Engineering process | Planning | Financial Plans
Financial Plan process
Projects approaching $100 million or greater
MnDOT has determined that any project within close range of $100 million will need to complete an initial financial plan, regardless of whether or not the project incorporates federal funds.
Major Projects Financial Plans has guidance for preparing financial plans. Follow this guidance when drafting the initial financial plan and any future updates. The Financial Plan Coordinator will verify if FHWA’s guidance is current and if any other information will be required.
The Total Project Cost Estimate (TPCE) information supports the financial plans. You can find guidance for developing the TPCE in the Cost Estimation and Cost Management Manual and the Project Management and Technical Support Cost page (This content is available only from computers on MnDOT's internal network). The TPCE is the value of all resources necessary to perform the planning, design, right of way engineering, and construction activities with contingencies regardless of the funding source or administering agency. It includes the construction let amount, post letting construction costs, other project costs, preliminary engineering, construction engineering, and right of way cost elements available in the Capital Highway Information Management Enterprise System (CHIMES). All projects need to include all six of these cost elements in the financial plan with a contingency cost estimate.
See the MnDOT Milestone Timeline below for details about when the financial plans fit into the project delivery schedule.
Initial financial plans
Develop an initial financial plan during the final design phase and after the National Environmental Policy Act (NEPA) process by following the guidance at the Major Projects Financial Plans. Obtain cost information from the NEPA document and any other applicable sources, such as any scoping TPCE updates. The initial financial plan provides the project’s baseline information related to the project’s scope, schedule, cost estimate, and funding structure so there is realistic assurance that sufficient funding is available to execute and complete the entire project or a fundable phase of the project. This plan will document when you will submit future financial plans.
Annual updates to financial plan
Annual updates to the financial plan provides the current project status as a comparison to baseline information and furnishes updated forecasts of future project activities. Annual updates show the progress of the project over time by emphasizing the major deviation from the initial financial plan and any previous annual updates. The annual updates describe the mitigating actions or the response plan you will take to address the deviations. Revise the annual financial plan narrative and financial information to include any changes in project scope, schedule, milestones, project costs, financial resources, cash flow, risks and mitigation, and trends since the previous financial plan. Each annual update, therefore, provides an all-inclusive outlook of the project’s background and status without requiring the reader to refer to previous plans. Update financial plans at least through the construction project’s substantial completion date or until a later date as the Federal Highway Administration (FHWA) may require.
Coordinate with the Financial Plan Coordinator to develop the financial plans. You can contact the Financial Plan Coordinator as soon as the construction project enters the State Transportation Improvement Plan (STIP) in order to get the plan into a time table with other development activities. Complete the financial plan early enough for MnDOT leadership to review and comment on it and then the Financial Plan Coordinator will schedule a review meeting with FHWA. From the review meeting, any issues with the financial plan will be addressed and comments incorporated prior to submitting the financial plan.
The MnDOT Office of Financial Management is responsible for drafting, obtaining signatures, and submitting the financial plans to the FHWA.
The FWHA will consider the TPCE for the project scope in the NEPA decision document when reviewing the financial plan.
The FHWA has a Financial Plan Checklist that can be helpful when creating an initial financial plan, award update, or annual update. The Financial Plan Coordinator has templates available for the financial plan.
Projects between $100 million and $500 million
If you have a construction project with a TPCE over $100 million that uses federal funds, you must submit an initial financial plan to the FHWA at least 30 days prior to federal authorization.
As 23 USC §106 (i) describes, projects with a TPCE exceeding $100 that the FHWA does not consider a major project, pursuant to 23 USC §106 (h) (1), must have an initial financial plan and annual updates. Large, multifaceted projects that deliver major highway needs require the investment of substantial financial resources. The preparation of a financial plan guarantees financial resources are identified, available, and managed throughout the life of the project instead of “expenditures” of the project. Annual financial plans for major projects and other projects defined in 23 USC §§106 (h) and 106 (i) consist of an initial financial plan and annual updates until the project is substantially completed.
A major project is a project with a minimum TPCE of $500 million that receives federal financial assistance under the code or a project that the FHWA identifies as a major project. The initial financial plan and annual updates must be submitted to the Secretary of the FHWA for any major project. The Financial Plan Coordinator will submit the documents.
Additional requirements for major project TPCEs of $500 million or more
Projects over $500 million demand a few additional requirements. In addition to the initial financial plan, a cost estimate review (CER) and project management plans (PMP) must be performed and documented. FHWA will perform the CER, however, the PMP is your responsibility. The timeline, in the following image, identifies these milestones for major projects as part of the overall project delivery process that extends from planning to final design to construction. One of the critical elements of successful project delivery lies in the CER and PMP. These documents provide critical information for the public, decision-makers in legislative bodies, and transportation officials when determining the transportation projects to support.
