![](media/image1.png){width="0.4798611111111111in"
height="0.5048611111111111in"}

U.S. Department 400 Seventh St. S.W.

Of Transportation Washington, D.C. 20590

**Federal Transit** Administrator

**Administration** C-13-01

November 6, 2001

![](media/image2.jpeg){width="2.0in" height="2.5in"}

Dear Colleague:

Welcome to the Federal Transit Administration's [Best Practices
Procurement Manual]{.underline} website.

Since the original publication of the manual on May 7, 1996, we have
added a number of new topics and have identified a variety of additional
best practices. Many thanks to all of you who have contributed ideas,
topics, and "best practice" content, as well as those who have helped to
make this document as "customer-friendly" as possible.

We continue to actively seek grantee and industry comments, suggestions
for new topics, and "best practice" proposals, so the manual can be kept
up-to-date and relevant to your needs. Your thoughtful contributions
will help ensure that America's transit systems keep our communities
safe and moving.

+-----------------------------------------------------------------------+
| Sincerely,                                                            |
|                                                                       |
| ![](media/image3.jpeg){width="1.1527777777777777in"                   |
| height="0.6944444444444444in"}                                        |
|                                                                       |
| Jennifer L. Dorn                                                      |
+-----------------------------------------------------------------------+

**FEDERAL TRANSIT ADMINISTRATION**

**BEST PRACTICES PROCUREMENT MANUAL**

**Preface**

**Purpose**

This Manual provides recipients of Federal Transit Administration (FTA)
funds suggestions on conducting third party procurements to assist them
in meeting the standards of FTA Circular 4220.1E (the Circular).

The Manual consists of suggested procedures, methods, and examples which
FTA encourages.

These are based on the Federal acquisition process, Comptroller General
decisions, and \"Best Practices\" of grantees and others in the
industry.

**[Please Note, Suggested Procedures Are Not Mandatory.]{.underline}**

The Manual is envisioned as an ongoing and expanding document. It will
be updated periodically with both new subjects as well as additions or
changes to existing subjects. The additions/changes will be based on:
(1) changes in statutes, (2) the result of recent court decisions, (3)
the need for further clarification, and (4) new or innovative practices
of grantees.

The Manual is located on the Internet World Wide Web under the FTA
Homepage. The internet location enables FTA to provide its customers
with the latest and newest information using the fastest means possible.
Additionally, FTA solicits \"best practices\" of its grantees and others
in the industry. After review by FTA, new and or innovative practices
will be added to the manual. FTA is being assisted in this endeavor by
Leon Snead & Company, P.C. Their Internet address is:
\[leonsnead.companypc@erols.com\]. All proposed \"best practices\"
should be sent to this Internet Address.

**Scope**

The Manual consists of 11 chapters and Appendices as follows:

1\. Purpose and Scope

2\. Procurement Planning & Organization

3\. Specifications

4\. Methods of Solicitation and Selection

5\. Award of Contracts

6\. Procurement Object Types: Special Considerations

7\. Disadvantaged Business Enterprise

8\. Contract Clauses

9\. Contract Administration

10\. Close‑Out

11\. Disputes

Appendix A: Governing Documents

Appendix B: Examples

Appendix C: Reserved\
Appendix D: Annotated FTA Circular 4220.1E. For a copy of this Circular,
go to
[www.fta.dot.gov/ftahelpline/fta_c4220_1E.doc](http://www.fta.dot.gov/ftahelpline/fta_c4220_1E.doc).

**Format**

The Manual is divided into 11 Chapters and Appendices (see above). This
format will allow FTA to send updates as necessary and allows you to
locate them easily. As sections of the Manual are updated, the last
revision date is indicated for that section in parentheses.

**Introduction**

You are responsible for ensuring full and open competition and equitable
treatment of all potential sources in the procurement process. You are
also responsible for planning, solicitation, award, administration and
documentation of all Federally funded contracts.

During the procurement process, the Procurement Officer is responsible
for making comprehensive business judgments based upon the application
of sound procurement policies and procedures.

This Manual will not make business judgments for the Procurement
Officer. It will aid him/her in performing the steps necessary to ensure
public funds are expended properly and will protect the integrity of the
grantees\' procurement process.

BEST PRACTICES PROCUREMENT MANUAL

RECENT UPDATES TO BPPM

[Revision Date]{.underline} [Section No.]{.underline}
[Subject]{.underline}

October 2005 1.3.3.10 Disposition of Surplus *(Revised)*

October 2005 4.6.4 Unsolicited Proposals *(New)*

October 2005 7.2.4 Prompt Payment Mechanisms *(Revised)*

October 2005 7.3.5.4 Good Faith Efforts to Meet Contract Goals
*(Revised)*

October 2005 7.3.5.5 Counting DBE Participation toward the Goal
*(Revised)*

October 2005 Appendix A.1 Federally Required and Other Model Contract
Clauses- #28 (*Revised)*

April 2005 2.3.2 Independent Grantee Cost Estimate *(Revised)*

April 2005 2.4.3.1 Fixed Price Contracts *(Revised)*

April 2005 2.4.4.3 Progress Payments *(Revised)*

April 2005 5.3.2 Debriefing of Offerors (*Revised*)

April 2005 6.1.7 Partnering (*Revised*)

April 2005 8.2 Surety Bonds (*Revised*)

April 2005 8.2.1 Performance Bonds (*Revised*)

April 2005 10.3 Record Retention (*Revised*)

April 2005 Appendix B.20 Independent Cost Estimate (ICE) Form (*New*)

March 2004 1.3.3.5 Intergovernmental Agreements, Joint Procurements,

Piggybacking/Assignments (*Revised*)

March 2004 4.4.3 Single Bid *(Revised)*

March 2004 6.5 Architect-Engineering Services (*Revised*)

March 2004 Appendix A.2 Dear Colleague Letters *(Revised)*

November 2003 1.1.1 FTA Circular 4220.1E (*Revised*)

November 2003 1.1.7 FTA Procurement System Reviews (PSRs) (*Revised*)

November 2003 1.1.9 Procurement System Self-Assessment Guide (*New*)

November 2003 1.3.3.4 Real Estate Contracts (*Revised*)

November 2003 1.3.3.11 Operating Assistance, Preventive Maintenance,

CMAQ and JARC Projects (*Revised*)

November 2003 4.1.2 Consolidation of Micro-Purchases (*New*)

November 2003 4.3.2.4 Pre-Bid and Pre-Proposal Conferences (*Revised*)

November 2003 4.3.3.2.2 Buy America Certification (*Revised*)

November 2003 4.5.2 Evaluation of Proposals (*Revised*)

November 2003 6.6 Insurance (*Revised*)

November 2003 9.4 Approval of Subcontractors *(formerly Section 5.1.5)*

**Number range CHAPTERFEDERAL TRANSIT ADMINISTRATION**

**BEST PRACTICES PROCUREMENT MANUAL**

**TABLE OF CONTENTS**

**1 - [Purpose and Scope]{.underline}**

1.1 [Assistance, Guidance and Requirements]{.underline} (5/98)

1.1.1 [FTA Circular 4220.1E]{.underline} (11/03)

1.1.2 [FTA Waivers and Approvals]{.underline} (6/03)

1.1.3 [Master Agreement]{.underline} (6/03)

1.1.4 [Federal Acquisition Regulation (FAR)]{.underline} (6/03)

1.1.5 [FTA Dear Colleague Letters]{.underline} (6/03)

1.1.6 [Locating FTA Documents]{.underline} 6/03)

1.1.7 [FTA Procurement System Reviews (PSRs)]{.underline} (11/03)

8.  [FTA HelpLine]{.underline} (6/03)

> 1.1.9 [Procurement System Self-Assessment Guide]{.underline} (11/03)

1.2 [Identifying a Contract]{.underline} (5/98)

1.2.1 [Offer, Acceptance, Consideration]{.underline} (5/98)

1.2.2 [Oral v. Written]{.underline} (5/98)

1.2.3 [Mutual and Unilateral Mistakes]{.underline} (5/98)

1.2.4 [Procurements Often Overlooked]{.underline} (5/98)

1.3 [Applicability of Federal Requirements]{.underline} (5/96)

1.3.1 [Recipient and Subrecipient]{.underline} (5/96)

1.3.2 [Federal Contractual Sphere]{.underline} (5/96)

1.3.3 [Types of Contract Actions]{.underline} (5/98)

1.3.3.1 [Supplies, Services, Equipment and Construction]{.underline}
(5/98)

1.3.3.2 [Legal and Associated Services]{.underline} (5/98)

1.3.3.3 [Employment Contracts]{.underline} (5/98)

1.3.3.4 [Real Estate Contracts]{.underline} (11/03)

1.3.3.5 [Intergovernmental Agreements, Joint Procurements,]{.underline}

[Piggybacking/Assignments]{.underline} (3/04)

1.3.3.6 [Subgrants]{.underline} (6/03)

1.3.3.7 [Equipment Leases]{.underline} (5/98)

1.3.3.8 [Revenue Contracts]{.underline} (1/02)

> 1.3.3.9 [Transit Oriented Joint Development Projects]{.underline}
> (7/02)

1.3.3.10 [Disposition of Surplus]{.underline} (10/05)

1.3.3.11 [Operating Assistance, Preventive Maintenance,
CMAQ]{.underline}

> [and JARC Projects]{.underline} (11/03)

1.3.3.12 [E-Commerce]{.underline} (6/03)

**2 - [Procurement Planning & Organization]{.underline}**

2.1 [Organization of Procurement Functions]{.underline} (5/96)

2.1.1 [Scope of Responsibility]{.underline} (5/96)

2.1.2 [Autonomy]{.underline} (5/96)

2.2 [Long Term Planning]{.underline} (5/96)

2.2.1 [Contract Period of Performance Limitation]{.underline} (6/03)

2.2.2 [Multi-year vs. Multiple-Year Contracting]{.underline} (7/02)

2.3 [Annual Planning]{.underline} (5/96)

2.3.1 [Sources and Contents]{.underline} (5/96)

2.3.2 [Independent Grantee Cost Estimate]{.underline} (4/05)

2.4 [Source Selection Plan]{.underline} (5/96)

2.4.1 [File Documentation]{.underline} (5/96)

2.4.2 [Full and Open Competition]{.underline} (5/96)

2.4.2.1 [Full and Open Competition Principle]{.underline} (5/96)

2.4.2.2 [Restraints on Competition]{.underline} (5/96)

2.4.2.2.1 [Brand Names]{.underline} (6/03)

2.4.2.2.2 [Written Standards of Conduct and Conflicts of]{.underline}

> [Interest]{.underline}:

[Personal and Organizational]{.underline} (6/03)

2.4.2.2.3 [Geographic Restrictions]{.underline} (6/03)

2.4.2.2.4 [Prequalification]{.underline} (5/98)

2.4.3 [Fixed Price v. Cost Reimbursement]{.underline} (5/98)

2.4.3.1 [Fixed Price Contracts]{.underline} (4/05)

2.4.3.2 [Cost Reimbursement Contracts]{.underline} (6/03)

2.4.3.3 [Time and Materials Contracts]{.underline} (5/98)

2.4.3.4 [Labor Hour Contacts]{.underline} (5/98)

2.4.3.5 [Cost Plus Percentage of Cost Contracts]{.underline} (6/03)

2.4.4 [Payments]{.underline} (5/98)

2.4.4.1 [Payment of the Price]{.underline} (5/98)

2.4.4.2 [Advanced Payments]{.underline} (6/03)

2.4.4.3 [Progress Payments]{.underline} (4/05)

2.4.4.4 [Withholding and Final Payment]{.underline} (5/98)

2.4.5 [Indefinite Delivery Contracts]{.underline} (10/99)

2.4.5.1 [Definite-quantity Contracts]{.underline} (10/99)

2.4.5.2 [Requirement Contracts]{.underline} (6/03)

2.4.5.3 [Indefinite-quantity Contracts]{.underline} (6/03)

**3 - [Specifications]{.underline}**

3.0 [Overview]{.underline} (6/03)

> 3.1 [Types Of Specifications and Risks]{.underline} (1/98)
>
> 3.1.1 [Design Specifications]{.underline} (1/98)
>
> 3.1.2 [Performance Specifications]{.underline} (1/98)
>
> 3.1.3 [Brand Name or Equal]{.underline} (1/98)
>
> 3.2 [Using Consultants to Prepare Specifications]{.underline} (1/98)
>
> 3.3 [Specifications for Equipment and Supplies]{.underline} (1/98)
>
> 3.4 [Specifications for Construction]{.underline} (1/98)
>
> 3.5 [Statements of Work for Services]{.underline} (1/98)

**4 - [Methods of Solicitation and Selection]{.underline}**

4.0 [Overview]{.underline} (5/96)

4.1 [Micro-Purchases]{.underline} (6/03)

4.1.1 [Purchase Cards BART]{.underline} (6/98)

4.1.2 [Consolidation of Micro-Purchases]{.underline} (11/03)

4.2 [Small Purchases]{.underline} (5/96)

4.3 [Competitive Procurement Methods]{.underline} (5/96)

4.3.1 [Overview \-- Sealed Bids v. Competitive Proposals]{.underline}
(5/96)

4.3.2 [Common Elements of Solicitation Process]{.underline} (5/96)

4.3.2.1 [Advertising and Publicizing Solicitation]{.underline} (5/96)

4.3.2.2 [Solicitation Mailing List]{.underline} (5/96)

4.3.2.3 [Solicitation]{.underline} (5/96)

4.3.2.4 [Pre-Bid and Pre-Proposal Conferences]{.underline} (11/03)

4.3.2.5 [Amendment of Solicitations]{.underline} (5/96)

4.3.3 [Common Elements of Offers]{.underline} (5/96)

4.3.3.1 [Receipt of Offers]{.underline} (5/96)

4.3.3.2 [Federally Required Submissions with Offers]{.underline} (5/96)

4.3.3.2.1 [Certification Regarding Debarment, Suspension, and Other
Responsibility Matters]{.underline} (5/96)

4.3.3.2.2 [Buy America Certification]{.underline} (11/03)

4.3.3.2.3 [Lobbying Certification]{.underline} (6/03)

4.3.3.3 [Other Submissions]{.underline} (5/96)

4.3.3.3.1 [Acknowledgment of Solicitation Addenda]{.underline} (5/96)

4.3.3.3.2 [Bid Guaranty]{.underline} (5/96)

4.4 [Sealed Bids (Invitation for Bids)]{.underline} (5/96)

4.4.0 [Overview]{.underline} (5/96)

4.4.1 [Solicitation]{.underline} (5/96)

4.4.2 [Bid Opening]{.underline} (5/96)

4.4.3 [Single Bid]{.underline} (3/04)

4.4.4 [Responsive Bidder]{.underline} (5/96)

4.4.5 [Bid Mistakes]{.underline} (5/96)

4.4.6 [Bid Withdrawal]{.underline} (5/96)

4.5 [Competitive Proposals (Request for Proposals)]{.underline} (5/96)

4.5.1 [Solicitation & Receipt of Proposals]{.underline} (5/96)

4.5.2 [Evaluation of Proposals]{.underline} (11/03)

4.5.3 [Competitive Range]{.underline} (5/96)

4.5.4 [Discussions and Clarifications]{.underline} (5/96)

4.5.5 [Additional Submissions]{.underline} (5/96)

4.5.5.1 [Request for Revised Proposals]{.underline} (5/96)

4.5.5.2 [Request for Best and Final Offer]{.underline} (5/96)

4.5.6 [Award Based on Initial Proposals]{.underline} (5/96)

4.5.7 [Withdrawal of Proposals]{.underline} (5/96)

4.5.8 [Debriefing Unsuccessful Offerors]{.underline} (5/96)

4.6 [Non-Competitive (Sole Source) Proposals]{.underline} (5/96)

4.6.1 [Justification for Use]{.underline} (5/96)

4.6.2 [Negotiation of Contract]{.underline} (5/96)

4.6.3 [Associated Capital Maintenance Item]{.underline} (5/96)

4.6.4 [Unsolicited Proposals]{.underline} (10/05)

4.7 [Special Procurement Methods]{.underline} (5/96)

4.7.1 [Multi-Step Procurements]{.underline} (5/96)

4.7.2 [Governmental Prices and Contracts]{.underline} (5/96)

4.7.2.1 [Procurements from General Services Administration]{.underline}

[Schedules]{.underline} (5/96)

4.7.2.2 [State and Local Schedules]{.underline} (6/03)

4.7.2.3 [State versus FTA Requirements]{.underline} (5/96)

4.7.3 [E-Commerce: Reverse Auctions]{.underline} (6/03)

**5 - [Award of Contracts]{.underline}**

5.0 [Overview]{.underline} (1/98)

5.1 [Responsibility of Contractor]{.underline} (5/98)

5.1.1 [General Standards of Responsibility]{.underline} (5/98)

5.1.2 [Special Standards of Responsibility]{.underline} (5/98)

5.1.3 [Obtaining Information for Determination of
Responsibility]{.underline} (5/98)

5.1.4 [Determination and Documentation]{.underline} (5/98)

5.2 [Cost and Price Analysis]{.underline} (6/03)

5.3 [Award Procedures]{.underline} (5/98)

5.3.1 [Public Announcements of Contract Awards]{.underline} (5/98)

5.3.2 [Debriefing of Offerors]{.underline} (4/05)

5.4 [Documentation of Procurement Action]{.underline} (5/98)

5.4.1 [Sealed Bid Procurements]{.underline} (5/98)

5.4.1.1 [Abstract of Bids]{.underline} (5/98)

5.4.1.2 [Documentation of Award Decision]{.underline} (5/98)

5.4.2 [Negotiated Procurements]{.underline} (5/98)

5.4.2.1 [File Documentation of Selection Decision]{.underline} (5/98)

5.4.2.2 [Pre-Negotiation Plan]{.underline} (5/98)

5.4.2.3 [Memorandum of Negotiations]{.underline} (5/98)

**6 - [Procurement Object Types: Special Considerations]{.underline}**

> 6.1 [Construction]{.underline} (10/98)
>
> 6.1.1 [The Traditional Construction Process
> Design/Bid/Build]{.underline} (10/98)
>
> 6.1.2 [Construction Management (\"CM\")]{.underline} (10/98)
>
> 6.1.3 [\"Fast Tracking\"\-- Phased Design, Award and
> Construction]{.underline} (10/98)

6.1.4 [\"Turnkey\" \-- Design/Build Contracting]{.underline} (10/98)

6.1.5 [Value Engineering]{.underline} (6/03)

6.1.6 [Facilities Maintenance \-- Job Order Contracts]{.underline}
(10/98)

6.1.7 [Partnering]{.underline} (4/05)

6.1 8 [Competitive Proposals vs. Sealed Bids]{.underline} (10/98)

6.1.9 [Incentives to Reduce Project Completion Time]{.underline} (10/98)

6.1.10 [Special Contract Provisions]{.underline} (10/98)

> 6.2 [Equipment and Supplies]{.underline} (2/00)

6.2.1 [Lease/Maintenance of Vehicles]{.underline} (2/00)

> 6.2.1.1 [Lease of Heavy Equipment with Operators]{.underline} (2/00)
>
> 6.3 [Rolling Stock]{.underline} (10/98)
>
> 6.3.1 [Buses]{.underline} (10/98)

6.3.1.1 [Competitive Proposals vs. Sealed Bids]{.underline} (10/98)

6.3.1.2 [APTA Standard Bus Procurement Guidelines]{.underline} (10/98)

6.3.2 [Rail Cars]{.underline} (10/98)

6.3.3 [Joint Procurements of Rolling Stock and
"Piggybacking"]{.underline} (6/03)

> 6.3.4 [Pre-Award and Post Delivery Reviews for Buy America
> Act]{.underline}

[Compliance]{.underline} (10/00)

6.3.5 [Warranties]{.underline} (6/03)

> 6.4 [Professional Services]{.underline} (5/96)
>
> 6.5 [Architect-Engineering Services]{.underline} (3/04)
>
> 6.6 [Insurance]{.underline} (11/03)
>
> 6.7 [Artwork]{.underline} (6/03)

**7 - [Disadvantaged Business Enterprise]{.underline}**

7.1 [Comparison of Old vs. New DBE Rules]{.underline} (6/99)

7.1.1 [Applicability of DBE Rules to Grantee Programs]{.underline}
(2/00)

7.1.2 [Definition of Terms]{.underline} (2/00)

7.2 [Administrative Requirements]{.underline} (6/99)

7.2.1 [Who Must Have a DBE Program]{.underline} (6/99)

7.2.2 [DBE Liaison Officer]{.underline} (6/99)

7.2.3 [Required Efforts on Behalf of DBE Financial
Institutions]{.underline} (6/99)

7.2.4 [Prompt Payment Mechanisms]{.underline} (10/05)

7.2.5 [DBE Directory]{.underline} (6/99)

7.2.6 [Bidders List]{.underline} (6/99)

7.2.7 [Monitoring Contractors\' Performance]{.underline} (2/00)

7.3 [Goals for DBE Participation]{.underline} (6/99)

7.3.1 [DOT National Goal of 10%]{.underline} (6/99)

7.3.2 [Use of Quotas and Set-Asides]{.underline} (6/99)

7.3.3 [Establishing Overall Goals]{.underline} (2/00)

7.3.4 [Establishing Overall Goals for Transit Vehicle
Manufacturers]{.underline} (6/99)

7.3.5 [Means of Meeting Overall Goals]{.underline} (6/99)

7.3.5.1 [Race-Neutral Means]{.underline} (6/99)

7.3.5.2 [Using Contract Goals]{.underline} (6/99)

7.3.5.3 [Evaluation of Contractor Proposals for DBE
Participation]{.underline} (2/00)

> 7.3.5.4 [Good Faith Efforts to Meet Contract Goals]{.underline}
> (10/05)

7.3.5.5 [Counting DBE Participation toward the Goal]{.underline} (10/05)

7.4 [Certification: Standards and Procedures]{.underline} (2/00)

7.5 [Exemptions and Waivers]{.underline} (6/99)

**8 - [Contract Clauses]{.underline} (1/98)**

8.1 [Federal Requirements]{.underline} (1/98)

8.1.1 [Sources of Model Federal Clauses and Applicability]{.underline}
(1/98)

8.1.2 [Davis Bacon Act]{.underline} (1/98)

8.1.3 [Cargo Preferences]{.underline} (1/98)

8.1.4 [Buy America]{.underline} (6/03)

8.1.5 [Fly America]{.underline} (1/98)

> 8.2 [Surety Bonds]{.underline} (4/05)

8.2.1 [Performance Bonds]{.underline} (4/05)

8.2.2 [Options]{.underline} (1/98)

8.2.3 [Liquidated Damages]{.underline} (1/98)

> 8.2.3.1 [Relationship with Default Termination]{.underline} (1/98)

8.2.4 [Intellectual Property Rights]{.underline} (1/98)

8.2.4.1 [Disclosure of Trade Secrets]{.underline} (1/98)

8.2.4.2 [Contract Work Products, Patents and Copyrights]{.underline}
(1/98)

8.2.5 [Termination]{.underline} (1/98)

> 8.2.5.1 [Termination for Convenience]{.underline} (1/98)
>
> 8.2.5.2 [Partial Terminations]{.underline} (1/98)
>
> 8.2.5.3 [Termination for Default]{.underline} (1/98)

**9 - [Contract Administration ]{.underline}**

9.1 [Documentation of Contract Administration]{.underline} (1/96)

> 9.2 [Changes]{.underline} (2/99)

9.2.1 [Contract Scope and Cardinal Changes]{.underline} (10/99)

9.2.2 [Cost/Price Analysis of Changes]{.underline} (2/99)

> 9.2.3 [Construction Changes]{.underline} (2/99)

9.2.3.1 [Differing Site Conditions]{.underline} (2/99)

> 9.2.3.2 [Field Change Orders]{.underline} (2/99)

9.2.3.3 [Pricing of Construction Changes]{.underline} (2/99)

> 9.2.3.4 [Variations in Estimated Quantities]{.underline} (2/99)

9.2.3.5 [Delays]{.underline} (2/99)

> 9.2.3.6 [Acceleration]{.underline} (2/99)

9.3 [Improving Vendor Delivery Performance]{.underline} (10/00)

9.4 [Approval of Subcontractors]{.underline} (11/03)

**10 - [Closeout]{.underline}**

10.1 [Closeout Procedures]{.underline} (7/99)

10.2 [Audits]{.underline} (7/99)

10.3 [Record Retention]{.underline} (4/05)

**11 - [Disputes]{.underline}**

11.1 [Protests]{.underline} (6/03)

11.2 [Claims, Grievances and Other Disputes with
Contractors]{.underline} (6/99)

**Appendix A - [Governing Documents]{.underline}**

A.1 [Federally Required and Other Model Contract Clauses]{.underline}

A.2 [Dear Colleague Letters]{.underline}

**Appendix B - [Examples]{.underline}**

B.1 [Example Evaluation Process]{.underline}

B.2 [Specification/Scope of Service Guide]{.underline}

B.3 [Liquidated Damages Checklist]{.underline}

B.4 [Bid Abstract Form]{.underline}

B.5 [BART Purchase Card System]{.underline}

B.6 [Prenegotiation Position]{.underline}

B.7 [Offer and Acceptance Form]{.underline}

B.8 [Award/Contract Form]{.underline}

B.9 [Memorandum of Negotiations]{.underline}

B.10 [Disclosure of Conflicts of Interest]{.underline}

B.11 [Bidder's Qualification Questionnaire]{.underline}

B.12 [Negotiation Memorandum Sample Format]{.underline}

B.13 [Warranty & Guarantee Register]{.underline}

B.14 [Contract Closeout Check List]{.underline}

> B.15 [Request for Proposal]{.underline}
>
> B.16 [Piggybacking Worksheet]{.underline}

B.17 [Example of Statement of Qualification of
Subcontractor]{.underline}

B.18 [Hiawatha Line Public Art and Design Budget]{.underline}

B.19 [Mandatory Procurement Standards Worksheet]{.underline}

B.20 [Independent Cost Estimate (ICE) Form]{.underline}

**Appendix C -- \[[Reserved]{.underline}\]**

**Appendix D -- [Annotated FTA Circular 4220.1E]{.underline}. For a copy
of this Circular, go to**
[www.fta.dot.gov/ftahelpline/fta_c4220_1E.doc](http://www.fta.dot.gov/ftahelpline/fta_c4220_1E.doc)**.**

######## Chapter 1

**[Purpose and Scope]{.underline}**

1.1 [Assistance, Guidance and Requirements]{.underline} (10/02)

1.1.1 [FTA Circular 4220.1E]{.underline} (11/03)

1.1.2 [FTA Waivers and Approvals]{.underline} (6/03)

1.1.3 [Master Agreement]{.underline} (6/03)

1.1.4 [Federal Acquisition Regulation (FAR)]{.underline} (6/03)

1.1.5 [FTA Dear Colleague Letters]{.underline} (6/03)

1.1.6 [Locating FTA Documents]{.underline} (6/03)

1.1.7 [FTA Procurement System Reviews (PSRs)]{.underline} (11/03)

1.1.8 [FTA Helpline]{.underline} (6/03)

1.1.9 [Procurement System Self-Assessment Guide]{.underline} (11/03)

1.2 [Identifying a Contract]{.underline} (5/98)

1.2.1 [Offer, Acceptance, Consideration]{.underline} (5/98)

1.2.2 [Oral v. Written]{.underline} (5/98)

1.2.3 [Mutual and Unilateral Mistakes]{.underline} (5/98)

1.2.4 [Procurements Often Overlooked]{.underline} (5/98)

1.3 [Applicability of Federal Requirements]{.underline} (5/96)

1.3.1 [Recipient and Subrecipient]{.underline} (5/96)

1.3.2 [Federal Contractual Sphere]{.underline} (6/03)

1.3.3 [Types of Contract Actions]{.underline} (5/98)

1.3.3.1 [Supplies, Services, Equipment and Construction]{.underline}
(5/98)

1.3.3.2 [Legal and Associated Services]{.underline} (5/98)

1.3.3.3 [Employment Contracts]{.underline} (5/98)

1.3.3.4 [Real Estate Contracts]{.underline} (11/03)

1.3.3.5 [Intergovernmental Agreements, Joint Procurements,
Piggybacking/Assignments]{.underline} (3/04)

1.3.3.6 [Subgrants]{.underline} (6/03)

1.3.3.7 [Equipment Leases]{.underline} (5/98)

1.3.3.8 [Revenue Contracts]{.underline} (1/02)

1.3.3.9 [Transit Oriented Joint Development Projects]{.underline} (7/02)

1.3.3.10 [Disposition of Surplus]{.underline} (10/05)

> 1.3.3.11 [Operating Assistance, Preventive Maintenance, CMAQ and JARC
> Projects]{.underline} (11/03)

1.3.3.12 [E-Commerce]{.underline} (6/03)

**1.1 ASSISTANCE, GUIDANCE AND REQUIREMENTS**

The topics addressed by this Manual are developed according to a
standardized format, which consists of three parts: (1) Requirements,
(2) Discussion and (3) Best Practices.

  -----------------------------------------------------------------------
  **REQUIREMENT**

  Where a *requirement* exists in the third-party procurement regulations
  which grantees must follow, a table entitled REQUIREMENT will set forth
  the pertinent sections of the *FTA Circulars*, the *Master Agreement*
  (MA), the *Code of Federal Regulations* (CFR\'s) or an FTA *Dear
  Colleague Letter*. When there is a mandatory requirement it will be
  clearly set forth as such.
  -----------------------------------------------------------------------

**DISCUSSION**

**Following the statement of the requirement, or if there is no
requirement as such, there will be a *discussion* section giving some
definition and guidance concerning the meaning or purpose of the topic
being presented.**

**Best Practices**

In those situations where the Federal or grantee practices have proven
to be effective, the Manual will present these *best practices* for the
assistance and guidance of the grantee. The procedures and practices
presented are not mandatory unless so identified. These best practices
are meant to be informative and helpful to the grantee community. They
are offered for the guidance and assistance of the grantee, but it is
also recognized that a grantee may have a unique situation that
precludes it from adopting the procedures of another grantee in a
certain area.

**1.1.1 [FTA Circular 4220.1E]{.underline}**

This Circular sets forth the requirements a grantee must adhere to in
the solicitation, award and administration of its third party contracts.
The Circular contains 54 mandatory procurement standards that grantees
must meet in their procurement operations. These 54 standards are set
forth in Appendix B.19 -- *Mandatory Procurement Standards Worksheet.*
The "Worksheet" provides cross-references to specific paragraphs in the
Circular where the standards may be found, and a column for grantees to
cross-reference the standards to their own policies and procedures.
Grantees are encouraged to review their written procurement policies to
ensure that they cover each of the 54 mandatory standards.

The requirements of the Circular are based on the common grant rules
found at 49 CFR Part 18 (State and Local Governments) and 49 CFR Part 19
(Institutions of Higher Education, Hospitals, and Other Non-Profit
Organizations), and the Federal Transit Laws. The Best Practices
Procurement Manual will state the requirements of this Circular wherever
they pertain to a topic being covered by the Manual. Since this Circular
is updated periodically, grantees must ensure that they consult the
latest edition of the Circular.

This Circular replaces 4220.1D dated 4-15-96 and Change 1, dated 8-4-98.
The Circular incorporates policy updates contained in several Dear
Colleague letters issued since 1996.

[Annotated Circular]{.underline} - FTA has also published an annotated
version of this Circular with interpretive comments. These comments were
developed to help avoid incorrect interpretations of the Circular that
have evolved over time. The comments explain what FTA believes the law
and regulations conveyed through the Circular actually require of its
grantees. As applicable laws, regulations and contracting practices
evolve, FTA will use the annotated Circular to convey its views to FTA
grantees and the transit industry as a whole. As changes are made in the
comments, a date will be inserted with the change to notify the reader
of when the change was made. The *Annotated Circular* is available
online at:
[www.fta.dot.gov/ftahelpline/fta_c4220_1E.doc](http://www.fta.dot.gov/ftahelpline/fta_c4220_1E.doc).

**1.1.2 [FTA Waivers and Approvals]{.underline}**

Grantees are required to process their requests for waivers and
approvals required by Circular 4220.1E through their regional FTA
offices. The regional FTA offices will instruct grantees as to the
required content and format of these requests. The FTA Administrator has
established the FTA signatory levels for granting *waivers*, and for the
*approval of actions* which require FTA approval in the Circular, as
follows:

Authority to grant waivers - Administrator

Authority to grant approvals - Associate Administrator for
Administration

*Waivers* pertain to those third party contract actions which a grantee
is not authorized to take under the Circular, but for which FTA has
authority to make exceptions.

*Approval/disapproval* covers third party contract actions which a
grantee is authorized to take under the Circular only after receiving
FTA approval. An example would be the use of advance payments for an
individual procurement.

**1.1.3 [Master Agreement]{.underline}**

The FTA Master Agreement contains standard terms and conditions
governing the administration of a Project supported with Federal
assistance awarded by the FTA through a Grant Agreement or Cooperative
Agreement with the Recipient. The FTA Master Agreement is updated
annually at the start of each fiscal year (October 1) and published on
the FTA web site. [^1] The Master Agreement contains procurement
requirements that may be referenced in the Best Practices Procurement
Manual.

**1.1.4 [Federal Acquisition Regulation (FAR)]{.underline}**

This Manual will frequently contain references to the FAR. These
references are, with one exception, always for information purposes and
are not intended to suggest that grantees must follow the FAR. [^2]
Neither grantees nor their contractors are required to follow the FAR.
The FAR citations are given in order to inform grantees how the Federal
government treats a particular issue but the Federal practices are not
binding on grantees.

The Federal Acquisition Regulation is available at the following
internet address: <http://www.arnet.gov/far>.

**1.1.5 [FTA Dear Colleague Letters]{.underline}**

The FTA Administrator periodically issues *Dear Colleague Letters* to
the FTA grantee community. When these letters affect grantee procurement
operations by imposing new FTA requirements or clarifying earlier FTA
policy statements, the Manual will be updated to reflect the new Dear
Colleague Letter. Those Letters that affect grantee procurement
operations are contained in Appendix A.2 of the Manual.

**1.1.6 [Locating FTA Documents]{.underline}**

The *FTA HelpLine* web site (see 1.1.8 below) contains a link to
important FTA documents, such as Circulars, Dear Colleague Letters, etc.
You may access these documents by using the *Online Tools & Resources*
tab at the following Internet address:
[www.fta.dot.gov/ftahelpline/index.htm](http://www.fta.dot.gov/ftahelpline/index.htm).
You may also access FTA documents at the FTA web site address:
[www.fta.dot.gov](http://www.fta.dot.gov/) under the "grantee" page tab.

**1.1.7 [FTA Procurement System Reviews (PSRs)]{.underline}**

FTA conducts periodic reviews of its grantee's procurement systems.
These reviews are conducted in accordance with the *Guide for
Procurement System Reviews,* which FTA has developed in order to
evaluate the grantee's compliance with the requirements of FTA Circular
4220.1E. Grantees now have access to this *Guide* and can effectively
evaluate their own procurement system's compliance with 4220.1E using
the *Guide*. Section III.2 of the *Guide* contains checklists for each
type of contract to be reviewed as well as for the procurement
system-wide elements that FTA also evaluates. The Guide is now available
on the Internet at the following FTA web site address:
[http://www.fta.dot.gov/grant_programs/fta_oversight/4022_8480_ENG_HTML.htm](http://www.fta.dot.gov/library/admin/psrg/cover.html).

# **Best Practices**

[Audit Follow-Up and Tracking System]{.underline} - Grantees should
consider adopting a tracking system for following up on the findings
generated by FTA Procurement System Reviews (PSRs), FTA Triennial
Reviews, and other public audits or internal audits conducted by the
agency\'s own management staff. The Los Angeles County Metropolitan
Transportation Agency (LACMTA) has developed an in-house, MS
Access-based database to manage audit findings and track corrective
actions to ensure they are implemented as proposed. This tracking
system - the Findings and Recommendations Management System (FARMS) - is
a central repository for all audits, findings, recommendations, audit
responses, proposed corrective actions, and audit follow-up and
close-out information. Information can be sorted in a variety of ways
such as by executive area, audit source, findings, dates, or
recommendation status (e.g., open, closed). Tickler reports are
routinely routed to inform appropriate parties of approaching or missed
deadlines and quarterly reports of implemented actions are routed to
management. This system enables the agency to track who proposed to do
what by when. The system is especially valuable when agency management
changes (usually with voting cycles) and incoming managers need to be
made aware of commitments made by their predecessors. LACMTA has seen a
number of benefits from their tracking system:

-   Minimizes likelihood of recurring findings that can lead to fines,
    schedule delays, fraud, waste, or abuse.

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-   Assures Management corrective action has been taken.

-   Maximizes audit value by tracking each finding and recommendation
    through resolution.

-   Automatically compiles Lessons Learned and Best Practices and
    greatly enhances reporting options.

LACMTA has agreed to make their system available to any agency that
wishes to implement an audit follow-up and tracking system capability.
[^3]

**1.1.8 [FTA Helpline]{.underline}**

FTA has initiated a *Third Party Procurement HelpLine* to provide a
means for FTA customers to get answers to their procurement questions.
The goal is to answer questions within 48 hours of receiving them. The
web site also contains a topical index to *Frequently Asked Questions*
and helpful links to important FTA documents, the FAR, the BPPM, etc.
The Internet address is: <http://www.fta.dot.gov/ftahelpline/index.htm>.

**1.1.9 [Procurement System Self-Assessment Guide]{.underline}**

FTA has developed a *Procurement System Self-Assessment Guide* for
grantees. This *Guide* is provided for assessing those particular areas
of procurement that have historically been the most problematic, as
determined by oversight reviews of transit agency procurement systems
(the Procurement System Reviews conducted by FTA). The *Guide* discusses
the top ten areas of deficiency consistently found during the
Procurement System Reviews. This Guide may be accessed online at:
[http://www.fta.dot.gov/ftahelpline/Cover_Self-Assessment_Guide.htm](http://www.ftahelpline.com/Cover_Self-Assessment_Guide.htm).

**1.2 IDENTIFYING A CONTRACT**

As defined by the Federal Acquisition Regulation, a \"contract\" means a
mutually binding legal relationship obligating the seller to furnish the
supplies or services (including construction) and the buyer to pay for
them. Contracts would include bilateral instruments, awards and notices
of awards; job orders or task assignment letters issued under basic
ordering agreements; letter contracts; orders, such as purchase orders,
under which the contract becomes effective by written acceptance or
performance; and bilateral contract modifications. Contracts do not
include grants and cooperative agreements. [^4]

The parties to a contract must possess the legal capacity to enter into
the contract, and they must assent to the terms of the contract. The
terms of the agreement must not require the performance of an illegal
act by the parties. Contracts may be either oral or written in form. The
subject matter of a contract determines which primary law applies.
Generally, Common Law rules apply for contracts. However, the *Uniform
Commercial Code* (UCC) Article 2 applies when the contract is for the
sale of goods.

**1.2.1 [Offer, Acceptance, Consideration]{.underline}**

Offer, acceptance and consideration are three essential elements of a
contract.

[Offer]{.underline} - The offer to enter into a contract can be made by
either party to the contract. In third party contracting, the offer is
normally made by the contractor. The grantee issues solicitations for
offers either by an Invitation for Bid (IFB) or a Request for Proposal
(RFP). The offer is made when the contractor submits a signed bid or
proposal in response to the grantee\'s solicitation. In small purchases,
however, the roles are reversed. The grantee issues a purchase order,
which is an offer, to buy supplies or services at a specified price
(usually obtained by a Request for Quotation that the grantee has issued
earlier).

The party to whom the offer is made, the offeree, may accept the offer
until it is terminated by the offeror. Termination of an offer can occur
in one of many different ways:

-   Expiration. The offer is not accepted within the specified time
    period or within a reasonable time, if no time period is stated. The
    offeree may agree to extend its offer beyond the specified time
    period without any changes or qualifying terms to its offer.

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-   Revocation. The offeror may withdraw the offer. The withdrawal is
    effective when received by the offeree. Generally, the revocation
    may occur at any time prior to acceptance by the offeree.

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-   Rejection. The offeree may reject the offer, and the rejection is
    effective when received by the offeror.

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-   Counter-offer. The offeree proposes new terms, not an inquiry
    regarding the possibility of new terms. The offeree\'s counter-offer
    to the offeror is effective when received by the offeror.

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-   Death. The offer is terminated when either the offeror or offeree
    dies. However, the offer passes to the personal representative of
    the offeree\'s estate in an option contract.

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-   Illegality. The offer is void if the subject matter is illegal.

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-   Destruction. The offer is terminated if the subject matter is
    destroyed.

[Acceptance]{.underline} - The offer must be accepted unequivocally. The
offeree must accept the offer without changing or qualifying the terms
of the offer. If the terms are changed, the offer is rejected and a
counter-offer is made. This terminates the original offer.

The offer may be accepted by any reasonable means of communication
(i.e., fax, telephone, etc.) unless the offeror indicates a specific
method of acceptance. As a general rule, the acceptance is effective
when mailed by the offeree, except where the offeror specifies the
acceptance must be received by a specific date and time.

Grantee procurements involve two processes for acceptance of offers.
When the grantee has issued an IFB or RFP, acceptance occurs when the
grantee assents to the terms made by the bidder or offeror in its bid or
proposal. The grantee accepts the offer by signing the contract and
issuing the offeror a notice of award. For small purchases the
contractor accepts the offer made by the grantee in its purchase order
by either signing the order (contract), if so required by the purchase
order, or by actually performing in accordance with the terms of the
purchase order.

[Consideration]{.underline} - Each party must give consideration for an
agreement to be a contract. Consideration exists when something of value
is given up in a bargained-for exchange. The following must exist:

-   Legal benefit. Someone receives something they had no prior legal
    right to receive.

-   Legal detriment. Someone gives up something they did not have to
    relinquish. This detriment does not have to involve a tangible
    detriment, only a legal detriment.

    **1.2.2 [Oral v. Written]{.underline}**

[Statute of Frauds]{.underline} - Generally, the Statute of Frauds
dictates whether contracts should be oral or written. In order to be
enforceable, the Statute of Frauds requires certain contracts to be
written and signed by the party charged with performing the contract.
The following contracts must be in writing:

-   An agreement in which the period of performance is greater than one
    year. The time period starts the date the contract is made, not on
    the date the performance commences.

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-   Contracts regarding real property; i.e., mortgages, easements, sale
    of real estate, etc.

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-   Contracts of guaranty; i.e., where someone guarantees to pay the
    obligation of another (send the deliverable item to X, and if X does
    not pay, I will).

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-   Contracts involving the sale of investment securities.

-   Promises by an executor/administrator to be held personally liable
    for the debts incurred by an estate.

-   Contracts for the sale of goods in excess of \$500.

    Consult your state law for applicable requirements.

    **1.2.3 [Mutual and Unilateral Mistakes]{.underline}**

If a material mistake has been made by one or both parties, there is a
possibility the contract is voidable. If a material mistake was made by
both parties (mutual mistake), either party has the option to void the
contract. If a material mistake was made by one party (unilateral
mistake), the contract remains valid. However, if the other party is
aware of or should have been aware of the mistake, the contract is
voidable.

**1.2.4 [Procurements Often Overlooked]{.underline}**

Many organizations may be overlooking procurements which could benefit
from the application of the procedures outlined in this manual. These
overlooked areas would include: utility services, mailing/shipping
services, telephone service, electric and gas service. In the past these
areas have been under the control of a single source supplier, but
recent deregulation has, or will soon, open up many of these areas to
competitive procurement possibilities.

**1.3 APPLICABILITY OF FEDERAL REQUIREMENTS**

One of the principles of contracting with Federal funds received
directly or indirectly from FTA is a recognition that, as a condition of
receiving the funds, certain specific Federal requirements must be met
not only by the recipient of the funds (the grantee) but also by
sub‑recipients and a grantee's third party contractors. The Federal
requirements to be met by the grantee's third party contractors will be
defined by the clauses included in the grantee's third party contracts.
It should also be noted that third party contractors are not required to
follow FTA Circular 4220.1E in their subcontracting activities.

The specific requirements for your particular grant of funds will be
found in the Master Agreement incorporated into the Grant Agreement or
Cooperative Agreement that was executed by you as a grant recipient.
Different rules apply depending upon whether you, as the recipient or
subrecipient, are a state, local, or Indian tribal governmental entity
or whether you are an institution of higher learning, a hospital, or
another non‑profit organization. Also, depending upon the type of
Federal funds you receive (e.g., operating assistance) or the nature of
the capital project you are involved in, the contractual sphere of
Federal requirements may include your procurements regardless of whether
Federal funds are actually drawn down to fund payments in a particular
procurement.

As the person responsible for procurement within your agency, you must
be aware that compliance with Federal requirements is a condition of
receipt of Federal funds. Failure to comply with these provisions may,
in accordance with the terms of your Grant or Cooperative Agreement, be
grounds for default of that agreement and result in the loss of the
funds.

**1.3.1 [Recipient and Subrecipient]{.underline}**

**DEFINITIONS**

The Master Agreement [^5] provides the following definitions for
\"Recipient\" and \"Subrecipient\".

[Recipient]{.underline} ‑ Any entity that receives Federal assistance
directly from FTA to accomplish the project. The term \"Recipient\"
includes each FTA \"Grantee\" as well as each FTA Recipient of a
Cooperative Agreement. Except as FTA permits otherwise, the Recipient is
the entire legal entity even though only a single organization within
that entity is designated as the Recipient in the Grant Agreement or
Cooperative Agreement. [^6]

[Subrecipient]{.underline} ‑ Any entity that receives Federal assistance
awarded by an FTA recipient rather than from FTA directly. The term
\"subrecipient\" also includes the term \"subgrantee,\" but does not
include \"third party contractor\" or \"third party subcontractor.\"
[^7]

**DISCUSSION**

**It is important to determine whether your agency is a recipient or
subrecipient so as to determine what third party contracting rules under
the Circular and 49 CFR Parts 18 and 19 (the \"common grant\" rules) are
applicable to your procurements.**

***What Third Party Contracting Requirements Under 49 CFR Parts 18 and
19 and FTA Circular 4220.1E are Applicable to Recipients and
Subrecipients?***

Section 15 of the Master Agreement contains the requirements to comply
with applicable procurement standards of 49 CFR Part 18.36 (state,
local, and tribal governments) or 49 CFR Part 19.40 through 19.48 and
Appendix A (hospitals, non‑profits, and institutions of higher
learning). For purposes of this discussion, it is important to recall
that \"recipient\" includes \"grantee,\" and \"subrecipient\" includes
\"subgrantee\" other than third party contractors and subcontractors.

Paragraph 4 of the FTA Circular 4220.1E outlines four distinct rules
relating to the applicability of the procurement requirements to
recipients/grantees or subrecipients/subgrantees:

1.  **If a transit authority is both a direct recipient of Federal funds
    and a subrecipient of a State, the State may permit the transit
    authority to follow the requirements of the Circular instead of
    State procurement requirements, although it is not obligated to do
    so. If your transit authority is in this situation, make sure that
    the procurement requirements you are obligated to follow for
    Federally assisted procurements are clearly stated, preferably by
    both the State and FTA.**

> **2. When a \"State\"** [^8] **procures property or services under a
> grant or cooperative agreement with FTA, it will follow the same
> procurement policies and procedures it uses for procurements using
> non‑Federal funds. States must, however, comply with the requirements
> of paragraphs 8.a (Full and Open Competition) and b (Prohibition\
> Against Geographic Preferences), and 9.d (Procurement of Architectural
> and Engineering Services (A&E) ) of the Circular and must include in
> all purchase orders and contracts executed by it, or a subgrantee
> using Federal funds, all clauses required by Federal statutes,
> executive orders and their implementing regulations. Subgrantees of a
> \"State\" (except as indicated in subparagraph (4) below) shall follow
> State law and procedures when awarding and administering contracts.**
>
> **3. For the purposes of this Circular, regional transit authorities
> are not State agencies or instrumentalities.**
>
> **4. Subgrantees of States which are institutions of higher education,
> hospitals or other nonprofit organizations and all other FTA
> recipients/grantees will administer contracts in accordance with the
> requirements of the Circular. Grantees and subgrantees that fall
> within this category shall use their own procurement\
> procedures that reflect applicable State and local laws and
> regulations provided that the procurements conform to applicable
> Federal law.** [^9]

**1.3.2 [Federal Contractual Sphere]{.underline}**

+-----------------------------------------------------------------------+
| #####                                                                 |
|                                                                       |
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| \"\...the Recipient agrees to include appropriate clauses in each     |
| third party contract stating the third party contractor\'s            |
| responsibility under Federal law, regulation, or directive, including |
| any\                                                                  |
| necessary provisions requiring the third party contractor to extend   |
| applicable requirements to its subcontractors to the lowest tier      |
| necessary.\"                                                          |
|                                                                       |
| Master Agreement § 2.e.(2)(a).                                        |
|                                                                       |
| "This Circular applies to all FTA grantees and subgrantees that       |
| contract with outside sources under FTA assistance programs. FTA      |
| grant recipients who utilize FTA formula funds for operating          |
| assistance are required to follow the requirements of this Circular   |
| for all operating contracts. These requirements do not apply to       |
| procurements undertaken in support of capital projects completely     |
| accomplished without FTA funds or to those operating and planning     |
| contracts awarded by grantees that do not receive FTA operating and   |
| planning assistance.\"                                                |
|                                                                       |
| FTA Circular 4220.1E, Paragraph 4.                                    |
|                                                                       |
| \"Project means activity or activities (task or tasks), listed in the |
| Project Description, the Approved Project Budget, and any             |
| modifications stated in the Conditions to the Grant Agreement or      |
| Cooperative Agreement applicable to the project.\"                    |
|                                                                       |
| Master Agreement § 1.l.                                               |
+-----------------------------------------------------------------------+

There are several aspects of your grant agreement which together
establish the sphere of procurements to which Federal requirements may
apply. In general you may undertake capital projects wholly without
Federal funds, and be confident that your grant agreements will not
affect those procurements. However, Federal grant requirements apply to
many contracts in addition to the contracts between you and your
suppliers for which you intend to draw down Federal payments. Generally,
the concept is that solely because of the receipt of Federal funds by a
grantee, certain clauses and federal requirements are required to be
included in contracts within the contractual sphere. There are four
procurement contexts to which the concept is important:

> 1\. The general \"flow down\" of Federal requirements in contracts;
>
> 2\. The inclusion of all Federal requirements if the transit property
> receives operating assistance;
>
> 3\. The inclusion of all Federal requirements in all elements and
> activities if the overall capital project (as defined in a full
> funding grant agreement) includes Federal funds; and,
>
> 4\. The concept of a \"minimal operable segment.\"

These concepts are highlighted below so you can be aware of them in your
capital project planning and procurement planning processes. Each
Federal requirement has applicability\
criteria deriving from statute, regulation, or policy. The sphere of
contracts to which the requirements apply, if they are otherwise
applicable, is affected by these four concepts:

1\. [Flow Down]{.underline} -- Perhaps the easiest determinant of the
sphere to visualize is the concept of "flow-down." Federally required
clauses and requirements, as a general rule, are required to be included
in each third party contract at every tier and in each subrecipient
agreement at every tier. [^10] When clauses are required to flow down,
the clauses and requirements flow down to all levels of the Federal
funding chain beginning with the grantee.

2\. [Inclusion of Federal Requirements when Receiving Operating
Assistance]{.underline} ‑ The second example of the sphere involves
grantees receiving operating assistance. In this instance, all grantee
procurements except for capital projects undertaken without Federal
funds, must include all of the Federal requirements that would be
included if the operating budget were fully Federally funded and must
comply with the Circular. [^11] FTA maintains that one dollar of Federal
operating assistance converts\
the operating funds of the transit property so that all such funds of
the property therefore become subject to Federal requirements. The rules
on this dimension of the sphere are clear ‑‑ if you receive operating
assistance, the requirements of the Circular apply, even if you do not
intend to use that assistance in support of any procurement action
(e.g., you intend to apply all the operating assistance to pay salaries
of your direct‑hire bus operators).

3\. [Inclusion of Federal Requirements in Federally Funded Capital
Projects]{.underline} ‑ FTA has recently taken the position that, when a
capital project requires a full funding grant agreement,

> *. . . the Federal \'undertaking\' in a Fully Funded Grant Agreement
> (FFGA) will no longer be segmented into Project and Local Activities.
> All activities related to a Federal undertaking will be identified as
> the Federal Project. The Federal funds will be distributed among all
> the activities in the project at a level funding ratio equal to the
> percentage of Federal financial participation in the entire project.
> Thus, all the elements and activities of the project, as described in
> the FFGA will be funded, in part, with Federal funds; and, the
> requirements attached to the use of Federal funds will apply to each
> such task, unless otherwise exempted as provided in the applicable
> laws, regulations and policies.* [^12]

Regardless of how large or small the percentage of Federal funding is,
where a full funding grant agreement with the FTA is executed, all
elements of the project identified in the agreement are within the
sphere and must be procured in compliance with Federal requirements.

4\. [Minimal Operable Segment]{.underline} ‑ In the case of a multi‑task
capital undertaking, the sphere includes a segregable portion of the
undertaking, or a project portion that has independent functional
utility. Under this concept, FTA and your agency identify a segment of
the overall undertaking that represents *the minimal segment that can be
feasibly operated independently.* Imagine you are able to overmatch
Federal funds to construct a badly needed new fueling station with 85%
state and local money. FTA\'s policies may not apply to every related
expenditure of these state and local funds, e.g., landscaping or a
nearby tire storage structure; however, neither will FTA apply its
policies to the mathematically minimum portion of the project with no
independent utility (e.g., applying FTA policies to the roof, alone);
rather you must define a segregable project with FTA to which the
Federal requirements apply, and you may then have additional latitude in
the remaining portions undertaken without Federal funds. The full
funding grant agreement will cover all of the necessary elements to
build and operate the segment ‑‑ a station at each end of the segment,
land to build the stations on, rail cars to run on the segment, systems
to support the rail cars, rail on which the cars will run, etc. Federal
requirements of the Circular apply to all of the individual contracts
relating to these elements because they are part of the minimal operable
segment and within the Federal contractual sphere. [^13]

**1.3.3 [Types of Contract Actions]{.underline}**

Details and Best Practices for meeting the requirements for various
types of contract actions that are described below can be found in other
sections of the manual.

**1.3.3.1 [Supplies, Services, Equipment and Construction]{.underline}**

+-----------------------------------------------------------------------+
| ###### REQUIREMENT                                                    |
+-----------------------------------------------------------------------+
| FTA Circular 4220.1E defines the requirements a grantee must adhere   |
| to in the solicitation, award and administration of its third party   |
| contracts. Such contracts would include the procurement of supplies,  |
| services, equipment and construction.                                 |
+-----------------------------------------------------------------------+

**1.3.3.2 [Legal and Associated Services]{.underline}**

  -----------------------------------------------------------------------
  **REQUIREMENT**

  The requirements of FTA Circular 4220.1E apply to the procurement of
  legal and associated services, such as paralegals, investigators,
  expert witnesses, etc. if Federal funds are being used to fund these
  contracts (i.e., if receiving operating funds or if the legal services
  are funded by a capital grant).
  -----------------------------------------------------------------------

##### DISCUSSION

As noted above, the requirements of FTA Circular 4220.1E apply to the
procurement of legal and associated services, such as paralegals,
investigators, expert witnesses, etc. if Federal funds are being used to
fund the contracts for legal services. FTA Circular 4220.1E would not
apply if the legal services are funded entirely with local funds. The
Circular requires such services to be procured competitively, as with
other types of services. However, there may be cases where the grantee
has pending litigation which might be jeopardized through a public
disclosure which would result from advertising the procurement
beforehand. In such cases the grantee may have valid grounds for
limiting

the competition to the degree of not publicly advertising the
procurement. In such cases a waiver request should be submitted to the
FTA.

**1.3.3.3 [Employment Contracts]{.underline}**

These are contracts with individuals that result in those individuals
becoming "employees" of the agency. These are not \"third party
contracts\" within the meaning of FTA Circular 4220.1E, and thus the
requirements of that Circular do not apply to employment contracts. The
term "employment contract" does not refer to a contract that retains a
consultant to perform temporary services for the agency. The individual
retained on these consultant-services contracts remains an independent
contractor and does not become an employee of the agency; thus these
contracts are not "employment contracts," and they are subject to the
requirements of FTA Circular 4220.1E.

**1.3.3.4 [Real Estate Contracts]{.underline}**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| Requirements related to the acquisition, use and disposal of real     |
| property may be found in the following regulations:                   |
|                                                                       |
| > \(a\) FTA Circular 5010.1C, *Grant Management Guidelines,* Chapter  |
| > II-2 *Real Property.* This Circular defines the requirements of the |
| > Federal Transit Laws which are codified at 49 U.S.C. Chapter 53.    |
| >                                                                     |
| > \(b\) 49 CFR § 18.31 *Real Property,* and 49 CFR Part 24, Subpart B |
| > *Real Property Acquisition*.                                        |
| >                                                                     |
| > \(c\) Master Agreement MA(12) Section 19.                           |
+-----------------------------------------------------------------------+

**DISCUSSION**

**The acquisition of real property, either by purchase or lease, is not
subject to the requirements of FTA Circular 4220.1E. *Real property* is
defined in 49 CFR § 18.3 as "land, including land improvements,
structures and appurtenances thereto, excluding movable machinery and
equipment." The acquisition of easements and rights of way are
considered real estate acquisitions and the requirements discussed
herein pertain to these types of acquisitions.**

**Real property acquisition[,]{.underline} use and disposal is also
covered by FTA Circular 5010.1C, Chapter II-2; 49 CFR Part 18.31; 49 CFR
Part 24 Subpart B; and by the FTA Master Agreement, Section 19.** [^14]
**It is important that the grantee be familiar with the requirements
established by FTA in Circular 5010.1C, Chapter II-2. This circular
establishes procedures to be followed by grantees in the following
areas:**

-   **The conduct of Hazardous Waste Site Assessments before acquiring
    real property.**

-   **The conduct of an independent appraisal by a certified
    appraiser.**

-   **The requirement for a review appraisal of the initial appraisal.**

-   **FTA review and concurrence requirements related to the grantee\'s
    offer to buy the property.**

-   **Incidental use of acquired real property as a means to supplement
    transit revenues.**

-   **Disposition of excess real property by sale, transfer to other
    programs, etc.**

-   **The requirement to prepare an excess property utilization plan for
    all real property no longer used for its original purpose.**

    **1.3.3.5 [Inter-Governmental Agreements, Joint Procurements,
    Piggybacking]{.underline}**

+-----------------------------------------------------------------------+
| # **REQUIREMENT**                                                     |
+-----------------------------------------------------------------------+
| FTA Circular 4220.1E, paragraph 7.e. encourages inter-governmental    |
| procurements:                                                         |
|                                                                       |
| > e\. [Intergovernmental Procurement Agreements]{.underline}.         |
|                                                                       |
| \(1\) Grantees are encouraged to utilize available state and local    |
| intergovernmental agreements for procurement or use of common goods   |
| and services. When obtaining goods or services in this manner,        |
| grantees must ensure all federal requirements, required clauses, and  |
| certifications (including Buy America) are properly followed and      |
| included, whether in the master intergovernmental contract or in the  |
| grantee\'s purchase document. [^15]                                   |
+-----------------------------------------------------------------------+

+-----------------------------------------------------------------------+
| > \(2\) Grantees are also encouraged to jointly procure goods and     |
| > services with other grantees. When obtaining goods or services in   |
| > this manner, grantees must ensure all federal requirements,         |
| > required clauses, and certifications are properly followed and      |
| > included in the resulting joint solicitation and contract           |
| > documents. [^16]                                                    |
|                                                                       |
| \(3\) Grantees may assign contractual rights to purchase goods and    |
| services to other grantees if the original contract contains          |
| appropriate assignability provisions. Grantees who obtain these       |
| contractual rights (commonly known as \'piggybacking\') may exercise  |
| them after first determining the contract price remains fair and      |
| reasonable. [^17]                                                     |
+-----------------------------------------------------------------------+

**DISCUSSION**

**[Piggybacking]{.underline} - Your Agency may be able to take advantage
of existing contracts awarded by other governmental entities for goods
and services which you currently need. This practice has become known as
"piggybacking**." **Piggybacking is defined by FTA Circular 4220.1E,
paragraph 6.e, as follows:**

***"Piggybacking" is an assignment of existing contract rights to
purchase supplies, equipment, or services.*** [^18]

**The use of piggybacking, which involves assignment of contracts or
portions of contracts from the original purchasing agency to another
agency, is discussed in the BPPM, Section 6.3.3 - *Joint Procurements of
Rolling Stock and "Piggybacking*." Appendix B. 16 of the BPPM contains a
*Piggybacking Worksheet* that will assist a grantee wishing to piggyback
another agency's contract to work through the FTA requirements that must
be met in order for piggybacking to be permissible.**

**[Adding Federal Clauses to Existing Contracts]{.underline} - FTA's
policy regarding the addition of Federal clauses to existing contracts
distinguishes between State GSA-type contracts and**

**contracts awarded by other grantees. For example, in the recently
issued Circular 4220.1E, paragraph 7.e.(1), *FTA allows grantees to
modify State GSA-type contracts and add Federally-required clauses and
certifications when the grantee issues the first purchase order against
the contract.* *However, FTA has taken the position that grantees may
not add Federal clauses and certifications to their own contracts or
those of other grantees in order to purchase against these contracts
with Federal funds.* The rationale is that, in a State GSA-type
contract, the purchase order is the transit community's initial work on
the contract -- much as any buy off the Federal GSA IT schedule will be
when a grantee chooses to use this Federal contract. In other cases
(like transit agency A buying off transit B's contract), the
transit-unique rules are in place and known from the beginning, there is
no expressed intent in the common grant rule (as with State schedules)
to balance the rules against each other, and it would infer that a
transit agency could essentially avoid most Federal rules by placing
orders through another transit agency. In short, the integrity of the
system would be threatened by extending the after-the-fact option beyond
schedule purchases.**

**[Joint Procurements]{.underline} - You may also wish to plan
procurements in advance with other agencies or governmental users, and
competitively award contracts that several governmental entities can
draw upon to meet their needs. Such an approach would create economies
of scale, reduce procurement lead times in the case of being able to use
existing contracts, and reduce administrative effort and expense. Any
third party contracts resulting from or utilized by grantees under
inter-governmental agreements are subject to the requirements of FTA
Circular 4220.1E. Inter-governmental agreements not involving third
party contracts would not be subject to FTA Circular 4220.1E. The topic
of joint procurements that makes use of advance planning by several
agencies is discussed in the BPPM, Section 6.3.3 - *Joint Procurements
of Rolling Stock and "Piggybacking."***

**Best Practices**

[Piggybacking]{.underline} - If it appears that there may be an existing
governmental contract which may be used for a specific need, you will
first want to obtain a copy of the entire contract and review it
carefully to determine if it contains the provisions required by FTA
Circular 4220.1E. This is an important first step, because the
requirements of the Circular apply to procurements made through
inter-governmental contracts and assignments. If the contract lacks
required provisions, you may be able to have it modified by the awarding
Agency to include the necessary Federal clauses. Among the steps you may
want to take are the following:

1.  Determine that the contract is still in effect or can be modified by
    the awarding Agency to permit sufficient lead time to make the
    required deliveries to your Agency.

2.  Determine that the specifications in the existing contract will meet
    your needs.

3.  Review the terms and conditions carefully to determine that they are
    acceptable to you; e.g., warranty provisions, insurance
    requirements, etc.

4.  Determine that the requirements needed by your Agency will not be
    *beyond the scope of the existing contract*, creating a sole-source
    (noncompetitive) add-on to the contract which will have to be
    justified in accordance with FTA Circular 4220.1E Paragraph 9.h.
    Generally, if you are working with an indefinite quantity contract
    you should have the needed flexibility to order additional
    quantities without having a \"new procurement\" action requiring a
    sole-source justification.

5.  Determine that the contract was awarded competitively, either
    through sealed bids or competitive proposals. If the contract was a
    sole-source award, you will have to justify a sole-source award in
    accordance with FTA Circular Paragraph 9.h. and your Agency\'s
    procurement procedures.

6.  You are not required to do a second price analysis if one was
    originally performed. However, you must determine that the contract
    prices originally established are still fair and reasonable.
    Circumstances should dictate the steps to be taken. For example, if
    the original award was made some time ago, you may want to do a
    market survey and/or perform price analysis to ensure that the
    prices are still fair and reasonable (even if the original award was
    competitive and a price analysis was performed initially).
    Similarly, if your deliveries are to be made to a local or
    centralized delivery point and the original contract calls for
    statewide deliveries, you should be entitled to a price reduction.
    See BPPM Section 5.2 *Cost and Price Analysis* for a discussion of
    price analysis techniques.

7.  Determine that the contractor has submitted all federally required
    certifications to the awarding Agency; e.g., Buy America, debarment,
    restrictions on lobbying, etc. See paragraph above *Adding Federal
    Clauses to Existing Contracts* and BPPM Section 4.3.3.2 *Federally
    Required Submissions with Offers.*

> 8\. Work through the items in the Piggybacking Worksheet in Appendix
> B. 16 (and explained in Section 6.3.3 - *Joint Procurements of Rolling
> Stock and Piggybacking* of the BPPM). Note that some of the items on
> this Worksheet may overlap with items already mentioned above.

9.  You should prepare a Memorandum for the Record documenting your
    analysis of the various items mentioned above. This will constitute
    the *Written Record of Procurement History* required by Paragraph
    7.i. of FTA Circular 4220.1E.

[Joint Procurements]{.underline} - When it appears that your agency has
a common requirement with another governmental user, and that a joint
procurement is feasible, you will want to carefully consider whether a
joint procurement will result in obtaining the best price for all of the
parties to the procurement. It is quite possible that substantial
differences in the requirements (delivery schedule, quantities,
location, etc.) of one party to the joint procurement will result in
increased costs to the other parties and thereby negate other benefits
of a joint procurement such as lower solicitation costs. You must also
determine whether the different funding sources have different
procurement regulations, especially where there are Federal and
non-Federal requirements

affecting contract clauses, etc. Should conflicts occur, grantees should
consult their respective legal counsels or request FTA pre-award review
of their procurement (as permitted by FTA Circular 4220.1E, Paragraph
5.b.)

**1.3.3.6 [Subgrants]{.underline}**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| FTA Circular 4220.1E, paragraph 4, defines the applicability of the   |
| Circular to subgrants:                                                |
|                                                                       |
| > 4\. [APPLICABILITY]{.underline}. This circular applies to all FTA   |
| > grantees and subgrantees that contract with outside sources under   |
| > FTA assistance programs. . . .                                      |
|                                                                       |
| a.  [States]{.underline}. When procuring property and services under  |
|     a grant, a State will follow the same procurement policies and    |
|     procedures that it uses for acquisitions that are not paid for    |
|     with Federal funds. States must, at a minimum, comply with the    |
|     requirements of paragraphs 7m, 8a and b, and 9e of this circular  |
|     and ensure that every purchase order and contract executed by it  |
|     using Federal funds includes all clauses required by Federal      |
|     statutes and executive orders and their implementing regulations. |
|                                                                       |
| > b\. [All Other Recipients]{.underline}. Subgrantees of states and   |
| > all other FTA grantees (to include regional transit authorities)    |
| > will administer contracts in accordance with this circular.         |
|                                                                       |
| 49 CFR § 18.37 -- *Subgrants* requires States and all other grantees  |
| to ensure that their subgrantees comply with certain requirements.    |
| These requirements are discussed below.                               |
+-----------------------------------------------------------------------+

**DISCUSSION**

**Subgrants themselves are not \"third party contracts\" within the
meaning of FTA Circular 4220.1E, and thus the requirements of that
Circular do not apply to the subgrant awards. However, to the extent
that the subgrantee contracts with third parties, the FTA Circular
applies to such contracts awarded by the subgrantee.**

***All subgrantees* are required to include in their contracts the
clauses required by Federal statutes and executive orders and their
implementing instructions. See BPPM Appendix A.1 *Federally Required and
Other Model Contract Clauses*.**

***Subgrantees which are institutions of higher education, hospitals or
other nonprofit organizations, and all subgrantees of grantees which are
not States,* are required to administer their contracts in accordance
with all of the requirements of the FTA Circular 4220.1E *Third Party
Contracting Requirements*. *Subgrantees of states (excluding
institutions ***

***of higher education, hospitals or other non-profit organizations)*
are authorized to follow state law and procedures when awarding and
administering contracts.**

**If you are a grantee awarding subgrants with FTA funds, you will want
to have an overview system in place for periodic reviews of your
subgrantees to ensure that they are in compliance with the requirements
of FTA Circular 4220.1E and the requirements of 49 CFR Part 18.37. The
Federal government practice (FTA) is to perform periodic Procurement
System Reviews (PSR\'s) of its grantees, evaluating their procurement
activities against the requirements of the circular. FTA has developed a
*Procurement Systems Review Guide* for its review teams, and you may
want to obtain a copy of this guide for your review of subgrantees. (See
BPPM Section 1.1.7 - *FTA Procurement System Reviews* above). You should
note that 49 CFR Part 18.37 imposes a responsibility on all grantees to
ensure that their subgrantees have included all Federally required
clauses in their contracts and that the subgrantees are aware of
requirements imposed on them by Federal statute and regulation,
including those requirements imposed by 49 CFR Part 18. 49 CFR Part
18.37(a)(3) specifically mentions a responsibility to include a clause
in all cost reimbursement subgrants that the subgrantee comply with Part
18.42, which deals with retention and access requirements for records.**

**1.3.3.7 [Equipment Leases]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| Requirements related to the lease of equipment and facilities may be  |
| found in the following regulations:                                   |
|                                                                       |
| > \(a\) FTA Circular 4220.1E generally, and Paragraph 7.d which       |
| > requires, where appropriate, an analysis of lease versus purchase   |
| > alternatives to determine the most economical approach.             |
| >                                                                     |
| > \(b\) FTA Circular 5010.1C, *Grant Management Guidelines,* Chapter  |
| > II-3(d) *Leasing-Out Agreements.* These guidelines contain several  |
| > requirements which grantees must incorporate in their lease         |
| > agreements.                                                         |
| >                                                                     |
| > \(c\) FTA Master Agreement MA(12), Section 16, *Leases***.**        |
| >                                                                     |
| > \(d\) Capital Leases (49 CFR Part 639).                             |
+-----------------------------------------------------------------------+

**DISCUSSION**

**Since equipment leases are considered \"third party contracts\" within
the meaning of FTA Circular 4220.1E, the requirements of that Circular
apply to such procurements**.

**FTA Circular 4220.1E requires a lease versus purchase analysis to
determine the most economical approach to any given procurement. FTA
Circular 5010.1C, Chapter II-3(d),**

**deals with maintenance requirements under leases. The FTA Master
Agreement references regulations dealing with Capital Leases (49 CFR
Part 639).**

**[Lease vs. purchase alternatives]{.underline} - It is usually less
economical to lease equipment than to purchase it. However, there are
some instances where this is not true. For example, short-term leases of
equipment which is required for a short time or for a unique task may be
reasonable and economically sound. It may also be advisable to lease
equipment that undergoes rapid technological change such as personal
computers and other IT related equipment. In some cases, it is easier to
have equipment maintained if it is leased. But long term leases and
leases for items that should be purchased and capitalized but cannot be
because of budget constraints are not economically prudent. If a
decision is made to lease equipment, a lease vs. purchase analysis
should be made. The analysis should be appropriate to the size and
complexity of the procurement. In determining whether the lease of
equipment is feasible, the following factors must be considered:**

-   **Estimated length of the period the equipment is required and the
    amount of time of actual equipment usage;**

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-   **Technological obsolescence of the equipment;**

-   **Financial and operating advantages of alternative types and makes
    of equipment;**

-   **Total rental cost for the estimated period of use;**

-   **Net purchase price, if acquired by purchase;**

-   **Transportation and installation costs;**

-   **Maintenance, storage and other service costs;**

-   **Trade-in or salvage value;**

-   **Imputed interest costs; and**

-   **Availability of a servicing facility especially for highly complex
    equipment (can the Agency service the equipment if it is
    purchased).**

    **1.3.3.8 [Revenue Contracts]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| 49 CFR Part 18.25 *Program Income* states that *grantees are          |
| encouraged to earn income to defray program costs.*                   |
|                                                                       |
| FTA Circular 4220.1E *Third Party Contracting Requirements* requires  |
| grantees to use competitive selection procedures in the award of      |
| revenue contracts.                                                    |
|                                                                       |
| The FTA Administrator\'s *Dear Colleague Letter C-98-25,* dated       |
| October 1, 1998 defined *revenue contracts* and stipulated            |
| requirements regarding competitive selection procedures, five-year    |
| term limits (no longer applicable) and requests for waivers.          |
|                                                                       |
| The FTA *Dear Colleague Letter* C-08-02, dated May 29, 2002 rescinded |
| the requirement that grantees obtain FTA approval for contract terms  |
| longer than five years.                                               |
+-----------------------------------------------------------------------+

**DISCUSSION**

**It is critical to *first determine the primary purpose of the
contract*. If it is to procure supplies or services, then it is not a
*revenue contract*. For example, management and para‑transit contracts
are not *revenue contracts* because the primary purpose is to manage a
project or operate a service. Royalties received as a by‑product of a
development or supply contract,\
e.g. software, would not be considered a *revenue contract*. Disposal of
Project property would be another example that would not be considered a
*revenue contract*.**

**If the *primary purpose is to generate revenue* then the contract is a
revenue contract. Advertising, concessions (food and news-stands), use
of right‑of‑ways, licenses, and land leasing are some examples of
revenue contracts. The definition of a revenue contract developed by FTA
is as follows:**

***A revenue contract is any third party contract whose primary purpose
is to either generate revenues in connection with a transit-related
activity or to create business opportunities utilizing an FTA‑funded
asset.***

**There are three concepts involved in the definition of a revenue
contract. First, the objective of revenue contracts is to lower program
costs, and thereby reduce both the federal and the grantee's financial
contribution. Creative ways of generating these revenues are encouraged,
and FTA uses broad latitude in approving them.**

**Second, revenue generation for the transit agency is a business
opportunity for the business community. Such business opportunities can
take various forms, such as: advertising, land development, concessions,
and utilization of right‑of‑ways.**

**Third, an FTA‑funded asset is anything that has been purchased, in
whole or in part, with FTA funds** **as part of an approved
transportation budget. This can include funds for acquisition, operating
expense or maintenance. Grantees must have a detailed familiarity with
the approved budgets to know if a particular activity is included and
funded by federal funds, in which case it would be governed by federal
requirements.**

All revenue generated activity involving third‑party contracts must
follow an important requirement of FTA Circular 4220.1E:

-   **The *requirement for competitive selection procedures* applies to
    all business opportunities including all revenue generating
    contracts.**

**[Competition]{.underline} ‑ The competitive process usually consists
of a formal bid or proposal process but it does not always have to.
Grantees may use their own judgment about how to meet the intent of the
competition requirement, but they must document the record to show how
competition requirements were met.**

**[Disadvantaged Business Enterprises]{.underline} ‑ DBEs should have
the maximum opportunity to participate in both contracts and
subcontracts that use any federal funds. The grantee is responsible for
taking all necessary and reasonable steps to ensure that DBEs have
maximum opportunity to compete for revenue contracts since these
contracts are considered business opportunities*.***

**[Contract Term]{.underline} - The five-year contract term limit was
rescinded by FTA's Dear Colleague Letter of May 29, 2002. For a
discussion of establishing appropriate contract terms, see BPPM Section
2.2.1 - *Contract Period of Performance Limitation.***

**[Flow‑down Requirements]{.underline} ‑ Generally, if federal funds
(not assets) are not used to generate revenues, then there are no
requirements to include federal clauses in the revenue contract
itself.**

**[Unsolicited Proposals]{.underline} ‑ These may come forth when
companies see an opportunity to use the transit system (an FTA‑funded
activity) to enhance their business interest. It may appear from such
proposals that no other company could offer the same product or service.
However, this does not justify a sole source contract. If the idea or
activity is of interest to you, the concept should be evaluated on its
own merit and revenue producing potential. If the decision is to
implement it, then a competitive process should be used to select the
contractor, unless you determine that the proposed concept itself is
proprietary.**

**Best Practices**

It is important to always keep in mind the requirement for competition.

The New York City Transit Authority (NYCTA) has experience in many of
the areas of revenue generation:

-   advertising ‑ buses, trains, stations and other property
    (billboards), direct advertising on back of MetroCard

-   lease/rental of MTA‑owned property ‑ concessions, news stands,
    retail space, subleasing of office space

The NYCTA procurement office does not handle the revenue generation
contracts. Various departments of the transit agency are responsible for
the revenue contracts, like the Advertising Department and Real Estate
Department. These Departments are aware of the federal requirements and
follow them to obtain third‑party contractors.

NYCTA was approached recently by a company, which submitted an
unsolicited proposal, who wanted to install an electronic information
system on the subway cars. The company wanted to program the system so
that riders would know what was overhead, e.g. Wall Street, theater
district. New York City decided to investigate the concept first to
determine if it was something that they wanted to do to enhance the
subway system. Deciding that they liked the idea, they then prepared an
RFP and solicited vendors on a competitive basis.

Metropolitan Atlanta Rapid Transit Authority (MARTA) received an
unsolicited proposal from a company about use of subway right‑of‑way for
linking Atlanta with fiber optic cable using MARTA's system‑wide
conduits. MARTA determined that they had unused conduits and could lease
space in them to various telecommunication companies. They contacted the
regional FTA office and received their approval for a non‑exclusive RFP
to seek competitive proposals for twenty‑year leases. This has produced
successful revenue contracts. [^19]

**1.3.3.9 [Transit Oriented Joint Development Projects]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| FTA Circular 9300.1 *Capital Program: Grant Application               |
| Instructions*, Appendix B, "Joint Development Projects."              |
|                                                                       |
| Federal Register Notice, March 14, 1997, *FTA Policy on Transit Joint |
| Development*. This *clarifies* the relationship between transit laws  |
| and regulations and FTA policy regarding property disposition, leases |
| of property, and sale of property affecting program income and the    |
| definition of "highest and best transit use" for joint development.   |
|                                                                       |
| FTA Circular 5010.1C *Grant Management Guidelines* states:            |
|                                                                       |
| > II-2b. [Use]{.underline} - \...FTA encourages incidental uses of    |
| > real property that can raise additional revenues for the transit    |
| > system or, at a reasonable cost, enhance system ridership.          |
| >                                                                     |
| > FTA approval is required for these incidental uses of real property |
| > which must be compatible with the original purposes of the grant.   |
|                                                                       |
| FTA Circular 4220.1E *Third Party Contracting Requirements* states    |
| the requirements the grantee must adhere to in third party            |
| contracting. Specifically, note:                                      |
|                                                                       |
| -   Competitive Selection Procedures                                  |
|                                                                       |
| > ● Possible Flow Down of Certain Federal Clauses                     |
+-----------------------------------------------------------------------+

**DISCUSSION**

**FTA is encouraging transit systems to undertake transit‑oriented joint
development projects (TODs) with either new grants or with property
acquired under previous grants. The property can be associated with
rail, bus or other transit facilities.**

**The purpose of a joint development project is to:**

-   **secure a revenue stream for the transit system; and,**

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-   **help shape the community that is being served by the transit
    system.**

**Where the grantee retains effective continuing control for mass
transit purposes, all proceeds of sale, lease or other encumbrance of
the property will be treated as *program income* for use by the transit
system to meet capital and operating needs. The very nature of a joint
development project *requires long‑term relationships* between the
various contracting parties due to issues related to land use, zoning,
financial investment, long‑term leases, multiple contracting parties,
construction, and management. The Federal Register notice of March 14,
1997, clarified and addressed apparent inconsistencies in the use of
revenues. This Notice states:**

1.  **Joint development projects are considered "mass transportation
    projects" eligible for funding under FTA capital programs.**

2.  **All projects must generate a one‑time payment or revenue stream
    for transit use, the present value of which equals or exceeds the
    fair market value of the property.**

3.  **When the grantee retains continuing control and use of the joint
    development for mass transportation purposes, all proceeds will be
    considered *program income*.**

**Grantees are advised to submit the joint development proposal to the
FTA regional office**

**in accordance with the Federal Register notice of March 14, 1997,
paragraph entitled "Procedures." The proposals to FTA should include:**

1.  **The proposed joint development agreement;**

2.  **A market and financial assessment of the joint development project
    and its impact on the transit system;\
    **

3.  **A statement of the outcome of planning and coordination between
    the joint development project and the transit facility; and**

4.  **Documentation of the projected benefits for the transit system as
    well as the effective continuing control of the joint development
    project for transit purposes.**

**[Competition]{.underline} is an important requirement in the
development of the project. Requirements for full and open competition
of the proposed project can be obtained by: public announcements in the
newspapers and trade journals; building a solicitation list that is
inclusive and not exclusive; developing a realistic response time for
developers, knowing that developers have to frequently build a "team" to
respond to the RFP; having realistic**

**criteria to judge the responses; having an evaluation team with broad
and diverse experience rate the proposals; and, competitive
negotiations.**

**[Flow‑down requirements]{.underline} dealing with Federal clauses in a
joint development project will follow the federal funds. It must be
determined whether and to what degree Federal regulations apply,
particularly to the privately funded, non‑transit portion of the
project. These regulations could include: National Environmental Policy
Act, Davis‑Bacon Act, Buy America Act, labor protection arrangements,
and third‑party procurement requirements. You should determine (with
FTA's assistance as necessary) the most appropriate procedures for
satisfying any flow‑down requirements, given the particular
circumstances of your project.**

**Best Practices**

Atlanta's transit system, Metropolitan Atlanta Rapid Transit Authority
(MARTA), is involved in a joint development project called the Lindbergh
Center. Their objective is to build a village that will: increase
ridership, be high‑density mixed use, be a livable community, generate
long‑term revenue, integrate the station and development. They have
addressed the issues, been through the procurement process, and selected
a developer. How did they do this? They began by working first with
their FTA regional office in explaining what they wanted to do. Next,
they

developed three requests for proposals (RFPs) leading to three contracts
for: marketing the property, evaluating the development proposals, and
the development itself.

The question of open and full competition was met through the marketing
strategy. The marketing plan was critical in reaching out to developers
who might bid on the project. MARTA set a target of 500 developers to
reach through a variety of methods: a predetermined listing of potential
developers, advertising in major newspapers (Wall Street Journal),
national and international solicitations. An outside management
consulting firm was retained to assist

MARTA in the evaluation of developers' proposals. The Development RFP
detailed the requirements of the expected development proposals.
Included in the evaluation factors was a

category of "maximize revenues and returns to MARTA." The process was
successfully completed and a developer has been chosen. [^20]

**1.3.3.10 [Disposition of Surplus]{.underline}**

+-----------------------------------------------------------------------+
| # **REQUIREMENT**                                                     |
+-----------------------------------------------------------------------+
| Requirements related to the generation of program income, and the     |
| disposition of surplus equipment, supplies and real property may be   |
| found in the following regulations:                                   |
|                                                                       |
| > \(a\) FTA Circular 4220.1E (general principles applicable to all    |
| > contracts involving Federal funds or Federally funded assets).      |
| >                                                                     |
| > \(b\) FTA Master Agreement MA(12), Section 19.g *Disposition of     |
| > Project Property*.                                                  |
| >                                                                     |
| > \(c\) 49 CFR 18.25 *Program Income*; 18.31 *Real Property*; 18.32   |
| > *Equipment*; 18.33 *Supplies.*                                      |
| >                                                                     |
| > \(d\) FTA Circular 5010.1C, *Grant Management Guidelines*, Chapter  |
| > II-2c, *Real Property -- Disposition;* Chapter III-4 *Program       |
| > Income*.                                                            |
| >                                                                     |
| > \(e\) 49 U.S.C. 5334(g) *Transfer of Assets No Longer Needed.*      |
+-----------------------------------------------------------------------+

# **DISCUSSION**

FTA interprets Circular 4220.1E as applying to contracts for the
disposition of surplus supplies, equipment or property. Grantees are
also advised to be familiar with other regulations that specifically
address the disposition of property, especially FTA Circular 5010.1C,
Chapter II -- *Management of Real Property, Equipment and Supplies.*

It is important that the grantee be familiar with the disposition
requirements of FTA Circular 5010.1C, Chapter II-2(c) and 3(f). This
Circular establishes procedures to be followed by grantees in a variety
of situations, and grantees need to carefully review these requirements.
They pertain to circumstances such as:

-   **Selling property (competitively to the extent practicable) and
    reimbursing FTA its share of the fair market value.**

-   **Selling real property and using the proceeds to reduce the cost of
    the grant if it is still open or of other FTA funded capital
    projects.**

-   **Retaining title to real property by reimbursing FTA for its share
    of the current (appraised) market value.**

-   **Disposing of rolling stock before the end of service life.**

-   **Disposing of equipment.** [^21]

-   **Transfer of equipment to a public agency for non-transit use.**

-   **Selling and using proceeds for other capital projects.** [^22]

**[Transfer of Assets No Longer Needed]{.underline} -- 49 USC 5334
(g)(1) allows for the transfer of assets no longer needed by the
grantee. If a grantee decides an asset acquired with FTA funds is no
longer needed for the purpose for which it was acquired, the grantee may
request FTA approval to transfer the asset to a local governmental
authority to be used for a public purpose with no further obligation to
FTA. The Secretary of Transportation may authorize a transfer for a
public purpose other than mass transportation, but only if the Secretary
decides -**

> **A) the asset will remain in public use for at least 5 years after
> the date the asset is transferred;**
>
> **B) there is no purpose eligible for assistance under 49 USC Chapter
> 53 for which the asset should be used;**
>
> **C) the overall benefit of allowing the transfer is greater than the
> interest of the Government in liquidation and return of the financial
> interest of the Government in the asset, after considering fair market
> value and other factors; and**
>
> **D) through an appropriate screening or survey process, that there is
> no interest in acquiring the asset for Government use if the asset is
> a facility or land.**

**The decision to permit the transfer must be in writing and include the
reasoning that supports the transfer.**

**[Sale of Assets No Longer Needed]{.underline} -- 49 USC 5334 (g)(4)
allows for the sale of assets no longer needed, subject to the approval
of the Secretary of Transportation. When real property, equipment, or
supplies acquired with FTA funds are no longer needed for mass
transportation purposes as determined under the applicable assistance
agreement, the Secretary may authorize the sale, transfer, or lease of
the assets under conditions determined by the Secretary. The net income
from asset sales, uses, or leases (including lease renewals) must be
used by the grantee to reduce the gross project cost of other capital
projects carried out with FTA funds.**

**Best Practices**

One transit agency has developed detailed procedures for disposing of
surplus items. [^23] These include:

-   Competitive bidding procedures for materials that are regularly
    generated, regularly removed, high volume, and low unit price such
    as scrap steel or motor oil.

-   Development of specifications by the Materials Management Department
    in coordination with the User Department(s) for the surplus items to
    be offered for sale and review by the Purchasing Department.

-   Preparation of a solicitation and advertising of the items being
    offered for sale by the Purchasing Department when competitive bids
    are being solicited.

-   Issuance of a \"Invitation to Quote\" letter to prospective bidders
    by the Purchasing Department, or a letter inviting "offers to
    purchase" by the Sales Division when the selling price of the
    material is expected to be below the small purchase threshold. [^24]

-   Analysis of bids by the Purchasing Department, with a written
    recommendation for award to the winning bidder.

-   Internal agency approvals to award a contract for the *sale* of
    Authority property or services parallels that of the approval
    process to award a contract for the *procurement* of goods and
    services.

    **1.3.3.11 [Operating Assistance, Preventive Maintenance, CMAQ and
    JARC Projects]{.underline}**

+-----------------------------------------------------------------------+
| # **REQUIREMENT**                                                     |
+-----------------------------------------------------------------------+
| FTA Circular 4220.1E, paragraph 4, addresses the issue of the         |
| Circular's applicability to (a) operating contracts, (b) contracts    |
| utilizing Congestion Mitigation and Air Quality (CMAQ) and Job        |
| Access/Reverse Commute (JARC) project funds, and (c) preventive       |
| maintenance contracts which are funded with FTA formula capital       |
| funds:                                                                |
+-----------------------------------------------------------------------+
| > This circular applies to all FTA grantees and subgrantees that      |
| > contract with outside sources under FTA assistance programs. FTA    |
| > grant recipients who utilize FTA formula funds for operating        |
| > assistance are required to follow the requirements of this circular |
| > for all operating contracts. These requirements do not apply to     |
| > procurements undertaken in support of capital projects completely   |
| > accomplished without FTA funds or to those operating and planning   |
| > contracts awarded by grantees that do not receive FTA operating and |
| > planning assistance. [^25]                                          |
| >                                                                     |
| > Congestion Mitigation and Air Quality (CMAQ) and Job Access/Reverse |
| > Commute (JARC) project funds may be used for operations. Although   |
| > grantees must follow circular requirements for any specific         |
| > contracts that utilize CMAQ or JARC funds, the use of CMAQ and JARC |
| > funds for operations does not trigger the applicability of the      |
| > circular to all other operating contracts. [^26]                    |
| >                                                                     |
| > Grantees that utilize formula capital funds for preventive          |
| > maintenance contracts are subject to the following requirements of  |
| > the circular: If FTA formula capital funds are fully allocated to   |
| > discrete preventive maintenance contracts, then the requirements of |
| > this circular will apply only to those discrete contracts and must  |
| > be identified and tracked by the grantee. If the FTA formula funds  |
| > are not allocated to discrete contracts then all preventive         |
| > maintenance contracts are subject to the requirements of the        |
| > circular. [^27]                                                     |
+-----------------------------------------------------------------------+

**DISCUSSION**

**If a transit property receives FTA formula funds for *operating
assistance*, all grantee procurements must comply with FTA Circular
4220.1E except for capital projects undertaken without Federal funds or
those operating and planning contracts awarded by grantees that do not
receive FTA operating and planning assistance. Grantees whose net
operating deficit is financed by Federal funds cannot segregate any of
their operating or planning contracts so that they are exempt from the
requirements of the Circular. The Circular must be applied to all such
contracts.**

**When grantees receive *CMAQ and JARC funds* for operations projects,
the Circular requirements must be followed for those specific contracts
using CMAQ and JARC funds. However, the use of these particular funds
for operations does not trigger the applicability of the Circular to all
operating contracts, as is the case with FTA formula funds.**

**1.3.3.12 E-Commerce**

+-----------------------------------------------------------------------+
| # **REQUIREMENT**                                                     |
+-----------------------------------------------------------------------+
| FTA Circular 4220.1E, paragraph 7.q. recognizes E-Commerce as an      |
| allowable means to conduct procurements. If a grantee chooses to      |
| utilize E-Commerce, written procedures must be developed and all      |
| requirements for full and open competition must be met.               |
+-----------------------------------------------------------------------+

**DISCUSSION**

**The Best Practices Procurement Manual (BPPM) intends to cover the
topic of E-Commerce at a later date when industry experience has been
sufficient to indicate some "best practices" for the transit industry.
In the meantime, the *Dear Colleague Letter* of May 29, 2002 reminds
grantees that E-Commerce is an allowable means to conduct procurements.
If a grantee chooses to implement an E-Commerce system, written
procedures must be developed and all the requirements of FTA Circular
4220.1E must be met, including the requirement for "full and open
competition" as stated in FTA Circular 4220.1E, Paragraph 8a.**

######## Chapter 2

**2 - [Procurement Planning & Organization]{.underline}**

2.1 [Organization of Procurement Functions]{.underline} (5/96)

2.1.1 [Scope of Responsibility]{.underline} (5/96)

2.1.2 [Autonomy]{.underline} (5/96)

2.2 [Long Term Planning]{.underline} (5/96)

2.2.1 [Contract Period of Performance Limitation]{.underline} (6/03)

2.2.2 [Multi-Year vs. Multiple-Year Contracting]{.underline} (7/02)

2.3 [Annual Planning]{.underline} (5/96)

2.3.1 [Sources and Contents]{.underline} (5/96)

2.3.2 [Independent Grantee Cost Estimate]{.underline} (4/05)

2.4 [Source Selection Plan]{.underline} (5/96)

2.4.1 [File Documentation]{.underline} (5/96)

2.4.2 [Full and Open Competition]{.underline} (5/96)

2.4.2.1 [Full and Open Competition Principle]{.underline} (5/96)

2.4.2.2 [Restraints on Competition]{.underline} (5/96)

2.4.2.2.1 [Brand Names]{.underline} (6/03)

> 2.4.2.2.2 [Written Standards of Conduct and Conflicts of Interest:
> Personal and Organizational]{.underline} (6/03)

2.4.2.2.3 [Geographic Restrictions]{.underline} (6/03)

2.4.2.2.4 [Pre-qualification]{.underline} (5/98)

2.4.3 [Fixed Price v. Cost Reimbursement]{.underline} (5/98)

2.4.3.1 [Fixed Price Contracts]{.underline} (4/05)

2.4.3.2 [Cost Reimbursement Contracts]{.underline} (6/03)

2.4.3.3 [Time and Materials Contracts]{.underline} (5/98)

2.4.3.4 [Labor Hour Contacts]{.underline} (5/98)

2.4.3.5 [Cost Plus Percentage of Cost Contracts]{.underline} (6/03)

2.4.4 [Payments]{.underline} (5/98)

2.4.4.1 [Payment of the Price]{.underline} (5/98)

2.4.4.2 [Advance Payments]{.underline} (6/03)

2.4.4.3 [Progress Payments]{.underline} (4/05)

2.4.4.4 [Withholding and Final Payment]{.underline} (5/98)

> 2.4.5 [Indefinite Delivery Contracts]{.underline} (10/99)

2.4.5.1 [Definite-quantity Contracts]{.underline} (10/99)

2.4.5.2 [Requirements Contracts]{.underline} (6/03)

2.4.5.3 [Indefinite-quantity Contracts]{.underline} (6/03)

**2.1 ORGANIZATION OF PROCUREMENT FUNCTION**

**2.1.1 [Scope of Responsibility]{.underline}**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| FTA Circular 4220.1E, paragraph 5a -- *Grantee Self-Certification,*   |
| states that FTA intends to rely on grantees\' \[annual\] \"self       |
| certifications\" that their procurement system meets FTA requirements |
| to support the required finding \[by FTA\] that a grantee has the     |
| technical capacity to comply with Federal procurement requirements.   |
|                                                                       |
| FTA Circular 4220.1E, paragraph 7b *-- Contract Administration        |
| System,* requires grantees to maintain a contract administration      |
| system that ensures that contractors perform in accordance with the   |
| terms, conditions, and specifications of their contracts or purchase  |
| orders.                                                               |
+-----------------------------------------------------------------------+

**DEFINITIONS**

[Centralize]{.underline} ‑ To concentrate procurement actions and
decisions in one person or group within an organization.

[Contracting Officer]{.underline} ‑ A procuring official who has
delegated authority, usually including authority to sign contracts and
amendments on behalf of the procuring agency for one or more specific
contracts.

[Contracting Officer\'s Technical Representative (COTR)]{.underline} ‑ A
representative of the procuring agency who has more limited authority
than the contracting officer, usually including providing technical
direction to the contractor.

**DISCUSSION**

**As a Contracting Officer you are responsible both for your contract's
cost‑effectiveness and its compliance with Federal and state
requirements. It is easier to fulfill these responsibilities if most of
the decisions and contractual actions concerning procurement are focused
in one or more individuals who are familiar with procurement
requirements and procedures. These actions begin with planning and
solicitation of offers, include communication with offerors and
contractors, and continue through contract acceptance and warranty
enforcement. Except in very small organizations, the contracting
responsibilities will often reside with different individuals than the
individuals who would best understand the functional and performance
requirements of the goods or services. These latter persons are your
internal customers.**

**Purpose**

You and the leadership of your organization need to clearly understand
the scope of the procurement function and organize responsibilities to
accomplish several objectives:

-   to obtain the best buy for your agency which requires an evaluation
    of all the service quality, safety, cost, schedule, and other
    objectives of the agency\'s operating functions;

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-   to comply with Federal, state, local, and agency procurement
    requirements;

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-   to ensure an understanding of the precise authority of you and your
    agency team members in dealing with suppliers who, while partners in
    many respects, have some interests that conflict sharply with your
    agency\'s; and

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-   to control through finite, professional boundaries, the possibility
    of corruption or unethical practices.

These objectives require the clear definition and assignment of
procurement responsibilities. A specific aspect of that assignment, the
need for autonomy, is discussed in more detail in the following section
of the Manual.

**Best Practices**

[Identification of Need]{.underline} ‑ The initial identification of
need is one aspect of the procurement cycle that is generally the sole
responsibility of your internal customers (i.e., program or technical
personnel for whom you are procuring goods or services). However, you
may be in a position to facilitate the consolidation of procurements of
different internal customers with the same need.

[Procurement Planning]{.underline} -- Preparation of procurement
planning, on the other hand, should be exclusively a procurement
function. If your agency has not conducted formal planning, this process
is a way to establish the need for a separate procurement function and
demonstrate its value to the organization. Specific suggestions for
useful planning activities are discussed below under long range and
annual planning cycles.

[Preparation of Specifications]{.underline} -- Preparing specifications
or statements of work is usually a customer function. Generally,
customers have the greatest understanding of functional and performance
requirements; however, the procurement function should play at least an
advisory role in order to avoid exclusionary specifications and to
encourage free and open competition.

[Solicitation of Offers]{.underline} -- The solicitation of offers
(including invitation for bids and request for proposals) is usually the
first important public action the agency takes, and it should clearly be
the responsibility at this point of the procurement staff. Customer team
members are often helpful in compiling lists of potential offerors, and
should participate in the procurement process, but communications with
offerors and the official action of soliciting offers is a procurement
function.

[Communications]{.underline} -- If communication with offerors is
decentralized, one offeror may obtain more information about the
agency\'s preferences or evaluation process than the others. It is a
general practice (except at the smallest agencies) to restrict
communication with offerors to only procurement personnel so that no
offeror could gain an advantage or apparent advantage over another.

[Evaluation of Offers]{.underline} -- Procurement personnel will usually
request and rely upon their technical customers to evaluate the
technical merits of proposals and assess the offeror's ability to
perform the contract successfully. The Procurement Officer must oversee
the technical evaluation to ensure it is consistent with the evaluation
criteria published in the RFP and that the contract file is adequately
documented to reflect the relative strengths, deficiencies, weaknesses
and risks of the various proposals. It is important that the technical
evaluation provide a clear narrative of the proposals' relative merits
and not merely a numerical rating of the proposals. To maintain the
overall integrity of the procurement, the procurement function normally
must at least approve the selection and (if it does not have sufficient
authority) will often present the recommendation to the final authority.

[Administration]{.underline} -- You should play a continuing role in the
administration of the contracts, particularly in changes and disputes.
Acceptance of goods and services and payment approvals always require
your review. In simpler or routine situations, a receiving report or
COTR acceptance can be matched to your original purchase order to ensure
proper control.

[Centralization / Decentralization]{.underline} -- Many organizations
find it more efficient to permit customer groups, particularly those
with a large number of similar, small procurements, to perform some of
the functions normally performed by the procurement office (e.g.,
solicitation and evaluation

of offers up to a specific dollar amount). However, in these cases,
procurement personnel can provide a valuable oversight role, providing
forms, procedures, and technical assistance. Although decentralized
procurement can reduce the administrative cost of the procurement and be
more responsive to a customers\' needs, if it is uncontrolled, it could
eventually result in situations involving non‑compliance, unwise
contracting, or unethical practices. It is a best practice to ensure
that no employee undertakes any of the procurement functions without
clear authority and guidelines.

**2.1.2 [Autonomy]{.underline}**

**DISCUSSION**

**Autonomy of the procurement function, or its independence from
internal customers, is important to carrying out procurement
responsibilities without undue influence by the customers and users of
the goods and services procured. While the degree of autonomy and
organizational reporting relationships will vary with the size of the
organization and its policies, autonomy enables procurement personnel to
give unbiased consideration to procurement principles and requirements,
as well as to the schedule, budget, functional and other requirements of
the internal customers.**

**Purpose**

A debate has raged for years between those who are process oriented
(procurement officials and compliance departments such as legal,
internal audit, or grants) and those who are program oriented
(maintenance managers, engineers, project managers).

-   Should the procurement functions described in the previous section
    be controlled by the program functions? After all, it is the program
    office whose needs are to be met, and, in most accounting systems,
    the program to whose budget the purchase will be charged.

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-   Should the procurement official be entirely autonomous and evaluate
    the needs of the program (e.g., for immediate services) against the
    legal or procedural requirements of the funding source (e.g., FTA
    Circular 4220.1E if Federal funds)?

Some degree of autonomy of the procurement function is necessary
organizationally and functionally so that procurement personnel will be
free from undue influence or pressure in the award and administration of
contracts. The obvious solution to the conflict between \"process\" and
\"program\" is to have a team in which each member recognizes the
strengths and capabilities of the other team members and appreciates the
role each side brings to the contract table. This

sounds easy to accomplish but, in most practical situations, is very
difficult to achieve. [^28] Failure to achieve unity and teamwork within
the agency in the awarding and administration of public contracts
creates frequent opportunities for a contractor to take advantage of a
contentious staff relationship to its financial advantage (and the
agency\'s financial disadvantage). Achieving proper balance between
groups requires delicate balancing of personalities and corporate
objectives, a strong executive, and a well‑trained staff. It must also
be recognized that there is no textbook answer that will work in every
situation and in every agency.

In addition to balancing the roles of program and process interests in
making procurement decisions, the payment of your agency\'s funds to
contractors generally requires three independent concurring actions. The
requirement for independent concurring actions is sometimes called
\"internal control,\" as it is a method for the agency to control the
propriety of its actions internally, rather than requiring external
reviews and control. While best practices differ, all authorities
recognize a fundamental need for a system of checks and balances in the
overall procurement process. In an organization with no checks and
balances, if an individual perceived a need for a staff car, that person
could draft the specifications for the car, prepare the solicitation
document, order the car, approve the contract, inspect the preparation
of the car, administer the contract, accept the car after delivery, sign
the agency check to pay the dealer, and use the car in a manner the
person deemed appropriate. It should be obvious that an organization and
procurement process such as this would not be credible and would be
subject to great abuse, actual or perceived. As a result, most public
and private agencies divide those functions among, at least, three
distinct elements within its organization.

-   The [requiring activity]{.underline} is represented by the program
    manager who is responsible for determining the requirement,
    preparing the specifications and, then, acting as the technical
    representative or advisor to the contracting officer during contract
    performance.

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-   The [procurement activity]{.underline} is represented by the
    contracting officer who is responsible for ensuring specifications
    are not restrictive, preparing the solicitation document in
    accordance with the law and rules and regulations of the agency and
    the FTA, soliciting the requirement, and awarding the contract in
    accordance with the solicitation. Contract administration functions
    are usually shared with the requiring activity and involve such
    functions as approving payment, accepting the goods or services
    bought, and closing out the contract.

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-   The [payment activity]{.underline} is represented by a third party
    (the finance department) who ensures that all approvals are obtained
    and that the payment is within the dollar amount of the contract.
    Often, the accounts payable function in finance either physically or
    electronically matches three documents issued by three different
    employees (the purchase order, receiving report, and approved
    invoice) before releasing funds.

The procurement and payment activities are \"process\" functions
ensuring that the goods are bought and paid for in accordance with the
terms of the contract. The \"program\" activity is to determine what is
needed and that it is obtained within the time required and budget
allocated.

**Best Practices**

[Degree of Autonomy]{.underline} ‑ From a narrow procurement
perspective, the procurement activity would enjoy the highest degree of
autonomy where it reports directly to the governing policy board of your
organization. Most transit organizations have too much direct operating
responsibility to permit this degree of autonomy. Three solutions are:

-   Procurement and contracting can report to a chief executive.

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-   Most typically, the procurement department reports to an
    administrative or financial function that is independent of the
    primary internal customers (facility equipment and operating
    functions).

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-   Some degree of autonomy can be preserved even within an operating or
    implementation function if procurement is separated from the program
    delivery sub-groups.

In medium and large systems, if the contracting function is not
separated from the program office, there is an inadequate system of
checks and balances on the procurement process. Overall, procurement
personnel should have enough autonomy or checks and balances to achieve
a quality product at a fair and reasonable price without real or
apparent conflicts of interest in the solicitation, evaluation or award.

**2.2 LONG TERM PLANNING**

**DISCUSSION**

**Long-term procurement planning (i.e., planning more than one year in
advance) is one option to be considered by large transit systems and by
systems planning a major transit investment, complex capital project, or
a substantial number of operating contracts that will span several
years. Systems without current major capital projects may find that
annual planning is adequate.**

**Purpose**

Procurement plans covering several years may be an improvement over
partitioning or consolidation in major projects as a way to facilitate
the most cost‑effective project management and delivery. The plans can
identify major changes in procurement work load, and can obviate any
tendency to rush procurement decisions or activities in ways that result
in waste (e.g., through failure to consolidate major procurements) or
risk non‑compliance (e.g., through inadequate notice and non‑competitive
awards).

[Plan Contents]{.underline} ‑ A long-term procurement plan would
identify the major procurements projected over the next two to five
years. The multi‑year element of the Transportation Improvement Program
(TIP) is a good starting point for identifying future capital projects
and their corresponding procurement requirements. Typically, the
procurement plan includes any fixed guideway projects, revenue rolling
stock replacements or fleet expansions, and major construction projects.
In the case of fixed guideway and other construction projects, where
multiple procurements may be involved, the plan would identify the
initial strategy for packaging the design, construction, and equipment.
Consideration would also be given to turnkey procurements and to long
term projects that are not public works. The latter would include major
software systems, fleet overhaul and ADA operational service.

[Major Projects]{.underline} ‑ Often major design/construction and rail
vehicle procurements are planned seven to ten years *in advance of
needed completion* because several interdependent contracts may have to
be awarded in order to accomplish the project. The time intervals
typically required to accomplish these contract awards might include:

-   One year advance planning before Request for Proposals (RFP) for the
    engineering services;

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-   Four months from RFP to award of the engineering services;

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-   Two years to prepare technical specifications;

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-   Three months from completion of specifications to system RFP;

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-   Six months from system RFP to award; and

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-   Three years for system construction.

The planning and design processes can change this schedule
significantly, and few procurements require this length of time. When
major projects are undertaken, a comprehensive procurement plan that
outlines these major projects along with the rest of your procurement
workload will be extremely helpful. Bus procurements and major
electronic/data systems generally require at least three years of
advance planning.

**2.2.1 [Contract Period of Performance Limitation]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| 49 USC § 5326(b) limits the procurement of rolling stock and          |
| replacement parts to no more than five years' requirements under a    |
| single contract, even though delivery may take place beyond five      |
| years from the date of the initial contract.                          |
|                                                                       |
| FTA Circular 4220.1E, paragraph 7.m, addresses the five-year contract |
| term limitation for rolling stock and replacement parts. It also      |
| requires that contract terms for all other types of contracts be      |
| based on sound business judgment.                                     |
|                                                                       |
| FTA Circular 4220.1E, paragraph 8 -- *Competition*, requires all      |
| procurement transactions to be conducted in a manner providing for    |
| full and open competition.                                            |
|                                                                       |
| FTA Circular 4220.1E, paragraph 7i -- *Written Record of Procurement  |
| History*, requires grantees to maintain records detailing the history |
| of a procurement.                                                     |
+-----------------------------------------------------------------------+

##### DISCUSSION

**On May 29, 2002, the FTA Administrator issued *Dear Colleague Letter*
C-08-02 rescinding FTA's long-standing five-year contract term
limitation for all contracts except those for rolling stock and
replacement parts. The limitation on rolling stock and replacement parts
remains in effect since the limitation is a statutory requirement and
not an FTA policy.**[^29] **The new FTA policy is now expressed in FTA
Circular 4220.1E, paragraph 7.m -- *Contract Term Limitation*.**

**Prior to this letter, FTA Circular 4220.1D, paragraph 7.m - *Contract
Period of Performance Limitation*, had limited the period of performance
of DOT-assisted supply and service contracts to five years, inclusive of
options, without prior FTA approval.** [^30] **As a result of this
rescission of the contract term limitation, grantees will no longer be
required to obtain prior FTA approval for contract terms longer than
five years.** [^31] **The rescission of the five-year term limit applies
not only to new contract awards, but to existing contracts as well.**

**Grantee procurements will continue to be reviewed by FTA for
compliance with the "full**

**and open competition" principle stated in FTA Circular 4220.1E
paragraph 8a, and grantees will continue to be responsible for
conducting their procurements in accordance with sound business
practices. Grantees are expected to be judicious in establishing and
extending their contract terms.**

## 

## Best Practices

Although FTA no longer requires prior approval for contract terms longer
than five years, grantees remain responsible for conducting their
procurement transactions in accordance with the "full and open
competition" principle expressed in FTA Circular 4220.1E, paragraph 8a.
As with any procurement action, grantees should ensure that their
procurement files adequately document their decision making process.
This record should include the rationale for the contract period of
performance.

[Period of Performance Criteria]{.underline} -- Periodic re-competition
of contracts preserves competition and keeps prices competitive. Without
periodic competition the incumbent will not have the pressures of a
competitive market to keep prices reasonable or an incentive to maintain
satisfactory performance. There are, however, criteria that the grantee
can employ when deciding upon the term of a contract. Some of these
criteria are suggested below.

[Revenue Contracts]{.underline} -- It is FTA policy to afford all
persons an equal opportunity to access FTA-funded assets. FTA also
encourages its recipients to maximize non-farebox revenues. This can be
done through contractual or other appropriate arrangements, which
involve the use of FTA-funded assets without interfering with its
transit use. FTA had previously invoked a five-year term limit as one
way to balance these potentially conflicting policies. It is important
for grantees to document their revenue contract files with an *economic
analysis* that demonstrates how these dual objectives were accomplished.
If the contract opportunities allow for free and open competition, then
the Grantee's procurement policies will address FTA's equal opportunity
policy. Where however, there is a limit to the number of firms who will
be awarded contracts, then the grantee should include an *economic
analysis* in the contract file to justify the contract term. The
*economic analysis* should explain why the specific period of
performance was necessary for the recovery of the contractor's
investment and a reasonable economic return. In performing this
analysis, grantees may wish to conduct a market survey to obtain
information and recommendations from prospective offerors to determine
what the typical up-front investment will be and what kind of contract
period would be required for the offerors to recover that investment and
realize a reasonable economic return on that investment. Grantees should
document their files with this information, showing the conclusions
reached with respect to the contract period of performance finally
selected.

[Supplies]{.underline} -- Typically the contract period of performance
for supplies will be dictated by the grantee's foreseeable needs and
such factors as economic quantity breaks, warehousing space, shelf life,
technology concerns, etc. When the grantee perceives that there may be
an opportunity to increase competition through a larger purchase, the
grantee may wish to conduct a *market*

*survey* of potential suppliers to determine if they would make an offer
under a different contracting scenario. For example, it may be that they
were discouraged from bidding because the up-front investment
(non-recurring costs of tooling, etc.) would be prohibitive over a
relatively short contract period/limited quantity buy. However, if the
period were extended and the quantity increased, these potential
suppliers might be induced to participate. This is in effect what one
large transit agency has done successfully. [^32] Thus, the shortest
contract period/ minimum quantity buy may not necessarily be the optimum
decision. Grantees will need to exercise some diligence in determining
if longer/larger contracts might be in their best interests. If they
decide to do that, they should document their files showing the benefits
obtained from the longer contract periods.

When deciding the best period of performance for on-going services
contracts, grantees need to consider the up-front investment by
potential offerors for specialized personnel training and other
non-recurring start-up costs (e.g., relocation) that must be recovered
over the life of the contract. Once again, grantees should consider a
pre-solicitation industry outreach to discuss with individuals in the
industry what they may see as up-front investments that must be
recovered from the profits anticipated by the contract. These
discussions should reveal what the industry needs in terms of a contract
life in order to submit competitive prices against the incumbent. These
facts need to be documented in your contract files as you reach an
agency decision on the proper period of performance of the services
contract.

**2.2.2 [Multi-Year vs. Multiple Year Contracting]{.underline}**

**DISCUSSION**

**Grantees are authorized to procure rolling stock or other supplies and
services by a number of methods. These include buying on an annual or on
an as-needed basis, and also on a multi-year or multiple-year basis. The
distinction between the multi-year and multiple year methods is as
follows:**

**[Multi-Year Contracting]{.underline} - multi-year contracting is a
method by which the grantee procures its needs for the entire life of
the contract, even though funding for the entire contract is not
available at the time of contract award. The contract requires the
contractor to deliver the entire requirements of the contract. Option
provisions are unnecessary. Because the grantee does not have sufficient
funds for the entire contract at the outset of the contract, it will be
necessary to recognize in the contract that the grantee may have to
cancel the contract at some point if additional funds are not
forthcoming. Grantees *may have to include cancellation costs* in the
contract in the form of an advance agreement for any program year or
portion thereof canceled by the grantee (but**

**cancellation costs are not required to be included if the contractor
will accept a contract without them). Additional information on
multi-year contracting, while not binding on grantees, is discussed in
the *Federal Acquisition Regulation* (FAR), Subpart 17.1 - *Multi-Year
Contracting*.**

**[Multiple Year Contracting]{.underline} - multiple year contracting is
a method by which the grantee awards a contract for a base period of one
or more years, with option provisions for future years\' requirements.
The base period of the contract is a firm and fully funded requirement.
Beyond the base period, the grantee uses option provisions, which may be
exercised unilaterally at the discretion of the grantee as additional
funding becomes available. There is no need for the inclusion of
cancellation payments since the exercise of the options is totally
within the discretion of the grantee.**

**Additional information on multiple year contracting, while not binding
on grantees, is discussed in the *Federal Acquisition Regulation* (FAR),
Subpart 17.2 - *Options*.**

**[Term of Contracts]{.underline} -- As noted above in Section 2.2.1 --
*Contract Period of Performance Limitation,* 49 USC § 5326(b) limits the
procurement of rolling stock and replacement parts to no more than five
years under a single contract, even though delivery may take place
beyond five years from the date of the initial contract.**

**2.3 ANNUAL PLANNING**

**2.3.1 [Sources and Contents]{.underline}**

**DISCUSSION**

**Every transit organization can carry out annual planning; large
systems may maintain multi‑step planning processes with substantive
documents that are carried forward from year to year. Small systems may
prepare the plan simply through preparation of a list of known
procurements at the beginning of a planning cycle (i.e., in budget
preparation or in the mandated planning process).**

**Purpose**

A basic purpose for maintaining formal plans regarding procurements well
in advance of issuing the solicitations is to enable more deliberate and
coordinated decision‑making in moving forward with the procurements and
related activities. In addition, procurement planning is the best
opportunity to identify potential consolidation of procurements (e.g.,
several internal customers purchasing furniture or personal computers in
the same time‑frame). Larger agencies may find that procurement
consolidation yields substantial savings. More specifically, an advance
procurement plan is a good way for the agency to document its compliance
with paragraph 7(d) of Circular 4220.1E which states, \"Grantee
procedures shall provide for review of proposed

procurements to avoid purchase of unnecessary or duplicative items.
Consideration should be given to consolidating or breaking out
procurements to obtain a more economical purchase.\"

The advance procurement plan also proves useful in responding to
procurement challenges. It provides an early record of decisions that
were made for business purposes before the receipt of offers and without
the possibility of competitive bias. Contracting officials should
recognize that the plan is fluid and that their customers\' needs will
change, but even this change can be more orderly if the base plan has
been documented. A change is simply accomplished through a plan update,
rather than being passed around by word of mouth or memorandum, which
tends to result in confusion and indecision.

**Best Practices**

[Sources for Plans]{.underline} ‑ The preparation of an advance
procurement plan can begin with data already prepared for service and
financial planning purposes. Both state and local Transportation
Improvement Programs list major Federally funded projects for all modes
of transportation. While the preparation of the plans is the
responsibility of the local Metropolitan Planning Organization and the
state, most transit agencies are involved in assisting with development
of the transit element of the plans, which lists their projects
separately. An internal capital budget is another source, which may have
more detailed or up‑to‑date information on planned capital procurements.

Although projects funded with operating funds are often smaller and the
operating budget does not usually offer as much specificity, contracting
officials may be able to identify many planned procurements from the
operating budget as well. Historical usage is another valuable source
for the plan, particularly when compared to the operating budget.

Another method available to assist with preparation of the plan is to
conduct a survey of internal customers. They may provide more detail on
the budgeted projects and may be able to identify projects that are not
differentiated in the budget. An annual survey of the major customers
will encourage the customers themselves to plan their needs for goods
and services.

Annual procurements, which account for a great deal of activity, such as
parts, fuel, and other supplies, can be projected at most agencies based
on historical need and agency‑wide plans and projects.

[Plan Contents]{.underline} ‑ In addition to the identity of each
procurement, plans normally identify the customer contact(s) (at medium
and large agencies), time requirements, and funding sources. Tentative
start dates, publication dates, opening dates and award dates are
usually based on the type and size of the procurement contemplated. Time
should be allowed for:

-   preparation of a source selection plan (if not already complete or
    in progress), where appropriate;

-   preparation of specifications;

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-   assembly of the solicitation of offers;

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-   publication period and time for preparation of offers, including
    pre‑bid/proposal conference, where appropriate;

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-   receipt and evaluation of offers; and

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-   required reviews and approval actions.

Complex projects will require more time for preparing specifications.
Negotiated procurements will require more time after receipt of offers.
If governing board approval is required, and the governing board meets
on a fixed schedule, time would be added for this step. In all major
procurements and cases where negotiated procurement is utilized, the
planning process can evolve into a source selection plan for each
procurement.

In the case of procurement of complex systems, such as rail transit
systems or advanced rail vehicles, an advanced procurement plan concept
includes planning, not only for the prototype development, testing, and
acceptance of the system, but also the life cycle support of the system,
which includes training of maintenance personnel, maintenance
infrastructure, such as electronic design diagrams and parts catalogs,
long term availability of parts, and technical support.

**2.3.2 [Independent Grantee Cost Estimate]{.underline}**

+-----------------------------------------------------------------------+
| ###### REQUIREMENT                                                    |
+-----------------------------------------------------------------------+
| FTA Circular 4220.1E, Paragraph 10 provides that grantees must        |
| perform a cost or price analysis in connection with every procurement |
| action, including contract modifications. The method and degree of    |
| analysis is dependent on the facts surrounding the particular         |
| procurement situation, but as a starting point, grantees must make    |
| independent estimates before receiving bids or proposals.             |
+-----------------------------------------------------------------------+

**DISCUSSION**

**A logical element of your annual procurement plan is a cost estimate
for each major procurement. It is normally cost‑effective to have an
independent cost estimate that also satisfies the Federal requirement
and to have such an estimate at some time before receiving bids or
proposals. You may obtain such estimates from published competitive
prices, results of competitive procurements, or estimates by in‑house or
outside estimators.**

**BPPM Appendix B.20 -- *Independent Cost Estimate Form*, provides a
format and guidance for grantee in-house estimators that should be
helpful. This form was developed by one**

**transit agency to assist its user organizations with the development
of independent cost estimates and statements of work.**

**Purpose**

The following are purposes of establishing a cost estimate using a
method independent from the prospective offerors in advance of the
offer:

-   it ensures a clear basis for the grantee\'s determination that the
    benefits of the procurement warrant its cost;

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-   it provides essential procurement and financial planning information
    (see \"Advance Procurement Plan,\" above); and

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-   it provides a basis for price analysis, which may assist in
    obviating the need for a more burdensome cost analysis.

Although it may seem self‑evident that the agency has at least
implicitly prepared a cost estimate in deciding to proceed with a
procurement, many projects can change in scope without clear
communication among the people responsible. For example, a management
information system for parts inventory control may seem cost‑effective,
but may grow during discussions to include unanticipated electronic
imaging, scanning of repair manual diagrams, unanticipated distributed
processing devices, and multi‑user programming. An independent cost
estimate prepared when the agency first undertook the project could
alert all involved that the project had grown beyond the scope
originally intended. A deliberate decision to reduce the scope or revise
the cost estimate can be made at each step of the project\'s
development.

The cost estimate is essential information for procurement planning. It
gives the contracting official some indication of the complexity of the
project and the degree of investment that offerors will want to make in
the procurement process, thus allowing planning of procurement time and
personnel. It is also the basis for determining which procurement
procedures apply to the project. If the cost estimate exceeds \$100,000,
for example, a competitive solicitation is normally required. (State or
local requirements may be stricter.) Similarly, certification and
bonding requirements imposed by Federal regulations are triggered based
on the value of the contract. (See \"Methods of Procurement\" FTA
Circular 4220.1E, § 9; \"Bonding Requirements," § 11; \"Buy America\"
Master Agreement § 14 (a); \"Debarment and Suspension\" Master Agreement
§ 3 b.) However, the application of these and most other requirements
depends not on the cost estimate, but on the contract amount.

A final purpose of the independent cost estimate is for price analysis.
Either a cost or price analysis is required for every contract and every
change order so that the essential objective of a reasonable price is
assured. The adequacy of the price or cost analysis is a critical
responsibility of the contracting official. In many contract awards the
bids alone may be adequate to assure a

reasonable price. However, in all negotiated procurements, most contract
changes, sealed bids where price competition was not sufficient, and
non-competitive awards, further analysis is required. An independent
cost estimate prepared before receipt of offers is invaluable in these
circumstances. The estimate alone may, if prepared with sufficient
detail and reliability in the contracting official\'s judgment, be
sufficient to determine whether the price is reasonable. It will at
least supplement other pricing data in making the determination. Because
cost analysis can be time consuming, expensive, and raise disputes, the
availability of an independent pre‑bid estimate, which allows for price
analysis and obviates cost analysis, is worth material pre‑bid effort.

In these circumstances, it is essential that the grantee's cost estimate
be developed independently from the offerors' pricing submissions. If a
bus purchase is being prepared, for example, the prospective offerors
should not be relied upon for the independent cost estimate, except in
the form of prior bids submitted with adequate competition.

Any price analysis or data collection performed after receipt of the
offers, in addition to consuming valuable time during the limited
validity of the offers, will not be as probative as data collected
before the receipt of the offers. An independent cost estimate prepared
before the receipt of the offers does not raise the question of whether
the particular data and analysis was consciously or unconsciously
intended to justify the award.

**Best Practices**

[Construction]{.underline} ‑ In some cases, cost estimates may be
difficult to obtain or may lie outside the competence of agency
personnel. In the case of construction projects, a design firm may
already be under contract and may perform this service. In some cases,
the agency\'s in‑house personnel who have participated in design or past
construction efforts may be the most professional and reliable cost
estimators.

[Supplies and Equipment]{.underline} ‑ Equipment estimates can often be
prepared from published price lists or from past competitive
procurements updated with inflation factors. Grantees may find relevant
pricing data by contacting other agencies that obtained competitive bids
for the same equipment or supplies. In the case of specialized
equipment, care must be taken that the source of the estimates is not
disproportionately obtained from one supplier.

[Services]{.underline} ‑ Professional services often range widely in
both price and quality, and are often being acquired precisely because
the agency personnel are unfamiliar with the subject matter. Therefore,
your in‑house personnel may not be qualified to estimate the cost of a
major professional service contract. In these cases, it may be worth
obtaining a professional cost estimate by a firm not interested in the
final procurement. Other grantees are a valuable source of cost
estimating information if they have undertaken similar projects. The
contracting official should obtain and, when appropriate, update the
independent cost estimate in the manner best suited to the circumstances
of the particular procurement. Because reasonable price is a key
objective of every procurement, and is also a critical Federal interest
in Federally funded procurements, an independent cost estimate should be
prepared for every action before offers are received.

**2.4 SOURCE SELECTION PLAN**

**2.4.1 [File Documentation]{.underline}**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| FTA Circular 4220.1E, Paragraph 7.i - *Written Record of Procurement  |
| History* requires grantees to maintain records detailing the history  |
| of a procurement. As a minimum, these records shall include:          |
|                                                                       |
| -   The rationale for the method of procurement;                      |
|                                                                       |
| ```{=html}                                                            |
| <!-- -->                                                              |
| ```                                                                   |
| -   Selection of contract type;                                       |
|                                                                       |
| ```{=html}                                                            |
| <!-- -->                                                              |
| ```                                                                   |
| -   Reasons for contractor selection or rejection; and                |
|                                                                       |
| -   The basis for the contract price.                                 |
+-----------------------------------------------------------------------+

**DISCUSSION**

**A properly documented procurement file provides an audit trail from
the initiation of the acquisition process to the beginning of the
contract. The file provides the complete background, including the basis
for the decisions at each step in the acquisition process. A
well-documented file speaks for itself, without need of interpretation
from the contract administrator. A well-documented file also supports
actions taken, provides information for reviews and investigations, and
furnishes essential facts in the event of litigation or legislative
inquiries.**

**Purpose**

Documents recording the key steps in each procurement are important for
a number of reasons, including the following:

-   You are taking legally and financially significant actions on behalf
    of your agency and the public. Information relating to these actions
    needs to be readily retrievable in the event that contract personnel
    are personally unavailable or their memory is not precise enough to
    assist the agency in moving forward with the administration of its
    program. You may routinely expect your colleagues to take actions
    based on the file.

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-   The key steps in a procurement, including those listed under
    \"Requirement,\" above, are frequently material elements in
    financial (e.g., payment or withholding) determinations or legal
    disputes. Written documentation will have great value to your agency
    under those circumstances.

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-   The agency's process may be reviewed, audited, and/or may be the
    subject of in‑depth investigation. This documentation is the history
    of the public procurement. Many hours of reconstructing events and
    decisions, stretching memories, and evaluating scenarios can be
    saved with a concise file that factually answers the questions
    typically raised.

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-   Finally, you reduce the likelihood of additional supervision or
    burdensome restrictions being placed on your agency or your
    procurement process with concise documentation of the decisions you
    are making.

Many procurement reviews, while finding few problems with the underlying
decisions or procurement results, may reach negative conclusions and
make unwanted recommendations simply because well considered decisions
were not well documented. Noting briefly why you did what you did may
help you and your agency, as well as satisfy the requirements of the
"Third Party Contracting Requirements" Circular.

**Best Practices**

Where appropriate, the procurement documentation file should contain:

-   Purchase request, acquisition planning information, and other
    pre-solicitation documents;

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-   Evidence of availability of funds;

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-   Rationale for the method of procurement (negotiations, formal
    advertising);

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-   List of sources solicited;

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-   Independent cost estimate;

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-   Statement of work/scope of services;

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-   Copies of published notices of proposed contract action;

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-   Copy of the solicitation, all addenda, and all amendments;

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-   Liquidated damages determination;

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-   An abstract of each offer or quote;

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-   Contractor\'s contingent fee representation and other certifications
    and representations;

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-   Source selection documentation;

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-   Contracting Officer\'s determination of contractor responsiveness
    and responsibility;

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-   Cost or pricing data;

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-   Determination that price is fair and reasonable including an
    analysis of the cost and price data, required internal approvals for
    award;

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-   Notice of award;

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-   Notice to unsuccessful bidders or offerors and record of any
    debriefing;

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-   Record of any protest;

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-   Bid, Performance, Payment, or other bond documents, and notices to
    sureties;

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-   Required insurance documents, if any; and

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-   Notice to proceed.

Purchase order forms (electronic or manual) and standard files for small
purchases can be designed to make the recording of most of the relevant
data for small purchases automatic. Bid and proposal files, particularly
if you use sealed bids under \$100,000 can also be standardized to
facilitate recording the appropriate data. For larger procurements,
there are often memoranda or correspondence that, if assembled in the
file, address many of the key issues.

The procurement file and the contract administration file can be
coordinated by standard practice, so that nothing between bid opening
(or proposal receipt) and notice of award is omitted.

**2.4.2 [Full and Open Competition]{.underline}**

1.  **[Full and Open Competition Principle]{.underline}**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| FTA Circular 4220.1E, Paragraph 8.a requires all procurements to be   |
| conducted in a manner providing full and open competition. This       |
| requirement finds its way into Paragraph 9.h of the Circular which    |
| limits the use of noncompetitive contract awards to those situations  |
| when the award of a contract is infeasible under small purchase       |
| procedures, sealed bids, or competitive proposals and at least one of |
| several specifically named circumstances are present. Thus, contracts |
| with a value of more than \$100,000 shall be awarded by sealed bid or |
| competitive negotiation unless there is an explicit exception.        |
|                                                                       |
| FTA Circular 4220.1E, Paragraph 8.a considers the following practices |
| to be restrictive of competition:                                     |
|                                                                       |
| -   Unreasonable requirements placed on firms in order for them to    |
|     qualify to do business;                                           |
|                                                                       |
| ```{=html}                                                            |
| <!-- -->                                                              |
| ```                                                                   |
| -   Unnecessary experience and excessive bonding requirements;        |
|                                                                       |
| ```{=html}                                                            |
| <!-- -->                                                              |
| ```                                                                   |
| -   Noncompetitive pricing practices between firms or between         |
|     affiliated companies;                                             |
|                                                                       |
| ```{=html}                                                            |
| <!-- -->                                                              |
| ```                                                                   |
| -   Noncompetitive awards to any person or firm on retainer           |
|     contracts;                                                        |
|                                                                       |
| ```{=html}                                                            |
| <!-- -->                                                              |
| ```                                                                   |
| -   Restrictive use of brand names;                                   |
|                                                                       |
| ```{=html}                                                            |
| <!-- -->                                                              |
| ```                                                                   |
| -   Any arbitrary action in the procurement process; and              |
|                                                                       |
| -   Geographic preferences [^33]                                      |
+-----------------------------------------------------------------------+

**DEFINITIONS**

[Competition]{.underline} ‑ The process by which two or more vendors
attempt to secure the business of a third party by the most favorable
price, quality, and service.

[Exclusionary]{.underline} ‑ Tending to limit competition for reasons
other than business or bona fide policy goals, such as price, quality,
and service.

**DISCUSSION**

**Full and open competition is the guiding principle of procurement
requirements and practices. You constantly seek to permit and encourage
meaningful interest and offers from all entities. Your practices should
be selective or rule out offerors only for business reasons (cost,
quality, and delivery). Because it is often easier not to accommodate a
potential new offeror, and easier to deal with fewer entities, you must
vigilantly cultivate ways to increase competition at reasonable
expense.**

**Purpose**

The principle of full and open competition has one primary and two
secondary purposes. The primary purpose is to obtain the best quality
and service at minimum cost. In other words, to get the best buy. The
secondary purposes are to guard against favoritism and profiteering at
public expense, and to provide equal opportunities to participate in
public business to every potential offeror.

[Best Buy]{.underline} ‑ The primary purpose of free and open
competition is to obtain for your customers (and the passengers, funding
partners, and local community or other vested interest) the optimum
combination of cost with goods and services. The most cost‑effective
procurement, the greatest value, and the best buy are all related terms.
The premise is that suppliers competing with each other will make
efforts to optimize the price and quality for you, even though it
minimizes their profit percentage.

A countervailing view is that having to compete increases the cost of
the goods and services. Some offerors will state, \"If I can have a sole
source contract, I can hold the cost down for you.\" This is a
short‑term perspective that is destructive in the long run. Even if a
lower price can be obtained in isolated circumstances, the odds are that
in most cases you can obtain a better buy through open competition. As
in all procurement practices, you can also benefit in the long run from
establishing a highly consistent expectation on the part of your
suppliers; they will compete more cost‑effectively and with less
difficulty, if they are confident that free and open competition is your
consistent practice. To succeed, you should diligently root out the
tendency to pursue false, short-term economies of limiting competition
in favor of free and open competition.

A provocative assertion is that, \"A unique characteristic of good
public purchasing is the underlying principle that more importance is
ultimately attached to the ways and means of

obtaining prices than to prices themselves.\" [^34] Whether this is true
or whether the best buy is more important than the means of procurement,
it is certainly true that you may be the voice in your transit system
for protecting procurement principles, particularly the principle of
free and open competition, against the occasional short‑sighted views of
your customers.

[Favoritism and Profiteering]{.underline} ‑ The concern that suppliers
or public agents may profit unjustly at public expense through poor
procurement practices is a constant theme in the history of government
procurement. While eliminating unjust gains does serve to achieve the
best price, the acute concern that suppliers or pubic officials may
exploit public procurements for their own gain at public expense is of
great significance and plays a major role in the public\'s overall
confidence in a transit operating entity.

[Offerors\' Opportunity]{.underline} ‑ Scrupulously fair treatment of
all offerors will foster the most satisfactory relations with the
offerors in the long run. Similarly, a firm expectation of free and open
competition is generally valued by the supplier community. However,
there can be circumstances where a supplier\'s right to participate is
at odds with the procuring agency\'s interest in the best buy. Examine
the case of failure of a delivery agency or the postal service to
deliver a proposal document. Although missing the proposal deadline was
not the fault of the proposer, its right to participate in public
business does not prevail over the procuring agency\'s interest in
proceeding with public business. Indeed, in some jurisdictions, a
disappointed bidder has no standing to enforce the competitive
procurement laws. However, to the extent Federal precedents apply to
your procurement, your offerors have an implied contract of fair-dealing

during the procurement process. [^35] So while your primary goal is the
best buy, and an offeror may have no vested right to participate nor
vested profit interest in the possibility of

participating, the offeror does have a right to fair dealing during the
solicitation and selection process. To the extent that it is not
inconsistent with the best buy, you will want to treat all potential
offerors as fairly as possible.

**Best Practices**

The following are illustrative of practices you can undertake to advance
competition.

[Partner Information]{.underline} ‑ You can undertake outreach programs
with your supplier partners by preparing brochures that give background
information about your agency and contain assistance in the most
practical ways to identify opportunities to do business with your
agency.

[Partner Treatment]{.underline} ‑ You can establish an ethic in your
organization of treating suppliers as partners in the delivery of
transit service. Everything from the telephone manner of agency staff to
the consideration shown in arranging conferences and presentations can
contribute to an increase in competition.

[Advertisement]{.underline} ‑ A traditional practice to increase
competition, and still one of the most meaningful, is widespread
advertising to the extent practical. Developing economical means to
widen access to your procurement advertisements, such as use of the
internet and private bid room services, is an area worthy of continual
review and effort.

**2.4.2.2 [Restraints on Competition]{.underline}**

**2.4.2.2.1 [Brand Names]{.underline}**

+-----------------------------------------------------------------------+
| ###### REQUIREMENT                                                    |
+-----------------------------------------------------------------------+
| FTA Circular 4220.1E Paragraph 8.a. requires:                         |
|                                                                       |
| > \"All procurement transactions will be conducted in a manner        |
| > providing full and open competition. Some of the situations         |
| > considered to be restrictive of competition include, but are not    |
| > limited to . . . Specifying only a 'brand name' product instead of  |
| > allowing 'an equal' product to be offered without listing its       |
| > salient characteristics."                                           |
|                                                                       |
| Paragraph 8.c. requires:                                              |
|                                                                       |
| > \"\...All solicitations shall:                                      |
| >                                                                     |
| > \(1\) Incorporate a clear and accurate description of the technical |
| > requirements for the material, product, or service to be procured.  |
| > Such description shall not, in competitive procurements, contain    |
| > features that unduly restrict competition\....                      |
| >                                                                     |
| > \... When it is impractical or uneconomical to make a clear and     |
| > accurate description of the technical requirements, a 'brand name   |
| > or equal' description may be used as a means to define the          |
| > performance or other salient characteristics of a procurement. The  |
| > specific features of the named brand which must be met by offerors  |
| > shall be clearly stated."                                           |
+-----------------------------------------------------------------------+

**DEFINITIONS**

[Approved Equal]{.underline} ‑ An item or service which has been
approved by the procuring agency as equal to the brand name item
originally specified.

[Salient Characteristics]{.underline} - Those qualities of an item that
are essential to ensure that the intended use of the item can be
satisfactorily realized. The term is mainly used in connection with a
brand-name-or-equal description, which should set forth those salient
physical, functional, or other characteristics of the referenced product
that an equal product must have in order to meet the Authority\'s needs.

[Brand Name]{.underline} ‑ A name of a product or service that is
limited to the product or service produced or controlled by one private
entity or by a closed group of private entities. Brand names may include
trademarks, manufacturer names, or model names or numbers that are
associated with only one manufacturer.

[Design Specifications]{.underline} ‑ Specifications based on the design
of a product or service. Typical design specifications may include
dimensions, materials used, commonly and competitively available
components, and non‑proprietary methods of manufacturing.

[Performance Specifications]{.underline} ‑ Specifications based on the
function and performance of a product or service under specified
conditions, preferably conditions that can be reproduced for testing
purposes. Performance specifications may include useful life,
reliability in terms of average intervals between failure, and capacity.

**DISCUSSION**

**Brand names (e.g. \"Motorola Metrocom,\" \"Webasto Heater\") are among
the most restrictive types of specification. Design and performance
specifications are the preferred alternatives. However, in some cases
using sealed bids, you may not be able to ensure you will receive an
acceptable product without mentioning a brand name. (In negotiated
procurements this is less often necessary because a performance or
design specification can be used and the proposed brands can be reviewed
during negotiations.) If you must use a brand name in your
specification, you can still allow bidders to substitute an equal
product with a different brand name. You may reserve the right to
determine whether a particular brand or model is equal to the one you
specified. If you use a brand name and allow equal brands, you must also
specify the salient characteristics of the specified brand that will be
among the criteria used in determining whether a suggested substitute is
equal to the specified brand or not.**

**If a grantee believes that a specific brand name must be used in a
specification and that it cannot accept any alternative product; i.e.,
it cannot allow a vendor to propose "an equal" product, the grantee must
process this as a sole source (non-competitive) procurement action
through the proper approving officials within the grantee's organization
prior to release of the solicitation.**

**Purpose**

The restriction on brand names serves the central purpose of maximizing
free and open competition to obtain the best buy. If you specify a brand
name with no opportunity for substitution, the original supplier of the
brand name has an effective monopoly. This results in exorbitant prices
and cessation of innovation and product development. In complex
equipment and construction contracts where a large number of components
are specified, the use of brand names can be even more restrictive than
in procurement of individual units because the proliferation of brand
names discourages the prime contractor from considering substitutes
which might contribute to a more cost‑effective end product. Therefore,
in the long run, you will get the best buy if you avoid the use of brand
names as much as possible.

In procuring complex systems, however, such as rolling stock and
electronic systems, where reliability or other performance standards are
mission critical to your transit service, you and your customers may not
be able to specify a component in terms of design or performance and
still ensure that your lowest responsive and responsible bidder will
offer you a satisfactory component. In these cases, some price and
quality competition can be preserved by allowing the substitution of
equal items with other brand names. If you are the one who will
determine which brand names are equal to the one specified, then you
have not sacrificed any control over the quality of the product. This
competition by substitution is facilitated by listing the salient
characteristics, such as you would use if you used a design or
performance specification, (e.g., \"10-year life under varying voltage
conditions of transit bus electrical systems\"), so that bidders will be
able to judge which brands may be equal to the specified brand.

**Best Practices**

[Design and Performance Specifications]{.underline} ‑ You can work with
your customers to see if brand names can be removed from the
specification by substituting design or performance specifications. Like
many of the qualities of fully open and competitive procurement
practices, this is an effort that may seem over‑zealous under the time
pressure of a specific procurement, but you can constantly seek to
remove restrictions and improve the competitiveness of your procurement
processes so that you generally achieve the best buy. If adequate design
and performance specifications cannot be prepared, listing several
acceptable brand names is far better than specifying just one.

\"[Or Approved Equal]{.underline}\" ‑ Whenever brand names are used,
there are several ways you can clarify beyond a doubt that the brand
name is used merely as a specification and not as a statement of a
preference for the specific product specified. One way is to include a
phrase such as \"or equal,\" \"or approved equal,\" or \"similar in
design, construction and performance\" with the brand name. Many
standard equipment and construction documents also contain a clause in
the general

provisions that states that even if the phrase \"or approved equal\" is
inadvertently omitted, it is implied after any brand name. If you
specify \"or equal,\" you shall clearly set forth those minimum
essential characteristics and standards to which the material, product
or service must conform if it is to satisfy its intended use. [^36]

Some of the onus of restriction is lifted for a large volume of transit
procurements by the "Third Party Contracting Requirements" Circular\'s
sanction for noncompetitive procurement of associated capital
maintenance items from the original equipment manufacturer. The Circular
states:

> *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: (e) the item is an associated capital
> maintenance item as defined in 49 U.S.C. § 5307(a)(1) that is procured
> directly from the original manufacturer or supplier of the item to be
> replaced*.[^37]

The Circular requires, however, that \"the grantee must first certify in
writing to FTA; (a) that such manufacturer or supplier is the only
source for such item; and (b) that the price of such item is no higher
than the price paid for such item by like customers.\" [^38]

[Approval Process]{.underline} ‑ If you have listed enough salient
characteristics and the brand name is an insignificant factor in the
overall procurement, you may simplify the procurement by not requiring
approval. The contractor would then have the right to substitute a
product. The ultimate determination of whether the substitute was equal
to the brand specified, if contested, would be through the dispute
resolution process culminating in the courts.

The better practice, however, is to provide an approval process,
preferably prior to bid opening, so that bidders, in finalizing their
bids will be confident about their right to substitute a brand they
consider to be more cost‑effective than the one specified. This will
also give you confidence about the product or service you will receive.
(Brand names may be used in competitive negotiation for complex systems,
but the approval process need only require approval prior to award
rather than at proposal submission. Approval of equal brands is usually
simply a part of the discussions or negotiations.) You will want to
avoid requiring bidders to wait

until after award to obtain approval, because a disapproval at that time
may place a bidder (now contractor) in financial jeopardy and may prompt
litigation.

If you want to require pre‑bid approval, the solicitation can specify a
time and format for requesting approval of equal brands. Typically, this
is the same time and format used for requesting other changes in the
specifications.

Approve requests for substitution whenever you determine that the
offered product is equal in all material respects to the products
referenced. Offers need not be rejected because of minor differences in
design, construction, or features, which do not affect the suitability
of the product for its intended use.

Determinations typically identify, or incorporate by reference,
identification of the specific products, which the contractor is to
furnish. Such identification can include any brand name, make or model
number, and descriptive material. You may want to issue your
determination, particularly any approval, to all bidders by addendum or
as your procedures provide. (In some competitive negotiations where
early and open discussion of creative integration of substitute brands
is important, issuance of approvals to competing proposers is considered
to constitute leveling the playing field, which would discourage open
negotiations. You can consider keeping design innovations confidential
but issuing approval of equal brand names to all proposers.) As with
other substantive addenda to a solicitation, consider extending the bid
period if the approvals are issued shortly before the scheduled bid
opening, to allow all bidders to take advantage of the information prior
to the bid opening.

Even if you have a pre‑bid approval process, a contractor can normally
request additional approvals after award. Consider clarifying in your
solicitation that the contractor who waits until after award proceeds at
its own risk.

2.4.2.2.2 [Written Standards of Conduct and Conflicts of Interest:
Personal and Organizational]{.underline}

**[Written Standards of Conduct]{.underline}**

+-----------------------------------------------------------------------+
| ###### REQUIREMENT                                                    |
+-----------------------------------------------------------------------+
| 49 CFR § 18.36(b)(3) establishes for the Department of Transportation |
| the government-wide requirement that state and local government grant |
| recipients must have written standards of conduct for procurement     |
| personnel.                                                            |
|                                                                       |
| > Grantees and sub-grantees will maintain a written code of standards |
| > of conduct governing the performance of their employees engaged in  |
| > the award and administration of contracts. No employee, officer or  |
| > agent of the grantee or sub-grantee shall participate in selection, |
| > or in the award or administration of a contract supported by\       |
| > Federal funds if a conflict of interest, real or apparent, would be |
| > involved. Such a                                                    |
| >                                                                     |
| > conflict would arise when: (I) The employee, officer or agent, (ii) |
| > Any member of his immediate family, (iii) His or her partner, or    |
| > (iv) An organization which employs, or is about to employ, any of   |
| > the above, has a financial or other interest in the firm selected   |
| > for award. The grantee\'s or sub-grantee\'s officers, employees or  |
| > agents will neither solicit nor accept gratuities, favors or        |
| > anything of monetary value from contractors, potential contractors, |
| > or parties to sub-agreements. Grantee and sub-grantees may set      |
| > minimum rules where the financial interest is not substantial or    |
| > the gift is an unsolicited\                                         |
| > item of nominal intrinsic value. To the extent permitted by State   |
| > or local law or regulations, such standards or conduct will provide |
| > for penalties, sanctions, or other disciplinary actions for         |
| > violations of such standards by the grantee\'s and sub-grantee\'s   |
| > officers, employees, or agents, or by contractors or their agents.  |
| > The awarding agency may in regulation provide additional            |
| > prohibitions relative to real, apparent, or potential conflicts of  |
| > interest.                                                           |
|                                                                       |
| 49 C.F.R. Sec. 19.42 imposes the same requirement for institutions of |
| higher education, hospitals and other non-profit organizations.       |
|                                                                       |
| > The recipient shall maintain written standards of conduct governing |
| > the performance of its employees engaged in the award and           |
| > administration of contracts. No employee, officer, or agent shall   |
| > participate in the selection, award, or administration of a         |
| > contract supported by Federal funds if a real or apparent conflict  |
| > of interest would be involved.                                      |
| >                                                                     |
| > Such a conflict would arise when the employee, officer, or agent,   |
| > any member of his or her immediate family, his or her partner, or   |
| > an organization which employs or is about to employ any of the      |
| > parties indicated herein, has a financial or other interest in the  |
| > firm selected for an award. The officers, employees, and agents of  |
| > the recipient shall neither solicit nor accept gratuities, favors,  |
| > or anything of monetary value from contractors, or parties to       |
| > sub-agreements. However, recipients may set standards for           |
| > situations in which the financial interest is not substantial or    |
| > the gift is an unsolicited item of nominal value. The standards of  |
| > conduct shall provide for disciplinary actions to be applied for    |
| > violations of such standards by officers, employees, or agents of   |
| > the recipient.                                                      |
|                                                                       |
| Paragraph 7.c of FTA Circular 4220.1E implements this requirement for |
| FTA grant recipients:                                                 |
|                                                                       |
| > Grantees shall maintain a written code of standards of conduct      |
| > governing the performance of their employees engaged in the award   |
| > and administration of contracts. No employee, officer, agent,       |
| > immediate family member, or Board member of the grantee shall       |
| > participate in the selection, award, or administration of a         |
| > contract supported by FTA funds if a conflict of interest, real or  |
| > apparent would 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.                                                              |
| >                                                                     |
| > The grantee\'s officers, employees, agents, or Board members will   |
| > neither solicit not accept gifts, gratuities, favors, or anything   |
| > of monetary value from contractors, potential contractors, or       |
| > parties to sub-agreements. Grantees may set minimum rules where the |
| > financial interest is not substantial or the gift is an unsolicited |
| > item of nominal intrinsic value. 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 grantee\'s officers, employees,  |
| > or agents, or by contractors or their agents.                       |
+-----------------------------------------------------------------------+

[Conflicts of Interest: Personal and Organizational]{.underline}

+-----------------------------------------------------------------------+
| REQUIREMENTS                                                          |
+-----------------------------------------------------------------------+
| As an ethics requirement, Section 3(a) of the FTA Master Agreement    |
| requires the written standards of conduct to encompass both personal  |
| and organizational conflicts of interest and defines them as follows: |
|                                                                       |
| > 1\. [Personal Conflicts of Interest]{.underline}. The Recipient\'s  |
| > code or standards of conduct shall prohibit the Recipient\'s        |
| > employees, officers, board members, or agents from participating in |
| > the selection, award, or administration of a third party contract   |
| > or\                                                                 |
| > sub-agreement supported by Federal funds if a real or apparent      |
| > conflict of interest would be involved. Such a conflict would arise |
| > when any of the following parties                                   |
|                                                                       |
| has a financial or other interest in the entity selected for award:   |
| (a) an employee, officer, board member, or agent; (b) any member of   |
| his or her immediate family; c) his or her partner; or (d) an         |
| organization that employs, or intends to employ, any of the above.    |
|                                                                       |
| > 2\. [Organizational Conflicts of Interest]{.underline}. The         |
| > Recipient\'s code or standards of conduct must include procedures   |
| > for identifying and preventing real and apparent organizational     |
| > conflicts of interest. An organizational conflict of interest       |
| > exists when the nature of the work to be performed under a proposed |
| > third party contract                                                |
| >                                                                     |
| > or sub-agreement may, without some restrictions on future           |
| > activities, result in an unfair competitive advantage to the third  |
| > party contractor or sub-recipient or impair its objectivity in      |
| > performing the contract work.                                       |
|                                                                       |
| 49 CFR § 18.36(c)(v) and 49 CFR § 19.43 prohibit organizational       |
| conflicts of interest as restrictive of competition. Section 19.43    |
| further states as follows:                                            |
|                                                                       |
| > All procurement transactions shall be conducted in a manner to      |
| > provide, to the maximum extent practical, open and free             |
| > competition. The recipient \[\[Page 167\]\] shall be alert to       |
| > organizational conflicts of interest as well as noncompetitive      |
| > practices among contractors that may restrict or eliminate          |
| > competition or otherwise restrain trade. In order to ensure         |
| > objective contractor performance and eliminate unfair competitive   |
| > advantage, contractors that develop or draft specifications,        |
| > requirements, statements of work, invitations for bids and/or       |
| > requests for proposals shall be excluded from competing for such    |
| > procurements. Awards shall be made to the bidder or offeror whose   |
| > bid or offer is responsive to the solicitation and is most          |
| > advantageous to the recipient, price, quality and other factors     |
| > considered. Solicitations shall clearly set forth all requirements  |
| > that the bidder or offeror shall fulfill in order for the bid or    |
| > offer to be evaluated by the recipient. Any and all bids or offers  |
| > may be rejected when it is in the recipient\'s interest to do so.   |
|                                                                       |
| 40 CFR § 1506.5(c) concerns the engagement of a consultant for the    |
| preparation of an environmental impact statement. It states the       |
| following:                                                            |
|                                                                       |
| > Environmental impact statements. Except as provided in Secs. 1506.2 |
| > and 1506.3 any environmental impact statement prepared pursuant to  |
| > the requirements of NEPA shall be prepared directly by or by a      |
| > contractor selected by the lead agency or where appropriate under   |
| > Sec. 1501.6(b), a cooperating agency. It is the intent of these     |
| > regulations that the contractor be chosen solely by the lead        |
| > agency, or by the lead agency in cooperation with cooperating       |
| > agencies, or where appropriate by a\                                |
| > cooperating agency to avoid any conflict of interest. Contractors   |
| > shall execute a disclosure statement prepared by the lead agency,   |
| > or where appropriate the cooperating agency, specifying that they   |
| > have no financial or other interest in the outcome of the\          |
| > project. If the document is prepared by contract, the responsible   |
| > Federal official shall furnish guidance and participate in the      |
| > preparation and shall independently evaluate the statement prior to |
| > its approval and take responsibility for its scope and contents.    |
| > Nothing in this section is intended to prohibit any agency from     |
| > requesting any person to submit information to it or to prohibit    |
| > any person from submitting information to any agency.               |
+-----------------------------------------------------------------------+

**DISCUSSION**

# **A. Why Conflicts of Interest Pose a Problem**

Every citizen is entitled to have confidence in the integrity of
government. Therefore, when using public funds for the purchase of goods
or services, each FTA grantee must prevent its personnel from taking any
action that might result in \-- or even create the appearance of \-- a
personal or organizational conflict of interest. Avoiding conflicts of
interest, through the implementation of written standards of conduct,
benefits the grantee in many ways and leads to a more efficient and
credible organization, while failure to deal with conflicts may not only
adversely impact the project itself but may also jeopardize the
grantee's ability to receive or retain federal funds. [^39]

# 

# **B. Responsibility of Grantee**

The grantee is responsible for avoiding both personal and organizational
conflicts of interest. Thus, grantees should be vigilant in preventing
and mitigating possible conflicts**.**

# 

# **C. Standards of Conduct**

Each grantee must have written standards of conduct governing the
performance of its personnel involved in the selection, award and/or
administration of contracts. [^40] The standards must prohibit the
grantee\'s or sub-grantee\'s officers, employees or agents from
soliciting or accepting gratuities, favors or things of monetary value
from contractors, potential contractors, or parties to sub-agreements.
The standards may contain minimum rules where the financial interest is
not substantial or the gift is an unsolicited item of nominal intrinsic
value. To the extent permitted by State or local law or regulations, the
standards should provide for penalties, sanctions, or other disciplinary
actions for violations of such standards by the grantee\'s and
sub-grantee\'s officers, employees, or agents, or by contractors or
their agents. These written standards must prohibit *personal* and
*organizational* conflicts of interest*, real* and *apparent*.

