[Federal Register Volume 73, Number 190 (Tuesday, September 30, 2008)]
[Notices]
[Pages 56896-56918]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-22914]
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DEPARTMENT OF TRANSPORTATION
Federal Transit Administration
[Docket No. FTA-2007-29125]
Third Party Contracting Guidance: Notice of Final Circular
AGENCY: Federal Transit Administration (FTA), DOT.
ACTION: Notice of Availability of Final Circular.
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SUMMARY: The Federal Transit Administration (FTA) has issued FTA
Circular 4220.1F, ``Third Party Contracting Guidance'' to provide
comprehensive guidance to grantees and recipients of cooperative
agreements (recipients) to implement third party contracting
requirements that apply to FTA assisted procurements.
DATES: Effective Date: The effective date of this circular is November
1, 2008.
ADDRESSES: A copy of this circular and comments and material received
from the public, as well as any documents indicated in the preamble as
being available in the docket, are part of docket FTA-2007-29125 and
are available for inspection or copying at the Docket Management
Facility, U.S. Department of Transportation, 1200 New Jersey Ave., SE.,
West Building Ground Floor, Room W12-140, Washington, DC between 9 a.m.
and 5 p.m., Monday through Friday, except Federal holidays.
You may retrieve the circular and comments online through the
Federal Document Management System (FDMS) at Web site: http://regulations.gov. Enter the docket number FTA-2007-29125 in the search
field. The FDMS is available 24 hours each day, 365 days each year.
Electronic submission and retrieval help and guidelines are available
under the help section of the Web site.
This notice does not include the final circular. An electronic
version of the circular may be found on the docket: http://regulations.gov, docket number FTA-2007-29125, or on the FTA Web site:
http://www.fta.dot.gov. Paper copies of the circular may be obtained by
contacting FTA's Administrative Services Help Desk, at 202-366-4865.
FOR FURTHER INFORMATION CONTACT: James Harper, Director, Office of
Procurement, Office of Administration, Federal Transit Administration,
1200 New Jersey Avenue, SE., East Building, Room E42-332, Washington,
DC 20590, phone: 202-366-1127, fax: 202-366-3808, or e-mail
[email protected] for issues regarding third party contracting
procedures and practices; or Kerry L. Miller, Assistant Chief Counsel
for General Law, Office of Chief Counsel, Federal Transit
Administration, 1200 New Jersey Avenue, SE., East Building, Room E56-
314, Washington, DC 20590, phone: 202-366-1936, fax: 202-366-3809, or
e-mail, [email protected], for legal issues.
Table of Contents
I. Background
II. Overview
III. Chapter-by-Chapter Analysis
A. Chapter I--Introduction and Role of the Federal Transit
Administration
B. Chapter II--Applicability
C. Chapter III--The Recipient's Responsibilities
D. Chapter IV--The Recipient's Property and Services Needs and
Federal Requirements Affecting Those Needs
E. Chapter V--Sources
F. Chapter VI--Procedural Guidance for Open Market Procurements
G. Chapter VII--Protests, Changes and Modifications, Disputes,
Claims, Litigation, and Settlements
1. Appendix A--References
2. Appendix B--FTA Regional and Metropolitan Contact Information
3. Appendix C--Third Party Contracting Checklists
4. Appendix D--Matrices of Third Party Contract Provisions
I. Background
This notice provides a summary of FTA's Third Party Contracting
Guidance final circular, and addresses comments received in response to
the FTA's September 28, 2007, Federal Register notice (72 FR 55630).
FTA's most recent enabling legislation, the Safe, Accountable,
Flexible, Efficient Transportation Equity Act: A Legacy for Users
(SAFETEA-LU), Public Law 109-59, August 10, 2005, as amended by the
SAFETEA-LU Technical Corrections Act, 2008, Public Law 110-244, June 6,
2008, added new third party contracting requirements for FTA
recipients. Other Federal laws and regulations have also amended
certain Federal requirements or added new Federal requirements
affecting third party procurements
[[Page 56897]]
undertaken by FTA recipients. To address these changes, FTA is re-
issuing FTA Circular 4220.1E, issued June 19, 2003, and last amended in
February of 2004.
FTA published proposed FTA Circular 4220.1F in the Federal Document
Management System (FDMS) at Web site: http://regulations.gov, and in
the FTA Web site: http://www.fta.dot.gov. FTA published a notice of
availability in the Federal Register (72 FR 55630) on September 28,
2007, seeking public comment on the proposed circular. FTA established
a November 27, 2007, deadline for comments, but extended the comment
period to February 15, 2008, as announced in the Federal Register on
October 31, 2007 (72 FR 61708).
Ten commenters responded to FTA's request for comments in response
to that notice and the proposed circular. Commenters included four
State departments of transportation, four regional transportation
authorities, one trade association, and one private for-profit firm.
This notice does not include the final circular. An electronic
version of the circular may be found on the docket: http://regulations.gov, docket number FTA-2007-29125, or on the FTA Web site:
http://www.fta.dot.gov. Paper copies of the circular may be obtained by
contacting FTA's Administrative Services Help Desk, at 202-366-4865.
II. Overview of the Circular
We recognize that this edition ``F'' of FTA Circular 4220.1 is
substantially different from the previous FTA Circular 4220.1E, ``Third
Party Contracting Requirements,'' 06-19-03. The final FTA Circular
4220.1F (the final circular) does contain much more information and
guidance than was available in the previous circular, which focused
mostly on Federal requirements. In part, this results from the SAFETEA-
LU amendment to 49 U.S.C. Section 5334 adding a new subsection ``(l)''
requiring FTA to publish for notice and comment any ``guidance document
* * * that * * * imposes obligations, produces significant effects on
private interests, or effects a significant change in existing
policy.'' The final circular now describes many procedures and
processes that will assist the recipient in complying with the many
Federal statutory and regulatory requirements that can affect third
party procurements.
Many commenters expressed the following views about the format and
contents of the proposed circular as a whole:
1. Too Much Information and Complexity
Several commenters objected to the length and complexity of the
proposed circular, expressing a preference for the ``tight structure
and focused approach'' of the previous circular. We understand that a
streamlined list of requirements can be desirable. Because we are
required by law to present all matters that may have a significant
effect on private interests for public comment, we have included as
many subjects as possible that might directly or indirectly affect a
specific FTA assisted procurement. FTA assisted procurements are
subjected not only to many Federal procedural requirements, but also to
many Federal requirements about the nature of property and services
that may be acquired and the prospective contractors that might seek to
provide them. FTA lacks authority to issue blanket waivers to those
Federal requirements.
The circular's purpose is to provide guidance on how a recipient
might comply with the many requirements affecting its procurements that
accompany the use of Federal assistance awarded by FTA. If the
recipient is prepared to forgo the use of FTA assistance to support a
procurement, then the circular's guidance will not apply to that
procurement. Nevertheless, we have attempted to reduce the circular's
complexity and make it more user-friendly by consolidating related
information in seven separate chapters. Chapter I describes the context
in which the guidance takes place and FTA's role in third party
contracting. Chapter II designates to whom and to what the circular
applies. Chapter III outlines the recipient's general procurement
responsibilities. Chapter IV describes the various Federal requirements
that may affect the eligibility of prospective contractors to
participate, the property and services to be acquired, the limitations
imposed on the use of the property or services acquired, as well as the
acquisition procedures to be used. Chapter V lists the various sources
from which the recipient might acquire property and services. Chapter
VI describes the procedural requirements that apply to the various
procurement methods. Chapter VII closes by providing guidance on
resolving contract difficulties that might emerge. Appendix A lists the
various laws, regulations, executive orders, and directives referenced
in the circular. Appendix B provides an updated list of FTA regional
and metropolitan offices with contact information. A new Appendix C
adds checklists to remind the recipient of the many Federal
requirements that might apply to its procurement, with references to
the various sections, subsections, paragraphs, and subparagraphs of
Chapters II through VI. A new Appendix D adds clause matrices. After a
recipient gains a clear understanding of the meaning of the terms used
in the circular, what FTA may do, and the types of acquisitions covered
by the circular, the recipient can use the later chapters of the
circular as reminders of the many Federal requirements that affect
various acquisitions, alternatives to the open market that may provide
the property and services that are sought, and the different procedures
to be used for the various methods of procurement.
Specifically, we are concerned that the recipient remains aware of
the many Federal requirements that could affect the contractor that may
be selected and the nature of what is being required. If concentration
is focused mainly on acquisition procedures, it can be easy to lose
sight of other Federal requirements that may prove difficult or
expensive to administer if considered too late. While these matters
were briefly noted in former FTA third party contracting circulars,
mostly by reference to the Master Agreement, we disagree that they are
beyond the scope of a third party contracting procurement circular. For
example, a prospective contractor should be aware of the implications
of entering into contracts financed with FTA assistance, such as
complying with our Buy America and Charter Service regulations,
government-wide environmental protections, among others, before
submitting a bid or proposal in response to a recipient's solicitation.
Also, the recipient may wish to consider the various sources from which
the property or services it seeks may be obtained.
One commenter complained that the proposed circular would no longer
be useful as a training document because it is too complex. We
disagree. We believe the final circular with its focus on consolidating
topics, providing more guidance and information, coupled with
checklists of requirements that might be overlooked if contract awards
need to be expedited, will far better serve the individuals to be
trained.
One commenter asked for review aids such as worksheets, clause and
certifications matrices, and model clauses. We agree that these aids
could be helpful, and have included a new Appendix C with checklists
including references to specific parts of the circular. FTA has also
prepared a new Appendix D with matrices identifying
[[Page 56898]]
the various clauses and contract provisions that might be required. For
examples of model clauses, we refer you to the FTA's Best Practices
Procurement Manual (BPPM), which we are planning to update in the near
future. We caution, however, that while these checklists and matrices
will be current on the day the final circular is issued, later enacted
Federal laws and regulations may not be reflected in timely amendments
to the circular. FTA will attempt to update the circular as necessary,
but recommends that the recipient check the Master Agreement and the
FTA Web site for information about any new Federal requirements.
2. Separate Requirements From Guidance
One commenter asked whether the circular only provides guidance to
FTA recipients or whether it intends to provide mandatory directions or
requirements when financing third party contracts with Federal
assistance. Several other commenters requested us to clearly identify
distinctions between Federal requirements and guidance or
recommendations or separate Federal third party procurement
requirements from guidance.
FTA considers this circular to be FTA's official guidance for
implementing Federal requirements. This guidance consists of FTA's
recommendations for achieving compliance with the various Federal
requirements that might apply to a recipient or its procurement. The
actual Federal requirements are contained in the provisions of Federal
statutes or in promulgated Federal regulations, and in many cases
impose binding requirements on participants in FTA assisted
procurements. Appendix A contains a list of many of those laws and
regulations applicable to FTA assisted procurements. Executive Orders,
directives, and similar publications are binding on the Executive
Branch of the U.S. Government, which must implement them. While the
Executive Orders and other directives to Federal agencies do not apply
directly to parties or individuals outside the Federal Government, some
provisions of those Orders or directives require the cooperation of
parties that are not part of the Executive Branch of the U.S.
Government. Consequently, FTA must gain the consent of the relevant
parties to ensure compliance with the Executive Orders and Federal
directives. FTA does this through the provisions of its Master
Agreement incorporated by reference in each FTA grant agreement and FTA
cooperative agreement. To determine what is required of the various
participants in an FTA assisted project, we suggest that you review
those documents.
Because this circular consists of a broad range of guidance to FTA
recipients, some of that guidance will simply re-state a Federal law or
regulation, while other guidance will provide one or more methods of
complying with an underlying Federal law or regulation, focusing on the
terms of the FTA law or regulation to clarify what is needed for
compliance. Doing so will result in ``blurring of lines between legal
and regulatory requirements, guidance, and commentary,'' as noted by
one commenter. Throughout the final circular, however, FTA has
attempted to identify those provisions that constitute Federal
statutory or regulatory requirements. Information not designated as a
Federal statutory or regulatory requirement in nearly all cases will be
compliance guidance.
FTA is willing to give serious consideration to alternative ways a
recipient may comply with the Federal laws and regulations that apply
to FTA programs. In some situations, FTA is familiar with only one
method of achieving compliance, and then only that method is listed in
the final circular. Other situations lend themselves to various methods
of compliance. In summary, an FTA recipient should review the Federal
laws and regulations cited in connection with each subject of concern
to learn what requirements apply to it and to other participants in its
project. To determine what is required of FTA that might affect third
party procurement, the recipient may also review any Executive orders
and other Federal directives referred to in connection with each
subject of concern as well as the relevant Federal laws and
regulations. FTA's BPPM, while not official FTA guidance, includes more
extensive examples of procedures, processes, or ways in which
compliance with specific Federal requirements might be achieved.
A recipient seeking methods of complying with a Federal requirement
other than those described in the final circular or in the BPPM should
contact FTA employees and officials in its region, particularly because
FTA is not authorized to provide Federal assistance for third party
procurements that do not comply with Federal requirements. While many
recipient actions do not expressly require approval under Federal law
or regulation, if FTA finds that a third party procurement fails to
comply with Federal requirements, then FTA may need to withdraw
funding, obtain a refund, or offset future Federal assistance that
would have been provided to the recipient. In summary, the recipient is
ultimately responsible for compliance with Federal requirements. If the
recipient chooses to take an action that is later determined to violate
Federal law or regulations, then it can expect that the Federal
Government will take remedial action.
3. Links to Relevant Documents Needed
One commenter requested us to add links to essential documents
referenced in the proposed circular. We are unable to do so at this
time, although we have included on-line addresses of certain resources
that may be difficult to find. Be aware, however, that these addresses
may change as Web sites change.
In summary, we recognize that implementing FTA's third party
contracting guidance can be complicated, and that many disparate
Federal requirements will apply. We expect to continue to learn from
your experience in administering the many Federal requirements that
apply to third party contracting. We will be monitoring the usefulness
of this guidance, and we continue to be open to comments and
suggestions. We value input from our recipients and others, and we urge
you to communicate with FTA staff at our headquarters and regional
offices regarding questions and concerns you may have and successes you
experience.
4. Notification of Changes to the Final Circular
One commenter recommended that FTA provide notice and comment about
all amendments or updates to the final circular, even if FTA later
amends or updates the final circular because of revisions to other FTA
or other Federal regulations or guidance that has undergone notice and
comment.
FTA disagrees. When the revision of a circular or regulation
requires the Federal Government to provide an opportunity for notice
and comment, there is no need to satisfy that requirement again just to
update a reference to that revised document. FTA is required by 49
U.S.C. 5334(l) to provide notice and comment and otherwise follow
applicable Federal rulemaking procedures about any change that ``grants
rights, imposes obligations, produces significant effects on private
interests, or effects a significant change in existing policy.'' FTA,
however, need not provide notice and comment when making minor
technical corrections, such as updating legal citations and ensuring
conformity of its circulars with the latest Federal regulations or
guidance that has
[[Page 56899]]
undergone notice and comment. FTA will notify the public of those
changes as they occur.
