- ect has been completed, and all right-of-way has been 165 Often, âlowerâ agencies cannot condemn property from âhigherâ agencies. In particular, no state or local agen- cy can condemn property from the federal government. (See nichols on eminenT DomAin, ch. 2, § 2.22 [3], at 2-131 (Matthew Bender, 3d ed., citing Sacramento v. Secây Hous- ing & Urban Dev. 363 F. Supp. 736 (E.D. Cal. 1972)). Simi- larly, local agencies often cannot condemn property owned by the state. Comparable issues affect property acquisi- tions from railroad operators granted rights in property by the federal government. Some exceptions to these rules exist, depending on state law. In some cases the agency may be able to obtain property rights by demonstrating that its proposed use qualifies as âmore necessaryâ than the use to which the property is currently being put. (See, e.g., cAl. coDe civ. proc., § 1240.610.) The best approach, where possible, is to negotiate a purchase agreement or a joint use agreement with the other entity, avoiding the need to navigate these thorny eminent domain issues. 166 See Tex. heAlTh & sAfeTy coDe § 711.035. 167 23 C.F.R. § 636.114(b)(5). 168 See 23 C.F.R. § 636.109. 169 23 C.F.R. § 636.114(a).
38 designâbuilder had the ability to identify additional properties and was responsible for preparing legal descriptions and other specified documentation for any parcels outside the planned right-of-way enve- lope. The designâbuilder was also required to pay the cost of acquiring any such additional parcels. As is typical, the contract required the designâbuilder to obtain any federal, state, or local permit amend- ments necessitated by the proposed addition of new parcels to the project right-of-way. Contracts that include a schedule of parcels to be acquired by the project owner sometimes also include a VE provision that allows the designâ builder to evaluate opportunities for project cost savings. The I-15 CORE contract included a formula for UDOTâs savings to be shared with the designâ builder if the VE proposal reduced the agencyâs right-of-way acquisition costs. When an agency retains responsibility for acqui- sition of right-of-way and delivery of access to the contractor by specified dates, the designâbuild con- tract will allocate the risk of delay between the par- ties by defining the circumstances in which delays in access will afford the designâbuilder schedule relief and compensation for additional costs result- ing from the delay. Usually the relief afforded will differ depending on whether the particular parcel is on the critical path, the extent to which the con- struction schedule can be adjusted to work around the problem parcel, and whether a party is at fault with respect to the delay. 3. Owner Identification of Outside Boundaries; Shared Responsibility for Acquisitions Some agencies may wish to allow the designâ builder a greater degree of flexibility in the design process than is allowed under the approach described in the preceding section, while still retaining ulti- mate responsibility for the acquisitions. For the Eastern Toll Road, a greenfield toll road built in the 1990s in Orange County, California, the contract doc- uments included outside boundaries for the project and required the designâbuilder to identify required parcels within the boundaries. The horizontal and vertical alignments for the mainline project were included in the projectâs basic configuration defini- tion, and the designâbuilder had the ability to make certain changes to the basic configuration through the design process. This could have included moving the alignment by up to 50 ft horizontally and up to 2 ft vertically, provided the change could be made with- out violating other contract requirements. For the Eastern Toll Road, once the design reached a level that allowed parcels to be identified for acquisition, the designâbuilder was required to perform survey, title review, document preparation, responsibility that agencies may wish to consider, including examples from some of the projects identi- fied in the chart set forth in Appendix A. 1. Reduce Risk of Delaying the Construction Schedule by Using Advance Acquisitions For some projects, it may be possible to eliminate risk of delays to the construction schedule that result from delays in property acquisitions if the agency acquires right-of-way before issuing a notice to pro- ceed to the designâbuilder. As discussed earlier in this section, this approach has several downsides. It requires the agency to determine the alignment in advance, which limits the designâbuilderâs flexibility in proposing alternative design solutions. In addi- tion, although this approach may reduce the risk of construction schedule delay, it will likely prolong the overall project delivery as the agency acquires the necessary right-of-way. This is the approach gener- ally adopted by ADOT for its designâbuild projects in the past, largely due to statutory limitations.170 ADOT is planning to use a different approach for its Loop 202 South Mountain Freeway project, as described in the chart set forth in Appendix A. 2. Owner Identification of Properties and Retention of Responsibility for Acquisitions Many agencies using designâbuild elect to identify parcels that will be required and retain responsibility for acquiring property over the course of the project. They will include a schedule in the contract docu- ments identifying dates by which access to individual parcels will be obtained to enable the designâbuilder to plan accordingly. In one example, the Utah Depart- ment of Transportation (UDOT) identified 287 parcels to be acquired by specified dates for the Interstate 15 (I-15) Corridor Reconstruction (CORE) designâbuild project, retaining liability for delay costs attributable to failure to meet the specified availability dates. In fact, because all parcels were acquired in a timely fashion, UDOT incurred no such liability.171 Even though the owner has pre-identified the parcels to be acquired, this approach allows some degree of flexibility in design. Designâbuilders are typically allowed to propose additional properties for acquisition either through ATCs during the pre- proposal period or through submittals during the design period. For the I-15 CORE project, the 170 See § 2.1 of ADOTâs 2007 Design-Build Procurement and Administration Guide, http://azdot.gov/docs/default- source/construction-group/designbuildguide.pdf?sfvrsn=0 (last visited June 29, 2015). 171 See uTAh DepâT of TrAnsp., 2012 efficiencies reporT, State Legislature Version, at 29 (2013), http://www.udot. utah.gov/main/uconowner.gf?n=2744130635144498 (last visited June 29, 2015).
