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Applicability of FTA Circular 4220.1F

Third Party Procurement

Frequently Asked Questions

Q = Question; A = Answer

Q. As an MPO which receives FTA funds for planning purposes only, how detailed must our Procurement Policies & Procedures be in order to comply with Federal requirements?

Do Federal requirements dictate the entire organization's procurement processes and procedures? Or can there be separate processes for Federal funding?

A. The FTA Procurement Circular applies to all procurements that use FTA grant funds. If no FTA funds are used for a given procurement, then the Circular does not apply. FTA Procurement Circular 4220.1F, Chapter II 2.b. discusses the circumstances when the Circular is applicable to capital contracts and operations contracts.

You should also know that FTA has published a Grantee Procurement Self Assessment Guide that gives guidance as to the requirements for grantee procurement policy and procedures' manuals. (Posted: September, 2010)

Q. Our agency receives Section 5307 funds. We are an area over 200,000 and cannot use funding for operating assistance. So, does the County procurement process need to follow the FTA Third Party Procurement guidelines? If so, would you please direct me to the guidance to support your answer?

A. The FTA Procurement Circular 4220.1F, Chapter II, paragraph 2 (b), defines the circumstances under which the FTA procurement Circular would apply to grantee procurements. The rule is that only those contracts financed by FTA grant funds are subject to the Circular requirements. (Posted: October, 2010)

Q. Does 4220.1E apply to Transit Agencies procuring replacement parts for buses purchased using FTA funding? Are cities required to approve non OEM parts after testing of said parts have been completed and approved? Background: Replacement parts for Allison Transmissions have been submitted for testing and no failures have occurred in over three years but the city will not approve the manufacturer of replacement parts for purchase.

A. All grantee purchases using FTA funds are subject to the FTA Procurement Circular 4220.1F, vice .1E, which is available online. The Circular requires full and open competition unless the grantee processes a sole source justification through its management approval chain authorizing a non-competitive procurement. You might submit an inquiry to the grantee asking why these replacement parts are being procured without competition as required by FTA regulations. The grantee should have documented its rationale for the sole source award and this document should be available under the State's "Freedom of Information" statute. (Posted: November, 2010)

Q. Do we need to include federal clauses in a bid were we would only be using 18.5% of federal funds? For example a bid for auto parts where the funds are in our operating budget but only 18.5% is federal.

A. You must use Federal contract clauses for contracts that have any amount of Federal funding, and the procurement process to award those contracts must comply with the FTA Procurement Circular 4220.1F, which is available online. There is a contract clause matrix in Appendix D of the Circular. (Posted: November, 2010)

Q. Can an agency remove federal provisions after execution of contracts, if no federal funds are available?

A. If the contracts were awarded without federal funds and will be completely performed without federal funds, then FTA does not require federal clauses and you may negotiate these provisions out of the contract if you so choose. However, you must comply with the FTA Circular 4220.1F, Chapter II. 2. b. (2) (b) - "Operations Contracts Financed Entirely without FTA Assistance," regarding Disadvantaged Business Enterprise. If your agency is required by DOT to have a DBE program, you may not remove contracts from the DBE program by restructuring the funding so as to eliminate FTA funds. (Posted: June, 2011)

Q. We were recently awarded two grants with that are made up of New Freedom Funds. The question we have is that we are a non-profit agency and will be sub-contracting out a portion of our funds we receive from New Freedom to reimburse local other for-profit and non-profit contractors for trips they provide on our behalf through a mobility management coordinated service delivery model. We are not clear on the dollar thresholds and what FTA requirements should be included in our service contracts, and also what are the requirements for going out to bid and what FTA language must be included?

A. It is our understanding that your firm will be a third party contractor to the FTA New Freedom grant recipient (SANDAG). As such you are not required to follow FTA Procurement Circular 4220.1F since that circular applies only to recipients and sub recipients. You will have to comply with the terms of your third party contract and these terms will include certain third party contract clauses required by 4220.1F, Appendix D. Instructions for those clauses may be found in the Best Practices Procurement Manual (BPPM) Appendix A.1. Some of those clauses will have to flow-down to your subcontractors.