FTA will also post updates on its Web site: http://www.fta.dot.gov.
The recipient should register for notifications when FTA issues Federal
Register notices or new guidance. To register for notifications, go to
the FTA public Web site: http://www.fta.dot.gov. In the middle of the
page will be a box with the following message:
Sign up for e-mail updates
The Federal Transit Administration now offers e-mail updates on various
topics including Federal Register notices, SAFETEA-LU and others.
Please click on the link above to begin the sign-up process.
5. Editorial Comments
A few commenters recommended brief descriptions of citations, and
noted editorial discrepancies and typographical errors. We agree with
most of their recommendations and have made appropriate changes in the
final circular.
III. Chapter-by-Chapter Analysis
This section briefly describes the contents of each chapter of the
final circular and addresses public comments received in response to
its September 28, 2007, and October 31, 2007, notices.
A. Chapter I--Introduction and Background
Chapter I is an introductory chapter with general information about
FTA and how to contact us. It also provides a brief review of FTA's
authorizing legislation, along with information about Grants.gov. It
includes definitions applicable to third party contracting, and
describes FTA's role in third party procurements. While contact
information about FTA officials is identified in the various chapters
of the final circular, if you have a question and an FTA official is
not identified as a contact source, you should contact the Regional
Administrator for the region in which the project is administered or
the Associate Administrator for the Program under which a headquarters
project is administered.
Sections 1 Through 4--Description of FTA, Its Authorizing Legislation,
Contact Information, and General Background
We have edited the first four sections of Chapter I, but they
otherwise remain substantially similar to those of the proposed
circular provided in connection with FTA's September 27, 2007, Federal
Register notice.
Section 5--Definitions
The fifth section of Chapter I contains definitions of various
terms used in the final circular. Several commenters submitted
recommendations, including requests for changes in some of the proposed
definitions and requests for additional definitions.
From FTA Circular 4220.1E, we have retained the definitions of
``Best Value,'' ``FTA,'' ``State,'' and ``Third Party Contract,''
modified to accommodate comments we received.
From the ``Definitions'' subsection of the proposed circular, we
have retained definitions of ``Approval, Authorization, Concurrence,
Waiver,'' ``Common Grant Rules,'' ``Cooperative Agreement,'' ``Design-
Bid-Build Project,'' ``Design-Build Project,'' ``Grant,'' ``Master
Agreement,'' ``Non-Governmental Recipient,'' ``Electronic Commerce (E-
Commerce),'' ``Property,'' ``Recipient,'' and ``Revenue Contract,''
modified to accommodate comments we received. We have separated the
definitions of ``State,'' ``Local Government'' and ``Indian Tribal
Government'' from the definition of ``Governmental Recipient'' without
changing the meaning of those terms.
We have also added definitions of ``Cardinal Change,'' ``Change
Order,'' ``Constructive Change,'' ``Force Account,'' ``Full and Open
Competition,'' ``Joint Procurement,'' ``Project Labor Agreement
(PLA),'' ``Public Transportation,'' ``State or Local Government
Purchasing Schedule or Purchasing Contract,'' ``Unsolicited Proposal,''
and ``Value Engineering,'' to preclude misunderstanding of those
subjects as they are discussed in the final circular.
As stated in the preamble to the proposed circular, we have
substituted a definition of ``Recipient'' for the definition of
``Grantee'' to encompass both recipients of Federal grants and
recipients of cooperative agreements. We transferred the term
``Piggybacking'' included in previous FTA Circular 4220.1E from the
Definitions section of Chapter I to the Chapter V discussion of
``Assignment of Contract Rights.'' We also transferred the term ``tag-
on'' included in previous FTA Circular 4220.1E from the Definitions
section of Chapter I to the Chapter V discussion of ``Cardinal
Changes.''
Subsection 5.a--Approval, Authorization, Concurrence, Waiver
In the definition of ``Approval, Authorization, Concurrence,
Waiver,'' appearing for the first time in the proposed circular, one
commenter objected to the term ``conscious written statement,'' and
recommended that it be replaced with ``written sanction * * * by.'' FTA
disagrees with this recommendation because not every ``approval,
authorization, concurrence, [or] waiver'' constitutes a sanction. We
have, however, replaced the word ``conscious'' with ``deliberate.''
Subsection 5.b--Best Value
Commenters submitted four recommendations for revisions to the
definition of ``Best Value.'' We have accepted those recommendations
and have redrafted the definition to emphasize that best value is one
type of competitive, negotiated procurement process with award
determined on the basis of other factors important to the recipient in
addition to cost or price factors. In this subsection, we have replaced
terms used in connection with sealed bid procurements, which implicitly
require award to the low bidder, with terms suitable for negotiated
procurements. We have also included a statement that the evaluation
factors for a specific procurement should reflect the subject matter
and the elements that are most important to the recipient, and a
clarification that our list of evaluation factors appearing in the
proposed circular are not an exhaustive list of acceptable evaluation
factors.
Subsection 5.c--Cardinal Change
One commenter sought clarification of terms pertaining to
``changes.'' To remedy misunderstandings, we have added a definition of
``Cardinal Change.''
Subsection 5.d--Change Order
To remedy misunderstandings, we have also added a definition of
``Change Order.''
Subsection 5.f--Constructive Change
We have also revised the definition of ``Constructive Change'' in
view of the same request for clarification.
Subsection 5.h--Design-Bid-Build Project
Another commenter requested that we remove the term ``at risk'' in
the definition of ``Design-Bid-Build Project'' when referring to
contracting for the construction portion of the project. We agree, and
have made that change.
Subsection 5.i--Design-Build Project
The same commenter also requested us to broaden the definition of
``Design-Build Project'' to include projects other than transportation
systems or operable segments. We agree, and have made the change.
[[Page 56900]]
Subsection 5.k--Force Account
One commenter's statements about our involvement in a recipient's
decision to use its workforce to perform project work prompted us to
add a definition of ``Force Account.''
Subsection 5.m--Full and Open Competition
One commenter's statements prompted us to add a definition of
``Full and Open Competition.''
Subsection 5.p--Indian Tribal Government
We separated the definition of ``Indian Tribal Government'' from
the definition of ``Governmental Recipient.''
Subsection 5.q--Joint Procurement
We have added a definition of ``Joint Procurement'' to
differentiate it from ``State or Local Purchasing Schedule or
Purchasing Contract.''
Subsection 5.r--Local Government
We separated the definition of ``Local Government'' from the
definition of ``Governmental Recipient.''
Subsection 5.s--Master Agreement
One commenter recommended that we change the definition of ``Master
Agreement'' to conform to our explanation in the FTA Master Agreement.
We agree, and have made that change.
Subsection 5.t--Non-Governmental Recipient
One recipient noted that the definition of ``non-governmental
recipient'' excludes private businesses except at FTA's discretion, but
does not add a definition of private business. We have used the term
``non-governmental recipient'' to mean ``recipient'' as defined in
Department of Transportation (DOT) regulations, ``Uniform
Administrative Requirements for Grants and Agreements with Institutions
of Higher Education, Hospitals, and Other Non-Profit Organizations,''
49 CFR Part 19. That definition includes the term ``commercial
organizations,'' which we interpret to mean ``private businesses.''
Thus we have not defined ``private business'' for purposes of the final
circular. FTA intends to inform recipients that it will reserve the
right to apply the provisions of 49 CFR Part 19 to all recipients not
covered by 49 CFR Part 18. As provided in those regulations, the
Federal Acquisition Regulation (FAR) cost principles applicable to for-
profit organizations will apply to commercial organizations.
Subsection 5.u--Project Labor Agreement (PLA)
We have added a definition of ``Project Labor Agreement''
consistent with the General Services Administration's (GSA) definition
of that term.
Subsection 5.v--Property
We have amended our definition of ``Property'' to replace ``real
property'' with ``land and buildings, structures, or appurtenances on
land.''
Subsection 5.w--Public Transportation
We have added a definition of ``Public Transportation'' in view of
the amendment to the SAFETEA-LU Technical Corrections Act, which
expressly restores the exclusion of ``sightseeing service'' from the
definition of ``public transportation'' for purposes of 49 U.S.C.
Chapter 53.
Subsection 5.x--Recipient
Another commenter requested us to include an explanation in our
definition of ``Recipient'' that a ``Recipient'' does not include a
third party contractor or third party subcontractor. We agree, and have
made the addition requested.
Subsection 5.y--Revenue Contract
One commenter requested us to reconcile the meanings of ``Revenue
Contract'' as used throughout the proposed circular. We agree, and have
revised the definition for consistency with the meaning of the term as
used in Chapter II, subparagraph 2.b(4).
Subsection 5.aa--State or Local Government Purchasing Schedule or
Purchasing Contract
We have added a definition of ``State or Local Government
Purchasing Schedule or Purchasing Contract'' to differentiate it from
``Joint Procurement.''
Subsection 5.bb--Third Party Contract
One commenter requested that the definition of ``Third Party
Contract'' be amended specifically to include purchase orders and
credit card purchases. We agree, and have made the change.
Subsection 5.cc--Unsolicited Proposal
We have added a definition of ``Unsolicited Proposal'' consistent
with FAR standards.
Subsection 5.dd--Value Engineering
One commenter's statements prompted us to add a definition of
``Value Engineering.''
Section 6--FTA's Role
The sixth section discusses FTA's role and responsibilities with
regard to third party procurements. The subsections hereunder
addressing third party contract reviews, procurement system reviews,
and training and technical assistance continue to be substantially
similar to those of FTA Circular 4220.1E.
Subsection 6.a--Reliance on the Recipient's Self-Certification
For consistency with the Common Grant Rules, the final circular
retains the proposed circular's discussion of self-certification.
Specifically, the DOT's Common Grant Rule for governmental recipients,
49 CFR Part 18, permits governmental recipients to request self-
certification, but does not require them to do so, nor does that Common
Grant Rule permit FTA to require self-certification. The DOT's Common
Grant Rule for non-governmental recipients, 49 CFR Part 19, has no
provisions addressing self-certification.
Subsection 6.f--Master Agreement
Two commenters requested changes to our discussions of FTA's Master
Agreement. In this subsection, we are not merely defining the Master
Agreement, but are providing more information about it and how it can
best be used.
Subsection 6.g--``Best Practices Procurement Manual (BPPM)''
One recipient asked us to clarify the purpose of the BPPM. We have
revised this subsection that describes the BPPM to emphasize that the
BPPM is not official FTA guidance applicable to the recipient, but
instead is a compilation of suggested procedures, methods, and examples
the recipient may use as it sees fit. Another commenter requested us to
update the BPPM so that it will be a reliable resource. We are planning
to update the BPPM, but are uncertain whether we will be able to
maintain it so that it will always reflect accurate recommendations.
Subsection 6.h--Third Party Contracting Helpline
We have included a better Web address for FTA's Third Party
Contracting Helpline.
Subsection 6.i--``Frequently Asked Questions''
We have included a reference to the FTA Web site for ``Frequently
Asked Questions'' about third party contracting.
[[Page 56901]]
B. Chapter II--Applicability
We have restructured Chapter II to consolidate provisions
pertaining to the various categories of recipients and their projects.
We expanded the chapter to include additional paragraphs to respond to
unanticipated comments to the proposed circular. As a result, we have
transferred some provisions of the proposed circular to this chapter.
Much of this chapter retains provisions substantially similar to
their counterpart provisions within FTA Circular 4220.1E or its
footnotes, with important exceptions discussed below:
Section 1--Legal Effect of the Circular
After reading many of those comments, we have become aware that
many of our recipients misunderstand the legal implications of FTA's
circulars. As a result, we included a new section at the beginning of
Chapter II to explain that the final circular, although official FTA
guidance, is not a Federal mandate comparable to a Federal law or
regulation.
Section 2--Applicability of the Circular
Subsection 2.a--Participants in FTA Assisted Procurements
Paragraph 2.a(1)--Recipients of FTA Grants and Cooperative Agreements
Subparagraph 2.a(1)(a)--States
As stated in the preamble to proposed FTA Circular 4220.1F, the
previous FTA Circular 4220.1E inadvertently misstated FTA's long-
standing practice in administering its State managed programs when it
took the position that only States and State instrumentalities could
use State procedures when undertaking procurements financed with FTA's
funding for State managed programs. We have retained the new language
of the proposed circular, which correctly states OMB's decision that
FTA governmental subrecipients of States may use State procurement
procedures, but non-governmental recipients of States must use the
procurement procedures of the Common Grant Rule for non-governmental
recipients.
Paragraph 2.a(3)--Recipients of Both Federal Assistance Awarded by FTA
and Funds Provided by Another Federal Agency
While there is a general understanding that FTA requirements apply
to FTA assisted procurements, one commenter asked what Federal
requirements would apply if another Federal agency were also providing
funding for the project. Our response is that the requirements of each
agency's laws and regulations would apply to the project, and the
recipient would need to take actions that would meet the requirements
of all participating agencies.
Paragraph 2.a(5)--Third Party Contractors and Subcontractors
Subparagraph 2.a(5)(b)--Effect of Federal Requirements
One commenter appears to question whether federally required
contract clauses must flow down to third party contractors and
subcontractors because the circular does not apply directly to them. We
have included a new paragraph addressing the status of third party
contractors and subcontractors and have informed recipients that some
Federal laws and regulations will, in effect, require the compliance of
their third party contractors and subcontractors as well as the
recipient. In those cases, the recipient must include adequate
provisions in their solicitation documents and third party contracts.
Subsection 2.b--Third Party Contracts
Paragraph 2.b(1)--Capital Contracts
Subparagraph 2.b(1)(b)--Art
One commenter asked us to update the procurement requirements in
FTA Circular 9400.1A, ``Federal Transit Administration Design and Art
in Transit Projects,'' dated 06-09-95. FTA intends to do so after the
end of Fiscal Year 2008.
Subparagraph 2.b(1)(c)--Over-the-Road Bus Accessibility Program
One commenter asked whether the exemption from the proposed
circular's provisions applies only to FTA's Over-the-Road Bus
Accessibility Program or whether all over-the-road bus procurements are
also exempted. We have revised the proposed circular to clarify that
the exemption applies only to the Over-the-Road-Bus Accessibility
Program and does not include over-the-road buses acquired through other
FTA programs.
Subparagraph 2.b(1)(d)--Real Property
Four commenters pointed out apparent inconsistencies pertaining to
the application of the proposed circular to real property. While we
have left the definition of ``Property'' to include ``real property,''
we agree that clarifications are needed and have revised the paragraph
pertaining to real property to emphasize that the final circular does
not apply to the purchase of land and existing facilities, but does
apply to construction of new buildings and facilities on the land
acquired for the project, and applies to alterations or repairs to
buildings and facilities on the land when it was acquired or made
available for project use.
