Appendix C - Utility Agreements

(White Paper Prepared by FTA)

Introduction

The utility and transportation industries are often linked through shared ROW, state and federal safety oversight, and a measure of economic regulation. Transit "New Starts" frequently require the relocation of utilities just as federally supported highway construction has for many years. In recognition of this long standing interaction, "utilities" are defined in 23 CFR, Part 645, Subpart B, Section 645.207 as a "privately, publicly, or cooperatively owned line, facility, or system for producing, transmitting, or distributing communications, cable television, power, electricity, light, heat, gas, oil, crude products, water, steam, waste, storm water not connected with highway drainage, or any other similar commodity, including any fire or police signal system or street lighting system, which directly or indirectly serves the public." The term utility shall also mean the utility company inclusive of any wholly owned or controlled subsidiary.

A "utility agreement" is a legally binding document between a utility company and a transit Agency that defines the scope of a relocation, including reimbursement, liability, right of entry, insurance, and schedule to complete the work. Such an agreement is essential to properly identify the parties involved and to ensure that all parties have a complete understanding of the scope, schedule, and reimbursement issues relating to the relocation. Utility agreements have long been the means by which a transit Agency arranges for a Utility to relocate its facilities from within the footprint of a proposed transit project.

Policies and Practices

It is extremely important that utility agreements be thoroughly reviewed by in-house counsel and engineering staff to ensure that all necessary information is included. For this review to occur the agreement must be completed well in advance of the start of construction. Cost and schedule penalties can be severe when construction activities and utility relocations occur concurrently.

Development of the Utility Agreement

The first step required for any utility relocation is to solicit utility maps from all known utility companies in the area under consideration. It is helpful to have a master list of utility companies and mail letters of intent to all of them asking for maps of any known utilities in the project limits. Subsurface Utility Engineering (SUE) is the process of accurately and comprehensively mapping all underground utilities. This method should be utilized, as budgets allow, to assist in locating all utilities.

After this preliminary effort, the utility locator company in the area is contacted and a request is made for all of the utilities to be marked in the field. This information is used, along with the preliminary survey information collected, to ensure that all utility locations are known, and are accurately identified on the field survey.

After all affected utilities have been identified, a determination of the most desirable location for their relocations should then be performed. Begin discussions with the Utility and determine if the Utility has a policy of relocating its own utilities or if it wants the relocation performed under the relocation activities of the project. Determine who is responsible for the relocation costs. A general review of existing license agreements will be necessary to make this determination. If costs are to be covered by the Agency, determine what these costs are up front, and begin negotiations.

As design of the transit project continues, and project alignments become known, initial work on the utility agreement should begin and increased coordination and negotiations with the affected Utility should continue. The most ideal situation is to have signed agreements and all utilities relocated prior to the general contractor receiving a Notice to Proceed on the main project. If this is not possible, all affected utility facilities need to be shown in the project documents and relocation will be made concurrent with the construction activities. Coordinating the availability of the project site with the project's general contractor and the Utility will be very important. Ensuring each has access to the site as promised will help to avoid any future litigation.

The next steps involve setting up a Utility pre-construction meeting, monitoring the relocation work of the Utility, and providing oversight of their progress. Any slip in the schedule of the utility relocation will have the same detrimental affect as any slip in the schedule of the main construction project. Finally, the Agency should inspect the utility relocations to ensure that all work is performed according to the Agency's expectations.

Utility Relocations During the Project Design Phase

Utility relocation must be properly coordinated with other phases of project development, ROW acquisition, and construction in order that conflicting utilities are removed or adjusted prior to construction or in a manner that will not interfere with construction. The scope of the utility relocation must be determined as well as the responsibility for costs of the relocation. The costs of the relocation are not always borne by the Agency. Cost sharing must always be considered as a feasible alternative. A review of the project plans must be made, relocation estimates checked, agreements prepared and relocation costs negotiated and agreed upon. The scheduling of the relocation must be made to coincide and agree with other contractors on site. Numerous contractors on site, all performing work independently, will often present scheduling issues, the potential for claims is increased, and possibility of contractor disputes may arise.