Usually at least 90 days prior to NEPA document approval, FHWA will conduct a CER. A CER is approximately a week long workshop and includes all stakeholders. The purpose of the CER is to gather unbiased input on the TPCE to further refine it, identify risks to the project, and identify a probability range for the TPCE. See Major Projects Cost Estimating for more guidance.
In addition to the financial plan, you must have a PMP on any project with a TPCE of $500 million or more. See the Major Projects Project Management Plans for guidance. The key purpose of the PMP is to define the roles and responsibilities of the relevant parties, and describe procedures and processes that will result in the project's completion on-time, within budget, with a high degree of quality, in a safe manner, and using a transparent process.
The Financial Plan Coordinator will submit the major project financial plans and updates to the FHWA Division Office for approval consistent with the graphic above. In addition to the FHWA Division Office reviewing the financial plans and updates, the FHWA in Washington will receive a copy of the financial plan from the FHWA Division Office to review and approve. If the FHWA in Washington has any comments or suggestions, you must address them in the financial plan or update prior to final submittal to FHWA Division Office. Include these steps in the schedule as you will not receive project authorization until Washington has reviewed and approved the financial plan or financial plan updates.
The FHWA will consider the TPCE for the project scope in the NEPA decision document.
Additional financial plan considerations
The MnDOT Office of Financial Management will present requests for operationally independent and non-concurrent construction projects to the FHWA division office. Any changes to the operationally independent and non-concurrent construction determinations will need to be submitted to the FHWA division office. They will consult with and obtain the concurrence of the FHWA Project Delivery Team in Washington prior to making any determination.
Phasing
If MnDOT determines there are insufficient financial resources immediately available to complete the entire project as the NEPA decision document defines, financial plans may identify fundable incremental improvements or phases (phasing plan) that address the purpose and need of the overall project in the short term (23 USC §106 (h) (3) (C)). For projects with financial plans that include phasing plans, use the total cost of the overall project, not the cost of any fundable incremental improvement or phase, to determine whether the project meets the $500 million threshold (23 USC §106 (h) (1)).
TPCE refined to actual cost
See the Project Management and Technical Support Cost (This content is available only from computers on MnDOT's internal network) guidance for more information.
Over time, you will need to refine a project’s costs from a planning level TPCE to “actual” costs. Due to the gradually evolving nature of cost estimates, it is important that you utilize a meticulous documentation/tracking system where you keep estimates up-to-date and can easily check and verify them.
Transportation Infrastructure Finance and Innovation Act (TIFIA) Projects
The TIFIA program provides federal credit assistance in the form of direct loans, loan guarantees, and lines of credit to support critical improvement to the national surface transportation system. For the purpose of implementing 23 USC §106 (h) and (i), TIFIA loan proceeds are considered federal financial assistance, and a TIFIA borrower must comply with all FHWA requirements, even if the project receives no federal-aid grant assistance (23 USC §602 (c) ; 49 CFR §80.9).
A TIFIA loan agreement, regardless of total project cost, requires the borrower to submit annual financial plans unless otherwise informed.
There may be one financial plan to meet the TIFIA and major project requirements. The TIFIA agreements further requires the submission of annual updates throughout the life of the loan, which can extend beyond substantial completion of construction for the project.
Others involved
The initial and annual financial plans require coordination with many functional groups and offices within MnDOT. The extent of that coordination can vary depending on the scope of the project and whether the MnDOT project manager maintains full responsibility for this work or hires a consultant to do so. Regardless of whether the he or she hires a consultant or retains the work, the MnDOT project manager is responsible for the financial plan, cost estimate reviews, and project management.
The US DOT, Federal Highway Administration (FHWA) provides guidance on federal financial plans for recipients of federal assistance. This agency also has oversight for major project approval.
FHWA Division Office reviews MnDOT construction project financial plans.
MnDOT districts or other state or local partners provide detailed construction project information for the initial and annual updates of financial plans.
MnDOT Office of Financial Management coordinates the financial plans for MnDOT and submits them to MnDOT leadership and the FHWA.
