Q. If experimental technology is being purchased, such as hybrid electric buses, can the spare ratio be exceeded? Since the new technology is still experimental and we expect these buses will break down more frequently, can we compensate for that by having, an extra five buses in the spare ratio?
A. You will need to present your question regarding a deviation from the recommended spares ratio to your regional FTA office since it is an issue within their jurisdiction and not a procurement matter. (Reviewed: September 15, 2009)
Q. Can you tell me where I can find the regulation or policy that gives the spares ratio when purchasing buses and vans?
A. The spares ratio focused on buses is found in FTA Circular 9030.1C, “Urbanized Area Formula Program: Grant Application Instructions,” chapter V, paragraph 9.a.5, which follows:
5. Spare Ratio Policies. Spare ratios will be taken into account in the review of projects proposed to replace, rebuild, or add vehicles. The basis for determining a reasonable spare bus ratio takes local circumstances into account. The number of spare buses in the active fleet for grantees operating 50 or more revenue vehicles should not exceed 20 percent of the number of vehicles operated in maximum service.” For purposes of the spare ratio calculation, "vehicles operated in maximum service" are defined as the total number of revenue vehicles operated to meet the annual maximum service requirement. This is the revenue vehicle count during the peak season of the year; on the week and day that maximum service is provided. It excludes atypical days and one-time special events. Scheduled standby vehicles are permitted to be included as "vehicles operated in maximum service.”
Spare ratio is defined as the number of spare vehicles divided by the vehicles required for annual maximum service. Spare ratio is usually expressed as a percentage, e.g., 100 vehicles required and 20 spare vehicles is a 20 percent spare ratio. (Revised: September 15, 2009)
Q. When an agency buys new railcars does FTA limit the amount of money that they can allocate to spare parts? If so what is the criteria for calculating an appropriate dollar amount for spare parts?
A. Here is the guidance from Ch. IV of FTA Cir. 4220.1F:
THE RECIPIENT’S PROPERTY AND SERVICES NEEDS AND?FEDERAL REQUIREMENTS AFFECTING THOSE NEEDS
1. DETERMINING THE RECIPIENT’S NEEDS. To support a third party contract with Federal assistance awarded by the Federal Transit Administration (FTA), the Common Grant Rules require the recipient to adopt adequate procedures for determining the type and amount of property and services it needs to acquire:
a. Eligibility. The property and services to be acquired must be eligible under the Federal law authorizing the FTA assistance award and any regulations thereunder. For example, FTA prohibits the use of capital assistance for the recipient’s operations expenses. If FTA assistance will be used to finance the cost of property or services, the property or services must be within the scope of the specific project from which that FTA assistance will be derived.
b. Necessity. The Common Grant Rules requires the recipient to establish procedures to avoid the purchase of unnecessary property and services (including duplicative items and quantities or options it does not intend to use or whose use is unlikely). In monitoring whether a recipient has complied with its procedures to determine what property or services are unnecessary, FTA bases its determinations on what would have been a recipient’s reasonable expectations at the time the recipient entered into the contract.
(1) Unnecessary Reserves. FTA expects the recipient to limit the acquisition of federally assisted property and services to the amount it needs to support its public transportation system. In particular, FTA seeks information about the recipient’s fleet to ensure that the recipient does not acquire more vehicles than it needs for public transportation service in its service area. Further guidance on spare ratios is contained in the most recent versions of FTA Circular 5010.1 providing Grant Management guidance, FTA Circular 9030.1 providing Urbanized Area Formula Program guidance, and FTA Circular 9300.1 providing Capital Investment Program guidance.
(2) Acquisition for Assignment Purposes. The recipient may contract only for its current and reasonably expected public transportation needs and may not add quantities or options to third party contracts solely to permit assignment to another party at a later date. These limits on assignments, however, do not preclude joint procurements that are entered into simultaneously by two or more parties to obtain advantages unavailable for small procurements.
(a) General Prohibition. The recipient may contract only for its current and reasonably expected public transportation needs, and may not add quantities or options to third party contracts solely to permit assignment to another party at a later date.
