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|        |                                       | **FTA C 4220.1F**  |
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| **Subj | **THIRD PARTY CONTRACTING GUIDANCE**  |                    |
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1.  [PURPOSE]{.underline}. This circular provides contracting guidance
    for the recipient of financial assistance awarded by the Federal
    Transit Administration (FTA) when using those funds to finance their
    procurements (third party contracts). This revision incorporates the
    new procurement provisions of the Safe, Accountable, Flexible,
    Efficient Transportation Equity Act: A Legacy for Users
    (SAFETEA--LU), and includes the most current available guidance for
    the Federal public transportation program as of the date of
    publication.

2.  [CANCELLATION]{.underline}. This circular, when final, will cancel
    FTA Circular 4220.1E, "Third Party Contracting Requirements," dated
    06--19--03.

3.  [AUTHORITY]{.underline}.

Federal Transit Laws, Title 49, United States Code, Chapter 53.

4.  [WAIVER]{.underline}. FTA reserves the right to waive any provision
    of this circular to the extent permitted by Federal law or
    regulation.

[FEDERAL REGISTER NOTICE]{.underline}. (This will be inserted when the
final circular is adopted)\...

5.  [AMENDMENTS TO THE CIRCULAR]{.underline}. FTA reserves the right to
    make changes to this circular in the future to update references to
    requirements contained in other revised or new guidance and
    regulations that undergo notice and comment procedures, without
    further notice and comment on this circular.

6.  [ACCESSIBLE FORMATS]{.underline}. This document is available in
    accessible formats upon request. Paper copies of this circular as
    well as information regarding these accessible formats may be
    obtained by calling FTA's Administrative Services Help Desk, at
    202--366--4865. The Federal Relay Service (FRS) is a Government
    system to support individuals with hearing impairment.  An operator
    trained to use the TTY System is available to assist people who are
    hearing impaired.  The FRS Toll Free Access Number is
    800--877--8339.

[/ S /Original signed by]{.underline}

James S. Simpson

Administrator

**This page intentionally left blank**

**THIRD PARTY CONTRACTING GUIDANCE**

**[TABLE OF CONTENTS]{.underline}**

> [CHAPTER]{.underline} [PAGE]{.underline}
>
> I. [INTRODUCTION AND ROLE OF THE FEDERAL]{.underline}
>
> [TRANSIT ADMINISTRATION]{.underline} I--1
>
> 1\. The Federal Transit Administration (FTA) I--1
>
> 2\. Authorizing Legislation I--1
>
> 3\. How to Contact FTA I--1
>
> 4\. Background I--2
>
> 5\. Definitions I--2
>
> 6\. FTA's Role I--4
>
> II\. [APPLICABILITY]{.underline} II--1
>
> 1\. Applicability II--1
>
> 2\. Federal Laws and Regulations II--5
>
> 3\. State and Local Laws and Regulations II--6
>
> III\. [THE RECIPIENT'S RESPONSIBILITIES]{.underline} III--1
>
> 1\. Written Standards of Conduct II--1
>
> 2 Self-Certification II--1
>
> 3\. Procurement Capacity II--1
>
> 4\. Audit II--4
>
> IV\. [THE RECIPIENT'S PROPERTY AND SERVICES NEEDS AND]{.underline}
>
> [FEDERAL REQUIREMENTS AFFECTING THOSE NEEDS]{.underline} IV--1
>
> 1\. Determining the Recipient's Needs IV--1
>
> 2\. Federal Requirements That May Affect a Recipient's
>
> Acquisitions IV--2
>
> V. [SOURCES]{.underline} V--1
>
> 1\. Force Account V--1
>
> 2\. Shared Use V--1
>
> 3\. Joint Procurement V--1
>
> 4\. State Purchasing Schedules V--1
>
> 5\. Federal Excess and Surplus Property V--2
>
> 6\. Federal Supply Schedules V--2
>
> 7\. Existing Contracts V--3
>
> 8\. The Open Market V--6
>
> [CHAPTER]{.underline} [PAGE]{.underline}
>
> VI\. [PROCEDURAL GUIDANCE FOR OPEN MARKET]{.underline}
>
> [PROCUREMENTS]{.underline} VI--1
>
> 1\. Competition Required VI--1
>
> 2\. Solicitation Requirements and Restrictions VI--1
>
> 3\. Methods of Procurement VI--4
>
> 4\. Prohibited/Restricted Contract Types VI--12
>
> 5\. Eligible Costs VI--13
>
> 6\. Cost and Price Analysis VI--13
>
> 7\. Evaluations VI--15
>
> 8\. Contract Award VI--15
>
> VII\. [PROTESTS, CHANGES AND MODIFICATIONS, CLAIMS,]{.underline}
>
> [DISPUTES AND SETTLEMENTS]{.underline} VII--1
>
> 1\. Protests VII--1
>
> 2\. Changes and Modifications VII--3
>
> 3\. Claims VII--3
>
> 4\. Disputes VII--4
>
> 5\. Settlements, Arbitration Determinations, and Court Awards---
>
> Cost Sharing VII--5

[APPENDICES]{.underline}

APPENDIX A [REFERENCES]{.underline} A--1

APPENDIX B [FTA REGIONAL AND METROPOLITAN CONTACT]{.underline}

[INFORMATION]{.underline} B--1

INDEX [SUBJECT AND LOCATION IN CIRCULAR]{.underline}

# CHAPTER I

# 

# [INTRODUCTION AND ROLE OF THE FEDERAL TRANSIT ADMINISTRATION]{.underline}

1.  [THE FEDERAL TRANSIT ADMINISTRATION (FTA)]{.underline}. FTA is one
    of ten operating administrations within the U.S. Department of
    Transportation (DOT). Headed by an Administrator who is appointed by
    the President of the United States, FTA functions through a
    Washington, DC, headquarters office, ten regional offices and five
    metropolitan offices that assist public transportation agencies in
    all 50 States, the District of Columbia, Puerto Rico, the U.S.
    Virgin Islands, Guam, Northern Mariana Islands, and American Samoa.

Public transportation encompasses transportation by buses, subways,
light rail, commuter rail, monorail, passenger ferry boats, trolleys,
inclined railways, people movers, and vans. Public transportation can be
either fixed-route or demand-response service. The Federal Government,
through FTA, provides financial assistance to develop new public
transportation systems and improve, maintain, and operate existing
systems. FTA oversees thousands of federally-assisted projects to
hundreds of State and local public transportation providers, primarily
through its ten regional offices. Each FTA recipient is responsible for
managing its programs and projects in accordance with Federal
requirements, and FTA is responsible for ensuring that recipients follow
Federal statutory and administrative requirements.

7.  [AUTHORIZING LEGISLATION]{.underline}. Most Federal transit laws are
    codified at 49 U. S. C. Chapter 53.  Authorizing legislation is
    substantive legislation enacted by Congress that establishes or
    continues the legal operation of a Federal program or agency.
     Congress has amended FTA's authorizing legislation every four to
    six years.  FTA's most recent authorizing legislation is the Safe,
    Accountable, Flexible, Efficient Transportation Equity Act:  A
    Legacy for Users (SAFETEA--LU), Public Law 109--59, signed into law
    August 10, 2005.  SAFETEA--LU authorizes FTA programs from Federal
    Fiscal Year (Fy) 2006 through Fiscal Year 2009.  Changes have been
    added to this circular to reflect the SAFETEA--LU changes to Federal
    transit law and to reflect changes required by other laws that have
    become effective since the circular was last published in 2003.

8.  [HOW TO CONTACT FTA]{.underline}. FTA's regional and metropolitan
    offices are responsible for the provision of financial assistance to
    FTA recipients and oversight of implementation for most FTA
    programs. Certain programs are the responsibility of FTA
    headquarters. Inquiries should be directed to either the regional or
    metropolitan office responsible for the geographic area in which you
    are located. See, Appendix B for additional information.

For further information, visit the FTA website:
[**http://www.fta.dot.gov**](http://www.fta.dot.gov/), or contact FTA
Headquarters at the following address and phone number:

Federal Transit Administration Office of Communication and Congressional
Affairs

1200 New Jersey Avenue SE

Washington, DC 20590

Phone: 202--366--4043

Fax: 202--366--3472

9.  [BACKGROUND]{.underline}. Because FTA makes grants and enters into
    cooperative agreements awarding such a substantial amount of Federal
    assistance to support public transportation, FTA has been charged by
    Federal laws and regulations to assure that those Federal assistance
    funds it provides to its recipients are used prudently in a manner
    consistent with all applicable Federal requirements. FTA's enabling
    legislation contains several provisions pertaining to procurements
    undertaken by FTA recipients. In addition, certain government-wide
    Federal principles must be applied to assure fair and economical
    procurements when Federal assistance is expended.

10. [DEFINITIONS]{.underline}. All definitions in 49 U.S.C. Section 5302
    are applicable to this circular. The following additional
    definitions are provided:

    a.  [Approval, Authorization, Concurrence, Waiver]{.underline} means
        a conscious written statement (transmitted in typewritten hard
        copy or electronically) of a Federal Government official
        authorized to permit the recipient to take or omit an action
        required by the Grant Agreement or Cooperative Agreement for the
        Project, Master Agreement, or this circular, which action may
        not be taken or omitted without such permission. Except to the
        extent that FTA determines otherwise in writing, such approval,
        authorization, concurrence, or waiver permitting the performance
        or omission of a specific action does not constitute permission
        to perform or omit other similar actions. An oral permission or
        interpretation has no legal force or effect.

    b.  [Best Value]{.underline} describes a competitive, negotiated
        procurement in which the recipient reserves the right to select
        the most advantageous offer by evaluating and comparing factors
        in addition to cost or price. Best Value procurement enables the
        recipient to purchase technical superiority even if it means
        paying a premium price. A "premium" is the difference between
        the price of the lowest priced proposal and the one that the
        recipient believes offers the best value. In accordance with 49
        U.S.C. Section 5325(c), a recipient may award a contract to
        other than the lowest bidder if the award furthers an objective
        consistent with the purposes of 49 U.S.C. Chapter 53, including
        improved long-term operating efficiency and lower long-term
        costs. To achieve best value in the context of acquisitions for
        public transportation purposes, evaluation factors may include
        technical design, technical approach, quality of proposed
        personnel, past performance, and/or management plan. Best Value
        also means the expected outcome of an acquisition that, in the
        recipient's estimation, provides the recipient the greatest
        overall benefit in response to the requirement. This definition
        is intended neither to limit nor to dictate qualitative measures
        recipients may employ, except that they must be in support of
        the purposes of the Federal public transportation program.

    c.  [Common Grant Rule]{.underline}, for purposes of this circular,
        means:

        1.  In the case of Federal grants and cooperative agreements
            with governmental recipients of Federal assistance including
            Indian tribal governments, DOT regulations, "Uniform
            Administrative Requirements for Grants and Cooperative
            Agreements to State and Local Governments," 49 CFR Part 18.

        2.  In the case of Federal grants and cooperative agreements
            with non-governmental recipients of Federal assistance, DOT
            regulations, "Uniform Administrative Requirements for Grants
            and Agreements with Institutions of Higher Education,
            Hospitals, and Other Non-Profit Organizations," 49 CFR Part
            19.

    d.  [Constructive Change]{.underline} means an act or omission by
        the recipient, which in fact causes a change in the contract
        work.

    e.  [Cooperative Agreement]{.underline} means an instrument by which
        FTA awards Federal assistance to a specific recipient to support
        a particular project in which FTA takes an active role or
        retains substantial control, as set forth in 31 U.S.C. Section
        6305.

    f.  [Design-Bid-Build Project]{.underline} means a construction
        project under which a recipient commissions an architect or
        engineer to prepare drawings and specifications under a design
        services contract, and separately contracts for at risk
        construction, by engaging the services of a contractor through
        sealed bidding or competitive negotiations to complete delivery
        of the project.

    g.  [Design-Build Project]{.underline} as defined in 49 U.S.C.
        Section 5325(d)(1) means (1) a project under which a recipient
        enters into a contract with a seller, firm, or consortium of
        firms to design and build a public transportation system, or an
        operable segment of such system, that meets specific performance
        criteria; and (2) may include an option to finance, or operate
        for a period of time, the system or segment or any combination
        of designing, building, operating, or maintaining such system or
        segment.

    h.  [Electronic Commerce (E-Commerce)]{.underline} consists of
        electronic techniques for accomplishing business transactions
        including electronic mail or messaging, World Wide Web
        technology, electronic bulletin boards, purchase cards,
        electronic funds transfer, electronic signatures, and electronic
        data interchange.

    i.  [FTA]{.underline} means the Federal Transit Administration.

    j.  [Governmental Recipient]{.underline} means a recipient that must
        comply with the Common Grant Rule at 49 CFR Part 18. This
        includes a State or local government or a federally recognized
        Indian tribal government.

        1.  [State]{.underline} means any of the several States of the
            United States, the District of Columbia, the Commonwealth of
            Puerto Rico, any territory or possession of the United
            States, or any agency or instrumentality of a State
            exclusive of local governments. The term does not include
            any public and Indian housing agency under United States
            Housing Act of 1937. Nor does the term include a State
            public institution of higher education.

        2.  [Local government]{.underline} means a county, municipality,
            city, town, township, local public authority (including any
            public and Indian housing agency under the United States
            Housing Act of 1937) school district, special district,
            intrastate district, council of governments (whether or not
            incorporated as a nonprofit corporation under state law),
            any other regional or interstate government entity, or any
            agency or instrumentality of a local government. This term
            does not include a local public institution of higher
            education.

        3.  [Federally recognized Indian tribal government]{.underline}
            means the governing body or a governmental agency of any
            Indian tribe, band, nation, or other organized group or
            community (including any Native village as defined in
            section 3 of the Alaska Native Claims Settlement Act, 85
            Stat 688) certified by the Secretary of the Interior as
            eligible for the special programs and services provided by
            him through the Bureau of Indian Affairs.

    k.  [Grant]{.underline} means the instrument by which FTA awards
        Federal assistance to a specific recipient to support a
        particular project in which FTA does not take an active role or
        retain substantial control, as set forth in 31 U.S.C. Section
        6304.

    l.  [Master Agreement]{.underline} means the FTA official document
        containing substantially all FTA and other cross-cutting Federal
        requirements applicable to the FTA recipient and its project. 
        The Master Agreement is generally revised annually.  The Master
        Agreement is incorporated by reference and made part of each FTA
        grant, cooperative agreement, and amendment thereto.

    m.  [Non-Governmental Recipient]{.underline} means a recipient that
        must comply with the Common Grant Rule at 49 CFR Part 19. These
        entities include public and private institutions of higher
        education, public and private hospitals, and other quasi-public
        and private non-profit organizations such as, but not limited
        to, community action agencies, research institutes, educational
        associations, and health centers. FTA reserves the right to
        apply the requirements of 49 CFR Part 19 to commercial
        organizations, foreign or international organizations (such as
        agencies of the United Nations), and individuals.
        Government-owned contractor-operated facilities or research
        centers providing continued support for mission-oriented,
        large-scale programs that are government-owned or controlled, or
        are designated as federally-funded research and development
        centers are not subject to the requirements of 49 CFR Part 19.

    n.  [Property]{.underline}, as used in this circular, encompasses
        real property, equipment, supplies, other expendable property,
        intellectual property, and intangible property.

    o.  [Recipient]{.underline} means the public or private entity to
        which a grant or cooperative agreement is awarded by FTA. The
        recipient is the entire legal entity even if only a particular
        component of the entity is designated in the assistance award
        document. The term "recipient" includes "grantee," which is a
        "recipient" of Federal grant assistance.

For the purposes of this circular, "recipient" also includes any
subrecipient or subgrantee of the recipient. Furthermore, a recipient is
responsible for assuring that each of its subrecipients complies with
the requirements and standards of this circular, and that each of its
subrecipients is aware of requirements imposed upon them by Federal
statutes and regulations.

p.  [Revenue Contract]{.underline} means a contract of the recipient or
    subrecipient the primary purpose of which is either to produce
    revenues in connection with a public transportation related
    activity, or to create business opportunities involving the use of
    an FTA assisted asset.

q.  [State]{.underline} means a State of the United States, the District
    of Columbia, Puerto Rico, the Northern Mariana Islands, Guam,
    American Samoa, and the Virgin Islands or any agency or
    instrumentality of a State exclusive of local governments. "State"
    does not include any public and Indian housing agency under the
    United States Housing Act of 1937.

r.  [Third Party Contract]{.underline} refers to any purchase order or
    contract awarded by a recipient to a vendor or contractor using
    Federal financial assistance awarded by FTA; a third party contract
    also includes purchases by credit card.

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11. [FTA'S ROLE]{.underline}. FTA's role in third party procurements
    reflects the principles of Executive Order No. 13132, "Federalism,"
    08--04--1999, 5 U.S.C. Section 601 note. The Executive Order directs
    Federal agencies to refrain from substituting their judgment for
    that of their State recipients unless the matter is primarily a
    Federal concern and to defer, to the maximum extent feasible, to the
    States to establish standards rather than setting national
    standards.

To ensure compliance with Federal procurement requirements, FTA will
continue to provide guidance and technical assistance to its recipients
consistent with its Federal oversight responsibilities.

a.  [Reliance on the Recipient's Self-Certification]{.underline}.
    Recognizing that most FTA recipients have experience with the third
    party contracting requirements of the Federal regulations (49 CFR
    Parts 18 and 19), FTA will rely primarily on the recipient's
    "self-certification" (usually provided annually in the first quarter
    of the Federal fiscal year) that its procurement system meets FTA
    requirements and that the recipient has the technical capacity to
    comply with Federal procurement requirements. Each recipient is
    asked to "self-certify" as part of the Annual Certifications and
    Assurances.

To preclude unnecessary delay in recipient procurements, FTA does not,
as a general rule, conduct pre-award reviews of third party contracts or
contract specifications as envisioned in the Common Grant Rules, 49 CFR
Section 18.36(g)(2) and 49 CFR Section 19.44(e). Instead, FTA relies
heavily on the recipient's self-certification of its procurement system.

FTA will, however, monitor compliance with this circular as part of its
routine oversight responsibilities. If FTA becomes aware of
circumstances that might invalidate a recipient's self-certification,
FTA will investigate and recommend appropriate measures to correct
whatever deficiency may exist.

b.  [Third Party Contract Reviews]{.underline}. Although authorized by
    the Common Grant Rules to conduct pre-award reviews, FTA relies on
    the validity of each recipient's self-certification rather than on a
    pre-award review of third party contracts. FTA will rely on
    periodic, post-award reviews to ensure that the recipient complies
    with Federal requirements and standards. Should a recipient fail to
    self-certify its procurement system, however, FTA reserves the right
    to conduct pre-award reviews as provided for in the Common Grant
    Rules. A recipient is still free to request FTA's pre-award review
    of its procurements as part of FTA's technical assistance program.
    Conversely, if FTA requests to review the record of a particular
    procurement, a recipient must make its procurement documents
    available for FTA's pre-award (or post-award) review.

c.  [Procurement System Reviews]{.underline}. In accordance with 49
    U.S.C. Section 5307(i), a recipient may request the Secretary to
    approve its procurement system, and FTA may provide that approval.
    FTA is required by 49 U.S.C. Section 5307(h) to perform reviews and
    evaluations of the Urbanized Area Formula Program and to perform a
    full review and evaluation of the performance of each recipient in
    carrying out Federal assistance through FTA's Urbanized Area Formula
    Programs with specific reference to their compliance with statutory
    and administrative requirements.

Accordingly, FTA will perform procurement system reviews as part of its
on-going oversight responsibility and will perform procurement system
reviews for Urbanized Area Formula Program recipients that self-certify
their procurement systems. FTA may recommend "best practices" in order
to assist the recipient in improving its procurement practices. In such
cases, FTA will identify such recommendations as "advisory." For more
information, see FTA's "Procurement Reviews," guidance at the FTA
website
[**http://www.fta.dot.gov/funding/oversight/grants_financing_100.html**](http://www.fta.dot.gov/funding/oversight/grants_financing_100.html).

d.  [Audits]{.underline}. FTA may perform, contract for, or instruct the
    recipient to obtain specific audits of particular third party
    contracts to ascertain that payments were made in conformance with
    the terms of the contract, or for other purposes.

e.  [Training and Technical Assistance]{.underline}. FTA provides
    procurement training and technical assistance at both regional and
    national levels by offering various instructional courses, by
    conducting regional technical assistance conferences, and by
    providing assistance by a contractor on an as needed basis.

f.  [FTA Master Agreement]{.underline}. FTA's grants and cooperative
    agreements incorporate terms and conditions referred to as the
    "Master Agreement." This document lists many FTA, and other
    crosscutting Federal requirements applicable to the FTA recipient.
    Many of these requirements are related to third party procurements.

g.  [FTA "Best Practices Procurement Manual]{.underline}." FTA provides
    written procurement guidance to recipients in its "Best Practices
    Procurement Manual." Although the manual can be a good resource for
    the recipient to use in conducting FTA assisted procurements, it is
    only a guidance document and is not the source of any FTA
    requirements. As such, reviewers should not refer to the manual when
    describing FTA requirements. Moreover, while FTA does revise and
    update the manual periodically, FTA cautions each recipient that
    relying solely on the manual may not ensure that all applicable FTA
    requirements will be met.

h.  [The FTA Third Party Procurement HelpLine.]{.underline} This Help
    Line is another resource through which you may submit your questions
    on FTA's third party acquisition policies and practices. It can be
    accessed at www.fta.dot.gov/funding/grants_financing_6036.html

i.  [FTA Offices]{.underline}. You may also contact your FTA Regional or
    Metropolitan Office for assistance, or FTA's Office of
    Administration for assistance . A list of the Regional and
    Metropolitan Offices can be found in Appendix B of this document.

# CHAPTER II

# 

# [APPLICABILITY]{.underline}

1.  [APPLICABILITY]{.underline}. Except to the extent that FTA
    determines otherwise in writing, the guidance within this circular
    applies to each Federal Transit Administration (FTA) recipient of
    Federal assistance (including each grantee and each recipient of
    Federal assistance under cooperative agreements) and each
    subrecipient (including each subgrantee) that enters into contracts
    with other parties under FTA assistance programs. As for "other
    agreements" authorized by 49 U.S.C. Section 5312(a) for research,
    development, demonstration, and deployment projects and 49 U.S.C.
    Section 5312(b) for joint partnership projects for the deployment of
    public transportation innovation, the principles of the circular may
    be used as an initial starting point from which to consider
    requirements and other provisions that should be adopted, and other
    requirements that should be modified or waived to achieve FTA's and
    the recipient's objectives.

To the extent that the circular restates requirements of Federal
statutes or regulations, however, those statutory and regulatory
requirements cannot be waived except as permitted therein. With a few
exceptions listed below, this circular applies whenever Federal
assistance is used to support a recipient's procurements. (Within this
circular, FTA uses the term "third party contract" to refer to the
recipient's contracts financed with Federal assistance funds). Neither
third party contractors nor third party subcontractors are "recipients"
for purposes of this circular. Consequently, third party contractors are
not directly covered by this circular, the Common Grant Rules at 49 CFR
Parts 18 and 19, and FTA's "Best Practices Procurement Manual" in
awarding their subcontracts. However, each third party contractor and
subcontractor is required to comply with the clauses in its prime
contracts with a recipient, including requirements to extend those
clauses to its subcontractors at the lowest tier required. For that
reason, this circular, the Common Grant Rules at 49 CFR Parts 18 and 19,
and FTA's "Best Practices Procurement Manual" do provide useful
information to a third party contractor about the constraints under
which a recipient may enter into a third party contract.

a.  [Categories of Recipients]{.underline}. The extent to which the
    provisions of this circular apply to a recipient depends on whether
    the recipient is a State or other than a State.

    1.  [States]{.underline}. When procuring property and services under
        a grant or cooperative agreement, a State will follow the same
        procurement policies and procedures that it uses for its
        acquisitions that are not financed with Federal funds. States
        must, at a minimum, comply with the statutorily-mandated
        requirements of this circular on contract term limitation for
        revenue vehicle purchases, competition, prohibitions against
        geographic preferences, and procurement of architectural and
        engineering services and ensure that every purchase order and
        contract executed by it using Federal funds includes all clauses
        required by Federal statutes and their implementing regulations.

        a.  [Governmental Subrecipients of the State]{.underline}. FTA
            takes the position that each State and its governmental
            subrecipients may utilize State procurement procedures for
            their third party contracts and that only the portions of
            this circular applicable to the State will apply to
            procurements by the State's governmental subrecipients.

        b.  [Private Non-profit Subrecipients of the State]{.underline}.
            In contrast, a private non-profit subrecipient of a State is
            required to comply with applicable requirements of 49 CFR
            Part 19.

