SECTION 9.34. Non-federal Process

(a) Applicability. The non-federal process, also referred to as the state process, described under this section may be used for contracts that are not subject to §9.35 of this subchapter (relating to Federal Process).

(b) Administrative qualification.

(1) Administrative qualification is a process used by the department to verify that a provider performing engineering and design related services has an indirect cost rate that meets department requirements. Except as provided by paragraph (8) of this subsection, to compete for a contract under this section a provider performing engineering and design related services either must be administratively qualified or must accept an indirect cost rate under paragraph (7) of this subsection.

(2) Factors in determining administrative qualification.

(A) A provider may demonstrate administrative qualification by an audit or by self-certification.

(i) An audit may be performed by an independent certified public accountant (CPA), an agency of the federal government, another state transportation agency, or a local transit agency. An audit performed by an independent CPA must be conducted in accordance with the current versions of 48 C.F.R. Part 31, the Generally Accepted Government Auditing Standards (GAGAS), and the American Association of State Highway and Transportation Officials (AASHTO) Uniform Audit and Accounting Guide. The provider must provide the department with unrestricted access to the audit work papers, records, and other information as requested by the department.

(ii) Self-certification may be conducted by the provider and must include a cost report and an internal controls report. The self-certified cost report must comply with the current versions of 48 C.F.R. Part 31, the GAGAS, and the AASHTO Uniform Audit and Accounting Guide. The self-certified internal control report must certify the provider has internal controls in place within its organization. Both the cost report and the internal control report must be signed by a company officer and notarized.

(B) The audit or self-certification shall be based on the provider's fiscal year. The indirect cost rate, as approved by the department, shall become effective six months after the end of the provider's fiscal year, or immediately if filed more than six months after the end of the provider's fiscal year. It shall be effective no more than twelve months and shall expire eighteen months after the end of the fiscal year upon which it is based, except that, for the purpose of competition referred to in paragraph (1) of this subsection, negotiations referred to in subsection (b)(5) of this section, or administratively qualified under §9.35(b) of this subchapter (relating to Federal Process), the department may extend an approved indirect cost rate for 90 days if the department has received the provider's annual administrative qualifications information submittal before the rate's expiration date.

(C) A provider must submit on an annual basis:

(i) a cognizant letter of concurrence issued by a state transportation agency in accordance with the AASHTO Uniform Audit and Accounting Guide; or

(ii) a compensation analysis for all executives and employees in accordance with the AASHTO Uniform Audit and Accounting Guide for which the provider may use either the National Compensation Matrix or surveys as prescribed in the AASHTO Uniform Audit and Accounting Guide.

(D) A provider's payment of a bonus or incentive compensation to an employee is allowable only if the bonus or compensation is paid under a written bonus plan that:

(i) is consistent with the AASHTO Uniform Audit and Accounting Guide that identifies eligibility requirements and provides details regarding how bonus payments are determined; and

(ii) includes an adequate description of the performance measures used to determine bonus amounts, such as employee performance evaluation ratings, contributions toward the firm's revenue growth, and responsibilities for cost containment.

(E) A provider must submit on an annual basis the salary rates for employees that it anticipates using on contracts that may be executed during the next 12-month period. The department will review the salary rates for reasonableness and consistency with industry norms and when approved, will apply the rates to contracts negotiated within the next 12-month period. During the 12-month period, the provider must submit the salary rate for any employee who is used on a contract and whose salary rate has not been provided under this subparagraph. The department will continue to negotiate contracts on an individual basis during the initial 12-month implementation period.

(F) The department may audit the indirect cost rate of a provider under contract with, or seeking to do business with, the department. These audits will be conducted in accordance with the criteria outlined in this subsection.

(G) A provider must submit a signed Certification of Final Indirect Costs with the audit report or self-certification. The certification must follow the requirements of the Federal Highway Administration.

(H) The department will treat the cost data as confidential pursuant to 23 U.S.C. Section 112 and 23 C.F.R. Part 172.

(3) Submittal and review process for administrative qualification.

(A) A provider must submit its administrative qualification information to the department in accordance with the instructions on the department's website.

(B) Upon review of an audit report or self-certification received from a provider, the department may request additional information from the provider. If the submittal is not complete and accurate, the department will return it to the provider for correction. The provider shall submit the additional information or the corrected administrative qualification submittal within 30 days after the day that it receives the department's request. If the information is not received within the 30-day period, the department will reject and not process the administrative qualification submittal.

(C) If an administrative qualification submittal is rejected under subparagraph (B) of this paragraph, the provider may refile a corrected audit report or self-certification and shall include any previously requested information. The provider may not refile earlier than 90 days after the day that the department sends the notice rejecting the submittal.

(D) The department will make a good faith effort to complete the administrative qualification review process within 60 days after the day that it receives a complete and accurate audit report or self-certification.

(4) Administrative qualification is applicable only to the incorporated business entity upon which the indirect cost rate is based and does not extend to a subsidiary, affiliate, or parent of the incorporated entity, except as provided by this paragraph. A corporation may administratively qualify a business segment of the corporation if the business segment is not limited to a geographical area that is less than the entire state of Texas and if the corporation is able to demonstrate and justify the allocation of costs between the business segment and other corporate operations. If a corporate business segment is administratively qualified, the resulting indirect cost rate is not applicable to staff not employed by the business segment.

(5) In negotiations under §9.38 of this subchapter (relating to Emergency Contract Process), the department will use the selected firm's indirect cost rate information that is in effect at that time the negotiations begin.

(6) The department will not provide a firm's administrative qualification information, including salary information, to the department's staff conducting negotiations or the consultant selection team before the selection of that firm.

