Digital Sign War Heats Up With Lawsuit By Scenic America Challenging FHWA Guidance on Sign Lighting

A lawsuit recently filed by Scenic America strikes at a guidance issued by the Federal Highway Administration (FHWA) in 2007 related to the use of changeable electronic variable message signs (CEVMS) also known as digital billboards.  These CEVMS, which are seen with increasing frequency on sites adjacent to and intended to be viewed from the highway right of way, rely on state of the art digital technology to provide changeable, high definition commercial messages to the traveling public. 

The FHWA guidance being challenged addresses an issue raised by the Highway Beautification Act (HBA), the federal law that regulates billboards outside the boundary of the right of way and within 660 feet of the edge of the right of way.  The HBA is implemented by state Departments of Transportation by negotiation of Federal State Agreements (FSAs) between the state DOT and the FHWA.  Those FSAs customarily contain restrictions regarding size, lighting and spacing of billboards. In respect to lighting the standard provision prohibits signs that have “intermittent, flashing or moving” lights. In the pre-digital era, compliance was fairly straightforward, but with the advent of LED/LCD signs, the restriction became problematic.

The FHWA responded in 1996 by adopting a “guidance” in the form of a memorandum issued by the agency, advising that FHWA’s view was that digital signs were “acceptable” so long as they were determined by the state DOT to be consistent with its FSA.  State DOT responses to the 1996 guidance varied and in 2007 the FHWA issued a new guidance, effectively concluding that CEVMS that met the State DOT’s requirements expressly did not violate the “intermittent, flashing or moving” lights prohibition in the FSA.  The guidance resulted in a significant increase in the number of digital signs allowed to be operated, to the point that digital signs have become an issue of controversy.

In its complaint, Scenic America asserts that the guidance was an illegal rulemaking, since the FHWA did not follow its own Administrative Procedures Act procedures for the implementation of agency regulations.  FHWA and the Outdoor Advertising Association of America, which intervened in the suit, have filed a motion to dismiss the suit, arguing that APA procedures were not followed because the guidance was merely that and not a formal rule or regulation of the agency. 

The stakes are high since the outdoor advertising industry is inexorably moving in the direction of electronic signs.  The motion to dismiss has been briefed by the parties and is awaiting oral argument.  The case is Scenic America, Inc, Plaintiff,. v. United States Department of Transportation, Ray LaHood, Federal Highway Administration and Victor Mendez, Defendants, and Outdoor Advertising Association of America, Inc., Intervenor-Defendant, United States District Court for the District of Columbia, Civil Action No 13-cv-0093.

FHWA Proposes Fix Avoiding Need for Special Approval to Include Alternative Technical Concepts in Design-Build Procurements

On August 1, 2013, the Federal Highway Administration (FHWA) issued a Notice of Proposed Rulemaking (NPRM) and request for comments regarding proposed changes to FHWA’s design-build regulation that would eliminate a requirement for proposers to submit base proposals where the contracting agency allows them to submit alternative technical concepts (ATCs) in their proposals.  ATCs have proved to be highly beneficial, encouraging innovation, cost savings and reduction of environmental impacts and increasing the overall value to procuring agencies through the best value selection process.

In 2002, when the FHWA regulation was originally promulgated, design-build procurements were experimental, and there was very little experience with use of ATCs.  The 2002 rule regarding ATCs (23 C.F.R. 636.209(b)) stated, in part, that ATC proposals may supplement, but may not substitute, for base proposals that respond to the RFP requirements.  The policy underlying this requirement was to ensure fair and open competition and to ensure that all proposers are competing for the same project. 

During the eleven years since the original rule was adopted, agencies asking proposers for ATCs have concluded that the base/option proposal requirement is impracticable.  ATCs can have a significant impact on the project design, and the cost of advancing two (or more) different design concepts and preparing alternative proposals is high.  The policies underlying the original rule can easily be addressed by placing boundaries on the ATCs, for example, by requiring that the ATC be equal or better than the underlying RFP requirements.  That is the approach that has been adopted by most of the transportation agencies using ATCs, obtaining approval from FHWA to deviate from the regulatory requirement through SEP-14 applications.