39 designâbuilder, alternative approaches that it may wish to consider include: ⢠Assigning responsibility to the designâbuilder for all aspects of the acquisitions, from negotiation to litigation, with the public agency retaining responsibility for determining the necessity of acquisitions. This approach is more commonly seen for publicâprivate partnerships, because it entails transfer of significant risk to the contractor. ⢠Requiring the designâbuilder to provide acquisition services, with the project owner retain- ing the obligation to pay the purchase price for par- cels acquired. This is the approach described in the chart set forth in Appendix A for ADOTâs Loop 202 South Mountain Freeway project. ⢠Requiring the designâbuilder to negotiate acquisitions, with the project owner retaining responsibility for prosecuting eminent domain actions and either paying for land purchase costs (the approach adopted by TxDOT) or paying for land purchase costs exceeding specified limits (the approach adopted by the South Carolina Depart- ment of Transportation (SCDOT)). From the time it first started using designâbuild, SCDOT has included right-of-way acquisition in the scope of its designâbuild contracts.173 Services to be provided by the designâbuilder, acting as an agent on behalf of the State of South Carolina, include appraisal, appraisal review, negotiation, acquisition, relocation assistance, and expert testimony. SCDOT retains final authority for approving just compensation, relocation benefits, and settlements.174 The designâbuilder is responsible for all costs, excluding âpremiumâ costs, associated with the purchase of the right-of-way, and for all costs of any additional area desired by the designâbuilder. Right-of-way costs for which the designâbuilder is responsible are the amounts paid for direct payments for ownership or other property rights and eligible relocation expenses, excluding âpremiumâ acquisition costs (i.e., amounts of a jury award that exceed the agencyâs estimated amount of âjust compen- sationâ). If additional right-of-way is required, extend- ing beyond the environmentally approved envelope, the designâbuilder is responsible for reevaluation of the approved environmental documents. Even where the designâbuilder assumes signifi- cant responsibility for acquisitions, it will be neces- sary for the project owner to coordinate closely with and related services to enable the agency to proceed with acquisitions. The procuring agency committed to review the documents and information delivered by the designâbuilder within a specified period after delivery. The contract documents included timelines for the acquisitions based on the agencyâs determi- nation as to whether or not condemnation would be required for the acquisition, with different timelines applying to vacant land and occupied property. This approach was considered feasible in part because the majority of the property required for the project was provided without the need for condemnation, due to a dedication by a single major landowner. An âAgency-Caused Delayâ was considered to occur if the critical path was delayed by the agencyâs failure to provide property as promised, entitling the designâbuilder to a time extension and delay damages. The designâbuilderâs scope also included services to identify excess properties and facilitate any required reconveyances to landowners upon completion of the project. 4. Transfer Responsibility to DesignâBuilder Some agencies have determined that the risks associated with timing of right-of-way acquisition may be managed best by including right-of-way acquisition in the designâbuilderâs scope of work.172 This is easier to do in states where the government already uses consultants to negotiate acquisitions, as the private sector has knowledge regarding the procedures to be followed and systems that can be used to monitor progress. If an agency is interested in transferring responsibility for acquisitions to the 173 See Request for Proposals for the U.S. Route 701 Bridge Replacements over Yauhannah Lake, Great Pee Dee River, and Great Pee Dee Overflow, South Carolina Depât of Transp. (2014) available at http://www.scdot.org/ doing/doingPDFs/US701_D-B_RFP_Final_08_05_14.pdf (last visited June 29, 2015). 174 Id. at 30. 172 In A Case Study of the Kentucky Transportation Cabinetâs Design/Build Pilot Projects, the University of Kentuckyâs Kentucky Transportation Center found that designâbuild was most effective when utility relocation, permitting, and right-of-way acquisition were placed directly under the designâbuilderâs control, by allow- ing them to better coordinate construction activities and resources required to address these concerns. Right of way acquisition has differed among the projects. Some projects required almost no right-of-way acquisition while others required millions of dollarsâ worth of parcels. Clearly projects that require more right of way acquisition are exposed to more risk of associated delays. While projects that require little or no right of way have less risk of delay. No matter how much ROW was required, it was clear that having the DBT provide ROW acquisition services was an advan- tage. It allowed the ROW to be acquired in sequence with the construction schedule. In the case that the acquisition was held up, the contractor knew the severity of the situation immediately and was able to adjust the work accordingly. The DBT handling ROW acquisition has been a definite advantage for the DB pilot projects. kenTucky TrAnsporTATion cenTer, universiTy of ken- Tucky, Research Report KTC-13-10/TA25-06-1F (2013), at 95.
