When a local government or reservoir agency is responsible for providing financial assistance for a highway improvement project, the department and the local government or reservoir agency shall enter into an agreement before any work is performed. The agreement will include, but not be limited to, the following provisions of this section.

1. (1) Right of entry. If the local government or reservoir agency is the owner of the project site, it shall permit the department or its authorized representative access to occupy the site to perform all activities required to execute the work.
2. (2) Right of way and/or utility relocation/adjustments. The local government will provide all necessary right of way and utility relocation/adjustments, whether publicly or privately owned, in accordance with §15.55 of this subchapter (relating to Construction Cost Participation). When specified, the reservoir agency will provide all necessary right of way and utility/relocation adjustments, whether publicly or privately owned. Existing utilities will be relocated and/or adjusted with respect to location and type of installation in accordance with the requirements of the department as specified in §21.21 of this title (relating to State Participation in Relocation, Adjustment, and/or Removal) and §21.31 et seq. of this title (relating to Utility Accommodation).

3. (3) Funding arrangement. The agreement will specify the type of funding share arrangement agreed upon by the department and the local government. The funding share arrangement shall include any adjustments required by §15.55 of this subchapter. The funding arrangement agreed upon by the department and the reservoir agency will be as specified under §15.54(f) of this subchapter.

   1. (A) Standard. The local government is responsible for all, or a specified percentage as shown in Appendix A of §15.55 of this title (relating to Construction Cost Participation), of the direct costs incurred by the department for preliminary engineering, construction engineering, construction, and right of way as well as the direct cost for any work included which is ineligible for federal or state participation. When specified, the reservoir agency is responsible for all of the direct costs incurred by the department for preliminary engineering, construction engineering, construction, and right of way as well as the direct cost for any work included which is ineligible for federal or state participation.

   2. (B) Alternate. A fixed price funding arrangement may be used if requested by the local government and approved by the executive director.

      1. (i) Definition. Under this arrangement, a local government is responsible for a firm fixed price which is a lump sum price not subject to adjustment except:

         1. (I) in the event of changed site conditions;
         2. (II) if work requested by the local government is ineligible for federal participation; or
         3. (III) as mutually agreed upon by the department and the local government.

      2. (ii) Conditions. The department may enter into a firm fixed price agreement only:

         1. (I) for projects that include state participation, as shown in Appendix A of §15.55 of this subchapter; and
         2. (II) if the fixed price is based on the estimated cost of the work for which the funds are received.

      3. (iii) Approval. In approving a request for an alternate funding arrangement, the executive director will consider:

         1. (I) requests by the local government to include work which is ineligible for federal or state participation;
         2. (II) need for expeditious project completion;
         3. (III) type of work proposed and the ability to accurately estimate its cost; and
         4. (IV) any other considerations relating to the benefit of the state, the traveling public, and the operations of the department.
   3. (C) Off State Highway System Bridge Program. For projects funded in the Off State Highway System Bridge Program, the local government is responsible for the specified percentage, as shown in Appendix A to §15.55 of this subchapter, of the estimated direct costs for preliminary engineering, construction engineering, and construction, and the actual direct costs for right of way and eligible utilities. The estimated direct costs are based on the department's estimate of the eligible work at the time of the agreement. The local government is responsible for the direct cost of any project cost item or portion of a cost item that is not eligible for federal participation under the Federal Highway Bridge Replacement and Rehabilitation Program under 23 U.S.C. §144 and 23 C.F.R. §650 Subpart D. The local government is also responsible for any cost resulting from changes made at the request of the local government, either during preliminary engineering or construction.
4. (4) Interest. The department will not pay interest on funds provided by the local government or the reservoir agency. Funds provided by the local government or the reservoir agency will be deposited into, and retained in, the state treasury.
5. (5) Amendments. In the case of significantly changed site conditions or other mutually agreed upon changes in the scope of work authorized in the agreement, the department and the local government or reservoir agency will amend the funding agreement, setting forth the reason for the change and establishing the revised participation to be provided by the local government or reservoir agency.

6. (6) Payment provision. The agreement will establish the conditions for payment by the local government or reservoir agency, including, but not limited to, the method of payment and the time of payment.

   1. (A) Standard. Following execution of the agreement, the local government or reservoir agency will pay, as a minimum, its funding share for the estimated cost of preliminary engineering for the project. Prior to the department's scheduled date for contract letting, the local government or reservoir agency will remit to the department an amount equal to the remainder of the local government's or reservoir agency's funding share for the project.

      1. (i) When the standard funding arrangement is used, after the project is completed the final cost will be determined by the department, based on its standard accounting procedures. If it is found that the amount received is insufficient to pay the local government's or reservoir agency's funding share, then the department shall notify the local government or reservoir agency which shall transmit the required amount to the department. If it is found that the amount received is in excess of the local government's or reservoir agency's funding share, the excess funds paid by the local government or reservoir agency shall be returned.
      2. (ii) When a fixed price funding arrangement is used, the lump sum price is not subject to adjustment except as provided for in paragraph (3)(B) of this section.
      3. (iii) For projects funded in the Off State Highway System Bridge Program, the department will determine the final cost after the project is completed, based on its standard accounting procedures. The department will notify the local government of any amount due for payment of costs related to any ineligible items and for changes made at the request of the local government. The local government shall promptly transmit the required amount to the department. The department will return excess funds paid by the local government if the amount received is in excess of the local government's funding share required by §15.55(c) of this subchapter.

