600 KAR 6:070. Contracting for engineering or engineering-related services

Link to law: http://www.lrc.ky.gov/kar/600/006/070.htm
Published: 2015

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      600 KAR 6:070. Contracting for engineering

or engineering-related services.

 

      RELATES TO: KRS 45A.800-45A.835, 45A.838,

23 C.F.R. 172, 23 U.S.C. 112, 121, 304, 315

      STATUTORY AUTHORITY: KRS 45A.807(2),

45A.838

      NECESSITY, FUNCTION, AND CONFORMITY: KRS

45A.807(2) requires the Transportation Cabinet to promulgate administrative regulations

to implement its procurement of engineering or engineering-related services

pursuant to KRS 45A.800 to 45A.835. KRS 45A.838 requires the cabinet to

promulgate administrative regulations to establish requirements for

establishing and operating a pool of firms to provide professional contract

services. This administrative regulation sets forth the procedure to be used by

the Transportation Cabinet to select engineering or engineering-related

services while implementing the provisions of KRS 45A.800 to 45A.835.

 

      Section 1. Methods of Contracting with

Consultants. (1) The following methods of contracting with a consultant shall be

used:

      (a) Lump sum;

      (b) Cost plus a fixed fee;

      (c) Specific rate of compensation;

      (d) Cost per unit of work; or

      (e) Other contract method approved by

FHWA.

      (2)(a) If the cabinet chooses the lump

sum method of contracting, the consultant shall present a statement to the

Division of Program Performance showing the probable cost for the elements of

work and the expected operating margin.

      (b) This statement shall include a

supported breakdown of the direct and indirect costs and subconsultant costs

which the consultant expects to incur.

      (c) The method of dividing the project

into work units and the calculation of related time units shall be devised so

that the estimate can be easily reviewed.

      (d) The Division of Program Performance and

the user division shall verify the following supporting documentation before

recommending the contract for approval:

      1. Reasonableness of the amount proposed

and consideration of the degrees of risk and responsibility to be assumed by

the consultant;

      2. The extent, scope, complexity,

character and duration of the required services;

      3. Professional and financial investments

to be required of the consultant;

      4. The consultant's normally-expected

return for services;

      5. Conditions under which the consultant

is expected to perform;

      6. The cabinet's estimate of the appropriate

amount for the services required; and

      7. The cabinet's findings on the basis of

experience and knowledge.

      (3)(a) If the cabinet chooses the cost

plus a fixed fee method of contracting, an upper limit of payment of actual

cost shall be established which shall not be exceeded without obtaining cabinet

approval.

      (b) During negotiations, the Division of

Program Performance or other negotiation unit shall be responsible for

establishing the upper limit along with the fixed fee to be paid to the consultant

for the services required.

      (c) The Division of Program Performance or

other negotiation unit shall establish the fixed fee and an upper limit based

on:

      1. Past experience gained from

negotiations of similar projects;

      2. Judgment regarding scheduling;

      3. Complexity of work; and

      4. User division's estimate.

      (4)(a) If the cabinet chooses the

specific rate of compensation method of contracting, the Division of Program

Performance or other negotiation unit shall document the basis on which the

amount specified as the upper limit or upset limit was established.

      (b) The agreement shall contain

provisions which permit adjustment to this upper limit if the consultant

establishes, and the user division agrees, that there has been or is to be a

significant change in the:

      1. Scope, complexity or character of the

services to be performed;

      2. Conditions under which the work is

required to be performed; or

      3. Duration of the work if the change

from the time period specified in the agreement for completion of the work

warrants that adjustment.

      (c) For a statewide agreement under which

there is to be subsequent individual authorizations, the establishment of a

maximum amount for the overall contract shall be submitted to the LRC's Government

Contract Review Committee. A maximum amount shall be established for each of

the individual authorizations which shall not exceed the maximum amount for the

overall contract.

      (5)(a) If the cabinet is using the cost

per unit of work method of compensation, the consultant shall be paid on the

basis of units completed.