Paragraph 2.b(2)--Operations Contracts
Subparagraph 2.b(2)(b)--Operations Contracts Financed Entirely Without
FTA Assistance
As stated in the notice of availability of proposed FTA Circular
4220.1F, FTA has been considering whether and to what the extent its
third party contracting provisions should apply to an FTA recipient's
acquisitions financed entirely without FTA assistance.
For many years, FTA has taken the position that ``one dollar taints
all,'' a policy in which FTA required a recipient to apply FTA
requirements to all its other operations contracts, including those
contracts financed entirely without Federal assistance, if the
recipient uses any part of its FTA formula assistance to support any
operation contract. Because recipients in large urbanized areas have
not been authorized to use Urbanized Area Formula assistance for
operations, operations contracts they can demonstrate were financed
entirely without FTA assistance have not been required to comply with
FTA requirements. In contrast, recipients in smaller urbanized areas
currently must apply FTA requirements to all their operations
procurements, whether or not they are financed with FTA assistance, if
they use any of their Urbanized Area Formula assistance or Nonurbanized
Area Formula assistance to support even one operations contract.
FTA did make exceptions for Congestion Mitigation and Air Quality
(CMAQ) and Job Access/Reverse Commute (JARC) assistance used for
operations, determining that if a recipient could demonstrate which
operations contracts CMAQ or JARC assistance supported, then the
recipient's other entirely privately financed operations contracts need
not comply with FTA requirements. Now that SAFETEA-LU changed the JARC
program from a discretionary program to a formula program, FTA must
determine whether to impose its procurement requirements on a
recipient's operations contracts not financed with Federal assistance
if the recipient uses its formula JARC funds for operations.
FTA also provided an exception for recipients in large urbanized
areas to exempt all their operations contracts from FTA requirements
provided they are able to trace their use of preventive maintenance
funding to specific contracts. If, however, they are unable to
[[Page 56902]]
do so, and use FTA assistance for general support of preventive
maintenance contracts, then FTA requirements will apply to all their
operations contracts.
At the same time, FTA has been reviewing its policies pertaining to
its recipients' use of other FTA assistance that finances operations
contracts in connection with other project activities. Among other
programs in which FTA supports the costs of project-related operations
are the New Freedom Program, 49 U.S.C. 5317, the Elderly Individuals
and Individuals with Disabilities Program, 49 U.S.C. 5310, the Elderly
Individuals and Individuals with Disabilities Pilot Program, 49 U.S.C.
5310 note, and the National Research Program, 49 U.S.C. 5312(a), all of
which involve some recipients or subrecipients that receive only a
small portion of their financial expenses from FTA.
FTA expressly sought comments about the extent to which FTA
requirements should be applied to a recipient or subrecipient's
operations contracts financed entirely without Federal assistance. FTA
also sought comments on the extent of agency operating expenses that
are not related to public transportation but must comply with FTA
procurement requirements under the concept that one dollar of FTA
operating assistance brings an agency's entire operating budget under
the FTA requirements. Specifically, FTA requested comments on the
rationale for excluding other operating contracts from the
applicability of FTA requirements. Those that commented overwhelmingly
urged FTA to exempt all acquisition financed without any Federal
assistance from Federal requirements. Most commenters believe imposing
Federal requirements on acquisitions not financed with Federal
assistance to be overbroad, if not unauthorized.
FTA also asked for examples of how operating expenses could be
tracked and managed so that FTA assisted expenses could be segregated
from other operating costs. One commenter explained that many
accounting and bookkeeping systems are generally capable of identifying
cost allocations sufficiently thoroughly so that the funding sources of
each contract can be readily identified. Because a variety of
accounting systems can identify funding sources, the commenter asked
FTA not to impose a uniform accounting system that might be expensive
to implement. The commenter also pointed out that FTA could monitor
that process by asking recipients to state whether or not they are
segregating federally assisted acquisitions, including operations
acquisitions, from acquisitions financed entirely without FTA
assistance, and then ask those recipients that are segregating their
acquisitions to describe the methods by which they are tracking sources
of funding. FTA could reserve the right to disallow the practice if the
recipient's recordkeeping methods are deficient. States could monitor
those practices for compliance by their recipients that qualify to use
State procedures.
In considering its proposal to remove FTA's procurement
requirements from operations contracts financed with FTA formula
assistance, FTA is aware that doing so might diminish contracting
opportunities for some disadvantaged business enterprises (DBE). To
preclude that result, FTA has emphasized its position that a recipient
required by DOT regulations, ``Participation by Disadvantaged Business
Enterprises in Department of Transportation Financial Assistance
Programs,'' 49 CFR Part 26, to have a DBE program may not structure its
operations expenditures (or other expenditures) in a manner that
removes an unreasonable proportion of contracts that could have been
performed by DBEs from its DBE program. Accordingly, we expressly
sought comments estimating the impacts on DBE participation that might
accompany FTA's proposed policy change that would permit all recipients
to separate their FTA assisted operations contracts from their other
operations contracts receiving no FTA assistance. However, we did not
receive any comments directly addressing prospective adverse impacts on
DBE participation that might result from that change.
One commenter advised that applying DBE requirements broadly to all
procurements might well invalidate the entire DBE program. FTA does not
intend to require each FTA assisted procurement to be included in a
recipient's DBE program. Nevertheless, a recipient that enters into a
third party contracts for operations or planning must comply with the
requirements of the DBE regulations. Therefore, FTA maintains that a
recipient required to have a DBE program may not structure its
operations expenditures (or other expenditures) in a way so that an
unreasonable proportion of contracts that could be performed by DBEs
are removed from its DBE program.
After considering the comments we received, FTA has determined not
to require any FTA recipient to apply FTA statutory and regulatory
requirements to acquisitions that the recipient can demonstrate
conclusively it has been financed entirely without FTA assistance. In
exempting the recipient from FTA requirements that have in the past
affected its procurements, however, we caution the recipient that FTA
cannot exempt a recipient from other Federal requirements that may
apply irrespective of whether or not the acquisition were financed with
Federal assistance. An example would be Federal requirements for
accessibility for individuals with disabilities that would apply to a
recipient irrespective of whether or not Federal assistance were made
available for an activity undertaken by the recipient. FTA assisted
procurements, however, must comply with all applicable Federal
requirements.
Paragraph 2.b(3)--Preventive Maintenance Contracts
In the paragraph pertaining to the application of FTA requirements
to preventive maintenance contracts, one commenter asked us to identify
``discrete.'' Rather than defining ``discrete,'' we have substituted
the term ``separate and distinct'' in the final circular.
Paragraph 2.b(4)--Revenue Contracts
One commenter objected to an FTA requirement that revenue contracts
be awarded ``utilizing competitive procedures and principles,'' asking
instead that we reinstate the distinction between situations that offer
unrestricted access to similar users and situations that can provide
only limited access to similar users. We agree, and have made that
change in the final circular.
Paragraph 2.b(6)--Public-Private Partnerships
One commenter asked us to describe or define the contract delivery
arrangements or project delivery systems listed in the proposed
circular in connection with public-private partnerships (PPPs). Because
we did not want to duplicate information previously published, we have
included a reference to the FTA ``Notice of establishment of Public-
Private Partnership Pilot Program; solicitation of applications,'' 72
FR 2583-2591, January 19, 2007, which includes a description of the
various contract delivery arrangements or project delivery systems in
the context of PPPs.
One commenter proposed that we designate as PPPs only those
partnerships that include both project delivery and operations. FTA
disagrees. Structured in multiple forms, PPPs can vary greatly
according to the scope of responsibility and degree of risk
[[Page 56903]]
assumed by the private partner for project activities. The same
commenter pointed out that design-build (with or without a warranty)
and construction manager at risk are variations on the design-bid-build
method of project delivery. We agree that design-build (with or without
a warranty) and construction manager at risk are project delivery
systems but consider that projects with those attributes can constitute
a PPP because the private partner or partners undertake the recipient's
function of selecting the construction firm, and assume the risk of
delivering the entire project.
In all eight categories of PPPs we have identified, the private
partner undertakes in part the duties usually performed by the
recipient and assumes some of the recipient's financial risk. Moreover,
FTA's ``Notice of establishment of Public-Private Partnership Pilot
Program; solicitation of applications,'' 72 FR 2583-2591, January 19,
2007, expressly acknowledges all eight types of PPPs listed in the
proposed circular.
Two commenters objected to our discussion of PPPs and joint
development as too intrusive. One commenter complained that having to
craft individual arrangements with FTA for each project would be unduly
time-consuming, recommending that FTA establish objective principles
for our participation in those projects. We agree that objective FTA
principles for PPP participation would be helpful. As a result of our
experience with joint development projects, we have excerpted parts of
our ``Notice of Final Agency Guidance on the Eligibility of Joint
Development Improvements under Federal Transit Law,'' 72 FR 5788,
February 7, 2007, which contains third party contracting guidance we
have found useful. As we gain more experience with joint development
projects and other PPPs, we will issue further guidance as appropriate.
Paragraph 2.b(7)--Transactions Involving Complex Financial Arrangements
Two commenters offered recommendations about the role of an
``arranger'' or facilitator in complicated financial transactions
involving FTA assisted property. One commenter pointed out that the
arranger is usually paid with the proceeds of the transaction resulting
from the use of FTA assisted property, and indicated that the arranger
should be selected using competitive procedures. Because FTA is not
sure that arrangers are always paid in part with FTA assistance or the
proceeds derived from the use of FTA assisted property, we have not
imposed that mandate. However, when an arranger is compensated with
proceeds derived from the use of FTA assisted property, we have stated
our expectation that the recipient would use competitive procedures to
select its arranger. In addition, one commenter recommended that FTA
strengthen conflict of interest procedures applicable to arrangers to
ensure that an arranger does not personally benefit by using his or her
company or other companies in which he or she has a financial interest.
In this matter, FTA believes it appropriate to rely on the recipient's
conflict of interest requirements and procedures to prevent unfair
dealing.
Paragraph 2.b(8)--Force Account
One commenter recommended that we clarify that the final circular
does not apply to a recipient's force account work. We agree, and have
added a paragraph stating that the final circular's third party
contracting guidance does not apply to force account work.
Section 3--Federal Laws and Regulations
Subsection 3.c--Other Federal Requirements
Paragraph 3.c(1)--Compilation in the Master Agreement
We received two comments about the significance of the Master
Agreement. One commenter suggested we add a paragraph discussing the
Master Agreement in much greater detail. We have included a reference
to the discussion of the Master Agreement in Chapter I, subsection 6.f
of the final circular, instead of repeating that information in Chapter
II. Because the purpose of discussing the Master Agreement here is to
identify it as a resource identifying Federal requirements, among other
things, we have revised the heading of that paragraph in the final
circular. Another commenter complained that the Master Agreement is not
a useful means of communicating procurement requirements to recipients.
Although we agree that the Master Agreement does not provide explicit
procurement guidance to recipients, we have found that the Master
Agreement is one of the most useful means of providing recipients a
reasonably current compilation of the many Federal requirements that
apply to FTA assisted projects.
Paragraph 3.c(2)--Conflicting Federal Requirements
One commenter asked which FTA official or officials should be
notified of conflicting Federal laws and regulations when more than one
Federal agency provides support for an FTA assisted project. The final
circular advises the recipient to notify the FTA Chief Counsel in
writing.
Section 4--State and Local Laws and Regulations
Subsection 4.b--Conflicts Between Federal Requirements and State or
Local Requirements
The same commenter also asked who should be notified when
conflicting Federal and State requirements apply to a project. Our
response is that the recipient should notify the Regional Counsel for
the region in which the project is being administered or the Assistant
Chief Counsel for General Law for those projects administered by FTA
headquarters staff.
The proposed circular noted that in the case of a conflict between
State and local laws, it might be necessary for FTA to terminate the
project if no resolution were available. One commenter sought an
explanation of how this might occur. Since the inception of the FTA
program, FTA has required recipients to comply with Federal
requirements. In a relatively few instances, recipients have needed to
persuade their State legislatures to enact special legislation that
would permit the recipient to comply with Federal laws and regulations
to permit its project to continue. For that reason, the recipient
should notify FTA in writing as soon as possible when conflicts between
Federal and State laws or regulations occur. FTA is willing to work
with the recipient in seeking and implementing an equitable resolution.
Two other commenters opposed the proposed circular's termination
provisions, claiming among other reasons that the recipient's counsel,
not FTA, should be authorized to determine what requirements apply, and
that FTA enforcement of Federal laws inconsistent with State laws would
effectively pre-empt State or local laws. First of all, FTA makes every
effort to avoid the need to terminate Federal assistance for a project
due to conflicting Federal and State or local laws or regulations. When
such situations arise, occasionally they have been resolved by efforts
the recipient has made to persuade its State legislature to amend the
conflicting law, at least to the degree necessary to permit FTA
assistance to be used. FTA is not
[[Page 56904]]
authorized to waive Federal requirements except to the extent permitted
by the underlying Federal laws and regulations. If a Federal law or
regulation contains a requirement that FTA may not waive, FTA has no
choice but to insist on the recipient's compliance as a condition of
FTA assistance. If the Federal Government terminates Federal assistance
for a project based on the recipient's failure or inability to comply
with Federal law or regulations, FTA's position is that the termination
would not be a Federal pre-emption of State or local law. The decision
of whether a Federal agency will provide or continue Federal assistance
for a specific project is separate and distinct from a Federal decision
to pre-empt State or local law.
C. Chapter III--The Recipient's Responsibilities
Apart from specific procurement procedures discussed at length in
Chapter VI, this chapter consolidates the recipient's procurement
responsibilities. We have retained much of the information included in
FTA Circular 4220.1E, but we have also added information about Common
Grant Rule provisions not discussed in that circular.
Section 1--Written Standards of Conduct
Subsection 1.a--Personal Conflicts of Interest
Three commenters objected to the personal conflict of interest
prohibitions as written in the proposed circular. The Common Grant
Rules and FTA Circular 4220.1E prohibit personal conflicts of interest
by prohibiting contract activities that ``would'' result in a real or
apparent conflict of interest, while the proposed circular would
prohibit personal conflicts of interest by prohibiting contract
activities that ``could'' result in a real or apparent conflict of
interest. We agree with the commenter who pointed out that changing
``would'' to ``could'' broadens the standard from predictable to
speculative. In drafting the proposed circular, FTA did not intend to
deviate from Common Grant Rules standards or otherwise amend FTA's
current standards. Accordingly, we have revised this provision by
substituting ``would'' for ``could,'' consistent with Common Grant
Rules standards.