FHWA is now proposing to revise paragraph (b) of the original rule by deleting the requirement to submit base proposals where a contracting agency is allowing the submission of ATC proposals and adding a sentence providing that the confidentiality of ATCs will be maintained except to the extent disclosure is necessary for the contracting agency to maintain compliance with a permit or other applicable legal requirement.  Such disclosure may be necessary, for example, if a submitted ATC demonstrates that a feasible and prudent 4(f) alternative exists for which a 4(f) determination had concluded that there was no such alternative, in which case the alternative must be disclosed to maintain 4(f) compliance.

The NPRM can be viewed at:  http://www.gpo.gov/fdsys/pkg/FR-2013-08-01/pdf/2013-18514.pdf.  FHWA is inviting comments, in particular, regarding the anticipated economic impact of the proposed changes.  The NPRM provides that comments must be received on or before September 30, 2013 and that late comments will be considered to the extent practicable. 

Update Regarding Buy America and Utility Relocations

As we have previously reported,  the Federal Highway Administration (FHWA) and Federal Transit Administration (FTA) recently adopted policies requiring Buy America compliance for utility relocations for federally funded transportation projects in cases where the utility performs relocation work.  On June 28, 2013, the American Association of State Highway and Transportation Officials (AASHTO), American Public Transportation Association (APTA), streetcar project sponsors, and associations representing electric, gas and broadband utilities sent a joint letter to the United States Department of Transportation (USDOT) asking for certain accommodations in implementation of the new policy.  The letter, addressed to Transportation Secretary Ray LaHood and Secretary-Designate Anthony Foxx, asks USDOT to clarify how the requirements will be applied, requests a transition period before Buy America requirements are applied to materials supplied by utility owners, and asks for USDOT to consider issuance of waivers for specialized utility products that may not be available from US manufacturers.  The letter also notes the importance of consistency in applying the Buy America requirements throughout the country, and cites a need for training and education of utility owners, suppliers and manufacturers.

The full letter can be found on APTA’s website.

On a related topic, FHWA has received a request for a waiver of Buy America requirements for various components related to the relocation of Pacific Gas and Electric's natural gas service facilities for a California project.  FHWA has requested comments regarding the waiver request.  View the request on FHWA's website.

Thanks to Frank Liu for his assistance with this entry.

FHWA's Expanded Application of Buy America to Utility Relocations Causes Consternation, Delays

As we have previously reported, the Federal Highway Administration (FHWA) has issued guidance holding that "Buy America applies to any utility work that is accomplished as a result of a Federal-aid highway project", unless the utility work cannot legally be reimbursed by the State.  This conclusion is based on an amendment to Buy America found in Section 1518 of MAP-21, which requires the application of Buy America to all contracts eligible for assistance within the scope of a project (as defined by the NEPA document), if at least one contract for the project is funded with Federal-aid highway funds.  The rule applies even if no federal funds are used to reimburse the utility work.

The relatively sudden application of Buy America to utility work that was not previously subject to its requirements has had serious consequences.  Utilities in many states are refusing to sign agreements that incorporate the Buy America requirements, which threatens to delay and increase costs for many projects.  Reasons advanced for this refusal vary, but many appear to be based on practical concerns; for example, a utility states that it does not have any experience in complying with Buy America, its current procurement processes do not yield the information necessary to confirm compliance, or it is not certain that it will be able to procure quality Buy America-compliant materials.

For a project sponsor, the consequences of noncompliance with Buy America could be dire.  According to FHWA (as stated on FHWA's MAP-21 website), failure to incorporate Buy America provisions where required ". . . would render all contracts within the scope of the NEPA document ineligible for Federal-aid highway funds." 