    2.  [Other Recipients and Subrecipients]{.underline}. The provisions
        of this circular apply to third party contracts and subcontracts
        of all other FTA recipients and their subrecipients, including
        regional public transportation authorities.

b.  [Categories of Third Party Contracts]{.underline}. Some variations
    in the applicability of the circular depend on the type of contract
    involved.

    1.  [Capital Contracts]{.underline}. The provisions of this circular
        apply to most third party capital contracts except as listed
        below:

        a.  [Contracts Financed Without Federal Funds]{.underline}. The
            provisions of this circular do not apply to a recipient's
            capital contracts that can be demonstrated to be wholly
            financed without FTA or other Federal funds even if those
            contracts are undertaken in support of FTA assisted capital
            projects.

        b.  [Art]{.underline}. Procurements of art are beyond the scope
            of this circular. The acquisition of art is addressed in FTA
            Circular 9400.1A, "Federal Transit Administration Design and
            Art in Transit Projects," dated 06--09--95. In addition,
            FTA's "Best Practices Procurement Manual" includes extensive
            non-binding guidance for applying FTA Circular 9400.1A and
            related provisions.

        c.  [Over-the-Road Buses]{.underline}. FTA determined that the
            provisions of this circular and the Common Grant Rules do
            not apply to FTA's Over-the-Road Bus Accessibility Program.
            Section 3038 of TEA--21, as amended by Section 3039 of
            SAFETEA--LU, 49 U.S.C. Section 5310 note established this
            program to provide private for-profit companies funding to
            support the incremental costs of wheelchair lift equipment
            and to provide the necessary training to implement the
            Department of Transportation's (DOT's) accessibility
            requirements for over-the-road buses. As a result, there is
            no discussion of the Common Grant Rules or this circular in
            FTA's annual notice of availability of funds for this
            program.

        d.  [Real Property]{.underline}. Procurements of real property
            are generally beyond the scope of this circular. Real
            property acquisition is addressed in DOT regulations,
            "Uniform Relocation Assistance and Real Property Acquisition
            for Federal and Federally Assisted Programs," 49 CFR Part
            24, which set forth protections for owners and lessees of
            real property to be acquired as part of an FTA assisted
            project. The procurement provisions of this circular,
            however, applicable to construction will apply to
            procurements of buildings and other structures that require
            construction, alteration, or repair.

    2.  [Operations Contracts]{.underline}. FTA is reviewing its
        policies with respect to operations procurements undertaken by
        FTA recipients and their subrecipients. 

        a.  [Operations Contracts Financed With FTA
            Assistance]{.underline}. The provisions of this circular
            apply to contracts in support of the recipient's operations
            financed with FTA assistance.

        b.  [Operations Contracts Financed Entirely Without FTA
            Assistance]{.underline}. RESERVED. \[FTA is reviewing its
            policies with respect to applicability of FTA procurement
            requirements for operations contracts that recipients and
            their subrecipients finance entirely without FTA assistance.
            Notwithstanding any other provision of this circular, a
            recipient that enters into third party contracts for
            operations or planning must comply with the requirements of
            DOT regulations, ""Participation by Disadvantaged Business
            Enterprises in Department of Transportation Financial
            Assistance Programs," 49 CFR Part 26, applicable to those
            contracts, regardless of the allocation of its FTA
            assistance to contracting or other purposes.\]

    3.  [Preventive Maintenance]{.underline}. Third party contracts for
        preventive maintenance are eligible for FTA capital assistance.
        This circular applies to a recipient's preventive maintenance
        contracts financed with FTA assistance. If a recipient uses its
        FTA assistance to support specific discrete preventive
        maintenance contracts, and if, through its accounting
        procedures, a recipient is able to allocate and trace all its
        capital preventive maintenance funds to discrete preventive
        maintenance contracts, only those specific discrete contracts
        are covered by the circular. If, however, the recipient applies
        its preventive maintenance funds as a percentage of its total
        maintenance costs, and the recipient is unable to allocate all
        of its capital maintenance funds to discrete preventive
        maintenance contracts, the circular applies to all the
        recipient's preventive maintenance contracts, even if specific
        operating contracts were financed wholly without FTA assistance.

    4.  [Revenue Contracts]{.underline}. A revenue contract is a
        contract of the recipient or subrecipient in which the recipient
        or subrecipient provides access to public transportation assets
        either to produce revenues in connection with a public
        transportation related activity, or to create business
        opportunities with the use an FTA assisted property. FTA
        requires these contracts to be awarded utilizing competitive
        selection procedures and principles. FTA provides the recipient
        broad latitude in determining the extent and type of competition
        appropriate for a particular revenue contract.

FTA requires these contracts to be awarded using competitive selection
procedures and principles, as necessary. For example, if more than one
interested party is readily available, and the opportunity (such as
advertising space) is limited and cannot accommodate most prospective
parties, then the recipient is expected to make its selection through
competition. If, however, only one party seeks access to a public
transportation asset (such as a utility that might seek cable access in
a subway system), but the recipient is willing and able to provide
access to other parties that may develop an interest in using the asset,
then competition would not be required because the opportunity to obtain
access is open to all interested parties.

5.  [Joint Development]{.underline}. An emerging area that combines
    aspects of federally-funded construction and revenue contracting is
    that of joint development. The circular's requirements must apply to
    the federally-funded construction aspects of a joint development
    project, but the revenue contracting aspects can make for difficult
    procurement practice decisions. FTA will work with the recipient to
    craft approaches on a case-by-case basis that satisfy the statutory
    and regulatory requirements for competition while preserving the
    benefits of this innovative contracting strategy to the maximum
    possible extent.

6.  [Public Private Partnerships]{.underline}. As part of FTA's interest
    in fostering Public Private Partnerships (PPP), FTA is considering
    which procurement and other requirements may be modified to
    facilitate project implementation, including procurement
    requirements to protect the Federal interest that are redundant with
    private sector safeguards, incentives, and obligations. Among the
    types of contracting arrangements FTA may be reviewing include:

    a.  Design-Build,

    b.  Design-Build with a Warranty,

    c.  Construction Manager at Risk,

    d.  Design-Build Operate Maintain,

    e.  Design-Build Finance Operate,

    f.  Build Operate Transfer,

    g.  Build Own Operate, and

    h.  Full Delivery or Program Management.

A recipient seeking an exception from specific requirements of this
circular should contact its Project Manager. FTA will work with the
recipient to craft approaches on a case-by-case basis that satisfy the
statutory and regulatory requirements for competition while preserving
the benefits of the innovative contracting strategy proposed to the
maximum possible extent.

7.  [Transactions Involving Complex Financial Arrangements]{.underline}.
    Should a public transportation project involve the services of an
    "arranger" or similar facilitator, whose services will not be
    financed with Federal assistance, FTA encourages, but does not
    require, competition in the selection of that arranger. But when the
    arranger constructs a transaction that will involve federally-funded
    assets, FTA requires competition to the extent permissible in view
    of the limitations of securities regulations. These principles have
    been applied to leveraged leasing projects in which FTA has
    previously participated.

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12. [FEDERAL LAWS AND REGULATIONS]{.underline}. Each recipient and
    subrecipient must comply with applicable Federal statutes, including
    but not limited to Federal transit laws at 49 U.S.C. Chapter 53 and
    Federal regulations, which contain requirements applicable to FTA
    assisted procurements and recipients thereof.

    a.  [Common Grant Rules]{.underline}. To the extent that their
        requirements have not been superseded by conflicting Federal law
        or regulations, the most comprehensive Federal regulations
        applicable to FTA's Federal assistance programs (frequently
        referred to as the "Common Grant Rule") are:

        1.  [Governmental Recipients]{.underline}. DOT regulations,
            "Uniform Administrative Requirements for Grants and
            Cooperative Agreements to State and Local Governments," 49
            CFR Part 18, which are applicable to governmental recipients
            (apart from institutions of higher education) and Indian
            tribes, and

        2.  [Non-Governmental Recipients]{.underline}. DOT regulations,
            "Uniform Administrative Requirements for Grants and
            Agreements with Institutions of Higher Education, Hospitals,
            and Other Non-Profit Organizations," 49 CFR Part 19, which
            are applicable to private non-profit entities, institutions
            of higher education and, within FTA's discretion, to private
            for-profit organizations.

    b.  [Federal Acquisition Regulation]{.underline}. The Federal
        Acquisition Regulation (FAR), 48 CFR Chapter 1, does not apply
        to federally-assisted procurements, absent Federal laws or
        regulations to the contrary. In the case of FTA programs, FAR
        cost principles apply to grants and cooperative agreements with
        private for-profit entities. In addition, audits of
        architectural and engineering services as defined at 49 U.S.C.
        Section 5325 must be carried out in accordance with FAR Part 31
        requirements. Nevertheless, in the absence of other guidance,
        FAR standards can provide helpful guidelines provided the
        recipient's circumstances are appropriate for application of the
        specific FAR standard under consideration.

    c.  [Other Federal Requirements]{.underline}. In addition to the
        Common Grant Rules, each FTA recipient is required to comply
        with applicable Federal transit laws and implementing
        regulations not addressed in the Common Grant Rules, as well as
        other Federal cross cutting statutes and regulations that impact
        what a recipient may acquire, and other conditions that impact
        such acquisitions. The latest edition of FTA's Master Agreement,
        typically issued at the beginning of each Federal fiscal year,
        includes a comprehensive list of Federal laws and regulations
        that may apply to a federally-assisted project. Each recipient
        and subrecipient may use its own procurement procedures,
        provided that its procurements conform to applicable Federal law
        and regulations.

13. [STATE AND LOCAL LAWS AND REGULATIONS]{.underline}. The Common Grant
    Rule provides that recipients and subrecipients will use their own
    procurement procedures that reflect applicable State and local laws
    and regulations, provided that the procurements conform to
    applicable Federal laws and regulations. If there is no State or
    local law addressing a particular aspect of procurement, Federal
    direct procurement principles can often (but not always) provide
    useful guidance.

In the event of a conflict between Federal and State or local
requirements, the recipient should notify FTA expeditiously in writing.
FTA will then work with the recipient to make appropriate arrangements
to proceed with the project or, if unsuccessful, then terminate the
Project.

# CHAPTER III

# 

# [THE RECIPIENT'S RESPONSIBILITIES]{.underline}

1.  [WRITTEN STANDARDS OF CONDUCT]{.underline}. The Common Grant Rules
    require each recipient to maintain written standards of conduct
    governing the performance of its employees engaged in the award and
    administration of contracts.

    a.  [Personal Conflicts of Interest]{.underline}. No employee,
        officer, agent, immediate family member, or board member of the
        recipient shall participate in the selection, award, or
        administration of a contract supported by Federal Transit
        Administration (FTA) funds if a conflict of interest, real or
        apparent, could be involved. Such a conflict would arise when
        any of the following has a financial or other interest in the
        firm selected for award:

        1.  The employee, officer, agent, or board member,

        2.  Any member of his/her immediate family,

        3.  His or her partner, or

        4.  An organization that employs, or is about to employ, any of
            the above.

    b.  [Gifts]{.underline}. The recipient's officers, employees,
        agents, or Board members may neither solicit nor accept gifts,
        gratuities, favors, or anything of monetary value from
        contractors, potential contractors, or parties to subagreements.
        The recipient may set minimum rules when the financial interest
        is not substantial or the gift is an unsolicited item of nominal
        intrinsic value.

    c.  [Violations]{.underline}. To the extent permitted by State or
        local law or regulations, such standards of conduct will provide
        for penalties, sanctions, or other disciplinary action for
        violation of such standards by the recipient's officers,
        employees, or agents, or by contractors or their agents.

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14. [SELF-CERTIFICATION]{.underline}. FTA expects each recipient to
    self-certify that its procurement system complies with Federal
    requirements for any FTA assisted third party contracts the
    recipient undertakes and administers.

15. [PROCUREMENT CAPACITY]{.underline}. As part of an FTA recipient's
    obligation to maintain adequate technical capacity to carry out its
    project and in compliance with the Common Grant Rules, the
    recipient's procurement capability must be adequate to undertake its
    procurements effectively and efficiently in accordance with
    applicable Federal requirements. The Common Grant Rules require the
    recipient to maintain a contract administration system to administer
    its third party contracts adequately to ensure that its contractors
    perform in accordance with the terms, conditions, and specifications
    of their contracts or purchase orders and applicable Federal
    requirements. Many FTA recipients assign contracting duties to
    financial management personnel. If the recipient lacks qualified
    personnel within its organization to undertake the various
    procurement tasks, such as drafting specifications, evaluating
    contracts, performing audits the recipient finds desirable, FTA
    expects the recipient to acquire the necessary services from sources
    outside the recipient's organization. In addition, these sources
    should be unrelated to and independent of any potential bidder or
    offeror.

    a.  [Written Procurement Procedures]{.underline}. The Common Grant
        Rules require the recipient to have written procurement
        procedures. These procedures must address:

        1.  [Property and Services]{.underline}. What types of property
            and services may be acquired,

        2.  [Procurement Methods]{.underline}. What procurement methods
            may be used,

        3.  [Legal Restrictions]{.underline}. Any Federal, State, or
            local restrictions on those acquisitions (discussed further
            in Chapter III, Section 2 of this circular),

        4.  [Contract Clauses]{.underline}. The requirements for
            including specific contract clauses (discussed further in
            Chapter IV of this circular),

        5.  [Sources]{.underline}. The availability of sources for those
            goods and services (discussed further in Chapter V of this
            circular),

        6.  [Open Market Procurements]{.underline}. Procedures for
            procuring in the open market in compliance with Federal laws
            and regulations (discussed further in Chapter VI of this
            circular), and

        7.  [Resolution of Contract Issues]{.underline}. Procedures to
            resolve contract issues (discussed further in Chapter VII of
            this circular).

    b.  [Adequate Contract Provisions]{.underline}. All third party
        contracts are required to include provisions adequate to form a
        sound and complete agreement. In addition, implementation of
        Federal laws and regulations requires the addition of many other
        clauses to assure compliance with the law or regulation. See,
        Chapter IV of this circular for requirements applicable to third
        party contractors and the property and services that they agree
        to provide.

    c.  [Industry Contracts]{.underline}. The recipient is cautioned to
        take special care when using an industry developed contract or
        contract that may be proffered by a bidder or offeror. Not only
        may it be unlikely to contain the required Federal clauses, but
        its terms may not be favorable to the recipient.

    d.  [Record Keeping]{.underline}. The Common Grant Rules require the
        recipient to prepare and maintain adequate and readily
        accessible project performance and financial records, covering
        procurement transactions as well as other aspects of project
        implementation. The Common Grant Rules require the recipient to
        maintain these records for three years after the recipient and
        subrecipients, if any, have made final payments and all other
        pending matters are closed. In addition to these requirements,
        the recipient is responsible for the preparing, maintaining, and
        distributing as necessary the following documents set forth
        below:

        1.  [Procurement History]{.underline}. The Common Grant Rules
            require the recipient to maintain and make available to FTA
            written records detailing the history of each procurement,
            as follows:

            a.  [Procurement Method]{.underline}. The governmental
                recipient must provide its rationale for the method of
                procurement it used, while a non-governmental recipient
                need only provide a justification for lack of
                competition when it does not obtain competitive bids or
                offers;

            b.  [Contract Type]{.underline}. The governmental recipient
                must state the factors for its selection of the contract
                type it used (fixed price, cost reimbursement, etc.);

            c.  [Contractor Selection]{.underline}. The governmental
                recipient must state its reasons for contractor
                selection or rejection, while a non-governmental
                recipient need only state its reasons for contractor
                selection; and

            d.  [Cost or Price]{.underline}. Each recipient is required
                to evaluate and state the basis for the contract cost or
                price.

FTA takes the position that the extent of documentation should be
reasonable. Documents comprising a procurement history should be
commensurate with the size and complexity of the procurement itself. FTA
recognizes that these written records will vary greatly for different
procurements. For example, a \$100 credit card purchase might be
accompanied by a receipt or bill from which all of the required
information might be implied. More substantial procurements may require
voluminous documentation.

2.  [Access to Records]{.underline}. Apart from the more limited record
    access provisions of the Common Grant Rules, Federal transit law at
    49 U.S.C. Section 5325(g) provides FTA and Department of
    Transportation (DOT) officials and to the Comptroller General, or
    any of their representatives, access to and the right to examine and
    inspect all records, documents, and papers, including contracts,
    related to any FTA project financed with Federal assistance
    authorized by 49 U.S.C. Chapter 53.

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e.  [Special Notification Requirements for States]{.underline}. For many
    years, various Federal appropriations laws establishing notification
    requirements were imposed on all recipients of Federal assistance
    awards exceeding \$500,000. In the recent past, these appropriation
    notification requirements have been limited to States. At this time,
    each State must include text 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 funding FTA has provided or expects to
    provide, and the Catalog of Federal Domestic Assistance (CFDA)
    Number of the program from which the Federal assistance is
    authorized. Given that appropriations laws expire annually and these
    provisions have not been enacted as permanent legislation, it is
    necessary to consult the appropriations act for the applicable
    fiscal year to determine what level of notification is required.
    Because general provisions in Federal appropriations laws may be
    amended year by year, notification requirements may not remain
    constant. The Master Agreement incorporates the notification
    requirements in effect when the Master Agreement is issued.

f.  [Use of Technology/Electronic Commerce]{.underline}. Along with
    other technology the recipient may choose to employ, the recipient
    may use a well-structured Electronic Commerce system to conduct
    third party procurements, provided that:

    1.  [Written Procedures]{.underline}. Adequate written procedures
        have been established prior to solicitation, and

    2.  [Sufficient System Capacity]{.underline}. The system can
        accommodate all requirements for full and open competition in
        accordance with this circular.

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16. [AUDIT]{.underline}. Audit of third party contracts is an important
    tool available to assist the recipient in managing its procurements.
    In addition to special audits FTA may initiate, the recipient may
    initiate a third party audit as part of its own management process.
    In addition, the firm conducting the recipient's single annual audit
    may recommend the audit of a specific third party contract.

    a.  [The Recipient's Auditors]{.underline}. In some cases, the
        recipient has sufficient qualified personnel that can perform
        the third party contract audits it believes are needed. In the
        alternative, the recipient may choose to employ a qualified
        independent accounting firm or accountant to perform its audit
        functions.

    b.  [Independent Auditors]{.underline}. The recipient's personnel
        will not be able to perform certain audits required by the
        Federal Government, such as audits required by the Single Audit
        Act of 1984, as amended, 31 U.S.C. Sections 7501 et seq. and OMB
        Circular A--133, "Audits of States, Local Governments, and
        Non-Profit Organizations," as revised. In addition, when the
        Federal Government requires other audits, in many cases, it will
        be necessary for the recipient to engage independent auditors
        not performing other work for the recipient. See also Chapter
        IV, Section 2.b (19) (a) of this circular.

    c.  [Federal Audit Agencies]{.underline}. In some cases, a
        continuing Federal audit function is maintained at contractor
        locations and can be used for audit of a FTA recipient's third
        party contracts. In other cases, an audit by a Federal agency
        may best serve the overall government interest. This can be true
        of audits to determine a contractor's provisional overhead
        (burden) and General & Administrative (G&A) rates that need to
        be verified by audit for the applicable contract periods.
        Federal audit services, however, may not be available when
        needed, and it will be necessary to obtain the services of a
        private firm that can initiate the audit soon after the
        recipient's request.

# CHAPTER IV

# 

# [THE RECIPIENT'S PROPERTY AND SERVICES NEEDS AND]{.underline}

# [FEDERAL REQUIREMENTS AFFECTING THOSE NEEDS]{.underline}

1.  [DETERMINING THE RECIPIENT'S NEEDS]{.underline}. To use Federal
    assistance awarded by FTA to finance a procurement, the Common Grant
    Rules require the recipient to adopt adequate procedures for
    determining the type and amount of property and services it needs to
    acquire:

    a.  [Eligibility]{.underline}. The property and services must be
        eligible within the scope of a specific project.

    b.  [Necessity]{.underline}. Proposed procurements should be
        reviewed to avoid the purchase of property and services the
        recipient does not need (including duplicative items and
        unnecessary options.)

        1.  [Unnecessary Reserves]{.underline}. The Federal Transit
            Administration (FTA) is concerned that the recipient does
            not acquire more property than it currently needs to support
            its public transportation system, and is particularly
            concerned that the recipient does not acquire more vehicles
            than are needed for public transportation service in its
            service area. See, the most recent version of FTA Circulars
            5010.1, 9030.1, and 9300.1 that addresses spare ratios for
            further guidance.

        2.  [Assignment Purposes]{.underline}. In addition, FTA believes
            it is extremely important that the recipient ensures that it
            contracts only for its current and reasonably anticipated
            needs and does not add quantities or options to contracts
            solely to allow assignment of these quantities or options to
            another party at a later date.

    c.  [Procurement Size]{.underline}. Consideration should be given to
        consolidating or breaking out procurements to obtain a more
        economical purchase.

        1.  [Joint Procurements]{.underline}. Depending on market
            conditions, it may be desirable for a recipient to enter
            into a joint procurement with other similarly situated
            recipients. Participation in a joint procurement, however,
            does not relieve any recipient participating therein from
            the requirements and responsibilities it would have if it
            were procuring the property or services itself.

        2.  [Smaller Procurements]{.underline}. In other circumstances,
            breaking out procurements may provide greater opportunities
            for small businesses and Disadvantaged Business Enterprises
            (DBEs) to participate. As indicated above, FTA takes the
            position that it is extremely important that the recipient
            ensures that it contracts only for its current and
            reasonably anticipated needs and does not add quantities or
            options to a contract solely to allow assignment of these
            quantities or options at a later date. In contrast, the
            recipient should not split a larger procurement merely to
            gain eligibility to use small purchase procedures for
            federally-assisted procurements.

    d.  [Options]{.underline}. Options may be included in contracts to
        assure the future availability of property or services. An
        option is a unilateral right in a contract by which, for a
        specified time, a recipient may elect to purchase additional
        equipment, supplies, or services called for by the contract, or
        may elect to extend the term of the contract. Procedures for
        evaluating options are contained in Chapter VI of this circular.

    e.  [Lease vs. Purchase]{.underline}. To obtain the best value,
        lease versus purchase alternatives for acquiring property should
        be reviewed and, if necessary, an analysis should be obtained to
        determine the more economical alternative. The recipient may use
        FTA capital funds to finance the costs of leasing eligible
        property if leasing is more cost effective than full ownership.
        FTA requires the recipient to make a written comparison of the
        cost of leasing the asset compared with the cost of purchasing
        or constructing it in accordance with FTA regulations, "Capital
        Leases," 49 CFR Part 639, Subpart C. Costs used in the
        comparison must be reasonable, based on realistic current market
        conditions, and based on the expected useful service life of the
        asset.

    f.  [Specifications]{.underline}. Typically, the recipient is
        responsible for preparing the specifications to meet its needs,
        while assuring that those specifications are not exclusionary,
        discriminatory, unreasonably restrictive, or otherwise in
        violation of Federal laws and regulations. In general, the
        specifications should include a clear description of the
        property or services to be procured and indicate how the
        proposals will be evaluated during the procurement process. For
        additional guidance, see Chapter IV, Section 2, and Chapter VI,
        Section 3 of this circular.

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17. [FEDERAL REQUIREMENTS THAT MAY AFFECT A RECIPIENT'S
    ACQUISITIONS]{.underline}. Before FTA assistance may be used to
    support an acquisition of property or services, all applicable
    Federal requirements, whether or not addressed in the Common Grant
    Rules, must be fulfilled. Some of those requirements will affect the
    third party contractor providing the property or services or even
    determine which entities may participate as a third party
    contractor. Other requirements will affect the nature of the
    property or services to be acquired or the terms under which that
    property or those services must be acquired. FTA assistance may not
    be used to support acquisitions that do not comply with all
    applicable Federal requirements. To facilitate inclusion of required
    clauses, matrices of the Federally Required and Other Model Clauses
    can be found in FTA's "Best Practices Procurement Manual." While
    these clauses cover most areas of concern, the recipient should also
    check the latest edition of FTA's Master Agreement to determine what
    requirements have been added, deleted, or changed.

Discussed below are some of the more typical requirements and
restrictions that will affect whether FTA assistance can be used to
finance a recipient's third party contracts:

a.  [Contractor Qualifications]{.underline}. Laws and regulations
    applicable to contractor selection include the following:

    1.  ["Responsibility" Requirements]{.underline}. In addition to the
        Common Grant Rules that require awards to responsible
        contractors, FTA transit law at 49 U.S.C. Section 5325(j) limits
        third party contractor awards to those contractors capable of
        successfully performing under the terms of the proposed
        contract. Notably, SAFETEA--LU now requires fixed guideway
        project contracts to be awarded after consideration of a
        contractor's past performance, including information reported in
        the Contractor Performance Assessment Reports FTA must prepare,
        49 U.S.C. Section 5325(j)(2)(C).