40 limited to circumstances in which the agency fails to perform its responsibilities in a timely manner. 2. Access Restrictions Affecting Construction For some projects, designâbuilders may raise con- cerns about possible schedule delays that result from restrictions placed on access to property being acquired by the agency. This seems more likely to present an issue when property needed for a project is owned by a governmental entity or railroad opera- tor with superior rights to the procuring agency or by a third party with political clout. Ideally, all such transactions would be fully negotiated before the proposal date so that the proposers can be advised of applicable restrictions in advance and account for the restrictions in setting the construction schedule. The precedent contracts reviewed in connection with this section generally obligate the designâ builder to comply with restrictions applicable to access to property, without any commitments regarding the nature of such restrictions. It appears, however, that some contractors are concerned about access restrictions and may ask the project owner to include detailed information regarding such restric- tions in the contract documents.176 the designâbuild team to avoid delays in the process. For TxDOTâs Grand Parkway project, involving acquisition of 435 parcels to coincide with a 30-month construction schedule, the owner co-located its right- of-way team with the designâbuilderâs, and the par- ties held workshops with the joint team. The ownerâs representative estimated that the coordination efforts significantly reduced the time required to complete the acquisitions.175 F. Common Challenges Relating to Right-of- Way Risk 1. Access to Parcel Not Provided by Date on Which Design-Builder Planned to Start Construction on the Parcel Regardless of which party is performing acquisi- tion services, it is essential for the design and con- struction team to coordinate closely with the right- of-way team, to enable mitigation of impacts of anticipated delays in property acquisition and to allow the construction team to take advantage of acquisitions closing ahead of schedule. However, despite best efforts to coordinate design and con- struction with right-of-way, unless all of the prop- erty is acquired in advance, one of the major risks for designâbuild projects concerns the possibility that property may not be available when needed for construction to proceed, resulting in delays to the project and disrupting the designâbuilderâs con- struction sequencing. This risk can be reduced by ensuring that the construction schedule includes reasonable assumptions regarding the timeline for property acquisitions. If the critical path is affected by delay in access to property, the risk of that delay is typically allocated based on which party bears responsibility for prop- erty acquisitions. If the contract requires the procur- ing agency to provide access to specific parcels by a specific date, failure to provide timely access that affects the critical path is normally considered a delay caused by the agency, entitling the designâ builder to a time extension and, in many jurisdic- tions, delay damages. As a general matter, as greater responsibility for right-of-way acquisitions shifts to the designâbuilder, the agencyâs potential liability for delays is reduced. For projects that use the approach adopted by SCDOT and TxDOT described in Section V.E.4 (Transfer Responsibility to Designâ Builder), where the agencyâs responsibility is limited to making certain decisions and payments related to acquisitions and prosecuting condemnation actions, the agencyâs liability to the designâbuilder can be 176 See, e.g., Concession and Lease Agreement 52â53, Regional Transp. Dist. and Denver Transit Partners, LLC (2010), available at http://www.rtd-fastracks.com/media/ uploads/ep3/Concession_Agreement.pdf (last visited June 29, 2015). The agreement required the district to deliver âVacant Possessionâ of specified parcels to the concession- aire, defined as access subject only to the following: (a) access rights of RTD and the Project Third Par- ties as set out in the Third Party Agreements, includ- ing with respect to Utility Work in connection with any RTD Relocated Utility; (b) access rights of the DUS Infrastructure Contrac- tor pursuant to the DUS Infrastructure Agreement; (c) the rights of Relevant Authorities, Utility Own- ers or third parties to have access to such Site existing as of the Final Proposal Due Date; (d) the statutory rights or public franchise rights of Relevant Authorities and Utility Owners to have access to such Site existing as of the Technical Proposal Due Date; (e) the rights, including rights of access, granted to RTD and its employees, agents, consultants and con- tractors and to other Persons under this Agreement and the other Project Agreements; (f) restrictions of use set forth in easement deeds and/or right of entry permits applicable to the Sites as such restrictions are specified in Part E (Limitations) of Attachment 2 (Description of Sites and Schedules of Site Availability) as provided to the Concessionaire prior to the Technical Proposal Due Date; and (g) restrictions set forth in any title commitments related to the Sites attached in Part F (Title Com- mitments) to Attachment 2 (Description of Sites and Schedules of Site Availability). 175 Interview with Donald C. Toner, Jr., SR/WA, Direc- tor, SPD-Right of Way Office/Strategic Projects Division, TxDOT (Mar. 10, 2015).