State DOTs, other project sponsors and related groups have expressed the need for guidance and practical assistance from FHWA in the application of this new law.  For example, in a February 12, 2013 letter to outgoing Transportation Secretary Ray LaHood, the American Public Works Association (APWA) and the National Association of County Engineers (NACE) requested guidance and future rule making to the effect that "Buy America requirements are not applied to contracts or work under an agreement with a utility that is not funded by title 23 programs".  Others have suggested a grace period for implementation of the new rules.  Discussion at a recent meeting of the AASHTO Subcommittee on Right of Way, Utilities, and Outdoor Advertising Control found that notwithstanding the guidance posted on FHWA's website, so far the new rules are not being interpreted or applied uniformly throughout the country. 

We understand that FHWA anticipates issuing a Notice of Proposed Rule Making for regulations dealing with these Buy America compliance issues sometime in 2013.  We urge FHWA to act quickly in developing its proposed regulations, and to pursue whatever other measures are necessary to resolve this impasse as soon as possible.
 

FHWA and FTA Issue Guidance on MAP-21 to Streamline Environmental Process

On January 14, 2013, the Federal Highway Administration (FHWA) and Federal Transit Administration (FTA) issued guidance on Section 1319 of the Moving Ahead for Progress in the 21st Century Act (MAP-21), Pub. L. 112-141, July 6, 2012.  MAP-21 is a measure that reauthorizes transportation funding through the end of 2014, and is the product of a robust effort by transportation advocates to streamline the lengthy, complex, and cumbersome federal environmental process.  As we reported here, MAP-21 includes several meaningful reforms that could expedite the National Environmental Policy Act (NEPA) process, thereby accelerating project delivery. 

Section 1319 attempts to expedite project delivery by providing a process by which agencies will begin to consolidate their NEPA documents.  Specifically, Section 1319 authorizes (1) the use of errata sheets attached to a draft EIS (DEIS) in lieu of the traditional final EIS (FEIS), and (2) the use of a combined FEIS and Record of Decision (ROD).  While the guidance provides details for transportation agencies regarding how to prepare and process these consolidated documents, it indicates that these devices are not likely to be applicable to controversial projects or where there are unresolved inter-agency disagreements. 

Use of Errata Sheets in Lieu of FEIS.  Pursuant to Section 1319(a), agencies may attach errata sheets to a draft EIS, in lieu of preparing a traditional FEIS.  The guidance indicates that errata sheets should only be used if the lead agency has modified the DEIS “in response to comments that are minor and are confined to factual corrections or explanations of why the comments do not warrant additional agency response.”  The errata sheets should also include the information required in a FEIS, as set forth in applicable regulations. 

Use of a Combined FEIS and ROD.  Section 1319(b) directs agencies to prepare a combined FEIS and ROD “to the maximum extent practicable.”  The guidance indicates that a combined FEIS/ROD should not be prepared if the FEIS makes substantial changes to the proposed action that are relevant to environmental or safety concerns, or there are significant new circumstances or information relevant to environmental concerns that impact the proposed action.  The guidance includes factors that an agency should consider when deciding whether a joint FEIS/ROD is appropriate, including whether the proposed action involves a substantial degree of controversy or whether there are unresolved inter-agency disagreements regarding the proposed action.  Any combined FEIS/ROD should also meet the requirements of applicable regulations. 

Prior to MAP-21, NEPA regulations prohibited agencies from approving a ROD any sooner than 30 days after the notice of availability of an FEIS.  Combining these processes, as well as encouraging the use of errata sheets to prepare an FEIS, may streamline and expedite the environmental review process for some projects.  The guidance suggests, however, that the use of these streamlining devices may not be appropriate for controversial projects or where there are unresolved inter-agency disagreements. 

The Section 1319 guidance was issued on an interim basis.  At a later date, FHWA and FTA will conduct a formal rulemaking to propose revisions to the FHWA/FTA NEPA regulations (23 C.F.R. Part 771) to reflect the changes made as a result of MAP-21.

FHWA Clarifies Broad Reach of Buy America Requirements

The Federal Highway Administration (FHWA) released two guidance memoranda in December 2012 relating to Buy America, largely in light of the amendments made by MAP-21.  On December 20, FHWA clarified the Buy America requirements applicable to utility work on Federal-aid projects.  The December 21 memorandum provided additional amplification on FHWA’s position regarding Buy America requirements applicable to manufactured products.

