This section describes the contents of the department's funding agreement with a local government for a highway improvement or other transportation project and the responsibilities of the parties to such an agreement. The department may refuse to enter into an agreement with a local government that has not previously complied with the financial obligations under an agreement entered into under this subchapter.
  (1) Right of entry. If the local government is the owner of the project site, it shall permit the department or its authorized representative to occupy the site to perform all activities required to execute the work. If the department is the owner of the project site, it shall permit the local government or its authorized representative to occupy the site to perform all approved activities required to execute the work.
  (2) Right of way and utility relocations and adjustments. The local government will provide all necessary right of way and utility relocations and adjustments, whether publicly or privately owned, in accordance with §15.55 of this subchapter (relating to Construction Cost Participation). Existing utilities will be relocated and adjusted by the local government with respect to location and type of installation in accordance with the requirements of the department under §21.21 of this title (relating to State Participation in Relocation, Adjustment, and/or Removal) and Chapter 21, Subchapter C of this title (relating to Utility Accommodation).
  (3) Responsibilities of the parties. The local government and the department shall identify in the agreement the responsibilities of each party. Responsibilities assigned to the local government must comply with subparagraph (A) of this paragraph and have the approvals required by subparagraph (B) of this paragraph.
    (A) Local government performance and management of projects. For state highway improvement projects and other transportation projects using state or federal funds, the agreement between the department and a local government may provide for the local government to:
      (i) perform a highway improvement project on the state highway system using employees under the direct control of the local government;
      (ii) outsource preliminary project engineering and design, bid opening, contract award, and construction management of an improvement project for which federal or state reimbursement is requested;
      (iii) contract for highway construction; or
      (iv) perform other projects and programs as authorized by law.
    (B) Approval authority. Before a local government may perform an act described in subparagraph (A) of this paragraph, the executive director must authorize the local government to perform that act. The executive director may also approve 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, guardrails, and other items incidental to the roadway itself, such as signing, pavement markings, signals, illumination, and traffic management systems.
    (C) Conditions. A local government may perform an act described in subparagraph (A) of this paragraph only if the following conditions are met:
      (i) the local government must commit in the agreement to comply with all federal, state, and department requirements, standards, and specifications, and agree to forfeit any claim to federal and state reimbursement if it fails to comply;
      (ii) the project must be authorized by the commission in the current Unified Transportation Program, Statewide Transportation Improvement Program, or a specific minute order;
      (iii) a project on the state highway system performed or managed by a local government must be operationally beneficial to the state;
      (iv) a roadway construction project requested by the local government that is to be on the state highway system, and for which local management is proposed, must be funded at least 50 percent from a non-federal and non-state source, unless a lesser percentage is approved by the executive director;
      (v) a project that includes the local government improving freeway mainlanes on the state highway system must have the express written approval of the executive director;
      (vi) the local government must agree to pay any cost overruns in addition to its local participation on an off-state highway system bridge program project for which local management is proposed; and
      (vii) the department must review and approve all plans, contract awards, and change orders.
    (D) Approval. Prior to execution of the funding agreement, a local government must receive written approval by the executive director to perform or manage one or more elements of a highway improvement or other transportation project. In determining whether to recommend approval or disapproval of a project, the department will evaluate the following criteria:
      (i) availability of department resources to perform or manage the highway improvement or other transportation project in an efficient and timely manner;
      (ii) the demonstrated 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;
      (iii) the percentage of total project cost to be provided by the local government;
      (iv) the department's determination of cost effectiveness of local performance of the work as compared to the department's performance of the project; and
      (v) any other considerations relating to the benefit of the state, the traveling public, and the operations of the department.
  (4) Funding arrangement. The agreement will specify the funding arrangement designated by the department. Funding arrangements in the agreement shall include any adjustments required by §15.55 of this subchapter. The funding arrangement for drainage construction costs will be as specified under §15.54(e) of this subchapter (relating to Construction). Available funding types are as follows:
    (A) Fixed price. The fixed price amount will be based on the department's estimated cost of the work to be performed.
      (i) In determining the fixed price amount, the department will consider:
        (I) eligibility of local government requested work for federal or state cost participation;
        (II) the department's experience in performing or managing the proposed type of work;
        (III) the clarity of defining the local government's proposed work scope and the department's ability to accurately estimate its cost; and
        (IV) any other considerations relating to the benefit of the state, the traveling public, and the operations of the department.
      (ii) A local government is responsible for the fixed price amount, which is not subject to adjustment unless:
        (I) differing site conditions are encountered;
        (II) further definition of the local government's requested scope of work identifies greatly differing costs from those estimated;
        (III) work requested by the local government is determined to be ineligible for federal participation; or
        (IV) the adjustment is mutually agreed to by the department and the local government.
    (B) Specified percentage. The local government is responsible for a specified percentage of actual project costs.
      (i) Minimum percentage participation amounts for preliminary engineering, construction engineering, construction, right of way, and eligible utilities for various state and federal funding programs will be designated by the department. In addition to the designated specified percentages, with this funding type, the local government is also responsible for the direct cost of any work included in the project which is ineligible for federal or state participation and all project costs that are greater than the maximum state and federal participation specified in the funding agreement between the department and the local government.
      (ii) For federally funded non-construction programs, the local government is responsible for any required match and for any work included that is ineligible for federal or state participation.
    (C) Periodic.
      (i) The executive director may approve a local government to make periodic payments of its funding share only if:
        (I) the periodic payments sought are based on the estimated cost for the work for which the funds are received and the local government proposes a schedule to repay the entire amount; and
        (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).
      (ii) In approving a request for periodic payments, the executive director will consider:
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