As far as requirements to compete your subcontracts, much depends on the type of contract you have with the FTA grant recipient. If that contract is firm fixed price, then the selection of subcontractors and the contractual risk associated with their performance is born by your firm, and thus the selection of those subcontractors should be entirely at your discretion. However, if the contract with SANDAG is a cost-reimbursement type, then the cost of the subcontract and the performance risk is passed on to the grantee, and we believe the subcontracts should be competed under these circumstances. In any event you should discuss this issue with the SANDAG Contracting Officer and obtain his/her concurrence with the subcontracting approach. (Posted: December, 2011)

Q. Are Circular 4220.1F requirements applicable to outside services that we procure as part of our operations that are partially funded by federal sources? I ask because we do not specifically apply the federal operating funds to these contracted services, but we do apply those federal funds to overall operations expenditures that include these contracted services. background = We are a mid-sized transit operator in a large UA. We receive 5307 and 5309 funding. The 5307 funding often includes operating funding for non-fixed route paratransit service as well as preventive maintenance that we apply to qualifying, vehicle maintenance and non-vehicle maintenance operating expenses as allowed. i.e. these funds are not applied to any specific project but to overall operating expenses. The operating expenses to which these funds are applied may include contractual arrangements such as administration of employee benefits plans, liability insurance or legal representation. Some of these may not be considered "micro-purchases" if one considers their longer term costs added up.

A. The current FTA Procurement Circular 4220.1F, discusses its applicability to grantee third party contracts in Chapter II. The Circular is available online.

Paragraph 2.b. (2) on page II-5 deals with Operations Contracts and applies the Circular to all operations contracts when the operations are financed with FTA assistance. If, however, the grantee can segregate its operations contracts to distinguish those financed with and without FTA funds, then the Circular may be applied only to those financed with FTA funds. If the contracts are not segregated as to FTA financing, then the Circular must be applied to all operations contracts.

Paragraph 2.b. (3) on page II-5 discusses the applicability of the Circular to Preventive Maintenance contracts, and the rules are similar. If the contracts are financed by with FTA assistance, then the Circular applies. If, however, FTA assistance is limited to specific contracts, which can be segregated from others not financed by FTA, then the Circular applies only to those contracts, and not to the others financed entirely without FTA assistance. (Posted: January, 2012)

Q. Would a grantee be precluded from utilizing preventative maintenance funds to support some or all preventative maintenance activities if the maintenance staff are management contract employees and the management contract is not FTA-funded?

background = The governing board for this grantee is insisting that the City bid the Transit Management Contract (Management Contract) for the Modern Streetcar outside of FTA Circular 4220.1F. They state that Management Contracts funded without FTA funds do not require adherence to the circular. I agree; management contracts funded without FTA funds are not subject to 4220.1F.

However, the grantee has always included the FTA boilerplate language in the Transit Management (Management Contracts), here is why:

  1. Someday, they may want/need to support this contract with FTA funds. Having the contract adhere to 4220.1F doesn't hurt and keeps the option open.
  2. The Transit Management contract for the fixed route service has the Management contractor managing the City's FTA-funded assets. In addition, a significant portion of preventative maintenance on those assets IS FTA-funded.

The grantee does NOT pay the Transit Management contractor directly with FTA funds. However, preventative maintenance IS funded with FTA funds.

A. As you note, FTA Circular 4220.1F, Chapter II 2. b. (3), "Preventive Maintenance Contracts," exempts all non-FTA-funded preventive maintenance contracts from the requirements of 4220.1F if such contracts are clearly segregated from FTA-funded maintenance contracts in the grantee's accounting system. However, we see no problem in the grantee adhering to the requirements of 4220.1F in competing and awarding this contract, if as you say, at some future time the grantee may wish to apply FTA funds to pay for the services of this contractor, and in this event having awarded the contract in accordance with FTA C 4220.1F would be required. We would also say that if the management contractor, as part of its management responsibilities in managing FTA funded assets, is required to expend FTA preventive maintenance funds in the "management" of those assets (e.g., repair, replacement, etc.), that those FTA funded expenditures will have to comply with 4220.1F. In fact, if it is the case that the management contractor will spend FTA funds in his management activities on the FTA funded assets, with the result that both local and FTA funds will be flowing from the grantee to the management contractor, although for different purposes, we would say that 4220.1F is required in the award of the contract. (Posted: June, 2012)

Q. I'm new to the transit world and working with the FTA procurement rules. I've been reading the Triennial Review, Section 6, 2014 manual, but still find it confusing as to what is absolutely needed as far as documents and/or documentation when purchasing something of this value. Is there an easy to read document that outlines this? I've received three bids and we're going with the lowest bidder. They will supply a buy America certificate to us. Is there any thing else we need to be concerned about?