FHWA’s December 20, 2012 Guidance

FHWA was in the process of evaluating the applicability of Buy America requirements to utility work on Federal-aid highway projects when President Obama signed the Moving Ahead for Progress in the 21st Century Act (MAP-21), Pub. L. 112-141, July 6, 2012.  Section 1518 of MAP-21, amending 23 U.S.C. §313, “substantially broadened” the application of Buy America requirements to any contract eligible for Federal highway funding “carried out within the scope of the applicable finding, determination, or decision under the National Environmental Policy Act [NEPA], regardless of the funding source of such contracts if at least one contract for the project is funded with Federal-aid highway funds.”  In a letter to the American Association of State Highway and Transportation Officials (AASHTO), FHWA concludes that, in light of the amendments to 23 U.S.C. §313, “the application of Buy America cannot be narrowed to exclude utility work, even if such utility work is not reimbursed with Federal-aid highway funds.”  The sole case in which Buy America requirements would not apply to utility work is if such utility work cannot legally be reimbursed by the State.

Under the federal-aid highway program, Buy America applies to iron and steel projects used in federal-aid highway project.  Such products must meet the requirements for being American made, unless their use increases the total project cost by at least 25%, suitable American made products are not reasonably available, or it is not in the public interest.  These determinations or waivers are made by FHWA upon application of the state department of transportation.  Exceptions to the Buy America requirement are closely reviewed and have become increasingly difficult to obtain. 

Prior to the enactment of MAP-21, Buy America only applied to contracts actually funded at least in part with federal-aid highway funds.  Since it is typical that the project described in a NEPA document might be constructed with funds from a variety of sources, this substantially expanded the reach of Buy America provisions.  This is particularly true of utility relocation projects, which might be paid for with state funds or even by the utility by itself.  If such work is eligible for federal assistance, whether or not federal funds are used, Buy America applies.

FHWA’s December 21, 2012 Memorandum

FHWA’s current Buy America policy is based on the statutory provisions in the Surface Transportation Assistance Act of 1982, as implemented with a November 25, 1983, final rule.  The 1983 final rule, along with a 1997 clarifying memo, conclude that Buy America does not apply to all manufactured products; Buy America applies only to components made predominately of steel or iron.  FHWA deems a product to be manufactured predominantly of steel or iron if the product consists of at least 90% steel or iron content when it is delivered to the job site for installation. 

While FHWA’s general policy in this regard has not changed, the primary purpose of the December 21 Memorandum is to explain the change in view of FHWA towards waivers of the Buy America requirements.  Upon passage of the American Recovery and Reinvestment Act in 2009 (ARRA), FHWA formed national review teams to analyze the use of ARRA funding and provide recommendations for improvements.  This analysis brought up some questions, such as, does the scope of the 1983 waiver apply to off-the-shelf products?  FHWA states its concern in the memorandum that a broad reading of the statute to include off-the-shelf products “is not cost-effective to administer.”  However, FHWA ultimately concludes that “the scope of the waiver was intended to encompass miscellaneous steel or iron components and subcomponents that are commonly available as off-the-shelf products such as faucets, door hardware, and light bulbs.” 

This reflects a decision by FHWA that even when purchasing or specifying off-the-shelf iron and steel products for use in projects funded with federal aid highway funds, the state or other grantee must require that such products be manufactured in the United States.  The more expansive reading of the statute is policy based and follows the enactment of MAP-21.  It reflects both the Obama Administration’s focus on strengthening Buy America requirements and the broadening of Buy America in the new statute.  Although the MAP-21 amendment does not address the types of products to which Buy America applies, it clearly reflects a desire by Congress to expand the reach of the statute. 

The December 21 Memorandum may be found at the FHWA website

Conclusion

What does this mean for transportation projects?  Previously contractors could get around the Buy America requirements by splitting up contracts into pieces that would or would not be reimbursed by federal funding depending on whether or not the work involved non-compliant materials.  This work-around is no longer available.  FHWA has made clear that a broader reading of the Buy America requirements will now be followed. 