# 

# **D. Personal Conflicts of Interest**

*Personal Conflict of Interest*: A personal conflict of interest arises
when one of the grantee's employees (including contractor employees),
officers, board members, or agents (including outside consultants)
involved in the selection, award or administration of a third party
contract or sub-agreement [^41] supported by Federal funds \-- or a
member of his or her immediate family, partner, or outside employer or
prospective employer \-- has a financial interest in the entity

selected, or competing, for the contract. [^42] A personal conflict of
interest also arises where any grantee employee, officer, board member,
or agent solicits or accepts gifts, gratuities, favors, or anything of
monetary value from a contractor, potential contractor, or party to a
sub-agreement.[^43] In addition, a personal conflict of interest arises
where any such person uses his position, or non-public information
gained during his work for the grantee, for personal gain, including
gain inuring to an immediate family member, partner, or current or
potential employer. These scenarios can result in potential
organizational conflicts for employers, or personal conflicts of
interest for the individual.

# 

# **E. Organizational Conflicts of Interest**

*Organizational Conflict of Interest*: An organizational conflict of
interest occurs where - because of other activities, financial
interests, relationships, or contracts - a contractor is unable, or
potentially unable, to render impartial assistance or advice to the
grantee; the contractor's objectivity in performing the contract work is
or might be impaired; or a contractor has an unfair competitive
advantage. [^44] Organizational conflicts of interest can cause two
distinct problems: *bias* and *unfair competitive advantage*. [^45]

*Bias* arises when a contractor is placed in a situation where it may
have an incentive to distort its advice or decisions. Whenever the
grantee is awarding a contract that involves the rendering of advice,
the grantee must consider whether there exists the potential for a
conflict of interest on the part of the contractor rendering the advice.
[^46]

*Unfair competitive advantage* occurs when one contractor has
information not available to other contractors in the normal course of
business. For example, an unfair competitive advantage would occur when
a contractor developing specifications or work statements has access to
information that the grantee has paid the contractor to develop, or
information which the grantee has furnished to the contractor for its
work, when that information has not been made available to the public.
Because this information enhances the contractor's competitive position
in the procurement process, it represents an unfair competitive
advantage over the other offerors. One solution to this problem is to
fully disclose all information to all prospective offerors for a
reasonable period of time prior to the grantee's receipt of proposals
for the follow-on work. Another example where an unfair competitive
advantage might arise is where a contractor is allowed to write
specifications or statements of work around its own or an affiliate's
corporate strengths or products and then compete for a contract based on
those specifications. The grantee can prevent such an unfair advantage
by placing reasonable restrictions or even a prohibition on the
contractor's involvement in the subsequent procurement. If an individual
employee has access to inside information, a possible solution would be
to wall off that employee, so he cannot give his employer an unfair
competitive advantage. Grantees should exercise care that specifications
do not provide an unfair competitive advantage to any party. Grantees
should also be alert to affiliations among contractors that might give
one contractor an unfair competitive advantage over others.

Note: A competitive advantage is not always *unfair.* A contractor may
have a *fair* competitive advantage by virtue of its prior experience,
its expertise, its more efficient operations, etc. Occasionally an
incumbent contractor may have what appears to be an insurmountable

competitive advantage by virtue of its previous work for the grantee. An
advantage of this type may not necessarily be *unfair.*

# **F. The "Appearance of Conflict" Standard**

As stated above, FTA rules prohibit conflicts of interest \-- both real
and apparent. This rule applies to both personal and organizational
conflicts of interest. Thus, each grantee's written code of conduct must
prohibit real and apparent conflicts, not just actual conflicts of
interest. The\
grantee should utilize the "reasonableness" standard to determine
whether an "apparent" conflict

of interest exists: *Would a reasonable person with all the material
facts believe there appears to be a conflict?*

# **G. Environmental Consultants**

The Council on Environmental Quality (CEQ) has enacted regulations that
address the use of consultants in the environmental process. [^47] These
regulations are intended to prevent contractors who are hired to study
alternatives and potential environmental impacts of proposed projects
from presenting and profiting from biased recommendations.

The CEQ regulation at 40 CFR Section 1506.5 "prohibits a person or
entity from entering into a contract with a federal agency to prepare an
environmental impact statement (EIS) when that party has at that time
and during the life of the contract pecuniary or other interests in the
outcomes of the proposal. Thus, a firm which has an agreement to prepare
an EIS for a construction project cannot, at the same time, have an
agreement to perform the construction, nor could it be the owner of the
construction site." See "Guidance Regarding NEPA Regulations," 48 Fed.
Reg. 34263 (July 18, 1983). FTA recognized this principle in the bid
protest case of JMA v. LACMTA, MTA RFP #PS-4310-0964 (2001), holding as
follows: "FTA understands the CEQ regulations to prohibit an EIS
contractor from being awarded a contract that includes work dependent
upon the completion of the EIS and issuance of a ROD."

CEQ rules do not prohibit a consultant responsible for preparing an EIS
from submitting a proposal on work connected with the project after the
completion of the EIS. Indeed, in guidance offered by the CEQ, the
Council expressed concern that "some agencies have been interpreting the
conflicts provision in an overly burdensome manner." See "Guidance
Regarding NEPA Regulations," 48 Fed. Reg. 34263 (July 18, 1983). The
Council explained that, "\[i\]n some instances, multidisciplinary firms
are being excluded from environmental impact statement preparation
contracts because of links to a parent company which has design and/or
construction capabilities. Some qualified contractors are not bidding on
environmental impact statement

contracts because of fears that their firm may be excluded from future
design or construction contracts.... The result of these
misunderstandings has been reduced competition in bidding for

EIS preparation contracts, unnecessary delays in selecting a contractor
and preparing the EIS, and confusion and resentment about the
requirement." Thus, the Council does not prohibit an EIS contractor from
bidding on work connected with the project after the contractor has
completed all performance required for the EIS, but it does prohibit
situations where the contractor has an interest in the outcome of the
EIS "at that time or during the life of" the EIS contract.

# **H. Insisting on Impartiality**

Each grantee is entitled to impartial advice from its consultants, based
solely on what is best for the transit system and the community, and not
for the benefit of persons with conflicting financial or other
interests. For additional protection, the grantee not only should
enforce its own written standards of conduct but insist, perhaps through
the use of certifications, that each of its employees, board members,
officers, or other agents (as well as contractor personnel) observe any
relevant code of professional responsibility governing his or her
conduct, such as the codes governing the conduct of lawyers, engineers,
architects, planners, and accountants. Among other things, this
requirement would demonstrate to the grantee's employees and contractors
the importance placed by the grantee on avoiding conflicts of interest.

**I. Grantee Decision to Proceed in Spite of Conflict of Interest.**

Finally, when a grantee has done all that reasonably can be done to
avoid, neutralize, or mitigate a real or apparent conflict of interest,
and if it is in the grantee's best interest to proceed with the contract
despite the conflict, the grantee needs to document its decision.
Documentation should include what steps were taken or considered, and
justification for the conclusion reached, before proceeding with the
contract. [^48]

## Best Practices

Every Agency employee involved in the award or administration of
contracts must be given a copy of the Agency\'s (or State\'s) written
standards of conduct, and they should be required to sign a statement
that they are familiar with and will abide by these standards. [^49]
These statements should be signed as a condition of employment. It would
be well to review and sign

them again annually as part of the employee\'s annual performance
evaluation as a means of reinforcing the importance of ethical conduct
by the Agency\'s employees.

In some Agencies, the General Manager has issued a memorandum to all
employees summarizing the most sensitive issues dealing with ethical
conduct and emphasizing the importance of avoiding even the appearance
of conflicts of interest. One public Agency has inserted such a
memorandum into its Procurement Manual, together with the standards of
conduct. [^50]

One area of particular sensitivity concerns \"outside employment.\"
Employees must understand what kinds of activities or outside employment
(actual or prospective) are inconsistent with their Agency
responsibilities; e.g., furnishing advice or services to a firm which is
bidding on or planning to bid on a contract with the Agency, or which is
doing business presently with the Agency. One strategy employed by firms
bidding on contracts is to offer employment to critical procurement or
technical personnel working on the procurement (if the firm is selected
for award). This kind of situation creates a financial conflict of
interest for those employees to whom offers have been made. Employees
need to be forewarned of these and similar tactics which they may
encounter in the course of their Agency work. The Agency may want to
conduct training sessions for all Agency personnel doing sensitive work
in the acquisition of Agency equipment or services.

Many public Agencies have adopted disclosure statement requirements for
certain positions. These disclosure statements require that employees
occupying designated positions within the Agency disclose their
investments in businesses which engage in certain activities related to
the business of the Agency. Reportable interests might include companies
engaged in manufacturing rail transit rolling stock and related
components, transit equipment suppliers, construction companies engaged
in transit systems, etc.

The FTA Circular requires penalties, sanctions, or other disciplinary
action for violation of the standards of conduct by the grantee\'s
employees or by contractors. The lack of explicit penalties in
grantees\' procurement policies and procedures is a recurring
observation made in the FTA Procurement System Reviews. Grantees need to
adopt explicit written penalties for their employees and contractors who
violate their standards of conduct.

# 

# **Procedural Suggestions**

The following is an outline of the steps that each grantee should
consider taking before and during the procurement process and during
project administration. Conflicts also can occur even before the
pre-contracting phase begins, so grantees should *always* be vigilant to
the possibility of a conflict.

**A. *THE PRE-CONTRACTING PHASE***

**1. Prepare Written Codes of Standards of Conduct.** FTA requires that
each of its grantees maintain a written code of standards of conduct
applicable to its employees (including contractor employees), officers,
board members, and agents (including outside consultants) involved in
the selection, award or administration of contracts. Each grantee should
consult with its counsel, as well as its procurement personnel, as to
whether its code of conduct complies with FTA's requirements as set
forth in Section 3 of FTA's Master Agreement, Paragraphs 7(c) and
8(a)(5) of FTA Circular 4220.1E, Third Party Contracting Requirements,
and 49 CFR § 18.36 and Part 19, as applicable. Moreover, the grantee
should provide a copy of its code of conduct to each of its employees,
board members, officers, and other agents.

**2. Require Financial Disclosure Statements and/or Non-Conflict
Certifications.** When determining how to deal with potential conflicts
of interest, a grantee may choose "proactive" measures, "reactive"
measures, or a combination approach. "Proactive" measures are designed
to identify and prevent potential conflicts *prospectively*. For
example, a grantee interested in employing proactive measures should
consider requiring each of its employees (and others potentially
involved in the procurement process) to file an annual disclosure
statement concerning his or her financial and employment status and that
of immediate family members (to the extent state and local law permit
such a financial disclosure requirement). [^51] With this information on
file, the grantee can "proactively" determine, ahead of time, whether
any of its employees (etc.) have interests in any of the potential or
actual contractors on a particular project. The grantee, for example,
can run a search on the parents, subsidiaries, and affiliates of bidders
and contractors, as well as on any companies listed on employee
disclosure statements, and get a broad picture of any potential
conflicts. If a conflict is discovered, the grantee can \-- again,
"proactively" \-- wall off any employee who may have a potential
conflict from a particular project, thus avoiding the need for later
action.

In some cases a grantee may require its contracting personnel (officers,
board members, agents, etc., as applicable) to submit a "non-conflict"
certification on a project-by-project basis, before that person
commences work on the selection, award or administration of a contract.
Such\
certification would state that neither the employee (etc.) nor any
member of his or her immediate family has a financial or employment
interest in any of the relevant bidders or contractors for the
procurement in question. If the employee identifies a real or apparent
conflict of interest, then the grantee can take action to mitigate it.
This is a different, somewhat "reactive," approach than requiring annual
financial disclosure statements.

There are pros and cons to both approaches. With annual financial
disclosure statements, the grantee attempts to identify and mitigate
conflicts as early as possible in the procurement process; but in order
for this approach to be effective, the grantee's reviewer must both
review the disclosure statements and perform relevant research as well
as be aware of the various corporate interconnections. An advantage of a
project-specific disclosure statement is that it serves as a regular
reminder to employees of the importance of conflict avoidance, and thus
may prevent some conflicts of interest from arising in the first place.
Realistically, however, requiring disclosure statements on a
project-by-project basis generally is too onerous for the grantees that
handle many procurements every year. Moreover, this somewhat "reactive"
approach puts a serious burden on the individual employee (etc.) to
"self-certify" that he has no conflict on a particular project, with the
understanding that the grantee will hold him accountable for the
veracity of that certification. It is also possible that an individual
employee, unaware of the ownership or other links between prospective
bidders or contractors and the financial interests he holds, may
unknowingly self-certify that no conflict exists.

The two approaches, however, are not mutually exclusive, and the best
approach may be a combination of proactive and reactive tools.
Ultimately, each grantee must determine for itself the preferable
approach, considering the costs involved in administering its program
and any other matter the grantee deems pertinent to the decision. As
indicated above, any program requiring certifications or disclosure
statements from employees also should apply those requirements to the
other categories of individuals listed in FTA Circular 4220.1E,
specifically, officers, board members, and agents, including consultants
and contractors involved in the selection, award or administration of
contracts. Finally, the grantee should ask its counsel to review the
form of its financial disclosure statements or non-conflict
certifications for compliance with local, state, and federal law before
they are issued.

**3. Obtain Certifications of Compliance with Professional Codes of
Conduct.** The grantee should consider requiring each of its employees,
board members, officers, and agents to identify in writing any code of
professional responsibility governing his or her conduct, and to certify
that to the best of his or her ability he or she will comply with that
code whenever conducting business on behalf of the grantee. To be
effective, such a requirement must be coupled with a mechanism for
reporting violations to the appropriate enforcement entity.

**4. Prepare Written Procedures for Addressing Personal and
Organizational Conflicts of Interest.** The grantees' written procedures
should establish not only a means of identifying conflicts but also a
predictable method of resolving them. For example, once a personal
conflict has been identified, mitigating measures may include creation
of blind trusts, recusal or other limits on scope of participation,
procedures to allow the employee back inside the information bubble if
the conflict ends (e.g., the company that the employee owns stock in
does not win the contract), etc. The written procedures may address:

a\. Responsibility for identifying potential conflicts;

b\. Range of alternative actions;

c\. Typical situations and the indicated response, for example:

i\. Situations that may warrant advance restrictions:

> \- A contract for procurement evaluation services;
>
> \- A contract for advice on competing approaches;
>
> \- A contract for technical review and project oversight services; or
>
> ii\. Situations that may warrant other conflict-mitigation measures,
> or even a possible waiver, rather than a prohibition against a
> contractor's participation in the project:
>
> \- Complex design of integrated elements of a structure, piece of
> equipment, or system; or
>
> \- Successive development/design phases of innovative equipment or
> systems.

d.  Participation of qualified personnel in the resolution of conflicts;
    and

e\. Review and approval of conflict resolutions.

The grantee should seek the assistance of counsel in preparing written
procedures for resolving conflicts of interest.

**B. *THE PROPOSAL STAGE***

**1. Define the Project to Avoid Potential Conflicts.** Grantees should
anticipate potential conflicts and structure procurements accordingly.
For example, the grantee should not allow a company that prepares the
specifications for procurement to supply the products as well. Also, the
grantee should be careful to structure the project so as to avoid
conflicts among contractors and subcontractors. For example, on a large
project, the grantee could avoid possible *bias* by procuring one
contractor to perform the needed evaluation independently, and then
initiating a\
new procurement to obtain any system that may be required and excluding
the first contractor from that second competition. [^52]

**2. Consider Advance Restrictions.** When the grantee awards separate
contracts on related procurements, it might consider placing notice of
an advance restriction in the solicitation where a conflict may arise.
It is far better to identify a potential conflict involving two
contracts in the first solicitation than to award the first contract and
then address the conflict when awarding the second contract. Prime
contractors should be required to inform prospective subcontractors (and
to give evidence that they have done so) that the subcontractors also
could be subject to the restrictions in future contracting. This way,
each bidder (prime and subcontractors) for the first contract will be
aware of the situation and can make its own choice about which contract
to pursue. When an advance restriction is desired, consider including:

-   An explanation of the conflict or potential conflict;

-   The nature of the proposed restriction upon future contractor
    activities; and

-   The terms of any proposed clause and whether those terms are
    negotiable, depending on the nature of the acquisition.

**3. For Environmental Impact Statement Contracts, Comply with CEQ
Regulations.** Regulations promulgated by the Council on Environmental
Quality require each contractor who develops an environmental impact
statement to sign a disclosure statement (prepared by the grantee)
certifying that it has no financial or other interests in the outcome of
the proposed project*.* [^53] This requirement is intended to prevent
contractors who are hired to study alternatives and potential
environmental impacts of proposed projects from presenting and profiting
from biased recommendations. Pursuant to the regulations, grantees must
require the submission of a disclosure statement in RFPs for consulting
services so that such conflicts can be identified early in the
contracting process. The grantee also must comply with 40 CFR § 1506.5
and "Guidance Regarding NEPA Regulations," 48 Fed. Reg. 34263 (July 18,
1983), explained above in Section G of the Discussion.

**4. Consult With Legal Counsel.** Before defining the scope of any
project or publishing any document describing the project, such as a
statement of work, the grantee should ask its counsel to review the
project and any descriptive documentation for compliance with conflicts
rules.

**C. *THE SELECTION AND AWARD PHASE***

**1. Review Disclosure Statements (if required by the grantee) for
Potential Conflicts with Bidders.** If the grantee requires its
procurement staff to submit annual financial disclosure statements or
project-specific disclosure statements, the grantee should review the
information on such statements for potential conflicts before any
procurement staff begins work on the selection process. If the
employee's work on the project would cause a real or apparent conflict,
then the grantee should reassign his or her duties on the project to
another employee.

**2. Obtain No-Conflict Certifications from contract personnel (if
required by the grantee).** If the grantee requires its contract
personnel who will participate in the administration of a contract to
submit no-conflict certifications, then the grantee should furnish
information on the likely bidders to the contractor. Each contractor
employee who will be assigned to work on the procurement should submit
his or her certification to the grantee's reviewing official before the
selection process begins. If a contractor employee fails to submit the
required no-conflict certification, then the grantee should direct the
contractor to reassign that employee's duties to another employee who
has complied with the certification requirement.

D.  ***THE ADMINISTRATION PHASE***

**1. Monitor Contract Staff/Contractor Compliance with Conflicts
Rules.** During the administration phase of a project, the grantee
should require each of its employees (etc.) involved

in the project to report any changes in his or her financial holdings or
other interests that might cause a conflict of interest. Similarly, the
grantee should require the contractor to report any changes in the
company's financial holdings, newly developed contractual or other
relationships, or those of its parents, subsidiaries, and affiliates. In
this way, the grantee can monitor the situation and address personal or
organizational conflicts that might arise during the administration
phase of the project.

**2. Obtain Certifications from Contractor Personnel Governed by
Professional Codes of Responsibility.** Before a contractor begins work
on a project, the grantee should consider requesting a written statement
from any contractor personnel working on the project whose conduct is
governed by a professional code of responsibility, in each case
identifying any relevant code and certifying that he or she will comply
with its rules on all grantee-related work.

**E. *THROUGHOUT THE ENTIRE PROCESS***

**1. Consult with Legal Counsel.** Grantee procurement and technical
personnel are encouraged to work closely \-- and proactively \-- with
their legal counsel throughout the procurement process to review all
situations that appear to have the potential for a conflict of interest.
Counsel can help in any number of ways, including reviewing written
materials for compliance with conflicts of interest rules, preparing
restrictive contracting clauses suitable for the particular situation,
and helping to restructure the project to avoid conflict situations.
Counsel may also suggest that involvement by FTA Regional Counsel would
be appropriate and solicit Regional Counsel's advice when necessary.

**2. Mitigate Conflicts.** As potential conflicts arise during the
procurement process, the grantee must take steps to avoid the conflict
or, if that is not possible, mitigate its effects. For example, where a
grantee's board is responsible for awarding contracts, a board member
with an interest in a project bidder should disclose his interest and
recuse himself from the selection process. As another example, where an
employee has an interest in a project bidder, the grantee could create a
"fire-wall" preventing the employee from providing the bidder with any
information gained during his employment with the grantee that would
give the bidder an unfair competitive advantage. As always, the grantee
should consult with counsel in formulating an appropriate approach to
any conflict situation.

**2.4.2.2.3 [Geographic Restrictions]{.underline}**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| Paragraph 15.h of the Master Agreement states:                        |
|                                                                       |
| > h\. [Geographic Restrictions]{.underline}. The recipient agrees to  |
| > refrain from using State or local geographic preference, except     |
| > those expressly mandated or encouraged by Federal statute, such as  |
| > those set forth in Subsection 15.i of this Master Agreement below,  |
| > or as permitted by FTA.                                             |
| >                                                                     |
| > i\. [Architectural, Engineering, Design, or Related                 |
| > Services]{.underline}. \...Provided a sufficient number of          |
| > qualified firms are eligible to compete for the third-party         |
| > contract, geographic location may be a selection criterion\....     |
|                                                                       |
| Paragraph 8.b of FTA Circular 4220.1E states:                         |
|                                                                       |
| > b\. [Prohibition Against Geographic Preferences]{.underline}.       |
| > Grantees shall conduct procurements in a manner that prohibits the  |
| > use of statutory or administratively imposed in-State or local      |
| > geographical preferences in the evaluation of bids or proposals,    |
| > except in those cases where applicable Federal statutes expressly   |
| > mandate or encourage geographic preference. This does not preempt   |
| > State licensing laws. However, geographic location may be a         |
| > selection criterion in procurements for architectural and           |
| > engineering (A&E) services provided its application leaves an       |
| > appropriate number of qualified firms, given the nature and size of |
| > the project, to compete for the contract.                           |
+-----------------------------------------------------------------------+

**DISCUSSION**

**The prohibition against geographic preferences as stated in FTA
Circular 4220.1E is based upon 49 CFR Part 18.36 (c) (2). The only
exception noted to this prohibition is in the procurement of
architectural and engineering (A&E) services, where knowledge of local
conditions and building codes is a relevant factor in the quality of the
A&E services. One public Agency, in its procurement procedures manual
for A&E contracts, recognizes the importance of the A&E\'s knowledge of
local conditions, and requires that A&E proposals be evaluated in terms
of their:**

***Knowledge of the locality of the project, provided that application
of this criterion leaves an appropriate number of qualified firms, given
the nature and size of the project**.* [^54]

**This Agency has stated its policy in terms which are focused on the
one generally accepted reason for allowing geographical preferences - an
A&E firm\'s demonstrated knowledge of local conditions, which is a
factor affecting the quality of the final product. This same Agency
prohibits geographic restrictions, except for those permitted by FTA for
A&E services, not only for its own procurements but for those of its
contractors as well.** [^55]

**Some grantees have used very localized geographical restrictions in
their solicitations for parts or services which must be furnished on a
short lead-time basis; e.g., within one or two hours of the request. A
much better approach, and one that is not prohibited by the FTA**

**Circular, would be to require an ability by the contractor to respond
within the time frame needed**, **and not to stipulate a geographical
restriction in the solicitation. The reason is that many parts suppliers
maintain a staff which is capable of quick response even though they are
not in the immediate city or county of the grantee.**

**Grantee procurement officials are sometimes confronted with pressure
from their Board members to place contracts with local firms, and it is
necessary for the grantees to include explicit statements in their
procurement policies and procedures that geographical restrictions are
prohibited except for A&E procurements, citing the FTA prohibitions in
FTA Circular 4220.1E, paragraph 8.b.**

**2.4.2.2.4 [Prequalification]{.underline}**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| Paragraph 8.d of FTA Circular 4220.1E states:                         |
|                                                                       |
| > d\. [Prequalification Criteria]{.underline}. Grantees shall ensure  |
| > that all lists of prequalified persons, firms, or products that are |
| > used in acquiring goods and services are current and include enough |
| > qualified sources to ensure maximum full and open competition.      |
| > Also, grantees shall not preclude potential bidders from qualifying |
| > during the solicitation period, which is from issuance of the       |
| > solicitation to its closing date.                                   |
+-----------------------------------------------------------------------+

**DISCUSSION**

**Prequalification of bidders and products has been used in several
circumstances, such as when an Agency is procuring critical equipment
with exacting performance requirements, or critical services which are
needed on a quick-reaction basis. A qualified products list (QPL) is a
listing of products which have been tested and found to have satisfied
all of the specified requirements. The products on the list may be
supplied by any responsible vendor bidding on the procurement. The
qualified bidders list (QBL) is a listing of bidders who are
manufacturing more complex items, such as buses, requiring sophisticated
manufacturing and quality control procedures. These bidders must be
reviewed carefully to determine if their internal controls and
procedures will produce satisfactory end products. These
pre-qualification procedures may also be appropriate for companies who
wish to bid on procurements for furnishing critical services, such as
quick reaction services for repairs, etc. Only those bidders on the
qualified bidders list may supply the products or services specified.
The Federal government has used this practice for critical military
equipment, such as jet engine turbine blades, or for critical
quick-reaction services such as ship repairs. Transit Agencies using
this procedure of establishing a qualified products list (QPL) often
cite a rationale of: \"For reasons of efficiency, economy,
compatibility, or maintenance reliability, there is a need for
standardization as to various supplies, materials, and equipment.\"**
[^56]

**Best Practices**

**[Documenting your decision to establish a QPL or QBL]{.underline} -**
Care must be taken to ensure that prequalification procedures are not
used to restrict full and open competition. Toward this goal Federal
Agencies are required to justify in writing the necessity for
establishing a prequalification requirement. [^57] Some transit Agencies
have also chosen to follow this practice of documenting the reasons why
a particular part or service is being placed on a qualified products
list (QPL) or a qualified bidders list (QBL), although they are not
required to do so by FTA. [^58]

**[Qualifying during solicitation period]{.underline}** - Some Transit
agencies have two different policies as to bids offering products which
have not been qualified prior to the solicitation. When using
non-Federal funds, the Agency will not allow bidders to offer
non-qualified products in response to a solicitation\--bidders must
obtain certification of their product before, and independently of, any
solicitation for that item. *When using grant funds, however, grantees
must allow vendors an opportunity to qualify their products during the
solicitation period* (FTA Circular 4220.1E, Paragraph 8.d). A grantee
would not be expected, however, to delay a proposed award (extend the
solicitation period) in order to afford a vendor the opportunity to
demonstrate that its product meets the standards in the specification.
The Federal procurement rules do not require Federal Agencies to delay
awards, and the standards applicable to these Agencies should be
appropriate for grantees as well. [^59]

**2.4.3 [Fixed Price v. Cost Reimbursement]{.underline}**

+-----------------------------------------------------------------------+
| ###### REQUIREMENT                                                    |
+-----------------------------------------------------------------------+
| Paragraph 9.c of FTA Circular 4220.1E authorizes procurement by the   |
| Sealed Bid/Invitation For Bids (IFB) method when certain conditions   |
| are present. Among those listed is the condition that:                |
|                                                                       |
| > \(c\) The procurement lends itself to a firm fixed price contract   |
| > and the selection of the successful bidder can be made principally  |
| > on the basis of price.                                              |
|                                                                       |
| Paragraph 9.d authorizes procurement by the Competitive               |
| Proposal/Request for Proposals (RFP) method and either a fixed price  |
| or cost reimbursement type contract may be awarded.                   |
|                                                                       |
| Paragraph 7.i requires that grantees document their reasons for       |
| selecting the contract type as a part of the written record of        |
| procurement history.                                                  |
|                                                                       |
| Paragraph 10.e prohibits the cost plus a percentage of cost method of |
| contracting.                                                          |
+-----------------------------------------------------------------------+

**DISCUSSION**

**The selection of contract type is probably the single most important
decision that the procurement specialist will make in the acquisition
process. A properly selected contract type will work in the interests of
the buying Agency to provide a product or service which meets the
Agency\'s needs at a reasonable price without undue risks to the
contractor and without excessive contract administration costs and
contractor claims. A contract poorly suited to the complexity of the
requirement, and the degree of specificity of the specifications or
statement of work, can cause a disastrous situation for both the
contractor and the Agency. When Agencies have complex requirements, and
performance uncertainties make it difficult to predict the costs of
performance in advance, some type of flexibly-priced contract should be
considered. Where the length of contract performance extends over a long
period of time, some type of economic price adjustment terms may be
necessary. As requirements are repetitively acquired, and a history is
established, the Agency should be able to more clearly define the
requirement, and contractors should be able to assume greater risks of
performance at fixed prices. Grantees have a very wide latitude in
structuring a contract type which affords the best incentive to the
contractor for delivering the particular product or service being
acquired*. ***

**There are two broad categories of contract types: fixed-price
contracts and cost-reimbursement contracts. Within these two families of
contract types there are a number of subtypes offering differing degrees
of incentives. At the extremes are the firm-fixed-price contract, in
which the contractor has complete responsibility for the costs of
performance and the resulting profit or loss, and the
cost-plus-fixed-fee contract, in which the contractor has virtually no
risk for performance costs and the fee (profit) is fixed. Between these
two extremes are the various incentive-type contracts where the degree
of cost risk and profit incentive can be tailored to meet almost any
specific program situation.**

**All fixed-price contract types impose upon the contractor an
obligation to deliver the product specified in the contract, and he is
not entitled to payment of the stipulated price unless he delivers the
product and it meets the specifications called out in the contract. On
cost-reimbursement contracts the contractor is obligated only to give
its \"best efforts\" in order to be paid the costs of performance. The
fee, however, is earned for complete performance of the contract, and if
less than full performance is made, the buying Agency**

**is entitled to a reduction of the fixed fee based on the percentage of
completion of the work.)**

**2.4.3.1 [Fixed Price Contracts]{.underline}**

**DISCUSSION**

**A firm-fixed price contract establishes a single price, or a series of
line item or unit prices, that are not subject to any adjustment on the
basis of the contractor\'s cost experience in performing the contract.
The contractor takes full responsibility for the cost and profit
outcome, and thus the contractor has maximum incentive to control costs
and complete the contract on schedule. This contract type represents the
least administrative burden upon the contracting parties; e.g., it is
not necessary for the buyer to monitor contractor costs or to perform
contract closeout audits. In some cases, however, there may be a need
for audits if, for example, change orders have been issued on a
cost-reimbursable basis.**

**Firm-fixed-price contracts are appropriate for acquiring commercial
items, or for supplies or services which can be clearly defined with
either performance/functional specifications or design specifications,**
**and where performance uncertainties do not impose unreasonably high
risks upon the contractor.** [^60] **This aspect of performance risk is
important to judge realistically, for if contractors are put into
positions of undue risk and the worst case happens, the buying Agency
can look forward to excessive claims, possible litigation, a
poor-quality product where the contractor has \"cut corners\" to save
money, and in some cases, the bankruptcy of the contractor or refusal to
complete the contract. High-risk performance situations will also result
in contractors building costly contingencies into their prices for risks
that may never occur, resulting in higher than necessary prices and
excessive profits on that contract.**

**[Fixed Price Contracts With Economic Price Adjustment]{.underline} -
Fixed-price contracts may provide for price adjustments (upward or
downward) when specified contingencies occur. These contracts are
typically used when there is serious doubt about the stability of
selected costs or prices over an extended period of contract
performance. For example, a five-year fixed-price contract may present
an unusually high cost risk to a contractor for certain commodity prices
or labor costs, and the parties may agree to use an economic price
adjustment clause. Price adjustments may be based on published indices,
actual cost experiences of the contractor for certain materials or
labor, or increases or decreases in published prices for specific items.
The contract will define the circumstances under which the economic
price adjustment will be made and the means whereby it will be
calculated. Using economic price adjustment clauses is an excellent way
to deal with high-risk situations and avoid having to price the initial
contract on the basis of contingencies that may never occur. This
technique may also be necessary to get contractors to accept fixed-price
contracts that have a lengthy performance period.** [^61]

## Best Practices

You may want to refer to the *Federal Acquisition Regulations* (FAR),
Subpart 16.203 -*Fixed-price contracts with economic price adjustment*,
and the related contract clause language in FAR 52.216-2,3,4. These FAR
provisions and contract clauses are not required to be followed by FTA
grantees but they may prove helpful in structuring contract language for
specific contingencies. The FAR may be accessed online at
<http://www.arnet.gov/far/>.

**[Steel Price Escalation Clauses]{.underline}** -- Following are two
examples of steel price escalation clauses used by transit agencies. The
first clause (Sound Transit) uses a one-time price adjustment. The
second clause (New York City Transit) allows for multiple price
adjustments.

[One-Time Price Adjustment]{.underline} - Following is an example of an
economic price adjustment contract clause used by Sound Transit one
transit agency to provide for one steel price increase during the period
of the contract. Note that this clause:

1.  Bases the price adjustment on the steel supplier's invoices to the
    Contractor from the time the bid was prepared to the time the steel
    was ordered after the Notice to Proceed.

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1.  Requires that the Producer Price Index (PPI) support the price
    increase as invoiced by the steel supplier. This is an important
    safeguard in establishing the reasonableness of the supplier's
    higher price by comparing it to the industry norm.

2.  Limits the increase to the lesser of the percentage increase in the
    invoiced price vs. the PPI.

3.  Requires adequate documentation from the Contractor, and the
    agency's right to review the Contractor's bid preparation documents
    and supplier invoices.

4.  Does not contain a maximum percentage by which the contract price
    may be adjusted for steel price increases. Under normal
    circumstances you should include a maximum limit on the percentage
    increase you will allow but the inclusion here of the lesser of the
    supplier's increase vs. the PPI provides a certain degree of price
    protection to the agency. [^62]

5.  The clause provides for downward price adjustments as well as
    increases.

# 

# **SP-9.10 STEEL PRICE ESCALATION**

A.  A price adjustment clause is included in this Contract to provide
    additional compensation to the Contractor or a credit to Sound
    Transit for fluctuations in steel prices. This price adjustment is
    dependent upon either: an increase or decrease in the price of steel
    used in the production of products utilized on this project or an
    increase or decrease in the ratio of the Bureau of Labor Statistics
    -- Producer Price Index listed below. Payment or credit for steel
    price adjustments will be evaluated under the following conditions.
    Payment or credit will be made under the Contract Pay item:
    Provisional Sum -- Steel Price Escalation.

B. The conditions of this provision are as follows:

1.  This provision shall only apply to material cost changes that occur
    between the date of bid opening and the date of certified invoice.
    The Contractor is expected to order materials promptly upon Notice
    to Proceed (or upon shop drawing approval) and take possession of
    materials as quickly as reasonably possible. [^63]

2.  A price adjustment to provide additional compensation to Contractor
    will be considered and paid only where the price increase in steel
    is due to market conditions beyond the control of Contractor and its
    suppliers or vendors. No adjustment is allowed under this provision
    for increases due to any other cause or peril (including, but not
    limited to, strike, weather, vendor backlog, delay in fabrication,
    etc.). If a price adjustment is sought under this provision,
    Contractor shall certify to Sound Transit that the price increase
    was due solely to market conditions beyond its control or that of
    its suppliers and that Contractor exercised its best efforts to
    mitigate any price increase. Sound Transit reserves the right to
    verify the accuracy of such certification as a condition of payment.

3.  This price adjustment clause only applies to structural steel,
    reinforcing steel, rail, steel excavation support elements, and
    overhead catenary structure poles. To be considered, the category of
    material must have a total dollar value of \$25,000 or greater.

4.  The Contractor shall submit within 5 days of Notice of Award, the
    fabricator's or supplier's material price quotes for the items
    listed above that meet the requirements of Article 9.10B.3. The
    Contractor must certify that they are the\
    \
    \
    actual quoted prices incorporated into the Contractor's bid amount
    submitted to Sound Transit for the represented pay item. Sound
    Transit has the right to inspect Contractor's bid preparation
    documents to verify the accuracy of such certification. Assuming
    such certification is accurate, these certified quotes will
    constitute the baseline steel material price. The quote must clearly
    identify the pay item(s) by number and description, describe the
    weights of the steel material, how the steel material will be
    utilized in the final project, and a breakdown of all costs
    including material, labor, equipment, overhead, and profit. This
    steel price escalation provision shall only apply to the steel
    component of the material quote. It shall not apply to any other
    materials used in the fabrication of an item supplied to the
    Contractor.

5.  For the items listed above that meet the requirements of Article
    9.10B.3, the increase or decrease in the steel materials unit cost
    must be in excess of 5 percent of the original quoted prices or the
    PPI as described below, for a price adjustment to the Contractor to
    be allowed.

6.  If there is an increase or decrease in steel materials cost in
    excess of 5 percent from the original quoted unit prices (or the PPI
    as described in Article 9.10F below), Sound Transit will evaluate
    and determine an increased or decreased payment(s) under this
    Contract as follows:

> C. The adjustment will be determined by computing the mathematical
> difference between the unit price that is 5 percent above (or below
> for decreases in price) the base unit price (bid quote) and the actual
> invoice unit price of the steel component. The final dollar value will
> be determined by multiplying this adjustment by the represented
> quantity of steel.
>
> D. The Contractor shall submit to Sound Transit certified invoices as
> soon as steel material is purchased. The invoices shall be listed in
> chronological order and contain a tabulation of quantity, the order
> date, the date shipped from the steel manufacturer, and the price per
> unit weight (reflecting all deductions for quantity shipments) with a
> breakdown as stipulated in Article 9.10B.4 above. Freight charges
> shall be listed separately and are not included in this price
> adjustment. These invoices shall be subject to audit verification.
>
> E. Sound Transit will verify the increased or decreased percentage
> between certified original quote and the actual invoice payment.
>
> F. This change shall be supported by the U.S. Department of Labor --
> Bureau of Labor Statistics index entitled "Producers Price Index"
> (PPI). The values contained in the PPI are subject to revision 4
> months after original publication. The price adjustment for steel
> shall be a function of the percentage of change of the price index for
> "Carbon Steel Scrap" Series ID WPU101211. Do not use seasonally
> adjusted indices. This
>
> index is available on the internet at:
>
> <http://data.bls.gov/labjava/outside.jsp?survey=wp>.
>
> G. The Producers Price Index (PPI) listed above must meet increase or
> decrease by at least 5 percent over the same time period for Article
> 9.10C. to be valid.
>
> H. For price increases, if the invoiced price increased, expressed as
> a percentage, exceeds the PPI increase, expressed as a percentage, for
> the same period, the adjustment will be based on the PPI percent
> increase; if the invoiced price increase, expressed as a percentage,
> is less than the PPI increase, expressed as a percentage, for the same
> period, the adjustment will be based on the invoiced price increase.
>
> I. For price decreases, if the value of the invoiced price decrease
> expressed as a percentage is greater than the calculated value of the
> PPI decrease, expressed as a percentage, for the same period, the
> adjustment will be based on the value of the invoiced percent
> decrease. If the value of the invoiced price decrease, expressed as a
> percentage, is less than the value of the PPI decrease expressed as a
> percentage for the same period, the adjustment will be based on the
> PPI percent decrease.

J.  If the PPI controls in determining the price adjustment, Sound
    Transit will review the PPI 4 months after initial publication to
    ensure that the data have not been revised. Final payments will be
    adjusted accordingly.

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J.  Adjustment Formulas:

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```
1.  If Invoice Price Controls:

    a.  Price Increase:

> \(1\) Factor = (PC/PB) -- 1.05)
>
> If Factor is equal to or less than 0.0, no adjustment will be made.
>
> If Factor is greater than 0.0, continue: PA = Factor\*Q\*PB

b.  Price Decrease:

> \(1\) Factor = (PC/PB -- 0.95)
>
> If Factor is equal to or greater than 0.0, no adjustment is made.
>
> If Factor is greater than 0.0, continue: PA = Factor\*Q\*PB
>
> Where: PA = Steel manufacturing price adjustment, in lump sum dollars
>
> PB = Fabricator / supplier quoted price in bid (converted to dollars
> per pound)
>
> PC = Current certified invoice price (converted to dollars per pound)
>
> Q = Quantity of manufactured steel, in pounds

1.  If PPI Controls:

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```
a.  Price Increase:

> \(1\) Factor = (IC/IB) -- 1.05)
>
> If Factor is equal to or less than 0.0, no adjustment is made.
>
> If Factor is greater than 0.0, continue: PA = Factor\*Q\*PB

a.  Price Decrease:

> \(1\) Factor = (IC/IB -- 0.95)
>
> If Factor is equal to or greater than 0.0, no adjustment is made.
>
> If Factor is greater than 0.0, continue: PA = Factor\*Q\*PB
>
> Where: PA = Steel manufacturing price adjustment, in lump sum dollars
>
> PB = Fabricator / supplier quoted price in bid (converted to dollars
> per pound)
>
> IB = BLS PPI index at the time of bid
>
> IC = BLS PPI index at the time material is purchased from mill
>
> (invoice date; after final US DOL BLS adjustments)
>
> Q = Quantity of manufactured steel, in pounds

[Multiple Price Adjustments]{.underline} - Following is an example of an
economic price adjustment clause developed by New York City Transit for
solicitations. This provision allows for multiple price adjustments
during the period of the contract. Note that this clause refers to the
"Scrap Steel" index, but any index could be used depending on the
material being procured.

### SOLICITATION PROVISION

[PRICE ADJUSTMENT CLAUSE FOR ITEMS CONTAINING STEEL]{.underline}

> To All Prospective Bidders:
>
> New York City Transit (NYCT) is soliciting this item(s) utilizing a
> price adjustment clause. The clause set forth below is included in
> this solicitation because of the steel content of the item being
> procured and the dollar amount of the item. For illustrative purposes,
> an example of this formula is provided below to assist you in the
> preparation of your bid.

-   In order to apply the adjustment formula, NYCT will utilize the
    pre-determined percentage steel content of the item's unit price as
    set forth by NYCT in the Bid Quotation Sheets. This percentage shall
    remain fixed for the duration of the contract.

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-   The unit price(s) that NYCT will pay for the item(s) during the
    first six months of the contract shall be the unit price quoted in
    the bid by the successful bidder.

-   Thereafter, the unit price may be adjusted, either up or down, every
    six months after award, reflecting the change in the Scrap Steel
    index set forth in the American Metals Market.

-   The adjustment will be in the form of a percentage and shall be
    determined by NYCT by comparing the Scrap Steel index on the day of
    bid opening to the index in effect on each six-month anniversary of
    the contract award date for the duration of the contract.

-   This adjustment percentage shall be applied to the portion of the
    unit price that represents the steel content of each item as
    predetermined by NYCT to arrive at the adjustment amount.

-   The adjustment amount is then applied to the original unit price set
    forth in the successful bidder\'s bid to arrive at the new unit
    price for the following six months.

-   No price adjustment shall be instituted unless the new price results
    in a percentage change of at least five (5) percent (increase or
    decrease) of the original unit price quoted by the successful
    bidder.

-   The unit price reverts back to the original unit price quoted if the
    price adjustment calculation at each successive six month interval
    results in a percentage change that is not at least five (5) percent
    (increase or decrease) of the original unit price quoted by the
    successful bidder.

-   Prices for release orders will be the price established for the six
    month time frame within which the release(s) is dated, regardless of
    delivery date.

-   If, for any reason, the index being utilized under this contract is
    discontinued for any reason, NYCT will select a new index to be
    applied.

> [EXAMPLE A]{.underline}:
>
> A. Successful Bidder\'s Unit Price: \$5.00
>
> B. % Of Item Containing Steel: 50%
>
> C. Portion of the Item\'s Price subject to a price adjustment: \$2.50
>
> D. Scrap Steel index on day of bid opening: 150
>
> E. Scrap Steel index at the six-month anniversary date of the bid
> opening: 180
>
> F. Percent change calculation: (E - D) ÷ D = percentage change.
>
> For example: (180 - 150) ÷ 150 = .20
>
> G. F X C: \$2.50 x .20 = \$0.50
>
> H. New Unit Price for next six months: A + G = \$5.50
>
> [EXAMPLE B]{.underline}:
>
> A. Successful Bidder\'s Unit Price: \$12.00
>
> B. % Of Item Containing Steel: 100%
>
> C. Portion of the Item\'s Price subject to a price adjustment: \$12.00
>
> D. Scrap Steel index on day of bid opening: 75
>
> E. Scrap Steel index at the six-month anniversary date of the bid
> opening: 30
>
> F. Percent change calculation:(E - D) ÷ D = percentage change.
>
> For example: (30 - 75) ÷ 75 = - 0.60
>
> G. F X C: \$12.00 x -0.60 = -\$7.20
>
> H. New Unit Price for next six months: A + G = \$4.80
>
> [EXAMPLE C]{.underline}:
>
> A. Successful Bidder\'s Unit Price: \$24.00
>
> B. % Of Item Containing Steel: 75%
>
> C. Portion of the Item\'s Price subject to a price adjustment: \$18.00
>
> D. Scrap Steel index on day of bid opening: 162
>
> E. Scrap Steel index at the six-month anniversary date of the bid
> opening: 194
>
> F. Percent change calculation:(E - D) ÷ D = percentage change.
>
> For example: (194-162) ÷ 162 = .1975
>
> G. F X C: \$18.00 x .1975 = \$3.555
>
> H. New Unit Price for next six months: A + G = \$27.555

**2.4.3.2 [Cost Reimbursement Contracts]{.underline}**

+-----------------------------------------------------------------------+
| #### **REQUIREMENT**                                                  |
+-----------------------------------------------------------------------+
| Paragraph 10.d of FTA Circular 4220.1E requires that Federal cost     |
| principles (described in FAR Part 31) be used to determine the        |
| allowability of costs incurred on third party cost- reimbursement     |
| contracts financed with Federal funds. However, grantees may          |
| reference their own cost principles if they comply with Federal cost  |
| principles.                                                           |
|                                                                       |
| Paragraph 10.e of FTA Circular 4220.1E prohibits the                  |
| cost-plus-a-percentage of cost method of contracting.                 |
+-----------------------------------------------------------------------+

### 

### DISCUSSION

**The cost-reimbursement contract is one that provides for payment of
allowable incurred costs, to the extent prescribed in the contract.
These contracts establish an estimate of total cost for the purpose of
obligating funds and establishing a ceiling on expenditures that the
contractor may not exceed without the approval of the contracting
officer. Cost-reimbursement contracts are suitable for use when the
uncertainties of performance do not permit costs to be estimated with
sufficient accuracy to use a fixed-price contract.**

**[Completion vs. Term Form]{.underline}- Two forms of cost-type
contracts are available for describing the contractor\'s responsibility:
the completion form and the term form. The *completion form* describes
the scope of work by specifying an end product or definite goal. This
form requires the contractor to complete the work and deliver the end
item as a condition for payment of the entire fee. If the contractor
fails to complete the contract, the buying Agency is entitled to a
reduction in the amount of the fee. This would mean that if the
contractor expended all the estimated cost and the work was not
complete, and the Agency decided not to add more funds (estimated cost)
to the contract, the contractor would not be entitled to full payment of
the original fixed fee. The term form of contract describes the work in
general terms and obligates the contractor to devote a specified level
of effort for a stated time period. The fixed fee is payable at the
expiration of the stated time period if the contractor has indeed
furnished the specified level of effort. Extension of the time period is
a new acquisition involving new cost and fee agreements (unless the
original time period expires and there remains a level of effort to be
provided, in which case the Agency may have the right to extend the
period of performance so as to use the remaining level of effort).**

**[Federal Cost Principles]{.underline}** - **FTA Circular 4220.1E
Paragraph 10.d requires grantees to use Federal Cost Principles to
determine allowable costs under cost-type contracts. 49 CFR 18.22,
*Allowable Costs,* defines the Federal Cost Principles for various types
of contractors. Contracts with commercial concerns are required to use
FAR Part 31 Cost Principles, or grantees may use their own cost
principles if they are consistent with FAR Part 31.**

**[Allowable Cost and Payment Clause]{.underline} -- Cost-type contracts
will need to include a clause or clauses addressing several important
issues regarding the payment of allowable costs. The clause used in
Federal contracts would be useful as a guide concerning the issues that
need**

**to be addressed.** [^64] **The matters covered by the FAR clause, and
that should be defined in a grantee's contract (though the FAR clause
itself is not required), would include:**

a.  **The frequency of contractor billings for costs incurred;**

b.  **The reference to subpart 31.2 of the FAR for determining
    allowability of costs;**

c.  **Whether the contractor must have actually paid for the supplies or
    services used in contract performance before it submits an invoice,
    or whether the contractor may invoice for costs incurred but not yet
    paid;**

d.  **The provisional billing rates to be used during contract
    performance for indirect costs prior to establishment of final
    audited rates;**

e.  **The procedure to be followed in submitting cost proposals for
    establishing final indirect cost rates for the contract;**

f.  **The requirement that final costs (direct and indirect) be audited
    before final payment;**

g.  **The Contractor's assignment to the grantee of any refunds, rebates
    or credits accruing to the Contractor that are allocable to costs
    for which the contractor has been paid;**

h.  **A release discharging the grantee from any future claims arising
    out of the contract.**

**[Fixed Fee]{.underline} -- It is important that the contract contain a
clear statement as to how the contractor will be paid the fixed fee
called for in the contract (i.e., how the fee is earned). The Federal
clause states that the contractor is to be paid the fixed fee "for
performing this contract."** [^65] **Grantee CPFF contracts should be
clear in defining the contractor's performance responsibility for
earning the fee. For example, if it is a completion form contract, then
the contractor must complete the statement of work and deliver all
required documents. If, however, it is a term form contract, the
contractor must furnish the required level of effort called for in the
contract during the period of performance in order to earn the full fee.
It should be noted that a cost-type contract, while it is a "best
efforts" contract in terms of entitlement to payment of allowable costs,
does in fact require actual performance for entitlement to payment of
the full fixed fee. Anything less than complete**

**performance entitles the grantee to a credit in the fee based on the
percent of actual completion of the work called for in the contract. In
this regard a CPFF contract operates very much like a fixed price
contract in requiring complete performance by the contractor for full
payment of the fixed fee. An example of a payment of fixed fee clause
used by a Federal agency that illustrates this principle of entitlement
to fee for performance is that of NASA, which reads: "The fixed fee
shall be paid in monthly installments based upon the percentage of
completion of work as determined by the Contracting Officer." Grantees
are encouraged to incorporate a *Payment of Fixed Fee* clause in their
contracts that clearly states the contractor's responsibility to perform
the contract in order to be paid the fee. The clause should also state
how the fee will be paid on a monthly/incremental basis (e.g., based on
a percentage of completion of work as determined by the Contracting
Officer). It is also suggested that the grantee consider a *fee
withholding provision* that provides for a certain percentage of the fee
to be withheld until the contractor completes and delivers all
documentation called for in the contract. Once again grantees may want
to review the Federal clause for guidance.** [^66]

**[Advance Agreements]{.underline} -- Certain types of costs may be
allowable according to the cost principles, and yet present difficulties
in determining after-the-fact what is reasonable for the particular
circumstances of any given contract.** [^67] **It is advisable to
anticipate these areas of potential conflict and negotiate advance
agreements before the costs are incurred (this may be before or during
the contract but should always be before incurrence of the costs
involved). The types of costs that tend to be problematic, and for which
advance agreements would be particularly helpful, would include:**

a.  **Pre-contract costs;**

b.  **Royalties and other costs for use of patents;**

c.  **Compensation for personal services, including location allowances,
    hardship pay, off-site pay, and incentive pay;**

d.  **Time charged directly to the contract by corporate officers and
    senior management personnel who normally charge their time to
    indirect cost accounts;**

e.  **Compensation for professional consultants (e.g., legal, accounting
    and engineering);**

f.  **Travel and personnel relocation costs;**

g.  **Severance pay to employees on support services contracts;**

h.  **Training and education costs;**

i.  **General and administrative costs (e.g., corporate, division or
    branch allocations) attributable to the general management,
    supervision and conduct of the contractor's business as a whole).
    These costs are especially important in construction, job-site, and
    architect-engineer contracts.**

**[Approval of Subcontractors]{.underline} -- There will probably be
situations when a grantee may wish to require their prime contractors on
CPFF contracts to submit subcontracts for the grantee's consent prior to
award of the subcontract by the prime. Grantees will want to exercise
due diligence in the management and administration of CPFF contracts
where the grantee bears much of the risk of poor performance, including
cost overruns, for both the prime contractor and the prime's
subcontractors. For guidance in this area of grantee review and consent
to subcontracts, see the BPPM Section 9.4 -- *Approval of
Subcontractors*.**

**[Adequacy of Contractor\'s Accounting System]{.underline} - It is
important to determine the adequacy of the contractor\'s accounting
system for cost-type contracts before awarding such a contract.** [^68]
**Care must be taken to assure that the accounting system can properly
identify contract costs by segregating them from the costs of other jobs
in the accounting records. Likewise it is important that the system of
allocating indirect costs to jobs/contracts produces a distribution of
costs which is fair and reasonable.**

**2.4.3.3 [Time and Materials Contracts]{.underline}**

+-----------------------------------------------------------------------+
| ###### REQUIREMENT                                                    |
+-----------------------------------------------------------------------+
| Paragraph 7.j of FTA Circular 4220.1E states:                         |
|                                                                       |
| > j\. [Use of Time and Materials Contracts.]{.underline} Grantees     |
| > will use time and materials contracts only:                         |
| >                                                                     |
| > 1\. After a determination that no other type of contract is         |
| > suitable; and                                                       |
| >                                                                     |
| > 2\. If the contract specifies a ceiling price that the contractor   |
| > shall not exceed except at its own risk.                            |
+-----------------------------------------------------------------------+

**DISCUSSION**

**Time-and-materials (T&M) contracts may be used for acquiring supplies
or services. These contracts provide for the payment of labor costs on
the basis of fixed hourly billing rates which are specified in the
contract. These hourly billing rates would include wages, indirect
costs, general and administrative expense, and profit. There is a
fixed-price element to the T & M contract - the fixed hourly billing
rates. But these contracts also operate as cost-type contracts in the
sense that labor hours to be worked, and paid for, are flexible.
Materials are billed at cost, unless the contractor usually sells
materials of the type needed on the contract in the normal course of his
business. In that case the payment provision can provide for the payment
of materials on the basis of established catalog or list prices in
effect when the material is furnished. These contracts also may provide
for the reimbursement of material handling costs, which are indirect
costs, such as procurement, inspection, storage, payment, etc. These
indirect costs are billed as a percentage of material costs incurred
(similar to the billing of overhead costs as a percentage of direct
labor). Such material handling costs must be segregated in a separate
indirect cost pool by the contractor\'s accounting system and must not
be included in the indirect costs included as part of the fixed hourly
billing rate for direct labor. It would always be prudent to obtain a
pre-award audit of the contractor\'s accounting system to determine the
adequacy of the system to properly segregate material handling costs
from other overhead costs being billed with the fixed hourly rates for
labor.**

**[Use Only When No Other Type Will Work]{.underline}** - ***The FTA
Circular requires that you make a determination, before using this type
of contract, that no other type of contract is suitable*. The reason why
this type of contract is the least preferable of all allowable types is
that it creates a disincentive for the contractor to complete the
contract in a timely manner. Since each labor hour expended carries with
it a profit (and a predetermined overhead charge) built into the fixed
hourly rate, the contractor is motivated to work as many hours as
possible. There is no incentive to complete the contract quickly, and
thus minimize total costs to the buyer. (In a CPFF contract the fee is
fixed in dollar terms at the outset of the contract, allowing the
contractor to earn the fee whenever the work is complete, thus providing
some incentive to finish the contract as quickly as possible.)**

**[Subcontracts]{.underline} - If your T&M contract will involve
subcontracts for large dollar items or services, you will need to
evaluate whether the contractor\'s material handling costs should be
charged to these large dollar subcontracts as an indirect cost (as an
overhead type of charge), because to do so may result in an inequitable
allocation of these indirect costs to your contract. This is because the
large dollar value subcontract will absorb a far greater proportion of
the indirect cost pool than it should, based on a reasonable assessment
of the material handling costs actually generated by the subcontract
versus those generated by all other materials procured by the contractor
for other customers. When this situation arises you will want to
negotiate an advance agreement with the contractor as to the charging of
material handling costs. It may be more equitable to pay for the cost of
subcontract administration on a direct charge basis; i.e., the labor
cost for the subcontract**

**administrator charged directly. Or you may want to negotiate a reduced
indirect material handling cost rate to be charged to the subcontract
(which represents a more equitable allocation of the material handling
costs actually generated by the subcontract).**

**[Ceiling Price]{.underline} - You will need to specify the Agency\'s
maximum obligation (ceiling price) in the contract; i.e., the limitation
of the Agency\'s financial obligation which the total funds allotted to
the contract will allow. The contractor may not exceed this funding
limitation without your written authorization in the form of a contract
modification adding more funds.**

**[Proper Agency Surveillance]{.underline} - This type of contract
requires a high degree of Agency surveillance during performance in
order to provide reasonable assurance that efficient methods and cost
controls are used by the contractor.**

**[Avoid Cost Plus Percentage of Cost Arrangements]{.underline} - As
discussed below under CPPC contracts, care must be taken not to
structure an agreement which compensates the contractor at a
*predetermined percentage (for overhead or profit) of actual costs
incurred.* If you break out the overhead and profit from the labor rate
and call for them to be billed as separate rates based on actual labor
costs incurred, you will have an illegal cost-plus-percentage-of-cost
situation. Overhead and profit must be recovered as a part of the fixed
hourly billing rate for labor, as discussed above. You may allow the
contractor to bill material handling costs as an indirect cost rate
applied to actual material costs, provided the contractor segregates
material handling costs in the accounting system. You should conduct a
contract cost close-out audit of the material handling cost pool and
adjust the rates billed to those actually incurred (as you would do for
an overhead rate on a cost-reimbursement contract). However, where the
actual material handling costs are not large,**

**Agencies may elect to close out the T&M contract without a final cost
audit of the material handling cost pool.**

**2.4.3.4 [Labor Hour Contracts]{.underline}**

**DISCUSSION**

**Labor hour contracts are a variation of the time and materials
contract, differing only in that materials are not supplied by the
contractor. You should use this type of contract only when no other
would be suitable, and you need to document your determination if you
choose to use this type of contract.**

**2.4.3.5 [Cost Plus Percentage of Cost Contracts (CPPC)]{.underline}**

**DISCUSSION**

**FTA Circular 4220.1E clearly prohibits the use of this contracting
method. CPPC contracts are prohibited by statute and FTA may not grant
waivers for grantees to use this**

**method of contracting.** [^69] **Grantees must not only avoid using
this type of contract themselves, they must also insert clauses in their
cost-type contracts that prohibit their prime contractors from using
CPPC subcontracts. Care must be taken to avoid any kind of agreement
whereby the contractor\'s fee would be increased automatically with
increases in a particular cost element. Generally, any contractual
arrangement whereby the contractor is assured of greater profits by
incurring additional costs will be held illegal. The obvious problem
with this form of contract is that profits increase in proportion to
dollars spent, thus providing a positive incentive to inefficiency. *To
fall within the definition of CPPC, the agreement must provide that the
contractor\'s compensation, or some portion of it, will be computed as a
percentage of some of the costs of performance.* So for example, it is
not permissible to pay for overhead (indirect) costs by establishing a
predetermined percentage in advance and stipulating that overhead
expense will be reimbursed as a stated percentage of some other cost
such as direct labor. The problem with this arrangement is that such
compensation may be greater than the contractor\'s actual and final
overhead expenses, which means the payment becomes additional profit. In
the same way, a time-and-materials contract which called for payment of
overhead and profit at predetermined percentages of 15% and 10% of cost
incurred was held to be illegal.**[^70]

**This is not to prohibit *provisional overhead rates* which are audited
and adjusted to actuals at the end of the contract, nor does it prohibit
provisional or interim fee payments based on costs being incurred,
because the total fee is fixed at the inception of the contract and will
not increase with increases in actual costs. It is also permissible to
pay a material handling charge as a percentage of material costs
incurred if the contractor has a separate material handling cost pool.
This indirect cost pool should be audited after contract completion, and
the billed rates should be adjusted to actuals based on the audit.**

**Another way of avoiding the problem is to include overhead and profit
in fixed rates for labor. This is done in time-and-materials and labor
hour contracts where contractors are paid one rate for each hour of
labor performed. This type of arrangement is not illegal, but it still
tends to operate as a disincentive to control cost (more hours worked
equals more profits), and for this reason should be avoided whenever
other contracting options exist.**

**2.4.4 [Payments]{.underline}**

Payment is the buyer\'s most important contractual obligation. Payments
are the principal source of funds during contract performance allowing
the contractor to continue working. Delays in payments can have a
serious effect on the contractor\'s ability to continue performance.
When

less than full payment is made of a contractor\'s invoice, the terms
*\"withholding\"* and *\"setoff\"* are

commonly used to describe the refusal to make full payment. The term
*\"final payment\"* usually implies that both parties to the contract
have fulfilled all of their responsibilities.

There are two major types of contract payments: (1) payments for
completed items of work (including *partial payments*), and (2)
*progress payments* based on costs incurred or upon a percentage of
completion of the work. Another type of payment, which is used only
under extraordinary circumstances, is payment in advance of doing the
work (*advance payments*).

**2.4.4.1 [Payment of the Price]{.underline}**

Payment of the contract price is due upon completion of the work and
submission of the contractor\'s invoice. When the contract authorizes
delivery or performance in increments, payment of a portion of the
contract price may be made before the contract is completed. Such
payments are referred to as *partial payments*. Partial payments are not
considered to be a financing technique but they can be an important
means of providing funds for performance, and they should be used
whenever the contract can be structured in terms of incremental stages
or deliveries and there are appropriate acceptance criteria for the
supplies, services or completed subsystems of a larger system. In other
words, when the Agency can safely inspect, test and accept these units
and make a \"final\" payment for those items delivered, without having
to worry about their functioning as part of a larger system, then
partial payments should be established in the contract.

**2.4.4.2 [Advance Payments]{.underline}**

+-----------------------------------------------------------------------+
| ###### REQUIREMENT                                                    |
+-----------------------------------------------------------------------+
| FTA Circular 4220.1E, Paragraph 12.a, "Advance Payments," states:     |
|                                                                       |
| > "FTA does not authorize and will not participate in funding         |
| > payments to a contractor prior to the incurrence of costs by the    |
| > contractor unless prior written concurrence is obtained from FTA.   |
| > There is no prohibition on a grant recipient's use of local funds   |
| > for advance payments. However, advance payments made with local     |
| > funds before a grant has been awarded, or before the issuance of a  |
| > letter of no prejudice or other pre-award authority, are ineligible |
| > for reimbursement."                                                 |
+-----------------------------------------------------------------------+

**DISCUSSION**

**Advance payments are actually a method of financing and not a method
of paying for work completed or items delivered. They are made prior to
a contractor's incurrence of costs in order to enable the contractor to
perform the contract. The Federal Government places severe restrictions
on its own use of advance payments (FAR coverage may be found at FAR
Subpart 32.4). As indicated below in the paragraph "Exceptions to the
Prior**

**Approval requirement," when advance payments are generally accepted
industry practice, FTA does not require prior approval.**

**The FTA Circular requires FTA approval before grantees may use this
form of financing on third-party contracts. However, the Circular
clearly restricts the advance payment prohibition to those contracts
where the grantee is using FTA funds for the advance payment. If the
advance payments are being made with non-FTA funds, then FTA has no
involvement in the decision and need not approve of it. Grantees are
free to use local funds to finance their contractors in this manner if
they deem it appropriate. The Circular also covers the situation where a
grantee may wish to use local funds for advance payments before a grant
has been awarded or before FTA has issued a letter of no prejudice to
the grantee. In these cases FTA will not reimburse the grantee later for
such payments.**

**[Exceptions to the Prior Approval Requirement]{.underline} -- The FTA
requirement for prior approval of advance payments does not apply to
transactions where it is "generally accepted industry practice" to pay
in advance. In these situations, grantees may make advance payments
without prior FTA approval. These situations would include (but not
necessarily be restricted to) the following types of transactions:**

1.  **Rent**

2.  **Tuition**

3.  **Insurance premiums**

4.  **Subscriptions to publications**

5.  **Software licenses**

6.  **Construction mobilization costs**

7.  **Public utility connections**

## Best Practices

New York City Transit (NYCT) completed a major procurement for rail cars
in which there were two payment schedules in the Request for Proposals
(RFP). The first was a payment schedule containing milestone payments
totaling 20% of the price of cars paid prior to the acceptance of the
first test trains. A second or \"Alternate\" payment schedule had
milestone payments of 42% of the price of cars paid prior to the
acceptance of the first test trains. Contractors were required to submit
proposals based on both payment scenarios, as well as any alternative
payment plan they wished to propose. NYCT requested that the Federal
Transit Administration (FTA) provide written concurrence to make
advanced payments up to approximately 45% of the price of the cars if
there was appropriate consideration for greater payments made up front.
In addition,\
NYCT required that an Advanced Payment Bond or Letter of Credit be
provided in the full amount of the price of cars paid prior to the
acceptance of the first test trains. FTA provided their written
concurrence to NYCT\'s request.\
\
In order to evaluate the proposals received from the contractors, NYCT
performed a Net Present Value analysis of the 20%, 42% and other
contractor alternatives in order to quantify the value of the different
payment schedules. The analysis took into account the cost of money and
all aspects

of the timing of invoicing, starting with receipt of the invoice through
the time for actual payment. The Net Present Value analysis showed that
appropriate consideration was given in the winning proposal and NYCT
accepted it. An Advanced Payment Bond or Letter of Credit was required
to protect all payments for cars prior to acceptance of the test
trains.\
\
This case shows a very conservative approach as to what is defined as an
Advance Payment. The Advance Payment is considered to be the amount paid
to the contractor for cars until the first trains are accepted by NYCT.
The contractor is required to design, build and test the first 18 cars
which means that the contractor is incurring substantial costs during
this period. These costs include engineering and design hours,
supervision, ordering materials, set-up of the production line, etc. The
contract has a mobilization payment of 3% upon award of the contract and
approval of the Advance Payment Bond or Letter of Credit. Thereafter,
the contract has milestone (or completion-type progress payments) for
various submissions of designs, approvals of designs, starting of tests,
completion of tests, etc. A more liberal approach would define the
mobilization cost of 3% to be considered an Advance Payment and the rest
of the payments to be considered progress payments.

**2.4.4.3 [Progress Payments]{.underline}**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| Paragraph 12.b of FTA Circular 4220.1E states:                        |
|                                                                       |
| > b\. Progress Payments. Grantees may use progress payments provided  |
| > the following requirements are followed: [^71]                      |
| >                                                                     |
| > 1\. Progress payments are only made to the contractor for costs     |
| > incurred in the performance of the contract. [^72]                  |
| >                                                                     |
| > 2\. The grantee must obtain adequate security for progress          |
| > payments. Adequate security may include taking title, letter of     |
| > credit or equivalent means to protect the grantee's interest in the |
| > progress payment. [^73]                                             |
+-----------------------------------------------------------------------+

#  

# **DISCUSSION**

**Progress payments are a means of financing contractors that are
performing *fixed-price* contracts (a) under unusual circumstances where
a contractor cannot get private financing at a reasonable cost, or (b)
where the commercial practice for the item being procured is for the
buyer to provide financing (e.g., rolling stock procurements).** [^74]
**There are two major types of progress payments: those based on costs
and those based on a percentage of completion of work. Both types are
considered contract-financing methods (see FAR 32.102). Progress
payments may be appropriate if:**

-   **The contractor will not be able to bill for the first-delivery of
    products, or other performance milestones, for a substantial time
    after work begins. In Federal contracting practice, the usual
    contract duration for using progress payments is four months or more
    for small businesses and six months or more for others, and**

```{=html}
<!-- -->
```
-   **The contractor\'s expenditures prior to delivery of the first
    items will have a significant impact on the contractor\'s working
    capital.** [^75]

***Progress payments* are to be distinguished from *partial payments*.
*Partial payments* are payments made, as authorized by the contract,
upon delivery and acceptance of one or more complete units (or one or
more distinct items of service) in accordance with the contract
specifications, even though other quantities remain to be delivered.
Note that *partial payments are for completed units*, whereas *progress
payments are for uncompleted work-in-progress. ***

**Because the grantee is making payments for uncompleted, non-functional
units, FTA requires that adequate security be obtained from the
contractor protecting the grantee's (and FTA's) investment in case the
contractor fails to complete the deliverable units. The form of security
is to be determined by the grantee based on what is in the best
interests of the grantee in the particular circumstances. (See footnote
above re *adequate security*.)**

**[Progress Payments Based on Percentage of Completion]{.underline} -
The Federal Government authorizes progress payments on its contracts
based on a percentage or stage of completion of the work. This type of
progress payment is standard for construction contracts for all Federal
agencies.** [^76] **49 CFR Part 18.21(d) allows grantees and subgrantees
to use the percentage of completion method to pay their construction
contractors, which is consistent with the regulations for Federal
contracts. *However, grantees may not use the percentage of ***

***completion method for non-construction contracts. For those
contracts, progress payments based on costs incurred must be used.***
[^77]

**[Contract Clause]{.underline} -- Grantees should refer to the FAR
clause at FAR 52.232-16 for guidance on the specific issues that need to
be addressed in the progress payments clause and ensure that their
agency's clause adequately covers the important issues, including:**

-   **[Computation of amounts]{.underline} -- percentage of total costs,
    definition of "costs" to be included in the calculation (i.e., only
    those actually paid by the contractor, incurred but not paid,
    etc.).**

-   **[Liquidation]{.underline} -- the method of linking value received
    to payments made.**

-   **[Reduction or suspension of payments]{.underline} -- the
    circumstances under which the grantee may reduce or suspend progress
    payments.**

-   **[Title]{.underline} -- this provision should define the property
    considered allocable to the contract (parts, materials, special
    tooling, special test equipment, drawings and technical data, etc.)
    and the party that retains title to the property/work-in-process for
    which the progress payments are made.**

-   **[Risk of loss]{.underline} -- the contract should be clear as to
    which party assumes the risk of loss to contract property and
    work-in-progress before final acceptance of the units. *In the
    Federal clause, the contractor assumes the risk of loss even though
    title to all property acquired under the contract vests in the
    Government. ***

-   **[Progress payments to subcontractors]{.underline} -- this
    provision needs to define the circumstances under which the prime
    contractor must make progress payments to fixed-price
    subcontractors, and the subcontract terms to be included (covering
    the same issues as the prime contract's progress payment clause).**

-   **[Adequate accounting system/reports]{.underline} -- the contract
    must require an adequate job-order accounting system to be
    maintained that properly accounts for the costs of the job even
    though the contract is fixed-price. This provision should also give
    the grantee the right to require certain reports or other data in
    support of the contractor's invoices.**

-   **[Access to records]{.underline} - this provision must give the
    grantee the right to conduct audits of costs claimed in progress
    payment invoices.**

    **2.4.4.4 [Withholding and Final Payment]{.underline}**

    **DISCUSSION**

**A number of contract provisions expressly authorize the withholding of
payments. See, for example, the Davis-Bacon Act Clause** [^78] **or the
Contract Work Hours and Safety Standards Act Clause.** [^79] **The
standard Federal government clause for the payment of fixed fee on CPFF
contracts calls for a 15% withholding of the fixed fee until the
contractor submits a certified final indirect cost rate proposal and
otherwise complies with the final deliverable documentation requirements
of the contract (e.g., delivery of the final report concerning
inventions made under the contract).**

**[Limitation on Withholding]{.underline} - In the event you decide to
withhold payments on a contract, you must take care that the amount of
money withheld bears a reasonable relationship to the unsatisfactory
work; in other words, the amount withheld must represent a reasonable
estimate of the contractor\'s potential liability.** [^80] **Moreover,
the amount withheld must not be so great that it impairs the
contractor\'s ability to perform.** [^81] **You may also wish to
consider a clause limiting the amount of payments that may be withheld
in total under all clauses of the contract, as is the practice on
Federal contracts.** [^82]

**[Final Payment]{.underline} - Final payment is made to the contractor
when it has satisfied all of the deliverable requirements called for by
all provisions of the contract, including all of the required
documentation. Final payment signifies that the performance obligations
of both parties to the contract have been satisfied. Before making a
final payment, therefore, you should obtain a signed release from the
contractor releasing the Agency from any further claims by the
contractor. You should also ensure that the program office has signed a
receiving and inspection report certifying that all deliverable items
have been received, inspected, and accepted as being in conformance with
the contract specifications.**

**[Retainage on Construction Contracts]{.underline} - For a discussion
of retainage on Construction Contracts, see BPPM, section 10.1,
paragraph entitled "Retainage and the Problems of Contractors who Quit
Work."**

**2.4.5 [Indefinite Delivery Contracts]{.underline}**

When the exact times or the exact quantities of future deliveries are
not known at the time of contract award, or when the shelf life of the
product needed is short, grantees may wish to consider some form of
indefinite delivery (ID) contract. Indefinite delivery contracts offer a
number of advantages that will be discussed below with each type of ID
contract. As a general rule, however, ID contracts permit the grantee to
maintain inventories at minimum levels and provide flexibility with
respect to shipments to various user locations. It also facilitates
decentralized ordering by users at different locations.

There are three types of indefinite delivery contracts:

1.  Definite-quantity contracts,

2.  Requirements contracts, and

3.  Indefinite quantity (IQ) contracts (commodities)/Task order
    contracts (services).

**2.4.5.1 [Definite-quantity Contracts]{.underline}**

A *definite-quantity contract* is one which provides for delivery of a
definite quantity of specific supplies or services during a time period
which is fixed, with deliveries or performance to be scheduled at
designated locations at the time each order is placed under the
contract. This type of contract is appropriate when the grantee knows in
advance how many total items it will need during the contract period but
is uncertain as to the exact time or the exact amount of its needed
deliveries to any given location. The supplies or services called for by
this type of contract must be regularly available from the supplier or
available after a short lead time. For guidance as to ordering
quantities above the quantity stated in the contract, see section
2.4.5.3 below, paragraph entitled *Orders above the stated maximum*.

**2.4.5.2 [Requirements Contracts]{.underline}**

A *requirements contract* is one in which the grantee commits to place
all of its requirements for a particular item or service with a
particular contractor during a specified contract period, with
deliveries or performance to be scheduled at the time each order is
placed under the contract. This type of contract is used when quantities
and/or the times of needed deliveries are uncertain. It permits
flexibility to the grantee in both quantities and delivery schedules. It
may also shorten the delivery time of a product that has a longer
production lead time because the contractor knows that the grantee will
obtain all of its requirements under its contract and in this situation
contractors may be willing to maintain some level of inventory. A
*requirements contract* also allows for the ordering of supplies or
services *after requirements become known.* It differs from the
*indefinite quantity contract* in that it promises the contractor that
all of the grantee's requirements for the particular item will be
procured from the contractor, whereas the *indefinite quantity contract*
makes no promise of this nature and may in fact be one of several
(multiple) contracts awarded for the same item or service. The
*requirements contract* may produce better prices for the grantee in
that the contractor is assured from the beginning that all supplies or

services of the type called for will be procured from the contractor
during a stated period of time. The disadvantage to the grantee is that
it will be committed to order all of the designated supplies at the
contracted price even if it later learns that the supplies can be
ordered elsewhere more cheaply.

[Estimated total quantity]{.underline} -- When this type of contract is
used, grantees should state a realistic estimated total quantity in the
solicitation and in the resulting contract. This estimate is not a
guarantee by the grantee that it will buy the estimated quantity, but is
a good faith estimate of what the requirements are likely to be. The
estimate should be based on records of previous requirements as well as
the most current information available.

[Maximum and minimum quantities]{.underline} -- The contract should
protect the contractor by stating a maximum limit of the contractor's
obligation to deliver. This maximum limit may be expressed for the
entire contract, as well as for each individual order and for any
particular period of time within the contract period of performance.
Minimum order amounts may also be expressed for each order placed and
for the contract as a whole. Minimum order amounts, however, are not
required for this type of contract because the grantee's commitment to
buy its requirements from the contractor represents the legal
consideration necessary to make the contract binding. For guidance as to
ordering quantities above the maximum amount stated in the contract, see
section 2.4.5.3 below, paragraph entitled *Orders above the stated
maximum*. It should be noted that the minimum and maximum quantities in
a *requirements contract* are for the contractor's protection and do not
necessarily limit the grantee's procurement authority to order more
units (since the grantee has contracted to award *all of its
requirements* to the contractor). Thus the grantee's authority to add
units to a requirements contract without re-competition is founded on
its initial promise to award all of its requirements to the successful
contractor and such additions would not constitute an impermissible
increase in scope (as would be the case with an *indefinite-quantity
contract* when the grantee seeks to add units above the stated maximum
-- see below).

**2.4.5.3 [Indefinite-quantity Contracts]{.underline}**

An *indefinite-quantity contract* is one that provides for an indefinite
quantity of supplies or services, within limits that are stated in the
contract, to be provided during a time period that is fixed in the
contract. Deliveries of the supplies or performance of the services are
scheduled by placing orders with the contractor. This type of contract
may be appropriate when the grantee cannot predetermine, above a
specified minimum, the precise quantity of supplies or services

that will be required during the contract period, and it is inadvisable
for the grantee to commit itself for more than a minimum quantity.
*Indefinite-quantity* contracts offer several advantages:

1.  minimum inventory levels of supplies can be maintained,

2.  shipments can be direct to users in various locations,

3.  they permit flexibility in both quantities and delivery scheduling,

4.  supplies or services can be ordered after requirements become known,
    and

5.  the grantee's obligation is limited to the minimum quantity
    specified in the contract.

[Minimum and maximum quantities]{.underline} -- To ensure that the
contract is binding, a minimum number of units must be stated in the
contract, and it must be more than a nominal quantity. There must also
be a stated maximum of units that may be ordered. Indefinite-quantity
contracts should never be "open ended," where no maximum quantity is
stated. This practice has led to serious problems when agencies attempt
to "piggy-back" the open ended contracts of other agencies by ordering
quantities that were never included in the original competitive process.
(See section 6.3.3\--*Joint Procurements of Rolling Stock and
"Piggybacking*.*"* The contract may also state maximum or minimum
quantities that may be ordered under each task or delivery order and the
maximum that may be ordered during a specified period of time within the
contract's period of performance.

[Orders above the stated maximum]{.underline} -- If it becomes necessary
to order quantities above the maximum stated in the contract, (which
would be the number of units included in the original competitive
process), such orders should generally not be processed as "change
orders," ("change orders" must be within the scope of the original
competition), but should be processed as "new procurements." These new
procurements may either be competed or, if circumstances warrant,
processed as "noncompetitive procurements" in accordance with the
grantee's internal approval process for noncompetitive ("sole source")
procurements. *Grantees should anticipate the possibility of needing
additional quantities when they compete the contract award initially
and, if necessary, include option provisions for additional quantities
in the original competitive bidding. In this way if additional
quantities are needed they may be procured under the original contract
without having to justify them as a "sole source" add-on.*

[Multiple Award/Task Order contracts]{.underline} -- Grantees may wish
to consider making multiple contract awards for the same or similar
supplies or services under a single competitive solicitation. This may
be appropriate in order to ensure the quality or timeliness of
deliveries by not limiting the grantee to a single supplier who may not
perform according to the grantee's expectations or needs or who may not
be able to meet peak delivery requirements. In this event, another
supplier is immediately available to assure that needs will be met.

The Federal Acquisition Regulations (FAR), Subpart 16.504 --
*Indefinite-Quantity Contracts,* addresses the issue of multiple awards
in 16.504(c). The FAR expresses a preference for making multiple awards
of indefinite-quantity contracts under a single solicitation for the
same or similar supplies or services if (i) a recurring need for the
supplies or services is anticipated, and (ii) the agency cannot
predetermine its needs above a specified minimum, and (iii) when it
would be inadvisable for the agency to commit itself for more than a
minimum quantity. The FAR envisions the award of multiple *task order
contracts* in which individual task orders would be issued following
competitive solicitations to the original awardees.

If multiple awards are made, grantees must advise prospective bidders of
the procedures that will be used in issuing orders to the contractors
selected for award, including the criteria that will be used to provide
the selected contractors with a fair opportunity to be considered for
each order issued. The criteria may include such items as past
performance on earlier tasks or orders issued under the contract,
quality of deliverables, timeliness of deliveries, and other factors
considered

relevant by the grantee. It is important that price or cost be one of
the selection factors considered for each order awarded. If the original
contract did not establish the price for the supply or service, the
grantee will have to solicit cost or price proposals for each order.

The FAR does provide for exceptions to the requirement that all awardees
be provided a fair opportunity for each order awarded. These would
include situations where --

a.  The agency's needs for the supplies or services are so urgent that
    providing a fair opportunity would result in unacceptable delays;

b.  Only one awardee is capable of providing the supplies or services
    because they are unique or highly specialized;

c.  The order must be placed on a sole-source basis in the interest of
    economy and efficiency as a logical follow-on to an order already
    issued under the contract, provided that all awardees were given a
    fair opportunity to be considered for the original order; and

d.  It is necessary to place an order to satisfy a minimum guarantee.

Multiple awards will not be advisable when:

a.  state law prohibits,

b.  more favorable terms will be provided if a single award is made,

c.  the cost of administering multiple contracts outweighs any potential
    benefits from

making multiple awards, and

d.  tasks likely to be ordered are so integrally related that only a
    single contractor can

reasonably perform the work.

######## Chapter 3 

**3 - [Specifications]{.underline}**

3.0 [Overview]{.underline} (6/03)

> 3.1 [Types of Specifications and Risks]{.underline} (1/98)
>
> 3.1.1 [Design Specifications]{.underline} (1/98)
>
> 3.1.2 [Performance Specifications]{.underline} (1/98)
>
> 3.1.3 [Brand Name or Equal]{.underline} (1/98)
>
> 3.2 [Using Consultants to Prepare Specifications]{.underline} (1/98)
>
> 3.3 [Specifications for Equipment and Supplies]{.underline} (1/98)
>
> 3.4 [Specifications for Construction]{.underline} (1/98)
>
> 3.5 [Statements of Work for Services]{.underline} (1/98)

**3.0 OVERVIEW**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+=======================================================================+
| § 8.c (1) of FTA Circular 4220.1E requires that all solicitations     |
| shall:                                                                |
|                                                                       |
| \(1\) Incorporate a clear and accurate description of the technical   |
| requirements for the material, product, or service to be procured.    |
| Such description shall not, in competitive procurements, contain      |
| features that unduly restrict competition. The description may        |
| include a statement of the qualitative nature of the material,        |
| product, or service to be procured and when necessary, shall set      |
| forth those minimum essential characteristics and standards to which  |
| it must conform if it is to satisfy its intended use. Detailed        |
| product specifications should be avoided if at all possible. When it  |
| is impractical or uneconomical to make a clear and accurate           |
| description of the technical requirements, a \"brand name or equal\"  |
| description may be used as a means to define the performance or other |
| salient characteristics of a procurement. The special features of the |
| named brand which must be met by offerors shall be clearly stated.    |
|                                                                       |
| § 15 of the Master Agreement states that:                             |
|                                                                       |
| > d\. [Exclusionary or Discriminatory Specifications]{.underline}.    |
| > Apart from inconsistent requirements imposed by Federal statute or  |
| > regulations, the Recipient agrees to comply with the requirements   |
| > of 49 U.S.C. § 5323(h)(2) by refraining from using any Federal      |
| > assistance awarded by FTA to support procurements using             |
| > exclusionary or discriminatory specifications.                      |
| >                                                                     |
| > e\. [Bus Seat Specifications]{.underline}. A State or local         |
| > government recipient may use specifications conforming with the     |
| > requirements of 49 U.S.C. § 5323(e) to acquire bus seats.           |
+-----------------------------------------------------------------------+

**DISCUSSION**

**As a recipient of public funds you will have to keep in mind that you
represent the government, whose objectives in spending taxpayers\' money
will always include, as one of its goals, the goal of full and open
competition. It is easy to lose sight of this under the pressure of
completing a project on time. Many programs in your domain have
political sensitivity and media visibility. The temptations will be
great to \"get something out now,\" and it will always be easier to
respond to the immediate pressure than to do a careful and thorough job
at the outset. But time taken here, in the careful research and drafting
of the specifications, will invariably reward you with a better product,
at a lower cost, and with far fewer claims and delays during the life of
the project. Another age-old problem in this area of drafting
specifications is the desire to push the state of the art to a new
level, to have the best possible system, regardless of cost. Government
organizations tend to be applauded for the visible quality of the things
they do, whether it\'s their services, or major transit systems. But
against these real-life pressures stands the Federal and State
Government policy to define the \"minimum needs\" and to avoid
specifications which might unduly restrict competition. We need to
remind ourselves that our industrial suppliers are also taxpayers whose
tax dollars are helping to finance this procurement; as such they are to
be given every opportunity to compete for the work they are helping to
finance.**

**Technical Specifications and Statements of Work must clearly describe
the products and services to be procured in terms which will permit full
and open competition and which will meet the buying agency\'s minimum
essential needs.**

**3.1 TYPES OF SPECIFICATIONS AND RISKS**

**DISCUSSION**

**Specifications may be very detailed in describing the product or work
to be done, or may simply require an end result, or may contain
combinations of these two approaches. There are different levels of
risks and responsibilities inherent in these different types of
specifications. As a general rule the more design details there are in
the specification, the more the buying agency becomes responsible for
the performance of the product. Conversely, the more the specification
describes the performance of the product instead of its design features,
the more responsible the contractor becomes for the end product. The
legal theory involved in these cases is the implied warranty of
specifications.**[^83] **Following is a discussion of the various types
of specifications and the risks inherent in each type.**

**3.1.1 [Design Specifications]{.underline}**

**DISCUSSION**

**Specifications detailing the manner or method of performance are often
treated as *design* specifications. Contrasted with these are
*performance* specifications, which leave the details of performance,
and the details of design, to the contractor\'s discretion. *Design*
specifications are those which set forth precise measurements,
tolerances, materials, in process and finished product tests, quality
control, inspection requirements, drawings and other specific
information. It is this *design* type of specification, dealing with the
details of the work, which the contractor is \"required to follow as one
would a road map,\" which gives rise to implied warranty. Under this
type of specification, the buying agency (as the author of the
specifications) will be held responsible for design and related
omissions, errors, and deficiencies in the specifications and
drawings.**[^84] **There is an implied warranty that the detailed
designs or processes will result in an end item which functions as
required. Conversely, there is no implied warranty where the
specification simply sets forth an objective or end result to be
achieved, and the contractor is free to select the means of
accomplishing the task, in which case he assumes responsibility for that
selection.** [^85] **In those cases where the specification contains
both design and performance requirements, it will depend on what portion
of the specification causes the contractor\'s difficulties, whether he
has discretion to choose how to do the work.** [^86]

**Specific situations working to relieve the contractor from end item
performance responsibility would include:**

-   **When the contractor is left no discretion or choice in the
    materials to be used.** [^87]

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-   **When specifications set forth dimensions and the item built to the
    dimensions cannot be used as anticipated because of those
    dimensions.** [^88]

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-   **When specifications define a method of performance or the
    particular manufacturing processes a contractor must follow (e.g.,
    detailed procedures for pouring concrete, detailed soldering
    methods, etc.)** [^89]

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```
-   **When specified equipment cannot be successfully used in performing
    the contract.** [^90]

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-   **When detailed specifications require performance contradictory to
    local codes or ordinances.** [^91]

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-   **When the specifications provide for alternate methods of
    performance, and the contractor selects a method from among
    alternatives in the specification, the contractor will not be liable
    if the alternative does not accomplish the desired results.** [^92]

**3.1.2 [Performance Specifications]{.underline}**

**DISCUSSION**

**Performance specifications dictate the performance of the end product,
not how the contractor will do the work. These are specifications which
give the contractor discretion in how to achieve the end result called
for by the contract.**[^93] **Performance specifications place the
greatest degree of responsibility on the contractor and represent the
lowest degree of legal risk (but not necessarily the lowest program
risk) to the buying agency. It must be said, however, that there are
valid reasons for specifying \"design\" type requirements within
performance specifications, as where standardization is needed, where
there is an opportunity to avoid duplication of design costs which have
already been incurred, etc.**

**As a general rule, when a performance-type specification is used, the
buying agency will not be liable for a contractor\'s increased costs in
performing the contract unless the performance specification embodies
requirements which are impossible to attain.** [^94]

**It should also be noted that the fact that the buying agency specifies
a minimum requirement for some component or some aspect of performance
(e.g., \"at least 3 hp\"; \"no more than 2\" wide\") does not change a
performance specification into a design specification; i.e., the buying
agency is not warranting that an item which meets the minimum
requirement will perform properly when incorporated into the system. For
example:**

-   **A provision that surfaces be at a certain specified minimum
    temperature when painted was not a warranty that satisfactory
    results would be obtained at that temperature.**[^95]

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-   **Where the agency specified a minimum of not less than 14-gauge
    steel it was not warranting that 14-gauge would meet performance
    requirements.** [^96]

**3.1.3 [Brand Name Or Equal]{.underline}**

##### DISCUSSION

These are specifications which require a particular manufacturer\'s
product, part number, or model. The specification may allow for an
\"equal\" product and should clearly set forth the salient physical and
functional characteristics of the brand name product. Under this type of
specification if the contractor uses the brand name product or an
approved \"equal,\" the buying agency assumes the responsibility for
proper performance (assuming the contractor used the product in the
proper way). If the contractor elects to manufacture an equal product
in-house, he will be responsible that the product performs equally with
the specified brand named product. The BPPM Section 2.4.2.2.1 contains
extensive guidance on the use of \"brand name or equal\" specifications.

2.  **USING CONSULTANTS TO PREPARE SPECIFICATIONS**

+-----------------------------------------------------------------------+
| #####                                                                 |
|                                                                       |
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| § 8.a.(5) of the FTA Circular 4220.1E requires that grantees avoid    |
| situations known as \"organizational conflicts of interest.\" An      |
| organizational conflict of interest arises when a contractor, because |
| of other activities, relationships, or contracts, is unable or        |
| potentially unable, to render impartial assistance or advice to the   |
| grantee, or when a contractor\'s objectivity in performing the        |
| contract work is impaired, or when a contractor has an unfair         |
| competitive advantage.                                                |
+-----------------------------------------------------------------------+

**DISCUSSION**

**The FTA Circular envisions two distinct problems when using
consultants to prepare specifications or statements of work: (1) that
the consultant will be biased toward a particular product or firm
because he has business relationships with that firm or a financial
interest in the product, or (2) that the consultant will have an unfair
competitive advantage if he is allowed to compete for a product or
service which he helped to define in a specification or statement of
work. When a contractor is used to prepare or assist in the preparation
of specifications and statements of work, care must be taken to ensure
that the contractor will be completely unbiased in his decisions. Buying
agencies must ascertain that the contractor has no financial or
organizational relationship with a potential supplier which might
motivate him to slant a specification toward that supplier. With respect
to the unfair competitive advantage issue, contractors developing
specifications should not be allowed to compete on procurements for
which they prepared specifications.**

**Best Practices**

Contractors who are working on specifications to be used for competitive
procurements should be required to accept a \"Limitation on Future
Contracting\" provision in their contract for the specification/
consulting work which precludes them from bidding on the resulting
procurement. Further guidance may be found in the BPPM Section 2.4.2.2.2
\"Organizational Conflicts Of Interest.\"

It is also advisable when using consultants to draft procurement
specifications to obtain a formal written certification with their
proposal which describes all of their past, present or planned
organizational, financial, contractual or other interests with
organizations whose products or services may be offered in response to
the procurement on which they will be consulting. Where there are such
interests identified by the contractor, the contractor should also be
required to describe why it believes that performance of the proposed
consulting contract can be accomplished in an impartial and objective
manner. An example of a certification requirement used by the Federal
Department of Transportation may be found in Appendix B.10[^97].

**3.3 SPECIFICATIONS FOR EQUIPMENT AND SUPPLIES**

**DISCUSSION**

**Plans, drawings, specifications or purchase descriptions should state
only the minimum needs of the agency and describe the supplies in a
manner which will encourage maximum**

**competition, avoiding restrictive features which might restrict
offers.**

**Best Practices**

[Planning]{.underline} **-** A market survey should be conducted to
determine sources that offer products which meet the requirements.
Caution must be exercised to avoid disclosure of agency budgets or other
information which might give a supplier an unfair competitive advantage.
Descriptive literature from one prospective supplier cannot be used as
the sole basis for writing specifications. Determine what your essential
requirements are and separate these essentials from those which are
\"nice to have\" or desirable. In your research determine what the
state-of-the-art is and develop your specification within the
state-of-the-art.

[Content]{.underline} -

-   A performance-type specification is generally preferable to a
    design-type specification (i.e., don\'t tell the contractor how to
    do the work but rather specify the end-item\'s performance). This is
    in keeping with a goal of maximum contractor responsibility and
    minimum risk to the buying agency. It may be necessary, however, to
    use design-type descriptions (as for components, tolerances, etc.)
    in certain situations, such as the need for standardization.

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-   The specification must set forth the minimum essential
    characteristics and standards required to satisfy the intended use
    (e.g., \"no more than 2\" wide\"; \"at least 3 hp\"; \"at least once
    per month\").

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-   When \"brand names\" are being used for specific components, it may
    be advisable to include at least two brand names followed by the
    words \"or equal\". When so used, the specific features which must
    be met by offerors should be clearly stated. See BPPM Section
    2.4.2.2.1.

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```
-   The specification must not only describe the product but must also
    include reliability and quality assurance requirements (Quality
    Control Plan).

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```
-   Criteria for inspecting, testing and accepting the product will have
    to be included in the specification.

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-   Preservation, packaging, packing, and marking requirements will also
    have to be addressed.

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```
-   Include a Contract Data Requirements List (CDRL) to tell the
    contractor what documentation is required, when it is to be
    delivered, and whether the documents need approval (e.g., drawings,
    maintenance recommendations, master parts list, shipping/ handling/
    storage procedures, etc.) When buying major systems be sure to
    require a comprehensive spare parts data package as a deliverable
    item. This will be\
    \
    \
    necessary for competing the procurement of spare parts after the
    initial complement of spares has been used.

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-   Is training needed for users and those who must maintain the
    equipment? Are maintenance manuals needed?

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-   Do not include contractual terms and conditions, such as, cost/price
    information, warranties, delivery information, etc.

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```
-   Write sentences which are short, concise and simple.

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```
-   Use decimals instead of fractions.

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```
-   Don\'t use open-ended requirements such as \"as directed,\"
    \"satisfactory to,\" etc.

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```
-   Do not use unfamiliar words, colloquialisms or words which are
    ambiguous.

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```
-   When you have finished, read your specification and ask yourself,
    \"Is there any way that anyone could misinterpret this statement?\"

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```
-   You may wish to consider standardizing your Agency\'s approach to
    the format and content of specifications and statements of work.
    Appendix B.2 provides a *Specification/ Scope of Service Guide*
    which contains guidelines and recommendations for developing
    specifications, data sheets, and statements of work for supplies,
    equipment and services. [^98]

**3.4 SPECIFICATIONS FOR CONSTRUCTION**

**DISCUSSION**

**The technical provisions of construction specifications must be in
sufficient detail so that, when used with the applicable drawings and
the documents incorporated by reference, bids can be prepared on a fair
and competitive basis. In contracting with public funds the essential
objective in drafting specifications is to satisfy the fundamental
public policy requiring full and open competition. This objective is not
only a Federal requirement but most states and local governments have
similar statutes.** [^99]

##### Best Practices

[Contracting books, manuals, etc.]{.underline} - Volumes have been
written about the forbidding and exotic world of construction
contracting, and we would like to begin by advising you to obtain some
essential roadmaps for this journey, beginning with a comprehensive text
entitled, appropriately, *Construction Contracting*. [^100] We would
also recommend you obtain a copy of the *Construction Contract
Administration Manual* (which is devoted entirely to construction
contracting) produced by a public agency working with FTA grant funds.
[^101]

[Content]{.underline} **-**

-   Materials, equipment, components or systems should be described,
    where possible, by reference to documents generally known to
    industry. Such documents include Federal, military, or
    nationally-recognized industry, and technical society specifications
    and standards. The standards which best represent no more and no
    less than the buying agency\'s minimum needs should be selected for
    incorporation by reference into the construction specifications.

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```
-   If you employ an A/E firm to develop your specifications be sure
    they are warned against the use of proprietary specifications, i.e.,
    writing a specification \"around\" a particular manufacturer\'s
    product, effectively precluding competition. This is a common
    practice among A/E firms, especially when a particular product has a
    proven track record, but the practice conflicts with the objective
    of full and open competition in public contracting.

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```
-   Keep the specifications as simple as possible**.** One court used
    these words:

> \"A contractor should not be required to wade through a maze of
> numbers, catalogues, cross-reference tables and other data resembling
> cross-word puzzles in order to find out what the government requires
> in an invitation for bids.\" [^102]

-   You may want to consider using an \"Order of Precedence\" clause
    telling bidders which bid documents are to be relied on in the event
    of a conflict within the documents. You should choose a clause that
    places the most important part of the bid package in the most
    important position. For example, if you are certain that the
    drawings are correct, your clause could give the drawings priority
    over the specification.

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```
-   Complex specifications are best discussed with bidders at a pre-bid
    conference but be careful to advise bidders that none of the
    explanations at the conference will qualify the terms of the
    specifications, which can only be modified by written amendments.

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```
-   Be sure to review carefully FTA Circular 4220 (latest version) and
    the Master Agreement (MA) for requirements which may affect your
    specifications. Examples would include:

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```
-   Preference for recycled products. [^103]

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```
-   Use of metric system. [^104]

-   Seismic safety for construction projects. [^105]

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```
-   Environmental requirements. [^106]

-   Requirements of the Americans with Disabilities Act. [^107]

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-   Describe all of the contractor\'s obligations as far as meeting
    codes and standards that are applicable to the project (local,
    State, and Federal).

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-   Review the suggestions above for Supplies and Equipment, Section
    3.3, for applicability to construction specifications.

**3.5 STATEMENTS OF WORK FOR SERVICES**

**DISCUSSION**

A statement of work, rather than a specification, is used for services
contracts. A statement of work defines the work required of a
contractor, either to design the equipment to be procured or to provide
services which are not related to the procurement of hardware.

**Best Practices**

Statements of work should include the following elements:

-   When buying services on a \"level-of-effort\" basis, i.e., when
    specifying the number of labor hours to be furnished by the
    contractor, be sure to define the labor categories/hours for each
    and define the minimum years of experience and licensing
    requirements (CPA, PE, etc.) for each.

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-   Include, if applicable, a detailed list of all data, property and
    services which will be provided to the contractor by your Agency for
    his use in performing the contract.

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-   Detail all tasks the contractor must perform, and specify
    coordination requirements.

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-   Specify the data that must be submitted for approval. Also define
    the schedules for initial submission and the review/approval time
    required.

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-   Describe all the standards the contractor must fulfill, including
    Federal, State, and local standards that are applicable to the
    project.

**Acronyms**

ASBCA - Armed Services Board of Contract Appeals

BCA - Board of Contract Appeals

DOTCAB - Department of Transportation Contract Appeals Board

ENGBCA - United States Army Corps of Engineers Board of Contract Appeals

FTA MA - Federal Transit Administration Master Agreement

GSBCA - General Services Administration Board of Contract Appeals

::: Definition-Term
MPC - American Bar Association Model Procurement Code for State and
Local Government
:::

**Chapter 4**

**4 - [Methods of Solicitation and Selection]{.underline}**

4.0 [Overview]{.underline} (5/96)

4.1 [Micro-Purchases]{.underline} (6/03)

4.1.1 [Purchase Cards BART]{.underline} (6/98)

4.1.2 [Consolidation of Micro-Purchases]{.underline} (11/03)

4.2 [Small Purchases]{.underline} (5/96)

4.3 [Competitive Procurement Methods]{.underline} (5/96)

4.3.1 [Overview \-- Sealed Bids v. Competitive Proposals]{.underline}
(5/96)

4.3.2 [Common Elements of Solicitation Process]{.underline} (5/96)

4.3.2.1 [Advertising and Publicizing Solicitation]{.underline} (5/96)

4.3.2.2 [Solicitation Mailing List]{.underline} (5/96)

4.3.2.3 [Solicitation]{.underline} (5/96)

4.3.2.4 [Pre-Bid and Pre-Proposal Conferences]{.underline} (11/03)

4.3.2.5 [Amendment of Solicitations]{.underline} (5/96)

4.3.3 [Common Elements of Offers]{.underline} (5/96)

4.3.3.1 [Receipt of Offers]{.underline} (5/96)

4.3.3.2 [Federally Required Submissions with Offers]{.underline} (5/96)

> 4.3.3.2.1 [Certification Regarding Debarment, Suspension, and Other
> Responsibility Matters]{.underline} (5/96)

4.3.3.2.2 [Buy America Certification]{.underline} (11/03)

4.3.3.2.3 [Lobbying Certification]{.underline} (5/96)

4.3.3.3 [Other Submissions]{.underline} (5/96)

4.3.3.3.1 [Acknowledgment of Solicitation Addenda]{.underline} (5/96)

4.3.3.3.2 [Bid Guaranty]{.underline} (5/96)

4.4 [Sealed Bids (Invitation for Bids)]{.underline} (5/96)

4.4.0 [Overview]{.underline} (5/96)

4.4.1 [Solicitation]{.underline} (5/96)

4.4.2 [Bid Opening]{.underline} (5/96)

4.4.3 [Single Bid]{.underline} (3/04)

4.4.4 [Responsive Bidder]{.underline} (5/96)

4.4.5 [Bid Mistakes]{.underline} (5/96)

4.4.6 [Bid Withdrawal]{.underline} (5/96)

4.5 [Competitive Proposals (Request for Proposals)]{.underline} (5/96)

4.5.1 [Solicitation & Receipt of Proposals]{.underline} (5/96)

4.5.2 [Evaluation of Proposals]{.underline} (11/03)

4.5.3 [Competitive Range]{.underline} (5/96)

4.5.4 [Discussions and Clarifications]{.underline} (5/96)

4.5.5 [Additional Submissions]{.underline} (5/96)

4.5.5.1 [Request for Revised Proposals]{.underline} (5/96)

4.5.5.2 [Request for Best and Final Offer]{.underline} (5/96)

4.5.6 [Award Based on Initial Proposals]{.underline} (5/96)

4.5.7 [Withdrawal of Proposals]{.underline} (5/96)

4.5.8 [Debriefing Unsuccessful Offerors]{.underline} (5/96)

4.6 [Non-Competitive (Sole Source) Proposals]{.underline} (5/96)

4.6.1 [Justification for Use]{.underline} (5/96)

4.6.2 [Negotiation of Contract]{.underline} (5/96)

> 4.6.3 [Associated Capital Maintenance Item]{.underline} (5/96)
>
> 4.6.4 [Unsolicited Proposals]{.underline} (10/05)

4.7 [Special Procurement Methods]{.underline} (5/96)

4.7.1 [Multi-Step Procurements]{.underline} (5/96)

4.7.2 [Governmental Prices and Contracts]{.underline} (5/96)

4.7.2.1 [Procurements from General Services Administration]{.underline}

> [Schedules]{.underline} (5/96)

4.7.2.2 [State and Local Schedules]{.underline} (6/03)

4.7.2.3 [State versus FTA Requirements]{.underline} (5/96)

::: Definition-Term
4.7.3 [E-Commerce: Reverse Auctions]{.underline} (6/03)
:::

**4.0 OVERVIEW**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| The methods of solicitation and selection allowed within the Federal  |
| contractual sphere [^108] are listed in § 9 of FTA Circular 4220.1E.  |
| You may choose:                                                       |
|                                                                       |
| -   micro-purchases only for contract amounts less than \$2,500;      |
|                                                                       |
| ```{=html}                                                            |
| <!-- -->                                                              |
| ```                                                                   |
| -   small purchase procedures only for contract amounts less than the |
|     simplified acquisition threshold (currently \$100,000);           |
|                                                                       |
| ```{=html}                                                            |
| <!-- -->                                                              |
| ```                                                                   |
| -   sealed bids where                                                 |
|                                                                       |
| ```{=html}                                                            |
| <!-- -->                                                              |
| ```                                                                   |
| -   you have a complete, adequate, and realistic specification or     |
|     purchase description,                                             |
|                                                                       |
| ```{=html}                                                            |
| <!-- -->                                                              |
| ```                                                                   |
| -   two or more responsible bidders are willing and able to compete,  |
|                                                                       |
| ```{=html}                                                            |
| <!-- -->                                                              |
| ```                                                                   |
| -   the procurement lends itself to a firm fixed price contract and   |
|     the selection can be made primarily on the basis of price, and    |
|                                                                       |
| ```{=html}                                                            |
| <!-- -->                                                              |
| ```                                                                   |
| -   no discussion with bidders is needed after receipt of offers;     |
|                                                                       |
| ```{=html}                                                            |
| <!-- -->                                                              |
| ```                                                                   |
| -   competitive proposals; or                                         |
|                                                                       |
| ```{=html}                                                            |
| <!-- -->                                                              |
| ```                                                                   |
| -   noncompetitive proposals (sole source) procurement                |
|     [only]{.underline} if you can justify not soliciting additional   |
|     competition in the manner explicitly defined in FTA Circular      |
|     4420.1E § 9.h.                                                    |
|                                                                       |
| State law usually restricts the method of procurement more tightly    |
| than these Federal requirements.                                      |
+-----------------------------------------------------------------------+

**DEFINITION**

[Solicitation]{.underline} ‑ A purchasing entity\'s request for offers,
including a telephone request for price quotations, an invitation for
bids, or a request for proposals.

[Offer]{.underline} ‑ A promise to provide goods or services according
to specified terms and conditions in exchange for material compensation.

[Acceptance]{.underline} ‑ Agreement to the terms of an offer. In most
jurisdictions, \"award\" by a public agency can constitute acceptance,
and may create an enforceable contract.

**DISCUSSION**

**Based on your procurement plans and the specification developed with
your customer, you will generally initiate the procurement by soliciting
offers. Depending on the requirements of the method of procurement you
choose, you may solicit offers in a telephone call or in many other
forms ranging up to multi‑volume requests for proposals. When you
receive offers (whether quotations, bids, or proposals), you may accept
one, reject them all, or (unless you are using the sealed bidding
method) request additional offers. Regardless of the procurement method,
when you accept an offer, you create a binding contract according to the
terms of the offer.**

**Best Practices**

When you and your customer have specified the requirement, you will
generally solicit offers from suppliers. The solicitation ranges from a
telephone call to make a reasonable price determination (in the case of
a micro‑purchase), to a lengthy request for proposals in the case of a
competitive proposal. The terms in your solicitation of offers are
substantially determined by the method of selection you will use.
Because your contract will ultimately be based on the terms of the
offers, the selection of a method of procurement and the terms in your
solicitation of offers are important and you will have the most success
if they are based on well‑tested practices and documents.

The solicitation of offers places you in the position of controlling the
competitive process. You, rather than the supplier, decide whether to
accept or reject the offers. A technical exception to this competitive
model occurs in some micro-purchases and small purchases when, based on
catalogues or other supplier information, you issue a purchase order (or
similar document) without receiving a direct offer. In this case you are
technically making the offer, and the supplier is in a position to
accept (usually by performing) or reject (usually by notice to you).

A solicitation does not bind your agency to purchase the goods or
services solicited, although it may create an implied contract of fair
dealing with your suppliers. [^109] Although you will want to treat
suppliers as partners and with respect for the purposes of long run
competition and cost‑effective business relations, many agencies make
clear in their solicitations that they reserve the right to reject all
offers, i.e., that they are merely soliciting offers and that the
solicitation does not create any rights in suppliers. The price
quotations, bids, or proposals submitted by suppliers should be firm
offers to your agency to supply the goods or services upon the material
terms in your solicitation.

In sealed bidding, there is generally no further modification of
material terms: your agency either accepts one of the offers or rejects
all bids. In the other procurement methods, you may request or receive
additional offers before you accept one.

Although FTA Circular 4220.1E provides you broad choice and discretion,
state laws and local policy often require that you use sealed bids in
certain procurements and that you use competitive proposals in others.
Based on state law and your own practice, you may find the method of
procurement is largely determined by the type of services or goods you
are procuring. [^110] If the procurement is too large for micro‑purchase
or small purchase procedures, you will generally invite sealed bids for
selection primarily based on price, or request proposals which will be
evaluated according to additional criteria before a selection is made.
Under certain restricted circumstances, you may solicit a
non‑competitive proposal from a sole source. Purchases under contracts
with sister states or local agencies may also meet the Federal
requirements. [^111]

If the legal and policy requirements leave you with more than one
available procurement method, your choice among these methods will
depend largely on:

-   the time and expense required of you and your suppliers for the
    respective methods, and

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-   the likelihood of getting the best buy for your customers.

When you accept an offer, you establish a contract.

**4.1 MICRO‑PURCHASES**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| § 9.a. of FTA Circular 4220.1E authorizes the use of micro‑purchases  |
| as a method of procurement, when appropriate. If used, the following  |
| apply:                                                                |
|                                                                       |
| 1\. Micro‑purchases are defined as those purchases under \$2,500.     |
|                                                                       |
| 2\. Micro-purchases may be made without obtaining competitive         |
| quotations if the grantee determines that the price to be paid is     |
| fair and reasonable.                                                  |
|                                                                       |
| 3\. Micro‑purchases are exempt from the Buy America requirements.     |
| [^112]                                                                |
+-----------------------------------------------------------------------+

+-----------------------------------------------------------------------+
| 4\. Micro‑purchases should be equitably distributed among qualified   |
| suppliers in the local area and purchases should not be split to      |
| avoid the requirements for competition above the \$2,500              |
| micro‑purchase threshold.                                             |
|                                                                       |
| 5\. The requirements of the Davis‑Bacon Act apply to construction     |
| contracts between \$2,000 and \$2,500. [^113]                         |
|                                                                       |
| 6\. Other than the Davis-Bacon Act clauses for construction contracts |
| between \$2,000 and \$2,500, no other Federal clauses are required.   |
|                                                                       |
| 7\. Minimal documentation is required: (a) a determination that the   |
| price is fair and reasonable and (b) how this determination was       |
| derived.                                                              |
+-----------------------------------------------------------------------+

**DEFINITION**

[Micro‑purchasing]{.underline} ‑ A method of procuring goods and
services under \$2,500. A micro-purchase does not require obtaining
competitive quotations if you determine that the price to be paid is
fair and reasonable.

**DISCUSSION**

**If permitted by state and local requirements, purchases under \$2,500
no longer require more than one price to satisfy Federal requirements,
as long as you determine that the price paid is fair and reasonable. You
can include a \"fair and reasonable price\" determination in your forms
used for micro‑purchases. Rotating through a list of the suppliers is
one method to equitably distribute the micro‑purchases among qualified
suppliers.**

**Best Practices**

A threshold question you must get an answer to is whether or not your
state law allows you to implement a micro‑purchase method of procurement
that does not require \"full and open competition.\" If you have the
legal authority under your state law to implement a micro‑purchase
program, you must comply with the procedural requirements stated as
items 1, 2, 4, & 5 under the Requirements portion of this section. Once
you are satisfied that you can legally have a

micro‑purchase program under your state\'s laws, you need to develop a
procedure or regulation that addresses the FTA requirements and provides
practical guidance to your organization

[Limits and Procedures]{.underline} ‑ **How will you guide the use of
micro‑purchase procedures?** In accordance with the general requirement
to have procurement procedures and a contract administration system
(including written selection procedures),[^114] larger agencies often
maintain formal written procedures that address the circumstances under
which micro‑purchase procedures should be used. Although these
circumstances shall not include purchases greater than \$2,500, you may
wish to set your limit lower depending on state law and your own
experience with the cost‑effectiveness of price competition using small
purchase procedures. If you can efficiently ascertain the lowest cost
supplier, you may not always wish to use micro‑purchase procedures.

This method of procurement is intended to be used as creatively as
possible and to minimize the paperwork that is inherent in other
procurement practices. In establishing policies relating to
micro‑purchases at the grantee level, you must always be mindful of the
\"equitably distribute\" requirement and the prohibition against
splitting procurements. [^115] The latter requirement is one you already
deal with at all levels of your procurement processes. However, a
significant requirement is to meet the documentation requirement of the
FTA ‑‑ a determination that the price is fair and reasonable and how
this determination was derived.

[Equitable Distribution]{.underline} ‑ **How will you equitably
distribute your purchases among local suppliers?** Do you have an
automated purchasing and materials management system in place that
allows you to track purchases by line item and vendor the item was
purchased from? If so, and if you have multiple vendors for that item or
service, you can alternate among those vendors. Do you have blanket
purchase agreements in place with multiple vendors for multiple products
which were established as a competitive process? If so, micro‑purchases
could be made from those vendors, again on a rotating basis. It is a
good practice to keep records on dollar amounts awarded during the year
to assist in monitoring distribution.

[Bid Splitting]{.underline} ‑ **How will you monitor procurements so
that requirements are not being split to avoid another procurement
method?** You may have a system in place now that allows you to monitor
any tendency to split requirements over your small purchase maximum into
small purchases. Micro‑purchasing would be an additional method of
procurement addressed in your procedures and training within your
agency. If you have an automated system which records individual
procurements, that system may have to be reviewed periodically to
analyze the

procurement patterns for a particular product or service. Many times,
you simply rely on your buyer or contracting officer to monitor not only
bid splitting but also equitable distribution.

[Fair and Reasonable Determination]{.underline} ‑ **How do you document
your determination that the price is fair and reasonable and the basis
for that determination?** You may want to prepare some \"boilerplate\"
determinations for signature that address specific ways you buy products
or services. You may want to say that based upon a telephone quote from
John Doe Company for the widget and comparing that price with a price
paid 6 months ago for the same widget, it is fair and reasonable ‑‑ you
would fill in the blanks in your form, sign it, and file in the
procurement file. Alternatively, you may use an existing form such as a
buyer\'s tabulation that is filed. You may want to have another form
that indicates the procurement is being made from an existing Blanket
Purchase Agreement for which competition was obtained. You may want to
prepare a form that addresses sales items ‑‑ you are buying this widget
from X Company based upon an advertisement that the widget normally
sells for \$35 each and is on sale for \$29.50 and this is fair and
reasonable. Finally, you may want to have a form that simply addresses a
standard commercial item ‑‑ the price is fair and reasonable because it
is a standard commercial item sold in the open marketplace. [^116]

In implementing this requirement at the Federal level, the regulations
recognize the paperwork cost of verifying the reasonableness of price
may more than offset the potential savings. The price is also
essentially assumed to be reasonable unless the contracting officer
suspects or has information to indicate that the price may not be
reasonable (higher than recent price paid or has personal knowledge of
price for the supply or service), or a supply or service is being
purchased for which there is not comparable pricing information readily
available. [^117]

[Other Federal Precedent]{.underline} ‑ In response to requests from its
own field offices for more guidance, the Federal Government recently
revised its regulations dealing with direct Federal micro-purchases.
[^118] Because these changes give more flexibility to procuring
agencies, you might want to review these provisions as you consider
policies and guidance for your agency\'s micro-purchases. Among the
changes were:

-   the Government‑wide commercial purchase card is the preferred means
    (but not the only means) to purchase and pay for micro‑purchases;
    [^119]

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-   agencies are encouraged to delegate micro‑purchase authority to
    employees of the agency who will actually be using the supplies or
    services being purchased; [^120]

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-   contract clauses are not required for micro-purchases; and

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-   documentation to support micro‑purchases is to be minimized. [^121]

A recent report by the General Accounting Office [^122] that addresses
use of credit cards by Federal agencies is expected to result in more
relaxed guidance being issued by the Federal agencies and increased
usage of the credit card. The report discusses the savings in time and
money that an agency can realize by utilizing credit cards for
micro‑purchases and the fact that there has been no apparent increase in
procurement fraud through the utilization of these cards.

There is no absolute guidance that can be given in this area as to what
works best or even well. The authority to use micro‑purchases is
intended to provide a very flexible procurement method which will allow
you to buy low‑priced items in a cost‑efficient manner.

**4.1.1 [Purchase Cards]{.underline}**

**DISCUSSION**

**This section deals with the use of purchase cards for micro-purchases,
which are those of \$2,500 or less. Since micro-purchases are exempt
from the requirements of publicizing and obtaining competitive quotes,
they are well suited to being delegated by the procurement department to
the end users of the supplies or services. And since purchase cards have
proven to have certain advantages in making micro-purchases, the
delegation of authority to use purchase cards will be the focus of this
section.**

**A *purchase card* works like a personal credit card, such as VISA or
MasterCard. Purchase cards offer a number of tangible advantages over
the traditional purchasing methods of issuing individual purchase orders
or blanket purchase orders, but they also present new challenges,
especially in the area of internal controls and the equitable
distribution of the agency\'s business to various vendors, including
Disadvantages Business Enterprises (DBE\'s).**

**Best Practices**

The San Francisco Bay Area Rapid Transit District (BART) instituted a
pilot program for purchase cards on July 1, 1996. The results of the
BART program have generally been very positive. The BART experience has
demonstrated a number of important lessons, which other grantees should
be aware of, and these are discussed below. The detailed procedures
adopted by BART for implementing its purchase card system are included
in Appendix B.13, *BART Purchase Card System.*

[Delegation of Authority]{.underline} - All purchase cards should be
centrally controlled out of the Procurement Department**.** The
Procurement Department must be responsible for training those
individuals who are to be given authority to use the purchase cards. In
order to maximize the benefits of micropurchasing with purchase cards,
the persons authorized to use the card should be those whose department
will be using the supplies or services being purchased. The delegation
of authority to end users should involve the appointment in writing of
these end users as \"contracting officers\" (or such other title as the
grantee may use to describe those having authority to award contracts).
Such an appointment procedure has been adopted by BART, and is also
followed by Federal agencies (See FAR 1.603-3, *Appointment*). All
purchase card activity would function, therefore, as re-delegated
procurement authority requiring a valid warrant, training and periodic
review by the Procurement Department. Cardholders would be subject to
the same *Standards of Conduct* as other procurement personnel (See BPPM
§ 2.4.2.2.2 - *Written Standards of Conduct).* They would also be
subject to the procurement policies issued by the Procurement
Department. The grantee\'s written procurement procedures must be
expanded to give specific guidance for purchase card activity, including
the internal controls and the best business practices for users to
follow.

[Advantages of the Purchase Card]{.underline} - BART has identified a
number of advantages in using the purchase card. These include:

-   Vendors are now getting paid much more quickly; i.e., within 1-2
    days.

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-   Vendors are responding rapidly to the agency\'s orders; i.e., within
    20-30 minutes of an order.

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-   If a vendor does not have the needed part, the end user \"shops\"
    the street until they can find another vendor who has the part,
    instead of ordering the part from the initial vendor\
    who would have to \"buy\" the part and pass it through the blanket
    purchase order with an additional \"markup.\"

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-   There is more price competition with the card than with using the
    traditional blanket purchase order system. In the past, vendors knew
    how difficult it was to get a blanket purchase order established, so
    their pricing tended to be inflexible. With the card, vendors know
    that BART has the ability to go to other vendors, so there is now
    more\
    \
    \
    price competition. The bottom-line result is that there are fewer
    vehicles out for parts and the budget performance has improved.

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-   The card provides a complete electronic listing of all cardholder
    activity. This activity can be analyzed using PC software such as MS
    Office-Access and Excel to look at trends in the data; for example:

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-   Were any individual transactions over the micro-purchase threshold
    of \$2,500? Are requirements being artificially split to stay within
    the \$2,500 limit?

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-   Were purchases of similar items for different vendors reasonably
    uniform in pricing? In other words, does the data prove the
    reasonableness of prices being paid?

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-   Is the business being equitably distributed among vendors?

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-   Are Disadvantaged Businesses receiving an equitable portion of the
    business? This can become a problem area with the card, and end
    users need to work to identify potential DBE vendors. The agency's
    written procedures for the card should make the cardholders
    responsible for meeting the agency's reasonable and attainable DBE
    goals.

4.1.2 [Consolidation of Micro-Purchases]{.underline}

If you have a large volume of repetitive buys, you should consider
whether it is feasible to consolidate these purchases into larger
quoting packages in order to get better pricing, reduce inventory
levels, and make the procurement operation more efficient in terms of
effort expended. The best practice described below may be something you
should consider for your agency if you have circumstances similar to
those at the Whidbey Island Naval Air Station.

##### Best Practices

This describes an initiative taken by the Purchasing Manager at Whidbey
Island Naval Air Station to analyze the repetitive procurements for
standard items from the several different shops at this government
facility, and consolidate them into larger quoting packages. The result
was a dramatic lowering of unit prices and a much more efficient
procurement office in terms of effort spent. This procurement manager
also used this technique for her next employer, Community Transit, with
similar savings.

When she assumed the duties of Purchasing Manager, this individual began
to develop lists of items bought repetitively during the last six-month
period. She entered the items into a database for easy retrieval and
updating. A list of items was developed for each of the functional user
shops that initiated procurements. These included: paint supplies,
building supplies, plumbing supplies, grounds keeping supplies, liquid
oxygen plant supplies, vehicle maintenance, office supplies, electrical
supplies and waste & heating plant chemicals. Once the historical
purchases information was developed, the Procurement Manager sent the
data to each of the shop managers and had them review it and update it
for their anticipated needs in the upcoming six-month period.

With the anticipated six-month requirements lists in hand, the
Purchasing Manager then developed vendor lists for each of the different
shop's requirements. Vendors were notified that the anticipated needs
for the next six-month period were based on actual historical usage so
that there was a certain degree of confidence that the items on the list
would be ordered during the upcoming period, although no guarantee was
given to the vendors that the Navy would buy the same quantities they
had bought in the past. It should also be noted that the six-month
contract period was chosen after dialogue with vendors who suggested
they would be willing to bid prices without contingencies for inflation
if the contract was six months and not, for example, one year. So the
contract terms were chosen with the vendors' advice as to what would
achieve the best pricing arrangement. For each list of standard items
bid, no more than two or three vendors were awarded each list. Then
blanket agreements were processed with unit prices that were firm for
the six-month period of the contract. This entire procedure was then
repeated every six months. The end result was not only dramatically
lower pricing and more efficient procurement operations, but also lower
inventory levels since the vendors were willing to stock the various
items knowing they would in all likelihood get orders for the items.
This meant the Navy received the items expeditiously when orders were
placed. [^123]

**4.2 SMALL PURCHASES**

  -----------------------------------------------------------------------
  **REQUIREMENT**

  Small purchase procedures may not be used if the services, supplies, or
  other property costs more than \$100,000. If small purchases procedures
  are used, price or rate quotations shall be obtained from an adequate
  number of qualified sources. FTA Circular 4220.1E § 9.b.
  -----------------------------------------------------------------------

**DEFINITION**

[Small Purchase]{.underline} ‑ Acquisition of services, supplies or
other property that cost less than the federal simplified acquisition
threshold, currently fixed at \$100,000.

[Small Purchase Procedures]{.underline} ‑ Those relatively simple and
informal procurement methods used to make small purchases. If these
procedures are used, price or rate quotations shall be obtained from an
adequate number of qualified sources.

**DISCUSSION**

**As a method of procurement, small purchase procedures recognize that
up to some statutory level (\$100,000 for federal procurements) it could
cost more to conduct formal competition than the value expected to be
yielded by the formal competition. This procedure requires obtaining
only limited competition from an \"adequate\" number of \"qualified\"
sources (at least two). Solicitations and quotations for small purchases
may be either oral or written.**

**Best Practices**

[State and Federal Thresholds]{.underline} ‑ As with most other
procurement methods, it is important that you determine the dollar
threshold for small purchases in your state law and local requirements.
In many cases, the definition will not define a small purchase but,
rather, will establish at what dollar value competitive sealed bids or
proposals are required ‑‑ e.g., \"before a contract can be awarded in
excess of \$15,000, the procedures of this statute relating to
competitive sealed bids or competitive sealed proposals shall be used.\"
Contracts awarded at the lower of this state level or \$100,000 are
considered small purchases for the purposes of this discussion and the
provisions of FTA Circular 4220.1E.

If your state and local threshold for small purchases is substantially
less than \$100,000, you may wish to recommend that these requirements
be changed to conform more closely to Federal requirements.
Alternatively, if the state\'s requirements above its small purchase
threshold are substantially less cumbersome than Federal requirements,
you may wish to create an intermediate procedure for small Federal /
competitive state purchases. For example, if your state required that in
all construction and equipment contracts over \$10,000, competition be
obtained by a simple posting and solicitation without advertisements,
you could establish a procedure for bids between \$10,000 and \$100,000
that avoided the time and expense of advertising the procurement and
relied on direct solicitation to known sources.

[Initiating a Small Purchase]{.underline} ‑ **What documentation do you
use to initiate this procurement method?** Most transit properties use
some sort of requisition that is typically prepared by the unit that has
the requirement (your customer) which details how many widgets are
required and by when. Many times, this same document will include
estimated pricing and this estimate will

frequently dictate which method of procurement you will use. Obviously,
if the requirement is for \$500,000 worth of widgets, you will use a
competitive process (IFB or RFP). Your procedures can encourage your
customers to attach a draft specification or scope of work to the
requisition, particularly if the small purchase method is to be used;
otherwise you may assist your customer. (See Chapter 3,
\"Specifications.\")

**Should you establish a practice of rotating buyers that are involved
in using these procedures from one commodity to another?** In rare
instances, it has been found that a buyer gets \"too close\" to a
particular vendor and, because of the informality of the procedures,
that vendor starts to receive most of the purchase orders for those
requirements. Purchase order

records can be reviewed (perhaps through your agency\'s accounts payable
records) to see if one vendor has received an abnormal amount of
purchase orders. On the other hand, a buyer who is familiar with the
supply industry characteristics of a commodity, such as the
manufacturing cycle, lead time, distribution practices, etc., can bring
both efficiency and more optimal buying to the work.

[Solicitation]{.underline} ‑ **What level of competition is required?**
Stated another way, how many individuals or firms must be solicited? It
is not unusual to have a requirement that three firms be solicited up to
an expected contract value of \$5,000 and between \$5,000 and \$15,000
(the hypothetical maximum), five firms would be solicited. If your
source list has more firms than you are required to notify, do you have
a procedure to rotate sources? For example on one procurement you will
contact firms 1 through 5 and on the next one, you will contact firms 6
‑ 10. It is not unusual to have procedures that require you to rotate
your sources in this manner. By doing so, you are broadening your base
of competitors and enhancing your competition.

**Is the small purchase for architectural or engineering (A&E)
services?** If so, A&E services may be procured using small purchase
procedures. However, the language in FTA Circular 4220.1E that requires
the procurement of A&E services using the Brooks Act procedures also
applies. [^124] The selection must be based initially on qualifications;
price may be considered only for the most qualified offeror. You may
proceed to the next most qualified if you cannot agree on a fair and
reasonable price. [^125]

**What level of documentation is required to solicit prices for small
purchase non‑Brooks procurements?** Can you use oral descriptions only,
up to a certain dollar value? Are written descriptions (specifications
or statements of work) required above a certain level? It is not unusual
for small purchase procedures to allow oral descriptions, (particularly
if the procurement

is decentralized or the buyer has expertise in the item), up to one
estimated dollar level and then require written descriptions above that
level. Remember, that for construction using federal dollars, the
Davis‑Bacon Act requirements apply to all procurements (including small
purchases) over \$2,000. [^126] The level of documentation may also be
tied to whether or not an off‑the‑shelf item is being bought or whether
the item or service being bought is as per an agency specification. Oral
solicitations and quotations may be allowed at a higher dollar level for
off‑the‑shelf products than for products built to agency specifications.

**Is there a requirement that you include a certain number of DBE firms
in the firms you contact?** This is a fairly common requirement transit
properties use for DBE participation. Compliance with your policies can
be systematically documented.

**How do vendors indicate their price(s) to you in response to your
request?** Do you accept oral prices? Do you require written quotations?
If so, do you allow faxes? You could do any of these. You must, however,
determine what complies with the laws governing your property and then
develop and follow appropriate procedures. The format and level of
detail in these procedures should be commensurate with the size of your
agency and they can be well enough promulgated so that they are well
known to members of your procurement staff and your internal customers.

[Award]{.underline} ‑ **What happens if the quotations are all higher
than your small purchase threshold?** Can you still issue a purchase
order or do you have to change methods and perform a competitive
procurement? In many states, you will not be able to award an order that
is in excess of your state\'s small purchase threshold. This is why it
is a good idea to try to develop an estimate prior to initiating the
quotation process. If it is \"close\", it will probably be better to
commence a formal competitive procurement to begin with.

**How do I award a small purchase?** The most common contractual
instrument used to accomplish a small purchase is a purchase order.
Typically, after you determine who will provide the best price for the
widget, you will prepare a purchase order with the price and other terms
and conditions required by your agency and send it to the vendor. In
most instances, this document transmission does not create a binding
contract ‑‑ it is your offer to the vendor to do the work or provide the
widget at the price quoted. A contract comes into existence when the
vendor demonstrates some level of acceptance of the offer ‑‑ usually
when accepted in writing, performance commences, or delivery is made.
[^127]

[Documentation]{.underline} ‑ **How much documentation of the
procurement process do I need to keep?** One standard you may find
useful is to how much would satisfy a third party (an auditor), that you
have complied with your agency\'s policies and procedures and that the
price you are paying is \"reasonable.\" This will typically include the
requisition (or purchase request), what specification was used (if any),
who were quotations requested from, when and what quotations were
received and from whom (a simple abstract of quotes received), and a
copy of the purchase order. Much of the documentation for small
purchases can be accomplished on pre‑printed forms or completed on‑line
if your computer system will allow for that type of input. Remember, it
is supposed to be simple, but never forget that we must make an audit
trail that can

be followed -- the clearer and more complete the trail is, the better.
Procurement documentation is discussed in Section 2.4.1, \"File
Documentation.\"

**4.3 COMPETITIVE PROCUREMENT METHODS**

**4.3.1 [Overview ‑‑ Sealed bids v. Competitive Proposals]{.underline}**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| There is no Federal requirement that grantees use the sealed bid or   |
| competitive proposal method of procurement for any procurement. These |
| are methods identified by the FTA as methods that may be used as      |
| appropriate. [^128] The following conditions should be present for    |
| sealed bidding to be feasible:                                        |
|                                                                       |
| > 1\. A complete, adequate, and realistic specification or purchase   |
| > description is available;                                           |
| >                                                                     |
| > 2\. Two or more responsible bidders are willing and able to compete |
| > effectively for the business;                                       |
| >                                                                     |
| > 3\. The procurement lends itself to a firm fixed price contract and |
| > the selection of the successful bidder can be made principally on   |
| > the basis of price; and                                             |
| >                                                                     |
| > 4\. No discussion with bidders is needed. [^129]                    |
|                                                                       |
| Sealed bidding is the preferred method for construction if the above  |
| conditions are present. [^130] If sealed bidding is used, FTA         |
| Circular 4220.1E places general requirements on the advertisement,    |
| bid period, bid opening, price adjudication, and contract award or    |
| rejection of bids. [^131]                                             |
|                                                                       |
| ::: Definition-Term                                                   |
| If, however, a grantee decides to use the competitive proposal method |
| of procurement, the FTA prescribes requirements for publication       |
| including evaluation factors, solicitation, evaluation, selection,    |
| and award. [^132]                                                     |
| :::                                                                   |
+-----------------------------------------------------------------------+

  -----------------------------------------------------------------------
  For some agencies, state law requires the sealed bidding or competitive
  proposal method in procuring certain goods or services, or in certain
  circumstances.

  -----------------------------------------------------------------------

**DISCUSSION**

**If you and your customer (using department) can specify what you need
accurately enough, you maybe confident you will receive a satisfactory
product or service from any responsible and responsive bidder. In these
cases you can maximize price competition and simplify the process by
using sealed bids. E.g., supply of diesel fuel normally fits this
procurement method.**

**There are commodities and services that your customers need that are
very difficult, if not impossible, to obtain through a sealed bidding
process under which award is made to the low responsive responsible
bidder. You may not be able to define your requirement precisely enough
and/or you may be concerned with performance specifications which are,
by their nature, more subjective than design specifications.** [^133]

**There may be technical and price tradeoffs in what you are trying to
buy. You may be willing to pay a somewhat higher price to obtain a
commodity that does more for your system, but there is a limit to what
you will pay. You may find that the quantities or time required are
unknown. The price risk associated with a fixed price contract may be
burdensome on the contractor and would be borne at too high a price to
the agency to use that type of contract. Consequently, you need the
ability to negotiate cost elements for the contract that could result in
a cost reimbursement type contract.**

**There may be a variety of good sound business reasons why you need the
ability to negotiate a contract and are willing to spend the time to do
so. The competitive proposal method is a flexible procurement tool for
you to use. E.g., development of a new information system to serve a
unique need would probably require a negotiated procurement.**

**Purpose**

Sealed bidding (sometimes called \"invitation for bid method\" or
\"formal competition\") and competitive proposals (sometimes called
\"request for proposal method, or \"competitive negotiation\") are the
two principal procurement methods. The sealed bid method is preferred
because:

-   it is a simple process without complex evaluation criteria or
    repeated requests for and receipt of offers;

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-   it maximizes price competition by basing the selection among
    responsive, responsible bidders on price alone; and

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-   it is the most easily understood by suppliers and the public,
    maximizing public acceptance and minimizing the opportunity for
    unethical practice.

However, it requires a very clear specification since it could result in
you not getting what you want, and the successful bidder can use
ambiguity in the specification to reduce its costs and increase its
profit. Nevertheless, this method is required by many state laws for
many major transit procurements.

Your customers may not embrace sealed bidding as eagerly. In addition to
the burden of specification which often falls on them, they may believe
that sealed bidding requires them to set minimums on these parameters
just to maximize price competition. Hence, the negative connotation of
\"low bid\" equipment or services. Most states require, or at least
permit, use of the competitive proposal method for professional
services. Computer system procurements were often classified as
professional services, recognizing the design and software development
content which made it difficult to specify computer systems for price
competition. Today, software systems often have their own exemptions
from competitive bidding requirements.

Where it is permissible, there is a growing trend to use competitive
proposals. An increasing number of states permit competitive proposals
for bus procurements and the American Public Transit Association
*Standard Bus Procurement Guidelines* encourage the use of this method.
The competitive proposal method is intended to permit competition on
quality and other factors,\
as well as on price. [^134] It is a good practice to become familiar
with your state laws and work with counsel to maximize flexibility of
the procurement process to be used.

**Best Practices**

[Similarities between the Sealed Bidding and Competitive Proposal
Methods of Procurement]{.underline} ‑ The competitive proposal method
has many common attributes with the sealed bidding process:

-   Like an Invitation for Bids, the Request for Proposals is a written
    document published to the \"world\", soliciting the submission of
    offers in response to the Request.

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-   The objective is to promote full and open competition.

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-   The terms and conditions of the solicitation and the resulting
    contract are spelled out in the Invitation or Request.

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-   If determined necessary, an opportunity is provided (through a
    pre‑bid or pre‑proposal conference) for prospective offerors to meet
    with procuring agency officials to get answers to questions prior to
    the submission of the bids or initial proposals.

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-   A reasonable amount of time is provided prospective offerors in
    which to prepare and submit their offers.

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-   Rules are normally provided that specify treatment of offers that
    are submitted late.

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-   Award will only be made to an offeror determined to be
    \"responsible.\"

[Differences between the Methods of Procurement]{.underline} ‑ The
competitive proposal procurement method differs from the sealed bidding
process in that:

-   A complete, adequate and realistic specification or purchase
    description allowing for competition primarily on the basis of price
    alone may not be available.

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-   The contract award amount, whether a firm‑fixed price or some type
    of cost reimbursement contract, can only be determined on the basis
    of costs of the contractor derived from a negotiation process.

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-   Discussions or negotiations may be needed to address technical
    requirements as well as proposed cost or price aspects of the
    offeror\'s proposal. Discussions may be conducted with one or more
    offerors who have submitted proposals.

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-   An opportunity may be given to revise proposals and to submit a
    final proposal at the completion of the discussion phase of the
    process.

**4.3.2 [Common Elements of Solicitation Process]{.underline}**

**4.3.2.1 [Advertising and Publicizing Solicitation]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| § 8.a. of FTA Circular 4220.1E requires that all procurement          |
| transactions be conducted in a manner providing full and open         |
| competition.                                                          |
|                                                                       |
| § 9.c. of FTA Circular 4220.1E requires that invitations for bids are |
| to be \"publicly\" advertised.                                        |
+-----------------------------------------------------------------------+

+-----------------------------------------------------------------------+
| § 9.d. of FTA Circular 4220.1E requires that requests for proposals   |
| are to be publicized.                                                 |
|                                                                       |
| State law requirements are sometimes more specific as to the content  |
| and manner of advertising, particularly when using the sealed bidding |
| method.                                                               |
+-----------------------------------------------------------------------+

**DISCUSSION**

**IFBs and RFPs must be publicly advertised and publicized
(respectively) but the precise manner and content is at your discretion
within your state law requirements. While the major local newspapers in
your commercial community are the most commonly used media, varying
procurements will dictate varying media and varying notice periods to
most cost‑effectively notify the greatest feasible number of
competitors.**

**Outreach through diverse media may be the most cost‑effective means to
increase competition, e.g. through market communication networks such as
trade associations, commercial procurement listing services, or mailing
list enhancement as discussed in Section 4.3.2.2, \"Solicitation Mailing
List.\" However, advertising in appropriate media is a prudent manner of
ensuring unbiased notification and of making new contacts. In addition
to increasing competition, advertising procurement actions also broadens
industry participation in meeting industry requirements, as well as
provides assistance to small businesses and DBE firms interested in
obtaining contracts and subcontracts.**

**Best Practices**

Your state legislature, in recognizing a causal relationship between
advertising and competition, may have addressed the need for advertising
procurements by enacting a requirement to advertise. As with other
procurement issues, you should check to see what, if any, specific
requirements you are obligated to follow under your state\'s law. The
requirement for advertisement generally takes the form of requiring a
notice inviting bids be published at least once in at least one
newspaper of general circulation in the state not later than the
fourteenth day before the day set for receipt of bids ‑‑ the numbers
vary from state to state but these parameters are typical.

There are many variations to this general type of notice requirement
including the number of times the notice must be published, the number
of newspapers it must be advertised in, the target circulation of those
newspapers, and the number of days prior to receipt of bids it must be
published. The contents of the notice itself are frequently mandated as
well: e.g., must include a general description of the items to be
purchased, must state the location at which bid forms and specifications
may be obtained, and must state the time and place for opening bids. The
same rules and notice requirements may apply to both competitive bids
and competitive proposals. If you have scheduled a pre-bid or
pre-proposal conference, this is also one of the first pieces of
information upon which the offerors will act. Remember, what you want to
gain from this advertisement are responses from potential bidders or
proposers to your up‑coming procurement and their interest in receiving
the solicitation you plan to issue.

If you are in a position to adopt regulations governing the
advertisement of solicitations, you should keep in mind that one of your
goals through this effort is to maximize competition. With that as your
goal, the following may be of assistance:

-   Deciding into which newspapers to place your notices, determine
    which (if you have a choice) reaches the broadest readership,
    particularly in the business community (i.e., prospective bidder or
    proposer).

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-   Because advertisements are such an expense, try to negotiate with
    the newspaper to include your notices for free as a \"public
    service.\" It doesn\'t hurt to ask, particularly if you have
    competition for the business. Even if you are unsuccessful in having
    the notices placed for free, you might be able to obtain a reduced
    rate.

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-   Does the city or county have a place where they post notices and is
    it used by bidders? Can you post there? You may have a place where
    your agency is required by law to post notices of its meetings (a
    public meeting act notice) which may be a good place to place these
    procurement notices as well.

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-   Does your agency have a \"home page\" on the Internet\'s World Wide
    Web? Getting the word out on upcoming procurements is one of the
    primary purposes many transit agencies establish a home page in the
    first place (the other is posting job vacancies). You may also want
    to consider using existing state‑level home pages or bulletin
    boards. Don\'t overlook this as a real medium to reach potential
    bidders and proposers. The federal government is really encouraging
    companies of all sizes to utilize computers in the procurement
    process, and has many initiatives to go \"paperless.\" This is
    particularly evident in small purchases. As the procurement
    community becomes more sophisticated in accessing and effectively
    using the Internet, consider utilizing this relatively inexpensive
    medium to advertise your procurements to a national audience.

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-   If your commercial environment supports many broad‑based newspapers,
    it may be appropriate to competitively procure newspaper
    advertising.

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-   If your advertising volume is significant and your media market
    complex, you may find that an agency can cost effectively negotiate
    media availability.

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-   One of the most effective ways to increase DBE participation in your
    procurement processes is to advertise in media read by that target
    community. Your DBE program may require you to advertise in
    target‑specific newspapers to enhance participation by those
    entities. Your agency\'s program may be large enough to distribute a
    regular publication to all vendors certified under your program or
    to membership lists of such organizations as minority chambers of
    commerce. Whatever is being done by your agency in terms of
    advertising the program, you can take advantage of that opportunity
    and advertise up‑coming procurements as well. Because of time
    requirements in advance of the actual publication, you may not be
    able to give all of the detail about a specific procurement, but you
    still can put the community on general notice about the opportunity.

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-   Does the construction industry in your community (AGC, ASA, etc.)
    advertise to its membership notices of up‑coming procurements in the
    public sector? If so, try to get your notices published there as
    well. Frequently there is no charge for this service.

We have identified in the \"Requirements\" discussion above, the only
FTA requirements that exist in terms of publicizing notices about
up‑coming procurements. Even though there are no detailed discussion or
set of guidelines other than these general statements. [^135] It is a
good practice to advertise your procurements in a manner that will
encourage maximum competition. Find out if your \"general circulation\"
newspaper has national circulation. That is the sort of information that
circulation departments of newspapers love to pass on to prospective
customers! Consider advertising your large rolling stock and
systems‑type contracts in national trade association publications such
as APTA\'s *Passenger Transport* and other trade magazines. Also,
consider advertising your procurements in the *Commerce Business Daily*
(*CBD*) which is the required publication for federal government
contract actions. [^136]

**4.3.2.2 [Solicitation Mailing List]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| In addition to the general requirement for full and open competition  |
| which we have discussed above, the only additional requirement        |
| dealing (indirectly) with a mailing list is the requirement in FTA    |
| Circular 4220.1E § 9.c. that, if the IFB method is used, \"bids shall |
| be solicited from an adequate number of known sources.\"              |
+-----------------------------------------------------------------------+

**DISCUSSION**

**The development and use of a solicitation mailing list is a critical
part of the procurement process. This list includes all eligible and
qualified concerns that have expressed an**

**interest in receiving the solicitation, or that the agency considers
capable of filling the requirements of a particular procurement. Over a
period of time and after repetitive procurements for the same items or
services, your mailing list for some items will stabilize and you will
not be adding too many new names to the list, even after an aggressive
and comprehensive advertisement campaign. However, it is important that
you continue to \"manage\" that list and ensure it is kept current and
that firms expressing an interest or desire to participate in up‑coming
procurements are added. During the actual solicitation process (after
the solicitation is released), the list takes on added significance
because it is the record detailing which firms received the solicitation
and to whom amendments should be issued.**

**Best Practices**

[Procurement Role of Solicitation Mailing Lists]{.underline} ‑ Very
simply put, the solicitation mailing list contains the names, addresses
and frequently the point of contact for entities that will receive your
solicitation.

[Development of Solicitation Mailing Lists]{.underline} ‑ This list can
be developed from a variety of sources:

-   Prior procurements are reviewed and the names of entities that
    submitted bids or proposals in response to those procurements are
    included in the list for this new procurement.

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-   If what you are going to buy is currently under contract, the
    incumbent contractor is normally included on the list. [^137]

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-   Firms that responded to your advertisement expressing an interest in
    obtaining the solicitation you are issuing should be added to the
    mailing list.

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-   You may encourage your internal customer to provide you with names
    of firms it considers capable of filling the requirements of the
    procurement for inclusion on your list. If the specifications for
    your requirement were prepared by third party consultants or

> contractors, they may be a source for firms that are considered
> capable of filling the requirements. [^138]

-   The DBE program office within your agency can identify any DBE firms
    that may be interested in receiving the solicitation. Depending upon
    how your database is established, you may need to identify the
    Standard Industrial Classification (SIC) Code number (or however
    your agency identifies firms within your database) and furnish that
    Code to the appropriate office to aid in their search. Any firms so
    identified can be added to your list as well.

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-   National, state, and local agencies may be able to assist with
    lists; e.g., your state economic development office or national
    trade associations.

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-   Particularly in construction solicitations, you will want to add to
    your mailing list plan rooms that are operated by various trade
    associations or chambers of commerce and any\
    Dodge Room services in your locale. These are ideal locations for
    specialty subcontractors to review the plans and specifications that
    are applicable to only their particular specialty without buying the
    entire solicitation package. The more knowledgeable multiple
    subcontractors are about your procurement, the better the
    competition to the prime contractors who will be submitting bids or
    proposals.

If you will be charging bidders or offerors for your solicitation
package (typically the case in construction service solicitations), you
may want to send out a pre‑solicitation notice indicating the cost and
how payment (or deposit) is to be made. Have that payment information
returned to your office. You may then include those firms that have
provided the required payment or deposit in your ultimate solicitation
list.

Similarly, if your mailing list is very long, you may want to mail a
pre‑solicitation notification to all entities on your list advising them
of the upcoming solicitation and asking if they want to receive the
solicitation for this procurement. If they fail to respond, you may
assume they do not wish to receive the solicitation. This action could
result in a smaller (and therefore less expensive) solicitation process,
while still allowing everyone on your list the opportunity to compete in
the procurement. You may also ask in some or all of these mailings if
the firm\
wishes to withdraw from the list; the quality and maintenance of the
mailing lists is important to fostering robust competition.

[Management of Solicitation Mailing Lists]{.underline} ‑ You are now
ready to issue your solicitation using the list that has been developed.
There are a number of management issues associated with the list at this
time:

-   When mailing the solicitation to the entities on the list, some
    agencies include a post card indicating that if the entity does not
    respond to the solicitation (furnish a bid or proposal) it will be
    removed from the list for future solicitations unless they indicate
    (on the post card) that they want to be included on future lists.
    This is a practical recognition that the issuance of solicitations
    is an expensive process for the agency and only entities that have a
    real interest in the procurements should receive future
    solicitations.

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-   If you have a separate mail room, that group may be responsible for
    the actual physical issuance of the solicitation. You may wish to
    double check that the list of entities furnished for the
    solicitation is the same as the list you have maintained ‑‑ be
    particularly concerned that the incumbent contractor (if there is
    one) is on the list. Notify the mail room that if a solicitation is
    returned because of an incorrect address or no forwarding address is
    available for the entity, you are to be notified immediately so that
    you can try to determine the cause of the return.

Once the solicitation has been issued, using the mailing list to ensure
that any solicitation amendments are furnished to all entities that
received the original solicitation is important, as discussed in Section
4.3.2.5, \"Amendment of Solicitations.\"

After the solicitation process is completed, the final administrative
task associated with the mailing list is to update it. Indicate which
firms on the list responded to the solicitation, which firms did not but
asked to receive future solicitations (if you asked for this), and which
firms did not respond nor indicate they wanted future solicitations. An
updated list will make preparation of the next solicitation that much
easier to accomplish.