It is the responsibility of the Agency utility staff to coordinate utility relocations on proposed projects with other phases of ROW acquisition and with construction in order that conflicting utilities are removed or adjusted prior to construction or in a manner that will not interfere with construction. The staff must determine the scope of utility relocation required as well as the responsibility for costs of the relocation. Utility designers must secure, review, and process plans. Also, they must review estimates and reimbursement agreements covering the relocation or removal of conflicting utilities. 23 CFR 645.109 considers the application of value engineering to utility relocations. In one particular case, under a lump sum utility agreement, a Utility later proposed a cost saving alternate solution. The Utility identified this as a value engineering savings and proposed that it share in the savings. The net impact would be to provide cash to the Utility. Value engineering incentives are supported in the customary Agency-contractor relationship. However, VE incentives should not be applied to the typical Agency-Utility relationship for utility work where the Utility is the "owner" and, therefore, the organization responsible for setting up the means for rewarding creative ideas. In no case should the relocation or adjustment of facilities result in a cash windfall to the Utility.

Scheduling Agreements

It is never too early to negotiate and execute utility agreements. Usually, however, the status of the design and the requirements of the Utility will control when the agreement can be negotiated. The DEIS/FEIS phase usually aids in the identification of which utilities are affected by the proposed transit project. As early as is economically feasible, the Agency must contact all affected Utilities to inform them of the proposed improvements and obtain their criteria for relocating or protecting their respective facilities. Some Utilities insist on performing their own design, while others insist that firms pre-qualified by the Utility perform the work and the design.

Utility Agreement Language/Content

Utility agreements should contain a detailed description of the scope of work to be accomplished. Providing design drawings, which accurately depict the existing conditions and the post-construction conditions, contribute extensively to describing the scope of work. The extent of the relocations must be clearly shown.

Many utility companies have their own design staff and are capable of designing the relocation themselves. If this is the case, the parameters of the relocation must be clearly identified in the agreement so that the designers have all the necessary information needed to conduct their design. Design reviews, constructability reviews, and continual coordination are essential with each Utility to ensure that all relocations are performed as expected.

Many utility companies are also capable of performing their own relocation. Again, this needs to be referenced in the utility agreement and the schedule becomes very important because the Utility often has priorities that are not the same as the construction project. Progress monitoring is essential for relocation work performed by the Utility.

It is important that all relocated utilities are moved, protected, and constructed to meet all applicable codes. Whether the utility is relocated by the Utility or by the Agency's general contractor, proper inspections must be performed to ensure adequate construction. The party responsible for this vital function needs to be identified in the agreement.

Ideally, the relocation costs are negotiated up front, before the relocation work takes place. This enables the Agency to properly budget all costs related to relocation. The lump sum method of payment is beneficial because it reduces the administrative and record-keeping costs associated with documenting payment for completed work. However, these savings may be offset by inaccuracies in the cost estimating process. The lump sum payment method should only be used where the end product, in this case the utility relocation, can be clearly and concisely defined. The cost estimate in support of the lump sum agreement must be accurate, comprehensive, verifiable, and in sufficient detail to give a clear picture of the work involved and the cost of the individual items.

If reimbursement is to be made on a cost reimbursement basis, this too must be determined before the relocation work is performed. A method for settling claims and a conflict resolution method should also be included in the agreement.

Finally, the schedule must be specified and completely understood by all parties. If multiple contractors will have access to the site, this must be identified and agreed to in the agreement. It is ideal to have the relocations substantially completed prior to the general contractor receiving the Notice to Proceed. However, this is not always possible, and when it is not, extensive coordination and written documentation must clearly define the expectations of all parties involved.