Section 2--Self-Certification
We received no comments on self-certification, except in the
context of some commenters' objections to statements recommending FTA
review of particular matters before the recipient takes action. Those
commenters argued that FTA reviews of prospective actions diminish
prerogatives they should have due to their self-certification. They
apparently believe that by acknowledging their self-certification, FTA
is endorsing the correctness of a self-certified recipient's
procurement decisions. Our response is that certain FTA reviews and
approvals are required by Federal laws and regulations irrespective of
self-certification. Other reviews FTA recommends are intended to
preserve the recipient's ability to use FTA assistance to support the
procurement by helping the recipient avoid an inadvertent violation of
Federal laws or regulations, some of which can be complex.
Section 3--Third Party Contracting Capacity
Section 3 contains discussions of the requirements for third party
contracting capacity, adequate contract provisions, and an adequate
procurement history that are substantially similar to their FTA
Circular 4220.1E counterparts. We have added other subsections to the
final circular, such as recordkeeping, that were omitted from FTA
Circular 4220.1E but addressed in the Common Grant Rules.
Two commenters objected to the provision in Section 3 stating that
contractors providing procurement expertise or support to the recipient
``should be unrelated to and independent of any potential bidder or
offeror.'' The commenter explained that prospective bidders or offerors
frequently know others with necessary procurement expertise, and
forbidding the use of those sources would unnecessarily reduce the
availability of expertise a recipient might need. We agree with that
commenter and have changed the standard to one that calls for
preventing or ameliorating organizational conflicts of interest that
would result in conflicting roles that might bias a contractor's
judgment or result in an unfair competitive advantage.
Subsection 3.c--Industry Contracts
One commenter noted that our caution about using industry
contracts, while reasonable in certain situations, might be unwarranted
if construed too broadly. Specifically, the commenter expressed the
belief that there are advantages to using well-known industry developed
forms, such as the AIA forms used in the construction industry or
payment request forms and similar documents whose contract terms and
clauses are familiar to contractors performing the work. In other
situations, a recipient should be able to solicit specifications or
contract terms for possible use in a future solicitation. We agree that
judicious use of standard forms, specifications, and contract terms may
be justified in certain situations, and have revised the subsection on
industry contracts to clarify that the recipient may use them if they
can accommodate Federal requirements.
Subsection 3.e--Special Notification Requirements for States
Two commenters had concerns about the project and contract
notification requirements for States that have been included in DOT's
annual appropriations acts for the last few years. FTA Circular 4220.1E
described former Appropriations Act notification requirements having a
$500,000 threshold that applied to all FTA recipients. In contrast, the
DOT Appropriations Acts in the last few years have limited their
notification requirements to States, but no longer recognize a $500,000
threshold. Now each State must include statements in all its requests
for proposals, solicitations, Federal assistance applications, forms,
notifications, press releases, or other publications involving FTA
assistance that FTA is or will be providing Federal assistance for the
project, the amount of Federal assistance FTA has provided or expects
to provide, and the Catalog of Federal Domestic Assistance (CFDA)
Number of the program that authorizes the Federal assistance.
One commenter asked whether, when issuing its announcements, it
really must include the CFDA Number for the FTA program under which the
project is supported. FTA's position is that because identification of
the CFDA number is expressly required by the recent DOT appropriation
acts, the recipient must include the requisite CFDA number. The
commenter also asked whether the requirement for States must flow down
to its subrecipients. FTA interprets the appropriations laws to require
compliance with those notification requirements by the State's
subrecipients, lessees, or third party contractors at any tier, and we
have included a provision in the final circular to that effect.
Another commenter has requested FTA to discuss this notification
requirement in its grant management circulars and to take other
measures to communicate with States directly about these broad
notification requirements. We agree and will make special efforts to
inform the States of these requirements.
[[Page 56905]]
Subsection 3.f--Use of Technology/Electronic Commerce
One commenter recommended that FTA expressly endorse a more
extensive use of electronic contracting, including electronic bidding
and reverse auctions, and that FTA permit the recipient to engage
contractors to perform those services. FTA approves the use of
electronic bidding and reverse auctions for third party procurements of
$100,000 or less and, if permitted under State or local law, for third
party procurements of a greater value. A recipient may perform
electronic contracting using its own staff or may engage one or more
contractors to act on its behalf.
Section 4--Audit
We received no comments on this section of Chapter III.
D. Chapter IV--The Recipient's Property and Services Needs and Federal
Requirements Affecting Those Needs
We have restructured Chapter IV to consolidate provisions
pertaining to the various categories of recipients and their projects.
We expanded the chapter to include additional paragraphs in response to
comments on the proposed circular. As a result, some of the guidance
originally included in other chapters of the proposed circular has been
transferred to this chapter of the final circular.
However, much of this chapter retains provisions that are
substantially similar to their counterpart provisions in FTA Circular
4220.1E or its footnotes, with important exceptions discussed below.
Section 1--Determining the Recipient's Needs
One commenter suggested that the acquisition planning and project
management functions addressed in this chapter should not be included
in a circular focused on third party contracting guidance. FTA
disagrees. FTA considers procurement procedures to be only one aspect
of third party contracting. The fundamental purpose of procurement is
to acquire property and services that meet the purchaser's needs. The
type, amount, characteristics, and features of the property or services
an FTA recipient seeks and conditions under which the property and
those services are acquired must satisfy Federal requirements that
apply to federally assisted procurements if the recipient intends to
use FTA assistance to support the costs of the property or services it
procures. For an FTA recipient, these requirements will encompass
Federal requirements focused on FTA acquisitions as well as general
Federal requirements that apply to all federally assisted acquisitions.
For example, some Federal requirements may change the way a
contractor fabricates and delivers property; others will affect how the
contractor provides the requested services, the amount of wages it must
pay, and the labor protections it must provide to some or all
employees. As a result, to assure that FTA assistance can be used to
support the costs of property and services a recipient seeks, it is
important that the recipient's acquisition comply with all of the many
applicable Federal laws and regulations having an indirect effect, if
not a direct effect, on the property or services to be acquired and
also on the contractor that provides the property and services.
FTA believes it important that the recipient be fully aware of
these requirements and restrictions at the time it begins to determine
the types of property and services it needs. FTA cannot support a
recipient's procurement that in some way has violated one or more
Federal requirements. Thus FTA cautions the recipient to examine its
initial preferences in light of Federal requirements before undertaking
a procurement for which it intends to use FTA assistance. As an aid, we
refer you to the checklists in Appendix C. In the course of developing
the checklists identified with specific provisions of the final
circular, we have consolidated requirements pertaining to specific
aspects of procurement in separate chapters, and thus have found it
necessary to transfer some information from Chapter IV of the proposed
circular to Chapter VI of the final circular, which provides procedural
guidance for open market procurements.
Subsection 1.a--Eligibility
The property or services a recipient acquires with FTA assistance
must be eligible for Federal support. One commenter requested a more
definitive explanation of eligibility and requested examples. We have
expanded that explanation to focus on the requirements for eligibility
under Federal law as well as eligibility under the scope of the
specific project supported by the FTA assistance to be used.
Subsection 1.b--Necessity
Paragraph 1.b(1)--Unnecessary Reserves
One commenter expressed concern about FTA's position that the
recipient's acquisitions be limited to its immediate needs, especially
when followed by prohibitions against the procurement of excess
capacity for assignment purposes (which FTA does permit in limited
circumstances). The commenter asked whether the recipient can and
should rely on its own understandings about what it needs or whether
FTA is, in effect, prohibiting cooperative procurements.
We have revised this discussion for clarity. FTA's decision to
limit participation in the costs of acquisitions to only that property
or services the recipient requires to fulfill its immediate needs, is
justified by the requirements of the Common Grant Rules. In monitoring
whether a recipient has complied with its procedures to determine what
property or services are necessary, FTA bases its determinations on
what would have been a recipient's reasonable expectations at the time
it entered into the contract.
Paragraph 1.b(2)--Acquisition for Assignment Purposes
FTA recognizes that a recipient's later needs might decrease due to
changed circumstances or even honest mistakes. In those cases, it is
appropriate for a recipient to assign its extra contract authority to
another entity needing the property or services. Although it may be
difficult to determine precisely, FTA expects the recipient to make a
concerted effort to measure its actual immediate needs carefully before
entering into a procurement. A recipient should be cautious about
acquiring contract rights whose use or disposition is genuinely
uncertain at the time of contract award, except if the contract is
intended to support State or local purchasing schedules.
Subsection 1.c--Procurement Size
Other commenters raised concerns that the guidance would prohibit
cooperative procurements. We understand that by ``cooperative
procurements,'' the commenters are referring to what we designate as
``joint procurements,'' meaning a method of contracting in which two or
more purchasers agree from the outset to use a single solicitation
document and enter into a single contract with a vendor for delivery of
property or services in a fixed quantity, even if expressed as a total
minimum and total maximum. This restriction does not preclude joint
(cooperative) procurements because a joint (cooperative) procurement is
intentionally developed to meet the actual, immediate needs of the two
or more parties that seek to acquire similar property or services, as
discussed more fully below. Nor does this restriction apply to a State
that enters into contracts with various vendors to
[[Page 56906]]
establish State Purchasing Schedules for its convenience and the
convenience of its authorized users.
One commenter has expressed the opinion that market conditions are
not the usual reason for using joint or cooperative procurements,
maintaining that joint procurements result when they are economically
advantageous. FTA disagrees on the grounds that market conditions can
affect what is economically advantageous to a recipient. We have,
however, revised the Procurement Size paragraph of the final circular
to emphasize the importance of economic advantage to the recipient.
Other commenters requested FTA to acknowledge that ``grantees are
not responsible for the actions of other grantees, even when conducting
joint or cooperative procurements.'' FTA is unwilling to make that
change. FTA generally holds recipients responsible for compliance with
Federal requirements by all participants in its project, apart from a
few exceptions involving designated recipients in FTA's Urbanized Area
Formula program that relinquish their responsibilities to other
grantees.
Section 2--Federal Requirements That May Affect a Recipient's
Acquisitions
One commenter recommended that FTA remove the references to its
Master Agreement, maintaining that they are inapplicable to the
discussion of Federal laws and regulations in this chapter. We
disagree, but have transferred our discussion of the Master Agreement
to the introductory paragraphs of Chapter I, subsection 6.f of the
final circular, which provides a general discussion of Federal
Requirements that may affect a recipient's acquisitions.
Subsection 2.a--Contractor Qualifications
Paragraph 2.a(2)--Debarment and Suspension
One commenter has informed us that its State maintains its own
debarment and suspension list, and that it checks both the Federal and
State lists for debarments and suspensions. FTA has no objection to a
recipient precluding a prospective participant included in a State
debarment or suspension list from participating in an FTA assisted
project, even if that prospective participant is not included in GSA's
Excluded Parties List System (EPLS).
Paragraph 2.a(5)--Federal Civil Rights Laws and Regulations
Subparagraph 2.a(5)(b)--Nondiscrimination on the Basis of Sex
We added a subparagraph reminding the recipient that its third
party contractors must comply with Federal laws and regulations
pertaining to nondiscrimination on the basis of sex.
Subparagraph 2.a(5)(c)--Nondiscrimination on the Basis of Age
We added a subparagraph reminding the recipient that its third
party contractors must comply with Federal laws and regulations
pertaining to nondiscrimination on the basis of age.
Paragraph 2.a(6)--Socio-Economic Development
Subparagraph 2.a(6)(a)--Disadvantaged Business Enterprises (DBE), and
Subparagraph 2.a(6)(b)--Small and Minority Firms and Women's Business
Enterprises
One commenter objected to the application of both DOT's DBE
regulations and the Common Grant Rules' participation preferences for
small and minority firms and women's business enterprises. FTA
disagrees with the commenter. At a minimum, each recipient must comply
with DOT's general DBE regulatory prohibition against discrimination,
49 CFR 26.13, irrespective of whether the recipient is required to have
a DBE program. A recipient required to have a DBE program must comply
with the provisions of its program. All Federal recipients, including
FTA recipients, must comply with the Common Grant Rules' provisions
concerning participation by small and minority firms and women's
business enterprises. FTA believes it is possible to comply with both
the DOT's DBE regulations and the Common Grant Rules, because the
Common Grant Rules for participation by small and minority firms and
women's business enterprises do not require fixed goals or actions,
such as extending the reach of DBE program requirements to all minority
firms and women's business enterprises that would not otherwise qualify
for inclusion under DOT's DBE regulations. These regulations contain no
provisions requiring them to be mutually exclusive.
Paragraph 2.a(7)--Sensitive Security Information
One commenter asked whether the Federal ``Protection of Sensitive
Security Information'' requirements of 49 U.S.C. section 40119(b) and
its implementing DOT regulations, ``Protection of Sensitive Security
Information,'' 49 CFR Part 15, and 49 U.S.C. 14(s) and its implementing
Department of Homeland Security (DHS) regulations, ``Protection of
Sensitive Security Information,'' 49 CFR Part 1520, actually apply to
FTA assisted procurements and must be included in third party
contracts. The commenter believes those regulations are targeted mainly
on airlines.
While recognizing the focus on airline security, FTA has determined
that these laws and regulations do apply to public transportation
agencies and other FTA recipients that have sensitive security
information, such as information related to vulnerability assessments
(including any information addressing vulnerabilities or corrective
actions) conducted after September 11, 2001, and other information
covered by the regulations. Therefore, FTA's view is that recipients
must include requirements for compliance with those regulations in
their third party contracts to assure that their contractors will take
the necessary steps to protect any sensitive security information
within their control.
This determination is based on the DHS Interim Final Rule issued in
2004 that extended sensitive security information protections to all
forms of transportation coupled with the Transportation Safety
Administration and DOT amendments to their regulations removing
limiting references to ``aviation or maritime'' in their regulations at
49 CFR Parts 1520 and 15, respectively. See, 70 FR 1379, January 7,
2005.
Paragraph 2.a(8)--Seat Belt Use
One commenter asked for a model contract clause for Seat Belt Use
with flowdown requirements in the final circular or FTA's BPPM. We have
not included a model clause in the final circular but will draft one
for inclusion in the BPPM.
Subsection 2.b--Administrative Restrictions on the Acquisition of
Property and Services
Notably we have re-arranged the format of this subsection to group
topics for easier usage in conjunction with the new checklists we have
included in Appendix C.
Paragraph 2.b(3)--Period of Performance
Four commenters objected to the period of performance provisions in
the proposed circular. One commenter found our period of performance
discussion confusing. We have restructured that discussion as
[[Page 56907]]
requested. Two other commenters objected to our statement that the
third party contract terms be no longer than ``minimally necessary'' as
unduly restrictive and not found in applicable law. Our response is
that this is not a new standard. In fact, FTA Circular 4220.1E, the
predecessor to the final circular, also provided that, ``Grantees are
expected to be judicious in establishing and extending contract terms
no longer than minimally necessary to accomplish the purpose of the
contract.'' We understand, however, that if a recipient takes that
guidance to an extreme, allowing no reasonable period to accommodate
even small performance delays, then the guidance would be undesirable.