**4.3.2.3 [Solicitation]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| § 9.c.(2) of FTA Circular 4220.1E requires that invitations for bids  |
| be issued with sufficient time to prepare bids prior to the date set  |
| for opening the bids. Further, the invitation for bids will include   |
| any specifications and pertinent attachments and shall properly       |
| define the items or services sought in order for the bidder to        |
| properly respond.                                                     |
|                                                                       |
| § 9.d.(1) of FTA Circular 4220.1E requires that requests for          |
| proposals identify all evaluation factors along with their relative   |
| importance. [^139]                                                    |
+-----------------------------------------------------------------------+

**DISCUSSION**

**Your solicitation, whether an invitation for bids or a request for
proposals, identifies the procurement, the agency and the contact
person(s). It contains simple, clear instructions for preparing an
offer, often including a checklist of the items in the offer. It clearly
states the time and manner for submitting the offer, and the length of
time for which the offer must remain firm (not subject to withdrawal).
Many agencies use a three‑part, one page form for simple bids; called a
\"solicitation, offer, and award form.\" The form invites bids on a list
of items, provides space for prices and the bidder\'s execution of the
offer, and space for the agency acceptance.**

**In more complex procurements where the specification or scope of work
is more extensive, a two‑part \"Offer and Award\" form incorporates the
specification by reference but still crystallizes the essence of the
solicitation in one page to be signed and submitted by the offeror, and
signed upon award by the contracting officer. The most expeditious
procurements often result from the inclusion of a complete contract in
the solicitation. When this is incorporated in the offer, no further
terms have to be discussed or executed when the agency accepts the
offer.**

**It is important not to include any unnecessary requirements and keep
the solicitation as simple as possible. Large or complex solicitation
packages discourage some potential offerors.**

**Best Practices**

Regardless of the method used, there are certain common elements that
will be present in a solicitation issued under either the competitive
bidding or competitive proposal method of procurement. [^140] Many
transit properties have developed procurement forms that detail what is
included as \"boilerplate\" in the solicitation process and include the
common elements of both methods. Other properties have established, as a
procedure, a requirement that \"boilerplate\" common provisions be
included in all solicitations that are then prepared as originals for
each procurement. Regardless of which method you use (or any variation
of them), the common elements include:

[Common Solicitation Contents (IFB and RFP)]{.underline}

1\. **A form which acts as the solicitation document ‑** When signed by
the bidder or proposer, this acts as the offer which, if accepted by the
contracting officer or buyer, results in a binding contract. Although it
is typically a single page, it is not unusual for the acceptance
document (the contract) to be a separate form. The form typically
identifies:

-   A solicitation number for reference;

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-   Who to contact for questions;

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-   If there will be a pre‑bid or pre‑proposal conference and where and
    when it will be held;

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-   The date, time, and place bids or proposals are to be received;

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-   What additional documents are included in the solicitation and what
    documents will be included in the contract;

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-   Space for the price (offer) to be included;

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-   Space where amendments to the solicitation can be acknowledged;

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-   Space where the firm can be identified; and

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-   Space for the firm official to sign and date the bid or proposal.

If the form is multi‑purpose and also acts as the contract, it will
typically have space for the contract number, contract amount, line
items awarded (if applicable), and a place for the contracting officer
to sign and date the contract.

If the instructions are lengthy, and because of the many certification
forms typically required, it is becoming more common to provide a
separate checklist of all the documents or other submissions required in
a responsive offer.

Of special importance is the **address to which offers should be
submitted**. Many agencies utilize post office box addresses for their
mail, and that is all that is included in the solicitation. All
solicitations normally clearly indicate a mailing address to which
offers can be mailed as well as a street address to which offers can be
delivered, because of the increased use of overnight and courier
services. If your agency has the ability, it is recommended that you
have a unique post office box number to which only offers are mailed. In
your \"delivery\" address, you reduce errors by including a specific
room number to which offers should be delivered. [^141]

2\. **A document that describes the various representations and
certifications that are required to be made by the bidder or offeror in
conjunction with the procurement at the time of bid or proposal
submission.** [^142] Many of these relate to responsibility‑type issues
and typically include:

-   A representation as to the type of business the offeror is
    (individual, partnership, sole proprietorship, etc.);

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-   A representation as to the DBE status;

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-   A representation that no gratuities have been offered or given with
    a view toward securing the contract;

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-   A certification of independent price determination (prices in offer
    have been arrived at independently without any communications for
    the purposes of restricting competition);

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-   A certification regarding compliance with the DBE provisions of the
    contract;

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-   A certification of restrictions on lobbying; [^143]

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-   A certification regarding debarment, suspension, ineligibility and
    voluntary exclusion; [^144]

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-   A certification regarding compliance or non‑compliance with the Buy
    America provisions of the Federal Transit Act and 49 CFR Part 661
    and; [^145]

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-   Any submissions required by state law.

3\. **A document that includes solicitation instructions and conditions
‑** These typically include instructions relating to: offer preparation;
instructions relating to acknowledging amendments to the solicitation;
rules relating to late submissions, modifications and withdrawals of
offers; instructions relating to the DBE participation goals and
program; instructions as to how the contract will be awarded; advice as
to agency and FTA bid/proposal protest procedures; advice as to ability
of agency to cancel the solicitation; and establishment of an order of
precedence covering how inconsistencies between provisions of the
solicitation are to be resolved.

4\. **A document that includes special contract requirements or
provisions (as opposed to general provisions) relating to this
particular solicitation and contract that are not**

> **addressed elsewhere in the solicitation** ‑ These provisions
> typically address such things as bonding requirements; insurance
> requirements; any special permits or licenses required; what property
> the authority will furnish the contractor and rules relating to that
> property; liquidated damages; warranties; indemnity provisions;
> options; contract administration; and rules relating to royalties and
> patents. If you are going to award a cost‑type contract, special
> provisions relating to those contracts are typically included in the
> special provisions.

5\. **Special provisions required by the FTA through FTA Circular
4220.1E** **or the Master Agreement which must be included in the
solicitation and the contract ‑** Model clauses for compliance with
these requirements are discussed in Section 8.1 and Appendix A.1, and
include such provisions as EEO clauses; affirmative action clauses; DBE
program clauses; Contract Work Hours and Safety Standards Act
provisions; Davis‑Bacon Act provisions; Title VI of the Civil Rights Act
of 1964 compliance provisions; Clean Air and Water Acts provisions;
Energy Policy and Conservation Act provisions; Cargo Preference Act
clause; Buy America Provisions; Officials Not to\
Benefit clause, and Restrictions on Lobbying provisions. Some properties
include these as part of the special provisions document, and state law
may require similar provisions.

6\. **The contractual requirements of the DBE programs ‑** (Sometimes
included in special provisions.) Although the DBE programs for FTA
funded projects must comply with 49 CFR Part 23, the contractual
language details included in the contracts vary between the individual
authorities. Chapter 8 includes model DBE contract clauses that could be
used in your contract.

7\. **The last of the \"boilerplate\" forms are the general
provisions.** You may have different forms for construction services,
A&E services, supplies, services contracts and cost type contracts. It
is in the general provisions that you include such clauses as: changes
clause; termination for default and convenience; inspection; assignment;
the impact of federal, state and local taxes; differing site conditions;
excusable delay; variation in quantity; disputes; governing law;
indemnification; order of precedence; pricing of adjustments;
examination of records; and payment terms.

8\. **Each solicitation will have some sort of specification or
statement of work or scope of work describing what it is that you are
buying**. As we discussed in the Specification section of the Manual,
the detail furnished will vary from contract to contract, but it is
against this document that you will measure satisfactory performance of
the contractor ‑‑ did the contractor furnish you with what you
requested?

There is no real \"best\" way to create your solicitation. We have
presented the common elements of the solicitation and highlighted those
issues or matters that solicitation documents typically address. How you
package it is in many respects a function of what is already in place in
your organization or, if you are creating a solicitation for the first
time, a function of what your prior procurement experiences have been.

The bottom line is that you want to create a document that will get you
through the solicitation and contract award process with little or no
controversy and through contract performance on time and within budget
while complying with the terms of your contract.

**4.3.2.4 [Pre‑Bid and Pre‑Proposal Conferences]{.underline}**

##### DISCUSSION

**Pre‑bid and pre‑proposal conferences are generally used in complex
acquisitions as a means of briefing prospective offerors and explaining
complicated specifications and requirements to them as early as possible
after the solicitation has been issued and before offers are received.
This is also an open forum for potential respondents to address
ambiguities in the solicitation documents that may require
clarification. Notice of the conference is included in the solicitation
at the time of issuance.**

**Best Practices**

When utilized properly, a pre‑bid or pre‑proposal conference is a
valuable tool for both the agency and the prospective offerors. There
are certain common practices and policies relating to this conference
that will aid you in achieving a successful procurement.

You will decide with your customer in your solicitation preparation
process whether or not you will conduct a pre‑proposal or pre‑bid
conference. It is recommended that you hold one if you believe that your
acquisition is so complex or contains peculiar requirements that can
only be

addressed by holding a conference for the benefit of your prospective
offerors. It may be advantageous if you anticipate that the offerors
will not be familiar with your procurement process. Determine if a
conference is necessary and put the time and location details in your
solicitation.

If you hold a conference, it is helpful to include in your solicitation
a format for questions submitted in advance of the conference that will
be answered at the conference. Explain that if you have the questions in
advance, better and more timely responses can be made to those
questions. You normally do not preclude questions from being raised at
the conference itself.

Develop an agenda for the conference and arrange to have the appropriate
staff members at the conference who can respond knowledgeably to
questions. In addition to the procurement official, large agencies
generally have a technical representative and a representative from the
DBE department, if appropriate, at the conference.

At the conference, have someone present who can develop a record of what
transpired, including a sign‑in list of attendees. Normally, this list
is made available to attendees as a matter of information. One of the
uses of this list by potential offerors is determining who else is
interested in the project and who might be interested in teaming.

At the conference, advise conferees that remarks and explanations at the
conference shall not qualify the terms of the solicitation, unless a
written amendment is furnished to everyone. You may actually want to
develop a script for this and make it a matter of practice to repeat
this at every conference ‑‑ it is that important.

Your pre-bid conference or general provisions in your solicitation
document may also limit the effect of unwritten statements at the
conference or of any other oral or unauthorized changes or
qualifications of the solicitation terms. The specifications and
solicitation document must stand alone representing the contractual
commitment.

During the conference, in addition to responding to any questions raised
by the conferees, explain anything unusual about the special provisions
or bidding conditions. Your DBE staff member may explain the DBE program
and the goals set for the procurement. Your technical staff member may
give an overview of the specifications or scope of work. If you have
received questions in advance, you can provide both the questions and
answers.

At the conclusion of the conference, determine which questions have been
raised that will necessitate the issuance of a solicitation amendment.
You may have received other questions during this period of time that
highlighted the need for an amendment, or an issue might have been
raised by internal reviews that necessitated an amendment. It is
recommended that you do not leave material questions unanswered ‑ if you
don\'t answer them, you may end up shifting the risk for that ambiguity,
conflict or other problem from the contractor back to your agency.

As soon as possible after the conference, finalize the record of the
conference and promptly furnish it to all prospective offerors (those on
your final solicitation mailing list); whether they were in attendance
at the meeting or not. It is important that all prospective offerors be
furnished the same information concerning the proposed acquisition. This
can be furnished with the amendment if one is to be issued.

Although it is not normally part of a pre‑bid or pre‑proposal
conference, if you want to offer prospective offerors an opportunity to
actually visit the site (in an appropriate procurement) it is a good
time to do this in conjunction with this conference. You should be
sensitive to the cost offerors incur in preparing a bid or proposal and
try to allow them to accomplish multiple tasks on the same trip,
particularly for those entities that are traveling to your location from
another city, state or country.

[Mandatory Attendance]{.underline} -- The question sometimes arises as
to whether grantees may require prospective offerors to attend pre-bid
or pre-proposal conferences in order to submit bids or proposals. The
answer to this question is that FTA has issued no specific policy
statement on this issue. However, the consensus of opinion is that
attendance at pre-bid conferences should not be made mandatory. Anything
that happens at a pre-bid conference to change what is expected under
the contract must be included in the contract document by means of an
amendment to the solicitation. It's true that a better understanding may
be obtained by being present for face-to-face discussions regarding
contract issues but the bottom line remains the clarity of the contract.
Experience would suggest that pre-bid conferences sometimes bring out
the existence of ambiguities or inconsistencies in contract language.
These are then changed in the solicitation/contract and made available
to all offerors. The result of this process is that changes in the
contractual obligations of the parties find their way into the
solicitation by means of an amendment to the original solicitation that
is issued to all potential offerors. [^146] It can also be conjectured
that mandatory attendance at the conference could work a hardship on
some potential bidders, especially small businesses. Mandatory
attendance may also tend to promote poor contract language because of
the feeling that everyone understands the intent of the contract as a
result of the discussions at the pre-bid conference, with the result
that clarifications to the written contract requirements are not issued.

**4.3.2.5 [Amendment of Solicitations]{.underline}**

**DISCUSSION**

**Frequently, in the course of the solicitation process and prior to
receipt of offers, you will find something within the solicitation
package that needs to be corrected. This is**

**something that can be done easily and may enhance competition if the
changes are significant (i.e., impact quantity, specifications, or
delivery). Each recipient of the solicitation should receive the
amendments and should acknowledge that receipt by the time of submitting
its offer. You should consider extending the time for receipt of offers,
if necessary, to permit offerors to compete effectively under the
modified terms.**

**Best Practices**

In many solicitations, someone will bring to your attention a problem
with the package that necessitates a change. The problem may have
something to do with the \"boilerplate\", changes in quantity, the
specifications, delivery schedules, opening dates, or drawings. It may
have to do with correcting an ambiguous provision or resolving
conflicting provisions. Regardless of what

(or who) requires the amendment, there are a few simple
steps/considerations that are normally followed.

As we discussed in the pre‑bid/pre‑proposal conference section, even if
a change was mentioned during that conference, an amendment to the
solicitation should be issued. When you change the written terms of the
solicitation, it must be done formally in writing. This serves two
purposes: (1) It documents the change in writing so there are no
misunderstandings, and (2) It provides the changes to offerors who were
not at the conference.

As with other normally repetitive requirements in the procurement
process, many agencies have adopted a pre‑printed form for amending
solicitations. Those forms normally include the following elements
(which can also be included in your amendment if you do not use a form):

-   Identify the solicitation number of the original solicitation;

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-   Identify the amendment number;

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-   Identify the contact person and phone number within your department
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-   Indicate whether or not the time and date specified in the original
    solicitation is changed as a result of the amendment;

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-   Advise offerors of the need to and how they should acknowledge
    receipt of the amendment;

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-   Advise offerors what the changes are; and

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-   Have the amendment signed by the appropriate procurement official,
    most frequently the contracting officer.

Amendments are typically sent to every firm that has been furnished the
original solicitation (the IFB or RFP). Once the solicitation has been
issued, using the mailing list to ensure that any solicitation
amendments are furnished to all entities that received the original
solicitation is important, as discussed in Section 4.3.2.2,
\"Solicitation Mailing List.\" This is an obvious issue, but some
agencies don\'t realize there is a problem until bids are received that
do not acknowledge a material amendment. You then declare the bidder
non‑responsive. Some agencies include clauses in solicitations making it
the offeror\'s responsibility to obtain addenda. While this may assist
in overcoming a protest from a bidder held non‑responsive, it will not
necessarily transform the bid into a responsive or acceptable one.

You cannot over‑emphasize the administrative importance of furnishing
amendments to all entities who received the original solicitation. It is
important to have a single point of contact within your organization
responsible for issuing solicitations and addenda. Some agencies post a
notice at the receipt of offers of the addenda that have been issued.
While there is little an offeror can do other than hold back the offer
at that point, the offeror may be able to perfect the acknowledgment of
addenda and live with the rest of the offer as prepared without the
addendum.

One of the critical issues when issuing an amendment is whether or not
to extend the time and date for receipt of offers. You should consider
the impact of the changes you are making in light of the time it will
take a prudent offeror to incorporate those changes. This includes the
time impact on the work already done in preparing the bid or proposal.
The impact could be minimal or very significant and there is no \"cookie
cutter\" answer to how much additional time, if any, should be allowed
‑‑ you want to allow sufficient time for the changes to be considered in
a meaningful manner.

One \"warning:\" this may be the first time in the solicitation process
you run into the schedule your internal customer has established. Your
instincts may say that the time and date set for receipt should be
extended but your customer may say the change is negligible and no time
is warranted. Early planning and communication with your customer may
build in some time for changes like this. If not, the consequences may
be fewer competitors, a protest, pricing that includes unnecessary
contingencies, or post‑award discovery of specification conflicts that
require compensation for changes.

If a decision is made to amend the solicitation with bids due in two
days, consider notifying prospective offerors by telephone, FAX, or
telegram of the new date and time [and]{.underline} follow that
notification up with an amendment to the solicitation. If you have
already received offers in your bid room, it is recommended that you
notify the offeror of the amendment to inquire if they want their offer
returned. [^147]

There are special rules regarding solicitation amendments that
incorporate revisions or modifications of Davis‑Bacon Act wage
determinations. These rules are discussed in detail in Section 8.1.3.

If, because of schedule distress, you proceed with the procurement
without a necessary amendment, adverse consequences are likely when the
change is brought forward with the ultimate contractor and the contract
must be modified. [^148] It is even possible that the change would
constitute a cardinal change if attempted after award, and would require
a new competition; in this case you have little choice but to amend and
postpone.

**4.3.3 [Common Elements of Offers]{.underline}**

**4.3.3.1 [Receipt of Offers]{.underline}**

**DISCUSSION**

**The culmination of your solicitation process is the receipt of bids or
proposals. Regardless of the method used, great importance is attached
to the time of receipt. Preparations are made to ensure that offers are
not delayed and are properly recorded. Your solicitation may contain a
checklist of items to be submitted with the offers, and the individual
submittals are discussed in the following sections.**

**Best Practices**

[Timeliness]{.underline} [^149] - Why do you care if a bid or offer is
late or not? If the price is the lowest or the best response of the
group, what difference does it make if it was received on time or not?
The rationale for having rules against considering late bids or offers
is tied to the importance of maintaining the integrity of the
competitive procurement process and that this outweighs the possibility
of any savings the public entity might realize in a particular
procurement by considering a late offer.

Unfortunately, late offers are such a common problem that language has
been developed to address what rules would be followed if an offer is
received late. [^150] That language is typically included in the
solicitation so that offerors know ahead of time what the consequences
will be if their offer is received late at the place designated for
receipt. A solicitation provision, and the explanatory rules relating to
the provision, generally include some or all of the following:

1\. **What are the consequences of an offer that is received after the
exact time specified for receipt?** Generally, the offer [will not be
considered]{.underline} at all. [^151] You may want to carve\
out exceptions to this absolute rule, and some will be suggested below.
These exceptions consist generally of the sets of circumstances which
you can determine in advance and set out in your solicitation which,
when proven within a specified time by the offeror, would demonstrate
that the delay was due solely to some independent event or action, such
as the documented failure of a registered delivery service. If the offer
is received after the contract is awarded, there are generally no
exceptions. That offer will not be considered at all.

2\. **If you decide to allow consideration of \"late\" offers, under
what conditions will you consider them?**

-   *Will you consider offers that are hand‑delivered late?* It is the
    responsibility of the offeror to make sure its offer is at the place
    designated in the solicitation by the time indicated. If it chooses
    to use a delivery/courier service or deliver its offer in person, it
    must allow sufficient lead time to get it there on time. Normally,
    such excuses as \"I was in an accident\", \"The traffic was heavier
    than usual\", or \"I couldn\'t find a place to park\" are not
    acceptable to excuse a late hand‑delivered offer. If, however, the
    reason the proposal is late is because of problems at your agency
    (e.g., your security guard directed the courier to the wrong room)
    you may want to consider those excuses ‑‑ in effect, you (the
    agency) were the reason the offer was late.

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-   *Will you consider offers that were mailed but not received until
    after the time and date set?* It is not unusual to consider mailed
    offers if certain facts can be established. If they were sent by
    registered or certified mail five calendar days (or some greater or
    lesser number of days) prior to the date specified for receipt of
    offers, they will be considered if the postmark on both the envelope
    or offer wrapper and the original receipt clearly establishes the
    offer was mailed before the five day window. If you want to allow
    this exception, a provision which clearly and unambiguously
    establishes the rules which will be acceptable to you will save
    extended argument and resentment in the inevitable test cases.

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-   *Will you consider an offer that was mailed (not registered or
    certified) but you are able to ascertain that it was mishandled in
    the mailroom?* It was properly addressed and, in the normal course
    of business at your agency, should have been delivered to your bid
    room on time. However, it was sent to the wrong department or fell
    behind\
    a desk in the mailroom. Again, if you can establish it was received
    in your agency prior to the time and date set for receipt but
    didn\'t get to you until \"late\", your policy might want to allow
    consideration of that offer. If so, spelling that exception out in
    your solicitation clause avoids many questions.

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-   *Will you consider offers that were sent via an \"overnight\"
    service? If so, which service(s) will you consider?* It is not
    unusual to limit the service to the U.S. Postal Service Express Mail
    Next Day Service and, even in that limited situation, the\
    package must be dispatched by 5:00 p.m. at the place of mailing two
    working days prior to the date set for receipt of offers. If you
    include Federal Express and other reliable overnight courier
    services, be sure you spell out exactly what service(s) you will
    allow.

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-   As a result of an increase in procurements being conducted via
    electronic commerce, rules have been developed addressing late
    offers received through that medium. Generally, the offer must have
    been received by the contracting agency no later than 5:00 p.m. one
    working day prior to date specified for receipt of offers. If you
    are into electronic commerce procurements, you need to consider the
    consequences of late offers through that medium as well.

> \"I\'ve got this great policy patterned after the FAR clauses on
> consideration of late offers and here it is, a day after I opened bids
> and another bid comes to my office through the mail. What do I do?\"
> If it was mailed \"regular\" first class mail, you normally would
> retain the bid, unopened, and advise the offeror that its bid was
> received late and will not be considered. If the envelope or wrapping
> indicates it was mailed registered or certified (the clause may have
> been complied with), you need to notify the bidder that its bid was
> received late and will not be opened unless, by a reasonable date
> [established in your notification]{.underline}, it can furnish you
> with the original post office receipt establishing compliance with the
> exceptions you have adopted in your provision.
>
> Because these issues have such a high probability of being protested
> or litigated, it is recommended that as soon as you become aware of
> the receipt of a late offer, you notify your legal counsel for advice
> on what action to take. Many of the exceptions recognized in the law
> are very fact‑intensive and care must be taken in ascertaining all of
> the facts and responding appropriately to what facts existed.

[Completeness of Offer]{.underline} ‑ Besides the obvious things (like
the bid or price schedule), there are a number of matters that are
normally submitted with the offer, whether it is a bid or a proposal.
These items either are required by law or the natural development of the
procurement process

has resulted in this being a good (or the best) time for some things to
get into the hands of the procurement officials. Many of these matters
are taken care of in the various representations and certifications that
are submitted with the offer and which normally address
responsibility‑type questions that aid in processing the ultimate
contract for award. Others, such as acknowledgment of solicitation
amendments and bid bonds can go to the issue of whether the offeror is
responsive ‑‑ did it consider a material amendment when it submitted its
offer?

In our discussion on common elements of the solicitation (see Section
4.3.2.3), we covered the common practice of developing a separate
document to include in your solicitation for all the representations and
certifications that you want each offeror to complete and return with
its offer to you. If they are all in one place, it is much easier for
the offeror to ensure it has furnished you everything you need as well
as you don\'t have to worry about forgetting to ask for something ‑‑
Everything you need is on one form.

**4.3.3.2 [Federally Required Submissions with Offers]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| § 16 of FTA Circular 4220.1E, entitled \"Statutory and Regulatory     |
| Requirements\" states that:                                           |
|                                                                       |
| > \"A current but not all inclusive and comprehensive list of         |
| > statutory and regulatory requirements applicable to grantee         |
| > procurements (such as Davis‑Bacon Act, Disadvantaged Business       |
| > Enterprise, Clean Air, and Buy America) is contained in the FTA     |
| > Master Agreement. [^152] Grantees are responsible for evaluating    |
| > these requirements for relevance and applicability to each          |
| > procurement. For example, procurements involving the purchase of    |
| > iron, steel and manufactured goods will be subject to the \'Buy     |
| > America\' requirements in 49 CFR Part 661. Further guidance         |
| > concerning these requirements and suggested wording for contract    |
| > clauses may be found in FTA\'s Third Party Procurement Manual.\"    |
+-----------------------------------------------------------------------+

**DISCUSSION**

**The FTA has included a comprehensive listing of contract clause
requirements in the Master Agreement. A copy of that Agreement is an
appropriate item for the procurement official\'s desk book of reference
materials. We will, in this subsection, highlight generally the federal
requirements that are germane to our discussion here of items that
should be submitted to the transit property as part of the solicitation
process involving either IFBs or**

**RFPs. We will also discuss in more depth four specific certifications
that are federally required.** [^153]

**4.3.3.2.1 [Certification Regarding Debarment, Suspension, and other
Responsibility Matters]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| Executive departments and agencies shall participate in a             |
| government-wide system for (nonprocurement) debarment and suspension. |
| [^154]                                                                |
+-----------------------------------------------------------------------+

**DISCUSSION**

**Much like the \"common grant rule\" (49 CFR Part 18), the federal
government has adopted a \"common rule\" on the government‑wide effect
of debarments and suspensions. DOT\'s implementation of that common rule
is found at 49 CFR Part 29. The policy behind this rule is that a person
or entity who is debarred or suspended shall be excluded from Federal
financial and non‑financial assistance and benefits under Federal
programs and activities. As stated in the regulations, debarment**
[^155] **and suspension** [^156] **are serious actions which should be
used only in the public interest and for the protection of the federal
government and not for the purposes of punishment.** [^157]

**In order to protect the public interest, it is the policy of the
federal government to conduct business only with responsible persons.**
[^158] **Persons who have been debarred or suspended are not
\"responsible\" and, unless approved by the FTA, contracts will not be
awarded to those persons.** [^159] **The certification required by this
common rule must be submitted with the offers, and is also an aid to
expedite the procurement process by providing critical information as to
the responsibility determination that the contracting officer must
ultimately make.** [^160]

**Best Practices**

The debarment and suspension [certification]{.underline} found at
Appendix B of Part 29 (and as set forth in Appendix A.1 of this manual)
is mandatory for use in contracts over \$100,000 involving federal
funds.

Include the [instructions]{.underline} for the certification as well as
the certification. Don\'t try to save space in your solicitation by only
including the certification ‑‑ the instructions are too critical. It is
recommended that you make this certification a topic at your [pre‑bid or
pre‑proposal conference]{.underline} if the resulting contract will
exceed \$100,000.

Even though you request this certification from all offerors, failure to
receive it with a bid (in the sealed bidding method of procurement) is
not a responsiveness question ‑‑ this goes to a contractor\'s
responsibility and may be received and talked about [after bids are
received]{.underline}. It must be received prior to award.

The certification and regulations allow you to [rely]{.underline} on
your contractor\'s certification that it is not debarred, suspended,
proposed for debarment, declared ineligible, or voluntarily excluded
from participation in your contract as an element of your responsibility
determination. However, if you know that the certification is erroneous,
you may not rely on the certification.

The certification and regulations state that you may, but are not
required to, check the *List of Parties Excluded from Federal
Procurement and Nonprocurement Programs* to determine the eligibility of
your contractor and its subcontractors. The *List of Parties Excluded
from Federal Procurement and Nonprocurement Programs* is available from
the General Services Administration in either a printed version or an
electronic version. The printed version is published monthly and may be
obtained by purchasing a yearly subscription. [^161] The electronic
version is updated daily and provides access to the names of firms and
individuals on the list through your computer. [^162] GSA also offers a
telephone inquiry service to answer general inquiries about entries on
the *List* at (202) 501‑4873 or 4740. [^163]

Although not required by the FTA, some transit properties check the
*List* on all their procurements, [whether or not federally
funded]{.underline}. Even if you are using local dollars, do you want to
award a contract to, or approve a subcontract for, a
contractor/subcontractor that has been

debarred, suspended, or proposed for debarment by the federal
government? Is that entity responsible? You may at least want to inquire
about the action prior to making your final responsibility
determination. If you know you would want to use debarment information
in a non‑Federally funded procurement, you may wish to mention it in
your solicitation\'s responsibility clause.

If the apparent awardee of your solicitation (e.g., the lowest
responsive bidder) has submitted a [conditioned
certification]{.underline}, you can use that information in arriving at
your responsibility determination and find the firm non‑responsible.
However, the firm may have submitted information you believe is
extenuating enough to warrant award consideration. Remember, if you want
to award a contract to a firm that has submitted a conditioned
certification, you cannot make an award until you have received approval
for the award from the FTA. [^164] It is recommended as soon as it
appears you will be faced with this situation, you notify your regional
FTA office for guidance and instructions on what information they need
and submit it promptly.

**4.3.3.2.2 [Buy America Certification]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| § 14.a of the Master Agreement states that:                           |
|                                                                       |
| a\. [Buy America]{.underline}. The Recipient agrees to comply with 49 |
| U.S.C. § 5323(j), FTA regulations, \"Buy America Requirements,\" 49   |
| C.F.R. Part 661, and any implementing guidance FTA may issue.         |
+-----------------------------------------------------------------------+

##### SUMMARY 

The Buy America requirements apply to all contracts for rolling stock,
steel, iron, or manufactured products with a value greater than
\$100,000. For these contracts, the grantee must obtain a certification
of compliance or non-compliance with the Buy America requirements with
each bid or offer. If the bidder or offeror is not able to comply by
using the requisite American content and certifies non-compliance, it
may qualify for a waiver, which the grantee must request before award.
FTA may grant a waiver if it is found that it is in the public interest,
there are no U.S. products available, or there is a 25 percent
price-difference between the foreign and domestic products.

##### REQUIREMENTS

[Steel and iron]{.underline}: All steel and iron manufacturing processes
must take place in the U.S. These requirements apply to all construction
materials made primarily of steel or iron and used in

infrastructure projects such as transit or maintenance facilities, rail
lines, and bridges. The requirements do not apply to steel or iron used
as components or subcomponents of other manufactured products or rolling
stock. 49 C.F.R. 661.5(a), (b), and (c).

[Manufactured products]{.underline}: The product itself must be
manufactured in the U.S. with 100 percent U.S. components; foreign
subcomponents are allowed. 49 C.F.R. 661.5(d).

[Construction contracts]{.underline} - Except for the iron and steel
used in a construction contract, FTA treats the procurement of a
construction project as the procurement of a \"manufactured product\"
subject to 49 CFR 661.5(d). Final assembly of the project takes place at
the construction site, and items directly incorporated into the project
at the job site are considered \"components.\" For instance, if the
deliverable under a particular contract is the building of a passenger
terminal, the terminal itself is the end product, and the main elements
incorporated into the terminal, e.g., shelters, elevators, and
platforms, are components of the end product. These main elements are
generally specified in the construction contract. *However, you must
first satisfy the steel and iron requirements, as discussed in 661.5(b)
and (c), before applying the manufactured product section as discussed
above, to the balance of the construction contract.*

[Rolling stock (including train control, communication, and traction
power equipment)]{.underline}: The cost of components and subcomponents
produced in the U.S. must be more than 60 percent of the cost of all
components and final assembly must take place in the U.S. 49 U.S.C.
5323(j)(2)(C) and 49 C.F.R. 661.11. Part 661.11 is a road map for
grantees and contractors to follow when determining compliance with the
domestic content requirements for rolling stock. It discusses in detail
what constitute components and subcomponents. It also illustrates train
control equipment, communication equipment, and traction power equipment
(at subsections (t), (u), and (v)); and provides a list of typical
components of rail and bus rolling stock in the Appendix. The March 18,
1997, Dear Colleague letter lays out the requirements for final
assembly. The March 30, 2001, Dear Colleague letter discusses
calculation of domestic content, specifically noting that

all items included in the list of typical components in the Appendix to
661.11 must be considered components, not subcomponents. For more
discussion, please see the Notice of Dear Colleague letter published in
the Federal Register. 66 Fed. Reg. 32412 (June 14, 2001).

\[Note: The Buy America requirements are different from the *Buy
American* requirements. The latter applies to direct federal
procurements. The Buy America regulations discussed here, apply only to
federal assistance programs funded by the Federal Transit
Administration.\]

**Best Practices**

If you spend much time in procurement, a copy of 49 C.F.R. Part 661 is
one of those \"mandatory\" documents for your procurement desk book. You
will be constantly referring to these rules throughout your career in
transit, whether you are buying buses, rail cars, computers or a
construction project. Because these rules are so critical, it is also
important that you keep abreast of FTA guidance and final rules
impacting these regulations as published in the *Federal Register* or on
the website. FTA's Buy America web page is

<http://www.fta.dot.gov/legal/buy_america/14328_ENG_HTML.htm>. The web
site has links to the regulations, all relevant Federal Register
publications, waivers and letters of interpretation, frequently asked
questions, rolling stock handbooks, and related Dear Colleague letters.

**Notice Requirements**

When a contract for rolling stock, steel, iron, or manufactured products
is estimated to exceed \$100,000, 49 C.F.R. 661.13 requires that the
solicitation include \"an appropriate notice of the Buy America
provision.\" A model clause addressing that requirement is included in
Appendix A.1, \"Federally Required Model Clauses\" of this Manual. This
suggested language is written as a preamble to the certifications
required by Parts 661.6 and 661.12.

Other grantees have satisfied this notice requirement in their general
or special provisions by including language substantially as follows:

> *[Buy America Provision]{.underline}*
>
> *This solicitation and the resulting contract are subject to the Buy
> America requirements of 49 U.S.C.* §*5323(j) and the Federal Transit
> Administration\'s implementing regulations found at 49 C.F.R. Part
> 661. These regulations require, as a matter of responsiveness, that
> the bidder or offeror submit with its offer a completed certification
> in accordance with Part 661.6 or 661.12, as appropriate. These
> certifications are set forth in this solicitation at \[identify where
> the certifications are\].*

**Certification Requirements**

49 C.F.R. 661.13(b) requires that you include in your solicitation a
requirement, [as a condition of responsiveness]{.underline}, that the
bidder or offeror submit with the bid or offer a completed Buy America
certificate in accordance with Part 661.6 for steel, iron, and
manufactured products, or Part 661.12, for rolling stock (including
train control, traction power, and communication equipment). In a sealed
bid, the bidder is bound by its certification and cannot change it after
bid opening, except as provided for clerical error. If the bidder does
not submit a signed certification with the bid, submits the wrong
certification of compliance, or certifies both compliance and
non-compliance, that bid is non-responsive and cannot be considered.
Except as discussed below for clerical error, you cannot go back and
ask, in a competitive sealed bidding procurement, for the bidder to
complete the certification and submit it after bids are opened.

In competitive negotiated procurements (i.e., requests for proposals),
certifications submitted as part of an initial proposal may be
superseded by subsequent certifications submitted with revised
proposals, and the certification submitted with the offeror's final
revised proposal (or best and final offer) will control. However, where
the grantee awards on the basis of initial proposals without discussion,
the certification submitted with the initial proposal will control.

The clerical error provision allows bidders and offerors to change a
certification of non-compliance to one of compliance *only if the bidder
or offeror certified wrongly due to a clerical or inadvertent error.* 49
C.F.R. 661.13(b). More explanation of this provision can be found in the
Final Rule published in the Federal Register. 68 Fed. Reg. 9797 (Feb.
28, 2003). If the bidder or offeror certifies it will comply with the
Buy America requirements, it will not be eligible later for a waiver of
those requirements. 49 C.F.R. 661.13(c).

The certification requirement for procuring steel, iron, or manufactured
products is at 49 C.F.R. Part 661.6. This certification language refers
to sections of the Surface Transportation Assistance Act of 1982 (steel
and manufactured products) and not to the most recent version of the
statute, found in 49 U.S.C. 5323(j) (steel, *iron*, and manufactured
products). The certification language in Appendix A.1, \"Federally
Required Model Clauses\" accurately references the correct statutory
provision. You should use this until the FTA publishes technical
corrections to this C.F.R. section. The bidder or offeror has a choice
of two certifications to complete, either:

-   it will comply with 49 U.S.C. 5323(j)(1) and 49 C.F.R. 661.5; or

-   it cannot comply with 49 U.S.C. 5323(j)(1) and 49 C.F.R. 661.5, but
    may qualify for an exception under 49 U.S.C. 5323(j)(2)(A),
    5323(j)(2)(B), or 5323(j)(2)(D), and 49 C.F.R. 661.7.

The certification requirement for procuring rolling stock (including
traction power, train control, and communication equipment) is at Part
661.12. This certification language also refers to sections of the
Surface Transportation Assistance Act of 1982 and not to the most recent
version of the statute, found in 49 U.S.C. 5323(j). The certification
language for 661.12 in Appendix

A.1, \"Federally Required Model Clauses\" of this Manual accurately
references the correct statutory provision. You should use this until
the FTA publishes technical corrections to this C.F.R. section. The
bidder or offeror has a choice of two certifications to complete,
either:

-   it will comply with 49 U.S.C. 5323(j)(2)(C) and 49 C.F.R. 661.11; or

-   it cannot comply with 49 U.S.C. 5323(j)(2)(C) and 49 C.F.R. 661.11,
    but may qualify for an exception under 49 U.S.C. 5323(j)(2)(A),
    5323(j)(2)(B), or 5323(j)(2)(D), and 49 C.F.R. 661.7.

##### Waiver Requirements 

If a bidder or offeror executes the certification indicating that it
cannot comply but may qualify for an exception, you must review the
circumstances to determine if you should request a waiver from FTA. If
you do not request a waiver or you request it and it is denied, you must
award to a compliant bidder or offeror if you plan to use federal funds.
The Buy America requirements may be waived in three specific instances:

-   [If the requirements are inconsistent with public
    interest]{.underline} - Unless a general exception is set out in the
    Appendix to Part 661.7 of the regulation, this waiver requires a
    determination by the FTA Administrator, on a case-by-case basis,
    that to require compliance is \"inconsistent with the public
    interest.\" 49 U.S.C. 5323(j)(2)(A) and 49 C.F.R. 661.7(b).

-   [If the materials are not available in from the U.S.]{.underline} -
    This waiver requires a determination by the FTA Regional
    Administrator that the materials for which a waiver is requested are
    not produced in the U.S. in sufficient and reasonably available
    quantities and of a satisfactory quality. If no responsive and
    responsible bid is received offering an item produced in the U.S.,
    it will be presumed the conditions exist to grant this
    non-availability waiver. In the case of a sole source procurement,
    the waiver will be granted only if the grantee provides sufficient
    information which indicates that the item to be procured is only
    available from a single source or that the item to be procured is
    not produced in sufficient and reasonably available quantities of a
    satisfactory quality in the U.S. 49 U.S.C. 5323(j)(2)(B) and 49
    C.F.R. 661.7(c).

-   [If the cost of the domestic product is more than 25 percent higher
    than the foreign product]{.underline} - This waiver requires a
    determination by the FTA Regional Administrator that including a
    domestic item or domestic material will increase the cost of the
    contract between the grantee and its supplier of that item or
    material by more than 25 percent. This waiver cannot be applied to
    components or subcomponents. 49 U.S.C. 5323(j)(2)(D) and 49 C.F.R.
    661.7(d).

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```
-   [General waivers]{.underline} - Appendix A to Part 661.7 lists
    specific waivers for which applications are not necessary. This list
    includes all waivers published in 48 C.F.R. 25.104, [^165] Chrysler
    vans, microcomputers and small purchases under \$100,000. A general
    waiver has also been granted under the rolling stock requirements of
    Part 661.11 at Appendix A. Under this waiver, the provisions of this
    section do not apply when foreign source spare parts for buses and
    other rolling stock whose total cost is 10 percent or less of the
    overall project contract cost are being procured as part of the same
    contract for the major capital item. If the product offered
    qualifies for a permanent discussed here, the bidder or offeror
    should certify compliance with Buy America.  

Generally, only grantees may apply for a waiver. However, if a bidder or
offeror is seeking a waiver under Part 661.7(f)(waiver for component or
sub-component under rolling stock procurements) or Part 661.7(g) (waiver
for specific item used a manufactured product), FTA will consider a
request for waiver directly from the bidder, offeror, or supplier.

The grantee may request a waiver from FTA when there is a viable public
interest argument supporting award to a non-compliant bidder or offeror
when there is a compliant bidder or offeror; when there are no compliant
bids or offers (including a justified sole source to a non-compliant
bidder or offeror); or when there is more than a 25 percent price
difference between

the compliant and non-compliant bid or offer. *Otherwise, the grantee
must award to the compliant bidder or offeror meeting all requirements
for award.*

Applications for waivers are processed following 49 C.F.R. 661.9. Except
as noted above, the waiver request must be obtained \"in a timely
manner\" through the grantee. Grantees should therefore review the bids
or offers and request a waiver, if one is necessary, before award. The
grantee\'s request for waiver must be made in writing and include all
facts and justification to support the waiver, and be submitted to the
FTA Administrator through the appropriate FTA Regional Office. The
Administrator (or Regional Administrator, in cases where authority has
been delegated) will issue a written determination setting forth the
reasons for granting or denying the waiver.

##### Investigations

FTA's Buy America investigative procedures establish a presumption that
a bidder who has submitted a Buy America certificate is in compliance
with the regulation. FTA will investigate if it finds that this
presumption has been overcome. FTA may initiate an investigation on its
own or in response to a third-party petition. The regulation requires
that the petition include a statement of the grounds of the petition and
any supporting documentation. 49 C.F.R. 661.15.

**Intentional Violations**

49 C.F.R. 661.18, states that any person determined by a Federal agency
or court to have intentionally affixed a false \"Made in America\" label
to, or misrepresented the origin of, a product that was used in the
project but which was not produced in the United States is ineligible to
receive an FTA-funded contract.

For instance, if a person has been convicted by a court of making a
false certification under these provisions, that person would be
ineligible for award of a contract. If there was a violation but not a
conviction, the information could still affect your responsibility
determination. Similarly, if it was determined (perhaps through a
suspension or debarment proceeding conducted by a federal agency) that
the person falsely represented the American origin of a product, that
person would similarly be ineligible for award of a contract.

If the violation is discovered after award, the contractor remains
responsible for performing the contract, including satisfying the Buy
America requirements. A typical resolution is to permit the contractor
to substitute a different product that meets the specifications
including the Buy America requirement at the contractor\'s expense. In
rare instances, FTA may approve a public interest waiver allowing the
non-compliant product to be used.

**4.3.3.2.3 [Lobbying Certification]{.underline}**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| §3.d of the Master Agreement states that:                             |
|                                                                       |
| > d\. [Lobbying Restrictions]{.underline}. The Recipient agrees as    |
| > follows:                                                            |
| >                                                                     |
| > \(1\) Refrain from using Federal assistance funds to support        |
| > lobbying, and                                                       |
| >                                                                     |
| > \(2\) Comply, and assure the compliance by each third party         |
| > contractor at any tier and each subrecipient at any tier, with      |
| > applicable requirements of U.S. DOT regulations, \"New Restrictions |
| > on Lobbying,\" 49 CFR Part 20, modified as necessary by 31 U.S.C. § |
| > 1352.                                                               |
+-----------------------------------------------------------------------+

**DISCUSSION**

**The requirements set forth above have been included in all grants
between the FTA and its grantees with a requirement that the
certification flow down to all contractors and subcontractors for whom a
contract involving federal funds in excess of \$100,000 is contemplated.
The requirement has two aspects to it: First, the certification itself
must be executed and returned with the bid or proposal. Second, in the
event funds of any sort have been used for lobbying activities** [^166]
**by the contractor or any subcontractor; a Standard Form‑LLL,
\"Disclosure Form to Report Lobbying\" must also be completed. It is
your ultimate responsibility to ensure that these certifications and
disclosure forms are submitted to the FTA.** [^167]

**Best Practices**

[Certifications Required]{.underline} ‑ In all solicitations that are
expected to result in contract amounts in excess of \$100,000, the
certification set forth in Appendix A to 49 CFR Part 20 must be
included. The certification is also included in Appendix A.1,
\"Federally Required Model Clauses\" of this Manual under the
\"Lobbying\" contract provisions.

Although it is not required that you include a copy of the Standard Form
LLL in the solicitation, it is recommended that you have a copy
available to furnish to an offeror if one is requested. A copy is
included in the CFR section and may be reproduced. [^168] A copy may
also be available from your legal counsel or federal grants office
because the agency had to furnish a copy to the FTA as well as part of
the Grant‑making process.

[Timeliness]{.underline} ‑ The certification (and Standard Form LLL if
applicable) should be executed and returned with the bid or proposal.
Because the language of the regulations refers to needing the
Certification and applicable disclosures at time of award, failure to
submit the executed certification with the offer would not be considered
a responsiveness issue in a competitive bidding procurement.

[Subcontracts]{.underline} ‑ You may not always know who your prime
contractor subcontracts with, particularly in fixed price contracts. It
is recommended that during any pre‑performance conference you have with
the prime, you remind him or her of the requirement to forward the
certification and disclosure statements made by subcontractors at any
tier who have subcontracts in excess of \$100,000 through the tiers to
the contracting officer.

**4.3.3.3 [Other Submissions]{.underline}**

**4.3.3.3.1 [Acknowledgment of Solicitation Addenda]{.underline}**

**DISCUSSION**

**Although the topic has been discussed in different contexts,** [^169]
**one of the most critical submissions that should be received with
offers is an acknowledgment of any amendments to the solicitation. These
are the changes to the terms of the solicitation (including to the
\"boilerplate,\" the drawings, specifications, scope of work, etc.) that
in all likelihood have an impact on price or schedule. If an amendment
is not acknowledged, you do not know if the offeror is really offering
the same product or service that you want.**

**Best Practices**

There are two ways most agencies allow offerors to acknowledge receipt
of amendments.

As we discussed in the section on the Solicitation, [^170] many agencies
include on the **solicitation form** itself, space for solicitation
amendments to be acknowledged.

A second way is for the offeror to actually sign and date the amendment
cover sheet and return it either at the time of receipt or include it
with the offer.

Seldom is it required by the agency, but it is not unusual for an
offeror to fill in the space on the solicitation form and return the
amendment too. No problem from your standpoint ‑‑ just \"overkill\" by a
concerned offeror. If you see this situation frequently, you may want to
check the instructions you have provided to offerors and determine if
there is some ambiguity about your acknowledgment requirements.

If you receive a bid or proposal and one or more of the issued
amendments are not acknowledged, what do you do?

Many times you are initially only looking at the low bidder\'s bid ‑‑
look at the other bidders and see if they acknowledged the amendment. If
not, there may be a mailroom or timeliness problem.

Are the changes to the solicitation made by the amendment material?

If the amendment is material, accumulate the documents and seek the
advice of your legal counsel. Particularly in an IFB procurement, you
may have a low bid that is non‑responsive and cannot be considered for
award. Depending upon how your agency conducts RFPs, the failure to
acknowledge an amendment is not usually \"fatal\" and you can ask for an
acknowledgment during negotiations or discussions.

You may wish to include in your procedures or solicitations a provision
for your determination regarding the responsiveness of offers which do
not acknowledge material addenda. Such a provision will reinforce your
discretion.

**4.3.3.3.2 [Bid Guarantee]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| ::: Definition-Term                                                   |
| In discussing bonding requirements, § 11 of FTA Circular 4220.1E      |
| provides:                                                             |
| :::                                                                   |
|                                                                       |
| > For those construction or facility improvement contracts or         |
| > subcontracts exceeding \$100,000, FTA may accept the bonding policy |
| > and requirements of the grantee, provided FTA determined that the   |
| > policy and requirements adequately protect the Federal interest.    |
| > FTA has determined that grantee policies and requirements that meet |
| > the following minimum criteria adequately protect the Federal       |
| > interest:                                                           |
|                                                                       |
| a.  A bid guarantee from each bidder equivalent to five (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, upon acceptance of its bid,       |
|     execute such contractual documents as may be required within the  |
|     time specified;                                                   |
|                                                                       |
| §15.m of the Master Agreement states that:                            |
|                                                                       |
| > \(m\) [Bonding]{.underline} - The Recipient agrees to comply with   |
| > the following bonding requirements.                                 |
| >                                                                     |
| > \(1\) [Construction Activities]{.underline} -- The recipient agrees |
| > to provide bid guarantee, contract performance, and payment bonding |
| > to the extent deemed adequate by FTA and applicable Federal         |
| > regulations, and comply with any other bonding requirements FTA may |
| > issue.                                                              |
|                                                                       |
| ::: Definition-Term                                                   |
| > \(2\) [Other Activities]{.underline} -- The Recipient agrees to     |
| > comply with any other bonding requirements or restrictions FTA may  |
| > impose. [^171]                                                      |
| :::                                                                   |
|                                                                       |
| ::: Definition-Term                                                   |
| State laws are sometimes specific in requiring or prohibiting         |
| security and guarantees in public procurements. Performance bonds are |
| often required, and the requirement may also affect bid guaranties.   |
| :::                                                                   |
+-----------------------------------------------------------------------+

**DISCUSSION**

**The primary function of obtaining a bid guarantee is to financially
protect the owner from loss should the successful offeror fail to
execute further contractual instruments and furnish performance bonds or
insurance certificates as required. As required by the FTA,**

**this financial protection on construction contracts is 5% of the
amount of the offer. Bid guaranties are usually used only where there is
a requirement for performance and/or payment bonds are required prior to
the commencement of performance.**

**We will discuss in other sections of the Manual bonding requirements
in particular types of procurements, such as for construction,** [^172]
**equipment and supplies,** [^173] **and rolling stock.** [^174] **In
this section, we will discuss the submission requirements for the
various types of bid guarantee, such as bid bonds, certified checks, and
other allowable negotiable instruments.**

**As with many other aspects of the procurement process, the use of bid
security and the types of security may be addressed in your state laws.
In these cases, you will be obligated to follow those laws as long as
they meet the minimum requirements of the federal regulations set forth
above.**

**Best Practices**

[Solicitation]{.underline} ‑ If a bid guarantee is to be required, a
solicitation clause is included that details:

-   the requirement;

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-   the amount of the guarantee (typically 5 percent of offer price) and
    how it should be calculated;

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-   acceptable forms of guarantee (usually, cashier\'s check, letter of
    credit, or bond from a licensed agency); and

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-   that the guarantee must be submitted with the offer.

[Nonresponsiveness]{.underline} ‑ You can include in your policy
regarding bid guaranties the actions to be taken if one is not furnished
in accordance with the solicitation requirement.

-   Normally in a *bidding* environment, if the proper guarantee is not
    furnished with the bid, the bid is non‑responsive. If you allowed
    the bidder to submit the missing guarantee or correct a defective
    guarantee after the bids were \"exposed\", you would be allowing
    \"two bites from the apple.\" Once the bids are known, the bidder
    could decide to submit (or not) the bid guarantee based on how much
    money is left on the table!

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-   In a *competitive proposal* process, if a guarantee was required and
    was not submitted, your solicitation document would determine
    whether it could be asked for during negotiations. But what do you
    do if you could award a contract without negotiations, (a right you
    will frequently reserve to yourself)? If you have to ask one offeror
    for its bid guarantee, is that considered discussions or
    negotiations? If so, that would necessitate opening discussions with
    all offerors in the competitive range. [^175] For these reasons, and
    because proposers have other means of effectively withdrawing from
    competitive proposal processes, proposal guarantee is less
    frequently used than bid guarantee (even if a performance bond is
    ultimately required).

What if the bid guarantee is not signed, but the bid is? What if you
only received one offer and the guarantee was not included with that
offer? What if the guarantee is received late? What if the amount of the
guarantee is insufficient? What if the guarantee is not dated or has an
incorrect date? These are all questions that could arise and can be
considered in your policy formulation.[^176] Your policy would provide,
e.g., that deficiencies affecting offer price would be material and
would establish nonresponsiveness.

[Custody of Guarantee]{.underline} ‑ What do I do with the bid
guarantee? It is recommended that if the guarantee is a bond or letter
of credit, it be retained with the procurement file. If it is other than
a bid bond, it is recommended that it be placed in a secure area (safe
or locked file cabinet) with a notation in the procurement file its
location.

[Unused Guarantee]{.underline} ‑ Guaranties have a financial impact on
proposers as long as they are in effect. Therefore, you will want to
return it to the unsuccessful offerors as soon as it is prudent to do so
(e.g., you have awarded the contract or the offeror is too far down the
bid list to reasonably expect an award). You may establish a rule that
all offerors beyond a certain rank (e.g., the fourth lowest and all
higher bids, all proposers outside the competitive range) will
immediately have their guarantee returned.

Return unused guarantees to contractors after the contingencies have
been met ‑‑ all contractual requirements have been met and the required
performance and payment bonds and insurance certificates are in place as
protection for the owner in the event of default or non‑performance of
the contractor.

[Collection of Bond]{.underline} ‑ Although you will seldom be involved
in collecting funds from a bonding agency under a bid bond, collection
is like the capture of the king in chess. It dictates many of the moves
you will want to make to use a bid bond effectively without imposing
unnecessary

burden on your offerors. The conditions which discharge the bond should
be specified in your solicitation. Generally, the principal condition
that discharges the bond or guarantee is the furnishing of a performance
bond. Often the terms of the bid guarantee also guarantee that the
offeror will provide executed contract documents, insurance
certificates, payment bonds, or evidence of DBE compliance.

Once the performance bond is in place, it guarantees performance of all
other contractor obligations. The most likely reasons a performance bond
would not be furnished (which are the conditions you might look for in
deciding whether to require bid guarantee) are: a financial condition so
weak that bonding companies will not participate, such a large amount of
bonds already issued that the bond cannot be obtained, second thoughts
about the contract based on the information revealed up to the point in
time of bonding, or a frivolous bid.

If the performance bond is not provided, you can specify the right under
your bid guarantee provision to immediately accept the next ranked offer
and to collect *from the defaulting offeror* the price and value
difference between the offers. (Estimating this difference is one way to
set the amount of the bid guarantee.) If the guarantee is a bond or
equivalent letter of credit, you may need to obtain a judgment against
the offeror before you can actually collect from the bonding company or
bank. As indicated above, it is critical to most suppliers who provide
bid guarantee that they retain the confidence of bonding companies. The
bonding company\'s concern may assist in collection from a defaulting
offeror.

**4.4 SEALED BIDS (INVITATION FOR BIDS)**

**4.4.0 [Overview]{.underline}**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| The FTA does not require use of the sealed bid (invitation for bids)  |
| method of procurement for any particular procurement. This method is  |
| simply one of many that may be used, as appropriate. If, however, the |
| grantee decides this method of procurement is appropriate, § 9.c.\    |
| of FTA Circular 4220.1E sets forth some definitions, parameters for   |
| use, and some specific requirements to be followed:                   |
|                                                                       |
| c\. Procurement by Sealed Bids/Invitation for Bid (IFB). Bids are     |
| publicly solicited and a firm‑fixed‑price contract (lump sum or unit  |
| price) is awarded to the responsible bidder whose bid, conforming     |
| with all the material terms and conditions of the invitation for      |
| bids, is the lowest in price.                                         |
|                                                                       |
| \(1\) In order for sealed bidding to be feasible, the following       |
| conditions should be present:                                         |
|                                                                       |
| \(a\) A complete, adequate, and realistic specification or purchase   |
| description is available;                                             |
+-----------------------------------------------------------------------+

+-----------------------------------------------------------------------+
| > \(b\) Two or more responsible bidders are willing and able to       |
| > compete effectively for the business;                               |
| >                                                                     |
| > \(c\) The procurement lends itself to a firm fixed price contract   |
| > and the selection of the successful bidder can be made principally  |
| > on the basis of price; and                                          |
| >                                                                     |
| > \(d\) No discussion with bidders is needed.                         |
|                                                                       |
| \(2\) If this procurement method is used, the following requirements  |
| apply:                                                                |
|                                                                       |
| > \(a\) The invitation for bids will be publicly advertised and 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;                                           |
| >                                                                     |
| > \(b\) The invitation for bids, which will include any               |
| > specifications and pertinent attachments, shall define the items or |
| > services sought in order for the bidder to properly respond;        |
| >                                                                     |
| > \(c\) All bids will be publicly opened at the time and place        |
| > described in the invitation for bids;                               |
| >                                                                     |
| > \(d\) 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                                                   |
| >                                                                     |
| > \(e\) Any or all bids may be rejected if there is a sound           |
| > documented reason.                                                  |
| >                                                                     |
| > \(3\) The sealed bid method is the preferred method for procuring   |
| > construction if the conditions in paragraph c(1) above apply.       |
|                                                                       |
| State law typically places additional and more specific requirements  |
| on the sealed bidding process.                                        |
+-----------------------------------------------------------------------+

**DISCUSSION**

**Having said there is no FTA requirement that grantees use the sealed
bidding method of procurement, it should be recognized that, as a
practical matter, many more grantee procurements are accomplished with
this method as opposed to the competitive proposal/request for proposal
method which will be discussed in more detail below. There is a mixture
of history and tradition behind the use of sealed bidding in the public
sector which is frequently embodied in legislative requirements at both
the federal and state levels. Although federal legislative requirements
mandating the use of this method have been relaxed in recent years, many
states still require its use for many commodities or services being
procured and it is still the \"preferred\" method for the acquisition of
construction services in the public sector, even by the FTA. Sealed
bidding is perceived to be a faster method of procurement; who gets the
contract can be determined fairly objectively; and the fixed price
contract which results is easy to understand and budget, as well as
manage after award.**

**Purpose**

As with so many other aspects of public procurement, we must begin with
a recommendation that you check you state or local law or ordinance to
determine if a legislative body has decided for you what flexibility, if
any, you have to use a procurement method other than the IFB method. If
you are limited on what methods you can use under what circumstances,
you will be obligated to comply with those laws, ordinances or
regulations. We will address this method in this section as though there
were no limiting constraints on your ability to use this method. As a
practical matter, the constraints you are likely to be faced with would
be limitations on your ability to use the competitive proposal method
rather than the sealed bidding method.

Because of the way this Manual has been drafted, it is important to read
Section 4.3 in conjunction with this Section because many of the
features or elements of both the IFB and RFP methods of procurement are,
if not the same, very similar. Rather than duplicate the discussion of
those features in our discussions of both methods, we suggest you read
that section first and then this section on the sealed bidding
method**.**

**Best Practices**

When do I use the sealed bid/IFB method of procurement?

-   In deciding whether or not to use the sealed bidding method of
    procurement, the conditions detailed in § 9.c.(1) of FTA Circular
    4220.1E are excellent and very self‑explanatory. Go down the list,
    do all of the conditions exist? If you need more information about a
    particular condition, this Manual is designed to provide you with
    that additional detail. For information about specifications, refer
    to Chapter 3*,* \"Specifications.\" For more information about
    \"responsibility\", refer to Section 5.1, \"Responsibility of
    Contractor.\" For questions about what a firm fixed‑price contract
    is, refer to Section 2.4.3.1, \"Fixed Price.\"

What steps are involved in the sealed bidding method of procurement?
Most of these steps have been addressed in Section 4.3, \"Competitive
Procurement Methods,\" but the following is an overview of those
necessary steps:

-   [Preparation of the Invitation\
    ]{.underline}

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-   The invitation must describe your requirements as completely,
    clearly, accurately and unambiguously as possible. Stated another
    way, the invitation should define the items or services sought in
    order for the bidders to properly respond. In addition to\
    the danger of inadequate goods or services, the claims arising from
    errors make this a\
    daunting task, but not an impossible one. [^177]

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-   Requirements that restrict or act as restraints on full and open
    competition should be avoided. [^178]

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-   The invitation typically includes all documents (whether actually
    attached or incorporated by reference) furnished to all prospective
    bidders for the purpose of bidding.

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-   [Publicizing the Invitation\
    ]{.underline}

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-   The invitation must be publicly advertised and distributed to
    prospective bidders. [^179]

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-   The amount of time after publication and distribution of the
    invitation to prepare and submit their bids and prior to the time
    and date set for opening of bids is important.

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-   [Submission of bids\
    ]{.underline}

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-   Sealed bids are submitted to you by bidders by the time and place
    stated in the invitation.

-   Bids are publicly opened at the time and place described in the
    invitation.

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-   [Evaluation of bids]{.underline}

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-   FTA requires that sealed bidding be used only if no discussion with
    bidders \"is needed\"; bids are, as a rule, evaluated without any
    discussions with bidders. [^180]

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-   [Contract Award\
    ]{.underline}

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-   A fixed price contract will be awarded to the responsible bidder
    whose bid, conforming to the terms and conditions of the invitation,
    [^181] is the lowest in price.

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-   If stated in the invitation, price‑related factors may be considered
    in determining the lowest price ‑‑ e.g., discounts, [^182]
    transportation costs, life cycle costs. A provision in the IFB that
    explains how the calculation of bids will be made will avoid
    confusion at the time of bid opening. The explanation can include
    options, escalators, currency issues, unit prices, etc. To preserve
    the right to exercise options with Federal funds, FTA requires that
    the option prices be evaluated in the selection process. You can
    also address how the rare instance of tie bids will be treated,
    e.g., with the traditional coin toss.

**4.4.1 [Solicitation]{.underline}**

**DISCUSSION**

**In addition to the material in Section 4.3.2.3, (the common elements
of the solicitation process for both the IFB and RFP), the rigidity and
precision of the sealed bid method require that your solicitation
anticipate the procedural issues that may arise. Although these items
may be appropriate to an RFP as well, an IFB should be particularly
clear regarding requested amendments and approval of items equal to
those specified, bid opening time and place, the price schedule, the
offer form, and the clarity of the technical specifications.**

**Best Practices**

In this section, we will provide you with a nominal checklist of things
for you to consider in the development of your solicitation ‑‑ some of
the items noted here may not be applicable to every procurement.

+----------------------+-----------------------------------------------+
| > [Identification of | > \- Solicitation number                      |
| > Solic              | >                                             |
| itation]{.underline} | > \- Date of solicitation issuance            |
+----------------------+-----------------------------------------------+

+----------------------+-----------------------------------------------+
| > [Identification of | > \- Name and address (street and mailing if  |
| >                    | > different) of your agency                   |
|  agency]{.underline} | >                                             |
|                      | > \- Name and telephone number (voice and     |
|                      | > facsimile) of contact within your agency    |
+----------------------+-----------------------------------------------+
| > [Instructions to   | > \- Date, time, and place of bid opening     |
| >                    | >                                             |
| bidders]{.underline} | > \- Instructions channeling communication    |
|                      | > regarding the procurement -- typically with |
|                      | > the designated procurement official only    |
|                      |                                               |
|                      | -   Instructions relating to rules regarding  |
|                      |     late submission of bids                   |
|                      |                                               |
|                      | -   Instructions relating to how amendments   |
|                      |     of the solicitation should be             |
|                      |     acknowledged                              |
|                      |                                               |
|                      | > \- Instructions on what documents should be |
|                      | > returned with bid                           |
|                      | >                                             |
|                      | > Bid guarantee                               |
|                      | >                                             |
|                      | > Price schedule                              |
|                      | >                                             |
|                      | > Representations and certifications          |
|                      | >                                             |
|                      | > Bid samples                                 |
|                      | >                                             |
|                      | > Descriptive literature                      |
|                      | >                                             |
|                      | > \- Notification of bid acceptance period is |
|                      | > a concept that may also be addressed in the |
|                      | > competitive proposal method, but is\        |
|                      | > \                                           |
|                      | > more prevalent in the IFB process. You can  |
|                      | > tell bidders in the solicitation that they  |
|                      | > must allow a minimum period in which your   |
|                      | > agency can accept their bid after its       |
|                      | > submission. Further, if they want to        |
|                      | > include a lesser period than your minimum,  |
|                      | > the bid will be rejected as nonresponsive.  |
|                      | > What is your normal processing time for     |
|                      | > bids ‑‑ 30, 60, 90, 120 days? Be realistic  |
|                      | > but also understand that the longer the     |
|                      | > period you allow to accept, the greater     |
|                      | > will be the contingency the bidder put in   |
|                      | > its bid to reflect price fluctuations in    |
|                      | > the marketplace. Also take into             |
|                      | > consideration that you can (and sometimes   |
|                      | > will) request offerors to voluntarily       |
|                      | > extend their offers for an additional       |
|                      | > period if you encounter a delay.            |
+----------------------+-----------------------------------------------+
| > [Boilerplate       | > \- Instructions and Conditions of           |
| > attachments or     | > Solicitation                                |
| > e                  | >                                             |
| xhibits]{.underline} | > \- General Provisions                       |
|                      | >                                             |
|                      | > \- Special Provisions                       |
|                      | >                                             |
|                      | > \- Bonds (Bid, Performance, Payment)        |
+----------------------+-----------------------------------------------+
| > [Specifications,   |                                               |
| > Scope of Work,     |                                               |
| > D                  |                                               |
| rawings]{.underline} |                                               |
+----------------------+-----------------------------------------------+

**4.4.2 [Bid Opening]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| \"All bids will be publicly opened at the time and place prescribed   |
| in the invitation for bids;\" [^183]                                  |
+-----------------------------------------------------------------------+

**DISCUSSION**

**The day that you have all been waiting for has arrived. Bids for your
project are due in Room 407 at 2 P.M. Will we get any bids? Where will
the price of the bids be in relation to the estimate? What do I do if
all of the bids exceed my budget? What if there\'s only one bid? What if
a bidder delivers its bid at 2:02 P.M.? What do I actually do at 2 P.M.?
Do I read the bids out loud? What if the bidders want to look at the
bids we received?**

These are some of the many concerns that you probably have every day you
receive bids. Although many of these issues are beyond the scope of this
manual since they are defined by your agency and its own peculiar
personality, a few of these issues are very important to the sealed
bidding procurement process. The time and date set for the receipt of
bids and

the public announcement of those bids are very critical to the success
and integrity of a public procurement process.

**Best Practices**

As with the other sealed bidding issues, the procedures surrounding the
receipt and opening of bids may be dictated by your state law or
procedures. As a general concept of public procurement, the opening of
bids is the point in time when completion of the procurement
(acquisition) process begins and the contract administration process
starts. It also initiates the rules relating to \"responsiveness\" and
\"responsibility\" which are discussed in Sections 4.4.3 and 5.1
respectively.

[The process of receiving bids]{.underline}. As you approach the date
and time set in your solicitation for receipt of bids, you will begin to
receive bids. A simple step to eliminate many questions that could arise
later is to keep the bids unopened in a secured location, preferably a
locked bid box, file cabinet, or safe.

> ● The identity and number of bids received need not be disclosed
> within your agency prior to the time and date set for receipt of bids
> except to those personnel with a real \"need to know.\"
>
> ● As discussed in Section 2.3.2, \"Independent Grantee Cost
> Estimate,\" when you receive the "independent estimate\" it can also
> be secured, logically in this same location. It is also a good
> practice to have on your \"procurement checklist\" to be sure you have
> received this estimate, particularly if this is a federally‑funded
> procurement.
>
> ● On the day of receipt of bids (maybe an hour ahead of time), you may
> want to establish a place in the room where the bids will be read
> where bids can be deposited and time‑stamped in.

**[Opening, reading, and recording bids]{.underline}.**

● Bid opening is a public event and is open to the general public.

> ● As the [time]{.underline} for receipt of bids approaches on the day
> bids are due, if you are the bid opening official, consider checking
> the time with a reliable source and using that time as the official
> time.
>
> ● Shortly (10 minutes?) before the time for receipt of bids, you may
> also want to call your office, the mailroom, the security desk, and
> anywhere else you can think of where a bid might be and get it logged
> in. \"Do you have an envelope indicating it is a bid for IFB No.
> 123‑4456? If so, please bring it to Room 407 immediately.\"
>
> ● Bidders are apt to be coming into the room at the last minute to
> submit bids. Don\'t be surprised when a breathless bidder comes
> running into the bid room frantically waving a bid and wanting you to
> consider it.
>
> ● At the designated time, you may announce to those in attendance that
> the time set for receipt of bids has arrived and that no further bids
> will be received.
>
> ● At that time, personally and publicly open the bids, read the bids
> aloud (if practical) to those persons present, and have the bids
> recorded. Some procedures also include opening, reading aloud, and
> recording the independent estimate. Other agencies believe this
> information could help a disappointed bidder to interfere with the
> process, or could be used by a single bidder to the agency\'s
> disadvantage.
>
> ● The bids are usually recorded on a document called an Abstract of
> Bids and this document is available for public inspection after
> completion.

-   Unless it unduly interferes with the conduct of your business, you
    may allow time after the bids are read for interested members of the
    public to review the bids submitted under the immediate supervision
    of an agency official and under conditions that preclude the
    possibility of a destruction, substitution, addition, deletion, or
    alteration of the bid.

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-   If irregularities or discrepancies are discovered during this review
    process, or if you noticed something irregular during the public
    reading, it is best to simply note them and not discuss these in
    public. These matters are best discussed only with appropriate
    agency personnel, including the appropriate procurement,
    engineering, maintenance, and legal staff members. [^184]

[Late bids]{.underline} ‑ Many instructions for bidders include a clause
that addresses the late submission, modification, and withdrawal of
bids. The clause may be required by state law or patterned after a
Federal provision. [^185] The clause specifies any circumstances (e.g.
documented failure by specific mail or delivery services) that are
exceptions to the general rule ‑ ‑ bids received at the place designated
in the IFB after the exact time set for bid opening are late and will
not be

considered under any circumstances. [^186] Whether or not the late bid
would have been low in price is of no consequence. It must be rejected,
the argument goes, because maintaining the integrity of the sealed bid
procurement process is more important than the possible advantage to be
gained by considering a late bid in a particular procurement. [^187]

-   Although the burden of getting the bids to the bid opening location
    on time is on the bidder, it is easier to take extra precautions to
    ensure all bids are at the proper location at the proper time, than
    to explain later the integrity of the process. As we alluded to
    earlier, you might want to consider the following as \"preventive\"
    measures designed to reduce the possibility of this happening to
    you:

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-   Consider placing clear instructions in the mailroom and at the
    reception area as to what is to happen with bids and bidders,
    particularly on the day bids are due.

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```
-   Consider calling your mailroom, your office, and the location where
    bids are \"normally\" received and secured shortly before the time
    for receipt of bids and inquire if any bids were received in the
    last mail delivery or delivered to the other location(s).

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-   Include labels or envelopes clearly marked with Bid \# and date and
    time due in the solicitation package for use by bidders.

**4.4.3 [Single Bid]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| Within the discussion of sole source contracts, the FTA Circular      |
| 4220.1E, Paragraph 9.h -- *Procurement By Noncompetitive Proposals    |
| (Sole Source)* also deals with the situation when a number of         |
| offerors are solicited but only one response is received:             |
|                                                                       |
| > *Sole Source procurements are accomplished through solicitation of  |
| > a proposal from only one source, or after solicitation of a number  |
| > of sources, competition is determined inadequate.* . . .[^188]      |
|                                                                       |
| FTA Circular 4220.1E, Paragraph 10 requires grantees to perform a     |
| cost or price analysis in connection with every procurement action:   |
|                                                                       |
| > 10.a. [Cost Analysis]{.underline}. A cost analysis will be          |
| > necessary when adequate price competition is lacking and for sole   |
| > source procurements . . .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.          |
| >                                                                     |
| > 10.b. [Price Analysis.]{.underline} A price analysis may be used in |
| > all other instances to determine the reasonableness of the proposed |
| > contract price.                                                     |
+-----------------------------------------------------------------------+

**DEFINITIONS**

[Single Bid]{.underline} ‑ Only one bid has been received at the time
and date set for bid opening.

[Single Responsive Bid]{.underline} ‑ Only one responsive bid received
at the time and date set for bid opening. This may result from having
only one bidder or from all other bidder(s) being nonresponsive.

[No Responsive]{.underline} Bids ‑ All bids received at the time and
date set for bid opening are nonresponsive.

##### DISCUSSION

**[State or Local Law]{.underline} - As with many other areas of
procurement, procedures for handling a single bid in response to an
invitation for bid may be addressed specifically by your state or local
law. In the absence of a prescribed procedure, this section presents
ways to analyze and move forward with your procurement.**

**[Adequacy of Competition]{.underline} - When only one bid is received
in response to a solicitation that was issued to multiple sources, you
will first have to determine if there was adequate competition. The FTA
interpretive comment in the annotated Circular 4220.1E, paragraph 10,
makes clear the fact, that when only one bid is received, this does not,
in itself, mean that competition was inadequate. In order to make this
determination, it may be necessary to talk to those firms solicited to
find out why they did not submit bids. If the reason is a restrictive
specification or a delivery requirement that only one bidder could meet,
you have a situation of inadequate competition. If this is the case then
the procurement is a sole source and you must process it as such with
internal agency approvals, or cancel the solicitation, change the
requirements to allow for more bids, and re-solicit bids. On the other
hand, if the reasons given by the non-responders are unrelated to the
specification and/or solicitation terms, then you may presume
competition was adequate and proceed with the award as a competitive
one. You should document your file so that there is a clear audit trail
for reviewers to understand how you reached your determination.**

**[Cost or Price Analysis]{.underline} - If the competition is deemed to
be adequate, then a *price analysis* must be performed to determine the
reasonableness of the bid price**. [^189] **If, on the basis of a price
analysis, you are able to document your determination that the price is
fair and reasonable, and if the bid is responsive and the bidder
responsible, you may proceed with award. If, however, you cannot
determine the reasonableness of the bid on the basis of a price
analysis, then you will have to request a detailed breakdown of costs
and profit from the bidder and perform a *cost analysis*.**

**If competition is deemed to be inadequate, and you decide to process
the award as a sole source, then you will have to perform a *cost
analysis* (i.e., request from the bidder a detailed breakdown of the
estimated costs and profit) unless you can establish the reasonableness
of the price based on the bidder's catalogue or market price (note that
the item must be sold in substantial quantities to the general public),
or the price is set by law or regulation. For a discussion of cost and
price analysis techniques, see BPPM section 5.2 -- *Cost and Price
Analysis*. If the bidder refuses to furnish a cost breakdown for your
analysis, then you will have to request a waiver from FTA of the
Circular requirement in paragraph 10.a that a cost analysis be conducted
on every sole source procurement, or cancel the procurement and
re-solicit bids.** [^190]

**[Negotiation]{.underline} ‑ If you have been unsuccessful in
determining through a price or cost analysis that the bid price is fair
and reasonable, you may wish to enter negotiations with the offeror to
attempt to establish a different price that can ultimately be determined
to be reasonable. Some authorities view this as canceling the sealed
bidding method of procurement and converting, through documentation, the
procurement either to a competitive proposal (a negotiated procurement)
or a sole source procurement. This is another area that may be
controlled or regulated by state law. For instance, your state may
require that construction services only be awarded by accepting a sealed
bid, with no exceptions. (If this is the case, you really have no choice
but to cancel the solicitation and, if your requirement continues, to
re‑advertise the procurement.) If, however, your state allows
flexibility and you are able to justify conversion of the procurement to
a negotiated**

**process, this may allow you to negotiate a contract with a price that
is fair and reasonable so that award can be made.**

**4.4.4 [Responsive Bidder]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| The concept of \"responsiveness\" is discussed in § 9 of FTA Circular |
| 4220.1E as an integral element of the sealed bidding method of        |
| procurement:                                                          |
|                                                                       |
| > c\. Procurement by Sealed Bids/Invitation for Bid (IFB). Bids are   |
| > publicly solicited and a firm‑fixed‑price contract (lump sum or     |
| > unit price) is awarded to the responsible bidder whose bid,         |
| > conforming with all the material terms and conditions of the        |
| > invitation for bids, is the lowest in price.                        |
|                                                                       |
| Subparagraph 9.c.(2) of FTA Circular 4220.1E, in discussing the       |
| requirements to be used if the sealed bid method of procurement,      |
| lists the following:                                                  |
|                                                                       |
| > \(d\) 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;                                                          |
+-----------------------------------------------------------------------+

**DEFINITION**

[Responsive]{.underline} ‑ If an offer conforms in all material aspects
to the requirements of the solicitation at the scheduled time of
submission and does not require further discussions with the offeror,
the offer is responsive.

**DISCUSSION**

**Although it may be stated differently in the rules or statutes
governing your procurement processes, the concept of awarding a contract
to the lowest responsive and responsible bidder is a common precept in
public contracting at the Federal, state, and local levels throughout
the country. It is helpful to maintain the distinction among these
concepts in reviewing bids, and to consider them in the stated sequence.
First identify the lowest bid, then find the lowest responsive bid, then
find the lowest responsive and responsible bidder.**

[Evaluation Sequence]{.underline}

The following is a sequence of evaluation that is useful for explanation
and may also be useful in practice; however, the concepts and correct
determinations are far more important to successful procurement than is
the sequence. Examination of bids logically begins with the lowest
bidder. Once the lowest bidder is determined, look to see if the bidder
is responsive. \"Responsiveness\" is a concept critical to the sealed
bidding process. In public contracting, in order for a bid to be
acceptable, it must conform in all material respects to the requirements
stated in the invitation. Responsiveness is determined from the bid
documents themselves and, with very few exceptions, is determined with
no discussions or further input from the bidder.

The precise definition of \"responsiveness\" may vary from jurisdiction
to jurisdiction and the definition applicable to your organization may
be stated in your procurement regulations or statute. If the initial low
bidder is not responsive (the bid does not conform to the material
requirements of the invitation), you need go no further with that
bidder. Instead you may go back and look at the second lowest bid and
determine if it is responsive.

Once you have determined that you have a low priced bidder who is
responsive, you then begin the more subjective process of determining
the bidder\'s responsibility.

\"Responsibility\" is also a term with specific connotations in
procurement. What is involved in determining a bidder\'s responsibility
may vary from jurisdiction to jurisdiction.

FTA defines \"responsibility\" to be a contractor who possesses the
ability to perform successfully under the terms and conditions of the
proposed procurement. In determining whether a contractor possesses this
ability, you may consider such matters as contractor integrity,
compliance with public policy (e.g., EEO record, attainment of DBE goal,
not debarred or suspended, etc.), record of past performance, and
financial and technical resources. Unlike responsiveness, which normally
can be finally determined based on the bids, a determination of

responsibility may be affected by new information up to the time of
contract award. Thus, in ascertaining whether or not a bidder is
responsible, discussions may be held with the bidder to discuss these
factors so that, by the time of award, a positive determination can be
made. If you do not determine that the bidder is responsible, look
through the list of bidders again to determine a low, responsive,
responsible bidder to whom a contract can be awarded.

[Strict Responsiveness]{.underline} ‑ To understand the concept of
\"responsiveness\" and its practical rigidity in the public contracting
environment, recall that the IFB issued by the agency is designed so
that all bidders who respond can make comparable offers under the same
terms and conditions. When a bidder submits its bid to the entity in
response to the IFB, the entity must be able to accept that bid as
submitted, thereby creating a binding contract. [^191] The following
discussion of responsiveness will cover general principles and
parameters of Federal procurement precedents. You may have to ensure
compliance with your state\'s laws and precedents and your agency\'s

procedures. The best practice is to establish a clear, unambiguous
agency policy on which bidders can rely, so that, in preparing their
bids, they can be confident that no material deviations will be allowed
to any bidder in complying with the solicitation and its specifications.

**Purpose**

Requiring strict responsiveness, i.e. compliance in all material
respects with the IFB \"enables bidders to stand on an equal footing and
maintains the integrity of the sealed bidding system.\" [^192] Examples
of bids typically considered nonresponsive include:

-   The bid fails to conform to material requirements;

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-   The bid does not conform to applicable specifications (unless the
    invitation allowed alternates);

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-   The bid fails to conform to delivery schedule or permissible
    alternates;

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-   The bid imposes conditions that would modify the requirements of the
    invitation or limit the bidder\'s liability to the entity;

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-   There is a condition of the bid which affects the substance of the
    bid (i.e., affects price, quantity, quality, or delivery of the
    items offered) or works an injustice on other bidders;

> The bid contains prices for line items that are materially unbalanced,
> i.e., figures in the bid conflict with the total bid price;

-   date;

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-   ::: Definition-Term
    The bidder fails to furnish a bid guarantee in accordance with the
    requirements of the invitation; [^193] or
    :::

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-   Failure to submit Buy America Certification.

Responsiveness is a fairly objective concept and is ascertainable at the
time of bid opening. [^194] Further, the bidder\'s intent to be bound by
the IFBs requirements can normally be determined from the bid itself.
[^195] A \"second bite at the apple\" is a phrase commonly heard in
discussions pertaining to the precept that responsiveness be determined
at the bid opening solely from the bid documents and without
explanation. You will not want an apparently low bidder to re‑evaluate
its bid after the public opening and effectively withdraw the bid by
refusing to respond or responding in a subversive way; the bidder should
not have a second bite at the apple. This means that the bid package
must be examined thoroughly. Some of the questions you may ask are:

-   Does the cover letter take exception to any material terms and
    conditions?

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-   Is the bid ambiguous? Is it susceptible to two or more reasonable
    interpretations?

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-   Were all material amendments to the solicitation acknowledged?

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-   Was the bid signed?

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-   Were all material representations and certifications completed?

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-   Is the Buy America certificate required by 49 CFR § 661.6 or §
    661.12 signed? [^196]

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-   Were required descriptive literature and bid samples included with
    the bid?

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-   If required, was a bid bond or bid guarantee submitted?

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-   Was the bid defective?

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-   Was the price offered firm and definite?

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-   Were the material items or information required by the invitation
    submitted with the bid?

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-   Was the bid received at the place designated in the invitation at
    the exact time specified or was it late?

If something is questionable, is the issue one of responsibility or
responsiveness? [^197] Your customers may want to gain greater
confidence in the bids by specifying, purportedly as a condition of
responsiveness, that bidders have specific capacities. You may also find
a defect (e.g. in certifications or requested information) that relates
primarily to the ability of the bidder to perform. Precedent for direct
Federal procurement is that merely by the language in an IFB, a
contracting agency cannot change a matter of responsibility (ability to
perform) into one of responsiveness (unequivocal offer to perform).
[^198] The best practice is to maintain this distinction.

[Materiality]{.underline} ‑ Whole courses are taught on sealed bidding
and the issue of responsiveness. The list of questions and issues raised
in this discussion should not be considered as all encompassing.
Instead, they are intended to raise sensitivity to some of the issues
that impact responsiveness. It should be apparent from this discussion
that the single most important concept impacting responsiveness is
\"materiality\" ‑‑ does the inclusion or omission of the fact, item, or
requirement affect price, quantity, quality, or delivery of the items
offered? If so, the bid is probably nonresponsive. If not, the bid is
probably responsive. There are, however, many facts and situations that
do not clearly fall within these parameters and become issues that may
require analysis and input from your legal advisor. If in doubt, ask!

[DBE]{.underline} ‑ Although DBE program compliance is more often a
responsibility requirement, some processes make DBE compliance a
condition of responsiveness. This issue is discussed further

in the discussion of DBE submissions and award in Chapter 7,
\"Disadvantaged Business Enterprise.\"

**4.4.5 [Bid Mistakes]{.underline}**

**DISCUSSION**

**It may not be as certain as death and taxes, but inevitably and
unfortunately, a mistake may be discovered in your low bid. A mistake
doesn\'t necessarily mean you cannot award a contract to the low bidder,
but that could be the result. How you typically treat the mistake will
depend upon what the mistake is and when it is discovered. State law in
some states explicitly addresses bid mistakes.**

**Best Practices**

Mistakes in bids are usually discovered after bids are opened [^199] and
before the contract is awarded. The mistake, or suspicion of a mistake,
may be discovered by the procurement official in its review of the bids.
Some procedures call for the identification of clear defects (e.g.,
absence of a bid bond) at the bid opening and the rejection without
reading of the bid. This minimizes the discussion and likelihood of
protest. The mistake may be discovered by an unsuccessful bidder ([not
just the low bidder]{.underline}) when it is reviewing the bids after
bid opening. Or it may be discovered by the apparent low bidder upon
returning to its office after bid opening ‑‑ sometimes driven to an
examination of its bid after it has learned how much money was \"left on
the table!\" Regardless of how it is discovered, it is a problem in the
sealed bidding method of procurement because of the strict rules of
responsiveness, because bids have been exposed, and because the
integrity of the procurement process is at stake.

The four generally accepted categories of bid mistakes are:

> 1\. Minor informalities or irregularities in bids prior to award of
> the contract;
>
> 2\. Obvious or apparent clerical mistakes discovered prior to award;
>
> 3\. Mistakes other than minor informalities or irregularities in bids,
> or obvious or apparent clerical mistakes that are discovered prior to
> award; or
>
> 4\. Mistakes discovered after award.

If a mistake fits within one of these categories, three things can
happen: the mistake can be corrected, the mistake will be recognized and
the bid allowed to be withdrawn, or the mistake will not be recognized
and the bid not allowed to be withdrawn.

We will discuss each of these categories of mistakes and what the
consequences of each are if it is established that a mistake has been
made. One final thought before that discussion: many transit properties
in their procurement regulations have adopted rules relating to the
treatment of these categories of mistakes and, in most cases, have
patterned their rules after the rules in either the FAR [^200] or the
*Recommended Regulations* for the American Bar Association\'s *Model
Procurement Code for State and Local Governments*. [^201] If you have
rules addressing this common problem, it makes the administration of
your procurement process much easier because the rules are known, not
decided on a case‑by‑case basis.

The following tables analyze the types of mistake and one set of
actions; many variations on the illustrative rules presented here are
successfully in use.

+-----------------------+---+---------------------------------------------+---+
| **[Minor              |   | **Remedy:** the contracting officer shall   |   |
| informalities or      |   | give the bidder an opportunity to cure the  |   |
| irregularities in     |   | deficiency or waive it, whichever is in the |   |
| bids prior\           |   | best interests of the owner.                |   |
| to award of the       |   |                                             |   |
| con                   |   | **Examples** of minor informalities or      |   |
| tract.]{.underline}** |   | irregularities include failure of the       |   |
|                       |   | bidder to:                                  |   |
| Merely a matter of    |   |                                             |   |
| form and not of       |   | Return the incorrect number of signed bids  |   |
| substance.            |   | required by the IFB (1 submitted, 3         |   |
|                       |   | required).                                  |   |
| May be an immaterial  |   |                                             |   |
| defect in\            |   | Sign the bid, but only if the unsigned bid  |   |
| a bid that can be     |   | [is accompanied]{.underline} by other       |   |
| corrected or waived   |   | material indicating the bidder\'s intent to |   |
| without being\        |   | be bound, such as a bid guarantee or letter |   |
| prejudicial to other  |   | signed by the bidder referring to and       |   |
| bidders.              |   | clearly identifying the bid itself.         |   |
|                       |   |                                             |   |
| The defect is         |   | Acknowledge receipt of an amendment to the  |   |
| \"immaterial\" when   |   | IFB, but only if it is clear from the bid   |   |
| the effect on price,  |   | itself that the bidder received the         |   |
| quantity, quality, or |   |                                             |   |
| delivery is\          |   |                                             |   |
| negligible when       |   |                                             |   |
| contrasted            |   |                                             |   |
+-----------------------+---+---------------------------------------------+---+
| with the total cost   | a |                                             |   |
| or scope of the       | m |                                             |   |
| requirement being     | e |                                             |   |
| procured.             | n |                                             |   |
|                       | d |                                             |   |
|                       | m |                                             |   |
|                       | e |                                             |   |
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|                       | n |                                             |   |
|                       | c |                                             |   |
|                       | o |                                             |   |
|                       | n |                                             |   |
|                       | c |                                             |   |
|                       | e |                                             |   |
|                       | r |                                             |   |
|                       | n |                                             |   |
|                       | i |                                             |   |
|                       | n |                                             |   |
|                       | g |                                             |   |
|                       | L |                                             |   |
|                       | o |                                             |   |
|                       | b |                                             |   |
|                       | b |                                             |   |
|                       | y |                                             |   |
|                       | i |                                             |   |
|                       | n |                                             |   |
|                       | g |                                             |   |
|                       | . |                                             |   |
|                       | [ |                                             |   |
|                       | ^ |                                             |   |
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|                       | ] |                                             |   |
|                       | ) |                                             |   |
+-----------------------+---+---------------------------------------------+---+
| **[Obvious or         | * |                                             |   |
| apparent clerical     | * |                                             |   |
| mistakes discovered   | E |                                             |   |
| prior to              | x |                                             |   |
| award]{.underline}.** | a |                                             |   |
| [^204]                | m |                                             |   |
|                       | p |                                             |   |
| Mistake must be       | l |                                             |   |
| obvious or apparent   | e |                                             |   |
| on the face of the    | s |                                             |   |
| bid.                  | * |                                             |   |
|                       | * |                                             |   |
| This is the category  | i |                                             |   |
| of mistake most       | n |                                             |   |
| frequently discovered | c |                                             |   |
| by the contracting    | l |                                             |   |
| officer during its    | u |                                             |   |
| examination of the    | d |                                             |   |
| bid after bid         | e |                                             |   |
| opening.              | : |                                             |   |
|                       |   |                                             |   |
| If you know, or have  | O |                                             |   |
| reason to know or     | b |                                             |   |
| suspect, that a       | v |                                             |   |
| mistake in a bid has  | i |                                             |   |
| been made, there is a | o |                                             |   |
| real issue of whether | u |                                             |   |
| you can, in good      | s |                                             |   |
| faith, accept that    | m |                                             |   |
| bid.                  | i |                                             |   |
|                       | s |                                             |   |
| The bidder may also   | p |                                             |   |
| discover this         | l |                                             |   |
| category of mistake   | a |                                             |   |
| and bring it to your  | c |                                             |   |
| attention and request | e |                                             |   |
| that it be allowed to | m |                                             |   |
| correct the mistake.  | e |                                             |   |
|                       | n |                                             |   |
|                       | t |                                             |   |
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|                       | f |                                             |   |
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|                       | t |                                             |   |
|                       | . |                                             |   |
|                       |   |                                             |   |
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|                       | b |                                             |   |
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+-----------------------+---+---------------------------------------------+---+
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|                       | . |                                             |   |
+-----------------------+---+---------------------------------------------+---+
| **[Mistakes other     | * |                                             |   |
| than minor            | * |                                             |   |
| informalities or      | P |                                             |   |
| irregularities in     | r |                                             |   |
| bids, or obvious or   | o |                                             |   |
| apparent clerical     | c |                                             |   |
| mistakes that are     | e |                                             |   |
| discovered prior      | d |                                             |   |
| to]{.underline}**     | u |                                             |   |
|                       | r |                                             |   |
| **[                   | e |                                             |   |
| award]{.underline}.** | s |                                             |   |
| [^205]                | : |                                             |   |
|                       | * |                                             |   |
| ::: Definition-Term   | * |                                             |   |
| These mistakes are    | I |                                             |   |
| generally raised by   | t |                                             |   |
| the bidder along with | i |                                             |   |
| a request to withdraw | s |                                             |   |
| its bid.              | r |                                             |   |
| :::                   | e |                                             |   |
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|                       | \ |                                             |   |
|                       | " |                                             |   |
+-----------------------+---+---------------------------------------------+---+

+-----------------------+----------------------------------------------+
| Examples include:     | **Remedy:** You should allow the bidder to   |
|                       | withdraw its bid if:                         |
| ::: Definition-Term   |                                              |
| A pricing element     | The mistake is clearly evident on the face   |
| from a vendor was     | of the bid document but the intended correct |
| received but not      | bid is not similarly evident; or             |
| included in the bid   |                                              |
| -- the electrical     | The bidder submits proof which clearly and   |
| subcontractor\'s      | convincingly demonstrates that a mistake was |
| quote was not         | made.                                        |
| included.             |                                              |
| :::                   | You may make a determination to correct the  |
|                       | bid and not allow its withdrawal if:         |
| ::: Definition-Term   |                                              |
| The material cost for | The bidder requests permission to withdraw a |
| an element of work    | bid rather than correct it; [^206]           |
| was included but the  |                                              |
| labor to install it   | The evidence is clear and convincing both as |
| was not included.     | to the existence of a mistake and as to the  |
| :::                   | bid actually intended; and                   |
|                       |                                              |
|                       | ::: Definition-Term                          |
|                       | The bid, both as originally submitted and as |
|                       | corrected, is the lowest bid received.       |
|                       | :::                                          |
+-----------------------+----------------------------------------------+
| **[Mistakes           | **Remedy**: What you do with mistakes        |
| discovered after      | discovered and proven after award are really |
| award]                | policy questions that you should consider    |
| {.underline}**.[^207] | when adopting your regulations. There really |
|                       | is no \"best\" practice in this area but it  |
| Although it is much   | appears that transit properties have taken   |
| rarer than other      | one of the two approaches outlined below:    |
| allegations of        |                                              |
| mistake, a contractor | The \"hard line\" approach: do not allow     |
| may raise the issue   | correction except where the contracting      |
| of mistake in bid     | officer makes a written determination that   |
| after award of the    | it would be unconscionable not to allow the  |
| contract is made.     | mistake to be corrected. [^209]              |
|                       |                                              |
| Obviously, the burden |                                              |
| of proving a mistake  |                                              |
| was made at this time |                                              |
| is great and must be  |                                              |
| carried by the        |                                              |
| contractor. [^208]    |                                              |
+-----------------------+----------------------------------------------+

+-----------------------+----------------------------------------------+
|                       | The FAR approach [^210] offers more          |
|                       | alternatives other than the                  |
|                       | \"unconscionable\" approach:                 |
|                       |                                              |
|                       | The mistake may be by contract amendment if  |
|                       | correcting the mistake would be favorable to |
|                       | the transit property without changing the    |
|                       | essential requirements of the specification. |
|                       |                                              |
|                       | Additionally, a determination could be made  |
|                       | to (a) rescind the contract; (b) reform the  |
|                       | contract to delete the items involved in the |
|                       | mistake or to increase the price if the      |
|                       | contract price (as corrected) does not       |
|                       | exceed that of the next lowest acceptable    |
|                       | bid under the original IFB; or (c) allow no  |
|                       | change to be made.                           |
|                       |                                              |
|                       | ::: Definition-Term                          |
|                       | It is recommended that you proceed very      |
|                       | carefully through this process and with      |
|                       | advice of legal counsel.                     |
|                       | :::                                          |
+-----------------------+----------------------------------------------+

**4.4.6 [Bid Withdrawal]{.underline}**

**DISCUSSION**

**It\'s two days after bid opening. You\'re sitting at your desk basking
in the great procurement you conducted and all the competitive bids you
received. The phone rings, breaking the self‑congratulatory mood, and
you pick it up. \"Hi, I\'m Mr. Low Bidder and\
we have decided we really don\'t want this contract and want to withdraw
our bid!\" Talk about messing up your day. What do you do next?**

**Section 4.4.5 addresses the rules relating to the withdrawal of bids
because of a mistake in bid. Those rules govern almost all of the
instances in public contracting in which a bidder\
is allowed to withdraw its bid after bid opening in the sealed bidding
process. Bidders are usually permitted to modify or withdraw their bids
prior to bid opening.**

**Best Practices**

[When to allow withdrawal of bids]{.underline}

If you receive a written request from a bidder prior to the time and
date set for receipt of bids that it wishes to withdraw a bid it has
previously submitted, that request is honored under most

procurement policies. If the request to withdraw is received after the
time and date set for receipt of bids, the same rules apply to that
request as would apply to the late receipt of a bid.

As we discussed in Sections 4.3.2.3, \"Solicitation,\" and 4.4.1,
\"Solicitation\" (Sealed Bids), we recommended inclusion of a clause
that addresses the Late Submissions, Modifications, and Withdrawals of
Bids. This clause sets forth the only contractual period during which
bids can be withdrawn. Subparagraph (g) of the FAR clause, which forms
the basis for many transit property clauses, provides:

> \(g\) Bids my be withdrawn by written notice or telegram (including
> mailgram) received at any time before the exact time set for receipt
> of bids. If the solicitation authorizes facsimile bids, bids may be
> withdrawn via facsimile received at any time before the exact time set
> for receipt of bids, subject to the conditions specified in the
> provision entitled \'Facsimile Bids.\' A bid may be withdrawn in
> person by a bidder or its authorized\
> representative if, before the exact time set for receipt of bids, the
> identity of the person requesting withdrawal is established and the
> person signs a receipt for the bid.

If a bidder has established the existence of a mistake in its bid prior
to award of the contract, it should be allowed to withdraw its bid if:

-   The mistake is clearly evident on the face of the bid document but
    the intended correct bid is not similarly evident; or

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-   The bidder submits proof which clearly and convincingly demonstrates
    that a mistake was made.

[What if the request to withdraw does not fit into those
categories]{.underline}?

For the reasons that follow, you will probably not allow the bidder to
withdraw its bid without legal counsel. This is an issue that may be
impacted by an interpretation of your state law on public contracting,
particularly in the absence of a clause as will be discussed next.

Of critical importance to being able to take this position is the
inclusion in your solicitation document of two clauses which we have
referred to in previous sections of the Manual. The first clause (which
we have included a suggested provision earlier in this discussion) is
the Late Submissions, Modifications, and Withdrawals of Bids clause. The
second is a clause addressing the bid notification period as discussed
in Section 4.4.1, \"Solicitation.\" Just as an example, the following is
the clause that accomplishes this level of protection by federal
agencies:

> **Period of Acceptance of Bids**
>
> In compliance with the solicitation, the bidder agrees, if this bid is
> accepted within \_\_\_\_ calendar days (60 calendar days unless a
> different period is inserted by the bidder) from
>
> the date specified in the solicitation for receipt of bids, to furnish
> any or all items upon\
> which prices are bid at the price set opposite each item, delivered at
> the designated point(s), within the time specified in the Schedule.
> [^211]

There is nothing magical about the particular language in this clause,
but the legal context is very important. If this language is part of the
solicitation that the bidder signs when submitting its bid, as part of
its offer, it is telling you that you have 60 days to accept its bid. It
has agreed to hold its offer open for that period of time and you can
take that long to act upon that offer. Under this example, you do not,
however, have 61 days to accept the bid!

\"What is the rationale for this result? I thought you could always
withdraw your offer prior to it being accepted.\" There is a lot of law
on this subject, but one of the earliest articulations of this
philosophy is contained in the quote from a 1909 decision of the United
States Court of Claims that is still good law on this issue:

> What are the rights of bidders as to the withdrawal of their bids
> after they have been opened and they have been informed thereof, but
> before they have been accepted? The agents of the Government stand
> upon a different footing from private individuals in the matter of
> advertising for the letting of contracts in behalf of the United
> States. They have no discretion. They must accept the lowest or the
> highest responsible bid, or reject all and re‑advertise. Private
> individuals are not required thus to act. Hence, it is apparent that
> the government agents should be allowed a reasonable time after the
> opening of bids before they are allowed to be withdrawn, so they can
> be afforded opportunities to ascertain whether collusion or fraud had
> been perpetrated against the United States by the parties engaged in
> the bidding. It is also apparent that if the rule of allowing
> immediate withdrawals after the results of the bidding are known,
> frauds innumerable could be perpetrated against the United States and
> thus public justice would be greatly hampered. [^212]

You need to check with your legal counsel to see how this language might
be addressed under your particular state law. If the matter has not been
challenged and you are faced with a challenge, this case is a good
starting point to see how and why this rule has developed in the way it
has. This rule is also referred to as the \"firm bid rule.\"

\"But I didn\'t have that language in the solicitation. What do I do?\"
Again, the answer may well lie in your state laws and your lawyer will
have to advise you on what to do.

However, in the absence of this clause, you might want to check § 2.205
of the Uniform Commercial Code, which may be the law in your state.
[^213] In addressing the FAR clause (or a

predecessor clause), the General Services Board of Contract Appeals
opined (and reiterated the *Scott* rationale):

> This rule for Government procurements also finds support in commercial
> settings. Under the Uniform Commercial Code, UCC 2‑205, \'firm\'
> offers are irrevocable. In *Western Adhesives*, GSBCA No. 7449, 85‑2,
> BCA § 17,961, the appellant attempted to dispute the validity of a
> contract and default termination on the basis that it withdrew its bid
> prior to award. The Board found that Government acceptance of a bid
> during an extended acceptance period granted by the bidder created a
> valid contract because the solicitation was a formally advertised
> procurement for which bids were irrevocable during the acceptance
> period. Failure to perform after acceptance justified default
> termination. The Board concluded, \'this appeal turns on the firm bid
> rule. A bid submitted in a formally advertised procurement ‑‑ sealed
> bid ‑‑ is irrevocable, and an acceptance after an\
> attempted withdrawal will create a contract.\' *Western Adhesives*,
> 85‑2 BCA \[§17.961\] at 90,018. [^214]

If a bidder withdraws its bid according to the allowances in the prior
section, you will normally proceed to the next lowest bidder without
expecting compensation from the erring bidder. However, if the bidder is
refused permission to withdraw, and attempts to withdraw by failure to
perform (e.g., failure to produce a performance bond), you may be in a
position to terminate the bidder for default, minimize your damages by
awarding to the next lowest bidder, and recover the damages including
the bid differential from the defaulting contractor. You should evaluate
all the costs of undertaking this course of action, (including long run
effect on competition and pricing) if any, before proceeding.

**4.5 COMPETITIVE PROPOSALS (REQUEST FOR PROPOSALS)**

**4.5.1 [Solicitation & Receipt of Proposals]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| Requests for proposals shall be publicized. [^215]                    |
+-----------------------------------------------------------------------+

+-----------------------------------------------------------------------+
| RFPs shall identify all evaluation factors along with their relative  |
| importance. [^216]                                                    |
|                                                                       |
| Proposals will be solicited from an adequate number of qualified      |
| sources .[^217] You shall make award only to responsible contractors  |
| possessing the ability to perform successfully under the terms and    |
| conditions of a proposed agreement. Consideration shall be given to   |
| such matters as contractor integrity, compliance with public policy,  |
| record of past performance, and financial and technical resources.    |
| [^218]                                                                |
|                                                                       |
| Awards will be made to the responsible firm whose proposal is most    |
| advantageous to the grantee\'s program with price and other factors   |
| considered. [^219]                                                    |
|                                                                       |
| In architectural and engineering services procurements, grantees      |
| shall use competitive proposal procedures based on the Brooks Act,    |
| which requires selection based on qualifications and excludes price   |
| as an evaluation factor provided the price is fair and reasonable.    |
| (See Section 6.5 -- *Architect-Engineering Services.*) [^220]         |
+-----------------------------------------------------------------------+

**DISCUSSION**

A request for proposals typically includes all of the elements of an
invitation for bids, and in addition shall contain the evaluation
factors and their relative importance, e.g., by stating that the factors
are listed in declining order of importance. The request can specify the
information needed to perform the evaluation, and may require that
cost/price information be physically separated so that the technical
evaluation can be performed separately from price evaluation. RFPs are
typically publicized in newspapers and/or trade journals, and are issued
to qualified mailing lists maintained in a manner similar to IFB lists.
(See Section 4.3.2.2, \"Solicitation Mailing List\")

**Purpose**

The required feature that principally distinguishes an RFP from an IFB
is the listing of evaluation factors. These factors typically include
not only responsibility factors (such as financial, human, and physical
capacity to perform), but also technical factors (such as the degree to
which the proposer is expected, based on information submitted and
available, to achieve the performance objectives, to provide the quality
expected, and on the relative qualifications of the proposer\'s
personnel). Many RFPs go beyond listing these factors in order of
importance, and also describe the evaluation process in detail, listing
weights for each factor, illustrating the scoring method, and specifying
the procedure for weighing price into the selection.

The purposes for disclosing of the evaluation process are so that:

-   offerors can more accurately respond to your needs rather than
    solely rely on the technical specifications alone;

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-   proposers will be able to clearly present the information you need
    to conduct your evaluation; and

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-   the appearance of favoritism or unethical practice in offeror
    selection will be diminished.

The competitive proposal process involves a subjective evaluation
process and discussions that are typically confidential. Public
acceptance and acceptance by disappointed offerors might be

less than in the case of sealed bids, if the evaluation and selection
process is not well documented and disclosed in advance.

**Best Practices**

[Evaluation and Award]{.underline} ‑ The following is a listing of
elements commonly found in the competitive proposal method of
procurement.

-   Both a technical and cost proposal are requested so that they may be
    evaluated, frequently by separate staff. Where the appearance of
    technical objectivity is important, it is a better practice to
    initially evaluate the technical proposals without knowledge of
    costs, so that an objective and impartial evaluation can be
    obtained.

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-   The evaluation factors to be considered in the award are identified
    in the RFP along with the relative importance of each. While this
    requires only the ranking of the factors\
    without quantifying the importance or describing the process for
    applying the factors to proposals, some agencies disclose their
    selection process in detail.

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-   [Disclosure Disadvantages]{.underline}. Disclosing the specific
    weights and scoring processes may encourage proposers to distort
    their proposals, and may strengthen the disappointed proposer\'s
    attack on the agency decision;

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-   [Disclosure Advantages]{.underline}. The full description of the
    process guides proposers in understanding your needs, bolsters the
    objectivity of your evaluation team, encourages candor from the
    proposers during negotiations, and encourages competition through
    the perception of fair treatment.

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-   Many standard RFPs notify prospective offerors that award may be
    made on the basis of initial proposals submitted without any
    negotiations or discussions. The implication is clearly, that the
    initial proposal should be their best effort.

[Proposal Guarantee]{.underline} ‑ Although performance bonds are often
appropriate and required by RFPs, the use of a proposal guarantee is
less common than bid guarantee. Because the proposers generally have
unavoidable opportunity during negotiations to render their proposals
unacceptable, part of the purpose of bid guaranties cannot be achieved
in the case of proposals. (See Section 4.3.3.3.2, \"Bid Guarantee\" and
Section 8.2.1*,* \"Performance Bonds.\") However, if it is particularly
important that the initial proposals be firm commitments by the
offerors, that frivolous proposals not be submitted, or that proposers
be able to provide performance bonds, then a proposal guarantee in the
form of a cashier\'s check, letter of credit, or approved bond may be
cost‑effective.

**4.5.2 [Evaluation of Proposals]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| FTA Circular 4220.1E, paragraph 9.d, requires the following when      |
| procuring by competitive proposals:                                   |
|                                                                       |
| > d\. [Procurement By Competitive Proposal/Request for Proposals      |
| > (RFP)]{.underline}. . . . If this procurement method is used the    |
| > following requirements apply:                                       |
|                                                                       |
| \(1\) Requests for proposals will be publicized. All evaluation       |
| factors will be identified along with their relative importance;      |
|                                                                       |
| ::: Definition-Term                                                   |
| \(2\) Proposals will be solicited from an adequate number of          |
| qualified sources;                                                    |
| :::                                                                   |
|                                                                       |
| > \(3\) Grantees will have a method in place for conducting technical |
| > evaluations of the proposals received and for selecting awardees;   |
| >                                                                     |
| > \(4\) Awards will be made to the responsible firm whose proposal is |
| > most advantageous to the grantee\'s program with price and other    |
| > factors considered; and                                             |
| >                                                                     |
| > \(5\) In determining which proposal is most advantageous, grantees  |
| > may award (if consistent with State law) to the proposer whose      |
| > proposals offer the greatest business value to the Agency based     |
| > upon an analysis of a tradeoff of qualitative technical factors and |
| > price/cost to derive which proposal represents the "best value" to  |
| > the Procuring Agency as defined in Section 6, *Definitions*. If the |
| > grantee elects to use the best value selection method as the basis  |
| > for award,                                                          |
+-----------------------------------------------------------------------+

+-----------------------------------------------------------------------+
| > however, the solicitation must contain language which establishes   |
| > that an award will be made on a "best value" basis. [^221]          |
|                                                                       |
| In architectural and engineering services procurements, grantees      |
| shall use competitive proposal procedures based on the Brooks Act,    |
| which requires selection based on qualifications and excludes price   |
| as an evaluation factor provided the price is fair and reasonable.    |
| (See Section 6.5 -- *Architect-Engineering Services.*) [^222]         |
+-----------------------------------------------------------------------+

**DISCUSSION**

**[FTA Circular 4220.1E]{.underline} -- The most recent edition of the
FTA Procurement Circular added an item (5) in paragraph 9.d.
-*Procurement By Competitive Proposals/Request for Proposals (RFP)* in
order to recognize the concept of best value in evaluating offerors'
proposals and selecting successful contractors in negotiated
procurements. The FTA Circular, paragraph 6.g, defines *best value* in
these terms:**

> ***Best Value: A selection process in which proposals contain both
> price and qualitative components, and award is based upon a
> combination of price and qualitative considerations. Qualitative
> considerations may include technical design, technical approach,
> quality of proposed personnel, and/or management plan. The award
> selection is based upon consideration of a combination of technical
> and price factors to\
> determine (or derive) the offer deemed most advantageous and of the
> greatest value to the procuring agency.*** [^223]

For purposes of this discussion it may be helpful to distinguish the
concept of "best value" selections from the more traditional practice of
identifying the lowest price, technically acceptable proposal (although
that too actually represents what the grantee feels will be the "best
value" selection given the nature of the requirements it is procuring).
Both approaches will require technical evaluations and price analysis,
and both will require the solicitation to clearly inform the prospective
offerors of how the selection decision will be made:

-   ***Best value* - requires tradeoffs between price and non-price
    factors to select the best overall value to the grantee.**

-   ***Lowest price technically acceptable proposal* - requires
    selection of the lowest price proposal meeting the minimum RFP
    requirements.**

**[The FAR Background]{.underline} - The concept of "best value" owes
its origin to acquisition reforms espoused in the Clinton-Gore
administration's "Report of the National Performance Review: Creating a
Government That Works Better and Costs Less." In that report, it was
recommended that Federal acquisition regulations should be revised and
restated with a major objective being (among others) a " . . . shift to
a new emphasis on choosing best value products."** [^224] **That reform
objective was eventually translated into a completely re-written Federal
Acquisition Regulation (FAR) Part 15 *-- Contracting By Negotiation.***
[^225] **Now the FAR makes *best value* the one stated objective of
every negotiated procurement:**

> ***15.302 -- Source Selection Objective*: *The objective of source
> selection is to select the proposal that represents the best value*.**

##### Best Practices

##### 

##### The Federal Approach

The FAR describes a "best value continuum" in negotiated procurements
where agencies are free to use any one of a combination of source
selection approaches. For example, in acquisitions where the requirement
is clearly definable and the risks of unsuccessful performance are
small, cost or price may play a dominant role in source selection; i.e.,
the selection may be based on the lowest price technically acceptable
proposal. [^226] Where, however, the agency's requirement is less
definitive, or where there is development work, or greater performance
risk, then the less important price will be and the more important will
be technical or past performance considerations in the source selection.
[^227]

The FAR goes on to describe both *the tradeoff process* that is used
when selecting a proposal other than the lowest price technically
acceptable proposal, as well as the process to be used when the lowest
price technically acceptable proposal method is appropriate. Several
important principles may be noted from the FAR guidance on source
selection that grantees should consider in their own acquisitions:

1.  Best value selection methodology affords the agency an opportunity
    to structure the source selection process in a way that is suitable
    for the nature of the agency's requirement. No longer is the
    emphasis on defining one's "minimum needs," with its\
    corollary selection process of choosing the lowest price technically
    acceptable proposal. While that approach will probably be the one
    most often used by grantees, agencies are now encouraged to
    structure selection procedures based on the realities of their
    requirements, and they are not expected to force-fit all
    acquisitions into a lowest-price-technically-acceptable-proposal
    mold when that may result in unacceptable performance risks or
    preclude the agency from selecting products that are a *better
    value* to them than the lowest price products or services.

2.  When the agency decides that its requirements are sufficiently
    defined to use the lowest price technically acceptable selection
    process, *the evaluation factors that establish the requirements of
    acceptability must be stated in the solicitation.* Solicitations
    must specify that award will be made on the basis of the lowest
    evaluated price of proposals meeting or exceeding the acceptability
    standards for non-price factors.

3.  When the agency decides that its requirements are not defined with
    sufficient precision, or where there are performance risks, so that
    selection of the lowest priced proposal is not in the best interests
    of the agency, then a tradeoff process should be used to select the
    best value proposal. In this case the importance of the non-price
    evaluation factors that will affect the contract award must be
    stated in the solicitation. The Federal approach in the solicitation
    is to state whether all evaluation factors other than price, when
    combined, are significantly more important than, approximately\
    equal to, or significantly less important than price. This permits
    the agency to make tradeoffs between price and technical merit. It
    also permits the offerors to know what is important to the agency -
    whether to focus on higher quality at the expense of cost, or lower
    cost at the expense of quality. It is not necessary to publish the
    specific weights (numerically) of the individual evaluation factors,
    only their relative importance (i.e., conceptually or adjectivally).
    Some Federal agencies have found through practice that the approach
    which gives the greatest degree of flexibility in selecting the best
    value proposal is to place equal weight on the price and technical
    factors. This then allows a choice in either direction as
    circumstances warrant.

4.  It is important to note that the perceived benefits of the higher
    priced proposal must merit the additional cost, and the rationale
    for tradeoffs must be documented in the file. It is not sufficient
    to say in the file that company X received a higher total score than
    company Y, and therefore deserves the award. Scores, without
    substantive explanations of the relative strengths and weaknesses of
    the competitive proposals, including the perceived benefits to the
    agency, are an insufficient basis for paying a

> higher price. The file must explain why company X represents the best
> value to the agency. The necessity of documenting the specific reasons
> why proposal A offers a better value to the grantee than proposal B is
> why a mathematically driven selection decision is not appropriate.

### Proposal Evaluation Mechanics

There are many different methods of conducting proposal evaluations to
determine best value, and many opinions as to which is the best
approach. Grantees may employ any rating method or combination of
methods, including: color or adjectival ratings, numerical weights and
ordinal rankings. Whatever the method, the important thing is that a
statement of the relative strengths, deficiencies, significant
weaknesses, and risks supporting the evaluation ratings be documented in
the contract file.

Some agencies have employed a quantitative approach of assigning scores
to both technical and cost proposals, thereby compelling a source
selection that is basically mathematically derived. Proponents of this
method usually argue it is the most "objective," and therefore the
fairest, approach to determining a winner. On closer examination,
however, all approaches are to one degree or another, subjective. The
decision regarding what score to assign any given factor is subjective,
and any formulas employed after the initial scoring cannot make the
process an "objective" one. Further, grantees must be allowed the
flexibility of making sound, factually based decisions that are in their
agency's best interests. Any approach that assigns a predetermined
numerical weight to price, and then seeks to "score" price proposals and
factor that score into a final overall numerical grade to automatically
determine contract award, is a mistake. Rather, agencies should evaluate
the prices offered but not score the price proposals. Prices should be
evaluated and brought along side the technical proposal scores in order
to make the necessary tradeoff decisions as to which proposal represents
the best overall value to the agency. Agencies should carefully consider
the technical merits of the competitors and the price differentials to
see if a higher price proposal warrants the award based on the benefits
it offers to the agency as compared to a lower price proposal. This is a
subjective decision-making, tradeoff process.

The difficulties in trying to assign a predetermined weight to price and
then scoring price proposals is that no one is smart enough to predict
in advance how much more should be paid for certain incremental
improvements in technical scores or rankings (depending on what scoring
method is used). For example, no one can predict the nature of what will
be offered in the technical proposals until those proposals are opened
and evaluated. Only then can the nature of what is offered be
ascertained and the value of the different approaches proposed be
measured. It is against the actual technical offers made that the prices
must be compared in a tradeoff process. Agencies cannot predict in
advance whether a rating of "Excellent" for a technical proposal will be
worth X\$ more that a rating of "Good," or whether a score of 95 is
worth considerably more or only marginally more than a score of 87. It
is what is underneath the "Excellent" and the "Good" ratings, or what
has caused a score of 95 vs. a score of 87, that is critical. The goal
is to determine if more dollars should be paid to buy the improvement,
and

equally important, how many more dollars those improvements are
perceived to be worth. It could well be that the improvements reflected
in the higher ratings are worth little in terms of perceived benefits to
the agency. In this case the grantee does not want to get "locked in" to
a mathematically derived source selection decision. This may very well
happen when price has been assigned a numerical score and the selection
is based on a mathematical formula instead of a well-reasoned analysis
of the relative benefits of the competing proposals.

Some agencies have recognized the pitfalls of using arithmetic schemes
to make source selection decisions. They have opted to not use numerical
scores to evaluate technical proposals and they have gone to adjective
ratings instead; e.g., "Acceptable," "Very Good," and "Excellent." They
have also heavily emphasized the need for substantive narrative
explanations of the reasons for the adjective ratings, and the Source
Selection Official then focuses on the narrative explanations in
determining if it is in the agency's best interest to pay a higher price
for the technical improvements being offered. In this scenario price is
evaluated and considered alongside technical merit in a tradeoff fashion
using good business judgment to choose the proposal that represents the
best value to the agency.

#### **Proposal Evaluation Criteria**

The solicitation will be more easily planned and developed, the criteria
will be more accurately listed and ranked, and the evaluation process
will be smoother and more objective if the evaluation process is
thoroughly planned in advance. The evaluation process begins with the
identification of the criteria that will be most meaningful in assessing
the relative advantage of the proposals to your agency. You will
generally include:

1\. [Past Performance]{.underline} -- The solicitation should advise
offerors of your approach in evaluating past performance, including
evaluating offerors that have no relevant performance history, and
should also advise offerors to identify past relevant contracts for
efforts similar to your requirement. The solicitation should also allow
offerors to provide information on problems encountered on the
identified contracts and corrective measures taken. This evaluation
should also consider the past performance of key personnel and
subcontractors that will perform major or critical aspects of the work.
This evaluation of past performance, as one indicator of an offeror's
ability to perform the contract successfully, is separate from the
responsibility determination discussed in Section 5.1.

2\. [Technical Criteria]{.underline} -- Technical factors regarding the
specific methods, designs, and systems proposed to be used by the
offeror will be considered and they must be tailored to the specific
requirements of your solicitation. These factors must represent the key
technical areas of importance that you intend to consider in the source
selection decision. *Technical factors should be chosen to support
meaningful comparison and discrimination between competing proposals*.
If the agency has established minimum standards for determining
technical acceptability of proposals, these standards must be clearly
set forth in the solicitation.

3\. [Key Personnel]{.underline} -- An evaluation of key personnel is
often suggested when the procurement involves services or requirements
where management of the work is a critical factor in determining its
success. Qualifications and experience of key personnel may be an
important\
evaluation factor. Some agencies have required oral presentations by key
personnel during which the agency officials may ask these key personnel
relevant questions to determine the depth of their knowledge in critical
areas.

4\. [Cost or Price]{.underline} -- Cost or price must be considered in
every procurement, even those for professional services (e.g., legal,
accounting, etc.), unless the services are those defined by Federal
statutes as requiring a qualifications-based selection. [^228]
Competition normally establishes price reasonableness. Therefore, when
contracting on a fixed price basis, comparison of the proposed prices
will normally satisfy the requirement to perform a price analysis and no
cost analysis will be necessary.\
\
If the contract is to be a cost reimbursement one, then a *cost realism
analysis* should be performed to determine what the grantee should
realistically expect to pay for the proposed effort. Grantees should
never simply accept at face value the total estimated cost in the
proposal and base a selection decision on the proposed amount since many
offerors tend to understate the estimated cost in hopes of winning the
contract as the "low bidder." A cost realism analysis would use each
offeror's specific labor and overhead rates as estimating factors
(assuming they are not understated) and the agency's own estimates for
labor hours,\
travel, materials, etc. The award decision would be made with the cost
realism analysis in mind.

5\. [Relative Importance of Price and Non-Price Factors]{.underline} -
The solicitation must advise offerors if the selection is to be made on
a "best value" basis. And as already noted, the solicitation must also
advise offerors if price is approximately equal to, less than, or
greater in importance than the technical evaluation factors as a
whole*.*

One agency with extensive experience in conducting negotiated
procurements uses language in its solicitations that informs offerors of
how the agency will select that proposal that is the most advantageous
to the agency, which may not necessarily be the highest ranked
technically nor the lowest proposed price. They also inform offerors of
how price may become a more important selection factor than technical
merit when the technical proposals are evaluated as essentially equal.
Following is the language used:

> *The Authority will make the award to the responsible Proposer whose
> proposal is most advantageous to the Authority. Accordingly, the
> Authority may not necessarily make an award to the Proposer with the
> highest technical ranking nor award to the Proposer with*
>
> *the lowest Price Proposal if doing so would not be in the overall
> best interest of the Authority. . . .*
>
> *The overall criteria listed below are listed in relative order of
> importance. As proposals are considered by the Authority to be more
> equal in their technical merit, the evaluated cost or price becomes
> more important so that when technical proposals are evaluated as
> essentially equal, cost or price may be the deciding factor.* [^229]

*Evaluation Criteria:*

*A. Technical Qualifications (With Details)*

*B. Overall Price*

> *C. Other Relevant Matters (With Details)*

**4.5.3 [Competitive Range]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| Grantees will have a method in place for conducting technical         |
| evaluations of the proposals received and for selecting awardees.     |
| [^230]                                                                |
|                                                                       |
| As discussed in this section, \"competitive range determination\" is  |
| a concept that can be used when developing methods for selecting      |
| awardees under the competitive proposal method of procurement.        |
+-----------------------------------------------------------------------+

**DISCUSSION**

**At this stage in the competitive proposal procurement, you have
received the proposals from interested offerors and have begun the
process of evaluation and selection. Negotiation and the repeated
analyses and evaluations required can be very time consuming and there
is often a wide range of competence or cost‑effectiveness in the initial
proposals. You may not wish to expend this effort on all the proposals
for two reasons:**

-   **certain proposals, upon evaluation, may be so much worse than
    others for price or other reasons, that the possibility of accepting
    a subsequent offer is so remote as to make negotiations unnecessary;
    and**

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-   **you may have enough proposals so that you can be assured of
    negotiating the best buy in dealing only with several of the best;
    negotiating with more would be wasteful of both your resources and
    the marginal proposers\'.**

**For these reasons, a commonly used technique is to conduct
negotiations only with offerors determined to be within the competitive
range. In assessing the competitive range, competition remains an
important objective, and the effort in determining the competitive range
is to preserve those proposals which stand a reasonable chance of being
found acceptable, not to unduly limit competition by eliminating viable
proposers.**

**Purpose**

Competitive range is a difficult concept to define in specific terms
which would apply to all potential procurements, because professional
judgment must be used in establishing the\
competitive range. Procedures and factors for determining the
competitive range may differ from procurement to procurement.

The competitive range can be determined so that it is:

-   Not used to unfairly eliminate offerors;

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-   Based on factors and criteria known to all offerors;

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-   Applied uniformly to all proposals; and

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-   Well documented in the procurement files.

One of your considerations may be that as many offerors as possible be
given the opportunity to be considered within the competitive range, so
as to attain the goal of full and free competition. Only those offerors
whose proposals are determined to be so deficient or so out of line as
to preclude meaningful negotiation need be eliminated from the
competitive range.

The competitive range can consist of those offerors whose proposals have
a reasonable chance of being selected for award, i.e., are acceptable as
submitted or can be made acceptable through modification. All
responsible offerors whose proposals are determined to be within the
competitive range would be invited to participate in any oral and/or
written discussions.

**Best Practices**

While it is not possible to identify all of the specific steps and
analyses that could be performed in determining which proposals are
within the competitive range, the following are provided for
consideration in making this determination:

-   The determination of which proposals are within the competitive
    range is usually made by the evaluation team (or procuring official,
    if there is no evaluation team).

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-   Competitive range determinations can be made using cost/price,
    technical and other factors identified in the solicitation.

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-   Detailed independent estimates prepared by the initiating department
    or project office can be considered when assessing the cost/price
    aspects of competitive range.

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-   The evaluation team\'s scoring of offerors\' technical and
    management proposals is a logical basis for establishing which
    proposals are within the competitive range, as is scoring of other
    evaluation/award criteria specified in the solicitation. However,
    you may paint yourself into a corner if you commit to competitive
    range determinations based on predetermined \"cutoff scores.\"

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-   Borderline proposals need not automatically be excluded from the
    competitive range, if they are reasonably susceptible of being made
    acceptable. Remember that as a general rule, if there is doubt as to
    whether a proposal should be in the competitive range, the goal of
    competition is served by including it.

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-   Only those proposals that are judged to be so deficient or so out of
    line as to preclude further meaningful negotiations need be
    eliminated from the competitive range.

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-   Competitive range determinations are significant documents in the
    procurement file. This documentation is helpful to serve as a basis
    for debriefing offerors, and for responding to inquiries and
    protests. Many systems notify, in writing, any offerors whose
    proposals have been eliminated from consideration for award. Such
    notification occurs at the earliest practicable time after this
    determination is made.

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-   Written and/or oral discussions are usually conducted with all
    offerors determined to be within the competitive range.

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-   At the conclusion of discussions with offerors in the competitive
    range, the procuring official may ask all offerors to submit their
    best and final offers in writing. This combines complete fairness
    for each offeror, with competitive incentive for each to make its
    best realistic offer. For a discussion on best and final offers,
    reference Section 4.5.5.2 "*Request for Best and Final Offer*."

**4.5.4 [Discussions and Clarifications]{.underline}**

**DEFINITIONS**

[Negotiation]{.underline} - A procedure that includes the receipt of
proposals from offerors, permits bargaining and usually affords offerors
an opportunity to revise their offers before award of a contract.

[Discussion]{.underline} ‑ Any oral or written communication between a
procurement official and a potential offeror (other than communication
conducted for the purpose of minor clarification) whether or not
initiated by the procurement official, that (1) involves information
essential for determining the acceptability of a proposal, or (2)
provides the offeror an opportunity to revise or modify its proposal.

[Clarification]{.underline} ‑ A communication with an offeror for the
sole purpose of eliminating minor irregularities, informalities, or
apparent clerical mistakes in a proposal.

**DISCUSSION**

**You may wish to obtain clarifications from one or more proposers, or
hold discussions with all proposers immediately after receipt of
proposals. However, it is also possible to proceed with evaluations and
determination of a competitive range as described in the following
sections, before discussions are held. Most typically, the first
discussions are oral presentations made by a short list of proposers
within a competitive range. If discussions are held with any proposer at
any phase of the procurement, holding discussions with all remaining
proposers (not already excluded from the competitive range as described
in**

**Section 4.5.3, \"Competitive Range\") will increase the likelihood and
the appearance of the most accurate and objective evaluation and
negotiation.**

**Best Practices**

You are not required to conduct discussions with any offeror provided:
(1) the solicitation did not commit in advance to discussions or
notified all offerors that award might be made without discussion, and
(2) the award is in fact made without any written or oral discussion
with [any]{.underline} proposer. Normally, however, you will need to
conduct discussions. If this is the case, you will preserve the
competitiveness and fairness of your procurement by conducting
discussions with [all]{.underline} offerors who submitted proposals in
the competitive range. The competitive range is determined on the basis
of cost or price and other factors and includes the proposals that have
a reasonable chance of being selected for award. The content and extent
of the discussions is a matter of your judgment based on the particular
facts of the procurement.

Confidentiality has many advantages during the evaluation process. The
name and number of proposals received is not normally considered a
public record and need not usually be released to the competitors or the
public at large. Your control of this information may ease the
proposers\' competitive tension and allow you to conduct more meaningful
negotiations. Competitive information provided relative to both the
technical and cost proposals may include trade secrets protected by
statute and can usually be kept confidential during the evaluation
process, and, in some instances, after the award of contract. However,
state public information laws and the Federal Freedom of Information Act
can also affect your latitude, particularly if there is public interest
in the procurement and inquiries are made by non‑competitors.

If you enter negotiations or discussions (as opposed to simple requests
for clarification) with one offeror, an automatic impression of
unfairness is avoided by entering them with all remaining offerors. An
occasional mistake is to circumvent the process merely by requesting
\"clarifications\" when you are in fact conducting discussions. If the
questions, and the concurrent opportunity to respond, are sufficient to
lead an offeror into areas of perceived deficiency in its proposal,
discussions have been held. If discussions are held, what should the
content be or how should they start? Competition and fairness are served
by conducting meaningful discussions with offerors.

This includes advising them of deficiencies in their proposals and
affording them the opportunity to satisfy the requirements by the
submission of revised proposals. You are not, however, obligated to
afford offerors all‑encompassing discussions, or to discuss every
element of a technically acceptable, competitive‑range proposal that has
received less than a maximum possible score. Also, if a proposal is
technically unacceptable as submitted and would require major revisions
to become acceptable, you are not required to include the proposal in
the competitive range for discussion purposes.

Sometimes you may be in the uncomfortable position of having concluded
discussions only to discover there is a significant mistake or an aspect
the evaluators do not understand in one proposal. Since allowing one
bidder to correct its proposal would constitute discussions with that
firm, discussions must reopened with all bidders in the competitive
range and the must be allowed the opportunity to submit revised
proposals.

During discussions with offerors, you may be requested to ask all
proposers to submit proposals with an advantageous approach proposed by
one of them. Someone on your team may suggest that a technique used by
proposer A would complement proposer B\'s approach well and could result
in an advantageous offer from B. Also, after price proposals have been
evaluated, someone may suggest that a proposer with a high technical
score should be asked if it can meet a price which happens to be the
price of a competitor. Such techniques are considered technical
leveling, technical transfusion or auctioning. The disadvantage of these
techniques is that proposers may react adversely. Because they are
concerned about their position relative to their competitors, and want
to keep their strengths confidential from their competitors, they may
become more secretive in their discussions with you if they sense you
may relay their ideas, pricing, or positions to their competitors. This
is not to discourage discussion of price or suggesting major revisions
in a proposal, but rather to discourage the disclosure, even indirect,
of one proposer\'s information to another. They may hold back their
strengths and valuable information, waiting for a BAFO. This can greatly
inhibit the negotiation of the most advantageous proposal.

**4.5.5 [Additional Submissions]{.underline}**

**4.5.5.1 [Request for Revised Proposals]{.underline}**

**DISCUSSION**

**The most common tool used by procurement officials in competitive
negotiations is a request for a revised proposal. Typically, the
deficiencies of a proposal are listed and explained. A complete revised
proposal, including price (except under the Brooks Act) is**

**requested from each offeror in the competitive range. Unless
explicitly stated otherwise, the revised offer extinguishes the prior
offer. The proposer should identify all changes in the revised offer.
The submission of the revised offers can trigger another round of
evaluations, determination of a new competitive range, and discussions.
You may repeat this cycle as many times as necessary to obtain the most
advantageous offers. If you conclude you have obtained the most
advantageous offer possible, you may recommend award.**

**Purpose**

The purpose of the request for revised proposals, like the original
request for proposals, is to harness the competitiveness and creativity
of the proposers to produce the most advantageous proposal for your
customers. You and the proposer may understand only gradually each
other\'s capabilities and constraints. Each written proposal may raise
new questions and new possibilities. You can elicit the best improvement
each time a revised proposal is prepared by listing clearly the
deficiencies of the current proposal as you understand it.

Although you expect proposers to respond primarily to your requests in
preparing revised offers, you also want to learn how your requests
affect other aspects of their proposals. Based on the format of the
proposals and the nature of the changes you are requesting, you may
require that revised proposals be submitted in a form that will both
easily allow you to identify the changes and also form the basis of a
coherent contract, if accepted.

Private parties in bilateral negotiations would probably make
counter‑offers to each other to advance the process. There are
disadvantages to your making a counter offer in a competitive proposal
procurement. Not only would a counter‑offer on your part extinguish the
proposer\'s last offer, it would place the proposers (possibly more than
one) in the position to accept or reject. Therefore counter‑offers are
usually not made by procuring agencies.

**4.5.5.2 [Request for Best and Final Offer]{.underline}**

**DEFINITION**

A best and final offer (BAFO) can be requested of each offeror in the
competitive range at the conclusion of discussions (negotiations) with
those offerors. If an offeror does not respond to your request, your
procedures may allow you to consider the most recent offer to be the
best and final offer.

**DISCUSSION**

**As the procuring official, you are now at the stage of your
competitive negotiation process where you are ready to receive final
offers from the offerors still within the competitive range. You now ask
for a \"best and final offer\" from those offerors. If the other offers
have no viable chance of being made competitive by this time, then you
may request the**

**BAFO from only one proposer; of course there is little competitive
pressure under those circumstances. Upon timely receipt of the BAFO(s)
and final evaluation by the agency, you should be in a position to
recommend award to a firm or individual in accordance with the terms and
conditions of the solicitation.**

**Purpose**

During the course of the evaluation process of the competitive proposal
procurement, you have entered into discussions (negotiations) and
clarifications [^231] with those offerors still in the competitive
range. [^232] As a result of those discussions, you may have amended
some parts of the solicitation and may have asked for revised proposals
during the negotiation process. You now feel that you have completed
negotiations and are ready to ask for and then evaluate the offerors\'
best and final offers. If you believe there is a significant possibility
that even if a BAFO is requested, you will probably want to improve
further on the next offers, then you are not ready to request BAFOs and
should, instead, request revised offers. This provides the offerors an
opportunity to respond to the requests and to provide their best offer
in response to the current solicitation.

**Best Practices**

The ability to enter into discussions with offerors in the competitive
range is one of the greatest advantages of utilizing the competitive
proposal method of procurement. This process allows offerors to resolve
questions and concerns they may have about the commodity or service
being procured and the public agency to resolve questions and concerns
it may have about the offerors\' proposals. At some point during the
negotiation process, a decision is made that all out‑standing issues
have been resolved to the satisfaction of the parties involved. This is
the time to formally conclude the discussions by requesting that each
offeror remaining in the competitive range submit its best and final
offer. The request normally would include the following elements:

-   Specific notice that discussions are concluded;

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-   Notice that this is the opportunity for the offeror to submit a best
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-   A definite, common cutoff date and time that allows a reasonable
    opportunity for the preparation and submission of the best and final
    offer; and

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-   Notice that the final offer must be received at the place designated
    by the time and date set in the request and is subject to any
    provisions dealing with late submissions, modifications and
    withdrawals of proposals set forth in the solicitation.

Following receipt of the best and final offers, you will evaluate them
in accordance with terms of the solicitation and recommend award in
accordance with those terms.

[Request for subsequent best and final offers]{.underline} ‑ It is the
preferred practice to only ask for one \"best and final offer.\"
Requests for additional best and final offers should be avoided if at
all possible. [^233] However, additional technical or price/cost‑related
issues may surface as a result of the offeror\'s final submission or
other factors that preclude a reasonable justification for contractor
selection and award. If it is clearly in the procuring agency\'s best
interests, discussions may be reopened and the issues resolved. Again,
at the conclusion of the round of discussions, an additional request for
best and final offers would be issued to all offerors still within the
competitive range.

**4.5.6 [Award Based on Initial Proposals]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| You shall make award only to responsible contractors possessing the   |
| ability to perform successfully under the terms and conditions of a   |
| proposed agreement. Consideration shall be given to such matters as   |
| contractor integrity, compliance with public policy, record of past   |
| performance, and financial and technical resources. [^234]            |
|                                                                       |
| Awards will be made to the responsible firm whose proposal is most    |
| advantageous to the grantee\'s program with price and other factors   |
| considered. [^235]                                                    |
+-----------------------------------------------------------------------+

You may accept one of the initial proposals if it can be clearly
demonstrated that acceptance of the most favorable initial proposal
without discussion would result in a fair and reasonable price.
Therefore, as a general matter, it is advantageous for solicitations to
contain a notice that award may be made without discussion of proposals
received, and that proposals should be submitted initially on the most
favorable terms possible, from a price and technical standpoint*.*

You are not required to conduct discussions with any offeror provided:
(1) the solicitation did not commit in advance to discussions or notify
offerors that award might be made without

discussion, and (2) the award is in fact made without any written or
oral discussion with [any]{.underline} proposer. This is often the case
where the proposal is for services where rates are regulated and the
competition is on the basis of service, e.g., certain types of
insurance. If you accept an initial offer, the determination of fair and
reasonable price will be an important document in your file. Normally,
however, you will need to conduct discussions.

**4.5.7 [Withdrawal of Proposal]{.underline}**

**DEFINITION**

[Firm offer]{.underline} ‑ A promise to undertake specified obligations
in exchange for consideration which promise may be accepted for a
specified or implied period of time; a firm offer cannot be withdrawn
during the period for which it remains firm.

**DISCUSSION**

**Your solicitation normally states a date and time by which offers must
be submitted, and a period following that date during which the offers
remain firm. (See Section 4.3.2.3, \"Solicitation\") Competition is best
served and unnecessary alternate proposals are avoided by allowing
proposers to withdraw or modify their proposals up to the time due.
However, after the due date, the proposals are usually firm and cannot
be withdrawn during the validity period. To ensure the legitimacy of
proposals and discourage frivolous proposals, you should have the right
to accept an initial proposal without regard to whether the proposer has
had second thoughts.**

**Purpose**

As in the case of sealed bids, it is important to the integrity of your
procurement that all offers are serious and not submitted for
exploratory reasons or to cast a certain light on other offers. Although
the negotiation process, in contrast to sealed bidding, reduces the
incentive to this sort of gamesmanship, the concern is still valid,
particularly where you may wish to accept an initial offer. It will be
important to proceed from offer to offer, eliminating offerors from the
competitive range on a firm basis, to ensure that you arrive smoothly at
a conclusion. It is customary, therefore, not permit proposals to be
withdrawn after submission.

**Best Practices**

The terms of your solicitation and your requests for revised offers or
BAFOs can state a period during which the offers remain firm. (See
Section 4.3.2.3, \"Solicitation\") A good practice is to note this
period on the offer form used by proposers to summarize their proposals.

Solicitations also often state that modifications or withdrawals will be
permitted until the time due. In the case of a revised offer or BAFO,
your solicitation can provide that the withdrawal of the offer would
result in the continued validity of the most recent offer.

**4.5.8 [Debriefing Unsuccessful Offerors]{.underline}**

**DISCUSSION**

**Proposers excluded from the competitive range or from award may
request a debriefing or you may offer to provide a debriefing. A candid
explanation of the process can serve the purposes of defusing any
potential dispute by the disappointed proposer and encouraging future
proposals. If a dispute is already probable, there is no requirement to
notify or debrief unsuccessful offerors, but the litigation and other
risks must be carefully weighed.**

**Best Practices**

Your decision not to include a proposer in the competitive range or to
recommend award to another proposer may have to be explained to the
public and to the offeror. [^236] If the reasons and rationale are
documented, you can proceed with confidence. Here, the advantages of an
objective, quantified scoring process [^237] implemented by a qualified
committee become obvious; even if you choose not to reveal the details
of the scoring, you will be more convincing when speaking with the
support of a wealth of independent, objective data. In some cases, the
details of the scoring may be subject to disclosure as public
information after the contract is awarded.

By notifying the disappointed firm expeditiously, you will not permit
doubts to grow, you can approach the firm on the basis of openness and
candor, and you will share the common perspective of the events to date
of your decision, rather than any subsequent developments which may cast
a different light. Be prepared to discuss the reasons with the offeror.
This may be a good opportunity to educate a firm or individual on the
competitive proposal process. Avoid comparisons to the successful
offeror. Focus on the strengths and weaknesses of the offer itself ‑‑ be
specific. If done properly and professionally, you may see this
\"smarter\" proposer again in a future procurement. This is your
ultimate goal, to maximize competition.

On the other hand, unless your procedures require you to notify the
disappointed proposer immediately, you may be able to wait to inform the
firm until contract award is made to the successful proposer.
Particularly if you have reason to believe a firm is inclined to dispute
or delay the action, you may be able to proceed unilaterally without
encouraging any delaying tactics. To maximize the likelihood of award
without delay, this alternative school of thought faces a number of
problems. The disappointed firm may be suspicious because you have not
contacted him/her about any further discussions, or may otherwise learn
that its offer is not being

considered for award. If you wait until award is made (which is a public
action), the proposer will be left with only two choices, to do nothing
or to file legal action. If the firm chooses the first course of action,
he/she may be reluctant to propose on your jobs again because they may
believe \"games\" were played. If the proposer chooses the second course
of action, to file either a protest or a lawsuit, this may result in a
delay in the commencement of contract performance and substantial other
costs to your agency.

**4.6 NON‑COMPETITIVE (SOLE SOURCE) PROPOSALS**

**4.6.1 [Justification for Use]{.underline}**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| In addressing the various methods of procurement that may be used,    |
| Section 9.h of FTA Circular 4220.1E provides:                         |
|                                                                       |
| > Procurement By Noncompetitive Proposals (Sole Source). Sole source  |
| > procurements are accomplished through solicitation or acceptance of |
| > a proposal from only one source, or after solicitation of a number  |
| > of sources, competition is determined inadequate. A contract        |
| > amendment or change order that is not within the scope of the       |
| > original contract is considered a sole source procurement that must |
| > comply with this subparagraph.                                      |
| >                                                                     |
| > 1\. 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) The item is available only from a single source;                  |
|                                                                       |
| > \(b\) The public exigency or emergency for the requirement will not |
| > permit a delay resulting from competitive solicitation;             |
| >                                                                     |
| > \(c\) FTA authorizes noncompetitive negotiations;                   |
| >                                                                     |
| > \(d\) After solicitation of a number of sources, competition is     |
| > determined inadequate; or                                           |
| >                                                                     |
| > \(e\) The item is an associated capital maintenance item as defined |
| > in 49 U.S.C. § 5307(a)(1) that is procured directly from the        |
| > original manufacturer or supplier of the item to be replaced. The   |
| > grantee must first certify in writing to FTA: (i) that such         |
| > manufacturer or supplier is the only source for such item; and (ii) |
| > that the price of such item is no higher than the price paid for    |
| > such item by like customers.                                        |
| >                                                                     |
| > 2\. A cost analysis, i.e., verifying the proposed cost data, the    |
| > projections of the data, and the evaluation of the specific         |
| > elements of costs and profit, is required.                          |
+-----------------------------------------------------------------------+

**DISCUSSION**

**Sole source solicitations may not be issued nor may noncompetitive
proposals be accepted except under the unusual conditions listed above.
Often, there are practical means of obtaining competition which are not
at first apparent. If a non‑competitive proposal is accepted, a careful
cost analysis must be done. Because of the strict scrutiny applied to
sole source procurements, painstaking documentation of the justification
for the noncompetitive proposal and of the cost analysis is valuable in
the long run. FTA approval for noncompetitive negotiation is not
required unless you are relying on justification (c) in the Circular.
This places a heavy burden on you to ensure you use noncompetitive
negotiation only in the public interest and according to the Federal
requirements. State requirements may be more restrictive than Federal.**

**Purpose**

Public procurement essentially operates in an environment where full and
open competition is the primary goal or aspiration and, in many cases,
is a mandate. [^238] However, there may be very legitimate reasons or
situations when, as opposed to \"full and open\" competition, limited or
no competition exists The FTA, through the requirements set forth above,
has established guidelines when sole source procurements may be used if
FTA funds are involved.

Even though we will address federal requirements in this section, you
should also be aware of any limitations or restrictions that your state
law or agency regulations may place on you.

Because procurement by sole source is a noncompetitive procurement, it
is treated as an \"exception‑to‑the‑norm\" in public procurements and,
as a result, your ability to use it requires justification and,
frequently, pre‑approval before you award a sole source contract. In
this context, \"justification\" equates to paperwork and documentation,
the bane of all procurement professionals but a necessary part of our
genetic make‑up.

**Best Practices**

As quoted above, FTA Circular 4220.1E establishes a matrix that should
be followed in justifying the use of noncompetitive or sole source
procurements.

[Step One]{.underline} ‑ You must first determine that your requirement
cannot be obtained under small purchase procedures, [^239] sealed bids,
[^240] or competitive proposals. [^241] Does more than one source exist?
Does adequate time exist to obtain your requirement through a
competitive process? Is Item B (for which competition exists) an
acceptable substitute for Item C (for which there is only one source)?

-   Stated another way, contracting officers should take reasonable
    steps to avoid using sole source procurement except in circumstances
    where it is both necessary and in the best interest of the agency.

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-   If one of the three methods can be used (or is feasible), even if
    you would rather not, sole source is not an option for you.

[Step Two]{.underline} ‑ If one of the competitive processes is not
feasible in your situation, you may use sole source procurement if at
least one of the following circumstances is present:

-   [The item is available only from a single source]{.underline} ‑ In
    justifying the use of this circumstance, you will frequently address
    such factors as:

+--------------------------------+-------------------------------------+
| Single Source Factors:         | **Examples**:                       |
|                                |                                     |
| How did you arrive at the      | *Utility services* (how many        |
| conclusion this item           | sources do you have for electricity |
| represents your minimum need   | in your community?) *Limited rights |
| or requirement? Is this a      | in data, patent rights, copyrights, |
| \"nice to have\" with all the  | or secret processes* (If one entity |
| \"bells and whistles\" or does | owns the patent on a process or     |
| it really represent your       | product you require, can anyone     |
| requirement or minimum need?   | else meet your need?) *Relocation   |
|                                | of a major natural gas distribution |
| How did you determine          | line from your rail right of way*   |
| availability? Did you check on | (the natural gas utility company is |
| prior procurements for the     | the only source available to work   |
| same or similar items?         | on the gas line)                    |
|                                |                                     |
| Are there other sources? Are   |                                     |
| they responsible? Are          |                                     |
| identical or compatible parts  |                                     |
| or equipment available from    |                                     |
| any other source?              |                                     |
+--------------------------------+-------------------------------------+

  --------------------------------- -------------------------------------
  Who prepared the specification or 
  statement of work? Did a vendor   
  or contractor assist? If so, will 
  they benefit somehow by the       
  decision to proceed with\         
  a sole source contract?           

  --------------------------------- -------------------------------------

-   [The public exigency or emergency for the requirement will not
    permit a delay resulting from competitive solicitation]{.underline}‑
    Two factors: public exigency or emergency and no time to
    competitively procure!

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-   When your agency\'s need for the supplies or services is of such an
    unusual or compelling urgency that the agency would be seriously
    injured unless sole source procurements were utilized, it can be
    justified.

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-   In an emergency situation, it is not unusual for health and safety
    issues to be a factor in the decision to proceed with a sole source.

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-   If the agency itself is responsible for being short of time ‑‑ i.e.,
    lack of advance planning, delays in procurement administration due
    to shortage of procurement personnel or incompetence of procurement
    personnel, money in the budget balance expires the end of next
    month, particular caution should be exercised in making a
    determination regarding whether the emergent consequences of delay
    warrant noncompetitive negotiation and to what extent the agency
    contributed; an independent opinion may be warranted.

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-   If the emergency is to repair a hole in the roof of your maintenance
    facility where a tree limb fell through it because of the storm last
    night, is the sole source procurement a patch job or a replacement
    of the roof because it was getting old anyway? One school of thought
    is that you should only perform the minimal work necessary to
    alleviate the exigency or the emergency. Don\'t use it as an excuse
    to do remedial work or buy a year\'s supply of something you
    intended to do competitively next month anyway.

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-   While many state laws parallel the other conditions under which
    Federal funds may be used for non‑competitive proposals, state laws
    for emergency situations are often more restrictive.\
    Furthermore, *the most critical delay in an emergency may be
    obtaining your agency\'s authority*, e.g. at a monthly board
    meeting; inquire about (and recommend changes to, if appropriate)
    your Board\'s policy for emergency procurements.

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-   [FTA authorizes noncompetitive negotiations]{.underline} ‑ You may
    have a situation you feel warrants the utilization of sole source
    procurements but it doesn\'t quite fit into one of the other
    circumstances. You are a small transit property with a vehicle
    monitoring system you installed last year. The accuracy and utility
    of the system is exceeding all expectations and you now need to
    display the schedule adherence information in three new downtown
    transfer locations. Could you go sole source to Brand X? If you
    justify why (compatibility requirements, interfaces with proprietary
    software, unavailability of interested competition, etc.), this may
    be the sort of procurement you should discuss with the FTA and
    request its permission to use sole source.

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-   [After solicitation of a number of sources, competition is
    determined inadequate]{.underline} ‑ You have issued an IFB and only
    received one bid from a responsible contractor, but you cannot
    determine its price to be reasonable. If you are satisfied about the
    bidding environment and the reasons why you only received one bid,
    you can negotiate a sole source contract to arrive at a reasonably
    priced contract.

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-   The item is an associated capital maintenance item as defined in 49
    U.S.C. § 5307(a)(1) that is [procured directly from the original
    manufacturer or supplier of the item to be replaced]{.underline}. ‑
    This topic is discussed in greater detail in § 4.6.3, \"Associated
    Capital Maintenance Item.\"

[Step Three]{.underline} ‑ **DOCUMENTATION** of justification. It is
recommended that you document very thoroughly and carefully the
rationale you went through to justify your sole source procurement. Your
agency may have very specific requirements for \"Findings and
Determinations\" that must be followed. You may have pre‑approval
requirements at a certain dollar threshold that must be met ‑‑ your
Board of Directors may require its approval of any proposed sole source
procurement in excess of \$250,000 prior to the commencement of the
negotiations. You may have other documentation requirements peculiar to
your agency, state, or local government that you must meet prior to the
initiation of negotiations which must be met.

**4.6.2 [Negotiation of Contract]{.underline}**

**DISCUSSION**

**\"Once I have justified the use of procurement by noncompetitive
proposals, what do I do next? How do I negotiate this thing?\"**

**Best Practices**

[Single Offer after Competitive Solicitation]{.underline} ‑ As
previously discussed in Section 4.4.3, \"Single Bid,\" you may conclude
after receiving only a single bid that competition is inadequate and
that you should negotiate with the single bidder to establish a fair and
reasonable price. You may be in this situation because you only received
one bid or proposal from one source or you have determined that the
competition you received was otherwise \"inadequate.\" To proceed in
this case, you must meet the requirements for noncompetitive
negotiation. However, you do not need to issue a new solicitation
because your requirement is adequately stated. You may, after meeting
the requirements of the previous section, proceed to negotiate a
reasonably priced contract using the negotiation procedures discussed in
Sections 4.5.2, \"Evaluation of Proposals,\" through 4.5.8, \"Debriefing
Unsuccessful Offerors.\"

[All Other Cases]{.underline} ‑ In other circumstances you have
justified, it is recommended that you request a proposal from the
source. There is no need to advertise ‑ there will be no competition!
Your request for a proposal can be as formal as you want ‑‑ from letter
requests up to a full blown solicitation document. Regardless of the
form used, you want to:

-   refer to, or attach, all terms and conditions of the solicitation.
    You still need to comply with federal representation and
    certification requirements. You still will want to have special and
    general provisions. You may have additional agency requirements that
    must be met. What is the DBE goal for this procurement ‑‑ how will
    it be met?