    2.  [Debarment and Suspension]{.underline}. Any third party contract
        at any tier of \$25,000 or more, any third party contract at any
        tier of any amount for a federally required audit, and any third
        party contract at any tier of any amount that must be approved
        by an FTA official is covered by Department of Transportation
        (DOT) regulations, "Governmentwide Debarment and Suspension
        (Nonprocurement)," 49 CFR Part 29. See, Section 29.220. Thus the
        recipient must apply DOT's debarment and suspension requirements
        to itself and each third party contractor at every tier to the
        extent required by DOT's regulations.

FTA strongly recommends that the recipient check the Excluded Parties
List System (EPLS) maintained by the General Services Administration
(GSA) and available at [**http://epls.gov**](http://epls.gov/) before
awarding any third party contract, although the recipient may collect a
certification from the prospective third party contractor, or include a
clause to the third party contract requiring disclosure.

3.  [Conflict of Interest]{.underline}. The recipient must take into
    consideration conflict of interest issues a prospective contractor
    might have, including lack of impartiality, impaired objectivity, or
    unfair competitive advantage, as discussed more fully in Chapter VI,
    Section 2.a(4)(h).

4.  [Lobbying Certification and Disclosure]{.underline}. If the third
    party contract will exceed \$100,000, the recipient must obtain a
    lobbying certification, and if applicable, a lobbying disclosure
    from the third party contractor before award, as well as require
    compliance with DOT regulations, "New Restrictions on Lobbying," 49
    CFR Part 20, modified as necessary by 31 U.S.C. Section 1352.

5.  [Federal Civil Rights Laws and Regulations]{.underline}. Although
    FTA does not have primary enforcement responsibility for all Federal
    Civil Rights laws and regulations, each FTA recipient has agreed
    that it and its third party contractors must be in compliance with:

    a.  [Federal Equal Employment Opportunity (EEO)
        Requirements]{.underline}. These include but may not be limited
        to:

        1.  49 U.S.C. Section 5332, and

        2.  Title VII of the Civil Rights Act of 1964, as amended, 42
            U.S.C. Section 2000e, and implementing Federal regulations.

    b.  [Federal Laws Protecting Individuals with
        Disabilities]{.underline}. These include, but may not be limited
        to:

        1.  Section 504 of the Rehabilitation Act, 29 U.S.C. Section
            794, and implementing DOT regulations, "Nondiscrimination on
            the Basis of Disability in Programs and Activities Receiving
            or Benefiting from Federal Financial Assistance," 49 CFR
            Part 27; and

        2.  Title I of the Americans with Disabilities Act of 1990
            (ADA), as amended, 42 U.S.C. Sections 12101 et seq., and the
            following implementing Federal Regulations:

            a.  DOT regulations, "Transportation Services for
                Individuals with Disabilities (ADA)," 49 CFR Part 37,
                and

            b.  Joint Architectural and Transportation Barriers
                Compliance Board (ATBCB)/DOT regulations, "Americans
                with Disabilities (ADA) Accessibility Specifications for
                Transportation Vehicles," 36 CFR Part 1192 and 49 CFR
                Part 38.

6.  [Socio-Economic Development]{.underline}. Each FTA recipient must
    comply with applicable Federal laws and regulations that afford
    competitive opportunities for a contractor that qualifies as a
    disadvantaged business enterprise (DBE), minority owned firm,
    women's business enterprise, or small business.

    a.  [Disadvantaged Business Enterprises (DBE)]{.underline}. Section
        1101(b) of SAFETEA--LU requires FTA to make available at least
        10 percent of the its funding under that Act for contracts with
        small business concerns owned and controlled by socially and
        economically disadvantaged people. Each FTA recipient assists
        FTA in meeting this national goal. Each FTA recipient must
        comply with applicable requirements of DOT regulations,
        "Participation by Disadvantaged Business Enterprises in
        Department of Transportation Financial Assistance Programs," 49
        CFR Part 26, (DBE regulations), in order to receive FTA funding.
        Third party contracts funded in whole or in part with FTA funds
        and subject to FTA's procurement rule are also subject to the
        recipient's DBE Program and are included to the extent of FTA
        funding in determining (i) whether the recipient meets the DBE
        threshold for goal setting; and, (ii) the goal if the threshold
        is met.

    b.  [Small and Minority Firms and Women's Business
        Enterprises]{.underline}. The Common Grant Rules require each
        recipient and subrecipient to take steps to assure that small
        and minority firms and women's business enterprises
        (irrespective of whether or not they qualify as DBEs) are used
        when possible, and to the fullest extent practicable. As an
        aside, while the Common Grant Rule for governmental recipients
        includes labor surplus area firms in the category of firms
        authorized for special treatment, this circular does not include
        them because nearly all labor surplus area preferences were
        deleted following enactment of Subsection 7101(a) of the Federal
        Acquisition Streamlining Act of 1994 (Public Law 103--355,
        October 13, 1994).

        1.  [Notice]{.underline}. The Common Grant Rules require each
            recipient to make information available to potentially
            qualified firms about procurement opportunities. Each
            governmental recipient is directed to include these
            contractors on solicitation lists and solicit their
            participation when they are potential sources.

        2.  [Contract Size]{.underline}. Each governmental recipient is
            directed to divide total requirements, when economically
            feasible, into smaller tasks or quantities to permit maximum
            participation. Each non-governmental recipient is directed
            to encourage contracting with consortiums when a contract is
            too large for one of these firms to handle individually.

        3.  [Delivery Schedule]{.underline}. The Common Grant Rules
            require recipients to establish delivery schedules that
            encourage their participation.

        4.  [Small Business Administration and the Department of
            Commerce's]{.underline} [Minority Business Development
            Agency]{.underline}. The Common Grant Rules direct each
            recipient to use the services and assistance of these
            Federal agencies.

        5.  [Subcontracting Opportunities]{.underline}. Each
            governmental recipient is expected to require its prime
            third party contractors to include the preceding
            requirements in their FTA assisted subcontracts. Each
            non-governmental recipient is directed to consider in the
            contract process whether firms competing for larger
            contracts intend to subcontract with small businesses,
            minority-owned firms, and women's business enterprises.

7.  [Sensitive Security Information]{.underline}. Each third party
    contractor must protect, and take measures to assure that its
    subcontractors at each tier protect, "sensitive security
    information" made available during the course of administering a
    third party contract or subcontract in accordance with 49 U.S.C.
    Section 40119(b) and implementing DOT regulations, "Protection of
    Sensitive Security Information," 49 CFR Part 15, and with 49 U.S.C.
    Section 114(s) and implementing Department of Homeland Security
    regulations, "Protection of Sensitive Security Information," 49 CFR
    Part 1520.

8.  [Seat Belt Use]{.underline}. In compliance with Federal Executive
    Order No. 13043, "Increasing Seat Belt Use in the United States,"
    04--16--1997, 23 U.S.C. Section 402 note, each third party
    contractor is encouraged to adopt and promote on-the-job seat belt
    use policies and programs for its employees and other personnel that
    operate company owned, rented, or personally operated vehicles, and
    to include this provision in any third party subcontracts, involving
    the project.

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b.  [Restrictions on Acquisitions of Property and Services]{.underline}.
    The following requirements are derived from Federal laws and
    regulations that may affect a specific procurement. A current but
    not all inclusive and comprehensive list of statutory and regulatory
    requirements applicable to recipient procurements (such as
    Disadvantaged Business Enterprise (DBE) and Clean Air, is contained
    in the FTA Master Agreement. FTA's Master Agreement states that
    applicable Federal requirements be applied to project participants
    to the lowest tier necessary for compliance with the requirement and
    be set forth in each subagreement, lease, third party contract, or
    other document pertaining to that participation. Further guidance
    concerning these requirements and suggested wording for contract
    clauses may be found in FTA's "Best Practices Procurement Manual."
    For specific guidance concerning the crosscutting requirements of
    other Federal agencies, the recipient is advised to contact those
    agencies.

    1.  [Scope of the Project]{.underline}. The property or services
        acquired must be within the scope of the underlying grant or
        cooperative agreement from which the Federal assistance to be
        used is derived. These restrictions will be derived from FTA's
        enabling legislation and implementing regulations. The recipient
        should take care that its third party contracts are within the
        scope of the grant or cooperative agreement from which Federal
        support will be derived.

    2.  [Period of Performance---Limits]{.underline}. A third party
        contract's period of performance, including any extensions
        thereof, should not be any longer than minimally necessary to
        accomplish the purpose of the contract. Additional factors to be
        considered include competition, pricing, fairness, and public
        perception. Thus FTA expects each recipient to use sound
        business judgment in establishing performance periods and any
        extensions, irrespective of the length of time involved. The
        recipient's procurement files should document its rationale for
        determining the performance period of each contract.

Except for procurements of rolling stock and replacement part contracts,
which are limited by law to five years as discussed in paragraph (14)(h)
of this subsection, the recipient's other third party contracts (such as
property, services, leases, construction, revenue, etc.) are not
encumbered by Federal requirements restricting the maximum periods of
performance. The five-year statutory limitation on rolling stock does
not extend to the recipient's other contracts. Nevertheless, the
duration of the recipient's other contracts must be reasonable.

After a third party contract has been awarded, a time extension of the
contract not authorized by the original terms of the contract would in
effect be an out-of-scope change that will require a sole source
justification and meet other sole source procurement requirements.
Consistent with the general tone of the circular, contract extensions
will be considered in light of whether they are in-scope or out-of-scope
contract changes. Out-of-scope changes will be regarded as new sole
source procurements.

3.  [Federal Cost Principles]{.underline}. The Common Grant Rules
    require costs to conform to Federal cost principles for allowable
    costs. In general, costs must be necessary and reasonable, allocable
    to the project, authorized, or not prohibited, by Federal law and
    regulations, and in conformance with Federal cost principles
    applicable to the recipient. Separate cost principles apply to the
    following four categories of recipients:

    a.  [Governmental Entities]{.underline}. Office of Management and
        Budget (OMB) Guidance for Grants and Agreements, "Cost
        Principles for State, Local, and Indian Tribal Governments (OMB
        Circular A--87)," 2 CFR Part 225, applies to project costs
        incurred by a recipient that is a State, local, or Indian tribal
        government.

    b.  [Education Institutions]{.underline}. OMB Guidance for Grants
        and Agreements, "Cost Principles for Educational Institutions
        (OMB Circular A--21)," 2 CFR Part 220, applies to project costs
        incurred by a recipient that is an institution of higher
        education.

    c.  [Non-Profit Organizations]{.underline}. OMB Guidance for Grants
        and Agreements "Cost Principles for Non-profit Organizations
        (OMB Circular A--122)," 2 CFR Part 230, applies to project costs
        incurred by a recipient that is a private non-profit
        organization.

    d.  [For-Profit Organizations]{.underline}. FAR Subpart 31.2,
        "Contracts with Commercial Organizations," applies to project
        costs incurred by a recipient that is a for-profit organization.

4.  [Payment Provisions]{.underline}. While the recipient may use its
    own funds to make payments on its third party contracts, it will
    need to structure its payment provisions carefully if it seeks to
    use FTA funds, be reimbursed with FTA funds, or dedicate its local
    share funds to support those costs.

    a.  [General]{.underline}. At the outset, FTA assistance may be used
        to support or reimburse those payments only if:

        1.  [Award Made]{.underline}. FTA has awarded Federal assistance
            to the recipient through a grant or cooperative agreement
            for the underlying project,

        2.  [Pre-Award Authority]{.underline}. FTA has provided
            pre-award authority for the underlying project through a
            Federal Register Notice, or

        3.  [Letter of No Prejudice]{.underline}. FTA has issued a
            letter of no prejudice for the underlying project.

    b.  [Advance Payments]{.underline}. Advance payments are payments
        made to the contractor before the contractor incurs costs in the
        performance of the contract. The following principles and
        restrictions apply:

        1.  [Use of FTA Funds Prohibited]{.underline}. FTA does not
            authorize the use of Federal assistance to make payments to
            a third party contractor before the contractor has incurred
            the costs for which the payments would be attributable.

        2.  [Exceptions for Sound Business Reasons]{.underline}. FTA
            does on occasion make exceptions to its advance payment
            prohibitions, provided the recipient has obtained FTA's
            prior written concurrence. A recipient that seeks to use FTA
            or local share funds to support advance payments should
            contact its Regional Office to obtain FTA concurrence.

FTA takes the position that sound business reasons justify its
concurrence permitting exceptions in certain circumstances:

a.  [Customary Advance Payments]{.underline}. FTA recognizes that
    advance payments are typically required for utility services and
    subscriptions to newspapers and magazines. Accordingly, the
    recipient may use FTA assistance to support or reimburse the costs
    of such acquisitions. FTA concurrence is required only when advance
    payment or payments customarily required in the market place exceed
    \$100,000.

b.  [Adequate Security for Payments]{.underline}. FTA recognizes that
    advance payments may be needed for mobilization payments; start up
    costs, and other costs supported by sound business judgment.
    Adequate security for the advance payment is an essential
    pre-condition to FTA's concurrence in the use of FTA or local share
    funds.

In sum, provided there are sound business reasons justifying the advance
payment and adequate security for the payment, FTA will generally concur
in a written request for an exception.

c.  [Progress Payments]{.underline}. Progress payments are payments for
    costs incurred by the contractor in the performance of the contract
    before the contract work has been completed. FTA assistance may be
    used to support progress payments provided the recipient obtains
    adequate security for those payments and has sufficient written
    documentation to substantiate the work performed for which payment
    is requested.

The recipient must obtain adequate security for progress payments.
Adequate security may include taking title or obtaining a letter of
credit or equivalent means to protect the recipient's financial interest
in the progress payment. Adequate security should reflect the practical
realities of different procurement scenarios and factual circumstances.
FTA acknowledges the practical reality that taking title to work in
progress may not be desirable in some circumstances. Each recipient
should always consider the costs associated with this security (e.g.,
bonds or letters of credit must be purchased in the commercial
marketplace) and the impact those costs have on the contract price, as
well as the consequences of incomplete performance as it considers what
constitutes adequate security for a given procurement.

The Common Grant Rules authorize progress payments for construction
contracts to be made on a percentage of completion method described
therein. This payment method may not be used in non-construction
contracts.

5.  [Preference for U.S. Property---Buy America]{.underline}. FTA
    cautions that its Buy America regulations that apply to third party
    procurements, published at 49 CFR Part 661, differ from Federal "Buy
    American Act" regulations that apply to direct Federal procurements,
    published in the FAR at 48 CFR Chapter 1, Subparts 25.1 and 25.2.
    The recipient is strongly advised to review these regulations before
    undertaking any procurement to assure compliance with the
    requirements applicable at the time the procurement will be
    undertaken.

6.  [Shipments of Property---U.S. Flag Requirements]{.underline}.

    a.  [Shipments by Ocean Vessel]{.underline}. The Common Grant Rules
        require third party contract provisions to assure compliance
        with 46 U.S.C. Section 55303 and Maritime Administration
        regulations, "Cargo Preference U.S. Flag Vessels," 46 CFR Part
        381, which provide for the use of U.S. Flag vessels to ship at
        least 50 percent of any federally-assisted property to be
        transported on ocean vessels.

    b.  [Shipments by Air Carrier]{.underline}. Third party contracts
        involving shipments of federally-assisted property by air
        carrier will require provisions to assure compliance with
        Section 5 of the International Air Transportation Fair
        Competitive Practices Act of 1974, as amended, known as the "Fly
        America" Act, 49 U.S.C. Section 40118, and GSA regulations, "Use
        of United States Flag Air Carriers," 41 CFR Sections 301--10.131
        through 301--10.143, which provide for shipment by U.S. flag air
        carriers unless such carriers are not reasonably available
        within the standards of GSA's implementing regulations.

7.  [Project Travel---Use of U.S. Flag Air Carriers]{.underline}. Third
    party contracts to acquire air travel services for people
    participating in a federally-assisted project require provisions
    facilitating compliance with Section 5 of the International Air
    Transportation Fair Competitive Practices Act of 1974, as amended,
    known as the "Fly America" Act, 49 U.S.C. Section 40118, and GSA
    regulations, "Use of United States Flag Air Carriers," 41 CFR
    Sections 301--10.131 through 301--10.143, which provide for the use
    of U.S. flag air carriers unless U.S. flag air carriers are not
    reasonably available within the standards of the GSA's implementing
    regulations.

8.  [Wage and Hour Requirements]{.underline}. The Common Grant Rules
    require the inclusion of clauses requiring the contractor to compute
    the wages of every mechanic and laborer on the basis of a standard
    workweek of 40 hours. Work in excess of the standard workweek is
    permissible provided that the worker is compensated at a rate of not
    less than 1½ times the basic rate of pay for all hours worked in
    excess of 40 hours in the workweek. These clauses are required to
    implement Sections 102 of the Contract Work Hours and Safety
    Standards Act, 40 U.S.C. Section 3702, and with Department of Labor
    (DOL) regulations, "Labor Standards Provisions Applicable to
    Contracts Governing Federally Financed and Assisted Construction
    (also Labor Standards Provisions Applicable to Nonconstruction
    Contracts Subject to the Contract Work Hours and Safety Standards
    Act)," 29 CFR Part 5. Notably, the thresholds of \$2,000 for
    construction work and \$2,500 for nonconstruction work set forth in
    the Common Grant Rules have been increased by law so that these
    requirements apply only to federally-assisted contracts in excess of
    \$100,000.

9.  [Environmental Protections]{.underline}. The recipient is required
    to comply with environmental requirements and implement them as
    necessary through its third party contracts.

    a.  [Environmental Mitigation]{.underline}. Third party contract
        provisions may be required to facilitate the recipient's
        compliance with environmental regulations it has agreed to
        implement.

    b.  [National Environmental Policy Act (NEPA)]{.underline}.  Certain
        acquisitions and the timing of certain acquisitions can
        adversely affect the environmental review process for a project
        constituting a major Federal action.

        1.  [Property]{.underline}. The recipient must refrain from
            entering into binding arrangements for acquisitions of
            property that may or would affect environmental impact
            determinations with respect to the underlying project or
            otherwise interfere with any required environmental impact
            reviews until applicable environmental impact determinations
            have been made.

        2.  [Services]{.underline}. The recipient must obtain from the
            contractor selected to prepare an environmental impact
            statement a disclosure statement specifying that the
            contractor has no financial or other interest in the outcome
            of the project, in accordance with Council on Environmental
            Quality regulations, "Other Requirements of NEPA," 40 CFR
            Part 1506, at Section 1506.5(c).

    c.  [Clean Air]{.underline}. The Common Grant Rules specifically
        require each third party contract at any tier exceeding
        \$100,000 to be implemented without the use of facilities
        included in the Environmental Protection Agency (EPA) "List of
        Violating Facilities," and in compliance with all applicable
        standards, orders, or regulations issued pursuant to Section 306
        of the Clean Air Act, as amended, 42 U.S.C. Section 7414, and
        other applicable provisions of the Clean Air Act, as amended, 42
        U.S.C. Sections 7401 through 7671q.

    d.  [Clean Water]{.underline}. The Common Grant Rules specifically
        require each third party contract at any tier exceeding
        \$100,000 to be implemented without the use of facilities
        included in the EPA "List of Violating Facilities," and in
        compliance with all applicable standards, orders, or regulations
        issued pursuant to Section 508 of the Clean Water Act, as
        amended, 33 U.S.C. Section 1368, and other applicable
        requirements of the Clean Water Act, as amended, 33 U.S.C.
        Sections 1251 through 1377.

    e.  [Recycled Products]{.underline}. The Resource Conservation and
        Recovery Act of 1976, 42 U.S.C. Section 6962, requires
        governmental recipients to provide a competitive preference to
        products and services that conserve natural resources, protect
        the environment, and are energy efficient. In accordance with
        EPA guidelines, "Comprehensive Procurement Guidelines for
        Products Containing Recovered Materials," 40 CFR Part 247
        through Part 253, third party contracts of \$10,000 or more must
        specify a competitive preference for products containing
        recycled materials identified in those EPA guidelines.

    f.  [Other Federal Environmental Requirements]{.underline}. Third
        party contract provisions may be needed to facilitate the
        recipient's requirements to implement other Federal laws and
        regulations. FTA's Master Agreement includes a list of
        environmental laws and regulations that may affect the
        acquisition of a property or service to be financed with Federal
        assistance. These laws and regulations encompass various
        provisions that facilitate the recipient's requirements to
        protect parks, recreation areas, wildlife or waterfowl refuges,
        wild and scenic rivers, coastal zones, wetlands, fisheries,
        endangered species, historic sites, and Indian sacred sites.

10. [Energy Conservation]{.underline}. The Common Grant Rules require
    third party contract provisions to facilitate compliance with
    applicable mandatory energy efficiency standards and policies of
    applicable State energy conservation plans issued in accordance with
    the Energy Policy and Conservation Act, as amended, 42 U.S.C.
    Sections 6321 et seq.

11. [Metric Measurements]{.underline}. The Common Grant Rules require
    the recipient to accept property and services with dimensions
    expressed in metric measurements, to the extent practicable and
    feasible in compliance with the Metric Conversion Act, as amended by
    the Omnibus Trade and Competitiveness Act, 15 U.S.C. Sections 205a
    et seq.; Executive Order No. 12770, "Metric Usage in Federal
    Government Programs," 07--25--1991, 15 U.S.C. Section 205a note; and
    DOT or FTA regulations and directives.

12. [Intelligent Transportation Systems]{.underline}. Intelligent
    transportation system (ITS) property and services must comply with
    the National Intelligent Transportation Systems (ITS) Architecture
    and Standards to the extent required by SAFETEA--LU Section 5307(c),
    23 U.S.C. Section 512 note, and FTA's published policies.
    Consequently, third party contracts involving ITS are likely to
    require provisions to facilitate compliance with Federal
    requirements.

13. [Electronic Reports and Information]{.underline}. Third party
    contracts for delivery of reports or other information in electronic
    format that the recipient intends to provide to FTA, among others,
    require specifications assuring that, when delivered to the
    recipient, the reports or information will be in compliance with
    accessibility standards of Section 508 of the Rehabilitation Act of
    1973, as amended, 29 U.S.C. Section 794d, and ATBCB regulations,
    "Electronic and Information Technology Accessibility Standards," 36
    CFR Part 1194.

14. [Rolling Stock---Special Requirements]{.underline}.

    a.  [Accessibility]{.underline}. Rolling stock must be in compliance
        with the accessibility provisions of DOT regulations,
        "Transportation Services for Individuals with Disabilities
        (ADA)," 49 CFR Part 37, and Joint Architectural and
        Transportation Barriers Compliance Board (ATBCB)/DOT
        regulations, "Americans with Disabilities (ADA) Accessibility
        Specifications for Transportation Vehicles," 36 CFR Part 1192
        and 49 CFR Part 38.

    b.  [Transit Vehicle Manufacturer Compliance with DBE
        Requirements]{.underline}. Pursuant to 49 CFR Section 26.49,
        before a transit vehicle manufacturer (TVM) may submit a bid or
        proposal to provide vehicles to be financed with FTA assistance,
        that TVM must submit a certification that it has complied with
        FTA's DBE requirements.

    c.  [Minimum Service Life]{.underline}. FTA requires each recipient
        to maintain satisfactory continuing control of FTA assisted
        property. In the case of vehicles, especially buses, FTA has
        established minimum service life policies. Consequently, third
        party contracts for vehicle acquisitions will require provisions
        to facilitate compliance with those service life policies. See,
        the most recent version of FTA Circulars 5010.1, 9030.1, and
        9300.1 that addresses minimum service life for vehicles.

    d.  [Air Pollution and Fuel Economy]{.underline}. Third party
        contracts to acquire rolling stock must contain provisions to
        facilitate the recipient's compliance with applicable Federal
        air pollution control and fuel economy regulations.

    e.  [Pre-Award and Post-Delivery Review]{.underline}. Third party
        contracts to acquire rolling stock require provisions to assure
        compliance with applicable requirements of 49 U.S.C. Section
        5323(m) and FTA regulations, "Pre-Award and Post-Delivery Audits
        of Rolling Stock Purchases," 49 CFR Part 663, that do not
        conflict with 49 U.S.C. Section 5323(m).

    f.  [Bus Testing]{.underline}. Third party contracts to acquire a
        new bus model or a bus with significant alterations to an
        existing model require provisions to assure compliance with
        applicable requirements of FTA regulations, "Bus Testing," 49
        CFR Part 665.

    g.  [In-State Dealers]{.underline}. In accordance with 49 U.S.C.
        Section 5325(i), third party procurements of buses may not be
        limited to in-State dealers.

    h.  [Basis for Award]{.underline}. To comply with 49 U.S.C. Section
        5325(f), the recipient may award a third party contract for
        rolling stock based on initial capital costs, or based on
        performance, standardization, life cycle costs, and other
        factors, or by selection through a competitive procurement
        process.

    i.  [Five-Year Limitation]{.underline}. To comply with 49 U.S.C.
        Section 5325(e)(1), a multi year third party contract to
        purchase additional rolling stock and replacement parts may not
        have options that extend more than five years after the date of
        the original contract.