      (b) Cost per unit contracting shall be

appropriate for use if:

      1. The extent of the work cannot be

accurately figured; and

      2. The cost of the work per unit can be

determined with reasonable accuracy in advance.

      (c) A proposal using this method of

contracting shall be supported in the same manner as that indicated for the

lump sum method used for consultants.

      (6)(a) For an individual acting as a

consultant, the specific rates of compensation shall include the direct salary

costs, salary additives, indirect costs and the net fee. The agreement of supporting

data shall specifically identify these costs.

      (b) Other direct costs may be included as

an element of a specific rate or as independent cost items.

 

      Section 2. Prenegotiation Procedures.

(1)(a) A consultant selected pursuant to 600 KAR 6:060 shall meet with cabinet

representatives in accordance with the schedule identified in the procurement

bulletin issued pursuant to 600 KAR 6:050 to discuss in detail the scope of

services to be provided by the consultant for the project.

      (b) The Transportation Cabinet may

require a consultant to obtain project-specific professional liability

insurance for an unusual project.

      (c) If project-specific professional

liability insurance is required:

      1. A firm's audit may be reexamined to

determine if a change in the overhead rate is needed; or

      2. The consultants may jointly purchase

the insurance if there is more than one (1) consultant involved in the project.

      (2)(a) After this prenegotiation meeting,

the consultant shall submit the following to the cabinet:

      1. Official minutes of the prenegotiation

meeting; and

      2. All required tasks and work units.

      (b) The cabinet shall have the following

options regarding the submittal:

      1. Concur;

      2. Modify and return the modification to

the consultant; or

      3. Reject and ask the consultant to

evaluate and resubmit the work units.

      (3) The consultant shall submit to the

Division of Program Performance a fair and reasonable fee proposal which shall

include the following:

      (a) Personnel classifications and average

wage rates for each classification as they appear in the audit and adjusted for

work in the future years;

      (b) Distribution of work by the personnel

classifications;

      (c) Overhead rates as determined by an

audit;

      (d) Subconsultants and fee proposals for

each;

      (e) Direct expenses not included in the

overhead and subject to the limitations of subsections (5), and (6) of this

section; and

      (f) Person-hours to achieve the agreed upon

task to achieve the scope of services that appear in the advertisement or procurement

bulletin.

      (4) After the Division of Program Performance

requests a proposal and fee estimate from the consultant, the user division

shall:

      (a) Prepare an estimate of resources

required to complete the project;

      (b) Discuss the project with other

divisions and request resource estimates from them as necessary; and

      (c) Coordinate all of the resource

estimates from other divisions to be used by the Division of Program Performance

in negotiation of the contract; and

      (d) Submit an independent person-hour

estimate for each discipline in which the firm's fee proposal exceeds 500

person-hours.

      (5) For contract negotiation purposes,

travel expenses for a consultant employee or survey crew shall be limited to

those incurred from an office in Kentucky or the border of Kentucky nearest the

consultant's office.

      (6) For contract negotiation purposes,

direct expenses shall be limited to the following items and limits:

      (a) Reimbursement rates for travel

expenses related to mileage shall be the twelve-month average of reimbursement

rates in accordance with the provisions of 200 KAR 2:006 beginning January 1st

and ending December 31st;

      (b) Printing of reports for distribution

external to the Transportation Cabinet - estimated cost from the printer per

document;

      (c) Special equipment which is

project-specific;

      (d) Capital cost of money;

      (e) Computer time, if accounted for as a

direct charge, shall not exceed fifteen (15) dollars per hour; and

      (f) Travel time for survey crew - travel

time to and from a job site in hours multiplied by the survey crew wage rate

multiplied by one and three-tenths (1.3) for salary additives.

 

      Section 3. Contract Negotiations. (1)(a)

The Division of Program Performance shall be the designated negotiating agent

for the Department of Highways in the Cabinet.

      (b) If engineering or engineering-related

services are requested by user divisions within the cabinet but not in the

Department of Highways, that user division shall designate the negotiating

agent.