A. FTA Procurement Requirements are fully described in the FTA Procurement Circular 4220.1F, which may be accessed online.

Your first priority is to become familiar with this Circular since it is much more comprehensive than the Triennial Handbook. Appendix D of this circular contains lists of various contract clauses and contractor submissions, grouped by type of procurement and dollar value, indicating which third party contract clauses are required for various types of contracts. The Circular is quite large but there is a topical index of subjects that will help you navigate on a subject by subject basis.

Another valuable document is the FTA Best Practices Procurement Manual (BPPM), which may also be accessed online.

This version of the BPPM is currently being updated to reflect FTA Circular 4220.1F; however, the contents are still helpful. The updated version is expected in October of this year. In this Manual is an Appendix A.1, which contains instructions and guidance for the various contract clauses required by the FTA Circular 4220.1F. You should become familiar with these clause instructions.

Section 9.1 of the BPPM deals in part with the documents that should be maintained in the contract file as part of the contract administration system.

Section 4.4 deals with sealed bid procurement issues specifically but there will be requirements affecting all procurements in other chapters and sections. For example, Chapter 7 deals with DBE and these requirements will cut across all types of acquisitions including sealed bids. In other words you should review the entire BPPM since requirements for all types of procurements are scattered throughout the manual in a topical manner.

Another valuable resource is the FTA Procurement HelpLine "Frequently Asked Questions" web page. Here you will find many Q&As assembled by topics that have been processed by FTA for grantees and their contractors in recent years.

You should also become familiar with the Grantee Procurement Self - Assessment Guide. This Guide was developed by FTA in order for grantees to assess their own procurement policies and procedures relative to FTA requirements in FTA C4220.1F. We believe your agency will find it helpful to review the Guide relative to your agency policies and procedures to ensure that all FTA procurement requirements are covered by your procedures. (Posted: December, 2014)

Q. Regional/state transit authority receiving federal funding for its operations engages a private third-party to manage its transit operations. The contract between
the transit authority and the private third-party manager is pursuant to FTA Circular 4220.1F and related federal procurement regulations, and the negotiated "price" for the
management service is all-inclusive -- i.e., the private third-party must absorb all costs it incurs in providing the service. If the third-party chooses to contract out some of the services it provides the transit authority, absorbing the cost of that subcontracting, does the private third-party management company have to comply with the Circular's procurement requirements, such as competitive bidding, in connection with its subcontracting of those services?

A. FTA Procurement Circular 4220.1F, which may be found online, exempts third party contractors and subcontractors from the Circular requirements. Following is the applicable guidance from Chapter II, Paragraph 2.a. (5):

  • (5) Third Party Contractors and Subcontractors.
    • (a) Status. Neither third party contractors nor third party subcontractors are “recipients” or “subrecipients” for purposes of this circular. Consequently, third party contractors are not directly covered by this circular, the Common Grant Rules at 49 CFR Parts 18 and 19, or FTA’s “Best Practices Procurement Manual” (BPPM) in awarding their subcontracts.
    • (b) Effect of Federal Requirements. However, each third party contractor and subcontractor is required to comply with the terms of its third party contract or subcontract, including requirements to extend those federally required clauses and provisions to its subcontractors at the lowest tier required. For that reason, this circular, the Common Grant Rules at 49 CFR Parts 18 and 19, and the BPPM do provide useful information to a third party contractor and third party subcontractor about the constraints under which a recipient may enter into a third party contract financed with FTA assistance.

(Posted: January, 2015)

Updated: Friday, March 18, 2016
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