We have therefore removed the ``minimally necessary'' standard,
replacing it with guidance that the recipient is expected to establish
a period of performance consistent with ``the time necessary to
accomplish the purpose of the contract.''
Four commenters also objected to the position that every time
extension would constitute an out-of-scope change requiring a sole
source justification. One commenter seems to believe that we would
treat all time extensions not contemplated in the original contract as
out-of-scope changes. This provision, which is included in FTA Circular
4220.1E, is not new. Nevertheless, we agree that a time extension can
sometimes be a legitimate remedy in circumstances beyond the
recipient's control, and should not in all cases be considered an out-
of-scope change. In other instances, however, the circumstances
surrounding other time extensions, especially those in which
significant new deliverables would be added, would be an out-of-scope
change. We have revised the final circular accordingly.
Paragraph 2.b(5)--Payment Provisions
Subparagraph 2.b(5)(b)--Advance Payments
One recipient pointed out that prohibiting a recipient from using
local share funds for advance payments without first obtaining FTA's
consent is unfair, particularly if no Federal assistance is at risk. We
agree, and have modified the paragraph to remove the prohibition for
projects having automatic preaward authority or projects having some
form of preaward authority.
Another recipient asked for more examples of allowable pre-award
expenditures. We agree, and have identified additional examples in the
final circular, noting that the examples given are not all-inclusive.
Paragraph 2.b(6)--Protections Against Performance Difficulties
Subparagraph 2.b(6)(a)--Changes
One commenter emphasized the need for changes clauses. We have
strengthened our recommendations that recipients include changes
clauses in their contracts. We recognize, however, that a recipient may
only be able to include a contract provision requiring the contractor
to consider a change rather than demand a change. Every recipient may
not have the economic leverage to compel a third party contractor to
continue contract work until it is assured payment and other terms
under which it must work. We do expect the recipient to include changes
and changed conditions clauses that provide for both parties to
negotiate in good faith about desirable changes.
Subparagraph 2.b(6)(b)--Remedies
Sub-subparagraph 2.b(6)(b)1--Liquidated Damages
Four commenters requested changes to the liquidated damages
provisions in the proposed circular. Two commenters recommended that
acceptable methods of calculating liquidated damages, in addition to
time, be acknowledged as acceptable. We agree, and the final circular
includes additional methods of calculating liquidated damages. Another
commenter recommended that we substitute the proposed circular's
statement that ``the rate and measurement period may not be
excessive,'' with the established standard for liquidated damages
``that the measure of damages must be calculated to reasonably reflect
the costs estimated to be incurred by the recipient should the standard
not be obtained, and that the procurement file should contain a record
of the calculation and rationale.'' We agree, and have made that
change. Another commenter asked how we expect a recipient to document
the reasonableness of the liquidated damages it intends to use. We have
included provisions in the final circular explaining that FTA expects
the recipient to calculate a rate and measurement standard that
reasonably reflects the costs should the standard not be met, and
expects the recipient to include this information in its solicitation
and contract. We have also added a discussion in Chapter VII of how
liquidated damages might, in certain situations, foster settlements.
Subsection 2.c--Socio-Economic Requirements for the Acquisition of
Property and Services
Paragraph 2.c(1)--Labor
Subparagraph 2.c(1)(a)--Wage and Hour Requirements
Two commenters pointed out that the threshold for the wage and hour
requirements of the Contract Work Hours and Safety Standards Act has
been amended to apply to contracts of $100,000 or more. We agree, and
the final circular includes that change.
Subparagraph 2.c(1)(b)--Fair Labor Standards
Consistent with the FTA Master Agreement, we added a reminder that
the Fair Labor Standards Act protects employees engaged in commerce.
Paragraph 2.c(2)--Civil Rights
Subparagraph 2.c(2)(c)--Environmental Justice
We added a subparagraph reminding the recipient of Federal
Environmental Justice provisions.
Subparagraph 2.c(2)(d)--Limited English Proficiency (LEP)
We added a subparagraph reminding the recipient of Federal Limited
English Proficiency provisions.
Subparagraph 2.c(2)(e)--Nondiscrimination on the Basis of Disability
Sub-subparagraph 2.c(2)(e)3--DOT Public Transportation Regulations
Implementing Section 504 and the ADA
We consolidated references to the major Federal regulations that
describe the various requirements for public transportation services to
individuals with disabilities, and provided some examples of their
application.
Subparagraph 2.c(2)(f)--Electronic Reports and Information
One commenter asked us to clarify whether the requirement to use
accessible electronic formats when delivering reports would apply only
to third party contracts for delivery of reports, or also to other
information in electronic format that the recipient intends to provide
to FTA. We have revised the paragraph on electronic reports and
information to clarify that all information submitted to FTA must be
provided in accessible formats.
[[Page 56908]]
Paragraph 2.c(3)--Environmental Requirements
Subparagraph 2.c(3)(f)--Recycled Products
One commenter asked FTA to post on its Web site a link to EPA's Web
site about recovered materials advisory notices. We have included the
EPA Web site in the final circular.
Paragraph 2.c(5)--Preference for U.S. Property--Buy America
One commenter pointed out that the proposed circular's description
of FTA's Buy America requirements omitted discussion of the $100,000
threshold. We agree, and have included this information in the final
circular. We have also revised the Buy America provisions for the final
circular to clarify that FTA's Buy America requirements apply to
property delivered to the recipient, but not to property acquired by a
contractor for use in performing contract work if the property used is
not delivered to the recipient.
Subsection 2.d--Technical Restrictions on the Acquisition of Property
and Services
Paragraph 2.d(3)--Use of $1 Coins
One commenter objected to the Presidential $1 Coin Act of 2006
requirement that each FTA-assisted public transportation service
property that uses coins or currency to be fully capable of accepting
and dispensing $1 coins because it is likely to cause an undue hardship
on rural public transportation agencies because they will need to
either retrofit existing equipment, including farebox and ticket
dispensing equipment, or purchase new equipment. The Department of
Treasury is implementing those requirements, and FTA lacks the
authority to waive them.
Subsection 2.e--Rolling Stock--Special Requirements
Paragraph 2.e(8)--In-State Dealers
One commenter asked how we will administer the SAFETEA-LU amendment
to 49 U.S.C. 5325 providing that bus purchases may not be restricted to
in-State dealers. The commenter's concern is focused on the conflict
that would arise if State law limits purchases of motor vehicles to in-
state dealers, while 49 U.S.C. 5325(i) prohibits the limitation. The
commenter points out that recipients must comply with Federal law as
well as State law. We agree that Federal laws that appear to conflict
with similar State laws can cause problems to FTA's recipients.
However, 49 U.S.C. 5325(i) preempts conflicting in-state dealer
requirements contained in State laws.
Paragraph 2.e(10)--Five-Year Limitation
One commenter asked how FTA plans to enforce the five-year
limitation on rolling stock contracts, and whether FTA will require the
recipient to prepare a five-year needs document for its contract files.
Our response is that FTA has considerable discretion to take actions to
determine and enforce compliance with the statutory requirements in its
enabling legislation. We believe it useful for the recipient to have
documentation in its files that can justify any actions that might call
into question the recipient's compliance with statutory requirements of
any type, including compliance with the five-year limitation on rolling
stock contracts.
Subsection 2.f--Public Transportation Services--Special Requirements
Paragraph 2.f(1)--Protections for Public Transportation Employees
Consistent with the FTA Master Agreement, we added a reminder that
the Fair Labor Standards Act protects employees engaged in commerce.
Subsection 2.g--Architectural Engineering and Related Services--Special
Requirements
We received three comments about procurements of architectural,
engineering, and related services as specified in 49 U.S.C. 5325(b)(1).
Paragraph 2.g(2)--Relation to Construction
Two commenters pointed out inconsistencies between Chapter IV and
Chapter VI of the proposed circular in determining when qualifications-
based procurement procedures must be used and may not be used. We have
re-drafted provisions of both chapters to stress that qualifications-
based procurement procedures may be used only when the services are
directly in support of, directly connected to, directly related to, or
lead to construction, alteration, or repair of real property.
Subparagraph 2.g(2)(c)--Type of Contractor Not Determinative
One commenter also suggested that we state that certain
architectural engineering firms have the capability of performing
services beyond traditional A&E services. We have amended both chapters
for consistency, so that the final circular emphasizes that it is the
nature of the work to be performed and its relationship to
construction, not the nature of the prospective contractor, that
determines whether qualifications-based procurement procedures must be
used or whether qualifications-based procurement procedures may not be
used.
Another commenter asked how these qualifications-based procurement
requirements would apply to various activities undertaken in an
Intelligent Transportation System (ITS) project involving construction
or improvements to real property. The final circular now contains a
list of some of the activities likely to take place during the
implementation and development of an ITS project, and have identified
those in which qualifications-based procurement procedures must be used
and those in which qualifications-based procurement procedures may not
be used.
Subsection 2.h--Construction--Special Requirements
Paragraph 2.h(1)--Bonding
Subparagraphs 2.h(1)(f)--Excessive Bonding
Three commenters questioned whether FTA would accept State bonding
policies that differ from Federal requirements. We have amended the
proposed circular to affirm that we will not challenge State or local
bonding policies that exceed FTA's requirements. One commenter
requested that we address the use of bonding for acquisitions beyond
construction, commenting on its expense and usefulness. We have amended
the proposed circular to explain that while bonding is expensive, bond
requirements can be useful if the recipient has a material risk of loss
because of a failure of the prospective contractor. This is to prevent
potential risks associated with contractor bankruptcy or financial
failure at the time of partially completed work. Another commenter
urged us not to encourage recipients to submit each bonding request
that exceeds the limits described in the proposed circular to FTA for
approval. We agree, and the final circular now reminds the recipient
that it may contact the Regional Administrator for the region
administering the project for approval of its bonding policies if it
chooses to do so. If a recipient's bonding policies far exceed FTA or
State or local requirements to an extent that competition is reduced,
FTA cannot assure the availability of FTA assistance to support the
costs of that acquisition.
Paragraph 2.h(3)--Value Engineering
One commenter cautioned us about our statement that ``FTA will not
approve a New Starts grant application
[[Page 56909]]
for final design funding or a full funding grant agreement until value
engineering is complete.'' While that sentence is based on the
requirements of 49 U.S.C 5309, we agree that restrictions pertaining to
New Starts projects should not be included in the final circular in a
way that might become invalid due to later changes in law. Therefore,
we have softened the statement to caution that value engineering can be
required as a pre-requisite for some FTA assistance awards.
Another commenter asked that we include a definition of ``value
engineering'' that distinguishes it from cost-cutting. We agree, and
have added a definition to Chapter I, section 5 that will be used
consistently in our revised circulars.
Paragraph 2.h(5)--Prevailing Wages
Two commenters expressed their belief that, along with raising the
threshold of the Contract Work Hours and Safety Standards Act to
$100,000, the threshold of the Davis-Bacon Act requiring prevailing
wages to be paid for construction labor had also been raised to
$100,000. FTA disagrees. The Davis-Bacon Act has not been so amended.
The Davis-Bacon Act applies its prevailing wage requirements to ``every
contract in excess of $2,000 . . . .'' 40 U.S.C. 3142.
Paragraph 2.h(9)--Preference for U.S. Property--Buy America
Three commenters objected to FTA's Buy America provisions for
construction projects as overbroad. We agree, and the final circular
now includes information about the $100,000 threshold. The final
circular also clarifies FTA's position that its Buy America
requirements apply to property delivered to the recipient, but not to
property acquired by a contractor for use in performing contract work
if that property the recipient used is not delivered to the recipient
under their contract.
Subsection 2.i--Research, Development, Demonstration, Deployment, and
Special Studies--Special Requirements
Paragraph 2.i(1)--Patent Rights
One commenter asked whether FTA will grant a waiver of patent
rights when the recipient wants the source code being created to be an
open source so that others will be encouraged to use that source code;
or when the recipient wants to contract with an entity that has already
created an open source code to tailor that code and allow the tailored
code also to become open source. At the outset, FTA cannot waive
another party's patent rights. While Federal law does not generally
authorize a Federal agency to require inventors to make their federally
assisted inventions available to the public at large, FTA can and does
support projects in which participants agree to make rights to use an
invention developed or reduced to practice under an FTA project broadly
available.
Paragraph 2.i(2)--Rights in Data
One commenter took exception to FTA's rights in data policy as
being inconsistent with the Common Grant Rules. For data developed
under a research, development, demonstration, or special studies
project, FTA's general policy is to obtain sufficient rights to permit
FTA to make either FTA's license in the copyright to the subject data
or a copy of the subject data to which it would be entitled under the
Common Grant Rules available to any FTA recipient, subrecipient, third
party contractor, or third party subcontractor,. FTA obtains these
rights in data through the recipient's agreement set forth in the FTA
Master Agreement. If FTA is not able to secure sufficient rights in
data derived from the research projects it supports and is unable to
make that data available for the general benefit of transportation,
then certain research and development projects might not be worth
pursuing.
The commenter then requested an explanation of those contracts
excepted from these requirements. FTA does not seek these broad rights
in data for other than research, development, demonstration, or special
studies projects. For example, FTA does not seek greater rights in data
supplied under its capital projects than those rights provided in the
Common Grants Rules, because FTA is not providing Federal assistance
for the research and development of property or services at the time
the property or services are eligible for capital funding. Due to
questions that arose in connection with licensing automatic data
processing equipment or programs for the recipient's use, if FTA
capital assistance is used to support those costs, then FTA would not
take the greater rights. In summary, FTA does not seek greater rights
in data used in projects for which FTA did not directly finance the
research and development costs of that data.
Paragraph 2.i(3)--Export Control
One commenter requested that we provide a citation to the Export
Control regulations referenced in the proposed circular. We agree, and
have added the requested citation to the final circular.
Subsection 2.j--Audit Services
Three commenters asked for more information about obtaining audit
information from other Federal agencies. We have included information
about Federal agencies that work with various types of recipients and
contractors to establish indirect cost rates consistent with FAR cost
principles. It is our understanding that those Federal agencies are
charged with those responsibilities and are expected to fulfill them.
While a Federal agency might not perform all audits for recipients of
Federal assistance, the Federal agency charged with the responsibility
for establishing indirect cost rates and other similar functions would
be expected to provide the recipient sufficient data that the
recipient's private or internal auditors could perform their duties
properly. When we revise our BPPM, we will include more information.