      (2)(a) The Division of Program

Performance or other designated negotiation unit shall receive the proposal and

fee estimate from the consultant.

      1. The proposal submitted by the

consultant shall include a breakdown of the estimated fee for performing the

work and one (1) of the following:

      a. A statement that the payment shall be

based on the percentage of work completed; or

      b. The proposed project milestones and

corresponding maximum percentage payments.

      2. The breakdown of the estimated fee

shall include:

      a. Direct salaries;

      b. Overhead;

      c. Other direct costs including cost of

materials which are not included in the overhead;

      d. Subconsultant costs;

      e. Operating margin; and

      f. Use of DBE firms.

      (b) The Division of Program Performance or

other designated negotiation unit shall analyze the proposal and may confer

with others regarding the proposal as necessary. The proposal shall be used as

a basis for further negotiation of the professional services agreement.

      (c) Unreasonable or deliberately inflated

proposals shall be rejected and may be cause for terminating negotiations in

accordance with KRS 45A.825(9).

      (3) If the contract which is being

negotiated uses a method of compensation other than lump sum, the consultant

shall use an accounting system which segregates and accumulates reasonable, allocable

and allowable costs to be charged to a contract for an audit by the External

Audit Branch.

      (4)(a) If a consultant intends to utilize

the services of a subconsultant to perform any part of the work, at the time of

negotiations the consultant shall submit a fee proposal for the amount of work

to be subcontracted.

      (b) The fee proposal shall be based on

the audited overhead and wage rates for the subconsultant.

      (c) A subconsultant shall be prequalified

with the cabinet to perform the services to be subcontracted to it if the

services are required to be prequalified.

      (d) Prior approval from the Division of

Program Performance or other negotiation unit shall be necessary.

      (e) If a consultant desires to utilize a

subconsultant to perform part of the work after a contract has been approved

and notice has been given to begin work, the procedures set forth in Section 6

of this administrative regulation shall be followed.

      (5) A consultant which is awarded a

contract for engineering or engineering-related services with the cabinet shall

perform at least fifty (50) percent of the dollar value of the work for the

project unless otherwise approved by the Director of the Division of Program

Performance, or designee.

      (6)(a) The operating margin allowed an

engineering or engineering-related services consultant shall be allowed only on

the negotiated direct labor and overhead costs regardless of the type of

contract and shall not exceed the following:

      1. For a lump sum contract, fifteen (15)

percent of the total direct labor cost plus overhead costs for a contract,

including all contract modifications up to and including $2,000,000 and ten

(10) percent of the total direct labor cost plus overhead costs for a contract,

including all contract modifications, for the amount in excess of $2,000,000.

The subconsultant's fee negotiated as part of the contract shall not be counted

against the first $2,000,000; or

      2. For a unit price contract, fifteen

(15) percent of the estimated unit cost at the time of execution of the

contract.

      (b) A cost plus fixed fee contract shall

have a lump sum fee equal to ten (10) percent of the estimated cost at the time

of the execution of the agreement.

      (7) The Division of Program Performance or

other negotiation unit shall compare the consultant's proposed fee with the

cabinet's estimate to determine both the reasonableness of the fee and areas of

substantial differences which may require further negotiation.

      (8) The Division of Program Performance or

other negotiation unit shall negotiate with the consultant to establish a

reasonable fee and basis of payment, including incremental payments for

completed work if appropriate, for the services to be performed under the

contract.

      (9)(a) The consultant shall keep written

documentation of each negotiation meeting and shall submit to the Division of

Program Performance or other negotiation unit the following:

      1. Minutes of negotiations;

      2. As-negotiated fee;

      3. As-negotiated person-hours;

      4. Classification percentage

distribution; and

      5. Direct cost breakdowns.

      (b) The public shall not be denied access

to the items set forth in paragraph (a) of this subsection.

      (10) After the Division of Program

Performance or other negotiation unit has negotiated a contract, the head of

the unit shall comply with the provisions of KRS 45A.825(10).