41 which the Department has an unsettled condemnation case, the same original appraiser shall value the TE. Obtain Department Approval of the value determination prior to any offers to landowners [sic]. After each TE is acquired, the DesignâBuilder shall submit a complete parcel acquisition file, which includes copies of offer letters, fair market value determinations, fully exe- cuted easement documents and/or agreements, the negotia- torâs signed diary, and a statement signed by the landowner acknowledging receipt of payment in full. Parcel acquisition files shall be submitted to the Department for Approval no later than two Working Days following tender of payment to the landowner. If the DesignâBuilder cannot reach an agreement with a landowner for the acquisition, the DesignâBuilder may request in writing that the Department acquire the ease- ment or easements through condemnation proceedings, at the expense of the DesignâBuilder. In most circumstances, designâbuild projects involve acquisition of temporary rights for precon- struction activities through a combination of volun- tary agreements with landowners and, where such agreements are not possible, court-ordered rights-of- entry. Although the procedures differ from state to state, in many cases some mechanism exists for the agency or designâbuilder to gain access to necessary properties for these types of preliminary activities.178 A 2014 California Court of Appeal decision may be indicative of a new trend. In that case, the court held that Californiaâs precondemnation right-of- entry statutes are unconstitutional to the extent that they allow the âtakingâ of a property right with- out affording the owner statutory and constitutional protections afforded to all condemnees, including the right to a jury trial.179 The court also held that many activitiesâsuch as environmental survey- ingâconstituted takings and, thus, could not be accomplished using the right-of-entry statutes, even though, in the past, such activities had routinely been found to fall within the scope of the right-of- entry statutes.180 The California Supreme Court granted review of the decision, and a final ruling is pending as of this publication. Regardless of how the California Supreme Court rules, it is important to 3. DesignâBuilder Wishes to Acquire Temporary Interest in Parcel that the Agency is Planning to Acquire for Permanent Right-of-Way Most projects require temporary rights in prop- erty outside of the permanent right-of-way for lay- down areas, temporary construction easements, and property interests needed to facilitate utility reloca- tions. Temporary interests in property may also be needed to conduct surveys and environmental test- ing during the preconstruction period (including tests for hazardous waste and impacts to critical habitat or protected species, among others) and other work. The designâbuild contract may require the designâbuilder to identify property interests that it needs and bear the costs and risks associated with acquiring those property rights. Many designâ build contracts limit the agencyâs responsibility in these circumstances to providing key approvals and, to the extent the agency deems it necessary and appropriate, prosecuting eminent domain actions. A designâbuilderâs acquisition of temporary rights in property outside of the permanent right-of- way typically does not trigger concerns with regard to Uniform Act compliance when the rights are negotiated voluntarily and the property is being acquired for the designâbuilderâs convenience (as opposed to being a necessary acquisition). Neverthe- less, in some situations, it may be in the interest of the project to preserve the ability to proceed under the Uniform Act in acquiring the property rights (e.g., where there is only one logical location for required activities). The Uniform Act is also a con- cern when the designâbuilder seeks to acquire tem- porary rights in a property that will be included within the final alignment, in advance of acquisition of the permanent interest.177 In such situations, care must be taken to ensure that the designâbuilder does not engage in any discussions that would be âcoerciveâ or otherwise violate Uniform Act require- ments, thus impairing the agencyâs ability to obtain permanent rights in the property in question. UDOTâs I-15 CORE contract documents include the following requirement related to temporary ease- ments (TEs) in the contractâs Technical Provisions: 19Câ4.1. Temporary Easements The DesignâBuilder, at its sole cost and expense, shall be responsible for acquiring all TEs not otherwise shown in Part 5 that are necessary to meet the requirements of the Contract Documents. All temporary easements shall be appraised and valued in accordance with the Departmentâs Right-of-Way Design Manual, Part 10. If a TE is to be acquired on a property 177 The primary concern is that the landowner might lat- er claim it was coerced into granting the temporary interest and raise that as a defense in a later condemnation action. 178 See, e.g., cAl. coDe civ. proc., §§ 1245.010â1245.060, Alabama Interstate Power Co. v. Mt. Vernon-Woodberry Cotton Duck Co., 186 Ala. 622, 650, 65 So. 287, 295 (1913) (discussing precondemnation entry rules under Alabama law); State Highway Commân v. Dist. Court, 147 Mont. 348, 412 P.2d 832, 835 (Mt. 1966); Square Butte Elec. Coop. v. Dohn, 219 N.W.2d 877, 881 (N.D. 1974). 179 See Property Reserve, Inc. v. Superior Court, 224 Cal. App. 4th 828, 168 Cal. Rptr. 3d 869 (2014), review granted, depublished by Property Reserve, Inc. v. Superior Court, 326 P.3d 976 (2014). 180 Id. at 859, 168 Cal. Reptr. 3d at 893 (âWe conclude the entry order for the environmental activities authorizes a taking of a property interest in the nature of a temporary easement that must be acquired in a condemnation suit.â).
