(a) A municipality may, by resolution of its governing body, request the assumption of all or part of the department's responsibilities relating to the planning, design, and construction of a public works project of the state that is to be located within the boundaries of the municipality and that would otherwise be constructed in the manner provided in AS 35.15.010. After receipt of the request, the department may provide by agreement for transfer to and assumption by the municipality of the department's responsibilities relating to the project, unless the commissioner determines that assumption of responsibilities by the municipality is not practicable or not in the best interests of the state.

(b) If the commissioner determines that assumption of responsibilities by a municipality under (a) of this section is not practicable or not in the best interests of the state, the commissioner shall notify the governing body of the municipality of the finding and specify reasons for it. If the governing body requests reconsideration of the decision, the commissioner shall hold a hearing in the municipality within 30 days following mailing of the request. Following the hearing, the commissioner may affirm, modify, or reverse the initial decision and shall specify in writing the reasons.

(c) A municipality may request joint assumption of responsibilities with the department relating to the planning, design, and construction of a public works project. Two or more municipalities may by agreement provide for cooperative assumption of responsibilities relating to the planning, design, and construction of a public works project. If two or more municipalities request assumption of responsibilities for a project and meet the standard of practicability set out in (a) of this section, the commissioner shall determine which municipality is best able to direct planning, design, and construction of the project and enter into an agreement with that municipality or provide for joint or cooperative administration, as the parties may agree or the commissioner may determine. Decisions of the commissioner under this subsection are final.

(d) Provisions of this title governing planning, design, and construction of public works by the department, and regulations adopted under the provisions, govern the administration of projects assumed by a municipality under this section. For that purpose the provisions supersede any conflicting provisions of ordinance or charter of a municipality.

(e) An organized borough may plan and construct public works under this section and make an agreement with the department for that purpose irrespective of restrictions of other provisions of law on the acquisition and exercise of borough powers. Borough exercise of the power conferred under this subsection does not preclude exercise by a city of the borough of the same power within the city.

(f) To carry out the purpose of this section, the commissioner shall adopt regulations relating to the application for and the making and the conditions of agreements and the local assumption of responsibilities for the planning, design, and construction of public works under this section. The commissioner may require different terms in agreements for different projects to meet local conditions and unique requirements and to assure compliance with the public facilities procurement policies developed by the department under AS 35.10.160 - 35.10.200. If necessary, the commissioner may require as a condition of an agreement approval of the agreement by the federal government.