Local Agency Program.

(1) There is created within the department a Local Agency Program for the purpose of providing assistance to subrecipient agencies, which include counties, municipalities, intergovernmental agencies, and other eligible governmental entities, to develop, design, and construct transportation facilities using funds allocated by federal agencies to the department which are then suballocated by the department to local agencies.

(2) The department is responsible for oversight of funded projects on behalf of the Federal Highway Administration. The department shall update the project cost estimate in the year the project is granted to the local agency and shall include a contingency amount as part of the project cost estimate.

(3) Local agencies shall prioritize and budget local projects through their respective metropolitan planning organizations or governing boards that are eligible for reimbursement for the services provided to the traveling public through compliance with applicable federal statutes, rules, and regulations.

(4) Federal-aid highway funds are available only to local agencies that are certified by the department based on their qualifications, experience, ability to comply with federal requirements, and ability to undertake and satisfactorily complete the work.

(5) At a minimum, such local agencies shall include in their contracts to develop, design, or construct transportation facilities the department’s Division I General Requirements and Covenants for local agencies and a contingency amount in the project cost to account for unforeseen conditions.