42 to review the schedule promptly after the contract is awarded and to consult with the agency regarding any desired changes in priorities. To the extent that the schedule is driven by allocation of agency resources, the agency may be able to modify the schedule, but in some cases the schedule may be set based on factors outside the agencyâs control, in which case the agency may not be able to accommo- date the designâbuilderâs requests. Such a provision is generally considered beneficial for the project, because it provides greater flexibility to the designâ builder and ensures that the agencyâs resources are deployed more efficiently. Section 9.1 of the UDOT I-15 CORE General Pro- visions includes the following clause identifying a process for developing agreed-upon modifications to the acquisition schedule: Prior to NTP2 and concurrent with the development of the Project Schedule, the DesignâBuilder may request the Department to re-prioritize the sequence of ROW acquisi- tion to better accommodate the DesignâBuilderâs perfor- mance of the Work. The DesignâBuilder and the Depart- ment may agree in writing to revise the ROW Schedule by a no-cost Change Order, which revisions shall be made to the ROW Schedule and Project Schedule. 5. Agencyâs Acquisition Plan Omits Property Needed for the Project Whenever the contract documents include a prop- erty acquisition schedule, there is a risk that the schedule may not include all of the property neces- sary for construction of the project. The instructions to proposers governing the procurement process itself usually require proposers to review the con- tract documents and identify omissions, thus plac- ing a burden on the proposer teams to consider whether the property schedule is complete and to submit a request to the agency either to modify the schedule or to include a provision in the contract addressing the omission. For the Eastern Toll Road project described previously in Section V.E.3, the proposers advised the agency that property would be required outside the right-of-way boundaries established by the owner for drainage purposes, and, as a result, the agency added a provision to the contract that made it clear the agency had the obli- gation to obtain such property. UDOTâs I-15 CORE General Provisions address the possibility of errors in the right-of-way schedule as follows: 9.2.3 Material Errors in Right-of-Way Plans Upon the DesignâBuilderâs fulfillment of all applicable requirements of this Section 9, and subject to the limitations contained therein, the Department shall be responsible for, and agrees to issue Change Orders: (i) to compensate the DesignâBuilder for additional costs directly attributable to material errors in the ROW limits indicated in the ROW understand the scope of any temporary rights needed during the planning or environmental review stages, to ensure that statutory authority to conduct such activities exists in the relevant juris- diction and to check for case law in the jurisdiction that places limits on any such statutory authority. When these types of temporary rights cannot be obtained voluntarily or through a simple statutory procedure, the project could suffer significant delays while proceeding through the formal condemnation process to obtain such rights. This would be espe- cially problematic for any agency in this position that also lacked quick-take authority, as obtaining simple entry rights could take a year or more. One key exception may apply with respect to con- straints on preconstruction temporary rights. Regard- less of any general statutory procedure allowing pre- condemnation rights-of-entry, many jurisdictions have specific rules concerning access to property by licensed surveyors who are performing a survey.181 These rules may come in the form of express rights to enter a pri- vate property for certain specified activities, or they may merely create immunity from liability for tres- pass for surveyors performing certain activities. In summary, where the temporary property inter- ests are on properties that lie outside the final align- ment and condemnation will not be necessary, the designâbuilder should be able to proceed without complying with the Uniform Act so long as the acquisition satisfies all of the criteria for a âvolun- taryâ acquisition.182 When in doubt as to whether the acquisition qualifies as âvoluntary,â the better approach is to proceed as if all requirements under the Uniform Act must be followed. It is also advis- able to follow the Uniform Act whenever the designâ builder needs early access to property within the permanent right-of-way. 4. DesignâBuilderâs Construction Plan Is Different from Assumptions Made by Agency in Setting Acquisition Schedule, Resulting in Request to Modify the Acquisition Schedule For projects where the procuring agency estab- lishes the acquisition schedule, the contract often includes a provision that requires the designâbuilder 181 See, e.g., cAl. civ. coDe § 846.5 and cAl. bus. & prof. coDe § 8774 (California), mAss. gen. lAws Ann. 266 § 120C (Massachusetts), or. rev. sTAT. § 672.047 (Oregon), mo. Ann. sTAT. § 327.371 (Missouri), mich. comp. lAws Ann. §§ 54.122â 54.124 (Michigan), wis. sTAT. Ann. § 59.73 (Wisconsin). For a more complete list, see NSPS Right of Entry Committee Report, dated Sep. 2006, http://www.scpls.net/files/RIGHT_ OF_ENTRY_CMT_REPORT_10_2006.pdf (last visited June 29, 2015). Use caution before relying on the 2006 Report, as rules may have changed in some jurisdictions. 182 See § V.A.5 (Relocation and Assistance).