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-   refer to, or attach, the specifications or statement of work for the
    supply or service being procured.

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-   request the applicable cost or pricing data. [^242]

Allow adequate time for the contractor to prepare its proposal prior to
submission back to you.

Review the proposal with impacted internal agency staff ‑‑ really
prepare for your negotiations with this sole source.

Negotiate the final terms and conditions of the contract using the
negotiation procedures you would use in your competitive proposal method
of procurement. [^243] These negotiations can be more pointed and open
because there is no competitive environment involved ‑‑ the integrity of
a procurement process is not involved so issues like \"technical
leveling\" and \"transfusion\" do not have to be considered.

As discussed in Section 5.2, \"Cost and Price Analysis,\"{and as
required by FTA Circular 4220.1E § 9.h.(2)}, a cost analysis is
required. This includes verifying the proposed cost data, the
projections of the data, and the evaluation of specific elements of
costs and profit.

**4.6.3 [Associated Capital Maintenance Item]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| Original Equipment Manufacturer components may be procured by         |
| competitive negotiations only if:                                     |
|                                                                       |
| > \(e\) The item is an associated capital maintenance item as defined |
| > in 49 U.S.C. § 5307(a)(1) that is procured directly from the        |
| > original manufacturer or supplier of the                            |
+-----------------------------------------------------------------------+

  -----------------------------------------------------------------------
  item to be replaced. The grantee must first certify in writing to FTA:
  (i) that such manufacturer or supplier is the only source for such
  item; and (ii) that the price of such item is no higher than the price
  paid for such item by like customers. [^244]

  -----------------------------------------------------------------------

**DEFINITION**

[Associated capital maintenance item]{.underline} ‑ Equipment, tires,
tubes, or material, each costing at least 0.5 percent of the current
fair market value of rolling stock comparable to the rolling stock for
which the equipment, tires, tubes, and material are to be used. [^245]

**DISCUSSION**

**If you can purchase a replacement part or component for rolling stock
only from the original manufacturer, and the item costs at least 0.5% of
the vehicle price, then you may procure the item by noncompetitive
proposal provided you make the requisite certifications in advance to
FTA and determine the price to be reasonable based on a cost analysis.**

**Best Practices**

In order to \"qualify\" to use this circumstance to justify sole source,
the FTA has established the following requirements:

-   The item must be an associated capital maintenance item as defined
    above.

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-   The item must be procured directly from the original manufacturer or
    supplier of the item to be replaced.

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-   Prior to execution of the contract, you must first certify in
    writing to the FTA that such manufacturer or supplier is the only
    source for such item; and that the price of such item is no higher
    than the price paid for such item by like customers.

Approval of the FTA is not required ‑‑ just certification of the grantee
(you).

When you read these requirements carefully, you are still essentially
justifying a sole source {as in FTA Circular 4220.1E § 9.h.(1)(a)} and
certifying that fact to the FTA. Also, even though you are certifying
that the price of the item is no higher than the price paid for such
item by like customers, you are still required to perform a cost
analysis as part of the contract negotiation and award process.

**4.6.4 [Unsolicited Proposals]{.underline}**

### DISCUSSION

**The subject of unsolicited proposals is one not covered in transit law
or the common grant rule. In cases like this, FTA would look to the
Federal Acquisition Regulations (FAR) provisions as a guide concerning
the circumstances under which a sole source award would be appropriate.
The FAR covers this subject as FAR Part 15.6. The FAR is available
online at <http://www.arnet.gov/far/>.**

**When unsolicited proposals are submitted to a grantee, the agency must
never assume that the product being offered in the unsolicited proposal
is the only, or best, product available to meet the needs or objectives
of the agency. The essential consideration in whether or not to accept
an unsolicited proposal without competition (i.e., to make a sole source
contract award) is whether or not the proposal is presenting an
innovative, proprietary concept that is itself essential to
accomplishing the agency's objective. If a company is merely presenting
a rationale for doing certain work that could be done by others if given
the chance to compete, then there is no permissible basis to award a
sole source contract.**

**In the case of a proprietary software product that is being offered to
achieve a certain goal, the transit agency receiving the proposal could
not, for example, release the offeror's proprietary programming codes in
a competitive solicitation. But the agency should, if it deems the
mission one it wants to pursue, compete the contract award in terms of
describing what the agency's objective or mission is in order to see
what other firms might offer in terms of software solutions.**

**New York City Transit (NYCT) requires that any contract resulting from
an unsolicited proposal be justified in writing by the Procurement
Office, regardless of the department that received the proposal. Each
proposal is reviewed to determine if the goods or services being offered
are essential to NYCT and whether the proposer is simply offering
something that can be obtained through open and competitive bidding. If
it is determined that the goods or services being offered would benefit
NYCT, and could be obtained through competitive bidding, then there is
not sufficient justification for a sole source award*.***

**[Revenue Contracts]{.underline} - The subject of unsolicited proposals
is discussed in the context of revenue contracts in BPPM section 1.3.3.8
-- *Revenue Contracts.* With respect to unsolicited proposals in the
context of companies seeking to use FTA funded assets for business
purposes, the BPPM offers the following guidance:**

** **

**"Unsolicited Proposals - These may come forth when companies see an
opportunity to use the transit system (an FTA-funded activity) to
enhance their business interest. It may appear from such proposals that
no other company could offer the same product or service. However, this
does not justify a sole source contract. If the idea or activity is of**

**interest to you, the concept should be evaluated on its own merit and
revenue producing potential. If the decision is to implement it, then a
competitive process should be used to select the contractor, *unless you
determine that the proposed concept itself is proprietary*."**

**New York City Transit (NYCT)** **was approached recently by a company,
which submitted an unsolicited proposal, wanting to install an
electronic information system on the subway cars. The company wanted to
program the system so that riders would know what was overhead, e.g.
Wall Street, theater district. New York City decided to investigate the
concept first to determine if it was something that they wanted to do to
enhance the subway system. Deciding that they liked the idea, they then
prepared an RFP and solicited vendors on a competitive basis.**

**Metropolitan Atlanta Rapid Transit Authority (MARTA) received an
unsolicited proposal from a company about use of subway right-of-way for
linking Atlanta with fiber optic cable using MARTA\'s system-wide
conduits. MARTA determined that they had unused conduits and could lease
space in them to various telecommunication companies. They contacted the
regional FTA office and received their approval for a non-exclusive RFP
to seek competitive proposals for twenty-year leases. This has produced
successful revenue contracts.**  

**4.7 SPECIAL PROCUREMENT METHODS**

**4.7.1 [Multi‑Step Procurements]{.underline}**

**DISCUSSION**

**You have discussed in detail the differences between the competitive
bidding process and the competitive proposal process but I\'ve got one
of those \'tweeners\' ‑‑ something that falls somewhere between those
two processes. There are a number of various technical approaches that
would probably meet our requirement and, if we determined which firms
met our minimal technical requirements, we could compete amongst them on
the basis of the lowest responsive, responsible bidder. But we may have
to enter into discussions with all offerors in order to determine
technical acceptability. Can this be done?**

**FTA Circular 4220.1E** **permits a great number of procedures that
vary from the classic procedures discussed in most of this Manual. For
example, a variation that has long‑been recognized in public procurement
is referred to as the two‑step, sealed bidding method of procurement.
While it has some characteristics of both sealed bidding and competitive
proposals, it complies with all FTA Circular 4220.1E** **requirements
for the competitive proposal process. This process allows, in the first
phase, for the submission of unpriced technical proposals in response to
the request. In the second phase, only those firms that have been found
to be technically qualified in the first phase are invited to submit
sealed bids, as though it were a regular sealed bid procurement. Award
is then made to the lowest, responsive and responsible bidder.**

**Best Practices**

[Overview]{.underline}

Two‑step bidding is a two-phase process generally consisting of a
technical first phase composed of one or more steps in which bidders
submit unpriced technical proposals (and discussions are held with
offerors of those proposals, if necessary) to be evaluated by the
transit property, and a second phase in which those bidders whose
technical offers are determined to be acceptable during the first phase
have their priced bids considered.

The process is designed to:

-   Obtain the benefit of sealed bidding by award of a contract to the
    lowest responsive, responsible bidder, and, at the same time,

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-   Obtain the benefit of the competitive proposal method of procurement
    through the solicitation of technical offers and conducting
    discussions to determine the acceptability of the technical offers.

The process may be recognized by your state law as a separate method of
procurement or may be allowed as a variation of a sealed bidding
statute, particularly in those states where limitations on the use of
the competitive proposal method exists.

[Conditions for Use]{.underline}

Transit properties generally follow one of two stated policies. Either
this method may be used when it is not considered practical to initially
prepare a definitive purchase or contract description which is suitable
to permit an award based on price. Or alternatively, in the absence of
factors or laws that require the use of sealed bidding, some authorities
[^246] establish a preference of the two‑stepped process over
negotiations when all of the following conditions are present:

-   Available specifications are not definite or complete or may be too
    restrictive without technical evaluation (and any necessary
    discussion), of the technical aspects of the requirement to ensure
    mutual understanding between each source and the Authority;

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-   Definite criteria exist for evaluating technical proposals;

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-   More than one technically‑qualified source is expected to be
    available;

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-   Sufficient time will be available for use of the two‑step method;
    and

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-   A firm‑fixed‑price contract or a fixed‑price contract with economic
    price adjustment will be used.

[Phase One of Process]{.underline}

This process normally includes the following steps:

*Solicitation phase* ‑ In addition to the normal requirements for an
IFB, [^247] the first phase solicitation also generally provides:

-   That unpriced technical offers are requested; [^248]

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-   That the procurement is a two‑step sealed bid procurement and that
    priced bids will be considered in the second phase and only from
    those bidders whose unpriced technical offers are found to be
    acceptable in the first phase;

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-   The criteria to be used in evaluating the unpriced technical offers;

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-   That the Authority, to the extent determined to be necessary, may
    conduct oral or written discussions regarding the technical offers;

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-   A statement that bidders should submit proposals that are acceptable
    without additional explanation or information and that the Authority
    may make a final determination regarding the acceptability of the
    proposals based solely on the basis of the proposals as submitted
    and may proceed with the second step without requesting further
    information from any bidder;

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-   That bidders may designate those portions of the technical offers
    which contain trade secrets or other proprietary data which are to
    remain confidential; and

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-   That the item being procured shall be furnished generally in
    accordance with the bidder\'s technical offer as found to be
    technically acceptable and shall meet the requirements of the
    solicitation.

*Amendments to solicitation in two‑step process*:

-   Amendments issued prior to the receipt of technical offers are
    important to all prospective bidders as in a \"normal\" IFB. [^249]

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-   Amendments issued after receipt of the technical offers need be
    submitted only to those bidders who submitted unpriced technical
    offers and they should be allowed to submit new technical offers or
    amend those previously submitted. [^250]

*Receipt of unpriced technical offers*. Unless required by law, unpriced
technical offers need not be publicly opened.

-   Offers are typically opened in front of two or more authority
    employees as witnesses.

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-   Offers are usually not disclosed to unauthorized persons.

*Evaluation of unpriced technical offers should be in accordance with
the criteria set forth in the solicitation.* The unpriced technical
offers should be categorized as \--

-   Acceptable;

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-   Potentially acceptable (i.e., reasonably susceptible of being made
    acceptable); or

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-   Unacceptable, in which case the contracting officer records in
    writing the basis for this finding and makes it part of the
    procurement file. [^251]

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-   Any proposal which modifies or fails to conform to the essential
    requirements or specifications of the solicitation can be considered
    nonresponsive and categorized as unacceptable.

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-   When an unpriced technical offer has been determined to be
    unacceptable, the bidder may be notified of that fact and is not
    normally afforded additional opportunities to submit supplemental
    information amending its technical offer.

*Discussions involving unpriced technical offers may be conducted with
any offeror who submitted an acceptable or potentially acceptable
technical offer.*

-   Discussions can be conducted in accordance with the principles
    discussed in § 4.5.4 involving the competitive proposal method of
    procurement.

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-   Once discussions have commenced, any offeror who has not been
    notified that its offer has been found unacceptable may submit
    supplemental information amending its technical offer at any time
    until the closing date established.

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-   Such submission may be made at the request of the Contracting
    Officer, or upon the offeror\'s own initiative.

*Phase Two of the process may be initiated without discussions* if there
are a sufficient number of acceptable proposals to ensure adequate price
competition under Phase Two. Based upon the results of Phase 1, you may
wish to revise the technical specifications (minimum technical
requirements) in your Phase 2 IFB, in a manner that does not conflict
with the final unpriced proposals. While you have no assurance that the
prices will be close to each other, you know to what degree the
proposals have competitive technical merit.

[Phase Two of the Process]{.underline}

The procedures discussed in Section 4.4, \"Sealed Bids,\" can be
followed in Phase Two.

Each bidder who submitted an unpriced offer that was determined to be
acceptable in Phase One is invited to submit a priced offer. The IFB
states that the bidder shall comply with the specifications and the
offeror\'s acceptable technical proposal. No additional public notice or
advertisement of the IFB need be given because such notice was given
during the Phase One Process.

Award would be made to the lowest, responsive responsible offeror as
discussed in Section 4.4, \"Sealed Bids.\"

**4.7.2 [Governmental Prices and Contracts]{.underline}**

**4.7.2.1 [Procurements from General Services Administration
Schedules]{.underline}**

**CURRENT STATUS**

The Federal Supply Schedule program has provided Federal agencies with a
simplified process of acquiring commonly used supplies and services in
varying quantities at lower prices while\
obtaining discounts associated with volume buying. Congress, in enacting
\' 1555 of the Federal

Acquisition Streamlining Act of 1994 (Public Law 103‑455), [^252]
extended the cooperative purchasing provisions of GSA enabling
legislation:

> (b)(2)(A) The Administrator may provide for the use of Federal supply
> schedules of the General Services Administration by any of the
> following entities upon request: (i) a State, any department or agency
> of a State, and any political subdivision of a State, including a
> local government. . .

However, Section 4309 of the National Defense Authorization Act for
Fiscal Year 1996 [^253] suspended the authority of the Administrator of
the General Services to allow state and local governments to use the
federal supply schedules. The provision suspended the authority until
the later of the period ending 18 months after the date of enactment of
this Act or the period ending 30 days after the date after the
Administrator has reviewed a General Accounting Office report that
assesses the effects of state and local governments use of the federal
supply schedules and has submitted the report and comments on the report
to Congress. The Act also directed the General Accounting Office to
include in its report to the Administrator an assessment of the impact
on costs to federal agencies from the use of federal supply schedules by
state and local governments.

In light of this recent legislation, what is the status of state and
local government (including most transit properties theoretically) being
able to use the GSA federal supply schedules? It is understood that at
least one transit property (Washington Metropolitan Area Transit
Authority) has at least limited authority from the GSA to utilize the
federal supply schedules. However, we are not aware of other Authorities
being able to utilize those Schedules. With this legislation, we must
await at least until August 1997 (18 months from the date of enactment
of the Defense Authorization Act of 1996) before we know what the GSA
and GAO reports to Congress will say and it could be longer than that if
the required reports are later than then. This does not appear to be a
source that we should expect to be able to use anytime soon.

At such time as this matter is clarified, the FTA, through this Manual,
will provide instruction and guidance to its grantees.

**4.7.2.2 [State and Local Schedules]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| An additional general procurement standard applicable to third‑party  |
| procurements included in FTA Circular 4220.1E encourages (at § 7.e)   |
| the use of intergovernmental procurement agreements as follows:       |
+-----------------------------------------------------------------------+

+-----------------------------------------------------------------------+
| \(e\) [Intergovernmental Procurement Agreements]{.underline}.         |
|                                                                       |
| > \(1\) Grantees are encouraged to utilize available state and local  |
| > intergovernmental agreements for procurement or use of common goods |
| > and services. When obtaining goods or services in this manner,      |
| > grantees must ensure all federal requirements, required clauses,    |
| > and certifications (including Buy America) are properly followed    |
| > and included, whether in the master intergovernmental contract or   |
| > in the grantee's purchase document.                                 |
| >                                                                     |
| > \(2\) Grantees are also encouraged to jointly procure goods and     |
| > services with other grantees. When obtaining goods or services in   |
| > this manner, grantees must ensure all federal requirements,         |
| > required clauses, and certifications are properly followed and      |
| > included in the resulting joint solicitation and contract           |
| > documents.                                                          |
|                                                                       |
| \(3\) Grantees may assign contractual rights to purchase goods and    |
| services to other grantees if the original contract contains          |
| appropriate assignability provisions. Grantees who obtain these       |
| contractual rights (commonly known as 'piggybacking') may exercise    |
| them after first determining the contract price remains fair and      |
| reasonable.                                                           |
+-----------------------------------------------------------------------+

**DISCUSSION**

**FTA has historically encouraged grantees to consider combining efforts
in their procurements 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 grantee's
requirements. FTA believes this is superior to the practice of
"piggybacking" since "piggybacking" does not combine buying power at the
price stage and may limit a grantee's choices to those products excess
to another grantee's needs.**

**Does your state, county, city, or other local government have a
schedule program similar to the GSA Federal Supply Schedule? Are you
legally eligible to utilize those schedules? In many ways, this is a
topic that is so State and locale‑specific, it is impractical to address
with any specificity in this Manual. This is an area of the Manual where
we solicit comments and best practices from your jurisdiction that would
(or could) have application on a national basis.**

**Purpose**

One of the challenges of a transit authority\'s procurement office is to
try to be more responsive to its customers from timeliness and
cost‑efficient perspectives. It is almost inevitable that someone will
take months trying to decide what is required and then is perplexed that
the procurement staff cannot procure it \"yesterday!\" We devoted an
extensive discussion in Chapter

2 on the importance of planning in the procurement process and the need
for cooperative efforts among the different staff elements of the
Authority.

One of the ways that Federal and State governments (to a greater extent)
and local governments (to a much lesser extent) have tried to address
the timeliness issue is through the use of \"schedule\" contracts that
can be mandated for use on a government‑wide basis. If an entity at the
state‑wide level has a contract that consolidates all requirements for
sedans and buys those off a schedule contract, all public purchasers
theoretically benefit from this larger quantity buy and do not have to
go through a procurement process to obtain those benefits.

**Best Practices**

Ascertain if your State has a schedule program. It may be for standard
commodities such as office supplies and equipment including vehicles of
all sorts and sizes as well as computer equipment on either a lease or
purchase basis.

Ascertain if your authority is eligible to participate in the program
and, if so, how.

-   Is an intergovernmental agreement required before you can
    participate?

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-   Is the order issued with the State agency or the contractor?

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-   Do you have any flexibility to make minor changes to the item being
    bought?

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-   How is the order funded?

These questions, and obviously many others, all must be worked out with
the \"parent\" agency. It may be difficult to track all of this
information down the first time, but after you go through the process
once, it will be much easier with each successive procurement you
process through these centralized contracts. You will then be able to
gauge the savings in time and money that may accrue to your agency by
using these contracts.

The same questions can be addressed at the local level. A program might
exist at a city, county, parish, school district or any other public
special districts. One of the most effective ways to participate in
cooperative purchases at the local level is through some sort of
inter‑local cooperative purchasing agreement. To be able to do this may
require special legislative authority, but most States have some sort of
Intergovernmental [^254] and/or Inter‑local [^255] Cooperation Act.
These statutes usually define not only what can be the subject of
agreements consummated pursuant to their provisions, but also define who
can participate and under what conditions.

Never underestimate the buying power (in terms of quantity you) bring to
the local public government buying community, particularly in such areas
as diesel, vehicle parts, office supplies and vehicles.

There is some real public relations benefit for your agency by being
actively involved in the local government buying community in helping
all public bodies get \"more bang for the buck\" through volume buying
of similarly‑used commodities.

**4.7.2.3 [State versus FTA Requirements]{.underline}**

  -----------------------------------------------------------------------
  **REQUIREMENT**

  The requirements and standards of FTA Circular 4220.1E apply to
  procurements entered into under such agreements using FTA funds. [^256]
  -----------------------------------------------------------------------

**DISCUSSION**

**\"I\'ve got no control over what the State puts into its contracts in
terms of FTA requirements. The State is concerned with state laws and
that contracts fully comply with the competitive requirements of the
state. What do I do?\"**

**There really is no easy answer! The problem most agencies face with
this requirement is not the competitive methods utilized by the State
(or local) governmental entity in establishing these contracts ‑‑ most
States have a small purchase procedures, sealed bidding and sealed
proposal methods of procurement that in all likelihood comply with the
federal standards set forth in FTA Circular 4220.1E and discussed
earlier in Section 4. Most States similarly buy architect and
engineering services in a procedure similar to the federal requirements
of the Brooks Act and as discussed in FTA Circular 4220.1E paragraph 9.e
and in paragraph 6.5** -- ***Architect-Engineering Services.***

**The problem most of us face is squaring State laws or regulations that
differ substantively with the FTA requirements of FTA Circular
4220.1E.**

-   **How do we reconcile State‑geographic preference statutes with the
    full and open competition requirements of the FTA and the Common
    Grant Rule? These statutes frequently establish a preference for
    certain services or commodities to in‑State sources and may even
    set‑aside certain procurements to in‑State sources. If you are using
    federal funds to procure something off a State schedule and your
    State has such a restriction, can you participate? Probably not.\
    **

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-   **Recent changes in the applicability of the Buy America provisions
    of 49 CFR Part 661 (and discussed in Section 4.3.3.2.2, \"Buy
    America Certification\") make compliance with those requirements
    less of an issue now than it used to be because of the \$100,000
    threshold. However, for procurements in excess of that amount, you
    will probably have problems participating because of the
    certification requirements imposed by Part 661.**

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-   **The current \$2,000 threshold of the Davis‑Bacon Act may preclude
    you from participating in any State construction contract because,
    in all likelihood, any wage rate requirement of the State is going
    to be a State law issue, not the Davis‑Bacon Act.**

**The list could go on. Under current federal statutory and regulatory
guidance and requirements, some of the conflicts between those
requirements and the procurement procedures and practices of your State
are irreconcilable. Unless the State or local agency is willing to
include the FTA requirements in its solicitations and contracts, you may
be effectively precluded from participating in those intergovernmental
or inter‑local procurements. Some relief could come in the future as the
FTA continues to examine its policy relative to the applicability of FTA
Circular 4220.1E to all procurements if the grantee accepts operating
assistance.** [^257]

**Until more clarification is obtained and as long as operating
assistance is an issue, you may not be able, realistically, to
participate in these procurements. You can, however, effectively
participate at the truly local level where you can either control the
procurement (you buy the diesel fuel using all the federal requirements)
and allow the city and school district draw off your contract or,
because of the one‑on‑one interface this process requires, you are able
to have the city or school board include the federal requirements in its
unleaded regular gasoline contract you want to order from. That works!**

Again, we specifically solicit input from you on your successes (and
failures) in the area of utilizing State and local government contract
schedules or inter‑local/intergovernmental procurement agreements and
how they have been reconciled with conflicting State and Federal
requirements.

4.7.3 [E-Commerce: Reverse Auctions]{.underline}

+-----------------------------------------------------------------------+
| ## REQUIREMENT                                                        |
+-----------------------------------------------------------------------+
| Reverse auctions are subject to all the procurement requirements of   |
| FTA Circular 4220.1E, Paragraph 7.q.                                  |
+-----------------------------------------------------------------------+

+-----------------------------------------------------------------------+
| > "E-Commerce is an allowable means to conduct procurements. If a     |
| > grantee chooses to utilize E-Commerce, written procedures need to   |
| > be developed and in place prior to solicitation and all             |
| > requirements for full and open competition must be met in           |
| > accordance with this Circular."                                     |
|                                                                       |
| We would note that *some* states, such as New York, require a sealed  |
| bid procedure for competitive procurements. *Where state law requires |
| sealed bidding, reverse auctions may not be legal*. In these          |
| situations grantees may still make use of online bidding but the bids |
| must be kept sealed and not disclosed. Grantees must check their      |
| state procurement statutes to determine if reverse auctions are       |
| permissible. For example, the state of Texas recently enacted         |
| legislation allowing reverse auctions. Grantees should consult with   |
| their counsel to determine whether reverse auctions are legally       |
| permissible under State law.                                          |
+-----------------------------------------------------------------------+

DISCUSSION

**One of the innovations arising out of e-commerce has been the use of
*reverse auctions*. The term *reverse auction* refers to a live online
auction in which the roles of buyer and seller are "reversed." In a
*normal* *(forward*) *auction*, sellers offer to sell at prices
determined by the bids of buyers. In a *reverse auction*, buyers are
offering to buy something at prices being bid by sellers. "Reverse"
refers to the relationship of buyer and seller and who does the bidding.
Sellers bid for the right to sell to the buying organization and buyers
agree to buy at the price established by the auction process. In a
reverse auction proceeding, the buyer advertises and defines on line the
commodity for which it is soliciting bids. The buyer may also post a
price at which the bidding will begin. These prices will usually be the
buyer's "last good buy" price or an industry standard price, and it
should be a price that will encourage suppliers to bid. If the price is
set too low, it will discourage sellers from participating. Suppliers,
whose identity is kept confidential, then post prices online anytime
within the duration of the auction (usually one day to several weeks) so
that suppliers can see their competitors' bids and respond immediately
with counter offers. Suppliers can reevaluate and adjust their bid in
response to other bidders' offerings. Some auctions provide for
automatic time extensions if a bid is placed in the last five minutes of
an auction, in which case an automatic five-minute extension prevents
last-second bidding and keeps all participants on an even playing field.
It is possible to have several automatic time extensions when bids are
submitted in the last five minutes of the event. The transparency of the
marketplace creates rigorous competition among the participants, which
tends to drive prices lower. Reverse auctions live up to their name by
having prices fall. Experience to date with reverse auctions indicates
that savings of 15% - 20% from prices previously paid may be possible,
especially if additional vendors can be found to bid on the
requirement.**

**Most of the work to be done in a reverse auction takes place prior to
the actual event. This includes identifying suppliers who will bid,
pre-qualifying them and informing them about the technology that is
being used. It is important to define everything up front, including**

**quality, delivery terms, payment terms, location of use, quantity
required and in what lot size. In some cases buyers have issued a
Request for Proposals (RFP) as a first step in a "best value"
competition in order to evaluate prospective bidders' products,
capabilities, etc. A reverse auction is then conducted among qualified
suppliers as a technique to elicit the best possible prices.**

**Anything that can be described well can be reversed auctioned. This
includes goods and services. The key is that the item have features that
are measurable, with a clear purchase description in terms of quality
and specificity, so that suppliers are bidding on a requirement that is
clear to everyone. Doing this will ensure you are able to compare bids
for essentially identical goods or services. In deciding if a reverse
auction is right for a particular commodity, the agency will need to
determine if it has long-term relationships with any one or two
suppliers for the commodity, and if so, why? What is valuable about the
relationship? Would an auction harm the relationship? Another
consideration will be whether there are enough suppliers of this
commodity to make it competitive. Any efforts taken to increase the
number of bidders who participate in the auction will pay dividends in
the end. Finally, the commodity must be such that there is a sufficient
profit margin to make prices compressible, so that suppliers have room
to bid. And finally, as has already been suggested, reverse auctions
need not be limited to lowest - price contract awards; they may be used
in "best value" procurements where technical proposals are required and
price auctions follow, with contract award being made to the firm
offering the best overall value to the buying agency, with both price
and technical merits considered.**

**Best Practices**

**[Federal Government Experience]{.underline}** - A number of Federal
agencies are now using reverse auctions. The Federal Government began to
use this technique with the re-write of the FAR Part 15 in 1997. FAR
1.102.4(e) now states that if a practice is not expressly addressed or
prohibited by statute or regulation, Government employees should feel
free to innovate and use sound business judgment in making procurement
decisions. With respect to auctions, FAR 15.306(e)(3) requires bidders
to agree to disclose their prices prior to their participation in an
auction event. Based on the FAR, government procurement personnel may
use reverse auctions as long as the vendors agree to participate.
(Grantees are not required to follow the FAR, and this information on
Federal procedures is provided for information purposes).

[Navy Department]{.underline} - The Navy Department's first auction was
for aircraft ejection seat mechanisms. This auction lasted 51 minutes,
with three bidders, and Navy estimates it saved over 28% off the
historical price for these mechanisms. Navy has conducted over fifteen
additional reverse auctions since the first in May 2000, for supplies as
well as services, using

both price and best value as evaluation criteria. Following are some of
the "lessons learned" by

the Navy Department, as published at their web site: [^258]

-   The reverse auction technique may not drastically change or
    streamline the procurement process.

-   It is a highly effective pricing tool.

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-   Prior to opening the auction, all participating vendors should log
    on and verify their connection to the system.

-   A set period of time for the reverse auction should be established
    based on the number of participants and the complexity of the
    acquisition.

-   The time established for the auction needs to be flexible in case
    there is an offer at closing time. For example, if a bid is received
    within one minute of the closing time for the auction, the auction
    period should be extended for an additional number of minutes to
    allow bidders to respond to the last bid.

[Marine Corps]{.underline} - The U.S. Marine Corps has also published
their experiences with reverse auctions. The Marine Corps took concerted
efforts to build a database of vendors for various product types and to
include more vendors, train them on the reverse auction tool, and get
them to participate in their first auction. The result was significantly
increased competition. The average auction has lasted 30 minutes with
award made directly thereafter. The average savings for the eight
auctions thus far have been 25% from the estimated values based on
historical and retail prices. The Marine Corps reports that vendors
actually prefer this process to the sealed bid process. The Marine Corps
Regional Contracting Office Southwest (RCO SW) received the Department
of the Navy Competition Excellence Award for the implementation of this
innovative practice.

[Army]{.underline} - The Army is using reverse auctions for *best value*
types of procurements. Following is an excerpt from the Army procurement
procedures guide as reproduced in the DOD *Defense Acquisition
Deskbook*:

### *Applicability to Best Value Acquisitions*

> *Reverse auctions are legal as long as the identity of the bidders is
> not disclosed. You may use them for trade-off acquisitions as a
> pricing tool. Once you have finished with technical discussions, you
> may conduct a reverse auction to establish the offerors' final prices.
> Provide these prices, along with the rest of the evaluation results,
> to the Source Selection Official for his/her use in selecting the
> proposal that represents the best value. A potential benefit is that
> competition will drive the prices down as the offerors have visibility
> of the other prices being proposed.*
>
> *You may use reverse auctions to purchase a variety of products and
> services. Reverse auctions work especially well on acquisitions of
> manufactured items. While you can use reverse auctions to buy
> commodities, these items usually have smaller profit margins and
> therefore, the potential benefits are less.*
>
> *\
> When using reverse auctions in a best value acquisition, ensure the
> auction does not drive prices down to the point that the resultant
> contract does not provide enough incentive for the contractor to
> provide quality supplies and services.*
>
> *Use of reverse auctions is appropriate at different points in an
> acquisition. For example, you may use them to achieve the offerors'
> final price or you may use them to downsize the number of offerors,
> but decide not to use them for the final negotiations.* [^259]

[Air Force]{.underline} - The Air Force *Contracting Policy Memo* *on
Reverse Auctions* (February 19, 2001) was issued after research on how
reverse auctions are being used in private industry, and the memo
provides a number of "lessons learned." Among these were:

-   Reverse auctions are being used by industry more for "best value"
    acquisitions than for lowest price acquisitions. (The Sun
    Microsystems' case discussed below under "Private Industry
    Experience" illustrates this.)

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-   Suppliers are normally pre-qualified, including past performance,
    and then a reverse auction is used for the submission of competitive
    prices.

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-   A responsibility determination is performed on the apparent
    successful bidder.

> The Air Force procured a motorized security gate for one of its
> facilities and requested technical proposals first. Those firms
> submitting acceptable technical proposals then submitted prices online
> through a reverse auction. The apparent low bidder was then required
> to submit a cost proposal for evaluation. Finding the proposal
> satisfactory, a contract was awarded. Air Force was pleased with the
> results of the process.
>
> [Treasury Department]{.underline} -- The U.S. Treasury Department
> (IRS) conducted, in May 2001, its first auction and one of the largest
> Federal auctions to date: \$131 million for PCs, laptops and monitors.
> Treasury estimates it saved about \$68 million in a very successful
> auction. An example of the savings achieved was the reduction in the
> unit price of a top-end desktop computer from a pre-auction price of
> \$1,434 to \$625 (a savings of 56 percent). There were three
> distributors that submitted bids, representing IBM, Gateway and Dell.
> The IRS requirements were solicited on a best value basis. [^260]
>
> Treasury has also had success with small buys. Many of those buys were
> below \$25,000 and several were below \$1,000. More than \$300,000 in
> purchases have been made in 2002, with some impressive results.
> Customs saved 43 percent on the purchase of a shredder and the
> Financial Crimes Enforcement Network saved 87 percent on two
> 265-megabyte memory kits. Vendor interest has been great. For example,
> the Bureau of Public Debt has been averaging 72 bids per auction. In
> all, close to 2,000 bids have been received from over 330 firms.
> Another noteworthy achievement is that the Bureau of Public Debt, the
> ATF and Customs have awarded 100 percent of their auction results to
> small businesses. [^261]

[General Services Administration (GSA)]{.underline} -- GSA maintains a
reverse auction web site for Federal agencies. On July 25, 2002 the GSA
Federal Technology Service awarded a number of contracts for reverse
auction services to various companies ("enablers") that provide services
ranging from conducting the complete auction ("Hosted Services") to
providing enabling software so that the

user agency can conduct its own auctions ("Desktop Services"). The
enablers that received GSA contracts are listed on the web site. [^262]

GSA conducted a reverse auction pilot program from May 2000 to May 2001.
GSA reports that various government agencies participating in the pilot
program realized savings of 12% - 48% through the reverse auction
process. For example, the Defense Financing and Accounting Service paid
22 percent, or \$2.1 million less, than normal prices for desktop
computers, laptops and printers. The National Institutes of Health (NIH)
paid 25 percent, or \$395,000, less than normal prices for utility
wipes, a type of cleaning supplies. The Coast Guard paid 22 percent, or
\$300,000, less than normal prices for spare parts for HU-25 Falcon
jets.

The Deputy Assistant Commissioner for Service Development, GSA Federal
Technology Service, Mr. Manny DeVera, is credited with developing "Ten
Commandments for Reverse Auctions:"

######## Reverse Auction

***Ten Commandments***

*1. Link reverse auction strategy to acquisition strategy. When
developing the acquisition strategy ask, "Could reverse auctioning apply
to this requirement?"*

*2. Follow the Federal Acquisition Regulation. These guiding principles
still apply.* [^263]

*3. Choose a solid performing enabler. (Enablers are firms that perform
reverse auctions.) With the troubles currently being experienced in the
digital economy, a few enablers may not be around in the future and
could present risks.\
*

*4. Educate suppliers in advance of conducting a reverse auction. Full
service enablers provide this service in their fees.*

*5. Be prepared for publicity and use it to your advantage. Publicity
happens because reverse auctions are relatively new and the media, trade
associations, senior government officials and others are all carefully
watching the government's entry into this new way of doing business.
Enablers are also aggressively publicizing their activities*.

*6. Begin with simple requirements and move gradually to more complex
ones. The more experience an organization has with conducting auctions,
the more complex requirements they can put out for bid.*

*7. Establish the rules of the reverse auction up front. Some examples
of these rules are the bid increments to be used, time extensions,
logistics and other considerations*.

*8. Conduct a mock auction. The adage "practice makes perfect" is very
appropriate here.*

*9. Consider conducting an auction where bidders bid to provide a
quantity of a commodity, as opposed to price based bidding. For example,
reverse auctions are being conducted where the buyer has a set amount
they want to spend, say \$1 million for PCs, and is not focused on the
unit cost. In these auctions, bidders base their bids on the number of
PCs that they will provide for the \$1 million.*

*10. The Contracting Officer is in control of the reverse auction event
at all times.*

[FIRSTGOV.gov]{.underline} -- The U.S. Government's official web portal
is www.firstgov.gov. [^264] Inserting "reverse auctions" in the *Search*
box will give you access to more than 186 million web pages from federal
and state governments where you will find information regarding these
agencies' experience with reverse auctions.

**[Private Industry Experience]{.underline} --** The private industry
sector has been using reverse auctions since the mid-1990's. A recent
white paper presented data indicating that 20 percent of all

private industry firms may be using on-line auctions (real-time bidding)
to procure a portion of their goods and services. [^265]

A current magazine article discusses the experience of one major private
industry player in the reverse auction arena -- Sun Microsystems. Sun
implemented its *Dynamic Bidding* program in May 2000 with a goal of 20
percent reduction of their targeted budget, and they achieved this in
their first pilot auction. It has since been used for more than 100
procurements and covers all the commodities Sun buys. One of the
important facets of the Sun method is that the company uses a "best
value" approach to source selection with their price auctions. Sun
believes its supplier relationships are strategic and it will not switch
to an untested company simply to get a lower price. Past performance in
areas such as quality, manufacturing flexibility, facility location and
engineering support are also considered in the final decision. Sun
emphasizes that the reverse auction approach does not replace the
strategic relationship between companies. Prices bid are only one factor
in the final selection decision process, but the auctions mean that less
time is spent on negotiating the price, terms and conditions than was
previously the case. "The end result is that it takes Sun an hour to
find the true market price, eliminating weeks or even months of
negotiating back and forth. It has also resulted in significant
bottom-line savings for Sun. They used this process on \$1 billion of
their direct spend in fiscal year 2001, and have raised the goal for
this fiscal year." [^266]

A recent article in an E-business publication suggested a number of
areas that might be good candidates for reverse auctions. [^267] The
author's recommendations for reverse auctions include:

-   *Strategic Relationship is Less Important*

> The author believes it is difficult to build cooperative relationships
> with suppliers through an auction process and thus auctions are more
> suitable for purchases of off-the-shelf, near-commodity direct
> materials.

-   *Price is Main Decision Factor*

> Auctions work best for categories where the main discriminator between
> suppliers is price.

-   *Many Qualified Suppliers*

> Auctions need adequate competition to succeed. Where there is limited
> competition because of a scarcity of suppliers, a commitment of supply
> is more important than any incremental price savings that could be
> achieved through an auction.

-   *Low to Medium Strategic Importance*

> The most strategic categories should not be subject to a stand-alone
> auction. This would include components critical to the company's end
> product. In these cases the auction, if conducted, should be combined
> with some sort of face-to-face discussions with key suppliers.

-   *Purchases Can be "Lotted"*

> It may be cumbersome to run individual auctions for each of many line
> items. Line items can be bundled into "lots" and suppliers will be
> required to bid on all the parts in that lot or none. This concept of
> "lotting" works well with office products.

-   *Benchmarks*

> When a company is satisfied with a current supplier but feels a need
> to test the market to ensure they are receiving a competitive price,
> they may do this through an auction. Potential suppliers can be
> required to respond to an RFP in order to qualify for the auction. The
> key is to adequately document one's service, delivery, payment terms
> and other "non price" requirements up-front to ensure that suppliers
> are bidding on an apples-to-apples basis.

**[Transit Agency Experience]{.underline}** -- Transit Agency experience
with reverse auctions has been extremely limited in comparison to both
the private sector and the Federal government. The Los Angeles County
Metropolitan Transit Authority (LACMTA) has used this process
successfully on a limited basis but does not feel it has significant
potential for their needs. [^268] LACMTA believes it can work well for
common materials but may be inconsistent with good long-term partnership
relationships with suppliers. For example, where there is a need for
technical support or for quick reaction time in order to meet critical
agency needs, the auction process does not lend itself to the kind of
agency/supplier relationships that are required for long-term mission
success. But LACMTA believes that if price is the only consideration,
and supplier partnerships for the commodity also is not a consideration,
then reverse auctioning can work well.

The Southeastern Pennsylvania Transportation Authority (SEPTA) conducted
a pilot program to test the process on a procurement of fluorescent
tubes and they were successful. But they also do not feel that their
agency will adopt this technique to any significant degree. One of the
lessons

learned by SEPTA is the criticality and difficulty of informing
potential bidders of the auction and getting them prepared to bid.
[^269]

The Houston Metropolitan Transit Authority (MTA) is considering the use
of a reverse auction for furniture. [^270]

Chapter 5

**5 - [Award of Contracts]{.underline}**

5.0 [Overview]{.underline} (1/98)

5.1 [Responsibility of Contractor]{.underline} (5/98)

5.1.1 [General Standards of Responsibility]{.underline} (5/98)

5.1.2 [Special Standards of Responsibility]{.underline} (5/98)

5.1.3 [Obtaining Information for Determination of
Responsibility]{.underline} (5/98)

5.1.4 [Determination and Documentation]{.underline} (5/98)

5.2 [Cost and Price Analysis]{.underline} (6/03)

5.3 [Award Procedures]{.underline} (5/98)

5.3.1 [Public Announcements of Contract Awards]{.underline} (5/98)

5.3.2 [Debriefing of Offerors]{.underline} (4/05)

5.4 [Documentation of Procurement Action]{.underline} (5/98)

5.4.1 [Sealed Bid Procurements]{.underline} (5/98)

5.4.1.1 [Abstract of Bids]{.underline} (5/98)

5.4.1.2 [Documentation of Award Decision]{.underline} (5/98)

5.4.2 [Negotiated Procurements]{.underline} (5/98)

5.4.2.1 [File Documentation of Selection Decision]{.underline} (5/98)

5.4.2.2 [Pre-Negotiation Plan]{.underline} (5/98)

5.4.2.3 [Memorandum of Negotiations]{.underline} (5/98)

**5.0 OVERVIEW**

This chapter concerns the more important procedures and documentation
requirements which are closest to and relate most directly to the time
of the actual contract award. These are the final steps in the long
process leading to the selection decision, the negotiation of a
contract, the signing of the contract, and the notifications to
unsuccessful offerors and the general public of who the winner is.

**5.1 RESPONSIBILITY OF CONTRACTOR**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| Paragraph 7.h. of FTA Circular 4220.1E states:                        |
|                                                                       |
| [Awards to Responsible Contractors]{.underline}. Grantees shall make  |
| awards only to responsible contractors possessing the ability to      |
| perform successfully under the terms and conditions of a proposed     |
| procurement. Consideration shall be given to such matters as          |
| contractor integrity, compliance with public policy, record of past   |
| performance, and financial and technical resources.                   |
|                                                                       |
| Paragraph 7.i. of FTA Circular 4220.1E states:                        |
|                                                                       |
| > [Written Record of Procurement History]{.underline}. Grantees shall |
| > maintain records detailing the history of a procurement. At a       |
| > minimum, these records shall include: ...(3) reasons for contractor |
| > selection or rejection.                                             |
+-----------------------------------------------------------------------+

**DEFINITION**

[Responsible]{.underline} ‑ If the lowest responsive bidder possesses,
at the time of contract award, the ability to perform successfully and a
willingness to comply with the terms and conditions of a proposed
contract, the bidder is considered responsible.

**DISCUSSION**

**Responsibility is a procurement issue determined after receipt of bids
or proposals and prior to the time of contract award. The contractor
must be considered responsible to be awarded a contract, regardless of
the procurement method used to select that contractor (sealed bidding,
competitive proposal, or sole source). For example, suppose your
procurement procedures allow for award of a contract to a sole source,
provided there is sufficient justification. As it turns out, the sole
source chosen has been debarred by the Department of the Army. If
Federal funds are involved, a contract cannot be awarded to the sole
source because the contractor is not considered responsible.** [^271]
**Your analysis of the factors involved in making a determination of
responsibility involves a great deal of subjectivity ‑‑ after all, you
are grading a firm\'s \"ability\" to do a job.**

**You may have a procurement where it is necessary to determine the
responsibility of a critical subcontractor in order for you to make a
positive determination about the prime contractor\'s responsibility.**
[^272] **If that is necessary, you may use the same standards in
determining the responsibility of the subcontractor as you would in
determining the responsibility of the prime contractor.**

**5.1.1 [General Standards of Responsibility]{.underline}**

To be determined responsible, a prospective contractor must meet all of
the following requirements:

> \(a\) Financial resources adequate to perform the contract, or the
> ability to obtain them.

\(b\) Ability to meet the required delivery or performance schedule,
taking into consideration all existing commercial and governmental
business commitments.

> \(c\) A satisfactory performance record;
>
> \(d\) A satisfactory record of integrity and business ethics;
>
> \(e\) The necessary organization, experience, accounting, and
> operational controls, and technical skills, or the ability to obtain
> them;
>
> \(f\) Compliance with applicable licensing and tax laws and
> regulations;
>
> \(g\) The necessary production, construction, and technical equipment
> and facilities, or the ability to obtain them;
>
> \(h\) Compliance with Affirmative Action and Disadvantaged Business
> Program requirements; and

\(i\) Other qualifications and eligibility criteria necessary to receive
an award under applicable laws and regulations.

**5.1.2 [Special Standards of Responsibility]{.underline}**

You may have a particular procurement or class of procurements which,
due to the complexity of the products being acquired, require that
prospective contractors meet special standards of responsibility. These
procurements will require that contractors have specialized expertise or

facilities in order to perform the contract adequately. These special
standards of responsibility must be set forth in the solicitation.
Failure to meet the special standards will disqualify a bidder from
consideration for award. An example of a Special Responsibility Standard
would be the Special Quality Assurance requirement concerning measuring
and testing facilities and manufacturing controls which must be met by
prospective bus manufacturers. [^273]

**5.1.3 [Obtaining Information for Determination of
Responsibility]{.underline}**

Before making a determination of responsibility, you must possess or
obtain information sufficient to satisfy yourself that a prospective
contractor meets the applicable standards and requirements for
responsibility set forth in this section. Appendix B.11 represents an
example of a \"Responsibility Questionnaire\" used by a major transit
authority to obtain information from bidders which is necessary in order
to make a determination of responsibility.

Sources of information available to your for your determinations could
include:

\(a\) General Services Administration publication titled List of Parties
Excluded from Federal Procurement or Nonprocurement Programs;

\(b\) Records and experience data, including verifiable knowledge of
your agency\'s personnel;

\(c\) Information supplied by the prospective contractor, including bid
or proposal information, questionnaire replies, financial data,
information on production equipment, and personnel information;

\(d\) Pre-award survey reports; and

\(e\) Other sources, such as publications, suppliers, subcontractors,
and customers of the prospective contractor, financial institutions,
government agencies, and business and trade associations.

**5.1.4 [Determination and Documentation]{.underline}**

The FTA Circular 4220.1E Paragraph 7(i) requires grantees to maintain a
written record of the procurement history, including \"reasons for
contractor selection or rejection.\" While the award of a contract
itself can in some instances (e.g. small purchases) be considered
implicit affirmation that a contractor has been determined to be
responsible, where appropriate the written record should state the
specific basis for a responsibility determination.

When an offer on which an award would otherwise be made is rejected
because the prospective contractor is found to be nonresponsible, the
Contracting Officer should make, sign, and place in the contract file a
determination of nonresponsibility which states the basis for the
determination.

Documents and reports supporting a determination of responsibility or
nonresponsibility, including any pre-award survey reports, should be
included in the contract file.

**[Discussions with Offeror]{.underline}** - In doing the research
necessary to make a responsibility determination, you are free to
discuss with the bidder/offeror any concerns which you may have
regarding the bidder\'s/offeror\'s responsibility. You are free to
discuss issues of \"responsibility\" with the bidder, unlike issues
regarding \"responsiveness,\" which cannot be discussed with bidders
(See BPPM Section 4.4.4).

**5.2 COST AND PRICE ANALYSIS**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| Paragraph 10 of FTA Circular 4220.1E requires a cost or price         |
| analysis for every procurement action:                                |
|                                                                       |
| > Grantees must perform a cost or price analysis in connection with   |
| > every procurement action, including contract modifications. The     |
| > method and degree of analysis is dependent on the facts surrounding |
| > the particular procurement situation, but as a starting point,      |
| > grantees 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.                                     |
| >                                                                     |
| > A cost analysis will be necessary whenever 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 catalogue 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.                                                         |
| >                                                                     |
| > \(b\) [Price Analysis]{.underline} ‑ A price analysis may be used   |
| > in all other instances to determine the reasonableness of the       |
| > proposed contract price.                                            |
| >                                                                     |
| > \(c\) [Profit]{.underline} - Grantees will negotiate profit as a    |
| > separate element of the price for each contract in which there is   |
| > no price competition and in all cases where cost analysis is        |
| > performed.                                                          |
| >                                                                     |
| > \(d\) [Federal Cost Principles]{.underline} - Costs or prices based |
| > on estimated costs for contracts under grants will be allowable     |
| > only to the extent that costs incurred or cost estimates included   |
| > in negotiated prices are consistent with Federal cost principles.   |
| > Grantees may reference their own cost principles that comply with   |
| > applicable Federal cost principles.                                 |
+-----------------------------------------------------------------------+

**DEFINITIONS**

[Cost Analysis]{.underline} - A cost analysis entails the review and
evaluation of the separate cost elements and the proposed profit of an
offeror\'s cost or pricing data and the judgmental factors applied in
estimating the costs. A cost analysis is generally conducted to form an
opinion on the degree to which the proposed cost, including profit,
represents what the performance of the contract should cost, assuming
reasonable economy and efficiency.

[Price Analysis]{.underline} ‑ A price analysis involves examining and
evaluating a proposed price without evaluating its separate cost and
profit elements. Price analysis is based essentially on data that is
verifiable independently from the offeror\'s data.

[Federal Cost Principles]{.underline} - It is important to understand
that grant funds may only be used by the grantee to pay for *allowable
costs when the contract is a cost-plus-fixed-fee contract or when a
fixed price contract is being negotiated on the basis of cost estimates
submitted by the contractor.* The term a*llowable cost* is defined in 48
CFR 31.201-2. (48 CFR 31 is Part 31 of the Federal Acquisition
Regulation (FAR). The common grant rule, found in 49 CFR 18.22 -
*Allowable Costs*, requires that the cost principles found in the FAR
(48 CFR 31) be used to determine allowable costs for commercial
(\"for-profit\") organizations. The FAR may be accessed on the Internet.
[^274] Grantees may use their own cost principles *if they are
consistent with the Federal cost principles.* This requirement to use
the FAR cost principles affects the allowability of costs not only on
cost-reimbursement contracts but also when evaluating and negotiating
cost elements in order to establish a price on a fixed-price contract.
Thus, whenever you do a *cost analysis* of an offeror\'s cost/price
proposal you will need to use the Federal cost principles (or principles
consistent with them) to determine what costs are acceptable.

**DISCUSSION**

In general, the purpose of cost or price analysis is to ensure that you
do not pay unreasonably high prices. However, prices which are
unreasonably low can also be detrimental to your agency\'s program if
they prove to be an indication that the offeror has made a mistake or
doesn\'t understand the work to be performed. It is important to do a

cost-realism analysis of cost proposals submitted for cost reimbursement
contracts that are

to be competitively awarded in order to determine the realism of the
various proposals and not permit a "buy in" (an unrealistically low
estimated contract cost and fee) that will eventually result in a
substantial cost overrun.

Before issuing a solicitation, develop an independent estimate of the
proper price level for the supplies or services to be purchased. The
estimate can range from a simple budgetary estimate to a complex
estimate based on inspection of the product itself and review of such
items as drawings, specifications, and prior data (such as cost data
from prior procurements). The estimate can then assist in a
determination of reasonableness or unreasonableness of price and/or the
estimated costs to do the job. If you will be requesting a proposal with
a breakdown of estimated costs, be sure to require a format for the cost
proposal that will allow you to compare the cost elements proposed with
those that were developed for your in-house estimate.

**Best Practices**

The Federal Acquisition Regulation (FAR), Subpart 15.404-1(a)(7) --
*Proposal Analysis Techniques,* references a five-volume set of
*Contract Pricing Reference Guides* to guide pricing and negotiation
personnel. These guides are informational and not directive. They are
available via the Internet. [^275]

The National Transit Institute (NTI) at Rutgers University offers a
course for FTA grantees titled "Cost and Price Analysis and Contract
Negotiation." It is a four-day course offered free of charge to FTA
grantees but it is also open to the public for a fee. [^276] Part of the
NTI course manual material includes a *Pricing Guide for FTA Grantees*
that is based in part on the Defense Contract Audit Agency's (DCAA)
*Pricing Manual*. The *Pricing Guide for FTA Grantees* is now available
on line at
[http://www.fta.dot.gov/ftahelpline/Price_Guide.doc](http://www.ftahelpline.com/Price_Guide.doc),
and grantees are urged to utilize this resource.

**[Price Analysis]{.underline}** --

The accepted forms of *price analysis* techniques discussed in the
*Pricing Guide for FTA Grantees* are:

1.  Adequate price competition;

2.  Prices set by law or regulation;

3.  Established catalog prices and market prices;

4.  Comparison to previous purchases;

5.  Comparison to a valid grantee independent estimate; and

6.  Value analysis.

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```
(1) *Adequate price competition* requires the following conditions:

-   At least two responsible offerors respond to a solicitation.

-   Each offeror must be able to satisfy the requirements of the
    solicitation.

-   The offerors must independently contend for the contract that is to
    be awarded to the responsive and responsible offeror submitting the
    lowest evaluated price.

-   Each offeror must submit priced offers responsive to the expressed
    requirements of the solicitation.

> If the four conditions above are met, price competition is adequate
> unless:

-   The solicitation was made under conditions that unreasonably deny
    one or more known and qualified offerors an opportunity to compete.

-   The low competitor has such an advantage over the competitors that
    it is practically immune to the stimulus of competition.

-   The lowest final price is not reasonable, and this finding can be
    supported by facts.

(2) *Prices set by law or regulation* are fair and reasonable. Grantees
    should acquire a copy of the rate schedules set by the applicable
    law or regulation. Once these schedules are obtained, verify that
    they apply to your situation and that you area being charged the
    correct price. For utility contracts, this policy applies only to
    prices prescribed by an effective, independent regulatory body.

(3) *Established catalog prices* require the following conditions:

-   Established catalog prices exist.

-   The items are commercial in nature.

-   They are sold in substantial quantities.

-   They are sold to the general public.

> The idea behind catalog prices is that a commercial demand exists and
> suppliers have been developed to meet that demand. You are trying to
> ensure that you are getting at least the same price as other buyers in
> the market for these items. You need to be sure that the catalog is
> not simply an internal pricing document. Request a copy of the
> document or at least the page on which the price appears.
>
> *Established market prices* are based on the same principle as catalog
> prices except there is no catalog. A market price is a current price
> established in the usual or ordinary course of business between buyers
> and sellers free to bargain. These prices must be verified by buyers
>
> and sellers who are independent of the offeror. If you do not know the
> names of other commercial buyers and sellers, you may obtain this
> information from the offeror.

(4) *Comparison to previous purchases* --

> Changes in quantity, quality, delivery schedules, the economy, and
> inclusion of non-recurring costs such as design, capital equipment,
> etc. can cause price variations. Each differing situation must be
> analyzed. Also ensure that the previous price was fair and reasonable.
> This determination must be based upon a physical review of the
> documentation contained in the previous files.

\(5\) *Comparison to a valid grantee independent estimate --*

Verify the facts, assumptions, and judgments used by your estimator.
Have the estimator give you the method and data used in developing the
estimate. For example, did prices come from current catalogs or industry
standards? Be sure that you feel comfortable with the estimate before
relying on it as a basis for determining a price to be fair and
reasonable.

\(6\) *Value analysis* requires you to look at the item and the function
it performs so you can determine its worth. The decision of price
reasonableness remains with the contracting officer; however, the
requiring activity should always be consulted for their expertise, and
they should participate in making the decision.

[Cost Analysis]{.underline} --

*Cost analysis* is the review and evaluation of the separate cost
elements and profit in an offeror's or contractor's proposal and the
application of judgment to determine how well the proposed costs
represent what the cost of the contract should be, assuming reasonable
economy and efficiency.

*Cost realism analysis* is the process of independently reviewing and
evaluating specific elements of each offeror's proposed cost estimate to
determine whether the proposed cost elements are realistic for the work
to be performed; reflect a clear understanding of the requirements; and
are consistent with the unique methods of performance and materials
described in the offeror's technical proposal. Cost realism analyses
should be performed on competitively awarded cost-reimbursement
contracts to determine the probable cost of performance for each
offeror. The probable cost may differ from the proposed cost and should
reflect the grantee's best estimate of the cost of any contract that is
most likely to result from the offeror's proposal. The probable cost is
determined by adjusting each offeror's proposed cost to reflect any
additions or reductions in cost elements to realistic levels based on
the results of the cost realism analysis. *The probable cost should be
used for purposes of evaluation to determine the best value.*

Cost proposals and *cost analysis* are typically associated with
negotiated procurements, including modifications and change orders to
existing contracts. In order to facilitate the evaluation of contractor
cost proposals, it is usually helpful to prescribe the format of the
cost proposals in your solicitation. This will ensure that all offerors
submit proposals that can be easily compared to one another on a cost
element basis (if the procurement is competitive), and it will
facilitate your evaluation of proposals against the in-house estimate
and for purposes of a cost realism analysis.

A *technical analysis* of the proposed types and quantities of
materials, labor, special tooling, equipment, travel requirements, and
other direct costs will usually be necessary. These analyses will have
to be performed by personnel specialized in engineering, science or
other disciplines. At a minimum, the technical analysis should examine
the types and quantities of material proposed and the need for the types
and quantities of labor hours and the labor mix.

*Advisory audit assistance* is strongly recommended whenever the value
of an offeror's proposal is significant and the costs of obtaining the
audit assistance do not outweigh the potential benefits. If the offeror
has performed work for Federal agencies, there may very well be a
Federal audit agency, such as DCAA, that can be contacted by phone for
the latest available audit information regarding direct labor rates,
indirect cost rates, and other pertinent costs. If there are no Federal
auditors, you should consider contacting the independent CPA firm that
audits and certified the contractor's latest annual financial
statements. Oftentimes these CPA firms can provide audit assistance. If
you do request an advisory pricing audit for the purpose of conducting
negotiations, be sure to inform the auditor that the FAR Part 31 cost
principles must be used to determine allowable costs. [^277] And also be
sure to evaluate the proposed costs of any subcontractor that has
submitted cost data to the prime contractor.

Profit/Fee - To negotiate a fair and reasonable profit, consideration
should 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.

**[Negotiation and Documentation]{.underline}** --

[Pre-negotiation Memorandum]{.underline} - Some form of pre-negotiation
document should be prepared for all negotiations. The extent of detail
and the content will depend on the magnitude and

complexity of the negotiation. *There are a number of important reasons
for grantees to make use of a pre-negotiation memorandum*:

1.  It will facilitate *effective cost and/or price analysis*. A lack of
    effective cost or price analysis has been one of the most common
    problem areas uncovered by FTA Procurement System Reviews (PSRs).
    [^278]

2.  It will *encourage negotiations* with the offeror by revealing those
    areas where the costs or price needs to be questioned and discussed
    with the offeror. Here again the PSRs have shown that many grantees
    simply accept contractor proposals without negotiations.

3.  It will document the file with an *explanation of the basis for the
    contract pr*ice and it can be used to *provide a history of the
    procurement*. This failure to document how the contract price was
    determined and to provide a history of the procurement is yet
    another problem area disclosed by PSRs. [^279]

4\. It will afford the grantee an *excellent method of
supervisory/management review and approval of the contract negotiator's
strategy for the negotiations*. This would include the concurrence of
the technical personnel (user office) in that strategy, which is an
important point if the negotiations are to be successful and all of the
agency's goals are to be met.

A sample PM is included in the *Pricing Guide for FTA Grantees* and is
reproduced below. [^280] This PM can be tailored to meet any negotiation
scenario that you might have, from large competitive procurements to the
negotiation of contract change orders or modifications.

######## PRE-NEGOTIATION MEMORANDUM (PM) FORMAT

1\. Grantee Contracting Activity
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ 2.
Date\_\_\_\_\_\_\_\_\_\_\_\_\_

3\. RFP/IFB or Contract Number
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

4\. Modification Number
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

5\. This acquisition is being accomplished by (check one)

Full and Open Competition \_\_\_\_\_\_\_\_\_\_\_\_\_

Other than Full and Open Competition \_\_\_\_\_

State reasons for other than full and open competition.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

6\. Contract Type
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

7\. Offeror\'s (Name, Address)
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

8\. Business Size and Type (Small, Large, DBE, WOB)
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

9\. Offeror\'s Proposed Amount
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

10\. Procurement Description (briefly describe the procurement)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

  ------------------------ ------------------------------- ------------------------ ----------------------------------------
  11\. [Pricing                                            [Prenegotiation          
  Structure]{.underline}                                   Objective]{.underline}   

                           Cost                                                     \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

                           Fee/Profit (\_\_\_\_\_\_%)                               \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

                           Total Price                                              \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
  ------------------------ ------------------------------- ------------------------ ----------------------------------------

12. Delivery or Performance Period
    \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

13. Points of Contact for this Document (name and phone number)

  ------------- ----- -----------------------------------------------------------------------------------------------------------
                a\.   Contracts\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

                b\.   Technical\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
  ------------- ----- -----------------------------------------------------------------------------------------------------------

**PART A [INTRODUCTION]{.underline}**

1\. In this paragraph, describe the acquisition, including a brief
history of the requirement, the place of performance, and any other
pertinent information. Questions to be answered include: What is it? Why
is it needed? What is it for? Quantity? If this is a contract
modification, what events or circumstances contributed to the needed
change? State the Grantee\'s estimated amount of the proposed
acquisition.

2\. In this paragraph, address the extent of competition under the
acquisition. Is the acquisition being accomplished under full and open
competition? If other than full and open, include a statement regarding
sole source approval. Additionally, was the requirement publicized in\
accordance with Grantee\'s procedures? (If not, cite the exception.) How
many requests for solicitations were received? How many offers were
received?

3\. In this paragraph, include your planned negotiation schedule, and
identification of the Grantee\'s negotiating team members by name and
position.

**PART B [SPECIAL FEATURES, REQUIREMENTS AND]{.underline}
[PRENEGOTIATION COMPLIANCE]{.underline}**

The following items should be addressed for all negotiated acquisitions:

1\. The use of sealed bid procedures is not appropriate for this
acquisition because

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

2\. The prospective contractor(s) has/have been determined to be
responsible technically and are financially stable. Yes\_\_\_\_\_\_\_
No\_\_\_\_\_\_\_

Major subcontractors (list their names) have been reviewed and found to
be technically responsible and are financially stable.

3\. The prospective contractor(s) is/are not on the list of \"Parties
Excluded from Procurement and Nonprocurement Programs.\"

(The following items should be included when applicable:)

4\. Pre-contract cost in the amount of \$\_\_\_\_\_\_\_\_\_\_\_ for the
period\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ were approved by (name of
individual).

5\. Authority to enter into a letter contract was approved by (name of
individual).

6.  Are optional quantities being proposed and are they being evaluated
    as part of the award decision? [^281]

7\. The offeror has submitted \"Cost or Pricing Data.\"
Yes\_\_\_\_\_\_\_\_ No\_\_\_\_\_\_\_\_\_

8\. \"Cost or Pricing Data\" for major subcontract(s) has been
submitted.\
Yes\_\_\_\_\_\_\_\_\_\_ No\_\_\_\_\_\_\_\_\_\_

9\. Written waiver of the audit was granted by (name of individual).

10\. The offeror(s) has/have an adequate accounting system as determined
by (name of individual). (Cost reimbursement contracts, fixed price with
price redetermination, incentive types and contracts containing progress
payment provisions.)

11\. EEO compliance has been requested or obtained.
Yes\_\_\_\_\_\_\_\_\_ No\_\_\_\_\_\_\_\_\_

12\. In the event Grantee property is to be furnished to the offeror,
has the Contracting Officer determined that the contractor has an
acceptable property control system? Grantee furnished equipment
estimated value \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_consisting mainly of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.
Grantee furnished material estimated value
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ consisting mainly of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.

13\. Address any deviations, special clauses or conditions anticipated.

14. The offeror has \_\_\_\_\_ has not \_\_\_\_\_\_ submitted a
    subcontracting plan. Briefly discuss the subcontracting plan if
    applicable.

**PART C [COST AND PROFIT/FEE ANALYSIS]{.underline}**

In this Part C, compare, in summary, the offeror\'s proposal, the audit
and/or other recommendations, and the Grantee\'s Prenegotiation
objective. For example:

+---------------+-------+---------------+------------+---------------+
| [Cost         | Offe  | Au            | Pren       | Numbered      |
| Element       | ror's | dit/Technical | egotiation |               |
| ]{.underline} | [P    | [R            | [Ob        | [Notes        |
|               | ropos | ecommendation | jective]{. | ]{.underline} |
|               | al]{. | ]{.underline} | underline} | \*\*          |
|               | under | \*            |            |               |
|               | line} |               |            |               |
+---------------+-------+---------------+------------+---------------+
| Direct Labor  | \$    | \$            | \$         | \(1\)         |
+---------------+-------+---------------+------------+---------------+
| Labor         | \$    | \$            | \$         | \(2\)         |
| Overhead      |       |               |            |               |
+---------------+-------+---------------+------------+---------------+
| Direct        | \$    | \$            | \$         | \(3\)         |
| Material      |       |               |            |               |
+---------------+-------+---------------+------------+---------------+
| Mat\'l        | \$    | \$            | \$         | \(2\)         |
| Overhead      |       |               |            |               |
+---------------+-------+---------------+------------+---------------+
| Other Direct  | \$    | \$            | \$         | \(4\)         |
| Costs         |       |               |            |               |
+---------------+-------+---------------+------------+---------------+
| Subtotal      | \$    | \$            | \$         |               |
+---------------+-------+---------------+------------+---------------+
| G&A           | \$    | \$            | \$         | \(2\)         |
+---------------+-------+---------------+------------+---------------+
| Subtotal      | \$    | \$            | \$         |               |
+---------------+-------+---------------+------------+---------------+
| Profit/Fee    | \$    | \$            | \$         | \(5\)         |
+---------------+-------+---------------+------------+---------------+
| Total         | \$    | \$            | \$         | \(6\)         |
+---------------+-------+---------------+------------+---------------+

The above is an example of the various cost elements that should be
reviewed when analyzing a proposal. These elements are not to be
interpreted as all encompassing because the cost elements of each
offeror may be different.

**\*Audit/Technical Recommended:**

> In general, an audit report will not include recommendations on direct
> labor hours or the validity of material and other direct costs. The
> technical evaluation/analysis generally will not include rate
> recommendations. Therefore, this column should be a combination of
> your two reports (audit and technical). In cases where you have not
> obtained an audit, you need only reflect the \"Offeror\'s Proposal\"
> and \"Prenegotiation Objective\" columns. The technical evaluation
> results can be addressed in your discussions, and would normally be
> used in the establishment of your objective.
>
> For your information, \"Technical Analysis\" is defined as the
> examination and evaluation by personnel having specialized knowledge,
> skills, experience, or capability in engineering, science, or
> management of proposed quantities and kinds of materials, labor,
> processes, special tooling, facilities, and associated factors which
> have been set forth in a proposal. In order to determine and report on
> the need for the reasonableness of the proposed resources assuming
> reasonable economy and efficiency, special knowledge is required.
> Therefore, a technical evaluation that doesn\'t address individual
> elements of cost (i.e., labor categories, labor hours, material, other
> direct costs, etc.), but merely states that the proposal is
> acceptable, is not considered adequate.

\*\***Numbered Notes:**

**(1) [Direct Labor]{.underline}**

> Compare, in detailed discussion, the proposal, the audit and/or
> technical recommendations, and the prenegotiation objective direct
> labor categories, hours and rates. For example:

<table style="width:100%;">
<colgroup>
<col style="width: 22%" />
<col style="width: 0%" />
<col style="width: 9%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 8%" />
<col style="width: 9%" />
</colgroup>
<tbody>
<tr class="odd">
<td><u>Labor Category</u></td>
<td colspan="4"><p>Offeror's</p>
<p><u>Proposal</u></p></td>
<td colspan="3">Audit/Technical <u>Recommendation</u></td>
<td colspan="3">Prenegotiation <u>Objective</u></td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td><u>Hours</u></td>
<td><u>Rate</u></td>
<td><u>Amt.</u></td>
<td><u>Hours</u></td>
<td><u>Rate</u></td>
<td><u>Amt.</u></td>
<td><u>Hours</u></td>
<td><u>Rate</u></td>
<td><u>Amt.</u></td>
</tr>
<tr class="odd">
<td>Engineer</td>
<td colspan="2">xx</td>
<td>$</td>
<td>$</td>
<td>xx</td>
<td>$</td>
<td>$</td>
<td>xx</td>
<td>$</td>
<td>$</td>
</tr>
<tr class="even">
<td>Programmer</td>
<td colspan="2">xx</td>
<td>$</td>
<td>$</td>
<td>xx</td>
<td>$</td>
<td>$</td>
<td>xx</td>
<td>$</td>
<td>$</td>
</tr>
<tr class="odd">
<td>Clerical</td>
<td colspan="2">xx</td>
<td>$</td>
<td>$</td>
<td>xx</td>
<td>$</td>
<td>$</td>
<td>xx</td>
<td>$</td>
<td>$</td>
</tr>
<tr class="even">
<td><strong>Total</strong></td>
<td colspan="2"></td>
<td></td>
<td>$</td>
<td></td>
<td></td>
<td>$</td>
<td></td>
<td></td>
<td>$</td>
</tr>
</tbody>
</table>

[Offeror\'s Proposal]{.underline}

First subparagraph. Summarize the offeror\'s rationale for the proposed
labor categories, hours and rates. Questions you can consider are: Are
the proposed labor rates the result of a negotiated forward pricing rate
agreement (FPRA)? Are they unaudited bidding rates that have been

approved at a corporate level? Are they current actual rates for
specific employees or a composite rate for personnel under each labor
category? If the labor rates are developed on a specific base rate, what
escalation factor (if any), has the offeror applied to the base rate? Is
that a reasonable factor? Are the proposed labor categories and hours
based upon the offeror\'s

previous experience? What evidence of historically incurred hours has
the offeror provided? Or, is the proposal an engineering estimate of the
projected labor and expertise to accomplish the requirements of the
acquisition? Do the proposed hours correspond to the performance period?

[Audit/Technical Recommendation]{.underline}

Second subparagraph. Summarize the basis of the audit or other
recommendations. How have the recommended labor rates been developed?
For instance, audit reports generally use the Data Resources Indices in
developing labor rate recommendations. This has been proven to be a
reliable *escalation predictor* for labor rates and material items. If
you have an audit report, the information for this subparagraph will be
within the audit report. In the event you have not obtained an audit, it
is advisable to contact your state audit office and request current
rate/escalation recommendations. The recommendations of the technical
evaluation should also be addressed under this subparagraph. It is
important that the evaluation includes complete and factual support for
any exceptions taken to proposed direct labor categories and hours.

[Prenegotiation Objective]{.underline}

Third subparagraph. Discuss the Grantee\'s negotiation objective. What
is it based upon? Did you rely on the audit recommendations? Did you
rely on the technical evaluation in development of your objective labor
categories and hours? An excellent resource for additional
considerations during analysis of a proposal is the Armed Services
Pricing Manual, ASPM. Additionally, the evaluation considerations in
evaluating manufacturing labor versus engineering labor differ greatly.
In a manufacturing environment, other considerations may include
application of learning curve theory, efficiency factors, recurring
versus non-recurring labor, etc.

It is your responsibility to establish a reasonable objective after
considering and analyzing all of the available data. Statements to the
effect, \" THE OFFEROR HAS PROPOSED THE SAME RATES ON OTHER CONTRACTS,\"
are not adequate without discussion of how price reasonableness was
determined under the other contracts.

**(2) [Labor Overhead, Material Overhead, and G&A]{.underline}**

Compare, in detailed discussion, the offeror\'s proposal, the audit
and/or other recommendations, and the Grantee\'s objective for labor
overhead, material overhead, and G&A. For example:

+----------------+-------+--------+--------+-------+-------+---------+
| [Categor       | Offer |        | Aud    |       | Pren  |         |
| y]{.underline} | or\'s |        | it/Tec |       | egoti |         |
|                |       |        | hnical |       | ation |         |
|                | [P    |        | [Rec   |       | [Ob   |         |
|                | ropos |        | ommend |       | jecti |         |
|                | al]{. |        | ation] |       | ve]{. |         |
|                | under |        | {.unde |       | under |         |
|                | line} |        | rline} |       | line} |         |
+----------------+-------+--------+--------+-------+-------+---------+
|                | [Ra   | [Amt.] | [Rate] | [Am   | [Ra   | [Amt    |
|                | te]{. | {.unde | {.unde | t.]{. | te]{. | .]{.und |
|                | under | rline} | rline} | under | under | erline} |
|                | line} |        |        | line} | line} |         |
+----------------+-------+--------+--------+-------+-------+---------+
| Labor Overhead | x%    | \$     | x%     | \$    | x%    | \$      |
+----------------+-------+--------+--------+-------+-------+---------+
| Material       | x%    | \$     | x%     | \$    | x%    | \$      |
| Overhead       |       |        |        |       |       |         |
+----------------+-------+--------+--------+-------+-------+---------+
| G&A            | x%    | \$     | x%     | \$    | x%    | \$      |
+----------------+-------+--------+--------+-------+-------+---------+

[Offeror\'s Proposal]{.underline}

First subparagraph. Describe how the offeror developed the proposed
indirect rates. Does a forward pricing rate agreement exist? If so, what
is the period covered by the agreement? This information should be
provided by the offeror.

[Audit/Other Recommendation]{.underline}

Second subparagraph. Explain what the audit\'s recommendations are based
upon. This

may include exception taken to some cost elements within the overhead
pool, such as fringe benefits, unemployment taxes, rent, depreciation,
etc. This information should be reflected in the audit report. If you do
not obtain an audit report, you can request current rate recommendations
and/or historical actual rates from your state audit office. Comparing
the offeror\'s proposed rates to the actual rates can provide a good
measure on how accurate the offeror\'s proposed rates have been.

[Prenegotiation Objective]{.underline}

Third paragraph. Address how you developed the Grantee\'s prenegotiation
objective, and upon what information you relied. Are your objective
rates based upon recommendations? Occasionally, you may experience a
situation where you haven\'t obtained an audit report, and your state
audit office has no information on a specific offeror. In such cases, it
may be to your advantage to request an audit of the offeror\'s rates.
Absent this information, you will need to evaluate the offeror\'s
proposed rates in detail (i.e., cost elements included in the indirect
pools) for allowability and allocability. Comparing one offeror\'s rates
with those of another offeror\'s is not an acceptable method in any
case. Also, comparing this year\'s proposed rates to last year\'s rates
is not a basis for establishing reasonableness of the currently proposed
rate.

**(3) [Direct Material]{.underline}**

Provide a detailed breakdown and compare, in detailed discussions, the
offeror\'s material quantities and unit prices.

Offeror\'s Technical/Audit Prenegotiation

[Material Proposal Recommendation]{.underline} Objective

  ---------------- ----- ---- -------- ----- ----- -------- ----- ---- --------
                   Qty   UP   Amt      Qty   UP    Amt      Qty   UP   Amt

  Pwr Sup          xx    \$   \$       xx    \$    \$       xx    \$   \$

  CM Chips         xx    \$   \$       xx    \$    \$       xx    \$   \$

  Wire             xx    \$   \$       xx    \$    \$       xx    \$   \$

  Other            xx    \$   \$       xx    \$    \$       xx    \$   \$

  **Total**                   \$                   \$                  \$
  ---------------- ----- ---- -------- ----- ----- -------- ----- ---- --------

[Offeror\'s Proposal]{.underline}

First subparagraph. Address the basis of the offeror\'s proposed direct
material (engineering estimate? based upon history? etc.) and costs
associated with the material (catalog prices? oral quotes? written
quotes? historical prices escalated by \$? competitive?, etc.) Will
there be any scrap, attrition or variance factors to consider? If
applicable, has the offeror included an analysis for large dollar items?
Is the analysis meaningful?

[Audit/Technical Recommendation]{.underline}

Second subparagraph. Address the audit/technical recommendations. Has
the auditor/originator taken exception to any of the proposed material
items, quantities or associated prices? Have exceptions been adequately
supported?

[Prenegotiation Objective]{.underline}

Third subparagraph. Support the Grantee\'s prenegotiation objective. If
you have taken exception to any material items and/or quantities, what
information have you relied upon to reach your conclusions? If you have
taken exception to any pricing aspects of the offeror\'s proposal,
explain fully how you arrived at your objective. In cases where you have
no audit report, the importance of a thorough technical evaluation is
increased. You must make a determination of price reasonableness for the
direct material items. When challenging a cost, explain the basis for
your position. \"Appears too high,\" without rationale, is not
sufficient.

**(4) [Other Direct Costs (ODC)]{.underline}**

> Compare, in detail discussions, the offeror\'s proposal, the audit
> and/or technical recommendation, and the prenegotiation objective for
> other direct costs. For example:

+----------------+---------------+-----------------+---+------------------+
| [Cost          | Offeror\'s    | Audit/Technical |   | Prenegotiation   |
| Elemen         |               | [Recommendati   |   | [Object          |
| t]{.underline} | [Proposal     | on]{.underline} |   | ive]{.underline} |
|                | ]{.underline} |                 |   |                  |
+----------------+---------------+-----------------+---+------------------+
| Computer       | \$            | \$              | \ |                  |
| Support        |               |                 | $ |                  |
+----------------+---------------+-----------------+---+------------------+
| ::: D          | \$            | \$              | \ |                  |
| efinition-Term |               |                 | $ |                  |
| Freight        |               |                 |   |                  |
| :::            |               |                 |   |                  |
+----------------+---------------+-----------------+---+------------------+
| Air Travel     | \$            | \$              | \ |                  |
|                |               |                 | $ |                  |
+----------------+---------------+-----------------+---+------------------+
| Per Diem       | \$            | \$              | \ |                  |
|                |               |                 | $ |                  |
+----------------+---------------+-----------------+---+------------------+
| Consultant     | \$            | \$              | \ |                  |
|                |               |                 | $ |                  |
+----------------+---------------+-----------------+---+------------------+
| **Total ODC**  | \$            | \$              | \ |                  |
|                |               |                 | $ |                  |
+----------------+---------------+-----------------+---+------------------+

[Offeror\'s Proposal]{.underline}

First subparagraph. Summarize the offeror\'s rationale for proposing the
various expenses. The elements above are examples of the types of costs
generally included as other direct costs (ODC).

[Technical/Audit Recommendation]{.underline}

Second subparagraph. Summarize the audit and/or technical
recommendations. Address all the items included under this element. Any
exceptions taken must be fully explained.

[Prenegotiation Objective]{.underline}

Third paragraph. Provide an analysis of the items included under this
cost element. For instance, are the number of trips scheduled considered
reasonable by audit or your technical evaluation? Are the costs per trip
reasonable?

You can check air travel rates with commercial airlines. How do the
offeror\'s proposed costs compare with previous history? Did the
contractor apply an escalation factor? Is it reasonable? In your
analysis, you may need to show a lower level breakdown (i.e., a
breakdown of the number and location of proposed trips).

**(5) [Profit/Fee Analysis]{.underline}**

> Provide a summary that compares the offeror\'s proposal and the
> Grantee\'s prenegotiation objective. For example:

+---------------------+-------------------------+-----------------------+
|                     | Offeror\'s              | Prenegotiation        |
|                     |                         | [O                    |
|                     | [Proposal]{.underline}  | bjective]{.underline} |
+---------------------+-------------------------+-----------------------+
|                     | Rate Amt                | Rate Amt              |
+---------------------+-------------------------+-----------------------+
|                     | xx% \$                  | xx% \$                |
+---------------------+-------------------------+-----------------------+

[Offeror\'s Proposal]{.underline}

First subparagraph. State the offeror\'s proposed profit/fee rate, that
amount, and any other information provided by the offeror to support the
proposed rate.

[Prenegotiation Objective]{.underline}

Second subparagraph. Address the Grantee\'s prenegotiation objective
profit/fee rate, which should be based upon application of your
structured approach.

• Structured approaches for determining profit or fee prenegotiation
objectives provide a discipline for ensuring that all relevant factors
are considered.

> − Grantees should use a structured approach for determining the profit
> or fee objective in those acquisitions that require cost analysis; and
>
> − May prescribe specific exemptions for situations in which mandatory
> use of a structured approach would be clearly inappropriate.

• Profit or fee prenegotiation objectives do not necessarily represent
net income to contractors. Rather, they represent that element of the
potential total remuneration that contractors may receive for contract
performance over and above allowable costs. This potential remuneration
element and the Grantee\'s estimate of allowable costs to be incurred in
contract performance together equal the Grantee\'s total prenegotiation
objective. Just as actual costs may vary from estimated costs, the
contractor\'s actual realized profit or fee may vary from negotiated
profit or fee, because of such factors as efficiency of performance,
incurrence of costs the Grantee does not recognize as allowable and
contract type.

It is in the Grantee\'s interest to offer contractors opportunities for
financial rewards sufficient to (1) stimulate efficient contract
performance, and (2) attract the best capabilities of qualified large
and small business concerns to Grantee contracts.

Both the Grantee and contractor should be concerned with profit as a
motivator of efficient and effective contract performance. Negotiations
aimed merely at reducing prices by reducing profit, without proper
recognition of the function of the profit, are not in the Grantee\'s
interest.

**PART D TYPE OF CONTRACT CONTEMPLATED**

Explain the type of contract contemplated and the rationale for
selection.[^282] If this prenegotiation memorandum is being written for
a modification to an existing contract, you must also address the
contract type.

**PART E MAJOR DIFFERENCES**

Identify any anticipated problem areas, exceptions taken by the
offeror(s) to the solicitation terms and conditions, or major
differences which may interfere with negotiations, and your intended
negotiation strategy.

**PART F NEGOTIATION APPROVAL SOUGHT**

Give your specific recommendation similar to the following:

\"Approval of this Pre-Negotiation Memorandum is recommended based upon
the information set forth herein and authority to negotiate and enter
into a contract is requested. It is considered the opinion of the
negotiator that the Grantee\'s prenegotiation objectives are realistic
and can be achieved.\"

  -------------------------------------------------------------- -----------------------------------------
  Prepared by:                                                   Date:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
  \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_   

  -------------------------------------------------------------- -----------------------------------------

(Signature and Title)

  -------------------------------------------------------------- -----------------------------------------
  Reviewed by:                                                   Date:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
  \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_   

  -------------------------------------------------------------- -----------------------------------------

(Signature and Title)

  -------------------------------------------------------------- -----------------------------------------
  Approved by:                                                   Date:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
  \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_   

  -------------------------------------------------------------- -----------------------------------------

::: Definition-Term
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
:::

(Name and Title)

  --------------------------- ---------- -----------------------------------
  My Approval is: (check one) \_\_\_\_   Unconditional
                              a.         

                              \_\_\_\_   Conditional (See attached
                              b.         exceptions.)
  --------------------------- ---------- -----------------------------------

**5.3 AWARD PROCEDURES**

**DISCUSSION**

**Contract awards generally follow one of two procedures:**

**[Offer and Acceptance]{.underline} - When you are fully in agreement
with all of the terms and conditions of the offer and you desire to make
an immediate contract award, you may wish to use a simple *offer and
acceptance* form as the awarding document. All that is required is that
you sign the \"acceptance\" block on the form and issue it to the
contractor. The form may reference documents such as the Request For
Proposal (RFP), which contain the terms and conditions upon which the
offer is based. For an example of an *offer and acceptance***

**format see Appendix B.7.** [^283] **This approach may work well if
there have been no changes to the terms originally established in the
RFP, but where there have been changes, either in the offeror\'s
proposed terms or resulting from negotiations, you may avoid confusion
by drafting a *bilateral contract* document which defines the final
terms agreed upon.**

**[Bilateral Contract]{.underline} - In many cases there will have been
changes to the RFP terms or the proposal terms during the course of
discussions and negotiations with the offerors. In such cases you may
want to issue a preliminary *notice of award* notifying the successful
offeror that it has been selected for award and that an integrated
*bilateral contract* document will be forthcoming. This integrated
contract would incorporate the final negotiated terms and conditions,
including price, specifications, warranty provisions, etc. Having the
offeror sign the contract with the final terms and conditions avoids the
problem of confusion as to what the final agreement actually was, which
could happen if the *offer and acceptance* format were used after
revisions were discussed. Offerors should be advised not to start work
until a contract has been signed by both parties. Appendix B.8 contains
the Federal contract award form.**

**5.3.1 [Public Announcements of Contract Awards]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| Paragraph 14 of FTA Circular 4220.1E, *Contract Award Announcement,*  |
| states:                                                               |
|                                                                       |
| > If a grantee announces contract awards with respect to any          |
| > procurement for goods and services (including construction          |
| > services) having an aggregate value of \$500,000 or more, the       |
| > grantee shall:                                                      |
| >                                                                     |
| > a\. Specify the amount of Federal funds that will be used to        |
| > finance the acquisition in any announcement of the contract award   |
| > for such goods and services; and                                    |
| >                                                                     |
| > b\. Express the said amount as a percentage of the total costs of   |
| > the planned acquisition.                                            |
+-----------------------------------------------------------------------+

**DISCUSSION**

**[Public Announcements]{.underline} - If your agency makes public
announcements of its contract awards, and the award has an aggregate
value of \$500,000 or more, you are required to comply with the contract
award announcement provision noted above. Public announcements may
include press releases, announcements in public meetings, Internet
postings and publicly released documents.**

**5.3.2 [Debriefing of Offerors]{.underline}**

**DISCUSSION**

**Debriefing of unsuccessful offerors can be valuable to both the
offerors and the procuring agency. A debriefing can be helpful for a
number of reasons:\
**

-   **It communicates a sense of fairness and appreciation to offerors
    who have made sizeable investments of time and resources in
    preparing bids or proposals for your program.**

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-   **It may avoid a protest by convincing a disappointed offeror that
    your agency\'s decision was carefully made, factually well
    supported, and the best one for your agency.**

-   **Of most importance, it can help offerors improve their future
    proposals, which is a definite advantage to them and to your
    agency.**

**Best Practices**

[Time of Debriefing]{.underline} - Most agencies conduct their
debriefings after contract award because they feel that evaluation
information communicated to an offeror prior to award could encourage a
protest or that it might result in an attempt by the unsuccessful
offeror to resubmit an improved proposal and delay the selection
process. Typically, one of the items addressed in a debriefing is the
proposal's strengths and weaknesses in the context of what the transit
agency was looking for; this information could be valuable to a
competitor in negotiations. On the other hand, some Federal agencies,
such as NASA, have had considerable success in avoiding protests by
using pre-award debriefings. NASA feels that an in-depth, pre-award
debriefing will work to convince an unsuccessful offeror that the Agency
chose the best proposal, thus discouraging a protest. In addition, NASA
would prefer to deal with a protest, if they are going to get one,
before award and not after award, when they would face the risk of
having to terminate the contract. Whatever policy your agency chooses to
use needs to be carefully coordinated with your written protest
procedures, which are discussed in Section 11.1, *Protests,* of the
BPPM. [^284]

[Pre-award Debriefing]{.underline} -- The timing of the debriefing
relative to contract award will affect the nature of the information you
can provide to the offeror. If an offeror has been notified that it has
been excluded from the competitive range or otherwise excluded from the
competition, and the offeror requests a debriefing prior to award, you
will have to decide whether to grant the request or delay the debriefing
until after contract award. If you decide to grant the request for a
pre-award debriefing, you must limit the information disclosed to that
offeror's proposal and not disclose any information about the other
offerors. To reveal information about other offerors would compromise
the integrity of the procurement. Information revealed to an offeror
prior to award must be limited to the following:

-   The agency's evaluation of the significant strengths and weaknesses
    of the offeror's proposal in accordance with the evaluation
    criteria;

-   A summary of the reasons for eliminating the offeror from the
    competition;

-   Reasonable responses to relevant questions about whether the
    evaluation procedures contained in the solicitation and other
    regulations were followed in eliminating the offeror from the
    competition.

Pre-award debriefings must not disclose the following:

-   The number of offerors;

-   The identity of other offerors;

-   The content or evaluation of other offerors' proposals.

-   The ranking of other offerors;

-   Confidential business information of other offerors. See below --
    *Disclosure of Confidential Information.*

[Post-award Debriefing]{.underline} -- Remember that the primary
objective of the debriefing is to help the offeror improve its chances
of success on future proposals, and not to defend the agency\'s
selection decision. In light of this purpose, post-award debriefings may
include, *at the agency's discretion*, the following information:

-   The agency's evaluation of the significant strengths and weaknesses
    or deficiencies in the offeror's proposal in accordance with the
    evaluation criteria;

-   Past performance information on the debriefed offeror but *not the
    names of individuals providing reference information about an
    offeror's past performance;* [^285]

-   The overall evaluated cost or price and technical ranking, if
    applicable, of the successful offeror and the debriefed offeror.
    Evaluated cost or price would include the agency's estimated cost of
    correcting defects or weaknesses in the items or services offered;

-   A summary of the rationale for the selection decision;

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-   Reasonable responses to relevant questions about whether the
    evaluation procedures contained in the solicitation and other
    regulations were followed.

> Post-award debriefings should not include:

-   Point-by-point comparisons of the debriefed offeror's proposal with
    those of other offerors;

-   *Specific numerical evaluation scores.* This inevitably leads to
    having to explain the basis for, and defend, the numbers. It will
    put the members of the agency's\
    \
    \
    \
    evaluation team "on trial" for their scores, and will make no
    positive contribution to the objectives of the debriefing. It may
    well contribute to a protest;

-   Confidential business information. See below -- *Disclosure of
    Confidential Information.*

[Method of Debriefing]{.underline} - Debriefings may be done orally or
in writing. If the debriefing is done orally, the contracting officer
should conduct the debriefing and control what is being divulged. [^286]
If the reasons for rejection are highly technical, a subject matter
expert may participate on a limited and controlled basis. The more
people present, the more difficult to control the flow of information.
Disclosure of the identity of evaluators can lead to personal friction
and allegations of bias.

[Disclosure of Confidential Information]{.underline} - Grantees should
consult their individual state laws regarding the disclosure of
proprietary information from competitors\' proposals. Such information
would include:

-   Trade secrets;

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-   Confidential manufacturing processes and techniques;

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-   Financial or business information that is confidential, such as cost
    information, profit, overhead rates, etc.

It is suggested that a disclaimer be used in the solicitation to state
that information will not be disclosed without prior notice to the
offeror and an opportunity (e.g., 10 days) to obtain court protection
from disclosure.

In conclusion, the information communicated to the offeror must be of
*value* to the offeror. The information must enable the offeror to
understand why its proposal was not selected. This type of discussion
may require some *general comparison* of the offeror\'s proposal with
the winning proposal in order to communicate the basis on which the
selection decision was made, and to meaningfully communicate the
weaknesses in the offeror\'s proposal.

**5.4 DOCUMENTATION OF PROCUREMENT ACTIONS**

  -----------------------------------------------------------------------
  **REQUIREMENT**

  Paragraph 7.i. of FTA Circular 4220.1E requires a written record of the
  procurement history:
  -----------------------------------------------------------------------

+-----------------------------------------------------------------------+
| > Grantees shall maintain records detailing the history of a          |
| > procurement. At a minimum, these records shall include:             |
| >                                                                     |
| > \(1\) the rationale for the method of procurement,                  |
| >                                                                     |
| > \(2\) selection of contract type,                                   |
| >                                                                     |
| > \(3\) reasons for contractor selection or rejection, and            |
| >                                                                     |
| > \(4\) the basis for the contract price.                             |
+-----------------------------------------------------------------------+

**DISCUSSION**

**Section 2.4.1, *File Documentation,* contains a listing of the various
types of contract file documentation which are typically required to
document the history of a procurement.**

**Section 9.1, *Documentation of Contract Administration*, contains
guidance for documenting contract administration activity.**

**The purpose of this section is to discuss the documentation
requirements which are closest to and relate most directly to the award
of the contract. It might be helpful to note that documentation of
contract decisions and actions is a perennial problem reported with
regularity by review teams doing Procurement System Reviews for FTA\'s
grantee community. These documentation problems are in the very areas of
FTA\'s highest priority concerns, as expressed in Circular 4220.1E, and
some are concerned with documentation related to contract awards. The
most commonly noticed problems include:**

-   **No independent cost analysis prior to solicitation,**

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-   **No cost or price analysis of contractors\' proposals,**

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-   **No documented rationale for the selected contract type,**

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-   **No documentation for the contractor selection decision,**

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-   **No documentation describing how the price was
    determined/negotiated**.

**5.4.1 [Sealed Bid Procurements]{.underline}**

**5.4.1.1 [Abstract of Bids]{.underline}**

**Best Practices**

At the time of bid opening there should be a public reading of the bids
and a recording of them, usually referred to as an *Abstract of Bids.*
An example of an abstract is in Appendix B.4 which contains the GSA
Forms 1409/1410, *Abstract of Offers,* used in Federal procurements for
the recording of bids. Abstracts of bids should be available for public
inspection.

**5.4.1.2 [Documentation of Award Decision]{.underline}**

**Best Practices**

A written record of the award decision needs to be made. The elements of
the award decision which need to be documented are:

-   A tabulation and evaluation of bids. This will include a
    determination that the low bid is fully responsive to the IFB.
    Responsiveness is discussed in Section 4.4.4, *Responsive Bidder*.
    When there are lower bids than the bid being accepted for award, the
    award decision document must give the reasons for rejecting the
    lower bids. When there are equal low bids, the documentation must
    describe how the tie was broken.

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-   A determination that the low bidder is responsible. Responsibility
    is discussed in Section 5.1, *Responsibility of Contractor.*

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-   A determination of the reasonableness of the price. Section 5.2,
    *Cost and Price Analysis*, discusses the FTA Circular requirement
    that every procurement action must include a cost or price analysis
    to determine the reasonableness of the proposed contract price. The
    starting point for this cost or price analysis should be the
    independent cost estimate. Significant differences between the
    independent cost estimate and the low bid need to be discussed.

**5.4.2 [Negotiated Procurements]{.underline}**

**5.4.2.1 [File Documentation of Selection Decision]{.underline}**

**Best Practices**

Having considered all of the available proposal evaluation data, the
selection official must document the basis for the decision to select
that offeror \"whose proposal is most advantageous to the grantee\'s
program with price and other factors considered.\" [^287] The contract
file documentation should include the following:

-   *Determination of Competitive Range* (See Section 4.5.3,
    *Competitive Range*). The Competitive Range Determination identifies
    those proposals that had a reasonable chance of being selected for
    award, given their relative technical strengths and weaknesses, and
    their relative prices.

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-   The *Technical Evaluation* (See Section 4.5.2, *Evaluation of*
    *Proposals* and *Appendix B.1*). The technical evaluation
    information indicates the relative strengths and weaknesses of the
    proposals, together with the technical risks (if any) of the various
    approaches.

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-   A *Cost/Price Analysis* (See Section 5.2, *Cost and Price
    Analysis*). In all instances, the contract file must reflect
    evidence of a cost or price analysis. You may wish to prepare a
    separate Cost/Price Analysis memorandum analyzing the costs or
    prices proposed against: (a) the independent cost estimate prepared
    prior to solicitation, (b) specific company information in the
    proposals, such as the particular technical approach being offered,
    and (c) any other pertinent information such as a technical
    evaluation of the cost proposal, an advisory audit of the offeror\'s
    cost proposal, or a comparison of prices offered with prior
    procurements.

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-   If the contract being awarded is a cost-reimbursement type, the
    Cost/Price Analysis needs to address the *realism* of the various
    cost elements proposed, and where the costs are unrealistically low,
    an adjustment should be made to reflect what the agency believes the
    effort will actually cost given that offeror\'s specific technical
    approach as well as its direct and indirect cost rates. This cost
    realism assessment must be carefully considered when determining
    which offeror\'s proposal represents the best value for the
    procuring agency. All too often contractors are unrealistically
    optimistic in estimating costs in competitive cost-type situations
    (known as \"buying in\"). The result is that the lowest
    proposed/estimated cost is not necessarily the most advantageous
    choice for the procuring agency.

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-   Determination of Selected Contractor\'s Responsibility (See Section
    5.1, *Responsibility of Contractor)*. Documentation regarding the
    selected contractor\'s responsibility should be included in the
    file.

**5.4.2.2 [Pre-Negotiation Plan]{.underline}**

**Best Practices**

Many procuring agencies have adopted a requirement for written
*Pre-Negotiation Plans* prior to conducting negotiations with offerors
in negotiated procurement situations. The advantages of using this kind
of document are numerous. First, it requires a reasoned analysis of the
offeror\'s price, leading to the establishment of a negotiation
objective which is acceptable to all organizational elements of the
agency. Second, it allows you to develop a *range of price* o*bjectives*
which is acceptable to your agency management, so that negotiations can
be concluded if the price can be negotiated within the range established
in the Pre-Negotiation Plan. A Plan also brings together the various
interested parties of the agency in the development and approval of a
unified negotiation position, so that internal agency differences of
opinion can be resolved before negotiations begin, producing negotiation
objectives that everyone can support.

An example of a grantee Pre-Negotiation Plan can be found in Appendix
B.6. [^288] Several features of this Plan are worth noting:

-   The independent grantee cost estimate was used in the price analysis
    of the contractor\'s proposal.

-   An advisory audit of the contractor\'s cost proposal was performed
    and the results were used to develop the prenegotiation position.
    Major subcontractors were also evaluated.

-   The technical program office and the contracts office met to jointly
    develop a negotiation position that was acceptable to both. (Note:
    some organizations find it helpful to develop their negotiation
    objectives as a range of prices, to include both a target price
    objective and a maximum price which will not be exceeded in
    negotiations without further approvals by agency management. This
    approach allows the negotiation team a degree of flexibility which
    is usually needed because contractors often bring information to
    negotiations which agency personnel did not have when they prepared
    their negotiation plan.) [^289]

-   Agency management officials reviewed the pre-negotiation strategy
    and approved the position adopted, thus precluding any
    after-the-fact \"second guessing\" during the contract review
    process.

**5.4.2.3 [Memorandum of Negotiations]{.underline}**

**Best Practices**

It is essential that every contract award be documented with a
*Memorandum of Negotiations*. An example of a Memorandum of Negotiations
is in Appendix B.9. [^290] This memorandum must describe the most
important aspects of the procurement history, which at minimum would
include the following information:

-   A statement of the purpose of the procurement.

-   A history of the procurement, including references to important
    documents with their dates and identifying numbers. These would
    include: advertisements of the procurement, RFP, technical
    evaluation of proposals, etc.

-   The names and positions of each person who participated in the
    negotiations.

-   An explanation of how the final price was negotiated. This
    explanation needs to reference the Pre-Negotiation Plan price
    objective (if a Plan was developed), the independent cost estimate
    (which should always be developed), and any advisory audits that may
    have been conducted. See Appendix B-12 (Negotiation Memorandum
    Sample Format) for an illustration.

-   A discussion of important contract terms and conditions, such as
    insurance requirements, DBE participation, Buy America provisions,
    etc.

Chapter 6

**6 - [Procurement Object Types: Special Considerations]{.underline}**

> 6.1 [Construction]{.underline} (10/98)
>
> 6.1.1 [The Traditional Construction Process -
> Design/Bid/Build]{.underline} (10/98)
>
> 6.1.2 [Construction Management (\"CM\")]{.underline} (10/98)
>
> 6.1.3 [\"Fast Tracking\"\-- Phased Design, Award and
> Construction]{.underline} (10/98)
>
> 6.1.4 [\"Turnkey\" \-- Design/Build Contracting]{.underline} (10/98)
>
> 6.1.5 [Value Engineering]{.underline} (6/03)
>
> 6.1.6 [Facilities Maintenance \-- Job Order Contracts]{.underline}
> (10/98)
>
> 6.1.7 [Partnering]{.underline} (4/05)
>
> 6.1 8 [Competitive Proposals vs. Sealed Bids]{.underline} (10/98)
>
> 6.1.9 [Incentives to Reduce Project Completion Time]{.underline}
> (10/98)

6.1.10 [Special Contract Provisions]{.underline} (10/98)

> 6.2 [Equipment and Supplies]{.underline} (2/00)
>
> 6.2.1 [Lease/Maintain]{.underline} (2/00)
>
> 6.2.1.1 [Lease/Maintenance of Vehicles]{.underline} (2/00)
>
> 6.2.1.2 [Lease of Heavy Equipment with Operators]{.underline} (2/00)
>
> 6.3 [Rolling Stock]{.underline} (10/98)
>
> 6.3.1 [Buses]{.underline} (10/98)
>
> 6.3.1.1 [Competitive Proposals vs. Sealed Bids]{.underline} (10/98)
>
> 6.3.1.2 [APTA Standard Bus Procurement Guidelines]{.underline} (10/98)
>
> 6.3.2 [Rail Cars]{.underline} (10/98)

6.3.3 [Joint Procurements of Rolling Stock and
"Piggybacking"]{.underline} (6/03)

> 6.3.4 [Pre-Award and Post-Delivery Reviews for Buy America
> Act]{.underline}
>
> [Compliance]{.underline} (10/00)

6.3.5 [Warranties]{.underline} (6/03)

> 6.4 [Professional Services]{.underline} (5/96)
>
> 6.5 [Architect-Engineering Services]{.underline} (3/04)
>
> 6.6 [Insurance]{.underline} (11/03)
>
> 6.7 [Artwork]{.underline} (6/03)

6.1 CONSTRUCTION

Construction contracting presents a unique set of problems for the
procurement specialist, and this section of the BPPM will attempt to
identify some of these issues. A number of factors tend to make
construction contracting an area where problems abound. The first is the
uniqueness of the projects themselves; i.e., they are usually performed
with drawings and specifications which are developed for the first, and
only time, for that project. Because the documents are one of a kind,
there has been no prior experience which would have identified errors
and clarified ambiguities. Another factor is the highly competitive
nature of the bidding process, producing prices which have no leeway for
solving design problems which arise during performance of the contract
or for accommodating changes. Add to these factors the legal
complexities arising from Federal, State and local statutes, regulations
and codes, and the process becomes one unlike any other in the
procurement field.

There is a high degree of specialization in the construction industry
among firms. The major areas being excavation and foundations, masonry,
steel work, roofing, plumbing, electrical, and heating and air
conditioning. Given this degree of specialization, the role of the
general contractor is to manage other specialty contractors, scheduling
and coordinating their work. In this role general contractors assume a
high degree of risk when they bid firm- fixed prices, thus guaranteeing
performance for the bid price. It should also be noted that a number of
States require that the various trades be bid as separate primes, which
adds to the complexity of project management and contracting; e.g., who
controls the various contractors? If the general trades contractor is
given this responsibility, how will it be compensated and what
enforcement authority does it have against the other primes?

Another party in this process is the *surety,* who issues a bond
assuring performance of the contract, including the payment of suppliers
and mechanics in accordance with the terms of their contracts with the
construction contractor.

A number of different construction contracting strategies are discussed
below. Some of the material presented has been excerpted from the
American Bar Association (ABA) *Model Procurement Code*, Chapter 5,
which grantees are encouraged to read. Grantees are also encouraged to
obtain the FTA construction management manual entitled *Project and
Construction Management Guidelines 1996 Update*.[^291] These
*Guidelines* were developed by FTA \"to assist local Transit agencies in
developing management structures and work programs to effectively plan
and implement the various phases of FTA-funded transit capital
improvement projects.\" The *Guidelines* contain useful procurement
information and guidance related to construction projects.

**6.1.1 [The Traditional Construction Process -
Design/Bid/Build]{.underline}**

It has been traditional in the construction industry to employ an
*architect/engineer (A/E)* to complete a detailed design of the entire
project before soliciting bids from construction contractors. This
traditional approach is known as *sequential design and construction*.
This sequential design/construction approach requires that a detailed
design package of the entire project be complete before bids are
solicited from construction contractors. Following award of the
construction contract, the A/E is often retained by the owner for the
construction phase, and acts as the owner\'s agent, to inspect the
construction work to ensure that the structures are built according to
the designs and specifications.

[Advantages]{.underline} - A major advantage of the sequential design
and construction approach is that complex or one- of- a- kind projects
can be thoroughly planned and thought through before construction
begins. The traditional approach thus produces, in the design phase of
the project, the most accurate estimate of final project costs, and this
is an advantage of the traditional technique. If problems are
encountered with design aspects for the latter stages of the project,
the earlier design features or phases can be modified before any
construction work has been done, thus avoiding construction contractor
claims and delays. Another advantage is that the Agency is given a fixed
price for completion of the entire project before construction begins.
There may also be advantages in obtaining the necessary financing and
project approvals. Overall management of the project should also be
simplified by this approach.

[Disadvantages]{.underline} - *Sequential design and construction*
requires a longer time to complete the project than *phased design and
construction (\"fast tracking\").* And since time pressures are often
the most intense issues confronting the Agency, the sequential method
may not be feasible. Alternative contracting approaches have arisen to
shorten the project completion time. These include *phased design and
construction (\"fast tracking\")*, which often involves the use of a
*construction manager*, and *turnkey (design-build)* contracting.

**6.1.2 [Construction Management]{.underline}**

In recent years a construction technique known as *construction
management* has come into practice. In this scheme the owner employs a
*construction manager* who acts as the owner\'s agent during the design
phase and as overseer during the construction phase. During the design
phase the *construction manager* works closely with the *A/E*,
monitoring the *A/E\'s* efforts to ensure that the design will be within
the owner\'s budget, will accomplish the owner\'s purposes, etc. One of
the critical tasks a CM can perform during the design phase is a
*constructability review*, ensuring that the design can actually be
built. [^292] The specific role of construction managers in this phase
will vary greatly from project to project. Their duties may include cost

estimating, cost evaluating, project scheduling, review or preparation
of contract documents, receiving bids, and advising the owner of bidder
qualifications and the acceptability of bids.

[Multiple prime contractors]{.underline} - During the construction
phase, the construction management role can also take a variety of
forms. Under one scheme the *construction manager* will coordinate the
work of the various *specialty contractors,* who contract directly with
the owner as *multiple prime contractors*. The *specialty contractors*,
who would normally have been subcontractors to a *general contractor* in
the traditional construction arrangement, now contract directly with the
owner, and the coordination normally done by the *general contractor* is
performed by the *construction manager*. The *construction manager* may
also assist the A/E with inspections of the work. In this scheme the
*construction manager* has no financial liability for successful
completion of the work\--there is no contract with the owner to complete
the project for a contract price.

[Advantages]{.underline} - The *construction manager* will bring
construction expertise to the project team at an early design stage of
the project, enabling design decisions to be made with an appreciation
of their impact on construction. A *construction manager* may be
indispensable if the Agency lacks the personnel resources to adequately
and aggressively manage the project. *Phased design and construction*
may be used much more easily because the *construction manager* can
perform the vital functions of coordinating the work of the *A/E*
contractor and the *specialty construction contractors.*

[Disadvantages]{.underline} - The construction manager\'s fee will add
to the overall cost of the project, and the cost of employing an
independent construction manager may not be feasible on smaller
construction projects.

[Contract provisions]{.underline} - It is critical that the construction
manager\'s contract clearly define the authority and the duties of the
construction manager with respect to the other contractors on the
project; e.g., how much authority does the construction manager have
over the work of the A/E and the specialty construction contractors? If
the construction manager fails to properly coordinate the work of the
specialty construction contractors, will the construction contractor or
the Agency be liable? It will also be necessary to define the CM\'s
authority in the design and construction contracts, so that these
contractors will know the degree to which they are to accept direction
from the CM.

**6.1.3 [\"Fast Tracking\" \-- Phased Design, Award and
Construction]{.underline}**

*Fast tracking* is a procedure designed to shorten the overall time for
project completion by phasing the design and construction activities so
that they can be performed together. In this scheme each phase of the
project is placed under contract once the design for that phase is
completed. Unlike the traditional approach, where the entire project is
first designed and then contracted for with one construction contract,
the fast track scheme will complete the design work in phases, and then
award construction contracts for the various subsystems or phases once
the design for that phase is finished. Thus there will be a number of
specialty construction

contracts awarded by the owner, and a *construction manager* will
normally, though not necessarily, be retained to assist in packaging the
various specialty contracts and to manage the work of these specialty
contractors. This work of defining and managing the specialty contracts
can also be done by in-house project management or by the *A/E.*

[Advantages]{.underline} - Phased design and construction can reduce the
overall completion time of the project. It can also allow the Agency to
reduce the scope of the later phases if the cost of the earlier phases
exceed the budget. It also allows the Agency greater flexibility in the
timing of the construction contract awards, thus taking advantage of
market conditions, or managing the available funding.

[Disadvantages]{.underline} - There is a risk inherent in phased design
and construction because portions of the project are begun before the
later portions are designed. If major changes occur in the later phases,
they may cause costly changes in the earlier work and delays to the
specialty contractors. These are risks which will be borne by the
Agency.

**6.1.4 [Turnkey or Design/Build Contracting]{.underline}**

This contracting technique has seen increasing use in recent years.
Between 1987 and 1992 there was a 300 percent increase in design-build
projects, which indicates a growing importance of turnkey projects in
the construction industry. According to statistics provided by the
Engineering News Record, by 1995, 30 percent of all non-residential
construction was using the turnkey method. The growing importance of
turnkey methods was attributed to its benefits in saving time and costs
with no reduction of quality relative to conventional project
approaches. It must be noted, however, that not all States permit
design-build contracting by State agencies.

In this scheme, a transit agency contracts with a single private entity,
the turnkey contractor, for the design, construction and delivery of a
complete and operational project. In some instances, the contractor is
required to operate and maintain the system for a defined period of
time. The private contractor is typically a consortium of private
companies offering engineering and design, construction, manufacture of
vehicles, finance and related support services. The developer-contractor
will be selected competitively based on \"performance-type\"
(non-detailed) specifications which describe the owner\'s objectives and
requirements**.** Developers will submit proposed designs with their
competitive proposals, and owners must select between competing design
approaches and prices.

It should be noted that one of the drawbacks of design-build is that the
owner does not have an independent source (the *A/E* in traditional
construction) overseeing design implementation and verifying conformance
with the drawings and specifications.

**[Workshop on International Transit Turnkey and Joint
Development]{.underline}** - The Transportation Research Board has
published a very informative Research Circular entitled *Proceedings of
the*

*Workshop on International Transit Turnkey and Joint Development*.
[^293] This Workshop was held on October 15-19, 1996 and its purpose was
\" to explore current international experience in the development of
turnkey transit projects, to discuss effective turnkey practices, and to
identify those aspects that warrant further consideration.\" The
Research Circular summarizes each of the presentations made at the
workshop, and presents the \"lessons learned\" by those organizations
using various turnkey approaches. The names of the presenters and their
organizations are also given, which provides a reference tool for
contacting others who are involved with turnkey projects. Grantees are
encouraged to obtain this Transportation Research Circular\--it is a
valuable source of information. Some of the more important observations
made at the Workshop include the following:

-   The Federal government and most States, but not all, allow turnkey
    for some agencies and/or projects. In fact, the recently enacted
    Federal statute\--Transportation Equity Act For The 21st Century
    (TEA-21)\--permits grantees to use turnkey contracting to design and
    build a mass transportation system or an operable segment of a mass
    transportation system. Some States have recently expanded their
    regulations to permit design-build contracts, and this trend is
    likely to continue. Many of the current transit turnkey projects had
    to enact legislation or receive waivers to permit the turnkey
    process.

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-   A *negotiated procurement process is strongly recommended* *for
    selection of a turnkey contractor.* Discussions between the owner
    and offerors facilitates a true \"meeting of the minds\"; allows
    crafting of tailored solutions for contractor concerns; and achieves
    the optimum balance of risk and price. Negotiations can lead to
    optimum decisions. If a negotiated procurement cannot be done, then
    a two-step bidding process is recommended as the next best approach.
    Some States which allow design-build contracting require a bid
    process rather than a negotiated procurement.

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-   Industry input on documents should be sought prior to solicitation.

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-   Agencies should develop and follow a detailed selection procedure
    that includes a multi-disciplined and knowledgeable evaluation
    committee.

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-   Design-build requires a new generation of contract documents that
    incorporate the needs of three distinct elements: design,
    construction and operation. Melding the required pricing and
    procedures into one contract is a complex endeavor.

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-   Typical post-award concerns with design-build contracts include the
    interpretation of commercial terms and the pricing of changes
    (including the obtaining of adequate cost data to support change
    orders). Specific recommendations include: requirements for
    contractor job-cost systems; pricing change orders based on the
    job-cost system; and detailed audit provisions.

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-   The turnkey approach may result in lower capital costs and fewer
    change orders and contract difficulties.

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-   The turnkey approach may have an adverse impact on small and
    medium-sized firms, including DBE firms. Agencies may want to
    consider using incentive clauses in their solicitations to encourage
    DBE participation, as well as requiring offerors to identify small
    and minority owned businesses in their proposals during the
    prequalification/RFP stages of the procurement. It was reported that
    BART had been very successful with this prequalification requirement
    in the San Francisco Airport Extension turnkey demonstration
    project.[^294]

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-   Environmental approvals, intergovernmental coordination, and finance
    should be in place prior to the turnkey procurement. It is
    critically important that project participants develop a teaming
    perspective. A formal *partnering* agreement with the contractor
    team and tangential agencies has been used with success. See Section
    6.1.7 *Partnering*.

**6.1.5 [Value Engineering]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| FTA Circular 4220.1E, Section 7(g) encourages the use of value        |
| engineering clauses in construction contracts:                        |
|                                                                       |
| > [g. Use of Value Engineering in Construction                        |
| > Contracts]{.underline}. Grantees are encouraged to use value        |
| > engineering clauses in contracts for construction projects. FTA     |
| > cannot approve a New Starts grant application for final design      |
| > funding or a full funding grant agreement until value engineering   |
| > is complete (see Circular 5010).                                    |
+-----------------------------------------------------------------------+

##### DISCUSSION

FTA Circular 4220.1E does not require value engineering clauses but it
does encourage them in construction contracts. Value engineering is a
procedure designed to incentivize contractors to submit change proposals
which reduce the cost of contract performance

by promising the contractor a share of the savings. Contractors can
often find less expensive ways to perform their contracts than the
methods prescribed in their contract specifications. They will be
reluctant, however, to propose changes which will reduce their contract
price and have the effect of reducing their profit on the contract.
Value engineering is a technique designed to overcome this disincentive
by offering them a share of the savings resulting from their change
proposals.

**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, change orders, or other processes.
From a procurement view, the concept of value engineering is more
important than the form it takes.**

**The Federal Government uses value engineering clauses in contracts for
supplies, services, construction and architect/engineer services. Part
48 of the FAR is dedicated to the subject of value engineering. The
prescribed clause for Federal construction contracts may be found at FAR
52.248-3 *Value Engineering-Construction*. While this clause is not
required for grantee third-party contracts, it may prove useful as a
guide as to how to structure a value engineering clause.**

**FTA's Project and Construction Management Guidelines 1996 Update,
Section 4.2.3 *Value Engineering and Peer Review*, presents a discussion
of the value engineering process during the design phase of the
project.**[^295]

**Best Practices**

Value engineering clauses in use by Transit Agencies tend to limit the
type of savings which the Agency will share with the Contractor to those
expected on the contract being performed. These are commonly known as
\"instant savings.\" The Contractor would not share in \"collateral
savings\" or \"future savings\" resulting from his change proposal.
\"Collateral savings\" are those savings anticipated by the Agency
outside the contract, such as operations, maintenance, logistical
support, etc. \"Future savings\" would be those resulting from the
Contractor\'s value engineering proposals on future contracts for the
same deliverable items. The typical share ratio is 50 percent for the
Agency and 50 percent for the Contractor of any \"net savings\"
resulting from the Contractor\'s change proposal. \"Net savings\" are
defined as \"gross savings\" less the Contractor\'s costs for developing
and implementing the proposal as well as any Agency costs resulting from
the change, such as review, implementation, inspection, etc. Estimated
\"gross savings\" would include the Contractor\'s labor, material,
equipment, overhead, profit and bond. At the conclusion of negotiations
for the change proposal, a contract modification is issued reducing the
contract price by the Agency\'s share.

An important feature of all value engineering clauses is that the
Agency\'s decision to accept or reject the contractor\'s proposal is
final and conclusive, and not subject to appeal.

Another important feature of the usual Agency clauses is that the
Contractor\'s value engineering change proposal (VECP) must not \"impair
any essential function or characteristic of the Work, such as safety,
service life, reliability, economy of operation, ease of maintenance,
and necessary\
standardization of features.\" [^296] Another Agency\'s clause reads
that the Contractor\'s VECP \"shall not alter any item\'s
characteristics such as functionality, service life, reliability,
economy of operation, ease of maintenance, and necessary standardized
features and appearance.\" [^297]

**6.1.6 [Facilities Maintenance \-- Job Order Contracts]{.underline}**

The Metropolitan Atlanta Rapid Transit Authority (MARTA) has made use of
a very cost-effective procurement approach known as Job Order
Contracting (JOC) for its facilities maintenance requirements. These
requirements would include the repair, alteration, modernization,
maintenance and rehabilitation of buildings, structures, or other real
property. The JOC is a competitively bid, firm fixed price indefinite
quantity contract, against which MARTA issues Work Orders as specific
needs arise.

The unusual feature of the JOC is that the Invitation For Bid (IFB)
includes all of the conceivable line items of work, with
specifications/definitions for each line item, and unit prices for each
item. These specifications and line item prices were developed by MARTA
with the assistance of a consulting engineering firm. The line item unit
prices were furnished to prospective bidders in a \"Unit Price Book,\"
which was developed by the consultant. The Unit Price Book has over
90,000 items which detail specific repair and construction tasks and
specifications. The Book covers a wide range of areas such as concrete,
air distribution, plumbing, electrical, and hazardous and toxic waste.
The Unit Price Book is work-segment based. Each job is detailed and
broken down by task. The prices are based on the use of experienced
labor and high quality materials. The Book also incorporates prevailing
market area cost data and wages.

When bids are solicited, the objective is to obtain bids on \"adjustment
factors.\" *No specific projects are bid. Award is based on the lowest
proposed adjustment factor.* The two price adjustment factors are for
normal and overtime work. These two adjustment factors are applied to
*all items in the Unit Price Book*. Adjustment factors are required to
be bid to four decimal places. The best way for a bidder to develop its
adjustment factor is to price out several types of

projects and take an average. For example, if the price book states that
the cost to replace a window is \$100, and a prospective bidder develops
an estimate of \$75, then the bidder\'s adjustment factor is .7500.
Likewise, if the bidder estimates a price of \$110 to replace the
window, then the bidder\'s adjustment factor would be 1.1000. On the
most recent award, the winning low bid offered an \"adjustment factor\"
of 0.7700.

Following award of the JOC, the process for issuing Work Orders would be
as follows:

-   A meeting is held with the contractor to discuss the scope of the
    work to be done.

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-   A Work Order Proposal is then requested from the Contractor. The
    Contractor\'s price is computed by:

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-   Selecting various pre-priced construction tasks from the Unit Price
    Book.

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-   Multiplying the pre-established prices from the Unit Price Book by
    quantities and then by the Contractor\'s adjustment factor.

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-   The Contractor\'s proposal is compared to an independent Authority
    estimate.

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-   If the price is reasonable, a Work Order is issued.

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-   If the price is not reasonable, the job is solicited under normal
    procurement procedures.

The JOC process offers the opportunity to save significant time and
administrative effort because there is only one competitive bid process,
and that is when the adjustment factors are solicited. Thereafter,
individual jobs do not have to be competed, so there is no lengthy
advertising or solicitation time, or complex solicitation documents to
prepare, approve and issue. The JOC can be a multi-year contract,
thereby reducing the number of times the program must be competed.
MARTA\'s contract is for one base year plus two one-year options, and
its value is approximately \$9 million.

**6.1.7 [Partnering]{.underline}**

*Partnering* is a concept/technique designed to foster a team building,
or \"partnering\" frame of mind toward the accomplishment of the
construction project. Partnering was originally developed by the Army
Corp of Engineers for use on major construction projects with large
project staffs on the work site and where effective communications are
essential. The parties involved in the performance of the project,
including the Agency, the A-E firm, the prime Contractor, and all
subcontractors would meet together on a regular basis (at least monthly)
to establish and maintain open lines of communication, with the goal of
ensuring relationships of trust and cooperation.

The partnering process usually employs a professional Facilitator who
conducts the sessions so as to promote trust and reach mutual agreements
on how the project is to proceed. The

Facilitator's fee and associated costs are paid for by the Contractor
who is in turn reimbursed by the owner (50%) from a line item in the
contract Price Schedule. The partnering process does not change or alter
the contract agreement. It is not just a one-time meeting at the start
of the project, but is an on-going process. It is usually accomplished
in five distinct phases:

-   Phase I is a joint session of top executives designed to arrive at a
    clear agreement on the project's business goals and establish a
    clear issue resolution process. Issues generally focus on safety,
    budget, communications, quality, schedule, teamwork, impact on the
    community and a commitment to work together for a successful
    project. MARTA developed a *Partnering Charter* for its North
    Springs Station Project, signed by all the team members, which reads
    as follows:

> *We, the team members of the North Springs Station (CF-520) Project
> Team, are committed to continuing the tradition of effective
> partnering among our organizations and to delivering a facility in
> which all team members take pride.*
>
> *We will measure our collective success through the following project
> objectives:*

-   *Complete the project on schedule and meet all milestones*

-   *Provide a safe worksite to minimize lost time accidents*

-   *Complete the project within budget*

-   *Fair profit earned by contractor*

-   *Quickly resolve claims without litigation*

-   *Deliver a quality product within specified standards*

-   *Serve as responsible neighbors and provide a positive impact to the
    surrounding community*

> *We will promote teamwork based on the following principles and
> attitudes:*

-   *Timely inputs, responses and decisions*

-   *Open, effective communications*

-   *Honesty and trust*

-   *Solving problems at the lowest possible level*

-   *Working together against the job - not each other*

-   *Full team commitment and participation in partnering*

Note that the *Partnering Charter* identifies its goals as the best
interests of *all the parties*. These interests include the earning of a
fair profit by the Contractor. It is critical for the Agency\'s
personnel to see the Contractor as a team member whose interest in
earning a fair profit is equally important to the interests of the
Agency.

-   Phase II consists of a workshop where all stakeholders participate
    in developing a project charter defining team goals, conduct and
    risks. Washington Metropolitan Area Transit\
    \
    \
    \
    Authority (WMATA) project members developed the following *Project
    Charter* for the Metro Georgia Avenue-Petworth Station:

> *Project Priorities:*

-   *Successful Partnering*

-   *Early identification and resolution of problems*

-   *Realizing one's own responsibilities and obligations*

-   *Community relations*

-   *Openness*

-   *Timeliness (especially early submittals, early permits)*

-   *Being able to live with changes*

-   *Safety*

-   *Quality*

-   *Making a profit*

-   *EEO, disadvantaged business program, employee salaries*

-   *Maintaining professionalism*

> *Challenges We Face:*

-   *Getting approvals quickly*

-   *Resolving issues by give and take*

-   *Minimizing changes*

-   *"Designing through changes"*

-   *Slurry wall*

-   *Architectural dome*

-   *Being paid on time*

-   *Closeout within 60 days*

-   *No claims...if unavoidable, finalize promptly*

-   *City construction*

-   *Public safety*

-   *Hazardous material*

-   *Avoiding interference with other contractors*

-   *Staying in harmony*

WMATA has used Partnering in its major construction contracts for over
ten years and in its last two Railcar contracts. WMATA believes that
partnering may also be useful in bus contracts where there is a need to
enhance communications and working relationships between the owner and
the bus manufacturer. For example, issues of delivery, payment and
potential performance matters relative to testing, warranty, etc. could
also be addressed.

-   Phase III provides for monthly evaluations by those managing the job
    for both parties. The objective is to solve problems at the lowest
    level, and all members should be evaluating the team's progress, or
    lack thereof, in meeting the established goals. Monthly\
    \
    meetings are held at the executive level to review and discuss areas
    of concern or interest. Problems are identified and solutions are
    agreed to. Organizational impediments to solutions are resolved. If
    necessary, unresolved issues are escalated to higher managers. Many
    issues are resolved before they become major problems and these
    successes are also discussed at the monthly meeting.

-   Phase IV is an executive session, supplemented by key project
    personnel from both parties. This is normally a quarterly meeting.
    The purpose is to address the main issues that require resolution,
    and to ensure that the Partnering process remains on track.

-   Phase V is a closure session to provide feedback on the value of the
    Partnering process. This session is not always held.

Additional information on *Partnering* is available from the
Construction Industry Institute. [^298]

**6.1.8 [Competitive Proposals vs. Sealed Bids]{.underline}**

**[Projects Involving Technology]{.underline}** - Generally such
projects are either part of a larger construction project, in which case
they may fall under competitive bidding requirements, or technology
acquisition projects involving professional services and possibly an
installation component, which takes them outside the construction field
with its sealed bid requirements. Where the work to be performed under
contract is to a dominant extent other than construction, some Transit
Agencies have experienced situations where a competitive proposal has
proven to be a better method of contracting for the project than the
typical sealed bid approach. This has been true for projects which
entailed technology, such as software and systems integration work. In
these situations you may want to evaluate alternative technical
approaches or alternative ways of construction. These conditions lend
themselves to an RFP type of solicitation, where you will have the
flexibility to hold discussions with the offerors and select the \"best
value\" for your Agency, considering not only price but the value of the
products being offered, including their expected reliability and
maintainability. One such project involving technology was a contract
for a Public Address/Customer Information Screen. This project is being
constructed over a number of phases. The first phase contract was
handled as a sealed bid. The problem with this approach was that the
lowest responsible bidder was a construction contractor and not a
systems integrator. There was a considerable amount of software involved
and the solicitation documents did not mention who retained software
rights. A project such as this should be solicited as an RFP so that
negotiations can take place and prospective contractors can be evaluated
on the basis of their suitability for the work. [^299]

**[Critical Projects Involving Schedule Incentives]{.underline}** - If
state law permits, it may be advantageous to consider a negotiated
method of procurement instead of sealed bids when the project involves a
critical completion schedule and where you have chosen to use incentive
provisions in the contract or a bid/proposal evaluation method such as
those described in section 6.1.9\--*Incentives to Reduce Project
Completion Times.* Where the methodology being used to evaluate bids is
unconventional, and where it may be advantageous to have the flexibility
to hold discussions with the prospective contractors, an RFP approach
may be preferable to a sealed bid method because it will give you the
ability to discuss the contractors\' proposed approaches to schedule
improvement and the realism of those proposals. It must be recognized,
however, that a negotiated procurement will require more time to award,
and this may be counter-productive when the project is a time-critical
one.

**6.1.9 [Incentives to Reduce Project Completion Times]{.underline}**

Transit agencies have had success in reducing project completion times
by using a technique wherein bids are solicited and evaluated in terms
of the prices offered and the best achievable completion schedule.
[^300] The contract award is determined by the *lowest evaluated bid*,
using both the bid price and the proposed completion schedule. In this
procurement scenario:

-   The Agency specifies the maximum duration of the project in the bid
    documents.

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-   The Agency determines the value of a \"day\" during the contract
    period and specifies this value in the bid documents.

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-   Bidders must propose the project duration (best achievable schedule)
    in their bids.

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-   The bid documents would define the damages for failure to achieve
    the proposed completion schedule, and the bonuses for early
    completion, if the Agency should choose to use them with the damages
    provisions. The use of damages for failure to meet the proposed
    completion schedule is important in order to keep the bidders
    \"honest\" in their proposed completion schedules. The use of
    bonuses will provide an even stronger incentive for the bidders to
    successfully make their proposed schedules after contract award.

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-   Price + Duration (# of Days) = Evaluated Bid

Example:

**[Bid]{.underline} [Company X]{.underline} [Days]{.underline} [Company
Y]{.underline} [Days]{.underline}**

Value of a day is A - (Bid Price) \$5,000,000 \$5,500,000

\$5,000 B - (Contract

Duration) \-\-\-\-\-\-\-\-\-\-\-- 720 Days **\-\-\-\-\-\-\-\-\-\-\-\--**
600 Days

Value of Duration

(Days x \$5,000) \$3,600,000 \$3,000,000

#####  Evaluated Total \$8,600,000 \$8,500,000

##### 

The contract would be awarded to Company Y since its evaluated bid is
lower than that of Company X by \$100,000. Value of award would be \$5.5
million.

[Advantages to Price Plus Schedule Bidding]{.underline} **-** This
technique is likely to encourage efficient contractors to bid, and it
offers the likelihood of shorter construction project durations because
of the strong financial incentives for achieving the best completion
schedule.

[Concerns with Price Plus Schedule Bidding]{.underline} - *It is
extremely important that the construction contractor have control over
the work site,* and that the Agency\'s responsibilities at the work site
be minimal or, preferably, nonexistent. If the contractor is dependent
upon the Agency to furnish support at the work site, or if the
contractor\'s work is dependent upon the activities of other
contractors, the Agency can expect claims regarding the issue of delays,
which in turn affect the incentive provisions of the construction
contract. In view of the probabilities of claims and litigation,
Agencies should avoid incentive contracts such as this unless they can
turn a work site over to a construction contractor and allow the
contractor to control that site and the scheduling of all work required
to complete the project. Where contractors lack the necessary control
over the work site, Agencies may well have to pay higher prices, based
on the contract bonuses and the contractor\'s successful claims for
delays, and still have a project that is late in completion.

Completion incentives may work to discourage prime contractors from
subcontracting with small or disadvantaged business firms. Primes will
probably seek partners who are large businesses with proven track
records, and which have substantial resources available to perform the
work as expeditiously as possible.

The quality of construction work may suffer due to the schedule
pressures, and Agencies will need to exert close surveillance over the
contractor.

**6.1.10 [Special Contract Provisions]{.underline}**

Construction contracts require certain provisions which are unique to
that activity. These provisions are discussed in detail in other
sections of the BPPM. Following is a summary of the special provisions
and the BPPM sections where they are discussed.

**[Labor]{.underline}** - The three wage and hour laws governing
construction in the Federal realm are the Davis-Bacon Act, the Contract
Work-Hours and Safety Standards Act, and the Copeland Anti-Kickback Act.
The applicable contract clauses are discussed in Appendix A.1, clauses
16, 17 and 18. Section 8.1.2 *Davis Bacon Act* contains more detailed
guidance with respect to administering the requirements of this Act.

**[Bonding]{.underline}** - Construction contracts require contractors
to furnish three types of bonds\--bid bonds, payment bonds and
performance bonds\--which are discussed in Appendix A.1, clause 13, with
more detailed guidance on each type of bond in Section 8.2.1
*Performance Bonds.*

**[Liquidated damages]{.underline}** *-* Section 8.2.3 *Liquidated
Damages* contains guidance on the use of liquidated damages clauses.

**[Differing Site Conditions]{.underline}** -- Section 9.2.3.1 contains
guidance on administering the *Differing Site Conditions* clause.

**[Specifications for Construction]{.underline}** - Section 3.4
*Specifications for Construction* discusses requirements within FTA
Circular 4220.1E and the Master Agreement (MA) which may affect your
construction specifications.

**[Insurance]{.underline}** - Section 6.6 *Insurance* discusses an
approach to insuring construction project contractors known as *Owner
Controlled Insurance Programs (OCIP),* which has proven to be an
effective method of insuring the contractor teams involved in
construction projects*.*

**[Warranties]{.underline}** *-* Obtaining acceptable warranty documents
in a timely manner from contractors has been historically difficult. No
contractual incentive has existed to motivate contractors to supply the
required warranties. Grantees may wish to consider making the submission
of an acceptable warranty form a condition of product or system
acceptance in order to motivate contractors to furnish the required
form. Grantees might also include the warranty forms as a fixed-price
line item in the contract for payment purposes, thus giving the
contractors a strong motivation to supply the required forms.

**[Contract Close-out]{.underline}** - Close-out of construction
contracts will require certain documentation unique to these contracts,
such as lien waivers, as-built drawings, etc. These requirements are
discussed in Chapter 10, *Close Out*.

6.2 EQUIPMENT AND SUPPLIES

**6.2.1 [Lease/Maintain]{.underline}**

+-----------------------------------------------------------------------+
| # **REQUIREMENT**                                                     |
+-----------------------------------------------------------------------+
| Requirements related to the lease of equipment and facilities may be  |
| found in the following regulations:                                   |
|                                                                       |
| (a) **FTA Circular 4220.1E generally, and paragraph 7d which          |
|     requires, where appropriate, an analysis of lease versus purchase |
|     alternatives to determine the most economical approach.**         |
|                                                                       |
| (b) FTA Master Agreement MA(12), Section 16, *Leases*.                |
|                                                                       |
| > \(c\) *Capital Leases* (49 CFR, Part 639.)                          |
+-----------------------------------------------------------------------+

##### DISCUSSION

**Since equipment leases are considered "third party contracts' within
the meaning of FTA Circular 4220.1E, the requirements of that Circular
apply to such procurements. The Circular requires a lease versus
purchase analysis to determine the most economical approach to any given
procurement. The Master Agreement, Section 16, concerns capital leases,
in accordance with 49 CFR, part 639.**

**[Lease vs. purchase alternatives]{.underline} -- Whenever an agency is
considering the leasing of equipment, a lease vs. purchase analysis
should be made. The analysis should be appropriate to the size and
complexity of the procurement. It is usually more economical to purchase
equipment than to lease it. This is not always true, however, especially
when highly complex equipment is involved and there are issues of
maintaining the equipment or having trained personnel who are competent
to operate the equipment. In determining whether the lease of equipment
is feasible, the following factors must be considered:**

-   **Estimated length of the period the equipment is to be used and the
    amount of time of actual equipment usage;**

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-   **When circumstances require the immediate use of equipment to meet
    program or system goals and the leasing would serve as an interim
    measure to meet these immediate needs.**

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-   **Financial and operating advantages of alternative types and makes
    of equipment;**

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-   **Total rental cost for the estimated period of use;**

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-   **Net purchase price if acquired by purchase;**

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-   **Transportation and installation costs;**

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-   **Maintenance and other service costs (e.g., the cost of permanent
    housing facilities for heavy cranes might preclude their purchase,
    and the lack of trained operators of heavy equipment may dictate
    that the agency lease the equipment with trained operators);**

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-   **Difference in warranty coverages between lease and purchase; e.g.,
    some office equipment leases do not provide for warranty repairs
    whereas new purchases would be covered by warranties;**

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-   **Availability of a servicing capability, especially for highly
    complex equipment (can the Agency service the equipment if it is
    purchased?);**

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-   **Potential obsolescence of the equipment because of imminent
    technological improvements;**

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-   **Trade-in or salvage value;**

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-   **Imputed interest costs (net present value of lease payments);
    and**

-   **Insurance costs.**

**Best Practices**

[Leases with options to purchase]{.underline} -- When a lease is
justified, a lease with option to purchase may be appropriate.

[Long term leases]{.underline} -- Generally, a long-term lease should be
avoided, but may be appropriate if an option to purchase or other
favorable terms are included.

**6.2.1.1 [Lease and Maintenance of Vehicles]{.underline}**

[Lease vs. Buy Analysis]{.underline} **--** When comparing the costs of
leasing vs. ownership, maintenance costs will usually be a major
economic factor. Indeed the primary advantage of leasing is the
avoidance of maintenance costs for items such as brakes, batteries, etc.
Grantees must carefully estimate the maintenance costs over the
anticipated life of the vehicle. The costs of ownership will be
increased by these maintenance costs and decreased by the anticipated
resale value (salvage value) of the vehicle when it is sold.

[Using a Request for Proposal vs. Invitation for Bid]{.underline} --
PACE Suburban Bus Service's experience with competitive procurements
using an RFP has been positive**.** [^301] There is much more
flexibility for the grantee when an RFP is used instead of an IFB. The
RFP approach gives the grantee an opportunity to establish evaluation
criteria for important factors of performance, including such items as
preventative maintenance, emergency roadside assistance, repairs, fuel
card management services, and accident services. Proposals can be
evaluated with the objective of selecting the best overall combination
of service quality and price. Negotiations can be held with the offerors
in order to secure the best possible proposal and contract terms. The
PACE Suburban Bus RFP issued for leasing and maintaining their fleet
vehicles may be found in Appendix B.15.

[Joint Procurements with State DOT's]{.underline} -- Grantees should
inquire with their State Departments of Transportation as to whether it
would be feasible to lease vehicles from contracts awarded by the State.
These State contracts frequently represent the best possible terms
available for vehicle leasing. When pursuing this "piggybacking"
approach, grantee personnel must determine if the

State contract contains all the required Federal clauses and
certifications required by Federal\
regulations. Grantees may wish to take the initiative with their State
DOT's to plan ahead for

joint procurements of vehicles in order to assure that their needs are
addressed and that the Federal requirements are included when the
procurements are initiated. For additional guidance, see Section 6.3.3 -
*Joint Procurements of Rolling Stock and "Piggybacking."*

**6.2.1.2 [Lease of Heavy Equipment with Operators]{.underline}**

Some agencies have found it beneficial to lease, rather than purchase,
heavy equipment, such as cranes, with operators. [^302] The more
important considerations here tend to be operational rather than
economic. Advantages to leasing would include such factors as:

-   the availability of fully trained and licensed equipment operators;

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-   the convenience of having the lessor provide the very specialized
    maintenance services and housing structures for the equipment; and

-   the lessor's assumption of liability in case of accidents.

[Joint Agency Procurements]{.underline} - Heavy equipment may be very
difficult to obtain on short notice, and longer-term leases, such as
three years, may be advisable. In addition, competition may be virtually
non-existent. Under these circumstances, agencies might be advised to
seek out other agencies in their geographical region in order to conduct
a joint procurement for their common needs so as to obtain a more
favorable contract than either could procure by themselves.

[Labor Laws]{.underline} -- Agencies will need to be aware of local or
State labor laws, as well as Federal laws if construction is involved
(e.g., Davis-Bacon Act), when developing their solicitation document and
contract.

[Insurance]{.underline} -- Insurance requirements will be an important
part of the contract terms. Agency procurement personnel should
carefully coordinate the insurance provisions with their insurance
department or legal specialists. Requirements might include coverage for
commercial general liability, auto vehicle insurance, workers
compensation, and perhaps, a special railway protective policy. The
agency's insurance specialists should determine specific coverage
requirements and amounts.

**6.3 ROLLING STOCK**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| The FTA Master Agreement, MA(12), Section15 (l) defines several       |
| requirements for the acquisition of rolling stock:                    |
+-----------------------------------------------------------------------+

+-----------------------------------------------------------------------+
| l\. [Rolling Stock]{.underline}. In acquiring rolling stock, the      |
| Recipient agrees as follows:                                          |
|                                                                       |
| > \(1\) [Method of Acquisition]{.underline}. The Recipient may award  |
| > a third party contract for rolling stock based on initial costs,    |
| > performance, standardization, life cycle costs, and other factors,  |
| > or based on a competitive procurement process in accordance with 49 |
| > U.S.C. Section 5326(c).                                             |
| >                                                                     |
| > \(2\) [Multi-year Options.]{.underline} In accordance with 49       |
| > U.S.C. Section 5326(b)(1), a Recipient may procure rolling stock    |
| > using financial assistance appropriated for 49 U.S.C. Chapter 53    |
| > using a contract with an option, not to exceed 5 years after the    |
| > date of the original contract, to purchase additional rolling stock |
| > or replacement.                                                     |
| >                                                                     |
| > \(3\) [Pre-Award and Post-Delivery Requirements]{.underline}. The   |
| > Recipient agrees to comply with the requirements of 49 U.S.C.       |
| > Section 5323 (m) and FTA regulations, \"Pre-Award and Post-Delivery |
| > Audits of Rolling Stock Purchases,\" 49 C.F.R. Part 663, and any    |
| > revision thereto.                                                   |
| >                                                                     |
| > \(4\) [Bus Testing]{.underline}. To the extent applicable, the      |
| > Recipient agrees to comply with the requirements of 49 U.S.C.       |
| > Section 5323 (c) and FTA regulations, \"Bus Testing,\" 49 C.F.R.    |
| > Part 665, and any revision thereto.                                 |
+-----------------------------------------------------------------------+

**6.3.1 [Buses]{.underline}**

**6.3.1.1 [Competitive Proposals vs. Sealed Bids]{.underline}**

Grantee experiences with competitive *Requests for Proposals* (RFP\'s)
for bus procurements indicates that this method may be preferable to the
use of sealed bids. When RFP\'s are used, the grantee has the
flexibility to hold discussions with the offerors and to evaluate the
proposals and conduct negotiations for the best delivery schedules,
warranties, quality/reliability, after market support in terms of parts
availability, and the best prices. In other words, grantees can award
their contracts on the basis of the best value, with all important
factors considered. Some State laws, however, require the use of sealed
bidding procedures for buses, in which case grantees would not be able
to use competitive RFP\'s.

[Prequalification of systems/components]{.underline} - The Metropolitan
Transit Authority (MTA) of Harris County, Houston, TX, completed a large
243 bus procurement which used a two-step sealed bid process. This
entailed a prequalification procedure \-- \"Request for Approved
Equals\"\-- for major systems and components. In Step one, MTA issued a
performance type specification identifying all the systems or components
which had to be submitted for approval prior to bids. Examples would
include: engines, transmissions, door systems, etc. MTA reviewed the
submissions in terms of their characteristics, specifications, etc. and
determined what systems and components they would accept. MTA then
issued a notice to all bidders identifying what components were
acceptable, so that all bidders knew beforehand what items were
acceptable to bid on. Sealed bids were then received, and when the low
bidder was identified, MTA performed an audit for specification
compliance and compliance with Buy America. [^303]

**6.3.1.2 [APTA Standard Bus Procurement Guidelines]{.underline}**

The American Public Transit Association (APTA) published the *Standard
Bus Procurement Guidelines (SBPG)* in January 1997 as \"a model for
solicitation of offers and contracts for the supply of transit buses.\"
[^304] The SBPG contains suggested terms and conditions regarding the
solicitation, the contract document, quality assurance and contractor
warranties. A second volume containing technical specifications is under
development. Grantees are cautioned, however, that the APTA *Guidelines*
may contain terms and conditions which are not consistent with FTA\'s
policies as set forth in FTA Circular 4220.1E. For example, the
provisions regarding *advance payments* and *warranties* in the APTA
*Guidelines* cannot be adopted without prior FTA waivers.

**6.3.2 [Rail Cars]{.underline}**

There are certain realities in the rail car industry which impact the
manner in which rail cars are procured. Transit Agencies buying rail
cars tend to do so infrequently, with a number of years between
procurements. The technology can be expected to change considerably
during the intervening years between these procurements. This fact makes
it critical that Agencies do considerable advance planning in order to
determine the current state of the art before they formulate their
specifications to procure rail cars.

Because there is virtually no standardization in the United States in
the area of track gauges, station platform heights, tunnel designs,
etc., and because new rail cars must be compatible with existing cars,
it is not feasible for Transit Agencies to consolidate procurements of
rail cars and use common buys or \"piggybacking.\" While joint
purchasing of rail cars is difficult, an agency designing a
specification should consult with others who have either recently
purchased cars or who are in the process of doing so, and attempt to
achieve whatever commonality of components is possible. This will
facilitate both joint purchases of parts in subsequent years and the
ability to second-source. Another aspect of this problem with
non-standardized rail cars is that it results in high one-time design
costs for each Agency\'s procurement. This in turn provides an incentive
to buy as many cars as feasible under each solicitation so that the
design costs can be amortized over a greater number of vehicles, with a
corresponding reduction in unit prices. On a recent MARTA procurement,
for example, the unit price was reduced by \$400,000 by increasing the
quantity of cars to be procured from 30 (the initially planned number)
to 100. This savings was due to amortizing the non-recurring design
costs over a larger number of units. Agencies should

carefully consider the multi-year contracting strategies discussed in
Section 2.2 *Long Term Planning*.

**Best Practices**

MARTA\'s experience with a recent major rail car procurement offers a
number of helpful insights. [^305]

**[Competitive proposals]{.underline}** - The procurement specifications
were subjected to a *peer review* by other Transit Agencies and
independent consultants prior to release in the RFP. This gave MARTA the
benefit of other Transit Agencies\' experiences with more recent rail
car procurements. MARTA elected to use a competitive *Request for
Proposal* (RFP) approach instead of a sealed bid method, which had been
their earlier practice. They were pleased with this decision because it
gave them the needed flexibility to discuss various technical approaches
for complex items with each of the offerors, and to achieve the \"best
value,\" given the different technical approaches offered and the prices
proposed for these approaches. \"Best value\" included expected
reliability and maintainability features, such as on-board diagnostics.

MARTA\'s RFP included a *Proposal Data Requirements List* (PDRL) which
defined the format and content of the required proposal information,
thereby creating proposal uniformity, which in turn increased the
quality and efficiency of proposal evaluation. The proposal evaluation
plan, including the scoring mechanism, was carefully developed and
tested using several mock proposals before the RFP was issued. Once
proposals were received, the proposal evaluation plan and scoring
mechanism were adhered to meticulously in order to avoid any appearance
of bias. *This kind of rigid adherence to the proposal evaluation plan
is a [critical requirement]{.underline} for Agencies to observe if they
use the RFP methodology.* MARTA\'s use of individuals outside the Agency
to participate on the proposal evaluation committee added an element of
objectivity and independence to the process, as well as enhancing the
overall experience base of the evaluation team.

MARTA kept the technical and price proposal evaluations separate, so as
not to influence the technical evaluators. They also established a
\"competitive range\" following initial proposal evaluations, and held
discussions with those companies in the competitive range (those that
had a reasonable chance for contract award). Offerors eliminated from
the competitive range were to be notified quickly after MARTA\'s
decision so that they could release their teams to other opportunities.

The time required to complete the procurement process was longer using
the RFP method than it would have been with sealed bids (IFB). Using an
IFB was estimated to take between four and

six months from advertising to award, whereas the RFP method took about
13 months from release of the RFP to contract award. Agencies planning
to use the RFP method will have to allow for more time than if sealed
bids are used, but the final results may be worth the added procurement
time.

**[Future purchases of proprietary parts]{.underline}** - Efforts should
be made in the original acquisition of rail cars (and buses) to include
an \"advance agreement\" with the supplier concerning the future
acquisition of proprietary parts. This could be done as a percentage
discount of the list price. The best approach might be to have a
one-year contract for the proprietary parts, with a series of four
one-year options (to be extended subject to FTA approval). This would
enable the agency, at the end of each year, to determine whether the
marketplace has changed in terms of the competitive availability of
parts formerly only available from the vehicle manufacturer.

**6.3.3 [Joint Procurements of Rolling Stock and "Piggybacking"
]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| FTA Circular 4220.1E applies to all third party contract actions      |
| undertaken by grantees with Federal funds, including actions taken    |
| pursuant to the contracts of other entities, such as (1) the exercise |
| of options which have been assigned to the grantee by another entity  |
| which awarded the contract initially, (2) the assignment of contracts |
| themselves to a grantee by another entity (under which the grantee    |
| will spend Federal funds), and (3) joint procurements with other      |
| entities (under which the grantee will spend Federal funds).          |
|                                                                       |
| Of particular significance are the following provisions of FTA        |
| Circular 4220.1E:                                                     |
|                                                                       |
| > 7.e. [Intergovernmental Procurement Agreements]{.underline}.        |
|                                                                       |
| 1.  Grantees are encouraged to utilize available state and local      |
|     intergovernmental agreements for procurement or use of common     |
|     goods and services. When obtaining goods or services in this      |
|     manner, grantees must ensure all federal requirements, required   |
|     clauses, and certifications (including Buy America) are properly  |
|     followed and included, whether in the master intergovernmental    |
|     contract or in the grantee's purchase document. [^306]            |
+-----------------------------------------------------------------------+

+-----------------------------------------------------------------------+
| > 2\. Grantees are also encouraged to jointly procure goods and       |
| > services with other grantees. When obtaining goods or services in   |
| > this manner, grantees must ensure all federal requirements,         |
| > required clauses, and certifications are properly followed and      |
| > included in the resulting joint solicitation and contract           |
| > documents. [^307]                                                   |
| >                                                                     |
| > 3\. Grantees may assign contractual rights to purchase goods and    |
| > services to other grantees if the original contract contains        |
| > appropriate assignability provisions. Grantees who obtain these     |
| > contractual rights (commonly known as 'piggybacking') may exercise  |
| > them after first determining the contract price remains fair and    |
| > reasonable. [^308]                                                  |
| >                                                                     |
| > 8.a. [Full and Open Competition]{.underline}. All procurement       |
| > transactions will be conducted in a manner providing full and open  |
| > competition.                                                        |
|                                                                       |
| 9.i.(1) [Evaluation of Options]{.underline}. The option quantities or |
| periods contained in the contractor\'s bid or offer must be evaluated |
| in order to determine contract award. When options have not been      |
| evaluated as part of the award, the exercise of such options will be  |
| considered a sole source procurement.                                 |
+-----------------------------------------------------------------------+

**DISCUSSION**

**Recently, there has been a growing trend amongst transit systems to
become creative in the acquisition of rolling stock. The most
constructive of these techniques involve advance planning and joint
procurement by several systems. FTA encourages this technique. In these
joint procurements, the needs of the various transit systems are defined
in the solicitation and the manufacturers are asked to bid upon the
total known needs of the agencies involved. In other situations, transit
agencies will identify an existing contract of another agency and
\"piggyback\" that contract by means of an assignment of contract rights
such as an assignment of options. Additionally, there is the occasion
where an agency awards an Indefinite Delivery/Indefinite Quantity
(ID/IQ) contract and allows other**

**agencies to purchase from it. Regardless of the approach used, it is
important that grantees be aware of the requirements of FTA Circular
4220.1E with respect to competition, evaluation of options in making the
basic contract award, and the existence of a sole-source condition when
optional quantities are ordered which were not priced and evaluated as
part of the basic contract award process.** ***It is FTA's policy that
the estimated quantities must reflect the immediate or reasonably
foreseeable needs of the parties to the solicitation and, in the case of
indefinite delivery/indefinite quantity contracts, a minimum and maximum
quantity must be stated.***

**Best Practices**

The streamlining of bus purchases can occur when two or more systems
join forces using the same specification, solicitation process, terms
and conditions, etc. leading to the purchase of vehicles from the same
vendor. This can be accomplished using (1) the services of one lead
governmental agency, (2) a consortium, or (3) \"piggy-backing.\" *While
all of these mechanisms require advance planning, the first two occur
"pre-award," while the latter occurs "post-award."* The advantages of
using a consolidated procurement approach include the following:

-   Smaller transit systems lack the personnel and the expertise to
    conduct bus procurements expeditiously, especially in light of
    Federal requirements. Procurement lead times should be greatly
    reduced through a consolidated procurement procedure.

