Chapter 4 — Agreements

No invoice processing until agreements executed

"The Federal-Aid Highway Program (FAHP) and most Local Assistance programs funded with state-only funds are reimbursable programs. Agreements (contracts) must be executed in order to pay funds to a Local Public Agency (LPA). The Division of Local Assistance (DLA) prepares and sends these agreements directly to the LPA. The agreements must be executed before any invoices for payment can be processed."

This discussion applies to all LPA projects receiving Federal-aid highway project funds administered by FHWA and state-only funds administered by DLA.

Master Agreement once per LPA, PSA per project

Master Agreement

"A Master Agreement is required with the LPA whenever federal or state funds are to be used on a local project funded from the programs noted above."

Two primary types:

1. Federal-Aid Highway Program — Administering Agency-State Agreement for Federal-aid Projects (Federal-aid Master Agreement). Exhibit 4-C.
2. State-only Funded Programs — Administering Agency-State Agreement for State-Funded Projects (State-only Master Agreement, no federal funds). Exhibit 4-E.

Periodic re-execution: "The Local Agency-State Master Agreements are periodically updated and re-executed to account for changes in laws and policies. An example of when a Master Agreement will be updated is after a new Transportation Act has been passed."

"After the Master Agreement has been updated, for LPAs that already have a prior executed Master Agreement, Caltrans will normally send the newer agreement for signature to the LPA as part of the implementation process for its next Local Assistance project. New projects to be implemented will be tied to the newer Master Agreement, while prior projects will continue to be tied to the version of the Master Agreement that they were originally associated with."

Between-update changes may be addressed via special covenants in individual project Program Supplement Agreements.

Program Supplement Agreement (PSA)

"The supplement to the Master Agreement is a project-specific agreement that formalizes the financial responsibilities and provisions for a specific Federal-aid or state-only funded project."

The PSA:

• Identifies the types and amounts of federal, state, and local funds used to finance the locally sponsored project
• It is the contractual basis for the state to pay the LPA for work done
• Special covenants or clauses in the agreement define the LPA's specific responsibilities in implementing and maintaining the project
• Others define state or local responsibilities for providing project funds

Exchange/Match Program — outside the Master/PSA framework

"Agreements are required for several programs which are prepared on a programmatic or project-by-project basis and do not follow the Master Agreement/Program Supplement process."

Federal Apportionment Exchange Program and State Match Program Agreement

"This program is commonly called the Exchange/Match or Match and Exchange Program. Under the provisions of Streets and Highways Code §182.6 et seq., MPOs, RTPAs and counties are allowed to exchange certain portions of their Federal-aid funds for State Highway Account funds."

See LAPG Ch 18: Optional Federal Exchange and State Match Programs for details.

Process: The DLA prepares the agreement for the maximum allowable amount that each LPA can exchange and sends it to the LPA for signature. The signed agreement is sent back to DLA. The agreement takes effect upon signature by appropriate DLA staff.

"If the LPA does not wish to participate, they will send the agreement back with a letter notifying DLA to cancel the agreement."

The Exchange/Match Program lets LPAs trade some federal funds (with strict eligibility, oversight, DBE, NEPA requirements) for state funds (more flexible, fewer federal compliance obligations) — at the cost of some federal share. Common use case: small jurisdictions with limited capacity to administer federal compliance trade away federal pro rata for flexible state funds.

CIAO Pre-Award audit clearance, allocation, encumbrance, signatures

New Locode and Master Agreement

"A new Locode and Master Agreement will normally be requested by the LPA soon after their first Local Assistance project is selected and programmed for inclusion or amended into a federal or state programming document."

Allocation and Authorization Prerequisites

"Federal-aid projects must be authorized and have funds obligated, and projects requiring a vote by the CTC must have received an allocation by CTC, before a project-specific agreement is prepared. All project-specific agreements are contingent on budget actions by the federal and state governments."

"A project-specific agreement is normally prepared only once for each project after the initial authorization/obligation or CTC allocation. In certain cases, an agreement will need to be revised upon a subsequent authorization/obligation or CTC allocation for a project. This typically occurs because of pertinent requirements having changed since the initial authorization, or as a result of funds having been added from a new Program for which additional requirements are applicable and need to be reflected in the agreement."

Processing — Caltrans → CLPA Encumbrance → LPA Signature

"After the funds have been allocated and/or obligated, the DLA prepares the agreement. Once the requested funds have been encumbered by Caltrans Local Programs Accounting (CLPA), the DLA sends the agreement to the LPA for signature."

"The agreement must be signed by the LPA and returned to the DLA along with a signed and dated authorizing resolution as soon as possible. Exhibit 4-B: Local Agency Agreement Execution Checklist, identifies key actions to be taken in the agreement execution process. Any changes in funding or agreement language made by the LPA will void the agreement."

Upon receipt of the signed agreement and resolution, DLA reviews and signs the agreement before it can be conformed and executed. A copy of the executed agreement is then sent to the LPA and CLPA — at which time invoices may then be submitted for payment.

23 USC §106(a) — the project agreement between Caltrans and FHWA

"In accordance with Section 106(a) of Title 23 of the United States Code (U.S.C.), the project authorization, obligation of funds, and execution of the Federal-aid project agreement between Caltrans and FHWA are accomplished in a single action in FHWA's Financial Management Information System (FMIS) utilizing an electronic form titled Authorization to Proceed (E-76)."

See Ch 3 for E-76 procedural details.

Specialty agreements outside the Master/PSA framework

"Various types of agreements are required when working within the State Highway right of way or with other state agencies."

"These are not processed with LPAs by DLA but are developed and processed as defined in other Caltrans manuals and documents. The LPA should not overlook the need for one or more of these agreements during project development."

Railroad Service Contracts

"These contracts are required when a railroad company will perform work on a project. When the work is funded with Grade Crossing funds, the contracts are made between Caltrans and a railroad company and are directly processed with the railroad. The PSAs for these Federal-aid projects are processed as described previously."

For grade crossing projects, the LPA's PSA is processed normally, while a separate Caltrans-railroad service contract is processed in parallel. The LPA isn't a party to the Caltrans-railroad contract — Caltrans handles that directly.