 

      Section 4. Contract Preparation and

Execution. (1) The Division of Program Performance or other negotiation unit

shall prepare an agreement or contract to cover the services to be provided,

method and amount of payment, the time of completion and necessary special

provisions.

      (a) The agreement shall include by

reference the General Provisions Attachment, unless the project is for a

consultant structure inspection.

      (b) If the project is for a consultant

structure inspection, the agreement shall also include by reference the

Division of Maintenance, Consultant Inspection Provisions.

      (2) The contract and negotiation minutes

shall be sent to the consultant for the signature of an authorized

representative. All original documents shall be returned to the Division of

Program Performance or other negotiation unit.

      (3) The contract shall be reviewed and

approved by the secretary of the cabinet.

      (4) For each project that has received

final approval for state or federal funding, the Division of Program

Performance shall retain the following documents:

      (a) A copy of the contract;

      (b) The negotiated fee and person-hours;

      (c) The consultant's fee and person-hour

proposal;

      (d) The cabinet's person-hour estimate;

      (e) The minutes of the negotiation;

      (f) The minutes of the predesign

conference;

      (g) A copy of the advertisement and

announcement;

      (h) The list of firms that responded to

the announcement in a timely manner;

      (i) The written approval from the

secretary of the cabinet to engage a professional firm;

      (j) The minutes of the Professional

Engineering and Engineering-related Services Selection Committee;

      (k) The memorandum from the Chairman of

the Selection Committee stating the ranking of the three best-qualified firms

by the Professional Engineering and Engineering-related Services Selection Committee;

and

      (l) The audit report of overhead and wage

rates which was used to establish the fee.

      (5) If FHWA does not approve the

contract, the secretary of the cabinet, after discussion with the State Highway

Engineer and staff, may decide to modify the contract, redefine the project, terminate

the project or ask for reconsideration by the FHWA.

 

      Section 5. Notice to Proceed and

Payments. (1)(a) Before a notice of approval for payment can be issued, funds

shall be encumbered by the cabinet.

      (b) The funds for statewide contracts

shall be encumbered on a project by project basis.

      (2) After the Division of Program

Performance or other negotiation unit receives notification indicating that the

LRC Government Contract Review Committee has received the contract and project

information for review, a notice to proceed shall be transmitted to the

consultant indicating that it may commence work but it shall not bill for

services until specifically authorized to do so. For projects requiring

approval of a unit of the federal government, notice to proceed shall not be

issued until the federal approval is obtained.

      (3) If the LRC Government Contract Review

Committee issues a notification of acceptance on a contract, the Division of

Program Performance or other negotiation unit shall issue a letter to the

consultant informing it that it may bill the cabinet for charges incurred while

working on the project.

      (4)(a) If the LRC Government Contract

Review Committee objects to the contract and the cabinet determines that the

contract is to be canceled, the Division of Program Performance or other

negotiation unit shall notify the consultant of the cancellation and shall take

necessary steps to close the contract.

      (b) If the cabinet determines that the

contract is to be modified to comply with the concerns of the LRC Government Contract

Review Committee, the Division of Program Performance or other negotiation unit

shall notify the consultant of the necessary modifications and shall follow the

contract modification procedures specified in Section 7 of this administrative

regulation.

      (c) If the cabinet determines that the

contract is to be executed as submitted to the LRC Government Contract Review

Committee, the Division of Program Performance or other negotiation unit shall

issue a letter to the consultant informing it that it may bill the cabinet for

charges incurred while working on the project.

 

      Section 6. Contract Administration. All

work performed under a professional services contract shall be subject to

general supervision, direction, review and approval by the cabinet. (1)(a) A

project manager shall be assigned to the project by the director or office head

of the user division.

      (b) The division director or office head

may serve as the project manager.

      (c) The project manager shall be

responsible for coordinating all cabinet activities with the consultant and for

providing necessary supervision through the duration of the contract. This coordination

shall include the following:

      1. Scheduling, monitoring and controlling

the consultant's activities;

      2. Reporting the status of these activities

to the appropriate authority;

      3. Periodically reviewing the work to

determine if the work:

      a. Is acceptable;

      b. Is in accordance with the agreement

for the particular project; and

      c. Scope has changed to the point that it

may require a supplemental agreement and increased or decreased compensation;

and

      4. Completing and processing the

Consultant Monthly Report Form incorporated by reference in Section (9) of this

administrative regulation.