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-   Staff time at the various transit systems and the vehicle
    manufacturers will be saved by eliminating the redundancy in
    conducting multiple bidding processes for the same vehicles.

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-   Quality improvements could result from the buses being manufactured
    in a more standardized fashion.

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-   Savings in transit systems\' operating costs will be realized from
    earlier delivery of new buses, as older vehicles with higher
    operating costs are retired earlier.

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-   It is to be hoped that larger quantity buying would result in better
    prices than a number of smaller individual solicitations.

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-   When common vehicles are purchased, it may result in better overall
    coordination/learning among transit systems in that they will be
    using the same vehicles.

**Advance Planning\--Joint Procurements**

**[Consolidated Procurements]{.underline}** - Various governmental
agencies may act as a facilitator for the award of *multiple contracts*.
This approach is particularly beneficial when dealing with a large

number of grantees. As an example, the New York State Department of
Transportation (NYSDOT) has been using the services of its Office of
General Services (OGS) for many years to purchase vehicles under FTA\'s
Section 5310 Program. Here, six different types of light duty buses are
purchased every year for the 5310 grantees using an OGS bid process
based upon specifications developed, in part, by the grantees
facilitated by NYSDOT. During the OGS bid process, NYSDOT estimates the
number of vehicles to be purchased not only for the 5310 grantees, but
also for other public transportation providers in the State. For the
5310 Program, New York State contracts directly with the successful
manufacturer. The buses are built and delivered directly to the 5310
grantee along with the title. Other public transportation systems within
the state (e.g. 5311 and 5307 grantees) may access these same contracts,
contracting directly with the successful manufacturer. By using this
contracting process, the efficiencies described previously are
maximized.

**[Consortiums]{.underline}** - Consortiums have been used where a
number of systems come together to *jointly issue a solicitation and
immediately award individual contracts* with the successful bidder.
Given the different types of bus configurations (e.g. diesel/CNG; low
floor/ high floor), it may be useful to identify a lead agency for
developing a specification for each type of bus configuration. The
specifications developed would then be reviewed by the other members of
the procuring group, who would provide their comments on the
specification to the lead system. The lead system might modify the
specification based on the comments received, but if the changes were
not in the best interest of the lead system, the changes would be
included as options in the bid package. For example, if the lead system
wanted roll curtain destination signs, and other systems wanted
electronic destination signs, the specification would call for roll
curtain destination signs, and electronic destination signs would be
included under the options to be priced by bidders as part of the bid
package.

The bid advertisement would specifically identify how many buses were
being purchased for

which transit systems. Differences or options in the specification for
each unique system would be identified and prices obtained from the
manufacturers for the various options outside of the base specification.

As an example, New York State has a successful history with a CNG
consortium involving FTA grants. Six major systems formed a consortium,
aided by NYSDOT as a facilitator, to purchase the first CNG buses placed
into service in the State. A single solicitation was used, after which
each transit system awarded its own contract in accordance with the
terms of the solicitation and the winning bid. [^309]

**Piggybacking**

**[Piggybacking and Tag-ons]{.underline}-** FTA Circular 4220.1E sets
forth FTA policy and guidance related to procurements commonly referred
to as "piggybacking" and "tag-ons." These terms are defined in the
Circular as follows:

> *"Piggybacking" is an assignment of existing contract rights purchase
> supplies, equipment or services.* [^310]
>
> *"Tag-on" is defined as the addition of work (supplies, equipment or
> services) that is beyond the scope of the original contract that
> amounts to a cardinal change as generally interpreted in Federal
> practice by the various Boards of Contract Appeals. "In scope" changes
> are not tag-ons.* (See "Tag-on" paragraph below for further
> discussion). [^311]

**[Circumstances When Piggybacking Is Permissible]{.underline} --**
There are a number of issues that should be addressed by a grantee
before deciding to piggyback another agency's contract. Grantees must be
able to affirmatively determine that the contract to be piggybacked
meets Federal requirements. These Federal requirements include
compliance with FTA Circular 4220.1E and the *Dear Colleague* Letter
C-98-25. Grantees are advised to pay particular attention to the
specific issues identified in the Piggybacking Worksheet paragraph
below.

**[Piggybacking Worksheet]{.underline}** -- A Piggybacking Worksheet may
be found in Appendix B.16. The issues referred to in the worksheet that
must be evaluated prior to a decision to piggyback another contract are
as follows:

1.  Have you obtained a copy of the contract and the solicitation
    document, including the specifications and any Buy America Pre-Award
    or Post-Delivery audits?

2.  Does the contract contain an express *assignability clause* that
    provides for the assignment of all or part of the specified
    deliverables? FTA's policy is that the original solicitation must
    contain an *express notification* to all bidders that an assignment
    would be possible under the terms of the contract. Such a
    notification would put the bidders on notice that they would likely
    be called upon to deliver all of the deliverable items, both the
    base as well as the option quantities. The assignment clause would
    thus be an important factor in the original competitive bidding. If
    the contract does not contain an express assignability clause,
    piggybacking is not permitted.

3.  Did the Contractor submit the "certifications" required by Federal
    regulations in accordance with the requirements of this
    solicitation? See the BPPM Section 4.3.3.2. - *Federally Required
    Submissions with Offers*. Piggybacking is not permitted when the
    Contractor has failed to submit the required Federal certifications
    with its bid.

4.  Does the contract contain the clauses required by Federal
    regulations? See the BPPM Appendix A - *Federally Required and Other
    Model Contract Clauses*. Note that not all clauses in Appendix A
    will apply to all contracts -- review each clause for applicability
    to\
    the specific contract to be piggybacked. If a required Federal
    clause is not included in the contract, piggybacking is not
    permitted.

5.  Were the piggybacking quantities included in the original
    solicitation; i.e., were they in the original bid and were they
    evaluated as part of the contract award decision? If not, a *Tag-on
    is not permitted.*

6.  If the contract is an *indefinite quantity contract*, did the
    original solicitation and resultant contract contain both a minimum
    and a maximum quantity, which represent the reasonably foreseeable
    needs of the parties to the solicitation? See BPPM Section 2.2.5.3
    -- *Indefinite-quantity Contracts*, and the paragraph below
    *Indefinite Quantity Contracts, Unlimited Options and Piggybacking.*

7.  If the piggybacking action represents the exercise of an option
    provision in the contract, is the option still valid? Options that
    have expired may not be exercised.

8.  Does your State law allow for the procedures used by the original
    contracting agency; e.g., negotiations vs. sealed bids?

9.  Was a cost or price analysis performed by the original procuring
    agency documenting the reasonableness of the contract price? Include
    a copy in your files.

10. Does the contract term comply with the five-year term limit
    established by FTA 4220.1E, paragraph 7.m?

11. Was there a proper evaluation of the bids or proposals? Include a
    copy of the analysis in your files.

12. What types of changes will you require to be made to the vehicles?
    For an assignment, only "within scope" (non-cardinal) changes are
    allowed (e.g., seating fabrics and colors, paint schemes, signage,
    floor coloring, etc.). For further guidance see BPPM Section
    9.2.1-*Contract Scope and Cardinal Changes*.

**[Indefinite Quantity Contracts, Unlimited Options and
Piggybacking]{.underline}** -- Serious problems arise when agencies
issue solicitations with unlimited quantities, which result in
open-ended contracts which other agencies then piggyback. This practice
creates a number of serious problems; therefore, *unlimited quantities
are not permitted*.

-   Since the rolling stock manufacturers do not know what the potential
    orders may be under the contract, they cannot plan their operations
    nor can they quote prices which reflect the quantities that may be
    produced.

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-   Unspecified quantities result in higher unit prices for the
    procuring agency because manufacturers must use the minimum quantity
    specified to calculate prices for material, engineering, etc.

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-   For these reasons, *open-ended, indefinite quantity/indefinite
    delivery contracts, or contracts with unlimited options are not
    permitted.* They are not only disruptive to bus manufacturers and
    their suppliers, who cannot plan their production schedules given
    the degree of uncertainty that these contracts entail, but they are
    also counter-productive to the grantee community, which will
    invariable pay higher prices for items which were not really
    competed in a "full and open competition."

    **6.3.4 [Pre-Award and Post-Delivery Reviews for Buy America Act
    Compliance]{.underline}**

+-----------------------------------------------------------------------+
| ######### REQUIREMENT                                                 |
+-----------------------------------------------------------------------+
| The FTA Master Agreement, MA(12), Section 15 (l) (3) defines the      |
| following requirements:                                               |
|                                                                       |
| > \(3\) [Pre-Award and Post-Delivery Requirements]{.underline}. The   |
| > Recipient agrees to comply with the 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, and any revision thereto.                                      |
|                                                                       |
| The FTA *Dear Colleague Letter* C-97-03, dated March 18, 1997         |
| provides further guidance to grantees on how to comply with the Buy   |
| America requirements of the Pre-Award and Post-                       |
+-----------------------------------------------------------------------+

  -----------------------------------------------------------------------
  Delivery reviews for rolling stock procurements set forth in 49 CFR
  Part 663. The FTA Administrator's *Dear Colleague* Letter C-97-13,
  dated August 5, 1997, that amended the March 18, 1997 guidance by
  removing axles from the required final assembly activities, was
  subsequently withdrawn by the *Dear Colleague* Letter, C-97-18, dated
  September 25, 1997, which rescinded the August 5, 1997 guidance by
  redirecting grantees and manufacturers to follow the March 18, 1997
  guidance on final assembly requirements for bus procurements.

  -----------------------------------------------------------------------

**DISCUSSION**

**The FTA Administrator\'s *Dear Colleague* Letter C-97-03, dated March
18, 1997, outlines the steps that a grantee must take in performing
pre-award and post-delivery reviews of rolling stock procurements to
ensure their compliance with Buy America Act requirements. This *Dear
Colleague* Letter may be found in Appendix A.2 of the BPPM. This letter
provides guidance to grantees concerning these reviews. It must be
stressed that grantees are to document their reviews and include this
documentation in their contract files as evidence that they have
performed the required reviews. The file documentation must describe the
data and information reviewed by the grantee\'s personnel and the basis
for concluding that the manufacturer has complied with the Buy America
Act requirements, including domestic content, final assembly location
and final assembly activities. Also, where appropriate, copies of
certifications of compliance with or inapplicability of Federal Motor
Vehicle Safety Standards should be included in the file.**

**FTA has also published two manuals that provide detailed guidance to
grantees concerning which Buy America certifications and documents are
needed to support the procurement process \-- from issuance of the
solicitation to title transfer, as well as the procedures that the
grantee may follow when conducting the pre-award and post delivery
reviews. There are also examples of Buy America calculations and
responses to frequently asked questions. **[^312]

**6.3.5 Warranties**

+-----------------------------------------------------------------------+
| # **REQUIREMENT**                                                     |
+-----------------------------------------------------------------------+
| FTA Circular 9030.1C, *Urbanized Area Formula Program: Grant          |
| Application Instructions* states the following:                       |
+-----------------------------------------------------------------------+

#  

# 

+-----------------------------------------------------------------------+
| [Preventive Maintenance]{.underline}. Preventive maintenance, an      |
| expense that became eligible for FTA capital assistance for one year  |
| with the DOT 1998 Appropriations Act, was established as              |
|                                                                       |
| eligible for FTA capital assistance under TEA-21, so FY 1998 funds    |
| and subsequent fiscal year appropriations may be used for preventive  |
| maintenance. Preventive maintenance costs are defined as all          |
| maintenance costs.... [^313]                                          |
|                                                                       |
| #                                                                     |
|                                                                       |
| [Warranty]{.underline}. A warranty that is an industry standard is an |
| eligible capital cost as part of the acquisition of a bus or any      |
| capital asset. [^314]                                                 |
|                                                                       |
| FTA Circular 5010.1C, G*rant Management Guidelines* states the        |
| following:                                                            |
|                                                                       |
| Warranty standards, when part of equipment contracts, should provide  |
| for correction of defective or unacceptable materials or workmanship. |
| These should specify coverage and duration and meet currently         |
| available industry standards. [^315]                                  |
+-----------------------------------------------------------------------+

# 

# **DISCUSSION**

**\"Warranty\" means a promise or affirmation given by a contractor to
the purchaser regarding the nature, usefulness, or condition of the
supplies, equipment or performance of services furnished under the
contract. The principal purposes of a warranty are to delineate the
rights and obligations of the contractor and the purchaser for defective
items and services, and to foster quality performance. The benefits to
be derived from a warranty must be commensurate with the cost of the
warranty to the purchaser.** [^316]

**Many transit agencies purchase or procure equipment with warranties.
Depending upon the item and the contract language, a manufacturer will
then repair or replace any piece of equipment that fails or is otherwise
defective during the warranty period, the commitment to repair or
replace being the \"warranty.\" FTA's grantees that specify and purchase
warranties should appropriately tailor the warranties, including but not
limited to remedies, exclusions, limitations and durations.**

**In many instances an item is customarily warranted in the trade, and,
as a result of that practice, the cost of an item to the purchaser will
be the same whether or not a warranty is included. In those instances,
it would be in the purchaser\'s interest to include such a**

**warranty.** [^317] **In some instances, industry associations such as
the American Public Transit Association or the American Society for
Testing and Materials have developed specifications including warranties
that are recognized as "Industry Standard."**

**Grantees are encouraged to exercise sound business decisions in
structuring broader and more comprehensive warranties than that offered
as a matter of trade practice or as an industry standard (i.e., an
"extended warranty") where such warranties are advantageous and cost
effective. Such business decisions must be based upon market research
and price/cost analysis.**

**For grant eligibility purposes, FTA had historically treated the
customary warranty offered as a matter of trade practice as a *normal*
warranty and *extended* warranties differently. This in turn affected
their cost eligibility differently.**

**Prior to 1998, *normal* warranties were eligible *capital* expenses
and therefore qualified for 80% Federal participation under capital
assistance grants. The Office of Inspector General saw the "extended
warranty" as a form of operating expense, impermissible at the time as a
capital expense. Hence, e*xtended* warranties were classified as
*maintenance* (*operating*) expense and as such were ineligible for
funding under *capital* *assistance grants and were only* eligible for
50% Federal participation under *operating assistance grants*.**

**With the passage of TEA-21 in 1998, FTA revised its policies to
reflect the provisions of the new statute. FTA's new policies are stated
in FTA Circular 9030.1C, *Urbanized Area ***

***Formula Program: Grant Application Instructions,* dated October 1,
1998.** [^318] **Under the new cost eligibility guidelines,
*maintenance* is now an eligible *capital expense*, and there is no
longer a distinction between *normal* warranties and *extended*
warranties, as both are eligible costs. There are, however, procurement
considerations and those are discussed below.**

**With respect to the procurement of warranties, prior to 1998 FTA grant
application guidance identified specific warranty time frames as being
"normal" for each of the major components of vehicles. In 1998, FTA
changed this to allow the grantee\--on the basis of its market
research\--to determine what is customary or "normal."**

**Normal warranty costs are eligible for reimbursement under FTA grants
to the extent that the grantee determines that they are customary or an
industry standard and FTA's other grant requirements are met such as
that contained in FTA's C4220.1E.**

**Similarly, extended warranties are eligible costs to the extent that
(1) the grantee determines what form of warranty would be advantageous
and cost effective as part of the grantee's procurement planning effort,
and (2) extended warranty costs are evaluated separately and determined
to be "fair and reasonable."**

# **Best Practices**

An example of warranty terms is the list developed by APTA in its
*Standard Bus Procurement Guidelines* -- *Commercial Terms and
Conditions* (October 10, 1997). [^319] Among the issues addressed in
APTA's suggested warranty provisions are:

-   Complete Bus -- Suggested Terms

-   Body and Chassis Structure -- Suggested Terms

-   Propulsion System -- Suggested Terms

-   Major Subsystems -- Suggested Terms for Brakes, Destination Signs,
    HVAC, Door Systems, Air Compressor and Dryer, Wheelchair Lift and
    Ramp System, etc.

-   Exceptions to Warranty -- For example, when Procuring Agency has not
    allowed an "equal" requested by the Contractor, and supplier won't
    offer the warranty required by the Procuring Agency;

-   Detection of Defects -- Schedule for notifying Contractor and
    Contractor's response;

-   Fleet Defects -- Contractor's duty to implement corrective work
    program;

-   Repair Procedures -- When repairs may be made by Procuring Agency
    and reimbursed by Contractor;

-   Warranty after Repairs -- Repair parts to have the unexpired
    warranty period of the original part.

**6.4 PROFESSIONAL SERVICES**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| Professional services other than architectural and engineering        |
| services may be obtained through sealed bids, competitive proposals,  |
| or (as the contract value warrants) small purchase or micropurchase   |
| procedures.                                                           |
+-----------------------------------------------------------------------+

  -----------------------------------------------------------------------
  *Procurement of Architectural and Engineering Services (A&E)*. Grantees
  shall use competitive proposal procedures based on the Brooks Act when
  contracting for A&E services as defined in 40 U.S.C. Section 541. Other
  types of services considered A&E services include program management,
  construction management, feasibility studies, preliminary engineering,
  design, surveying, mapping and services which require performance by a
  registered or licensed architect or engineer. . . . This
  \"qualifications based procurement method\" can only be used for the
  procurement of A&E services. It cannot be used to obtain other types of
  services even though a firm that provides A&E services is also
  available to perform other types of services. These requirements apply
  except to the extent any state adopts or has adopted by statute a
  formal procedure for the procurement of architectural and engineering
  services. (FTA Circular 4220.1E, Section 9e).

  -----------------------------------------------------------------------

**DISCUSSION**

Although you may use any of the applicable selection methods described
in Chapter 4 and permitted by state law for professional services, the
competitive proposal method is the most common for procuring
professional services. Special Federal requirements apply to
architectural and engineering services. Even though professional
services such as legal advice, investment advice, auditing or
engineering advice may have been rendered to your agency on a
long‑standing basis, or without a written contract, or by formal
approval at the highest level, such practices do not exempt those
services from the requirements for free and open competition, maximum
five year terms, and written selection procedures.

**Purpose**

You have a requirement to contract for a laboratory to provide testing
for your agency\'s drug and alcohol testing program. You cannot afford
to take a chance on getting a contractor who has little experience, a
poor history of quality control, and an unreliable performance history
in terms of chain of custody. If you have to bid this contract, with low
price being the deciding element, that is apt to be what you get.
Unfortunately, in a few jurisdictions, that is what you may be faced
with. However, in most jurisdictions, the state legislatures have wisely
enacted a procurement policy that exempts professional and personal
service contracts from the strict requirements of the competitive
procurement laws. In those states, competitive sealed proposal statutes,
mini‑\"Brooks Act\" statutes for architect/engineering and related
services, or exemptions from competitive requirements altogether (or a
combination of all of the above) have been enacted. The critical point
is that your state, either legislatively or through statutory
interpretations by the state attorney general or the courts, will allow
you some flexibility in buying professional services because it does not
make sense \"to buy the services of brain surgeon through a low bidder
procurement process.\"

It is important to distinguish between two types of professional
services:

-   [Statutory Professional Services]{.underline} ‑ These are services
    that are clearly spelled out in a statute and procurement process is
    defined for obtaining these services. These are the mini ‑ \"Brooks
    Act\" statutes and include architectural and engineering services.
    The statute may also include some related services or other services
    the legislature has determined should be bought in a multi‑step
    procurement process.

In Texas, for instance, the Texas Professional Services Act defines
\"professional services\" as services within the scope of the practice
of accounting, architecture, land surveying, medicine, optometry or
professional engineering, or are provided in connection with the
professional employment or practice of a person who is licensed as a
certified public accountant, an architect, a land surveyor, a physician
(including a surgeon), an optometrist or a professional engineer. [^320]
Texas has said, as to these contracts or services, that competitive
bidding shall not be used and that the selection and award shall be made
on the basis of \"demonstrated competence and qualifications to perform
the service\" and for a fair and reasonable price. [^321] For
architectural or engineering services, Texas mandates a \"Brooks Act\"
process [^322] and concludes this Act with the public policy statement
that contracts entered into in violation of these provisions are void.
[^323] In all likelihood, your state will have adopted a public policy
on the procurement of statutorily defined professional services that may
be similar to the Texas statute and you should be very knowledgeable of
that statute.

-   [Other Professional Services]{.underline} ‑ Most states offer you
    other ways to avoid strict compliance with competitive bidding laws
    (and, in some states, competitive proposal laws as well) by
    exempting the procurement of professional or personal services from
    following competitive requirements. Thus, it is important to know
    what is considered a professional service for the purposes of this
    exemption under your state\'s law. This may vary from state to
    state. The service usually will involve labor and skills that are
    predominately mental or intellectual rather than physical or manual
    and the providers of the service are members of disciplines
    requiring special knowledge or the attainment of a high level of
    learning, skill and intelligence.

The exemptions are designed to permit the services of the most
qualified, competent and experienced individuals to be obtained and a
recognition that these services can seldom be measured with objective
criteria. In the absence of a statutory definition, these services may
include such professions as attorneys, construction management
consultants, insurance brokers,

physicians, auctioneers, medical laboratory testing, theologians, etc.
You must consult your state law on these issues ‑‑ unlike the statutory
professional services discussed above, most states do not prohibit you
from using a competitive process to obtain the services of these other
\"professionals,\" they just provide an exemption if you choose to use
it.

##### Best Practices

[A&E Services]{.underline} ‑ For the procurement of architectural and
engineering services, the FTA and most state laws mandate a
qualifications‑based procurement process.

[Other Professional Services]{.underline} ‑ For the procurement of
professional services other than A&E services, you generally have a
great deal of flexibility in how you obtain those services. In some
cases, you may be able to adequately and objectively define the services
required and obtain those services through a competitive bidding process
on the basis of low priced bids. In other cases, either because of an
inability to adequately and/or objectively define your requirement or
because of a limitation of your state\'s law, the competitive bidding
method of procurement may not be possible to be used. In that case, a
competitive proposal process may be the best method to use where more
subjective requirements can be evaluated and weighed with the price
offered to arrive at a properly balanced award decision. Depending upon
the statement of work and the estimated dollar value of the procurement,
you may be able to effectively and efficiently use the micro‑purchase
method of procurement (detailed in Section 4.1) or the small purchase
method of procurement. As the stewards of public funds, it is always
important to remember that you are spending tax dollars and to properly
weigh the services you are obtaining against what you are paying for
those services.

Finally, it is possible that the professional services you desire may be
obtained from only one source and, thus, you will select your
professional service provider on the basis of a sole source
(noncompetitive) method of procurement. In this case, you must comply
with the provisions of Section 9.e of FTA Circular 4220.1E as well as
your state law. Again, even though you are negotiating with only one
source for these services, your goal should be to obtain a price that is
fair and reasonable.

6.5 ARCHITECT - ENGINEER SERVICES

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| FTA Circular 4220.1E states:                                          |
|                                                                       |
| > 8.b. [Prohibition Against Geographic Preferences]{.underline} . . . |
| > However, geographic location may be a selection criterion in        |
| > procurements for architectural and engineering (A-E) services       |
| > provided its application leaves an appropriate number of qualified  |
| > firms, given the nature and size of the project, to compete for the |
| > contract.                                                           |
| >                                                                     |
| > 9.e. [Procurement of Architectural and Engineering Services         |
| > (A&E)]{.underline}. Grantees shall use qualifications-based         |
| > competitive proposal procedures (i.e., Brooks Act procedures)       |
+-----------------------------------------------------------------------+
| > when contracting for A&E services as defined in 40 U.S.C. § 1102    |
| > and 49 U.S.C. § 5325(b). Services subject to this requirement are   |
| > program management, construction management, feasibility studies,   |
| > preliminary engineering, design, architectural, engineering,        |
| > surveying, mapping, and related services. [^324]                    |
|                                                                       |
| Qualifications-based competitive proposal procedures require that:    |
|                                                                       |
| > \(1\) An offeror\'s qualifications be evaluated;                    |
| >                                                                     |
| > \(2\) Price be excluded as an evaluation factor;                    |
| >                                                                     |
| > \(3\) Negotiations be conducted with only the most qualified        |
| > offeror; and                                                        |
| >                                                                     |
| > \(4\) Failing agreement on price, negotiations with the next most   |
| > qualified offeror be conducted until a contract award can be made   |
| > to the most qualified offeror whose price is fair and reasonable to |
| > the grantee.                                                        |
|                                                                       |
| These qualifications-based competitive proposal procedures can only   |
| be used for the procurement of the services listed above. This method |
| of procurement cannot be used to obtain other types of services even  |
| though a firm that provides A&E services is also a potential source   |
| to perform other types of services.                                   |
|                                                                       |
| These requirements apply except to the extent the grantee's State     |
| adopts or has adopted by statute a formal procedure for the           |
| procurement of these services. [^325]                                 |
|                                                                       |
| > 9.g [Procurement of Design-Build]{.underline}: Grantees must        |
| > procure design-build services through means of qualifications-based |
| > competitive proposal procedures based on the Brooks Act as set      |
| > forth in Section 9.e when the preponderance of the work to be       |
| > performed is considered to be for architectural and engineering     |
| > (A&E) services as defined in Section 9.e.                           |
+-----------------------------------------------------------------------+

+-----------------------------------------------------------------------+
| > Qualifications-based competitive proposal procedures should not be  |
| > used to procure design-build services when the preponderance of the |
| > work to be performed is not of an A&E nature as defined in Section  |
| > 9.e, unless required by State law. [^326]                           |
|                                                                       |
| ##### The FTA Master Agreement, FTA MA(12), Sect                      |
| ion 15i -- *Architectural, Engineering, Design or Related Services*,  |
| requires grantees, when awarding contracts for architectural, enginee |
| ring, or related services, to accept undisputed audits conducted by o |
| ther governmental agencies for the purpose of establishing indirect c |
| ost rates if such rates are not currently under dispute. This require |
| ment to accept undisputed audits conducted by other governmental agen |
| cies originates in 49 U.S.C. § 5325(b). It should also be noted that  |
| this language has been interpreted by FTA's Chief Counsel's Office as |
|  precluding grantees from imposing (requiring) ceilings (or "caps") o |
| n overhead rates in contracts for architect-engineer services. [^327] |
+-----------------------------------------------------------------------+

##### 

##### DISCUSSION

**[Selection of Contractor]{.underline} - FTA Circular 4220.1E requires
the procurement of A-E services in accordance with the \"qualifications
based procurement methods\" of the Brooks Act. The "A&E services" that
must be procured according to the Brooks Act procedures are defined in
two statutes: 40 U.S.C. § 1102 and 49 U.S.C. § 5325(b). Both of these
statutes must be taken into consideration when deciding what constitutes
"A&E services."**

**The easiest way to conceptualize the requirements of these two
statutes is to first apply the definition in 49 U.S.C. § 5325(b) and
determine if the services are** "**program management, construction
management, feasibility studies, preliminary engineering, design,
architectural, engineering, surveying, mapping, and related services."
If the services fall into one of these categories, they are services
that must be procured pursuant to the Brooks Act.** [^328] **If the
services do not fall into one of these categories, then the three-part
test from 40 USC 1102 must be applied. The three-part test from that
statute states:**

**"The term "architectural and engineering services" means-**

> **(A) professional services of an architectural or engineering nature,
> as defined by State law, if applicable, which are required to be
> performed or approved by a person licensed, registered, or certified
> to provide such services as described in this paragraph;**
>
> **(B) professional services of an architectural or engineering nature
> performed by contract that are associated with research, planning,
> development, design, construction, alteration, or repair of real
> property; and**
>
> **(C) other professional services of an architectural or engineering
> nature, or incidental services, which members of the architectural and
> engineering professions (and individuals in their employ) may
> logically or justifiably perform, including studies, investigations,
> surveying and mapping, tests, evaluations, consultations,
> comprehensive planning, program management, conceptual designs, plans
> and specifications, value engineering, construction phase services,
> soils engineering, drawing reviews, preparation of operation and
> maintenance manuals, and other related services."**

**This is the portion of A&E services that relies on indicators such as
licensing and whether A&E firms normally do the specific sort of task
under consideration. If the function fits within this definition of A&E
services, 'Brooks Act procedures' apply.**

**The Brooks Act (40 USC 1102) defines the competitive procedures to be
used in the selection of A-E firms, and these procedures will apply to
grantee procurements of A-E services unless the grantee\'s State has
adopted formal procurement procedures for A-E services, in which case
the State procedures will govern. A qualifications-based selection
process must be followed for all A-E procurements regardless of dollar
value.**

**The Brooks Act requires a *qualifications based* *procurement method*
for the selection of A-E firms. Price is excluded as an evaluation
factor, and negotiations are conducted with the most qualified firm
only. If an agreement cannot be reached on price with the most qualified
firm, *negotiations are* *formally terminated* *with that firm, thereby
rejecting that firm's proposal, and the grantee cannot return to this
firm at a later date to resume negotiations.* Negotiations are then
conducted with the next most qualified firm. This process continues
until a negotiated agreement is reached which the grantee considers to
be fair and reasonable.**

**[Negotiating Indirect Costs]{.underline}** [^329]

A)  **Grantees must (as a general rule) accept undisputed audits that
    have been conducted by any Federal or State agency of the
    consultant's indirect cost rate if the audit report has been
    developed in accordance with the cost principles contained in the
    FAR Part 31. However, if the audit is conducted by another State
    agency, and the grantee can fully document and justify to FTA why
    the other State agency's audit should not be accepted, then FTA may
    permit the grantee to conduct its own audit.**

> **B) Undisputed audited rates must be used for the purpose of contract
> estimation, negotiation, administration, reporting and contract
> payment. This requirement applies to the undisputed audited rates of
> A&E subcontractors that are performing under cost-reimbursement
> subcontracts as well as prime contractors.**

C)  **If there is more than one audit, the grantee may use whichever
    audit it wishes. However, as a practical matter, the audits should
    have virtually identical results if they are conducted in accordance
    with FAR Part 31. Also, if the audits resulted in different
    findings, it is likely that someone would be disputing one or more
    of the audit findings.**

D)  **If a consultant has not been audited by any Federal or State
    government agency, the grantee or State government agency should
    conduct an audit and become the cognizant agency. However, in the
    case of a consultant contract involving a very small dollar amount,
    the grantee should be able to rely on its own cost and price
    analysis in order to negotiate the contract price.**

E)  **Many consultant firms have multiple indirect cost rates such as a
    national or corporate-wide rate, a regional or State rate, and a
    business segment rate. If a consultant proposes a particular rate
    such as a regional rate or a rate for a particular service (e.g.,
    design services or construction management), that rate must have
    been audited by a cognizant Federal or State governmental agency
    before the grantee would be required to accept it. If another
    governmental agency's audited rate is not applicable to the contract
    in question, the grantee may perform its own audit applicable to the
    unaudited rate. For example, if the consultant has an audited rate
    for design services but not for construction management services,
    the grantee does not have to accept the rate proposed for
    construction management services.**

F)  **Grantees may not require or impose a cap or ceiling on an A&E
    consultant's overhead rates even if the consultant agrees to such a
    cap by contract. The key words here are *require or impose*. In its
    final rule, Section 172.7(b) -- *Audits for Indirect Cost Rate*,
    FHWA made the following concession in response to a Wisconsin DOT
    expressed concern that a State may not be able to accept a lower
    overhead rate freely offered by a consultant firm:**

> ***The FHWA agrees there are many reasons why an overhead rate for a
> firm may be unusually high for a short period of time. In such cases,
> a firm may believe that it would be in its best interest to offer a
> lower rate. The FHWA agrees that a consultant should be free to offer
> a lower overhead rate than the one determined by a cognizant Federal
> or State government agency, and that the contracting agency should be
> free to accept it provided such rate is offered voluntarily by the
> consultant. Under no circumstances, however, shall a contracting
> agency require a lowering of the overhead rate.***

G)  **Grantees may not negotiate an overhead rate that is fixed for the
    entire contract, or for any particular fiscal year, and not subject
    to adjustment based on an audit of actual costs incurred. Grantees
    may, however, use *provisional billing rates* where a billing rate
    is established for a particular contract period and is subject to
    adjustment based on an audit of actual costs incurred for that
    period.**

H)  **If the cognizant Federal or State agency for a consultant is
    behind schedule in finalizing audits and the latest accepted audit
    of indirect cost rates lags by three or four years, the grantee may
    use another agency's audit if it was conducted in accordance with
    the FAR and its findings were undisputed. If an audit has been
    performed by a private firm in accordance with FAR Part 31 and is
    undisputed, that audit could also be used. If there are no audits
    available under these assumed parameters where the cognizant agency
    is three or four years behind, the grantee may conduct its own audit
    in accordance with FAR principles to determine the actual overhead
    rates. Otherwise, the last audit performed by the "cognizant Federal
    or State" agency would be used.**

> []{.mark}

I)  **Grantees may not use a negotiated overhead rate procedure in lieu
    of using the actual undisputed and accepted audit by a cognizant
    Federal or State governmental agency. The reason is that price
    negotiations on the indirect cost rate or any component thereof can
    be viewed as an administrative or de facto ceiling prohibited by 49
    U.S.C. § 5325(b). Nevertheless, the State has the right and
    obligation to negotiate a fair and reasonable total price for the
    contract. Any component of the price, except the indirect cost rate,
    may be negotiated.**

J)  **FTA has elected to follow the provisions of FHWA in its
    implementation of TEA-21 contracting requirements for
    architect-engineer services. FTA is not bound by the FHWA rule,
    however, and may permit exceptions in compelling and unusual
    circumstances.**

##### 

##### Best Practices

The basic approach used to select A-E contractors using Brooks Act
procedures makes use of *Statements of Qualifications*. This basic
approach is outlined below.

# 

# Statements of Qualifications Process

**Consultant Resource File** - Grantees may wish to maintain a
*consultant resource file* with the names of A-E firms and their
respective disciplines, personnel resources, corporate experience, etc.
This file would provide an initial mailing list for issuance of a
request for *Contract-Specific Statements of Qualifications*. The
initial list of potential offerors that a grantee might maintain would
be supplemented by a public announcement of the project, calling for
interested A-E firms to respond to a questionnaire from the grantee
identifying the firm's basic experience and personnel resources. For an
example of a questionnaire used by the Federal Government to identify
potential A-E firms who would then be solicited to submit their
contract-specific qualifications, see the Federal Standard Form 330 (SF
330), *Architect-Engineer Qualifications.* [^330] The SF 330, Part 2, is
the Federal equivalent of a *consultant resource file*. This
questionnaire will provide the following types of information about each
of the firm's branch offices:

-   The location of the company's offices and a point of contact within
    each office.

-   The number of personnel by discipline (e.g., architects, civil
    engineers, geologists, surveyors, soils engineers, etc.).

-   Summary of professional services fees received for each of the last
    five years.

-   Profile of firm's project experience for last five years. The
    questionnaire lists over 100 different types of project codes
    (airports, tunnels, towers, gas systems, etc.)

-   Summary of annual average professional services revenues for last
    three years showing totals for Federal and Non-Federal work.

Note that the SF 330, Part 2, does not ask the A-E firm to identify
specific personnel or approaches that it would propose to use for the
specific project that the grantee is advertising. Project specific
information would come later in a statement of "Contract Specific
Qualifications" (SF 330, Part1) discussed below.

**Public Announcements -** Agencies must publicize requirements for A&E
services in accordance with State law. These notices could be placed in
*local newspapers* and in publications such as *Passenger Transport,
Engineering News Record, Dodge Report,* etc. These notices should
describe the Agency\'s requirements and the criteria to be used in the
evaluation of A-E qualification statements. The public announcements
would advise interested A-E firms to submit expressions of interest to
the procurement office. These expressions of interest may take the form
of a questionnaire regarding the A-E firm's basic resources and
corporate experience, along the lines of the SF 330, Part 2, used by the
Federal Government. From these expressions of interest, and the list of
firms identified in the consultant resource file, the grantee can then
solicit *Project Specific Qualification Statements* from prospective A-E
firms that the grantee judges to have the basic capabilities to perform
the project.

**Pre-proposal Conference** -- Pre-proposal conferences are generally
used in more complex acquisitions as a means of briefing prospective
offerors as to the project requirements as well as the agencies
selection criteria. This allows the firms to better understand the
agency's objectives and ask pertinent questions that will help them in
preparing their proposals or project specific qualification statements
(see below). For further guidance on pre-proposal conferences, see
Section 4.3.2.4 - *Pre-Bid and Pre-Proposal Conferences*.

**Request for Contract/Project Specific Qualification Statements** -
Interested A-E firms would be required to submit their *Project Specific
Qualification Statements* to the procurement office. For an example of a
questionnaire used to solicit project-specific qualifications, see the
Federal Standard Form 330 (SF 330), Part 1, *Contract-Specific
Qualifications*. [^331] The SF 330, Part1, goes beyond the general
information requested in the SF 330, Part 2. Part 1 asks the firm to
identify (1) the proposed project team, showing all firms and their
roles in the project, (2) an organizational chart of the proposed team,
showing the names and roles of all key personnel and the firm they are
associated with, (3) resumes of all key personnel being proposed for the
project, and (4) relevant project experience of each of the proposed
team's firms.

From these Qualification Statements, the grantee's A-E evaluation
committee would score and rank the firms on the basis of their technical
qualifications. It would be advisable not to have a predetermined
cut-off score to determine those firms that are the most qualified.
Scoring should be a tool for the individual committee member to
determine the relative strengths and weaknesses of the firms being
evaluated. Also, it would be best not to determine the most qualified
firms by averaging the individual committee member scores. The numerical
scores should help each member rank the various firms in order to allow
the procurement officer to determine a "short list" for conducting oral
presentations and discussions. Once each committee member has ranked the
firms (using the published evaluation criteria, the relative weights and
scoring system), the committee should meet to discuss the findings of
the individual members and reach a consensus on a ranking of the various
firms.

Some agencies have found a qualitative (adjective) rating system to be
more effective than a numerical scoring system. For example, firms are
evaluated with respect to their qualifications statements in each of the
evaluation criteria elements as being "excellent," "satisfactory," or
"unsatisfactory." After rating each firm's qualifications for each
criterion, the committee members then give each firm an overall
evaluation rating. The overall ratings for the firms are then compared
and the firms with the most "excellent" ratings are short-listed.
Whether you use a numerical or qualitative (adjective) rating system, a
written narrative by each evaluator justifying their decision should be
prepared.

**Request for Technical Proposals** -- If you determine to require
detailed technical proposals after the short list has been determined,
you will need to establish the evaluation criteria to be used in
selecting the successful contractor and to advise the firms of the
criteria in your RFP. Criteria will normally involve such matters as the
following:

[]{.mark}

1.  [Past Performance]{.underline} -- The solicitation should advise
    offerors of your approach in evaluating past performance, including
    evaluating offerors that have no relevant performance history, and
    should also advise offerors to identify past relevant contracts for
    efforts similar to your requirement. The solicitation should also
    allow offerors to provide information on problems encountered on the
    identified contracts and corrective measures taken. This evaluation
    should also consider the past performance of key personnel and
    subcontractors that will perform major or critical aspects of the
    work. This evaluation of past performance, as one indicator of an
    offeror's ability to perform the contract successfully, is separate
    from the responsibility determination discussed in Section 5.1.

[]{.mark}

2.  [Technical Criteria]{.underline} -- Technical factors regarding the
    specific methods, designs, and systems proposed to be used by the
    offeror will be considered and they must be tailored to the specific
    requirements of your solicitation. These factors must represent the
    key technical areas of importance that you intend to consider in the
    source selection decision. *Technical factors should be chosen to
    support meaningful comparison and discrimination between competing
    proposals*. If the agency has established minimum\
    \
    \
    standards for determining technical acceptability of proposals,
    these standards must be clearly set forth in the solicitation.

3.  [Key Personnel]{.underline} -- An evaluation of key personnel is
    often suggested when the procurement involves services or
    requirements where management of the work is a critical factor in
    determining its success. Qualifications and experience of key
    personnel may be an important evaluation factor. Some agencies have
    required oral presentations by key personnel during which the agency
    officials may ask these key personnel relevant questions to
    determine the depth of their knowledge in critical areas.

> []{.mark}

4.  [Specialized Criteria]{.underline} - Grantees may also want to
    include specialized criteria such as experience in complying with
    the Americans with Disability Act requirements and previous work on
    landmark or historic structures.

**Design Competition** -- The question is sometimes raised as to whether
the A&E contractor can be selected on the basis of a conceptual design
competition rather than qualifications statements. The Brooks Act would
permit grantees to select an A&E firm on this basis. The FAR discusses
this approach in Subpart 36.602-1 -- *Selection Criteria,* paragraph
(b). Of course the FAR is not binding on grantees but the Federal
parameters for using design competitions may prove useful to grantees.
Grantees will have to consider the payment of proposal stipends to those
firms that are requested to submit design proposals. [^332] The amount
of the proposal stipend would be uniform for all competitors. It would
almost assuredly attract greater competitive interest and should give
the grantee title to the proposal design concepts since the proposal is
being paid for by the grantee. Against the advantages is the cost to the
grantee of paying for the proposals.

**Architect-Engineer Selection Committee --** When establishing their
A-E Selection Committees, agencies will need to appoint members who have
specific expertise in the disciplines needed for performing the
contract. It would also be well to have a DBE advisor. It may be helpful
to appoint some members to this Committee who are organizationally
outside the engineering office that will be managing the A-E contract.
The problem to be avoided when establishing this Selection Committee is
one of "control;" i.e., care must be taken that one office does not
control the selection process to the point where only a select group of
"favorite" contractors are winning contract awards. This committee
performs the initial review of A-E contractor qualifications and
determines the rankings.

**Developing the Short List** -- Determination of the *short list* or
competitive range of qualified firms with whom oral
discussions/presentations will take place should be the prerogative of
the procurement officer. The short list should be a number appropriate
for adequate competition and

should consist of those firms that have a reasonable chance of getting
the award. These firms would then be invited to make presentations to
the evaluation committee. Grantees should check their state laws to see
if a minimum number of firms is required to be short-listed.

**Oral presentations by A-E firms** -- Having evaluated the
qualifications of the A-E firms who submitted detailed qualification
statements (or technical proposals), and developed the short list of
qualified firms, the A-E Selection Committee would establish a schedule
for each firm to make oral presentations, although presentations are not
always necessary or appropriate. If discussions are necessary, they can
be written or by phone or videoconference. The Committee would advise
the firms in advance of any questions the Committee had regarding the
firm and its capabilities. These questions would be addressed by the A-E
firm at the oral presentation. The Committee may also wish to specify
those key personnel of the A-E firm that should present in order to
answer the Committee's questions. It is important that the user
organization be comfortable with the actual project managers being
assigned to the project, and for this reason the presentations should be
made by the firm's proposed key staff, not by a sales executive.

**Final ranking of A-E firms** - At the conclusion of the oral
presentations, each of the Selection Committee members would perform a
final scoring and ranking of the short- listed firms. These final scores
would then be discussed, and the procurement officer chairing the panel
should strive for consensus -- finding a firm that is valued by most
members and acceptable to the rest. This process should not be a
mechanical "majority-rules" vote. Failure to obtain a consensus can
result in internal fighting if the project gets into difficulty, and can
even create these difficulties. Once an agreement is reached on the
highest qualified firm, that firm is then requested to submit a cost
proposal for negotiation of a contract.

**Contract Negotiations** - The Brooks Act requires a *qualifications
based* *procurement method* for the selection of A-E firms. Price is
excluded as an evaluation factor, and negotiations are conducted with
the most qualified firm only. If an agreement cannot be reached on price
with the most qualified firm, *negotiations are* *formally terminated*
*with that firm.* Once negotiations are terminated, that firm is
irrevocably out of contention for the contract and cannot be brought
back in. Negotiations are then conducted with the next most qualified
firm. This process continues until a negotiated agreement is reached
which the grantee considers to be fair and reasonable.

**In-house Cost Estimate** - One of the biggest problems noted in FTA
Procurement Systems Reviews is the failure of agencies to prepare
detailed in-house cost estimates prior to receiving cost proposals. This
is especially critical in A-E procurements where there are no competing
proposals to provide a comparison. *In order to meaningfully evaluate
and negotiate the A-E firm's cost proposal, it is critical that the
grantee's technical staff prepare a detailed in-house cost estimate
(work estimate) of the work required by the A-E firm before the
solicitation is issue.* In order to be useful as a tool in evaluating
the cost proposal, this in-house estimate needs to be prepared in the
same level of detail that the grantee is requiring the A-E firm to
submit its proposal. In other words, *the grantee's technical staff
prepares its in-house estimate as if the grantee were the contractor
proposing on the contract.* It is also important that grantees require
A-E firms to submit their cost proposals in the same format in which the
in-house estimate was prepared. Grantees should consider issuing their
Request for Proposal with a sample cost proposal format and a list of
position descriptions for each of the direct labor categories used by
grantee's in-house cost estimating team. This should allow for a
one-for-one comparison of the cost proposal and the in-house estimate,
thus facilitating the evaluation and negotiation process.

**Terms and Conditions** - The RFP should contain all of the agency's
required *terms and conditions* (clauses, etc.). This will allow the
contractor to address these terms and conditions in its proposal, which
can then be discussed at negotiations. The A-E contractor should be
advised before it submits its proposal what contract clauses are
negotiable and what are not. This will save both the contractor and the
grantee a lot of needless effort in discussing non-negotiable terms and
conditions. For example, Federally required clauses would not be subject
to negotiation and contractors should be so advised before they put
their proposals together. Any exceptions taken by the contractor to
terms and conditions should be included in the price proposal only. This
will avoid influencing the technical evaluation, and it recognizes that
contract terms involve risk allocation and therefore cost.

**Controlling the Negotiations** - An experienced contract specialist
who can control the meeting should lead the negotiation team. Resource
personnel (engineers, architects, lawyers, cost analysts, etc.) are a
valuable resource to the contract specialist for advice, but these
personnel should not be the ones making business decisions and
committing the agency during the negotiations. Care must be taken that
the contractor does not create a situation where the agency's contract
specialist and resource personnel become divided in their positions.
When the agency's team needs to discuss alternatives or possible
concessions during negotiations, they should do so in private caucuses
and not in the presence of the contractor. There should be one
spokesperson for the agency---the contract specialist---who controls the
meeting.

**Contract Type** -- Grantees will need to choose the type of contract
that is most appropriate for the scope of work anticipated. BPPM Section
2.4.3 contains a discussion of contract types, including fixed price,
cost reimbursement, time and materials, and labor hour contracts. This
section should be reviewed for general guidance as to the circumstances
when each type of contract may be appropriate.

**Indirect Cost Rates** - The FTA Master Agreement requires grantees to
accept undisputed audits of other Federal or State government agencies
for purposes of establishing indirect cost rates that are used for
pricing, negotiation, reporting and contract payments. See the paragraph
above entitled "Negotiating Indirect Costs" in the DISCUSSION section.

**Profit Analysis Factors** *--*Suggested profit analysis factors
include:

-   Skill and expertise of the A-E personnel required for the work,

-   Contract cost risk based on contract type and the degree of risk in
    completing the work within the negotiated price,

-   Potential liability (e.g., third-party liability) of the A-E firm
    based on the nature of the project,

-   Prior performance record of the firm,

-   Degree of contractor investment, as it may contribute to more
    efficient and economical contract performance.

[Profit on Change Orders]{.underline} -- It is common practice in the
construction industry for A-E firms to request increases in their
contract fees/profit based on the percentage increase in the cost of the
construction contract. Grantees should avoid this practice even though
it is commonplace in the construction industry. A-E contractors' profits
should be based on their work effort and should never be negotiated on a
predetermined percentage basis of a cost increase in the contract whose
cost the A-E firm is affecting by its designs. Grantees are prohibited
from any type of cost-plus-percent-of-cost contracting. (See BPPM
Section 2.4.3.5 - *Cost Plus Percentage of Cost Contracts (CPPC).*

**A-E Role in Construction Change Orders, Claims and Litigation** -- The
A-E firm can provide assistance to the agency in the evaluation of
*changes* to the construction contract, whether the changes originate
with the agency or with the construction contractor. When changes are
suggested by the construction contractor, they must be evaluated, before
they are adopted, as to their total system impact on the project, and
the A-E is in the best position to do this. The A-E can also prepare a
cost estimate of the changed work that the grantee can use to evaluate
the construction contractor's price proposal for the change, and the A-E
can assist the grantee in negotiations as a technical resource if the
grantee so desires. The A-E also has a role to play in the evaluation of
*claims* submitted by the construction contractor, although in this case
the A-E's participation is somewhat defensive. For example, the A-E may
be called in to defend its designs or specifications, or the time the
A-E took to review and approve the construction contractor's
documentation, and in this case the A-E's efforts may not be
reimbursable under the terms of the A-E's contract with the agency. The
same would hold true for issues that go to *litigation*---the A-E should
be required to defend its designs and specifications without additional
charge to the agency. Grantees would do well to make this a subject for
an "advance understanding" in their A-E contracts, so that when claims
and litigation occur, the parties will understand their respective
obligations. If the claims or litigation are caused by the agency's
actions, however, and are not due to the A-E's work products or actions,
then the A-E can expect to be reimbursed by the agency for its efforts
in defending the claim and assisting the agency in the litigation.

**ABA Model Procurement Code (MPC) -** The American Bar Association\'s
*Model Procurement Code* Section 5-501, *Architect-Engineer and Land
Surveying Services***,** contains a comprehensive and very worthwhile
presentation of procurement procedures using *Statements of
Qualifications* for the award of A-E contracts. The *MPC* covers the
entire spectrum of events leading to a contract award, with detailed
recommendations for the procuring Agency to follow.

**Federal Procedures** - The Federal Government procedures for procuring
Architect-Engineer services may be found in FAR 36.6,
*Architect-Engineer Services.*

**[A-E Contract Provisions]{.underline}**

**Design within funding limitations** - You may wish to include a clause
requiring the A-E firm to design the project so that the construction
costs do not exceed your budget, an amount that would be stated in the
A-E contract as a "design-to-cost" requirement. If the price offered by
the low bidder in your construction IFB exceeds the stated limit in the
A-E contract, the A-E firm should be responsible to redesign the project
at no increase in the price of the A-E contract. If the higher than
anticipated construction cost is due to reasons beyond the control of
the A-E firm, such as an unexpected increase in the cost of certain
materials, then the A-E firm should not be obligated to redesign the
project at its own expense. Likewise, if the grantee has required
features in the facility that contribute to the bids being in excess of
the budget, then a change order to these requirements may be in order,
and this too would be something beyond the A-E firm's ability to
control, thus relieving the A-E from redesign responsibility. Grantees
will need, therefore, to examine the elements of the construction
contractor's bid to see why the bid price exceeds the "design-to-cost"
amount that the A-E was attempting to achieve. An example of a contract
clause used by one transit agency follows:

::: Definition-Term
**Design Within Funding Limitations** [^333]
:::

[]{.mark}

> A. The contractor shall accomplish the design services required under
> this contract so as to permit the award for the construction of
> the proposed facility at a price that does not exceed the estimated
> construction contract price as set forth in paragraph (C) below.  When
> bids or proposals for the construction contract are received that
> exceed the estimated price, the Agency shall analyze the reasons for
> the excessive prices and, if appropriate, the Contractor shall perform
> such redesign and other services as are necessary to permit contract
> award within the funding limitation. These additional services shall
> be performed at no increase in the price of this contract. However,
> the Contractor shall not be required to perform such additional
> services at no cost to the Agency if the unfavorable bids, or
> proposals are the result of conditions beyond the its reasonable
> control.

 

> B. The Contractor will promptly advise the Director of Purchasing if
> it finds that the project being designed will exceed or is likely to
> exceed the funding limitations and it is unable to design a usable
> facility within these limitations. Upon receipt of such information
> the Director of Purchasing will review the Contractor\'s revised
> estimate of construction cost.  The Agency may, if it determines that
> the estimated
>
> construction cost contract price set forth in this contract is so low
> that award of a construction contract not in excess of such estimate
> is improbable, authorize a change in scope or materials as required to
> reduce the estimated construction cost to an amount within the
> estimated construction contract price set forth in paragraph (C)
> below.

 

> C. The estimated construction contract price for the project described
> in this contract is \$\_\_\_\_\_\_\_\_\_\_\_\_\_.

 

**Design errors or deficiencies** - If the A-E firm\'s designs, drawings
or specifications contain errors or deficiencies, the A-E firm should be
required to correct them at no increase in price to the grantee. When
errors are discovered during construction, A-E's are generally liable
for correction of the drawings at their own cost, and for the difference
between what the "correct" construction will cost (as a change order
issued to the construction contractor) and what it would have cost in
the original contract had the drawings been correct. This includes any
tear-out that needs to be done, etc.

State licensing laws also result in many multi-state A-E's that are set
up as shell companies to hold licenses in different states. Agencies
should obtain a performance guarantee from the parent company in these
situations.

**A-E Insurance** -- Agencies should require A-E's to have *General
Liability* as well as *Errors and Omissions* insurance. When A-E's
propose to be self-insured, agencies must look carefully at the adequacy
of the firm's assets before accepting this self-insurance approach. See
also BPPM Section 6.6 -- *Insurance.*

6.6 INSURANCE

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| 49 CFR Part 19.31 prescribes insurance requirements *for grantees who |
| are institutions of higher education, hospitals, and other non-profit |
| organizations:*                                                       |
|                                                                       |
| > [Section 19.31 Insurance Coverage]{.underline}. Recipients shall,   |
| > at a minimum, provide the equivalent insurance coverage for real    |
| > property and equipment acquired with Federal funds as provided to   |
| > property owned by the recipient. Federally-owned property need not  |
| > be insured unless required by the terms and conditions of the       |
| > award.                                                              |
|                                                                       |
| The Master Agreement, FTA MA(12), Section 20 prescribes insurance     |
| requirements *for all grantees:*                                      |
|                                                                       |
| > a\. [Minimum Requirements]{.underline}. At a minimum, the Recipient |
| > agrees to comply with the insurance requirements normally imposed   |
| > by its State and local governments.                                 |
+-----------------------------------------------------------------------+

+-----------------------------------------------------------------------+
| > b\. [Flood Hazards]{.underline}. To the extent applicable, the      |
| > Recipient agrees to comply with the flood insurance purchase        |
| > requirements of section 102(a) of the Flood Disaster Protection     |
|                                                                       |
| ##### Act of 1973, 42 U.S.C.                                          |
| Section 4012a(a), with respect to any Project activity involving cons |
| truction or acquisition having an insurable cost of \$10,000 or more. |
+-----------------------------------------------------------------------+

##### 

##### DISCUSSION

**The Master Agreement prescribes a requirement that grantees determine
what their individual States require in terms of insurance for
construction projects, and that grantees ensure that their State
insurance requirements, if any, are reflected *in third party
contracts*. The customary approach for insuring against risks associated
with work under third-party contracts is to require contractors to
purchase and maintain insurance coverages that the grantee specifies
within the terms and conditions of the third-party contract. These terms
and conditions would specify the type of insurance required, such as
*workers compensation*, *builder\'s risk*, *general liability*,
*railroad protective insurance*, *automobile*, *errors and omissions*,
etc., as well as the amount of the various coverages required.** [^334]

Under 49 CFR 19.31, institutions of higher education, hospitals, and
other non-profit organizations are required to insure real property and
equipment, which has been acquired with Federal funds, to the same
degree, if any, they insure their own property and equipment. This CFR
requirement pertains to property that has been procured and accepted by
the grantee, and for which title has vested in the grantee. This type of
insurance would be designed to insure against damage or loss to the
property itself, and the grantee would procure this insurance directly
from an insurance company or through an insurance broker, as part of its
annual insurance program for the grantee\'s property and operations.

##### Best Practices

###### Wrap Up Policies

[Construction projects]{.underline} - The traditional method of insuring
the participants on large construction projects has been for each party
(project owner, contractors and subcontractors) to purchase insurance
independently to protect themselves from financial losses. In contrast
with the traditional method, project owners can elect to purchase a
*wrap-up* insurance policy that will cover all the parties involved in
the project. Over the past decade, wrap-up insurance has become
increasingly popular because of the potential for cost savings. In 1998,
for example, wrap-up insurance covered about 300 construction projects
nationwide.

Grantees may want to consider some type of *wrap up* program for their
larger construction projects (those over \$10M). These programs are also
known as *owner controlled insurance programs* (OCIP). A *wrap up* or
*owner-controlled insurance program* is one in which the Transit Agency
procures an insurance program covering all contractors and
subcontractors who will be working on a large construction project or a
family of related construction projects. Typical insurance coverage
would provide for: *workers compensation*, *general* *liability*, and
*\"all risks* *course of construction*\" (sometimes referred to as
*builder\'s risk*). This policy is usually purchased through the
services of an *insurance broker,* who may have been selected through a
competitive RFP. As construction contracts are awarded over the term of
the policy period, the names of the contractors and all subcontractors
are added to the policy as named insureds.

This approach has been used with excellent results. [^335] Among the
advantages noted are:

-   The Agency knows for sure that its contractors/subcontractors have
    adequate insurance coverage.

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-   For *Workers Compensation* insurance there will be premium discounts
    because of the size of the policy. When the insurance is bought as
    one, coordinated policy, rather than procured piecemeal through the
    individual contractors and subcontractors, there will be premium
    discounts. The bigger the policy, the bigger the discount. Other
    premium-saving plans may be available through a wrap-up program.
    Note that the construction contractors are informed in the
    Invitation For Bid (IFB) provisions what insurance the Agency is
    providing, thus permitting the contractors to request credits from
    their insurance companies for that project. The credits to their
    premiums can then be passed along to the agency in terms of lower
    bid prices.

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```
-   Newer and smaller construction contractors may have a difficult time
    getting insurance. This is especially true for small contractors and
    some Disadvantaged Business Enterprises (DBE\'s). A *wrap up
    program* can enhance the Agency\'s DBE\
    participation, as well as the overall competitive environment for
    its construction projects, by enabling more contractors to compete
    for the work.

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```
-   In cases where there is a loss and it is not clear which
    construction contractor or subcontractor is at fault, the injured
    party does not have to prove which company caused the loss, only
    that a loss has occurred, and someone in the group was responsible.
    This greatly reduces the cost of settlement of claims, with obvious
    benefits to the injured parties.

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```
-   By having one insurance company, there will be one insurer\'s safety
    engineer with complete authority over the entire job, thus providing
    better coordination of safety issues.

[GAO Study of Wrap Up]{.underline} - In 1999 the U.S. General Accounting
Office (GAO) completed a study of six major transit and highway projects
using wrap-up insurance. [^336] These projects included several
design-build projects financed by FTA and FHWA. The purpose of the
report was to identify the advantages and disadvantages of wrap-up
insurance over traditional insurance and the factors that can affect the
broader use of wrap-up insurance.

GAO found a number of advantages and disadvantages in using wrap-up
insurance. Their research findings included the following:

> *Major advantages include savings from buying insurance "in bulk,"
> eliminating duplication in coverage, handling claims more efficiently,
> reducing potential litigation, and enhancing workplace safety.
> According to insurance industry officials, wrap-up insurance can save
> project owners up to 50 percent on the cost of traditional insurance,
> or from 1 to 3 percent of a project's construction cost, depending on
> its size. The potential disadvantages of wrap-up insurance include
> requiring project owners to invest more time and resources in
> administration. Project owners must hire additional personnel or pay
> to contract out the management of wrap-up insurance. In addition,
> Project owners could also have to pay large premiums at the beginning
> of the project. However, transportation officials said these costs
> were reasonable.*
>
> *A number of factors can affect the broader use of wrap-up insurance.
> Perhaps the most significant barriers are state systems for workers'
> compensation that, in some states, effectively prevent wrap-up
> insurance by greatly reducing its potential cost savings. Another
> limitation is that a project must be sufficiently large, or contain at
> least a sufficient amount of labor costs, to make wrap-up insurance
> financially viable. Finally, some contractors dislike wrap-up
> insurance because it reduces a contractor's profits from insurance
> rebates.*

[Types of Wrap-Up Insurance Plans]{.underline} - Two types of plans are
available to project owners. One is to pay a flat premium (also known as
a *guaranteed cost plan*). With this plan, premiums remain fixed for the
term of the policy even if a high amount of claims is paid out. This
type of plan is common for small and medium-sized businesses. The second
type of plan is known as a *loss-sensitive plan*. Here the premiums
depend on the policyholder's claims that are actually paid (called
"losses"). A loss-sensitive plan returns a refund for low losses and
charges additional premiums for high losses, thus giving the owner an
incentive to maximize safe operations. Five of the six major projects
studied by GAO used loss-sensitive plans, and all used deductible limits
to lower their insurance costs. [^337]

[Cost Savings]{.underline} - The six projects studied by GAO all claimed
cost savings as a result of using wrap-up insurance. Savings claimed
ranged from \$2.9 million to \$265 million. [^338] Contributing to these
savings were fewer injuries resulting from centralized safety programs,
as well as using bulk buying power, avoiding duplicate insurance
coverage, using more efficient ways to process claims, and reducing
litigation. [^339]

[Centralized Safety Programs]{.underline} - Under traditional insurance,
each contractor and its insurance company may be involved with safety
but typically there is no coordinated safety program. Each contractor
and subcontractor is concerned only for their segment of the work, and
the degree of emphasis placed on safety will vary from contractor to
contractor. Additionally, some of these contractors may be poorly
monitored by their insurance companies at the job site. In contrast, on
projects insured under wrap-up policies, the responsibility for safety
will be centralized in one safety team (including one insurance company)
that oversees all aspects of safety at a job site, with jurisdiction
over all contractors and subcontractors*. It is improved safety,
resulting in fewer injuries, that produces much of the potential savings
from wrap-up insurance*. When l*oss-sensitive plans* are used, the
participants have a compelling financial interest to keep injuries to a
minimum so as to realize insurance rebates. All six projects studied by
GAO claimed reduced injuries as the main basis for their insurance cost
savings. [^340]

[State Insurance Regulations]{.underline} -- Because three-fourths of
the total insurance cost on a construction project can be for *workers'
compensation*, removing it from the project owner's control effectively
eliminates most of the cost savings derived from wrap-up insurance.
[^341] And this is what happens in some states that require contractors
to use the state fund for workers' compensation as the primary insurance
vehicle for construction projects. [^342] Some states, such as Michigan
and Ohio, require owners to obtain prior approval for wrap-up insurance
from the state insurance regulator. Michigan also establishes a minimum
project cost of \$65 million to be

eligible for wrap-up insurance. Oregon limits wrap-up to projects of
\$100 million and will not allow "rolling" different projects (combining
several projects) under one insurance program.

[Developing Insurance Cost Information]{.underline} -- In the six
projects studied by GAO, owners developed cost information for
traditional vs. wrap-up insurance by one of three methods: (1) obtaining
two bids -- one with insurance included (traditional method) and one
with insurance excluded (wrap-up method), (2) removing insurance costs
from existing contracts, or (3) relying on brokers' estimates of
traditional insurance.

[Helping Small and Disadvantaged Businesses]{.underline} -- By providing
insurance coverage to all contractors, including small and disadvantaged
businesses, owners can often improve the degree of participation by
these businesses when they use wrap-up insurance. For example, according
to GAO, the Chicago Transit Authority (CTA) achieved about 30 percent
participation by DBEs in their 1994 Green Line Rehabilitation Project.

[Potential Problems With Wrap Up]{.underline} - Grantees must be
cautious about contractors with poor safety records and high insurance
costs. They can present a problem when the grantee is using an owner
controlled insurance program. Grantees using an OCIP should specify in
their solicitation documents (IFB's, RFP's) that the bidder's past
performance with respect to safety matters will be considered as part of
the grantee's determination of contractor "responsibility." See Section
5.1 *Responsibility of Contractor*.

[Mega-projects]{.underline} - On mega-projects, grantees should consult
with individuals who have had working experience with such projects
because there may be opportunities for innovative techniques. Such
projects lend themselves to creative negotiations with the insurance
companies. FTA regional personnel with such experience may be consulted.
[^343]

[Equipment and Supplies]{.underline} - Equipment contractors would
typically furnish their own insurance coverage for the products they
furnish, except that for *installation* of heavy equipment, the *wrap
up* policy could apply to the installation work. It would be prudent to
do some market research before establishing the insurance limits that
you require the suppliers to have in order to bid on your requirement.
If the limits are too large, it may restrict competition. By calling the
potential bidders in advance, you can determine what insurance limits
are reasonable to stipulate in your IFB or RFP.

[Hazardous materials]{.underline} - When your project requires the
contractor to work with pollutants or any type of hazardous materials
(such as asbestos, waste oil products, parts cleaners, etc.,) *be sure
to have your insurance specialist* *and your environmental safety
officer* *review all of the contractor\'s policies very carefully to
determine if there are any exclusions* *in any of the policies*

*for the type of material involved.* If there is any question in any of
the policies, be sure to have the contractor obtain a rider from his
insurance company removing the exclusion.

**[Architect -Engineer Services]{.underline}** - It is the customary
practice of Architect-Engineer firms to buy *errors and omissions*
insurance to protect against design errors which they may make in the
course of their design work. However, there may be situations where the
cost of insurance for a particular project is very high. This could
occur, for example, when the A-E firm is designing elements of a system,
such as a rapid rail system, which will carry large numbers of
passengers. This situation carries with it the potential for very high
liability in the event of an accident caused by a faulty design of a
system element. In some cases, like these, Agencies have decided to
indemnify their A-E firm against liability arising from design errors or
omissions. When this approach is followed, the A-E firm does not incur
the very high cost of *errors and omissions* insurance, which would have
been passed along to the Agency as a direct cost on their contract. The
money thus saved by the Agency in not having to pay for insurance could
then be deposited in a special self-insurance fund from which future
claims, if any, would be paid. If there are no accidents and claims, the
Agency will realize some extraordinary savings. MARTA elected to use
this indemnification approach with its primary engineering consulting
contractor, and the resulting savings were about \$300,000 annually. Any
decision to adopt this approach is a major one, and obviously entails an
element of risk to the Agency. It should be pointed out that in many
states it is against public policy for one party to indemnify another
against that party's own negligence. Under these circumstances, the type
of indemnity described would be illegal.

6.7 ARTWORK

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| Requirements related to the procurement of artwork in transit         |
| projects may be found in the following documents:                     |
|                                                                       |
| > a\. FTA Circular 9400.1A -- *Design and Art in Transit Projects*,   |
| > dated June 1995.                                                    |
| >                                                                     |
| > b\. 49 CFR Section 18.34 "Copyrights."                              |
+-----------------------------------------------------------------------+

##### DISCUSSION

**FTA Circular 9400.1A provides FTA policy and guidance for the
incorporation of design and art into transit projects funded by FTA.**
[^344] **Some of the more important issues in this Circular concern:**

**1. The eligibility of design and art as eligible costs and guidance
for the incorporation of quality design and art into transit projects
funded by the FTA.**

2\. Flexible guidelines for the amount to be spent on artwork; e.g.,
costs should be at least one half of 1% of construction costs, but
should not exceed 5% of construction costs, depending on the scale of
the project. Funds spent on the artwork should be adequate to have an
impact.

3\. The encouragement of artists to interact with the community
(residents and businesses) on a project.

4\. The Circular has certain specific recommendations for the
procurement of art:

> **a. The selection process should consider use of a variety of artists
> that are capable of working on the project,**
>
> b\. Selection of artists should be by a panel of art and design
> professionals, such as art administrators, artists, curators, and
> architects,
>
> **c. The community surrounding the future facility should participate
> in the selection process -- this may include all levels of
> participation, including generating ideas for the project, supplying
> information, attending panel meetings, and being voting members of the
> panel.**

5.  **Criteria for evaluating specific works of art for commissioning.
    These would include:**

```{=html}
<!-- -->
```
a.  **quality of art or design,**

b.  **impact on mass-transit customers,**

c.  **connection to site and/or adjacent community; art that relates, in
    form or substance to the cultures, people, natural or built
    surroundings, or history of the area in which the project is
    located,**

d.  **appropriateness for site, including safety and scale,**

> **e. durability of materials,**
>
> **f. resistance to vandalism, and**
>
> **g. minimum maintenance.**

##### Best Practices

The size and nature of the project may affect the choice of procedures
to be followed. The guidance here may be most relevant for the
procurement of major art-in-transit projects, and is in fact taken from
the experiences of several transit agencies that have procured or are in
the process of procuring significant artwork for their transit projects.

Grantees should also be familiar with the ten case studies that FTA has
published on its website detailing the "lessons learned" from agencies
that faced a diversity of problems and challenges in bringing their
art-in-transit projects to a successful conclusion. [^345]

##### 

##### A. Maintaining an Artists Registry 

Many States and the U.S. General Services Administration (GSA) maintain
an Artists Registry. The GSA has developed the "GSA National Artists
Registry," which is a database of several thousand contemporary American
artists of all career levels, media, and styles. This registry is used
to solicit expressions of interest from artists whose prior work is of
the type that GSA is interested in considering for their current
project.

The Los Angeles County Metropolitan Transportation Authority (MTA)
maintains a mailing list database of professional artists who are
interested in working on MTA programs. Inclusion on the mailing list is
open to all professional artists on an on-going basis. Artists are
solicited from this mailing database for expressions of interest via
open 'Call for Artists.'

It must be pointed out that some Artists Registries require the
submission of slides and statements of qualifications by artists. They
require considerable time and resources to maintain, and unless
acceptance into the registry is juried, the number of unqualified or
inappropriate artists may expand to the point of rendering the registry
of little or no value. Artists will want to update their slides
periodically, and the handling, storage, database entry and return
mailing may be prohibitive for all but the largest programs.

A more practical approach for most grantee organizations will be to
contact their State's Arts Council and other organizations that maintain
mailing lists of public artists. Examples of these other organizations
would include other transit agencies that have been active in public
artwork programs [^346] and organizations such as Forecast Public
Artworks at [www.forecastart.org](http://www.forecastart.org/) and
Public Art Network (PAN) at
[www.americansforthearts.org](http://www.americansforthearts.org/). This
approach will provide the grantee with an extensive list of artists at
minimal expense to the grantee, and is a much more practical approach
for those grantees that have "one-time" artwork projects and limited
staffing to maintain an expensive Artists Registry or mailing database.

#####  

##### B. The "Call For Artists"

The "call for artists" can be published for national coverage in
publications such as *Public Art Review, Sculpture Magazine, Art In
America, ArtNews, and ArtForum*, and regional periodicals such as, *New
Art Examiner, ArtPapers, and ArtWeek* as well as local newspapers.
However, the experiences of several agencies in advertising have not
been completely satisfactory as far as reaching prospective artists. A
far more successful approach has been to develop the names and addresses
of the artists to be solicited and send them a notice of the commission
opportunities and "Request for Expression of Interest" (RFI) letter. For
example, Southeastern Pennsylvania Transportation Authority (SEPTA)
hired an art consultant who culled a list of candidate artists from
various art foundations. Other agencies have used their State Arts
Council as a resource for listings of artists' names and addresses. As
already discussed, some have gone to the expense of maintaining Artists
Registries and mailing databases to identify candidates who are
contacted directly by mail.

Applicants are normally asked to provide resumes, slides of past work,
copies of published reviews/articles about their work, and perhaps a
videotape of several minutes length. Artists may also be required to
state in their cover letters why they are interested in creating artwork
for the project being advertised and why their work is applicable to an
outdoor transit environment.

##### C. Publicizing the Project's Art Budget

It has been the practice of almost all agencies, including the U.S. GSA,
to publish the agency's budget for the art project at the time the "call
for artists" is released and/or the notices are sent to candidate
artists soliciting their interest in the project. The reasoning behind
the practice is to inform the artists of the relative magnitude of the
project and to establish an evaluation and selection process that will
be based on a "best-value-for-the- money" type of decision, instead of
the more traditional procurement approach of determining the lowest
price proposal that will produce an artwork that meets a predetermined
specification. In other words, agencies want the very best product that
can be obtained with the funds available for art, and there is generally
no motivation to reduce the artwork monetary investment by selecting art
concepts that are less costly but also may be artistically and
aesthetically less rewarding to the agency and the community.

An example of a budget that was published with a "Call to Artists" by
the Metropolitan Council, Minneapolis, MN is shown in Appendix B.18 --
*Hiawatha Line Public Art & Design Budget.* The Call to Artists listed
sixteen commission opportunities, four of which were "Design Only"
commissions, while twelve others were listed as "Design, Fabrication,
and Installation" commissions. The work involved in the various phases
of these commissions was described in the Call to Artists, and the
amount of the commission allocated for each phase was as shown in
Appendix B.18. Note that every commission included the completion of
designs and the preparation of construction drawings within the scope of
the initial contract award. The initial contracts did not, however,
include the Fabrication and Installation Phases. The agency's decision
to involve any particular artist in the Fabrication and/or Installation
Phase was to be

made at the completion of the Design Phase, and was to be related to
such considerations as the artwork design, the artist's interest in
involvement in the Fabrication and Installation Phase, and the agency's
interest in retaining the artist's involvement in those follow-on
phases. The involvement of any particular artist in the Fabrication and
Installation phase could vary from the complete fabrication and
installation of the artwork, fabrication and installation of certain
elements of the artwork coordinated with the installation of other
elements by the project's Design/Builder, oversight of fabrication and
installation by the project's Design/Builder, or in an unusual
situation, no involvement at all. Because the involvement of the artist
might vary in the Fabrication and Installation Phase, the commission
amount associated with this Fabrication and Installation Phase was
estimated as a maximum amount in the published budget. The actual amount
of any fabrication and installation commission was to be determined by
negotiations between the agency and the artist at the conclusion of the
Design Phase depending on the artist's degree of involvement. [^347]

##### D. The Selection Process

[Timing]{.underline} - One of the most important lessons learned from
those who procure artwork is that the artist should be selected and
on-board at a very early date in the design process, preferably at the
inception of the design process as members of the design team. Starting
the artist early with the Architect-Engineer firm that will do the
design work enables the artist to have maximum opportunities for the
artwork. If you wait until the facility is designed already, or
virtually designed, you limit what the artist can do. This is a major
consideration. In order to afford the artist the opportunity to
collaborate with the A/E firm during the design concept phase, the
artist selection process should begin well before the A/E contract is
awarded.

[Methods of Selecting Artists]{.underline} - There are two basic
approaches that have been used to select artists. One involves the
selection of a "short list" of candidates from whom competitive
proposals are solicited and evaluated. These proposals would typically
call for the submission of design concepts, models and/or renderings,
cost proposals, etc. The other approach is one in which the evaluation
is designed to select the artist instead of selecting the best artwork
concept as in the competitive proposal method. This method would produce
a "short list" of the most qualified candidates based on artists'
resumes, slides of previous artwork products, videotapes, the artist's
expected hourly remuneration, etc. Interviews are conducted with the
short-list candidates. Selection then follows the interviews. The latter
approach does not involve the submission of design concepts for the
project being advertised -- the preparation of designs comes after
artist selection. Nor does this approach call for artists to submit the
estimated prices of their artwork because the art has not yet been
designed. It does, however, call for the artists to submit their
proposed hourly rates of remuneration, which fulfills the requirement of
FTA Circular 4220.1E that cost be a factor in the selection process.
Note that cost may in fact be the

least important factor if the grantee so chooses, but it must be
considered in the selection process. A discussion of these two
approaches follows.

[Review of Qualifications to Determine a "Short List" of
Candidates]{.underline} -- Having issued the "call for artists" and
received letters of interest from candidate artists, most agencies (with
participation of an artist selection panel) use a qualifications-based
process to narrow down the candidates to a "short list" of four to seven
candidates. This process of developing the short list would typically be
based on the artist's past work. Resumes and slides of the artist's
previous work would normally be reviewed (by a selection panel) at this
stage of the evaluation process. Artists would not normally be required
to submit a "technical proposal" of their conceptual designs for the
project at this stage.

[Selection after Interviews]{.underline} -- Having determined a "short
list" of candidate artists, agencies' approaches to determine the actual
winning artist may vary. When the project is just beginning and the
artists will be working with the A/E firm to develop design concepts,
the typical approach has been to furnish the short-listed artists with
the community profile and invite them to be interviewed by the selection
panel. The winning artist is then selected on the basis of their past
work and the interview process. An example of the artist selection
criteria which might be used in this type of scenario would be as
follows:

-   Aesthetic quality of previously completed art projects and
    commissions.

-   Applicability and suitability of past work to the specific
    commission opportunities being advertised by the grantee.

-   Appropriateness of previously completed artworks to their sites,
    including safety and scale.

-   Durability and suitability of materials, resistance to vandalism and
    a minimum of maintenance requirements.

-   Experience working with the public and neighborhood communities.

[Soliciting Competitive Proposals]{.underline} -- When the project for
which the art is being procured has already been designed and/or built,
some agencies invite all of the short listed artists to submit proposals
for the project. However, some agencies have required proposals even
when the artist selection process is occurring early in the program,
before the A/E firm has done any design.

When proposals are solicited, and following the submission and
evaluation of these proposals, interviews are then scheduled with all of
the candidates where the artists may present their proposals and the
agency's selection panel may ask questions of the artists. Artists may
be called upon to present a rendering of their proposed artwork (a model
or drawings or written descriptions), a cost proposal, and samples of
the actual proposed material to be used. The cost proposal (budget)
would include costs for design, fabrication, site preparation and
installation, insurance, etc. Since the conceptual designs are probably
the most valuable contribution that the

artists will make, agencies have often felt it equitable to compensate
the artists for this conceptual design work, and they will establish a
uniform amount of money to be paid to each artist for his/her work in
developing the proposal. For example, SEPTA's procurement of artwork for
the Frankford Transportation Center included a "design stipend" of
\$2,500 to each of the semi-finalist artists that were asked to provide
detailed proposals as part of the final

competition. This design stipend of \$2,500 for the semi-finalists was
adequate to generate significant interest from nationally acclaimed
artists. [^348]

This approach of requiring competitive proposals is not without its
problems. The first significant problem will be how to involve the
community during the process of proposal (conceptual design)
development. Community involvement is one of the most important aspects
of the design process and FTA Circular 9400.1A notes it as such. It may
be difficult for community representatives to deal objectively and
interact with the competing artists' designs if competitive proposals
are required. Experience has shown that involvement of community
representatives at this stage produces problems in having to deal with a
number of competing artists and designs, and to reconcile differences of
preference with grantee personnel responsible for artist selection. It
may be easier and perhaps more constructive for community
representatives to work with one artist who has been selected by the
grantee prior to conceptual design development, and then serve as a
major contributor to the process of design development. This affords the
community a design development role during conceptual design work rather
an after-the-fact- role with several artists whose design concepts have
already been formulated. Another consideration is the adequacy of the
design stipend. Will the stipend your agency can afford to pay a number
of artists be adequate to compensate them for research, travel,
community discussions, conceptual design work, models, renderings, etc.?
Consider also whether the rather small stipend and limited time given to
the competing artists will produce the best possible design concepts for
your project, or whether your agency would be better served with
selecting an artist based on the quality and suitability of his/her past
work for your application, and giving this artist more resources and
time to produce the best design concept after collaboration with
community representatives.

##### E. Contracting with the Selected Artist for Design and Fabrication of the Art

[Direct Contract vs. Subcontract with the A/E Firm]{.underline} -- Most
agencies will normally award a prime contract to the artist, although
some have assigned the responsibility of contracting with the artist to
the A/E firm that is doing the facility design.

[Type of Contract]{.underline} -- Because of potential problems with
unsuitable accounting systems for cost reimbursement contracts, grantees
would be advised to consider contract types for artwork that

do not require the auditing of incurred costs. Using a fixed price
contract with the artist would usually be preferable to a cost type
contract.

[Determining a Fair and Reasonable Contract Price]{.underline} -- When
negotiating a contract price with the selected artist, a cost proposal
should be solicited, evaluated and negotiated as with any procurement
for professional services; e.g., a contract with an architect to design
a facility. It is recommended that the grantee consider whether it is
advisable to contract initially for the design phase of the work and
postpone negotiations of the cost/price for fabrication and installation
until the design is completed and approved. This phased approach would
then allow the artist to solicit bids or proposals from fabricators and
installers based on a final design and specifications for fabrication
and installation. The phased approach will avoid the problem of trying
to prematurely guess what the fabrication and installation costs will be
prior to completion of the design. A phased approach will also allow the
grantee and artist to negotiate fixed price contracts for the design
phase and then for the fabrication/installation phase. This in turn will
avoid the pitfalls inherent in cost reimbursement contracting with an
artist that probably does not have a cost accounting system in place
that is suitable for a cost type contract. See the paragraph,
Fabrication Costs, below.

Experience with artwork projects would indicate that the design phase of
the project could be anywhere between 10% and 20% of the total project
budget. For larger projects the design phase costs should represent the
lower end of the range (about 10% of the project budget). Smaller
projects may have a larger percentage (up to 20%) of the project cost
devoted to design activities. The primary reason for this is that the
costs of doing community research, including the travel expenses
associated with this research and discussions with community
representatives, will represent a larger fraction of the total budget
for smaller projects than larger ones. This is not to suggest that the
design phase contract be negotiated as a percent of the total project
budget, only that grantees may wish to apply these historical percents
as a "sanity check" when evaluating the artist's cost proposal for the
design phase. Design budget percentages may also be impacted by the
artist's national/international prominence and recognition. Historical
experience with architectural fees for a variety of construction
projects may prove to illustrate the point being made here. Typical fees
for the most artistic type of building projects have been tabulated by
the

R.S. Means Company, and the fee percentages range from a high of 16% of
total project costs for the smaller projects (\$100K) to a low of 8.3%
for the highest dollar value projects (over \$50M)**.**[^349]

[Determining an Hourly Rate of Compensation]{.underline} - The hourly
rate of compensation for the artist should be proposed by the artist in
his/her cost proposal (along with the other necessary cost elements),
and evaluated by the grantee for reasonableness. The grantee would be
advised to

evaluate the artist's compensation on other projects, as well as what
artists working on similar size public art projects have recently and
historically been paid by other owners. The objective is to determine a
fair and reasonable rate of compensation for the expertise offered by
that particular artist, which will be an important part of the overall
contract price for the design phase.

Determining a fair and reasonable hourly rate of compensation for the
artist may also be extremely helpful if for any reason the grantee
decides to terminate the artist's contract for the convenience of the
grantee. In the event of a termination, the grantee and the artist will
have to negotiate the amount to be paid the artist for his/her efforts
up to the point of termination. Having already negotiated an hourly rate
of compensation as part of the contract negotiations to determine a
price for the design phase contract, the parties will then have an
equitable basis to determine the amount to be paid for the artist's
efforts prior to the termination.

[Payment Provisions -- Design Phase]{.underline} -- Experience has shown
that there may be problems with using standard "progress payment"
clauses where payments are made at regular intervals based upon the
artist's "progress" towards completion of the artwork design. Measuring
progress on an artwork contract may prove to be a very subjective
exercise and one that causes problems for the agency and the artist. A
preferable approach would be to use a "milestone" payments approach
where contractually specified dollar payments are to be made for
achievement of specified milestones.

[Fabrication Costs]{.underline} - When the artist is to be contractually
responsible for fabricating the artwork, the typical scenario will
involve a subcontractor that will do the actual fabrication work. It is
very important that the artist be required to furnish credible cost and
price information regarding fabrication of the artwork so that a
realistic contract price can be negotiated with the artist. Grantees
should not rely on "guestimates" from the artist when the contract price
is being negotiated. There has been a tendency to use the artist's own
cost estimates for fabrication instead of requiring the artist to obtain
realistic cost/price proposals from fabricators. This in turn has led to
some significant cost overruns when the real fabrication cost becomes
known as a result of bids obtained later by the artist. This tends to
happen when the agency's contract with the artist is a
cost-reimbursement or Time and Material type of contract. Owing to the
uncertainties in fabrication costs, agencies may want to contract in
"phases" for the artwork project, where the first phase is for work up
to submission and agency approval of the artist's design, and a second
phase for fabrication and installation support by the artist. This
second phase would be priced using competitive bids from fabricators
following agency approval of the artist's detailed designs.

[Intellectual Property Rights]{.underline} -- Ownership of data and
copyrights may be negotiated by the grantee and the artist under an arts
in transit procurement provided that the Federal interests are
protected. 49 CFR 18.34 -- Copyrights, requires the grantee to include a
clause in the artwork contract that provides FTA a royalty-free,
non-exclusive, and irrevocable license to reproduce, publish or
otherwise use, and to authorize others to use, for Federal Government
purposes, the copyright developed under the grant.

Grantees will want to involve their Legal Counsel in drafting and
negotiating the specific provisions related to rights in the Artwork and
artwork design concept developed under the contract due to stipulations
found in Federal and State laws governing artists' rights. Some of the
more important issues that have been addressed (but not necessarily
resolved as stated) by those procuring artwork have included the
following:

[RIGHTS IN ARTWORK DESIGN AND ARTIST'S SUBMITTALS]{.underline}

> 1\. Copyright: Artist's rights in all drawings, documents, studies
> developed by artist as well as the artwork itself.
>
> 2\. License for FTA: To reproduce, publish or authorize others to use
> for Federal Government purposes, in accordance with 49 CFR Section
> 18.34 -- Copyrights.
>
> 3\. Right of grantee to reproduce (such as photographs and prints):
> For noncommercial purposes (educational, public relations, arts
> promotional, etc.) the Artwork submittals and Artwork Design.
>
> 4\. Right of grantee to distribute reproductions: To the public by
> gift, sale or other transfer of ownership.
>
> 5\. Right of grantee to incorporate the Artwork Design into any
> trademarks or service marks.
>
> 6\. Grantee rights for commercial uses: To be negotiated with the
> artist and the terms to be established in a separate written
> agreement.
>
> 7\. Artwork Design not to be duplicated by artist without grantee's
> written consent.
>
> 8\. Termination of Artist's Rights: Artist's rights terminate with
> death of Artist and do not extend to Artist's heirs, successors or
> assigns.

[RIGHTS IN THE ARTWORK]{.underline}

> 1\. Ownership: Title to pass to the grantee upon installation and
> final acceptance of Artwork. Grantee to have right to donate,
> transfer, or sell the Artwork, or any portion thereof.
>
> 2\. Display: Grantee to have exclusive right to publicly display the
> Artwork and to loan the Artwork to others for purpose of public
> display.
>
> 3\. Reproductions and Adaptations: Grantee to have license to
> reproduce (e.g., photographs and prints) and three-dimensional
> reproductions for noncommercial purposes (educational, public
> relations, arts promotional, etc.) Examples of such\
> \
> reproductions for noncommercial purposes might include: books, slides,
> postcards, posters, tee-shirts, mugs and calendars; reproductions in
> art magazines, art books, newspapers, videos, film and other visual
> media of whatever kind; reproductions in or on world wide web sites,
> internet sites and other electronic media; and reproductions for
> advertising purposes. Reproductions to contain a credit to the Artist
> and a copyright notice.
>
> 4\. Commercial Uses by Grantee: Reproductions for commercial uses are
> only to be made with the mutual consent of the parties; e.g., use of
> the Artwork as background for advertisements, publications, movies,
> television, video and other types of productions or entertainment
> media.
>
> 5\. Artist Credit: All references and all reproductions or adaptations
> of the Artwork will credit the Artwork to the Artist unless Artists
> requests to the contrary.
>
> 6\. Artist's Commitments: Artwork Design not to be duplicated by
> artist without grantee's written consent.
>
> 7\. Future Removal, Relocation or Modification: Grantee to have right
> to remove the Artwork from the site and relocate to another site.
>
> 8\. Repairs and Restoration: Grantee, after consultation with Artist,
> shall have the right to determine when and if repairs and restorations
> are needed. If grantee makes repairs or restoration not approved by
> Artist, Artist shall have the right to sever its association with the
> Artwork.
>
> 9\. Termination of Artist's Rights: Artist's rights terminate with
> death of Artist and do not extend to Artist's heirs, successors or
> assigns.
>
> 10\. Notice of Claims: Artist to give grantee written notice prior to
> asserting any claim pertaining to the Artwork, and the grantee shall
> have not less than 90 days from the date of receipt of claim to cure
> any such claim.
>
> 11\. The right of grantee to incorporate the Artwork into any
> trademark or service marks to be utilized by the grantee and to
> register the same in accordance with state or local law.

##### F. Contracting for Installation of the Artwork

Many times the installation work will be outside the artist's realm of
expertise, especially for work involving construction services. Much
artwork installation will be regulated by the Davis-Bacon Act wage
requirements. For example, modifications to real property, such as the
installation of murals on building walls, will require Davis-Bacon wage
determinations. Agencies may wish to contact their regional Department
of Labor (DOL) office for assistance in

determining the applicability of the Davis-Bacon Act to their artwork
projects. It has been the usual practice to install the artwork under a
construction contract competitively bid. For example, the artwork
installation may be part of the main construction contract for the
project. When this is done, the artist's services are usually obtained
to serve in the role of a consultant to the agency or the A/E firm that
has responsibility for construction oversight.

**Chapter 7**

**7 - [Disadvantaged Business Enterprise]{.underline}**

> 7.1 [Comparison of Old vs. New DBE Rules]{.underline} (6/99)
>
> 7.1.1 [Applicability of DBE Rules to Grantee Programs]{.underline}
> (2/00)
>
> 7.1.2 [Definition of Terms]{.underline} (2/00)
>
> 7.2 [Administrative Requirements]{.underline} (6/99)
>
> 7.2.1 [Who Must Have a DBE Program?]{.underline} (6/99)
>
> 7.2.2 [DBE Liaison Officer]{.underline} (6/99)
>
> 7.2.3 [Required Efforts on Behalf of DBE Financial
> Institutions]{.underline} (6/99)
>
> 7.2.4 [Prompt Payment Mechanisms]{.underline} (6/99)
>
> 7.2.5 [DBE Directory]{.underline} (6/99)
>
> 7.2.6 [Bidders List]{.underline} (6/99)
>
> 7.2.7 [Monitoring Contractors' Performance]{.underline} (2/00)
>
> 7.3 [Goals for DBE Participation]{.underline} (6/99)
>
> 7.3.1 [DOT National Goal of 10%]{.underline} (6/99)
>
> 7.3.2 [Use of Quotas and Set-Asides]{.underline} (6/99)
>
> 7.3.3 [Establishing Overall Goals]{.underline} (2/00)
>
> 7.3.4 [Establishing Overall Goals for Transit Vehicle
> Manufacturers]{.underline} (6/99)
>
> 7.3.5 [Means of Meeting Overall Goals]{.underline} (6/99)
>
> 7.3.5.1 [Race-Neutral Means]{.underline} (6/99)
>
> 7.3.5.2 [Using Contract Goals]{.underline} (6/99)
>
> 7.3.5.3 [Evaluation of Contractor Proposals for DBE
> Participation]{.underline} (2/00)
>
> 7.3.5.4 [Good Faith Efforts to Meet Contract Goals]{.underline} (6/99)
>
> 7.3.5.5 [Counting DBE Participation toward the Goal]{.underline}
> (6/99)

4.  [Certification: Standards and Procedures]{.underline} (2/00)

5.  [Exemptions and Waivers]{.underline} (6/99)

**7.1 COMPARISON OF OLD VS. NEW DBE RULES**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| The Federal Department of Transportation's policies concerning        |
| Disadvantaged Business Enterprise (DBE) participation in programs of  |
| the Federal Transit Administration are set forth in 49 CFR Part 26.   |
|                                                                       |
| 49 CFR Part 26 supercedes the old DBE regulation found at 49 CFR Part |
| 23, subparts A and C through E. [^350] This Part 26 also supercedes   |
| FTA Circular 4716.1A, dated July 26, 1988.                            |
+-----------------------------------------------------------------------+

**DISCUSSION**

**Grantees are encouraged to visit the Web sites of the Department of
Transportation, Office of Small and Disadvantaged Business Utilization
(OSDBU)** [^351] **and the FTA Office of Civil Rights**[^352] **for
current information and guidance on DBE regulations and issues.
Following is a summary of the old vs. the new DBE rules as found at the
Web site of the Office of Small and Disadvantaged Business Utilization
(OSDBU).**

# **Setting and Meeting DBE Goals**

+-----------------------------------+-----------------------------------+
| # **Old Rule -- Part 23**         | # **New Rule -- Part 26**         |
+-----------------------------------+-----------------------------------+
| 1\. Did not use, but also did not | **1. The new rule explicitly      |
| prohibit, quotas. It explicitly   | prohibits the use of quotas. The  |
| authorized set-asides under some  | rule also explicitly prohibits    |
| circumstances. DOT never          | the use of set-asides, except in  |
| penalized recipients for failing  | extreme cases to remedy egregious |
| to meet goals under the old rule, | problems. The rule explicitly     |
| but the text of the rule did not  | provides that recipients will not |
| make the point explicitly.        | be penalized for failing to meet  |
|                                   | their DBE goals.**                |
| 2\. Under the old rule,           |                                   |
| recipients who had less than a    | **2. The new rule views the       |
| ten percent goal had to make a    | statutory 10 percent goal as a    |
| special justification to the      | nationwide aspirational goal,     |
| Department.                       | which does not require that       |
|                                   | recipients set their goals at 10  |
| 3\. Under the old rule, overall   | percent or any other particular   |
| goals were set to achieve the     | level.**                          |
| object of "maximum practicable"   |                                   |
| use of DBEs. The recipient's goal | 3\. Recipients must set overall   |
| could be based directly on the 10 | goals to represent a "level       |
| percent national goal or on the   | playing field"- the amount of DBE |
| recipient's past achievements.    | participation they could          |
|                                   | realistically expect in the       |
| 4\. The old rule did not mandate  | absence of discrimination. This   |
| the use of race-neutral measures  | goal must be based on             |
| or give them priority. There was  | demonstrable evidence of the      |
| no prompt payment requirement.    | availability of ready, willing    |
|                                   | and able DBEs to participate on   |
| 5\. Under the old rule, contract  | your DOT-assisted contracts. The  |
| goals were required on all        | rule gives recipients substantial |
| contracts with subcontracting     | flexibility in the methods they   |
| possibilities, regardless of      | choose to set overall goals.      |
| whether the contract goals were   |                                   |
| needed to meet overall goals.     | 4\. Recipients must obtain as     |
|                                   | much as possible of the DBE       |
| **\                               | participation needed to meet      |
| \                                 | their overall goals through       |
| \                                 | race-neutral measures.            |
| \                                 | Race-neutral measures include     |
| \                                 | such activities as training,      |
| \                                 | technical assistance, bonding     |
| **                                | assistance, business development  |
|                                   | or mentor-protégé programs,       |
| 6\. The old rule employed the     | breaking contracts up into pieces |
| same good faith efforts           | that small businesses can readily |
| mechanism, but did not emphasize  | perform, and awards of prime      |
| as strongly the mandate that      | contracts to DBEs through the     |
| recipients seriously consider     | regular competitive process. One  |
| good faith efforts showings.      | type of race-neutral measure, a   |
| There was no reconsideration      | prompt payment provision, will be |
| provision.                        | required for all subcontractors,  |
|                                   | DBEs and non-DBEs alike.          |
| 7\. The old rule did not have an  |                                   |
| over-concentration provision.     | 5\. Contract goals, or other      |
|                                   | race-conscious measures, must be  |
|                                   | used only to obtain DBE           |
|                                   | participation needed to meet      |
|                                   | overall goals that cannot be      |
|                                   | obtained through use of           |
|                                   | race-neutral measures. Contract   |
|                                   | goals are not required on every   |
|                                   | contract. If recipients are       |
|                                   | over-achieving or under-achieving |
|                                   | their overall goals, they have to |
|                                   | adjust their use of contract      |
|                                   | goals.                            |
|                                   |                                   |
|                                   | **\                               |
|                                   | \                                 |
|                                   | \                                 |
|                                   | \                                 |
|                                   | \                                 |
|                                   | \                                 |
|                                   | \                                 |
|                                   | **                                |
|                                   |                                   |
|                                   | 6\. When there is a contract      |
|                                   | goal, a bidder must make good     |
|                                   | faith efforts to meet it. The     |
|                                   | bidder can do so either through   |
|                                   | obtaining enough DBE              |
|                                   | participation to meet the goal or |
|                                   | documenting the good faith        |
|                                   | efforts it made to do so. The     |
|                                   | rule explicitly provides that     |
|                                   | recipients must not disregard     |
|                                   | showings of good faith efforts,   |
|                                   | and it gives bidders the right to |
|                                   | have the recipient reconsider a   |
|                                   | decision that their good faith    |
|                                   | efforts were insufficient.        |
|                                   |                                   |
|                                   | 7\. If a recipient determines     |
|                                   | that DBE firms are so             |
|                                   | over-concentrated in a certain    |
|                                   | type of work as to unduly burden  |
|                                   | the opportunity of non-DBE firms  |
|                                   | to participate in this type of    |
|                                   | work, it must devise appropriate  |
|                                   | measures to address this          |
|                                   | over-concentration.               |
+-----------------------------------+-----------------------------------+

## Certification and Eligibility

+-----------------------------------+-----------------------------------+
| # **Old Rule -- Part 23**         | # **New Rule -- Part 26**         |
+-----------------------------------+-----------------------------------+
| **1. The old rule did not state a | **1. Applicants must show that    |
| specific standard of proof.**     | they meet size, group membership, |
|                                   | ownership and control standards   |
| **2. The old rule did not have    | by a preponderance of the         |
| either a personal net worth cap   | evidence.**                       |
| for participation or a            |                                   |
| requirement to submit information | **2. Each disadvantaged           |
| concerning personal net worth.**  | individual seeking certification  |
|                                   | for his or her firm must submit a |
| **3. The less specific standards  | notarized certification of        |
| of the old regulation were        | disadvantage and a statement of   |
| interpreted in many varying ways  | personal net worth. If an         |
| by recipients and DOT offices,    | individual's personal net worth   |
| leading to inconsistent and       | (excluding his or her principal   |
| confusing results.**              | residence and his of her interest |
|                                   | in the applicant firm) exceeds    |
| **4. Formerly, a firm that wanted | \$750,000, the person is not an   |
| to work for the State highway     | eligible DBE owner.**             |
| agency, two airports, and three   |                                   |
| transit agencies in the same      | **3. Ownership and control        |
| State had to fill out six         | requirements provide detailed,    |
| application forms and endure six  | specific, clarified standards for |
| certification processes. This     | determining whether to certify    |
| created significant burdens on    | firms. The standards are intended |
| applicants and used recipient     | to resolve many difficult issues  |
| resources inefficiently.**        | that have arisen in the           |
|                                   | implementation of the program.**  |
| **5. The old rule suggested, but  |                                   |
| did not require, administrative   | **4. By February 2002, all the    |
| due process. Recipients'          | transit, airport, and highway     |
| practices varied, and some        | recipients in each State are      |
| recipients' processes were so     | required to agree on a unified    |
| lacking in due process that       | certification program (UCP). This |
| substantively valid decisions     | program must be fully operational |
| were overturned by the courts on  | no later than August 2003. The    |
| procedural grounds. Many          | UCP must provide for "one-stop    |
| recipients erroneously believed   | shopping" for DBE firms applying  |
| that the Department required      | for certification in each State.  |
| annual recertifications, which    | The applicant fills out one form, |
| burdened DBEs and used recipient  | goes through one application      |
| resources inefficiently.**        | process and, if certified, can    |
|                                   | work as a DBE for any DOT         |
| **6. The old rule lacked specific | recipient in the State. There     |
| standards and procedures for      | will be a single DBE directory    |
| certification appeals, resulting  | for the State. The rule allows    |
| in informal and sometimes         | recipients substantial discretion |
| inconsistent handling of          | about the form the UCP will take  |
| certification issues.**           | in each State.**                  |
|                                   |                                   |
|                                   | **5. In certifying or             |
|                                   | decertifying firms, recipients    |
|                                   | must provide administrative due   |
|                                   | process to ensure that procedures |
|                                   | are fair. When a firm is          |
|                                   | certified, it normally stays      |
|                                   | certified for three years, but    |
|                                   | must inform the recipient in      |
|                                   | writing of any changes that would |
|                                   | affect its eligibility and must   |
|                                   | submit an annual affidavit that   |
|                                   | such changes have not taken       |
|                                   | place.**                          |
|                                   |                                   |
|                                   | **6. All certification actions    |
|                                   | begin with a proceeding by a      |
|                                   | recipient. A party dissatisfied   |
|                                   | with the result can appeal to the |
|                                   | DOT Office of Civil Rights. This  |
|                                   | appeal proceeding is an           |
|                                   | administrative review of the      |
|                                   | record of the recipient's action, |
|                                   | and does not involve a new        |
|                                   | hearing before DOT. Recipients    |
|                                   | must promptly implement the       |
|                                   | Department's decision.**          |
+-----------------------------------+-----------------------------------+

## Program Administration

+-----------------------------------+-----------------------------------+
| # **Old Rule -- Part 23**         | # **New Rule -- Part 26**         |
+-----------------------------------+-----------------------------------+
| **\                               | > **\                             |
| 1. There was no program waiver    | > 1. A recipient can apply to the |
| provision in the old rule.**      | > Department for a program waiver |
|                                   | > if it wants to implement the    |
| **3. The inconsistency of DOT     | > program in a way not provided   |
| guidance concerning the old rule  | > for in the rule. If the         |
| led to substantial confusion and  | > Secretary believes that the     |
| was criticized by a General       | > recipient's idea will meet the  |
| Accounting Office report. Greater | > program's objectives, he or she |
| coordination is appropriate in an | > will approve the application.   |
| era of "One DOT."**               | > Waivers can apply to such       |
|                                   | > matters as overall and contract |
| **5. The old rule did not have    | > goals, but program waivers do   |
| similar provisions.**             | > not apply to DBE eligibility    |
|                                   | > standards and procedures, which |
|                                   | > must remain uniform             |
|                                   | > nationwide.**                   |
|                                   | >                                 |
|                                   | > **2. Recipients must submit     |
|                                   | > revised DBE program documents   |
|                                   | > to DOT, reflecting the new      |
|                                   | > rule's changed requirements, by |
|                                   | > September 1999.**               |
|                                   | >                                 |
|                                   | > **\                             |
|                                   | > 3. To avoid confusion and       |
|                                   | > promote consistency and         |
|                                   | > certainty, written guidance     |
|                                   | > about the new rule is valid and |
|                                   | > binding -- and represents the   |
|                                   | > official position of the        |
|                                   | > Department -- only if it has    |
|                                   | > been approved by the DOT        |
|                                   | > General Counsel. Guidance       |
|                                   | > issued under the old rule is no |
|                                   | > longer binding.\                |
|                                   | > **                              |
|                                   |                                   |
|                                   | **\                               |
|                                   | 4. Recipients must begin to       |
|                                   | collect data about the bidders on |
|                                   | their contracts and subcontracts, |
|                                   | for later use in calculating      |
|                                   | overall goals.**                  |
|                                   |                                   |
|                                   | **5. In the near future, DOT will |
|                                   | develop new, uniform program data |
|                                   | reporting and certification       |
|                                   | application forms.**              |
+-----------------------------------+-----------------------------------+

1.  **[Applicability of DBE Rules to Grantee Programs]{.underline}**

+-----------------------------------------------------------------------+
| ### REQUIREMENT                                                       |
+-----------------------------------------------------------------------+
| 49 CFR § 26.3, *To Whom Does This Part Apply,* defines the            |
| applicability of the new DBE regulations in terms of the types of     |
| funds being expended by the recipient. The types of *Federal transit  |
| funds* to which the DBE regulations apply are defined as those        |
| authorized by:                                                        |
|                                                                       |
| a)  Titles I, III, V and VI of ISTEA, Pub. L. 102-240, or             |
|                                                                       |
| b)  Federal transit laws in Title 49, U.S. Code, or                   |
|                                                                       |
| c)  Federal transit laws in Titles I, III, and V of the               |
|     Transportation Equity Act for the 21^st^ Century (TEA-21),        |
|     Pub. L. 105-178.                                                  |
|                                                                       |
| *Stated simply, any third party contract which is awarded by a FTA    |
| grantee and which is funded in whole or in part with Federal DOT      |
| funds, is subject to the DBE regulations in 49 CFR Part 26. It does   |
| not matter whether the Federal funds are for planning, capital or     |
| operating assistance, the DBE rules apply.* *A contract that is       |
| funded entirely with local funds -- without any Federal funds -- is   |
| not subject to the DBE requirements under this rule.*                 |
+-----------------------------------------------------------------------+

**DISCUSSION**

The DBE rules set forth in 49 CFR Part 26 apply to all third party
contracts funded in whole or in part with Federal DOT funds. This does
not mean, however, that every procurement or contract must be reviewed
for DBE participation. The rules give grantees flexibility in when and
how they establish individual contract goals. Certain types of
procurements (e.g., off-the-shelf commodities) may not have
subcontracting opportunities

or be appropriate for DBE goal setting. In other words, the DBE rules
that apply to all

contracts also include guidance and flexibility throughout Part 26 as to
how grantees can comply with this part without subjecting every
procurement to an individual review for DBE participation. If, for
example, the grantee can meet its overall goal through race-neutral
means, then contract goal setting will not be necessary. And where goal
setting is necessary, the rules do not require goals for every contract
nor that every procurement be reviewed for goal setting purposes.

1.  **[Definition of Terms]{.underline}**

+-----------------------------------------------------------------------+
| ### REQUIREMENT                                                       |
+-----------------------------------------------------------------------+
| #### 49 CFR §26.5, *What Do The Terms                                 |
|  Used In This Part Mean,* contains definitions of the terms used in t |
| he new DBE regulation. The definitions of the designated groups inclu |
| ded in the definition of "socially and economically disadvantaged ind |
| ividual" are derived from the Small Business Administration's (SBA) n |
| ew small disadvantaged business program regulation (13 CFR § 124.3).  |
+-----------------------------------------------------------------------+

### DEFINITIONS

> a\) *Disadvantaged business* *enterprise* or *DBE* means a for-profit
> small business concern: (1) That is at least 51 percent owned by one
> or more individuals who are both socially and economically
> disadvantaged, or, in the case of a corporation, 51 percent of the
> stock of which is owned by one or more such individuals; and (2) Whose
> management and daily business operations are controlled by one or more
> of the socially and economically disadvantaged individuals who own it.
>
> b\) *Small business concern* means, with respect to firms seeking to
> participate as DBEs in DOT-assisted contracts, a small business
> concern as defined pursuant to section 3 of the Small Business Act and
> Small Business Administration regulations implementing it (13 CFR part
> 121) that also does not exceed the cap on average annual gross
> receipts specified in 49 CFR §26.65(b). The cap is currently set at
> \$16.6 million in average annual gross receipts over the firm's
> previous three fiscal years. [^353] This amount is adjusted for
> inflation by the Secretary of DOT from time to time. It should be
> noted that a not-for-profit firm may not be certified as a DBE.
> However, a firm owned by an Indian tribe or Alaska Native Corporation
> as an entity may be certified as a DBE.
>
> c\) *Race-conscious* measure or program is one that is focused
> specifically on assisting only DBEs, including women-owned DBEs. The
> use of contract goals is the primary example of a *race-conscious*
> measure in the DBE program, but set-asides and price credits for DBEs
> would also be considered *race-conscious* measures.
>
> d\) *Race-neutral* measure or program is one that is, or can be, used
> to assist all small businesses. While benefiting DBEs, such programs
> are not solely focused on DBE firms. Examples of *race-neutral*
> measures would include outreach programs, technical assistance
> programs, and prompt payment clauses, all of which can assist a wide
> variety of small businesses, not just DBEs. As used in this
> regulation, *race-neutral includes gender neutrality*.
>
> e\) *Set-aside* means a contracting practice restricting eligibility
> for the competitive award of a contract solely to DBE firms.
>
> f\) *Personal net worth* means the net value of the assets of an
> individual remaining after total liabilities are deducted. An
> individual's *personal net worth* does not include: The individual's
> ownership interest in an applicant or participating DBE firm or the
> individual's equity in his or her primary place of residence. An
> individual's *personal net worth* includes only his or her own share
> of assets held jointly or as community property with the individual's
> spouse.
>
> g\) *Socially and economically disadvantaged individuals* means any
> individual who is a citizen (or lawfully admitted permanent resident)
> of the United States and who is --
>
> \(1\) Any individual who a recipient finds to be a socially and
> economically
>
> disadvantaged individual on a case-by-case basis.
>
> \(2\) Any individual in the following groups, members of which are
> rebuttably
>
> presumed to be socially and economically disadvantaged:

(i) "Black Americans," which includes persons having origins in any of
    the Black racial groups of Africa;

(ii) "Hispanic Americans," which includes persons of Mexican, Puerto
     Rican, Cuban, Dominican, Central or South American, or other
     Spanish or Portuguese culture or origin, regardless of race;

(iii) "Native Americans," which includes persons who are American
      Indians, Eskimos, Aleuts, or Native Hawaiians;

(iv) "Asian-Pacific Americans," which includes persons whose origins are
     from Japan, China, Taiwan, Korea, Burma (Myanmar), Vietnam, Laos,
     Cambodia (Kampuchea), Thailand, Malaysia,\
     Indonesia, the Philippines, Brunei, Samoa, Guam, the U.S. Trust
     Territories of the Pacific Islands, Macao, Fiji, Tonga, Kirbati,
     Juvalu, Nauru, Federated States of Micronesia, or Hong Kong;

(v) "Subcontinent Asian Americans," which includes persons whose origins
    are from India, Pakistan, Bangladesh, Bhutan, the Maldives Islands,
    Nepal or Sri Lanka;

(vi) Women;

(vii) Any individual groups whose members are designated as socially and
      economically disadvantaged by the SBA, at such time as the SBA
      designation becomes effective.

```{=html}
<!-- -->
```
h)  *Contract* means a legally binding relationship obligating a seller
    to furnish supplies or services (including, but not limited to,
    construction and professional services) and the buyer to pay for
    them. For purposes of this part, a *lease* is considered to be a
    *contract.*

i)  *Bidders List* -- For the meaning of this term, see Section 7.2.6 --
    *Bidders List.*

7.2.2 ADMINISTRATIVE REQUIREMENTS

**7.2.1 [Who Must Have a DBE Program?]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| #### 49 CFR § 26.21 *Who Must Have a                                  |
|  DBE Program?* requires all FTA recipients who receive \$250,000 or m |
| ore in FTA planning, capital, and/or operating assistance in a *Feder |
| al fiscal year*, exclusive of transit vehicle purchases, and transit  |
| vehicle manufacturers who must submit an overall goal under Sec. 26.4 |
| 9, to have a DBE program meeting the requirements of 49 CFR part 26.  |
+-----------------------------------------------------------------------+

**7.2.2 [DBE Liaison Officer]{.underline}**

+-----------------------------------------------------------------------+
| ### REQUIREMENT                                                       |
+-----------------------------------------------------------------------+
| #### 49 CFR §26.25 *What Is the Requir                                |
| ement for a Liaison Officer?* requires grantees to have a DBE Liaison |
|  Officer who has direct, independent access to the Chief Executive Of |
| ficer concerning DBE program matters. The Liaison Officer must be res |
| ponsible for implementing all aspects of the grantee's DBE program. G |
| rantees must also have adequate staff to administer the DBE program.  |
+-----------------------------------------------------------------------+

### DISCUSSION

**The DBE Liaison Officer will be responsible for overseeing all aspects
of the grantee's DBE program. One area of the Liaison Officer's
responsibility would include acting as an advocate for DBE contractors,
subcontractors and suppliers of any tier on the grantee's contracts. The
DBE Liaison Officer would be available to any DBE who is experiencing
difficulties in the payment process or in any other aspect of the
contract work. The Liaison Officer would be available to investigate
complaints, mediate disputes and recommend remedies to the appropriate
grantee management officials.**

**Some grantees require their contractors to post notices on the job
site, (these notices are provided by the grantee), identifying the DBE
Liaison Officer, and the contractors must require all subcontractors of
any tier to include an appropriate notification in their subcontracts
with DBE firms.**[^354]

**7.2.3 [Required Efforts On Behalf of DBE Financial
Institutions]{.underline}**

+-----------------------------------------------------------------------+
| ### REQUIREMENT                                                       |
+-----------------------------------------------------------------------+
| 49 CFR §26.27\--*What Efforts Must Recipients Make Concerning DBE     |
| Financial Institutions?\--* requires grantees to thoroughly           |
| investigate the full extent of services offered by DBE financial      |
| institutions in the community, and to make reasonable efforts to use  |
| these institutions. Grantees must also encourage prime contractors to |
| use such institutions.                                                |
+-----------------------------------------------------------------------+

**7.2.4 [Prompt Payment Mechanisms]{.underline}**

+-----------------------------------------------------------------------+
| ### REQUIREMENT                                                       |
+-----------------------------------------------------------------------+
| > 49 CFR §26.29\--*What Prompt Payment Mechanisms Must Recipients     |
| > Have?\--* requires grantees to establish a contract clause which    |
| > requires prime contractors to pay subcontractors for satisfactory   |
| > performance of their contracts no later than 30 days from receipt   |
| > of each payment that the grantee makes to the prime contractor.     |
| > This clause must also require the prompt return of retainage        |
| > payments from the prime contractor to the subcontractor within 30   |
| > days after the subcontractor's work is satisfactorily completed.    |
| >                                                                     |
| > This part also discusses other aspects of a prompt payment program  |
| > that grantees may wish to consider, including:                      |
|                                                                       |
| (1) Appropriate penalties for failure to comply,                      |
|                                                                       |
| ```{=html}                                                            |
| <!-- -->                                                              |
| ```                                                                   |
| (1) Prior written consent of grantee for delays in payment of         |
|     subcontractors,                                                   |
|                                                                       |
| ```{=html}                                                            |
| <!-- -->                                                              |
| ```                                                                   |
| (1) Requirement for primes and subcontractors to use alternative      |
|     dispute resolution mechanisms to resolve payment disputes, and    |
|                                                                       |
| (2) Requirement that primes will not be paid for work performed by a  |
|     subcontractor until the prime ensures that the subcontractor is   |
|     paid.                                                             |
+-----------------------------------------------------------------------+

**DISCUSSION**

**Prompt payment provisions are an important race-neutral mechanism that
can benefit DBEs and all other small businesses. Under part 26, all
grantees must include a provision in their DOT-assisted contracts
requiring prime contractors to make prompt payments to their
subcontractors, DBE and non-DBE alike. DBE contractors are significantly
affected by late payments from prime contractors, and lack of prompt
payment constitutes a very real barrier to the ability of DBEs to
compete in the marketplace. Non-DBE contractors are also affected by
late payment problems. A prompt payment requirement applying to all
subcontractors is an excellent example of a race-neutral measure that
will assist all subcontractors.**

**The required contract clause would obligate the prime contractor to
pay subcontractors no later than 30 days from the receipt of each
payment the grantee makes to the prime contractor. Payment is required
only for satisfactory completion of the subcontractor's work. Retainage
would have to be returned within 30 days from the time the
subcontractor's work had been satisfactorily completed, even if the
prime contractor's work had not yet been completed. The number of days
specified in the prompt payment clause for the payment of subcontractors
may be less than 30 days, at the grantee's discretion. Grantees who
already operate under prompt payment statutes may use their existing
authority in implementing this requirement. It may be necessary,
however, to add to existing contract clauses in some cases (e.g., if
existing prompt payment requirements do not cover retainage).**

**Paragraph (e) of § 26.29 lists a series of additional measures that
the regulation authorizes, but does not require, grantees to use. In
addition to the mechanisms suggested by §26.29, another possible
mechanism that grantees should consider would be declaring a prime
contractor to be not responsible for future awards where the contractor
has exhibited a pattern of withholding or making late payments to
subcontractors**.

##### Best Practices

Following are examples of *prompt payment* and *reporting requirements*
(of payments to subcontractors*)* contract clauses used by the Chicago
Transit Authority (CTA). [^355] We would note that the time periods
specified in the CTA clause for payment of subcontractors may be too
aggressive and may not be feasible for all grantees. In any event, FTA
gives grantees discretion in stipulating the payment timelines in their
prompt payment contract clauses.

##### PROMPT PAYMENT TO SUBCONTRACTORS 

A. The Contractor is required to pay all Subcontractors for all work
that the Subcontractor has satisfactorily completed, no later than five
(5) business days after the Contractor has received payment from the
Authority. [^356]

B. In addition, all Retainage amounts must be paid by the Contractor to
the Subcontractor no later than fourteen (14) business days after the
Subcontractor has, in the opinion of the VP Construction, satisfactorily
completed its portion of the Work. [^357]

C. A delay in or postponement of payment to the Subcontractor requires
good cause and prior written approval of the General Manager,
Purchasing.

D. The Contractor is required to include, in each subcontract, a clause
requiring the use of appropriate arbitration mechanisms to resolve all
payment disputes.

E. The Authority will not pay the Contractor for work performed unless
and until the Contractor ensures that the Subcontractors have been
promptly paid for the work they have performed under all previous
payment requests, as evidenced by the filing with the Authority of lien
waivers, canceled checks (if requested), and the Contractor's sworn
statement that it has complied with the prompt payment requirements.
Prime Contractors must submit a prompt payment affidavit, (form to be
provided by the Authority) which identifies each subcontractor (both DBE
and non-DBE) and the date and amount of the last payment to such
subcontractor, with every payment request filed with the Authority,
except for the first payment request, on every contract with the
Authority. (See below for *Prompt Payment Affidavit* developed by CTA).

F. Failure to comply with these prompt payment requirements is a breach
of the Contract, which may lead to any remedies permitted under law,
including, but not limited to, Contractor debarment. In addition,
Contractor's failure to promptly pay its Subcontractors is subject to
the provisions of 50 ILCS 505/9.

## REPORTING REQUIREMENTS DURING THE TERM OF THE CONTRACT

> A. The bidder shall, within five (5) business days of contract award,
> or prior to any work being performed, execute formal subcontracts or
> purchase orders with the DBE firms\
> included in the bid. [^358] These written agreements shall be made
> available to the General Manager, DBE Program, upon request. All
> contracts between the bidder and its subcontractors must contain a
> prompt payment clause as set forth in Section VIII herein.
>
> B. During the term of annual contracts, the bidder shall submit
> regular \"Status Reports of DBE Subcontract Payments\" in a form
> acceptable to the Authority. The frequency with which these reports
> are to be submitted will be determined by the General Manager, DBE
> Program, but in no event will reports be required less frequently than
> quarterly. **In the absence of written notice from the General
> Manager, DBE Program, the bidder's first "Status Report of DBE
> Subcontract Payments" will be due ninety (90) days after the date of
> contract award, with additional reports due quarterly thereafter.**

C. In the case of a one-time procurement with either a single or
multiple deliveries, a "Status Report of DBE Subcontract Payments," in a
form acceptable to the Authority, indicating final DBE payments shall be
submitted directly to the General Manager, DBE Program. The information
must be submitted prior to or at the same time as the bidder's final
invoice to the Authority user department identified in the solicitation.
(NOTICE: The original invoices must be submitted directly to the
Authority's department identified in the contract documents and the
Status Report of DBE Subcontract Payments must be submitted directly to
the General Manager, DBE Program.) **Failure to follow these directions
may delay final payment.**

> D. The address for the General Manager, DBE Program, is: CTA General
> Manager, Chicago Transit Authority, DBE/EEO Programs/Contract
> Compliance Department, 567 West Lake Street, Chicago, IL 60661-1498).

# 

# **PROMPT PAYMENT AFFIDAVIT**

Contractor will place a check in the appropriate box below that applies
to this payment request.

> Re: Payment Request No. \_\_\_\_\_\_\_

I, \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, the
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Name Title (e.g., President, Vice President, etc.)

> of
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
> (\"Company\"), do state the following with regard to payments made
> under Contract No. \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
> (\"Contract\"):
>
> 1\. Subcontractors, at the first tier, both DBE and non-DBE, who
> completed work and were listed for payment on the prior Payment
> Request No. \_\_\_\_\_\_\_, were paid no later than five (5) business
> days after Company received payment from CTA.
>
> 2\. Copies of invoices and cancelled checks for subcontractors at the
> first tier who were paid under the prior payment request have been
> delivered or mailed to the DBE Department. In addition, Company has
> attached to the current Payment Request all lien waivers for prior
> subcontractor payments and any other documentation required by CTA.
>
> (Failure to attach all required documentation to the Payment Request
> or forward cancelled checks and invoices to the CTA DBE Department may
> cause the Payment Request to be rejected by CTA.)
>
> 3\. All retainage amounts withheld from any subcontractor who
> satisfactorily completed its portion of the contract work, including
> punch list items, were paid to the subcontractor(s) no later than
> fourteen (14) business days after it satisfactorily completed its
> work, whether or not CTA has paid said retainage amounts to Company.
> Attach a copy of the cancelled check evidencing payment of each
> retainage amount.
>
> 4\. There was no delay in or postponement of any payment owed to a
> subcontractor, whether periodic payment or retainage amount, except
> for good cause and after receipt of prior written approval from the
> CTA Purchasing Agent.
>
> Attach a copy of the written approval from the CTA Purchasing Agent.

+------------------------------+---------------------------------------+
| Subscribed and sworn to      | \_\_\_                                |
|                              | \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\ |
| before me this               | _\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ |
| \_\_\_\_\_\_\_\_             |                                       |
|                              | Company Name                          |
| day of \_\_\_\_\_\_\_\_      |                                       |
| 20\_\_\_                     | \_\_\_                                |
|                              | \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\ |
| \_\_\_\_                     | _\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ |
| \_\_\_\_\_\_\_\_\_\_\_\_\_\_ |                                       |
| \_\_\_\_\_\_\_\_\_\_\_\_\_\_ | Signature                             |
|                              |                                       |
| Notary Public                | \_\_\_                                |
|                              | \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\ |
|                              | _\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ |
|                              |                                       |
|                              | Print Name                            |
|                              |                                       |
|                              | Date:                                 |
|                              | \_\_\_\_\                             |
|                              | _\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ |
+------------------------------+---------------------------------------+

**7.2.5 [DBE Directory]{.underline}**

+-----------------------------------------------------------------------+
| #### **REQUIREMENT**                                                  |
+-----------------------------------------------------------------------+
| 49 CFR §26.31 *What Requirements Pertain to the DBE Directory?*       |
| requires grantees to compile and update at least annually a directory |
| or source list of all firms eligible to participate as DBEs in the    |
| grantee's programs. The listing for each firm must include its        |
| address, phone number, and the types of work the firm has been        |
| certified to perform as a DBE. This directory is to be made available |
| to interested persons, including contractors and the public on        |
| request.                                                              |
+-----------------------------------------------------------------------+

**DISCUSSION**

**Grantees must maintain directories of DBE firms that have been
certified to do work as DBEs. The information required for the Directory
includes the name, address, phone number, and the types of work the firm
has been certified to perform as DBE. The primary purpose of the
Directory is to show the results of the certification process. Since
certification under the DBE rule pertains to the various kinds of work a
firm's disadvantaged owners can control, it is important to list those
kinds of work in the Directory. For example, if a firm seeks to work in
fields A, B, and C, but the grantee has determined that its
disadvantaged owners can control its operations only with respect to A
and B, then the Directory would recite that the firm is certified to
perform work as a DBE in fields A and B.**

**The focus of the Directory is intended to be eligibility. A Directory
is intended to permit interested firms to contact the DBEs. The
Directory is not intended to be a comprehensive business resource
manual. For example, information about firms' qualifications,
geographical preferences for work, performance track record,
capitalization, etc. are not required to be part of the Directory.**

**7.2.6 [Bidders List]{.underline}**

+-----------------------------------------------------------------------+
| ### REQUIREMENT                                                       |
+-----------------------------------------------------------------------+
| 49 CFR §26.11 *What Records Do Recipients Keep and Report?* requires  |
| grantees to create and maintain a *bidders list*, consisting of all   |
| firms bidding on prime contracts and bidding or quoting subcontracts  |
| on DOT-assisted projects. For every firm, the following information   |
| must be included:                                                     |
|                                                                       |
| (1) Firm name,                                                        |
|                                                                       |
| (2) Firm address,                                                     |
|                                                                       |
| (3) Firm's status as a DBE or non-DBE,                                |
|                                                                       |
| (4) The age of the firm,                                              |
|                                                                       |
| (5) The annual gross receipts of the firm.                            |
+-----------------------------------------------------------------------+

### DISCUSSION

**The *bidders list* is intended to be a count of all firms that are
participating, or attempting to participate, on DOT-assisted contracts.
The list must include all firms that bid on prime contracts or bid or
quote subcontracts on DOT-assisted projects, including both DBEs and
non-DBEs. DOT believes that *bidders lists* are a promising method for
accurately determining the availability of DBE and non-DBE firms, and
DOT believes that developing bidders data will be useful for grantees.
Creating and maintaining a bidders list will give grantees another
valuable way to measure the relative availability of ready, willing and
able DBEs when setting their overall goals. (See section
7.3.3\--*Establishing Overall Goals*.) The DOT regulations do not impose
any procedural requirement as to how the data is collected. Grantees are
free to choose how they collect the required data. DOT suggests that
grantees consider using a widely publicized public notice or a widely
disseminated survey to encourage all firms that have bid on the
grantees' contracts to make themselves known to the grantee. Once the
list of bidders has been created, grantees will need to supplement this
information with the age of each firm (since establishment) and the
annual gross receipts of the firm (or an average of its annual gross
receipts). Grantees can gather this additional information by sending a
questionnaire to the firms on the list, or by any other means that the
grantee believes will produce reliable information. The grantee's plan
for how to create and maintain the list and gather the required
information must be included in its DBE program.**

7.  **[Monitoring Contractors' Performance]{.underline}**

+-----------------------------------------------------------------------+
| ### REQUIREMENT                                                       |
+-----------------------------------------------------------------------+
| 49 CFR §26.37 *What Are a Recipient's Responsibilities for Monitoring |
| the Performance of Other Program Participants?* requires grantees to  |
| establish a monitoring and enforcement mechanism to verify that the   |
| work committed to DBEs at contract award is actually performed by the |
| DBEs.                                                                 |
+-----------------------------------------------------------------------+

**DISCUSSION**

**DOT has avoided prescribing monitoring and enforcement mechanisms for
grantees. The Department is looking for grantees themselves to define a
strong and effective set of monitoring and compliance provisions in
their DBE programs. These mechanisms could be almost anything available
to the grantee under Federal, State or local law (e.g., liquidated
damages provisions, responsibility determinations, suspension and
debarment rules, etc.). The results that grantees must measure consist
of payments actually made to DBEs, not just promises at the award stage.
Credit toward goals can be awarded only when payments (including, for
example, the return of retainage payments) are actually made to DBEs.
Grantees must keep a running tally of the extent to which, on each
contract, performance had matched promises. Prime contractors whose
performance fell short of original commitments would be subject to the
compliance mechanisms the grantee had made available.**

**Best Practices**

Suggestions for monitoring contractor's performance would include:

a)  Requiring adequate justification when a prime contractor proposes to
    substitute a non-DBE subcontractor.

b)  Conducting status reviews of contractor's compliance at regularly
    scheduled project meetings.

c)  Requiring written monthly or quarterly reviews of the contractor's
    performance in meeting goals.

d)  Requiring the contractor to propose plans to cure and then implement
    those plans when the contractor is failing to meet the contract
    goals.

**7.3 GOALS FOR DBE PARTICIPATION**

**7.3.1 [DOT National Goal of 10%]{.underline}**

### 

### DISCUSSION

#### **There is a statutory goal that not less than 10 percent of the transit funds authorized are to be expended with DBEs. Under the former part 23, the 10 percent goal derived from the statute played a role in the setting of overall goals by grantees. For example, if grantees had a goal of less than 10 percent, the rule required them to make a special justification to FTA. *The new rule makes clear that the 10 percent goal is an aspirational goal that applies to the Department of Transportation on a national level, not to individual grantees or their contractors.* The national goal of 10 percent is not tied to grantees' goal-setting decisions. Grantees set goals based on what will achieve a level playing field for DBEs in their own programs, without regard to the national DOT goal. Grantees are not required to set their overall or contract goals at 10 percent or any other particular level. Nor are grantees required to make a special justification if their overall goals are less then 10 percent.**

**7.3.2 [Use of Quotas and Set-Asides]{.underline}**

+-----------------------------------------------------------------------+
| ### REQUIREMENT                                                       |
+-----------------------------------------------------------------------+
| 49 CFR § 26.43\--*Can Recipients Use Quotas or Set-Asides as Part of  |
| This Program?\--* prohibits the use of quotas for DBEs on             |
| DOT-assisted contracts under any circumstances. Set-asides are not    |
| permitted except in limited and extreme circumstances to redress      |
| egregious instances of discrimination.                                |
+-----------------------------------------------------------------------+

**DISCUSSION**

**The DBE program does not set aside a certain percentage of contracts
or dollars for a specific set of contractors. The DBE program is a goals
program, which encourages participation without imposing rigid
requirements of any type.**

***Quotas* are not permitted under any circumstances. A *quota* is a
simple numerical requirement that a contractor must meet, without
consideration of other factors. For example, if a grantee sets a 12
percent goal on a particular contract and refuses to award the contract
to any bidder who does not have a 12 percent DBE participation, either
refusing to look at showings of good faith efforts or arbitrarily
disregarding them, then the grantee has used a quota. Bidders must make
good faith efforts to meet contract goals where such goals are stated,
but grantees may not deny a contract to a bidder simply because it did
not obtain enough DBE participation to meet the goal. Grantees must
seriously consider bidders' documentation of good faith efforts. If
bidders make good faith efforts to meet contract goals, they have
complied with the intent of the DBE regulations, even if their good
faith efforts fail to meet the actual contract goal.**

***Set-asides* are not permitted except in extreme circumstances to
redress extreme instances of discrimination. A contracting agency sets a
contract aside for DBEs if it permits no one but DBEs to compete for the
contract. Firms other than DBEs are not eligible to bid. A grantee may
use a set-aside under part 26 if other methods of meeting overall goals
are demonstrated to be unavailing and the grantee has legal authority
independent of part 26. DOT believes that set-asides should not be used
in the DBE program unless they are absolutely necessary to address a
specific problem when no other means would suffice*. Set-asides are a
last resort.***

**7.3.3 [Establishing Overall Goals]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| 49 CFR §26.45\--*How Do Recipients Set Overall Goals?\--* requires    |
| grantees to set an overall goal for DBE participation in their        |
| DOT-assisted contracts. The overall goal must be based upon           |
| demonstrable evidence of the relative availability of DBEs in the     |
| grantee's own market. Section 26.45 also furnishes examples of        |
| methods that grantees may use to develop a base figure for the        |
| *relative availability of DBEs* in their particular market. The       |
| methods suggested include the use of DBE Directories, Census Bureau   |
| Data, Bidders Lists, etc. Goals must be submitted to FTA by August 1  |
| of each year. Public participation is also required in establishing   |
| an overall goal; i.e., consultation with minority, women's and        |
| general contractor groups, and other organizations that could have    |
| information concerning the availability of DBEs, as well as public    |
| notices announcing the proposed overall goal and its rationale.       |
+-----------------------------------------------------------------------+

**DISCUSSION**

**"Establishing Overall Goals" is not normally a procurement office
function DBE. Program administrators should seek guidance from the US
DOT Office of Small and Disadvantaged Business Utilization
(<http://osdbu.dot.gov/>).**

**7.3.4 [Establishing Overall Goals for Transit Vehicle
Manufacturers]{.underline}**

+-----------------------------------------------------------------------+
| ### REQUIREMENT                                                       |
+-----------------------------------------------------------------------+
| 49 CFR §26.49\--*How Are Overall Goals Established for Transit        |
| Vehicle Manufacturers?\--* requires grantees to obtain a              |
| certification from each transit vehicle manufacture that desires to   |
| bid or propose upon a DOT-assisted transit vehicle procurement that   |
| it has complied with the requirements of 49 CFR §26.49. Grantees may, |
| however, with FTA approval, establish project-specific goals for DBE  |
| participation in the procurement of transit vehicles in lieu of       |
| complying through the overall goal-setting procedures.                |
+-----------------------------------------------------------------------+

**DISCUSSION**

**49 CFR §26.49 requires transit vehicle manufacturers (TVMs) to
establish and submit for FTA approval an annual overall percentage goal
for DBEs. Part 26 continues the older rule that was in part 23 for TVMs.
TVMs must set their goals based on the principles in**

**§26.45. Grantees are required to obtain a certification from TVMs that
wish to bid or propose on DOT-assisted transit vehicle procurements, or
alternately, grantees may, with FTA approval, establish a
project-specific goal for DBE participation.** [^359] **The APTA
*Standard Bus Procurement Guidelines* provide a sample *solicitation
provision* and a *certification* to be signed by the TVM's authorized
official.**[^360]

5.  **[Means of Meeting Overall Goals]{.underline}**

    1.  **[Race-Neutral Means]{.underline}**

  -----------------------------------------------------------------------
  **REQUIREMENT**

  49 CFR §26.51\--*What Means Do Recipients Use to Meet Overall
  Goals?\--r*equires grantees to meet the maximum feasible portion of
  their overall goal by using *race-neutral* means of facilitating DBE
  participation. This Section includes examples of *race-neutral* steps
  that grantees can take to facilitate DBE participation. In any year in
  which the grantee expects to meet part of its goal through race-neutral
  means and the remainder through contract goals, the grantee must
  maintain data separately on DBE achievements in those contracts with
  and without contract goals, respectively. This data must be reported to
  FTA.
  -----------------------------------------------------------------------

**DISCUSSION**

**One of the key points of the new DBE rule is that, in meeting overall
goals, grantees have to give priority to *race-neutral* means. By
*race-neutral* means (a term that includes gender neutrality for
purposes of this rule), DOT means outreach, technical assistance,
procurement process modification, etc.---measures that can be used to
increase opportunities for all small businesses, not just DBEs, and *do
not involve setting specific goals for the use of DBEs on individual
contracts.* Whenever a DBE receives a prime contract because it is the
lowest responsible bidder, the resulting DBE participation was achieved
through race-neutral measures. Similarly, when a DBE receives a
subcontract on a project that does not have a contract goal, its
participation was also achieved through race-neutral measures.**

***Race-neutral* means include, but are not limited to, the following:**

(1) **Arranging solicitations, times for the submission of bids or
    proposals, quantities, specifications, and delivery schedules in
    ways that facilitate participation by DBEs, and other small
    businesses. Examples might include the unbundling of large contracts
    to make them more accessible to small\
    businesses, requiring or encouraging prime contractors to
    subcontract portions of work that they might otherwise perform with
    their own forces, etc.;**

(2) **Providing assistance in overcoming limitations such as inability
    to obtain bonding or financing (e.g., by such means as simplifying
    the bonding process, reducing the bonding requirements, eliminating
    the impact of surety costs from bids, and providing services to help
    DBEs, and other small businesses, obtain bonding and financing;**

(3) **Providing technical assistance and other services;**

(4) **Carrying out information and communications programs on
    contracting procedures and specific contract opportunities (e.g.,
    ensuring the inclusion of DBEs and other small businesses on grantee
    mailing lists for bidders; ensuring that prime contractors receive
    lists of potential subcontractors; provision of information in
    languages other than English, where appropriate);**

(5) **Implementing a supportive services program to develop and improve
    immediate and long-term business management, record keeping, and
    financial and accounting capability for DBEs and other small
    businesses;**

(6) **Providing services to help DBEs, and other small businesses,
    improve long-term development, increase opportunities to participate
    in a variety of kinds of work, handle increasingly significant
    projects, and achieve eventual self-sufficiency;**

(7) **Establishing a program to assist new, start-up firms, particularly
    in fields in which DBE participation has historically been low;**

(8) **Ensuring distribution of the DBE Directory, through print and
    electronic means, to the widest feasible universe of potential prime
    contractors; and**

(9) **Assisting DBEs and other small businesses to develop their
    capability to utilize emerging technology and conduct business
    through electronic media.**

    2.  **[Using Contract Goals]{.underline}**

+-----------------------------------------------------------------------+
| ### REQUIREMENT                                                       |
+-----------------------------------------------------------------------+
| 49 CFR §26.51(d)\--*What Means Do Recipients Use to Meet Overall      |
| Goals?\--r*equires grantees to establish contract goals to meet any   |
| portion of their overall goal that they do not project being able to  |
| meet using *race-neutral* means. Grantees may use contract goals only |
| on those DOT-assisted contracts that have subcontracting              |
| possibilities. Further, grantees are not required to set goals on     |
| every DOT-assisted contract, nor must they set a particular contract  |
| goal at the level of the overall goal. The particular contract goal   |
| will depend on the type of work involved, the location of the work,   |
| and the availability of DBEs for the work of the particular contract. |
| However, over the period covered by the overall goal, grantees must   |
| set contract goals so that they will cumulatively result in meeting   |
| any portion of the overall goal that they do not project being able   |
| to meet through the use of race-neutral means. If the grantee's       |
| approved projection indicates that it can meet its entire overall     |
| goal through race-neutral measures, the grantee must implement its    |
| program without setting contract goals during that year.              |
+-----------------------------------------------------------------------+

**DISCUSSION**

**The expressed priority for race-neutral means does not preclude the
use of race-conscious measures, such as contract goals, by grantees. The
rule simply requires grantees to get the maximum feasible DBE
participation through race-neutral measures. The first step is to
establish an overall goal and estimate, in advance, what part of the
goal can be met through the use of race-neutral measures. This
projection is furnished to FTA at the time the overall goal is
submitted, and is subject to FTA approval. The grantee uses
race-conscious measures (e.g., sets contract goals) to get the remainder
of the DBE participation it needs to meet the overall goal. If the
grantee expects to meet its entire overall goal through race-neutral
means, it could, with FTA approval, implement its program without any
use of contract goals.**

**Grantees will most likely use a combination of race-neutral and
race-conscious measures. It is important that grantees keep accurate
records of contract awards to DBEs through race-neutral vs.
race-conscious methods. The grantee's actual experience with the methods
will enable the grantee to adjust the methodology it uses to achieve its
future overall goal. For example, a grantee that was consistently able
to meet its overall goal using only race-neutral measures would never
need to use contract goals.**

**The new DBE rule makes clear that contract goals are not required on
all contracts. The rule also states that the contract goal need not be
set at the same level as the overall goal. For example, if a grantee has
an overall goal of 11 percent, it does not have to set a contract goal
on each contract. Nor does it have to establish an 11 percent goal on
each contract where it does set a contract goal. The idea is for the
grantee to set contract goals that, cumulatively for the year, bring in
enough DBE participation, which when added to the participation expected
from race-neutral measures, will result in achieving the overall goal.**

### Best Practices

When grantees must use contract goals to meet their overall goal,
grantees need to review candidate procurements to determine if they
afford subcontracting opportunities for DBE participation. DBE
subcontracting goals are to be established based on the known
availability of qualified DBEs**.** Grantees can obtain information
about certified DBE firms from their State or local government offices
as well as the Federal *Small Business Administration*, which publishes
a listing of certified small businesses and small disadvantaged
businesses on their *Pro-Net* Internet site. *Pro-Net* is an
Internet-based database of information on more than 171,000 small,
disadvantaged, 8(a) and women-owned businesses. This data is free to the
general public as a resource for those seeking contractors and
subcontractors and/or partnership opportunities. Businesses profiled on
the *Pro-Net* can be searched by SIC codes; key words; location; quality
certifications; business type, ownership race and gender; E.I.
capability, etc.[^361] Of course, grantees are required to maintain a
current *Directory* of DBE sources in order to facilitate the
establishment of specific contract goals and to assist prime contractors
in identifying potential DBE subcontractors. See Section 7.2.5, *DBE
Directory*, above.

Grantee initiatives to promote DBE participation in their third-party
contracts would include such steps as:

-   Reviewing all purchase requisitions above a certain dollar threshold
    or for certain types of work (e.g. construction and professional
    services), to determine if DBE goals should be required.

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-   Encouraging bidders to divide their total requisitions, where
    appropriate, into economically feasible units, tasks or quantities
    so as to permit maximum DBE participation.

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```
-   Stressing the importance of DBE participation at pre-bid/proposal
    conferences, with guidance to bidders and proposers as to the
    resources available to them in locating potential DBE subcontractors
    and suppliers (such as the Small Business Administration's *Pro-Net*
    database).

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```
-   Targeting advertisement notices in minority-owned newspapers in
    addition to other newspapers of general circulation.

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```
-   Extending the bidding time to allow contractors to identify DBE
    firms and permit their certification where necessary. This technique
    was used by the Metro-Dade Transit Agency on a procurement for
    technical, computer-related end items where DBE firms with the
    technical expertise to perform the work were not certified. Allowing
    an extended proposal period permitted the prime contractors to
    locate DBE subcontractors and have them certified.[^362]

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<!-- -->
```
-   Including a prominent notification in all "Notice of Award Letters"
    similar to that used by NYC Transit:

> *Your contract contains a Disadvantaged Business Goal of
> \_\_\_\_\_\_%. The Contract requires that you submit work schedules
> and copies of executed subcontract agreements for your proposed DBE
> subcontractors within 30 days of the date of this award letter. You
> are further required to submit monthly reports of your progress toward
> meeting these goals, on the forms provided in the contract
> documents*.[^363]

-   Inviting your DBE program office to participate on all selection
    committees for procurements that require DBE subcontracting goals.

    2.  **[Evaluation of Contractor Proposals For DBE
        Participation]{.underline}**

::: Definition-Term
**DISCUSSION**
:::

::: Definition-Term
**There are two practices for submission of DBE information by offerors\
**
:::

-   ::: Definition-Term
    **Offerors may be required to complete their DBE submissions,
    including either the list of proposed DBE subcontractors and
    amounts, or the proof of good faith efforts, with their offers. This
    approach is typical of professional service contracts; or**
    :::

-   ::: Definition-Term
    **Offerors may be required only to promise compliance with the
    program in their offers, postponing submission of the list of
    subcontractors (or proof of good faith efforts) until determination
    of the apparent low bidder.**
    :::

**When determining compliance with DBE requirements, two scenarios are
possible:**

-   **The proposer/bidder submits information indicating that the DBE
    goals will be met; or**

-   **The proposer/bidder submits information indicating that the DBE
    goals will not be met.**

The following are best practices to follow for the two scenarios:

**[Scenario 1: Proposer/bidder submits information that the DBE goals
will be met]{.underline}**

**[Required Information]{.underline} ‑ The information submitted by the
offeror must include**

-   **Names of DBE subcontractors/suppliers participating in the
    contract. DBEs must be eligible (those that are currently certified
    or that can be certified prior to award);**

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```
-   **A description of the work each DBE is to perform or the products
    to be provided by the DBE, with an indication of the percentage of
    the work to be done by the DBE's own work forces, as compared with
    that which will be subcontracted by the DBE to other DBEs or
    non-DBEs; and**

```{=html}
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```
-   **The dollar value of each proposed DBE subcontract, including the
    dollar values of subcontracts to be awarded by the DBE
    subcontractor.**

**[Counting DBE Participation]{.underline} ‑ Having received the above
information, verify the counting of DBE participation towards the goal
using the criteria set forth above in section 7.3.5.5, *Counting DBE
Participation Toward the Goal*.**

**If the goal has been met satisfactorily, the award process can
continue. If the goal has not been met even though the offeror stated
that it will, you should assess the cause for differing conclusions;
notify the offeror and seek additional information, or consider
documentation of good faith efforts as provided by your DBE program and
procedures.**

-   **If you have required evidence of compliance from all offerors with
    their offers, giving the offeror an additional opportunity may,
    depending on your program and procedures, appear to give the offeror
    an unfair chance to re‑evaluate its offer after submission. You
    apparently have either a mistake or an offer that does not comply
    with the terms of your solicitation. In the former case, you should
    follow the guidance on mistakes in Section 4.4.5, \"Bid Mistakes.\"
    In the latter case, you may work with the offeror to reconcile the
    difference if your DBE program provides for that opportunity; if
    your program provides it, all offerors could have expected the**
    **opportunity and it would not give the offeror a gratuitous or
    unfair second chance to evaluate its offer.**

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```
-   **However, if you requested evidence be submitted only after
    selecting the apparent awardee, you may work freely with the offeror
    to reconcile the discrepancy, as all offerors should expect the
    opportunity to provide information regarding responsibility and
    similar determinations made prior to award.**

**If these steps conclude with the offeror meeting the goal or
demonstrating good faith efforts to meet the goal, you can proceed with
the award. If these steps conclude without the offeror meeting the goal
or demonstrating good faith efforts to meet the goal, you can eliminate
the offer and proceed to the next ranked offer.**

**[Scenario 2: Offeror submits information that the DBE goals will not
be met.]{.underline}**

**[Required Information]{.underline} ‑ Documentation of good faith
efforts by the proposer/bidder is required in all cases where the
proposer/bidder fails to meet the stated goal for DBEs. As discussed
above, the solicitation may require that good faith efforts be
accomplished prior to bid opening or that good faith efforts be
accomplished prior to the receipt of best and final offers. Where the
shopping period is permitted after final submission of offers, good
faith effort requirements are established accordingly.**

**Your agency\'s DBE program** **should include guidelines for
determining and evaluating good faith efforts by proposers/bidders.
Criteria for determining whether a good faith effort was made can
include those factors discussed in section 7.3.5.4\--*Good Faith Efforts
to Meet Contract Goals*.**

If the proposer/bidder has satisfactorily demonstrated good faith
efforts, the award process must continue. If not, the offer should not
be accepted, and you may proceed to the next best offer (next lowest
bid, or next highest score proposal, depending on your agency\'s DBE
program components). In either case, the proposer/bidder\'s good faith
effort documentation, as well as your written evaluation of that
material, are important entries in the contract file. This is a
potential protest area and should be well‑documented.

2.  **[Good Faith Efforts to Meet Contract Goals]{.underline}**

+-----------------------------------------------------------------------+
| ### REQUIREMENT                                                       |
+-----------------------------------------------------------------------+
| 49 CFR §26.53\--*What Are the Good Faith Efforts Procedures           |
| Recipients Follow?\--* requires grantees to award a contract that     |
| requires a DBE goal to a bidder/offeror who has made *good faith      |
| efforts* to meet the goal. A *good faith effort* is defined as one    |
| where the bidder:                                                     |
|                                                                       |
| (1) Documents that it has obtained enough DBE participation to meet   |
|     the goal; or                                                      |
|                                                                       |
| (2) Documents that it made adequate good faith efforts to meet the    |
|     goal, even though it did not succeed in obtaining enough DBE      |
|     participation to do so.                                           |
|                                                                       |
| Appendix A to Part 26 -- *Guidance Concerning Good Faith Efforts,*    |
| provides grantees with suggested types of actions that they should    |
| consider when making judgments as to whether bidders/offerors have    |
| used good faith efforts. Grantees are specifically prohibited from    |
| ignoring bona fide good faith efforts.                                |
|                                                                       |
| It follows from the above that grantees, in a negotiated procurement, |
| may not give extra credit (higher evaluation scores) to an offeror's  |
| proposal if it exceeds the grantee's subcontracting goal, nor less    |
| credit (lower scores) to a proposal that cannot achieve the full DBE  |
| goal. The DOT requirement is that the offeror make good faith efforts |
| to meet the goal, and if this is demonstrated by the offeror the      |
| grantee cannot penalize the offeror in the proposal evaluation and    |
| contract award process.                                               |
|                                                                       |
| If a grantee determines that an otherwise successful bidder/proposer  |
| has failed to meet the good faith efforts requirement of this Part,   |
| the grantee must provide the bidder/proposer an opportunity for       |
| *administrative reconsideration*. The requirements that grantees must |
| follow in the administrative reconsideration process are outlined in  |
| 49 CFR § 26.53(d).                                                    |
+-----------------------------------------------------------------------+

## DISCUSSION

**The types of actions that grantees should consider as part of the
bidder's good faith efforts would include, but not be limited to, the
following:**

(1) **Adequate solicitation of DBEs (through all reasonable and
    available means), with sufficient time for DBEs to respond to the
    solicitation;**

(2) **Selecting portions of the work to be performed by DBEs in order to
    increase the likelihood that the DBE goals will be achieved;**

(3) **Providing interested DBEs with adequate information about the
    plans, specifications and requirements of the contract in a timely
    manner;**

(4) **Negotiating in good faith with interested DBEs. The fact that
    there may be some additional costs involved in finding and using
    DBEs is not in itself sufficient reason for a bidder's failure to
    meet the contract goal, as long as the costs are reasonable. Prime
    contractors are not, however, required to accept higher quotes from
    DBEs if the price difference is excessive or unreasonable.**

(5) **Not rejecting DBEs as being unqualified without sound reasons
    based on a thorough investigation of their capabilities.**

(6) **Making efforts to assist interested DBEs in obtaining bonding,
    lines of credit, or insurance as required by the grantee or
    contractor.**

(7) **Making efforts to assist interested DBEs in obtaining necessary
    equipment, supplies, materials, or related assistance or services.**

(8) **Effectively using the services of available minority/women
    community organizations and other organizations to provide
    assistance in the recruitment and placement of DBEs.**

**In determining whether a bidder has made good faith efforts, grantees
may take into account the performance of other bidders in meeting the
contract goal. For example, if the apparent successful bidder failed to
meet the goal, but meets or exceeds the average DBE participation
obtained by other bidders, grantees may view this as evidence of the
bidder having made good faith efforts.**

The CFR allows discretion to grantees in when they require
bidders/proposers to submit their good faith efforts documentation. This
may be required: (a) as a matter of responsiveness with initial bids
under sealed bid procedures; (b) as a matter of responsiveness with
initial proposals under contract negotiation procedures; or (c) as a
matter of responsibility at any time before the grantee commits itself
to the performance of the contract by the bidder/proposer. [^364]

> **In those procurements where bidders/proposers are required to submit
> their DBE participation information and good faith efforts with the
> initial bid/proposal as a matter of responsiveness, they are to be
> evaluated on the basis of that information, and may be rejected if the
> information presented is not satisfactory. (See however, the
> requirement for administrative reconsideration noted above in the
> Requirements block.) During the course of the negotiation process,
> changes may be made to the contract scope that affect either the need
> for some DBE subcontractors or the level of their participation. In
> that event, the agency should request that the proposer adjust its
> subcontract plan to maintain or enhance the DBE participation, and
> should require each proposer to submit a final DBE participation plan
> as part of its Final Proposal Revision (Best and Final Offer).**

# 

# **Best Practices**

Following is a solicitation provision used by the Chicago Transit
Authority (CTA) describing the types of actions that CTA would consider
as demonstrating *good faith efforts* on the part of a bidder. [^365]

**GOOD FAITH EFFORTS**

> In order to be responsive, a bidder must make good faith efforts to
> meet the DBE participation goal set forth in the contract. The bidder
> must document the good faith efforts it made in that regard. Thus, the
> Bid submitted to the Authority must be accompanied by written
> documentation prepared by the bidder evidencing all of its sufficient
> and reasonable good faith efforts toward fulfilling the goal. These
> efforts must be active steps, and ones, which could reasonably be
> expected to lead to sufficient DBE participation to meet the contract
> DBE participation goal. Mere *pro forma* efforts are not acceptable
> and will be rejected by the General Manager, DBE Program.
>
> Good Faith Efforts require that the bidder consider all qualified
> DBEs, who express an interest in performing work under the contract.
> This means that the bidder cannot reject\
> a DBE as unqualified unless the bidder has sound reasons based on a
> thorough investigation of the DBE's capabilities. Further, the DBE's
> standing within its industry, membership in specific groups,
> organizations or associations and political or social affiliation (for
> example, union vs. non-union employee status) are not legitimate
> causes for the rejection or non-solicitation of bids in the
> Contractor's efforts to meet the contract DBE participation goal.
>
> The following list, which is not exclusive or exhaustive, sets forth
> the types of actions, which indicate good faith efforts on the part of
> a bidder to meet the DBE goal. The extent and type of actions required
> will vary depending on such things as industry practice; the time
> available for submitting a bid and the type of contract involved.