43 construction, the developer of adjoining property modified its subdivision plan to include additional lots, placing fill on property adjacent to the planned right-of-way to support the new lots. This increased the cost of building the toll road as originally planned, since the original plan did not contemplate the need to provide lateral and subjacent support for the addi- tional lots. The designâbuilder and owner, working together, evaluated solutions that included building a tie-back wall, as well as the possibility of removing the fill and acquiring the affected lots. The solution that was ultimately adopted involved building a large mechanically stabilized earth (MSE) wall and pur- chasing sliver parcels from the affected lots. 7. In Developing the Design, It Becomes Apparent that a New Utility Easement Will Be Needed Utility relocations present a major risk for trans- portation projects, largely because relocations require the cooperation of utility owners, and there is always the risk of finding unknown utilities. Util- ity relocations involve complex issues relating to property rights. When the utility owner holds âfran- chiseâ rights (often the case for utilities within pub- lic rights-of-way), the utility owner may be obli- gated to relocate its facilities at its own expense. If, however, the utility owner has âprior rightsâ (usu- ally in the form of an easement granted by a prop- erty owner, or reserved in a grant deed), the trans- portation project owner will likely be required to pay for the relocation, potentially including the need to acquire an easement for the benefit of the utility owner in connection with relocation. A utility easement, strictly speaking, is not part of the trans- portation project right-of-way, as title to the ease- ment is held by a third party (namely, the utility owner). Nevertheless, a utility easement is a prop- erty right and therefore raises many of the same issues as right-of-way acquisitions. Many designâ build contracts deal with utility easements by treat- ing them in the same way as rights-of-way. It is not uncommon for staff and consultants rep- resenting transportation agencies to ask whether the agency can opt to pay for utility relocation costs. Part of the logic for this is that it might expedite the project work and avoid confrontation with the utili- ties. Whether this is possible is dependent upon the rules applicable to the agency. It should be noted that FHWA will participate in the costs of utility relocations only if the federal funds grantee has a legal obligation to pay such costs.185 In some cases, it may be considered a gift of public funds for a public agency to volunteer to pay costs of relocating utili- ties with franchise rights. In other cases, the agency Plans; and (ii) to extend the Completion Deadlines as the result of any delay in the Critical Path affecting a Completion Deadline caused by any such errors. The DesignâBuilder shall provide written notice to the Department immediately upon discovery of any such material error. The Department, in the Departmentâs sole discretion, shall have the right to cure any such error such as by acquiring additional property. 6. DSCs Resulting in Need to Acquire Additional Property Site conditions risk is often a major topic of dis- cussion during the industry review process for designâbuild projects, with the procuring agency typically interested in shifting maximum risk to the designâbuilder and the proposers taking the position that transfer of such risk is not cost-effective. Many agencies include provisions in their designâbuild contract documents that limit their responsibility for DSCs to errors in the agencyâs boring data (i.e., Type 1) and unusual subsurface conditions (i.e., Type 2).183 DSCs may also include previously unidentified sub- surface utilities. Many designâbuild contracts pro- vide for the procuring agency to bear the risk if major underground utilities are discovered during final design and construction that were not anticipated as of the proposal due date. In at least one state, public agencies are subject to a statutory requirement to identify such facilities in the plans and specifications for their construction contracts.184 The risk of differ- ing surface (as opposed to subsurface) conditions is often transferred to the designâbuilder. In many cases, additional work is required to be performed due to discovery of differing conditions (including discovery of unanticipated utilities), and such conditions may also delay the project schedule. Differing conditions may also necessitate a change in the design or result in increased right-of-way acquisi- tion costs. One interesting example can be seen in the following problem that arose during the process of developing the San Joaquin Hills Toll Road in Orange County, California. During the period between award of the designâbuild contract and start of roadway 183 See, e.g., Request for Proposals I-15 CORE, Part 1: Gen- eral Provisions, § 6.1 Differing Site Conditions, Utah Depât of Transp. (2009). 184 See cAl. govâT coDe § 4215, obligating public agen- cies to âassume the responsibility, between the parties to the contract, for the timely removal, relocation, or protec- tion of existing main or trunkline utility facilities located on the site of any construction project that is a subject of the contract, if such utilities are not identified by the pub- lic agency in the plans and specifications made a part of the invitation for bids.â It seems possible that this statute was intended to apply only to designâbidâbuild contracts, as opposed to contracts where the plans and specifications are provided by a designâbuilder, and it should be noted that the statute does not include any provisions prohibit- ing contractors from waiving the benefit of the statute. 185 See 23 C.F.R. § 645.103(d).