      (2)(a) During the project, the consultant

may subcontract with other firms to perform specialized services in a manner

similar to Section 1(4) of this administrative regulation. The subconsultant

shall be prequalified by the cabinet in accordance with the provisions of 600

KAR 6:040 if the services that are subcontracted are required to be

prequalified.

      (b) If the services to be performed by

the subconsultant are subject to prequalification by the cabinet and were not

previously identified in the original negotiation or subsequent contract

modifications, the consultant shall submit a request for a fee adjustment for

the person-hours to be performed by the subconsultant.

      (c) If the subconsultant services are not

subject to prequalification procedures and exceed $25,000, they shall be

reviewed by the External Audit Branch for reasonableness of cost. For subcontracts

equal to or less than $25,000, the Director of the Division of Program Performance

or other negotiation unit, upon recommendation of the negotiator, may accept

the rates and costs if they are reasonable and in line with past costs incurred

for similar work.

 

      Section 7. Contract Modifications. (1) If

it is determined by either the consultant or the cabinet that one (1) or more

of the following conditions are acceptable and necessary, a contract modification

for a fee or schedule adjustment may be requested:

      (a) Change in termini or section;

      (b) Addition of major phases of work to

the negotiated scope of work;

      (c) Modification of previously approved

work resulting from factors beyond the control of the consultant;

      (d) Modification of a major item, if in

the original contract, the item is designated as a basis of the original

negotiations and the conditions for a contract modification consideration are

identified in the original contract;

      (e) Delay by the cabinet as outlined in

each contract;

      (f) Use of a subconsultant for services

previously identified to be done by the consultant or other subconsultant; or

      (g) Availability of current audit

established in accordance with 600 KAR 6:080.

      (2) The request for a contract

modification may be originated by the Division of Professional Services, user

division, highway district office or the consultant.

      (3)(a) If the director or office head of

the user division determines the change is appropriate, the user division shall

advise the consultant in writing of the contemplated change in the scope,

complexity, extent, character or duration of the original agreement.

      (b) If additional or reduced compensation

is justified, the user division shall request a revised proposal from the

consultant.

      (4) The contract modification shall be

negotiated using the procedures set forth in Sections 1, 2, and 3 of this

administrative regulation.

      (5) The Division of Program Performance or

other negotiation unit shall send the Contract Modification form TC 40-17 to

the consultant for its approval.

      (6) After approval by the cabinet, the

contract modification, LRC's proof of necessity form and other supporting

documentation shall be submitted to the LRC Government Contract Review Committee.

      (7) For projects requiring FHWA

oversight, the approved contract modification shall be sent to the Federal

Highway Administration for approval.

      (8) Funds shall be encumbered by the

cabinet sufficient to pay for the approved contract modification.

      (9) If a contract modification results in

a fee negotiated for the contract modification in other than lump sum as a

method of compensation, the consultant shall use an accounting system which

segregates and accumulates allocable and allowable costs which are to be

charged to the contract modification.

 

      Section 8. Completion of Contract. (1)

Upon completion of the contract, the cabinet shall review the work performed to

determine that it meets the terms and conditions of the contract and shall

evaluate the consultant for future reference.

      (2) The project manager or the director

of the user division shall review the work performed by the consultant,

including any progress and final reports, to determine that all terms and

conditions of the contract have been met before processing the final voucher

for payment or releasing the consultant.

      (3) Before approving the final invoice

for payment, the director of the user division or the project supervisor shall

evaluate the consultant and prepare written documentation of the consultant's

performance on the project.

      (4) The user division shall send the

consultant written documentation of the consultant's performance for the

project. Copies of the documentation shall be placed in the contract file maintained

by the Division of Program Performance and in the consultant's experience

record file.