FTA interprets this five-year period as covering the recipient's rolling
stock and replacement needs from the first day when the contract becomes
effective to those at the end of the fifth year. This means that the
contract may not encompass more rolling stock and replacement parts than
the recipient needs within five years. The five-year rule does not mean
delivery, acceptance, or even fabrication must be completed in five
years---only that a contract is limited to purchasing no more than the
recipient's rolling stock or replacement parts needs for five years
based on the effective date of the contract.

15. [Architectural/Engineering and Related Service---Special
    Requirements]{.underline}. In connection with projects related to or
    leading to construction, an FTA recipient must use
    qualifications-based competitive proposal procedures of 40 U.S.C.
    Chapter 11 (i.e., Brooks Act, procedures) when contracting for
    architectural and engineering services, described in 49 U.S.C.
    Section 5325(b), to include not only traditional architectural
    engineering services, but also program management, engineering,
    construction management, a feasibility study, and preliminary
    engineering, design, engineering, surveying, mapping, or related
    services. FTA recognizes that most of the services listed (e.g.,
    feasibility studies or mapping) may not be performed by
    architectural or engineering services companies. While,
    qualifications-based competitive proposals (i.e., Brooks Act
    procedures) still must be applied to procurements of services
    enumerated in 49 U.S.C. Section 5325(b), FTA seeks to clarify that
    its interpretation of that statute as authorizing the use of
    qualifications-based procurement procedures for those services only
    when they support or are connected or related to real property.
    FTA's position is consistent with typical Federal policies
    implementing the Brooks Act, which is limited to research, planning,
    development, design, construction, alteration, or repair of real
    property, as set forth in 40 U.S.C. Section 1102. Consequently, the
    recipient may not use qualifications‑based procurement procedures
    for services that are not in support of or connected or related to
    real property, except to the extent FTA expressly permits otherwise
    in writing.

SAFETEA--LU also divided the former Brooks Act provision by authorizing
State audit services in lieu of Federal standards. In part, the statute
reads " . . . to the extent a State has adopted by law, before the date
of enactment of the Federal Public Transportation Act of 2005, an
equivalent State qualifications-based requirement for contracting for
architectural, engineering, and design services." 49 U.S.C. 5325(b)(2).

In addition, SAFETEA--LU amended 49 U.S.C. Section 5325 to require the
use of FAR or a cognizant State agency's cost principles and a firm's
audited indirect cost principles for contract estimates, negotiation,
administration, reporting, and payments, and apply those undisputed
rates. See, 49 U.S.C. Section 5325(b)(3) and Section
2.b(19)(b)[3]{.underline} of this chapter.

16. [Construction---Special Requirements]{.underline}.

    a.  [Bonding]{.underline}. The Common Grant Rules require bonds for
        all construction contracts except to the extent FTA determines
        that the Federal interest is adequately protected through other
        arrangements. FTA's bonding policies are as follows:

        1.  [Bid Guarantee]{.underline}. Both FTA and the Common Grant
            Rules require a bid guarantee from each bidder equivalent to
            5 percent of the bid price. The "bid guarantee" shall
            consist of a firm commitment such as a bid bond, certified
            check, or other negotiable instrument accompanying a bid as
            assurance that the bidder will honor its bid upon acceptance
            of its bid.

        2.  [Performance Bond]{.underline}. Both FTA and the Common
            Grant Rules require a performance bond on the part of the
            contractor for 100 percent of the contract price. A
            "performance bond" is one executed in connection with a
            contract to secure fulfillment of all the contractor's
            obligations under the contract.

        3.  [Payment Bond]{.underline}. The Common Grant Rules specify a
            standard payment bond on the part of the contractor for 100
            percent of the contract price. A "payment bond" is one
            executed in connection with a contract to assure payment as
            required by law of all people supplying labor and material
            in the execution of the work provided for in the contract.
            FTA, however, has determined the following payment bond
            amounts are adequate to protect FTA's interest:

FTA has determined the payment bonds in the following amounts are
adequate to protect FTA's interest and will accept a local bonding
policy that meets the following minimums:

a.  [Less Than \$1 Million]{.underline}. Fifty percent of the contract
    price if the contract price is not more than \$1 million;

b.  [More Than \$1 Million but Less Than \$5 Million]{.underline}. Forty
    percent of the contract price if the contract price is more than \$1
    million but not more than \$5 million; or

c.  [More Than \$5 Million]{.underline}. Two and one half million
    dollars if the contract price is more than \$5 million.

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4.  [Acceptable Sureties]{.underline}. A non-governmental recipient is
    required to obtain construction bonds from companies holding
    certificates of authority as acceptable sureties pursuant to
    Department of the Treasury regulations, "Surety Companies Doing
    Business with the United States," 31 CFR Part 223. For a current
    list of approved sureties, see Department of the Treasury's Listing
    of Approved Sureties (Department Circular 570),
    [**http://fms.treas.gov/c570/c570.html**](http://fms.treas.gov/c570/c570.html).
    FTA strongly encourages each governmental recipient to require
    similarly acceptable sureties.

FTA will accept a local bonding policy that meets the minimums set forth
above. FTA reserves the right to approve bonding that does not meet
these minimums if the local bonding policy adequately protects the
Federal interest. A recipient that wishes to adopt less stringent
bonding requirements, for a specific class of projects, or for a
particular project, may submit its policy and rationale to its FTA
Regional Office for approval.

FTA approval is not required for more stringent local bonding policies,
but FTA cautions that if the recipient's bonding policies result in
"excessive bonding" prohibited under the Common Grant Rules as
restrictive of competition, FTA will not provide Federal assistance for
those procurements. Consequently, if the recipient's bonding policies
exceed those described in this subsection; the recipient is strongly
encouraged to obtain FTA's written concurrence to assure the
availability of Federal assistance for the project.

b.  [Seismic Safety]{.underline}. Third party contracts for the
    construction of new buildings or additions to existing buildings
    must be constructed in accordance with 42 U.S.C. Sections 7701 et
    seq. and DOT regulations, "Seismic Safety," 49 CFR Part 41 at
    Sections 41.117 and 41.120.

c.  [Value Engineering]{.underline}. The Common Grant Rule for
    governmental recipients encourages the governmental recipient to use
    value engineering clauses in contracts for construction projects.
    FTA will not approve a New Starts grant application for final design
    funding or a full funding grant agreement until value engineering is
    complete. It is important to note that some contractual arrangements
    (e.g., design-build contracts) may inherently include value
    engineering concepts and principles. Where this is the case, FTA
    does not require separate value engineering proposals, contract
    changes, or other processes. From a procurement view, the concept of
    value engineering is more important than the form it takes.

d.  [Equal Employment Opportunity]{.underline}. The Common Grant Rules
    require that third party construction contracts include provisions
    requiring compliance with DOL regulations, "Office of Federal
    Contract Compliance Programs, Equal Employment Opportunity,
    Department of Labor," 41 CFR Parts 60 et seq., which implement
    Executive Order No. 11246, "Equal Employment Opportunity," as
    amended by Executive Order No. 11375, "Amending Executive Order No.
    11246 Relating to Equal Employment Opportunity."

e.  [Prevailing Wages]{.underline}. In accordance with 49 U.S.C. Section
    5333(a), Davis‑Bacon Act prevailing wage protections apply to
    laborers and mechanics employed on FTA assisted construction
    projects. Thus, the Common Grant Rules specify that for third party
    contracts at any tier exceeding \$2,000, provisions are needed
    requiring compliance with the Davis‑Bacon Act, 40 U.S.C. Sections
    3141 et seq. and as supplemented by DOL regulations, "Labor
    Standards Provisions Applicable to Contracts Governing Federally
    Financed and Assisted Construction," 29 CFR Part 5. The Davis‑Bacon
    Act requires contractors to pay wages to laborers and mechanics at a
    rate not less than the minimum wages specified in a wage
    determination made by the Secretary of Labor. In addition,
    contractors are required to pay wages not less than once a week. A
    copy of the current prevailing wage determination issued by DOL must
    be placed in each contract solicitation and the award of a contract
    must be conditioned upon the acceptance of the wage determination.
    These requirements are in addition to in addition to the Wage and
    Hour Requirements addressed in Section 2.b(7) of this chapter.

f.  [Anti-Kickback]{.underline}. For all third party construction and
    repair contracts at any tier, the Common Grant Rules require
    provisions for compliance with the Copeland "Anti Kickback" Act, as
    amended, 18 U.S.C. Section 874, and implementing DOL regulations,
    "Contractors and Subcontractors on Public Building or Public Work
    Financed in Whole or in part by Loans or Grants from the United
    States," 29 CFR Part 3. The Act provides that each contractor shall
    be prohibited from inducing, by any means, any person employed in
    the construction, completion, or repair of public work, to give up
    any part of the compensation to which he or she is otherwise
    entitled.

g.  [Construction Safety]{.underline}. The Common Grant Rules require
    provisions to ensure safety at construction sites so that no laborer
    or mechanic shall be required to work in surroundings or under
    working conditions that are unsanitary, hazardous, or dangerous in
    accordance with safety requirements of Section 107 of the Contract
    Work Hours and Safety Standards Act, 40 U.S.C. Section 3704, and
    implementing DOL regulations, "Safety and Health Regulations for
    Construction," 29 CFR Part 1926. Notably, the thresholds of \$2,000
    for construction work set forth in the Common Grant Rules have been
    increased by law so that these requirements apply only to
    federally-assisted construction contracts in excess of \$100,000.

h.  [Labor Neutrality]{.underline}. A recipient's third party contracts
    may not require or prohibit the use of project labor agreements
    (PLA), except, if special circumstances require the use of a PLA to
    avert an imminent threat to public health or safety. Third party
    contractors or subcontractors may, however, voluntarily enter into
    PLAs. These provisions facilitate implementation of Executive Order
    No. 13202, "Preservation of Open Competition and Government
    Neutrality Towards Government Contractors' Labor Relations on
    Federal and Federally Funded Construction Projects," 02--17--2001,
    as amended by Executive Order No. 13208, 04--06--2001, 41 U.S.C.
    Section 251 note.

i.  [Preference for U.S. Property]{.underline}. For any third party
    contract exceeding \$100,000, FTA's "Buy America Requirements," 49
    CFR Part 661 require the third party contractor to provide property
    produced or manufactured in the United States in accordance with
    FTA's regulations unless a waiver authorized by those regulations
    has been granted. A third party contractor that provides services is
    also required to comply with FTA's Buy America regulations in
    connection with any new property it acquires to fulfill its
    contractual responsibilities.

FTA cautions that its Buy America regulations are complex and differ
from Federal "Buy American Act" regulations in FAR Subparts 25.1 and
25.2.

j.  [Accessibility]{.underline}. Facilities and vehicles used in the
    provision of public transportation services must be in compliance
    with 42 U.S.C. Sections 12101 et seq. and DOT regulations,
    "Transportation Services for Individuals with Disabilities (ADA),"
    49 CFR Part 37; and Joint Architectural and Transportation Barriers
    Compliance Board (ATBCB)/DOT regulations, "Americans with
    Disabilities (ADA) Accessibility Specifications for Transportation
    Vehicles," 36 CFR Part 1192 and 49 CFR Part 38.

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17. [Public Transportation Services---Special Requirements]{.underline}.
    Although the following matters are not covered by Federal
    regulations pertaining to federally-assisted procurements, the
    following will affect how a third party contractor implements its
    contract to provide services. Consequently, either the third party
    contract itself must include provisions assuring compliance with the
    following matters, or the recipient must obtain the third party
    contractor's agreement in another form, as a matter of contractor
    responsibility, to assure compliance with the following:

    a.  [Protections for Public Transportation Employees]{.underline}.
        When the recipient purchases public transportation services from
        a third party contractor, the terms of the recipient's DOL
        certification of employee protective arrangements will apply to
        work under the contract provided by employees covered by the
        certification. For this reason, third party contracts involving
        the employment of public transportation employees are covered by
        the protections of 49 U.S.C. Section 5333(b) and DOL guidelines,
        "Section 5333(b), Federal Transit Law," 29 CFR Part 215.

    b.  [Drug and Alcohol Testing]{.underline}. A third party contractor
        providing services involving the performance of safety sensitive
        functions must comply with 49 U.S.C. Section 5331 and FTA
        regulations, "Prevention of Alcohol Misuse and Prohibited Drug
        Use in Transit Operations," 49 CFR Part 655.

    c.  [Accessibility]{.underline}. Facilities and vehicles used in the
        provision of public transportation services must be in
        compliance with 42 U.S.C. Sections 12101 et seq. and DOT
        regulations, "Transportation Services for Individuals with
        Disabilities (ADA)," 49 CFR Part 37; and Joint Architectural and
        Transportation Barriers Compliance Board (ATBCB)/DOT
        regulations, "Americans with Disabilities (ADA) Accessibility
        Specifications for Transportation Vehicles," 36 CFR Part 1192
        and 49 CFR Part 38.

    d.  [Protection of Animals]{.underline}. A third party contractor
        performing services involving the use of animals is required
        must comply with Department of Agriculture regulations, "Animal
        Welfare," 9 CFR Subchapter A, Parts 1, 2, 3, and 4.

    e.  [Charter Service Restrictions]{.underline}. A third party
        contractor performing services using FTA assisted facilities or
        equipment may not use those facilities or that equipment to
        support any charter service operations except as permitted by 49
        U.S.C. Section 5323(d) and FTA regulations, "Charter Service,"
        49 CFR Part 604 that are consistent with 49 U.S.C. Section
        5323(d).

    f.  [School Bus Restrictions]{.underline}. A third party contractor
        performing services using FTA assisted facilities or equipment
        may not use those facilities or that equipment to support
        exclusive school bus operations except as permitted by 49 U.S.C.
        Sections 5323(f) or (g) and FTA regulations, "School Bus
        Operations," 49 CFR Part 605, to the extent consistent with 49
        U.S.C. Section 5323(f) or (g).

18. [Research, Development, Demonstration, Deployment, and Special
    Studies---Special Requirements]{.underline}. Procurements of
    research type services can involve circumstances that bring special
    Federal requirements into effect. Among these are:

    a.  [Patent Rights]{.underline}. Irrespective of the status of the
        recipient, subrecipient, or third party contractor (i.e., a
        large business, small business, State government, State
        instrumentality, local government, Indian tribe, non-profit
        organization, institution of higher education, individual, etc.)
        the Common Grant Rules require provisions invoking the
        requirements of Department of Commerce regulations, "Rights to
        Inventions Made by Nonprofit Organizations and Small Business
        Firms," 37 CFR Part 401 (implementing 35 U.S.C. Sections 200 et
        seq.), except to the extent the Federal Government requires
        otherwise. Except in the case of an "other agreement" in which
        the Federal Government has agreed to take more limited rights,
        the Federal Government is entitled to a non-exclusive royalty
        free license to use the patent for Federal Government purposes.

    b.  [Rights in Data]{.underline}. In general, FTA's purpose in
        providing Federal assistance for a research, development,
        demonstration, or special studies project is to increase
        transportation knowledge, rather than limit the benefits of the
        project-to-project participants. Therefore, except to the extent
        FTA determines otherwise in writing, FTA imposes the following
        rights in data requirements for FTA assisted research,
        development, demonstration, or special studies projects.

        1.  [Publication Restrictions]{.underline}. Except for its own
            internal use, neither the recipient nor the third party
            contractor may publish or reproduce subject data in whole or
            in part, or in any manner or form, without the prior written
            consent of the Federal Government, unless the Federal
            Government has previously released or approved the release
            of such data to the public; the foregoing prohibition does
            not apply to an institution of higher education.

        2.  [Distribution of Data]{.underline}. Each recipient and third
            party contractor must agree that, in addition to the rights
            in data and copyrights that it must provide to FTA in
            accordance with the Common Grant Rules, FTA may make
            available to any FTA recipient, subrecipient, third party
            contractor, or third party subcontractor, either FTA's
            license in the copyright to the subject data or a copy of
            the subject data. If the project is not completed for any
            reason whatsoever, all data developed under the project
            shall become subject data and shall be delivered as FTA may
            direct. The foregoing provisions do not apply to contracts
            for adaptations of automatic data processing equipment or to
            data provided in support of FTA capital projects.

FTA, however, may determine in certain circumstances that it is in the
public interest to take only those rights in data provided by the Common
Grant Rules.

c.  [Export Control]{.underline}. If data developed in the course of a
    third party contract is subject directly or indirectly to U.S.
    Export Control regulations, that data may not be exported to any
    countries or any foreign persons, without first obtaining the
    necessary Federal license or licenses and complying with any
    applicable U.S. Export Control regulations.

d.  [Protection of Human Subjects]{.underline}. A third party contractor
    performing services involving the use of human subjects is required
    must comply with 42 U.S.C. Sections 289 et seq., and DOT
    regulations, "Protection of Human Subjects," 49 CFR Part 11.

e.  [Protection of Animals]{.underline}. A third party contractor
    performing services involving the use of animals is required must
    comply with 7 U.S.C. Sections 2131 et seq., and Department of
    Agriculture regulations, "Animal Welfare," 9 CFR Subchapter A, Parts
    1, 2, 3, and 4.

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19. [Audit Services]{.underline}. In general, audit services financed
    with FTA assistance must be procured in accordance with the standard
    procedures of this circular. The following considerations, however,
    are especially important in procurements of audit services.

    a.  [Single Audit Act]{.underline}. Each recipient that expends
        \$500,000 or more in Federal awards in a single year is expected
        to procure audit services to fulfill the requirements of the
        Single Audit Act of 1984, as amended, 31 U.S.C. Sections 7501 et
        seq. and OMB Circular A--133, "Audits of States, Local
        Governments, and Non-Profit Organizations," as revised.

        1.  [Organizational Conflict of Interest]{.underline}. It is
            essential that any auditor selected be independent of the
            recipient.

        2.  [Eligibility of Costs]{.underline}. Costs for audits
            required by OMB Circular A--133 may be charged to the
            recipient's project as direct or indirect costs as permitted
            by the Federal Cost Principles applicable to the recipient.
            A recipient that expends less than \$500,000 in Federal
            awards in a single year is not required to arrange for this
            audit and may not finance the costs of such an audit with
            Federal funds.

    b.  [Other Project Audits]{.underline}. A recipient that seeks an
        audit of a specific third party contract should consider the
        implications of the following before procuring audit services.

        1.  [Organizational Conflict of Interest]{.underline}. In
            general, any auditor selected must be independent of the
            third party contractor to be audited.

        2.  [Verification of Indirect Costs]{.underline}. Federal
            verification of a contractor's indirect cost rates (such as
            provisional overhead (burden) and General & Administrative
            (G&A) rates) may be required. Some information sought may be
            available through undisputed audits that have been
            previously performed.

        3.  [Duplication of Services]{.underline}. While audits of third
            party contracts can be desirable, it is especially useful to
            contact FTA before engaging such services to preclude
            duplication and to assure the eligibility of the particular
            services for Federal participation. This is particularly
            important in connection with the procurement of
            architectural and engineering (A&E) services, because FTA is
            required by 49 U.S.C. Section 5325(b)(3) to assure that A&E
            contracts are audited in accordance with FAR Part 31 cost
            principles or State cognizant agency standards, and that A&E
            contractors and subcontractors must accept indirect cost
            rates established in accordance with those FAR or State
            cognizant agency principles if those rates are not under
            dispute. For this reason, it is essential that duplicative
            audits likely to produce disparate indirect cost rates may
            not be undertaken. Accordingly, FTA recommends that the
            recipient seek guidance from the cognizant Federal auditor
            or agency that approved the third party contractor's
            indirect cost rates before negotiating audit contract
            agreements.

        4.  [Eligibility of Costs]{.underline}. Costs of third party
            contract audit and proposal evaluation are eligible for
            reimbursement by FTA as a direct or indirect charge in
            accordance with applicable Federal cost principles. FTA
            reserves the right to disallow payments for duplicative
            audit charges.

20. [Use of \$1 Coins]{.underline}. To facilitate compliance with
    Section 104 of the Presidential \$1 Coin Act of 2006, 31 U.S.C.
    Section 5312(p), FTA assisted property that requires the use of
    coins or currency in public transportation service or supporting
    service must be fully capable of accepting and dispensing \$1 coins.

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c.  [Performance Difficulties]{.underline}. The Common Grant Rule for
    governmental recipients authorizes FTA to require each governmental
    recipient to include clauses to ameliorate possible difficulties
    that can be encountered during contract performance. In addition to
    other clauses that may be approved by the Office of Federal
    Procurement Policy, FTA may seek the inclusion of clauses described
    below:

    1.  [Changes]{.underline}. Changes and changed conditions clauses
        can be very desirable in large construction contracts, among
        others.

    2.  [Remedies]{.underline}. The Common Grant Rule for governmental
        recipients provides as follows:

        a.  [Delay]{.underline}. FTA has determined that a recipient may
            use liquidated damages if the recipient reasonably expects
            to suffer damages through delayed contract completion and
            the extent or amount of such damages would be difficult or
            impossible to determine. The rate and measurement period
            must be specified in the third party contract and may not be
            excessive. The assessment for damages is usually established
            at a specific rate per day for each day beyond the
            contract's delivery date or performance period, but a
            measurement period other than a day may be established if
            appropriate. The measurement period for liquidated damages
            may be other than a day, where some other measuring period
            is appropriate. Any liquidated damages recovered shall be
            credited to the project account involved unless FTA permits
            otherwise.

        b.  [Violation or Breach]{.underline}. Third party contracts
            exceeding \$100,000 must include administrative,
            contractual, or legal remedies for violations or breach of
            the contract by the third party contractor.

        c.  [Suspension of Work]{.underline}. FTA may require provisions
            pertaining to suspension of work.

        d.  [Termination]{.underline}. For contracts exceeding \$10,000,
            there must be termination for cause and termination for
            convenience provisions.

While the Common Grant Rule for non-governmental recipients does not
expressly require contract remedies or termination clauses, FTA strongly
encourages the inclusion of appropriate remedy clauses in all third
party contracts.

# CHAPTER V

# 

# [SOURCES]{.underline}

A recipient will often have several sources from which to obtain the
property and services it needs as described below:

1.  [FORCE ACCOUNT]{.underline}. As used in this circular, "force
    account" means the recipient's own labor forces and equipment. To
    assure that the recipient will have adequate technical capacity to
    perform its public transportation and contracting responsibilities
    in connection with the project, The Federal Transit Administration's
    (FTA's) grant or cooperative agreement secures FTA the right to
    determine the extent to which Federal assistance may be used to
    participate in force account costs.

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18. [SHARED USE]{.underline}. The Common Grant Rule for governmental
    recipients encourages recipients and subrecipients to enter into
    agreements for shared use of common goods and services. FTA
    encourages non-governmental recipients to consider joint
    procurements if economical and feasible.

19. [JOINT PROCUREMENT]{.underline}. The Common Grant Rule for
    governmental recipients encourages recipients and subrecipients to
    enter into State and local intergovernmental agreements for
    procurements for common goods or services. FTA also permits
    non-governmental recipients to consider joint procurements if
    economical and feasible. FTA encourages recipients to procure goods
    and services jointly with other recipients to obtain better pricing
    through larger purchases. Joint procurements offer the additional
    advantage of being able to obtain goods and services that exactly
    match each cooperating recipient's requirements. When obtaining
    goods or services in this manner, each recipient must ensure that
    all Federal requirements, required clauses, and certifications are
    included in the resulting joint solicitation and contract documents
    and properly implemented.

20. [STATE PURCHASING SCHEDULES]{.underline}. State Purchasing Schedules
    or other State contracts may also be available for recipient and
    subrecipient use. These permit subordinate government agencies to
    buy from established State schedules akin to the General Services
    Administration (GSA) schedules used by Federal agencies.

FTA takes the position that a recipient may acquire property or services
through these contracts provided all parties agree to append the
required Federal clauses in the purchase order or other document that
effects the recipient's procurement. When obtaining goods or services in
this manner, each recipient must ensure that all Federal requirements,
required clauses, and certifications (including Buy America) are
included in the resulting joint solicitation and contract documents and
properly implemented, whether in the master intergovernmental contract
or in the recipient's purchase document. When buying from these schedule
contracts, the recipient should obtain Buy America certification before
entering into the purchase order. If the property to be acquired
complies with FTA's Buy America regulations and underlying law, there is
no problem. If the property is not Buy America compliant, the recipient
will still have to obtain a waiver from FTA before proceeding.

