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The following highlights policies and procedures in addition to 45 CFR Parts 74 and 92 and governing programmatic regulations applicable to PHS construction grants.


An applicant for a PHS construction grant must assure that it will not advertise for bids or negotiate a contract for any part of the grant-supported activity until working drawings and specifications have been approved. One set of design standards against which these drawings and specifications will be reviewed is program specific and is meant to ensure that the facility will suitably accommodate the service to be provided there. These standards are set forth in programmatic regulations and in other program policy issuances. In addition to these standards, there are general design requirements applicable to all PHS-assisted construction.

The following design requirements (1) are to be included in the review and evaluation of all working drawings and specifications:

Where State and local codes or requirements exceed the design requirements set forth in Technical Handbook 2.1 or standards incorporated in it, the more stringent requirements will be applied. Where State or local codes are proposed to be used as a basis for facility design in lieu of the HHS design requirements, a prior determination must be made by the appropriate HHS Office of Engineering Services that the specific State or local code is equivalent to, or exceeds, HHS requirements.


See section 4, "Public Policy Requirements."


Applicants for construction grants may include a project contingency fund in initial cost estimates to provide for unanticipated charges. Such funds will be limited to 5 percent of construction and equipment costs before bids are received and will be reduced to 2 percent after a contract has been awarded.

Under construction grant programs, costs incurred before an award for architect's fees and consultant's fees necessary to the planning and design of the project are allowable if the project is approved and funded.


When phased 3 construction methods are employed, the grantee will normally be authorized to proceed with construction and to receive grant payments before approval of later phase contract awards, provided a guaranteed maximum price is obtained by the grantee before the award of the first construction contract for completion of the total project within the amount of funds available to meet the cost of the project.


PHS prior approval requirements for contracting under discretionary grants are found in section 8, "Changes in Expenditures/Activities."

PHS will find acceptable only those contracting methods that--

Therefore, PHS-assisted prime construction contracts under grants must conform to the following requirements.

All construction work must be procured by the methods described in 45 CFR Part 74, Subpart P, and 45 CFR Part 92.36. Normally, this means formal advertising resulting in lump sum, fixed-price contracts, although other procurement methods and other types of contracts may be authorized when formal advertising is impractical.

The grantee (owner) must obtain PHS awarding office approval of plans and specifications both before bids or proposals are solicited and before the award of a prime construction contract. The procurement methods to be employed must be reviewed by the regional Office of Engineering Services and must be approved by the PHS awarding agency or regional office. In those construction programs where a State agency has final approval authority, the State agency must concur in the contract award. The grantee (owner) is responsible for ensuring that the project is constructed to completion in accordance with the approved plans or specifications and for obtaining necessary approvals for changes (see section 8, "Changes in Expenditures/Activities").

The grantee (owner), including the firms acting for it in a professional capacity, must take adequate steps to ensure that the total cost of all contracts, i.e., total cost of construction, awarded under a project will be within the amount of funds available for the project.

This can be accomplished by accurate price estimating and/or the use of bid alternates. A precise description of the scope of work, specifications, materials, and construction techniques in the invitation to bid will facilitate accurate cost estimating by both the bidder and the grantee's (owner's) professional representatives. The description of work becomes especially important when multiple contracts will be let in support of the same project, since each contractor must know exactly what is involved in the portions of the job he is bidding on. Invitations to bid must stipulate a time for completion of the project, expressed either in calendar days or as a fixed date, for each prime contract to be awarded under the project.

Where more than one PHS (HHS) program will support a construction project or where the PHS-supported project is less than the entire facility or construction to be bid, the grantee must obtain bids that provide, to the maximum extent possible, the costs for that portion of the total job that will be financed by PHS funds. This may be done by showing the cost for each building or site in the project if it consists of more than one building or construction site and may be divided for bidding and construction purposes, or by identifying to the extent possible or prorating the applicable costs when the project is a single site or contains common space and may not be divided for bidding and construction purposes.

Where practicable, the grantee (owner) may request, in the invitation for bids, alternates to the base bid that are keyed to specified and explicitly stated changes in the project scope, materials, or construction techniques. Alternates may be used when the amount of the low bid exceeds the amount of funds available to the owner to award a contract, and the grantee (owner) must make adjustments to the project so as to reduce costs in order to award a contract within the funds available. Additive alternates may be used when available funds exceed the amount of the low bid, thus making it possible to incorporate necessary features that otherwise would not have been included in the project. Alternates that are selected will be included in determining the low aggregate bid. If all bids exceed the funds available even after the steps described above have been taken, the grantee (owner) may--


Construction management services are management services that may be produced on a negotiated basis rather than by formal advertising. These services include technical consultation during the design state of a project and organization and direction of construction activities during the construction phase. The services of construction managers may also be procured by formal advertising in those cases where State or local governments prohibit the procurement of construction management services on a negotiated basis. Where bids are taken, the bidders should be prequalified.