A. Attendance at a pre-bid meeting, if any, scheduled by the Authority
to inform DBEs of subcontracting opportunities under a given
solicitation.

B. Advertisement in general circulation media, trade association
publications, and minority-focus media for at least twenty (20) days
before bids are due. If 20 days are not available, publication for a
shorter reasonable time is acceptable.

> C. Written notification to capable DBEs that their interest in the
> contract is solicited.
>
> D. Documentation of efforts to negotiate with DBEs for specific
> sub-contracts including at a minimum:
>
> 1\. The names, addresses, and telephone numbers of DBEs that were
> contacted and the date(s) of contact.
>
> 2\. A description of the information provided to DBEs regarding the
> plans and specifications for portions of the work to be performed.
>
> 3\. A statement explaining why additional agreements with DBEs were
> not reached.
>
> E. For each DBE the bidder contacted but rejected as unqualified, the
> reason for the bidder's conclusion.
>
> F. Documentation of efforts made to assist the DBEs contacted that
> needed assistance in obtaining bonding or insurance required by the
> bidder or the Authority.
>
> G. Documentation of efforts to utilize the services of small business
> organizations, community and contractor groups to locate qualified
> DBEs.
>
> H. Documentation that the bidder has broken out contract work items
> into economically feasible units in fields where there are available
> DBE firms to perform the work.
>
> I. Evidence that adequate information was provided to interested DBEs
> about the plans, specifications and requirements of the contract, and
> that such information was communicated in a timely manner.
>
> J. Documentation of any efforts made to assist interested DBEs in
> obtaining necessary equipment, supplies, materials or related
> assistance or services.

**GOOD FAITH EFFORTS RECONSIDERATION**

> If it is determined that the apparent successful low bidders have
> failed to meet the requirements of the contract goal/good faith
> efforts, the Authority will provide them with ONE opportunity for
> administrative reconsideration, before the Authority awards the
> contract. This reconsideration will include the following:
>
> A. The bidder will be permitted to either provide written evidence or
> to present oral argument at a pre-scheduled time that the
> documentation it submitted with its bid met the DBE goal and/or showed
> good faith efforts to do so. No new evidence of good faith efforts may
> be presented after the bid submission deadline.
>
> B. The Authority's Reconsideration Officer will review the evidence
> presented by the bidder and issue a written determination that the
> bidder has: 1) met the DBE goal; 2) not met the DBE goal but has made
> adequate good faith efforts to do so; or 3) has not met the DBE goal
> and the good faith efforts made were not adequate.
>
> C. The decision of the Authority's Reconsideration Officer is final
> and may not be appealed to the Authority, its funding agencies or the
> USDOT.
>
> D. The Authority will not award a contract to any bidder who does not
> meet the contract DBE participation goal or show good faith efforts to
> meet that goal. Thus, it is essential that all bidders submit ALL
> relevant documentation concerning the DBE goal and/or good faith
> efforts in the envelope or package containing their sealed bid.

**7.3.5.5 [Counting DBE Participation toward Goals]{.underline}**

+-----------------------------------------------------------------------+
| # **REQUIREMENT**                                                     |
+-----------------------------------------------------------------------+
| 49 CFR § 26.55\--*How is DBE Participation Counted Toward Goals?\--*  |
| sets forth the criteria to be used in counting DBE participation      |
| toward DBE contract goals. Grantees should refer to this section and  |
| not rely solely on the discussion below since the section may contain |
| relevant additional details not included here.                        |
+-----------------------------------------------------------------------+

**DISCUSSION**

**49 CFR § 26.55 defines the methodology for counting DBE participation
toward contract goals. *Grantees must be familiar with the details of
this section, not all of which are discussed here.* The basic principles
of this section are summarized below:**

1.  **When a DBE participates in a contract, you count only the value of
    the work actually performed by the DBE toward DBE goals.**

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```
(a) **For construction contracts, count the entire amount of that
    portion of the contract that is performed by the DBEs own forces,
    including the cost of supplies purchased and equipment leased by the
    DBE for the work.**

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```
(a) **For professional, technical, consultant or managerial services
    contracts, count the entire amount of fees or commissions charged by
    a DBE firm for providing a bona fide service, or for providing bonds
    or insurance specifically required for the performance of a
    DOT-assisted contract, provided you determine the fee to be
    reasonable and not excessive as compared with fees customarily
    allowed for similar services.**

(b) **When a DBE subcontracts part of the work of its contract to
    another firm, the value of the subcontracted work may be counted
    toward DBE goals only if the DBE's subcontractor is itself a DBE.
    Work that a DBE subcontracts to a non-DBE firm does not count toward
    DBE goals.**

**2. When a DBE performs as a participant in a joint venture, count a
portion of the total dollar value of the contract equal to the distinct,
clearly defined portion of the work that the DBE performs with its own
forces toward DBE goals.**

**3. Count expenditures to a DBE contractor only if the DBE is
performing a *commercially useful function* on that contract. This
section sets forth a number of criteria for determining when a DBE is
performing a *commercially useful function*. Included among these
criteria for determining when a DBE is performing a commercially useful
function is a requirement that the DBE perform or exercise
responsibility for at least 30 percent of the total cost of its contract
with its own work force, or that the DBE does not subcontract a greater
portion of the work of a contract than would be expected on the basis of
normal industry practice for the type of work involved. Grantee
decisions on commercially useful functions matters are subject to review
by FTA, but are not administratively appealable to DOT. This section
also contains detailed guidance for: (i) determining whether a DBE
*trucking company* is performing a *commercially useful function*, and
(ii) how to count DBE participation under several scenarios, including
DBE ownership of the trucks and circumstances when the trucks are leased
from a non-DBE owner.** [^366]

**4. For expenditures with DBEs who supply materials or supplies, this
section establishes rules for counting DBE participation based upon
whether the DBE is a manufacturer or a regular dealer. For expenditures
with DBE manufacturers, count 100 percent of the cost of the materials
or supplies. For expenditures with DBEs who are regular dealers, count
60 of the cost of the materials or supplies.**

**5. For purchases of materials and supplies from a DBE, which is
neither a manufacturer nor a regular dealer, do not count any portion of
the cost of the materials and supplies toward DBE goals. However, fees
or commissions charged by a DBE for assistance in the procurement of the
materials and supplies, or fees or transportation charges for the
delivery of materials or supplies required on a job site, may be counted
toward DBE goals, provided they are reasonable and not excessive as
compared with industry practices.**

6.  **Do not count the participation of a DBE subcontractor toward the
    prime contractor's DBE achievements or your overall goal until the
    amount being counted toward the goal has been paid to the DBE.**

**Best Practices**

Following is a solicitation provision developed by the Chicago Transit
Authority (CTA) that defines how the Authority will evaluate and count
DBE participation. [^367]

**COUNTING DBE PARTICIPATION TOWARD THE CONTRACT GOAL**

The inclusion of any DBE by the bidder in its bid documents shall not
conclusively establish the bidder's eligibility for full DBE credit for
the firm's participation in the contract. The amount of DBE
participation credit shall be based upon an analysis by the General
Manager, DBE Program, of the specific duties which will be performed by
the DBE.

**The bidder may count toward its DBE goal only expenditures to firms
which are currently certified by the IL UCP (or with the Authority prior
to the implementation of the IL UCP) and which perform a commercially
useful function**. A firm is considered to perform a commercially useful
function when it is responsible for the performance of a distinct
element of the work and carries out its responsibilities by actually
performing, managing and supervising the work involved.

To determine whether a firm is performing a commercially useful
function, the General Manager, DBE Program, will evaluate the amount of
work subcontracted, industry practices and other relevant factors. The
General Manager, DBE Program, reserves the right to deny or limit DBE
credit to the bidder where any DBE is found to be engaged in substantial
pass-through activities with others.

DBE participation shall be counted toward the DBE goal in the contract
as follows:

> A. Once a DBE is determined to be eligible in accordance with these
> rules, the total dollar value of the contract awarded to the DBE may
> be counted toward the DBE goal except as indicated below.
>
> B. A bidder may count toward its DBE goal that portion of the total
> dollar value of a contract with an eligible joint venture equal to the
> distinct, clearly defined portion of the work of the contract that the
> DBE performs with its own forces.
>
> C. Consistent with normal industry practices, a DBE may enter into
> subcontracts. If a DBE subcontracts more than thirty percent (30%) or
> a significantly greater portion of the work of the contract than would
> be expected on the basis of normal industry practices, the DBE shall
> be presumed not to be performing a commercially useful function.
> Evidence may be presented by the bidder involved to rebut this
> presumption.[^368]
>
> D. When a DBE subcontracts a part of the work under the contract to
> another firm, the value of the subcontracted work may only be counted
> towards the DBE goal if the DBE's subcontractor is itself a DBE. Work
> that a DBE subcontracts to a non-DBE firm does not count towards the
> DBE goal.
>
> E. The bidder may count one-hundred percent (100%) of its expenditures
> for materials and supplies required under the contract and which are
> obtained from a DBE manufacturer towards the DBE goal. The bidder may
> count sixty percent (60%) of its expenditures for material and
> supplies under the contract obtained from a DBE regular dealer towards
> its DBE goal. The terms "manufacturer" and "regular dealer" are
> defined in 49 C.F.R. Part 26.55(e)(1)(ii) and (2)(ii).
>
> F. The bidder may count towards its DBE goal expenditures to DBEs
> which are not manufacturers or regular dealers, such as fees or
> commissions charged for services and assistance in the procurement of
> essential personnel, facilities, equipment, materials or supplies and
> transportation charges as set forth in 49 C.F.R. Part 26. However, the
> General Manager, DBE Program, must determine the fee or charge to be
> reasonable and not excessive as compared with fees or charges
> customarily allowed for similar services.
>
> G. The bidder must use good business judgment when negotiating with
> subcontractors and take a DBE's price and capabilities into
> consideration. The fact that there may be some additional costs
> involved in finding and using DBE firms is not sufficient reason to
> fail to meet the DBE goal set forth in the contract, as long as such
> costs are reasonable.

**7.4 CERTIFICATION: STANDARDS AND PROCEDURES**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| 49 CFR Part 26, Subparts D and E, prescribe standards to be applied   |
| and procedures to be followed when certifying businesses as DBEs.     |
| *Grantees must use the new certification standards for all decisions  |
| issued after March 4, 1999.* Grantees must also determine whether all |
| disadvantaged *owners of current certified firms meet the personal    |
| net worth standard by September 1, 1999.\                             |
| *                                                                     |
|                                                                       |
| APPENDIX E to Part 26 contains guidance as to how grantees are to     |
| make individual determinations of *social and economic disadvantage*. |
+-----------------------------------------------------------------------+

**DISCUSSION**

**"Certification: Standards and Procedures" is not normally a
procurement office function, and detailed guidance may be found at the
Web site of FTA's Office of Civil Rights
(http://www.fta.dot.gov/office/civil) -- See "Final Rule" published in
the Federal Register.**

**7.5 EXEMPTIONS AND WAIVERS**

+-----------------------------------------------------------------------+
| # **REQUIREMENT**                                                     |
+-----------------------------------------------------------------------+
| #### 49 CFR §26.15 *How Can Recipients Apply for Exemption            |
| s or Waivers?* describes the provisions made by DOT for the granting  |
| of exemptions and waivers to the requirements of the DBE regulations. |
+-----------------------------------------------------------------------+

### DISCUSSION

**There is a distinction made in this section between *exemptions* and
*waivers.* The procedures to be followed when applying for *exemptions*
and *waivers* are described in §26.15.**

***Exemptions* are for unique situations that are most likely not to be
either generally applicable to all recipients or to have been
contemplated in the rulemaking process. If such a situation occurs and
it makes it impractical for a particular grantee to comply with a
provision of part 26, the grantee should apply for an exemption from
that provision. The Secretary will grant the request only if it
documents special or exceptional circumstances, not likely to be
generally applicable, and not contemplated in connection with the
rulemaking that established this part, that make the grantee's
compliance with a specific provision of this part impractical.**

***Waivers*, by contrast, are not designed for extraordinary
circumstances where a grantee may not be able to comply with part 26.
*Waivers* are for situations where a grantee believes that it can better
accomplish the objectives of the DBE program through means other than
the specific provisions of part 26. The waiver provision is designed to
ensure that DOT and a grantee can work together to respond to any unique
local circumstances. Grantees are encouraged to carefully review the
circumstances in their own jurisdictions to determine what mechanisms
are best suited to achieving compliance with the overall objectives of
the DBE program. If a grantee believes it is appropriate to operate its
program differently from the way that a provision of Subpart B or C
provides, including, but not limited to, any provisions regarding
administrative requirements, overall or contract goals, good faith
efforts or counting provisions, it can apply for a waiver. For example,
waiver requests could pertain to such subjects as the use of a
race-conscious measure other than a contract goal, different ways of
counting DBE participation in certain industries, use of separate
overall or contract goals to address demonstrated discrimination against
specific categories of socially and economically disadvantaged
individuals, the use or wording of assurances, differences in
information collection requirements and methods, etc.**

######## Chapter 8

**8 - [Contract Clauses ]{.underline}**

8.1 [Federal Requirements]{.underline} (1/98)

> 8.1.1 [Sources of Model Federal Clauses and Applicability]{.underline}
> (1/98)

8.1.2 [Davis-Bacon Act]{.underline} (1/98)

> 8.1.3 [Cargo Preferences]{.underline} (1/98)
>
> 8.1.4 [Buy America]{.underline} (6/03)
>
> 8.1.5 [Fly America]{.underline} (1/98)
>
> 8.2 [Surety Bonds]{.underline} (4/05)

8.2.1 [Performance Bonds]{.underline} (4/05)

> 8.2.2 [Options]{.underline} (1/98)
>
> 8.2.3 [Liquidated Damages]{.underline} (1/98)
>
> 8.2.3.1 [Relationship with Default Termination]{.underline} (1/98)
>
> 8.2.4 [Intellectual Property Rights]{.underline} (1/98)
>
> 8.2.4.1 [Disclosure of Trade Secrets]{.underline} (1/98)
>
> 8.2.4.2 [Contract Work Products, Patents and Copyrights]{.underline}
> (1/98)
>
> 8.2.5 [Termination]{.underline} (1/98)
>
> 8.2.5.1 [Termination for Convenience]{.underline} (1/98)
>
> 8.2.5.2 [Partial Terminations]{.underline} (1/98)
>
> 8.2.5.3 [Termination for Default]{.underline} (1/98)

**8.1 FEDERAL REQUIREMENTS**

**8.1.1 [Sources of Model Federal Clauses and
Applicability]{.underline}**

+-----------------------------------------------------------------------+
| ###### REQUIREMENT                                                    |
+-----------------------------------------------------------------------+
| § 16 of FTA Circular 4220.1E requires that grantees evaluate Federal  |
| statutory and regulatory requirements for relevance and applicability |
| to a particular procurement.                                          |
|                                                                       |
| Appendix A.1 of this Manual contains a discussion of each of the most |
| generally applicable requirements, including the types of contracts   |
| to which each applies, any specific wording that must be incorporated |
| in your contracts, suggested wording where specific wording is not    |
| mandatory, and the applicability to subcontracts.                     |
+-----------------------------------------------------------------------+

**DISCUSSION**

**FTA grantees recognize that the most significant of the strings
attached to the receipt of federal funds is the requirement to comply
with federal statutes and regulations applicable to their project or
particular contract.**

**You will want to be able to determine exactly which clauses are
required for a specific procurement because the incorporation of
unnecessary or loosely drafted clauses can:**

-   **discourage competitors,**

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-   **cause confusion for anyone involved with the contract, and**

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-   **ultimately result in additional costs for your agency.**

**Appendix A.1 of this manual discusses each of the most generally
applicable clauses. Knowing that a particular law must be complied with
and that appropriate language must be included in a third party
contract, still leaves the Grantee trying to draft or incorporate a
clause that meets those requirements. The clause‑by‑clause discussions
in Appendix A.1 have been developed by FTA to assist you.**

**Best Practices**

Appendix A.1 of this Manual contains thirty model contract clauses that
are either federally required or are suggested model clauses that you
may include in contracts. The clauses contained in this Appendix include
the following common elements which will be helpful to grantees in
deciding if a specific clause is required in a particular procurement:

> [Applicability to Contracts]{.underline} ‑ discusses the types of
> contracts for which the clause is applicable.
>
> [Flow Down]{.underline} ‑ discusses to which prime contractors and
> which level of subcontractors the clauses apply.
>
> [Mandatory Clause/Language]{.underline} ‑ includes the model clause,
> identified by FTA as either a required (specified) clause or a
> suggested‑language clause.

The narratives provided with the individual clauses in the Appendix
indicate the source of the clause, if required. Many of the required
clauses come directly from requirements in various sections of the Code
of Federal Regulations (CFR) which is published by various executive
departments of the federal government. The most common requirements for
FTA grantees come from various parts of Title 49 of the CFR, published
by the Department of Transportation. Requirements of the Department of
Labor (such as Davis‑Bacon Act clauses) originate as specific language
in Title 29 of the CFR. Where clauses are not mandated by an executive
department, they are frequently modeled after clauses in the Federal
Acquisition Regulations (FAR) which are applicable to those executive
departments.

Even though the FAR does not apply to grantee procurements, one
advantage of using FAR clauses in the absence of a specific requirement
imposed upon your Agency is that a body of federal law has been
developed which interprets those clauses. [^369]

Your State, local jurisdiction, or transit Agency may have enacted a
procurement code or body of regulations that actually establishes
specific clauses which you must use. In that case, you will be obligated
to use what has been established for you. Many of the recent enactments
of those codes or regulations are adaptations of the American Bar
Association\'s *Model Procurement Code for State and Local Governments*.
[^370]

You may have the ability to incorporate clauses by reference (such as,
title, date and where it can be found) in your contracts. To the extent
clauses you want to incorporate are published in a Federal, State, or
local statute, code, or ordinance, or in an official regulation such as
the CFR, you should be able to incorporate those provisions directly
into your contractual document by reference only. You can check with
your supporting legal counsel on what clauses you can and cannot
incorporate by reference and the manner in which they may be
incorporated. It is doubtful you would ever be able to incorporate by
reference a clause that was only published in an FTA Circular, because
of the way FTA Circulars are published (i.e. they are not officially
published in the *Federal Register*).

**8.1.2 [Davis-Bacon Act]{.underline}**

+-----------------------------------------------------------------------+
| ###### REQUIREMENT                                                    |
+-----------------------------------------------------------------------+
| § 24 of the Master Agreement delineates the Grantee\'s obligations to |
| comply with the employee protection requirements of the Davis‑Bacon   |
| Act. For construction activities exceeding \$2,000 performed in       |
| connection with an FTA‑funded Project, the Recipient of those funds   |
| agrees to comply with, and assure compliance with, the requirements   |
| of 49 U.S.C. § 5333(a), the Davis‑Bacon Act, [^371] and the           |
| implementing regulations of the Department of Labor at 29 CFR Part 5. |
| In addition to the requirements of the statute and regulations, the   |
| Recipient also agrees to report to the FTA every suspected or         |
| reported violation of the Davis‑Bacon Act or its Federal implementing |
| Regulations.                                                          |
+-----------------------------------------------------------------------+

**DISCUSSION**

**The Davis‑Bacon Act (the Act) provides that contracts in excess of
\$2,000 to which the United States is a party (i.e., federal funds are
involved) for construction, alteration, or repair (including painting
and decorating) of public buildings or public works within the United
States shall contain a clause that no laborer or mechanic employed
directly upon the site of the work shall receive less than the
prevailing wage rates as determined by the Secretary of Labor.** [^372]
**The clause mandated by the Act and its implementing federal
regulations is found in Appendix A.1 of the Manual. The purpose of this
section in the Manual is to discuss the practical issues surrounding the
requirements of the Act and the regulations implementing it.**

**Best Practices**

[Federal Wage Determinations]{.underline} ‑ When a construction project
is being performed with federal funds, laborers and mechanics employed
directly upon the site of the work shall be paid a minimum wage which is
determined by the Secretary of Labor. That rate of pay is referred to as
the \"Davis‑Bacon wage rate\" and is specifically identified in the
contract between the Recipient and the Contractor.

[Types of Wage Determinations]{.underline} - Federal wage determinations
are of two types: (a) General Wage Determinations and (b) Project Wage
Determinations. *General wage determinations* contain prevailing wage
rates for the types of construction designated in the determination, and
they are used in contracts performed within a specified geographical
area. They contain no expiration date and remain valid until modified,
superseded, or canceled by a notice in the Federal Register by the
Department of Labor. These determinations should be used whenever
possible.

*Project wage determinations* are issued at the specific request of the
grantee. They are used only when no general wage determination applies
and they are effective for 180 days from the date of the determination.

It is the obligation of the contracting officer to ensure that a copy of
the most current wage determination of the Department of Labor (DOL) is
actually included in the solicitation and ensuing contract. The Wage and
Hour Division of the DOL is responsible for the publication of wage
determinations. Such determinations are numbered, dated, and issued as
different rate schedules, depending upon the type of construction
involved (building, residential, highway, or heavy construction). [^373]

[State Wage Determinations on Federally Funded Projects]{.underline} -
Your state may also prescribe minimum wages and benefits for public
works projects. *If your state has established prevailing wages that are
higher than Davis-Bacon Act rates, you should get advice of counsel to
determine whether or not the state law or Davis-Bacon Act rate prevails,
however in no event can rates be lower than Davis-Bacon Act rates.*

[Where to Obtain Wage Determinations]{.underline} ‑ General wage
determinations may be found in the Government Printing Office document
entitled *General Wage Determinations Issued Under The Davis‑Bacon and
Related Acts.*

Subscriptions to this information are available electronically [^374]
and by hard‑copy. [^375] The decisions are included in six different
volumes, arranged by state. If ordering a hard‑copy subscription, only
get the volume that includes your state. An annual edition is published
in January or February of each year and then updated weekly throughout
the year as part of the loose‑leaf service.

This publication is available at each of the 50 Regional Government
Depository Libraries and many of the Government Depository Libraries
across the country. In large metropolitan areas, this document may also
be available in a central public library as well as through local
offices of your state\'s department of transportation. In addition, The
Davis-Bacon Act wage rates can be accessed on the Internet at
http://159.185.2:80/wagerate. This site is maintained by the General
Services Administration (GSA).

If you are involved in a project that will involve the issuance of
multiple construction‑related solicitations over an extended period of
time, you may want your own copy of this document. This is not only for
convenience but also ensures that your solicitations and contracts
contain the most up‑to‑date determinations. [^376]

[Requesting a Wage Determination]{.underline} ‑ As you start a project
involving construction, one of the best personal contacts you can make
is with the local DOL representative who will be monitoring your
contract for compliance with the Davis‑Bacon minimum wage requirements.
If a general wage determination is available for your area, you may use
it without notifying the Department of Labor. If a general determination
is not available for your area, you can work with your local

DOL representative in requesting either a general wage determination or
a project determination.[^377] Do not hesitate to utilize the services
of a project\'s design services professional to assist in obtaining
information about the latest wage determinations. In all likelihood,
that firm will know precisely what the requirements are and who to
contact at the DOL.

Because the process to make a determination takes at least 45 days, it
is important to know early in the project whether or not a determination
is available for your area. The request to have a determination made
needs to be submitted to the DOL 45 to 60 days before the solicitation
is to be issued.

[Wage Determinations and Your Solicitation/Contract]{.underline} ‑ The
clause and regulations require that the wage determination be physically
attached to the solicitation. The wage determination cannot be
incorporated by reference. If the solicitation is issued without a wage
determination included, bids may not be opened until a reasonable time
after the wage determination has been furnished to all bidders and
incorporated into the solicitation by amendment.

**What if the wage determination expires before award?** It should be
noted that *general wage determinations* never expire and remain valid
until modified, superseded or canceled by DOL. But *project wage
determinations* do expire. In the event that your project wage
determination expires or your general wage determination is superseded
by a new determination *before bids* *are received*, you must request a
new project determination (if using a project wage determination) and
incorporate the new rates in a solicitation amendment in sufficient time
for bidders to amend their bids. If the new determination does not
change the wage rates and would not cause bidders to change their bid
prices, you should amend the solicitation to include the number and date
of the new determination.

*If the wage determination expires after bid receipt but prior to
award*, you should request an extension of the determination from DOL\'s
Wage and Hour Division. If necessary, award of the contract should be
delayed until the request for extension has been granted or a new wage
determination has been issued. If the request for extension is denied
and a new wage determination issued that changes the wage rates for
classifications to be used in the contract, the contracting officer may
either cancel the solicitation and re‑advertise with the appropriate
determination or award the contract and incorporate the new
determination effective on the date of contract award. [^378] If the new
wage determination did not change any wage rate, the

contracting officer should award the contract and modify it to include
the number and date of the new determination. [^379]

**What if the wage determination is modified before award?** *If the
wage determination is modified (as opposed to expires) before bids are
received*, whether or not it must be included in the solicitation is
determined by the time of receipt of the modification by the contracting
agency or the time of its publication in the *Federal Register*. The
modification is effective and must be included in the solicitation if
(a) it is received by the contracting agency, or notice of the
modification is published in the *Federal Register*, 10 or more calendar
days before the date of bid opening or (b)  it is received by the
contracting agency or notice of the modification is published in the
*Federal Register*, less than 10 days before bids are due to be opened
unless the contracting officer finds that there is not reasonable time
to notify bidders of the modification.

*If the modification is received (or notification of the modification
published in the Federal Register) after bid opening,* it is not
effective and shall not be included in the solicitation.[^380]

You may have a situation where an \"effective modification\" (i.e.,
received by the contracting agency or published in the *Federal
Register* 10 days prior to the bid opening date) is received by the
contracting officer at some time later than it was received by the
contracting agency. In this case, if the \"effective modification\" is
received by the contracting officer prior to bid opening, the bid
opening date shall be postponed to allow a reasonable time to amend the
solicitation to incorporate the modification and permit bidders to
consider the impact of the modification on their bids. If the
modification is received after bid opening, but prior to award, the same
procedures apply as in our earlier discussion about new wage
determinations received after bid opening, but prior to award. If the
effective modification is not received by the contracting officer until
after award, the contracting officer must modify the contract to
incorporate the wage modification retroactively to the date of contract
award and equitably adjust the contract for any increased or decreased
cost of performance resulting from any changed wage modifications.[^381]

**What if the Wage Determination is modified after award?** It is
recommended that grantees incorporate language such that contractors are
obligated to pay prevailing wages throughout the life of the project and
are not entitled to change orders for increased costs associated with
any change in the prevailing wage made after award.

As you can see from this discussion, you should not wait until you are
ready to issue the solicitation to start checking on the Davis‑Bacon
wage rates for your area and it should be equally obvious that a good
working relationship with your local Department of Labor officials is
very important. They generally are very cooperative and helpful in
answering any questions you may have and notifying you of impending
changes or revisions to existing wage determinations that would impact
your contract because it is in their best interests that your project
run smoothly from a minimum wage standpoint.

[Contract Administration and the Davis‑Bacon Act]{.underline} ‑ Once the
contract is awarded, it is initially the responsibility of the
contracting officer to ensure that the contractor comply with the
provisions of the contract clause. This means ensuring that the
appropriate signs are available and posted, as well as ensuring that the
appropriate payrolls and certificates are submitted not less frequently
than weekly. If you have a construction management contractor, you may
want to assign that firm the task of checking payrolls on a regular
basis and spot- check the pay of individuals against the actual work
that they are performing. The failure of the contracting officer to
properly monitor the contractors compliance with Davis-Bacon may result
in a determination by DOL that your agency is responsible for payment of
the back wages.

If you do not have such a contractual relationship and your construction
management is done \"in‑house,\" the contracting officer will have
responsibility for compliance checks. Once you have reviewed the
payrolls, they should be retained unless requested by an appropriate FTA
official. In your initial meeting with the FTA regional officials for
your project (or this particular contract) make sure it is clear to whom
the payrolls should be transmitted. FTA may request that you hold them
on‑site or at the agency for them to review and not actually transmit
them. FTA may also delegate the review function to its Project
Management Oversight contractor.

[Complaint Process]{.underline} - If DOL comes to the site to
investigate a complaint (often the way minimum wage discrepancies are
uncovered), you (and the contractor) will want to cooperate in that
investigation. If a determination is made that the contractor is not in
compliance with the Davis‑Bacon Act contractual provisions, it is the
contracting officer\'s responsibility to ensure that DOL and the FTA are
informed of the discrepancy. If it is determined that back wages are
owed, you will receive written communication to that effect from the DOL
and the FTA and you should comply very strictly with that direction ‑‑
at this point in time, it is an issue between the contractor and the
DOL, and the DOL regulations govern the reviews and appeals from
determinations of that type.

**8.1.3 [Cargo Preference]{.underline}**

  -----------------------------------------------------------------------
  **REQUIREMENT**

  § 14.b of the Master Agreement sets forth the Grantee\'s obligations to
  comply with the requirements of the United States Maritime
  Administration regulations entitled \"Cargo Preference ‑ U.S. ‑Flag
  Vessel,\" found at 46 CFR Part 381. Specifically, the grantee is
  obligated to incorporate the clause found at 46 CFR Section 381.7(b)
  into contracts in which equipment, materials, or commodities may be
  transported by an ocean vessel.
  -----------------------------------------------------------------------

**Best Practices**

The fourth model clause in Appendix A.1 to this Manual contains a
suggested clause that complies with the requirements of the United
States Maritime Administration at 46 CFR Section 381.7(b), which
provides a suggested clause for use as well.

If your contract contemplates the shipment of any equipment, materials,
or commodities by ocean vessel, a clause that meets the requirements of
46 CFR Part 381 must be included in the contract. Additionally, if a
subcontractor at any tier would be responsible for the ocean vessel
shipment, the clause would flow down to that subcontractor. The clause
in Appendix A.1 or as found at Section 381.7(b) meets that requirement
and it is recommended that either of these clauses be utilized.

If it appears you have a contract in which ocean vessel transport would
be required, it is recommended you check with your legal counsel and
ascertain if there are any changes to the law or the clause. Questions
about this clause frequently come up in the context of rail car
procurements which, until recently, invariably required the shipment of
rail cars from overseas locations. It is recommended that you either be
prepared to address this requirement, or be prepared to respond to any
questions offerors may have at any pre‑bid or pre‑proposal conferences
held in conjunction with those procurements.

**8.1.4 [Buy America]{.underline}**

+-----------------------------------------------------------------------+
| ###### REQUIREMENT                                                    |
+-----------------------------------------------------------------------+
| § 14.a of the Master Agreement requires compliance with 49 U.S.C. §   |
| 5323(j) and FTA\'s Buy America regulations found at 49 CFR Part 661,  |
| as well as implementing guidance issued by the FTA.                   |
+-----------------------------------------------------------------------+

**DISCUSSION**

Please see, Section 4.3.3.2.2 of this Manual for a thorough discussion
of the Buy America requirements. Please see the Appendix for the
required clauses.

**8.1.5 [Fly America]{.underline}**

+-----------------------------------------------------------------------+
| ###### REQUIREMENT                                                    |
+-----------------------------------------------------------------------+
| § 14.c of the Master Agreement states that if the contract or         |
| subcontracts may involve the international transportation of goods,   |
| equipment, or personnel by air, the contract must require contractors |
| and subcontractors at every tier to use U.S.‑flag air carriers, to    |
| the extent service by these carriers is available. 49 U.S.C. 40118    |
| and 4 CFR Part 52.                                                    |
+-----------------------------------------------------------------------+

**DISCUSSION**

**A contract for goods or equipment must contain a Fly America provision
as discussed in Appendix A.1, just as it contains a Cargo Preference
provision, if there is reason to expect that international air travel
would be involved. Although there is no Federally prescribed language
for this provision, model language is contained in Appendix A.1. If
there is no possibility of international shipments or travel under the
contract, these provisions are not required.**

8.2 SURETY BONDS

History

The idea behind surety bonding is straightforward. One person guarantees
to another that a third person will perform.

The first corporate surety bonding company in the United States, the
Fidelity Insurance Company, was formed in 1865. In 1894, Congress passed
the Heard Act, which required surety bonds on all federally funded
projects as a result of the large number of contractors working on
public projects who had defaulted and in response to complains from
unpaid suppliers and subcontractors. The Miller Act (40 U.S.C. §270a et
seq.) was passed in 1935 to replace the Heard Act. The Miller Act
requires performance and payment bonds for all public work contracts in
excess of \$100,000 and payment protection, with payment bonds the
preferred method for contracts in excess of \$25,000. [^382] Almost all
states and most local jurisdictions have enacted similar legislation
requiring surety bonds on public works. These generally are referred to
as "Little Miller Acts.

Today, surety bonds protect virtually every public construction project
in the U.S. In 1977, nearly \$160 billion in public works projects were
so protected with surety bonds. From 1990-1997, more than 80,000
contractors failed, with losses of \$21.8 billion, according to Dun and
Bradstreet's *Business Failure Record*. From 2001-2003, surety companies
incurred more than \$1.8 billion in losses from surety bonds, according
to The Surety Association of America.

# Types of Surety Bonds

[Surety Bond]{.underline} - A written agreement whereby one party,
called the *surety*, obligates itself to a second party, called the
*obligee* (the owner, grantee), to answer for the default of a third
party, called the *principal* or *obligor*. Surety bonds used in
construction are called *contract surety*

*bonds*. There are three primary types of contract surety bonds: *bid
bonds*, *performance bonds,* and *payment bonds*.

[Bid Bond (or Bid Guarantee)]{.underline} *--* A promise from a surety
(or a certified or cashier's check given by a bidder) for a supply or
construction contract to guarantee that the bidder, if awarded the
contract within the time stipulated, will enter into the contract at the
price bid and furnish the prescribed performance and/or payment bond.
Default ordinarily will result in liability to the obligee for the
difference between the amount of the principal's bid and the bid of the
next low bidder who can qualify for the contract. The liability of the
surety is limited to the bid bond penalty. Contractors that have a
relationship with a surety can normally obtain bid bonds at no cost. Bid
bonds are not usually appropriate for negotiated procurements due to the
nature of the process.

[Performance Bond]{.underline} ‑ A promise from a bonding company (\"the
surety\") to perform (or cause to be performed) those obligations of the
contractor (\"the principal\"), when the contractor fails to perform its
obligations, in an amount up to but not exceeding the amount of the bond
(\"penal sum\"). Performance bonds can incorporate payment bond (labor
and materials) and maintenance bond liability (see below). A performance
bond protects the owner (grantee) from financial loss should the
contractor fail to perform the contract in accordance with its terms and
conditions. Once a surety bond is issued, it cannot be withdrawn or
cancelled. General contractors may also act as the obligee when bonding
subcontractors. General contractors may require subcontractor bonds if
the subcontractor is a significant part of the job or a specialized
contractor that is difficult to replace.

[Payment Bond]{.underline} ‑ A promise from a surety that guarantees
payment to certain subcontractors, laborers and suppliers for the labor
and materials used in the work performed under the contract. Payment
bonds are also called *labor and material bonds*. These bonds protect
laborers and suppliers in the event the contractor fails to pay them.
The surety's obligation is limited by the amount of the bond.

[Maintenance Bond]{.underline} - A maintenance bond normally guarantees
against defective workmanship or materials. However, maintenance bonds
occasionally may incorporate an obligation guaranteeing "efficient or
successful operation" or other obligations of like intent and purpose.

It is important to note that surety bonds are not intended to protect
the contractors that post them. These bonds are for the protection of
the owner of the construction project and for the protection of
laborers, material suppliers and subcontractors. Since mechanic's liens
cannot be placed against public property, the payment bond may be the
only protection these claimants have if they are not paid for the goods
and services they provide to the project. Under normal circumstances,
sureties do not charge a separate premium for Payment Bonds.

### 

### General Indemnity Agreement

When a surety guarantees the performance of a firm (the principal), the
principal remains liable for this obligation to the surety in the event
of a contract default by the principal. The principal is obligated to
reimburse the surety for whatever sums the surety is required to pay out
to

complete the principal's contract. Many contracting firms do not have
the capital to assure this repayment, and so most surety companies
require a general agreement of indemnity (GAI) to be signed not only by
the firm, but by individuals willing to support the firm. This might be
the owner of the firm, the spouse of the owner, a parent corporation or
other individuals willing to risk their assets for the firm.

## [Public vs. Private Sectors]{.underline}

Performance bonding is not typical in large private sector contracts but
is required in the public sector. Public construction contract
performance bonding is more common because:

-   The public interest is served by the surety industry's protection of
    taxpayer dollars expended for public sector projects;

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-   the public sector undertakes large, fixed price public works
    projects;

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-   unforeseen costs could easily bankrupt a construction contractor
    that is a pure service organization with few assets;

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-   public agencies accept the lowest responsive bid from a responsible
    bidder without an opportunity to fully consider and adjust the
    contracting strategy and terms to the apparent low bidder; and

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-   if a contractor is unable to perform, (e.g. because it is having
    difficulty obtaining funds to pay suppliers and employees) and if
    the work is slowed down and ultimately turned over to other forces
    to complete, the cost to the public agency of mobilizing the
    substitute forces and picking up each of the work tasks where the
    failed contractor left them is higher than in a typical supply
    contract where there are usually a number of suppliers offering the
    product at competitively established market prices.

Payment Bonds have a related but secondary purpose. Usually in the
public sector, a contractor\'s suppliers cannot place liens on the
material and work supplied when payment to the subcontractor is overdue.
States often protect public property and services by exempting public
works from materialmen\'s liens. Therefore, although performance bonds
alone would often guarantee payment to subcontractors, additional
payment bonds are often required in construction contracts to assure
there are no disputes over potential performance bond liability to
satisfy second and third tier subcontractor claims.

# Prequalification of Contractors

Most surety companies are subsidiaries or divisions of insurance
companies, and both surety bonds and traditional insurance policies are
risk transfer mechanisms regulated by state insurance departments.
However, traditional insurance is designed to compensate the insured
against unforeseen adverse events. The policy premium is actuarially
determined based on aggregate premiums earned versus expected losses.
Surety companies operate on a different business

model. *The surety prequalifies the contractor based on financial
strength and construction expertise*. Since the bond is underwritten
with little expectation of loss, the premium is primarily a fee for
prequalification services and the allocation of the surety's capital to
protect the obligee against the possibility of loss.

Although the bonding companies perform this prequalification for their
own purposes and their interests are similar to those of the transit
agency, the transit agency is still required to review potential
contractors' responsibility before award. While surety bonds are a
necessary condition in the determination of responsibility, they alone
are not sufficient. Prequalification of contractors is the primary focus
of surety underwriters. Surety bond underwriters must analyze applicants
closely since they are committing the assets of their companies to
guarantee the contractor's performance and payment of its suppliers.
Underwriters must be certain that only those contractors who can
complete a project receive a bond, and they must be fully satisfied that
the contractor's business is well-managed and profitable.
Prequalification is one of the most valuable services of the surety bond
process. The process involves underwriters satisfying themselves that
the contractor has:

-   Good references and reputation;

-   A track record of successful operations in the past and the ability
    to meet current and future obligations;

-   Experience matching the contract requirements;

-   The necessary equipment to do the work or the ability to obtain it;

-   The financial strength to support the desired work program;

-   An excellent credit history, and an established bank relationship
    and line of credit.

Surety bonds are obtained through insurance agents and brokers, called
*producers.* These producers help their contractor clients during the
prequalification process and assist them in developing a business
relationship with the surety bond company. [^383]

# Surety Bonds vs. Bank Letters of Credit

Bank letters of credit are discussed below for consideration under "Best
Practices" in the context of non-construction contracts. At first glance
it may appear that letters of credit and surety bonds offer the same
degree of financial protection. However, a more thorough review reveals
that surety bonds provide greater benefits to both the grantee (obligee)
and the contractor (principal).[^384]

+-----------------------------------+-----------------------------------+
| **A Comparison**                  |                                   |
+-----------------------------------+-----------------------------------+
| **Bank Letters of Credit**        | **Surety Bonds**                  |
|                                   |                                   |
| *[Prequalification                | ::: Definition-Term               |
| Services]{.underline}:*           | The essence of surety             |
|                                   | underwriting is prequalification. |
| The underwriting bank focuses     | The surety examines the           |
| primarily on the quality and      | contractor's entire business      |
| liquidity of the underlying       | operation, checking for adequate  |
| collateral; i.e., on the ability  | finances, necessary experience,   |
| of the contractor to repay any    | organization, existing work- load |
| draws on the LOC.                 | and its profitability, and        |
|                                   | management skills to successfully |
|                                   | complete the project for which    |
|                                   | the bond is required.             |
|                                   | :::                               |
+-----------------------------------+-----------------------------------+
| *[Claims - Access to              | In most cases, a bond covers      |
| Funds]{.underline}:*              | liabilities that were incurred    |
|                                   | during the bond term. A claim may |
| The beneficiary must make a       | be made on the bond after the     |
| demand prior to expiration date.  | termination of the bond for       |
| No funds are available after      | liabilities incurred prior to     |
| expiration date, even for         | cancellation or nonrenewal.       |
| liabilities incurred prior to     |                                   |
| expiration. The bank has no       | The surety has obligations to     |
| obligation to complete the        | both the owner and the            |
| project.                          | contractor. If the contractor and |
|                                   | owner disagree on contract        |
| There is no completion clause in  | performance issues and the owner  |
| a LOC. The task of administering  | declares the contractor in        |
| completion of the contract is     | default, the surety must          |
| left to the owner. The owner must | investigate the claim.            |
| evaluate work done, develop       |                                   |
| detailed specifications for       | ::: Definition-Term               |
| completion of the work and        | The surety has several            |
| solicit bids or negotiate         | alternatives if the               |
| (depending on state law) for a    | :::                               |
| new contractor to complete the    |                                   |
| work. Under a performance bond,   | Contractor defaults:              |
| these tasks are the               |                                   |
| responsibility of the surety.     | 1.  Finance the original          |
|                                   |     contractor or provide support |
| The owner must determine the      |     necessary to allow the        |
| validity of claims by             |     contractor to finish the      |
| subcontractors, laborers, and     |     project;                      |
| material suppliers. If there is   |                                   |
| not enough money from the letter  | 2.  Arrange for a new contractor  |
| of credit to pay all of the       |     to complete the contract;     |
| claims, then the owner has to     |                                   |
| decide                            | 3.  Assume the role of the        |
|                                   |     contractor an subcontract the |
| which claims will be paid and     |     remaining work;               |
| which will be rejected.           |                                   |
|                                   | 4.  Pay the penal sum of the      |
|                                   |     bond.                         |
|                                   |                                   |
|                                   | ::: Definition-Term               |
|                                   | With payment bonds, the surety    |
|                                   | pays the rightful claims of       |
|                                   | certain subcontractors, laborers  |
|                                   | and suppliers.                    |
|                                   | :::                               |
+-----------------------------------+-----------------------------------+
| *[Borrowing                       | With few exceptions, performance  |
| Capacity]{.underline}:*           | and payment bonds are issued on   |
|                                   | an unsecured basis. They are      |
| Specific assets are pledged to    | usually provided on the strength  |
| secure bank letters of credit.    | of the corporate and personal     |
| LOCs diminish an existing line of | signatures of the company owners. |
| credit, and are reflected on the  | The issuance of bonds has no      |
| contractor's financial statement  | effect on the contractor's bank   |
| as a contingent liability. The    | line of credit.                   |
| tying up of assets, or the        |                                   |
| reduction of an available line of | Subcontractors and material       |
| credit, is counter-productive to  | suppliers may be more willing to  |
| both the owner and the            | provide labor and materials to    |
| contractor. This can adversely    | the contractor when they are      |
| affect the contractor's cash flow | protected by a payment bond.      |
| during contract performance.      |                                   |
|                                   |                                   |
| ::: Definition-Term               |                                   |
| Subcontractors and material       |                                   |
| suppliers may be reluctant to     |                                   |
| provide labor and supplies to the |                                   |
| contractor since they have no     |                                   |
| access or rights to funds         |                                   |
| available from the LOC.           |                                   |
| :::                               |                                   |
+-----------------------------------+-----------------------------------+
| *[Cost]{.underline}:*             | Generally ½ - 2% of contract      |
|                                   | price. The premium includes 100%  |
| ::: Definition-Term               | performance bond, a 100% payment  |
| Cost is generally 1% of the       | bond, and normally a one-year     |
| contract amount covered by the    | maintenance period.               |
| LOC- e.g., if the LOC covers 10%  |                                   |
| of contract, Cost = 1% x (10% x   |                                   |
| Contract Amount).                 |                                   |
| :::                               |                                   |
+-----------------------------------+-----------------------------------+

# **Cost of Bonds**

The price or premium for a bond will vary depending on the type of
construction, the contract amount, the duration of the project, the
surety company, and the experience and financial strength of the
contractor. Premiums range, on average, from ½ % to 2 % (or perhaps
higher, and not necessarily tied to business strength) of the contract
price for contractors with established bonding credit. If the contract
amount changes, the bond premium will be adjusted for the change in
contract price. There is usually no additional cost for bid bonds or
payment bonds when purchased with a performance bond.

Bond premiums cannot be reduced by lowering the percentage of the bond
from, say, 100% to 50%. Thus, it usually makes sense to require 100
percent performance and payment bonds so the

owner receives maximum protection. [^385] *The advantage, however, in
considering a lower*

*percentage is that more contractors may be allowed to compete because
some may not have the bonding capacity to get a 100% bond, but may
qualify for a lesser amount.* [^386]

Surety bonds issued through the SBA *Surety Bond Guarantee Program* (see
below) carry an additional 0.6 percent fee.

# 

# **Government Oversight** 

Surety bond companies are regulated by state insurance departments.
Surety bonds on state public works must be issued by a surety bond
company licensed by the insurance department in that state. [^387]

On the federal level, the U.S. Treasury Department maintains a list of
surety bond companies that it has qualified to write surety bonds
required for federal construction projects. To be on this list, a surety
bond company must file financial and other information with the Treasury
Department and undergo the Department's financial analysis. [^388]

# **Bonding Assistance Programs**

Since the early 1970s, the Small Business Administration (SBA) has
operated its *Surety Bond Guarantee Program*, which provides some
repayment of losses to surety bond companies from bonds they would
otherwise not provide. Small contractors have performed more than \$1
billion of contracts per year with the help of this SBA program.

The U.S. Department of Transportation (DOT) has established a *Bonding
Assistance Program* that is administered by the Office of Small and
Disadvantaged Business Utilization (OSDBU) within the Office of the
Secretary. The Bonding Assistance Program offers certified minority,
women-owned and disadvantaged business enterprises (DBEs) an opportunity
to obtain bid, payment and performance bonds for transportation-related
projects. The Program provides surety companies an 80% guarantee against
losses on contracts up to \$1,000,000. Bond approval and issuance are
performed by the DOT approved surety companies.

A number of states have also established bond guarantee programs for
contractors, as well as other special bonding assistance programs.

The Surety Association of America (SAA) is a nonprofit trade association
that represents more than 650 U.S. and eight foreign surety bond
companies. SAA has developed a *Model Contractor Development Program*
(MCDP) to increase and promote the availability of surety bonds to
small, minority and women contractors. The objectives of this program
include:

-   Educating emerging contractors about surety bonds and helping them
    become bondable,

-   Identifying resources available to emerging contractors in obtaining
    their first bond, such as the SBA Surety Bond Guarantee Program and
    similar state and local programs,

-   Providing assistance and referrals to emerging contractors in
    obtaining appropriate accounting, project management and financing
    expertise,

-   Assisting these contractors with increasing their bonding capacity.
    [^389]

SAA also offers an educational tool for contractors and subcontractors,
*Your First Bond*, a videotape and brochure of what contractors need to
do to apply for bonds, and other educational materials. [^390]

**[Ratings Organizations]{.underline}**

A.M. Best Company (Best's) is a private company that analyzes and rates
insurance companies. Each year it publishes *Best's Insurance Reports,
Property-Casualty,* which includes detailed profiles and financial
information on almost every insurance company operating in the United
States. Best's gives each company a rating (designated by an alphabetic
character) and a financial size category (designated by a Roman numeral
scale). Best also publishes an abbreviated version of its *Best's Key
Rating Guide, Property-Casualty*, which contains only the alphabetic
ratings and financial size categories of each insurance company. These
books are available in many public and financial libraries or may be
purchased from A.M. Best. [^391]

Other ratings organizations include Dun & Bradstreet, [^392] Fitch
Ratings, [^393] Moody's Investors Service, [^394] Standard & Poor's
[^395] and Weiss Ratings Inc. [^396] FTA does not endorse any particular
company or program.

**8.2.1 [Performance Bonds]{.underline}**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| **[[For Construction Activities]{.underline}:]{.smallcaps}**          |
|                                                                       |
| § 15.m. (1) of the Master Agreement states that:                      |
|                                                                       |
| > [Construction Activities]{.underline}. The Recipient agrees to      |
| > provide bid guarantee, contract performance, and payment bonding to |
| > the extent deemed adequate by FTA and applicable Federal            |
| > regulations, and comply with any other bonding requirements FTA may |
| > issue.                                                              |
|                                                                       |
| FTA Circular 4220.1E states the specific minimum bonding requirements |
| for construction or facility improvement contracts with a value       |
| exceeding \$100,000:                                                  |
|                                                                       |
| 11. [BONDING REQUIREMENTS]{.underline}. For those construction or     |
|     facility improvement contracts or subcontracts exceeding          |
|     \$100,000, FTA may accept the bonding policy and requirements of  |
|     the grantee, provided FTA determined that the policy and          |
|     requirements adequately protect the Federal interest. FTA has     |
|     determined that grantee policies and requirements that meet the   |
|     following minimum criteria adequately protect the Federal         |
|     interest. [^397]                                                  |
|                                                                       |
| > a\. A bid guarantee from each bidder equivalent to five (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, upon acceptance of his bid, execute |
| > such contractual documents as may be required within the time       |
| > specified;                                                          |
| >                                                                     |
| > b\. 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 such a contract; and            |
| >                                                                     |
| > c\. A payment bond on the part of the contractor. A payment bond is |
| > one executed in connection with a contract to assure payment, as    |
| > required by law, of all persons supplying labor and material in the |
| > execution of the work provided for in the contract. Payment bond    |
| > amounts determined to adequately protect the federal interest are   |
| > as follows: (1) 50% of the contract price if the contract price is  |
| > not more than \$1 million; (2) 40% of the contract price if the     |
| > contract price is more than \$1 million but not more than \$5       |
| > million; or (3) \$2.5 million if the contract price is more than    |
| > \$5 million.                                                        |
| >                                                                     |
| > d\. A grantee may seek FTA approval of its bonding policy and       |
| > requirements if they do not comply with these criteria.             |
|                                                                       |
| *State laws are sometimes specific in requiring or prohibiting        |
| security and guaranties in public procurements; performance bond      |
| requirements may apply even when the Federal requirements do not, and |
| the state requirement may also affect bid guaranties.*                |
|                                                                       |
| **[[For Non-Construction Activities]{.underline}:]{.smallcaps}**      |
|                                                                       |
| *FTA does not require bonding in any amount for non-construction      |
| contracts, including rolling stock.* FTA leaves the decision to       |
| require bonds for non-construction contracts to the discretion of its |
| grantees. [^398]                                                      |
+-----------------------------------------------------------------------+

**DISCUSSION**

**[Construction]{.underline}: For construction contracts with a value
exceeding \$100,000, your solicitation documents must include the
performance bond, payment bond, and bid security requirements specified
above. Bids that do not include the required bid security are to be
rejected. Your state law may require additional bond protection (e.g.,
for even smaller construction contracts).**

**[Non-Construction]{.underline}: You may decide to include bond
requirements in other procurements where your agency has a material risk
of loss because of a failure of the prospective contractor. This is
particularly so if the risk arises from the potential for contractor
bankruptcy or financial failure at the time of partially completed work.
If you require a performance bond, you may also require bid security
that assures the execution of the performance bond as described in
Section 4.3.3.3.2, \"Bid Guarantee.\" Payment bonds are most typically
used in construction contracts or contracts where the risk of failure of
the prime contractor with debts to subcontractors is material.** **Since
the contract is incorporated into the bond, it is essential that the
grantee complies with the terms of the contract or the bond may not be
enforceable.**

**In recent years sureties have been paying much more attention to the
terms of their customers' contracts. One area of great concern to
sureties in the current environment is the *length of contracts*. Here
the issues tend to be *parts warranties* and *option* provisions.
Sureties are tending to limit their exposure to five years, including
warranties.** [^399] **Another major surety issue affecting the transit
industry, especially bus manufacturers, is the *poor financial condition
of many suppliers*. The financial strength of the contractor affects the
cost of the bond, as well as the ability of the contractor to secure a
bond. If a grantee asks for a 100% performance bond on a bus procurement
in the current environment, it may very well preclude potential
suppliers from bidding. Another practice causing surety problems
concerns liquidated damage*s*; i.e., some agencies have contractual
provisions that produce *unlimited liquidated damages.***

**Alternative forms of acceptable security include *letters of credit*
from financially secure institutions, such as banks, and cash deposits.
Letters of credit are frequently used in a field or for a principal with
which bonding companies have little experience. Letter of credit terms
differ from bonds in that they do not provide for completion of the
contract, in the event the principal is unable to perform. Procedures
should be established to make certain the letter is issued by a bank or
other financial institution that offers financial security similar to a
bonding company. Cash deposits are not typically used except as bid
security.**

**The FTA requirement discourages unnecessary bonding because it
increases the cost of the contract and restricts competition,
particularly by disadvantaged business enterprises. Bonding companies
exercise their discretion and assure their profits primarily by
declining to undertake excessive risks. Consequently many bidders have
limited \"bonding capacity.\" Unnecessary performance bonds reduce their
ability to bid on bonded work. Small businesses with short histories may
have particular difficulty obtaining a bond.**

##### Best Practices

[Bond Authenticity]{.underline} - It is essential that bonds be verified
as being authentic when they are presented to owners. It is a fact that
unscrupulous contractors have on occasion presented fraudulent bonds.
*Owners (obligees) should always contact the surety company to confirm
the authenticity of the bond that has been presented.* The Surety
Association of America (SAA) maintains a list of surety companies that
will assist in verifying the authenticity of a surety bond. The
authenticity program is available via the Internet. [^400]

[Exclude Warranties from Bond]{.underline} -- It has become increasingly
difficult to obtain bonds of longer duration than two years. Since the
warranty periods will greatly extend the duration of the bond, it would
be best to remove any warranty requirement from the performance bond and
cover the warranty risk through other techniques. Suggestions include
withholding a reasonable portion of the contract price for warranty
repairs and releasing the withholding in increments as the warranty
time-period dissipates, or requiring a separate Maintenance or Warranty
Bond in a reduced amount sufficient to cover the potential obligations
of the Contractor for repairs or maintenance. This will remove a bonding
obstacle and keep the bonding costs more reasonable. The key message
here is to *keep long-term obligations with the manufacturers and not
attempt to give them to sureties*.

[Consider Letters of Credit]{.underline} -- On non-construction
contracts, where you are not required by FTA to have bonds, but where
you may be required to protect your progress payments to the contractor
prior to delivery of final products, consider the use of a bank *letter
of credit* (LOC) from the contractor instead of a bond. A bank letter of
credit (LOC) is a cash guarantee to the owner. The owner can call on the
letter of credit on demand without cause. [^401] Once called upon, the
letter of credit converts to a payment to the owner and an
interest-bearing loan for the contractor. Bonds may be an expense that
you don't need to incur, and bonds may not even be available in the
amounts you would need at reasonable prices. [^402]

[Cap the Liquidated Damages]{.underline} -- The Contractor's maximum
risk must be clearly expressed in the contract so that the surety will
know how to price the risk. Damages should not be open-ended.
Additionally, if damages are expressed "per day," make the daily damages
accrue for *business days* only. Do not include Saturdays or Sundays
since you cannot take delivery on those days.

[Design-Build Projects]{.underline} -- For design-build projects and
large transit capital projects (those over \$200M) it would be advisable
to *talk to prospective sureties before the solicitation is issued to
see if the Design-Build contractors will have problems securing bonds
because of the size of the project*. There are two problems to be aware
of: (1) The lack of bonding capacity in the industry at the current
time, and (2) The fact that surety practice has historically been based
on the conventional *Design-Bid-Build* method, where design and
construction are performed by separate companies and where sureties have
detailed designs completed for which they can assess the performance
risks. On a Design-Build project, the lack of detailed designs desired
by sureties to evaluate project risk may make it difficult to obtain
performance bonds for the full value of the contract. When this is the
case, the grantee will want to involve their FTA regional office and
request a waiver from the standard bonding requirements. It should also
be noted that consultation with FTA would be advisable in any
design-build project to create a reasonable bonding strategy. In any
case, if a 100% bond were required by your agency, it would apply only
to the value of the construction work within the design-build contract.

[Technology]{.underline} - Surety companies like "brick and mortar"
business because they understand it. They are adverse to *technology
(e.g., projects requiring software development)*, and do not like to
bond the *Operation and Maintenance* phase of contracts where rail cars
are being bought with O&M responsibilities. If you are considering a
bond in these situations, you should contact prospective sureties to
determine if bonds will be available before you issue your solicitation.

[Notify Surety of Problems Early]{.underline} -- It is very important to
*notify the surety of problems as soon as they occur*. When the surety
is notified, and becomes involved, contractors are strongly motivated to
perform because the *threat of losing the ability to obtain bonds is a
very serious concern to contractors*.

If the Contractor is experiencing financial difficulties, the surety
will often provide working capital to keep the contractor going. This
*financial assistance* may occur without a formal declaration of default
by the owner. Another form of financial assistance often provided by
sureties is to guarantee a line of bank credit. This will assure a
steady flow of materials to the job site and payments to subcontractors.

Sureties frequently will provide *technical assistance* in order to
minimize problems and losses on a project. Many sureties employ
professional engineers, accountants, and other technical staff or
advisors who can help a contractor who is experiencing problems.

Sureties can provide *mediation between an owner and Contractor*. When
problems occur on a construction project, it's likely that the
relationship between the owner and Contractor is strained. The surety,
as a third-party participant, can investigate the issues that are
dividing the parties and offer workable solutions before the owner
declares a default.

Subcontractor failure is a frequent cause of a prime's problems.
Sureties can become involved in *assisting a subcontractor* with
financing and technical help, just as they do with the prime

contractors they are bonding. They will do this to protect their bonded
contractor from default. Once again, it is important that the surety be
informed early of performance problems on all levels of the project so
they can assist when circumstances require it.

[Subcontractor Bonds]{.underline} -- Grantees can help their prime
contactors manage risk by *requiring performance bonds from major
subcontractors*. If a subcontractor is a significant part of the job or
so specialized that it will be difficult to find a replacement, bonding
is a cost-effective way to limit the exposure of both the grantee and
the prime contractor.

Remember the important contribution of the surety in *prequalifying the
subcontractor.* This is an important step in ensuring that a responsible
subcontractor is selected by the prime for a critical role on the
project. While the cost of the subcontractor's bond will have to be paid
by the prime and will be passed on to the grantee, it is nevertheless an
insurance policy that can help avoid significant problems for the prime
and thus for the grantee. It is also well to keep in mind that a
subcontractor that is experiencing financial difficulties is more likely
to complete a bonded project because corporate assets, and possibly
personal assets, are at risk. This may be a singularly important factor
in keeping the subcontractor performing on the job. Be sure to
investigate the quality of the subcontractor's surety, using one of the
industry rating companies mentioned above, and always confirm the
authenticity of any bond presented.

Subcontractor bonding may also be beneficial when the prime contractor
is not financially strong. For example, New York City Transit (NYCT)
recently had a situation where the cost of a warranty bond was very
expensive to a vehicle manufacturer because of their financial
condition. In order to overcome this, the manufacturer had its major
parts supplier provide the bond, and as a result the manufacturer saved
\$2,000 per vehicle. The supplier's cost for the bonding was
significantly less since they were in excellent financial condition.

[Consider More Stringent Prequalification/Responsibility
Criteria]{.underline} ‑ If performance bonding is a problem because the
project is so large that few bidders can be fully bonded, or because of
its effect on competition, you can consider other ways of reducing your
agency\'s risk. You may (through prequalifying only strong bidders, or
requiring a high standard of responsibility) be able to reduce your risk
in a way that allows more competition than would result from a full
performance bond requirement.

[Balance the Costs of Bonding against Risks Present in a Range of
Contractors]{.underline} ‑ In addition to construction contracts,
specialty supply contracts that involve custom manufacturing, e.g., for
rail cars or buses, involve some risk of failure and consequences
similar to construction situations. However, performance bonds are far
less common in these situations than in construction contracts.
Information technology development contracts also hold the potential for
loss in the event of contractor failure, but performance bonding is less
common in developmental work because the risks of failing are too
expensive to insure and because the surety/contractor relationships have
not developed as they have in the construction industry.

If you are seriously concerned about one or more of the following,
considering your possible successful offerors, you can evaluate the need
for a performance bond, in light of its cost, its effect on competition,
and effect on DBEs:

-   financial strength and liquidity of the offerors,

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-   inadequacy of legal remedies for contractor failure and the effect
    that failure of the contractor could have on your agency,

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-   difficulty and high cost of completing the contractor\'s work if it
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-   experience of the contractor on other contracts -- whether there is
    a history of contract failure in a particular activity,

-   degree of technical difficulty; e.g., where new working methods are
    required.

[Consider Corporate Guaranty]{.underline} ‑ Where your concern is partly
that the proposers have limited financial resources, but they have
relationships with financially stronger corporate entities, you could
consider requiring a corporate guaranty of the contract rather than a
performance bond. In this case, the parent corporation of your
contractor, whose liquidity might rival the bonding company\'s, would
promise to perform the contract should the contracting corporation fail
to do so. This arrangement may not only be less expensive than a
performance bond, but may also result in more influence on the
contractor where contract disputes are involved.

[Return Unnecessary Bid Guaranty]{.underline} ‑ Because guarantees have
a financial impact on proposers as long as they are in effect, unused
bid guarantees should be returned to proposers as soon as it is
determined that they have no reasonable chance of winning the contract.
This is discussed in Section 4.3.3.3.2, \"Bid Guaranty.\"

[Surety Bond Claims and Counsel]{.underline} -- Before a surety will
assume responsibility for a contractor that you have defaulted, *the
surety must be satisfied that its contractor owes a debt.* *The surety
will conduct an investigation as a result of receiving your notice of
claim*. Keep in mind that the issues of default and claims under the
bond are predicated on the legal interpretation of a contractual
relationship, as developed through statutes and legal precedents. This
means it is critical that you seek legal assistance from counsel who is
familiar with surety bonds and construction, which is a specialized
field of law. Never rely on a layperson's interpretation of the
contract. *Experienced counsel can save time, money, and frequently,
unnecessary litigation.* The American Bar Association (ABA) Trial Tort
and Insurance Practice Section's Fidelity and Surety Law Committee
includes lawyers who specialize in surety law. Many state bar
associations also have surety committees or construction law committees.
For names of lawyers in your area, call the ABA (312) 988-5607 and ask
for the FLSC membership directory or the pages for a particular state,
or call the state bar association for a reference.

It is also of the utmost importance that you document the progress of
your project. Remember that the surety promises to complete the contract
when the "principal is in default of the contract

and has been declared to be in default by the obligee." Well documented
project files will be a great asset to facilitate the surety's initial
investigation and especially if the matter goes to court. See BPPM
Section 11.2 -- *Claims, Grievances and Other Disputes With
Contractors,* paragraph titled "Avoiding Disputes Through Proper
Documentation."

[Indemnification Clauses]{.underline}-- One of sureties' concerns in any
construction contract today is the increasingly broad and unlimited
indemnity that contractors are contractually required to provide. If
this indemnification is needed to satisfy political constituencies or
due to other factors, clearly stating that the liability is to be
covered through insurance and not the performance and/or payment bond
would eliminate one potential obstacle that sureties sometimes raise as
an underwriting road block.

Grantees should not assume that contractual indemnification, whereby the
contractor agrees to indemnify and hold the grantee harmless from and
against various risks, is an adequate substitute for bonds or insurance.
These contractual promises are only as good as the contractor's
financial resources backing them. If the contractor fails to perform the
contract, it is likely that the contractual indemnification provisions
will be of little value. It is important, therefore, to ensure the
contractor is bonded or has adequate insurance to support the
indemnification clauses in the contract.

[Resources]{.underline} -- Following is a list of organizations offering
information and resources related to surety bonds and insurance:

1.  Surety Information Office (SIO)

> 5225 Wisconsin Avenue NW, Suite 600
>
> Washington, DC 20015-2014
>
> \(202\) 686-7463
>
> [www.sio.org](http://www.sio.org/)
>
> SIO is the information source on contract surety bonds in public and
> private construction. SIO is supported by The Surety Association of
> America and the National Association of surety Bond Producers.

2.  National Association of Surety Bond Producers (NASBP)

> 5225 Wisconsin Avenue NW, Suite 600
>
> Washington, DC 20015-2014
>
> \(202\) 686-3700
>
> [www.nasbp.org](http://www.nasbp.org/)
>
> NASBP is the international organization of professional surety bond
> producers and brokers. NASBP represents more than 5,000 personnel who
> specialize in surety bonds for the construction industry and other
> types of bonds such as license and permit bonds.

3.  The Surety Association of America (SAA)

> 1101 Connecticut Avenue NW, Suite 800
>
> Washington, DC 20036
>
> \(202\) 463-0600
>
> [www.surety.org](http://www.surety.org/)
>
> SAA is a voluntary, non-profit, incorporated association of companies
> engaged in the business of suretyship. SAA represents more than 500
> companies that collectively underwrite the majority of suretyship and
> fidelity bonds in the United States.

4.  U.S. Department of the Treasury

> [www.fms.treas.gov/c570](http://www.fms.treas.gov/c570)
>
> This website offers a free download of the Federal Treasury List
> (Circular 570), which lists all surety companies qualified to
> underwrite surety bonds on federal construction.

5.  The International Risk Management Institute (IRMI)

> [www.irmi.com](http://www.irmi.com/)
>
> The IRMI site offers articles and information on surety bonds and
> other risk management tools, along with contact information for risk
> management professionals and advisors. The Expert Commentary section
> includes more than 500 articles on a variety of risk management
> issues.

6.  The National Association of Insurance Commissioners

> [www.naic.com](http://www.naic.com/)
>
> The National Association of Insurance Commissioners site verifies that
> a surety company is licensed to conduct business in a particular
> state, and provides access to state insurance department websites.

7.  The Risk & Insurance Management Society

> [www.rims.org](http://www.rims.org/)
>
> The Risk & Insurance Management Society website offers a number of
> helpful tools to assess and manage risk.

8.  U.S. Small Business Administration (SBA)

> [www.sba.gov/osg](http://www.sba.gov/osg)
>
> The SBA website offers information on the Surety Bond Guarantee
> Program, including free copies of forms required to be submitted for
> approval into the program and contacts for local SBA offices.

**8.2.2 [Options]{.underline}**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| § 9.i. of FTA Circular 4220.1E requires grantees to evaluate options: |
|                                                                       |
| > \(1\) [Evaluation of Options]{.underline}. The option quantities or |
| > periods contained in the contractor\'s bid or offer must be         |
| > evaluated in order to determine contract award. When options have   |
| > not been evaluated as part of the award, the exercise of the        |
| > options will be considered a sole source procurement.               |
| >                                                                     |
| > \(2\) [Exercise of Options]{.underline}.                            |
| >                                                                     |
| > \(a\) A grantee must ensure that the exercise of an option is in    |
| > accordance with the terms and conditions of the option stated in    |
| > the initial contract award.                                         |
| >                                                                     |
| > \(b\) An option may not be exercised unless the grantee has         |
| > determined that the option price is better than the prices          |
| > available in the market or that the option is the more advantageous |
| > offer at the time the option is exercised.                          |
|                                                                       |
| § 7.m. of FTA Circular 4220.1E states that:                           |
|                                                                       |
| > Grantees shall not enter into any contract for rolling stock or     |
| > replacement parts with a period of performance exceeding five (5)   |
| > years inclusive of options.                                         |
+-----------------------------------------------------------------------+

**DEFINITIONS**

[Option]{.underline} ‑ A unilateral right in a contract by which, for a
specified time, a grantee may elect to purchase additional equipment,
supplies, or services called for by the contract, or may elect to extend
the term of the contract.

**DISCUSSION**

**If you include terms in a contract that permit you to choose, at the
time of award or later, quantities and items in addition to the base
amount (options), you must include the price of those quantities or
items in the price evaluation of the offer before selecting an apparent
low bidder or determining the competitive range for negotiations.
Otherwise you may not use Federal funds for the additional quantity
without a separate, non‑competitive procurement process (i.e.,
processing as a sole-source procurement).**

**If you include the price in the evaluation and later choose to order
the additional quantities or items, you must again review the prices to
ensure that they are advantageous.**

**Purpose**

Options are most often used where there is uncertainty as to the
quantity of goods and services you will require under a contract. Rather
than planning a separate, later procurement when the requirement becomes
certain, and incurring potential delays in delivery of the items because
of the procurement lead-time to buy additional items, you may want to
specify the option to buy more in your present contract. Options may
also be appropriate when there is a need for standardization of parts or
interchangeability and it is best to get proposers to bid competitively
on the entire potential need at the time of the first procurement,
rather than processing a sole-source add-on at a later date when the
supplier will be under no competitive pressures.

Another common use of options is to fit a construction project to a
budget. For example, a number of elective items such as additional
landscaping, signage that could be purchased separately, and a higher
quality, lower maintenance finish are specified as options in a
construction solicitation. When the bids are evaluated, you can elect
the base construction plus those options that can be procured with the
available funds. Those options that are not purchased under the basic
contract would be established as options and ordered when future funding
becomes available. When this approach is used, the optional items are
often called \"deductible options\". In this case, the stated bid amount
already includes the options, and each option is associated with a
deduction from the stated bid. This method generally caries the clear
implication to the offerors that the cost of optional items will be
evaluated in determining the successful bid. If you award the contract
minus certain options, and then wish later to add those optional items
back, you must comply with the requirement to make a new determination
that the option prices are advantageous.

**Best Practices**

Whenever the option quantities are a significant portion of the total
potential requirement, you should carefully consider whether a
*requirements* or *indefinite delivery* type of contract would better
suit your circumstances and needs. A *requirements* contract would
provide for filling all of your requirements for certain supplies or
services during a specified time period by placing orders with the
contractor who wins the competition. Your solicitation and contract
would state what you believe to be a realistic estimated total quantity
but you would not be legally required to order that quantity. The
contract would also state the maximum limit of the contractor\'s
obligation to deliver as well as the minimum quantities that you may
order under an individual order. The contract would contain
competitively bid, fixed unit prices for the items being procured.

An *indefinite quantity* contract works like the *requirements* contract
above except that you do not obligate your agency to fill all of your
requirements for a particular supply or service from any given
contractor.

Orders placed under a requirements or indefinite delivery contract are
not treated as sole-source procurements and do not have to be evaluated
like option orders and found to be advantageous from a price standpoint
before being placed.

When options are justified by the degree of uncertainty, the difficulty
of conducting a separate procurement in a timely manner, or the
importance of a single source, then include in your solicitation a clear
statement that the full option price will be included in your evaluation
of prices to determine the lowest bid.

When options may be exercised at a time of your choosing over a long
contract period, you may wish to reduce the offeror\'s risk by including
a price escalation provision. Consumer price indices or other indices of
prices germane to your suppliers may be obtained from the Bureau of
Labor Statistics of the U.S. Department of Labor.

In the case of rolling stock and similar custom equipment for which you
have an ongoing need, you may find that the advantage of having an
option for identical equipment at a predetermined price outweighs the
pricing difficulties introduced by options.

You may also benefit from a competitive procurement conducted by another
transit agency by asking that agency to specify optional quantities for
rolling stock you expect you may need in the same time frame as the base
procurement. The advantage of specifying your options in the other
agency\'s original solicitation, rather than piggy‑backing after the
offers are submitted, is that you will take advantage of a competitive
environment instead of a sole-source add on at a later date.

**8.2.3 [Liquidated Damages]{.underline}**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| § 13 of FTA Circular 4220.1E states:                                  |
|                                                                       |
| A grantee may use liquidated damages if it may reasonably expect to   |
| suffer damages from late completion and the extent or amount of such  |
| damages would be difficult or impossible to determine.                |
|                                                                       |
| The assessment for damages shall be at a specific rate per day for    |
| each day of overrun in contract time; and the rate must be specified  |
| in the third party contract. Any liquidated damages recovered shall   |
| be credited to the project account involved unless the FTA permits    |
| otherwise.                                                            |
+-----------------------------------------------------------------------+

**DEFINITION**

[Liquidated Damages]{.underline} ‑ Liquidated damages are a specific sum
(or a sum readily determinable) of money stipulated by the contracting
parties as the amount to be recovered for each day of delay in delivery
of the product or completion of the contract. They do not represent
actual damages but are established in the initial contract as a
substitute for actual damages. They should represent, however, the most
realistic forecast possible of what the actual damages are likely to be.

**DISCUSSION**

**Liquidated damages are a widely used method of ensuring contractors
perform timely. These provisions are regularly used in construction
contracts and sometimes in supply and service contracts.**

**Liquidated damages clauses are most appropriately used when:**

-   **The time of delivery or performance is of particular importance
    and you may reasonably expect to suffer damage if the delivery or
    performance is delinquent; and**

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```
-   **The extent or amount of such damage would be difficult to prove.**

**When determining whether to use a liquidated damages clause, you will
wish to consider such factors as:**

-   **The probable effect on pricing and competition; and**

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```
-   **The costs and difficulties of contract administration.**

**Liquidated damages may be used for supplies, services and
construction.**

**Best Practices**

[Rate Determination]{.underline} ‑ The rate of liquidated damages must
be a reasonable estimate to compensate for possible damages and not be
so large as to be construed as a penalty. If it is construed as a
penalty it will be held unenforceable. The most prudent approach is to
formulate the liquidated damages on a case-by-case basis. You will find
it useful to briefly document the calculation of the rate of damages
each time you use liquidated damages in a contract and keep the
documentation on file. Appendix B.3 is an example of a *Liquidated
Damages Checklist* being used by a Transit Authority. [^403] Once
liquidated damages are included in a contract, you will be unable to
recover actual damages in many jurisdictions.

[Application]{.underline} ‑ When it is determined that a liquidated
damages clause will be included in the contract, the applicable clause
and appropriate rate(s) must be contained in the solicitation. For
construction contracts, the rate to be assessed can be for each day of
delay, and the rate typically, at a minimum, covers the estimated cost
of inspection and superintendence for each day of delay in completion.
If you will suffer other specific losses due to failure of timely
completion, the rate can also include an amount for these items (for
example, the cost of substitute facilities or the rental of buildings or
equipment). The contract may include an overall maximum dollar amount or
period of time, or both, during which liquidated damages may be
assessed. This will help ensure that there is not an unreasonable
assessment of damages.

*It is important to note, that in your establishment of liquidated
damages, you may use whatever consequential damages may result from a
failure to deliver or perform, even damages for items which are not
within the scope of the grant. However, it must be understood that all
liquidated damages collected from the contractor must be credited to the
grant and treated as a reduction to the allowable costs of the grant, in
accordance with § 13 of FTA Circular 4220.1E. This will have the effect
of making the funds collected (or the contract price reduction taken)
available to the grantee for other activities/costs which are within the
scope of the grant. In other words, while you may use the incurred cost
of activities which are not within the scope of the grant to estimate
and establish liquidated damages amounts, you will not be able to
directly apply the collected damages to those impacted activities unless
they are within the scope of the grant. The funds returning to the
grantee must be credited to the grant where they become available for
other activities which are within the scope of the grant.*

[Collection]{.underline} ‑ If your agency has a financial obligation to
the contractor under the contract, you may simply credit the amount of
liquidated damages due from the contractor to your agency as payment by
your agency of part of its remaining obligation to the contractor. Some
contracts in which liquidated damages are particularly critical contain
retainage provisions which are activated when liquidated damages are
anticipated. In most jurisdictions you may also have a right of offset
to credit the liquidated damages as payment to the contractor under
other contracts it holds with your agency. If you decide to pursue this
approach be sure you comply with the FTA approval requirements in
Circular 4220.1E concerning the crediting of the project account with
the amount of the liquidated damages. Finally, like any claim, you may
settle your claim for liquidated damages in exchange for credit on
future purchases such as spare parts or other items within the scope of
the contract.

[Excusable Delay]{.underline} ‑ Contracts with liquidated damages
clauses should also contain excusable delay clauses. These typically
provide that if the contractor is delayed by certain specified causes
that are beyond the contractor\'s control (e.g., weather, strikes,
natural disasters) then the resulting delay is excused and liquidated
damages will not be assessed. Whenever a contractor incurs liquidated
damages, the precise counting of each day\'s delay based on these
conditions directly affects the sum paid; therefore, it is worth making
the calculation of delay in your contracts as clear as possible. When
excusing construction delay caused by rainfall beyond normal, for
example, you may specify in the contract what normal rainfall is and how
the number of days of greater than normal rainfall will be computed.

[Substantial Completion]{.underline} - Liquidated damages are not
assessed after the date on which the work is substantially completed.
Substantial completion is usually defined as the time when the
construction site or the supplies delivered are [capable of being used
for their intended purposes]{.underline}.[^404] There is no
predetermined percentage that will establish substantial completion and
the decisions place more emphasis on the availability of the work for
its intended use than on the use of formulas as to the percentage of
completion of the work. [^405]

**8.2.3.1 [Relationship with Default Termination]{.underline}**

**DISCUSSION**

**When a contract containing liquidated damages is terminated for
default the contractor will be liable for both liquidated damages and
the excess costs of reprocurement (i.e., the amount by which the
replacement contractor\'s price exceeds the terminated contractor\'s
price). You have an obligation to the defaulting contractor to mitigate
both his liquidated damages and the excess reprocurement costs. This
means that you need to not unduly delay your termination for default
action once the contractor is in default, and you will need to take
expeditious action to resolicit bids/proposals for the supplies or work
not performed. The time period for the liquidated damages will be the
time between the contractually required date of completion of the
defaulted contract and the actual completion date of the new contract
[assuming there is no unreasonable delay in awarding the new
contract.]{.underline} Contractors will not be assessed liquidated
damages for any period of delay caused by your agency. This
reprocurement must not only be done expeditiously to mitigate liquidated
damages but must also be in accordance with sound procurement
procedures, producing a fair and reasonable price, so as to mitigate
excess reprocurement cost damages. The contract to reprocure should be
awarded competitively, with bids/offers solicited from a sufficient
number of competent potential sources to ensure adequate competition.**

**8.2.4 [Intellectual Property Rights]{.underline}**

**8.2.4.1 [Disclosure of Trade Secrets]{.underline}**

**DEFINITIONS**

[Trade Secret]{.underline} ‑ A plan, process, tool or other intellectual
property which is used in some process of commercial value and which is
known to a group of individuals who have been intentionally

restricted by the trade secret owner. The key attribute of a trade
secret is that the owner has

diligently and effectively restricted knowledge so that its competitors
cannot obtain the information.

**DISCUSSION**

**If you gain access to trade secrets either to evaluate the offer or to
use and support use of the product or service, you may undertake an
obligation to protect the trade secret. More particularly, there may be
a direct conflict between the supplier\'s interest in the trade secret,
and sunshine laws that require you to disclose any information upon
request. By not retaining the proprietary documents or by use of
intermediaries, you may be able to reduce the potential for a violation
of trade secrets.**

**The laws permitting public access to government data vary by state. It
is helpful to contractors to disclose your obligations under the laws in
any solicitation document which calls for you to receive confidential
information from a supplier. Consideration for the suppliers\'
legitimate interests will be an important factor in their continuing
willingness to participate in your programs.**

**Best Practices**

[Return Data]{.underline} ‑ One method of accommodating the supplier\'s
interest in the confidentiality of the data is to return all the
documents to the supplier. This is particularly feasible at the
conclusion of a procurement in which you have been evaluating known
trade secrets.

[Inspect Data Off Site]{.underline} ‑ If concerns about trade secrets
and confidential information are particularly acute, you may find it
advantageous to visit the contractor\'s premises and inspect the
information or materials there, returning with only the minimum
necessary data in recorded form.

[Third Parties]{.underline} ‑ Another way to resolve the conflict is to
use a third party (e.g., one of your advisors) to evaluate the data or
retain the data. The possession of data by an agent of a public agency
is sometimes also subject to action under public access laws. However,
this method is common in software licensing agreements, where a trustee
retains confidential source code data until specified conditions occur
under which the supplier has agreed that the data can be disclosed to
the public agency.

[Opportunity to Defend]{.underline} ‑ A final strategy is to incorporate
into your contract clauses a provision granting (or requiring, depending
on the circumstances) the owner of the trade secret the ability to
defend your agency in any action against your agency to force
disclosure. Often, this takes the form of the contractor indemnifying
your agency for your cost in defending against disclosure, or, at your
agency\'s option, the contractor\'s own attorneys undertaking the
defense.

**8.2.4.2 [Contract Work Products, Patents, and
Copyrights]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| Appendix A.1 of this Manual contains the requirements for             |
| intellectual property rights created under research and development   |
| contracts. These requirements apply only where a primary purpose of   |
| the contract is research or development.                              |
+-----------------------------------------------------------------------+

**DISCUSSION**

**In research and development contracts, you are required to obtain
certain rights in the intellectual property created for FTA, and also,
incidentally, to obtain indemnification for**

**FTA in case the contractor violates another\'s rights. A clause
satisfying these requirements is contained in Appendix A.1.**

**In contracts that are not primarily research and development
contracts, you may also consider including portions of these provisions
for your agency\'s own benefit. You may consider this where intellectual
property (e.g., computer software) will be developed with your funds as
part of a larger effort which is not developmental.**

**In contracts that involve the use but not the development of
intellectual property (e.g., the use of patented equipment)
indemnification against the contractor\'s violation of another\'s rights
may be advantageous.**

**Best Practices**

[Indemnification]{.underline} ‑ The indemnification provision, in case
the contractor violates the intellectual property rights of a third
party, (e.g., reproduces copyrighted material or incorporates a patented
device in your equipment) is a useful provision wherever intellectual
property is involved. Even though you may have little knowledge of the
intellectual property the contractor is using, the intellectual property
owner may name you in the suit and you may have more funds to pay
damages than does your contractor.

[Secure Support Rights]{.underline} ‑ When you take delivery of
intellectual property which you will need for your program, you will
also need to carefully anticipate and define your agency\'s rights to
use, modify, or disseminate the material to others. If licenses control
the software or patents control the components of your vehicles, you may
wish to obtain the right to reproduce the intellectual property for your
agency\'s own internal use, without the right to resell it or distribute
it outside your agency. Whether the contractor is willing to grant that
right depends on the practices in the industry, the competitive value of
the intellectual property, and the contractor\'s policies. If a practice
is not well‑established, the matter may have to be addressed in pre‑bid
discussions or in negotiations. Where the contractor is unwilling to
grant access except through additional purchases, the contractor may be
willing to place the intellectual property in a trust arrangement

whereby the trustee would grant you access in case of the contractor\'s
demise or inability to support your ongoing use of the product.

[Evolving Law]{.underline} ‑ The law of intellectual property,
particularly as it pertains to information technology, is evolving
rapidly. If you are involved in procuring software or other intellectual
property with any substantial value, you may wish to have attorneys who
are current in this area review your contract provisions.

**8.2.5 [Termination]{.underline}**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| § 15.b of FTA Circular 4220.1E requires grantees to include           |
| provisions in their contracts and subcontracts that allow for:        |
|                                                                       |
| b.  Termination for cause and for convenience by the grantee or       |
|     subgrantee including the manner by which it will be effected and  |
|     the basis for settlement. (All contracts in excess of \$10,0000.) |
+-----------------------------------------------------------------------+

**DISCUSSION**

**It is sometimes necessary to end a contractual relationship prior to
the completion of the work called for in the contract. In the public
sector, when that relationship is ended because of a problem with the
contractor\'s compliance with one or more terms of the contract, that
termination is most commonly referred to as a *termination for default
or a termination for cause*.**

**When the public agency decides to end the contract for a reason other
than the default of the contractor, that termination is most frequently
referred to as a *termination for the convenience of the public
entity*.**

**If you do not plan for the possibility of one or the other of these
events occurring in your contractual relationships, through the careful
drafting of clauses which define the rights and** **obligations of the
parties under a default and convenience situation, the consequences can
be substantial from a monetary and contract performance standpoint.**

**Because of the nature of the different types of contracts, you may
want to consider having different termination clauses for fixed price as
opposed to cost reimbursement contracts.**

**Because of the different nature of the product or services being
bought, you may want to have different termination clauses for
construction, supply, and services contracts, including professional
services.**

You may want to have an abbreviated termination clause for contracts
below a dollar threshold (say \$100,000). Likewise for purchase orders,
you will need to decide how sophisticated you want these to be.

**You need to address *partial* as well as *complete* terminations.**

**8.2.5.1 [Termination For Convenience]{.underline}**

**DISCUSSION**

**The development of clauses allowing the government to terminate
contracts for its convenience was a necessity growing out of the major
wars and the need to end the large number of procurement contracts once
the wars were ended. Without such clauses the government could terminate
its contracts but such action constituted a breach. This meant having to
pay profits to contractors on unperformed work (anticipatory profits).
Thus the need for and the development of these convenience termination
clauses, which give the government the right to terminate without cause
and which limit the contractor\'s recovery of profit based upon the work
actually performed up to the point of termination.**

**Best Practices**

You will note that the FTA Circular requires a clause which defines
\"the manner by which the termination will be effected and the basis for
settlement\". Appendix A.1, Model Contract Clauses, section 21, contains
model clauses with suggested language for both convenience and default
terminations. These model clauses are very broad in their definition of
the basis for settlement. For example, while the clauses clearly limit
the contractor\'s profit to work actually performed, and they commit to
pay the contractor its costs, they do not define how those costs will be
determined, i. e., the *cost principles* which will be used to determine
allowable costs. [It is highly recommended that you supplement these
clauses to stipulate the *cost principles* which will be operative in
the event of a termination]{.underline}, and which will determine which
costs are allowable and which are not. By using an objective and clearly
defined method for determining allowable costs you will avoid problems
which may otherwise arise in the negotiation of final costs.

The American Public Transit Association has published a procurement
manual with a Termination for Convenience Clause referencing Part 49,
*Termination of Contracts*, of the Federal Acquisition Regulations (48
CFR 49) as the basis for settlement of claims. [^406] Another approach
is to reference the FAR, Part 31.205, which deals very comprehensively
with *Selected Costs* and their allowability. [^407]

The APTA approach of referencing FAR Part 49 as the basis for settlement
of terminations for convenience would seem to be a very effective
solution to the problem of defining the basis for settlement. Part
49.113 of the FAR incorporates Part 31, *Contract Cost Principles and
Procedures,* thus covering all the normal cost issues which arise on
cost- type contracts, but

going beyond the normal to define those costs and issues peculiar to
terminations in the rest of FAR Part 49. The termination clauses
themselves may be found in FAR Part 52, and you will see that they refer
to both Part 31 and Part 49 of the FAR in order to define the cost
standards to be used for the settlement.

Suggested termination clauses are also contained in the ABA\'s *Model
Procurement Code for State and Local Governments* and implementing
suggested regulations. [^408]

**8.2.5.2 [Partial Terminations]{.underline}**

**DISCUSSION**

**Your Termination for Convenience clause must include a provision
allowing for a partial termination of the work, in which case the
contractor must continue with the unterminated portion. The Federal
government clause at FAR 52.249-2(k) allows the contractor to file a
proposal for an equitable adjustment of the price(s) for the continued
portion of the contract. Note that the model clauses in Appendix A.1 do
not address this issue of an equitable price adjustment for the
continued work, and you should consider this provision as a matter of
equity to the contractor. This price adjustment would allow the
contractor to recover those costs of a fixed nature which he would have
recovered in the prices of the terminated work, had there been no
termination. This is not anticipatory profit but recovery of fixed
overhead.** [^409] **An example might be the rental of a facility whose
costs would have been recovered over all the deliverable units of the
original contract but which can only be recovered over a smaller number
of units on the partially terminated contract, assuming you allow a
price adjustment for the unterminated portion of the contract.**

**8.2.5.3 [Termination for Default]{.underline}**

**DISCUSSION**

**[Fixed Price Supply Contracts]{.underline} - If you are using a
default termination clause similar to the federal clauses, the
termination is likely to have the following effects:**

-   **Your agency is not liable for the costs of unaccepted work. The
    contractor will only be paid for work which you accept.**

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-   **You are entitled to a return of all progress, partial, or advance
    payments.**

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-   **You have the right to take custody of the contractor\'s material,
    inventory, construction plant and equipment at the site, and of the
    drawings and plans, with the price to be negotiated.**

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-   **The contractor will be liable for the excess costs of
    reprocurement or completion.**

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-   **The contractor will be liable for either actual damages or
    liquidated damages if your contract provides for them.**

**[Services and Construction Contracts]{.underline} - Some of the above
consequences for supply contracts are also applicable to services and
construction contracts but a contractor furnishing services or
construction will be entitled to payment for work that was properly
performed prior to the default termination. Under supply contracts the
contractor will not be paid costs for producing supplies not accepted,
whereas services and construction contractors can recover costs because
your agency will be seen as having benefited from the contractor\'s
partial performance in the services rendered or the improvements made to
your property.** [^410]

**Best Practices**

[Defining \"Default\"]{.underline} - The clause must define what
\"default\" means ‑‑ i.e., failure to deliver the supplies or perform
the services within the time specified in the contract, failure to make
progress so as to endanger performance of the contract, refusal or
failure in a construction contract to prosecute the work or any
separable part within the time specified in the contract.

[Excess Reprocurement Costs]{.underline} - The model contract clauses in
section 21 of Appendix A.1 include default termination clauses for
various types of contracts. You will need to decide if you wish to hold
the contractor responsible for excess reprocurement costs and include an
appropriate provision in your clause. Only the construction contract
termination clause \[21.(h)\] in Appendix A.1 includes excess
reprocurement costs.

The APTA bus procurement *Guidelines* at § 2.2.6.2 (see note 20 in this
chapter) include a provision for excess reprocurement costs for
\"similar supplies or services.\"

[Excusable Reasons for Non-performance]{.underline} - The clause
typically defines acts or events that will excuse the contractor\'s
default ‑ i.e., causes beyond the control and without the fault or
negligence of the contractor, such as acts of God, unusually severe
weather, etc.

[Conversion to Convenience Termination]{.underline} - If you terminate a
contract for default, and it is later determined that the contractor was
not in default or that the default was excusable, it would be very
helpful if your default termination clause specifically stated that the
termination will be treated as if it had been issued for the convenience
of the agency. This will act to limit your liability for a wrongful
termination by invoking the procedures of the convenience termination
clause, thus precluding the contractor from recovering anticipatory
profits. The default termination clauses in Appendix A.1 contain this
stipulation.

[Notice Provisions]{.underline} - The clause typically defines what kind
of written notices, if any, must be furnished to the contractor prior to
the termination taking place ‑ i.e., *cure* and *show* *cause* letters.
Within a specified time after you notify the contractor in writing to
*cure* the deficiency in performance, the contractor has the opportunity
(without jeopardy of immediate termination) to *show cause* why it
should not be terminated; it may accelerate performance, present new
information, or offer additional promises. If the contractor does not
successfully show that it should not be terminated, your agency may then
proceed with a termination for default. If your clause grants the
contractor a cure period, you may wish to specify exceptions such as
where default is necessary to take over the work in the interest of
public safety.

**Acronyms**

ASBCA - Armed Services Board of Contract Appeals

BCA - Board of Contract Appeals

IBCA - Department of Interior Board of Contract Appeals

PSBCA - Postal Service Board of Contract Appeals

Chapter 9

**9 - [Contract Administration]{.underline}**

9.1 [Documentation of Contract Administration]{.underline} (5/96)

9.2 [Changes]{.underline} (2/99)

> 9.2.1 [Contract Scope and Cardinal Changes]{.underline} (10/99)
>
> 9.2.2 [Cost/Price Analysis of Changes]{.underline} (2/99)
>
> 9.2.3 [Construction Changes]{.underline} (2/99)
>
> 9.2.3.1 [Differing Site Conditions]{.underline} (2/99)
>
> 9.2.3.2 [Field Change Orders]{.underline} (2/99)
>
> 9.2.3.3 [Pricing of Construction Changes]{.underline} (2/99)

9.2.3.4 [Variations in Estimated Quantities]{.underline} (2/99)

9.2.3.5 [Delays]{.underline} (2/99)

9.2.3.6 [Acceleration]{.underline} (2/99)

9.3 [Improving Vendor Delivery Performance]{.underline} (10/00)

9.4 [Approval of Subcontractors]{.underline} (11/03)

**9.1 DOCUMENTATION OF CONTRACT ADMINISTRATION**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| In listing the \"General Procurement Standards Applicable to          |
| Third-Party Procurements,\" FTA has established two standards that    |
| address contract administration documentation as opposed to           |
| procurement [^411] administration documentation:                      |
|                                                                       |
| > b\. [Contract Administration System]{.underline} -- Grantees shall  |
| > maintain a contract administration system that ensures that         |
| > contractors perform in accordance with the terms, conditions, and   |
| > specifications of their contracts or purchase orders. . . .         |
| >                                                                     |
| > k\. [Responsibility for Settlement of Contract                      |
| > Issues/Disputes]{.underline} - Grantees alone 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. These issues include, but are   |
| > not limited to source evaluation, protests, disputes, and claims.   |
| > These standards do not relieve the grantee of any contractual       |
| > responsibility under its contracts.                                 |
+-----------------------------------------------------------------------+

+-----------------------------------------------------------------------+
| > FTA will not substitute its judgment for that of the grantee or     |
| > subgrantee, unless the matter is primarily a Federal concern.       |
| > Violations of the law will be referred to the local, state, or      |
| > Federal authority having proper jurisdiction. [^412]                |
+-----------------------------------------------------------------------+

**DEFINITIONS**

[Contract Administration]{.underline} - The post-award administration of
the contract to ensure compliance with the terms of the contract by both
the contractor and the Governmental entity.

[Contract Administration File Documentation]{.underline} - The
documentation contained in the contract file maintained by, or on behalf
of the contracting officer. It reflects the actions taken by the
contracting parties in accordance with the requirements of the contract
and documents the decisions made, and the rationale therefore, of
matters which may result (or have resulted) in controversy or dispute.

[Procurement File Documentation]{.underline} - The documentation
contained in a procurement file which details the history of the
procurement through award of the contract. It includes, at a minimum,
the rationale for the method of procurement, the selection of the
contract type, the reasons for selection or rejection of the contractor,
and the basis for the contract price.

**DISCUSSION**

**Now that your contract has been awarded, performance is set to begin.
It is important to get off to the right start in terms of documenting
the administration of the contract and identifying what information
should be maintained in the contract administration files. Different
people involved in the project (QA, engineers, inspectors, financial,
DBE office, safety, etc.) may have their own individual files relating
to the contract reflecting their involvement with the administration of
the contract, but it is good practice for the procurement official to
maintain the \"official\" contract file. The \"official\" file would
include all official correspondence relating to the administration of
the contract so as to verify the contractor\'s adherence to the terms of
the contract and demonstrate that the agency is following good
administrative practice and sound business judgment in settling all
contractual and administrative issues arising during contract
performance.**

**Purpose**

Any contract involving the expenditure of public funds is subject to
review/audit during and after performance to ensure that, at the very
broadest level, the Government got what it paid for. This concept means
that at the contract administration level, you want the file (standing
alone and without need of interpretation or augmentation of the contract
administrator or other staff element) to demonstrate that the
contracting officer and the contractor have complied with the terms of
the contract (i.e., bonds have been submitted, contractual issues
requiring the approval of the contracting officer have been submitted
and approved, requests for payment have been submitted, reviewed,
approved, and processed, etc.) and that contractual and administrative
issues in dispute have been addressed and settled in accordance with
good administrative practice and sound business judgment.

**Best Practices**

[File Contents]{.underline} - For sealed bid procurements and
competitive negotiations, consider including as standard practice in the
contract administration file the following:

-   The executed contract and notice of award;

-   Performance and payment bonds, bond-related documentation, and
    correspondence with any sureties;

-   Contract-required insurance documentation;

-   Post-award (pre-performance) correspondence from or to the
    contractor or other Governmental agencies;

-   Notice to proceed;

-   Approvals or disapprovals of contract submittals required by the
    contract and requests for waivers or deviations from contractual
    requirements;

-   Modifications/changes to the contracts including the rationale for
    the change, change orders issued, and documentation reflecting any
    time and or increases to or decreases from the contract price as a
    result of those modifications;

-   Documentation regarding settlement of claims and disputes including,
    as appropriate, results of audit and legal reviews of the claims and
    approval by the proper authority (i.e., city council, board of
    directors, executive director) of the settlement amount;

-   Documentation regarding stop work and suspension of work orders and
    termination actions (convenience as well as default); and

-   Documentation relating to contract close-out.

For small purchases and micro-purchases, you may wish to automate the
documentation or keep some of the above elements on a standard record.

[Administration Duties]{.underline} - Every type of contract will have
different contract administration actions and the documentation required
to support that administration will differ as well. Supply contracts
have different specific administrative actions than construction
contracts do just as fixed price contracts are administered differently
than cost-reimbursement contracts. The FAR has an extensive listing of
contract administration functions that are considered \"normal\" and you
might want to review them to see what might be applicable to your
particular contract. [^413]

[File Location]{.underline} - On any given contract, there may be a
number of different agency personnel involved in monitoring various
aspects of the administration of the contract such as the maintenance
department quality control office, the engineering department, the
construction management office, the safety office, the disadvantaged
business department, and the finance department. In some agencies, these
offices may have official contract roles for which they will be
maintaining an \"official\" file as to their delegated responsibility.
For instance, your contract may have a \"contracting officer\'s
representative\" or \"contracting officer\'s technical representative\"
that has delegated authority from the contracting officer to approve
submittals and payments. Your agency may have delegated to your program
office the authority, up to a certain dollar amount, to issue change
orders and settle claims. In all situations, whether the contractual
role is performed by the contracting officer or another designee, the
files should be documented so that it would be possible to recreate,
from the files alone, what happened and how issues were resolved. [^414]

**9.2 CHANGES**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| 49 CFR § 18.30 *Changes* discuses certain classes of changes which    |
| require grantees to obtain the prior written approval of the Federal  |
| awarding agency.                                                      |
|                                                                       |
| FTA Circular 4220.1E paragraph 9.h. states:                           |
|                                                                       |
| > A contract amendment or change order that is not *within the scope  |
| > of the original contract* is considered a sole source procurement . |
| > . .                                                                 |
+-----------------------------------------------------------------------+

DEFINITIONS

[Contract Modification]{.underline} - Any written change in the terms of
the contract.

[Bilateral Contract Modification]{.underline} - A modification which is
signed by the Contractor and the Contracting Officer**;** also referred
to as a *supplemental agreement*. They are used to (1) make negotiated
equitable adjustments to the contract price, delivery schedule and other
contract terms resulting from the issuance of a change order, (2)
definitize letter contracts, and (3) reflect other agreements of the
parties modifying the terms of the contract.

[Unilateral Contract Modification]{.underline} - A contract modification
that is signed only by the Contracting Officer. They are used to make
administrative changes, issue change orders, make changes authorized by
clauses other than a *Changes clause* (e.g., *Options clause*), and
issue termination notices.

[Administrative Change]{.underline} - A unilateral contract change, in
writing, that does not affect the substantive rights of the parties
(e.g., changes of address for submittals of documents, reports, etc.).

[Changes Clause]{.underline} - A clause which permits the grantee
Contracting Officer to make unilateral changes, in designated areas,
*within the general scope of the contract*, to be followed by such
equitable adjustments in the price and delivery schedule as the change
makes necessary. Although the grantee has a unilateral right, two
general principles are important:

> *The right exists only because it is specifically conferred by the
> terms of the contract*; and
>
> When such unilateral rights are exercised, the grantee has an
> obligation to adjust the price and/or other provisions to compensate
> for the alteration in the contractor\'s obligations.

[Change Order]{.underline} - A written order, signed by the Contracting
Officer, directing the Contractor to make a change that the *Changes
clause* authorizes the Contracting Officer to order without the
Contractor\'s consent.

[Cardinal Change]{.underline} **-** A contract change which is \"outside
the scope\" of the original contract, and thus not within the authority
of the Changes clause to order. Such changes are \"sole source
procurements, and must be processed according to the requirements of FTA
Circular 4220.1E, paragraph 9.h. (See Section 9.2.1 *Contract Scope and
Cardinal Changes*.)

[Constructive Contract Change]{.underline} **-** A change to a contract
resulting from the conduct of the grantee\'s officials that has the
effect of requiring the Contractor to perform additional work. A
*constructive change* results from the acts, written or oral, or from
the omissions of the grantee\'s officials, which have the same effect as
if the Contracting Officer had issued a formal, written change order.
Actions giving rise to constructive changes should, of course, be
avoided. Such changes represent actions which usually exceed the
authority of the individual responsible for them, e.g., improper
technical direction by the Technical Officer which is actually a change
to the contract. When these actions occur, contractors need to be
advised as part of the terms of their contracts to bring any such
actions to the immediate attention of the Contracting Officer so

that an official determination can be made by the appropriate grantee
officials and proper directions given in writing under the Changes
clause. Some common examples are:

-   Specifications or contract provisions that are \"impossible to
    perform.\"

-   Specifications that are ambiguous.

-   Drawings that contain errors, omissions or inconsistencies.

-   Grantee-provided information that is late, defective, etc.

-   Technical direction by personnel that modifies the expressed terms
    of the contract.

-   Acceleration of work, where the grantee insists that the contract
    delivery schedule be met despite the Contractor\'s valid claims of
    excusable delays.

-   An inspector\'s interpretations of test specifications, procedures,
    methods, conditions and results that go beyond a reasonable
    interpretation of the specification.

[Deductive Change]{.underline} - A change resulting in a reduction in
the contract price because of a net reduction in the Contractor\'s work.

[Equitable Adjustment]{.underline} - An adjustment in the contract
price, delivery schedule or other terms of the contract arising out of
the issuance of a *change order*.

**DISCUSSION**

**49 CFR § 18.30 *Changes*, requires grantees to obtain the approval of
the awarding agency (FTA) whenever a change would result in the need for
additional funding from the awarding agency, and for other specified
situations which grantees should be aware of.**

**FTA Circular 4220.1E paragraph 9.h. concerns the issue of contract
changes and whether they are *within the scope of the original
contract*. This issue is discussed in Section 9.2.1 *Contract Scope and
Cardinal Changes.***

**Purpose**

The Changes clause has several purposes:

(1) To give the grantee flexibility to order changes in the work, which
    may be necessary due to advances in technology or changes in the
    grantee\'s requirements.

> \(2\) To give the Contractor a method of suggesting changes to the
> work, thus improving the quality of the contract end-items. The
> equitable adjustment provisions of the Changes clause will encourage
> the Contractor to suggest improvements when those suggestions will
> increase the contract price. When, however, the situation calls for
> suggestions regarding dollar savings, the Changes clause may not
> incentives the Contractor if it stands to lose the dollar savings
> because of a price reduction in the contract. For this reason, *value
> engineering clauses* are included in contracts.
>
> \(3\) To give the grantee authority to order additional work which is
> \"within the general scope of the contract, and thereby avoid having
> to procure this work as a \"new procurement with all of the time and
> expense associated with another solicitation.
>
> \(4\) To require the Contractor to proceed with the changed work and
> resolve the issue of compensation later. This is important since it
> gives the grantee a contract right to order changes without having to
> agree beforehand on the price of the work. Emergency situations can
> thus be handled expeditiously without placing the Contractor in a
> position of demanding a certain amount of compensation before the work
> can proceed. In the event of a failure to agree on price, the issue
> can be resolved by a third party in accordance with the dispute
> procedure in the Disputes clause of the contract. But disputes over
> compensation will not impede the progress of the contract as changed.

##### Best Practices

[National Transit Institute]{.underline} - The National Transit
Institute (NTI) offers several in-depth courses for FTA which would be
of great value to grantees who have to manage contracts with significant
change order activity. [^415]

Grantee third party contracts should contain a *Changes* clause. The
language of the clause may differ depending upon the nature of the
contract and the end-item being procured. The American Bar Association
(ABA) recommends several different *Changes* clauses in its *Model
Procurement Code for State and Local Governments*. There is a suggested
clause for *supply* contracts and another for *construction* contracts.
[^416]

The *Federal Acquisition Regulation* covers the subject of changes
within Part 43 *Contract Modifications,* with alternative contract
*Changes* clauses in Subpart 52.243. The Federal clauses are tailored to
the specific contracting situation, e.g., fixed-price supply,
construction, services, cost-reimbursement, etc. The Federal clauses
direct the Contractor to proceed with the work in accordance with the
change order directive and submit a proposal within 30 days, following

which the parties are to negotiate an equitable adjustment to the price,
delivery schedule and other affected terms. In the event of a failure to
agree, the resolution is to be handled as a dispute in accordance with
the *Disputes* clause of the contract. This provision is important
because disputes over compensation do not delay the work. The Contractor
is required to proceed with the work as changed and settle the issue of
compensation later. The Contractor cannot quit work because of a
disagreement over price.

[Non-emergency changes]{.underline} - When time permits, the best
procedure for issuing changes is to solicit a cost and technical
proposal from the contractor *before the change is issued*, and to
negotiate an equitable adjustment to the contract price, delivery
schedule, etc. A bilateral supplemental agreement can then be issued
setting forth the change in work and the adjustment to the contract
price, etc.

[Emergency changes]{.underline} - When time will not permit the
negotiation of the change prior to issuance, it should be possible to
obtain a \"not-to-exceed\" price from the Contractor prior to the
beginning of work. A bilateral contract Change Order could then be
issued defining the changed work, with a maximum/ceiling price which is
to be negotiated at a later date, but *downward only*. This Change Order
would have to be issued as a two-party modification because it contains
a

\"not-to-exceed,\" maximum/ceiling price for the change, and the grantee
could not unilaterally impose a ceiling price commitment on the
Contractor. The Contractor would then submit a formal proposal within
thirty days and negotiations would take place. A bilateral contract
modification (supplemental agreement) would then be issued reflecting
the equitable adjustment to the price, etc.

**9.2.1 [Contract Scope and Cardinal Changes]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| FTA Circular 4220.1E paragraph 9.h. states:                           |
|                                                                       |
| > A contract amendment or change order that is not *within the scope  |
| > of the original contract* is considered a sole source procurement . |
| > . .                                                                 |
+-----------------------------------------------------------------------+

DISCUSSION

**Changes clauses limit the authority of the issuer in two ways. First,
they stipulate that changes must be \"within the general scope of the
contract.\" Second, they describe the types of changes that may be made.
In order for the change to be binding on the**

**Contractor, it must meet both tests. It must be within the general
scope and be one of the types of changes described in the clause**.

**With respect to the FTA requirements governing changes, the change
must be *within the scope of the original contract.* If it is not
*within the scope*, it is considered a *cardinal change*. Such changes
are not properly processed as changes under the Changes clause, but
are**

**properly processed as *new procurements* according to the principles
of FTA Circular 4220.1E 9.h. \--*Procurement By Noncompetitive
Proposals.***

***Within the general scope* - The meaning of this phrase is somewhat
vague and has been the subject of much interpretation by various
judicial bodies processing contractor protests and claims. The Federal
Court of Claims coined the term \"cardinal change\" to describe those
changes that are beyond the scope of the contract. There are various
tests used to determine if a change is within scope. One test examines
changes in the *nature of work* to be performed. Another looks at the
*amount of effort* the Contractor is required to perform. Still another
test concerns whether the proposed change is within the *scope of the
original competition*.**

***Nature of work* - In one case the court held that the changed work is
considered to be within the general scope if it \"should be regarded as
having been fairly and reasonably within the contemplation of the
parties when the contract was entered into.\"** [^417] **The Federal
Court of Claims stated the test to be whether the work performed was
\"essentially the same work as the parties bargained for when the
contract was awarded.\"** [^418] **In another case the court stated that
a cardinal change occurs if the ordered deviations alter the nature of
the thing to be constructed.** [^419] **The general principle appears to
be that if the function or nature of the work as changed is generally
the same as the work originally called for, the changes are considered
to be within the general scope. For example, in a contract to build a
hospital where there were many changes in the materials used, but where
the size and layout of the building remained the same, the changes were
held to be within the scope.** [^420]

***Amount of effort* - The second test for determining if a change is
within scope concerns the amount of effort in terms of *work disruption*
and *cost increases* experienced by the Contractor. In one case
requiring a subcontractor to place backfill simultaneously with the work
of other subcontractors, the change was considered so disruptive as to
be a**

**cardinal change because it added over 200% to the cost of the backfill
work.** [^421] **In another case the court decided to hold a trial on
the cardinal change issue where there had been 130 changes, the time of
performance had doubled, and costs of \$4.6 million were incurred**

**above the contract price of \$5.8 million.** [^422] **But it should be
noted that contractors have rarely been successful in arguing for
cardinal changes on the basis of *amount of effort*.**

***Scope of the original competition* - Competitors sometimes protest
the issuance of changes when they believe that a new competitive
procurement process should have been used for the changed work. In
deciding these cases, the courts have used the criterion of whether the
change was within *the* *scope of the original competition*, i.e., what
the competitors should have anticipated to be within the scope of the
competition. An important factor to be considered is \"whether the
original solicitation adequately advised offerors of the potential for
the type of changes during the course of the contract that in fact
occurred . . . or whether the modification is of a nature which
potential offerors would reasonably have anticipated under the changes
clause.\"** [^423] **This issue is an important one because the Changes
clause lends itself to potential abuse in the matter of ordering
quantities not originally competed. This practice tends to become an
expedient to avoid the time and expense of a new procurement action, but
it is improper when the additional quantities exceed the scope of the
original competition. Such additional quantities should either be bought
through a new competitive procurement, or processed as a sole source
action with the requisite organizational approvals.**

***Number of changes* - The *number of changes* issued has not been a
determining factor as to whether the changes cumulatively are within
scope. The Board of Contract Appeals held that approximately 100 change
orders was not beyond the general scope.** [^424] **Another case held
that 200 change orders was not beyond the general scope.** [^425]

***Time of issuance -* The *time of issuance* of the changes has not
been considered a factor. In one case the Contracting Officer issued six
changes after completion of the work, which extended the contract period
by 120 days, and the court held that these changes were within the
general scope.** [^426]

***Changes in quantity* - *Major changes in the quantity* of the work
have been held to be cardinal changes. This principle applies to both
additive and deductive changes. Major additions in the quantity should
be processed as new competitive procurements. Large reductions in
quantity should be processed as contract *termination actions*. The
Comptroller General has held that a change adding quantities *above the
contractual maximums* was outside the scope and therefore a cardinal
change.** [^427]

***Collateral impacts of change* -- This criteria involves looking at
all the various factors, such as changes in schedule, quantity, quality,
and costs, no one of which may be sufficient in itself to render a
change outside the contract's scope, but the cumulative impact of the
change being such as to alter the nature of the item being procured. For
example, a change in specification from a gasoline to a diesel driven
heater was outside the scope because the change required substantial
alteration of other components: (1) it substantially increased the
heater's weight, (2) added an electrical starting system, (3) required a
redesigned fuel control, (4) required a redesigned combustor nozzle, (5)
altered the performance characteristics, (6) increased unit price by
29%, and (7) doubled the delivery schedule.** [^428]

## Best Practices

[**Buying additional vehicles**]{.underline} -- In order to avoid the
problem of having to conduct a new competitive procurement for minor
increases in quantities, grantees should structure their initial
competitive solicitation with option provisions for additional
quantities that could conceivably be required. When there are no option
provisions, however, and it becomes clear that increases in the quantity
of vehicles are necessary, grantees should either conduct a new
competition or process a justification for noncompetitive procurement
(sole source) through the required internal approving official or board.

**[Changing bus specifications]{.underline}** -- Certain types of
specification changes are clearly within the authority of the Changes
clause. They satisfy all of the "within scope" criteria noted above. For
example, changes to seating fabrics and colors, exterior paint schemes,
signage, and floor coloring. Such changes are "reasonably within the
contemplation of the parties when the contract was entered into," and
they do not alter the nature of the vehicle being procured.

**[Bus engine changes]{.underline}** - There are other potential bus
design changes, however, which may not be proper under the Changes
clause. One of these would be a change in engine type, which was not
*within the scope* *of the original competition*. For example, several
manufacturers do not build buses with certain engine types (CNG or
Diesel). Such a change would be one that was not *within the scope of
the original competition* (i.e., what the competitors should have
anticipated to be within the scope of the original competition). This
type of change is so critical that it would have affected the original
bidding seriously enough that another company could have won the
contract.

**[High floor vs. low floor buses]{.underline}** - Another design change
that would not be proper under the Changes clause would be a change from
a "high floor" to a "low floor" configuration. The *cumulative impacts
of the change* would be so serious that it would in fact be a "cardinal
change."

**[Construction contract changes]{.underline}** -- For a discussion of
changes to construction contracts and the issue of the types of changes
that would be "within scope" vs. "cardinal changes," see section 9.2.3
*Construction Changes*.

**9.2.2 [Cost/Price Analysis of Changes]{.underline}**

+-----------------------------------------------------------------------+
| #                                                                     |
|                                                                       |
| # **REQUIREMENT**                                                     |
+-----------------------------------------------------------------------+
| Paragraph 10 of FTA Circular 4220.1E requires a cost or price         |
| analysis for every procurement action:                                |
|                                                                       |
| > Grantees must perform a cost or price analysis in connection with   |
| > every procurement action, including contract modifications. The     |
| > method and degree of analysis is dependent on the facts surrounding |
| > the particular procurement situation, but as a starting point,      |
| > grantees 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.                                     |
| >                                                                     |
| > A cost analysis will be necessary whenever 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 catalogue 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.                                                         |
| >                                                                     |
| > \(b\) [Price Analysis]{.underline} ‑ A price analysis may be used   |
| > in all other instances to determine the reasonableness of the       |
| > proposed contract price.                                            |
| >                                                                     |
| > \(c\) [Profit]{.underline} -- Grantees will negotiate profit as a   |
| > separate element of the price for each contract in which there is   |
| > no price competition and in all cases where cost analysis is        |
| > performed.                                                          |
| >                                                                     |
| > \(d\) [Federal Cost Principles]{.underline} -- Costs or prices      |
| > based on estimated costs for contracts under grants will be         |
| > allowable only to the extent that costs incurred or cost estimates  |
| > included in negotiated prices are consistent with Federal cost      |
| > principles. Grantees may reference their own cost principles that   |
| > comply with applicable Federal cost principles.                     |
+-----------------------------------------------------------------------+

**DISCUSSION**

**FTA Circular 4220.1E paragraph 10 requires that grantees perform a
cost or price analysis, as appropriate, for every contract action,
including change orders. Paragraph 10(d) requires the use of Federal
cost principles, which are found in the Federal Acquisition Regulation
Part 31, whenever grantees are negotiating costs or prices based on
estimated costs. The nature of change orders is such that contractors
will almost always be required to submit change order cost proposals
which are based on estimated costs which are expected to be incurred as
a result of the change order. Thus, change order proposals will almost
always be subject to the Federal cost principles found in FAR Part 31
(or equivalent grantee cost principles). Grantees should ensure that
their third-party contract provisions provide for the Federal cost
principles, or equivalent grantee cost principles, in determining
allowable costs for equitable adjustments arising out of changes to the
contract. For a general discussion of cost and price analysis
techniques, see Section 5.2 *Cost And Price Analysis*. For a discussion
of price adjustment criteria for construction contracts, see Section
9.2.3.3 *Pricing of Construction Changes*.**

**9.2.3 [Construction Changes]{.underline}**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| § 23 of the Master Agreement MA(12), *Construction*, requires         |
| grantees to provide and maintain competent and adequate engineering   |
| *supervision at the construction site* to ensure that the complete    |
| work conforms to the approved plans and specifications.               |
|                                                                       |
| FTA Circular 4220.1E paragraph 10a. requires a *cost analysis* for    |
| every procurement action, including contract modifications and        |
| *change orders*. Paragraph 10e. of the Circular *prohibits            |
| cost-plus-percentage-of-cost* methods of contracting, including       |
| percentage of construction cost methods.                              |
|                                                                       |
| With respect to pricing methods, FTA Circular 4220.1E paragraph 7j    |
| states that *the Time and Materials* type of pricing requires that a  |
| determination be made that no other type of agreement is suitable and |
| that a ceiling price be specified in the contract.                    |
+-----------------------------------------------------------------------+

**DISCUSSION**

**The issue of on-site supervision as it relates to the issuance of
construction contract changes will be discussed in Section 9.2.3.2
*Field Change Orders*. The pricing of construction contract changes is
discussed in Section 9.2.3.3 *Pricing of Construction Changes*.**

**Every construction contract should include a Changes clause giving the
grantee the unilateral right to order changes in the contract work
during the course of performance, and the Contractor the duty to proceed
with the work as changed upon receipt of the change order, assuming that
the change is within the scope of the contract. The Changes clause must
contain language deferring the pricing of the changed work until some
later time, while obligating the Contractor to proceed with the work and
resolve the issue of compensation later. Failure to reach an agreement
on compensation would be a dispute to be processed according to the
procedures of the *Disputes* clause of the contract.**

**It is not a best practice to issue change orders where the price and
schedule for the changed work is not negotiated and agreed upon
beforehand. However, in construction projects, proceeding with work
prior to agreement may be necessary to avoid delay. In such cases, time
and material records must be kept, and a price agreed upon as soon after
the beginning of work as practicable. Grantees must ensure that they are
authorized to do this under their own regulations.**

**The Federal clause for construction changes is found at FAR 52.243-4.
It authorizes changes, within the general scope of the contract:**

> **(1) In the specifications (including drawings and designs);**
>
> **(2) In the method or manner of performance of the work;**
>
> **(3) In the Government-furnished facilities, equipment, materials,
> services, or site; or**
>
> **(4) Directing acceleration in the performance of the work.**

**The Federal clause also provides guidance on the processing of
*claims* which the Contractor regards as *\"constructive changes,\"*
i.e., Government actions, directions, interpretations or determinations
which were not identified as changes, but which cause the cost of the
work or the time required to do the work to change.**

**The ABA Model Procurement Code (MPC) Changes clause for construction
contracts is very broad in giving owners the right to order:**

> **(1) Changes in the work within the scope of the contract; and**
>
> **(2) Changes in the time for performance.**

**The MPC clause gives the Contractor *the duty to proceed with the work
while the issue of compensation is being resolved.* This clause also
contains a notice to the Contractor not to perform work above a certain
dollar amount unless the change order has been signed by an appropriate
fiscal officer or other responsible official *certifying that the funds
are available* for the work being ordered.** [^429]

**[Within scope v. cardinal changes]{.underline} - Construction
contracts are, of course, subject to the same criteria as other
contracts with respect to the requirement that changes be *within the
general scope of the contract.* See Section 9.2.1 *Contract Scope and
Cardinal Changes*. A**

**few observations can be made concerning construction contracts as they
have been litigated in the Federal realm with respect to the within
scope issue:**

**[Changes in quantity]{.underline} - Increases in the quantity of the
major items are not generally regarded as authorized by the *Changes
clause*. For example, on a construction project, additional buildings
may not be added by the *Changes clause*.** [^430] **On unit price
contracts, this rule regarding additional quantities has been
interpreted to allow increases in the quantity of subsidiary items
unless the variation is so large that it alters the entire bargain. For
example, on a contract requiring the doubling of the amount of material
for an embankment to build a levee, the court held that the change was
beyond the scope of the contract.** [^431] ***Deletions* of major items
or portions of the work are likewise not within the scope of the
*Changes clause*. For example, buildings may not be deleted from
construction contracts.** [^432] **However, deletions of portions of the
work are permissible unless the deletion becomes so large as to alter
the original bargain. When large deletions are necessary, they should be
made under the *Termination for Convenience clause*.**

**[Changes in time of performance]{.underline} - The Federal clause
lists *acceleration of performance* as one of the types of changes
permitted by the Changes clause. In contracts which do not contain the
acceleration language, it is unclear whether such changes are permitted
by the Changes clause or not. Some Federal Contract Appeals Boards have
held that the contract schedule was part of the specifications, and
therefore a permissible change. Grantees may wish to review their
changes clause and add the ability to accelerate or delay performance.
Another approach would be to state in the contract that the schedule was
part of the specifications for purposes of ordering accelerated or
decelerated performance under the Changes clause. Remember that having
this ability under the Changes clause gives the grantee the right to
change the schedule of work immediately and resolve compensation later,
instead of having to agree on the price of the change before the
schedule can be altered.**

**[Changes in method or manner of performance]{.underline} - Changes in
the method or manner of performance have traditionally not been a
\"changes issue\" under the Federal clause because such changes altered
the work itself and were seen as changes to the specifications. It is
not necessary that the contract initially specify a certain method or
manner of work in order to find a change if, in fact, the Contractor is
ordered to perform in such a manner or use a method other than one that
could have properly been used.**

**9.2.3.1 [Differing Site Conditions]{.underline}**

Unless the contract provides otherwise, the construction contractor will
usually be held to bear the risk of unexpected subsurface site
conditions. This creates a serious problem for the company wishing to
bid on a construction project. The contractor must either perform a
costly site inspection, even though there is no assurance that its bid
will be successful, or it must include a substantial contingency in its
bid price to cover the risk of the unknown site conditions. The latter
alternative results in much higher bid prices to the owner than would be
the case if the risk were not being assumed by the bidders. It is only
where the contract contains a clause shifting the risk to the owner that
the bidder can safely assume it will be compensated for \"differing site
conditions\" or \"changed conditions.\" For these reasons most
construction solicitations will contain a \"differing site conditions\"
clause describing the types of risk being assumed by the owner,
promising the contractor an *equitable adjustment* if the defined
conditions materialize.

The usual clause will refer to *\"subsurface or latent physical
conditions at the site differing materially from those indicated in the
contract, or unknown physical conditions at the site, of an unusual
nature, differing materially from those ordinarily encountered and
generally recognized*

*as inherent in work of the character provided for in the contract.*\"
[^433] The clause will normally require the Contractor to notify the
owner prior to disturbing the site conditions so that the owner\'s
representative can investigate the site and confirm the conditions
alleged by the Contractor.

[Equitable adjustments]{.underline} - The phrase *equitable adjustment*
allows for considerable latitude in establishing the measurement of the
compensation. The *equitable adjustment* includes added costs for *any*
contract work, whether changed or unchanged by the unforeseen
conditions; i.e., the Contractor is entitled to recover any increased
costs for any portion of the contract work, presuming it can demonstrate
that it will incur increased costs, including delay and impact costs, on
account of the differing site condition. [^434] In the event that the
parties cannot agree on the amount of compensation, the clause will
require the Contractor to proceed with the work and resolve the issue at
a later date, which is the same procedure as the Changes clause.

This clause enhances the competitive bidding environment by allowing
bidders to submit their best prices, without having to include
substantial contingencies. It provides a mechanism to compensate the
contractor through negotiation rather than litigation. The clause does
not, however, automatically guarantee the contractor an adjustment; the
contractor must prove that

the site conditions encountered differ materially from the conditions
indicated by the owner\'s contract or from conditions ordinarily
encountered.

**9.2.3.2 [Field Change Orders]{.underline}**

  -----------------------------------------------------------------------
  **REQUIREMENT**

  § 23 of the Master Agreement MA(12), *Construction*, requires grantees
  to provide and maintain *competent and adequate engineering*
  *supervision at the construction site* to ensure that the complete work
  conforms to the approved plans and specifications.
  -----------------------------------------------------------------------

Construction projects require on-site engineering supervision by a
resident engineer/program manager. At the same time it is not feasible
to have a contracting officer at each construction site. It is also
inherent in the nature of construction projects that emergencies will
occur which require immediate direction to the contractor to do changed
work. For these reasons it has become generally accepted practice by
most organizations doing construction contracting that some type of
delegation of authority from the contracting officer to the resident
engineer to direct field changes is essential. Delegations of authority
to issue and/or negotiate field changes are the prerogative of the
grantee. Where the grantee chooses to delegate authority to resident
engineers, several procedures should be observed:

> \(1\) The grantee\'s procurement policies and procedures must clearly
> establish organizational responsibility and provide a general
> procedural framework for the process of contract modifications to
> construction contracts. This policy will clearly define which
> personnel are authorized to issue change orders, including the limits
> of their dollar authority.

\(2\) The grantee should ensure that any person authorized to issue
change orders has met certain educational, training and experience
requirements. Suggested courses for resident engineers/project managers
would include: [^435]

-   Basic Contract Administration (1 week)

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-   Cost and Price Analysis (1 week)

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-   Contracting Officer\'s Representative Course (1 week)

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-   Construction Contracting Basics (1 week)

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-   Contracting by Negotiation (1 week)

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-   Changes under Contracts (1 week)

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-   Federal Contract Law (1 week)

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-   Construction Claims (1 week)

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-   Contracting by Sealed Bidding (1 week)

> \(3\) Delegations of authority to issue field changes should be
> limited to those situations where time is critical; *where there is
> insufficient time to process the change through the contracting
> officer*. Where time permits, the change should be processed through
> the contracting officer, who would obtain a proposal from the
> contractor and conduct negotiations before the change is issued. The
> change could then be issued as a bi-lateral contract modification
> setting forth the changed work and the equitable price adjustment and
> time extension for the change. Where time is critical, however, the
> resident engineer would issue the change, furnish the contracting
> officer with an in-house cost estimate for the work, evaluate the
> contractor\'s proposal when received, and assist the contracting
> officer in the negotiation of the change.

**9.2.3.3 [Pricing of Construction Changes]{.underline}**

[Price adjustments under contract clauses]{.underline} - When a contract
clause exists which addresses the action causing the change (e.g., the
changes clause, differing site conditions clause, etc.), the contract
clause will determine the manner of the price adjustment. For Federal
contracts and many State and local contracts, the term *equitable
adjustment* is used to describe the method of adjusting the contract
price. [^436] The term *equitable adjustment* includes an allowance for
profit, while the term *adjustment*, which is used in the Federal
*Suspension of Work* clause, [^437] provides for an adjustment for
increased performance *costs,* due to directed suspensions of work under
this clause, but *not profit*. The specific language in the grantee
contract clause will determine whether the adjustment is to include
profit or will be limited to costs only. There are certain rules
governing equitable adjustment methodology which have been developed in
Federal cases, and these Federal contract rules have generally been
adopted in cases involving non-Federal contracts as well. The Federal
contract rules pertaining to *equitable adjustments* arising out of
change orders on construction contracts are summarized below.

**A. [Basic Pricing Formula]{.underline}**

The basic pricing formula for an *equitable adjustment* is \"the
difference between what it would have reasonably cost to perform the
work as originally required and what it reasonably cost to perform the
work as changed.\" [^438] State courts have adopted the same basic
formula for equitable adjustments. When repricing as a result of the
change order, courts have limited the repricing to the changed work,
without altering the original profit or loss position of the contractor.
This is known as the \"leave them where you find them approach.\" This
rule would preclude a contractor from converting a loss to a profit or
vice versa.

> a\) [Pricing the deleted work]{.underline} - Under the basic pricing
> formula, the amount of the adjustment for the deleted work is the cost
> that the contractor would have incurred had the change not been
> issued; i.e., had the work been performed. Usually one of the parties
> will argue that the amount should be the amount originally estimated
> by the contractor when the original bid was prepared. However, the
> courts have usually rejected this argument if better information is
> available showing what the contractor\'s actual cost of performance
> would have been had the change not been issued. The \"would have
> cost\" rule is applied to cases involving deductive changes or changes
> where work is deleted, and other work is substituted for the deleted
> work.

-   In one Federal case, the contractor had failed to include costs in
    its original bid price for a certain specification requirement,
    which was later deleted by the Government. The contractor argued
    that the Government was not entitled to a price credit because there
    was nothing in the contractor\'s original price for the work, but
    the Board held that the Government was entitled to a price credit
    based on the amount that the contractor would have spent to comply
    with the deleted specification requirement. [^439]

-   In another case involving a change from underground electrical ducts
    and cable to an overhead system, it was determined that the original
    electrical work \"would have cost\" about \$61,000. The work as
    changed only cost about \$19,000. The Government argued for a price
    reduction of \$42,000, which was the net difference. The contractor,
    however, had only included about \$35,000 in its original bid for
    the underground work. The contractor argued that, if the
    Government\'s price reduction of \$42,000 were allowed, the
    contractor would actually be paying the Government \$7,000 on
    account of the changed work. The court, however, ruled for the
    Government, finding that the contractor\'s own negligent bid caused
    the problem, not the change order. [^440] Here again we see the
    basic pricing formula applied \-- the amount of the adjustment for
    the deleted work is the cost that the contractor would have incurred
    had the work actually been performed. The cost adjustment is not
    based upon the amount included in the contractor\'s original bid if
    that amount is not indicative of the cost to actually perform the
    work.

> b\) [Pricing the added work]{.underline} - The basic pricing formula
> requires that the contractor recover the increased cost of performing
> the work as changed. This is true even if the amount included in the
> original bid/contract was more than what was necessary for performance
> of the original work.

-   In one case where the contract was improperly changed to require the
    contractor to comply with the Davis-Bacon Act, the contractor was
    entitled to an increase in the contract price even though its bid
    already included enough costs for Davis-Bacon wages. [^441]

**B. [Exceptions to the Basic Pricing Formula]{.underline}**

> a\) [Complete Deletion of a Severable Item]{.underline} - When the
> contract contains *severable items*, the *complete deletion* of such
> an item will result in an equitable adjustment which deducts the
> *original price* *of the deleted item* *as stated in the contract*.
> This is an exception to the \"would have cost rule.\" Whether the
> contract items are *severable* or not depends on the provisions of the
> solicitation, the nature of the work, and the intentions of the
> parties. Merely because an item has a separate unit price in the
> contract does not make the item *severable.*

-   In a case where the Government awarded a contract for work to be
    performed in four phases and priced each phase separately in the
    original contract, a cancellation of one phase in its entirety
    resulted in a price reduction equal to the amount of the price for
    that phase in the original contract. This was proper even though the
    contractor had seriously overpriced that phase and had underpriced
    another phase. [^442]

> b\) [Advance Agreements in the Contract]{.underline} - The parties to
> the contract may agree in advance upon the methodology to be followed
> in making *equitable adjustments*. For example, the contract may state
> that equitable adjustments for deductive changes will be the unit
> prices included in the contract. Another approach to deductive changes
> is to state in a contract clause that price credits for deductions
> will be based upon estimated costs at the time the contract was made.

c\) [Deletion of Minor Items]{.underline} - It is customary to use the
contractor\'s bid price to delete relatively minor items. To attempt to
base the adjustment on a \"would have cost\" approach may be costly
without producing a better result, so courts usually follow the
expediency of using the original bid price for deletion of minor items
or work.

**C. [Cost Impact on Contractor]{.underline}**

The contractor\'s cost must be affected in order for there to be an
equitable adjustment. The use of *market value* of the old/new work is
generally rejected. [^443]

> a\) [Incurrence of Costs]{.underline} - A contractor must make
> payments or incur obligations which are greater than it would have
> incurred to do the original work. When no payment has yet been made,
> or when the loss is recoverable, costs are not considered incurred.
> For example, where the contractor\'s \"loss\" is covered by insurance,
> no costs are incurred and therefore no adjustment is due. In the case
> of a credit for decreased work, the amount of credit is the cost
> savings to the contractor. If the contractor realizes no savings from
> the change, then no credit will be due.

-   In a case where the Government waived a *requirement for an American
    product*, but the contractor had used foreign costs in its bid
    initially, the waiver did not result in cost savings to the
    contractor. The Court found that the Government was not entitled to
    a price reduction. [^444]

> b\) [Allowable Costs]{.underline} - Whenever a contract modification
> requires the submission of estimated costs for negotiation, as is the
> case in virtually all construction change orders, the cost principles
> in FAR Part 31 (or equivalent grantee cost principles) must be used to
> determine what is an *allowable cost*. This is true for all contracts,
> whether they be cost-type or fixed price. FAR 31 provides that
> allowable costs must meet all of the following tests:

-   Reasonableness;

-   Allocability;

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-   In accordance with generally accepted accounting principles and cost
    accounting standards (if applicable);

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-   Not excluded by specific contract provisions such as *advance
    agreements*.

**D. [Burden Of Proof]{.underline}**

The party seeking the adjustment has the burden of proof in establishing
the amount of the price adjustment. The grantee has the burden to prove,
for example, how much price reduction is

appropriate for deleted work, while the contractor carries the burden of
proving how much of a price increase it may be entitled to receive. To
meet this burden, the party must show the *reasonableness of the claimed
costs* and demonstrate that these *costs have a causal connection to the
change or other action on which the claim is based*. [^445]

> a\) [Causation]{.underline} - The cost increase or decrease must be
> caused by the event for which an adjustment is being claimed. There
> must be a *relationship in time* between the costs and the event on
> which the claim is based. This relationship is demonstrated when the
> costs follow the event in a predictable sequence. Also, the costs must
> bear a logical relationship to the event, resulting from its
> occurrence.
>
> b\) [Reasonableness of Amount]{.underline} - FAR 31.201-3(a) places
> the burden of proof of *reasonableness* for both direct and indirect
> costs on the contractor. However, the *test of* *reasonableness* gives
> the contractor broad discretion in how it performs the work. A
> \"reasonable cost\" has been defined as follows:
>
> \"A cost is reasonable if, in its nature or amount, it does not exceed
> that which would be incurred by an ordinary prudent person in the
> conduct of competitive business.\" [^446]

**E. [Major Cost Elements]{.underline}**

> a\) [Labor]{.underline} - The contractor bears the burden of
> demonstrating that the cost of its additional labor effort has been
> caused by the event on which the claim is based. In some cases the
> contractor may be able to segregate the cost of the changed work in
> its records, and thus demonstrate the additional labor hours due to
> the change. However, when it is impossible to segregate the additional
> labor hours resulting from the change or other action of the owner,
> courts have accepted an approach to pricing the change\
> known as the *total cost method*. By this is meant *the total costs
> actually incurred compared to the original estimate. This method can
> only be used if:*

-   The original labor estimates in the contractor\'s bid are
    reasonable, based on objective, external evidence, and

-   The owner was solely responsible for the overrun\--there must be no
    concurrent delays, etc.

-   There is no other reliable method to establish the additional labor
    costs. If there is another method, the *total cost* approach cannot
    be used. [^447]

> If the change disrupts the labor effort on unchanged work, having a
> \"ripple effect or impact\" on the effort required to do the unchanged
> work, the additional costs of performing the unchanged work are
> compensable. [^448] One case of this nature involved a \"disruption of
> the work because of the unexpected and excessive number of change
> orders.\" [^449] Increases in labor costs are recoverable when a
> contractor incurs higher wage rates because of compensable delays in
> performing the work. Contractors are also entitled to compensation
> when there is a disruption to the work sequence, thus resulting in
> inefficiencies; for example, disruptions which preclude planned
> simultaneous work activities, or forced use of overtime work paid at
> premium rates, or delay of work because of unfavorable weather
> conditions.
>
> b\) [Field Overhead]{.underline} - *Field overhead* is the cost of
> maintaining the contractor\'s field operations staff, facilities and
> equipment at the job site. Field overhead includes the cost of
> personnel chargeable to the specific project, such as the salaries for
> office\
> clerks, project supervisors, timekeepers and engineers. It may also
> include rental or ownership costs for on-site trailers, office
> equipment, utilities, telephones, automobiles, trucks, etc. *Field
> overhead* is different than *Home Office Overhead,* which are general
> costs of conducting the contractor\'s overall business and cannot be
> attributed directly to any one project.
>
> [Direct vs. indirect costs]{.underline} - In any proposal for a price
> adjustment arising out of a change order, it is always important to
> determine if the costs being proposed are direct or indirect
> (overhead) costs. If your contract includes a clause specifying the
> markup for field overhead\--the percentage which will be allowed in
> the pricing of changes\--then it is critical to ensure that the
> contractor is being consistent in its treatment of direct vs. indirect
> costs, and that there is no duplication of costs. For example, if the
> contractor\'s normal accounting practice is to include the cost of its
> salaried general foreman in the field overhead pool, then a change
> order claim cannot propose this foreman\'s salary as a direct labor
> cost because the cost is already included in the field overhead markup
> which is applied to direct labor costs. It is important, therefore,
> for the grantee\'s contract administrator to have an in-depth
> knowledge of all of the elements in the contractor\'s field overhead
> pool; that is, a good understanding of the various accounts which make
> up the pool. The contract administrator will then be in a position to
> evaluate the contractor\'s
>
> cost proposals and ensure that there is no duplication of costs
> because of the improper charging of overhead costs as direct costs. An
> audit of the Contractor\'s indirect cost pools may be necessary to
> obtain the required degree of information/knowledge concerning the
> composition of the indirect cost pools.
>
> [Extended performance]{.underline} - When the contractor is delayed or
> the contract performance period is extended by a change order or other
> action of the owner, the contractor will incur additional job site
> overhead expenses which are time-related. These will consist of
> additional costs for supervision, maintenance of trailers, telephones,
> insurance, etc. There are two ways to price these additional overhead
> expenses. The first is to total all of the job site overhead expenses
> for the entire project and divide this total by the number of days
> over which the costs were incurred in order to compute a daily
> overhead cost. This average daily overhead cost is then multiplied by
> the number of days of delay in order to compute the cost of the delay.
> However, this method of using the average daily cost may not produce
> an equitable result. For example, if the contractor is delayed in the
> earlier stages of a project when it has a full complement of
> supervisory personnel and equipment at the job site, the field
> overhead cost of a day\'s delay will be much greater than if it occurs
> at the end of the project when most of the supervisors have been
> released and the equipment has been removed. Because daily field
> overhead charges may vary materially depending on the stage of the
> project when the delay occurs, it may be more equitable to use another
> method of computing the field overhead delay costs. This method
> computes *the daily field overhead cost for the time period when the
> delay occurs*. In one Federal case involving this issue, the
> Government argued that the delay costs should be computed using the
> tail end of the project; i.e., the extended period of performance. The
> court, however, ruled that the delay damages should be calculated
> using *the specific time*
>
> *periods in which the delay occurred\--the actual period of the work
> disruption.* The average daily field overhead costs during this period
> of actual work disruption were considerably higher than the daily
> costs at the tail end of the job, and the court chose a more equitable
> method of compensating the contractor for its actual costs during the
> period of work disruption. [^450]
>
> c\) [Home Office Overhead]{.underline} **-** Home office overhead is
> generally referred to as \"General and Administrative\" (G&A) costs,
> and these costs include those activities necessary for the overall
> business of the contractor. They would include the salaries of the
> company\'s executives, legal counsel, corporate liability insurance,
> accounting, depreciation, proposal/bidding costs, bad debts, etc.
> These costs are usually fixed costs, not varying with the volume of
> business, and continuing to be incurred with the passage of time.
> These costs cannot be assigned to any specific project. They are not
> of the type that can be reduced, or mitigated, during periods of
> project delays associated with work stoppages, change orders, etc.
> These costs are allowable and\
> \
> \
> recoverable by the Contractor as part of its cost proposal for an
> equitable adjustment arising out of delays (assuming the delays are
> compensable). The method of computing the recovery is discussed below.
>
> [Federal cost principles]{.underline} - Since virtually all
> construction change order proposals/claims involve the submission of
> cost data/estimates by the contractor, the Federal cost principles
> contained in FAR Part 31 would apply to the determination of an
> *allowable cost for the purpose of negotiating these change order
> proposals or claims.* [^451] These cost principles stipulate that
> certain costs, usually included in home office overhead costs (G&A)
> are unallowable, including entertainment costs, contributions,
> interest, and bad debts. [^452] Thus, while the contractor may have
> based its original sealed bid price on the company\'s full home office
> overhead rate, it will not be able to base its change order proposals
> or claims on this full rate\--the rate must be adjusted to remove
> unallowable costs because the proposal is being negotiated on the
> basis of cost data and not sealed bidding as was the original
> contract. [^453] In order to remove these costs, the Contracting
> Officer may wish to obtain an advisory audit of the indirect rate cost
> pools prior to negotiations, or simply ask the Contractor to submit
> overhead information identifying the unallowable portion of the rate
> and accept the Contractor\'s submission as being factually accurate
> without an audit. The dollar value of the negotiations, (as well as
> the future potential for changes) may be the determining factor in
> deciding whether to audit the rates or not.
>
> [Extended performance]{.underline} - The contractor\'s performance
> time may be extended by owner-caused disruptions of work, suspensions
> or change orders. Some of these actions may have a negligible effect
> on the contractor\'s direct costs, and thus entitle the contractor to
> only a small amount of markup on the direct costs for home office
> overhead. This type of situation may leave the contractor with a
> significant under recovery of its home office overhead costs. The
> courts have recognized that the nature of construction projects is
> such that contractors may be entitled to recovery of extended home
> office expenses when their contracts are delayed, and this recovery is
> beyond the usual percentage markup on the direct costs. Where actual
> overhead cannot be demonstrated or agreed upon, the\
> *Eichleay formula* has been widely used as a method of calculation.
> [^454] This formula, however, should be used with caution, as it can
> overstate actual contractor\'s overhead. The use of the formula varies
> from State to State and you should consult with your legal counsel for
> guidance in the use of this formula.
>
> In the Eichleay case, the Government had argued for a percentage
> computation which applied the contractor\'s normal home office
> overhead rate to the excess direct costs incurred during the delay
> period. The Government argued that there was no increase in the
> overhead rate during the delay. But the Board found that the
> Government\'s method was totally inadequate because (1) the delay
> added very little direct costs to the contract price; thus there was
> very little for the contractor to recover for home office overhead
> using a recovery method of a percentage of direct costs for overhead,
> and (2) the contractor\'s home office overhead costs continued
> throughout the delay period and could not be reduced (the costs were
> fixed, not variable). The facts were that the delays and suspensions
> occurred through an extended series of interruptions, and it would not
> have been prudent for the contractor to lay off its Home Office
> personnel or to take on other new business commitments during this
> delay period. *The Eichleay formula is proper, then, if the contractor
> can demonstrate that it was not \"prudent or practical\" to reduce its
> home office staff or to seek new business commitments during the
> period of the disruption*. [^455] The Eichleay formula is accepted in
> Federal and State courts, boards of contract appeals and by
> arbitrators as a fair and reasonable method for compensating
> construction contractors for extended home office expenses resulting
> from owner-caused, compensable performance delays.
>
> [The Eichleay formula]{.underline} - The formula consists of three
> calculations: [^456]
>
> 1\. [Contract Billings During Performance]{.underline} x Total
> Corporate = Corporate
>
> Total Billings During Performance Overhead During Overhead
>
> Performance Allocable to

Contract

> 2\. [Contract Allocable Corporate Overhead]{.underline} = Contract
> Corporate
>
> Total Calendar Days of Contract Performance Overhead Daily Cost
>
> 3\. Compensable Delay Days x Corporate Overhead = Additional
>
> Daily Cost Corporate

Overhead

> Expense

During

Contract

Delay

> The methodology outlined above consists of taking the total home
> office overhead costs for the contract performance period and
> multiplying this total cost by the ratio of contract billings to total
> company billings; this calculation produces the amount of home office
> overhead dollars allocable to the contract. That amount is then
> divided by the number of days of contract performance; the result is
> the daily home office overhead rate in dollars per day allocable to
> the contract. That rate is then multiplied by the number of days of
> delay. The final result is the dollar amount of recovery for home
> office overhead costs.
>
> d\) [Profit]{.underline} - Profit is allowed as part of any owner
> action which entitles the contractor to an \"equitable adjustment\"
> under the terms of the contract. The profit would be that which is
> reasonable and customary for the type of work being performed. The
> contract may include a recoverable profit rate on change order work,
> but it is suggested that the rate be stated as a maximum percentage,
> negotiable downward only. The reason for this approach is to avoid a
> cost-plus-percentage-of cost methodology, which is prohibited. [^457]
> In this way the grantee can negotiate a lower rate of profit on
> changes where the nature of the work and the risks might warrant a
> lower rate of profit than for the basic contract.

**9.2.3.4 [Variations in Estimated Quantities]{.underline}**

Many construction contracts contain unit prices and estimated quantities
of the various pay items. This procedure is used when the quantity of
work cannot be estimated with sufficient accuracy so as to permit the
work to be priced on a lump-sum (total price) basis. When it is
necessary to use unit prices with estimated quantities, owners
frequently include a clause requiring adjustment of the unit prices only
when the actual quantities vary significantly from the estimates. For
example, both the Federal clause and the Model Procurement Code clauses
require that actual quantities must vary by more than 15% (up or down)
before an adjustment will be made in the unit prices. [^458] The
adjustment can be at the request of either party.

[Relationship to Differing Site Conditions clause]{.underline} - The
*Variation In Quantity* clause will not govern the Contractor\'s
entitlement to an equitable adjustment when the Contractor encounters
conditions of the type described in the *Differing Site Conditions*
clause. In such situations, where the Contractor encounters materially
differing physical conditions not anticipated by either party, the
*Differing Site Conditions* clause will take precedence and the
Contractor will be entitled to an equitable price adjustment even if the
final quantities vary by less than the % stated in the *Variation In
Quantity* clause. [^459] In one case the Board of Contract Appeals found
a

differing site condition when the Contractor encountered an unforeseen
rock ledge in a river being dredged. The contract contained a pay item
for dredging loose rock, and the removal of the rock ledge did not cause
the Contractor to exceed the estimated quantities of rock actually
removed. However, the Board ruled that the methods required to remove
the rock ledge were not those normally used for loose rock, and thus the
Contractor was entitled to a price adjustment under the *Differing Site
Conditions* clause even though the total quantity of rock removed was
not in excess of the estimated quantity in the contract.

[Unit price adjustments]{.underline} - Both the Federal clause and the
MPC clause call for a unit price adjustment when the Contractor\'s costs
increase or decrease *due solely to the variation* above 115% or below
85% of the estimated quantity. The phrase \"due solely to variation\"
means that the amount of the equitable adjustment is determined solely
from the difference in costs which is due to the larger or smaller
quantity, rather than from a complete repricing of the work based on
actual incurred costs for the excess quantity. Furthermore, the party
demanding the adjustment has the burden of proving that costs have
varied *because of a difference in quantity*. [^460]

The typical *Variation In Quantity* clause entitles the Contractor to a
price adjustment for under-runs as well as over-runs in quantities. This
presumes the Contractor can demonstrate that its unit costs have risen
because of the under-runs. Typically the Contractor\'s fixed costs per
unit will be higher because of fewer units over which to amortize the
fixed costs. In the case of over-runs to the estimated quantity, *the
repricing would apply to only those quantities falling outside the range
specified.* In the case of under-runs, the repricing would apply to the
entire actual quantity produced/delivered.