44 the designâbuilder, this becomes a non-issue, as the designâbuilder would be able to account for the esti- mated savings in its pricing. As noted previously in this section, VE provisions found in some contracts, including the UDOT I-15 CORE contract, would allow the designâbuilder to share in the agencyâs cost savings that result from not having to pay right-of-way costs. 9. Political Decision to Change the Alignment As discussed in Section V.D.6, the risk of a politi- cal decision to change the alignment following award is relatively low for contracts awarded after the final environmental approvals have been obtained. In such a case, the procuring agency has a greater abil- ity to manage this risk than the designâbuilder, and it thus appears appropriate for such an alignment change to be treated as an owner-directed change. With respect to contracts awarded prior to issu- ance of environmental approvals, the contract should include provisions that limit the scope of work to be performed by the designâbuilder prior to the final NEPA decision and avoid the need to pay for work that may later prove to be unnecessary. If the con- tract is awarded early in the environmental process, the project owner should consider which types of changes may occur and include provisions in the con- tract to facilitate negotiation of a change order if the alignment is changed. Absent unusual circum- stances, it would not make sense to allocate the polit- ical risk of an alignment change to the designâbuild contractor, due to the high contingency that propos- ers would likely include in the contract price. New Jersey Transitâs (NJT) HudsonâBergen Light Rail Transit project provides a notable example of an alignment change following award of a designâbuild contract. NJT entered into a designâbuildâoperateâ maintain contract for the project in October 1996, based on a preferred alignment selected by NJT in 1993 and approved by the Federal Transit Administra- tion in a record of decision issued in October 1996.189 In January 1997, New Jerseyâs governor made a decision to shift the project alignment to reduce impacts on downtown Hoboken, thereby reducing the need for track to be embedded in streets and also reducing property acquisition costs.190 The designâbuild con- tract for the project allocated the risk of delay in prop- erty acquisitions to NJT, but, because the alignment may be required by law to pay utility relocation costs without regard to the nature of the utility own- erâs interest.186 It may also be possible for a trans- portation agency to avoid the need to undertake detailed title evaluations by entering into a master agreement with utility owners that establishes a predetermined approach to cost sharing.187 Utility relocations can often be accommodated within the project right-of-way, in which case a util- ity owner with prior rights would receive a replace- ment easement within the right-of-way. However, for various reasons, it may be necessary to relocate the facilities to an easement outside the right-of- way. Ideally, the need for any utility easements will be determined before award of the contract and included in the initial schedule for property acquisi- tions. If this does not occur, or if circumstances change, additional costs and delays are likely. Designâbuild contracts often require the designâ builder to pay the cost of utility easements if the designâbuilder makes the choice to locate the facil- ity outside of the right-of-way. They will sometimes require the designâbuilder to pay some or all of the cost of utility easements regardless of the reason the easement is requiredâserving to encourage propos- ers to identify errors in the property acquisition schedule during the pre-proposal period. This also helps to act as an incentive for the designâbuilder to produce an effective design. 8. DesignâBuilder Submits ATC or Value Engineering Proposal that Avoids the Need to Acquire a Particular Parcel Designâbuild procurements often give proposers the opportunity to propose ATCs.188 As previously discussed in this section, proposers may submit ATCs that avoid the need to acquire a particular parcel. In most cases, if such an ATC is proposed, the cost savings to the agency is considered as part of the technical evaluation. Although several agencies have considered the cost savings as part of the price proposal evaluation, most decide not to adopt that approach due to the uncertainty of determining the amount of the savings. If the project involves trans- fer of responsibility for property acquisition costs to 186 See, e.g., cAl. pub. uTil. coDe 100131, granting eminent domain rights to the Santa Clara Valley Transportation Au- thority and requiring the agency to pay âthe cost, exclusive of betterment and with credit for salvage value, of removal, reconstruction, or relocation of any structure, railways, mains, pipes, conduits, wires, cables, or poles of any public utility which is required to be moved to a new location.â 187 See, e.g., Caltrans master agreements with utility owners. 188 For a discussion of various issues relating to ATCs, see NCHRP Synthesis 455. 189 Fed. Transit Admin., Northern New Jersey/Hudson- Bergen LRT MOS-1 (2000), available at http://www.fta.dot. gov/12304_3062.html (last visited June 29, 2015). 190 office of inspecTor generAl, reporT To feDerAl TrAnsiT ADminisTrATion on TrAnsporTATion invesTmenT proJecTs mAnAgemenT AnD oversighT (Report No. RT-2000- 063, 2000), available at https://www.oig.dot.gov/sites/ default/files/rt2000063.pdf (last visited June 29, 2015).