The construction management contract must place total financial responsibility on the construction manager to complete construction of the project at or below the guaranteed maximum price. If the contract exceeds $100,000, the construction manager shall be required to provide 100-percent performance and payment bonds to ensure the grantee (owner) that the facility can be completed within the amount of available funds (see 45 CFR Part 74, Subpart C).

When a construction management firm is retained by the grantee (owner), a guaranteed maximum price must be obtained from the construction manager before PHS will authorize the award of the first construction contract. This requirement shall apply whether or not phased construction techniques are employed. Each portion of the work for which a separate contract is expected to be let shall be separately priced as an individual line item in the guaranteed maximum price contract.

Contracting for construction work on a project covered by a construction management agreement as in item 3 above is subject to the requirements for bidding and award of contracts, except that bids may be obtained by prequalification and selective solicitation. When prequalification and selective solicitation are used, the construction manager must (1) issue, no more than 6 months in advance of the date of the invitation to bid, a "sources sought" announcement in newspapers or other publications having general circulation in the area specifically describing the nature of the construction work required, the separate contracts that will be let, and the standards for prequalification; (2) prequalify all firms that respond to the announcement and which are determined to meet the prequalification standards; (3) establish bidders lists for each of the invitations to bid, including at least all firms qualified in (2), and that may also include other known qualified firms; (4) by written invitation, solicit bids from all firms on the bidders list; (5) consider bids from any contractor who requests permission to bid and who is determined by the grantee (owner) to meet the prequalification standards; and (6) advertise the project formally if fewer than three responsive bids are received in response to the selective solicitation.


In design-construct contracting, construction firms respond to a request for proposals by submitting building designs that they claim will meet the grantee's (owner's) performance requirements within a guaranteed maximum price covering all architectural, engineering, and construction services required.

The design-construct firm must be selected in a manner that will allow maximum feasible competition. Because of the nature of design-construct contracting, the following departures from formal advertising are authorized:

The selection of a design-construct firm must be accomplished by a process that includes public announcement of requests for proposals, provided that at least one form of the announcement receives nationwide distribution; consideration of all proposals from firms that are determined to be qualified; and selection based on the firm's qualifications and responsiveness to the criteria in the request for proposals.


At the option of the grantee (owner), a liquidated damage provision may be included in the construction contract for assessment of damages when the contractor has not completed construction by the date specified in the contract. Where there is an assessment of damages, any amounts paid belong to the owner.

Labor standards and equal employment opportunity requirements for federally assisted construction must be included in the information provided to bidders on construction contracts under PHS grants and be included in the contract documents for all such projects (see 45 CFR Part 74, Subpart P and Appendix F, and 45 CFR Part 92.36).

Unanticipated changes or modifications to previously approved construction contracts shall be handled in accordance with 45 CFR Part 74, Subpart L; 45 CFR Part 92.30; and section 8, "Changes in Expenditures/ Activities."

Invitations for bids must stipulate a time for completion of the project, expressed either in calendar days or as a fixed date, for each prime contract to be awarded under the project.

Disposition of Unclaimed Wages

If it is discovered, either during or after the period of performance of a PHS-assisted construction contract, that an employee is entitled to wages but cannot be located for the purposes of payment (or for some reason refuses to accept payment), the grantee or loan recipient may eventually have to make a repayment to the Federal Government. Therefore, PHS suggests that the contractor be required to turn over unclaimed wages to the grantee institution.

The grantee institution should notify the Grants Management Officer (GMO) of the PHS awarding office that an escrow account has been established in the affected employee's name and should maintain the account for a period of either 2 years following the completion of the contract or such longer period as may be required by State or local law. Upon the expiration of this period, any amounts still unclaimed will be disbursed by refunding to PHS either the entire amount if the construction project received 100-percent PHS participation or the same percentage of the amount remaining in the account as the percentage of PHS participation in the project. In the event the project was participated in by more than one PHS program at differing rates, the percentage on which the refund is based should be an average percentage arrived at by weighting each program's rate of participation by the dollar amount of that program's contribution.

If the contractor has made a reasonable effort to locate the employee by having mail forwarded and by contacting his union, the institution need not repeat such attempts. If there is reason to believe that the contractor's efforts to locate employees due wages were not thorough, it will be to the institution's advantage to attempt to locate such employees. Doing so will reduce the likelihood of future claiming actions.

If any wages held in escrow are paid to an employee or his legal representative during the period in which the account is maintained, a complete report must be made to the GMO of the PHS awarding office when the account is closed.

Reporting to Department of Labor

Department of Labor (DOL) regulations at 41 CFR Part 60-4 require that all grantees awarding federally assisted construction contracts over $10,000 notify the applicable regional, area, or field office of the DOL Office of Federal Contract Compliance Program.


Except as provided below, the following clauses must be included in the information furnished to bidders on PHS construction projects under grants and must be included in the contract documents for all such projects. However, Paragraph E, Minimum Wages, shall be included only when required by the Federal program legislation.

A. Equal Employment Opportunity