21. [FEDERAL EXCESS AND SURPLUS PROPERTY]{.underline}. The Common Grant
    Rule for governmental recipients encourages recipients to use
    Federal excess and surplus property managed by the GSA when feasible
    and economical rather than procuring new property. The eligibility
    of activities and organizations to obtain supplies and services
    through GSA's personal property utilization and disposal programs is
    governed by Federal Property Management Regulations, 41 CFR Parts
    101--42 through 101--46, 101--48, and 101--49.

22. [FEDERAL SUPPLY SCHEDULES]{.underline}. Use of GSA's Federal Supply
    Schedules is restricted to those recipients with specific
    legislative authority to use them, subject to the extent of GSA's
    authorization to do so.

    a.  [Full Use of Federal Supply Schedules]{.underline}. In
        accordance with Appendix B of GSA Order ADM 4800.2E,
        "Eligibility to Use GSA Sources of Supply and Services," FTA
        recipients eligible for full use of GSA Schedules are limited to
        the Washington Metropolitan Area Transit Authority, the District
        of Columbia Department of Mass Transportation (40 U.S.C. Section
        502(a)(3)., the Government of American Samoa, the Government of
        Guam, Virgin Islands Department of Public Works, and the
        Commonwealth of the Northern Marianas (48 U.S.C. Section 1469e).

    b.  [Limited Use of Federal Supply Schedules]{.underline}. State and
        Local Governments (including institutions of higher education)
        are authorized by law to use Federal Supply Schedules to acquire
        information technology (IT) and to mitigate disasters. In both
        cases, GSA defines the term the term "State and Local
        Government" broadly to cover many of FTA's governmental
        recipients and others as follows:

> "The States of the United States, counties, municipalities, cities,
> towns, townships, tribal governments, public authorities (including
> public or Indian housing agencies under the United States Housing Act
> of 1937), school districts, colleges, and other institutions of higher
> education, council of governments (incorporated or not), regional or
> interstate government entities, or any agency or instrumentality of
> the preceding entities (including any local educational agency or
> institution of higher education), and including legislative and
> judicial departments."

GSA states in its Order that the term "State and Local Government" does
not include "contractors, or grantees, of State or local governments."
Nevertheless, with regard to State and local government entities
(including institutions of higher education) themselves receiving
Federal assistance funds either as an FTA recipient or subrecipient,
these entities are eligible users under the Cooperative Purchasing
Program by virtue of meeting the definition of State and local
government entities; the source of funding for these entities is
irrelevant.

1.  [Information Technology]{.underline}. In accordance with Section 211
    of the E Government Act of 2002, 40 U.S.C. Section 502(c), "State
    and local governments" are eligible, within limits established by
    law, to procure Information Technology (IT) of various types through
    GSA's Cooperative Purchasing Program, Federal Supply Schedule 70.
    The shortcut to GSA's website with information about cooperative
    purchasing is
    [**www.gsa.gov/cooperativepurchasing**](http://www.gsa.gov/cooperativepurchasing).

2.  [Disaster Recovery]{.underline}. Since February 1, 2007, in
    accordance with Section 833 of the John Warner National Defense
    Authorization Act for Fiscal Year 2007, Pub. L. 109--364, which
    amended 40 U.S.C. Section 502(d), State and local government
    entities may use any GSA Federal Supply Schedule to purchase
    property and services in advance of a major disaster declared by the
    president, as well as in the aftermath of an emergency event. State
    and local government entities are responsible for ensuring that the
    property or services purchased are to be used to facilitate
    recovery. More information about disaster recovery purchasing is
    available at
    [**http://www.gsa.gov/Portal/gsa/ep/contentView.do?faq=yes&pageTypeId=8199&contentId=22410&contentType=GSA_OVERVIEW**](http://www.gsa.gov/Portal/gsa/ep/contentView.do?faq=yes&pageTypeId=8199&contentId=22410&contentType=GSA_OVERVIEW).

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23. [EXISTING CONTRACTS]{.underline}. Use of existing contracts may
    prove an advantageous means of acquiring needed property or
    services.

    a.  [Permissible Uses]{.underline}. The following uses of existing
        contracts are permitted to the extent set forth below:

        1.  [Exercise of Options]{.underline}. Options may be used in
            accordance with the following limitations:

            a.  [Consistency with the Contract]{.underline}. A recipient
                must ensure that the exercise of an option is in
                accordance with the terms and conditions of the option
                stated in the initial contract awarded.

            b.  [Price]{.underline}. An option may not be exercised
                unless the recipient has determined that the option
                price is better than prices available in the market or
                that the option is the more advantageous offer at the
                time the option is exercised.

            c.  [Awards Treated as Sole Source
                Procurements]{.underline}. The following actions
                constitute sole source awards:

                1.  [Failure to Evaluate the Options Before Awarding the
                    Underlying Contract]{.underline}. When options have
                    not been evaluated as part of the award, the
                    exercise of such options will be considered a sole
                    source procurement.

                2.  [Negotiating a Lower Option Price]{.underline}.
                    Exercising an option after a lower price has been
                    negotiated also constitutes a sole source
                    procurement.

An award described above can only be permissible if it can be justified
under FTA's third party contract standards for sole source awards.

2.  [Assignment of Rights]{.underline}. Although FTA does not encourage
    the practice, a recipient may assign its contractual rights to
    purchase property and services to other recipients if the original
    contract contains an appropriate assignability clause that provides
    for the assignment of all or a portion of the specified deliverables
    as originally advertised, competed, evaluated, and awarded, or other
    appropriate assignment provisions. Some refer to this process as
    "piggybacking." As discussed more fully in Section 7.b of this
    chapter, the recipient must assure that the entity from which it
    intends to acquire contractual rights to purchase property or
    services has not improperly expanded the quantity of property or
    services to be delivered under its contract beyond the scope of that
    contract's limits. For example, if the supplies or services were
    solicited, competed and awarded through the use of an
    indefinite-delivery-indefinite-quantity (IDIQ) contract, then both
    the solicitation and contract award must contain both a minimum and
    maximum quantity that represent the reasonably foreseeable needs of
    the party(s) to the solicitation and contract.

An FTA recipient that obtains these contractual rights through
assignment may exercise them after first determining the contract price
remains fair and reasonable, and all Federal requirements have been
addressed in the contract's clauses. The recipient is not required to
perform a second price analysis if a price analysis was originally
performed. However, the recipient must determine the contract price or
prices originally established are still fair and reasonable. See,
Appendix B.16 of FTA's "Best Practices Procurement Manual" for use in
connection with decisions to enter into procurements through assignment
of another's contract rights. The recipient is responsible for Buy
America compliance with the transaction and assuring that they execute
all of the required pre-award and post-delivery Buy America audit
certifications. For further detail please refer to FTA's Pre-Award and
Post-Delivery Handbooks for buses and rail cars which contain copies of
the certifications to be executed

FTA recommends that recipients consider combining efforts in their
procurements to obtain better pricing through larger purchases. Some
refer to this process as "pooling." Joint procurements or cooperative
procurements offer the additional advantage of being able to obtain
goods and services that exactly match each cooperating recipient's
requirements. FTA considers joint procurements or cooperative
procurements to be better than procurements through assignments because
assignments do not combine buying power when prices are negotiated and
may limit a recipient's choices to that property and services excess to
another recipient's needs. FTA cautions, however, that if two or more
parties jointly solicit and award an IDIQ contract, then there must be a
total minimum and maximum.

Given the opportunities for joint procurements, inter‑governmental
procurements, and other innovative means of obtaining goods and
services, the recipient should pay renewed attention to its procurement
practices to ensure that it contracts only for its reasonably
anticipated needs and does not build excess capacity into its contracts
simply for the purpose of assigning rights to others at a later date.

b.  [Impermissible Uses]{.underline}. A contract improperly expanded
    beyond its original scope may not be used to support
    federally-assisted acquisitions. The following actions are
    prohibited:

    1.  [Improperly Expanded Scope]{.underline}. A recipient may not use
        Federal assistance to acquire property or services through
        another contract whose scope has been improperly expanded. FTA
        believes it is extremely important that the recipient ensure
        that it contracts only for its reasonably anticipated needs and
        does not add quantities or options to contracts solely to allow
        it to assign those quantities or options at a later date.

    2.  [Improperly Expanded Quantity]{.underline}. A recipient may not
        expand the quantity of property or services to be delivered
        under its contract beyond the scope of the contract's limits
        solely to assign those contract rights to another entity.

FTA considers an addition of work (property or services) that is beyond
the scope of the original contract to constitute a cardinal change. Such
practices are sometimes informally referred to as "tag-ons." Changes
within the scope of the contract ("in-scope" changes) are not "tag-ons."

FTA takes the position that earlier attempts to categorize virtually any
change in quantity as a prohibited out-of-scope change failed to account
for the realities of the marketplace and unnecessarily limited a
recipient from exercising reasonable freedom to make those minor
adjustments contemplated fairly and reasonably by the parties when they
entered into the contract. FTA's policy is supported by the U.S. Supreme
Court decision in *Freund v. United States*, 260 U.S. 60 (1922).

FTA recognizes that determining a "cardinal change" to a third party
contract can be difficult. A cardinal change cannot be identified easily
by assigning a specific percentage, dollar value, number of changes, or
other objective measure that would apply to all cases. Among other
things, customary marketing practices can influence the determination of
which changes would be "cardinal."

Before attempting any change in quantity of major items (e.g., buses,
rail cars), grantees should review their contract clauses to ensure they
allow for such changes. In the case of rolling stock, a change in
quantity or a substitution of major end items not contemplated in the
original competition is an out-of-scope change. FTA also considers an
out-of-scope change would include changing the engine, or changing from
a high to a low floor vehicle. FTA, however, considers changes to
seating fabrics and colors, exterior paint schemes, signage, and floor
coloring, and other similar changes to be permissible "in-scope"
changes.

FTA has not developed a finite list of acceptable changes and instead
advises recipients to look to the broader standards applied in Federal
contracting practice as reflected in Boards of Contract Appeals, Federal
courts, and Comptroller General decisions to determine whether what they
are trying to do is "in-scope." FTA does not imply that these Federal
procurement decisions are controlling. FTA intends to consider the
collective wisdom within these decisions in judging where changes in a
third party contract falls along the broad spectrum between clearly an
in-scope change and clearly out-of-scope change. FTA intends to monitor
its recipients and oversight contractors to ensure this concept is well
understood and uniformly applied, and to issue additional guidance as
necessary to assist the recipient in exercising this authority. This
approach permits greater latitude but, because it requires analysis, it
can sometimes require a greater knowledge of Federal contracting
practice.

24. [THE OPEN MARKET]{.underline}. Most likely the vast majority of a
    recipient's acquisitions will be through procurements in the open
    market. The next two chapters of this circular will address proper
    procedures for conducting and administering such procurements.

# CHAPTER VI

# 

# [PROCEDURAL GUIDANCE FOR OPEN MARKET PROCUREMENTS]{.underline}

1.  [COMPETITION REQUIRED]{.underline}. Except as permitted by Federal
    law or regulations, the Common Grant Rules require third party
    procurement transactions to be conducted in a manner providing open
    competition. This is reinforced by 49 U.S.C. Section 5325(a), which
    requires a Federal Transit Administration (FTA) recipient to conduct
    all third party procurement transactions financed under 49 U.S.C.
    Chapter 53 in a manner that provides full and open competition as
    determined by FTA. Awards may be made on the basis of:

    a.  [Solicitation by the Recipient]{.underline}. Compliance with the
        solicitation procedures described in this chapter will fulfill
        FTA requirements for "full and open competition."

    b.  [Unsolicited Proposals]{.underline}. A recipient may also enter
        into contracts resulting from the receipt of unsolicited
        proposals when authorized by applicable State or local law or
        regulation. Such contractual actions will satisfy the
        requirement for full and open competition if, before entering
        into the contract, the recipient publicizes its intent to accept
        the unsolicited proposal and provides an opportunity for
        interested parties to comment or submit competing proposals.

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25. [SOLICITATION REQUIREMENTS AND RESTRICTIONS]{.underline}. The Common
    Grant Rules require that each solicitation provide for the
    following:

    a.  [Description of the Property or Services]{.underline}. A clear
        and accurate description of the technical requirements for the
        property or services to be procured must be set forth in the
        solicitation and in the resulting contract.

        1.  [What to Include]{.underline}. The description may include a
            statement of the qualitative nature of the property or
            services to be procured. Whenever practicable, the
            description should express requirements in terms of
            functions to be performed or the level of performance
            required, including the range of acceptable characteristics
            or minimum acceptable standards. Detailed technical
            specifications should be avoided if at all possible in favor
            of performance specifications.

        2.  [Quantities Limited to the Recipient's Actual
            Needs]{.underline}. FTA restricts Federal assistance to the
            acquisition of that amount of property and services expected
            to meet, but not exceed, the recipient's actual needs at the
            time of acquisition. FTA will not knowingly participate in
            the cost of excess property or services merely to permit
            assignment of rights to others.

        3.  [Brand Name or Equal]{.underline}. When it is impractical or
            uneconomical to make a clear and accurate description of the
            technical requirements of the property the recipients seeks
            to acquire, a "brand name or equal" description may be used
            as a means to define the performance or other salient
            characteristics of a specific type of property. The
            recipient, however, must state the salient characteristics
            of the named brand that offerors must provide. When using a
            "brand name" specification, the recipient need not attempt
            to reverse-engineer a complicated part to discern precise
            measurements or specifications in order to describe its
            salient characteristics. FTA's "Best Practices Procurement
            Manual," contains guidance on preparation of specifications
            including examples with specific language.

        4.  [Prohibitions]{.underline}. The Common Grant Rules prohibit
            solicitation requirements that contain features that unduly
            restrict competition. FTA is also prohibited by 49 U.S.C.
            Section 5325(h) from using Federal funds to support an
            exclusionary or discriminatory specification.

Examples of such requirements appear in one or both Common Grant Rules
and include, but are not limited to, the following:

a.  [Excessive Qualifications]{.underline}. Unreasonable requirements
    placed on bidders or offerors in order for them to qualify to do
    business.

b.  [Unnecessary Experience]{.underline}. Unnecessary experience
    requirements.

c.  [Improper Prequalification]{.underline}. Use of prequalification
    procedures that do not meet the standards described below in this
    Chapter VII, Subsection 1.d.

d.  [Retainers]{.underline}. Making noncompetitive awards without
    further justification to any person or firm on a retainer contract
    with the recipient or subrecipient.

e.  [Excessive Bonding]{.underline}. Imposing excessive bonding
    requirements. Notably, FTA does not require any bonding for rolling
    stock, services, maintenance operations, or any contracts other than
    construction as explained previously in Chapter IV.

f.  [Brand Name Only]{.underline}. Specifying only a "brand name"
    product instead of allowing an "or equal" product to be offered or
    failing to specify the brand name product's salient characteristics.

g.  [In-State or Local Geographic Restrictions]{.underline}. Specifying
    statutorily or administratively imposed in-State or local
    geographical preferences or evaluating bids and proposals in light
    of such in-State or local geographic preferences. Specifically, an
    FTA recipient is prohibited by 49 U.S.C. Section 5325(i) from
    limiting their bus purchases to in-State dealers. Exceptions
    expressly mandated or encouraged by Federal law include the
    following:

    1.  [Architecture and Engineering Services]{.underline}. Geographic
        location may be a selection criteria provided an appropriate
        number of qualified firms are eligible to compete for the
        contract, given the nature and size of the project.

    2.  [Licensing]{.underline}. State licensing laws may be enforced.

    3.  [Disaster Projects]{.underline}. With respect to Stafford Act
        funding, 42 U.S.C. Section 5150 provides a preference to firms
        and individuals located in the area affected by a major disaster
        or emergency for debris clearance, distribution of supplies,
        reconstruction, and other major disaster or emergency assistance
        activities.

h.  [Organizational Conflict of Interest]{.underline}. An organizational
    conflict of interest can result in unfair competitive situations:

    1.  [Occurrence]{.underline}. An organizational conflict of interest
        occurs when any of the following circumstances arise:

        a.  [Lack of Impartiality]{.underline}. When the contractor is
            unable, or potentially unable, to render impartial
            assistance or advice to the recipient due to other
            activities, relationships, contracts, or other
            circumstances.

        b.  [Impaired Objectivity]{.underline}. When the contractor's
            objectivity in performing the contract work is or might be
            otherwise impaired due to other activities, relationships,
            contracts, or other circumstances.

        c.  [Unfair Competitive Advantage]{.underline}. The contractor
            has an unfair competitive advantage.

    2.  [Remedy]{.underline}. Separation of Functions is one means to
        remedy organizational conflicts of interest. For example, a
        contractor that develops or drafts specifications, plans,
        requirements, statements of work, invitations for bids and/or
        requests for proposals should be excluded from competing for
        contract awards of the execution of the work, except if the
        contractor is participating in a consortia, joint venture, or
        other innovative contractual arrangement in which the recipient
        contemplates award of both development and execution functions
        to the same entity.

i.  [Restraint of Trade]{.underline}. Engaging in noncompetitive pricing
    practices between firms or between affiliated companies.

j.  [Arbitrary Action]{.underline}. Taking any arbitrary action in the
    procurement process.

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b.  [Other Federal Requirements Affecting the Property or Services to be
    Acquired]{.underline}. Identify those Federal requirements that will
    impact contract scope and performance. See, Chapter IV, Section 2.b
    of this circular, and the latest FTA Master Agreement that may
    contain additional requirements.

c.  [Other Federal Requirements Affecting the Bidder/Offeror and
    Contractor]{.underline}. Identify all Federal requirements that a
    bidder or offeror must fulfill before and during contract
    performance. See, Chapter IV, Section 2.a of this circular. The
    latest FTA Master Agreement may also contain additional
    requirements.

d.  [Prequalification]{.underline}. Prequalification lists are most
    commonly used for recurring requirements for property that take a
    good deal of time to evaluate to determine if they satisfy the
    recipient's standards. A recipient may prequalify people, firms, or
    products for participation in its procurements provided that:

    1.  [Lists]{.underline}. The recipient ensures that all its
        prequalification lists used in acquiring property and services
        are current.

    2.  [Sources]{.underline}. The recipient ensures that all its
        prequalification lists include enough qualified sources to
        ensure maximum full and open competition.

    3.  [Qualification Periods]{.underline}. The recipient permits
        potential bidders or proposers to qualify during the
        solicitation period (from the issuance of the solicitation to
        its closing date), as set forth in the Common Grant Rule for
        governmental recipients. Evaluations for prequalification,
        however, need not be accelerated or truncated. FTA does not
        require a recipient to hold a particular solicitation open to
        accommodate a potential bidder or proposer that submits a
        person, firm, or product for approval before or during that
        solicitation. Prequalification as discussed here should not be
        confused with reviews of technical qualifications that are an
        essential step in two‑step procurement processes, as discussed
        further in Section 3.g of this chapter of the circular.

e.  [Evaluation Factors]{.underline}. Identify all factors to be used in
    evaluating bids or proposals.

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26. [METHODS OF PROCUREMENT]{.underline}. The recipient is expected to
    use the competitive procedure(s) best suited to the circumstances of
    the contract action sought and consistent with the need to fulfill
    its requirements efficiently. FTA has established the following
    standards for various procurement methods, based on requirements of
    the Common Grant Rules and supplemented by FTA policies that address
    the needs of FTA recipients.

    a.  [Micro-Purchases]{.underline}. Consistent with the FAR, FTA
        considers micro-purchases to be those purchases of \$3,000 or
        less. (However, Davis-Bacon prevailing wage and hour
        restrictions apply to construction contracts exceeding \$2,000.)

FTA permits purchases below these thresholds to be made without
obtaining competitive quotations and those purchases are exempt from Buy
America requirements. FTA cautions, however, that there should be
equitable distribution among qualified suppliers and no splitting of
procurements to avoid competition.

FTA's only documentation requirement for micro-purchases is a
determination that the price is fair and reasonable and a description of
how this determination was arrived at. The rationale for the procurement
method, selection of contract type, and reasons for contractor selection
or rejection are not required. Micro-purchases may be documented through
various means. One, but not the only, method is for the official tasked
to review and authorize payment of a credit card bill to add a statement
to that bill such as "I have examined the expenditures reflected in this
bill and determined that each expenditure reflects a reasonable price
based on market prices offered by the vendors to the general public." A
statement as described may then be added by: (1) stapling a preprinted
sheet to the bill, (2) stamping the bill with a rubber stamp imprinting
the statement, or (3) even asking the credit card provider to print an
appropriate statement on each bill that the reviewing official may sign.

This is not intended to imply that any purchase under \$3,000 must be
treated as a micro-purchase. A recipient remains free to set lower
thresholds as it deems fit for this procurement method.

b.  [Small Purchases]{.underline}. The Common Grant Rule for
    governmental recipients defines small purchase procedures as those
    relatively simple and informal procurement methods for securing
    services, supplies, or other property that cost more than the
    micro-purchase threshold but do not cost more than the simplified
    acquisition threshold fixed at 41 U.S.C. Section 403(11) (currently
    \$100,000). If small purchase procedures are used, price or rate
    quotations must be obtained from an adequate number of qualified
    sources. This is not intended to imply that any purchase under
    \$100,000 must be treated as a small purchase. The recipient remains
    free to set lower thresholds as it deems fit for this procurement
    method.

c.  [Sealed Bids (Formal Advertising)]{.underline}. The Common Grant
    Rule for governmental recipients identifies Sealed Biding as a
    procurement method in which bids are publicly solicited and a
    firm-fixed-price contract (lump sum or unit price) is awarded to the
    responsible bidder whose bid, conforming to all the material terms
    and conditions of the invitation for bids, is the lowest in price.

    1.  [When Appropriate]{.underline}. The sealed bid method of
        procurement is the preferred method for procuring construction
        and other property, if the factors below are present. In order
        for sealed bidding to be feasible, the following conditions
        should be present:

        a.  [Specifications]{.underline}. A complete, adequate, and
            realistic specification or purchase description is
            available;

        b.  [Adequate Sources]{.underline}. Two or more responsible
            bidders are willing and able to compete effectively for the
            business;

        c.  [Firm Fixed Price Contract]{.underline}. The procurement
            lends itself to a firm fixed price contract;

        d.  [Price]{.underline}. The selection of the successful bidder
            can be made on the basis of price and those price-related
            factors included in the solicitation; and

        e.  [Discussions]{.underline}. No discussion with bidders is
            needed.

    2.  [Procurement Requirements]{.underline}. If this procurement
        method is used, the following requirements apply:

        a.  [Publicity]{.underline}. The invitation for bids will be
            publicly advertised;

        b.  [Adequate Sources]{.underline}. Bids shall be solicited from
            an adequate number of known suppliers, providing them
            sufficient time to prepare bids prior to the date set for
            opening the bids;

        c.  [Specifications]{.underline}. The invitation for bids, which
            will include any specifications and pertinent attachments,
            shall describe the items or services sought in order for the
            bidder to properly respond;

        d.  [Public Opening]{.underline}. All bids will be publicly
            opened at the time and place prescribed in the invitation
            for bids;

        e.  [Firm Fixed Price Contract]{.underline}. A firm fixed-price
            contract award will be made in writing to the lowest
            responsive and responsible bidder. When specified in bidding
            documents, factors such as discounts, transportation costs,
            and life cycle costs shall be considered in determining
            which bid is lowest; payment discounts will only be used to
            determine the low bid when prior experience indicates that
            such discounts are usually taken advantage of; and

        f.  [Rejection of Bids]{.underline}. Any or all bids may be
            rejected if there is a sound, documented business reason.

d.  [Competitive Proposals/Request for Proposals (RFP)]{.underline}.
    Competitive Proposals is a procurement method normally conducted
    with more than one source submitting an offer, or proposal.

    1.  [When Appropriate]{.underline}. This method of procurement is
        generally used when conditions are not appropriate for the use
        of sealed bids. Competitive proposals should be used when:

        a.  [Specifications]{.underline}. Adequate specifications or
            descriptions are not available;

        b.  [Adequate Sources]{.underline}. It is uncertain whether more
            than one offeror will submit a proposal;

        c.  [Price]{.underline}. Due to the nature of the procurement,
            award should not be based exclusively on price or
            price-related factors;

        d.  [Discussions]{.underline}. Discussions with the offeror(s)
            are likely to be needed.