      (5)(a) If a consultant receives a below

average rating, he may appeal, in writing, to the user division director within

thirty (30) days of receiving the rating notification.

      (b) The written notice of appeal shall

specifically set forth the reasons why the consultant believes the below

average rating is erroneous.

      (c) The appeal shall be conducted in

accordance with KRS Chapter 13B.

      (d) At the conclusion of the appeal, if the

performance evaluation is revised, the initial documentation of the below

average rating shall be:

      1. Removed from the file; and

      2. Replaced with the revised performance

documentation.

      (6) The Director of the Division of

Program Performance or head of other negotiation unit shall request the

External Audit Branch to perform a final audit if appropriate. The audit shall

determine the total allowable contract costs and the total dollars to be paid

to the consultant. All contracts utilizing a cost plus fixed rate method of

payment shall be audited.

      (7) The user division shall forward the

Federal Highway Administration a copy of all progress and final reports for

federal-aid projects if required or requested by the FHWA.

 

      Section 9. Cancellation of Contract. (1)

Each professional service contract shall include a provision for the

termination of the agreement and shall allow for the cancellation of the

contract by the cabinet with proper notice to the consultant.

      (2) If the cabinet decides to cancel a professional

services contract, the Division of Program Performance or other negotiation

unit shall notify the consultant of the cancellation and of the reasons for the

cancellation.

      (3) The cabinet shall not be liable for

payment of services past the effective date of cancellation of the contract as

specified by the terms of the contract.

      (4) The cabinet shall be liable for a

demobilization fee equal to ten (10) percent of the remaining balance of the

contract not to exceed $25,000, unless the contract is terminated due to

criminal, fraudulent, or negligent behavior.

 

      Section 10. Payments to Consultants.

Before payment of a partial or final request for payment, the cabinet shall

review the work of the consultant, including any progress or final reports, to

ensure that the work for which the payment is to be made has been completed and

that the terms and conditions of agreement have been satisfactorily followed.

      (1) During the course of the project,

progress billings shall be submitted by the consultant as agreed upon in the

contract. The consultant shall submit an Engineer's Pay Estimate, TC 61-408 and

a Consultant Monthly Report, Exhibit 200-02 as an invoice to the chief district

engineer or director of the user division or to their designees.

      (2) The chief district engineer or

director of the user division or his designee shall review the Engineer’s Pay

Estimate and Consultant Monthly Report, verify that the work has been completed

as described in the document, and sign both forms.

      (3) If an Engineer’s Pay Estimate is not

needed to be submitted to the chief district engineer or director of the user

division within a given month, the Consultant Monthly Report shall still be

submitted.

      (4) A final invoice and request for

payment shall not be authorized until after all work has been reviewed and

accepted or approved, including any final reports prepared by the consultant.

All terms and conditions of the contract shall be satisfactorily met and the

final audit shall be performed prior to processing the final payment.

 

      Section 11. Incorporation by Reference.

(1) The following material is incorporated by reference:

      (a) "Contract Modification",

Form TC 40-17, September 1999 edition;

      (b) "Engineer's Pay Estimate",

Form TC 61-408, October 2002 edition;

      (c) "Consultant Monthly

Report", Exhibit 200-02, August 2005 edition;

      (d) "General Provisions Attachment

(Exhibit 15-06)", May 2003 edition; and

      (e) Division of Maintenance Consultant

Inspection Provisions, May 1993 edition.

      (2) This material may be inspected copied,

or obtained, subject to applicable copyright law, at the Transportation

Cabinet, Division of Program Performance, 200 Mero Street, Frankfort, Kentucky

40622, 8 a.m. to 4:30 p.m. (22 Ky.R. 1414;

Am. 1628; 1844; eff. 4-5-96; 24 Ky.R. 1378; 1693; eff. 2-19-98; 25 Ky.R. 1954;

2413; 2561; eff. 5-4-99; 29 Ky.R. 1881; 2489; 2884; eff. 6-3-03; 33 Ky.R. 552;

1314; eff. 11-9-06.)