Policy Changes and Clarifications Re: Procurement Transactions
400 Seventh St. S.W.
Washington, D.C. 20590
I am pleased to announce a number of Federal Transit Administration (FTA) policy changes and clarifications that we believe will simplify your procurement transactions, as well as several initiatives intended to identify and share successful procurement practices. The changes and clarifications involve:
Rescission of five-year contract term limitations;
Use of E-commerce for procurements;
Rules on advance payments; and
The effect of using of various FTA funding sources for operating and preventive maintenance contracts.
In addition, you will find information on a new Best Practices initiative, as well as the introduction of the Experimental Procurement Laboratory initiative. Through these initiatives, we hope to persuade you to share what works well and encourage new thinking about how procurement practices can be simplified and improved.
This information will also be made available on the FTA public website, and I encourage you to share it with your procurement staff. I also want to thank the many transit agencies that have offered comments on how to improve procurement practices, and particularly those who responded to our recent survey.
Policy Changes and Clarifications
A. FTA C 4220.1D, Paragraph 7(m) - Contract Term Limitation
The five-year contract term limitation for FTA-funded contracts, including "revenue contracts," awarded by grant recipients is hereby rescinded. Revenue contracts are those that utilize FTA-funded real estate, equipment and facilities to generate revenue. With this rescission, grant recipients no longer need to obtain FTA approval for contract terms exceeding five years. Please note, however, that contracts for rolling stock and replacement parts are still limited to not more than five years, as required by statute. (49 United States Code Section 5326(b))
Grantees are expected to continue to be judicious in establishing and extending their contract terms. Good procurement practice dictates that grantees enter into contract terms no longer than minimally necessary to accomplish the purpose of the contract.
E-Commerce has been and continues to be an allowable means to conduct procurements. If a grantee chooses to utilize E-Commerce, written procedures must be developed and all requirements for full and open competition must be met.
C. FTA C4220.1D, Paragraph 12.a. - Advance Payments
There continues to be some confusion about FTA policy with respect to advance payments, stemming from the interpretation of American Public Transportation Association’s Standard Bus Procurement Guidelines and subsequent FTA Dear Colleague Letters. The clarification of requirements regarding advance payments provided in the Dear Colleague Letter of June 15, 2001, remains accurate, but is further clarified as follows:
FTA C 4220.1D, Paragraph 12, "Payment Provision in Third Party Contracts," states: "FTA does not authorize and will not participate in funding payments to a contractor prior to the incurrence of costs by the contractor unless prior written concurrence is obtained from FTA." This policy remains unchanged: FTA funds may not be used to make advance payments unless prior written concurrence is obtained from FTA. There is no prohibition on a grant recipient’s use of local funds for advance payments. However, advance payments made with local funds before a grant has been awarded, or before the issuance of a letter of no prejudice or other pre-award authority, are ineligible for reimbursement.
D. FTA C 4220.1D, Paragraph 4 – Applicability (Regarding Operating Assistance and Preventive Maintenance)
FTA grant recipients who utilize FTA formula funds for operating assistance are required to follow the requirements of the FTA C 4220.1D for all operating contracts. Since FTA formula funds pay a percentage of the net operating deficit, such contracts cannot be segregated and FTA C 4220.1D must be applied.
Congestion Mitigation and Air Quality (CMAQ) and Job Access/Reverse Commute (JARC) project funds may be used for operations. Grantees must follow the Circular requirements for any specific contracts that utilize CMAQ or JARC funds. However, the use of CMAQ and JARC funds for operations does not trigger the applicability of the Circular to all other operating contracts.
Grantees who utilize formula capital funds for preventive maintenance contracts are subject to the following requirements under the Circular. If the FTA formula funds are allocated to discrete contracts identified in the grant application for preventive maintenance, then FTA C 4220.1D will apply only to those specific contracts. If the FTA formula funds are not allocated to discrete contracts in the grant application, then all preventive maintenance contracts are subject to the requirements of the Circular.
Best Practices Initiatives
A. Best Practices Contest
While the Best Practices Procurement Manual (BPPM) contains some excellent examples of grantee "best practices," we are eager to encourage the sharing of many more of these practical ideas among grantees. Everyone who submits a best practice that is incorporated into the Manual will be publicly recognized at American Public Transit Association’s Annual Meeting. In addition, one individual/agency will be recognized at the annual Awards Ceremony, and APTA will waive the conference registration fee for the person who submits the winning "best practice."
B. Experimental Procurement Laboratory
FTA also is creating an experimental "procurement laboratory." The goal of this initiative is to allow and encourage grantees to improve or streamline their contracting processes through innovative approaches. Grantees are invited to propose procurement innovations for consideration and approval by FTA. If the experiment is successful, the practice will be published in the Best Practices Procurement Manual.
More information about the Best Practices Contest and the Experimental Procurement Laboratory initiative will be published soon on the FTA website, the BPPM website, and the APTA website, and will be made available at FTA conferences and National Transit Institute procurement courses.
I appreciate your continued support, and look forward to working with you to further improve procurement practices in the transportation industry.
Jennifer L. Dorn