E. Chapter V--Sources
Section 1--Force Account
Four commenters questioned our inclusion of force account as a
source from which a recipient could obtain services. Three commenters
asserted that the use of force account is a grants management issue,
not a procurement issue. Understanding our decision to discuss force
account in contrast with third party contracting, one commenter
recommended that we clarify that the final circular does not apply to
force account work. We agree, and the final circular states that its
procurement guidance does not apply to a recipient's force account
work.
Section 3--Joint Procurements, and
Section 4--State or Local Government Purchasing Schedules or Purchasing
Contracts
Several commenters informed us that the proposed circular's
descriptions of joint procurements and procurements through State or
local government purchasing schedules or contracts is confusing, and
recommended that we reinstate the provisions of FTA Circular 4220.1E.
Two commenters, for example, pointed out that joint procurements are
unlikely to be undertaken using State or local government purchasing
schedules. We agree, and we have revised the sections on Joint
Procurement as well as the section on State or Local Government
Purchasing Schedules or Purchasing Contracts for clarity.
Section 3--Joint Procurements
The final circular defines ``joint procurement'' to mean a method
of contracting in which two or more
[[Page 56910]]
purchasers agree from the outset to use a single solicitation document
and enter into a single contract with a vendor for delivery of a
property or services in a fixed quantity, even if expressed as a total
minimum and total maximum. The final circular emphasizes that the
contract resulting from a joint procurement is not drafted with the
understanding that its terms will be made available to purchasers other
than the original parties at a later date. As with all FTA assisted
contracts, the recipient must comply with all applicable Federal
requirements.
One commenter asked whether a ``Cooperative Purchasing Program'' is
the same as a joint procurement. We used the term ``Cooperative
Purchasing Program'' to refer to the GSA Cooperative Purchasing Program
for the Federal Government. The final circular now identifies that
program as the ``GSA's Cooperative Purchasing Program'' to preclude
confusion with joint procurements.
Subsection 3.a--Use Encouraged
One commenter suggested that discussing the advantages of joint
procurement as being able to ``exactly match'' each participating
recipient's requirements is misleading, and informs us that in many
cases customizing would be required. We agree, and we removed the term
``exactly match.''
Section 4--State or Local Government Purchasing Schedules or Purchasing
Contracts
In this section, we have established a definition of ``state or
local government purchasing schedule'' to mean an arrangement that a
State or local government has established with multiple vendors in
which those vendors agree to provide essentially an option to the State
or local government to acquire specific property or services in the
future at established prices. If the State or local government wishes
to permit others to use the schedules, the State or local government
might seek the agreement of the vendor to provide the listed property
or services to others with access to the schedules, or it may permit
the vendor to determine whether it wishes to do so. This arrangement
has two parts: (1) Establishing the schedule, and (2) acquiring
property and services from the schedule. FTA does not provide Federal
assistance to a State or local government when it is establishing its
schedule. FTA assistance is provided after the schedule is established
and a recipient acquires property or services from that schedule.
Subsection 4.a--Use Encouraged
One commenter asked how State or local government schedules or
purchasing agreements could be available to other parties. The extent
to which a State or local government chooses to make its purchasing
agreements or schedules available rests with the State or local
government that has established the schedule or purchasing contract.
Subsection 4.b--All FTA and Federal Requirements Apply
Several commenters expressed the view that it would be impossible
for a recipient to use State or local government schedules or
purchasing agreements if FTA requirements were to apply to those
procurements. FTA recognizes that when a State or local government
establishes a schedule, it has not contemplated the need to comply with
FTA's third party procurement requirements. For example, a State or
local government generally does not consider matters such as FTA Buy
America standards at the time its schedules are introduced. A recipient
that seeks to use FTA assistance to acquire property or services from a
State or local government purchasing schedule, however, must comply
with applicable FTA requirements. To do so, the recipient is expected
to use competition by seeking bids from three or more vendors listed on
the schedule, and then determine whether the property or services as
offered would comply with Federal requirements. Among other things, the
recipient would need to determine whether a product sought from the
schedule would qualify as domestic or foreign under our Buy America
standards, if the product would be shipped by ocean-going vessel or by
air for compliance with Federal cargo preference requirements, if a new
bus had been tested and whether preaward and post delivery review could
be obtained, whether the property sought had been manufactured in
accordance with environmental restrictions, and so forth. FTA is not
able to waive Federal requirements beyond what is permissible under
law. Only if the property or services listed on a State or local
government purchasing schedule complies with FTA's requirements would
the recipient be able to use FTA assistance to support the costs of
that property or services.
One commenter asked us to describe methods of meeting FTA
requirements when acquiring property and services through a State or
local government purchasing schedule. While the recipient would not
prepare an open market solicitation for the property or services when
attempting to use a State or local government purchasing schedule, the
recipient might choose to append the relevant Federal requirements to a
purchase order and obtain the vendor's consent to those conditions as a
prerequisite for using FTA assistance to support the costs of that
property or those services. But whatever procedure the parties use,
requirements applicable to FTA procurements cannot be waived.
Section 6--Federal Supply Schedules
Subsection 6.d--Competition and Price Reasonableness
One commenter asked whether State and local governments must verify
competition was used for the procurement of items listed on GSA
schedules before using those schedules. Our response is that there is
no need to verify that competition was used for the property and
services listed on GSA schedules prior to using the schedules. Vendors
listed on GSA schedules should be treated as prospective sources.
Therefore, a recipient is generally expected to select at least three
vendors from a GSA schedule and seek proposals.
Section 7--Existing Contracts
Subsection 7.a--Permissible Actions
Paragraph 7.a(1)--Exercise of Options
Subparagraph 7.a(1)(c)--Awards Treated as Sole Source Procurements
One commenter requested that we explain what we mean by ``failure
to evaluate the option.'' There is no requirement to solicit for
options or obtain firm option prices as part of a solicitation. If
option prices are obtained, the recipient need not evaluate those
option prices in determining the underlying contract award. However, if
the recipient does not evaluate options when the contract was awarded,
it may not exercise the options at a later date unless it can justify a
sole source award.
Two commenters objected to our position that negotiating a lower
option price would always result in a sole source award requiring
justification. FTA recognizes that it is reasonable to permit the price
of an option to be reduced if the lower price can be reasonably
determined from the terms of the original contract, or if that price
results from actions that can be reliably measured, such as changes in
Federal prevailing labor rates, or as authorized under State or local
law. One of the commenters also objected to our view
[[Page 56911]]
that negotiating a higher option price would always result in a sole
source award requiring justification. FTA has not changed its position.
If only a higher price is available, then competition would normally be
required unless the higher price results from actions that can be
reliably measured, such as increases in Federal prevailing labor rates,
or as authorized under State or local law.
One commenter objected to our requirement for contracts to include
maximum quantities. The commenter believes that requiring maximum
quantities could adversely affect the establishment of State or local
government purchasing schedules. FTA disagrees. FTA does not finance
the establishment of State or local purchasing schedules, so that when
State or local governments and their vendors enter into contracts for
their purchasing schedules, those contracts are not subject to FTA
requirements. It is only when a recipient intends to use FTA assistance
to acquire property or services that FTA requirements are imposed. Thus
if an FTA recipient seeks to acquire an indefinite amount of property
or services through a State or local purchasing schedule, it would need
to specify a maximum quantity as well as a minimum quantity.
Paragraph 7.a(2)--Assignment of Contract Rights
Subparagraph 7.a(2)(a)--Acquisition Through Assigned Contract Rights
Three commenters objected to our position that a recipient seeking
an assignment of contract rights from another recipient must ensure
that the assigning recipient ``has not improperly expanded the quantity
of property or services to be delivered under its original contract.''
The purpose of this provision is to express FTA's intention that the
recipient seeking the assignment would review the assigning recipient's
contract to determine whether the total quantities sought would not
exceed the limits of that original contract. We agree that a recipient
seeking an assignment of contract rights cannot determine whether or
not the assigning recipient specified greater quantities than the
assigning recipient needed at the time of its original solicitation. We
have revised this guidance to clarify FTA's concerns.
Subsection 7.b--Impermissible Actions
Paragraph 7.b(2)--Cardinal Changes
One commenter asked us to provide more guidance about cardinal
changes and not use the terms ``in-scope'' and ``out-of-scope'' as
determinative of contract changes. The commenter warned that if the
contract provisions are read without consideration of their context,
minor changes not expressly addressed or even contemplated under the
contract when it was signed might be considered out-of-scope changes.
Minor changes, even if considered ``out-of-scope'' because they are not
addressed in the contract, should not be considered ``cardinal''
changes. The commenter recommended that a cardinal change be described
as ``a major deviation from the original purpose of the work or the
intended method of achievement,'' rather than an ``out-of-scope
change.'' Although the Federal Court of Claims coined the term
``cardinal change'' to describe changes that are beyond the scope of
the contract, we agree that some changes necessary to fulfill the
original intent of the contract might not be expressly included in the
contract. Therefore, we have adopted the commenter's recommendation,
and the final circular contains revised provisions.
One commenter wanted many more examples and much more guidance.
Such guidance can be found in FTA's BPPM at the FTA Web site: http://www.fta.dot.gov/funding/thirdpartyprocurement/grants_financing_6037.html and ``Frequently Asked Questions'' at the FTA Web site:
http://www.fta.dot.gov/funding/thirdpartyprocurement/grants_financing_6039.html.
Two commenters objected to the example of an engine change or
similar large component change as a cardinal change per se,
particularly since it might be necessary to obtain a compatible new
engine if the old engine is no longer available. FTA's view is that if
a major component of a vehicle is no longer available, the recipient
should use competition to obtain a compatible substitute. In some
cases, the recipient would need to enter into a contract with the
original manufacturer if installation of the needed component would be
complicated, but in other cases, similar components available from more
vendors might be usable and available. If the vehicle has not been
fabricated when a specific major component became obsolete, whether
using a different component would cause a cardinal change would depend
on the extent of the effect of that change. The final circular,
however, states that the circumstances surrounding the need for
changing major components will determine whether or not a change would
be a cardinal change.
F. Chapter VI--Procedural Guidance for Open Market Procurements
We have also restructured Chapter VI so that the final circular
consolidates provisions pertaining to the various procurement methods.
Chapter VI of the final circular includes additional paragraphs to
respond to unanticipated comments on the proposed circular. As a
result, we have transferred some of the guidance originally included in
other chapters of the proposed circular to Chapter VI of the final
circular. Much of this chapter retains provisions substantially similar
to their counterpart provisions in FTA Circular 4220.1E or its
footnotes, with important exceptions discussed below.
Section 1--Competition Required
Subsection 1.b--Unsolicited Proposals
Two commenters pointed out that the unsolicited proposal provisions
of the proposed circular are too broad. FTA agrees that the proposed
circular's guidance could be misunderstood. The final circular now
permits a recipient to use the same standards applicable to a Federal
agency that must comply with the FAR.
Section 2--Solicitation Requirements and Restrictions
Subsection 2.a--Description of Property or Services
Paragraph 2.a(1)--What To Include
Four commenters objected to our admonition that ``Detailed
technical specifications should be avoided if at all possible in favor
of performance specifications.'' Two commenters pointed out that
prohibiting detailed technical specifications could make fleet
management more difficult, while one commenter informed us that the
prohibition would conflict with design-bid-build construction
contracting procedures. We agree in part, and have revised the
discussion of detailed technical specifications so that the final
circular only expresses a preference for performance or functional
specifications, coupled with a statement explaining that there is no
flat prohibition against detailed technical specifications when
appropriate. The final circular also includes a statement referencing
Common Grant Rules requirements.
Paragraph 2.a(2)--Quantities Limited to the Recipient's Actual Needs
One commenter recommended that a discussion of the recipient's
needs be placed in a different circular or policy document. We
disagree. It is important to remind recipients that they should
[[Page 56912]]
not contract for excess quantities, particularly because doing so can
increase costs and provide more opportunities for them to assign their
contract rights to others, a practice FTA does not favor.
Paragraph 2.a(4)--Prohibitions
Subparagraph 2.a(4)(d)--Retainer Contracts
Two commenters objected to our prohibition against a recipient
making noncompetitive awards to any person or firm on a retainer
contract without providing further justification. The commenters
reminded us that many recipients award retainer contracts based on
competition. They expressed their view that this prohibition would
unduly limit the recipient's flexibility to acquire the property and
services it needs. We agree in part, and the final circular now
prohibits only noncompetitive awards to persons or firms on retainer
contracts if those awards are not for the property or services
specified for delivery under the retainer contracts.
Subparagraph 2.a(4)(e)--Excessive Bonding
One commenter requested more discussion of bonding. The final
circular now explains more fully our objections to unnecessary bonding
as unduly restrictive of competition.
Subparagraph 2.a(4)(f)--Brand Name Only
Two commenters requested us to state that specifying a brand name
product without stating salient characteristics that would allow for an
equivalent may be acceptable as a proper sole source award. We have not
adopted that recommendation, as we believe it would encourage
specifications based on brand names without descriptions of salient
characteristics. The final circular, however, includes a modified
discussion of ``brand name only'' matters indicating that prohibitions
against the use of ``brand name only descriptions'' would apply in some
situations.
Subparagraph 2.a(4)(g)--In-State or Local Geographic Restrictions
Sub-subparagraph 2.a(4)(g)3--Major Disaster or Emergency Relief
One commenter recommended that we revise our discussion of
exceptions to in-state or geographical preferences for major disaster
or emergency relief projects, making special reference to the Stafford
Act's preference for organizations, firms, and individuals residing or
doing business primarily in the affected area. We agree, and the final
circular includes this change.
Subparagraph 2.a(4)(h)--Organizational Conflicts of Interest
One commenter recommended that the organizational conflict of
interest subparagraph be revised for clarity. We agree, and have made
that revision.
Sub-subparagraph 2.a(4)(h)2--Remedies
Three commenters objected to the proposed circular's provisions
that appeared to exempt consortia from organizational conflict of
interest restrictions. When drafting those provisions, we were
attempting to distinguish arrangements in which a contract would be
awarded for both initial and follow-on work from arrangements in which
a contract would be awarded for only the initial work. The final
circular contains revised provisions stressing that FTA expects the
recipient to analyze each planned acquisition for potential
organizational conflicts of interest as early in the acquisition
process as possible, and to take appropriate measures to avoid,
neutralize, or mitigate them before contract award.
Subparagraph 2.a(4)(i)--Restraint of Trade
One commenter asked why noncompetitive pricing is included within
the same category as matters within the recipient's control. Both
Common Grant Rules provide that noncompetitive pricing practices
between firms or between affiliated companies are practices that in
some situations can be restrictive of competition. Consequently, the
recipient should be alert to situations evidencing the possibility that
bidders or offerors seeking contracts might be engaging in
noncompetitive pricing practices. Questionable practices would include
submissions of identical bid prices for the same products by the same
group of firms. Other questionable practices would be reflected in an
unnatural pattern of awards that had the cumulative effect of
apportioning work among a fixed group of bidders or offerors.