    2.  [Procurement Requirements]{.underline}. If this procurement
        method is used, the following requirements apply:

        a.  [Publicity]{.underline}. Requests for proposals will be
            publicized;

        b.  [Evaluation Factors]{.underline}. All evaluation factors
            will be identified in the procurement documents along with
            their relative importance; numerical or percentage ratings
            or weights, however, need not be disclosed in the
            solicitation;

        c.  [Adequate Sources]{.underline}. Proposals will be solicited
            from an adequate number of qualified sources;

        d.  [Evaluation Method]{.underline}. The recipient will have a
            method in place for conducting technical evaluations of the
            proposals received and for selecting awardees;

        e.  [Price]{.underline}. Award will be made to the responsible
            firm whose proposal is most advantageous to the recipient's
            program with price and other factors considered; and

        f.  [Value]{.underline}. In determining which proposal is most
            advantageous, a recipient may award (if consistent with
            State law) to the offeror whose proposal offers the greatest
            value to the recipient. This decision should be based upon
            an analysis of a tradeoff of qualitative technical factors
            and price/cost to decide which proposal represents the "best
            value" to the recipient's public transportation project as
            defined in Chapter I, Section 4 of this circular. Apart from
            the statutory requirement that factors used must support the
            purposes of the Federal transit laws at 49 U.S.C. Chapter
            53, FTA does not wish to dictate any particular factors or
            analytic process. Solicitations must, of course, inform
            potential offerors that the award will be made on a "best
            value" basis and what the basis for award will be.

e.  [Architectural and Engineering Services (A&E) and Other
    Services]{.underline}. FTA's enabling legislation at 49 U.S.C.
    Section 5325(b)(1) requires the use of qualifications based
    competitive proposal procedures as set forth in the "Brooks Act," 40
    U.S.C. Sections 1101 1104.

    1.  [When Required]{.underline}. Qualifications-based competitive
        proposal procedures are required for projects related to or
        leading to a construction project. These procedures must be used
        not only when contracting for architectural and engineering
        services, but also for program management, construction
        management, feasibility studies, preliminary engineering,
        design, architectural, engineering, surveying, mapping, or
        related services.

    2.  [When Prohibited]{.underline}. Qualifications based competitive
        proposal procedures described below can only be used for the
        procurement of the services such as program management,
        construction management, feasibility studies, preliminary
        engineering, design, architectural, engineering, surveying,
        mapping, or related services if those services to be provided
        relate to or lead to a construction project. Unless FTA
        determines otherwise in writing, these qualifications based
        procurement procedures may not be used to obtain other types of
        services if those services are not related to or do not lead to
        a construction project, even if those services would be provided
        by a firm that also provides architectural and engineering
        services.

    3.  [Qualifications-Based Proposal Requirements]{.underline}. When
        this procurement method is used, the following requirements
        apply:

        a.  [Qualifications]{.underline}. An offeror's qualifications
            must be evaluated;

        b.  [Price]{.underline}. Price is excluded as an evaluation
            factor;

        c.  [Most Qualified]{.underline}. Negotiations are conducted
            with only the most qualified offeror; and

        d.  [Next Most Qualified]{.underline}. Failing agreement on
            price, negotiations with the next most qualified offeror
            and, if necessary, negotiations with successive offerors in
            descending order must be conducted until a contract award
            can be made to the offeror whose price the recipient
            believes is fair and reasonable.

    4.  [Effect of State Laws]{.underline}. To the extent that a State
        has, prior to August 10, 2005, adopted by law, an equivalent
        State qualifications-based requirement for contracting for
        architectural, engineering, and design services, Federal "Brooks
        Act" procedures, 40 U.S.C. Sections 1101--1104, will not apply.

    5.  [Audits and Indirect Costs]{.underline}. As required by
        49 U.S.C. Section 5325(b)(3), the recipient must comply with the
        following requirements when awarding a contract for program
        management, architectural engineering, construction management,
        feasibility studies, preliminary engineering, design,
        architectural, engineering, surveying, mapping, or related
        services:

        a.  [Performance of Audits]{.underline}. Any contract or
            subcontract shall be performed and audited in compliance
            with FAR Part 31 cost principles.

        b.  [Indirect Cost Rates]{.underline}. The recipient and third
            party contractor and its subcontractors shall accept
            indirect cost rates established in accordance with the FAR
            for one year applicable accounting periods by a cognizant
            Federal or State government agency, if such rates are not
            currently under dispute.

        c.  [Application of Rates]{.underline}. After a firm's indirect
            cost rates are accepted under subparagraph (b), the
            recipient of the funds shall apply such rates for the
            purposes of contract estimation, negotiation,
            administration, reporting, and contract payment, and shall
            not be limited by administrative or de facto ceilings.

        d.  [Prenotification; Confidentiality of Data]{.underline}. A
            recipient requesting or using the cost and rate data
            described in subparagraph (c) shall notify any affected firm
            before such request or use. Such data shall be confidential
            and shall not be accessible or provided by the group of
            agencies sharing cost data under this subparagraph, except
            by written permission of the audited firm. If prohibited by
            law, such cost and rate data shall not be disclosed under
            any circumstances.

f.  [Design-Bid-Build]{.underline}. This procurement method is used when
    the recipient chooses to contract separately for design and
    construction of its project. Design services must be procured by
    qualifications based methods, and construction services may be
    procured services through sealed bidding or competitive
    negotiations. Design and construction services must be procured in a
    manner that conforms to applicable State and local law, the
    requirements of this circular relative to the method of procurement
    used, and all other applicable Federal requirements.

g.  [Design-Build]{.underline}. This procurement method is used when the
    recipient seeks to award the contract to a single contractor that
    will be responsible for both the project's design and construction.
    SAFETEA--LU expressly authorizes the use of FTA capital assistance
    to support design-build projects "after the recipient complies with
    Government requirements." 49 U.S.C. Section 5325(d)(2).

An FTA recipient must procure design-build services through means of
qualifications based competitive proposal procedures based on the Brooks
Act as set forth in Chapter V, Subsection 3.e of the circular when the
preponderance of the work to be performed is considered to be for
architectural and engineering program management, construction
management, feasibility studies, preliminary engineering, design,
architectural, engineering, surveying, mapping, or related A&E services.
Except to the extent FTA determines otherwise in writing, qualifications
based competitive proposal procedures may not be used to procure
design-build services when the preponderance of the work to be performed
are services other than those listed in the previous sentence, unless
required by State law. Specifically, except to the extent FTA determines
otherwise in writing, qualifications based competitive proposal
procedures may not be used to acquire other types of services even
though a firm that provides A&E services is also a potential source to
perform other types of services.

Consequently, the recipient should determine which portion of the work
is predominant and use the appropriate method for that type of
procurement. We would normally expect the construction portion of a
design-build procurement to be predominant and, in that case, normal
procurement methods may be used in lieu of qualification-based
competitive proposals (the Brooks Act method).

In the alternative, Federal law at 41 U.S.C. Section 253m permits the
Government to use a two-phase selection procedure for large design-build
projects. FTA takes the position that the recipient may also use that
procedure. Essentially, the two-phase selection procedure allows the
contracting officer to solicit proposals for design-build projects in
two steps, the first a review of technical qualifications and technical
approach to the project and the second a complete proposal including
price. This allows the contracting officer to narrow the competitive
range in the first step without a requirement for extensive proposal
review on the government's part or expensive proposal drafting on
potential contractors' parts. This two-phase selection procedure is
separate and distinct from prequalification and is but one method a
recipient may use in their procurements.

h.  [Other Than Full and Open Competition]{.underline}. Normally, the
    recipient shall provide for full and open competition in soliciting
    offers and awarding contracts. However, the Common Grant Rule for
    governmental recipients acknowledges that under certain
    circumstances, a recipient will be permitted to contract without
    providing for full and open competition.

    1.  [When Appropriate]{.underline}. Procurement by noncompetitive
        proposals may be used only when the award of a contract is
        infeasible under small purchase procedures, sealed bids, or
        competitive proposals and at least one of the following
        circumstances applies:

        a.  [Inadequate Competition]{.underline}. After solicitation of
            a number of sources, competition is determined inadequate.
            Before competition may be determined inadequate, however,
            the recipient is expected to review its specifications to
            determine if they were unduly restrictive or whether there
            were other reasons the recipient could remedy to encourage
            submission or additional bids or proposals.

        b.  [Sole Source]{.underline}. When the supplies or services
            required by the recipient are available from only one
            responsible source, and no other type of supplies or
            services will satisfy the recipient's requirements.

            1.  [Unique Capability and Availability]{.underline}.

            2.  [Single Bid]{.underline}. As discussed above, upon
                receiving a single bid or proposal in response to a
                solicitation, the recipient should determine if
                competition was adequate. This determination may include
                a review of the specifications to determine if they were
                unduly restrictive or a review of contacting sources
                that chose not to submit a bid or offer. The mere fact
                that only one bid or proposal was received does not
                automatically mean competition was inadequate since many
                unrelated factors could cause potential sources not to
                submit a bid or proposal. It is only if the recipient
                determines that competition was inadequate because
                prospective contractors chose not to participate for
                reasons beyond the recipient's control that the
                procurement should continue as a sole source
                procurement.

        c.  [Unusual and Compelling Urgency]{.underline}. When the
            recipient's need for the supplies or services is of such an
            unusual and compelling urgency that the recipient would be
            seriously injured unless the recipient is permitted to limit
            the number of sources from which it solicits bids or
            proposals, or when the public exigency or emergency for the
            requirement will not permit a delay resulting from
            competitive solicitation.

        d.  [Authorized by FTA]{.underline}. The Common Grant Rule
            provides Federal agencies the authority to permit a
            recipient to use noncompetitive proposals. Under this
            authority, FTA has made the following determinations:

            1.  [Joint Partnership, Joint Venture,
                Consortia,---Research]{.underline}. In the case of a
                grant agreement or cooperative agreement with a joint
                partnership, joint venture, or consortia, or a research
                project in which FTA has full knowledge of a particular
                firm or combination of firms as participants or third
                party contractors, the grant agreement or cooperative
                agreement constitutes approval of arrangements in which
                participants were not selected through full and open
                competition.

            2.  [FAR Standards]{.underline}. To ensure that the
                recipient has flexibility equal to that of Federal
                contracting officers, FTA authorizes procurement by
                noncompetitive proposals in all of the circumstances
                authorized by FAR Part 6.3. In addition to circumstances
                discussed in the Common Grant Rule, the FAR recognizes
                the following circumstances justify less than full and
                open competitive procurements:

                a.  [Statutory Authorization or
                    Requirement]{.underline}. FTA's enabling legislation
                    has not yet specified third party contracting with
                    specific entities. Specific statutory requirements,
                    however, have been included in DOT appropriations
                    acts with the result that only a single contractor
                    is able to perform the contract.

                b.  [National Emergency]{.underline}. To maintain a
                    facility, producer, manufacturer, or other supplier
                    available for furnishing supplies or services in
                    case of a national emergency or to achieve
                    industrial mobilization.

                c.  [Research]{.underline}. To establish or maintain an
                    essential engineering, research, or development
                    capability to be provided by an educational or other
                    non-profit institution or a federally-funded
                    research and development center.

                d.  [Disputes/Litigation]{.underline}. To acquire the
                    services of an expert or neutral person for any
                    current or anticipated litigation or dispute.

                e.  [International Arrangements]{.underline}. When
                    precluded by the terms of an international agreement
                    or a treaty between the United States and a foreign
                    government or international organization, or the
                    written directions of a foreign government
                    reimbursing the recipient for the cost of the
                    acquisition of the supplies or services for such
                    government.

                f.  [National Security]{.underline}. When the disclosure
                    of the recipient's needs would compromise the
                    national security.

                g.  [Public Interest]{.underline}. When the recipient
                    determines that it is not in the public interest in
                    the particular acquisition concerned.

    2.  [When Prohibited]{.underline}. Less than full and open
        completion is not justified on the basis of---

        a.  [Failure to Plan]{.underline}. The recipient's lack of
            advance planning; or

        b.  [Limited Funding Availability]{.underline}. Concerns related
            to the amount of funds available (e.g., funds will expire)
            for the property or services.

    3.  [Required Procedures]{.underline}.

        a.  [Limited Sources]{.underline}. When not providing for full
            and open competition, the recipient shall solicit offers
            from as many potential sources as is practicable under the
            circumstances.

        b.  [Sole Source]{.underline}. Procurements are accomplished
            through solicitation of a proposal from only one source, or
            after solicitation of a number of sources, competition is
            determined inadequate.

        c.  [Change Order]{.underline}. A contract change that is not
            within the scope of the original contract is considered a
            sole source procurement that must comply with this
            subparagraph.

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27. [PROHIBITED/RESTRICTED CONTRACT TYPES]{.underline}. The Common Grant
    Rule for governmental recipients provides more guidance on contract
    type than the Common Grant Rule for non-governmental recipients,
    which merely states that the recipient determines the type of
    contract to be used (e.g. fixed price, cost reimbursement, purchase
    order, and incentive contract) but requires that it be appropriate
    for the particular procurement and promote the best interest of the
    program or project involved. For these reasons, FTA recommends that
    non-governmental recipients adhere to standards for governmental
    recipients to the extent feasible. Special attention is required as
    explained below.

    a.  [Cost Plus a Percentage of Cost Prohibited]{.underline}. The
        Common Grant Rules expressly prohibit the use of the cost plus a
        percentage of cost and percentage of construction cost methods
        of contracting.

    b.  [Time and Materials Restricted]{.underline}. The Common Grant
        Rule for governmental recipients permits the use of time and
        material type contracts only:

        1.  [Restricted Use]{.underline}. After a determination that no
            other type of contract is suitable; and

        2.  [Firm Ceiling Price]{.underline}. If the contract specifies
            a ceiling price that the contractor shall not exceed except
            at its own risk.

28. [ELIGIBLE COSTS]{.underline}. Property and services must be eligible
    for Federal reimbursement under the standards of the Federal Cost
    Principles Circular (OMB Circular A--87, OMB Circular A--21, OMB
    Circular A--122, or FAR Part 31) applicable to the recipient before
    FTA funds can be used to support their costs. Costs or prices based
    on estimated costs for contracts under grants or cooperative
    agreements will be allowable only to the extent that costs incurred
    or cost estimates included in negotiated prices are consistent with
    Federal cost principles. However, a recipient may use its own cost
    principles that comply with applicable Federal cost principles.

29. [COST AND PRICE ANALYSIS]{.underline}. The Common Grant Rules
    require the recipient to perform a cost or price analysis in
    connection with every procurement action, including contract
    modifications. The method and degree of analysis depends on the
    facts surrounding the particular procurement situation, but as a
    starting point, the recipient must make independent estimates before
    receiving bids or proposals.

    a.  [Cost Analysis]{.underline}. A cost analysis must be performed
        when the offeror is required to submit the elements (i.e., labor
        hours, overhead, materials, etc.) of the estimated cost, (e.g.,
        under professional consulting and architectural and engineering
        services contracts, etc.). A cost analysis will be necessary
        when adequate price competition is lacking and for sole source
        procurements, including contract modifications or change orders,
        unless price reasonableness can be established on the basis of a
        catalog or market price of a commercial product sold in
        substantial quantities to the general public or on the basis of
        prices set by law or regulation.

FTA recognizes that some recipients may have difficulty obtaining the
information necessary to conduct a proper cost analysis. The
requirements for cost analysis, however, are based in the Common Grant
Rules and require action beyond FTA or the Department of
Transportation's (DOT's) authority to change. FTA continues to seek an
equitable, practical solution to this problem consistent with the
flexibility Federal contracting officers enjoy under the FAR.

While Federal cost principles contain many requirements about the
allowability and allocability of costs, FTA has established the
following policies for determining appropriate indirect cost rates,
profit, and incentive payments.

1.  [Establishing Indirect Cost Rates]{.underline}. If the third party
    contractor or subcontractor does not have an approved Government
    indirect cost rate agreement, FTA's position is that the dollar
    value of the contract should determine how that rate is verified.

    a.  [Contracts of \$5 Million or Less]{.underline}. FTA will accept
        the audit recommendations of the contractor's certified public
        accountant, or indirect cost information in the contractor's
        annual statement to their stockholders, shareholders, or owners,
        or examples of acceptance of their rates by other government
        agencies within the last six months.

    b.  [Contracts Exceeding \$5 Million]{.underline}. If the
        subcontract exceeds \$5 million, then the Defense Contract Audit
        Agency, another Federal cognizant audit agency, or an accounting
        firm that has been approved to perform audits for the Federal
        Government will need to verify the contractor's rates.

2.  [Profit]{.underline}. The recipient will negotiate profit as a
    separate element of the price for each contract in which there is no
    price competition and in all cases in which cost analysis is
    performed. To establish a fair and reasonable profit, consideration
    will be given to the complexity of the work to be performed, the
    risk borne by the contractor, the contractor's investment, the
    amount of subcontracting, the quality of its record of past
    performance, and industry profit rates in the surrounding
    geographical area for similar work.

3.  [Incentive Payments]{.underline}. FTA treats as eligible costs the
    recipient's incentive payments to contractors that provide accurate
    cost and ridership estimates in connection with a new fixed guideway
    capital project. FTA also treats as eligible costs the recipient's
    incentive payments to contractors that enable a new fixed guideway
    capital project to be completed for less than its original estimated
    cost. Such incentive payments facilitate implementation of 49 U.S.C.
    Section 5309(l).

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b.  [Price Analysis]{.underline}. A price analysis may be used in all
    other instances to determine the reasonableness of the proposed
    contract price. FTA takes the position that price analysis for
    micro-purchases may be conducted on a limited basis as discussed in
    Chapter VII, Section 9.a. Similarly, an abbreviated price analysis
    may be used for small purchases in most cases. One method to record
    this analysis is through use of a preprinted form on which a
    contracting officer (or other responsible person) can annotate a
    finding of fair and reasonable pricing and check off the most common
    reasons why this would be so such as catalog or market prices
    offered in substantial quantities to the general public, regulated
    prices (e.g., for many utilities purchases), or comparison with
    recent prices for similar goods and services.

c.  [Guidance]{.underline}. The following resources may be used as
    guidance in preparing cost or price analyses:

    1.  FTA's "Best Practices Procurement Manual," Chapter 5,

    2.  The National Transit Institute Course, "Cost or Price Analysis
        and Risk Assessment,"

    3.  Guide for FTA Grantees
        [**http://www.fta.dot.gov/documents/Helpline_Price_Guide.doc**](http://www.fta.dot.gov/documents/Helpline_Price_Guide.doc).,

    4.  FAR Part 31, Contract Cost Principles and Procedures, and

    5.  Defense Contract Audit Agency Audit Manual.

Note, however, that the requirements of FAR Part 31 and the Defense
Contract Audit Agency Audit Manual may differ from restrictions
applicable to an FTA recipient. Each FTA recipient must comply with
those Federal laws and regulations directly applicable to it.

30. [EVALUATIONS]{.underline}. The following standards apply:

    a.  [General]{.underline}. Bids and offers must be evaluated in
        accordance with the all the evaluation factors set forth in the
        invitation for bids or request for proposals. Only those
        evaluation factors that have been set forth in those procurement
        documents may be used to determine the award. The recipient may
        not modify their evaluation factors after bids or proposals have
        been submitted.

    b.  [Options]{.underline}. In awarding the basic contract:

        1.  [Evaluation Required]{.underline}. Except as provided in
            this Chapter VI, paragraph 7.b(2), the recipient shall
            evaluate offers for any option quantities or periods
            contained in a solicitation when it has been determined
            prior to soliciting offers that the recipient is likely to
            exercise the options.

        2.  [Evaluation Not Required]{.underline}. The recipient need
            not evaluate offers for any option quantities when it is
            determined that evaluation would not be in the best
            interests of the recipient and this determination is
            approved by senior official of the recipient. An example of
            a circumstance that may support a determination not to
            evaluate offers for option quantities is when there is a
            reasonable certainty that funds will be unavailable to
            permit exercise of the option.

    c.  [Evaluators]{.underline}. Many FTA recipients assign proposal
        evaluation and contract monitoring duties to their own auditors
        or financial management personnel. Those lacking qualified
        personnel within their organization may contract for those
        services. If they do so, they must comply with the procurement
        standards of this circular.

31. [CONTRACT AWARD]{.underline}. The following provisions apply to
    third party contract awards:

    a.  [Award to Other Than the Lowest Bidder or Offeror]{.underline}.
        Federal transit law at 49 U.S.C. Section 5325(c) authorizes the
        recipient to award a contract to other than the lowest bidder if
        the award furthers an objective consistent with the purposes of
        this Chapter VI of the circular, including improved long-term
        operating efficiency and lower long-term costs.

    b.  [Award to a Responsible Contractor]{.underline}. SAFETEA--LU
        added a new subsection codified at 49 U.S.C. Section 5325(j) to
        strengthen the responsibility requirements of contractors
        participating in FTA assisted procurements. A recipient now may
        award a contract financed under 49 U.S.C. Chapter 53 only to a
        "responsible" contractor capable of successfully performing
        under the terms and conditions of the contract. To determine
        responsibility, the recipient must consider the following
        criteria before awarding the contract:

        1.  [Integrity]{.underline}. The contractor's integrity;

        2.  [Public Policy]{.underline}. The contractor's compliance
            with public policy;

        3.  [Past Performance]{.underline}. The contractor's past
            performance, including the performance reported in the
            Secretary of Transportation's Contractor Performance
            Assessment Reports pertaining to new fixed guideway capital
            projects;

        4.  [Financial and Technical Resources]{.underline}. The
            contractor's financial and technical resources and;

        5.  [Debarment/Suspension]{.underline}. Contractor's status with
            respect to DOT regulations, "Governmentwide Debarment and
            Suspension (Nonprocurement)," 49 CFR Part 29.

In general a separate responsibility determination is made after bids
and proposals have been evaluated under the factors set forth in the
invitation for bids or request for proposals.

c.  [Rejection of Bids and Offers]{.underline}.

    1.  [Governmental Recipients]{.underline}. The Common Grant Rule for
        governmental recipients asserts the recipient's right to reject
        all bids submitted in response to formal advertising or sealed
        bid procurements, even though the bidders might have had an
        expectation that one of them would be awarded a contract.

    2.  [Non-Governmental Recipients]{.underline}. The Common Grant Rule
        for non-governmental recipients authorizes the recipient to
        reject any and all bids or offers when it is in the recipient's
        interest to do so.

# CHAPTER VII

# [PROTESTS, CHANGES AND MODIFICATIONS, CLAIMS, DISPUTES AND SETTLEMENTS]{.underline}

The Common Grant Rules specify that the recipient will be responsible in
accordance with good administrative practice and sound business judgment
for the settlement of all contractual and administrative issues arising
out of procurements, including source evaluation and selection,
including protests of awards, disputes, and claims. In addition to
Common Grant Rule standards applicable to the recipient and the Federal
Transit Administration (FTA), FTA encourages the recipient to use such
alternative dispute resolution procedures as may be appropriate. Neither
FTA nor the Common Grant Rules relieve the recipient of any
responsibility under its contracts to resolve disagreements that may
arise in the course of contract formation or contract administration.

In general, FTA will not substitute its judgment for that of the grantee
or subgrantee unless the matter is primarily a Federal concern.
Nevertheless, FTA can become involved in the recipient's administrative
decisions when the recipient's protest decisions are challenged, and
particularly when the recipient seeks to use FTA funds to support the
costs it incurs when entering into settlements.

1.  [PROTESTS]{.underline}.

    a.  [The Recipient's Role and Responsibilities]{.underline}. The
        Common Grant Rules charge the recipient with the initial
        responsibility of settling protests of third party contract
        awards.

        1.  [Protest Procedures]{.underline}. In addition to other
            methods the recipient may have to resolve third party
            contract issues, such as mediation or arbitration, the
            Common Grant Rule for governmental recipients requires the
            recipient to have protest procedures to handle third party
            contract issues. FTA interprets this requirement to mean
            that all the recipient's protest procedures must be in
            writing. While the Common Grant Rule for non-governmental
            recipients does not impose a similar requirement on a
            non-governmental recipient, FTA expects each recipient to
            have appropriate protest procedures, as part of its
            requirement to maintain or acquire adequate technical
            capacity to implement the project.

        2.  [Responsibilities to FTA]{.underline}. The recipient's
            minimum responsibilities to FTA consist of the following:

            a.  [Timely Notification]{.underline}. The Common Grant Rule
                requires a governmental recipient involved in any
                protest to notify FTA when it receives a protest related
                to a third party contract to which this circular applies
                and to similarly keep FTA informed about the status of
                the protest. At any time, FTA may require the recipient
                to forward copies of a particular protest or all
                protests for information or review purposes. A
                non-governmental recipient involved in protests is
                similarly expected to notify FTA when it receives a
                protest related to a third party contract to which the
                circular applies and to similarly keep FTA informed
                about the status of the protest. At a minimum, the
                recipient should provide informal notification to the
                FTA office managing the project under which the protest
                is taken.

            b.  [Access to Information]{.underline}. At any time, FTA
                may require the recipient to provide copies of
                particular protest or all protests, and related
                supporting documents for information or review purposes.
                In all instances, FTA reserves the right to review the
                recipient's supporting documentation, and FTA expects
                the recipient to disclose information regarding any
                third party procurement protest to FTA upon FTA's
                request.

    b.  [FTA's Role and Responsibilities]{.underline}. FTA has
        established an appeals process it may use to review, in limited
        circumstances, protests of a recipient's procurement decisions.