For additional Buy America information please see the FHWA website.

Edward Kussy co-authored this entry.

FHWA Holds P3 Model Contract "Listening Sessions" and Beta-tests "P-3 VALUE Toolkit"

As part of its effort to meet MAP-21’s legislative requirement to develop “standard public-private partnership transaction model contracts for the most popular types of public-private partnerships,” the Federal Highway Administration held a “listening session” with representatives from the transportation industry at the U.S. Department of Transportation in Washington D.C. on January 16.  Representatives from state departments of transportation, general contractors, trade associations, legal advisors and others were in attendance, and solicited to provide FHWA with the P3 community’s view of what the model contracts should be. 

In her introductory remarks, the Hon. Beth Osborne, Deputy Assistant Secretary of Transportation for Policy, saw the effort as “compiling best practices” of the P3 community, but one for which FHWA did not have “pre-conceived notions.”  FHWA and USDOT representatives spent the better part of four hours hearing out the industry’s hopes for, expectations about and cautionary recommendations regarding FHWA’s final product.  The resounding theme of the audience comments was that “every P3 is different,” FHWA’s effort should tilt toward educating public sponsors as to the project-specific risk-sharing and “value-for-money” considerations that makes a P3 an effective delivery tool, and FHWA should refrain from prescribing risk allocations or other contract terms.

In a companion effort, FHWA is also beta-testing an interactive model, which intends both to help educate public sponsors in alternative procurement strategies (like the public-private partnership (“P3”)) “apples to apples” comparison with conventional procurements).  The “P3-VALUE Toolkit” collects project sponsors’ (and their consultants’) project-specific risks, quantifies their value, and, with other financing assumptions and project-specific parameters considered, produces a snapshot of the value-for-money that a P3 strategy may or may not present for that project.  FHWA held an initial roll-out “webinar” of the draft toolkit on January 10, with a follow-up webinar session on January 24.

FHWA has set up a docket, Federal Register No. FHWA-2012-0126, to collect industry comments by May 31, to keep pace with the rigorous requirement of MAP-21 to produce and promulgate model contracts by December 31, 2013.

Fred Kessler co-authored this entry.

USDOT Issues Guidance on MAP-21 Tolling Program

On September 24 the Federal Highway Administration issued policy guidance on various aspects of MAP-21, including a memorandum to its Division Administrators on the tolling provisions in MAP-21 and questions and answers on federal tolling laws.

The tolling guidance addresses (1) the “complete replacement” of the prior statutory language of 23 U.S.C. 129(a), (2) the application of the existing HOV/HOT lane provisions in 23 U.SC 166, and (3) the status of the four existing toll pilot programs.  It is a must-read for anyone concerned with federal tolling law and policy.

Sections 129 and 166

The guidance recognizes the important expansion of tolling rights under Section 129 to newly constructed lanes added to existing toll-free Interstate highways, and to initial construction of highways, bridges, and tunnels on the Interstate System.  These provisions mainstream the interstate construction and express lanes demonstration programs.  Inexplicably, it does not mention another important expansion of tolling rights – for reconstruction of existing Interstate facilities, provided the number of toll-free, non-HOV lanes is preserved.

Sections 129 and 166 have overlapping provisions addressing conversion of HOV lanes to tolled lanes.  New Section 129(a)(1)(H) authorizes conversions and is free of conditions or limitations on the tolling method and rates.  Standing alone, it allows tolling of HOV vehicles in what were formerly HOV lanes.  Existing Section 166(b)(4), on the other hand, allows non-HOV use of HOV lanes if the non-HOV vehicles – but not the HOV vehicles - are tolled under a demand management automatic tolling system.  So there is an issue under MAP-21 whether Section 129(a)(1)(H) is limited by Section 166(b)(4) and its lack of authority to toll HOV vehicles.