   2. (B) Alternate. Incremental payments may be made if requested by the local government and approved by the executive director. When the standard funding arrangement is used, after the project is completed, the final cost will be determined by the department based on its standard accounting procedures. If it is found that the amount received is insufficient to pay the local government's funding share, then the department shall notify the local government which shall transmit the required amount to the department. If it is found that the amount received is in excess of the local government's funding share, the excess funds paid by the local government shall be returned. When a fixed price funding arrangement is used, the lump sum price is not subject to adjustment except as provided for in paragraph (3)(B) of this section. For projects funded in the Off State Highway System Bridge Program, the department will determine the final cost after the project is completed, based on its standard accounting procedures. The department will notify the local government of any amount due for payment of costs related to any ineligible items and for changes made at the request of the local government. The local government shall promptly transmit the required amount to the department. The department will return excess funds paid by the local government if it is found that the amount received is in excess of the local government's funding share required by §15.55(c) of this subchapter.

      1. (i) Conditions. The department may approve incremental payments only if:

         1. (I) the incremental payments sought are based on the estimated cost for the work for which the funds are received and payment is made in accordance with the schedule established in the funding agreement; and
         2. (II) the local government does not have a delinquent obligation to the department, as defined in §5.10 of this title (relating to Collection of Debts).

      2. (ii) Approval. In approving a request for incremental payments, the executive director will consider:

         1. (I) inability of the local government to pay its total funding share prior to the department's scheduled date for contract letting, based upon population level, bonded indebtedness, tax base, and tax rate;
         2. (II) past payment performance;
         3. (III) need for expeditious project completion;
         4. (IV) whether the project is located in a local government that consists of all or a portion of an economically disadvantaged county; and
         5. (V) any other considerations relating to the benefit of the state, the public, and the operations of the department.
7. (7) Termination. If the local government or reservoir agency withdraws from the project after the agreement is executed, it shall be responsible for all direct and indirect project costs incurred by the department for the items of work in which the local government or reservoir agency is participating.

8. (8) Responsibilities of the parties.

   1. (A) Agreement. The agreement shall identify the responsibilities of each party, including, but not limited to, preparing or providing construction plans, construction performance, advertising for bids, awarding a construction contract, and construction supervision.

   2. (B) Local performance and management of highway improvement projects.

      1. (i) Request. If requested by a local government and approved by the department, an agreement with the governing body of a local government may provide for:

         1. (I) the performance by employees under the direct control of the local government of a highway improvement project, other than a project to improve freeway mainlanes on the state highway system; or
         2. (II) the award of preliminary project engineering and design to a consultant, bid opening, award of construction to a contractor, and construction management by the local government or a consultant hired by the local government of a highway improvement project, other than a project to improve freeway mainlanes on the state highway system.

      2. (ii) Approval authority. The executive director may authorize a local government to perform an act described in clause (i) of this subparagraph. The executive director may delegate the authority to approve:

         1. (I) the performance by employees of the local government of work on a metropolitan highway not maintained by the department; and
         2. (II) the performance by employees of the local government of projects or activities appurtenant to a state highway, including drainage facilities, surveying, traffic counts, driveway construction, landscaping, signs, lighting, guardrails and other items incidental to the roadway itself on facilities for which the department is responsible for maintenance.

      3. (iii) Conditions. A local government may perform an act described in clause (i) of this subparagraph only if:

         1. (I) the local government commits in the agreement to comply with all federal, state, and department requirements, standards, and specifications, and agrees to forfeit any claim to federal and/or state reimbursement if they fail to comply;
         2. (II) the project is authorized by the commission in the current Unified Transportation Program or by a specific minute order;
         3. (III) a project on the state highway system performed or managed by a local government is operationally beneficial to the state;
         4. (IV) a project on the state highway system for which a contract is awarded and managed by a local government is funded with at least 50% of the funds not coming from federal or state highway funding; and
         5. (V) the department reviews and approves all plans, contract awards, and change orders.

      4. (iv) Approval. In approving a request, the executive director or designee will consider:

         1. (I) previous experience of the local government in performing the type of work proposed;
         2. (II) the capability of the local government to perform the type of work proposed or to award and manage a contract for that work in a timely manner, consistent with federal, state, and department regulations, standards, and specifications;
         3. (III) need for expeditious project completion;
         4. (IV) department resources available to perform or manage the highway improvement project in an efficient and timely manner;
         5. (V) cost effectiveness of local performance of the work as compared to awarding the highway improvement project through the competitive bidding process; and
         6. (VI) any other considerations relating to the benefit of the state, the traveling public, and the operations of the department.
9. (9) Acknowledgment. The local government or reservoir agency must acknowledge in the agreement that while not an agent, servant, nor employee of the state, it is responsible for its own acts and deeds and for those of its agents or employees during the performance of the work authorized in the contract.

Source Note:The provisions of this §15.52 adopted to be effective September 26, 1996, 21 TexReg 8957; amended to be effective September 23, 1997, 22 TexReg 9260; amended to be effective January 1, 1998, 22 TexReg 12090; amended to be effective November 22, 1998, 23 TexReg 11661; amended to be effective February 21, 1999, 24 TexReg 1194; amended to be effective August 20, 2000, 25 TexReg 7781; amended to be effective September 20, 2001, 26 TexReg 7126.