Safe Harbor Overhead Rate

MnDOT Policy #FM023
Revised: June 25, 2025

Please go to the MnDOT Org Chart to find specific contact information: Org Chart.

Responsible Senior Officer: Deputy Commissioner/Chief Administrative Officer
Policy Owner: Director, Office of Audit
Policy Contact: Consultant Services

Policy statement

Consulting firms that provide engineering and design-related services on fixed hourly rate contracts may be eligible to enroll in the Minnesota Department of Transportation Safe Harbor Overhead Rate Program. This program allows a consulting firm to use MnDOT’s established Safe Harbor Overhead Rate of 115.00% of direct labor for the first two years that it is under contract to work with MnDOT. The rate of 115.00% is effective for all new contracts signed after the revision date of this policy.

Safe Harbor Program Eligibility

To be eligible for the Safe Harbor Program, a consulting firm cannot have:

an overhead cost rate accepted by a cognizant agency or State Department of Transportation, or
contract cost history sufficient to use as a base for development of an overhead cost rate, or
previous experience with federally funded contracts for which an overhead cost rate would have been developed in compliance with Federal Cost Principles and accepted for use by a cognizant agency.

A consulting firm is not eligible for the Safe Harbor Program if it has an audited or otherwise accepted overhead rate that was developed in accordance with the Federal Cost Principles.

Program Requirements

A consulting firm must enroll in and meet all Safe Harbor Program Procedures.
Once enrolled, a consulting firm that does not have established salaries or wage rates for employees (or classes of employees) must establish fixed hourly labor rates for the direct labor portion of the contracted services. The MnDOT approved fixed hourly rates must comply with Federal Cost Principles.
If the consulting firm establishes a cognizant indirect cost rate while participating in MnDOT’s Safe Harbor Program, that cognizant rate must be used on future contracts. Existing contracts using the Safe Harbor Overhead Rate must be invoiced using that rate for the entirety of the contract.
If the consulting firm cannot establish an accounting system within two years, the consulting firm must contact MnDOT Consultant Services to request a time extension at least 90 days before the expiration of its participation in the program. MnDOT may grant an extension, not to exceed one additional calendar year.

Reason for policy

In 2024, the federal Office of Management and Budget (OMB) revised the provisions in 2 CFR 200.414 to define the allowable de minimis rate for recipients and subrecipients without negotiated indirect cost rates to charge up to 15% of modified total direct costs. In 2025, FHWA approved the use of the Safe Harbor Overhead Rate Program for the consultant overhead rate calculation with a cap of 115%, in line with the change to the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards specified in 2 CFR 200. The purpose of the Safe Harbor Overhead Rate Program is to allow time for engineering consulting firms new to working with MnDOT to satisfy the requirements of Part 31 of the Federal Acquisition Regulation for Overhead Calculations. The federal regulations allow a consulting firm to use a Safe Harbor indirect cost rate if it has not had an indirect cost rate previously accepted by MnDOT. Consulting firms with an audited, or otherwise accepted, actual indirect cost rate, developed in accordance with the Federal cost principles, are not eligible to participate in the Safe Harbor Overhead Rate Program.

This policy establishes MnDOT’s Safe Harbor Overhead Rate Program to implement the federal program and is based on Federal Guidance on Safe Harbor Rate Streamlining for Engineering and Design Services Consultant Contracts. The guidance requires state departments of transportation authorizing the use of the Safe Harbor indirect cost rate to prepare and maintain written policies and procedures establishing the program in accordance with 23 CFR 172.5(c)(10), and develop written risk-based oversight procedures designed to provide reasonable assurance of consultant compliance with the Federal cost principles in accordance with 23 CFR 172.11(c)(2).

Applicability

All MnDOT employees must comply with this policy.

Key stakeholders with responsibilities under this policy include:

Consultant Services
Office of Audit

Definitions

Cognizant Agency

The Federal agency designated to carry out the responsibilities described in 2 CFR 200.513, paragraph (a).

Consulting Firm

A firm providing engineering and design-related services as a party to a contract with a recipient or subrecipient of Federal assistance (as defined by 2 CFR 200.86 and 2 CFR 200.93 respectively).

Engineering and Design-related Services

Program management, construction management, feasibility studies, preliminary engineering, design engineering, surveying, mapping, or architectural-related services with respect to a highway construction project subject to 23 U.S.C. 112(a) as defined in 23 U.S.C. 112(b)(2)(A); and
Professional services of an architectural or engineering nature, as defined by State law, which are required to or may logically or justifiably be performed or approved by a person licensed, registered, or certified to provide the services with respect to a highway construction project subject to 23 U.S.C. 112(a) and as defined in 40 U.S.C. 1102(2).

Responsibilities

Consultant Services

Serve as liaison between the Office of Audit and consulting firms.
Ensure the required documentation to participate in the program is received from the consulting firm.
Monitor the length of time participants are in the program.
Notify the Office of Audit and the consulting firm when the two-year program participation maximum is approaching.
Work with consulting firms who request an extension in the program to complete required justification and submit to the Office of Audit for review.

Office of Audit

Provide education to Consultant Services on program requirements so Consultant Services can act as liaison between consulting firms and the Office of Audit.
Review documentation provided by Consultant Services to ensure all required documentation has been received from consulting firms applying for the program and request additional information from Consultant Services, as needed.
Determine whether consulting firms are qualified to participate in the program and approve the use of the 115% Safe Harbor Overhead Rate.
Perform pre-award and overhead audits and issue audit reports.
Review requests for extensions.
Grant extensions for up to one year.

Policy Owner (Director, Office of Audit)

Review the policy every two years, or sooner as necessary, to ensure the policy remains up to date.
Ensure procedures, forms, and other documents associated with the policy remain current.
Monitor state, federal, enterprise, agency, or other requirements that apply to the policy or procedures.
Consult with the Office of Chief Counsel to ensure the policy and procedures remain compliant with all state, federal, enterprise, agency, or other requirements.
Ensure that necessary approvals by state or federal agencies are obtained before changes to the policy or procedures are implemented.
Work with the Policy Coordinator to revise the policy and/or confirm its accuracy.
Communicate policy revisions, reviews, and retirements to stakeholders.

Resources and related information

History and updates

Adopted

May 26, 2022

Revised

Biennail review minor revision - April 26, 2024 - Updated links and added 3 policy owner responsibilities to match revised policy template.
First revision: June 25, 2025 - Increased rate from 110% to 115% and established effective date for new rate.

This policy's next scheduled review is due May 2026.