45 As an alternative, if the project has an approved Real Estate Acquisition Management Plan (RAMP), the design-builder can certify that it will follow the approved RAMP.194 The proposed regulations contain provisions that allow local transportation agencies to develop their own right-of-way manuals and to there- after follow (and have their designâbuilders follow) their own manuals.195 This serves to bring designâ build projects more in line with traditional designâ bidâbuild projects in terms of how right-of-way acqui- sitions are handled. It also means that, as states update their right-of-way manuals, the requirements for designâbuild projects will also change without the need to update the FHWA regulations. The proposed regulations also create a mandatory âhold off zoneâ around properties that have not been vacated by the time construction commences.196 Under existing regulations, a hold off zone is optional as a means of protecting the quality of life of occupants who have not yet been relocated when construction com- mences.197 In addition, in place of a longer, more techni- cal list of requirements, the new regulations contain a simple provision about preserving quality of life: âCon- tractors activities must be limited to those that the grantee determines do not have a material adverse impact on the quality of life of those in occupied prop- erties that have been or will be acquired.â198 The proposed regulations also offer flexibility regarding early acquisition activities (i.e., acquisi- tions prior to NEPA compliance). The changes are designed to implement early-acquisition flexibility provided for in the Moving Ahead for Progress in the 21st Century Act (MAP-21),199 but not yet existent in the implementing regulations. The proposed regula- tions contain provisions for early acquisitions using: 1) no federal funds, 2) state funds subject to federal reimbursement, or 3) regular federal funds. The most significant change involves âFederally funded early acquisition.â200 Despite having many conditions and change occurred early in the designâbuild process, the designâbuilder had not yet performed significant design work and had flexibility to deal with the change. As a consequence, although the change delayed com- pletion of the affected portion of the project, it did not have a material effect on the total project cost.191 G. Proposed Federal Rulemaking May Mitigate Some Risks of Uncertainty During the 12-plus years that have passed since FHWA promulgated its designâbuild rule, federal funds grantees, their contractors, and FHWA have had the opportunity to evaluate how the existing federal regulations that relate to right-of-way acquisitions affect designâbuild projects. As discussed in Section V.C (FHWA Rules Relevant to DesignâBuild Con- tracts), FHWA has received a number of comments over the years asking for changes to the regulations. In November 2014, FHWA announced proposed changes to the rules to, among other things, better address right-of-way needs in the designâbuild context.192 If approved in the form that exists as of this pub- lication, the new regulations will streamline the right-of-way process for designâbuild projects, mak- ing compliance simpler, while at the same time somewhat increasing the flexibility provided to designâbuild project participants. The most significant change may be the updates to what is currently known as 23 C.F.R. § 710.313 (to be renumbered as 23 C.F.R. § 710.309). The current § 710.313 contains a laundry list of requirements the designâbuilder must comply with if the designâ builder assumes responsibility for right-of-way acqui- sitions. The proposed § 710.309 simplifies the process by removing most of those requirements. Instead, the designâbuilder would be required to certify that it will comply with the FHWA-approved right-of-way manual for the state in which the project is located.193 191 Id. 192 See prop. 23 C.F.R. § 710.309(d)(1), 79 Fed. Reg. 69997, 69999 (Nov. 24, 2014). 193 Id. The Executive Summary for the proposed regu- lations describes this aspect of the update as follows: The revisions proposed in this NPRM (proposed § 710.309) would eliminate many of the detailed require- ments that address individual ROW activities. Under the proposal, a designâbuild contractor handling acqui- sitions directly would be required to certify that it will comply with the SDOT ROW manual or an approved RAMP. Most often, the designâbuild contractor would certify it will comply with the SDOT ROW manual. The FHWA believes this approach will provide the same protections as the current regulation because the approved ROW procedures, whether in an SDOT ROW manual or an approved RAMP, include the full range of applicable procedures and requirements. Id. 194 Id. 195 See prop. 23 C.F.R. § 710.201(c)(1) & (d), 79 Fed. Reg. 69999,70005 (Nov. 24, 2015).. 196 See prop. 23 C.F.R. § 710.309(d)(2), 79 Fed. Reg. 69997, 69999 (Nov. 24, 2914). The Executive Summary describes the purpose for this change as follows: âThe FHWA believes this change will help ensure that po- tential impacts not currently listed in regulation are addressed, and that the SDOT and contractor focus on outcomes rather than technical compliance issues.â 197 See 23 C.F.R. § 710.313(d)(3). 198 See prop. 23 C.F.R. § 710.309(d)(3), 79 Fed. Reg. 69997, 70025 (Nov. 24, 2014). 199 See 23 U.S.C. 108, as revised by § 1302 of Pub. L. No. 112-141, July 2012 (the Moving Ahead for Progress in the 21st Century Act). 200 See prop. 23 C.F.R. § 710.501(e), 79 Fed. Reg. 69997, 70028 (Nov. 24, 2014).