Subsection 2.c--Contract Type Specified
Paragraph 2.c(1)--Typical Contract Types
Subparagraph 2.c(1)(a)--Firm Fixed Price
One commenter recommended that we include a discussion of firm
fixed price contracts with economic price adjustments. We agree, and
revised the final circular to state that a firm fixed price contract
may include an economic price adjustment provision, incentives, or
both.
Section 3--Methods of Procurement
Subsection 3.a--Micro-Purchases
We received three comments about micro-purchases. Two commenters
advised us that the discussion in the proposed circular was too
detailed, and specifically recommended that documentation procedures be
moved to the BPPM. We believe a reasonably comprehensive discussion of
micro-purchases is necessary in view of the opportunities for
misunderstanding.
One commenter recommended that we remove discussions of dollar
limits in connection with micro-purchases, mainly because States or
local jurisdictions may have lower limits. We disagree. Although we
stated in the proposed circular that the recipient could establish
lower thresholds for micro-purchases, the final circular emphasizes
that the recipient may set lower thresholds for micro-purchases in
compliance with State and local law, or otherwise as it considers
appropriate.
The same commenter asked how Davis-Bacon requirements relate to the
dollar value of a procurement unless it is FTA's position that
contracts subject to Davis-Bacon cannot be procured as micro-purchases.
In its discussion of micro-purchases, the proposed and final circulars
are cautioning the recipient that even though it may use micro-purchase
procedures for procurements of construction, it still must comply with
Davis-Bacon prevailing wage requirements.
One commenter asked whether the Service Contract Act's threshold of
$2,500 should be mentioned in connection with micro-purchases. We have
not discussed the Service Contract Act because the only FTA recipient
that must comply with the Service Contract Act is the District of
Columbia.
Subsection 3.c--Sealed Bids (Formal Advertising)
Paragraph 3.c(1)--When Appropriate
One commenter pointed out that our discussion of sealed bidding
gives the impression that sealed bidding can only be used for
acquisition of property and construction. We agree that sealed bidding
can be used for the acquisition of other types of property and
services, and the final circular now clarifies that matter.
[[Page 56913]]
Subparagraph 3.c(1)(d)--Price Determinative
One commenter recommended that we clarify the term ``price-related
factors'' in our discussion of contract price in the context of sealed
bidding procurements. We agree, and revised the final circular to
identify transportation costs, life cycle costs, and discounts expected
to be taken as examples of price-related factors.
Subparagraph 3.c(1)(e)--Discussions Unnecessary
The same commenter recommended that we clarify this subparagraph to
distinguish between when discussions are acceptable, such as before
receipt of bids, in negotiations after receipt of bids, and in pre-
award responsibility determinations, and when discussions are not
acceptable, such as after receipt of bids. We agree, and made
appropriate changes.
Subsection 3.d--Competitive Proposals (Request for Proposals)
The same commenter also recommended that we change the wording of
the standard for using competitive proposals to ``there is an
expectation that there is more than one source willing and able to
submit an offer, or proposal.'' We agree, and the final circular
contains appropriate changes.
Two commenters requested that we clarify that only one of the four
pre-conditions justifying the use of competitive proposals need be
present. We agree, and the made that revision.
Paragraph 3.d(1)--When Appropriate
Subparagraph 3.d(1)(a)--Type of Specifications
One commenter recommended that we support the use of negotiations
when performance specifications are used. Two commenters recommended
that we delete ``unavailability of adequate specifications or
descriptions'' as a standard justifying use of competitive proposals.
We have adopted those recommendations, and the final circular now
include a statement that detailed technical specifications may be used
if other circumstances, such as the need for discussions or factors
other than price alone should determine contract award.
Subparagraph 3.d(1)(b)--Uncertain Number of Sources
The same commenter expressed the view that uncertainty about
whether more than one offeror will submit a proposal is not in itself a
reason to require the use of competitive proposals if State and local
laws permit the recipient to negotiate if it only receives a single bid
in response to a formally advertised procurement. The commenter then
recommended that we delete the standard or explain it more fully. We
agree, and have explained the standard more fully.
Subparagraph 3.d(1)(c)--Price Alone Not Determinative
One commenter asked us to clarify the distinction between price-
related factors in sealed bidding and award criteria for competitive
proposals. We agree, and made the necessary revision.
Subparagraph 3.d(1)(d)--Discussions Expected
The same commenter asked us to make the distinction between
discussions permitted in sealed bidding and the discussion/negotiation
process in competitive proposals. We agree, and made the revision.
Paragraph 3.d(2)--Procurement Procedures
Subparagraph 3.d(2)(f)--Best Value
That commenter also requested us to amend the discussion of ``Best
Value'' to stress that the evaluation factors for a specific
procurement should reflect the subject matter and the elements that are
most important to the recipient. We agree, and made the revision.
Subsection 3.e--Two-Step Procurement Procedures
One commenter recommended that competitive negotiation be included
in the discussion of two-step procurement processes. We agree, and
added guidance about proposals as well as bids in our general
discussion of two-step procurement procedures.
Subsection 3.f--Architectural Engineering Services and Other Services
Again as in Chapter IV, the same commenter suggested that we state
that certain architectural engineering firms have the capability of
performing services beyond traditional A&E services. We have revised
both Chapter VI and Chapter IV of the final circular for consistency,
emphasizing that the nature of the work to be performed and its
relationship to construction, not the nature of the prospective
contractor, determines whether qualifications-based procurement
procedures must be used or may not be used.
Paragraph 3.f(1)--Qualifications-Based Procurement Procedures Required
One commenter reminded us to resolve the inconsistencies between
Chapter IV and Chapter VI of the proposed circular in designating the
relationship to real property compared with the relationship to
construction as the standard for determining when qualifications-based
procurement procedures must be used and may not be used. We have
revised both Chapter VI and Chapter IV of the final circular to stress
that qualifications-based procurement procedures may be used only when
the services are directly in support of, directly connected to,
directly related to, or will lead to construction, alteration, or
repair of real property.
Another commenter requested us to provide examples of activities
related to a project involving ``improvements to real property'' that
would require the use of qualifications-based procurement procedures.
The final circular includes several examples.
Paragraph 3.f(2)--Qualifications-Based Procurement Procedures
Prohibited
The same commenter also requested us to provide examples of
``improvements to real property'' for which qualifications-based
procurement procedures would be prohibited. We agree, and have added
several examples.
Paragraph 3.f(5)--Audits and Indirect Costs
Subparagraph 3.f(5)(d)--Prenotification: Confidentiality of Data
Two commenters asked us to clarify the confidentiality requirements
for cost or rate data used to determine indirect cost rates for
architectural engineering contracts, particularly in light of the fact
that States have widely differing ``Open Records'' type laws. FTA
recognizes that some State laws might make it difficult for a recipient
to protect cost and rate data pertaining to its contractors.
Nevertheless, FTA's enabling legislation at 49 U.S.C. 5325(b)(3)(D)
requires a recipient to treat any cost or rate data used to determine
indirect cost rates for architectural engineering contracts as
confidential. Section 5325(b)(3)(D) also prohibits the recipient from
making that data accessible or providing it to another party unless the
audited firm provides the recipient written permission to do so.
Moreover, if prohibited by law, that cost and rate data may not be
disclosed under any circumstances. FTA is not authorized to waive the
requirements of 49 U.S.C. 5325(b)(3)(D). Therefore, the final circular
recommends that before requesting or using cost or rate data, not only
should a recipient notify the affected firm, but it also must obtain
permission to provide that data in
[[Page 56914]]
response to a valid request under a State's ``Open Records'' type law.
Subsection 3.g--Design-Bid-Build
One commenter asked us to use an outline format for this
subsection. We agree, and have revised the format of this subsection
for greater consistency with the formats generally used in the final
circular.
The same commenter requested us to revise the subsection to
emphasize that two contracts are awarded when a recipient uses the
design-bid-build procurement method. We agree, and made that revision.
Subsection 3.h--Design-Build
In response to comments about format and clarity, we revised the
final circular for greater consistency with the formats generally used
in the final circular.
Subsection 3.i--Other Than Full and Open Competition
Paragraph 3.i(1)--When Appropriate.
Subparagraph 3.i(1)(b)--Sole Source
Sub-subparagraph 3.i(1)(b)1--Unique Capability and Availability
One commenter asked us to provide examples of unique capability and
availability that justify a sole source procurement, pointing out that
many vendors have unique capabilities that do not justify a sole source
procurement. We do not believe specific examples would be helpful and
might further cause misunderstanding. In describing property or
services that have unique capability and availability, we recognize
that property or services with unique or innovative concepts, that have
patents or restricted data rights, that would require substantial
duplication costs, or would require unacceptable delay meet the
standard of having unique capability and availability. Our position is
that a unique or innovative concept qualifies as a sole source if it is
a new, novel, or changed concept, approach, or method that is the
product of original thinking, the details of which are kept
confidential or are patented or copyrighted. The property or services
must also be available to the recipient only from one source and have
not been available in the past to the recipient from another source. We
believe situations in which prospective acquisitions are limited by
patents or restricted data rights, substantial duplication costs, or
requiring unacceptable delay can be readily recognized and need no
further explanation.
Sub-subparagraph 3.i(1)(b)2--Single Bid or Proposal
Four commenters pointed out that in our discussion of the
consequences of procurements resulting in a single bid or proposal, the
proposed circular uses the terms ``adequate'' and ``inadequate'' in
ways different from the BPPM's use of those terms. In short, the
commenters requested that we adopt the standard that competition is
``adequate'' if a single bid or proposal is submitted through no fault
of the recipient. We agree, and made that revision.
Subparagraph 3.i(1)(d)--Associated Capital Maintenance Item Exception
Repealed
Two commenters asked why we omitted associated capital maintenance
items as appropriate for sole source. When SAFETEA-LU was signed into
law on August 10, 2005, it repealed the sole source procurement
authority for associated capital maintenance items. Since then, an
associated capital maintenance item must qualify under the same
standards that would apply to other sole source acquisitions.
Paragraph 3.i(3)--Procurement Procedures
Subparagraph 3.i(3)(b)--Sole Source Justification
One commenter recommended that we require that a sole source
justification must be prepared by an entity that can independently
evaluate information provided by the recipient and prospective
contractor. FTA agrees that independent sole source evaluations would
be desirable, but believes it would be unrealistic to impose a firm
requirement for independent evaluations. Requirements for independent
sole source evaluations are not expressly authorized by our law or the
Common Grant Rules, and may conflict with State or local procurement
procedures.
Section 5--Incentive Costs and Payments
One commenter asked whether incentive payments are available only
to contractors that provide accurate cost and ridership estimates in
connection with a new fixed guideway capital project and to contractors
that enable a new fixed guideway capital project to be completed for
less than its original estimated cost. Another commenter objected to
that limitation. We agree that incentive payments should not be limited
to the two situations described. The final circular now contains a
reference to the ``Incentive Payments'' information in ``Frequently
Asked Questions'' at the FTA Web site: http://www.fta.dot.gov/funding/thirdpartyprocurement/faq/grants_financing_6148.html.
Section--6 Cost and Price Analysis
Subsection 6.a--Cost Analysis
One commenter asks whether, as stated in the proposed circular, a
cost analysis will be necessary in the case of a single bid or proposal
when competition has been determined adequate because submission of
only one bid or proposal was not the fault of the recipient, or whether
a price analysis would be acceptable. FTA's position is that a cost
analysis will be required in the case of a single bid or proposal that
is not the fault of the recipient, except if a price analysis can be
based on a catalog or market price of a commercial product sold in
substantial quantities to the general public or based on prices set by
law or regulation.
Paragraph 6.a(2)--Establishing Indirect Cost Rates
One commenter questioned whether the discussion about which entity
must approve indirect cost rates applies to architectural engineering
contracts. FTA did not intend these provisions to apply to
architectural engineering contracts because architectural engineering
contracts have their own statutory indirect costs requirements. We have
revised this discussion and the final circular now states that the
provisions of this paragraph do not apply to architectural engineering
contracts.
Subparagraph 6.a(2)(b)--Contracts Exceeding $5 Million
Rather than engage an outside auditor, one commenter has
recommended that a recipient be permitted to use its internal audit
staff to perform indirect costs when required for contracts exceeding
$5 Million. FTA disagrees. The purpose of using an outside entity is to
obtain an objective review of the recipient's rates, profits, and other
financial data related to a contract that must undergo cost analysis.
Section 7--Evaluations
Subsection 7.c--Evaluators
One commenter objected to the proposed circular's implied
requirement that all proposal evaluations must be performed by auditors
or financial management personnel, pointing out that for certain
procurements, technical or public policy personnel should perform the
evaluations. We agree that technical and public policy staff should
participate in bid or proposal
[[Page 56915]]
evaluations and that a recipient may use auditors and financial
management personnel as they see fit, and have made that revision to
the final circular. We have also clarified that the recipient may
contract for those services its staff are unable to perform.
Subsection 8--Contract Award
Subsection 8.a--Award to Other Than the Lowest Bidder
One commenter recommended that the recipient be advised to state
its right to award the contract to other than the low bidder or offeror
in its solicitation document. We agree, and the final circular has been
revised accordingly.
Subsection 8.c--Rejections of Bids and Proposals
Three commenters recommended that the subparagraph discussing bid
rejection should be expanded to apply to both bids and offers or
proposals. We agree, and have made the revision requested.
G. Chapter VII--Protests, Changes and Modifications, Disputes, Claims,
Litigation, and Settlements
This chapter consolidates FTA guidance pertaining to third party
procurement protests with guidance pertaining to disagreements that may
emerge during the course of a third party procurement. The chapter now
includes discussions of protests, changes and modifications, disputes,
claims, litigation, and settlements.
Section 1--Protests
Section 1 addresses FTA and the recipient's responsibilities
pertaining to protests of third party contract decisions. These
provisions are substantially similar to those in FTA Circular 4220.1E.
It adds a new discussion of FTA's practice of reviewing only those
protests of an ``interested party,'' which must be an actual or
prospective bidder or offeror with a direct economic interest in the
third party contract award.
Subsection 1.a--The Recipient's Role and Responsibilities
Paragraph 1.a(2)--Responsibilities to FTA
Subparagraph 1.a(2)(a)--Timely Notification
Three commenters asked who the recipient should notify when it
receives a third party contract protest. Our response is that FTA
expects the recipient to report any current or prospective third party
contract protest involving more than $100,000, and any protests
involving controversial or highly publicized matters irrespective of
amount in its next quarterly Milestone Progress Report, and at the next
Project Management Oversight review, if any. If the recipient issues a
protest decision adverse to the protester, FTA expects the recipient to
notify the FTA Regional Administrator for the region administering a
regional project or the FTA Associate Administrator for the Program
Office administering a headquarters project directly, so that FTA can
be prepared in case of an appeal. We included that information in the
final circular.