The FHWA guidance on this issue is creative, to say the least:

"MAP-21 makes the conversion of HOV lanes to toll facilities eligible under Section 129. However, since Section 129 does not provide specific authority allowing vehicles not meeting the occupancy limitation to operate on HOV lanes, such authority can only come from Section 166, and its provisions will thus apply to all conversions of HOV lanes to toll operations."

FHWA apparently takes the view that tolling agencies must continue to allow HOVs to have toll-free use of converted HOV lanes at all times of day.  It was not necessary for FHWA to reach this conclusion.  It was equally possible for it to conclude that Section 166 provides the authority for non-HOVs to use HOV lanes and pay a toll, and that Section 129 authorizes tolling of the HOVs.  In other words, it is reasonable to conclude that new Section 129(a)(1)(H) on its face allows a tolling agency to take an HOV lane out of circulation and make it a completely tolled facility.  While we question whether FHWA's interpretation is correct, we at least now have some more clarity on the issue.

The guidance also acknowledges that tolling agreements are no longer required under Sections 129 and 166.  Previously executed agreements will continue in effect.  FHWA will take no further action for those agreements in process but not yet signed.  In the same breath, however, FHWA is now recommending that tolling agencies use (the catchphrase is “may wish to enter into”) a form of “Memorandum of Understanding” regarding tolling of a project.  The form MOU, included in the guidance, looks conspicuously similar to a Section 129 agreement and would create a binding contract.  It remains to be seen whether FHWA division offices will leave use of the MOU to the discretion of tolling agencies or mandate their use despite clear Congressional intent to do away with tolling agreements.

Pilot Programs

MAP-21 left a lot of guesswork as to the status of the pilot programs.  The guidance and answers to questions do a good job of clarifying where the programs stand.

The Express Lanes Demonstration Program expires this September 30.  Agreements for five of the 15 slots have been executed and will remain in effect.  The projects for which slots were allocated but no agreement signed will receive no further processing under this pilot program but will be addressed under Section 129.

The Interstate System Construction Toll Pilot Program, while technically continuing until 2015, is effectively defunct.  Because new interstate system construction is now a statutory right under Section 129, FHWA will accept no further applications under this pilot program.

MAP-21 does not change the Interstate System Reconstruction and Rehabilitation Pilot Program.  This pilot program authorized only three slots, and all of them are currently reserved.  Tolling agreements are required under this pilot program.

The most important continuing pilot program is the Value Pricing Pilot Program.  It provides considerable flexibility in introducing congestion pricing mechanisms to existing interstates and highways.  For instance, the VPPP could be used to authorize a regional managed lanes program, or a cordon pricing program.  Of the 15 available slots, seven are permanently reserved under executed statewide tolling cooperative agreements; and the other eight are reserved to selected state agencies for studies or non-toll projects.  The eight slots will become available again once the studies are done.  The guidance indicates that FHWA will use the VPPP only for situations that are not authorized under the new Section 129.  Tolling agreements are required under this pilot program.

What’s Next

In the short term, expect to see increasing use of the expanded tolling authority under MAP-21, as state DOTs and local transportation agencies struggle to find new revenue sources to meet critical needs.  As Bob Poole notes, the number of managed lane projects is proliferating (Surface Transportation Newsletter #107).

In the long run, the combination of shrinking federal funding for transportation and continuation of federal restrictions on tolling is not sustainable.  Unless another robust revenue source is identified, tolling across all lanes of Interstates will be critical to finance the major Interstate reconstruction and rehabilitation that looms.  Federal law still prohibits such tolling.  There may be an opportunity to further expand federal tolling rights as part of the negotiation in Congress and with the Administration of the “Grand Fiscal Bargain” after the November elections.

In my view, there is no sound policy reason for federal law restrictions on what facilities may be tolled, at least in urbanized areas where the predominant traffic is local and regional.  Policy decisions on tolling are driven by state and local needs and local citizen input.  Local transportation bodies and the elected officials that appoint them are accountable to the voters directly affected by tolling policy decisions.  Where there is accountability, the decisions will reflect the balance of local interests and needs.  Federal law and policy should accommodate, rather than inhibit, those decisions.