Relationship to the project development process
You can contact the Financial Plan Coordinator as soon as the construction project enters the State Transportation Improvement Plan (STIP) in order to get the plan into a time table with other development activities. Do not wait until the NEPA has been approved, but start shortly after the NEPA document has begun development. The Financial Plan Coordinator will provide a FHWA-approved template of a financial plan to you for any projects close to or over $100 million well in advance of federal authorization. The best time to start the initial financial plan is when you know the full project scope and a reasonably accurate TPCE is identified.
Make contact with the Financial Plan Coordinator to start the initial financial plan process early enough for completion, prior to requesting federal authorization. For construction projects over $100 million with federal funds, Federal Authorization cannot occur without an initial financial plan.
When federal funds are involved, MnDOT Leadership and the FHWA meet to discuss the financial plan, whether it is the initial, annual update or final. MnDOT Leadership involved in the review and approval includes the project manager, Capital Highway Program Director, and Capital Highway Program Supervisor. If a Certification is requested by FHWA, the Commissioner certifies the financial plan, and the Office of Financial Management Director provides the accompanying cover letter. If the project only has state funds, the MnDOT Leadership responsible for the review and approval will include the project manager, District Engineer, Capital Highway Program Director, and the Capital Highway Program Supervisor.
FHWA-approved Financial Plan templates are available from the Financial Plan Coordinator for design-build, design-bid-build, and construction manager/general contractor (CMGC) projects. As a project manager, you or your consultant provide the project specific timeline and “planned expenditure” information for the narrative of the financial plan. The Financial Plan Coordinator will, collectively, work with you and/or the consultant and the Office of Financial Management to insert the required information into the financial plan.
Glossary
- Annual updates: The sections in the initial financial plan will need to be updated annually to reflect changes that have occurred since its approval. Annual updates will include the current TPCE compared to the previous TPCE and the differences to cost, funding and schedule changes and trends will need to be addressed and explained in the latter sections of the Annual Financial Plan. Changes should be clearly presented and reasons should be clearly described. Dates and reporting periods for annual updates will be proposed in the initial financial plan and carried through to the annual plan.
- Contents of initial financial plan: The items in the plan must include project description, schedule, project cost, project funds, financing issues, cash flow, P3 assessment, risk and response strategies, and annual update cycle.
- Cost estimate review: A workshop to review the cost estimate and identify risks.
- Financial Plans Major Project Financial Plan Guidance: Guidance for recipients of federal financial assistance in the preparation of financial plans for projects is required by 23 USC §106 (h) and 23 USC §106 (i). The guidance was issued on December 18, 2014 and supersedes previously issued Interim Major Project Financial Plan Guidance, dated September 24, 2012; Operations Independence and Non-Concurrent Construction Guidance dated December 30, 2009; and the January 2007 Major Project Financial Plans Guidance.
- Initial financial plan: Plan submitted and approved prior to the first authorization of federal funds for construction. The selected alternative for the project must be identified in the NEPA decision document for the project.
- Major projects: A title 23 construction project receiving federal financial assistance with an estimated total cost of $500 million or more. The US Secretary of Transportation has the discretion to designate a major project.
- NEPA: National Environmental Policy Act is a federal law that promotes efforts that will prevent or eliminate damage to the environment and biosphere and stimulate health and welfare.
- Operationally independent and non-concurrent construction projects: A construction project spread over such a long period of time that it is reasonable to treat portions of the overall project as separate and independent projects. This may be where future work is not anticipated to start construction for at least 20 years after the initial construction commences.
- P3: Public-Private Partnership—a long-term contract between a government entity and a private-sector party for providing a public asset or service in which the private party bears significant risk and management responsibility. There is a cooperative arrangement between two or more public and private sectors.
- Phases: Fundable incremental improvements that will address the purpose and need of the overall project, the total cost of the overall project, not the cost of the phases, is used to determine whether the project meets the $500 million threshold.
- Project management plan: Document that provides the procedures and processes that are in effect to provide timely information to the project decision makers to effectively manage the scope, costs, schedules, and quality of, and the federal requirements applicable to the project and includes the roles/responsibilities of the agency leadership and management team in the delivery of the project.
- TIFIA: Transportation Infrastructure Finance and Innovation Act—an act that provides federal credit assistance (direct loans, loan guarantees, and lines of credit) to support critical improvement to the Nation’s surface transportation system.
- Total Project Cost Estimate (TPCE): All costs associated with the project from the NEPA phase through final construction. The TPCE must include the Construction Let Amount, Post Letting Construction Cost, Other Project Costs, Preliminary Engineering, Construction Engineering and Right of Way costs as defined in the software Capital Highway Information Management Enterprise System (CHIMES). The total cost estimate must include adequate contingencies and reserves for all cost elements.