Subsection 1.b--FTA's Role and Responsibilities
Paragraph 1.b(1)--Requirements for the Protester
Subparagraph 1.b(1)(a)--Qualify as an ``Interested Party''
One commenter asked whether a subcontractor that has committed to
be part of a team that prepared the proposal or bid would be eligible
to qualify as an ``interested party'' and file a protest with FTA, or
whether only a prime contractor or consultant would qualify as an
``interested party.'' Our response is that a subcontractor does not
qualify as an ``interested party'' that may file a protest with FTA
because a subcontractor has only an indirect interest in the results of
the procurement; moreover, a subcontractor does not submit bids or
offers to the recipient. The final circular lists various entities that
either qualify or do not qualify as an ``interested party'' that may
file a protest with FTA. For example, an established consortium, joint
venture, team, or partnership that is an actual bidder or offeror would
qualify as an ``interested party'' that has a direct economic interest
in the results of the procurement. An individual member of a
consortium, joint venture, team, or partnership, acting solely for
itself, however, would not qualify as an ``interested party.'' An
association or organization that does not perform contracts also would
not qualify as an ``interested party.''
Paragraph 1.b(2)--Extent of FTA Review
In view of FTA's decision to limit its review of third party
contract protests to a recipient's failure to have or to follow its
protest procedures, a recipient's failure to review a complaint or
protest, or allegations of violations of Federal law or regulations,
one commenter complained that FTA's requirements for recipients are
very detailed and impose additional administrative burdens on the
recipient to report each protest to the FTA even if the protest does
not involve any of the areas that the FTA would review. We disagree.
The Common Grant Rules for governmental recipients require the
recipient ``in all instances * * * [to] * * * disclose information
regarding the protest to the awarding agency.'' FTA reserves the right
to obtain as much information as it needs about each protest, although
the amount of information it may request will vary depending on whether
FTA is asked to participate in the costs of defending the protest and
its resolution. The extent of information FTA may require will also
vary depending on whether the protest involves controversial or highly
publicized matters. The final circular states that FTA is particularly
interested in any protest of an FTA assisted third party contract
exceeding $100,000, and any protest of an FTA assisted third party
contract involving controversial or highly publicized matters
irrespective of the amount.
Section 2--Changes and Modifications
This section consists of guidance on changes and modifications to
third party contracts. We revised the guidance in the final circular to
accommodate some of the comments discussed below.
One commenter requested an extensive discussion of the procedures
for contract changes and modifications. Our response is that more
extensive information about changes and modifications can be found in
the BPPM.
The same commenter asked that the final circular include references
to other parts of the circular pertaining to contract changes. In
Chapter I, section 5 of the final circular, we have established
definitions for ``cardinal change,'' ``change order,'' and
``constructive change.'' We are not using the term ``constructive
change order'' in the final circular. The final circular includes
information about changes in Chapter IV, paragraph 2.b(3) in connection
with period of performance, in Chapter IV, subparagraph 2.b(6)(a) in
connection with protecting against performance difficulties, and
Chapter V, paragraph 7.b(2) in connection with assignment of contract
rights.
Section 3--Disputes
The final circular changes the location of the section on disputes
with the section on claims set forth in the proposed circular, and adds
more information in response to comments we received as described
below.
[[Page 56916]]
Subsection 3.a--The Recipient's Role and Responsibilities
Paragraph 3.a(1)--Notify FTA about Disputes
One commenter asked whom the recipient should notify when it
becomes involved in a dispute related to a third party contract. Our
response is that FTA expects the recipient to report any current or
prospective third party contract dispute involving more than $100,000,
and any dispute involving controversial or highly publicized matters
irrespective of amount, in its next quarterly Milestone Progress
Report, and at the next Project Management Oversight review, if any.
The final circular contains that information.
Paragraph 3.a(2)--Adequate Documentation
One commenter argued that requiring the recipient to include all
pertinent facts, events, negotiations, applicable laws, and a legal
evaluation of the likelihood of success in any potential litigation
pertaining to a dispute appears to imply that FTA would question any
settlement the recipient arranges unless there is no likelihood of
successful litigation. The commenter also added that while some
disputes may lead to litigation, many should be settled. We agree in
principle that many disputes may best be resolved through settlement.
But whether or not FTA seeks access to the recipient's records
pertaining to a dispute, FTA expects the recipient to include adequate
documentation in its project files of the facts, events, negotiations,
applicable laws, and a legal evaluation of the likelihood of success in
any potential litigation proceeding as may be necessary to justify
FTA's concurrence in the compromise or settlement of the claim, should
FTA determine its concurrence would be necessary. Maintaining adequate
documentation of a dispute or other significant event will likely
benefit the recipient, even if FTA does not inspect those records. The
amount of information FTA may request will vary depending upon the
nature of the claim. FTA is particularly interested in any current or
prospective major dispute exceeding $100,000, and any dispute involving
controversial or highly publicized matters irrespective of amount
relating to any third party contract. The final circular contains that
information.
Paragraph 3.a(3)--Audit
The same commenter expressed concerns about our recommendation that
the recipient obtain a project audit, and argued that for FTA to delay
participation in settlement costs until an audit has been completed
could unnecessarily hamper negotiations and delay closure of the
project. Our response is that a recipient should rely on itself to
finance its own settlements, with the use of project funds that have
been awarded for the contract under the grant or cooperative agreement
to the extent that settlement costs are supportable under the Federal
cost principles that apply to the recipient. The recipient should not
rely on FTA to provide any extra Federal assistance beyond the amount
previously awarded to support the settlement.
The same commenter asked why FTA would recommend an audit after the
recipient has reached a settlement agreement. We consider an audit to
be a tool that the recipient can use to justify that the settlement is
necessary, reasonable, adequately documented, and that FTA should
participate in its costs.
Section 4--Claims and Litigation
In addition to changing the location of the section on claims with
the section on disputes as set forth in the proposed circular, the
final circular includes a discussion of litigation and also includes
more information in response to comments we received as described
below.
Subsection 4.a--The Recipient's Role and Responsibilities
One commenter asked us to clarify whether the Common Grant Rules'
assignment of responsibility to the recipient to resolve third party
contract claims means that the recipient is expected to resolve claims
made under its third party contracts or claims against the contractor
made by third parties. FTA's interpretation of the Common Grant Rules
is that the recipient is expected to resolve claims made under its
third party contracts, but not claims against the contractor made by
third parties. We have revised the circular to make that clarification.
Paragraph 4.a(2)--Legal Rights and Remedies
The same commenter complained about the provision in the proposed
circular directing the recipient to pursue all legal rights and
remedies available under any third party contract, claiming that doing
so would preclude settlement of minor disputes until all contract
remedies, including termination or litigation, have been exhausted. The
commenter pointed out that such an interpretation would have
significant adverse effects on the project. We agree in part with the
commenter's observations. The final circular has been revised to
clarify that, in resolving third party contract claims, FTA expects the
recipient to take reasonable measures to pursue its rights and remedies
available under law, including settlement, particularly if failure to
do so would jeopardize the Federal interest in the project or cause the
recipient to seek additional Federal assistance.
The same commenter argued that providing the level of documentation
specified in the proposed circular would have the potential of
violating attorney/client privilege, and that providing documentation
relative to any disputed negotiations is very different from producing
procurement files relative to a particular solicitation. While FTA
understands that providing information in connection with claims or
litigation can be difficult, FTA reserves the right to review the
recipient's records and supporting documentation that would justify the
use of FTA assistance to support the costs resulting from the claim or
litigation. The amount of information FTA may request will vary
depending on the nature of the claim or litigation. FTA is particularly
interested in any current or prospective major third party contract
claim or litigation in amounts exceeding $100,000, and any claim or
litigation involving controversial or highly publicized matters
irrespective of the amount relating to any third party contract. The
final circular contains that information.
Subsection 4.b--FTA's Role and Responsibilities
Paragraph 4.b(1)--Proceeds Recovered
One commenter pointed out that it may not be possible to calculate
the amount of proceeds a recipient recovers in proportion to the
Federal share committed to the project. The amount of ``any net
proceeds'' may not have a direct correlation to a portion of an overall
project. Except for unusual circumstances, we disagree. We believe that
equitable calculations of the Federal share committed to a project or
part of a project may in some instances be difficult, but not
impossible. Moreover, the last sentence of 49 U.S.C. 5309(h)(6)
requires proportionate refunds of the Federal share when reductions in
the net project costs of capital investment projects are made. The
Common Grant Rules provide that recipients should expend refunds and
rebates for project costs before requesting further payments from the
Federal Government, which would have the effect of providing some, if
not a
[[Page 56917]]
strictly proportionate, refund of Federal assistance to the Federal
grantor agency.
Paragraph 4.b(2)--Liquidated Damages
One commenter asked whether in negotiating a settlement, the
recipient could exchange its rights to liquidated damages for extra
property or services. We agree that in some situations doing so would
be reasonable. The final circular includes a new paragraph addressing
that matter.
Section 5--FTA Participation in Settlements, Arbitration Awards, and
Court Awards
Much of the guidance in this section has been transferred from FTA
Circular 5010.1C, ``Grant Management Guidelines,'' 10-01-98
substantially intact, modified to accommodate the comments we received
as discussed below.
Subsection 5.a--The Recipient's Responsibilities
Paragraph 5.a(1)--Settlement Arrangements Must Be Reasonable
One commenter asked that FTA discuss settlements in lieu of
liquidated damages that substitute additional services or equipment for
cash payments, possibly resulting in benefits to all parties. We agree
that, in certain situations, substitutions of extra property or
services rather than liquidated damages payments could constitute all
or part of a reasonable settlement. FTA also recognizes that in certain
instances a settlement may require the recipient to relinquish its
claims for all or part of the liquidated damages and other amounts the
recipient would be owed if it prevailed on all matters at issue. The
final circular includes a new paragraph explaining FTA's views on
reasonable settlements.
Subparagraph 5.a(3)(c)--Special Federal Interest or Federal Concern
We have amended the heading of this subparagraph to include the
term ``Federal Concern,'' which is sometimes used interchangeably with
``Special Federal Interest.'' We believe it is in the best interests of
the recipient to obtain FTA review and written concurrence in
settlements when a special Federal interest or concern is declared due
to program management concerns, possible mismanagement, impropriety,
waste, or fraud. One commenter requested that we explain when and how
the recipient should be aware that a special Federal interest in a
project is ``declared,'' and complained that, as written, the
declaration could be an after-the-fact action by FTA. Our response is
that if the recipient has entered into a settlement before FTA has
declared a special interest in the matter at issue, then the recipient
would not be able to obtain FTA's review and concurrence in advance. In
such a case, if after the recipient agreed to a settlement and FTA
became interested in the project due to allegations of program
management concerns, possible mismanagement, impropriety, waste, or
fraud, FTA could refuse to participate in the costs of activities
associated with those improprieties, and even recover the Federal
assistance used to support those improprieties. The purpose of
obtaining FTA review and concurrence is to gain assurance that the
costs of specific activities, including procurements, will be eligible
for FTA assistance.
Subsection 5.b--FTA's Prerogatives
Paragraph 5.b(2)--Provide Federal Assistance
The same commenter expressed concerns that FTA will fund only a
portion of eligible costs of contractor's claims. Our response is as
follows: To the extent that the recipient has not used all or part of
the FTA assistance budgeted for the activity that was the subject of a
dispute, claim, or litigation, the recipient may use the funds so
budgeted to pay the costs of the settlement or resolution of the
matter. Any additional FTA assistance that could be provided would
depend on the availability of all or part of the FTA assistance
requested. Even if all the requested FTA assistance were available, we
cannot assure that FTA will be able to provide a sufficient amount of
Federal assistance to pay for the entire Federal share of those costs.
Nevertheless, FTA generally attempts, subject to availability of funds,
to provide FTA assistance in the percentage that matches the percentage
of the original award. However, any expenditure of FTA assistance is
also subject to the requirement that the costs claimed be reasonable,
allowable, and allocable.
Paragraph 5.b(3)--Deny Federal Assistance
Three commenters objected to the list of situations in which FTA
may determine the extent to which FTA assistance could be used for
their support. The commenters pointed out that many of the situations
listed involving the recipient, the contractor, and other jurisdictions
or entities may be a result from judgments entered into in good faith
that turned out bad, rather than matters of negligence or incompetence.
We agree, and have revised the final circular to clarify FTA's views
that the situations described in the paragraph do not always mean that
FTA will not provide all or some Federal assistance contemplated, or
that FTA will withdraw all or some Federal assistance previously
awarded, or that FTA will attempt to recover all or some Federal
assistance used in the situation.
The commenter asked that FTA remove its examples of specific
circumstances in which FTA might not participate in project costs
unless those circumstances are exhaustive. FTA disagrees. Not knowing
all the possibilities that can affect a project, we are unable to
provide an all-inclusive list of examples that might cause FTA to
reduce, withdraw, or seek recovery of all or some Federal assistance.
We believe these examples can be useful indications of situations of
concern to FTA.
Another commenter implied that failure by FTA or its oversight
contractors to note and correct errors the recipient has made should
affect FTA's decision to participate in the costs of resolving
protests, disputes, claims or litigation in which the recipient
otherwise might be found to be at fault. We disagree. FTA pays its
``oversight'' contractors only to perform ``oversight'' and report
their findings and recommendations to FTA. Neither FTA nor its
oversight contractors act as a recipient's quality control agents nor
do they make decisions for recipients. Any perceived failure of FTA or
its oversight contractors to note and correct a recipient's error does
not indicate FTA's concurrence in the recipient's action, nor does it
impose any liability on FTA.
Appendix A--References
One commenter provided recommendations about changes to citations
as listed in the Appendix. The final circular includes most of those
recommended changes.
Appendix B--FTA Regional and Metropolitan Office Contact Information
The final circular's list of regional and metropolitan office
contact information now includes the Philadelphia Metropolitan Office,
which was erroneously omitted.
Appendix C--Third Party Contracting Checklists
In response to one commenter's request for review aids and
worksheets, the final circular now includes a new Appendix C with
checklists including references to specific sections of the final
circular.
[[Page 56918]]
Appendix D--Federally Required and Other Model Clauses
In response to one commenter's request for clause matrices, the
final circular now includes a new Appendix D with matrices identifying
the various clauses and contract provisions that might be required.
Index
One commenter asked us to include ``piggybacking'' and ``tag-on''
to the index. We agree, and the final circular includes those terms in
this index.
The same commenter asked that topic headings be formatted to stand
out more clearly. The final circular includes these changes.
Issued in Washington, DC, this 24th day of September, 2008.
James S. Simpson,
Administrator.
[FR Doc. E8-22914 Filed 9-29-08; 8:45 am]
BILLING CODE 4910-57-P