(7) Providers not administratively qualified. The department may contract with a prime provider or allow the use of a subprovider that is not administratively qualified if:

(A) the provider has been in operation, as currently organized, for less than one fiscal year and the provider accepts an indirect cost rate developed by the department; or

(B) on request by the department during the selection process, the prime provider provides written certification that the prime provider or subprovider, as applicable, does not have an indirect cost rate audit and will accept an indirect cost rate developed by the department.

(8) Exemptions to administrative qualification.

(A) A non-engineering firm is exempt from the administrative qualification requirement of this section.

(B) A provider performing a service under standard work category 18.2.1, subsurface utilities engineering, or any of the following work groups, as listed on the department's precertification website, is exempted from administrative qualification, to the extent of the service being performed:

(i) Group 6, bridge inspection;

(ii) Group 12, materials inspection and testing;

(iii) Group 14, geotechnical services;

(iv) Group 15, surveying and mapping;

(v) Group 16, architecture; and

(vi) Group 17, facilities engineering.

(C) The department may exempt services other than those indicated in subparagraph (B) of this paragraph on a case-by-case basis. Any request for an exemption must be received by the department by the closing date of the RFP.

(c) Consultant selection team (CST).

(1) The department shall use a CST in selecting providers under this section.

(2) The CST shall be composed of at least three department employees.

(3) At least one CST member must be a professional engineer, for engineering contracts; a registered architect, for architectural contracts; and either a professional engineer or registered professional land surveyor, for surveying contracts.

(4) If a CST member leaves the CST during the selection process, the process may continue with the remaining members, subject to paragraph (3) of this subsection.

(d) Request for proposals. Not fewer than 14 calendar days before the RFP closing date, the department will post on a web-based bulletin board an RFP providing the contract information and specifying the requirements for preparing and submitting a proposal.

(e) Proposal. To be considered, a proposal must comply with the requirements specified in the RFP.

(f) Replacements.

(1) An individual may be proposed as a replacement for the prime provider project manager prior to the department's notification of firms short-listed for an interview or, if an interview is not required, prior to selection.

(2) An individual may be proposed as a replacement for a task leader prior to contract execution.

(3) A proposed replacement for the prime provider project manager must be an employee of the prime provider. A proposed replacement for a task leader must be an employee of the prime provider or its subprovider. A proposed replacement for either position must satisfy the applicable precertification and non-listed category requirements.

(g) Proposal screening and evaluation.

(1) The department may disqualify a proposal if the department has knowledge that a firm on the project team or an employee of a firm on the project team is the subject of a final administrative or judicial determination that the firm or employee has violated a statute or rule of a state licensing entity related to occupational or professional conduct.

(2) If a proposal is not disqualified under paragraph (1) of this subsection, the CST will screen the proposal to determine whether it complies with the requirements specified in the RFP. Each proposal that meets these requirements will be considered responsive to the RFP and evaluated.

(3) The CST will evaluate the responsive proposal according to the evaluation criteria detailed in the RFP based on factors the department has identified as most likely to result in the selection of the most qualified provider, including the prime provider's past performance scores, as contained in the department's database, that reflect less than satisfactory performance.

(h) Short list. The short list will consist of the most qualified providers, as indicated by the proposal scores.

(1) For single contract selections, the minimum number of short-listed prime providers is three, unless fewer than three prime providers submitted a responsive proposal.

(2) For multiple contract selections, the minimum number of short-listed prime providers is the number of desired contracts plus three, unless fewer than the desired number of prime providers submitted a responsive proposal.

(3) Notification.

(A) The department will notify each prime provider that submitted a proposal whether it was short-listed.

(B) The department will notify each short-listed prime provider whether a short list meeting will be held.

(i) Short list evaluation.

(1) An interview is required for any specific deliverable contract that is $5 million or more in value or any indefinite deliverable contract for higher-risk services as determined by the department based on project complexity, anticipated project costs, number of contracts, or type of services.

(2) The RFP will state whether an interview will be required as part of the short list evaluation. The department will issue an Interview and Contract Guide (ICG) to each short-listed prime provider. The ICG will provide contract information and specify the requirements for the interview.

(3) The CST will evaluate the interviews according to the criteria specified in the ICG.

(j) Selection.

(1) Basis of final selection.

(A) If interviews are required, the CST will select the best qualified provider, as indicated by the interview scores.

(B) If interviews are not required, the CST will select the best qualified provider, as indicated by the proposal scores.

(2) Tie scores. The PEPS Division Director will break a tie using the following method.

(A) The first tie breaker will be the scores for:

(i) the interview criterion with the highest RIF; or

(ii) if interviews are not required, the proposal criterion with the highest RIF.

(B) The remaining criteria shall be compared in the order of decreasing RIF until the tie is broken.

(C) If the providers have identical scores on all of the criteria, the provider will be chosen by random selection.

(3) Notification. The department will:

(A) provide written notification to the prime provider selected for contract negotiation and arrange a meeting to begin contract negotiations;

(B) provide written notification to each short-listed prime provider that was not selected, notifying the provider of the non-selection; and

(C) publish the short list and the selected provider on a web-based bulletin board.

(4) Appeal. A provider may file a written appeal concerning the selection process with the executive director or the executive director's designee as provided under §9.7 of this chapter (relating to Protest of Contract Practices or Procedures).

Source Note: The provisions of this §9.34 adopted to be effective February 21, 2013, 38 TexReg 994; amended to be effective October 17, 2013, 38 TexReg 7122; amended to be effective April 16, 2015, 40 TexReg 2098; amended to be effective July 20, 2016, 41 TexReg 5248; amended to be effective February 15, 2017, 42 TexReg 569; amended to be effective June 20, 2019, 44 TexReg 2957; amended to be effective November 17, 2021, 46 TexReg 7806