        1.  [Requirements for the Protester]{.underline}.

            a.  [Protester Must Qualify as an "Interested
                Party]{.underline}." To qualify for FTA review, the
                appeal must be requested by an "interested party," which
                is a party that is an actual or prospective bidder or
                offeror whose direct economic interest would be affected
                by the award or failure to award the third party
                contract at issue.

            b.  [Exhaustion of Administrative Remedies]{.underline}. The
                protester must pursue and complete all administrative
                procedures established by the recipient to resolve the
                protest before appealing the recipient's decision to
                FTA.

            c.  [Five-Day Limit for Appeal]{.underline}. The cognizant
                FTA Office in the Region or at Headquarters must receive
                the protester's appeal within five working days of the
                date the protester has received actual or constructive
                notice of an adverse final decision by the recipient, or
                another basis of appeal to FTA has been identified, for
                example, if the recipient has failed to have or follow
                its protest procedures or has failed to review the
                complaint.

        2.  [Extent of FTA Review]{.underline}. As provided in the
            Common Grant Rule for governmental recipients, FTA reviews
            of third party contract protests will be limited.

            a.  [Procedural Failures]{.underline}. A recipient's failure
                to have or follow its protest procedures, or a
                recipient's failure to review a complaint or protest is
                grounds for FTA review; or

            b.  [Violations of Federal Law or Regulations]{.underline}.
                FTA will continue to limit its review of a recipient's
                protest decisions and will read this Common Grant Rule
                provision in conjunction with other Common Grant Rule
                provisions that express FTA's intent to avoid
                substituting FTA's judgment for those of its recipients.
                FTA will not consider every appeal of a recipient's
                protest decision simply because a Federal law or
                regulation may be involved. Instead, FTA will exercise
                discretionary jurisdiction over those cases deemed to
                involve issues important to FTA's overall third party
                contracting program. Violations of Federal law for which
                FTA does not have primary jurisdiction will be referred
                to the Federal authority having proper jurisdiction.

            c.  [Violations of State or Local Law or
                Regulations]{.underline}. Violations of State or local
                law will be referred to the State or local authority
                having proper jurisdiction.

        3.  [FTA Determinations]{.underline}. Consistent with the Common
            Grant Rules, FTA will not substitute its judgment for that
            of the grantee or subgrantee, unless the matter is primarily
            a Federal concern.

Any decision by FTA to decline jurisdiction over a protest does not
imply approval of or agreement with the grantee's determination or that
FTA has determined the contract is eligible for Federal participation
but only that FTA does not believe the issues presented are important to
the overall program.

32. [CHANGES AND MODIFICATIONS]{.underline}.

    a.  [The Recipient's Role and Responsibilities]{.underline}. The
        recipient is responsible for issuing, evaluating and making
        necessary decisions pertaining to change orders it may issue. In
        addition, the recipient is also responsible for evaluating and
        making the necessary decisions involving any constructive change
        order or modification it may have invoked. In general, FTA
        expects each recipient to comply with the following procedures:

        1.  [Approval Requirements]{.underline}. All change orders must
            be approved by the recipient's authorized officials and
            supported by cost justification.

        2.  [Cost Restrictions]{.underline}. To be eligible for funding
            under the recipient's grant or cooperative agreement, the
            cost of the modification, change order, or constructive
            change must be allowable, within the scope of the grant or
            cooperative agreement, allocable and reasonable for the
            completion of project scope.

    b.  [FTA's Role and Responsibilities]{.underline}. FTA does not
        participate in the recipient's decisions pertaining to change
        orders, constructive changes, or modifications, but reserves the
        right to review the recipient's supporting documentation.

33. [CLAIMS]{.underline}.

    a.  [The Recipient's Role and Responsibilities]{.underline}. The
        Common Grant Rules charge the recipient with responsibility for
        evaluating and resolving third party contract claims resulting
        from violations, defaults, or breaches by the contractor. The
        recipient is also responsible for resolving any claims the
        contractor may present against the recipient. In view of FTA's
        financial interest in the settlement of third party contract
        claims, the recipient must take the following actions:

        1.  [Legal Rights and Remedies]{.underline}. The recipient must
            pursue all legal rights and remedies available under any
            third party contract.

        2.  [Notification to FTA]{.underline}. The recipient must notify
            FTA of any current or prospective litigation or major
            disputed claim in excess of \$100,000 relating to any third
            party contract. FTA reserves the right to review the
            recipient's supporting documentation.

    b.  [FTA's Role and Responsibilities]{.underline}. In support of its
        vested interest in the settlement of claims involving any
        federally-assisted third party contracts, FTA's financial rights
        are as follows:

        1.  [Proceeds Recovered]{.underline}. FTA retains a right to a
            share of any net proceeds recovered through a third party
            contract claim, in proportion to the Federal share committed
            to the project.

        2.  [Liquidated Damages]{.underline}. If the third party
            contract contains a liquidated damages provision, any
            liquidated damages recovered must be credited to the project
            unless FTA permits other uses of the funds involved.

34. [DISPUTES]{.underline}.

    a.  [The Recipient's Role and Responsibilities]{.underline}. The
        Common Grant Rules charge the recipient with responsibility for
        evaluating and resolving third party contract disputes. If the
        recipient intends to request FTA's permission to use Federal
        assistance to support payments to a third party contractor, or
        even intends to request increased funding for that purpose, the
        recipient's responsibilities are as follows:

        1.  [Adequate Documentation]{.underline}. The recipient must
            adequately document in its project files all pertinent
            facts, events, negotiations, applicable laws, and a legal
            evaluation of the likelihood of success in any potential
            litigation proceeding. The recipient must assure that its
            documentation provides sufficient information to serve as
            the basis for FTA concurrence in the compromise or
            settlement of the claim, in the event that FTA review and
            concurrence become necessary.

        2.  [Audit]{.underline}. The recipient considers conducting or
            obtaining a formal audit to substantiate each part of a
            large contract dispute before entering into a settlement. In
            those instances, the audit should be conducted in accordance
            with "Generally Accepted Auditing Standards" as defined by
            the American Institute of Certified Public Accountants. The
            recipient is also encouraged to undertake an audit or
            similar analysis before settlement of a smaller dispute.

        3.  [Notification to FTA]{.underline}. The recipient must
            provide a list of all outstanding claims exceeding \$100,000
            and a list of all claims settled during the reporting period
            as part of each quarterly progress report. This list should
            be accompanied by a brief description and reasons for each
            claim. The recipient must notify FTA of any current or
            prospective litigation relating to any third party contract.

    b.  [FTA's Role and Responsibilities]{.underline}. In general, FTA
        does not become involved in the negotiation of the resolution of
        a dispute. However, FTA does reserve the right to become
        involved as follows:

        1.  [Determine Reasonableness]{.underline}. FTA may review the
            reasonableness of a negotiated settlement for the purpose of
            determining the extent of FTA's participation in the
            settlement.

        2.  [Review Documents]{.underline}. When deemed necessary, FTA
            may initiate review of the recipient's claims file/history
            or experience under a particular grant or cooperative
            agreement. Claimed amounts, determined to be ineligible
            through subsequent audit or FTA review, if already
            disbursed, must be returned to FTA by the recipient. FTA
            reserves the right to defer participation in settlement
            costs until an adequate audit has been provided.

35. [SETTLEMENTS, ARBITRATION DETERMINATIONS, AND COURT AWARDS---COST
    SHARING]{.underline}.

    a.  [The Recipient's Responsibilities]{.underline}.

        1.  [Maintain Sufficient Records]{.underline}. The recipient's
            claims records must be sufficient to substantiate that
            reasonable and prudent measures were taken to prevent or
            offset the causes underlying the claim to justify FTA's
            participation in the negotiated cost or costs imposed
            through binding arbitration or costs imposed by judgments
            rendered by Federal, State, or local courts.

        2.  [Obtain FTA Concurrence]{.underline}. Even when costs are
            assessed against the recipient through binding arbitration
            or court decision, the recipient must secure FTA review and
            its written concurrence in a proposed claim or final claim
            settlement before using Federal funds in the following
            instances:

            a.  [More Than \$100,000]{.underline}. When negotiated
                settlement exceeds \$100,000;

            b.  [Insufficient Funds]{.underline}. When insufficient
                funds remain in the approved project to cover the
                settlement; or

            c.  [Special Federal Interest]{.underline}. Where a special
                Federal interest is declared because of program
                management concerns, possible mismanagement,
                impropriety, waste, or fraud.

    b.  [FTA's Prerogatives]{.underline}.

        1.  [Review Supporting Documentation]{.underline}. FTA reserves
            the right to review the recipient's supporting
            documentation.

        2.  [Provide Federal Assistance]{.underline}. Subject to
            availability of funds, FTA may fund a prorated share of the
            properly incurred, eligible costs of contractor claims that
            are not caused by mismanagement on the part of the recipient
            or attributable to the contractor.

        3.  [Deny Federal Assistance]{.underline}. Claims that result
            from the recipient's negligence or error normally are not
            eligible for FTA participation. FTA normally will not
            participate in any claim settlement for which the
            recipient's failure involved the following:

            a.  [Right-of-Way]{.underline}. Failure to obtain clear
                access to all needed right-of-way prior to award of the
                construction contract;

            b.  [Utility Agreements]{.underline}. Failure to execute all
                required utility agreements in time to assure
                uninterrupted construction progress;

            c.  [Planning and Scheduling]{.underline}. Failure to
                undertake comprehensive project planning and scheduling
                to achieve proper coordination among contractors;

            d.  [Subsurface Conditions]{.underline}. Failure to inform
                potential contractors of all available geo-technical
                information on subsurface conditions;

            e.  [Materials Compatibility]{.underline}. Failure to assure
                that all recipient furnished materials are compatible
                with contractor project facilities and/or equipment and
                available when needed;

            f.  [Pre-Construction Survey and Engineering]{.underline}.
                Failure to complete all pre-construction survey and
                engineering prior to issuing the contractor a Notice to
                Proceed;

            g.  [Public Authority Approvals]{.underline}. Failure to
                obtain the necessary approvals and agreements from all
                other public authorities affected by the project prior
                to contract award; or

            h.  [Drawing Approvals]{.underline}. Failure to assure that
                all design and shop drawings are promptly approved and
                made available to the contractor as needed.

# APPENDIX A

# 

# [REFERENCES]{.underline}

1.  Federal Transit Laws, Title 49, United States Code, Chapter 53; also
    public transportation provisions of Title 23, United States Code.

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36. Safe, Accountable, Flexible, Efficient Transportation Equity Act: A
    Legacy for Users, (SAFETEA--LU) (Pub. L. 109--59).

37. Transportation Equity Act for the 21st Century 1998 (TEA--21), P.L.
    105--178 as amended by TEA--21 Restoration Act 1998, P.L. 105--206.

38. 7 U.S.C. Sections 2131 et seq.---Animal Protections.

39. 15 U.S.C. Sections 205a et seq.---Metric Usage.

40. 18 U.S.C. Section 874---Anti Kickback.

41. 23 U.S.C. Section 512 note---Intelligent Transportation Systems.

42. 29 U.S.C. Section 794---Nondiscrimination on the Basis of
    Disability.

43. 29 U.S.C. Section 794d---Information Accessibility.

44. 31 U.S.C. Section 1352---Lobbying.

45. 31 U.S.C. Section 5112(p) -- Section 104 of the Presidential \$1
    Coin Act of 2005

46. 31 U.S.C. Sections 7501 et seq.---Single Audit.

47. 33 U.S.C. Sections 1251 through 1377---Clean Water.

48. 35 U.S.C. Sections 200 et seq.---Patent Rights.

49. 40 U.S.C. Section 502(a)(3)---GSA Schedule Use by the District of
    Columbia.

50. 40 U.S.C. Section 502(c)---GSA Schedule Use for Information
    Technology.

51. 40 U.S.C. Section 502(d)---GSA Schedule Use for Disaster Relief.

52. 40 U.S.C. Chapter 11---Architectural/Engineering Procurement
    Requirements.

53. 40 U.S.C. Sections 3141 et seq.---Prevailing Wages.

54. 40 U.S.C. Section 3702---Wage and Hour Restrictions.

55. 40 U.S.C. Section 3704---Construction Safety.

56. 41 U.S.C. Section 253m---Federal Design-Build Two Step Procurement
    Process.

57. 41 U.S.C. Section 403(11)---Federal Simplified Acquisition
    Threshold.

58. 42 U.S.C. Sections 289 et seq.---Protection of Humans.

59. 42 U.S.C. Section 2000e et seq.---Equal Employment Opportunity.

60. 42 U.S.C. Section 5150---Disaster Relief.

61. 42 U.S.C. Sections 6321 et seq.---Energy Conservation.

62. 42 U.S.C. Section 6962---Resource Conservation and Recovery.

63. 42 U.S.C. Sections 7401 through 7671q---Clean Air.

64. 42 U.S.C. Sections 7701 et seq.---Seismic Safety.

65. 42 U.S.C. Sections 12101 et seq.---Accessibility for Persons with
    Disabilities.

66. 46 U.S.C. Section 55305---Cargo Preference.

67. 48 U.S.C. Section 1469e---Use of GSA Supply Schedules by Insular
    Areas.

68. 49 U.S.C. Section 114(s)---Sensitive Security Information.

69. 49 U.S.C. Section 40118---Fly America.

70. 49 U.S.C. Section 40119(b)---Sensitive Security Information.

71. Subsection 7101(a) of the Federal Acquisition Streamlining Act of
    1994, Pub. L.103--355, October 13, 1994---Repeal of Labor Surplus
    Area Programs.

72. Department of Transportation (DOT) regulations, "Uniform
    Administrative Requirements for Grants and Cooperative Agreements to
    State and Local Governments," 49 CFR Part 18.

73. DOT regulations, "Uniform Administrative Requirements for Grants and
    Agreements with Institutions of Higher Education, Hospitals, and
    Other Non-Profit Organizations," 49 CFR Part 19.

74. DOT regulations, "Protection of Human Subjects," 49 CFR Part 11.

75. DOT regulations, "Protection of Sensitive Security Information," 49
    CFR Part 15.

76. DOT regulations, "New Restrictions on Lobbying," 49 CFR Part 20.

77. DOT regulations, "Uniform Relocation Assistance and Real Property
    Acquisition for Federal and Federally Assisted Programs," 49 CFR
    Part 24.

78. DOT regulations, "Participation by Disadvantaged Business
    Enterprises in Department of Transportation Financial Assistance
    Programs," 49 CFR Part 26.

79. DOT regulations, "Nondiscrimination on the Basis of Handicap in
    Programs and Activities Receiving or Benefiting from Federal
    Financial Assistance," 49 CFR Part 27.

80. DOT regulations, "Government Wide Debarment and Suspension
    (Nonprocurement)," 49 CFR Part 29.

81. DOT regulations, "Transportation Services for Individuals with
    Disabilities (ADA)," 49 CFR Part 37.

82. Joint ATBCB/DOT regulations, "Americans with Disabilities (ADA)
    Accessibility Specifications for Transportation Vehicles," 36 CFR
    Part 1192 and 49 CFR Part 38.

83. DOT regulations, "Seismic Safety," 49 CFR Part 41 at Sections 41.117
    and 41.120.

84. Federal Transit Administration (FTA) regulations, "Charter Service,"
    49 CFR Part 604.

85. FTA regulations, "School Bus Operations," 49 CFR Part 605.

86. FTA regulations, "Capital Leases," 49 CFR Part 639.

87. FTA regulations, "Prevention of Alcohol Misuse and Prohibited Drug
    Use in Transit Operations," 49 CFR Part 655.

88. FTA regulations, "Buy America," 49 CFR Part 661.

89. FTA regulations, "Pre-Award and Post-Delivery Audits of Rolling
    Stock Purchases," 49 CFR Part 663.

90. FTA regulations, "Bus Testing," 49 CFR Part 665.

91. Federal Acquisition Regulation (FAR), 48 CFR Chapter 1.

92. FAR Part 6.3, 48 CFR Chapter 1, Subpart 6.3 (Federal Procurement by
    Noncompetitive Proposals).

93. FAR Subparts 25.1 and 25.2, 48 CFR Chapter 1, Subparts 25.1 and 25.2
    (Federal Buy American Regulations).

94. FAR Part 31, 48 CFR Chapter 1, Part 31 (Federal Cost Principles).

95. FAR Subpart 31.2, 48 CFR Chapter 1, Subpart 31.2 (Contracts with
    Commercial Organizations).

96. Department of Homeland Security regulations, "Protection of
    Sensitive Security Information," 49 CFR Part 1520.

97. Department of Labor (DOL) regulations, "Contractors and
    Subcontractors on Public Building or Public Work Financed in Whole
    or in part by Loans or Grants from the United States," 29 CFR Part
    3.

98. DOL regulations, "Labor Standards Provisions Applicable to Contracts
    Governing Federally Financed and Assisted Construction (also Labor
    Standards Provisions Applicable to Nonconstruction Contracts Subject
    to the Contract Work Hours and Safety Standards Act)," 29 CFR Part
    5.

99. DOL guidelines, "Section 5333(b), Federal Transit Law," 29 CFR Part
    215.

100. DOL regulations, "Safety and Health Regulations for Construction,"
     29 CFR Part 1926.

101. Department of Agriculture regulations, "Animal Welfare," 9 CFR
     Subchapter A, Parts 1, 2, 3, and 4.

102. Department of the Treasury regulations, "Surety Companies Doing
     Business with the United States," 31 CFR Part 223.

103. Architectural and Transportation Barriers Compliance Board (ATBCB)
     regulations, "Electronic and Information Technology Accessibility
     Standards," 36 CFR Part 1194.

104. Department of Commerce regulations, "Rights to Inventions Made by
     Nonprofit Organizations and Small Business Firms," 37 CFR Part 401.

105. Environmental Protection Agency regulations, "Comprehensive
     Procurement Guidelines for Products Containing Recovered
     Materials," 40 CFR Part 247.

106. Council on Environmental Quality regulations, "Other Requirements
     of NEPA," 40 CFR Part 1506.

107. General Services Administration (GSA), Federal Property Management
     Regulations, 41 CFR Parts 101--42 through 101--46, and 101--48,
     101--49.

108. GSA regulations, "Use of United States Flag Air Carriers," 41 CFR
     Sections 301--10.131 through 301--10.143.

109. Maritime Administration regulations, "Cargo Preference U.S. Flag
     Vessels," 46 CFR Part 381.

110. Executive Order No. 12770, "Metric Usage in Federal Government
     Programs," 15 U.S.C. Section 205a note.

111. Executive Order No. 13202, "Preservation of Open Competition and
     Government Neutrality Towards Government Contractors' Labor
     Relations on Federal and Federally Funded Construction Projects,"
     02--17--2001, as amended by Executive Order No. 13208,
     04--06--2001, 41 U.S.C. Section 251 note.

112. Executive Order No.13132, "Federalism," 08--04--1999, 5 U.S.C.
     Section 601 note.

113. Executive Order No. 13043, "Increasing Seat Belt Use in the United
     States," 04--16--1997, 23 U.S.C. Section 402 note.

114. OMB Guidance for Grants and Agreements, "Cost Principles for
     Educational Institutions (OMB Circular A--21)," 2 CFR Part 220.

115. OMB Guidance for Grants and Agreements, "Cost Principles for State,
     Local, and Indian Tribal Governments (OMB Circular A--87)," 2 CFR
     Part 225.

116. OMB Guidance for Grants and Agreements "Cost Principles for
     Non-profit Organizations (OMB Circular A--122)," 2 CFR Part 230.

117. OMB Circular A--133, "Audits of States, Local Governments, and
     Non-Profit Organizations," as revised.

118. GSA Order ADM 4800.2E, "Eligibility to Use GSA Sources of Supply
     and Services."

119. FTA Circular 5010.1C, "Grant Management Guidelines," 10--01--98.

120. FTA Circular 9030.1C, "Urbanized Area Formula Program: Grant
     Application Instructions,:" 10‑01--98.

121. FTA Circular 9300.1A, "Capital Program: Grant Application
     Instructions,:" 10--01--98.

122. FTA Circular 9400.1A, "Federal Transit Administration Design and
     Art in Transit Projects,:" 06--09--95.

123. FTA Master Agreement \[PDF\].

124. FTA "Best Practices Procurement Manual."

# APPENDIX B

# 

# [FTA REGIONAL AND METROPOLITAN CONTACT INFORMATION]{.underline}

+------------------+---------------------+----------------------------+
| **Office**       | **Area Served**     | **Contact Information**    |
+==================+=====================+============================+
| Region I         | Connecticut, Maine, | Transportation Systems     |
|                  | Massachusetts,      | Center                     |
|                  |                     |                            |
|                  | New Hampshire,      | Kendall Square             |
|                  | Rhode Island, and   |                            |
|                  | Vermont             | 55 Broadway, Suite 920     |
|                  |                     |                            |
|                  |                     | Cambridge, MA 02142--1093  |
|                  |                     |                            |
|                  |                     | Phone: 617--494--2055      |
|                  |                     |                            |
|                  |                     | Fax: 617--494--2865        |
+------------------+---------------------+----------------------------+
| Region II        | New York and New    | One Bowling Green          |
|                  | Jersey              |                            |
|                  |                     | Room 429                   |
|                  |                     |                            |
|                  |                     | New York, NY 10004--1415   |
|                  |                     |                            |
|                  |                     | Phone: 212--668--2170      |
|                  |                     |                            |
|                  |                     | Fax: 212--668--2136        |
+------------------+---------------------+----------------------------+
| Region III       | Delaware, District  | 1760 Market Street         |
|                  | of                  |                            |
|                  |                     | Suite 500                  |
|                  | Columbia, Delaware, |                            |
|                  | Maryland,           | Philadelphia, PA           |
|                  | Pennsylvania,       | 19103--4124                |
|                  | Virginia, and West  |                            |
|                  | Virginia            | Phone: 215--656--7100      |
|                  |                     |                            |
|                  |                     | Fax: 215--656--7260        |
+------------------+---------------------+----------------------------+
| Region IV        | Alabama, Florida,   | 230 Peachtree St., N.W.    |
|                  | Georgia,            |                            |
|                  |                     | Suite 800                  |
|                  | Kentucky,           |                            |
|                  | Mississippi, North  | Atlanta, GA 30303          |
|                  | Carolina, Puerto    |                            |
|                  | Rico, South         | Phone: 404--865--5600      |
|                  | Carolina,           |                            |
|                  | Tennessee, and U.S. | Fax: 404--865--5605        |
|                  | Virgin Islands      |                            |
+------------------+---------------------+----------------------------+
| Region V         | Illinois, Indiana,  | 200 West Adams Street      |
|                  | Minnesota,          |                            |
|                  |                     | Suite 320                  |
|                  | Michigan, Ohio, and |                            |
|                  | Wisconsin           | Chicago, IL 60606          |
|                  |                     |                            |
|                  |                     | Phone: 312--353--2789      |
|                  |                     |                            |
|                  |                     | Fax: 312--886--0351        |
+------------------+---------------------+----------------------------+
| Region VI        | Arkansas,           | 819 Taylor Street          |
|                  | Louisiana,          |                            |
|                  |                     | Room 8A36                  |
|                  | New Mexico,         |                            |
|                  | Oklahoma, and Texas | Forth Worth, TX 76102      |
|                  |                     |                            |
|                  |                     | Phone: 817--978--0550      |
|                  |                     |                            |
|                  |                     | Fax: 817--978--0575        |
+------------------+---------------------+----------------------------+
| Region VII       | Iowa, Kansas,       | 901 Locust, Suite 404      |
|                  | Missouri, and       |                            |
|                  |                     | Kansas City, MO 64106      |
|                  | Nebraska            |                            |
|                  |                     | Phone: 816--329--3920      |
|                  |                     |                            |
|                  |                     | Fax: 816--329--3921        |
+------------------+---------------------+----------------------------+
| Region VIII      | Colorado, Montana,  | 12300 W Dakota Avenue      |
|                  |                     |                            |
|                  | North Dakota,       | Suite 310                  |
|                  |                     |                            |
|                  | South Dakota, Utah, | Lakewood, CO 80228--2583   |
|                  | and Wyoming         |                            |
|                  |                     | Phone: 720--963--3300      |
|                  |                     |                            |
|                  |                     | Fax: 720--963--3333        |
+------------------+---------------------+----------------------------+
| Region IX        | Arizona,            | 201 Mission Street         |
|                  | California, Hawaii, |                            |
|                  |                     | Room 1650                  |
|                  | Nevada, Guam,       |                            |
|                  |                     | San Francisco, CA          |
|                  | American Samoa, and | 94105--1839                |
|                  | Northern Mariana    |                            |
|                  | Islands             | Phone: 415--744--3133      |
|                  |                     |                            |
|                  |                     | Fax: 415--744--2726        |
+------------------+---------------------+----------------------------+
| Region X         | Alaska, Washington, | 915 Second Avenue, Suite   |
|                  | Oregon, and Idaho   | 3142                       |
|                  |                     |                            |
|                  |                     | Seattle, WA 98174--1002    |
|                  |                     |                            |
|                  |                     | Phone: 206--220--7954      |
|                  |                     |                            |
|                  |                     | Fax: 206--220--7959        |
+------------------+---------------------+----------------------------+
| Lower Manhattan  | Lower Manhattan     | 1 Bowling Green, Room 436  |
|                  |                     |                            |
| Recovery Office  |                     | New York, NY 10004         |
|                  |                     |                            |
|                  |                     | Phone: 212--668--1770      |
|                  |                     |                            |
|                  |                     | Fax: 212--668--2505        |
+------------------+---------------------+----------------------------+
| New York         | New York            | One Bowling Green, Room    |
| Metropolitan     | Metropolitan        | 428                        |
|                  |                     |                            |
| Office           | Area                | New York, NY 10004--1415   |
|                  |                     |                            |
|                  |                     | Phone: 212--668--2201      |
|                  |                     |                            |
|                  |                     | Fax: 212--668--2136        |
+------------------+---------------------+----------------------------+
| Chicago          | Chicago             | 200 West Adams Street      |
| Metropolitan     | Metropolitan Area   | Suite 2410                 |
|                  |                     |                            |
| Office           |                     | Chicago, IL 60606          |
|                  |                     |                            |
|                  |                     | Telephone: 312--886--1616  |
|                  |                     |                            |
|                  |                     | Fax: 312--886--0351        |
+------------------+---------------------+----------------------------+
| Los Angeles      | Los Angeles         | 888 S. Figueroa, Suite     |
|                  |                     | 1850                       |
| Metropolitan     | Metropolitan Area   |                            |
| Area             |                     | Los Angeles, CA 90012      |
|                  |                     |                            |
|                  |                     | Telephone: 213--202--3950  |
|                  |                     |                            |
|                  |                     | Fax: 213--202--3961        |
+------------------+---------------------+----------------------------+
| Washington, DC   | Washington, DC      | 1990 K Street NW, Suite    |
|                  |                     | 510                        |
| Metropolitan     | Metropolitan Area   |                            |
| Area             |                     | Washington, DC 20006--1178 |
|                  |                     |                            |
|                  |                     | Telephone:                 |
|                  |                     | 202--219--3562/219--3565   |
|                  |                     |                            |
|                  |                     | Fax: 202--219--3545        |
+------------------+---------------------+----------------------------+