[Payment on basis of actual costs]{.underline} - Some transit agencies
have adopted contract provisions paying contractors\' *actual costs,* on
a \"force account\" basis, for quantities outside the range specified in
the estimated quantities clause. In such cases the methodology is
different than that described above where the contractor\'s starting
point for establishing an equitable price adjustment is the unit price
in the original contract, adjusted for cost increases or decreases due
solely to the variation in quantities. In those cases where the price
adjustment is to be based on actual costs for the increased/decreased
quantities, the contract terms may describe in detail the methodology
for determining payments, including the establishment of ceiling rates
to cover such costs as home office overhead, field office overhead,
equipment rental, etc. Where ceiling rates are used, they are subject to
a final audit, and may be adjusted downward after audit to reflect the
contractor\'s actual costs for the various individual cost elements
(e.g., home office overhead). The rates are not fixed, predetermined
percentages applied to actual costs of labor, materials, etc.\--such an
arrangement would be an impermissible
cost-plus-percentage-of-construction-cost method which is prohibited by
FTA Circular 4220.1E 10e. [^461]

**9.2.3.5 [Delays]{.underline}**

There are many events which can occur to delay a contractor\'s
performance. Delays can be of three generic types:

> \(1\) Those where the contractor bears the risk of both time and
> cost\--these are delays within its control. These delays are
> *non-excusable.*
>
> \(2\) Those for which the owner is responsible for both time and cost
> impacts\--these are delays for which the owner agrees to be
> responsible or which are caused by it. These are *compensable* delays.
>
> \(3\) Those for which neither party is responsible to the
> other\--these are delays, such as *concurrent* delays, where both
> parties have caused delays which have an equal impact on completion,
> and it is impossible to apportion or separate the delays. In such
> cases, the contractor may not recover its increased costs and the
> owner may not enforce liquidated damages.

The following provides typical examples of these types of delays.
However, there are many variations used in contracts and grantees must
make their own determination as to how the risks associated with delays
are allocated between themselves and their contractors.

[Excusable delays]{.underline} - The primary purpose of an *excusable
delay* provision is to protect the contractor from sanctions for late
performance (e.g., default termination, liquidated damages, and actual
delay damages). *Excusable* delays may not be *compensable*. Whether a
delay is considered *excusable* depends on the language of the
particular clause in the contract. The Federal clause for construction
contracts names a number of events which can give rise to an *excusable
delay*, but there are *three elements which are critical in determining
whether an excusable delay has occurred*. [^462] The three elements are:

> \(1\) The delay must arise from *unforeseeable causes*. If
> circumstances which are known when the contract is entered into make
> certain delays foreseeable, then courts have held the contractor
> responsible and refused to grant relief. [^463]
>
> \(2\) The event must be *beyond the control of the contractor.* If a
> contractor cannot prevent an event from occurring, that event is
> beyond the contractor\'s control. Also, the standard applied is one of
> reasonable economic practice. For example, where\
> \
> there has been unusually severe weather, the contractor is not
> obligated to institute a two-shift operation to overcome the delays
> caused by the weather. [^464]
>
> \(3\) The delay must be *without the fault or negligence of the
> contractor*. Fault or negligence deals with either acts or omissions
> of the contractor that cause delays. A contractor was not granted
> relief when its subcontractor failed to perform because the contractor
> was negligent for failing to assure itself of the subcontractor\'s
> ability to perform. [^465]

If the excusable delay provision lists a type of event relieving the
contractor from responsibility, then, under the Federal clause, the
three criteria discussed above are applied to the event to determine the
issue of excusability. It should be noted, however, that private
contracts may or may not contain the same language as the Federal
clause, and thus the proper interpretation of the clause should be
sought from the grantee\'s in-house legal counsel. The types of events
usually included in these provisions would include:

-   [Strikes]{.underline} - To obtain an excusable delay for a strike
    *under the Federal clause*, a contractor must prove that it acted
    reasonably and did not wrongfully precipitate or prolong the strike,
    and it must take steps to avoid its effect. In other words, the
    three-fold criteria of being unforeseeable, beyond the contractor\'s
    control, and without the fault or negligence of the contractor, must
    be met. *In private contracts* which do not contain this language,
    however, a court may well excuse a delay even where the strike is
    precipitated by the contractor\'s actions, such as reducing its
    workers\' wages. [^466]

-   [Weather]{.underline} - Most contracts will contain excusable delay
    provisions concerning adverse weather. Generally, adverse weather is
    *abnormal in comparison to the previous weather patterns at the same
    location for the same time of year.* Some grantee construction
    contracts contain provisions noting the anticipated non-work weather
    days for each month of the year, and contractors are advised to bid
    with this information and to plan their schedules accordingly.
    [^467] The usual method of proving that weather is unusually severe
    is to obtain comparative data from the U.S. weather bureau for past
    periods in the area with those recorded during the period of
    performance.

-   [Subcontractor and supplier delays]{.underline} - Where the delay is
    caused by a subcontractor or supplier, and the excusable delay
    clauses mention this as an excusable cause, there is usually the
    added requirement that the subcontractor\'s or supplier\'s delay be
    excusable based on the same three-fold criteria as discussed above
    in connection with other causes of delay; i.e., it must have been
    due to circumstances unforeseen by the subcontractor, beyond the
    subcontractor\'s control, and without the subcontractor\'s fault or
    negligence.

-   [Owner conduct]{.underline} - To be excused for owner conduct,
    contractors must show that the contractual acts or omissions of the
    owner were wrongful (e.g., an improper failure to pay for services
    performed, or improper interference with the work of the
    contractor(. But where delays are due to owner acts properly taken,
    there is no basis for an excusable delay (e.g., where owner rightly
    insists on compliance with specifications, or properly rejects
    subcontractors who do not meet qualification/ experience
    requirements). Of course when the owner issues Change Orders (which
    are not wrongful acts), the contractor is entitled to both a price
    and schedule adjustment in accordance with the terms of the Changes
    clause.

[Compensable delays]{.underline} - These are delays for which the
*contractor is entitled to* *compensation*, not merely an extension of
time, as with many of the *excusable delays*. Entitlement to
compensation may be expressly stated in a specific contract clause, but
if not, *there is an implied duty of each party not to hinder, delay or
make more expensive the performance of the other party.* Thus, even in
the absence of a specific contract clause granting the contractor
compensation for owner-caused delays, many courts find an implied owner
duty not to hinder or delay, and they will grant compensation to
contractors for such delays. [^468] This implied duty has been used as
justification for compensation in a wide variety of circumstances.

Compensable delays may arise because of *express orders of the owner*
(e.g., suspensions of work for owner\'s convenience, written Change
Orders, etc.), or because of so-called *constructive changes*; i.e.,
some act of the owner or failure to act which causes a compensable
suspension of work (e.g., delay in the availability of the site, delay
in issuing approvals where prior approval is required before starting
work, delays in the inspection process, or owner\'s interference with
the contractor\'s work).

In order to be compensated for delays, *a contractor must demonstrate
that the delay is* *unreasonable in duration*. It is important to
determine if the delay is the result of the owner\'s fault or whether it
results from an action taken by the owner pursuant to a contractual
right. If the delay results from an owner\'s fault, the courts have
generally held that the entire period of the delay is unreasonable and
therefore compensable. If, on the other hand, the delay arises out of an

action taken pursuant to an owner\'s contractual right, the contractor
will be compensated only for the unreasonable portion of the delay.
[^469]

Delays where the total delay period has been found unreasonable include:

-   Delay in issuing notice to proceed beyond date needed by contractor
    to perform work efficiently.

-   Delays because of conflicting or defective specifications.

-   Delays in obtaining city authorizations which could only be obtained
    by the owner.

Delays which have been found to be reasonable include:

-   Delays in awarding the contract arising out of compliance with bid
    protest procedures.

-   Delays in issuing changes which were not attributable to defective
    specifications.

[Concurrent delays]{.underline} - When both parties contribute to a
delay, the issue arises as to how to resolve the question of
responsibility for the delay. The courts have resolved this issue by
assessing the losses attributable to each party\'s delay and
apportioning the damages accordingly. [^470] The case law in this area
focuses on apportioning the delay to its appropriate category of
owner-caused, contractor-caused, and caused by neither\--\"excusable\"
per the contract terms. What this means is that if one party contributed
in part to the delay, it will not be barred from recovering damages from
the other party (e.g., an owner who is *partly responsible* for the
delay will not be precluded from recovering liquidated damages). [^471]
Where it is impossible to allocate or separate the delays, or where the
delays are truly concurrent (where each party has had an equal impact on
completion, the following rules would apply:

-   Where contractor-caused delay is concurrent with owner-caused delay,
    the contractor may not recover its increased costs resulting from
    the delay.

-   Where *noncompensable* delays are concurrent with owner-caused
    delays, a contractor may not recover its increased costs resulting
    from the delay.

-   Where the owner has contributed to the project delay, and such
    contribution cannot be separated from other causes of delay,
    liquidated damages cannot be enforced by the owner.

**9.2.3.6 [Acceleration]{.underline}**

Acceleration is the speeding up of the rate of performance in order to
complete the contract earlier than would be the case if the contractor
pursued the effort in a normal manner. There are two situations where
contractors are entitled to compensation for acceleration costs.

[Owner-caused delay]{.underline} - When an owner causes a delay which
would entitle a contractor to recover its increased costs (see
*compensable delays* in section 9.2.3.5), the contractor may attempt to
mitigate the costs of the delay by voluntarily accelerating its efforts.
In this case the contractor is entitled to recover the costs of
accelerating the effort and these increased costs are actually
recoverable as part of the delay costs because they were incurred in
mitigation of those delay costs. [^472]

[Owner-directed acceleration]{.underline} - When an owner orders the
contractor to complete the work earlier than the contract requires, the
contractor is entitled to recover the costs of acceleration. The owner
may expressly order the contractor to accelerate performance, thus
creating a compensable acceleration, but in the majority of cases the
acceleration is *constructive* rather than expressed; i.e., the owner
orders the contractor to meet the contract completion date even though
there has been an *excusable delay* which would entitle the contractor
to an extension in the completion date. (See *excusable delays* in
section 9.2.3.5). The effect of this order by the owner is to require a
rate of performance which is faster than the contract requires, and this
is equivalent to an express order to accelerate. [^473]

[Elements required for constructive acceleration]{.underline}: - In
order to recover for constructive acceleration, it is generally held
that the contractor must demonstrate three elements:

> \(1\) the delays which occasioned the order to accelerate were
> excusable.
>
> \(2\) the contractor was ordered to accelerate.
>
> \(3\) the contractor in fact accelerated performance and incurred
> extra costs. [^474]

[Order to accelerate]{.underline} - An order to accelerate does not have
to be a specific command. If the owner \"requests\" the contractor to
accelerate, it has the same effect as an \"order.\" Further, it makes no
difference whether the contractor complies willingly or unwillingly. If
the initiative comes from the owner and the work is done in a manner
different than the contract requires, then the contractor will be
entitled to compensation. Other circumstances giving rise to
constructive

acceleration would be: (a) a wrongful threat to terminate for default
where the delays were excusable, [^475] and (b) a threat to assess
liquidated damages where delays were excusable. [^476]

[Acceleration orders where both excusable and non-excusable delays
exist]{.underline} - The Federal cases have held that when the owner
directs the contractor to accelerate in order to recover the
non-excusable delay, the acceleration costs are not recoverable. [^477]
It has also been held that where both excusable and non-excusable delays
exist, and the contractor accelerates performance pursuant to an order
of the owner, the acceleration costs are not compensable when the time
recovered is less than the amount of the non-excusable delay. [^478]

[Recovery of acceleration costs not dependent on recovery of lost
time]{.underline} - When the owner orders completion ahead of schedule,
and the contractor uses its \"best efforts\" to accelerate completion of
the project but fails to recover the lost time, the contractor is
permitted to recover the increased costs associated with its efforts to
accelerate. [^479]

**9.3 IMPROVING VENDOR DELIVERY PERFORMANCE**

Late deliveries from vendors can be, and often are, a serious problem
for many agencies, especially those that are awarding and administering
many thousands of purchases annually. New York City Transit (NYCT) is an
agency that has faced this problem with respect to its maintenance
materials and developed some innovative solutions to deal with it. This
agency has faced all of the normal difficulties in dealing with vendors,
including late deliveries, quality and quantity problems as well as
difficulties in motivating its suppliers to grasp the significance of
improved performance. The following summarizes some of the methods NYCT
has used to address vendor performance problems.

[Vendor Performance Module]{.underline} -- The first step in addressing
poor vendor delivery performance was to develop a computer software
program or module that would accurately gather and report different
measurements of vendor performance.

This permits NYCT's procurement and receiving functions to be
electronically linked, thereby enabling receiving personnel to enter the
data summarizing the details of each inventory receipt transaction. For
example, the data recorded includes the actual date of delivery in
comparison to

the date promised by the vendor, purchase order quantity vs. actual
quantity received and quality assurance rejections. The module
accumulates this data on a vendor specific basis and provides
performance information. Using this performance information, NYCT has
implemented several programs to improve on-time delivery performance.

["100 Worst" Program]{.underline} -- Utilizing the vendor performance
data, NYCT can identify the "vital few" vendors who are generally
responsible for the greatest number of late deliveries and are having
the most significant impact on NYCT's ability to support maintenance and
production efforts. Presently NYCT has directed its focus on the 100
firms having the highest number of late deliveries through open,
non-adversarial meetings between agency procurement staff and the chief
executives of the companies in question. Specific emphasis is placed
upon the expansion of the vendor's understanding of the significance of
late deliveries. Individualized action plans are developed with clearly
defined remedial steps and corresponding milestone dates. For the most
part this approach has been successful; however, in those rare instances
where a vendor is completely unable to improve, determinations of
non-responsibility, suspensions, defaults and debarments are invoked.

[Top 100 Suppliers]{.underline} -- This program looks at the 100 best
suppliers. NYCT holds an annual vendor conference and invites senior
management officials from these suppliers. Awards are presented to the
very best companies for excellent on-time performance, with special
emphasis on companies showing marked improvement. These awards are
perceived as prestigious within the industry and are anticipated to have
an extremely positive effect on a vendor's ability to attract future
business with other transit properties. Goals and strategies are
discussed for continued improvement and the attendees are given a
complete understanding of the major\
initiatives that NYCT has embarked upon which will require the support
of the vendor community through timely performance.

["STATUS" Program]{.underline} -- *[S]{.underline}ystem [T]{.underline}o
[A]{.underline}utomatically [T]{.underline}rack [U]{.underline}ntimely
[S]{.underline}hipments*

The STATUS program is a standard method of late delivery notification to
any vendor. At set time periods, letters detailing a missed delivery
date are mailed to the vendor. The system officially notifies each
vendor's sales representative and chief officer of late deliveries,
advising them of potential action and affording the company an
opportunity to respond.

[Program Results]{.underline} - The programs adopted by NYCT (Vendor
Performance Module, "100 Worst" Program, "STATUS" Program, and "Top 100
Suppliers") have proven to be highly successful in improving vendor
performance.

Another program that has proven successful at MARTA involves linking
employee performance to on time vendor deliveries.

9.4 APPROVAL OF SUBCONTRACTORS

+-----------------------------------------------------------------------+
| #                                                                     |
|                                                                       |
| # **REQUIREMENT**                                                     |
+-----------------------------------------------------------------------+
| FTA Circular 4220.1E paragraph 16 requires grantees to evaluate       |
| Federal statutory and regulatory requirements for relevance and       |
| applicability to a particular procurement.                            |
|                                                                       |
| Appendix A.1 -- *Federally Required and Other Model Contract          |
| Clauses*, and Chapter 8 -- *Contract Clauses*, contain a discussion   |
| of many contract clause requirements, including the applicability to  |
| subcontracts.                                                         |
|                                                                       |
| 49 CFR Part 26 sets forth the requirements of the Federal Department  |
| of Transportation                                                     |
|                                                                       |
| concerning Disadvantaged Business Enterprise (DBE) participation in   |
| FTA programs. A discussion of these requirements may be found in      |
| Chapter 7 of this Manual.                                             |
+-----------------------------------------------------------------------+

##### DISCUSSION

**The management of subcontracts usually involves three areas:**

(1) **Assurance that the prime contractor has included the required
    "flow-down" provisions (clauses) from the prime contract in the
    subcontract. A discussion of the requirements related to the
    flow-down of Federal contract clauses may be found in Chapter 8 --
    *Contract Clauses*, and Appendix A.1 -- *Federally Required and
    Other Model Contract Clauses.***

> **(2) The prime contractor's compliance with the Disadvantaged
> Business Enterprise (DBE) requirements in its prime contract. Guidance
> related to the DOT requirements concerning DBE matters may be found in
> Chapter 7 - *Disadvantaged Business Enterprise. ***
>
> **(3) Assurance that the prime contractor has selected its critical
> subcontractors in a prudent fashion, so as to protect the grantee's
> program interests.**

**The purpose of this section relates to the third objective above -- it
is to furnish guidance concerning those circumstances when grantees may
wish to require their prime contractors to submit certain subcontracts
for the grantee's consent prior to award of the subcontract by the
prime.** [^480]

**[When the prime contract is CPFF or T&M]{.underline}-- Under a
cost-plus-fixed-fee contract (CFPP) and a time-and-materials (T&M)
contract, the grantee bears the burden of allowable costs**

**incurred by the prime contractor, including amounts spent for supplies
and services on purchase orders or subcontracts. It behooves the
grantee, therefore, to exercise diligence in the management and
administration of these types of prime contracts with respect to the
primes' selection of its major subcontractors or suppliers. If the cost
incurred by the prime is greater than necessary (for example, because of
inadequate competition or a poorly negotiated subcontract), it is the
grantee that will bear the higher than necessary costs. If the selected
subcontractor performs poorly, it will be the grantee that will bear the
cost of correcting the problems or be put in a position of having to
accept a product that is substandard.**

**[When the subcontract involves a critical component or
subsystem]{.underline} -- This situation is more likely to arise when
the contract involves the procurement of a major system or involves new
technology. Here the issue is not so much the cost risk that accrues to
the grantee under every CPFF or T&M type of contract, but the risk of
failure of the system being procured due to problems with subcontracted
components or subsystems that are critical to the system's successful
performance. For example, on a large contract for rehabilitating a
subway station, a prime contractor with civil engineering experience may
have to subcontract the electrical system work. You may very well
require the prime to submit its proposed subcontractor for electrical
work for your approval, and you will want to do a "responsibility" type
of review of that particular subcontractor. If you have evidence of poor
prior work by that subcontractor, or evidence of marginal financial
resources, you may require the prime to select a different company with
a better track record of performance or a stronger balance sheet.**

**[When the subcontract exceeds a certain dollar threshold]{.underline}
-- Grantees may require their primes to submit all subcontracts over a
certain stated value for consent. New York City Transit, for example,
requires its prior approval of all subcontractors whose subcontracts
will exceed \$1,000,000 or 10% of the total contract price. For Federal
contracts, the threshold for subcontract consent is 5% of the prime
contract value when the prime contract is a CPFF or T&M type of
contract.** [^481]

##### Best Practices

**[Determining Subcontractor Responsibility -- Sealed
Bids]{.underline}** - You may wish to consider a standard provision in
your solicitations that would require the bidders to submit certain
subcontractor information for your review prior to contract award. This
information would enable you to make a determination that a proposed
subcontractor or supplier was technically and financially qualified to
perform the work. This determination would be part of your
"responsibility" determination for awarding the contract. New York City
Transit uses a standard provision in its Invitation for Bids (IFB's)
entitled "Bidder's Qualifications/Responsibility."

This clause requires the bidder to demonstrate to the satisfaction of
NYCT that it has the integrity, skill, experience, facilities and
financial resources necessary to perform the contract. The clause covers
major subcontractors as well as the prime contractor. The pertinent part
of this clause concerning subcontractors reads as follows:

(h) *Except to the extent set forth in subparagraph (i) below, Authority
    approval of all Subcontractors and Suppliers is required. In order
    to assist the Authority in its evaluation of Bidder's
    qualifications, the Bidder shall supply to the Procurement
    Representative within three (3) working days after the opening of
    bids, or within three working days after notification, in the case
    of a subsequently identified apparent low bidder, a detailed list
    of: (i) proposed Subcontractors supplying labor or labor and
    materials, with a value exceeding the lesser of \$1,000,000 or ten
    percent (10%) of the Total Contract Price as bid by the apparent low
    Bidder;\
    and (ii) Proposed Subcontractors and Suppliers of the following
    equipment, materials or labor:*

> *(See Information for Bidders Data Sheet)*
>
> *Bidder's submission is to also include the completed form titled
> "Statement of Qualification of Subcontractor," a copy of which is
> available from the Procurement Representative.* [^482] *These
> requirements are in addition to, and not in lieu of, submission
> requirements pertaining to subcontractor's proposal to meet DBE or
> MBE/WBE or affirmative action requirements.*
>
> *The Bidder shall state in writing to the Authority the name and place
> of business of each proposed Subcontractor or Supplier, the portion of
> the work which such Subcontractor is to do or the equipment/materials
> which such supplier is to furnish and such other information as the
> Authority may reasonably require tending to establish that the
> proposed Subcontractor or Supplier has the necessary skill,
> facilities, integrity, experience and financial resources to perform
> the work or supply the equipment in a satisfactory manner and in
> accordance with the Contract. To be considered skilled and
> experienced, the proposed Subcontractor or Supplier must show that he
> has satisfactorily performed work, or supplied equipment, of the same
> general type that he is proposing to perform for the Bidder under this
> Contract. The Authority may require such proposed Subcontractor or
> Supplier to submit proof of financial or other qualification to do the
> Work. In addition to submitting for approval the above-mentioned
> categories of Subcontractors and Suppliers, Bidder may submit any
> other proposed Subcontractor or Supplier for approval prior to
> contract award.*
>
> *The Authority will notify the Bidder within a reasonable time whether
> use of the proposed Subcontractor or Supplier has been approved. Where
> use of a proposed Subcontractor or Supplier has not been approved, the
> Bidder may propose another Subcontractor or Supplier, or propose to
> perform the work himself.*

(i) *With respect to any Subcontractor(s)/Supplier(s), the successful
    Bidder will be required to obtain approval of such
    Subcontract(s)/Supplier(s) in accordance with the provisions of
    Article 1.08.*

The contract Article No. 1.08 referenced above in the solicitation
provision requires the Bidder to use the Subcontractors/Suppliers that
were approved by NYCT. The contract clause reads, in part:

> ***ARTICLE 1.08 - SUBCONTRACTS***
>
> *(a) Any Subcontractor or Supplier which required and received
> pre-award approval in accordance with paragraph 16 of the Information
> for Bidders, must be utilized by the Contractor for the portion of the
> Work for which they were approved. The Authority will generally not
> entertain any post-award substitutes of any such Subcontractor or
> Supplier in the absence of compelling circumstances to do so.* [^483]

Several points can be noted concerning the above solicitation provision
and contract clause:

a.  Every subcontract greater than 10% of the bid price will
    automatically be captured for review.

b.  The provision is tailored on a case-by-case basis to capture any
    subcontract deemed important or critical by the grantee regardless
    of dollar value. You would simply insert the equipment, materials or
    labor in your "Bidders Data Sheet" (or wherever you wish to note the
    items) so as to require your review and approval of those
    subcontractors.

c.  The Bidder will be required by the contract Article 1.08 --
    *Subcontracts,* to use the Subcontractors/Suppliers that were
    proposed and approved unless there are "compelling circumstances"
    that preclude the Bidder from doing so.

**[Consenting to Subcontracts When the Prime Contract is Cost Plus Fixed
Fee (CPFF) or Time & Materials (T&M)]{.underline}** - For these types of
contracts, grantees may wish to require the prime contractor to submit
the proposed subcontract for the grantee's consent prior to award by the
prime, especially if the subcontract is significant in dollar terms,
involves a critical component,

or is itself a CPFF or T&M subcontract. If the grantee determines that
any subcontracts should be submitted for consent, the grantee will want
to identify the types of information that the prime should submit with
its request for consent. The type of information that will usually be
relevant as part of an advance notification for consent package would
consist of:

> 1\. A description of the supplies or services to be subcontracted. The
> best description would be the actual subcontract specifications and/or
> statement of work.
>
> 2\. Identification of the type of subcontract to be used. The actual
> subcontract document itself would be best since it would give you all
> the terms and conditions, which you can then review to ensure that all
> required flow-down clauses are incorporated in the subcontract. The
> BPPM Appendix A.1 contains the required Federal clauses and identifies
> those that have flow-down requirements.
>
> 3\. An explanation of how and why the proposed subcontractor was
> selected, including an identification of the competitive proposals
> obtained, and their relative strengths and weaknesses.
>
> 4\. The subcontractor's cost or price proposal, together with the
> prime contractor's cost or price analysis of the subcontractor's
> proposal.
>
> 5\. Evidence from a competent auditor that the subcontractor's
> accounting system is adequate for cost-type subcontracts (if the
> subcontract is cost-type) and that the proposed labor and indirect
> expense rates are reasonable in light of recent actual rates incurred
> and the best available business projections for the company.
>
> 6\. The Prime contractor's explanation of how the subcontract price
> was determined.
>
> 7\. The Prime contractor's assessment of the subcontractor's
> "responsibility," including the subcontractor's performance record on
> prior jobs of a similar magnitude.

**[Degree of Work that is Subcontracted]{.underline} -** Grantees may
consider requiring the prime contractor to perform certain tasks on a
project or a minimum percentage of the work, to insure that the prime
contractor maintains a certain degree of control over the project. For
instance, where a job is primarily civil/structural work, bidders may be
allowed to subcontract associated electrical work, but may be required
to perform the civil/structural work with their own forces. In any
event, where a significant amount of the work is subcontracted, the
agency may wish to take a more active role in approving subcontractors.
[^484]

**Chapter 10**

**10 -- [Closeout]{.underline}**

> 10.1 [Closeout Procedures]{.underline} (7/99)
>
> 10.2 [Audits]{.underline} (7/99)
>
> 10.3 [Record Retention]{.underline} (4/05)

# 

# **10.1 CLOSEOUT PROCEDURES**

+-----------------------------------------------------------------------+
| # **REQUIREMENT**                                                     |
+-----------------------------------------------------------------------+
| 49 CFR Part 18.50, *Closeout*, addresses the requirements that        |
| grantees must adhere to in the closeout of their grants. In order to  |
| comply with these requirements, grantees will have to obtain the      |
| required information, reports, final invoices, and other              |
| documentation as appropriate from their third party contractors as    |
| part of the contract closeout process. The closeout information       |
| required by FTA from grantees pertains to the following:              |
|                                                                       |
| > 1\. Final performance or progress report.                           |
| >                                                                     |
| > 2\. Financial Status Report.                                        |
| >                                                                     |
| > 3\. Final request for payment.                                      |
| >                                                                     |
| > 4\. Invention disclosure (if applicable).                           |
| >                                                                     |
| > 5\. Federally-owned property report (does not include property      |
| > obtained with grant funds).                                         |
+-----------------------------------------------------------------------+

**DISCUSSION**

**A completed contract is one that is both physically and
administratively complete. A contract is *physically complete* only
after all deliverable items and services called for under the contract
have been delivered and accepted by the grantee. These deliverable items
include such things as reports, spare parts, warranty documents, and
proof of insurance (where required by the contract terms). These
deliverable items may or may not have been priced as discrete pay items
in the contract, but they are required deliverables, and the contract is
not physically complete until all deliverables are made. A contract is
*administratively complete* when all payments have been made and all
administrative actions accomplished. The steps that must be completed to
close out a contract will depend upon the type and/or nature of the
contract.**

**[Routine commodity procurements]{.underline} -- The closeout of
routine purchase orders and contracts for commodities and other
commercial products is usually a straightforward and uncomplicated
process. The procurement person responsible for closeout will need to
ensure that his end item user has inspected and accepted the deliverable
items as being in**

**conformance with the purchase order/contract specifications. An
inspection/acceptance form should be in the file attesting to the
contractor's delivery of all contract end items, including any
descriptive literature or warranty documentation. There must also be
documentation attesting to final payment by the accounts payable
department.**

[**Non-routine** **contracts for services, construction, rolling stock,
etc.**]{.underline} **-- Contracts for personal services, complex
equipment, construction, and other one-of-kind items will require a
number of steps to effect an administrative closeout. Major elements of
the closeout process, and related documentation, might include:**

a)  **Resolution of all contract changes, claims, and final quantities
    delivered.**

b)  **Determination/recovery of liquidated damages.**

c)  **Review of the insurance claim file by counsel/insurance specialist
    to determine if funds need to be withheld from final payment to
    cover unsettled claims against the contractor.**

d)  **Settlement of all subcontracts by prime contractor.**

e)  **Performance of all inspections (and acceptance tests if any) by
    the grantee's project management office, with appropriate
    documentation.**

f)  **Conduct of a cost audit for cost-reimbursement contracts and
    resolve questioned costs, if any.**

g)  **Generation of a Contractor Performance Report. See *Best Practice*
    below.**

h)  **The submittal of all required documentation by the Contractor,
    including such items as:**

-   **Final reports**

-   **Final payroll records and wage rate certifications**

-   **Spare parts list**

-   **Manufacturer's Warranties and Guarantees**

-   **Final corrected shop drawings**

-   **Operation and maintenance manuals**

-   **Catalogues and brochures**

-   **Invention disclosure (if applicable)**

-   **Federally-owned property report (if there was Government-furnished
    property)**

-   **Resolution of final quantities (construction contracts)**

-   **Final invoice**

-   **Consent of Surety to release final payment to Contractor**

-   **Contractor's Affidavit of Release of Liens**

-   **Contractor's General Release (releasing the grantee from any
    further liabilities/claims under the contract)**

-   **Maintenance Bond (if required)**

> **i) Conduct a Post-delivery Audit for rolling stock contracts as
> required by 49 CFR Part 663 -- Pre-award and Post delivery Audits of
> Rolling Stock Purchases.**

**[Federal closeout procedures]{.underline} -- Should the grantee wish
to review the contract closeout procedures used by the Federal
Government for its contracts, they may be found in FAR Part 4.804,
*Closeout of contract files*. FAR Part 42.15, *Contractor Performance
Information*, discusses the preparation of *Contractor Performance
Reports.* These procedures are not binding on grantees, and are included
here for information purposes only.**

# 

# **Best Practice**

[Establishing That a Contract Is Completed]{.underline} -- It is
generally the responsibility of the Project Manager (PM) to establish
that the work under a contract has been completed and the contract is
ready for closeout. When the PM determines that the work is complete,
the PM should prepare a checklist showing all the contract deliverables
and submittals, and indicating on the checklist that all submittals and
deliverables have been reviewed, inspected and accepted. The PM should
notify the contract administrator by memorandum that the contract is
complete and all required deliverables have been inspected and accepted.

[Contract Closeout Checklist]{.underline} -- The PM or contract
administrator should have a *contract closeout checklist*, listing all
the administrative steps required to close out a contract. The checklist
is an extremely useful tool for the contract administrator or project
manager who is responsible for contract closeout. Given the different
requirements for the various contracting situations,

grantees may wish to have different checklists for different types of
contracts; e.g., commodities, services, construction, cost-type
contracts, etc. An example of a *contract closeout checklist* used by
MARTA for construction contracts is shown in Appendix B.14.

[Contractor Performance Report]{.underline} -- Documentation of a
contractor's performance for future source selection decisions is an
option that grantees should consider for certain types of procurements
such as professional services, complex equipment, construction, etc.
These performance reports can be an important reference point for future
source-selection decisions. See BPPM Section 5.1, *Responsibility of
Contractor*. If the grantee chooses to document a contractor's
performance, input to the report should be received from the technical
office, contracting office, disadvantaged business office (if contract
contained DBE requirements) and end users of the product or service (if
appropriate). Contractors should be furnished with the report and given
an opportunity to submit comments, rebutting statements or additional
information. The Contractor's comments should be retained in the report
file. It would be advisable to have a review level above the grantee
Procurement Officer to consider disagreements between the parties
regarding the evaluation. However, final decision on the content of the
report must rest with the grantee. Copies of the final evaluation should
be furnished to the Contractor. Grantees should have a time limit on the
retention of these reports. [^485]

[Review by legal counsel]{.underline} -- For procurements involving
services, construction, and larger dollar value equipment purchases,
grantees may wish to have their legal counsel review the closeout file
to ensure the adequacy of the contractor's legal documents, including
the contractor's general release, insurance certificates, surety's
release, maintenance bonds, etc.

[Proof of insurance coverage]{.underline} -- For all contracts requiring
the Contractor to maintain insurance for its products or services (e.g.,
professional liability or product liability insurance), the contract
administrator should obtain *proof of insurance* from the Contractor as
part of the closeout process. This documentation should be submitted to
the grantee's Insurance Department for approval prior to final payment
of the Contractor. The Insurance Department will be required to maintain
these documents as "active" files until such time as the insurance
requirement ceases under the terms and conditions of the contract; i.e.,
these insurance terms will continue past (survive) the final contract
payment.

[Final payment]{.underline} -- The contract administrator (CA) must be
sure that all administrative steps have been accomplished prior to final
payment. Contract administrators should make use of a *contract*
*closeout checklist* to the extent that the Program Manager's checklist
does not cover everything in the closeout process (e.g., the contract
administrator may have certain areas of concern not assigned to the
Program Manager). The CA must ensure that all required inspections have
been performed by the technical program office, and a memorandum has
been received from the project manager certifying to the satisfactory
completion of the contract, which includes

all required documentation from the Contractor, before they authorize
final payment or the release of any funds being retained under the
contract. Contract administrators need to pay careful attention to those
types of documents that are notoriously problematic, such as warranties.
In fact, grantees may wish to consider making these warranty documents a
pay item in their contracts when the contract pay items are being
established, so that the Contractor will be motivated to deliver the
documents in a timely manner, and there will be no dispute as to the
proper amount that should be paid for these items.

[Contractor's General Release]{.underline} -- As part of the contract
closeout process, the contract administrator must send the Contractor a
closeout letter that includes the Contractor's "general release." This
document must be a standard statement prepared by the grantee's legal
counsel for use on all of the grantee's contracts. The release will say
that for the payment of a sum certain, which is the final contract
amount agreed to by both parties, the Contractor releases the grantee
from any and all claims of every kind arising directly or indirectly out
of the contract. The release may also contain a certification that the
contractor has paid its subcontractors and suppliers for all their
labor, materials, services, etc. furnished under the contract. The
release is to be signed by a corporate official authorized to bind the
Contractor. The *general release* is important to obtain prior to final
payment because it assures the grantee that there will be no further
claims from the Contractor once the final payment has been made. The
grantee should have the release reviewed by its legal counsel if the
Contractor makes any changes to the grantee's standard release language
that was sent to the Contractor for signature. Of course it will be
necessary for the grantee and the Contractor to have resolved all open
issues of a financial nature prior to the execution of the release
(change orders, claims, liquidated damages, etc.), and this resolution
of all outstanding claims is an important step in the contract closeout
process.

[Retainage and the problem of contractors who quit work]{.underline} --
Occasionally a construction contractor may "walk away" from a project
that is almost complete, refusing to sign a general release and forgoing
final payment. This situation may occur when the contractor lacks
sufficient financial incentive to complete the contract; e.g., if the
"punch list" is large and there is very little money left in retainage,
the contractor may profit by refusing to correct the punch list items
and leave the retainage with the grantee. Or the contractor may have
been awarded another contract which requires the reassignment of his
personnel to another job. Whatever the reason, *the grantee should
anticipate this possibility by carefully estimating the amount of
retainage in such a way that it represents twice the amount of the punch
list work and undelivered items (manuals, drawings, spare parts, etc.).*
For example, MARTA's procedures (which are spelled out in the contract
provisions) call for the retainage of at least 5% of the total contract
value as the work progresses (10% if there are problems observed with
the work). At the point of final inspection and punch list preparation,
the resident engineer estimates the value of the punch list items and
the undelivered items such as spares, manuals, warranties, etc., and
then MARTA pays out the retainage minus twice the value of all the
unfinished work. By establishing the retainage in this way, the
contractor is motivated to complete the contract, because the contractor
will actually receive twice the amount of money that it takes to finish
the work. In other words, the contractor is given a strong incentive to
complete the contract. When all else fails, the grantee should
definitely involve the surety in the issue of unfinished work

(even if the amount of work is relatively small) because the
contractor's relationship with its surety is a vital one for its future
business. If the contractor loses the confidence of its surety, it is
effectively foreclosing on its ability to bid on future work requiring
performance bonds.

[Warranty and Guarantee Register]{.underline} -- The contract
specifications may require that individual warranties or guarantees be
furnished for various installed equipment or building systems. For each
completed contract requiring warranties, the contract administrator
should develop a *Warranty and Guarantee Register*, which is a status
form listing:

-   each individual item of equipment and system for which a warranty or
    guarantee is specified (roofing, doors, sealants, etc.);

-   the pertinent section in the contract specification;

-   the name of the company providing the warranty;

-   the expiration date of the warranty; and

-   the address of the providing company

An example of a *Warranty and Guarantee Register*, used by MARTA, can be
found in Appendix B.13. The *Warranty and Guarantee Register* will
enable the grantee to monitor upcoming warranty expirations so that the
equipment or building system can be inspected before the expiration
date, and corrective actions taken by the Contractor if required.

**10.2 AUDITS**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| FTA's Grant Management Guidelines Circular 5010.1C, dated October 1,  |
| 1998, Chapter III-7, *Third Party Contract Audits*, provides guidance |
| to grantees concerning those third party contract audits.             |
+-----------------------------------------------------------------------+

# 

# **DISCUSSION**

**FTA's *Grant Management Guidelines* do not establish a contract
value/dollar threshold requirement for conducting contract audits.
Grantees must use their own discretion as to the nature and extent of
third party contract audits. However, the FTA *Guidelines* mention
certain types of contracts that usually include provisional overhead
(burden) and General Administrative (G&A) rates. These provisional, or
interim, rates need to be verified by audit for the applicable contract
periods. The types of contracts that typically may be structured as
cost-reimbursement contracts requiring final cost audits would include
consultant, engineering or service contracts.**

**Contract audits may also be requested by FTA to verify that grantee
payments to the contractor are consistent with the terms of the
contract. In addition, audit of a third party contract may be
recommended by the firm conducting the grantee's single annual audit.**
[^486]

**Third party contract audits must be conducted by auditors who are
independent from the third party contractor. Many grantees assign the
contract audit function to their own auditors or financial management
personnel. However, some grantees do not have the personnel resources
within their own organization to perform this function. There are two
sources for audit services that are available to grantees: independent
accounting firms and contract auditors from agencies of the Federal
Government. Private accounting firms can usually respond more rapidly to
the grantee's request for audit, but in some cases the Federal
Government maintains a continuing audit function at contractor
locations, and these auditors can be used for third party contract
audits. In contracting for private firms to provide audit services,
grantees should follow standard contracting procedures for third party
contracts. Requests for Federal audit assistance should be directed to
FTA.**

**When audits result in questioned costs, and the grantee is thus
required to resolve the questioned costs through negotiation with the
Contractor, the results of the negotiation should be documented in a
*Summary of Negotiations* memorandum which must be placed in the
contract file. This memorandum must explain how the final contract costs
were arrived at.**

**The cost of performing an audit of a third party contract can be
charged to the grant.**

10.3 RECORD RETENTION

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| 1\. The FTA Master Agreement MA(12) Section 8, *Reporting, Record     |
| Retention, and Access*, contains the following requirements           |
| concerning the retention of documents:                                |
|                                                                       |
| c.  [Record Retention]{.underline}. The Recipient agrees to maintain  |
|     intact and readily accessible all data, documents, reports,       |
|     records, contracts, and supporting materials relating to the      |
|     Project as the Federal Government may require during the course   |
|     of the project and for three years thereafter.                    |
|                                                                       |
| > d\. [Access to Records of Recipients and                            |
| > Subrecipients]{.underline}. Upon request, the Recipient agrees to   |
| > permit and require its Subrecipients to permit the Secretary of     |
| > Transportation, the Comptroller General of the United States, and,  |
| > if appropriate,                                                     |
+-----------------------------------------------------------------------+

#  

# 

+-----------------------------------------------------------------------+
| > the State, or their authorized representatives, to inspect all      |
| > Project work, materials, payrolls, and other data, and to audit the |
| > books, records, and accounts of the Recipient and its Subrecipient  |
| > pertaining to the Project.                                          |
| >                                                                     |
| > e\. [Project Closeout]{.underline}. Project closeout does not alter |
| > these reporting and record retention requirements.                  |
|                                                                       |
| 2\. 49 CFR Part 18.36 (i), *Contract provisions*, requires grantees   |
| to incorporate certain provisions in their contracts dealing with     |
| access and records retention. Specifically, Part 18.36(i)(11)         |
| requires a three-year retention period for all documents after the    |
| grantee makes final payment.                                          |
+-----------------------------------------------------------------------+

# **DISCUSSION**

**The FTA Master Agreement (MA) deals with grantee and subgrantee record
retention requirements in Section 8. Grantees are "recipients" and
subgrantees are "subrecipients." The MA requires recipients and
subrecipients to maintain their records for at least three years
following completion of the project. *These rules do not pertain to
third-party contractors since the latter are not "recipients" or
"subrecipients." ***[^487]

**The requirements pertaining to *third-party contractors* are set forth
in the Common Grant Rule (49 CFR 18.36). Grantees are required to
include a clause in their contracts whereby contractors agree to
maintain records for inspection by the grantee, FTA, Comptroller
General, etc. for three years *after final payment is made by the
grantee and all other matters are closed. ***[^488] **This three-year
period begins, not with completion of the contract work, but with final
payment, which may be considerably longer than three years after work
completion. This will especially be true with cost-type contracts that
require a final audit before final payment can be made. In these cases
the three-year retention period does not begin until the audit is
completed and final payment is made. The BPPM includes suggested clause
language for third-party contracts in Appendix A.1, Clause #11 --
*Access to Records and Reports*. Grantees should develop their clause
language so it complies with the common grant rule language that
contractors must retain records for three years "after final payment is
made by the grantee and all other matters are closed." The grantee may
wish to ensure that such records are readily accessible.**

Number range CHAPTER **Chapter 11**

**11 - [Disputes]{.underline}**

11.1 [Protests]{.underline} (6/03)

11.2 [Claims, Grievances and Other Disputes with
Contractors]{.underline} (6/99)

**11.1** **PROTESTS**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| § 7.l. of FTA Circular 4220.1E states:                                |
|                                                                       |
| > [Written Protest Procedures]{.underline}. Grantees shall have       |
| > written protest procedures to handle and resolve disputes relating  |
| > to their procurements and shall in all instances disclose           |
| > information regarding protests to FTA. [^489] All protest decisions |
| > must be in writing. A protester must exhaust all administrative     |
| > remedies with the grantee before pursuing a protest with FTA.       |
| >                                                                     |
| > Reviews of protests by FTA will be limited to: (1) a grantee\'s     |
| > failure to have or follow its protest procedures, or its failure to |
| > review a complaint or protest; or (2) violations of Federal law or  |
| > regulation. [^490]                                                  |
| >                                                                     |
| > An appeal to FTA must be received by the cognizant FTA regional or  |
| > Headquarters Office within five (5) working days of the date the    |
| > protester learned or should have learned of an adverse decision by  |
| > the grantee or other basis of appeal to FTA. [^491]                 |
+-----------------------------------------------------------------------+

**DISCUSSION**

You can adopt protest procedures that will provide an outlet for
supplier concerns that cannot be informally resolved. These procedures
will help you resolve these concerns on a schedule that minimizes the
ultimate cost to your agency. Consider including the procedures or key
requirements of the procedures in your solicitations. If you adopt and
adhere to these procedures, FTA's involvement will be very limited.

**Purpose**

A protest is a potential bidder's or contractor's remedy for correcting
a perceived wrong in the procurement process. A protest must be accepted
and reviewed with the understanding that integrity of the procurement
process as well as the procurement office may be at stake.

If an offeror does not have a satisfactory means of resolving his/her
disagreement with you, his/her efforts to obtain satisfaction, including
the possibility of litigation, may substantially interfere with the
procurement process and be costly to the agency. One aspect of the
protest process is am acknowledgment that public procurement officials
are making major public decisions, can conceivably err on occasion, and
that there should be some process short of litigation to remedy such and
error. The success of this process enables FTA to discharge its
responsibility while seldom becoming directly involved in a procurement
dispute.

**Best Practices**

There are three basic types of protests, based on the time in the
procurement cycle when they occur.

-   A pre-bid or solicitation phase protest is received prior to the bid
    opening or proposal due date.

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-   A pre-award protest is a protest against making an award and is
    received after receipt of proposals or bids, but before award of a
    contract.

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-   A post-award protest is a protest received after award of a
    contract.

[Content of Procedures]{.underline} -To ensure that protests are
received and processed effectively, all grantees must have adequate
written bid protest procedures. It is recommended that these procedures
be included or referenced in the solicitation document. If they are
referenced, information must be included on how a copy of the procedures
may be acquired by any interested party. When the procedures are
requested, they should be provided immediately. The written procedures
typically address the following elements:

-   Difference in procedures for pre-bid, pre-award and post-award
    protests;

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```
-   Specific deadlines (in working days) for filing a protest, filing a
    request for reconsideration and for the grantee's response to a
    protest;

```{=html}
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```
-   Specific contents of a protest (name of protester,
    solicitation/contract number or description, statement of grounds
    for protest);

```{=html}
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```
-   Location where protests are to be filed;

-   Statement that the grantee will respond, in detail, to each
    substantive issue raised in the protest,

-   Identification of the responsible official who has the authority to
    make the final determination;

-   Statement that the grantee's determination will be final;

-   Statement that FTA will only entertain a protest that alleges the
    grantee failed to follow their protest procedures and that such a
    protest must be filed in accordance with the Circular; and

-   Allowance for request for reconsideration (if data becomes available
    that was not previously known, or there has been an error of law or
    regulation).

[Effect on Pending Actions]{.underline} - One of the concerns that may
arise in administering a protest is the effect on the award or contract.
The decision to open a bid or to award a contract prior to resolution of
a protest rests with you. However, should the grounds for the protest be
found valid by FTA, FTA may choose not to participate in the contract.
You must weigh this risk against the cost to the agency for terminating
the contract or providing alternative funding.

**11.2 CLAIMS, GRIEVANCES AND OTHER DISPUTES WITH CONTRACTORS**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| FTA Circular 4220.1E paragraph 7.k reads as follows:                  |
|                                                                       |
| k\. [Responsibility for Settlement of Contract                        |
| Issues/Disputes.]{.underline} Grantees alone will be responsible in   |
| accordance with good administrative practice and sound business       |
| judgement for the settlement of all contractual and administrative    |
| issues arising out of procurements. These issues include, but are not |
| limited to, source evaluation, protests, disputes, and claims. These  |
| standards do not relieve the grantee of any contractual               |
| responsibility under its contracts.                                   |
+-----------------------------------------------------------------------+

+-----------------------------------------------------------------------+
| FTA will not substitute its judgement for that of the grantee or      |
| subgrantee, unless the matter is primarily a Federal concern.         |
| Violations of the law will be referred to the local, State, or        |
| Federal authority having proper jurisdiction.                         |
|                                                                       |
| FTA Circular 5010.1C, Chapter I, Section 7b deals with issues of      |
| *claims* and *change orders,* including the settlement of *disputes*. |
|                                                                       |
| The FTA Master Agreement MA(12), October 1, 2005, Section             |
| 43-*Disputes, Breaches, Defaults, or Other Litigation,* states that   |
| FTA has a vested interest in the settlement of any dispute, breach,   |
| default, or litigation involving the Project. Accordingly:            |
|                                                                       |
| a\. [Notification to FTA]{.underline}. The Recipient agrees to notify |
| FTA of any current or prospective major dispute, breach, default, or  |
| litigation that may affect the Federal Government's interests in the  |
| Project of the Federal Government's administration or enforcement of  |
| Federal laws or regulations. If the Recipient seeks to name the       |
| Federal Government as party to litigation for any reason, in any      |
| forum, the Recipient agrees to inform the FTA before doing so.        |
|                                                                       |
| b\. [Federal Interest in Recovery.]{.underline} The Federal           |
| Government retains the right to a proportionate share, based on the   |
| percentage of the Federal share awarded for the Project, of any       |
| proceeds derived form any third party recovery, except that the       |
| Recipient may return any liquidated damages recovered to the Project  |
| Account in lieu of returning the Federal share to the Federal         |
| Government.                                                           |
|                                                                       |
| c\. [Enforcement.]{.underline} The Recipient agrees to pursue all     |
| legal rights available under any third party contract.                |
|                                                                       |
| d\. [FTA Concurrence.]{.underline} FTA reserves the right to concur   |
| in any compromise or settlement of any claim involving the Project    |
| and the Recipient.                                                    |
|                                                                       |
| e\. [Alternative Dispute Resolution.]{.underline} FTA encourages the  |
| Recipient to use all alternative dispute resolutions procedures, as   |
| may be appropriate.                                                   |
+-----------------------------------------------------------------------+

**DISCUSSION**

**FTA Circular 4220.1E paragraph 7k gives grantees the authority to
settle protests, claims and disputes with their third-party contractors.
The Circular stipulates "FTA will not substitute its judgement for that
of the grantee or subgrantee, *unless the matter is primarily a Federal
concern.*" The types of situations that constitute a *Federal concern*
are discussed below in the paragraph entitled FTA *Review and
Concurrence.***

**[Notification of FTA-]{.underline}The Master Agreement MA(12), Section
43a, requires grantees to notify FTA of any current or prospective major
dispute, breach, default, or litigation pertaining to the Project. And
if the Recipient seeks to name the Federal Government as a party to the
litigation for any reason, the Recipient must inform the FTA before
doing so.**

**FTA Circular 5010.1C, Chapter I, Section 7b(1)(d) requires grantees to
notify FTA of any current or prospective litigation or major disputed
claim in excess of \$100,00 relating to any third party contract. This
Circular also requires grantees to 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. A brief
description and reasons for each claim should accompany this list.**

**[FTA Review and Concurrence]{.underline} - The FTA Master Agreement
MA(12), Section 43d, states that FTA reserves the right to concur in any
compromise of settlement of any claim involving the Project and the
grantee. FTA Circular 5010.1C, Chapter I, Section 7b(4), *FTA Review and
Concurrence,* requires grantees to secure the FTA review and concurrence
in a proposed claim settlement before using Federal funds in the
following instances:**

**1. When the negotiated settlement exceeds \$100,00. This would include
any situation when the grantee is waiving liquidated damages in an
amount over \$100,000. The Government has a vested interest in the
recovery of liquidated damages, and the general rule is that liquidated
damages may not be waived. However, grantees may "set-off" the
liquidated damages against some other valid claim of the contractor, but
FTA concurrence is necessary in any "set-off" action.**

**2. When insufficient funds remain in the approved grant to cover the
settlement. The Government cannot be obligated to pay the grantee an
amount that would exceed the funds obligated on the grant. To do so
would be a violation of the Anti-Deficiency Act.**

**3. Where a special Federal interest is declared because of program
management concerns, possible mismanagement, impropriety, waste or
fraud. FTA could notify the grantee that it wishes to review and concur
in any particular claim/dispute settlement based on the criteria stated
here in section 7b(4). Even more broadly, FTA may initiate a review of
grantee claims under a particular grant whenever it deems a review to be
necessary\--5010.1C, Section 7b(5).**

**4. The requirement for FTA concurrence also applies to any settlement
arrived at by arbitration, mediation, etc. Grantees must advise their
contractors that any decisions reached through arbitration must be
reviewed and approved by the FTA. The reason for this is that an
arbitrator may require the grantee to pay for something that is
ineligible for funding (unallowable cost) under the terms of the grant.
The arbitrator may also require the grantee to pay its contractor an
amount that would cause the funding limit of the grant to be exceeded,
thus violating the Anti-Deficiency Act.**

**5. There are certain situations that grantees must seek to avoid
because they may result in the grantee being liable to its contractor
but unable to recover from FTA. These circumstances may give rise to a
FTA review, through its Project Management Offices and other oversight
reviews, before FTA will participate in the cost of settling the
claim/dispute. If grantees encounter any of these situations, and they
believe the claim to be legitimate, they should be prepared to support a
challenge by FTA. If the grantees's claim records substantiate that
reasonable and prudent measures were taken to prevent or offset the
causes underlying the claim, FTA may participate in the negotiated cost
\[(5010.1C, Section 7b(3)\]. The types of situations in question are
those where the grantee has failed to:**

> **a) obtain clear access to all needed right-of-way prior to award of
> the construction contract;**

**b) execute all required utility agreements in time to assume
uninterrupted construction progress;**

**c) undertake comprehensive project planning and scheduling to achieve
proper coordination among contractors;**

**d) inform potential contractors of all available geo-technical
information on subsurface conditions;**

**e) assure that all grantee-furnished materials are compatible with
contractor project facilities and/or equipment, and available when
needed;**

**f) complete all pre-construction survey and engineering prior to
issuing the contractor a Notice to Proceed;**

**g) obtain the necessary approvals and agreements from all other
public** **authorities affected by the project prior to contract
award;**

**h) assure that all design and shop drawings are promptly approved and
made available to the contractor as needed.**

**[Freedom of Information Act]{.underline} - Grantees are cautioned that
the written materials furnished to FTA with notifications of disputed
claims or relating to proposed statements of claims and disputes, are
subject to release to the public under the Freedom of Information Act
(FOIA). Therefore, when the dispute is still in the
evaluation/negotiation stage, and a settlement has not yet been reached,
a prudent approach would be for grantees to include in their quarterly
written reports to FTA only information that, if released, would not
prejudice the grantee's negotiation or settlement strategy.**

**Best Practices**

[Steps to be Taken Prior to Negotiations]{.underline} - When a claim
and/or grievance is initiated by one of the parties, the grantee should
take the following steps:

a\) Request from the contractor a written detailed position on each
separate claim setting forth the amount and rationale for the
contractor's positions on each item.

b\) List all the counterclaims by the grantee, setting forth the amount
and rationale for the grantee's position on each item.

c\) Perform a price, cost, technical and legal analysis, as required,
for each claim and/or grievance presented by the parties. See BPPM
Section 5.2 *Cost and Price Analysis.* A *technical analysis* is to
determine the validity of the claims and/or grievances, and to determine
the rebuttals to those claims and grievances. The *legal analysis* is to
consider all the factors available after the price, cost, and technical
reviews have been completed to determine the contractor's, the grantee's
and the Government's (FTA) legal position. Each review should be
performed by the persons qualified to make the particular
review/analysis.

d\) The grantee should then establish its best position assuming it
prevails on all of its claims and the other party loses all of its
claims before a court or arbitration panel. This is considered the
grantee's "best" position.

e\) The grantee should then determine the contractor's best position,
assuming the contractor prevails on all its claims before a court or
arbitration panel. This is the grantee's "worst" position.

f\) The grantee should then establish a "realistic" position, based on
the grantee's best judgement as to each item in issue, by attempting to
anticipate the outcome of a determination by a court or arbitration
panel. The "realistic" position should result from consideration of all
the arguments and facts gathered through the analysis above.

g\) Each claim or grievance item should be considered and handled
separately in the grantee's preparation for negotiations with the
contractor.

h\) If liquidated damages are involved in the claim/grievance
settlement, the Government has a vested interest in the liquidated
damages and will need a complete analysis of how the liquidated damages
amount was determined. Once assessed, liquidated damages may not be
waived by the grantee, without prior FTA concurrence. However, a valid
setoff against some other contract claims or other tradeoff for other

contractual deliverables may be appropriate with FTA approval.
Liquidated damages are considered assessed when a written notification
is sent to the contractor.

> Sections 9.2.3.5 *Delays*, and 9.2.3.6 *Acceleration,* should be
> carefully reviewed for guidance when settling claims involving delays,
> or claims where the contractor alleges "constructive acceleration" on
> the part of the grantee. Where, for example, there are *concurrent
> delays* (those caused by both parties), and it is impossible to
> apportion or separate the delays as to how much is due to the actions
> of the separate parties, then liquidated damages cannot be enforced.
> On the other hand, if the delays can be apportioned as to
> contractor-caused, grantee-caused, and "excusable" per the contract
> terms, then the grantee can enforce liquidated damages to the extent
> of the contractor-caused delays (but not for the grantee-caused delays
> or for "excusable" delays). The end product of your negotiations with
> the Contractor on the issue of delays and liquidated damages would be
> a contract modification extending the delivery date for "excusable
> delays" as defined by the contract terms, as well as for delays for
> which the grantee is responsible (changes, constructive changes,
> etc.). The delivery date would not be extended for delays that were
> caused by the Contractor. The newly established delivery date would
> then become the date used to assess liquidated damages.

i\) If there is an arbitration clause in the third party contract, FTA
must be notified before the matter is submitted to arbitration. FTA must
concur in any arbitration award before it becomes final and Federal
Funds are released.

[Negotiations]{.underline} - Negotiations should be on an *item-by-item
basis* with written arguments for each side. The grantee should
aggressively pursue all claims and counterclaims as well as defend
against all claims and counterclaims of the contractor. The final
position arrived at through the negotiations should be set forth and
justified in writing.

If diligent efforts to settle the claims and/or disputes on an
item-by-item basis have failed to resolve all the items, then a
determination can be made regarding the feasibility of a *total cost* or
other type settlement. If the determination is made by the parties to go
to a *total cost* or other type settlement, the grantee should write a
detailed explanation of how the parties arrived at the conclusion that
the total cost or the other type settlement was the best way to proceed.
In addition, the grantee should provide a complete explanation of how
the final settlement figure was reached, and how each item in the
claim/dispute was considered.

Finally, the grantee should not accept a contractor's claim for its cost
without having conducted an appropriate review/analysis. If the grantee
is unable to verify the cost prior to accepting it, the grantee should
conditionally accept it subject to later audit verification.

[When FTA Concurrence is Required]{.underline} - Should FTA request to
review the proposed settlement before it is implemented between the
grantee and its contractor, the grantee should send to the

FTA Regional Office a detailed summary of the settlement, and include as
backup the negotiation memorandum and all the pre-negotiation analyses,
described above, that led to the negotiations. In addition, the grantee
should provide a written opinion of counsel explaining

why the proposed settlement is fair and reasonable, consistent with
State law, and in the best interests of the grantee and the Government.

[Engaging Outside Counsel]{.underline} - If it becomes necessary for the
grantee to engage outside counsel to handle the settlement negotiations
or, if necessary, to litigate or arbitrate the case, the grantee must,
if grant funds are requested to cover the legal costs, obtain FTA's
concurrence in advance. Grantees must demonstrate to FTA that their own
legal resources are inadequate to handle the issues at hand, whether
because of the nature of the claim, the training and experience of its
personnel, or the potential strain on the grantee's staff resources.
Outside counsel must be selected through a competitive process that may
range from being very informal to very formal. Note that a
qualifications-based selection procedure, such as is permitted for A-E
procurements, is not permitted for legal services; cost/price proposals
must be requested and evaluated as apart of the selection process. The
fee arrangement with outside counsel cannot be based upon a contingency
or percentage of recovery methodology.

[Avoiding Disputes Through Proper Documentation]{.underline} -
*"Documentation of significant events as they occur in the form of
correspondence, daily diary entries, inspector's daily reports,
photographs, memoranda of telephone conversations and meetings, etc.,
creates a project record that is absolutely essential in evaluating
claims reaching litigation. Absolute attention to documentation is vital
in both discouraging submittals of invalid claims and properly analyzing
any claim filed."* [^492]

[Daily Logs]{.underline} - The daily reports/logs of the grantee's
inspector may be the most important source for claim research and
defense. Inspectors and field engineers must be trained to spot
change/claim situations and they must be instructed on what to include
in their reports, both on a routine basis and when they sense a real or
potential problem. The daily reports should track the construction
progress against the approved schedule (CPM Schedule). The daily reports
should also track the equipment on site as well as the utilization of
equipment. These inspector reports must be monitored carefully by the
inspector's supervisor to maintain high quality.

[Documentation of meetings and telephone conversations]{.underline} - In
order to avoid misunderstandings regarding agreements reached during
meetings and telephone conversations with the Contractor and/or between
grantee personnel, it is critical to prepare minutes of the meetings and
distribute them to all of the attendees. All important telephone
conversations should recorded on a Telephone Call Record, noting the
pertinent issues discussed, how the issues were resolved, who is
responsible for taking the required action, etc. The other party to the
call should always be sent a copy of the completed Telephone Call
Record.

[Photographs]{.underline} - Frequently, photographs are a valuable form
of documentation in a claim situation. The grantee's resident engineer
must make an adequate photographic record of the progress of the
contract. The photographs must be dated, properly identified, annotated
as to

who took the photograph and the weather conditions at the time, and
filed. Photographs should cover the following items:

-   Progress of the work

-   Unusual construction techniques

-   Accidents or damages

-   Unsafe or hazardous working conditions

-   Reinforcing steel prior to concrete placement

-   Work completed prior to being covered

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-   Areas or activities where claims and/or changes are anticipated

The construction contract should itself contain provisions requiring the
contractor to provide monthly progress photographs. The grantee's
resident engineer must participate in the choosing of locations, angles,
and subjects in order to maximize the usefulness of the photographs for
progress records.

[Alternative Dispute Resolution]{.underline}-The FTA Master Agreement
MA(12), Section 43e, encourages grantees to use alternative dispute
resolution procedures, as may be appropriate. The alternatives to
litigation that are most commonly used are *arbitration and mediation*.
Grantees are advised to be cautious in their decisions to use
arbitration. In cases that are complex, arbitration may not be
preferable over litigation because arbitrators frequently have
limitations on the amount of time they can devote to any individual
case. As a result, if the case is complex and time-consuming, it may be
necessary to change arbitrators during the proceedings, and this may be
very disruptive to the parties and their case. Arbitration may be more
advisable for disputes that are not complex and do not involve a great
deal of facts that must be determined in order to settle the claim.
Grantees are advised to think the case through carefully before deciding
not to litigate.

# FEDERAL TRANSIT ADMINISTRATION

BEST PRACTICES PROCUREMENT MANUAL

**TABLE OF CONTENTS (Appendix A - Governing Documents)**

**[A.1 - Federally Required and Other Model Contract
Clauses]{.underline}**

1\. Fly America Requirements\
2. Buy America Requirements\
3. Charter Bus and School Bus Requirements\
4. Cargo Preference Requirements\
5. Seismic Safety Requirements\
6. Energy Conservation Requirements\
7. Clean Water Requirements\
8. Bus Testing\
9. Pre-Award and Post Delivery Audit Requirements\
10. Lobbying\
11. Access to Records and Reports\
12. Federal Changes\
13. Bonding Requirements\
14. Clean Air\
15. Recycled Products\
16. Davis-Bacon and Copeland Anti-Kickback Acts\
17. Contract Work Hours and Safety Standards Act\
18. \[Reserved\]\
19. No Government Obligation to Third Parties\
20. Program Fraud and False or Fraudulent Statements and Related Acts\
21. Termination\
22. Government-wide Debarment and Suspension (Nonprocurement)\
23. Privacy Act

24\. Civil Rights Requirements\
25. Breaches and Dispute Resolution\
26. Patent and Rights in Data\
27. Transit Employee Protective Agreements\
28. Disadvantaged Business Enterprises (DBE)\
29. \[Reserved\]\
30. Incorporation of Federal Transit Administration (FTA) Terms

31\. Drug and Alcohol Testing

1.  **[FLY AMERICA REQUIREMENTS]{.underline}**

# **49 U.S.C. § 40118**

**41 CFR Part 301-10**

## [Applicability to Contracts]{.underline}

The Fly America requirements apply to the transportation of persons or
property, by air, between a place in the U.S. and a place outside the
U.S., or between places outside the U.S., when the FTA will participate
in the costs of such air transportation. Transportation on a foreign air
carrier is permissible when provided by a foreign air carrier under a
code share agreement when the ticket identifies the U.S. air carrier's
designator code and flight number. Transportation by a foreign air
carrier is also permissible if there is a bilateral or multilateral air
transportation agreement to which the U.S. Government and a foreign
government are parties and which the Federal DOT has determined meets
the requirements of the Fly America Act.

### Flow Down Requirements

The Fly America requirements flow down from FTA recipients and
subrecipients to first tier contractors, who are responsible for
ensuring that lower tier contractors and subcontractors are in
compliance.

### Model Clause/Language

The relevant statutes and regulations do not mandate any specified
clause or language. FTA proposes the following language.

**[Fly America Requirements]{.underline}**

The Contractor agrees to comply with 49 U.S.C. 40118 (the "Fly America"
Act) in accordance with the General Services Administration's
regulations at 41 CFR Part 301-10, which provide that recipients and
subrecipients of Federal funds and their contractors are required to use
U.S. Flag air carriers for U.S Government-financed international air
travel and transportation of their personal effects or property, to the
extent such service is available, unless travel by foreign air carrier
is a matter of necessity, as defined by the Fly America Act. The
Contractor shall submit, if a foreign air carrier was used, an
appropriate certification or memorandum adequately explaining why
service by a U.S. flag air carrier was not available or why it was
necessary to use a foreign air carrier and shall, in any event, provide
a certificate of compliance with the Fly America requirements. The
Contractor agrees to include the requirements of this section in all
subcontracts that may involve international air transportation.

**[2. BUY AMERICA REQUIREMENTS]{.underline}**

**49 U.S.C. 5323(j)**\
**49 C.F.R. Part 661**

**[Applicability to Contracts]{.underline}**\
The Buy America requirements apply to the following types of contracts:
Construction Contracts and Acquisition of Goods or Rolling Stock (valued
at more than \$100,000).

**[Flow Down]{.underline}**\
The Buy America requirements flow down from FTA recipients and
subrecipients to first tier contractors, who are responsible for
ensuring that lower tier contractors and subcontractors are in
compliance. The \$100,000 threshold applies only to the grantee
contract, subcontracts under that amount are subject to Buy America.

**[Mandatory Clause/Language]{.underline}**\
The Buy America regulation, at 49 CFR 661.13, requires notification of
the Buy America requirements in FTA-funded contracts, but does not
specify the language to be used. The following language has been
developed by FTA.

**Buy America -** The contractor agrees to comply with 49 U.S.C. 5323(j)
and 49 C.F.R. Part 661, which provide that Federal funds may not be
obligated unless steel, iron, and manufactured products used in
FTA-funded projects are produced in the United States, unless a waiver
has been granted by FTA or the product is subject to a general waiver.
General waivers are listed in 49 C.F.R. 661.7, and include final
assembly in the United States for 15 passenger vans and 15 passenger
wagons produced by Chrysler Corporation, and microcomputer equipment and
software. Separate requirements for rolling stock are set out at 49
U.S.C. 5323(j)(2)(C) and 49 C.F.R. 661.11. Rolling stock must be
assembled in the United States and have a 60 percent domestic content.

A bidder or offeror must submit to the FTA recipient the appropriate Buy
America certification (below) with all bids or offers on FTA-funded
contracts, except those subject to a general waiver. Bids or offers that
are not accompanied by a completed Buy America certification must be
rejected as nonresponsive. This requirement does not apply to lower tier
subcontractors.

**Certification requirement for procurement of steel, iron, or
manufactured products.**

*Certificate of Compliance with 49 U.S.C. 5323(j)(1)*

The bidder or offeror hereby certifies that it will meet the
requirements of 49 U.S.C. 5323(j)(1) and the applicable regulations in
49 C.F.R. Part 661.5.

Date

Signature

Company Name

Title

*Certificate of Non-Compliance with 49 U.S.C. 5323(j)(1)*

The bidder or offeror hereby certifies that it cannot comply with the
requirements of 49 U.S.C. 5323(j)(1) and 49 C.F.R. 661.5, but it may
qualify for an exception pursuant to 49 U.S.C. 5323(j)(2)(A),
5323(j)(2)(B), or 5323(j)(2)(D), and 49 C.F.R. 661.7.

Date

Signature

Company Name

Title

**Certification requirement for procurement of buses, other rolling
stock and associated equipment.**

*Certificate of Compliance with 49 U.S.C. 5323(j)(2)(C).*

The bidder or offeror hereby certifies that it will comply with the
requirements of 49 U.S.C. 5323(j)(2)(C) and the regulations at 49 C.F.R.
Part 661.11.

Date

Signature

Company Name

Title

*Certificate of Non-Compliance with 49 U.S.C. 5323(j)(2)(C)*

The bidder or offeror hereby certifies that it cannot comply with the
requirements of 49 U.S.C. 5323(j)(2)(C) and 49 C.F.R. 661.11, but may
qualify for an exception pursuant to 49 U.S.C. 5323(j)(2)(A),
5323(j)(2)(B), or 5323(j)(2)(D), and 49 CFR 661.7.

Date

Signature

Company Name

Title

**[3. CHARTER BUS REQUIREMENTS]{.underline}**

**49 U.S.C. 5323(d)**\
**49 CFR Part 604**

**[Applicability to Contracts]{.underline}**\
The Charter Bus requirements apply to the following type of contract:
Operational Service Contracts.

**[Flow Down Requirements]{.underline}**\
The Charter Bus requirements flow down from FTA recipients and
subrecipients to first tier service contractors.

**[Model Clause/Language]{.underline}**\
The relevant statutes and regulations do not mandate any specific clause
or language. The following clause has been developed by FTA.

**Charter Service Operations -** The contractor agrees to comply with 49
U.S.C. 5323(d) and 49 CFR Part 604, which provides that recipients and
subrecipients of FTA assistance are prohibited from providing charter
service using federally funded equipment or facilities if there is at
least one private charter operator willing and able to provide the
service, except under one of the exceptions at 49 CFR 604.9. Any charter
service provided under one of the exceptions must be \"incidental,\"
i.e., it must not interfere with or detract from the provision of mass
transportation.

**[3. SCHOOL BUS REQUIREMENTS]{.underline}**

**49 U.S.C. 5323(F)**\
**49 CFR Part 605**

**[Applicability to Contracts]{.underline}**\
The School Bus requirements apply to the following type of contract:
Operational Service Contracts.

**[Flow Down Requirements]{.underline}**\
The School Bus requirements flow down from FTA recipients and
subrecipients to first tier service contractors.

**[Model Clause/Language]{.underline}**\
The relevant statutes and regulations do not mandate any specific clause
or language. The following clause has been developed by FTA.

**School Bus Operations -** Pursuant to 69 U.S.C. 5323(f) and 49 CFR
Part 605, recipients and subrecipients of FTA assistance may not engage
in school bus operations exclusively for the transportation of students
and school personnel in competition with private school bus operators
unless qualified under specified exemptions. When operating exclusive
school bus service under an allowable exemption, recipients and
subrecipients may not use federally funded equipment, vehicles, or
facilities.

**[4. CARGO PREFERENCE REQUIREMENTS]{.underline}**

**46 U.S.C. 1241** **\
46 CFR Part 381**

**[Applicability to Contracts]{.underline}**\
The Cargo Preference requirements apply to all contracts involving
equipment, materials, or commodities which may be transported by ocean
vessels.

**[Flow Down]{.underline}**\
The Cargo Preference requirements apply to all subcontracts when the
subcontract may be involved with the transport of equipment, material,
or commodities by ocean vessel.

**[Model Clause/Language]{.underline}**\
The MARAD regulations at 46 CFR 381.7 contain suggested contract
clauses. The following language is proffered by FTA.

**Cargo Preference - Use of United States-Flag Vessels -** The
contractor agrees: a. [to use]{.underline} privately owned United
States-Flag commercial vessels to ship at least 50 percent of the gross
tonnage (computed separately for dry bulk carriers, dry cargo liners,
and tankers) involved, whenever shipping any equipment, material, or
commodities pursuant to the underlying contract to the extent such
vessels are available at fair and reasonable rates for United
States-Flag commercial vessels; b. [to furnish within]{.underline} 20
working days following the date of loading for shipments originating
within the United States or within 30 working days following the date of
leading for shipments originating outside the United States, a legible
copy of a rated, \"on-board\" commercial ocean bill-of -lading in
English for each shipment of cargo [described in the preceding
paragraph]{.underline} to the Division of National Cargo, Office of
Market Development, Maritime Administration, Washington, DC 20590 and to
the FTA recipient ([through the contractor in the case of a
subcontractor\'s bill-of-lading.)]{.underline} c. [to include
these]{.underline} requirements in [all subcontracts issued pursuant to
this contract when the subcontract may involve the transport of
equipment, material, or commodities by ocean vessel.]{.underline}

**[5. SEISMIC SAFETY REQUIREMENTS]{.underline}**

**42 U.S.C. 7701 et seq. 49\
CFR Part 41**

**[Applicability to Contracts]{.underline}**\
The Seismic Safety requirements apply only to contracts for the
construction of new buildings or additions to existing buildings.

**[Flow Down]{.underline}**\
The Seismic Safety requirements flow down from FTA recipients and
subrecipients to first tier contractors to assure compliance, with the
applicable building standards for Seismic Safety, including the work
performed by all subcontractors.

**[Model Clauses/Language]{.underline}**\
The regulations do not provide suggested language for third-party
contract clauses. The following language has been developed by FTA.

**Seismic Safety** - The contractor agrees that any new building or
addition to an existing building will be designed and constructed in
accordance with the standards for Seismic Safety required in Department
of Transportation Seismic Safety Regulations 49 CFR Part 41 and will
certify to compliance to the extent required by the regulation. The
contractor also agrees to ensure that all work performed under this
contract including work performed by a subcontractor is in compliance
with the standards required by the Seismic Safety Regulations and the
certification of compliance issued on the project.

**[6. ENERGY CONSERVATION REQUIREMENTS]{.underline}**

**42 U.S.C. 6321 et seq.\
49 CFR Part 18**

**[Applicability to Contracts]{.underline}**\
The Energy Conservation requirements are applicable to all contracts.

**[Flow Down]{.underline}**\
The Energy Conservation requirements extend to all third party
contractors and their contracts at every tier and subrecipients and
their subagreements at every tier.

**[Model Clause/Language]{.underline}**\
No specific clause is recommended in the regulations because the Energy
Conservation requirements are so dependent on the state energy
conservation plan. The following language has been developed by FTA:

**Energy Conservation** - The contractor agrees to comply with mandatory
standards and policies relating to energy efficiency which are contained
in the state energy conservation plan issued in compliance with the
Energy Policy and Conservation Act.

**[7. CLEAN WATER REQUIREMENTS]{.underline}**

**33 U.S.C. 1251**

**[Applicability to Contracts]{.underline}**\
The Clean Water requirements apply to each contract and subcontract
which exceeds \$100,000.

**[Flow Down]{.underline}**\
The Clean Water requirements flow down to FTA recipients and
subrecipients at every tier.

**[Model Clause/Language]{.underline}**\
While no mandatory clause is contained in the Federal Water Pollution
Control Act, as amended, the following language developed by FTA
contains all the mandatory requirements:

**Clean Water** - (1) The Contractor agrees to comply with all
applicable standards, orders or regulations issued pursuant to the
Federal Water Pollution Control Act, as amended, 33 U.S.C. 1251 et
[seq]{.underline}. The Contractor agrees to report each violation to the
Purchaser and understands and agrees that the Purchaser will, in turn,
report each violation as required to assure notification to FTA and the
appropriate EPA Regional Office.

\(2\) The Contractor also agrees to include these requirements in each
subcontract exceeding \$100,000 financed in whole or in part with
Federal assistance provided by FTA.

**[8. BUS TESTING]{.underline}**

**49 U.S.C. 5323(c)\
49 CFR Part 665**

**[Applicability to Contracts]{.underline}**\
The Bus Testing requirements pertain only to the acquisition of Rolling
Stock/Turnkey.

**[Flow Down]{.underline}**\
The Bus Testing requirements should not flow down, except to the turnkey
contractor as stated in Master Agreement.

**[Model Clause/Language]{.underline}**\
Clause and language therein are merely suggested. 49 CFR Part 665 does
not contain specific language to be included in third party contracts
but does contain requirements applicable to

subrecipients and third party contractors. Bus Testing Certification and
language therein are merely suggested.

**Bus Testing** - The Contractor \[Manufacturer\] agrees to comply with
49 U.S.C. A 5323(c) and FTA\'s implementing regulation at 49 CFR Part
665 and shall perform the following:

1\) A manufacturer of a new bus model or a bus produced with a major
change in components or configuration shall provide a copy of the final
test report to the recipient at a point in the procurement process
specified by the recipient which will be prior to the recipient\'s final
acceptance of the first vehicle.

2\) A manufacturer who releases a report under paragraph 1 above shall
provide notice to the operator of the testing facility that the report
is available to the public.

3\) If the manufacturer represents that the vehicle was previously
tested, the vehicle being sold should have the identical configuration
and major components as the vehicle in the test report, which must be
provided to the recipient prior to recipient\'s final acceptance of the
first vehicle. If the configuration or components are not identical, the
manufacturer shall provide a description of the change and the
manufacturer\'s basis for concluding that it is not a major change
requiring additional testing.

4\) If the manufacturer represents that the vehicle is \"grandfathered\"
(has been used in mass transit service in the United States before
October 1, 1988, and is currently being produced without a major change
in configuration or components), the manufacturer shall provide the name
and address of the recipient of such a vehicle and the details of that
vehicle\'s configuration and major components.

CERTIFICATION OF COMPLIANCE WITH FTA\'S BUS TESTING REQUIREMENTS\
The undersigned \[Contractor/Manufacturer\] certifies that the vehicle
offered in this procurement complies with 49 U.S.C. A 5323(c) and FTA\'s
implementing regulation at 49 CFR Part 665.

The undersigned understands that misrepresenting the testing status of a
vehicle acquired with Federal financial assistance may subject the
undersigned to civil penalties as outlined in the Department of
Transportation\'s regulation on Program Fraud Civil Remedies, 49 CFR
Part 31. In addition, the undersigned understands that FTA may suspend
or debar a manufacturer under the procedures in 49 CFR Part 29.

Date:

Signature:

Company Name:

Title:

**[9. PRE-AWARD AND POST DELIVERY AUDITS REQUIREMENTS]{.underline}**

**49 U.S.C. 5323\
49 CFR Part 663**

**[Applicability to Contracts]{.underline}**\
These requirements apply only to the acquisition of Rolling
Stock/Turnkey.

**[Flow Down]{.underline}**\
These requirements should not flow down, except to the turnkey
contractor as stated in Master Agreement.

**[Model Clause/Language]{.underline}**\
Clause and language therein are merely suggested. 49 C.F.R. Part 663
does not contain specific language to be included in third party
contracts but does contain requirements applicable to subrecipients and
third party contractors.

\- Buy America certification is mandated under FTA regulation,
\"Pre-Award and Post-Delivery Audits of Rolling Stock Purchases,\" 49
C.F.R. 663.13.

\-- Specific language for the Buy America certification is mandated by
FTA regulation,

\"Buy America Requirements\--Surface Transportation Assistance Act of
1982, as amended,\"

49 C.F.R. 661.12, but has been modified to include FTA\'s Buy America
requirements codified at 49 U.S.C. A 5323(j).

**Pre-Award and Post-Delivery Audit Requirements** - The Contractor
agrees to comply with 49 U.S.C. § 5323(l) and FTA\'s implementing
regulation at 49 C.F.R. Part 663 and to submit the following
certifications:

\(1\) Buy America Requirements: The Contractor shall complete and submit
a declaration certifying either compliance or noncompliance with Buy
America. If the Bidder/Offeror certifies compliance with Buy America, it
shall submit documentation which lists 1) component and subcomponent
parts of the rolling stock to be purchased identified by manufacturer of
the parts, their country of origin and costs; and 2) the location of the
final assembly point for the rolling stock, including a description of
the activities that will take place at the final assembly point and the
cost of final assembly.

\(2\) Solicitation Specification Requirements: The Contractor shall
submit evidence that it will be capable of meeting the bid
specifications.

\(3\) Federal Motor Vehicle Safety Standards (FMVSS): The Contractor
shall submit 1) manufacturer\'s FMVSS self-certification sticker
information that the vehicle complies with relevant FMVSS or 2)
manufacturer\'s certified statement that the contracted buses will not
be subject to FMVSS regulations.

BUY AMERICA CERTIFICATE OF COMPLIANCE WITH FTA REQUIREMENTS\
FOR BUSES, OTHER ROLLING STOCK, OR ASSOCIATED EQUIPMENT

*(To be submitted with a bid or offer exceeding the small purchase
threshold for Federal assistance programs, currently set at \$100,000.)*

[Certificate of Compliance]{.underline}

The bidder hereby certifies that it will comply with the requirements of
49 U.S.C. Section 5323(j)(2)(C), Section 165(b)(3) of the Surface
Transportation Assistance Act of 1982, as amended, and the regulations
of 49 C.F.R. 661.11:

Date:

Signature:

Company Name:

Title:

[Certificate of Non-Compliance]{.underline}

The bidder hereby certifies that it cannot comply with the requirements
of 49 U.S.C. Section 5323(j)(2)(C) and Section 165(b)(3) of the Surface
Transportation Assistance Act of 1982, as amended, but may qualify for
an exception to the requirements consistent with 49 U.S.C. Sections
5323(j)(2)(B) or (j)(2)(D), Sections 165(b)(2) or (b)(4) of the Surface
Transportation Assistance Act, as amended, and regulations in 49 C.F.R.
661.7.

Date:

Signature:

Company Name:

Title:

**[10. LOBBYING]{.underline}**

**31 U.S.C. 1352\
49 CFR Part 19\
49 CFR Part 20**

**[Applicability to Contracts]{.underline}**\
The Lobbying requirements apply to Construction/Architectural and
Engineering/Acquisition of Rolling Stock/Professional Service
Contract/Operational Service Contract/Turnkey contracts.

**[Flow Down]{.underline}**\
The Lobbying requirements mandate the maximum flow down, pursuant to
Byrd Anti-Lobbying Amendment, 31 U.S.C. § 1352(b)(5) and 49 C.F.R. Part
19, Appendix A, Section 7.

**[Mandatory Clause/Language]{.underline}**\
Clause and specific language therein are mandated by 49 CFR Part 19,
Appendix A.

Modifications have been made to the Clause pursuant to Section 10 of the
Lobbying Disclosure Act of 1995, P.L. 104-65 \[to be codified at 2
U.S.C. § 1601, *et seq.*\]

\- Lobbying Certification and Disclosure of Lobbying Activities for
third party contractors are mandated by 31 U.S.C. 1352(b)(5), as amended
by Section 10 of the Lobbying Disclosure Act of 1995, and DOT
implementing regulation, \"New Restrictions on Lobbying,\" at 49 CFR §
20.110(d)

\- Language in Lobbying Certification is mandated by 49 CFR Part 19,
Appendix A, Section 7, which provides that contractors file the
certification required by 49 CFR Part 20, Appendix A.

Modifications have been made to the Lobbying Certification pursuant to
Section 10 of the Lobbying Disclosure Act of 1995.

\- Use of \"Disclosure of Lobbying Activities,\" Standard Form-LLL set
forth in Appendix B of 49 CFR Part 20, as amended by \"Government wide
Guidance For New Restrictions on Lobbying,\" 61 Fed. Reg. 1413 (1/19/96)
is mandated by 49 CFR Part 20, Appendix A.

**Byrd Anti-Lobbying Amendment, 31 U.S.C. 1352, as amended by the
Lobbying Disclosure Act of 1995, P.L. 104-65 \[to be codified at 2
U.S.C. § 1601, et seq.\]** - Contractors who apply or bid for an award
of \$100,000 or more shall file the certification required by 49 CFR
part 20, \"New Restrictions on Lobbying.\" Each tier certifies to the
tier above that it will not and has not used Federal appropriated funds
to pay any person or organization for influencing or attempting to
influence an officer or employee of any agency, a member of Congress,
officer or employee of Congress, or an employee of a member of Congress
in connection with obtaining any Federal contract, grant or any other
award covered by 31 U.S.C. 1352. Each tier shall also disclose the

name of any registrant under the Lobbying Disclosure Act of 1995 who has
made lobbying contacts on its behalf with non-Federal funds with respect
to that Federal contract, grant or award covered by 31 U.S.C. 1352. Such
disclosures are forwarded from tier to tier up to the recipient.

APPENDIX A, 49 CFR PART 20\--CERTIFICATION REGARDING LOBBYING

::: Definition-Term
Certification for Contracts, Grants, Loans, and Cooperative Agreements
:::

*(To be submitted with each bid or offer exceeding \$100,000)*

The undersigned \[Contractor\] certifies, to the best of his or her
knowledge and belief, that:

\(1\) No Federal appropriated funds have been paid or will be paid, by
or on behalf of the undersigned, to any person for influencing or
attempting to influence an officer or employee of an agency, a Member of
Congress, an officer or employee of Congress, or an employee of a Member
of Congress in connection with the awarding of any Federal contract, the
making of any Federal grant, the making of any Federal loan, the
entering into of any cooperative agreement, and the extension,
continuation, renewal, amendment, or modification of any Federal
contract, grant, loan, or cooperative agreement.

\(2\) If any funds other than Federal appropriated funds have been paid
or will be paid to any person for making lobbying contacts to an officer
or employee of any agency, a Member of Congress, an officer or employee
of Congress, or an employee of a Member of Congress in connection with
this Federal contract, grant, loan, or cooperative agreement, the
undersigned shall complete and submit Standard Form\--LLL, \"Disclosure
Form to Report Lobbying,\" in accordance with its instructions \[as
amended by \"Government wide Guidance for New Restrictions on
Lobbying,\" 61 Fed. Reg. 1413 (1/19/96). Note: Language in paragraph (2)
herein has been modified in accordance with Section 10 of the Lobbying
Disclosure Act of 1995 (P.L. 104-65, to be codified at 2 U.S.C. 1601,
*et seq.*)\]

\(3\) The undersigned shall require that the language of this
certification be included in the award documents for all subawards at
all tiers (including subcontracts, subgrants, and contracts under
grants, loans, and cooperative agreements) and that all subrecipients
shall certify and disclose accordingly.

This certification is a material representation of fact upon which
reliance was placed when this transaction was made or entered into.
Submission of this certification is a prerequisite for making or
entering into this transaction imposed by 31, U.S.C. § 1352 (as amended
by the Lobbying Disclosure Act of 1995). Any person who fails to file
the required certification shall be subject to a civil penalty of not
less than \$10,000 and not more than \$100,000 for each such failure.

\[Note: Pursuant to 31 U.S.C. § 1352(c)(1)-(2)(A), any person who makes
a prohibited expenditure or fails to file or amend a required
certification or disclosure form shall be subject to

a civil penalty of not less than \$10,000 and not more than \$100,000
for each such expenditure or failure.\]

The Contractor, \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, certifies or
affirms the truthfulness and accuracy of each statement of its
certification and disclosure, if any. In addition, the Contractor
understands and agrees that the provisions of 31 U.S.C. A 3801, *et
seq., apply* to this certification and disclosure, if any.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Signature of
Contractor\'s Authorized Official

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Name and Title of
Contractor\'s Authorized Official

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Date

**[11. ACCESS TO RECORDS AND REPORTS]{.underline}**

**49 U.S.C. 5325**\
**18 CFR 18.36 (i)** **\
49 CFR 633.17**

**[Applicability to Contracts]{.underline}**\
Reference Chart \"Requirements for Access to Records and Reports by Type
of Contracts\"

**[Flow Down]{.underline}**\
FTA does not require the inclusion of these requirements in
subcontracts.

**[Model Clause/Language]{.underline}**\
The specified language is not mandated by the statutes or regulations
referenced, but the language provided paraphrases the statutory or
regulatory language.

**Access to Records -** The following access to records requirements
apply to this Contract:

1\. Where the Purchaser is not a State but a local government and is the
FTA Recipient or a subgrantee of the FTA Recipient in accordance with 49
C.F.R. 18.36(i), the Contractor agrees to provide the Purchaser, the FTA
Administrator, the Comptroller General of the United States or any of
their authorized representatives access to any books, documents, papers
and records of the Contractor which are directly pertinent to this
contract for the purposes of making audits, examinations, excerpts and
transcriptions. Contractor also agrees, pursuant to 49 C.F.R. 633.17 to
provide the FTA Administrator or his authorized representatives
including any PMO Contractor access to Contractor\'s records and
construction sites pertaining to a major capital project, defined at 49
U.S.C. 5302(a)1, which is receiving federal financial assistance through
the programs described at 49 U.S.C. 5307, 5309 or 5311.

2\. Where the Purchaser is a State and is the FTA Recipient or a
subgrantee of the FTA Recipient in accordance with 49 C.F.R. 633.17,
Contractor agrees to provide the Purchaser, the FTA Administrator or his
authorized representatives, including any PMO Contractor, access to the
Contractor\'s records and construction sites pertaining to a major
capital project, defined at 49 U.S.C. 5302(a)1, which is receiving
federal financial assistance through the programs described at 49 U.S.C.
5307, 5309 or 5311. By definition, a major capital project excludes
contracts of less than the simplified acquisition threshold currently
set at \$100,000.

3\. Where the Purchaser enters into a negotiated contract for other than
a small purchase or under the simplified acquisition threshold and is an
institution of higher education, a hospital or other non-profit
organization and is the FTA Recipient or a subgrantee of the FTA
Recipient in accordance with 49 C.F.R. 19.48, Contractor agrees to
provide the Purchaser, FTA Administrator, the Comptroller General of the
United States or any of their duly authorized representatives with
access to any books, documents, papers and record of the Contractor
which are directly pertinent to this contract for the purposes of making
audits, examinations, excerpts and transcriptions.

4\. Where any Purchaser which is the FTA Recipient or a subgrantee of
the FTA Recipient in accordance with 49 U.S.C. 5325(a) enters into a
contract for a capital project or improvement (defined at 49 U.S.C.
5302(a)1) through other than competitive bidding, the Contractor shall
make available records related to the contract to the Purchaser, the
Secretary of Transportation and the Comptroller General or any
authorized officer or employee of any of them for the purposes of
conducting an audit and inspection.

5\. The Contractor agrees to permit any of the foregoing parties to
reproduce by any means whatsoever or to copy excerpts and transcriptions
as reasonably needed.

6\. The Contractor agrees to maintain all books, records, accounts and
reports required under this contract for a period of not less than three
years after the date of termination or expiration of this contract,
except in the event of litigation or settlement of claims arising from
the performance of this contract, in which case Contractor agrees to
maintain same until the Purchaser, the FTA Administrator, the
Comptroller General, or any of their duly authorized representatives,
have disposed of all such litigation, appeals, claims or exceptions
related thereto. Reference 49 CFR 18.39(i)(11).

7\. FTA does not require the inclusion of these requirements in
subcontracts.

**Requirements for Access to Records and Reports by Types of Contract**

 

+----------+---+-------+---------+--------+--------+--------+--------+
| **       |   | O     | Turnkey | Constr | A      | \<s    | Profes |
| Contract |   | perat |         | uction | rchite | hading | sional |
| C        |   | ional |         |        | ctural | =\"    | Se     |
| haracter |   | Se    |         |        | Engin  | 10%\"\ | rvices |
| istics** |   | rvice |         |        | eering | >Acqui |        |
|          |   | Con   |         |        |        | sition |        |
|          |   | tract |         |        |        | of     |        |
|          |   |       |         |        |        | R      |        |
|          |   |       |         |        |        | olling |        |
|          |   |       |         |        |        | Stock  |        |
+----------+---+-------+---------+--------+--------+--------+--------+
| I [State |   |       |         |        |        |        |        |
| Grante   |   |       |         |        |        |        |        |
| es]{.und |   | None  | Those   | None   | None   | None   | None   |
| erline}\ |   |       | imposed |        |        |        |        |
| \        |   |       | on      |        |        |        |        |
| a.       |   |       | state   |        |        |        |        |
| C        |   |       | pass    |        |        |        |        |
| ontracts |   |       | thru to |        |        |        |        |
| below    |   | None  | Con     | Yes,   | None   | None   | None   |
| SAT      |   | unle  | tractor | if     | unless | unless | unless |
| (\$      |   | ss^1^ |         | non    | non    | non    | non    |
| 100,000) |   | non-c |         | -compe | -compe | -compe | -compe |
|          |   | ompet |         | titive | titive | titive | titive |
|          |   | itive |         | award  | award  | award  | award  |
|          |   | award |         | or if  |        |        |        |
| b\.      |   |       |         | funded |        |        |        |
| C        |   |       |         | t      |        |        |        |
| ontracts |   |       |         | hru^2^ |        |        |        |
| above    |   |       |         | 53     |        |        |        |
| \        |   |       |         | 07/530 |        |        |        |
| $100,000 |   |       |         | 9/5311 |        |        |        |
| /Capital |   |       |         |        |        |        |        |
| Projects |   |       |         |        |        |        |        |
+----------+---+-------+---------+--------+--------+--------+--------+
| II [Non  |   |       | Those   |        |        |        |        |
| State    |   |       | imposed |        |        |        |        |
| G        |   | Y     | on      | Yes    | Yes    | Yes    | Yes    |
| rantees\ |   | es^3^ | no      |        |        |        |        |
| \        |   |       | n-state |        |        |        |        |
| ]{.unde  |   |       | Grantee |        |        |        |        |
| rline}a. |   |       | pass    | Yes    | Yes    | Yes    | Yes    |
| C        |   | Y     | thru to |        |        |        |        |
| ontracts |   | es^3^ | Con     |        |        |        |        |
| below    |   |       | tractor |        |        |        |        |
| SAT      |   |       |         |        |        |        |        |
| (\$      |   |       |         |        |        |        |        |
| 100,000) |   |       |         |        |        |        |        |
|          |   |       |         |        |        |        |        |
| b\.      |   |       |         |        |        |        |        |
| C        |   |       |         |        |        |        |        |
| ontracts |   |       |         |        |        |        |        |
| above    |   |       |         |        |        |        |        |
| \        |   |       |         |        |        |        |        |
| $100,000 |   |       |         |        |        |        |        |
| /Capital |   |       |         |        |        |        |        |
| Projects |   |       |         |        |        |        |        |
+----------+---+-------+---------+--------+--------+--------+--------+

Sources of Authority:

^1^ 49 USC 5325 (a)

^2^ 49 CFR 633.17

^3^ 18 CFR 18.36 (i)

**[12. FEDERAL CHANGES]{.underline}**

**49 CFR Part 18**

**[Applicability to Contracts]{.underline}**\
The Federal Changes requirement applies to all contracts.

**[Flow Down]{.underline}**\
The Federal Changes requirement flows down appropriately to each
applicable changed requirement.

**[Model Clause/Language]{.underline}**\
No specific language is mandated. The following language has been
developed by FTA.

**Federal Changes -** Contractor shall at all times comply with all
applicable FTA regulations, policies, procedures and directives,
including without limitation those listed directly or by reference in
the Master Agreement between Purchaser and FTA, as they may be amended
or

promulgated from time to time during the term of this contract.
Contractor\'s failure to so comply shall constitute a material breach of
this contract.

**[13. BONDING REQUIREMENTS]{.underline}**

**[Applicability to Contracts]{.underline}**

For those construction or facility improvement contracts or subcontracts
exceeding \$100,000, FTA may accept the bonding policy and requirements
of the recipient, provided that they meet the minimum requirements for
construction contracts as follows:

a\. A bid guarantee from each bidder equivalent to five (5) percent of
the bid price. The \"bid guarantees\" shall consist of a firm commitment
such as a bid bond, certifies check, or other negotiable instrument
accompanying a bid as assurance that the bidder will, upon acceptance of
his bid, execute such contractual documents as may be required within
the time specified.

b\. A performance bond on the part to 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 such contract.

c\. A 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 persons supplying
labor and material in the execution of the work provided for in the
contract. Payment bond amounts required from Contractors are as follows:

\(1\) 50% of the contract price if the contract price is not more than
\$1 million;

\(2\) 40% of the contract price if the contract price is more than \$1
million but not more than \$5 million; or

\(3\) \$2.5 million if the contract price is more than \$5 million.

d\. A cash deposit, certified check or other negotiable instrument may
be accepted by a grantee in lieu of performance and payment bonds,
provided the grantee has established a procedure to assure that the
interest of FTA is adequately protected. An irrevocable letter of credit
would also satisfy the requirement for a bond.

**[Flow Down]{.underline}**\
Bonding requirements flow down to the first tier contractors.

**[Model Clauses/Language]{.underline}**\
FTA does not prescribe specific wording to be included in third party
contracts. FTA has prepared sample clauses as follows:

**Bid Bond Requirements (Construction**)

\(a\) Bid Security

A Bid Bond must be issued by a fully qualified surety company acceptable
to (Recipient) and listed as a company currently authorized under 31
CFR, Part 223 as possessing a Certificate of Authority as described
thereunder.

\(b\) Rights Reserved

In submitting this Bid, it is understood and agreed by bidder that the
right is reserved by (Recipient) to reject any and all bids, or part of
any bid, and it is agreed that the Bid may not be withdrawn for a period
of \[ninety (90)\] days subsequent to the opening of bids, without the
written consent of (Recipient).

It is also understood and agreed that if the undersigned bidder should
withdraw any part or all of his bid within \[ninety (90)\] days after
the bid opening without the written consent of (Recipient), shall refuse
or be unable to enter into this Contract, as provided above, or refuse
or be unable to furnish adequate and acceptable Performance Bonds and
Labor and Material Payments Bonds, as provided above, or refuse or be
unable to furnish adequate and acceptable insurance, as provided above,
he shall forfeit his bid security to the extent of (Recipient\'s)
damages occasioned by such withdrawal, or refusal, or inability to enter
into an agreement, or provide adequate security therefor.

It is further understood and agreed that to the extent the defaulting
bidder\'s Bid Bond, Certified Check, Cashier\'s Check, Treasurer\'s
Check, and/or Official Bank Check (excluding any income generated
thereby which has been retained by (Recipient) as provided in \[Item x
\"Bid Security\" of the Instructions to Bidders\]) shall prove
inadequate to fully recompense (Recipient) for the damages occasioned by
default, then the undersigned bidder agrees to indemnify (Recipient) and
pay over to (Recipient) the difference between the bid security and
(Recipient\'s) total damages, so as to make (Recipient) whole.

The undersigned understands that any material alteration of any of the
above or any of the material contained on this form, other than that
requested, will render the bid unresponsive.

**Performance and Payment Bonding Requirements (Construction)**

The Contractor shall be required to obtain performance and payment bonds
as follows:

\(a\) Performance bonds

1\. The penal amount of performance bonds shall be 100 percent of the
original contract price, unless the (Recipient) determines that a lesser
amount would be adequate for the protection of the (Recipient).

2\. The (Recipient) may require additional performance bond protection
when a contract price is increased. The increase in protection shall
generally equal 100 percent of the increase in contract price. The
(Recipient) may secure additional protection by directing the Contractor
to increase the penal amount of the existing bond or to obtain an
additional bond.

\(b\) Payment bonds

1\. The penal amount of the payment bonds shall equal:

\(i\) Fifty percent of the contract price if the contract price is not
more than \$1 million.

\(ii\) Forty percent of the contract price if the contract price is more
than \$1 million but not more than \$5 million; or

\(iii\) Two and one half million if the contract price is more than \$5
million.

2\. If the original contract price is \$5 million or less, the
(Recipient) may require additional protection as required by
subparagraph 1 if the contract price is increased.

**Performance and Payment Bonding Requirements (Non-Construction)**

The Contractor may be required to obtain performance and payment bonds
when necessary to protect the (Recipient\'s) interest.

\(a\) The following situations may warrant a performance bond:

1\. (Recipient) property or funds are to be provided to the contractor
for use in performing the contract or as partial compensation (as in
retention of salvaged material).

2\. A contractor sells assets to or merges with another concern, and the
(Recipient), after recognizing the latter concern as the successor in
interest, desires assurance that it is financially capable.

3\. Substantial progress payments are made before delivery of end items
starts.

4\. Contracts are for dismantling, demolition, or removal of
improvements.

\(b\) When it is determined that a performance bond is required, the
Contractor shall be required to obtain performance bonds as follows:

1\. The penal amount of performance bonds shall be 100 percent of the
original contract price, unless the (Recipient) determines that a lesser
amount would be adequate for the protection of the (Recipient).

2\. The (Recipient) may require additional performance bond protection
when a contract price is increased. The increase in protection shall
generally equal 100 percent of the increase in contract price. The
(Recipient) may secure additional protection by directing the Contractor
to increase the penal amount of the existing bond or to obtain an
additional bond.

\(c\) A payment bond is required only when a performance bond is
required, and if the use of payment bond is in the (Recipient\'s)
interest.

\(d\) When it is determined that a payment bond is required, the
Contractor shall be required to obtain payment bonds as follows:

1\. The penal amount of payment bonds shall equal:

\(i\) Fifty percent of the contract price if the contract price is not
more than \$1 million;

\(ii\) Forty percent of the contract price if the contract price is more
than \$1 million but not more than \$5 million; or

\(iii\) Two and one half million if the contract price is increased.

**Advance Payment Bonding Requirements**

The Contractor may be required to obtain an advance payment bond if the
contract contains an advance payment provision and a performance bond is
not furnished. The (recipient) shall determine the amount of the advance
payment bond necessary to protect the (Recipient).

**Patent Infringement Bonding Requirements (Patent Indemnity)**

The Contractor may be required to obtain a patent indemnity bond if a
performance bond is not furnished and the financial responsibility of
the Contractor is unknown or doubtful. The (recipient) shall determine
the amount of the patent indemnity to protect the (Recipient).

**Warranty of the Work and Maintenance Bonds**

1\. The Contractor warrants to (Recipient), the Architect and/or
Engineer that all materials and equipment furnished under this Contract
will be of highest quality and new unless otherwise specified by
(Recipient), free from faults and defects and in conformance with the
Contract Documents. All work not so conforming to these standards shall
be considered defective. If

required by the \[Project Manager\], the Contractor shall furnish
satisfactory evidence as to the kind and quality of materials and
equipment.

2\. The Work furnished must be of first quality and the workmanship must
be the best obtainable in the various trades. The Work must be of safe,
substantial and durable construction in all respects. The Contractor
hereby guarantees the Work against defective materials or faulty
workmanship for a minimum period of one (1) year after Final Payment by
(Recipient) and shall replace or repair any defective materials or
equipment or faulty workmanship during the period of the guarantee at no
cost to (Recipient). As additional security for these guarantees, the
Contractor shall, prior to the release of Final Payment \[as provided in
Item X below\], furnish separate Maintenance (or Guarantee) Bonds in
form acceptable to (Recipient) written by the same corporate surety that
provides the Performance Bond and Labor and Material Payment Bond for
this Contract. These bonds shall secure the Contractor\'s obligation to
replace or repair defective materials and faulty workmanship for a
minimum period of one (1) year after Final Payment and shall be written
in an amount equal to ONE HUNDRED PERCENT (100%) of the CONTRACT SUM, as
adjusted (if at all).

**[14. CLEAN AIR]{.underline}**

**42 U.S.C. 7401 et seq\
40 CFR 15.61\
49 CFR Part 18**

**[Applicability to Contracts]{.underline}**\
The Clean Air requirements apply to all contracts exceeding \$100,000,
including indefinite quantities where the amount is expected to exceed
\$100,000 in any year.

**[Flow Down]{.underline}**\
The Clean Air requirements flow down to all subcontracts which exceed
\$100,000.

**[Model Clauses/Language]{.underline}**\
No specific language is required. FTA has proposed the following
language.

**Clean Air** - (1) The Contractor agrees to comply with all applicable
standards, orders or regulations issued pursuant to the Clean Air Act,
as amended, 42 U.S.C. §§ 7401 [et]{.underline} [seq]{.underline}. The
Contractor agrees to report each violation to the Purchaser and
understands and agrees that the

Purchaser will, in turn, report each violation as required to assure
notification to FTA and the appropriate EPA Regional Office.

\(2\) The Contractor also agrees to include these requirements in each
subcontract exceeding \$100,000 financed in whole or in part with
Federal assistance provided by FTA.

**[15. RECYCLED PRODUCTS]{.underline}**

**42 U.S.C. 6962\
40 CFR Part 247\
Executive Order 12873**

**[Applicability to Contracts]{.underline}**\
The Recycled Products requirements apply to all contracts for items
designated by the EPA, when the purchaser or contractor procures
\$10,000 or more of one of these items during the fiscal year, or has
procured \$10,000 or more of such items in the previous fiscal year,
using Federal funds. New requirements for \"recovered materials\" will
become effective May 1, 1996. These new regulations apply to all
procurement actions involving items designated by the EPA, where the
procuring agency purchases \$10,000 or more of one of these items in a
fiscal year, or when the cost of such items purchased during the
previous fiscal year was \$10,000.

**[Flow Down]{.underline}**\
These requirements flow down to all to all contractor and subcontractor
tiers.

**[Model Clause/Language]{.underline}**\
No specific clause is mandated, but FTA has developed the following
language.

**\
Recovered Materials -** The contractor agrees to comply with all the
requirements of Section 6002 of the Resource Conservation and Recovery
Act (RCRA), as amended (42 U.S.C. 6962), including but not limited to
the regulatory provisions of 40 CFR Part 247, and Executive Order 12873,
as they apply to the procurement of the items designated in Subpart B of
40 CFR Part 247.

**[16. DAVIS-BACON AND COPELAND ANTI-KICKBACK ACTS]{.underline}**

**[Background and Application]{.underline}**

The Davis-Bacon and Copeland Acts are codified at 40 USC 3141, *et seq.*
and 18 USC 874. The Acts apply to grantee construction contracts and
subcontracts that "at least partly are financed by a loan or grant from
the Federal Government." 40 USC 3145(a), 29 CFR 5.2(h), 49 CFR
18.36(i)(5). The Acts apply to any construction contract over \$2,000.
40 USC 3142(a), 29 CFR 5.5(a). 'Construction,' for purposes of the Acts,
includes "actual construction, alteration and/or repair, including
painting and decorating." 29 CFR 5.5(a). The requirements of both Acts
are incorporated into a single clause (*see* 29 CFR 3.11) enumerated at
29 CFR 5.5(a) and reproduced below.

The clause language is drawn directly from 29 CFR 5.5(a) and any
deviation from the model clause below should be coordinated with counsel
to ensure the Acts' requirements are satisfied.

**[Clause Language]{.underline}**

##### Davis-Bacon and Copeland Anti-Kickback Acts

\(1\) **Minimum wages** - (i) All laborers and mechanics employed or
working upon the site of the work (or under the United States Housing
Act of 1937 or under the Housing Act of 1949 in the construction or
development of the project), will be paid unconditionally and not less
often than once a week, and without subsequent deduction or rebate on
any account (except such payroll deductions as are permitted by
regulations issued by the Secretary of Labor under the Copeland Act (29
CFR part 3)), the full amount of wages and bona fide fringe benefits (or
cash equivalents thereof) due at time of payment computed at rates not
less than those contained in the wage determination of the Secretary of
Labor which is attached hereto and made a part hereof, regardless of any
contractual relationship which may be alleged to exist between the
contractor and such laborers and mechanics.\
\
Contributions made or costs reasonably anticipated for bona fide fringe
benefits under section 1(b)(2) of the Davis-Bacon Act on behalf of
laborers or mechanics are considered wages paid to such laborers or
mechanics, subject to the provisions of paragraph (1)(iv) of this
section; also, regular contributions made or costs incurred for more
than a weekly period (but not less often than quarterly) under plans,
funds, or programs which cover the particular weekly period, are deemed
to be constructively made or incurred during such weekly period. Such
laborers and mechanics shall be paid the appropriate wage rate and
fringe benefits on the wage determination for the classification of work
actually performed, without regard to skill, except as provided in 29
CFR Part 5.5(a)(4). Laborers or mechanics performing work in more than
one classification may be compensated at the rate specified for each
classification for the time actually worked therein: Provided, That the
employer\'s payroll records accurately set forth the time spent in each
classification in which work is performed. The wage determination
(including any additional classifications and wage rates conformed under
paragraph (1)(ii) of this section) and the Davis-Bacon poster (WH-1321)
shall be posted at all times by the contractor and its subcontractors at
the site of the work in a prominent and accessible place where it can be
easily seen by the workers.\
\
(ii)(A) The contracting officer shall require that any class of laborers
or mechanics, including helpers, which is not listed in the wage
determination and which is to be employed under the contract shall be
classified in conformance with the wage determination. The contracting
officer shall approve an additional classification and wage rate and
fringe benefits therefore only when the following criteria have been
met:\
\
(1) Except with respect to helpers as defined as 29 CFR 5.2(n)(4), the
work to be performed by the classification requested is not performed by
a classification in the wage determination; and\
\
(2) The classification is utilized in the area by the construction
industry; and

\(3\) The proposed wage rate, including any bona fide fringe benefits,
bears a reasonable relationship to the wage rates contained in the wage
determination; and\
\
(4) With respect to helpers as defined in 29 CFR 5.2(n)(4), such a
classification prevails in the area in which the work is performed.\
\
(B) If the contractor and the laborers and mechanics to be employed in
the classification (if known), or their representatives, and the
contracting officer agree on the classification and wage rate (including
the amount designated for fringe benefits where appropriate), a report
of the action taken shall be sent by the contracting officer to the
Administrator of the Wage and Hour Division, Employment Standards
Administration, U.S. Department of Labor, Washington, DC 20210. The
Administrator, or an authorized representative, will approve, modify, or
disapprove every additional classification action within 30 days of
receipt and so advise the contracting officer or will notify the
contracting officer within the 30-day period that additional time is
necessary.\
\
(C) In the event the contractor, the laborers or mechanics to be
employed in the classification or their representatives, and the
contracting officer do not agree on the proposed classification and wage
rate (including the amount designated for fringe benefits, where
appropriate), the contracting officer shall refer the questions,
including the views of all interested parties and the recommendation of
the contracting officer, to the Administrator for determination. The
Administrator, or an authorized representative, will issue a
determination within 30 days of receipt and so advise the contracting
officer or will notify the contracting officer within the 30-day period
that additional time is necessary.\
\
(D) The wage rate (including fringe benefits where appropriate)
determined pursuant to paragraphs (a)(1)(ii) (B) or (C) of this section,
shall be paid to all workers performing work in the classification under
this contract from the first day on which work is performed in the
classification.\
\
(iii) Whenever the minimum wage rate prescribed in the contract for a
class of laborers or mechanics includes a fringe benefit which is not
expressed as an hourly rate, the contractor shall either pay the benefit
as stated in the wage determination or shall pay another bona fide
fringe benefit or an hourly cash equivalent thereof.\
\
(iv) If the contractor does not make payments to a trustee or other
third person, the contractor may consider as part of the wages of any
laborer or mechanic the amount of any costs reasonably anticipated in
providing bona fide fringe benefits under a plan or program, Provided,
That the Secretary of Labor has found, upon the written request of the
contractor, that the applicable standards of the Davis-Bacon Act have
been met. The Secretary of Labor may require the contractor to set aside
in a separate account assets for the meeting of obligations under the
plan or program.

(v)(A) The contracting officer shall require that any class of laborers
or mechanics which is not listed in the wage determination and which is
to be employed under the contract shall be classified in conformance
with the wage determination. The contracting officer shall approve an
additional classification and wage rate and fringe benefits therefor
only when the following criteria have been met:\
\
(1) The work to be performed by the classification requested is not
performed by a classification in the wage determination; and\
\
(2) The classification is utilized in the area by the construction
industry; and\
\
(3) The proposed wage rate, including any bona fide fringe benefits,
bears a reasonable relationship to the wage rates contained in the wage
determination.\
\
(B) If the contractor and the laborers and mechanics to be employed in
the classification (if known), or their representatives, and the
contracting officer agree on the classification and wage rate (including
the amount designated for fringe benefits where appropriate), a report
of the action taken shall be sent by the contracting officer to the
Administrator of the Wage and Hour Division, Employment Standards
Administration, Washington, DC 20210. The Administrator, or an
authorized representative, will approve, modify, or disapprove every
additional classification action within 30 days of receipt and so advise
the contracting officer or will notify the contracting officer within
the 30-day period that additional time is necessary.\
\
(C) In the event the contractor, the laborers or mechanics to be
employed in the classification or their representatives, and the
contracting officer do not agree on the proposed classification and wage
rate (including the amount designated for fringe benefits, where
appropriate), the contracting officer shall refer the questions,
including the views of all interested parties and the recommendation of
the contracting officer, to the Administrator for determination. The
Administrator, or an authorized representative, will issue a
determination with 30 days of receipt and so advise the contracting
officer or will notify the contracting officer within the 30-day period
that additional time is necessary.\
\
(D) The wage rate (including fringe benefits where appropriate)
determined pursuant to paragraphs (a)(1)(v) (B) or (C) of this section,
shall be paid to all workers performing work in the classification under
this contract from the first day on which work is performed in the
classification.\
\
(2) **Withholding** - The \[ ***insert name of grantee*** \] shall upon
its own action or upon written request of an authorized representative
of the Department of Labor withhold or cause to be withheld from the
contractor under this contract or any other Federal contract with the
same prime contractor, or any other federally-assisted contract subject
to Davis-Bacon prevailing wage requirements, which is held by the same
prime contractor, so much of the accrued payments or

advances as may be considered necessary to pay laborers and mechanics,
including apprentices, trainees, and helpers, employed by the contractor
or any subcontractor the full amount of wages required by the contract.
In the event of failure to pay any laborer or mechanic, including any
apprentice, trainee, or helper, employed or working on the site of the
work (or under the United States Housing Act of 1937 or under the
Housing Act of 1949 in the construction or development of the project),
all or part of the wages required by the contract, the \[ ***insert name
of grantee*** \] may, after written notice to the contractor, sponsor,
applicant, or owner, take such action as may be necessary to cause the
suspension of any further payment, advance, or guarantee of funds until
such violations have ceased.\
\
(3) **Payrolls and basic records** - (i) Payrolls and basic records
relating thereto shall be maintained by the contractor during the course
of the work and preserved for a period of three years thereafter for all
laborers and mechanics working at the site of the work (or under the
United States Housing Act of 1937, or under the Housing Act of 1949, in
the construction or development of the project). Such records shall
contain the name, address, and social security number of each such
worker, his or her correct classification, hourly rates of wages paid
(including rates of contributions or costs anticipated for bona fide
fringe benefits or cash equivalents thereof of the types described in
section 1(b)(2)(B) of the Davis-Bacon Act), daily and weekly number of
hours worked, deductions made and actual wages paid. Whenever the
Secretary of Labor has found under 29 CFR 5.5(a)(1)(iv) that the wages
of any laborer or mechanic include the amount of any costs reasonably
anticipated in providing benefits under a plan or program described in
section 1(b)(2)(B) of the Davis-Bacon Act, the contractor shall maintain
records which show that the commitment to provide such benefits is
enforceable, that the plan or program is financially responsible, and
that the plan or program has been communicated in writing to the
laborers or mechanics affected, and records which show the costs
anticipated or the actual cost incurred in providing such benefits.
Contractors employing apprentices or trainees under approved programs
shall maintain written evidence of the registration of apprenticeship
programs and certification of trainee programs, the registration of the
apprentices and trainees, and the ratios and wage rates prescribed in
the applicable programs.\
\
(ii)(A) The contractor shall submit weekly for each week in which any
contract work is performed a copy of all payrolls to the \[ ***insert
name of grantee*** \] for transmission to the Federal Transit
Administration. The payrolls submitted shall set out accurately and
completely all of the information required to be maintained under
section 5.5(a)(3)(i) of Regulations, 29 CFR part 5. This information may
be submitted in any form desired. Optional Form WH-347 is available for
this purpose and may be purchased from the Superintendent of Documents
(Federal Stock Number 029-005-00014-1), U.S. Government Printing Office,
Washington, DC 20402. The prime contractor is responsible for the
submission of copies of payrolls by all subcontractors.\
\
(B) Each payroll submitted shall be accompanied by a \"Statement of
Compliance,\" signed by the contractor or subcontractor or his or her
agent who pays or supervises the payment of the persons employed under
the contract and shall certify the following:

\(1\) That the payroll for the payroll period contains the information
required to be maintained under section 5.5(a)(3)(i) of Regulations, 29
CFR part 5 and that such information is correct and complete;\
\
(2) That each laborer or mechanic (including each helper, apprentice,
and trainee) employed on the contract during the payroll period has been
paid the full weekly wages earned, without rebate, either directly or
indirectly, and that no deductions have been made either directly or
indirectly from the full wages earned, other than permissible deductions
as set forth in Regulations, 29 CFR part 3;\
\
(3) That each laborer or mechanic has been paid not less than the
applicable wage rates and fringe benefits or cash equivalents for the
classification of work performed, as specified in the applicable wage
determination incorporated into the contract.\
\
(C) The weekly submission of a properly executed certification set forth
on the reverse side of Optional Form WH-347 shall satisfy the
requirement for submission of the \"Statement of Compliance\" required
by paragraph (a)(3)(ii)(B) of this section.\
\
(D) The falsification of any of the above certifications may subject the
contractor or subcontractor to civil or criminal prosecution under
section 1001 of title 18 and section 231 of title 31 of the United
States Code.\
\
(iii) The contractor or subcontractor shall make the records required
under paragraph (a)(3)(i) of this section available for inspection,
copying, or transcription by authorized representatives of the Federal
Transit Administration or the Department of Labor, and shall permit such
representatives to interview employees during working hours on the job.
If the contractor or subcontractor fails to submit the required records
or to make them available, the Federal agency may, after written notice
to the contractor, sponsor, applicant, or owner, take such action as may
be necessary to cause the suspension of any further payment, advance, or
guarantee of funds. Furthermore, failure to submit the required records
upon request or to make such records available may be grounds for
debarment action pursuant to 29 CFR 5.12.\
\
(4) **Apprentices and trainees** - (i) [Apprentices]{.underline} -
Apprentices will be permitted to work at less than the predetermined
rate for the work they performed when they are employed pursuant to and
individually registered in a bona fide apprenticeship program registered
with the U.S. Department of Labor, Employment and Training
Administration, Bureau of Apprenticeship and Training, or with a State
Apprenticeship Agency recognized by the Bureau, or if a person is
employed in his or her first 90 days of probationary employment as an
apprentice in such an apprenticeship program, who is not individually
registered in the program, but who has been certified by the Bureau of
Apprenticeship and Training or a State Apprenticeship Agency (where
appropriate) to be eligible for probationary employment as an
apprentice. The allowable ratio of apprentices to journeymen on the job
site in any craft classification shall not be greater than the

ratio permitted to the contractor as to the entire work force under the
registered program. Any worker listed on a payroll at an apprentice wage
rate, who is not registered or otherwise employed as stated above, shall
be paid not less than the applicable wage rate on the wage determination
for the classification of work actually performed. In addition, any
apprentice performing work on the job site in excess of the ratio
permitted under the registered program shall be paid not less than the
applicable wage rate on the wage determination for the work actually
performed. Where a contractor is performing construction on a project in
a locality other than that in which its program is registered, the
ratios and wage rates (expressed in percentages of the journeyman\'s
hourly rate) specified in the contractor\'s or subcontractor\'s
registered program shall be observed. Every apprentice must be paid at
not less than the rate specified in the registered program for the
apprentice\'s level of progress, expressed as a percentage of the
journeymen hourly rate specified in the applicable wage determination.
Apprentices shall be paid fringe benefits in accordance with the
provisions of the apprenticeship program. If the apprenticeship program
does not specify fringe benefits, apprentices must be paid the full
amount of fringe benefits listed on the wage determination for the
applicable classification. If the Administrator of the Wage and Hour
Division of the U.S. Department of Labor determines that a different
practice prevails for the applicable apprentice classification, fringes
shall be paid in accordance with that determination. In the event the
Bureau of Apprenticeship and Training, or a State Apprenticeship Agency
recognized by the Bureau, withdraws approval of an apprenticeship
program, the contractor will no longer be permitted to utilize
apprentices at less than the applicable predetermined rate for the work
performed until an acceptable program is approved.\
\
(ii) [Trainees]{.underline} - Except as provided in 29 CFR 5.16,
trainees will not be permitted to work at less than the predetermined
rate for the work performed unless they are employed pursuant to and
individually registered in a program which has received prior approval,
evidenced by formal certification by the U.S. Department of Labor,
Employment and Training Administration. The ratio of trainees to
journeymen on the job site shall not be greater than permitted under the
plan approved by the Employment and Training Administration. Every
trainee must be paid at not less than the rate specified in the approved
program for the trainee\'s level of progress, expressed as a percentage
of the journeyman hourly rate specified in the applicable wage
determination. Trainees shall be paid fringe benefits in accordance with
the provisions of the trainee program. If the trainee program does not
mention fringe benefits, trainees shall be paid the full amount of
fringe benefits listed on the wage determination unless the
Administrator of the Wage and Hour Division determines that there is an
apprenticeship program associated with the corresponding journeyman wage
rate on the wage determination which provides for less than full fringe
benefits for apprentices. Any employee listed on the payroll at a
trainee rate who is not registered and participating in a training plan
approved by the Employment and Training Administration shall be paid not
less than the applicable wage rate on the wage determination for the
classification of work actually performed. In addition, any trainee
performing work on the job site in excess of the ratio permitted under
the registered program shall be paid not less than the applicable wage
rate on the wage determination for the work actually performed. In the
event the Employment

and Training Administration withdraws approval of a training program,
the contractor will no longer be permitted to utilize trainees at less
than the applicable predetermined rate for the work performed until an
acceptable program is approved.\
\
(iii) [Equal employment opportunity]{.underline} - The utilization of
apprentices, trainees and journeymen under this part shall be in
conformity with the equal employment opportunity requirements of
Executive Order 11246, as amended, and 29 CFR part 30.\
\
(5) **Compliance with Copeland Act requirements** - The contractor shall
comply with the requirements of 29 CFR part 3, which are incorporated by
reference in this contract.\
\
(6) **Subcontracts** - The contractor or subcontractor shall insert in
any subcontracts the clauses contained in 29 CFR 5.5(a)(1) through (10)
and such other clauses as the Federal Transit Administration may by
appropriate instructions require, and also a clause requiring the
subcontractors to include these clauses in any lower tier subcontracts.
The prime contractor shall be responsible for the compliance by any
subcontractor or lower tier subcontractor with all the contract clauses
in 29 CFR 5.5.\
\
(7) **Contract termination: debarment** - A breach of the contract
clauses in 29 CFR 5.5 may be grounds for termination of the contract,
and for debarment as a contractor and a subcontractor as provided in 29
CFR 5.12.\
\
(8) **Compliance with Davis-Bacon and Related Act requirements** - All
rulings and interpretations of the Davis-Bacon and Related Acts
contained in 29 CFR parts 1, 3, and 5 are herein incorporated by
reference in this contract.\
\
(9) **Disputes concerning labor standards** - Disputes arising out of
the labor standards provisions of this contract shall not be subject to
the general disputes clause of this contract. Such disputes shall be
resolved in accordance with the procedures of the Department of Labor
set forth in 29 CFR parts 5, 6, and 7. Disputes within the meaning of
this clause include disputes between the contractor (or any of its
subcontractors) and the contracting agency, the U.S. Department of
Labor, or the employees or their representatives.\
\
(10) **Certification of eligibility** - (i) By entering into this
contract, the contractor certifies that neither it (nor he or she) nor
any person or firm who has an interest in the contractor\'s firm is a
person or firm ineligible to be awarded Government contracts by virtue
of section 3(a) of the Davis-Bacon Act or 29 CFR 5.12(a)(1).\
\
(ii) No part of this contract shall be subcontracted to any person or
firm ineligible for award of a Government contract by virtue of section
3(a) of the Davis-Bacon Act or 29 CFR 5.12(a)(1).

\(iii\) The penalty for making false statements is prescribed in the
U.S. Criminal Code, 18 U.S.C. 1001.

**[17. CONTRACT WORK HOURS AND SAFETY STANDARDS ACT]{.underline}**

**[Background and Application]{.underline}**

The Contract Work Hours and Safety Standards Act is codified at 40 USC
3701, *et seq.* The Act applies to grantee contracts and subcontracts
"financed at least in part by loans or grants from ... the \[Federal\]
Government." 40 USC 3701(b)(1)(B)(iii) and (b)(2), 29 CFR 5.2(h), 49 CFR
18.36(i)(6). Although the original Act required its application in any
construction contract over \$2,000 or non-construction contract to which
the Act applied over \$2,500 (and language to that effect is still found
in 49 CFR 18.36(i)(6)), the Act no longer applies to any "contract in an
amount that is not greater than \$100,000." 40 USC 3701(b)(3) (A)(iii).

The Act applies to construction contracts and, in very limited
circumstances, non-construction projects that employ "laborers or
mechanics on a public work." These non-construction applications do not
generally apply to transit procurements because transit procurements (to
include rail cars and buses) are deemed "commercial items." 40 USC 3707,
41 USC 403 (12). A grantee that contemplates entering into a contract to
procure a developmental or unique item should consult counsel to
determine if the Act applies to that procurement and that additional
language required by 29 CFR 5.5(c) must be added to the basic clause
below.

The clause language is drawn directly from 29 CFR 5.5(b) and any
deviation from the model clause below should be coordinated with counsel
to ensure the Act's requirements are satisfied.

**[Clause Language]{.underline}**

##### Contract Work Hours and Safety Standards

\(1\) **Overtime requirements** - No contractor or subcontractor
contracting for any part of the contract work which may require or
involve the employment of laborers or mechanics shall require or permit
any such laborer or mechanic in any workweek in which he or she is
employed on such work to work in excess of forty hours in such workweek
unless such laborer or mechanic receives compensation at a rate not less
than one and one-half times the basic rate of pay for all hours worked
in excess of forty hours in such workweek.\
\
(2) **Violation; liability for unpaid wages; liquidated damages** - In
the event of any violation of the clause set forth in paragraph (1) of
this section the contractor and any subcontractor responsible therefor
shall be liable for the unpaid wages. In addition, such contractor and
subcontractor shall be liable to the United States for liquidated
damages. Such liquidated damages shall be computed with respect to each
individual laborer or mechanic, including watchmen and guards, employed
in violation of the clause set forth in paragraph (1) of this section,
in the sum of \$10 for each calendar day on which such individual was
required or permitted to work in excess of the standard workweek of
forty hours without payment of the overtime wages required by the clause
set forth in paragraph (1) of this section.

\(3\) **Withholding for unpaid wages and liquidated damages** - The
(***write in the name of the grantee***) shall upon its own action or
upon written request of an authorized representative of the Department
of Labor withhold or cause to be withheld, from any moneys payable on
account of work performed by the contractor or subcontractor under any
such contract or any other Federal contract with the same prime
contractor, or any other federally-assisted contract subject to the
Contract Work Hours and Safety Standards Act, which is held by the same
prime contractor, such sums as may be determined to be necessary to
satisfy any liabilities of such contractor or subcontractor for unpaid
wages and liquidated damages as provided in the clause set forth in
paragraph (2) of this section.\
\
(4) **Subcontracts** - The contractor or subcontractor shall insert in
any subcontracts the clauses set forth in paragraphs (1) through (4) of
this section and also a clause requiring the subcontractors to include
these clauses in any lower tier subcontracts. The prime contractor shall
be responsible for compliance by any subcontractor or lower tier
subcontractor with the clauses set forth in paragraphs (1) through (4)
of this section.

**[18. \[ RESERVED \]]{.underline}**

**[19. NO GOVERNMENT OBLIGATION TO THIRD PARTIES]{.underline}**

**[Applicability to Contracts]{.underline}**\
Applicable to all contracts.

**[Flow Down]{.underline}**\
Not required by statute or regulation for either primary contractors or
subcontractors, this concept should flow down to all levels to clarify,
to all parties to the contract, that the Federal Government does not
have contractual liability to third parties, absent specific written
consent.

**[Model Clause/Language]{.underline}**\
While no specific language is required, FTA has developed the following
language.

**No Obligation by the Federal Government.**

\(1\) The Purchaser and Contractor acknowledge and agree that,
notwithstanding any concurrence by the Federal Government in or approval
of the solicitation or award of the underlying contract, absent the
express written consent by the Federal Government, the Federal
Government is not a party to this contract and shall not be subject to
any obligations or liabilities to the Purchaser, Contractor, or any
other party (whether or not a party to that contract) pertaining to any
matter resulting from the underlying contract.

\(2\) The Contractor agrees to include the above clause in each
subcontract financed in whole or in part with Federal assistance
provided by FTA. It is further agreed that the clause shall not be
modified, except to identify the subcontractor who will be subject to
its provisions.

**[20. PROGRAM FRAUD AND FALSE OR FRAUDULENT STATEMENTS]{.underline}**

**[AND RELATED ACTS]{.underline}**

**31 U.S.C. 3801 et seq.**\
**49 CFR Part 31 18 U.S.C. 1001\
49 U.S.C. 5307**

**[Applicability to Contracts]{.underline}**\
These requirements are applicable to all contracts.

**[Flow Down]{.underline}**\
These requirements flow down to contractors and subcontractors who make,
present, or submit covered claims and statements.

**[Model Clause/Language]{.underline}**\
These requirements have no specified language, so FTA proffers the
following language.

**Program Fraud and False or Fraudulent Statements or Related Acts.**

\(1\) The Contractor acknowledges that the provisions of the Program
Fraud Civil Remedies Act of 1986, as amended, 31 U.S.C. § 3801
[et]{.underline} [seq]{.underline}. and U.S. DOT regulations, \"Program
Fraud Civil Remedies,\" 49 C.F.R. Part 31, apply to its actions
pertaining to this Project. Upon execution of the underlying contract,
the Contractor certifies or affirms the truthfulness and accuracy of any
statement it has made, it makes, it may make, or causes to be made,
pertaining to the underlying contract or the FTA assisted project for
which this contract work is being performed. In addition to other
penalties that may be applicable, the Contractor further acknowledges
that if it makes, or causes to be made, a false, fictitious, or
fraudulent claim, statement, submission, or certification, the Federal
Government reserves the right to impose the penalties of the Program
Fraud Civil

Remedies Act of 1986 on the Contractor to the extent the Federal
Government deems appropriate.

\(2\) The Contractor also acknowledges that if it makes, or causes to be
made, a false, fictitious, or fraudulent claim, statement, submission,
or certification to the Federal Government under a contract connected
with a project that is financed in whole or in part with Federal
assistance originally awarded by FTA under the authority of 49 U.S.C. §
5307, the Government reserves the right to impose the penalties of 18
U.S.C. § 1001 and 49 U.S.C. § 5307(n)(1) on the Contractor, to the
extent the Federal Government deems appropriate.

\(3\) The Contractor agrees to include the above two clauses in each
subcontract financed in whole or in part with Federal assistance
provided by FTA. It is further agreed that the clauses shall not be
modified, except to identify the subcontractor who will be subject to
the provisions.

**[21. TERMINATION]{.underline}**

**49 U.S.C. Part 18**\
**FTA Circular 4220.1E**

**[Applicability to Contracts]{.underline}**\
All contracts (with the exception of contracts with nonprofit
organizations and institutions of higher education,) in excess of
\$10,000 shall contain suitable provisions for termination by the
grantee including the manner by which it will be effected and the basis
for settlement. (For contracts with nonprofit organizations and
institutions of higher education the threshold is \$100,000.) In
addition, such contracts shall describe conditions under which the
contract may be terminated for default as well as conditions where the
contract may be terminated because of circumstances beyond the control
of the contractor.

**[Flow Down]{.underline}**\
The termination requirements flow down to all contracts in excess of
\$10,000, with the exception of contracts with nonprofit organizations
and institutions of higher learning.

**[Model Clause/Language]{.underline}**\
FTA does not prescribe the form or content of such clauses. The
following are suggestions of clauses to be used in different types of
contracts:

**a. Termination for Convenience (General Provision)** The (Recipient)
may terminate this contract, in whole or in part, at any time by written
notice to the Contractor when it is in the Government\'s best interest.
The Contractor shall be paid its costs, including contract close-out
costs, and profit on work performed up to the time of termination. The
Contractor shall promptly submit its termination claim to (Recipient) to
be paid the Contractor. If the Contractor has any property in its
possession belonging to the (Recipient), the Contractor will account for
the same, and dispose of it in the manner the (Recipient) directs.

**b. Termination for Default \[Breach or Cause\] (General Provision)**
If the Contractor does not deliver supplies in accordance with the
contract delivery schedule, or, if the contract is for services, the
Contractor fails to perform in the manner called for in the contract, or
if the Contractor fails to comply with any other provisions of the
contract, the (Recipient) may terminate this contract for default.
Termination shall be effected by serving a notice of termination on the
contractor setting forth the manner in which the Contractor is in
default. The contractor will only be paid the contract price for
supplies delivered and accepted, or services performed in accordance
with the manner of performance set forth in the contract.

If it is later determined by the (Recipient) that the Contractor had an
excusable reason for not performing, such as a strike, fire, or flood,
events which are not the fault of or are beyond the control of the
Contractor, the (Recipient), after setting up a new delivery of
performance schedule, may allow the Contractor to continue work, or
treat the termination as a termination for convenience.

**c. Opportunity to Cure (General Provision)** The (Recipient) in its
sole discretion may, in the case of a termination for breach or default,
allow the Contractor \[an appropriately short period of time\] in which
to cure the defect. In such case, the notice of termination will state
the time period in which cure is permitted and other appropriate
conditions

If Contractor fails to remedy to (Recipient)\'s satisfaction the breach
or default of any of the terms, covenants, or conditions of this
Contract within \[ten (10) days\] after receipt by Contractor of written
notice from (Recipient) setting forth the nature of said breach or
default, (Recipient) shall have the right to terminate the Contract
without any further obligation to Contractor. Any such termination for
default shall not in any way operate to preclude (Recipient) from also
pursuing all available remedies against Contractor and its sureties for
said breach or default.

**d. Waiver of Remedies for any Breach** In the event that (Recipient)
elects to waive its remedies for any breach by Contractor of any
covenant, term or condition of this Contract, such waiver by (Recipient)
shall not limit (Recipient)\'s remedies for any succeeding breach of
that or of any other term, covenant, or condition of this Contract.

**e. Termination for Convenience (Professional or Transit Service
Contracts)** The (Recipient), by written notice, may terminate this
contract, in whole or in part, when it is in the Government\'s interest.
If this contract is terminated, the Recipient shall be liable only for
payment under the payment provisions of this contract for services
rendered before the effective date of termination.

**f. Termination for Default (Supplies and Service)** If the Contractor
fails to deliver supplies or to perform the services within the time
specified in this contract or any extension or if the Contractor fails
to comply with any other provisions of this contract, the (Recipient)
may terminate this contract for default. The (Recipient) shall terminate
by delivering to the Contractor a Notice of Termination specifying the
nature of the default. The Contractor will only be paid the contract
price for supplies delivered and accepted, or services performed in
accordance with the manner or performance set forth in this contract.

If, after termination for failure to fulfill contract obligations, it is
determined that the Contractor was not in default, the rights and
obligations of the parties shall be the same as if the termination had
been issued for the convenience of the Recipient.

**g. Termination for Default (Transportation Services)** If the
Contractor fails to pick up the commodities or to perform the services,
including delivery services, within the time specified in

this contract or any extension or if the Contractor fails to comply with
any other provisions of this contract, the (Recipient) may terminate
this contract for default. The (Recipient) shall terminate by delivering
to the Contractor a Notice of Termination specifying the nature of
default. The Contractor will only be paid the contract price for
services performed in accordance with the manner of performance set
forth in this contract.

If this contract is terminated while the Contractor has possession of
Recipient goods, the Contractor shall, upon direction of the
(Recipient), protect and preserve the goods until surrendered to the
Recipient or its agent. The Contractor and (Recipient) shall agree on
payment for the preservation and protection of goods. Failure to agree
on an amount will be resolved under the Dispute clause.

If, after termination for failure to fulfill contract obligations, it is
determined that the Contractor was not in default, the rights and
obligations of the parties shall be the same as if the termination had
been issued for the convenience of the (Recipient).

**h. Termination for Default (Construction)** If the Contractor refuses
or fails to prosecute the work or any separable part, with the diligence
that will insure its completion within the time specified in this
contract or any extension or fails to complete the work within this
time, or if the Contractor fails to comply with any other provisions of
this contract, the (Recipient) may terminate this contract for default.
The (Recipient) shall terminate by delivering to the Contractor a Notice
of Termination specifying the nature of the default. In this event, the
Recipient may take over the work and compete it by contract or
otherwise, and may take possession of and use any materials, appliances,
and plant on the work site necessary for completing the work. The
Contractor and its sureties shall be liable for any damage to the
Recipient resulting from the Contractor\'s refusal or failure to
complete the work within specified time, whether or not the
Contractor\'s right to proceed with the work is terminated. This
liability includes any increased costs incurred by the Recipient in
completing the work.

The Contractor\'s right to proceed shall not be terminated nor the
Contractor charged with damages under this clause if-

1\. the delay in completing the work arises from unforeseeable causes
beyond the control and without the fault or negligence of the
Contractor. Examples of such causes include: acts of God, acts of the
Recipient, acts of another Contractor in the performance of a contract
with the Recipient, epidemics, quarantine restrictions, strikes, freight
embargoes; and

2\. the contractor, within \[10\] days from the beginning of any delay,
notifies the (Recipient) in writing of the causes of delay. If in the
judgment of the (Recipient), the delay is excusable, the time for
completing the work shall be extended. The judgment of the (Recipient)
shall be final and conclusive on the parties, but subject to appeal
under the Disputes clauses.

If, after termination of the Contractor\'s right to proceed, it is
determined that the Contractor was not in default, or that the delay was
excusable, the rights and obligations of the parties will be the same as
if the termination had been issued for the convenience of the Recipient.

**i. Termination for Convenience or Default (Architect and
Engineering)** The (Recipient) may terminate this contract in whole or
in part, for the Recipient\'s convenience or because of the failure of
the Contractor to fulfill the contract obligations. The (Recipient)
shall terminate by delivering to the Contractor a Notice of Termination
specifying the nature, extent, and effective date of the termination.
Upon receipt of the notice, the Contractor shall (1) immediately
discontinue all services affected (unless the notice directs otherwise),
and (2) deliver to the Contracting Officer all data, drawings,
specifications, reports, estimates, summaries, and other information and
materials accumulated in performing this contract, whether completed or
in process.

If the termination is for the convenience of the Recipient, the
Contracting Officer shall make an equitable adjustment in the contract
price but shall allow no anticipated profit on unperformed services.

If the termination is for failure of the Contractor to fulfill the
contract obligations, the Recipient may complete the work by contact or
otherwise and the Contractor shall be liable for any additional cost
incurred by the Recipient.

If, after termination for failure to fulfill contract obligations, it is
determined that the Contractor was not in default, the rights and
obligations of the parties shall be the same as if the termination had
been issued for the convenience of the Recipient.

**j. Termination for Convenience of Default (Cost-Type Contracts)** The
(Recipient) may terminate this contract, or any portion of it, by
serving a notice or termination on the Contractor. The notice shall
state whether the termination is for convenience of the (Recipient) or
for the default of the Contractor. If the termination is for default,
the notice shall state the manner in which the contractor has failed to
perform the requirements of the contract. The Contractor shall account
for any property in its possession paid for from funds received from the
(Recipient), or property supplied to the Contractor by the (Recipient).
If the termination is for default, the (Recipient) may fix the fee, if
the contract provides for a fee, to be paid the contractor in proportion
to the value, if any, of work performed up to the time of termination.
The Contractor shall promptly submit its termination claim to the
(Recipient) and the parties shall negotiate the termination settlement
to be paid the Contractor.

If the termination is for the convenience of the (Recipient), the
Contractor shall be paid its contract close-out costs, and a fee, if the
contract provided for payment of a fee, in proportion to the work
performed up to the time of termination.

If, after serving a notice of termination for default, the (Recipient)
determines that the Contractor has an excusable reason for not
performing, such as strike, fire, flood, events which are not the fault
of and are beyond the control of the contractor, the (Recipient), after
setting up a new work

schedule, may allow the Contractor to continue work, or treat the
termination as a termination for convenience.

**22. GOVERNMENT-WIDE DEBARMENT AND SUSPENSION (NONPROCUREMENT)**

**[Background and Applicability]{.underline}**

In conjunction with the Office of Management and Budget and other
affected Federal agencies, DOT published an update to 49 CFR Part 29 on
November 26, 2003. This government-wide regulation implements Executive
Order 12549, *Debarment and Suspension*, Executive Order 12689,
*Debarment and Suspension*, and 31 U.S.C. 6101 note (Section 2455,
Public Law 103-355, 108 Stat. 3327).

The provisions of Part 29 apply to all grantee contracts and
subcontracts at any level expected to equal or exceed \$25,000 as well
as any contract or subcontract (at any level) for Federally required
auditing services. 49 CFR 29.220(b). This represents a change from prior
practice in that the dollar threshold for application of these rules has
been lowered from \$100,000 to \$25,000. These are contracts and
subcontracts referred to in the regulation as "covered transactions."

Grantees, contractors, and subcontractors (at any level) that enter into
covered transactions are required to verify that the entity (as well as
its principals and affiliates) they propose to contract or subcontract
with is not excluded or disqualified. They do this by (a) Checking the
Excluded Parties List System, (b) Collecting a certification from that
person, or (c) Adding a clause or condition to the contract or
subcontract. This represents a change from prior practice in that
certification is still acceptable but is no longer required. 49 CFR
29.300.

Grantees, contractors, and subcontractors who enter into covered
transactions also must require the entities they contract with to comply
with 49 CFR 29, subpart C and include this requirement in their own
subsequent covered transactions (i.e., the requirement flows down to
subcontracts at all levels).

**[Clause Language]{.underline}**

The following clause language is suggested, not mandatory. It
incorporates the optional method of verifying that contractors are not
excluded or disqualified by certification.

**[Suspension and Debarment]{.underline}**

> This contract is a covered transaction for purposes of 49 CFR Part 29.
> As such, the contractor is required to verify that none of the
> contractor, its principals, as
>
> defined at 49 CFR 29.995, or affiliates, as defined at 49 CFR 29.905,
> are excluded or disqualified as defined at 49 CFR 29.940 and 29.945.
>
> The contractor is required to comply with 49 CFR 29, Subpart C and
> must include the requirement to comply with 49 CFR 29, Subpart C in
> any lower tier covered transaction it enters into.
>
> By signing and submitting its bid or proposal, the bidder or proposer
> certifies as follows:
>
> The certification in this clause is a material representation of fact
> relied upon by **{insert agency name}**. If it is later determined
> that the bidder or proposer knowingly rendered an erroneous
> certification, in addition to remedies available to **{insert agency
> name}**, the Federal Government may pursue available remedies,
> including but not limited to suspension and/or debarment. The bidder
> or proposer agrees to comply with the requirements of 49 CFR 29,
> Subpart C while this offer is valid and throughout the period of any
> contract that may arise from this offer. The bidder or proposer
> further agrees to include a provision requiring such compliance in its
> lower tier covered transactions.

**[23. PRIVACY ACT]{.underline}**

**5 U.S.C. 552**

**[Applicability to Contracts]{.underline}**\
When a grantee maintains files on drug and alcohol enforcement
activities for FTA, and those files are organized so that information
could be retrieved by personal identifier, the Privacy Act requirements
apply to all contracts.

**[Flow Down]{.underline}**\
The Federal Privacy Act requirements flow down to each third party
contractor and their contracts at every tier.

**[Model Clause/Language]{.underline}**\
The text of the following clause has not been mandated by statute or
specific regulation, but has been developed by FTA.

**Contracts Involving Federal Privacy Act Requirements** - The following
requirements apply to the Contractor and its employees that administer
any system of records on behalf of the Federal Government under any
contract:

\(1\) The Contractor agrees to comply with, and assures the compliance
of its employees with, the information restrictions and other applicable
requirements of the Privacy Act of 1974,

5 U.S.C. § 552a. Among other things, the Contractor agrees to obtain the
express consent of the Federal Government before the Contractor or its
employees operate a system of records on behalf of the Federal
Government. The Contractor understands that the requirements of the
Privacy Act, including the civil and criminal penalties for violation of
that Act, apply to those individuals involved, and that failure to
comply with the terms of the Privacy Act may result in termination of
the underlying contract.

\(2\) The Contractor also agrees to include these requirements in each
subcontract to administer any system of records on behalf of the Federal
Government financed in whole or in part with Federal assistance provided
by FTA.

**[24. CIVIL RIGHTS REQUIREMENTS]{.underline}**

**29 U.S.C. § 623, 42 U.S.C. § 2000\
42 U.S.C. § 6102, 42 U.S.C. § 12112\
42 U.S.C. § 12132, 49 U.S.C. § 5332\
29 CFR Part 1630, 41 CFR Parts 60 et seq.**

**[Applicability to Contracts]{.underline}**\
The Civil Rights Requirements apply to all contracts.

**[Flow Down]{.underline}**\
The Civil Rights requirements flow down to all third party contractors
and their contracts at every tier.

**[Model Clause/Language]{.underline}**\
The following clause was predicated on language contained at 49 CFR Part
19, Appendix A, but FTA has shortened the lengthy text.

**Civil Rights -** The following requirements apply to the underlying
contract:

\(1\) [Nondiscrimination]{.underline} - In accordance with Title VI of
the Civil Rights Act, as amended, 42 U.S.C. § 2000d, section 303 of the
Age Discrimination Act of 1975, as amended, 42 U.S.C. § 6102, section
202 of the Americans with Disabilities Act of 1990, 42 U.S.C. § 12132,
and Federal transit law at 49 U.S.C. § 5332, the Contractor agrees that
it will not discriminate against any employee or applicant for
employment because of race, color, creed, national origin, sex, age, or
disability. In addition, the Contractor agrees to comply with applicable
Federal implementing regulations and other implementing requirements FTA
may issue.

\(2\) [Equal Employment Opportunity]{.underline} - The following equal
employment opportunity requirements apply to the underlying contract:

\(a\) [Race, Color, Creed, National Origin, Sex]{.underline} - In
accordance with Title VII of the Civil Rights Act, as amended, 42 U.S.C.
§ 2000e, and Federal transit laws at 49 U.S.C. § 5332, the Contractor
agrees to comply with all applicable equal employment opportunity
requirements of U.S. Department of Labor (U.S. DOL) regulations,
\"Office of Federal Contract Compliance Programs, Equal Employment
Opportunity, Department of Labor,\" 41 C.F.R. Parts 60 [et]{.underline}
[seq]{.underline}., (which implement Executive Order No. 11246, \"Equal
Employment Opportunity,\" as amended by Executive Order No. 11375,
\"Amending Executive Order 11246 Relating to Equal Employment
Opportunity,\" 42 U.S.C. § 2000e note), and with any applicable Federal
statutes, executive orders, regulations, and Federal policies that may
in the future affect construction activities undertaken in the course of
the Project. The Contractor agrees to take affirmative action to ensure
that applicants are employed, and that employees are treated during
employment, without regard to their race, color, creed, national origin,
sex, or age. Such action shall include, but not be limited to, the
following: employment, upgrading, demotion or transfer, recruitment or
recruitment advertising, layoff or termination; rates of pay or other
forms of compensation; and selection for training, including
apprenticeship. In addition, the Contractor agrees to comply with any
implementing requirements FTA may issue.

\(b\) [Age]{.underline} - In accordance with section 4 of the Age
Discrimination in Employment Act of 1967, as amended, 29 U.S.C. §§ 623
and Federal transit law at 49 U.S.C. § 5332, the Contractor agrees to
refrain from discrimination against present and prospective employees
for reason of age. In addition, the Contractor agrees to comply with any
implementing requirements FTA may issue.

\(c\) [Disabilities]{.underline} - In accordance with section 102 of the
Americans with Disabilities Act, as amended, 42 U.S.C. § 12112, the
Contractor agrees that it will comply with the requirements of U.S.
Equal Employment Opportunity Commission, \"Regulations to Implement the
Equal Employment Provisions of the Americans with Disabilities Act,\" 29
C.F.R. Part 1630, pertaining to employment of persons with disabilities.
In addition, the Contractor agrees to comply with any implementing
requirements FTA may issue.

\(3\) The Contractor also agrees to include these requirements in each
subcontract financed in whole or in part with Federal assistance
provided by FTA, modified only if necessary to identify the affected
parties.

**[25. BREACHES AND DISPUTE RESOLUTION]{.underline}**

**49 CFR Part 18\
FTA Circular 4220.1E**

**[Applicability to Contracts]{.underline}**\
All contracts in excess of \$100,000 shall contain provisions or
conditions which will allow for administrative, contractual, or legal
remedies in instances where contractors violate or breach contract
terms, and provide for such sanctions and penalties as may be
appropriate. This may

include provisions for bonding, penalties for late or inadequate
performance, retained earnings, liquidated damages or other appropriate
measures.

**[Flow Down]{.underline}**\
The Breaches and Dispute Resolutions requirements flow down to all
tiers.

**[Model Clauses/Language]{.underline}**\
FTA does not prescribe the form or content of such provisions. What
provisions are developed will depend on the circumstances and the type
of contract. Recipients should consult legal counsel in developing
appropriate clauses. The following clauses are examples of provisions
from various FTA third party contracts.

**Disputes** - Disputes arising in the performance of this Contract
which are not resolved by agreement of the parties shall be decided in
writing by the authorized representative of (Recipient)\'s \[title of
employee\]. This decision shall be final and conclusive unless within
\[ten (10)\] days from the date of receipt of its copy, the Contractor
mails or otherwise furnishes a written appeal to the \[title of
employee\]. In connection with any such appeal, the Contractor shall be
afforded an opportunity to be heard and to offer evidence in support of
its position. The decision of the \[title of employee\] shall be binding
upon the Contractor and the Contractor shall abide be the decision.

**Performance During Dispute** - Unless otherwise directed by
(Recipient), Contractor shall continue performance under this Contract
while matters in dispute are being resolved.

**Claims for Damages** - Should either party to the Contract suffer
injury or damage to person or property because of any act or omission of
the party or of any of his employees, agents or others for whose acts he
is legally liable, a claim for damages therefor shall be made in writing
to such other party within a reasonable time after the first observance
of such injury of damage.

**Remedies** - Unless this contract provides otherwise, all claims,
counterclaims, disputes and other matters in question between the
(Recipient) and the Contractor arising out of or relating to this
agreement or its breach will be decided by arbitration if the parties
mutually agree, or in a court of competent jurisdiction within the State
in which the (Recipient) is located.

**Rights and Remedies** - The duties and obligations imposed by the
Contract Documents and the rights and remedies available thereunder
shall be in addition to and not a limitation of any duties, obligations,
rights and remedies otherwise imposed or available by law. No action or
failure to act by the (Recipient), (Architect) or Contractor shall
constitute a waiver of any right or duty afforded any of them under the
Contract, nor shall any such action or failure to act constitute an
approval of or acquiescence in any breach thereunder, except as may be
specifically agreed in writing.