(b) Changes in the Recipient’s Needs. FTA recognizes that the quantity of property or services a recipient reasonably believes it may need at the time of contract award may change. A recipient’s later needs might decrease due to changed circumstances or honest mistakes. In those situations, the recipient may assign its unneeded contract authority to another entity that would like to acquire the property or services.
(c) Exceptions. These limits on assignments, however, do not preclude:
1 Joint Procurements. Two or more recipients may enter into a single procurement at the same time to obtain advantages unavailable for smaller procurements, as discussed more fully in Chapter V, section 3 of this circular.
2 State or Local Government Purchasing Schedules or Purchasing Contracts. A State or local government may enter into contracts that support its purchasing schedules or purchasing contracts established as discussed more fully in Chapter V, section 4 of this circular.
c. Procurement Size. The recipient should consider whether to consolidate or break out the procurement to obtain a more economical purchase.
(1) Joint Procurements. It may be economically advantageous for a recipient to enter into a joint procurement with others that have similar needs. The recipient responsible for undertaking the joint procurement may, upon contract award, assign to the other participants responsibilities for administering those parts of the contract affecting their property or services. Participation in a joint procurement, however, does not relieve any participating recipient from the requirements and responsibilities it would have if it were procuring the property or services itself, and does not relinquish responsibility for the actions of other participants merely because the primary administrative responsibility for a particular action resides in an entity other than in itself.
(2) Small Procurements. In other circumstances, breaking out procurements may provide greater opportunities for Disadvantaged Business Enterprises (DBEs), small and minority firms, and women’s business enterprises to participate. As stated in paragraph 1.b(2) of this Chapter, the FTA expects the recipient to ensure that it contracts only for its current and reasonably expected needs. Absent efforts to foster greater opportunities for DBEs, small and minority firms, and women’s business enterprises, the recipient should not split a large procurement merely to gain the advantages of small purchase available for federally assisted procurements of $100,000 or less identified in 41 U.S.C. Section 403(11).
d. Options. The recipient’s contracts may include options to ensure the future availability of property or services, so long as the recipient is able to justify those options as needed for its public transportation or project purposes. An option is a unilateral right in a contract by which, for a specified time, a recipient may acquire additional equipment, supplies, or services than originally procured. An option may also extend the term of the contract. Chapter VI of this circular contains procedures for evaluating options.
e. Lease versus Purchase. To obtain the best value, the recipient should review lease versus purchase alternatives for acquiring property and, if necessary, should obtain an analysis to determine the more economical alternative. The recipient may use FTA capital assistance to finance the costs of leasing eligible property if leasing is more cost effective than full ownership. Before the recipient may lease an asset, FTA regulations, “Capital Leases,” 49 CFR Part 639, Subpart C, require the recipient to make a written comparison of the cost of leasing the asset compared with the cost of purchasing or constructing the asset. Costs used in the comparison must be reasonable, based on realistic current market conditions, and based on the expected useful service life of the asset.
f. Specifications. Typically, the recipient is responsible for preparing specifications that describe its needs while assuring that those specifications are not exclusionary, discriminatory, unreasonably restrictive, or otherwise violate Federal laws or regulations. In general, specifications should clearly describe the property or services to be procured and state how the bids or proposals will be evaluated. For additional guidance, see section 2 of this Chapter, and Chapter VI, section 3 of this circular.
The amount necessary for the grantee to meet its needs depends on the specific facts surrounding the procurement and project. The grantee should contact its region for assistance if it cannot make this determination. (Posted: November, 2015)
Q. Can you direct me to legislation or regulations re the following?
Is it legal for a company to sell you a train car and then knowingly stop production on parts they know you will need for it? This causes the unavoidable scenario where you place the expected order for the part and they tell you that you have to pay prices 4 to 8 times higher than the initial prices, because they stopped production of the item they just sold you.
Shouldn’t they be required to produce the mandatory parts for the train during the reasonable life of the train? Is it ok to stop production on parts that will render the vehicle inoperable during its normal life if not replaced?
A. CTA needs to refer this matter to their in-house or retained counsel. Their lawyer needs to review the contract they entered into and see how applicable state laws affect their contractual rights. If they wish to file a federal complaint, it must go to the Federal Trade Commission or the U.S. Department of Justice. FTA does not get involved with a contractual dispute between a grantee and its third party contractor. (Posted: November, 2015)