Safe Harbor Overhead Rate

MnDOT Policy #FM023
Revised: September 3, 2026

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

For-profit consulting firms that provide engineering or design-related services under contract to Minnesota Department of Transportation (MnDOT) may be eligible to enroll in the MnDOT Safe Harbor Overhead Rate Program. This program allows a consulting firm to enter into contracts using MnDOT’s established Safe Harbor Overhead Rate for up to three years. Participating firms may use the Safe Harbor Overhead Rate regardless of funding source (state or federal).

MnDOT will establish its Safe Harbor Overhead Rate with consideration to the de minimis rate that the federal Office of Management and Budget establishes in the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR 200). MnDOT will publish its Safe Harbor Overhead Rate in its program procedures.

Safe Harbor Program eligibility

For-profit consulting firms may be eligible to enroll in the Safe Harbor Program pending the MnDOT Office of Audit’s review of the firm’s application materials if they do not have:

an overhead cost rate that a cognizant agency has accepted, or
sufficient cost history on which to base development of an overhead cost rate, or
previous experience with federally funded contracts that would have required development of an overhead rate in compliance with Federal Cost Principles.

Program requirements

A consulting firm must submit enrollment documentation and, within three years of enrollment, establish an accounting system in accordance with the Safe Harbor Program Procedures requirements.
If a consulting firm that is enrolled in the Safe Harbor Overhead Rate Program establishes an overhead cost rate with a cognizant agency while participating in MnDOT’s Safe Harbor Program, the firm may not use a rate higher than the cognizant agency-approved rate in future contracts. For existing contracts with MnDOT that include the Safe Harbor Overhead Rate, the firm must continue to use the Safe Harbor Overhead Rate for the duration of the contract.

Fraud

MnDOT employees must take actions to prevent and report fraud, abuse, or misuse of public funds. Employees must report suspected violations to their supervisor, the Office of Chief Counsel, by completing MnDOT’s Report of Wrongdoing/Questionable Activity Form.

Reason for policy

The purpose of the Safe Harbor Overhead Rate Program is to remove certain barriers to participation for new and small engineering or design firms to effectively compete for contracts with MnDOT while maintaining MnDOT’s ability to reasonably assure the Federal Highway Administration that MnDOT only reimburses allowable consulting firm costs under Federal Aid Highway Program (FAHP) contracts, in line with the federal cost principles that 48 CFR 31 (FAR 31) prescribes.

Consulting firms providing services under contract to MnDOT must account for and bill costs in accordance with FAR 31. To do so, firms develop overhead rates in accordance with the federal cost principles. However, many small firms lack financial expertise or resources to either develop an overhead rate themselves or hire a Certified Public Accounting firm to do it for them. Additionally, new or start-up firms generally lack a cost history to use as a basis for development of an overhead rate. Typically, these firms would have to use a provisional overhead rate for each Federal Aid Highway Program contract, which MnDOT would subsequently adjust based on a labor-intensive final audit at the completion of the contract. However, the federal regulations allow a consulting firm to use a Safe Harbor overhead rate if MnDOT has previously accepted an overhead cost rate. Consulting firms with an audited or otherwise accepted actual overhead rate that complies 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 and is based on Federal Guidance on Safe Harbor Rate Streamlining for Engineering and Design Services Consultant Contracts. The guidance directs state departments of transportation authorizing the use of the Safe Harbor overhead 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

Any government agency that has performed the responsibilities as described in 23 CFR 172.3.

Consulting Firm

An individual or firm providing engineering or design-related services as a party to a contract with a recipient or subrecipient (as defined by 2 CFR 200.1) of federal assistance.

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 and 40 U.S.C. 1102(2), 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).

Overhead rate

For purposes of this policy, the terms overhead rate and indirect cost rate (as used in FAR 31) are interchangeable.

Responsibilities

Consultant Services

Serve as liaison between the Office of Audit and consulting firms.
Collect all required documentation for program participation from the consulting firm.
Monitor the length of time participants are in the program.
Notify the Office of Audit and the consulting firm at least 90 days before the final date of the firm’s three-year program participation if the firm has not submitted an overhead rate for a cognizant agency’s review and acceptance.

Office of Audit

Inform Consultant Services of program requirements to facilitate Consultant Services’ communication with consulting firms.
Review documentation that consulting firms applying for the program submit to Consultant Services and request additional information, as needed.
Validate consulting firms’ eligibility to participate in the program and issue a report to Consultant Services describing the results of the documentation review and validation.
Review consultants’ overhead rate submissions upon their request to exit the Safe Harbor Overhead Rate Program and issue reports describing the results.
Report suspected fraud to the Bureau of Criminal Apprehension in accordance with Executive Order 25-01 and to the Office of the Legislative Auditor in accordance with Minn. Stat. § 3.971 Subd. 9. and Minn. Stat. § 15.1573 et. al.

Policy Owner (Director, Office of Audit)

Review the policy every two years, or sooner as necessary, to keep the policy up to date.
Maintain current procedures, forms, and other documents associated with the policy.
Monitor state, federal, enterprise, agency, or other requirements that apply to the policy or procedures.
Consult with the Office of Chief Counsel to assure the policy and procedures comply with all state, federal, enterprise, agency, or other requirements.
Coordinate, as necessary, to obtain approvals from state or federal agencies before implementing changes to the policy or procedures.
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

Forms

Safe Harbor Program Questionnaire (for enrollment)
Consultant Certification Form to Apply for the MnDOT Safe Harbor Program

Processes, Procedures, and Instructions

Safe Harbor Program Procedures

Resources

History and updates

Adopted

May 26, 2022

Revised

Biennial 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.
Second revision: September 3, 2026

This policy's next scheduled review is due September 2028.