# INDEX

# 

# [SUBJECT AND LOCATION IN CIRCULAR]{.underline}

[Subject]{.underline} Chapter/[Page]{.underline}

Administrative Services Help Desk Number P--1

American Institute of Certified Public Accountants VII--4

Americans With Disabilities (ADA) Accessibility Specifications for
Transportation Vehicles

IV--4; IV--12; IV--15; IV--16; App. A--3

Animal Welfare IV--17; IV--18; App. A--3

Annual Certifications and Assurances I--4

Approval, Authorization, Concurrence, Waiver I--2

Definition I--2

Architectural and Engineering (A&E) IV--19

Contractors and Subcontractors IV--19

Contracts IV--19

Services IV--19; VI--7; VI--9

Architectural and Transportation Barriers Compliance Board (ATBCB)
IV--4; IV--9; IV--11

IV--16; IV--17; App. A--3; A--4

Audits III--2; IV--19

Architectural and Engineering Services II--5

Duplication of Services IV--19

Duplicative IV--19

Eligibility of Costs IV--19

Federal Audit Agencies III--4

Other Audit Services III--4

Other Projects IV--19; IV--20

Performance VI--8

Pre-Award and Post-Delivery Audits of Rolling Stock Purchases IV--12;
App. A--3

Recipients'Auditors III--4

Third Party III--4

Audits and Indirect Costs VI--8

Best Practices Procurement Manual I--6; II--1; IV--2; IV--5; VI--1;
VI--13; App. A--5

Best Value I--2

Definition I--2

Brooks Act IV--16; IV--17; VI--7; VI--8; VI--9; VI--10

Bus Testing IV--12; App. A--3

Buy America IV--5; IV--6; V--1; V--2; App. A--3

Certification V--1

Regulations IV--6; IV--15; V--1, App. A--3

Requirements IV--5; IV--6; IV--15; VI--5

Buy American Act IV--6; IV--15

Capital Contracts II--2

Art II--2

[Subject]{.underline} Chapter/[Page]{.underline}

Over-the-Road Buses II--2

Real Property II--2

Without Federal Funds II--2

Catalog of Federal Domestic Assistance (CFDA) Number III--3

Changes and Modifications VII--3

FTA's Role and Responsibilities VII--3

Recipient's Role and Responsibilities VII--3

Administration VII--3

Approval Requirements VII--3

Cost Restrictions VII--3

Claims VII--3

FTA's Role and Responsibilities VII--4

Liquidated Damages VII--4

Proceeds Recovered VII--4

Recipient's Role and Responsibilities VII--3

Legal Rights and Remedies VII--3

Notification to FTA VII--3

Clean Air Act IV--5; IV--7; App.; A--2

Clean Water Act (CWA) IV--7, IV--8; A--1

Common Grant Rule I--3; I--4; I--5; II--1; II--2; II--3; II--5; II--6;
III--1; III--2

III--3; IV--1; IV--2; IV--4; IV--5; IV--6; IV--7; IV--8; IV--9; IV--12;
IV--13

IV--14; IV--15; IV--17; IV--20; V--1: V--2; VI--1; VI--2; VI--3; VI--4;
VI--5; VI--6

VI--10; VI--11; VI--12; VI--13; VI--14; VI--16; VI; VII--1; VII--2;
VII--3; VII--4

Definition I--3

Governmental Recipients

Uniform Administrative Requirements for Grants and Cooperative
Agreements to State and Local Governments II--5

Non-Governmental Recipients

Uniform Administrative Requirements for Grants and Agreements with
Institutions of Higher Education, Hospitals, and Other Non-Profit
Organizations II--5

Uniform Administrative Requirements for Grants and Agreements with
Institutions of

Higher Education, Hospitals, and Other Non-Profit Organizations (Part
19) I--3

Uniform Administrative Requirements for Grants and Cooperative
Agreements to State

and Local Governments (Part 18) I--2

Common Grant Rules *See* Common Grant Rule

Comprehensive Procurement Guidelines for Products Containing Recovered
Materials IV--7 App. A--5

Comptroller General III--3

Congestion Mitigation and Air Quality (CMAQ) II--3; II--4

Constructive Change I--3

Definition I--3

Contract Work Hours and Safety Standards Act IV--8; IV--15; VI--5; App.
A--4

Contractor Qualifications IV--2

[Subject]{.underline} Chapter/[Page]{.underline}

Civil Rights Laws and Regulations IV--3

DBE IV--4

Debarment and Suspension IV--3

EEO Requirements IV--3

Individuals with Disabilities IV--3

Lobbying Certification and Disclosure IV--3

Minority Firms and Women's Businesses IV--4

Seat Belt Use IV--5

Sensitive Security Information IV--5

Cooperative Agreement I--3

Definition I--3

Cooperative Agreement for the Project I--2

Cooperative Purchasing Program V--2

Copeland Anti Kickback Act IV--14

Davis-Bacon Act IV--14

Debarment and Suspension IV--3; VI--16; App. A--3

Defense Contract Audit Agency Audit Manual VI--14

Department of Labor (DOL) IV--14; IV--16

Guidelines IV--16; App. A--4

Regulations IV--8; IV--14; IV--15; App. A--4

Department of Transportation (DOT) I--1;III--3; IV--3; App. A--2

Regulations

Governmentwide Debarment and Suspension (Nonprocurement) VI--16

New Restrictions on Lobbying IV--3

Protection of Human Subjects IV--18

Protection of Sensitive Security Information IV--5

Seismic Safety IV--14; App. A--3

Transportation Services for Individuals with Disabilities (ADA) IV--15;
IV--16

Uniform Administrative Requirements for Grants and Cooperative
Agreements to

> State and Local Governments App. A--2

Uniform Relocation Assistance and Real Property Acquisition for Federal
and

> Federally Assisted Programs II--2

Design-Bid-Build Project I--3

Definition I--3

Design-Build Project I--3

Definition I--3

Disadvantaged Business Enterprises (DBEs) IV--1; IV--4; IV--5; IV--11

Disaster Recovery Purchasing V--3

Website V--3

Disputes VII--4

FTA's Role and Responsibilities VII--4

Determine Reasonableness VII--5

Review Documents VII--5

[Subject]{.underline} Chapter/[Page]{.underline}

Recipient's Role and Responsibilities VII--4

Adequate Documentation VII--4

Audit VII--4

Notification to FTA VII--4

District of Columbia Department of Mass Transportation V--2

E Government Act of 2002 V--3

Electronic and Information Technology Accessibility Standards IV--9;
App. A--4

Electronic Commerce I--3

Definition I--3

Electronic Commerce System III--4

Environmental Protection Agency (EPA) IV--7 App. A--4

Equal Employment Opportunity (EEO) Requirements IV--3

Excluded Parties List System (EPLS) IV--3

Website IV--3

Existing Contracts V--3

Impermissible Uses V--4

Expanded Quantity V--4

Expanded Scope V--4

Permissible Uses V--3

Assingment of Rights V--4

Exercise of Options V--3

Consistency V--3

Price V--3

Source Procrement Awards V--3

Failure to Evaluate the Options V--3

Negotiating Price Options V--3

Federal Acquisition Regulation (FAR) II--5; IV--6; IV--15; IV--16;
IV--19; VI--5; VI--8

VI--9; VI--11; VI--13; VI--14; App. A--3; A--5

Standards VI--11

Federal Relay Service (FRS) P--1

> Toll Free Access Number P--1

Federal Supply Schedule *See* General Services Administration (GSA)

Federal Transit Administration (FTA) P--1; I--1; II--1; III--1; IV--1;
V--1; VI--1; VII--1

Address I--1

Best Practices Procurement Manual I--6; II--2; IV--6; VI--1; VI--13;
App. A--5

Circular

Capital Program---Grant Application Instructions App. A--5

Federal Transit Administration Design and Art in Transit Projects II--2;
App. A--5

Grant Management Guidelines App. A--5

Third Party Contracting Requirements P--1

Urbanized Area Formula Program---Grant Application Instructions App.
A--5

Definition I--3

FTA Role I--4

[Subject]{.underline} Chapter/[Page]{.underline}

Audits I--5

Procurement System Reviews I--5

Reliance on the Recipient's Self-Certification I--4

Third Party Contract Reviews I--5

Master Agreement I--2; II--5; III--4; IV--2; IV--5; IV--7; VI--4; App.
A--5

Website I--1

Fly America Act IV--8; IV--9

General & Administrative (G&A) Rates III--4; IV--20

General Services Administration (GSA) IV--3; IV--8; IV--9; V--2

Cooperative Purchasing Program V--3

Cooperative Purchasing Program, Federal Supply Schedule 70 V--3

Disaster Recovery Website V--3

Federal Excess and Surplus Property V--2

Federal Supply Schedule V--2; V--3

Full Use V--2

Limited Use V--2

Disaster Recovery V--3

Information Technology V--3

Regulations IV--8; IV--9; App. A--1; A--4; A--5

Schedules V--1; V--2

Website V--3

Governmental Recipient I--3

Definition I--3

Grant I--3

Definition I--3

Grant Agreement I--2

Indefinite-Delivery-Indefinite-Quantity (IDIQ) Contract V--4

Indian Tribal Governments I--2; IV--6; V--2; App. A--5

Intelligent transportation system (ITS) IV--8

International Air Transportation Fair Competitive Practices Act *See*
Fly America Act

Job Access/Reverse Commute (JARC) II--3

John Warner National Defense Authorization Act for Fiscal Year 2007 V--3

List of Violating Facilities IV--7

Master Agreement *See* Federal Transit Administration (FTA)

Metric Conversion Act IV--8

Metric Usage in Federal Government Programs IV--8; App. A--5

National Intelligent Transportation Systems (ITS) Architecture and
Standards IV--8

New Freedom II--3

New Restrictions on Lobbying App. A--2

New Starts IV--14

Nondiscrimination on the Basis of Handicap in Programs and Activities
Receiving or

Benefiting from Federal Financial Assistance App. A--2

Non-Governmental Recipient I--3

[Subject]{.underline} Chapter/[Page]{.underline}

Definition I--3

[Office of Management and Budget (]{.underline}OMB) Circular

Audits of States, Local Governments, and Non-Profit Organizations
III--4; IV--19; App. A--5

Cost Principles for Educational Institutions (OMB Circular A--21) IV--6,
App. A--5

Cost Principles for Non-profit Organizations (OMB Circular A--122)
IV--6, App. A--5

Cost Principles for State, Local, and Indian Tribal Governments (OMB
Circular A--87)

IV--6; App. A--5

Omnibus Trade and Competitiveness Act IV--8

Open Market Acquisitions V--5

Open Market Requirements VI--1

Contract Award VI--15

Award to Other Than Lowest Bidder VI--15

Award to Responsible Contractor VI--16

Debarment/Suspension VI--16

Financial and Technical Resources VI--16

Integrity VI--16

Past Performance VI--16

Public Policy VI--16

Rejection of Bids and Offers VI--16

Governmental Recipients VI--16

Non-Governmental Recipients VI--16

Cost and Price Analysis VI--14

Cost Analysis VI--14

Price Analysis VI--15

Eligible Costs VI--13

Incentive Payments VI--14

Indirect Cost Rates VI--13

Contracts Exceeding \$5 Million VI--13

Contracts of \$5 Million or Less VI--13

Guidance VI--13

Best Practices Procurement Manual VI--13

Defense Contract Audit Agency Audit Manual VI--14

Federal Acquisition Regulation (FAR) VI--14

National Transit Institute Course VI--13

Pricing Guide for FTA Grantees VI--13

Profit VI--14

Evaluation Factors VI--4

Evaluations VI--15

General VI--15

Evaluators VI--15

Options VI--15

Evaluation Not Required VI--15

Evaluation Required VI--15

[Subject]{.underline} Chapter/[Page]{.underline}

Other Federal Requirements VI--4

Other Federal Requirements Affecting Bidder/Offeror/Contractor VI--4

Prequalification VI--4

Lists VI--4

Sources VI--4

Procurement Methods VI--4

Architectural and Engineering Services (A&E) and Other Services VI--7

Audits and Indirect Costs VI--8

Application of Rates VI--9

Indirect Cost Rates VI--8

Performance Audits VI--8

Prenotification/Confidentiality of Date VI--9

Design-Bid-Build VI--9

Design-Build VI--9

Effect of State Laws VI--8

Other Than Full and Open Competition VI--10

Required Procedures VI--12

Change Order VI--12

Limited Resources VI--12

Sole Source VI--12

When Appropritate VI--10

FTA Authorized VI--11

FAR Standards VI--11; VI--12

Joint Partnership/Joint Venture/Consortia/Research VI--11

Inadequate Competition VI--10

Sole Source VI--10

Single Bid VI--10

Unique Capability and Availability VI--10

Unusual and Compelling Urgency VI--11

When Prohibited VI--12

Failure to Plan VI--12

Limited Funding Availability VI--12

Qualifications-Based Proposal Requirements VI--8

Most Qualified VI--8

Next Most Qualified VI--8

Price VI--8

Qualifications VI--8

When Prohibited VI--8

When Required VI--8

Competitive Proposal/Request for Proposals (RFP) VI--6

Cost Type Contract VI--7

Discussions VI--7

Price VI--7

[Subject]{.underline} Chapter/[Page]{.underline}

Procurement Requirements VI--7

Adequate Sources VI--7

Evaluation Factors VI--7

Evaluation Method VI--7

Price VI--7

Publicity VI--7

Value VI--7

When Appropriate VI--6

Adequate Sources VI--7

Specifications VI--6

Micro-Purchases VI--5

Sealed Bids/Formal Advertising VI--5

Procurement Requirements VI--6

Adequate Sources VI--6

Firm Fixed Price Contract VI--6

Public Opening VI--8

Publicity VI--6

Rejection of Bids VI--6

Specifications VI--6

When Appropriate VI--5

Adequate Sources VI--6

Discussions VI--6

Firm Fixed Price Contract VI--6

Price VI--6

Specifications VI--5

Small Purchases VI--5

Prohibited /Restricted Contract Types VI--12

Cost Plus a Percentage of Cost Prohibited VI--12

Time and Materials Restricted VI--13

Firm Ceiling Price VI--13

Restricted Use VI--13

Qualification Periods VI--4

Solicited VI--1

Solicition Prohibitions VI--2

Arbitrary Action VI--4

Brand Name Only VI--2

Excessive Bonding VI--2

Excessive Qualifications VI--2

Geographic Restrictions VI--2

Architecture and Engineering Services VI--2

Disaster Projects VI--3

Licensing VI--3

Improper Prequalification VI--2

[Subject]{.underline} Chapter/[Page]{.underline}

Organizational Conflict of Interest VI--3

Occurrence VI--3

Impaired Objectivity VI--3

Lack of Impartiality VI--3

Unfair Competitive Advantage VI--3

Remedy VI--3

Governmental Recipients VI--3

Non-Governmental Recipients VI--3

Restraint of Trade VI--3

Retainers VI--2

Unnecessary Experience VI--2

Solicition Requirements VI--1

Property or Services Description VI--1

Brand Name or Equal VI--1

What to Include VI--1

Unsolicited VI--1

Operations Contracts II--3

CMAQ, JARC, and New Freedom II--3

Formula Assistance II--3

Preventive Maintenance II--3

Original Equipment Manufacturer (OEM) VI--2

Over-the-Road Bus Accessibility Program II--2

Participation by Disadvantaged Business Enterprises in Department of
Transportation

Financial Assistance Programs IV--4; App. A--2

Payment Bond IV--13

Peformance Clauses IV--20

Change Condition IV--20

Remedies IV--20

Delay IV--20

Suspension of Work IV--20

Termination IV--20

Violation or Breach IV--20

Performance Bond IV--13

Pricing Guide for FTA Grantees VI--13

Procurement Capacity II--1

Adaquate Contract Provisions III--2

Industry Contracts III--2

Record Keeping III--2

State Notification Requirements III--3

Technology/Electronic Commerce Use III--4

Written Procurement Procedures III--2

Contract Clauses III--2

Contract Resolution III--2

[Subject]{.underline} Chapter/[Page]{.underline}

Legal Restrictions III--2

Methods III--2

Open Market III--2

Property and Services III--2

Sources III--2

Procurement Restrictions IV--5

Architectural/Enginerring/Related Service IV--16

Audit Services IV--18

Other Project Audits IV--19

Duplication of Services IV--19

Eligibility of Costs IV--20

Organizational Conflict of Interest IV--19

Verification of Indirect Costs IV--19

Single Audit Act IV--19

Cost Eligibility IV--19

Organizational Conflict of Interest IV--19

Construction Special Requirements IV--12

Accessibility IV--15

Anti-Kickback IV--14

Bonding IV--12

Bid Guarantee IV--12

Payment Bond IV--13

Accepable Sureties IV--13

Less More \$5 Million IV--13

Less Than \$1 Million IV--13

More Than \$1 Million, Less Than \$5 Million IV--13

Performance Bond IV--13

Construction Safety IV--15

EEO IV--14

Labor Neutral IV--15

Prevailing Wages IV--14

Seismic Safety IV--14

U.S. Preference IV--15

Value Engineering IV--14

Electronic Reports/Information IV--9

Energy Conservation IV--7

Environmental Protections IV--7

Clean Air IV--7

Clean Water IV--7

Mitigation IV--7

Other Requirements IV--7

Recycled Products IV--7

Federal Cost Principles IV--6

[Subject]{.underline} Chapter/[Page]{.underline}

Education Institutions IV--6

For-Profit Organizations IV--6

Government Entities IV--6

Non-Profit Organizations IV--6

ITS IV--8

Metric Measurements IV--8

Payment Provisions IV--9

Advance IV--10

General IV--10

Progress Payments IV--11

Performance Period Limits IV--8

Project Scope IV--6

Public Transportation IV--16

Accessibility IV--16

Animal Protection IV--17

Charter Service Restrictions IV--17

Drug/Alcohol Testing IV--16

School Bus Restrictions IV--17

Transit Employee Protection IV--16

Research Type Services IV--17

Animal Protection IV--18

Export Control IV--18

Human Subjects Protection IV--18

Patent Rights IV--17

Right in Data IV--17

Distribution of Data IV--18

Publication Restrictions IV--18

Rolling Stock Special Requirements IV--11

Accessibility IV--11

Air Pollution/Fuel Economy IV--12

Basis for Award IV--12

Bus Testing IV--12

DBE Compliance IV--11

Five-year Limitation IV--12

In-State Dealers IV--12

Pre-Award/Post-Delivery IV--12

Service Lift IV--11

Shipments/U.S. Flag Requirements IV--9

Air Carrier IV--9

Ocean Vessel IV--9

U.S. Preference IV--6

Use U.S. Flag Air Carriers IV--8

Wage/Hour Requirements IV--8

[Subject]{.underline} Chapter/[Page]{.underline}

Procurement System Reviews I--5

Property I--3

Definition I--3

Property and Service Needs IV--1

Eligibilty IV--1

Lease vs Purchase IV--2

Necessity IV--1

Options IV--2

Procurement Size IV--1

Specifications IV--2

Protection of Human Subjects App. A--2

Protection of Sensitive Security Information App. A--2; A--4

Protests Settlements VII--1

FTA's Role and Responsibilities VII--2

Extent of FTA Review VII--2

Procedural Failures VII--2

Violations of Federal Law or Regulation VII--2

Protester Requirements VII--2

Exhaustion of Administrative Remedies VII--2

Five-Day Limit for Appeal VII--2

Interested Party VII--2

Recipients' Role and Responsibilities VII--1

Protest Procedures VII--1

Responsibilities to FTA VII--1

Access to Information VII--2

Timely Notification VII--1

Recipient I--4

Categories II--1

Definition I--4

Governmental Subrecipients II--2

Nonprofit Subrecipients II--2

Other Recipients II--2

Self-Certification I--5

States II--1

Rehabilitation Act IV--3; IV--8

Request for Proposals (RFP) VI--6

Revenue Contract I--4

Definition I--4

Rights to Inventions Made by Nonprofit Organizations and Small Business
Firms IV--17

App. A--5

Safe Accountable, Flexible, Efficient Transportation Equity Act: A
Legacy for Users (SAFETEA--LU) P--1; I--1; IV--4; IV--8; IV--16; App.
A--1

Secretary of Labor IV--14

[Subject]{.underline} Chapter/[Page]{.underline}

Seismic Safety IV--14; App. A--2; A--3

Settlements, Arbitration, and Court Awards---Cost Sharing VII--5

FTA Prerogative VII--5

Deny Federal Assistance VII--6

Drawing Approvals VII--6

Materials Compatibility VII--6

Planning and Scheduling VII--6

Pre-Construction Survey and Engineering VII--6

Public Authority Approvals VII--6

Right of Way VII--6

Subsurface Conditions VII--6

Utility Agreements VII--6

Provide Federal Assistance VII--5

Review Supporting Documentation VII--5

Recipient's Responsibilities VII--5

Maintain Sufficient Records VII--5

Obtain FTA Concurrence VII--5

Special Federal Interest VII--5

Single Audit Act III--4; IV--19

Standards of Conduct III--1

Conflicts of Interest III--1

Gifts III--1

Violations III--1

State I--4

Definition I--4

State Purchasing Schedules V--1

Surety Companies Doing Business with the United States IV--13; App. A--4

Tag-Ons V--5

Third Party Contracts II--2

Capital Contracts II--2

Definition I--4

Joint Development II--4

Operations Contracts II--3

Public Private Partnerships (PPP) II--4

At-Risk Construction Manager II--4

Build Operate Transfer II--4

Build Own Operate II--4

Design-Build II--4

Design-Build Finance Operate II--4

Design-Build Operate Maintain II--4

Design-Build With Warranty II--4

Full Delivery or Program Management II--4

Revenue Contracts II--3

[Subject]{.underline} Chapter/[Page]{.underline}

Title I of the Americans with Disabilities Act IV--4

Title VII of the Civil Rights Act IV--3

Transit Vehicle Manufacturer (TVM) IV--11

Transportation Equity Act for the 21st Century (TEA--21) I--1; App. A--1

Transportation Services for Individuals with Disabilities (ADA) IV--4;
IV--11, App. A--3

U.S. Export Control Regulations IV--18

Uniform Relocation Assistance and Real Property Acquisition for Federal
and

Federally Assisted Programs II--2; App. A--3

United States Housing Act I--4; V--2

Urbanized Area Formula Program I--5; App. A--5

Wage and Hour Requirements IV--8; IV--14

Washington Metropolitan Area Transit Authority V--2