Agreements and Authorizations, as identified in 23 CFR 645.113, states that the agreement should be supported by plans and/or drawings that show:

• The location, length, size and/or capacity, type, class, and pertinent operating conditions and design features of existing, proposed, and temporary facilities, including any proposed changes to them, using appropriate nomenclature, symbols, legend, notes, color-coding, etc.;
• The project number, plan scale and date, the horizontal and, where appropriate, the vertical location of the utility facilities in relation to the highway alignment, geometric features, stationing, grades, structures, and other facilities, proposed and existing ROW lines, and, where applicable, the access control lines;
• The limits of ROW to be acquired from, by, or on behalf of the utility, where applicable; and
• The portion of the work to be accomplished, if any, at the sole expense of the Utility, using appropriate notes or symbols.
• The agreement should also include a cost estimate for the proposed work. The cost estimate should set forth the items of work to be performed, broken down by the estimated costs of the following:
  • Direct labor
  • Labor surcharges
  • Overhead and indirect construction charges
  • Materials and supplies
  • Handling charges
  • Transportation
  • Equipment
  • ROW
  • Preliminary engineering
  • Construction engineering
  • Salvage credits
  • Betterment credits
  • Accrued depreciation credits

The estimate should include sufficient detail to provide the Agency with a reasonable basis for analysis. Factors included in the Utility's overhead and indirect construction charges should be set forth. Materials should be itemized where they represent relatively major components or cost in the relocation. Unit costs, such as broad-gauge units of property, may be used for estimating purposes where the utility uses such units in its own operations. Typically, a Utility uses its own forces or those of a utility contractor to accomplish the needed adjustments to its facilities. Records of actual costs incurred should form the basis for reimbursement.

Negotiation and Reimbursement

Only actual allowable, allocable, and reasonable costs are reimbursable. Where the work is to be performed by the public utility's forces, no profit is allowed and reimbursement is limited to the amount necessary to relocate and/or rearrange the facilities to affect a condition equal to the existing utility facilities. Generally, reimbursement would not provide for greater capacity, capability, durability, efficiency or function, or other betterments, except for meeting current state and local codes. The cost estimate should contain, at a minimum, the labor type along with hours and hourly rate, equipment type and rates, material quantities and costs, and engineering costs.

If a Utility elects to improve, change, rearrange, or otherwise enhance its facilities beyond that which currently exists, the Agency should obtain separate estimates to identify the cost difference between the improved adjustment and the adjustment that is comparable to the existing facility.

Utility agreements must accurately reflect the costs of the activities involved. Acceptable methods for developing relocation costs include:

• Actual direct and related indirect costs accumulated in accordance with a specified work order and in accordance with a jointly approved procedure for documenting those costs.
• An agreed fixed amount (lump sum) payment.
• An agreed unit cost method of payment.

When the Agency is obligated to reimburse a Utility for the removal or alteration of its facility, all parties should understand that the adjustment is to be undertaken in the most economical manner consistent with good engineering practice and in compliance with applicable codes and permit regulations. The Agency will only reimburse the Utility for comparable facilities. If the Utility elects to improve its facility during the adjustment (i.e., a utility betterment), the Agency should strive to only reimburse the company for the cost of a comparable facility.

Conclusion

The most important element to successfully negotiate a signal utility agreement is to begin the process early. By accurately locating all utilities through surveys, SUE and general inquiries early in the design process, more time is available to negotiate and coordinate the content of the utility agreements. Coordinating and meeting often with the affected Utilities ensures that the entire process is progressing and the eventual outcome has a greater chance of being successful. Proper oversight of the Utility activities is essential to maintaining the project schedule and ensuring that Utilities are relocated in a manner that suits the transit project.

It is important to employ people who have experience and are adept at all aspects of utility relocation. Many things can delay the relocation of an important utility. It is essential that management of the utility relocation efforts be given the same amount of manpower as design and construction oversight activities. Simply signing a Utility Agreement and then allowing the Utility to monitor itself is not an effective plan for the Agency. Constant oversight and coordination is essential. Knowledgeable staff is also better prepared to estimate relocation costs and successfully negotiate with the Utility.

Utility companies often operate at their own pace and under their own set of rules. For these reasons, it is more important then ever, that the Agency do everything within its capability to effectively oversee, negotiate, and monitor all of the utility relocations performed by Utilities.