**[26. PATENT AND RIGHTS IN DATA]{.underline}**

**37 CFR Part 401**\
**49 CFR Parts 18 and 19**

**[Applicability to Contracts]{.underline}**\
Patent and rights in data requirements for federally assisted projects
ONLY apply to research projects in which FTA finances the purpose of the
grant is to finance the development of a product or information. These
patent and data rights requirements do not apply to capital projects or
operating projects, even though a small portion of the sales price may
cover the cost of product development or writing the user\'s manual.

**[Flow Down]{.underline}**\
The Patent and Rights in Data requirements apply to all contractors and
their contracts at every tier.

**[Model Clause/Language]{.underline}**\
The FTA patent clause is substantially similar to the text of 49 C.F.R.
Part 19, Appendix A, Section 5, but the rights in data clause reflects
FTA objectives. For patent rights, FTA is governed by Federal law and
regulation. For data rights, the text on copyrights is insufficient to
meet FTA\'s purposes for awarding research grants. This model clause,
with larger rights as a standard, is proposed with the understanding
that this standard could be modified to FTA\'s needs.

CONTRACTS INVOLVING EXPERIMENTAL, DEVELOPMENTAL, OR RESEARCH WORK.

A. **Rights in Data** - This following requirements apply to each
contract involving experimental, developmental or research work:

\(1\) The term \"subject data\" used in this clause means recorded
information, whether or not copyrighted, that is delivered or specified
to be delivered under the contract. The term includes graphic or
pictorial delineation in media such as drawings or photographs; text in
specifications or related performance or design-type documents; machine
forms such as punched cards, magnetic tape, or computer memory
printouts; and information retained in computer memory. Examples
include, but are not limited to: computer software, engineering drawings
and associated lists, specifications, standards, process sheets,
manuals, technical reports, catalog item identifications, and related
information. The term \"subject data\" does not include financial
reports, cost analyses, and similar information incidental to contract
administration.

\(2\) The following restrictions apply to all subject data first
produced in the performance of the contract to which this Attachment has
been added:

\(a\) Except for its own internal use, the Purchaser or Contractor may
not publish or reproduce subject data in whole or in part, or in any
manner or form, nor may the Purchaser or Contractor

authorize others to do so, without the written consent of the Federal
Government, until such time as the Federal Government may have either
released or approved the release of such data to the public; this
restriction on publication, however, does not apply to any contract with
an academic institution.

\(b\) In accordance with 49 C.F.R. § 18.34 and 49 C.F.R. § 19.36, the
Federal Government reserves a royalty-free, non-exclusive and
irrevocable license to reproduce, publish, or otherwise use, and to
authorize others to use, for \"Federal Government purposes,\" any
subject data or copyright described in subsections (2)(b)[1]{.underline}
and (2)(b)[2]{.underline} of this clause below. As used in the previous
sentence, \"for Federal Government purposes,\" means use only for the
direct purposes of the Federal Government. Without the copyright
owner\'s consent, the Federal Government may not extend its Federal
license to any other party.

1\. Any subject data developed under that contract, whether or not a
copyright has been obtained; and

2\. Any rights of copyright purchased by the Purchaser or Contractor
using Federal assistance in whole or in part provided by FTA.

\(c\) When FTA awards Federal assistance for experimental,
developmental, or research work, it is FTA\'s general intention to
increase transportation knowledge available to the public, rather than
to restrict the benefits resulting from the work to participants in that
work. Therefore, unless FTA determines otherwise, the Purchaser and the
Contractor performing experimental, developmental, or research work
required by the underlying contract to which this Attachment is added
agrees to permit FTA to make available to the public, either FTA\'s
license in the copyright to any subject data developed in the course of
that contract, or a copy of the subject data first produced under the
contract for which a copyright has not been obtained. If the
experimental, developmental, or research work, which is the subject of
the underlying contract, is not completed for any reason whatsoever, all
data developed under that contract shall become subject data as defined
in subsection (a) of this clause and shall be delivered as the Federal
Government may direct. This subsection (c) , however, does not apply to
adaptations of automatic data processing equipment or programs for the
Purchaser or Contractor\'s use whose costs are financed in whole or in
part with Federal assistance provided by FTA for transportation capital
projects.

\(d\) Unless prohibited by state law, upon request by the Federal
Government, the Purchaser and the Contractor agree to indemnify, save,
and hold harmless the Federal Government, its officers, agents, and
employees acting within the scope of their official duties against any
liability, including costs and expenses, resulting from any willful or
intentional violation by the Purchaser or Contractor of proprietary
rights, copyrights, or right of privacy, arising out of the publication,
translation, reproduction, delivery, use, or disposition of any data
furnished under that contract. Neither the Purchaser nor the Contractor
shall be required to indemnify the Federal Government for any such
liability arising out of the wrongful act of any employee, official, or
agents of the Federal Government.

\(e\) Nothing contained in this clause on rights in data shall imply a
license to the Federal Government under any patent or be construed as
affecting the scope of any license or other right otherwise granted to
the Federal Government under any patent.

\(f\) Data developed by the Purchaser or Contractor and financed
entirely without using Federal assistance provided by the Federal
Government that has been incorporated into work required by the
underlying contract to which this Attachment has been added is exempt
from the requirements of subsections (b), (c), and (d) of this clause,
provided that the Purchaser or Contractor identifies that data in
writing at the time of delivery of the contract work.

\(g\) Unless FTA determines otherwise, the Contractor agrees to include
these requirements in each subcontract for experimental, developmental,
or research work financed in whole or in part with Federal assistance
provided by FTA.

\(3\) Unless the Federal Government later makes a contrary determination
in writing, irrespective of the Contractor\'s status
([i.e.]{.underline}, a large business, small business, state government
or state instrumentality, local government, nonprofit organization,
institution of higher education, individual, etc.), the Purchaser and
the Contractor agree to take the necessary actions to provide, through
FTA, those rights in that invention due the Federal Government as
described in

U.S. Department of Commerce regulations, \"Rights to Inventions Made by
Nonprofit Organizations and Small Business Firms Under Government
Grants, Contracts and Cooperative Agreements,\" 37 C.F.R. Part 401.

\(4\) The Contractor also agrees to include these requirements in each
subcontract for experimental, developmental, or research work financed
in whole or in part with Federal assistance provided by FTA.

B. **Patent Rights** - The following requirements apply to each contract
involving experimental, developmental, or research work:

\(1\) [General]{.underline} - If any invention, improvement, or
discovery is conceived or first actually reduced to practice in the
course of or under the contract to which this Attachment has been added,
and that invention, improvement, or discovery is patentable under the
laws of the United States of America or any foreign country, the
Purchaser and Contractor agree to take actions necessary to provide
immediate notice and a detailed report to the party at a higher tier
until FTA is ultimately notified.

\(2\) Unless the Federal Government later makes a contrary determination
in writing, irrespective of the Contractor\'s status (a large business,
small business, state government or state instrumentality, local
government, nonprofit organization, institution of higher education,
individual), the Purchaser and the Contractor agree to take the
necessary actions to provide,

through FTA, those rights in that invention due the Federal Government
as described in U.S. Department of Commerce regulations, \"Rights to
Inventions Made by Nonprofit Organizations and Small Business Firms
Under Government Grants, Contracts and Cooperative Agreements,\" 37
C.F.R. Part 401.

\(3\) The Contractor also agrees to include the requirements of this
clause in each subcontract for experimental, developmental, or research
work financed in whole or in part with Federal assistance provided by
FTA.

**[27. TRANSIT EMPLOYEE PROTECTIVE AGREEMENTS]{.underline}**

**49 U.S.C. § 5310, § 5311, and § 5333\
29 CFR Part 215**

**[Applicability to Contracts\
]{.underline}**The Transit Employee Protective Provisions apply to each
contract for transit operations performed by employees of a Contractor
recognized by FTA to be a transit operator. (Because transit operations
involve many activities apart from directly driving or operating transit
vehicles, FTA determines which activities constitute transit
\"operations\" for purposes of this clause.)

**[Flow Down]{.underline}**\
These provisions are applicable to all contracts and subcontracts at
every tier.

**[Model Clause/Language]{.underline}**\
Since no mandatory language is specified, FTA had developed the
following language:

**Transit Employee Protective Provisions.** (1) The Contractor agrees to
the comply with applicable transit employee protective requirements as
follows:

\(a\) [General Transit Employee Protective Requirements]{.underline} -
To the extent that FTA determines that transit operations are involved,
the Contractor agrees to carry out the transit operations work on the
underlying contract in compliance with terms and conditions determined
by the U.S. Secretary of Labor to be fair and equitable to protect the
interests of employees employed under this contract and to meet the
employee protective requirements of 49 U.S.C. A 5333(b), and U.S. DOL
guidelines at 29 C.F.R. Part 215, and any amendments thereto. These
terms and conditions are identified in the letter of certification from
the U.S. DOL to FTA applicable to the FTA Recipient\'s project from
which Federal assistance is provided to support work on the underlying
contract. The Contractor agrees to carry out that work in compliance
with the conditions stated in that U.S. DOL letter. The requirements of
this subsection (1), however, do not apply to any contract financed with
Federal assistance provided by FTA either for projects for elderly
individuals and individuals with disabilities authorized by 49 U.S.C. §
5310(a)(2), or for projects for nonurbanized areas authorized by 49
U.S.C. § 5311. Alternate provisions for those projects are set forth in
subsections (b) and (c) of this clause.

\(b\) [Transit Employee Protective Requirements for Projects Authorized
by 49 U.S.C. § 5310(a)(2) for Elderly Individuals and Individuals with
Disabilities]{.underline} - If the contract involves transit operations
financed in whole or in part with Federal assistance authorized by 49
U.S.C. § 5310(a)(2), and if the U.S. Secretary of Transportation has
determined or determines in the future that the employee protective
requirements of 49 U.S.C. § 5333(b) are necessary or appropriate for the
state and the public body subrecipient for which work is performed on
the underlying contract, the Contractor agrees to carry out the Project
in compliance with the terms and conditions determined by the U.S.
Secretary of Labor to meet the requirements of 49 U.S.C. § 5333(b), U.S.
DOL guidelines at 29 C.F.R. Part 215, and any amendments thereto. These
terms and conditions are identified in the U.S. DOL\'s letter of
certification to FTA, the date of which is set forth Grant Agreement or
Cooperative Agreement with the state. The Contractor agrees to perform
transit operations in connection with the underlying contract in
compliance with the conditions stated in that U.S. DOL letter.

\(c\) [Transit Employee Protective Requirements for
Projects]{.underline} Authorized by 49 U.S.C. § 5311 [in Nonurbanized
Areas]{.underline} - If the contract involves transit operations
financed in whole or in part with Federal assistance authorized by 49
U.S.C. § 5311, the Contractor agrees to comply with the terms and
conditions of the Special Warranty for the Nonurbanized Area Program
agreed to by the U.S. Secretaries of Transportation and Labor, dated May
31, 1979, and the procedures implemented by U.S. DOL or any revision
thereto.

\(2\) The Contractor also agrees to include the any applicable
requirements in each subcontract involving transit operations financed
in whole or in part with Federal assistance provided by FTA.

**[28. DISADVANTAGED BUSINESS ENTERPRISE (DBE)]{.underline}**

**49 CFR Part 26**

**[Background and Applicability]{.underline}**

The newest version on the Department of Transportation's Disadvantaged
Business Enterprise (DBE) program became effective July 16, 2003. The
rule provides guidance to grantees on the use of overall and contract
goals, requirement to include DBE provisions in subcontracts, evaluating
DBE participation where specific contract goals have been set, reporting
requirements, and replacement of DBE subcontractors. Additionally, the
DBE program dictates payment terms and conditions (including limitations
on retainage) applicable to all subcontractors regardless of whether
they are DBE firms or not.

The DBE program applies to all DOT-assisted contracting activities. A
formal clause such as that below must be included in all contracts above
the micro-purchase level. The requirements of clause subsection b flow
down to subcontracts.

A substantial change to the payment provisions in this newest version of
Part 26 concerns retainage (*see* section 26.29). Grantee choices
concerning retainage should be reflected in the language choices in
clause subsection d.

**[Clause Language]{.underline}**

The following clause language is suggested, not mandatory. It
incorporates the payment terms and conditions applicable to all
subcontractors based in Part 26 as well as those related only to DBE
subcontractors. The suggested language allows for the options available
to grantees concerning retainage, specific contract goals, and
evaluation of DBE subcontracting participation when specific contract
goals have been established.

**Disadvantaged Business Enterprises**

a\. This contract is subject to the requirements of Title 49, Code of
Federal Regulations, Part 26, *Participation by Disadvantaged Business
Enterprises in Department of Transportation Financial Assistance
Programs. * The national goal for participation of Disadvantaged
Business Enterprises (DBE) is 10%.  The agency's overall goal for DBE
participation is **\_\_ %.**  A separate contract goal **\[of \_\_ % DBE
participation has\] \[has not\]** been established for this procurement.

b\. The contractor shall not discriminate on the basis of race, color,
national origin, or sex in the performance of this contract.  The
contractor shall carry out applicable requirements of 49 CFR Part 26 in
the award and administration of this DOT-assisted contract.  Failure by
the contractor to carry out these requirements is a material breach of
this contract, which may result in the termination of this contract or
such other remedy as **{insert agency name}** deems appropriate.  Each
subcontract the contractor signs with a subcontractor must include the
assurance in this paragraph (*see* 49 CFR 26.13(b)).

c\. **{*If a separate contract goal has been established, use the
following}***  Bidders/offerors are required to document sufficient DBE
participation to meet these goals or, alternatively, document adequate
good faith efforts to do so, as provided for in 49 CFR 26.53.  Award of
this contract is conditioned on submission of the following
**\[concurrent with and accompanying sealed bid\] \[concurrent with and
accompanying an initial proposal\] \[prior to award\]**:

1.      The names and addresses of DBE firms that will participate in
this contract;

2.      A description of the work each DBE will perform;

::: Definition-Term
3.      The dollar amount of the participation of each DBE firm
participating;
:::

4.      Written documentation of the bidder/offeror's commitment to use
a DBE subcontractor whose participation it submits to meet the contract
goal;

5.      Written confirmation from the DBE that it is participating in
the contract as provided in the prime contractor's commitment; and

6.      If the contract goal is not met, evidence of good faith efforts
to do so.  

**\[Bidders\]\[Offerors\]** must present the information required above
**\[as a matter of responsiveness\] \[with initial proposals\] \[prior
to contract award\]** (*see* 49 CFR 26.53(3)).

**{*If no separate contract goal has been established, use the
following}***  The successful bidder/offeror will be required to report
its DBE participation obtained through race-neutral means throughout the
period of performance.

d\. The contractor is required to pay its subcontractors performing work
related to this contract for satisfactory performance of that work no
later than 30 days after the contractor's receipt of payment for that
work from the **{insert agency name}**. In addition, **\[the contractor
may not hold retainage from its subcontractors.\] \[is required to
return any retainage payments to those subcontractors within 30 days
after the subcontractor\'s work related to this contract is
satisfactorily completed.\] \[is required to return any retainage
payments to those subcontractors within 30 days after incremental
acceptance of the subcontractor's work by the {insert agency name} and
contractor's receipt of the partial retainage payment related to the
subcontractor's work.\]**

e\. The contractor must promptly notify **{insert agency name}**,
whenever a DBE subcontractor performing work related to this contract is
terminated or fails to complete its work, and must make good faith
efforts to engage another DBE subcontractor to perform at least the same
amount of work. The contractor may not terminate any DBE subcontractor
and perform that work through its own forces or those of an affiliate
without prior written consent of **{insert agency name}**.

**[29. \[ RESERVED \]]{.underline}**

**[30. INCORPORATION OF FEDERAL TRANSIT ADMINISTRATION (FTA)
TERMS]{.underline}**

**FTA Circular 4220.1E**

**[Applicability to Contracts]{.underline}**\
The incorporation of FTA terms applies to all contracts.

**[Flow Down]{.underline}**

The incorporation of FTA terms has unlimited flow down.

**[Model Clause/Language]{.underline}**\
FTA has developed the following incorporation of terms language**:**

**Incorporation of Federal Transit Administration (FTA) Terms** - The
preceding provisions include, in part, certain Standard Terms and
Conditions required by DOT, whether or not expressly set forth in the
preceding contract provisions. All contractual provisions required by
DOT, as set forth in FTA Circular 4220.1E, are hereby incorporated by
reference. Anything to the contrary herein notwithstanding, all FTA
mandated terms shall be deemed to control in the

event of a conflict with other provisions contained in this Agreement.
The Contractor shall not perform any act, fail to perform any act, or
refuse to comply with any (name of grantee) requests which would cause
(name of grantee) to be in violation of the FTA terms and conditions.

**[31. DRUG AND ALCOHOL TESTING]{.underline}**

**49 U.S.C. §5331**\
**49 CFR Parts 653 and 654**

**[Applicability to Contracts]{.underline}**\
The Drug and Alcohol testing provisions apply to Operational Service
Contracts.

**[Flow Down Requirements]{.underline}**\
Anyone who performs a safety-sensitive function for the recipient or
subrecipient is required to comply with 49 CFR 653 and 654, with certain
exceptions for contracts involving maintenance services. Maintenance
contractors for non-urbanized area formula program grantees are not
subject to the rules. Also, the rules do not apply to maintenance
subcontractors.

**[Model Clause/Language]{.underline}**

**[Introduction\
]{.underline}**FTA\'s drug and alcohol rules, 49 CFR 653 and 654,
respectively, are unique among the regulations issued by FTA. First,
they require recipients to ensure that any entity performing a
safety-sensitive function on the recipient\'s behalf (usually
subrecipients and/or contractors) implement a complex drug and alcohol
testing program that complies with Parts 653 and 654. Second, the rules
condition the receipt of certain kinds of FTA funding on the
recipient\'s compliance with the rules; thus, the recipient is not in
compliance with the rules unless every entity that performs a
safety-sensitive function on the recipient\'s behalf is in compliance
with the rules. Third, the rules do not specify how a recipient ensures
that its subrecipients and/or contractors comply with them.

How a recipient does so depends on several factors, including whether
the contractor is covered independently by the drug and alcohol rules of
another Department of Transportation operating

administration, the nature of the relationship that the recipient has
with the contractor, and the financial resources available to the
recipient to oversee the contractor\'s drug and alcohol testing program.
In short, there are a variety of ways a recipient can ensure that its
subrecipients and contractors comply with the rules.

Therefore, FTA has developed three model contract provisions for
recipients to use \"as is\" or to modify to fit their particular
situations.

**[Explanation of Model Contract Clauses]{.underline}**\
Under Option 1, the recipient ensures the contractor\'s compliance with
the rules by requiring the contractor to participate in a drug and
alcohol program administered by the recipient. The advantages of doing
this are obvious: the recipient maintains total control over its
compliance with 49 CFR 653 and 654. The disadvantage is that the
recipient, which may not directly employ any safety-sensitive employees,
has to implement a complex testing program. Therefore, this may be a
practical option only for those recipients which have a testing program
for their employees, and can add the contractor\'s safety-sensitive
employees to that program.

Under Option 2, the recipient relies on the contractor to implement a
drug and alcohol testing program that complies with 49 CFR 653 and 654,
but retains the ability to monitor the contractor\'s testing program;
thus, the recipient has less control over its compliance with the drug
and alcohol testing rules than it does under option 1. The advantage of
this approach is that it places the responsibility for complying with
the rules on the entity that is actually performing the safety-sensitive
function. Moreover, it reserves to the recipient the power to ensure
that the contractor complies with the program. The disadvantage of
Option 2 is that without adequate monitoring of the contractor\'s
program, the recipient may find itself out of compliance with the rules.

Under option 3, the recipient specifies some or all of the specific
features of a contractor\'s drug and alcohol compliance program. Thus,
it requires the recipient to decide what it wants to do and how it wants
to do it. The advantage of this option is that the recipient has more
control over the contractor\'s drug and alcohol testing program, yet it
is not actually administering the testing program. The disadvantage is
that the recipient has to specify and understand clearly what it wants
to do and why.

**Drug and Alcohol Testing**

**Option 1**

The contractor agrees to:

*(a) participate in (grantee\'s or recipient\'s) drug and alcohol
program established in compliance with 49 CFR 653 and 654.*

**Drug and Alcohol Testing**\
**Option 2**

The contractor agrees to establish and implement a drug and alcohol
testing program that complies with 49 CFR Parts 653 and 654, produce any
documentation necessary to establish its compliance with Parts 653 and
654, and permit any authorized representative of the United States
Department of Transportation or its operating administrations, the State
Oversight Agency of (name of State), or the (insert name of grantee), to
inspect the facilities and records associated with the implementation of
the drug and alcohol testing program as required under 49 CFR Parts 653
and 654 and review the testing process. The contractor agrees further to
certify annually its compliance with Parts 653 and 654 before (insert
date) and to submit the Management Information System (MIS) reports
before (insert date before March 15) to (insert title and address of
person responsible for receiving information). To certify compliance the
contractor shall use the \"Substance Abuse Certifications\" in the
\"Annual List of Certifications and Assurances for Federal Transit
Administration Grants and Cooperative Agreements,\" which is published
annually in the Federal Register.

**Drug and Alcohol Testing**\
**Option 3**

The contractor agrees to establish and implement a drug and alcohol
testing program that complies with 49 CFR Parts 653 and 654, produce any
documentation necessary to establish its compliance with Parts 653 and
654, and permit any authorized representative of the United States
Department of Transportation or its operating administrations, the State
Oversight Agency of (name of State), or the (insert name of grantee), to
inspect the facilities and records associated with the implementation of
the drug and alcohol testing program as required under 49 CFR Parts 653
and 654 and review the testing process. The contractor agrees further to
certify annually its compliance with Parts 653 and 654 before (insert
date) and to submit the Management Information System (MIS) reports
before (insert date before March 15) to (insert title and address of
person responsible for receiving information). To certify compliance the
contractor shall use the \"Substance Abuse Certifications\" in the
\"Annual List of Certifications and Assurances for Federal Transit
Administration Grants and Cooperative Agreements,\" which is published
annually in the Federal Register. The Contractor agrees further to
\[Select a, b, or c\] (a) submit before (insert date or upon request) a
copy of the Policy Statement developed to implement its drug and alcohol
testing program; OR (b) adopt (insert title of the Policy Statement the
recipient wishes the contractor to use) as its policy statement as
required under 49 CFR 653 and 654; OR (c) submit for review and approval
before (insert date or upon request) a copy of its Policy Statement
developed to implement its drug and alcohol testing program. In
addition, the contractor agrees to: (to be determined by the recipient,
but may address areas such as: the selection of the certified
laboratory, substance abuse professional, or Medical Review Officer, or
the use of a consortium).

Number range CHAPTER

FEDERAL TRANSIT ADMINISTRATION

######## BEST PRACTICES PROCUREMENT MANUAL

**TABLE OF CONTENTS (Appendix A.2 - Governing Documents -- Dear
Colleague Letters)**

**[A.2 -- Dear Colleague Letters]{.underline}**

1\. [January 20, 2004: Performance and Payment Bonding
Requirements]{.underline}

2\. [May 29, 2002: Policy Changes and Clarifications re: Procurement
Transactions]{.underline}

3\. [June 15, 2001: Feedback on the Effectiveness of FTA's Third Party
Contracting]{.underline}

[Requirements and Procurement Assistance Program]{.underline}

4\. [December 21, 1998: Joint Procurements, Y2K Compliance
Requirements]{.underline}

5\. [October 1, 1998: Revenue Contracts, Piggybacking,
Tag-ons]{.underline}

6\. [September 4, 1998: APTA's Standard Bus Procurement
Guidelines]{.underline}

7\. [March 18, 1997: Buy America Requirements of Pre-Award and
Post-Delivery]{.underline}

**[1. January 20, 2004: Performance and Payment Bonding
Requirements]{.underline}**

U.S. Department Administrator 400 Seventh St. S.W.

of Transportation Washington, D.C. 20590

**Federal Transit**

**Administration** January 20, 2004 C-01-04

Dear Colleague:

In working with our grantees and their transit suppliers, we have found
some misunderstanding about the Federal Transit Administration (FTA)
requirements regarding performance and payment bonds in
Federally-assisted procurements, particularly for rolling stock
procurements. In short, FTA *does not require* bonding in any amount for
rolling stock or any other non-construction contracts. FTA leaves to the
good business judgment of our grantees the discretion to determine the
appropriate amount of bonding ---- if any ---- to incorporate in
non-construction contracts.

With APTA's assistance, FTA examined the prices rolling stock
manufacturers pay for bonds and how those prices have reacted to changes
in the broader bond market. We found wide variation in manufacturers''
experiences overall, but a strong indication that rail car manufacturers
have been particularly hard hit in terms of bond pricing and
availability. Needless to say, high bond costs and reduced availability
directly impact both the grantee's bottom line and competition within
the industry. I challenge each of you to carefully assess the risks
involved in any given procurement and carefully balance those risks
against the cost and competitive impacts of bonding requirements. At
FTA, we will continue to work with the industry to identify
cost-effective ways to manage risks, and will share that information
through our *Best Practices Procurement Manual*. Additionally, we will
continue to work with both the public and private sectors to ensure our
grantees have access to the information they need to make informed
choices as they consider bonds in their procurement practices.

Even in the area of construction contracts (where bonding is an FTA
requirement), we remain willing to review and approve sensible
alternatives and exceptions to the bonding levels identified as adequate
to protect the Federal interest in FTA Circular 4220.1E. The Circular
notes that "a Grantee may seek FTA approval of its bonding policy and
requirements if they do not comply with these criteria," and FTA has
approved exceptions to the circular requirements.

As responsible stewards of our public resources, it is incumbent upon
each of us to maximize the benefits generated by every transit dollar.
Please review your bonding practices to ensure that

you are prudently utilizing this important tool. I look forward to
sharing the sound and innovative practices that the transit industry
always generates.

> Sincerely,

![](media/image6.wmf){width="0.8638888888888889in"
height="0.5215277777777778in"}

> Jennifer L. Dorn

**[2. May 29, 2002: Policy Changes and Clarifications re: Procurement
Transactions]{.underline}**

U.S. Department Administrator 400 Seventh St. S.W.

of Transportation Washington, D.C. 20590

**Federal Transit**

**Administration** May 29, 2002 C-08-02

Dear Colleague:

I am pleased to announce a number of Federal Transit Administration
(FTA) policy changes and clarifications that we believe will simplify
your procurement transactions, as well as several initiatives intended
to identify and share successful procurement practices. The changes and
clarifications involve:

\" Rescission of five-year contract term limitations;

\" Use of E-commerce for procurements;

\" Rules on advance payments; and

\" The effect of using of various FTA funding sources for operating and
preventive maintenance contracts.

In addition, you will find information on a new Best Practices
initiative, as well as the introduction of the Experimental Procurement
Laboratory initiative. Through these initiatives, we hope to persuade
you to share what works well and encourage new thinking about how
procurement practices can be simplified and improved.

This information will also be made available on the FTA public website,
and I encourage you to share it with your procurement staff. I also want
to thank the many transit agencies that have offered comments on how to
improve procurement practices, and particularly those who responded to
our recent survey.

**POLICY CHANGES AND CLARIFICATIONS**

A. [FTA C 4220.1D, Paragraph 7(m) \-- Contract Term
Limitation]{.underline}

The five-year contract term limitation for FTA-funded contracts,
including \"revenue contracts,\" awarded by grant recipients is hereby
rescinded. Revenue contracts are those that utilize FTA-funded real
estate, equipment and facilities to generate revenue. With this
rescission, grant recipients no longer need to obtain FTA approval for
contract terms exceeding five years. Please

note, however, that contracts for rolling stock and replacement parts
are still limited to not more than five years, as required by statute.
(49 United States Code Section 5326(b))

Grantees are expected to continue to be judicious in establishing and
extending their contract terms. Good procurement practice dictates that
grantees enter into contract terms no longer than minimally necessary to
accomplish the purpose of the contract.

B. [E-Commerce]{.underline}

E-Commerce has been and continues to be an allowable means to conduct
procurements. If a grantee chooses to utilize E-Commerce, written
procedures must be developed and all requirements for full and open
competition must be met.

C. [FTA C4220.1D, Paragraph 12.a. \-- Advance Payments]{.underline}

There continues to be some confusion about FTA policy with respect to
advance payments, stemming from the interpretation of American Public
Transportation Association's Standard Bus Procurement Guidelines and
subsequent FTA Dear Colleague Letters. The clarification of requirements
regarding advance payments provided in the Dear Colleague Letter of June
15, 2001, remains accurate, but is further clarified as follows:

FTA C 4220.1D, Paragraph 12, \"Payment Provision in Third Party
Contracts,\" states: \"FTA does not authorize and will not participate
in funding payments to a contractor prior to the incurrence of costs by
the contractor unless prior written concurrence is obtained from FTA.\"
This policy remains unchanged: FTA funds may not be used to make advance
payments unless prior written concurrence is obtained from FTA. There is
no prohibition on a grant recipient's use of local funds for advance
payments. However, advance payments made with local funds before a grant
has been awarded, or before the issuance of a letter of no prejudice or
other pre-award authority, are ineligible for reimbursement.

D. [FTA C 4220.1D, Paragraph 4 -- Applicability (Regarding Operating
Assistance and Preventive Maintenance)]{.underline}

FTA grant recipients who utilize FTA formula funds for operating
assistance are required to follow the requirements of the FTA C 4220.1D
for all operating contracts. Since FTA formula funds pay a percentage of
the net operating deficit, such contracts cannot be segregated and FTA C
4220.1D must be applied.

Congestion Mitigation and Air Quality (CMAQ) and Job Access/Reverse
Commute (JARC) project funds may be used for operations. Grantees must
follow the Circular requirements for any specific contracts that utilize
CMAQ or JARC funds. However, the use of CMAQ and JARC funds for
operations does not trigger the applicability of the Circular to all
other operating contracts.

Grantees who utilize formula capital funds for preventive maintenance
contracts are subject to the following requirements under the Circular.
If the FTA formula funds are allocated to discrete contracts identified
in the grant application for preventive maintenance, then FTA C 4220.1D
will apply only to those specific contracts. If the FTA formula funds
are not allocated to discrete contracts in the grant application, then
all preventive maintenance contracts are subject to the requirements of
the Circular.

**BEST PRACTICES INITIATIVES**

A. [Best Practices Contest]{.underline}

While the Best Practices Procurement Manual (BPPM) contains some
excellent examples of grantee \"best practices,\" we are eager to
encourage the sharing of many more of these practical ideas among
grantees. Everyone who submits a best practice that is incorporated into
the Manual will be publicly recognized at American Public Transit
Association's Annual Meeting. In addition, one individual/agency will be
recognized at the annual Awards Ceremony, and APTA will waive the
conference registration fee for the person who submits the winning
\"best practice.\"

B. [Experimental Procurement Laboratory]{.underline}

FTA also is creating an experimental \"procurement laboratory.\" The
goal of this initiative is to allow and encourage grantees to improve or
streamline their contracting processes through innovative approaches.
Grantees are invited to propose procurement innovations for
consideration and approval by FTA. If the experiment is successful, the
practice will be published in the Best Practices Procurement Manual.

More information about the Best Practices Contest and the Experimental
Procurement Laboratory initiative will be published soon on the FTA
website, the BPPM website, and the APTA website, and will be made
available at FTA conferences and National Transit Institute procurement
courses.

I appreciate your continued support, and look forward to working with
you to further improve procurement practices in the transportation
industry. Regional Office.

> Sincerely,

![](media/image6.wmf){width="0.8638888888888889in"
height="0.5215277777777778in"}

> Jennifer L. Dorn

**[3. June 15, 2001: Feedback on the Effectiveness of FTA's Third Party
Contracting Requirements and Procurement Assistance
Program]{.underline}**

U.S. Department

Of Transportation 400 Seventh St. S.W.

**Federal Transit** Washington, D.C. 20590

**Administration** Deputy Administrator

C-08-01

June 15, 2001

Dear Colleague:

In May 1999, the Federal Transit Administration (FTA) issued a survey
inviting feedback on the effectiveness of FTA's Third Party Contracting
Requirements and Procurement Assistance Program. Based on comments and
suggestions in the survey responses, FTA implemented certain changes to
these two areas of our program. These changes include offering an
increased number and variety of procurement courses; adding to and
refining the \"Best Practices Procurement Manual;\" and posting
procurement questions and answers on the Internet.

During a workshop held on May 9, 200l, at the American Public
Transportation Association (APTA) Bus and Paratransit Conference in
Calgary, Canada, FTA provided an update on the actions it has
undertaken. The participants felt it was necessary to work
collaboratively to address the 5-year term limitation issue at a
workshop dedicated solely to this topic at the Fall APTA Bus Equipment
and Maintenance/Procurement and Materials Management Conference in Ft.
Worth, Texas. Both FTA and APTA agreed to this recommendation.

It was also agreed that in the interim, FTA would exempt certain classes
of contracts from the requirement to obtain prior FTA approval for
periods of performance in excess of a 5-year term, and that FTA would
clarify other areas of Circular 4220.1D, \"FTA Third Party Contracting
Requirements,\" that the survey revealed were in need of further
clarification.

A. [FTA Circular 4220.1D, Paragraph 7(m) -- Contract Period of
Performance Limitation]{.underline}

Paragraph 7(m) states, \"grantees shall not enter into either service or
supply contracts with a period of performance exceeding five years
inclusive of options without prior written FTA approval. A maximum of
five years' requirements may be acquired under a single contract without
prior FTA approval (including rolling stock), even though delivery may
occur beyond five years after the date of contract award. FTA approval
is required for contract extensions or renewals beyond a five-year term.
This limitation does not apply to construction contracts or to leases of
real property for the life of a transit asset to be constructed on such
property (which

period will extend beyond five years in order to fulfill the statutory
requirements that grantees have 'satisfactory continuing control.')\"

Further, a blanket waiver is granted to exempt the following class of
contracts from the requirement to obtain FTA prior approval for a
contract term in excess of five years:

> Non-construction related contracts such as proprietary software
> maintenance, consulting and other professional services contracts
> (except contracts for general engineering services) awarded for a
> discrete, identifiable item, e.g., a particular piece of litigation, a
> discrete tort claim, and audit of a particular transaction or fiscal
> year.

This blanket waiver, however, does not cover the following class:

> All contracts for general engineering consultant services are
> non-exempt. Task order type arrangements for engineering,
> architectural, legal, accounting, non-proprietary software maintenance
> or other professional services not tied directly to a related
> construction contract or a discrete identifiable item, require prior
> FTA approval for periods of performance in excess of five years.

B. [Revenue Contracts -- Five-Year Term Limitation]{.underline}

It is FTA's policy that all persons be afforded an equal opportunity to
benefit from business opportunities arising from use of FTA-funded
assets. It is also FTA's policy to encourage FTA recipients to maximize
non-farebox revenues through contractual and other appropriate
arrangements involving non-interfering uses of such FTA-funded assets.
The establishment of a five-year contract term limitation is one means
by which FTA seeks to balance these potentially conflicting policies. A
review of recent requests for exemption from the 5-year limitation in
the area of \"revenue contracts,\" however, suggests that prior FTA
approval is not required under certain conditions. Accordingly, prior
FTA approval of the following categories of \"revenue contracts\" in
excess of five years is no longer required:

> 1). Non-exclusive revenue contracts: Revenue contracts involving
> business opportunities, that due to their nature and the capacity of
> the transit system, are not limited by physical constraints or grantee
> policy to any specific number of entrants do not require prior FTA
> approval. For example, if a grantee allows any vendor to install fiber
> optic cable within the grantee's right-of-way on reasonable terms and
> conditions, until such time as the grantee decides to limit the number
> of entrants due to capacity of the system or other factors, there is
> no need for prior FTA review. Another example might be allowing
> multiple vendors to put transmission towers or antennas on grantee
> property.
>
> 2). Exclusive revenue contracts under certain conditions: Revenue
> contracts involving business opportunities due to their nature and the
> capacity of the transit system which are limited to a specific number
> of entrants, whether due to physical constraints or grantee policy, do
> not require prior FTA approval where the following conditions exist
> and are documented in the grantee's files:
>
> a). Contracts are awarded through a competitive process;
>
> b). Economic analysis shows that a contract term longer than five
> years is necessary to allow the contractor to recover any required
> capital investment and a reasonable return on investment taking into
> account both tax (depreciation) and economic/business considerations.
>
> 3). Transit Oriented/Joint Development Revenue Contracts. Transit
> Oriented Developments and Joint Development projects undertaken in
> conformance with FTA joint development policies may subsequently give
> rise to revenue contracts. Prior FTA concurrence in a contract term in
> excess of five years is governed by the same criteria as described in
> paragraphs 1) and 2) above. Note that FTA routine oversight and
> concurrence in transit oriented development and joint development
> projects remains unchanged by this exemption.

C. [FTA Circular 4220.1D, Paragraph 12 - Payment Provisions in Third
Party Contracts]{.underline}

The survey results indicated that there is some confusion concerning the
use of advance payments. With regard to advance payments, the Circular
states, \"FTA does not authorize and will not participate in funding
payments to a contractor prior to the incurrence of costs by the
contractor unless prior written concurrence is obtained from FTA.\" This
policy is unchanged. To clarify, however, there is no prohibition on a
Grantee's using local funds for advance payments where a grant has been
awarded or the project is covered by a letter of no prejudice, or other
pre-award authority. Please note that advance payments made before a
grant has been awarded or before the project is covered by a letter of
no prejudice or other pre-award authority, will be ineligible for
reimbursement.

D. [Preventive Maintenance]{.underline}

Preventive maintenance is an eligible expense under FTA's capital and
operating assistance programs depending upon the size of the population
served by the grantee. Grantees have asked how the requirements of FTA
Circular 4220.1D apply when preventive maintenance activities are
contracted to third parties under a capital assistance program rather
than an operating assistance program. The question arises because of the
different treatment of capital and operating contracts by the Circular
in accordance with applicable law. There are two options. Under the
capital assistance program, the grantee may apply the Circular only to
the specific preventive maintenance contracts identified in the grant
application, but not others. Alternatively, the grantee may elect to
receive preventive maintenance funds as a certain percentage of total
maintenance costs. Under this alternative, the requirements of the
Circular apply across the board to all of the grantee's maintenance
contracts. Please note that under the latter option, grantees may not
selectively exclude certain maintenance contracts from the total
operations amount on which they base their percentage calculation.

All of the changes reflected in this \"Dear Colleague\" letter are
effective immediately.

FTA does appreciate your feedback. Please continue to give us your
suggestions for improving our procurement program.

> Sincerely,
>
> Signed
>
> Hiram J. Walker
>
> Acting Deputy Administrator

**[4. December 21, 1998: Joint Procurements, Y2K Compliance
Requirements]{.underline}**

U.S. Department

Of Transportation 400 Seventh St. S.W.

**Federal Transit** Washington, D.C. 20590

**Administration** The Administrator

C-98-39

December 21, 1998

Dear Colleague:

Recently, there have been several requests for more insight and guidance
on the Federal Transit Administration\'s (FTA) policy and philosophy on
various aspects of procurement, and specifically on the use of different
strategies and approaches in fulfilling Year 2000 (Y2K) compliance
requirements. The minimum requirements applicable to FTA funded
procurements are set forth in FTA Circular 4220.1D, \"Third Party
Contracting Guidelines.\" The Circular has been designed to provide
grant recipients maximum flexibility to operate within the framework of
the minimum requirements.

In keeping with the discretionary powers and authority which are vested
in grant recipients through the Circular, the FTA fully supports the use
of creative and innovative procurement techniques and strategies. Grant
recipients may utilize these tools to procure their actual needs and for
the purpose of leveraging bargaining power, achieving economies-of-scale
and/or fulfilling Y2K compliance requirements. Further, recipients are
afforded the freedom to collaborate and to partner with each other in
order to facilitate and to maximize the use of innovative procurement
techniques. This includes, but is not limited to, conducting joint
procurements; proceeding with awards that result from proper
\"piggybacking\" transactions; and/or developing standard specifications
for consolidated purchases to address common needs for equipment and
services such as escalators, Y2K technology, hardware and software. FTA
recently clarified its position on \"piggybacking\" and \"tag-one\" in a
\"Dear Colleague\" letter dated October 1, 1998, a copy of which is
attached. Presently, that policy applies to rolling stock procurements
only; however, consideration is being given to expanding the policy to
cover other procurements in the near future.

Joint procurements may be conducted on a regional, statewide or national
basis pursuant to the needs and applicable regulatory and statutory
requirements of the parties to the procurement. The FTA has specifically
encouraged the use of joint procurements for rolling stock. Guidance on
innovative procurement techniques, such as joint procurements, will be
covered in the next issue of the \"Best Practices Procurement Manual\"
(BPPM). Currently, the BPPM contains an example

of a statewide acquisition of buses which was provided by the New York
Department of Transportation to facilitate and to assist others in use
of the joint procurement concept.

Regardless of the procurement methodology or strategy chosen, the
controlling requirement is that FTA funded procurements must conform to
the requirements of FTA Circular 4220.ID. The guiding principle of the
Circular is that procurements must be conducted in a manner that
provides for full and open competition. However, this does not preclude
the award of contracts on a non-competitive basis when supported by
sound reasons documented in the recipients\' files. For example, sound
reasons may exist to either conduct a limited competition among a few
known sources or to make award to a single source on a noncompetitive
basis in order to fulfill the Y2K compliance requirements. Specifically,
the award of a noncompetitive contract to address a Y2K problem would be
permissible if circumstances existed where time is of the essence to
avoid creating a safety hazard in the operation of your transit system.

Should you have questions or desire assistance in addressing procurement
issues relating to fulfilling Y2K compliance requirements, please
contact your respective FTA Regional Office.

> Sincerely,

![](media/image13.png){width="1.3736111111111111in"
height="0.6027777777777777in"}

> Gordon J. Linton

**[5. October 1, 1998: Revenue Contracts, Piggybacking,
Tag-ons]{.underline}**

U.S. Department 400 Seventh St. S.W.

Of Transportation Washington, D.C. 20590

**Federal Transit** The Administrator

**Administration** C-98-25

October 1, 1998

Dear Colleague:

I am pleased to announce the procurement initiatives underway in the
Federal Transit Administration (FTA) and to provide recent FTA policy on
some key areas which will impact your procurement transactions.

First, the FTA has initiated steps to conduct a survey of its customers
whose operations and business transactions are impacted by the FTA
Circular 4220.lD, Third Party Contracting Requirements. As you may
recall, the circular, as amended, was issued on October 1, 1995. The
circular was well received, and the feedback has been consistently
favorable. However, as we strive to enhance customer satisfaction
through the continuous improvement in the delivery of services, the
survey will enable us to measure the degree to which the needs of our
grantees and industry have been met.

Second, the FTA plans to issue the Third Party Contracting Requirements
as a formal rule following a Notice of Proposed Rule Making (NPRM). The
NPRM will afford both grantees and industry representatives the
opportunity to partner with the FTA through the exchange of ideas and
recommendations to influence and shape the final rule.

Third, in response to numerous requests for FTA policy and guidance in
some key areas, the following policy-and guidance is effective
immediately relating to transactions in the categories identified:

1\. \"Tag-ons\" are not permitted. This term is defined as the adding on
to the contracted quantities (base and option) as originally advertised,
competed, and awarded, whether for the use of the buyer or for others
and then treating the add-on portion as though it met the requirement of
competition.

2\. The term \"piggybacking\" is defined as the post-award use of a
contractual

> document/process that allows someone who was not contemplated in the
> original procurement to purchase the same supplies or equipment
> through the original document/process.
>
> Piggybacking is permissible when: (a) the solicitation document and
> the resultant contract contain an assignability clause that provides
> for the assignment of all or part of the specified deliverables as
> originally advertised, competed, evaluated, and awarded. This includes
> the base and option quantities. In addition, the original solicitation
> and resultant contract must contain both a minimum and a maximum
> quantity, which represent the reasonably foreseeable needs of the
> parties to the solicitation.

3\. Revenue contracts are defined as third party contracts whose primary
purpose is to either generate revenues in connection with a transit
related activity, or to create business opportunities utilizing an FTA
funded asset. FTA requires that these contracts be awarded utilizing
competitive selection procedures and principles. The extent of and type
of competition required is within the discretionary judgment of the
grantee. In addition, FTA requires that the contract term be limited to
a period of 5 years, except in those instances where FTA has waived this
requirement. Requests for waivers from the term limitation may be
submitted to your Regional Office. In those situations where FTA may
provide prior approval on a project (e.g., Transit Oriented Development
projects, Cross Border leases) the waiver for a revenue contract in
excess of five years may be obtained as part of the initial FTA approval
of the project.

Guidance on each of these procurement categories will be published in
the Best Practices Procurement Manual within the next few months.

Finally, the Office of Federal Procurement Policy is currently
re-examining the procurement requirements in the Common Grant Rules
which form the basis for the requirements contained in 4220.lD. If you
wish to suggest ideas or changes to the Common Grant Rules, please
contact the Office of Acquisition and Grant Management, Office of the
Secretary at the address below or call area code (202) 366-4289.

Mr. Robert G. Taylor

Chief, Grants Management Division, M-60

Office of the Secretary of Transportation

Washington, DC 20590

I look forward to your continued support and invaluable contributions
toward these efforts.

Sincerely,

> ![](media/image13.png){width="1.3736111111111111in"
> height="0.6027777777777777in"}

Gordon J. Linton

**[6. September 4, 1998: APTA's Standard Bus Procurement
Guidelines]{.underline}**

U.S. Department 400 Seventh St. S.W.

Of Transportation Washington, D.C. 20590

**Federal Transit** The Administrator

**Administration** C-98-16

September 4, 1998

Dear Colleague:

With the Publication of the Standard Bus Procurement Guidelines (SBPG),
I issued a letter pronouncing my support of the collaborative efforts of
the American Public Transit Association (APTA) and the Federal Transit
Administration (FTA). In that letter I assured APTA members that any FTA
funded procurement in conformance with the Phase I guidelines would be
deemed to comply with FTA\'s third party procurement guidelines with
respect to the areas addressed.

Recently, it has come to my attention that my letter has created some
confusion regarding its application and impact on the requirements of
third party contracting set forth in the FTA Circular 4220.lD. To
clarify this issue, I wish to reiterate that the requirements for FTA
funded procurements are covered in FTA Circular 4220.ID. I strongly urge
grantees desiring to conduct FTA funded bus procurements utilizing the
SBPG to ensure there are no conflicts with the FTA circular. Should
clarification be required, grantees should contact their appropriate FTA
regional office for guidance.

In closing, I hope this clarifies any confusion relating to FTA
procurement requirements, and I offer my continued support to this
effort and those in the future.

> Sincerely,

![](media/image13.png){width="1.3736111111111111in"
height="0.6027777777777777in"}

Gordon J. Linton

**[7. March 18, 1997: Buy America Requirements of Pre-Award and
Post-Delivery]{.underline}**

U.S. Department 400 Seventh St. S.W.

Of Transportation Washington, D.C. 20590

**Federal Transit** The Administrator

**Administration** C-97-03

March 18, 1997

Dear Colleague:

A Buy America problem and follow-up surveys of several Pre-Award and
Post-Delivery Reviews of bus procurements indicates that many grantees
and their contractors are not conducting adequate reviews of the Buy
America requirements. The Pre-Award and Post-Delivery Reviews are
designed to ensure that any vehicle purchased with Federal Transit
Administration funds has at least a 60 percent domestic content and
undergoes final assembly in the United States.

In general, we have found that, particularly in the case of final
assembly activities, the grantees surveyed did not provide a description
of the manufacturer\'s final assembly activities and an evaluation of
whether Buy America requirements were met. When a grantee receives
information from a manufacturer, it must review this information to
determine whether it is sufficient to determine if the manufacturer has
met the Buy America requirements. If the information is insufficient,
the grantee must take whatever steps are necessary to satisfy itself
that the manufacturer is complying with the Buy America requirements.
This will usually involve seeking additional information from the
manufacturer. Otherwise, the grantee certifies compliance with Buy
America at its own risk.

In order to assist you in conducting reviews in accordance with the
Pre-Award and Post-Delivery Review Regulation, 49 CFR Part 663, I have
outlined in the enclosure the procedures a grantee must use to ensure
that any vehicles it purchases comply with Buy America. If you have any
questions regarding Buy America compliance, please contact your Regional
Office.

> Sincerely,

![](media/image13.png){width="1.3736111111111111in"
height="0.6027777777777777in"}

> Gordon J. Linton

Enclosure

**FEDERAL TRANSIT ADMINISTRATION**

**GUIDANCE ON BUY AMERICA REQUIREMENTS OF THE PRE-AWARD AND
POST-DELIVERY REVIEWS**

This guidance only addresses the Buy America requirements of the
Pre-Award and Post-Delivery Reviews. The Purchaser\'s Requirements and
the Federal Motor Vehicle Safety Standards requirements must still be
met.

I. Pre-Award Review (before contract award)

> Review data and information on Buy America compliance submitted by the
> manufacturer, including
>
> Proposed domestic content of vehicle components to determine that the
> 60 percent United States content requirement is met;
>
> \- Proposed final assembly location; and
>
> \- Manufacturing activities that will take place during final
> assembly.
>
> The manufacturer should provide enough detail about these activities
> to allow for the determination that these activities would constitute
> adequate final assembly under Buy America requirements. If the
> manufacturer does not provide sufficient information, the grantee must
> seek additional information. If the grantee determines that the
> activities are not adequate, the manufacturer must be asked to submit
> a revised manufacturing plan. A contract may not be awarded until the
> grantee is assured that the Buy America requirements will be met.
>
> Final assembly is defined in 49 CFR Part 661 Buy America Requirements;
> Final Rule as \"the creation of the end product from different
> elements brought together for that purpose through the application of
> manufacturing processes.\" In the case of the manufacture of a new
> rail car, final assembly would typically include, as a minimum, the
> following operations: installation and interconnection of propulsion
> control equipment, propulsion cooling equipment, brake equipment,
> energy sources for auxiliaries and controls, heating and air
> conditioning, communications equipment, motors, wheels and axles,
> suspensions and frames; the inspection and verification of all
> installation and interconnection work; and the in-plant testing of the
> stationary product to verify all functions. In the case of a new bus,
> final assembly would typically include, at a minimum, the installation
> and interconnection of the engine, transmission, axles, including the
> cooling and braking systems; the installation and interconnection of
> the heating and air conditioning equipment; the installation of
> pneumatic and electrical systems, door systems, passenger seats,
> passenger grab rails, destination signs, wheelchair lifts; and road
> testing, final inspection, repairs and preparation of the vehicles for
> delivery.
>
> If a manufacturer\'s final assembly processes do not include all the
> activities that are typically considered the minimum requirements, it
> can request a Federal Transit Administration (FTA) determination of
> compliance. FTA will review these requests on a case-by-case basis to
> determine compliance with Buy America.
>
> The information reviewed supports a Pre-Award Buy America
> Certification that the proposed procurement meets the domestic
> content, the final assembly location and final assembly activities
> requirements.

II\. Post-Delivery Review Requirements (during and after manufacturing)

The grantee is required to:

> \- Review actual component content to ensure that the vehicle meets
> the 60 percent Buy America domestic content requirement;
>
> \- Check that the final assembly location is in the United States and
> the manufacturer\'s final assembly activities meet the requirements
> outlined in paragraph I above; and
>
> \- Have an on-site inspector for rail car procurements and bus
> procurements of greater than 10 vehicles.
>
> The inspector must verify that the actual manufacturing processes are
> consistent with the information provided by the manufacturer or with
> the grantee\'s own assessments. The post-delivery reviews verifies a
> grantee\'s Post-Delivery Buy America Certification that the domestic
> content, final assembly location and final assembly activities
> requirements are met. Any questions or uncertainties concerning these
> activities should be referred immediately to FTA.

######## APPENDIX B.1

**EXAMPLE EVALUATION PROCESS**

Excerpt from the American Public Transit Association

Standard Bus Procurement Guidelines

**Draft as of 9/20/96**

**1.1.4 PROPOSAL EVALUATION, NEGOTIATION AND SELECTION**

Proposals will be evaluated, negotiated, selected and any award made in
accordance with the criteria and procedures described below. The
approach and procedures are those which are applicable to a competitive
negotiated procurement whereby proposals are evaluated to determine
which proposals are within a competitive range. Discussions and
negotiations may then be carried out with Offerors within the
competitive range, after which Best and Final Offers (BAFOs) may be
requested. However, the Procuring Agency may select a proposal for award
without any discussions or negotiations or request for any BAFO(s).
Subject to the Procuring Agency\'s right to reject any or all proposals,
the Offeror will be selected whose proposal is found to be most
advantageous to the Procuring Agency, based upon consideration of the
criteria of \"Qualification Requirements\" (Section 1.1.4.3.1) and 
\"Proposal Evaluation Criteria\" (Section 1.1.4.3.2) below.

**[1.1.4.1 Opening of Proposals]{.underline}**

Proposals will not be publicly opened. All proposals and evaluations
will be kept strictly confidential throughout the evaluation,
negotiation and selection process. Only the members of the Selection
Committee and Evaluation Team and other Procuring Agency officials,
employees and agents having a legitimate interest will be provided
access to the proposals and evaluation results during this period.

**[1.1.4.2 Selection Committee and Evaluation Team]{.underline}**

*(NOTE: Procuring Agency to specify how it will organize the evaluation
and appropriately title this section. The following is provided as an
example.)*

A Selection Committee will be established. The Committee will make all
decisions regarding the evaluations, determination of responsible
Offerors and the competitive range, negotiations and the selection of
the Offeror, if any, that may be awarded the Contract. The Selection
Committee will be assisted by an Evaluation Team which will include
officers, employees and agents of the Procuring Agency. The Evaluation
Team will carry out the detailed evaluations and report all of its
findings to the Selection Committee.

**[1.1.4.3 Proposal Selection Process]{.underline}**

The following describes the process by which proposals will be evaluated
and a selection made for a potential award. Any such selection of a
proposal by a responsible Offeror shall be made by consideration of only
the criteria of \"Qualification Requirements\" (Section 1.1.4.3.1) and
\"Proposal Evaluation Criteria\" (Section 1.1.4.3.2) below. Section
1.1.4.3.1 specifies the requirements for determining responsible
Offerors, all of which must be met by an Offeror to be found qualified.
Final determination of an Offeror\'s qualification will be made based
upon all information received during the evaluation process and as a
condition for award. Section 1.1.4.3.2 contains all of the evaluation
criteria, and their relative order of importance, by which a proposal
from a qualified Offeror will be considered for selection. An award, if
made, will be to a responsible Offeror for a proposal which is found to
be in the Procuring Agency\'s best interest, price and other evaluation
criteria considered.

The procedures to be followed for these evaluations are provided in
\"Evaluation Procedures\" (Section 1.1.4.4) below.

**[1.1.4.3.1 Qualification Requirements]{.underline}**

The following are the requirements for qualifying responsible Offerors.
All of these requirements must be met; therefore, they [are
not]{.underline} listed by any particular order of importance. The
Offeror of any proposal that the Selection Committee finds not to meet
these requirements, and cannot be made to meet these requirements, may
be determined by the Selection Committee not to be responsible and its
proposal rejected. The requirements are as follows:

*(NOTE: Requirements shown in italics are examples to serve as
guidelines. The Procuring Agency is to choose and specify the
appropriate requirements.)*

> I. Sufficient financial strength and resources and capability to
> finance the work to be performed and complete the Contract in a
> satisfactory manner as measured by:
>
> A. Offeror\'s financial statements prepared in accordance with United
> States Generally Accepted Accounting Principles (GAAP) and audited by
> an independent certified public accountant authorized to practice in
> the jurisdiction of either the Procuring Agency or the Offeror.
> *(NOTE: Procuring Agency to determine any minimum requirements for
> equity, working capital, debt, etc. For example where it would be
> possible to establish some minimum numerical values for equity, debt
> to assets ratio, etc. as a screening mechanism, this should be done on
> an approximate basis to avoid having to rule out an otherwise viable
> Offeror which is just below a rigid minimum. Whatever measures are
> established should be consistent with what the financial strength
> needs are for the project. Here it is only important to determine if
> the Offeror will have sufficient financial strength to pay its bills
> on time, fund the cash flow, and meet obligations to subcontractors.
> The evaluation of financial strength should take into account the
> Offeror\'s other contractual commitments)*
>
> B. *(NOTE: If performance bonding is specified as an alternative to or
> together with other financial qualifications and assurances)* Ability
> to secure required bond(s) as evidenced by a letter of commitment from
> an underwriter confirming that the Offeror can be bonded for the
> required amount.
>
> C. Willingness of any parent company to provide the required financial
> guaranty evidenced by a letter of commitment signed by an officer of
> the parent company having the authority to execute the parent company
> guaranty. *(NOTE: If the Offeror is a subsidiary(ies) of another
> company(ies) or is a joint venture, guaranties from the parents and/or
> corporate members of the joint venture should be required. Language
> can be stipulated by the Procuring Agency to assure that the guaranty
> is effective.)*
>
> D. Ability to obtain required insurance with coverage values that meet
> minimum requirements evidenced by a letter from an underwriter
> confirming that the Offeror can be insured for the required amount.

II\. Evidence that the human and physical resources are sufficient to
perform the contract as specified and assure delivery of all equipment
within the time specified in the Contract, to include:

> A. Engineering, management and service organizations with sufficient
> personnel and requisite disciplines, licenses, skills, experience, and
> equipment to complete the Contract as required and satisfy any
> engineering or service problems that may arise during the warranty
> period.
>
> B. Adequate manufacturing facilities sufficient to produce and
> factory-test equipment on schedule.
>
> C. A spare parts procurement and distribution system sufficient to
> support equipment maintenance without delays and a service
> organization with skills, experience, and equipment sufficient to
> perform all warranty and on-site work.
>
> III\. Evidence that Offeror is qualified in accordance with Part 4:
> Quality Assurance Provisions.
>
> IV\. Evidence of satisfactory performance and integrity on contracts
> in making deliveries on time, meeting specifications and warranty
> provisions, parts availability, and steps Offeror took to resolve any
> judgments, liens, fleet defects history, and warranty claims. Evidence
> shall be by client references.

**[1.1.4.3.2 Proposal Evaluation Criteria]{.underline}**

The following are the complete criteria, listed by their relative degree
of importance, by which

proposals from responsible Offerors will be evaluated and ranked for the
purposes of determining any competitive range and to make any selection
of a proposal for a potential award. Any exceptions, conditions,
reservations or understandings explicitly, fully and separately stated
on the \"Form for Proposal Deviation (Section 1.1.6.9) which do not
cause the Procuring Agency to consider a proposal to be outside the
competitive range, will be evaluated according to the respective
evaluation criteria and/or sub-criteria which they affect.

The criteria are listed numerically by their relative order of
importance. However, certain criteria may have sub-criteria that are
listed by their relative order of importance within the specific
criterion they comprise. Also, certain sub-criteria may have
sub-criteria that are listed by their relative degree of importance
within the specific sub-criterion they comprise.

*(NOTE: Procuring Agency to define and insert the evaluation criteria.
At the option of the Procuring Agency weights should be assigned to each
criterion and sub-criterion and shown in the document. The criteria are
to be listed by their order of importance in the evaluation. The
following are suggested categories of criteria for Procuring Agency
consideration, but not listed in suggested order of importance:*

> *Technical*
>
> *Qualifications and Resources*
>
> *Management*
>
> *Price*
>
> *Other Financial Impacts*

*Example evaluation criteria are presented in Appendix at the end of
this Section 1.)*

**[1.1.4.4 Evaluation Procedures]{.underline}**

All aspects of the evaluations of the proposals and any
discussions/negotiations, including documentation, correspondence and
meetings, will be kept confidential during the evaluation and
negotiation process.

Proposals will be analyzed for conformance with the instructions and
requirements of the RFP and Contract documents. Proposals that do not
comply with these instructions and do not include the required
information may be rejected as insufficient or not be considered for the
competitive range. Procuring Agency reserves the right to request an
Offeror to provide any missing information and to make corrections.
Offerors are advised that the detailed evaluation forms and procedures
will follow the same proposal format and organization specified in
\"Instructions to Offerors\" (Section 1.1.3). Therefore, Offerors shall
pay close attention to and strictly follow all instructions. Submittal
of a proposal will signify that the Offeror has accepted the whole of
the Contract documents, except such conditions, exceptions, reservations
or understandings explicitly, fully and separately stated on the forms
and according to the instructions of \"Form for Proposal Deviation.\"
Any such conditions, exceptions, reservations or understandings which do
not result in the rejection of the proposal are subject to evaluation
under the criteria of \"Proposal Evaluation Criteria\" (Section
1.1.4.3.2).

Evaluations will be made in strict accordance with all of the evaluation
criteria and procedures specified in \"Proposal Selection Process\"
(Section 1.1.4.3). The Procuring Agency will select for any award the
highest ranked proposal from a responsible Offeror, qualified under
\"Qualification Requirements\" (Section 1.1.4.3.1) which does not render
this procurement financially infeasible and is judged to be most
advantageous to the Procuring Agency based on consideration of the
evaluation \"Proposal Evaluation Criteria\" (Section 1.1.4.3.2).

**[1.1.4.4.1 Evaluations of Competitive Proposals]{.underline}**

> **I. Qualification of Responsible Offerors.** Proposals will be
> evaluated in accordance with requirements of \"Qualification
> Requirements\" (Section 1.1.4.3.1) to determine the responsibility of
> Offerors. Any proposals from Offerors whom the Procuring Agency finds
> not to be responsible and finds cannot be made to be responsible may
> not be considered for the competitive range. Final determination of an
> Offeror\'s responsibility will be made upon the basis of initial
> information submitted in the proposal, any information submitted upon
> request by the Procuring Agency, information submitted in a BAFO and
> information resulting from Procuring Agency inquiry of Offeror\'s
> references and its own knowledge of the Offeror.
>
> **II. Detailed Evaluation of Proposals and Determination of
> Competitive Range.** Each proposal will be evaluated in accordance
> with the requirements and criteria specified in \"Proposal Selection
> Process\" (Section 1.1.4.3).
>
> The following are the minimum requirements that must be met for a
> proposal to be considered for the competitive range. All of these
> requirements must be met; therefore, they [are not]{.underline} listed
> by any particular order of importance. Any proposal that the Procuring
> Agency finds not to meet these requirements, and may not be made to
> meet these requirements, may be determined by the Procuring Agency to
> not be considered for the competitive range. The requirements are as
> follows:
>
> A. Offeror is initially evaluated as responsible in accordance with
> the requirements of \"Qualification Requirements\" (Section
> 1.1.4.3.1), or that the Procuring Agency finds it is reasonable that
> said proposal can be modified to meet said requirements. Final
> determination of responsibility will be made with final evaluations.
>
> B. Offeror has followed the instructions of the RFP and included
> sufficient detail information, such that the proposal can be
> evaluated. Any deficiencies in this regard must be determined by the
> Procuring Agency to be either a defect that the Procuring Agency will
> waive in accordance with \"Acceptance/Rejection of Proposals\"
> (Section 1.1.5.1) or that the proposal can be sufficiently modified to
> meet these requirements.
>
> C. Proposal price would not render this procurement financially
> infeasible, or it is reasonable that such proposal price might be
> reduced to render the procurement financially feasible.
>
> The Procuring Agency will carry out and document its evaluations in
> accordance with the criteria and procedures of \"Proposal Selection
> Process\" (Section 1.1.4.3). Any extreme proposal deficiencies which
> may render a proposal unacceptable will be documented. The Procuring
> Agency will make specific note of questions, issues, concerns and
> areas requiring clarification by Offerors and to be discussed in any
> meetings with Offerors which the Procuring Agency finds to be within
> the competitive range.
>
> Rankings and spreads of the proposals against the evaluation criteria
> will then be made by the Procuring Agency as a means of judging the
> overall relative spread between proposals and of determining which
> proposals are within the competitive range, or may be reasonably made
> to be within the competitive range.
>
> **III. Proposals not within the Competitive Range.** Offerors of any
> proposals that have been determined by the Procuring Agency as not in
> the competitive range, and cannot be reasonably made to be within the
> competitive range, will be notified in writing, including the
> shortcomings of their proposals.
>
> **IV. Discussions with Offerors in the Competitive Range.** The
> Offerors whose proposals are found by the Procuring Agency to be
> within the competitive range, or may be reasonably made to be within
> the competitive range, will be notified and any questions and/or
> requests for clarifications provided to them in writing. Each such
> Offeror may be invited for a private interview(s) and discussions with
> the Procuring Agency to discuss answers to written or oral questions,
> clarifications, and any facet of its proposal.
>
> In the event that a proposal, which has been included in the
> competitive range, contains conditions, exceptions, reservations or
> understandings to any Contract requirements as provided in \"Form for
> Proposal Deviation," said conditions, exceptions, reservations or
> understandings may be negotiated during these meetings. However, the
> Procuring Agency shall have the right to reject any and all such
> conditions and/or exceptions, and instruct the Offeror to amend its
> proposal and remove said conditions and/or exceptions; and any Offeror
> failing to do so may cause the Procuring Agency to find such proposal
> to be outside the competitive range.
>
> No information, financial or otherwise, will be provided to any
> Offeror about any of the proposals from other Offerors. Offerors will
> not be given a specific price or specific financial requirements they
> must meet to gain further consideration, except that proposed prices
> may be considered to be too high with respect to the marketplace or
> unacceptable. Offerors will not be told of their rankings among the
> other Offerors.
>
> **V. Factory and Site Visits.** The Procuring Agency reserves the
> right to conduct factory visits to inspect the Offeror\'s facilities
> and/or other transit systems which the Offeror has supplied the same
> or similar equipment.
>
> **VI. Best and Final Offers (BAFO).** After all interviews have been
> completed, each of the Offerors in the competitive range will be
> afforded the opportunity to amend its proposal and make its BAFO. The
> request for BAFOs shall include:
>
> A. Notice that discussions/negotiations are concluded;
>
> B. Notice that this is the opportunity for submission of a BAFO;
>
> C. A common date and time for submission of written BAFOs, allowing a
> reasonable opportunity for preparation of the written BAFOs;
>
> D. Notice that if any modification to a BAFO is submitted, it must be
> received by the date and time specified for the receipt of BAFOs and
> is subject to the late submissions, modifications, and withdrawals of
> proposals provisions of the Request for Proposal;
>
> E. Notice that if Offerors do not submit a BAFO or a notice of
> withdrawal and another BAFO, their immediate previous Offer will be
> construed as their BAFO.
>
> Any modifications to the initial proposals made by an Offeror in its
> BAFO shall be identified in its BAFO. BAFOs will be evaluated by the
> Procuring Agency according to the same requirements and criteria as
> the initial proposals \"Proposal Selection Process\" (Section
> 1.1.4.3). The Procuring Agency will make appropriate adjustments to
> the initial scores for any sub-criteria and criteria which have been
> affected by any proposal modifications made by the BAFOs. These final
> scores and rankings within each criteria will again be arrayed by the
> Procuring Agency and considered according to the relative degrees of
> importance of the criteria defined in \"Proposal Evaluation Criteria\"
> (Section 1.1.4.3.2).
>
> The Procuring Agency will then choose that proposal which it finds to
> be most advantageous to the Procuring Agency based upon the evaluation
> criteria. The results of the evaluations and the selection of a
> proposal for any award will be documented in a report.
>
> The Procuring Agency reserves the right to make an award to an Offeror
> whose proposal it judges to be most advantageous to the Procuring
> Agency based upon the evaluation criteria, without conducting any
> written or oral discussions with any Offerors or solicitation of any
> BAFOs.

***APPENDIX A: ILLUSTRATIVE EVALUATION CRITERIA AND SCORING PROCEDURE***

Two scoring methods, each including criteria and application of the
criteria, are presented below. The first is a completely weighted
method, in which all the criteria have a predetermined role and, given
the unavoidably subjective assignment of pass/fail or numerical scores
to specific criteria, results in a single, certain total score for each
proposal. The second method, the narrative/trade-off method, provides
more subjectivity in the assignment and combination of technical scores,
and in the trade-offs between price and non-price criteria. An infinite
number of variations and combinations of these methods could be
developed.

**I. COMPLETELY WEIGHTED FORMULA METHOD**

*[**1.1.4.3.2 Illustrative Evaluation Criteria** (Completely Weighted
Formula Illustrative Method)]{.underline}*

> ***I.** **Affordability** **(pass or fail).** The price proposals will
> be assessed for affordability. The Procuring Agency will not make an
> award for any proposal which proposes prices that would render the
> procurement infeasible.*
>
> ***II.** **Minimum Technical Requirements (pass or fail).** Technical
> proposals shall meet the following minimum technical requirements for
> any consideration for selection and award. A proposal not meeting
> [all]{.underline} of these requirements will be rejected.*
>
> *(NOTE: Certain requirements of the specification can be selected as
> absolute requirements, such that where any one is not proposed to be
> met would be reason to reject a proposal. When doing so, the specific
> requirements must be identified by detailed references.)*
>
> *EXAMPLES:*
>
> *1. Passenger Capacity specified in \_\_\_\_\_\_\_.*
>
> *2. Overall dimensions specified in \_\_\_\_\_\_\_.*
>
> *3. Performance (speed, acceleration, braking, turning radius)
> specified in \_\_\_\_\_\_\_.*
>
> *4. Emissions specified in \_\_\_\_\_\_\_.*
>
> *5. Propulsion system requirements of \_\_\_\_\_\_\_.*
>
> *6. Body structural and material requirements of \_\_\_\_\_\_\_.*
>
> *7. Service proven technology*
>
> ***III.** **Unacceptable Exceptions, Conditions, Reservations and
> Understandings (pass or fail).** Exceptions, conditions, reservations
> or understandings that are explicitly, fully and separately stated on
> the required form of Section 1.1.6.9 \"Form for Proposal Deviation\"
> will be evaluated for their acceptability. A proposal having a
> preponderance of unacceptable exceptions and conditions may be cause
> for the proposal to be rejected. Each of any exceptions and/or
> conditions made in a proposal will be evaluated and the Procuring
> Agency will determine their individual acceptability. An unacceptable
> exception, condition, reservation or understanding, if not withdrawn
> by the Offeror upon the request by the Procuring Agency, would be
> cause for the proposal to be rejected. For the purposes of determining
> the competitive range a proposal containing unacceptable exceptions,
> conditions, reservations or understandings may be included on the
> basis that the proposal is capable of being made acceptable provided
> that the Offeror withdraw or modify the unacceptable exceptions,
> conditions, reservations or understandings. Any exceptions,
> conditions, reservations or understandings which do not cause the
> Procuring Agency to consider a proposal to be outside the competitive
> range, will be evaluated according to the respective evaluation
> criteria and/or sub-criteria which they affect.*
>
> ***IV.** **Technical Proposal Scoring Criteria (weight =
> \_\_\_\_\_\_\_)** The transit bus offered in the technical proposal
> will be evaluated for the following factors which are listed in their
> relative order of importance:*
>
> *A. [Engine]{.underline} - Operating experience of previous users and
> test results of proposed engine and subsystems in transit service. The
> degree to which performance requirements of Part 3: Technical
> Specifications, for the engine are proposed to be met. The risk of
> development tasks (if any) will be assessed. (sub-weight =
> \_\_\_\_\_\_)*
>
> *B. [Transmission]{.underline} - Operating experience of previous
> users and test results of proposed transmission in transit service.
> The degree to which performance requirements of Part 3: Technical
> Specifications, for the transmission are proposed to be met. The risk
> of development tasks (if any) will be assessed. (sub-weight =
> \_\_\_\_\_\_)*
>
> *C. [Major Subsystems]{.underline} - Operating experience of previous
> users and test results of proposed major subsystems in transit
> service. The degree to which performance requirements of Part 3:
> Technical Specifications, for each major subsystem are proposed to be
> met. The risk of development tasks (if any) will be assessed.
> (sub-weight = \_\_\_\_\_\_)*
>
> *D. [Quality Assurance]{.underline} - Sufficiency of in-place Quality
> Assurance Program and procedures to meet requirements. (sub-weight =
> \_\_\_\_\_\_)*
>
> *E. [Spare Parts Availability -]{.underline} Degree to which the
> required availability of spare parts (Section 2.5.4) are proposed to
> be met or exceeded. (sub-weight = \_\_\_\_\_\_)*
>
> *F. [Standard Warranty -]{.underline} Degree to which the standard
> warranty of Part 5 is proposed to be met or exceeded. (sub-weight =
> \_\_\_\_\_\_\_)*
>
> *G. [System Support]{.underline} - Demonstrated ability to meet or
> exceed reliability and maintainability requirements; suitability of
> test equipment; quality of manuals; and effectiveness of training
> programs. (sub-weight = \_\_\_\_\_\_)*
>
> ***V.** **Proposed Price (weight = \_\_\_\_\_\_\_).** The lowest
> proposal price (among all proposals) will be divided by the proposal
> price being scored, and the resulting quantity will be multiplied by
> the weight for the proposed price criterion.*
>
> ***VI.** **Qualifications (weight = \_\_\_\_\_\_\_).** Degree to which
> Offeror exceeds the required qualifications of Section 1.1.4.3.1
> above.*
>
> *A. Financial Strength and Resources (sub-weight = \_\_\_\_\_\_)*
>
> *B. Human and Physical Resources (sub-weight = \_\_\_\_\_\_)*
>
> *C. Record of Performance on Bus Contracts (sub-weight =
> \_\_\_\_\_\_)*
>
> ***VII.** **Other Financial Impacts (weight = \_\_\_\_\_\_\_).** This
> factor will consider the following financial impacts: maintenance
> costs resulting from parts reliability, parts standardization,
> warranties, timeframe for Contract performance and final delivery, and
> the extent to which the Procuring Agency can analyze cost and pricing
> data.*

*[**1.1.4.3.3 Application of Evaluation Criteria.** (Completely Weighted
Formula Illustrative Method)]{.underline}*

*(NOTE: This section may or may not be included, dependent upon the
specific criteria that are included in Section 1.1.4.3.2.)*

Proposals will be evaluated against the pass/fail Criteria Nos. 1, 2 and
3. Any proposal which meets all pass/fail criteria, or fails one or more
of these criteria but is susceptible of being made to meet such failed
criteria, will be considered within the competitive range. Otherwise, a
proposal may not be considered to be within the competitive range.

*Sub-criteria of Criteria Nos. 4 and 6 will be scored based on the
reviewer\'s determination of the degree of compliance with Contract
requirements, potential risks and benefits, and strengths and
weaknesses. The score is reduced in proportion to the extent of
non-conformance, discrepancies, errors, omissions, and risks to the
Procuring Agency. Scores will be assigned according to the following:*

+------+---------------------------------------------------------------+
| *9 - | *Exceptional. Fully compliant with Contract requirements and  |
| 10*  | with desirable strengths or betterments; no errors, or risks, |
|      | or weaknesses or omissions.*                                  |
+------+---------------------------------------------------------------+
| *6 - | *Good to Superior. Compliant with Contract requirements; some |
| 8*   | minor errors, or risks, or weaknesses or omissions.*          |
+------+---------------------------------------------------------------+
| *4 - | *Adequate. Minimally compliant with Contract requirements;    |
| 5*   | errors, or risks, or*                                         |
|      |                                                               |
|      | *weaknesses or omissions; possible to correct and make        |
|      | acceptable.*                                                  |
+------+---------------------------------------------------------------+
| *1 - | *Poor to Deficient. Non-compliant with Contract requirements; |
| 3*   | errors, or risks, or weaknesses or omissions; difficult to    |
|      | correct and make acceptable.*                                 |
+------+---------------------------------------------------------------+
| *0*  | *Unacceptable. Totally deficient and not in compliance with   |
|      | Contract requirements; not correctable.*                      |
+------+---------------------------------------------------------------+

*An estimate of the impact costs to the Procuring Agency will be made
for the items listed in Criterion No. 7. Resultant scores for each
sub-criterion will be weighed by the appropriate weight factors and a
total score for each criterion determined. The scores of Criteria Nos.
4, 5 and 6 will then be weighed by the appropriate weight factors and a
total score developed for the proposal. The following table illustrates
the procedure.*

***II. NARRATIVE / TRADE-OFF METHOD***

*[**1.1.4.3.2 Evaluation Criteria** (Narrative / Trade-Off Illustrative
Method)]{.underline}*

> ***I.** **Unacceptable Exceptions, Conditions, Reservations and
> Understandings (pass or fail).** Exceptions, conditions, reservations
> or understandings that are explicitly, fully and separately stated on
> the required form of Section 1.1.6.9 \"Form for Proposal Deviation\"
> will be evaluated for their acceptability. A proposal having a
> preponderance of unacceptable exceptions and conditions may be cause
> for the proposal to be rejected. Each of any exceptions and/or
> conditions made in a proposal will be evaluated and the Procuring
> Agency will determine their individual acceptability. An unacceptable
> exception, condition, reservation or understanding, if not withdrawn
> by the Offeror upon the request by the Procuring Agency, would be
> cause for the proposal to be rejected. For the purposes of determining
> the competitive range a proposal containing unacceptable exceptions,
> conditions, reservations or understandings may be included on the
> basis that the proposal is capable of being made acceptable provided
> that the Offeror withdraw or modify the unacceptable exceptions,
> conditions, reservations or understandings. Any exceptions,
> conditions, reservations or understandings which do not cause the
> Procuring Agency to consider a proposal to be outside the competitive
> range, will be evaluated according to the respective evaluation
> criteria and/or sub-criteria which they affect.*
>
> ***II.** **Other Pass/Fail Criteria** - (NOTE: If the procuring agency
> wishes to impose any other unalterable conditions on the proposals,
> these may be included as pass/fail criteria. Proposer criteria in
> addition to those specified in Section 1.1.4.3.1 "Qualification
> Requirements" (such as financial capability, proof of ability to
> provide performance bonds, or proven experience record) or essential
> technical criteria (such as propulsion system or approved equal, or
> structural requirements) may be either included in this category as
> pass/fail criteria, or evaluated under the following criteria with
> extremely low ranking for attributes that are unsatisfactory. The
> necessary input data should correspond to proposal requirements listed
> in Sections 1.1.3.2.2 \"Technical Proposal\" or 1.1.3.2.3 \"Management
> Plan.\")*
>
> ***III.** **Technical Proposal -** The transit bus and support offered
> in the technical proposal will be evaluated for the following factors
> which are listed in their relative order of importance:*
>
> *A. [Powertrain]{.underline} - Operating experience of previous users
> and test results of proposed engine, transmission, and subsystems in
> transit service. The degree to which performance requirements of Part
> 3: Technical Specifications and the needs of the Procuring Agency, for
> the engine and transmission are proposed to be met. The risk of
> development tasks (if any) will be assessed.*
>
> *B. [Structure, Suspension, and Body]{.underline} - Operating
> experience of previous users and test results of proposed structure,
> suspension (including braking systems and steering) and body in
> transit service. The degree to which performance requirements of Part
> 3: Technical Specifications and the needs of the Procuring Agency, for
> these systems are proposed to be met. The risk of development tasks
> (if any) will be assessed.*
>
> *C. [Other Major Subsystems]{.underline} - Operating experience of
> previous users and test results of proposed major subsystems in
> transit service. The degree to which performance requirements of Part
> 3: Technical Specifications and the needs of the Procuring Agency, for
> each major subsystem are proposed to be met. The risk of development
> tasks (if any) will be assessed.*
>
> *D. [Quality Assurance]{.underline} - Sufficiency of in-place Quality
> Assurance Program and procedures to meet requirements.*
>
> *E. [Spare Parts Availability -]{.underline} Degree to which the
> required availability of spare parts (Section 2.5.4) are proposed to
> be met or exceeded.*
>
> *F. [Standard Warranty -]{.underline} Degree to which the standard
> warranty of Part 5 is proposed to be met or exceeded.*
>
> *G. [System Support]{.underline} - Demonstrated ability to meet or
> exceed reliability and maintainability requirements; suitability of
> test equipment; quality of manuals; and effectiveness of training
> programs.*
>
> *H. [Other Financial Impacts]{.underline} **-** This factor will
> consider the following financial impacts: maintenance costs resulting
> from parts reliability, parts standardization, warranties, timeframe
> for Contract performance and final delivery, and the extent to which
> the Procuring Agency can analyze cost and pricing data.*
>
> *I. [Qualifications]{.underline} **-** Degree to which Offeror exceeds
> the required qualifications of Section 1.1.4.3.1 above.*

a)  *Human and Physical Resources.*

b)  *Financial Strength and Resources.*

> *c) Record of Performance on Bus Contracts.*
>
> *(NOTE: The necessary input data should correspond to proposal
> requirements listed in Sections 1.1.3.2.2 \"Technical Proposal\" or
> 1.1.3.2.3 \"Management Plan.\")*
>
> ***IV.** **Proposed Price**. The price proposals will be evaluated and
> appropriate, uniform treatment of unit costs, ancillary products and
> services, escalators, exchange rates, deviations and options will
> reduce each proposal to a single price evaluation figure. (NOTE: FTA
> competitive procurement requirements specify that to preserve the
> right to exercise options, they should be included in the
> evaluation).*

*[**1.1.4.3.3 Application of Evaluation Criteria.** (Narrative /
Trade-Off Illustrative Method)]{.underline}*

*(NOTE: This section may or may not be included, dependent upon the
specific criteria that are included in Section 1.1.4.3.2.)*

1\. Proposals will be evaluated against the pass/fail Criteria Nos. 1
and 2. Any proposal which meets all pass/fail criteria, or fails one or
more of these criteria but is deemed susceptible of being made to meet
such failed criteria, will be considered within the competitive range.
Otherwise, a proposal may not be considered to be within the competitive
range.

*Sub-criteria of Criterion No. 3 will be evaluated based on the
reviewer\'s determination of the degree of compliance with Contract
requirements, potential risks and benefits, and strengths and
weaknesses. One of the following adjectival ratings should be used for
each subcriterion:*

  ------------------ ----------------------------------------------------------
  *Excellent*        *Significantly exceeds in all respects the minimum
                     requirements; high probability of success; no significant
                     weaknesses.*

  *Very Good*        *Substantial response; meets in all aspects and in some
                     cases exceeds, the critical requirements; no significant
                     weaknesses.*

  *Good*             *Generally meets minimum requirements; good probability of
                     success; weaknesses can be readily corrected.*

  *Marginal*         *Lack of essential information; low probability for
                     success; significant weaknesses, but correctable.*

  *Unsatisfactory*   *Fails to meet minimum requirements; needs major revision
                     to make it acceptable.*
  ------------------ ----------------------------------------------------------

Evaluators are to substantiate each rating with a brief narrative
explaining their evaluation. The narrative will be specific in nature,
addressing the strengths/weaknesses of the proposal in each area and
provide a sound rationale for the conclusion reached. This becomes the
basis for the evaluator\'s overall rating and comparison to other
proposals. To arrive at the overall technical rating, the evaluator will
develop a summary statement.

*Evaluators may utilize an informal weighting scheme as a tool (not to
be considered the formal evaluation) to assist them in formulating their
evaluation. This may be helpful to individual evaluators in terms of
remaining focused on the relationship between criteria and facilitate
the evaluation process.*

*2. The individual evaluators will rank each of the proposals reviewed
in descending order and provide a supporting narrative, addressing the
specific elements of the proposal that are the determining factors
(consistent with step 1 findings) for their position within the
ranking.*

*3. Committee members will review and discuss the individual findings
and develop a consensus ranking consistent with the evaluation criteria.
The committee ranking must also be supported by a narrative that
provides the rationale (specific strengths and weaknesses) for their
determination.*

4\. The rank ordered list of proposals will be arrayed in descending
order together with the price evaluation figure for each proposal. As
the list is reviewed in descending order, any increase in price as
technical merit decreases will cause the elimination of the proposal
from the list. If more than one proposal remains, the committee will
review the trade-offs between descending technical merit and descending
price. The committee will then make a decision regarding which of the
proposals is the most advantageous to the Procuring Agency, price and
other factors considered.

**APPENDIX B.2**

**SPECIFICATION/SCOPE OF SERVICE GUIDE**

**Prepared by Office of Procurement**

**The Metropolitan Transit Authority**

**of Harris County, Texas**

**January 1987**

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

Foreword 3

Introduction 3

Objective of Specification or Scope of Service 3

Which Type of Specification or Scope of Service to Use 4

Do\'s and Don\'ts of a Specification or Scope of Service 4

Project Manager/User Responsibility to Contracts 6

Part I Six-Section Equipment Specification. 7

Data Sheet for Six-Section Specification. 12

Check List for Six-Section Specification. 17

Part II Scope of Service 17

Part III Brand Name or Equal Equipment Specification/Data Sheet. 19

Part IV Statement of Work/Purchase Description. 22

**[FOREWORD]{.underline}**

This document has been prepared to assist Metropolitan Transit Authority
(METRO) personnel in the preparation of Equipment Specifications, Data
Sheets, Scope of Services and Statements of Work.

**[INTRODUCTION]{.underline}**

This document provides guidelines and recommendations for developing the
format and content of a specification, data sheet, Scope of Service or
Statement of Work for the following, but not limited to:

-   Capital equipment procurement

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-   Bus modifications

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-   Maintenance equipment

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-   Off-the-shelf equipment or hardware

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-   Services - professional

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-   Services - personal and non-personal

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-   Supplies

Statements shown in light type provide instruction and clarification for
a specification or Scope of Service paragraph, and statements in bold
type are suggested wordings for the content of a paragraph.

Each specification, data sheet or statement of work statement adopted
from this document should be carefully reviewed and modified as needed
prior to being incorporated into a specification. The scope of service
statements are typical examples for services required and should only be
used as a guide.

The use of the word Contractor is synonymous with the words vendor,
supplier, seller or bidder.

Commercial-type requirements such as warranty provisions, cost
information, delivery information and method of payments should not
appear in a technical specification or scope of service since they will
be specified in other documents provided by the Office of Procurement.

**[OBJECTIVE OF A SPECIFICATION OR A SCOPE OF SERVICE]{.underline}**

The objective of a specification, data sheet or scope of service is to
communicate to Contractors and Procurement personnel what is required
and also provide the basis for quality assurance to determine if the
Contractor has met the requirements of the contract or purchase order.
The specification or scope of service must be written in clear,
unambiguous and precise language to communicate effectively what is
required. Remember, the Contractor has total responsibility for the work
after receipt of order.

**[WHICH TYPE OF SPECIFICATION OR SCOPE OF SERVICE TO USE]{.underline}**

The following is an example of which type of specification or scope of
service may be used, but not necessarily limited to:

Six-Section Equipment Specification

-   Capital equipment procurement

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-   Bus modifications

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-   Maintenance equipment

Scope of Service

-   Services - professional

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-   Services - personal and non-personal

Brand Name or Equal Equipment Specification/Data Sheet

-   Capital equipment procurement

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-   Maintenance equipment

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-   Off-the-shelf equipment or hardware (complex)

Statement of Work/Purchase Description

-   Off-the-shelf equipment or hardware (routine)

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-   Services - personal and non-personal

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-   Supplies

**[DO\'S AND DON\'TS OF A SPECIFICATION OR SCOPE OF
SERVICE]{.underline}**

The following is a list of do\'s and don\'ts that should be reviewed
prior to starting the first draft of a Specification or Scope of
Service:

[DO\'S]{.underline}

-   Develop the correct mental attitude. Be positive.

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-   Learn the content and format of a six-section specification. (Once
    you have done this and adopted the proper specification writing
    attitude, you will be able to write any type or format of
    Specification or Scope of Services. This will hold true whether you
    require equipment, supplies, or services.)

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-   Write the Specification or Scope of Service to be precise and
    perfectly clear.

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-   Write the Specification or Scope of Service in short, concise
    sentences in the simplest form possible.

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-   Determine and separate your essential requirements from desirables
    or \"nice to have\" needs.

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-   Whenever possible, write specifications that allow open competition.

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-   Specify requirements within the state-of-the-art of the industry.

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-   Obtain technical information from sources such as:

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-   publications

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-   industry releases

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-   manufacturers

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-   contractors

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-   fellow workers

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-   In the process of obtaining technical information, do not commit
    METRO in any way.

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-   Include Quality Assurance Provisions that mesh with the stated
    requirements.

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-   Clearly communicate your technical knowledge in the Specification.

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-   Use decimals in preference of fractions.

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-   After you have written what you feel is a perfectly clear and brief
    statement of requirement, ask yourself, \"Is there any way that
    anyone could misconstrue this statement?\"

[DON\'TS]{.underline}

-   \"Re-invent the wheel\" when an existing Specification or Scope of
    Service is available.

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-   Make ambiguous statements, i.e.; the highest quality, in accordance
    with industry practices, acceptance per industry practices.

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-   Specify unrealistic or unnecessarily restrictive requirements.

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-   Provide information to one bidder that will give an advantage over
    another bidder.

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-   Allow manufacturer\'s or manufacturer\'s representatives to write
    the Specification or Scope of Service.

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-   Use unfamiliar words, colloquialisms and words having more than one
    meaning.

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-   Use open-ended requirements such as:

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-   As directed

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-   Subject to approval

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-   Satisfactory to

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-   Use \"Bidder to do at no additional cost\" (Leave any addresses to
    money out of the Specification or Scope of Service.)

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-   Use the term \"and/or\" in the Specification or Scope of Service.

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-   Dictate to the Contractor how to accomplish the requirements.

**[PROJECT MANAGER/USER RESPONSIBILITY TO PROCUREMENT]{.underline}**

Upon preparing an Invitation for Bid (IFB), Procurement with assistance
from the Project Manager or user has total responsibility for preparing
the following sections:

-   Bidding Requirements

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-   Forms for Bidding

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-   Proposed Contract

[The Project Manager or user should input to Procurement any information
that does not apply to the Specification or Scope of Service via
memorandum]{.underline} and the information will be included in the
appropriate document. Examples of this type of information are as
follows:

-   Requirements that must be provided to METRO with bids or prior to
    award

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-   Requirements that must be completed prior to Notice to Proceed of
    the Contract

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-   Cost Information

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-   Delivery Information

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-   Warranty Provisions

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-   Methods of Payments

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-   Liquidated Damages

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-   Instructions on Reworking Rejected Items

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-   Availability of Equipment for Retrofit, Modifications, Service or
    Repair

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-   Inspection/Acceptance Provisions

This shall also be true for Request for Proposals (RFP) or Purchase
Orders.

The Specification or Scope of Service of the IFB, is the total
responsibility of the Project Manager or user with the assistance of
Contracts. The Specification or Scope of Service should be provided to
Procurement double-spaced and in the final format. To be consistent with
the typing of the entire contract, the specification or scope of service
should be typed with a 10 pitch courier print wheel and margins of 8 and
77.

[The ultimate goal is for the Project Manager or user to furnish to
Contracts a specification or scope of service that can be utilized in a
bid package without discussions with the Project Manager or
user.]{.underline}

**[PART I SIX-SECTION EQUIPMENT SPECIFICATION]{.underline}**

The six-section specification, sometimes called a detail specification,
is used where there is a need to purchase the same product or equipment
repeatedly.

The section numbers and headings shown below should be used on all
specifications when the headings are applicable.

[Number]{.underline} [Section]{.underline}

1.0 Scope

2.0 Reference Documents

3.0 Requirements

4.0 Contractor Quality Assurance Program

5.0 Preparation for Shipment

6.0 Contract Data Requirements List

The recommended content for each section is shown below.

**1.0 Scope**

Provide a brief description of the product or item of equipment to be
purchased and a general description of the contents of the
specification. Also, state where the equipment is to be used and if
installation is required.

> This specification shall govern the materials, fabrication, assembly,
> testing, and other requirements for [(Example: centrifugal
> pumps)]{.underline} for use [(Example: in METRO\'s Kashmere
> Maintenance Facility)]{.underline} .

**2.0 Reference Documents**

List governmental regulations, major codes, industry standards, and
other similar documents which are utilized in the specification to
define the design, materials, fabrication, testing, installation,
services, and other similar requirements. Every reference document
listed here should be addressed at the appropriate point in the body of
the specification.

The introductory wording given below for this paragraph establishes the
date of inquiry issue as the control data for applicable editions of
standards, codes and addenda referenced within a specification. The
responsible individual should verify that a control data is established
for reference standards at the time of use.

> In addition to the requirements designated elsewhere in this
> specification, the design, materials, fabrication, and testing of the
> equipment, materials, and services shall be, to the extent specified
> herein, in accordance with the latest issues and addenda, in effect at
> the date of inquiry issue, of the following industry codes and
> standards.

Reference standards employed by this outline are listed below to provide
an example of formatting for industry references.

  --------------------------------- -------------------------------------
  **[Document]{.underline}          **[Title]{.underline}**
  [Identification]{.underline}**    

  **[American Institute of Steel    
  Construction                      
  (AISC)]{.underline}**             

  AISC S326                         Specification for the Design,
                                    Fabrication, and Erection of
                                    Structural Steel for Buildings.

  **[American National Standards    
  Institute (ANSI)]{.underline}**   

  ANSI A58.1                        Minimum Design Loads for Building and
                                    Other Structures

  **[American Society for Testing   
  and Materials                     
  (ASTM)]{.underline}**             

  ASTM A36                          Specification for Structural Steel

  **[American Welding Society       
  (AWS)]{.underline}**              

  AWS D1.1                          Structural Welding Code, Steel

  **[National Fire Protection       
  Association (NFPA)]{.underline}** 

  NFPA 70                           National Electrical Code (NEC)

  **[Occupational Safety and Health 
  Standards of the U.S. Department  
  of Labor, Part 1910               
  (OSHA)]{.underline}**             

  Section 1910.95                   Occupational Noise Exposure

  Subpart D                         Walking-Working Surfaces
  --------------------------------- -------------------------------------

**3.0 Requirements**

**3.1 General**

Include statements of those requirements that are common to all
components of the equipment of system being specified.

**3.2 Performance**

Provide a definition of the performance requirements for rating the
equipment.

**3.3 System Description**

Provide a brief but inclusive system description for a specification
written for a mechanical system or equipment package. Single equipment
items usually will not require a system description.

**3.4 Mechanical Design**

**3.4.1 Component**

> Describe requirements for the individual components that make up the
> piece of equipment under this series of headings. This would include
> such things as a listing of design requirements for the components
> that make up an equipment item (e.g., shaft, seals, coupling,
> impeller).

**3.5 Electrical**

A reference should be provided here for invoking the National Electrical
Code and for identifying the required hazardous area classification for
electrical components that are to be provided. This reference should be
a statement such as:

[3.5.1]{.underline} Electrical equipment furnished under this
specification shall be in compliance with NFPA Bulletin No. 70,
\"National Electrical Code,\" (NEC) and shall comply with NEC
requirements for the hazardous and non-hazardous area classifications
specified on the data sheets.

**3.6 Structural**

Specify the structural requirements for the item of equipment under this
heading. This section should include a reference to appropriate AISC and
ASTM standards and requirements of a general nature. Specific
requirements such as design criteria or a basis for handling wind loads,
transportation and other specific details should be incorporated by line
entries on the equipment data sheets.

The following wording is suggested for general structural requirements
in an equipment specification:

[3.6.1]{.underline} All structural steel shall be new and damage-free.
Each structural steel member for skids, bases or other assembly shall be
a hot-rolled structural shape, plate or bar meeting the requirements of
ASTM a 36.

[3.6.2]{.underline} Anchor bolt details and design shall be provided by
the contractor. Anchor bolts will be furnished by METRO.

[3.6.3]{.underline} Ladders and platforms with handrails shall be
furnished for access to all service and inspection openings for
equipment requiring inspection and servicing.

[3.6.4]{.underline} Stair treads, platforms, walking and work surfaces,
and access ways shall be provided with steel grating walking surfaces.

**3.7 Exceptions**

Specifications that are written around a code or industry standard such
as ASME or API should list exceptions or clarifications to those
standards. The following is an example of how this would be done:

[3.7.1 Requirements]{.underline}

> Each centrifugal pump shall be in accordance with API 610 except for
> the additions, modifications, deletions, or further clarifications
> stated below:

  ---------------------- -------------------- ----------------------------------
  **[API 610 Para.       **[Buyer Exc.        **[Description]{.underline}**
  No.]{.underline}**     No.]{.underline}**   

                                              [SECTION 2 - BASIC
                                              DESIGN]{.underline}

                                              [General]{.underline}

  2.1.21                 1                    Add the following new paragraph:
                                              Single-stage process pumps are to
                                              have a double volute casing when
                                              the pump has a 3-inch (76 mm)
                                              discharge or larger and a
                                              10.5-inch (267 mm) maximum
                                              allowable impeller diameter, or
                                              larger.

  2.1.22                 2                    Add the following new paragraph:
                                              Mechanical equipment and
                                              components of centrifugal pumps
                                              quoted in accordance with this
                                              specification must be proven in
                                              service for at least one year in
                                              not less than two similar
                                              applications.
  ---------------------- -------------------- ----------------------------------

**4.0 Contractor Quality Assurance Program**

**4.1 Inspection And Testing**

For specifications written for a product, material, service, equipment
or bus modifications/retrofit with a standard level of quality the
following wording is suggested:

> The responsibility for Quality Assurance shall be with the Contractor
> subject to verification by METRO.

**4.2 Contractor Surveillance**

The purpose of this section is to initiate METRO surveillance of
Contractor manufacturing operations and document certification
requirements. Paragraphs included in this section should define where to
find the specific requirements. The following wording is suggested:

**4.2.1** Product surveillance and document certification shall be as
specified in the procurement documents, e.g., specification, data
sheets, contractor data requirements list.

**5.0 Preparation for Shipment**

**5.1 Cleaning (suggested wording)**

All dirt, grime, grease, and shop residue shall be removed from surfaces
of furnished equipment prior to packaging and shipping from the
Contractor\'s facility.

**5.2 Lubrication (suggested wording)**

All bearings and other similar parts of furnished equipment shall be
suitably lubricated prior to shipment in accordance with the
Contractor\'s recommended lubrication instructions.

**5.3 Painting (suggested wording)**

The items provided under this specification shall be painted in
accordance with the painting requirements specified on the data sheets.

**5.4 Preservation and Packaging**

The following wording may be used in specifications for items where the
Contractor\'s standard preservation and packaging methods are considered
to be acceptable and preservation and packaging requirements are not
defined by a national standard.

**5.4.1** Machined and interior surfaces of furnished equipment shall be
coated with a preservative material capable of preventing corrosion
damage for a minimum of 6 months in covered storage.

**5.4.2** Contractor\'s standard preservation and packaging methods will
be acceptable if such comply with applicable requirements of governing
freight classifications and provide adequate protection from all
anticipated shipping exposures.

**5.5 Equipment Identification (Suggested Wording)**

Equipment identification requirements are specified on the attached data
sheets.

**6.0 [Contract Data Requirements]{.underline} (suggested wording)**

**6.1 Contract data requirements shall be as specified on the attached
Contract Data Requirements List (CDRL).**

+----------------------+----------------------+------------------------+
| **[DATA SHEET FOR    |                      |                        |
| SIX-SECTIONS         |                      |                        |
| SPECIFICA            |                      |                        |
| TIONS]{.underline}** |                      |                        |
+----------------------+----------------------+------------------------+
| The data sheet is    |                      |                        |
| used to describe     |                      |                        |
| specific             |                      |                        |
| requirements of a    |                      |                        |
| product or equipment |                      |                        |
| item. The originator |                      |                        |
| shall complete the   |                      |                        |
| description and      |                      |                        |
| requirements column  |                      |                        |
| of the data sheet.   |                      |                        |
+----------------------+----------------------+------------------------+
| [DATA                |                      |                        |
| SHEET]{.underline}   |                      |                        |
+----------------------+----------------------+------------------------+
|                      |                      | Identification         |
|                      |                      | No.\_\_\_\_\_\_\_\_\_  |
+----------------------+----------------------+------------------------+
| Description:         |                      |                        |
| \_\_\_\_\_\_\_\_\_   |                      |                        |
| \_\_\_\_\_\_\_\_\_\_ |                      |                        |
| \_\_\_\_\_\_\_\_\_\_ |                      |                        |
| \_\_\_\_\_\_\_\_\_\_ |                      |                        |
| \_\_\_\_\_\_\_\_\_\_ |                      |                        |
| \_\_\_\_\_\_\_\_\_\_ |                      |                        |
|                      |                      |                        |
| \_\_\_\_\_\_\_\_\_\_ |                      |                        |
| \_\_\_\_\_\_\_\_\_\_ |                      |                        |
| \_\_\_\_\_\_\_\_\_\_ |                      |                        |
| \_\_\_\_\_\_\_\_\_\_ |                      |                        |
| \_\_\_\_\_\_\_\_\_\_ |                      |                        |
| \_\_\_\_\_\_\_\_\_\_ |                      |                        |
| \_\_\_\_\_\_\_\_\_\_ |                      |                        |
+----------------------+----------------------+------------------------+
| Quantity:\_\_\_      | IFB No.:             |                        |
| \_\_\_\_\_\_\_\_\_\_ | \_\_\_\_\_\_         |                        |
|                      | \_\_\_\_\_\_\_\_\_\_ |                        |
+----------------------+----------------------+------------------------+
| Location:            |                      |                        |
| \_                   |                      |                        |
| \_\_\_\_\_\_\_\_\_\_ |                      |                        |
| \_\_\_\_\_\_\_\_\_\_ |                      |                        |
| \_\_\_\_\_\_\_\_\_\_ |                      |                        |
| \_\_\_\_\_\_\_\_\_\_ |                      |                        |
| \_\_\_\_\_\_\_\_\_\_ |                      |                        |
| \_\_\_\_\_\_\_\_\_\_ |                      |                        |
|                      |                      |                        |
| \_\_\_\_\_\_\_\_\_\_ |                      |                        |
| \_\_\_\_\_\_\_\_\_\_ |                      |                        |
| \_\_\_\_\_\_\_\_\_\_ |                      |                        |
| \_\_\_\_\_\_\_\_\_\_ |                      |                        |
| \_\_\_\_\_\_\_\_\_\_ |                      |                        |
| \_\_\_\_\_\_\_\_\_\_ |                      |                        |
| \_\_\_\_\_\_\_\_\_\_ |                      |                        |
+----------------------+----------------------+------------------------+
| [                    | [AV                  | [CONT                  |
| UTILITY]{.underline} | AILABLE]{.underline} | RACTOR\'S]{.underline} |
|                      |                      | [REQ                   |
|                      |                      | UIREMENTS]{.underline} |
+----------------------+----------------------+------------------------+
| Volts                | 120/460              | \_\_\_\_\_\_\_\_       |
|                      |                      | \_\_\_\_\_\_\_\_\_\_\_ |
+----------------------+----------------------+------------------------+
| Phase                | 1/3                  | \_\_\_\_\_\_\_\_       |
|                      |                      | \_\_\_\_\_\_\_\_\_\_\_ |
+----------------------+----------------------+------------------------+
| System               | 60 Hz                | \_\_\_\_\_\_\_\_       |
|                      |                      | \_\_\_\_\_\_\_\_\_\_\_ |
+----------------------+----------------------+------------------------+
| Air                  | 90 psi               | \_\_\_\_\_\_\_\_       |
|                      |                      | \_\_\_\_\_\_\_\_\_\_\_ |
+----------------------+----------------------+------------------------+

+-------------------+------------------+----------+-------------------+
| **INSTRUCTION TO  |                  |          |                   |
| CONTRACTOR**      |                  |          |                   |
+-------------------+------------------+----------+-------------------+
| This data sheet   |                  |          |                   |
| will also be used |                  |          |                   |
| as a part of the  |                  |          |                   |
| technical bid     |                  |          |                   |
| tabulation.       |                  |          |                   |
| Contractor shall  |                  |          |                   |
| complete the      |                  |          |                   |
| right hand column |                  |          |                   |
| of this data      |                  |          |                   |
| sheet to identify |                  |          |                   |
| the equipment     |                  |          |                   |
| that is to be     |                  |          |                   |
| furnished.        |                  |          |                   |
| Contractor shall  |                  |          |                   |
| print the         |                  |          |                   |
| Contractor\'s     |                  |          |                   |
| company name and  |                  |          |                   |
| proposal number   |                  |          |                   |
| on the top line   |                  |          |                   |
| of each such      |                  |          |                   |
| right hand        |                  |          |                   |
| column. The       |                  |          |                   |
| following legend  |                  |          |                   |
| is used to define |                  |          |                   |
| the Requirement   |                  |          |                   |
| Class (Reqmt Cl): |                  |          |                   |
|                   |                  |          |                   |
| R - Mandatory     |                  |          |                   |
| Requirement       |                  |          |                   |
|                   |                  |          |                   |
| A - METRO         |                  |          |                   |
| Engineering       |                  |          |                   |
| Preference        |                  |          |                   |
|                   |                  |          |                   |
| B - As Specified  |                  |          |                   |
| or Equal          |                  |          |                   |
|                   |                  |          |                   |
| \* - Seller to    |                  |          |                   |
| Specify           |                  |          |                   |
|                   |                  |          |                   |
| All data sheet    |                  |          |                   |
| items noted by a  |                  |          |                   |
| bullet (o) in the |                  |          |                   |
| right hand margin |                  |          |                   |
| shall be          |                  |          |                   |
| completed with    |                  |          |                   |
| the Contractor\'s |                  |          |                   |
| bid.              |                  |          |                   |
|                   |                  |          |                   |
| Contractor shall  |                  |          |                   |
| comply with all R |                  |          |                   |
| (mandatory        |                  |          |                   |
| requirement)      |                  |          |                   |
| class             |                  |          |                   |
| requirements to   |                  |          |                   |
| be considered     |                  |          |                   |
| technically       |                  |          |                   |
| acceptable.       |                  |          |                   |
+-------------------+------------------+----------+-------------------+
| **[DESCRIPTI      | **[REQUIREMENT   | **[REQMT | **[REMAR          |
| ON]{.underline}** | S]{.underline}** | C        | KS]{.underline}** |
|                   |                  | l]{.unde |                   |
|                   |                  | rline}** |                   |
+-------------------+------------------+----------+-------------------+
| \_\_              | \_               | \_\_     | \_                |
| \_\_\_\_\_\_\_\_\ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | \_\_\_\_\_\_\_\_\ |
| _\_\_\_\_\_\_\_\_ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | _\_\_\_\_\_\_\_\_ |
+-------------------+------------------+----------+-------------------+
| \_\_              | \_               | \_\_     | \_                |
| \_\_\_\_\_\_\_\_\ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | \_\_\_\_\_\_\_\_\ |
| _\_\_\_\_\_\_\_\_ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | _\_\_\_\_\_\_\_\_ |
+-------------------+------------------+----------+-------------------+
| \_\_              | \_               | \_\_     | \_                |
| \_\_\_\_\_\_\_\_\ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | \_\_\_\_\_\_\_\_\ |
| _\_\_\_\_\_\_\_\_ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | _\_\_\_\_\_\_\_\_ |
+-------------------+------------------+----------+-------------------+
| \_\_              | \_               | \_\_     | \_                |
| \_\_\_\_\_\_\_\_\ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | \_\_\_\_\_\_\_\_\ |
| _\_\_\_\_\_\_\_\_ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | _\_\_\_\_\_\_\_\_ |
+-------------------+------------------+----------+-------------------+
| \_\_              | \_               | \_\_     | \_                |
| \_\_\_\_\_\_\_\_\ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | \_\_\_\_\_\_\_\_\ |
| _\_\_\_\_\_\_\_\_ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | _\_\_\_\_\_\_\_\_ |
+-------------------+------------------+----------+-------------------+
| \_\_              | \_               | \_\_     | \_                |
| \_\_\_\_\_\_\_\_\ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | \_\_\_\_\_\_\_\_\ |
| _\_\_\_\_\_\_\_\_ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | _\_\_\_\_\_\_\_\_ |
+-------------------+------------------+----------+-------------------+
| \_\_              | \_               | \_\_     | \_                |
| \_\_\_\_\_\_\_\_\ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | \_\_\_\_\_\_\_\_\ |
| _\_\_\_\_\_\_\_\_ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | _\_\_\_\_\_\_\_\_ |
+-------------------+------------------+----------+-------------------+
| \_\_              | \_               | \_\_     | \_                |
| \_\_\_\_\_\_\_\_\ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | \_\_\_\_\_\_\_\_\ |
| _\_\_\_\_\_\_\_\_ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | _\_\_\_\_\_\_\_\_ |
+-------------------+------------------+----------+-------------------+
| \_\_              | \_               | \_\_     | \_                |
| \_\_\_\_\_\_\_\_\ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | \_\_\_\_\_\_\_\_\ |
| _\_\_\_\_\_\_\_\_ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | _\_\_\_\_\_\_\_\_ |
+-------------------+------------------+----------+-------------------+
| \_\_              | \_               | \_\_     | \_                |
| \_\_\_\_\_\_\_\_\ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | \_\_\_\_\_\_\_\_\ |
| _\_\_\_\_\_\_\_\_ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | _\_\_\_\_\_\_\_\_ |
+-------------------+------------------+----------+-------------------+
| \_\_              | \_               | \_\_     | \_                |
| \_\_\_\_\_\_\_\_\ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | \_\_\_\_\_\_\_\_\ |
| _\_\_\_\_\_\_\_\_ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | _\_\_\_\_\_\_\_\_ |
+-------------------+------------------+----------+-------------------+
| \_\_              | \_               | \_\_     | \_                |
| \_\_\_\_\_\_\_\_\ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | \_\_\_\_\_\_\_\_\ |
| _\_\_\_\_\_\_\_\_ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | _\_\_\_\_\_\_\_\_ |
+-------------------+------------------+----------+-------------------+
| \_\_              | \_               | \_\_     | \_                |
| \_\_\_\_\_\_\_\_\ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | \_\_\_\_\_\_\_\_\ |
| _\_\_\_\_\_\_\_\_ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | _\_\_\_\_\_\_\_\_ |
+-------------------+------------------+----------+-------------------+
| \_\_              | \_               | \_\_     | \_                |
| \_\_\_\_\_\_\_\_\ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | \_\_\_\_\_\_\_\_\ |
| _\_\_\_\_\_\_\_\_ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | _\_\_\_\_\_\_\_\_ |
+-------------------+------------------+----------+-------------------+
| \_\_              | \_               | \_\_     | \_                |
| \_\_\_\_\_\_\_\_\ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | \_\_\_\_\_\_\_\_\ |
| _\_\_\_\_\_\_\_\_ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | _\_\_\_\_\_\_\_\_ |
+-------------------+------------------+----------+-------------------+
| \_\_              | \_               | \_\_     | \_                |
| \_\_\_\_\_\_\_\_\ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | \_\_\_\_\_\_\_\_\ |
| _\_\_\_\_\_\_\_\_ | \_\_\_\_\_\_\_\_ | \_\_\_\_ | _\_\_\_\_\_\_\_\_ |
+-------------------+------------------+----------+-------------------+

**CONTRACT DATA REQUIREMENTS LIST**

**FOR**

**SIX-SECTION SPECIFICATION OR EQUIPMENT SPECIFICATION/DATA SHEET**

The Contract Data Requirements List (CDRL) is used by METRO to convey to
the Contractor the required contract data documents, type of document
and the time span that each type of document must be submitted to METRO.
The following list is an example of the types of required Contractor
data. Each individual specification should be reviewed for the specific
required types of Contractor data.

Description:

Location:

IFB/RFP No.:

Contract/P.O. No.:

Contractor:

The Contractor\'s bid shall state his intended compliance with this
listing, as regards to the type of data required and schedule for data
submittal, as well as the Quantity and Data Form (reproducible, prints,
etc.) indicated in the IFB and Contract. The Contractor shall confirm
responsibility for similar compliance by his subcontractors as a part of
the Contractor\'s bid. Deviation(s) from the Data Submittal Schedule
shall be shown in the comments column.

All data submitted shall be identified as a minimum with identification
number, description and Contract number.

When an \"X\" has been indicated in the \"B\" (with bid) column on the
following list, \_\_\_\_\_ copies of the required data shall accompany
the bid.

After notice of award, the Contractor shall furnish quantities of
reproducibles and copies of all data to be submitted as follows:

-   For Approval \_\_\_\_\_\_ reproducibles, \_\_\_\_\_\_ copies

```{=html}
<!-- -->
```
-   Certified \_\_\_\_\_\_ reproducibles, \_\_\_\_\_\_ copies

```{=html}
<!-- -->
```
-   Record \_\_\_\_\_\_ reproducibles, \_\_\_\_\_\_ copies

The above quantities are to be submitted to the Project Manager with a
copy of the transmittal to Contracts.

Drawing prints may be folded, but reproducibles shall be rolled. Where
the Contractor\'s originals are multicolored or halftone \"slick paper\"
brochures, bulletins, instruction books, and other similar preprinted
documents, the Contractor shall furnish originals for the quantity of
copies required.

After notice of award, unless otherwise noted in the comments column,
the following data submittal schedule shall apply:

FOR APPROVAL DATA DUE \_\_\_\_ WEEKS AFTER CONTRACT NOTICE OF AWARD,

CERTIFIED CORRECT DATA DUE \_\_\_\_ WEEKS AFTER METRO\'S APPROVAL,

RECORD DATA DUE \_\_\_\_ WEEKS AFTER CONTRACT NOTICE OF AWARD.

ABBREVIATIONS: B - With Bid, A - Approval, C - Certified, R - Record
(information only)

+--------------------------------+----+---+---+---+-------------------+
|                                | ** |   |   |   |                   |
|                                | DA |   |   |   |                   |
|                                | TA |   |   |   |                   |
|                                | RE |   |   |   |                   |
|                                | QU |   |   |   |                   |
|                                | IR |   |   |   |                   |
|                                | ED |   |   |   |                   |
|                                | ** |   |   |   |                   |
+================================+====+===+===+===+===================+
| **DATA                         | *  | * | * | * | **COMMENTS**      |
| DESCRIPTION/DEFINITION**       | *B | * | * | * |                   |
|                                | ** | A | C | R |                   |
|                                |    | * | * | * |                   |
|                                |    | * | * | * |                   |
+--------------------------------+----+---+---+---+-------------------+
| OUTLINE DRAWINGS               | X  | X | X | \ |                   |
|                                |    |   |   | _ |                   |
| Plan/elevation drawings with   |    |   |   | \ |                   |
| overall dimensions, connection |    |   |   | _ |                   |
| dimensions, and required       |    |   |   |   |                   |
| clearances for assembly,       |    |   |   |   |                   |
| operation, and maintenance     |    |   |   |   |                   |
| access.                        |    |   |   |   |                   |
+--------------------------------+----+---+---+---+-------------------+
| EQUIPMENT ARRANGEMENT DRAWINGS | X  | X | X | \ |                   |
|                                |    |   |   | _ |                   |
| Relative dimensioned location  |    |   |   | \ |                   |
| of Contractor supplied         |    |   |   | _ |                   |
| components.                    |    |   |   |   |                   |
+--------------------------------+----+---+---+---+-------------------+
| ASSEMBLY DRAWINGS              | [  | [ | \ | \ |                   |
|                                | X] | X | _ | _ |                   |
| Relative location and          | {. | ] | \ | \ |                   |
| dimensions of components and   | un | { | _ | _ |                   |
| subassemblies required for     | de | . |   |   |                   |
| installation.                  | rl | u |   |   |                   |
|                                | in | n |   |   |                   |
|                                | e} | d |   |   |                   |
|                                |    | e |   |   |                   |
|                                |    | r |   |   |                   |
|                                |    | l |   |   |                   |
|                                |    | i |   |   |                   |
|                                |    | n |   |   |                   |
|                                |    | e |   |   |                   |
|                                |    | } |   |   |                   |
+--------------------------------+----+---+---+---+-------------------+
| ONE-LINE ELECTRICAL DIAGRAM    | \_ | [ | [ | \ |                   |
| One-line representation of an  | \_ | X | X | _ |                   |
| electrical power and/or        |    | ] | ] | \ |                   |
| control circuit.               |    | { | { | _ |                   |
|                                |    | . | . |   |                   |
|                                |    | u | u |   |                   |
|                                |    | n | n |   |                   |
|                                |    | d | d |   |                   |
|                                |    | e | e |   |                   |
|                                |    | r | r |   |                   |
|                                |    | l | l |   |                   |
|                                |    | i | i |   |                   |
|                                |    | n | n |   |                   |
|                                |    | e | e |   |                   |
|                                |    | } | } |   |                   |
+--------------------------------+----+---+---+---+-------------------+
| FABRICATION OR PRODUCTION      | \_ | \ | \ | [ |                   |
| SCHEDULE                       | \_ | _ | _ | X |                   |
|                                |    | \ | \ | ] |                   |
| Calendar-dated schedule for    |    | _ | _ | { |                   |
| manufacture of Contractor      |    |   |   | . |                   |
| supplied equipment/            |    |   |   | u |                   |
| components, including schedule |    |   |   | n |                   |
| or inquiry Purchase Order, and |    |   |   | d |                   |
| delivery of subcontractor      |    |   |   | e |                   |
| items with subcontractor       |    |   |   | r |                   |
| names.                         |    |   |   | l |                   |
|                                |    |   |   | i |                   |
|                                |    |   |   | n |                   |
|                                |    |   |   | e |                   |
|                                |    |   |   | } |                   |
+--------------------------------+----+---+---+---+-------------------+
| EQUIPMENT WEIGHTS              | [  | \ | \ | [ |                   |
|                                | X] | _ | _ | X |                   |
| Empty, operating and shipping  | {. | \ | \ | ] |                   |
| weight.                        | un | _ | _ | { |                   |
|                                | de |   |   | . |                   |
|                                | rl |   |   | u |                   |
|                                | in |   |   | n |                   |
|                                | e} |   |   | d |                   |
|                                |    |   |   | e |                   |
|                                |    |   |   | r |                   |
|                                |    |   |   | l |                   |
|                                |    |   |   | i |                   |
|                                |    |   |   | n |                   |
|                                |    |   |   | e |                   |
|                                |    |   |   | } |                   |
+--------------------------------+----+---+---+---+-------------------+
| COMPLETED METRO\'S DATA SHEETS | [  | \ | \ | \ |                   |
|                                | X] | _ | _ | _ |                   |
|                                | {. | \ | \ | \ |                   |
|                                | un | _ | _ | _ |                   |
|                                | de |   |   |   |                   |
|                                | rl |   |   |   |                   |
|                                | in |   |   |   |                   |
|                                | e} |   |   |   |                   |
+--------------------------------+----+---+---+---+-------------------+
| CATALOG DATA                   | [  | \ | \ | \ |                   |
|                                | X] | _ | _ | _ |                   |
|                                | {. | \ | \ | \ |                   |
|                                | un | _ | _ | _ |                   |
|                                | de |   |   |   |                   |
|                                | rl |   |   |   |                   |
|                                | in |   |   |   |                   |
|                                | e} |   |   |   |                   |
+--------------------------------+----+---+---+---+-------------------+
| LIST OF EXCEPTIONS TO          | [  | \ | \ | \ |                   |
| SPECIFICATION                  | X] | _ | _ | _ |                   |
|                                | {. | \ | \ | \ |                   |
|                                | un | _ | _ | _ |                   |
|                                | de |   |   |   |                   |
|                                | rl |   |   |   |                   |
|                                | in |   |   |   |                   |
|                                | e} |   |   |   |                   |
+--------------------------------+----+---+---+---+-------------------+
| OPERATING INSTRUCTIONS         | \_ | \ | \ | [ |                   |
|                                | \_ | _ | _ | X |                   |
|                                |    | \ | \ | ] |                   |
|                                |    | _ | _ | { |                   |
|                                |    |   |   | . |                   |
|                                |    |   |   | u |                   |
|                                |    |   |   | n |                   |
|                                |    |   |   | d |                   |
|                                |    |   |   | e |                   |
|                                |    |   |   | r |                   |
|                                |    |   |   | l |                   |
|                                |    |   |   | i |                   |
|                                |    |   |   | n |                   |
|                                |    |   |   | e |                   |
|                                |    |   |   | } |                   |
+--------------------------------+----+---+---+---+-------------------+
| MAINTENANCE AND LUBRICATION    | \_ | \ | \ | [ |                   |
| RECOMMENDATIONS                | \_ | _ | _ | X |                   |
|                                |    | \ | \ | ] |                   |
| Recommend maintenance          |    | _ | _ | { |                   |
| procedures and intervals, with |    |   |   | . |                   |
| lubricant descriptions,        |    |   |   | u |                   |
| grades, and alternate supplier |    |   |   | n |                   |
| designations.                  |    |   |   | d |                   |
|                                |    |   |   | e |                   |
|                                |    |   |   | r |                   |
|                                |    |   |   | l |                   |
|                                |    |   |   | i |                   |
|                                |    |   |   | n |                   |
|                                |    |   |   | e |                   |
|                                |    |   |   | } |                   |
+--------------------------------+----+---+---+---+-------------------+
| MASTER PARTS LIST              | \_ | \ | \ | [ |                   |
|                                | \_ | _ | _ | X |                   |
| List parts, part numbers,      |    | \ | \ | ] |                   |
| serial numbers, and            |    | _ | _ | { |                   |
| interchangeability             |    |   |   | . |                   |
| information.                   |    |   |   | u |                   |
|                                |    |   |   | n |                   |
|                                |    |   |   | d |                   |
|                                |    |   |   | e |                   |
|                                |    |   |   | r |                   |
|                                |    |   |   | l |                   |
|                                |    |   |   | i |                   |
|                                |    |   |   | n |                   |
|                                |    |   |   | e |                   |
|                                |    |   |   | } |                   |
+--------------------------------+----+---+---+---+-------------------+
| SPECIAL MAINTENANCE TOOL       | [  | \ | \ | \ |                   |
| REQUIREMENTS                   | X] | _ | _ | _ |                   |
|                                | {. | \ | \ | \ |                   |
|                                | un | _ | _ | _ |                   |
|                                | de |   |   |   |                   |
|                                | rl |   |   |   |                   |
|                                | in |   |   |   |                   |
|                                | e} |   |   |   |                   |
+--------------------------------+----+---+---+---+-------------------+
| SHIPPING, HANDLING AND STORAGE | \_ | \ | \ | [ |                   |
| PROCEDURES                     | \_ | _ | _ | X |                   |
|                                |    | \ | \ | ] |                   |
|                                |    | _ | _ | { |                   |
|                                |    |   |   | . |                   |
|                                |    |   |   | u |                   |
|                                |    |   |   | n |                   |
|                                |    |   |   | d |                   |
|                                |    |   |   | e |                   |
|                                |    |   |   | r |                   |
|                                |    |   |   | l |                   |
|                                |    |   |   | i |                   |
|                                |    |   |   | n |                   |
|                                |    |   |   | e |                   |
|                                |    |   |   | } |                   |
+--------------------------------+----+---+---+---+-------------------+
| INSTALLATION/ERECTION          | \_ | \ | \ | [ |                   |
| PROCEDURE                      | \_ | _ | _ | X |                   |
|                                |    | \ | \ | ] |                   |
|                                |    | _ | _ | { |                   |
|                                |    |   |   | . |                   |
|                                |    |   |   | u |                   |
|                                |    |   |   | n |                   |
|                                |    |   |   | d |                   |
|                                |    |   |   | e |                   |
|                                |    |   |   | r |                   |
|                                |    |   |   | l |                   |
|                                |    |   |   | i |                   |
|                                |    |   |   | n |                   |
|                                |    |   |   | e |                   |
|                                |    |   |   | } |                   |
+--------------------------------+----+---+---+---+-------------------+
| DBE/WBE ASSURANCE STATEMENT    | [  | \ | \ | \ |                   |
|                                | X] | _ | _ | _ |                   |
|                                | {. | \ | \ | \ |                   |
|                                | un | _ | _ | _ |                   |
|                                | de |   |   |   |                   |
|                                | rl |   |   |   |                   |
|                                | in |   |   |   |                   |
|                                | e} |   |   |   |                   |
+--------------------------------+----+---+---+---+-------------------+
| DBE/WBE UNAVAILABILITY         | [  | \ | \ | \ |                   |
| CERTIFICATE                    | X] | _ | _ | _ |                   |
|                                | {. | \ | \ | \ |                   |
|                                | un | _ | _ | _ |                   |
|                                | de |   |   |   |                   |
|                                | rl |   |   |   |                   |
|                                | in |   |   |   |                   |
|                                | e} |   |   |   |                   |
+--------------------------------+----+---+---+---+-------------------+
| CONTRACTOR AND FIRST TIER      | [  | \ | \ | [ |                   |
| SUBCONTRACTOR PARTICIPATION    | X] | _ | _ | X |                   |
|                                | {. | \ | \ | ] |                   |
|                                | un | _ | _ | { |                   |
|                                | de |   |   | . |                   |
|                                | rl |   |   | u |                   |
|                                | in |   |   | n |                   |
|                                | e} |   |   | d |                   |
|                                |    |   |   | e |                   |
|                                |    |   |   | r |                   |
|                                |    |   |   | l |                   |
|                                |    |   |   | i |                   |
|                                |    |   |   | n |                   |
|                                |    |   |   | e |                   |
|                                |    |   |   | } |                   |
+--------------------------------+----+---+---+---+-------------------+
| DBE/WBE UTILIZATION REPORT     | \_ | \ | \ | [ |                   |
|                                | \_ | _ | _ | X |                   |
|                                |    | \ | \ | ] |                   |
|                                |    | _ | _ | { |                   |
|                                |    |   |   | . |                   |
|                                |    |   |   | u |                   |
|                                |    |   |   | n |                   |
|                                |    |   |   | d |                   |
|                                |    |   |   | e |                   |
|                                |    |   |   | r |                   |
|                                |    |   |   | l |                   |
|                                |    |   |   | i |                   |
|                                |    |   |   | n |                   |
|                                |    |   |   | e |                   |
|                                |    |   |   | } |                   |
+--------------------------------+----+---+---+---+-------------------+

**[CHECKLIST FOR SIX-SECTION SPECIFICATION (PART I)]{.underline}**

1\. Review Section 1 for:

Accurate statement of scope

2\. Review the references in Section 2 for:

a\. Necessity

b\. Availability

3\. Review the requirements of Section 3 to determine that:

a\. Referenced documents are necessary and applicable

b\. Requirements are predominantly design or performance and that the
same requirement is not covered both ways

c\. No requirement is

Unrealistic

Indefinite

Restrictive

d\. The requirements meet the needs of METRO

e\. The requirements are within industry\'s capability

f\. Each requirement is capable of being inspected or otherwise verified

4\. Review Section 4 to determine that:

The Contractor\'s standard quality assurance program will be suitable to
METRO

5\. Review Section 5 to insure that:

Preservation, packaging, and packing are realistic

6\. Review Section 6 to insure that:

a\. Delivery of adequate data, i.e., drawings, calculations, catalogs,
reports, etc., is identified on the CDRL to accomplish a project.

b\. Requested data will meet the needs of an installation contractor.

**[PART II SCOPE OF SERVICE]{.underline}**

The Scope of Service is the contractual document for expressing exactly
what services or product you require and for evaluating the service or
product of the contractor.

The suggested section headings shown below should be used in all scope
of services when the heading is applicable. Appropriate headings should
be added as required.

[Section Headings]{.underline}

Background

Primary Work Task

Other Work Tasks/Services

Ordering Procedure

Contractor Quality Assurance

Technical Reports

**[BACKGROUND]{.underline}**

Provide a description of the services/product to be contracted for and a
general description of the contents of the scope of service. Provide any
special background information available.

**[PRIMARY WORK TASKS]{.underline}**

Include statements under this heading to thoroughly describe the primary
work task expected under the scope of service.

**[OTHER WORK TASKS/SERVICES]{.underline}**

Include statements under this heading to describe additional work tasks
or services that may be required under the scope of service.

**[CONTRACTOR QUALITY ASSURANCE]{.underline}**

Include statements to describe any special quality reliability or
quality assurance requirements.

**[TECHNICAL REPORTS]{.underline}**

Include statements to include any and all technical reports that will be
required during the term of the contract.

**[SCHEDULE OF ITEMS AND PRICING]{.underline}**

The following is a suggested format to list items and request unit
pricing for pay items referenced in the Scope of Services. The Schedule
of Items and Price should be an attachment to the Scope of Services.

**[SCHEDULE OF ITEMS AND PRICES]{.underline}**

The Contractor shall complete the following price schedule based on the
annual estimated quantities of the services required:

[Estimated Unit]{.underline}

[Item Description Quantity Price]{.underline}

**[PART III BRAND NAME OR EQUAL EQUIPMENT SPECIFICATION/DATA
SHEET]{.underline}**

The brand name or equal equipment specification/data sheet format is
used for the procurement of items such as machine tools, fabrication
equipment, cleaning equipment, mobile equipment, and standard
off-the-shelf equipment.

The following is an example of a specification/data sheet for a 19\" x
78\" engine lathe that can be used as a guide for the procurement of any
of the above listed items:

**[SPECIFICATION/DATA SHEET]{.underline}**

**[ENGINE LATHE]{.underline}**

**[19\" X 78\"]{.underline}**

**[GENERAL DESCRIPTION]{.underline}**

This Data Sheet covers the requirements for a rigid base, floor mounted,
metal cutting, electric motor driven engine lathe suitable for general
purpose metal turning, facing, boring, drilling and threading operations
in a General Purpose Maintenance Shop for a Transit Authority. The
machine shall consist of a floor mounted base and bed with ways, head
stock, tail stock, carriage and other specified components.

The lathe shall be a Monarch Dean Smith & Grace Limited Model #1910 or
equivalent.

**[DESIGN FEATURES]{.underline}**

[GROUNDING]{.underline}

The point of connections for METRO\'s power supply is to include a
grounding point for the electrical grounding of the machine frame.
Contractor to provide a grounding stud.

[NAMEPLATE]{.underline}

A corrosion resistant metal nameplate shall be attached to the Machine
with removable corrosion resistant screws. The nameplate shall contain
at least the following information:

Manufacturer\'s name

Model number of Machine

Serial number of Machine

METRO\'s contract number

METRO\'s equipment tag number

Date of manufacture

[LUBRICATION]{.underline}

A means of positive lubrication shall be provided for all components of
the Machine that require lubrication.

[ENGLISH/METRIC]{.underline}

When applicable, machines with thread cutting capabilities must have the
capability in both English and Metric.

  ------------------------------------ ------------------------------- ------------------ ----------------------------------------
  **[SIZES AND                                                                            
  CAPACITIES]{.underline}**                                                               

  The Engine Lathe must comply with                                                       
  the following sizes and capacities.                                                     
  The Contractor must furnish                                                             
  brochures, information requested and                                                    
  fill in the blank spaces.                                                               

  **[SIZES/CAPACITIES]{.underline}**   **[REQUIREMENT]{.underline}**                      **[CONTRACTOR\'S
                                                                                          SPECIFICATION]{.underline}**

  The following are suggested major                                                       
  headings with an example of each                                                        
  from a brochure of a Monarch Dean                                                       
  Smith & Grace Limited Model #1910:                                                      

  **[WORKING CAPACITY]{.underline}**                                                      

  Swing Over Bed (Min)                                                 19.5\"             \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

  **[SPEEDS & FEEDS]{.underline}**                                                        

  Head stock                                                                              

  Forward & Reverse Speeds (Min)                                       16                 \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

  Universal Gearbox                                                                       

  Longitudinal Feeds (Min)                                             30                 \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

  **[SIZES]{.underline}**                                                                 

  Head stock                                                                              

  Camlock Spindle Nose                                                 D1-8\"             \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

  **[SCREW CUTTING]{.underline}**                                                         

  Thread Per Inch                                                      45 from 2 to 56    no exception
                                                                       tpi                

  **[TAIL STOCK]{.underline}**                                                            

  Spindle Diameter (Min)                                               3.5\"              \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

  **[SADDLE AND APRON]{.underline}**                                                      

  Length of Saddle Guide                                               Mfr. Std.          \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
  ------------------------------------ ------------------------------- ------------------ ----------------------------------------

  ------------------------------------ ------------------------------- ------------------------------------
  **[OPTIONS AND                                                       
  ACCESSORIES]{.underline}**                                           

  The Contractor must furnish                                          
  manufacturer and descriptive                                         
  literature of the following listed                                   
  options and accessories.                                             

  **[OPTION/ACCESSORY]{.underline}**   **[REQUIREMENT]{.underline}**   **[CONTRACTOR\'S]{.underline}
                                                                       [SPECIFICATION]{.underline}**

  Gap Bed w/Removable Piece            1 ea.                           \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

  Traveling Steady .625\" to 4.5\"     1 ea.                           \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

  Stationary Steady 1\" - 7\"          1 ea.                           \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

  4 - Jaw Chuck 18\"                   1 ea.                           \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
  ------------------------------------ ------------------------------- ------------------------------------

  ------------------------------ ------------------------------- ------------------------------------
  **[TOOLING]{.underline}**                                      

  The Contractor must furnish                                    
  manufacturer and descriptive                                   
  literature of the following                                    
  listed tooling.                                                

  **[TOOLING]{.underline}**      **[REQUIREMENT]{.underline}**   **[CONTRACTOR\'S]{.underline}
                                                                 [SPECIFICATION]{.underline}**

  Jacobs Rubberflex Collet       1 set                           \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
  Chucks (Specify Capacity)                                      

  Jacobs Rubberflex Collets for  1 set                           \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
  use with above Collet Chucks                                   

  Revolving Live Center for Tail 1 ea.                           \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
  stock                                                          

  Face Plate - 16\"              1 ea.                           \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
  ------------------------------ ------------------------------- ------------------------------------

  ------------------------------ ----------------------------- ----------------------------------------
  **UTILITIES**                                                

  The following utilities are                                  
  available at the maintenance                                 
  facility. The Contractor must                                
  furnish the required utility                                 
  consumption.                                                 

  **[UTILITY]{.underline}**      **[AVAILABLE]{.underline}**   **[CONTRACTOR\'S]{.underline}
                                                               [REQUIREMENTS]{.underline}**

  Volts                          120/460                       \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

  Phase                          1/3                           \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

  System                         60 Hz                         \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

  AMPS                           N/A                           \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
  ------------------------------ ----------------------------- ----------------------------------------

+--------------------------------------------------+-------------------+
| **[CONTRACTOR INFORMATION                        |                   |
| REQUIRED]{.underline}**                          |                   |
|                                                  |                   |
| **[(MUST BE FILLED IN BY BIDDER)]{.underline}**  |                   |
+--------------------------------------------------+-------------------+
| MACHINE SIZE AND WEIGHT                          |                   |
+--------------------------------------------------+-------------------+
| Weight with Standard Equipment including Motors  | \_\               |
|                                                  | _\_\_\_\_\_\_\_\_ |
|                                                  | lbs.              |
+--------------------------------------------------+-------------------+
| Shipping Weight of Completed Machine             | \_\               |
|                                                  | _\_\_\_\_\_\_\_\_ |
|                                                  | lbs.              |
+--------------------------------------------------+-------------------+
| Overall Dimensions of Machine (L x W x H)        | \_\_\_\" x        |
|                                                  | \_\_\_\"          |
|                                                  | x\_\_\_\"         |
+--------------------------------------------------+-------------------+
| [MANUFACTURER OF MACHINE]{.underline}            | \_\_\_\_\_\_\_\   |
|                                                  | _\_\_\_\_\_\_\_\_ |
+--------------------------------------------------+-------------------+
| [COUNTRY OF ORIGIN OF MACHINE]{.underline}       | \_\_\_\_\_\_\_\   |
|                                                  | _\_\_\_\_\_\_\_\_ |
+--------------------------------------------------+-------------------+
| [COUNTRY OF ORIGIN OF OPTIONS AND                | \_\_\_\_\_\_\_\   |
| ACCESSORIES]{.underline}                         | _\_\_\_\_\_\_\_\_ |
+--------------------------------------------------+-------------------+
| [COUNTRY OF ORIGIN OF TOOLING]{.underline}       | \_\_\_\_\_\_\_\   |
|                                                  | _\_\_\_\_\_\_\_\_ |
+--------------------------------------------------+-------------------+
| [TECHNICAL DATA ON MACHINE ATTACHED]{.underline} | Yes \_\_\_\_ No   |
|                                                  | \_\_\_\_          |
+--------------------------------------------------+-------------------+
| [EQUIPMENT I.D. NUMBER]{.underline}              | \_\_\_\_\_\_\_\   |
|                                                  | _\_\_\_\_\_\_\_\_ |
+--------------------------------------------------+-------------------+

**[PART IV STATEMENT OF WORK/PURCHASE DESCRIPTION]{.underline}**

The Statement of Work (SOW) is a special category of a specification
that is used when contracting for services and equipment. The SOW
outlines the nature of the work, the level of effort required and the
anticipated results of the work, rather than detailed technical
specifications of a particular item. For services and equipment that can
be adequately described with less data than that contained in the
Six-Section Equipment Specification, Scope of Services or Brand Name or
Equal Equipment Specification/Data Sheet Format, you can write a short
SOW. This approach is usually reserved for Off-the-Shelf hardware or
commonly available services.

When writing a SOW, you must utilize you special knowledge of the
subject in deciding the content of the SOW. The key elements are the
same as those for any Specification or Scope of Service, with the added
requirement that you must state when and where the work is to be
performed. The SOW must deal with the following basic questions:

> What needs to be done?
>
> Where should it be done?
>
> When should it be done?
>
> What should the final output consist of?

When the SOW has answered the above questions, it is essentially
complete.

######## APPENDIX B.3

+------------------------------------+---+----------+---+----------+---+---+----------+
| **LIQUIDATED DAMAGES CHECK LIST**  |   |          |   |          |   |   |          |
|                                    |   |          |   |          |   |   |          |
| BART PROJECT NO.                   |   |          |   |          |   |   |          |
| \_\_\_\_\_\_\_\_\_\_\_ CONTRACT    |   |          |   |          |   |   |          |
| TITLE:                             |   |          |   |          |   |   |          |
| \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_   |   |          |   |          |   |   |          |
|                                    |   |          |   |          |   |   |          |
| ESTIMATED CONTRACT VALUE: General  |   |          |   |          |   |   |          |
| \_\_\_\_\_\_\_Mechanical           |   |          |   |          |   |   |          |
| \_\_\_\_\_\_\_\_                   |   |          |   |          |   |   |          |
|                                    |   |          |   |          |   |   |          |
| > Electrical \_\_\_\_\_\_\_\_Other |   |          |   |          |   |   |          |
| > \_\_\_\_\_\_\_\_\_\_             |   |          |   |          |   |   |          |
+------------------------------------+---+----------+---+----------+---+---+----------+
| **Item**                           |   | *        |   |          |   |   |          |
|                                    |   | *Project |   |          |   | * |          |
|                                    |   | Ma       |   |          |   | * |          |
|                                    |   | nager\'s |   |          |   | I |          |
|                                    |   | Determi  |   |          |   | f |          |
|                                    |   | nation** |   |          |   | A |          |
|                                    |   |          |   |          |   | p |          |
|                                    |   |          |   |          |   | p |          |
|                                    |   |          |   |          |   | l |          |
|                                    |   |          |   |          |   | i |          |
|                                    |   |          |   |          |   | c |          |
|                                    |   |          |   |          |   | a |          |
|                                    |   |          |   |          |   | b |          |
|                                    |   |          |   |          |   | l |          |
|                                    |   |          |   |          |   | e |          |
|                                    |   |          |   |          |   | , |          |
|                                    |   |          |   |          |   | D |          |
|                                    |   |          |   |          |   | o |          |
|                                    |   |          |   |          |   | l |          |
|                                    |   |          |   |          |   | l |          |
|                                    |   |          |   |          |   | a |          |
|                                    |   |          |   |          |   | r |          |
|                                    |   |          |   |          |   | A |          |
|                                    |   |          |   |          |   | m |          |
|                                    |   |          |   |          |   | o |          |
|                                    |   |          |   |          |   | u |          |
|                                    |   |          |   |          |   | n |          |
|                                    |   |          |   |          |   | t |          |
|                                    |   |          |   |          |   | * |          |
|                                    |   |          |   |          |   | * |          |
+------------------------------------+---+----------+---+----------+---+---+----------+
|                                    |   | **Appl   |   | **       |   |   |          |
|                                    |   | icable** |   | Non-Appl |   |   |          |
|                                    |   |          |   | icable** |   |   |          |
+------------------------------------+---+----------+---+----------+---+---+----------+
|  1. Costs reflecting the relative  |   |          |   |          |   |   |          |
| importance of completion of this   |   |          |   |          |   |   |          |
| contract to the completion of      |   |          |   |          |   |   |          |
| other directly associated          |   |          |   |          |   |   |          |
| activities, e.g., if a \$10        |   |          |   |          |   |   |          |
| million dollar substation is being |   |          |   |          |   |   |          |
| procured and requires construction |   |          |   |          |   |   |          |
| of a building, the cost to BART of |   |          |   |          |   |   |          |
| delays upon the completion of the  |   |          |   |          |   |   |          |
| building on the substation         |   |          |   |          |   |   |          |
| procurement should be considered.  |   |          |   |          |   |   |          |
+------------------------------------+---+----------+---+----------+---+---+----------+
|  2. Rental costs for each day of   |   |          |   |          |   |   |          |
| facilities and equipment           |   |          |   |          |   |   |          |
| necessitated by the delays in      |   |          |   |          |   |   |          |
| contract completion.               |   |          |   |          |   |   |          |
+------------------------------------+---+----------+---+----------+---+---+----------+
|  3. Cost(s) for additional         |   |          |   |          |   |   |          |
| maintenance required on equipment  |   |          |   |          |   |   |          |
| or structures being replaced for   |   |          |   |          |   |   |          |
| each day of delay in completion of |   |          |   |          |   |   |          |
| the project.                       |   |          |   |          |   |   |          |
+------------------------------------+---+----------+---+----------+---+---+----------+
|  4. Additional operating costs to  |   |          |   |          |   |   |          |
| BART for each day of delay in      |   |          |   |          |   |   |          |
| completion, including but not      |   |          |   |          |   |   |          |
| limited to cashier, operator and   |   |          |   |          |   |   |          |
| supervisory costs resulting from   |   |          |   |          |   |   |          |
| contract completion delays. Costs  |   |          |   |          |   |   |          |
| of route detours or substitution   |   |          |   |          |   |   |          |
| of one transit mode for another    |   |          |   |          |   |   |          |
| shall be considered.               |   |          |   |          |   |   |          |
+------------------------------------+---+----------+---+----------+---+---+----------+
|  5. Loss of revenue to BART\'s     |   |          |   |          |   |   |          |
| operations for each day due to     |   |          |   |          |   |   |          |
| delay in contract completion.      |   |          |   |          |   |   |          |
+------------------------------------+---+----------+---+----------+---+---+----------+
|  6. Any other damages for each day |   |          |   |          |   |   |          |
| of delay in completion which BART  |   |          |   |          |   |   |          |
| may anticipate, e.g., is there a   |   |          |   |          |   |   |          |
| high potential for delay of one    |   |          |   |          |   |   |          |
| prime contract with resulting      |   |          |   |          |   |   |          |
| costs to BART for the other prime  |   |          |   |          |   |   |          |
| contracts.                         |   |          |   |          |   |   |          |
+------------------------------------+---+----------+---+----------+---+---+----------+
|  7. Estimated costs of inspection. |   |          |   |          |   |   |          |
+------------------------------------+---+----------+---+----------+---+---+----------+
|  8. Actual damages (Project        |   |          |   |          |   |   |          |
| Manager to indicate whether actual |   |          |   |          |   |   |          |
| types of damages should be         |   |          |   |          |   |   |          |
| excluded from the calculations).   |   |          |   |          |   |   |          |
+------------------------------------+---+----------+---+----------+---+---+----------+

>  SIGNED \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

PROJECT MANAGER

**APPENDIX B.5**

**BART PURCHASE CARD SYSTEM**

**1.0 PURPOSE AND CONTENT**

> The BART purchase card system provides a means for using credit cards
> for small purchases.
>
> The regulations governing the use of the BART purchase cards are set
> forth in the District\'s Procurement Manual, Chapter V, Section \[.\]
> Micropurchase procedures and other related sections.
>
> The system contains specific procedures for use by procurement
> personnel as well as a wide range of individuals who participate in
> the purchase card program. These procedures integrate diverse
> regulatory and operational information from numerous sources in a
> user-oriented document.
>
> The Supervisor, Procurement Administration has been designated by the
> Department Manager, Procurement as the focal point for applications,
> issuance and destruction of cards, establishment of reports, and
> administrative training for this Program.

**2.0 INTRODUCTION**

> The State of California (\"State\") has awarded a contract for
> statewide commercial credit card services to Rocky Mountain BankCard
> System, Inc. (\"contractor\"). The contract was intended to provide,
> at the request of state ordering agencies, state-wide commercial
> purchase cards and associated services to state employees for the
> purpose of paying for purchases made for official state purposes.
>
> In 1995, the State made these services available to any of its
> political subdivisions of which BART as a public utility district
> qualifies for participation in the program. On July 1, 1996, the
> District commenced its program and issued these procedures.
>
> These procedures are designed to supplement the District\'s
> Procurement Manual and any \"Instructions for the Use of the District
> Purchase Card\" distributed to the cardholder and \"Approving Official
> Instructions for the Use of the District Purchase Card\" distributed
> to the approving official at the time the card is issued. In the event
> these procedures conflict with any instructions provided by the
> contractor, these procedures take precedent.
>
> ALL PURCHASES THAT WILL BE PAID FOR USING THE CARD SHALL COMPLY WITH
> BART\'S PROCUREMENT MANUAL AND THESE PROCEDURES UNLESS OTHERWISE
> APPROVED BY BART\'S PROCUREMENT DEPARTMENT.

**3.0 DEFINITIONS**

> \"Approving Official\" means the person who reviews and approves the
> cardholder\'s monthly statement of purchases.
>
> \"Cardholder\" means the District employee to whom a card is issued.
> The card bears this cardholder\'s name and may only be used by this
> individual to pay for authorized District purchases.
>
> \"Contractor\" means the organization that will maintain all accounts
> as required by the State contract.
>
> \"Oral procedure\" means a procedure where an order is placed or a
> purchase is made through an oral agreement which is made in person or
> by telephone by providing the card for imprint by the Merchant or the
> card number to the Merchant. No written purchase order or contract is
> issued by the District. The supplies or services are provided by the
> Merchant and payment is made using the District Purchase card.
>
> \"Statement of Account\" is a monthly listing of all payments
> authorized for purchase and credits made by the cardholder and billed
> by the merchant.

**4.0 RESPONSIBILITIES**

**4.1** As approved by the Procurement Department, the contractor will
issue cards to designated cardholders and send out monthly statements to
cardholders, approving officials, and the District Controller\'s office.
The contractor will pay merchants in a timely manner and will receive
reimbursement from BART.

**4.2** The Supervisor, Procurement Administration will serve as the
liaison between the District and the contractor and subject to the
direction of the Department Manager, Procurement, shall oversee the
program and establish District guidelines. This individual shall
establish authorization codes for controlling purchases as well as
approve changes to dollar limitations or authorized merchant codes.

**4.3** Each cardholder is to reconcile his/her monthly statement and
forward the reconciled statement to his/her approving official
consistent with instruction issued by Procurement Administration.

**4.4** The approving official will review the cardholder\'s monthly
statement and serve as liaison with Procurement Administration and the
Controller\'s Office. Each approving official shall establish, after
coordination with Procurement Administration, a budgetary limit for each
cardholder\'s monthly purchases.

> THE SPONSORING DEPARTMENT\'S CONTINUING PARTICIPATION IN THIS PROGRAM
> IS PREDICATED UPON MAINTAINING EXPENDITURES WITHIN OPERATING BUDGET
> LIMITS.
>
> FAILURE TO DO SO WILL CAUSE THIS MICROPURCHASE AUTHORITY TO BE REVOKED
> BY THE PROCUREMENT DEPARTMENT.
>
> The approving official will certify the cardholder\'s monthly
> statements and ensure that payments are for purchases which are
> authorized and made in accordance with the District\'s Procurement
> Manual and these procedures.
>
> The approving official will also assist the cardholder in resolving
> disputed payments.
>
> Either the approving official or the Department Manager, Procurement
> has authority to direct Procurement Administration to instruct the
> contractor to cancel a card at any time.

**4.4.1** This approving authority nominally rests with the Sponsoring
or Using Department Manager and may not be further redelegated other
than for temporary absences without the concurrence of the Department
Manager, Procurement.

> Generally, this authority should be redelegated where the Division
> Manager function oversees 50 employees or more. Any such redelegation
> on a standing basis such as mentioned above, must be reviewed at least
> semi-annually by the supervisor as part of employees performance
> evaluation. Any pertinent information coming out of these reviews
> should be separately summarized and transmitted to the Procurement
> Department for their review.

**4.5** Procurement Administration shall establish a budgetary limit for
each office that does not exceed the sum of the approving official\'s
cardholders\' monthly purchase limits. This should be reviewed quarterly
and adjusted if necessary to reflect the cardholders\' actual spending
patterns and minimize the risk to the District of a spending overrun in
the fourth quarter of the then current fiscal year.

> Procurement Administration shall also coordinate, process and monitor
> resolution of all disputed purchases, credits or billing errors,
> unless the Department Manager, Procurement designates another
> individual or office to perform this function.

**4.6** District Controller\'s Office shall answer the contractor\'s
questions about payment of monthly statements as well as make payments
under this program.

**5.0 USE OF THE DISTRICT PURCHASE CARD**

**5.1** The Purchase card may be used to pay for small purchases made in
accordance with Chapter V of the District\'s Procurement Manual and
these procedures. It may also be used to pay for orders placed against
established requirements contracts or with established sources of
supply, when authorized by the contract or regulation requiring use of
the source. However, District inventories should be checked for
availability prior to making a purchase using the card.

**5.2** The Purchase card can be used to pay for supplies or services
acquired using oral solicitation procedures. It may also be used to pay
for supplies or services that are acquired through a purchase order or
an individual order under a requirements contract where the contract
specifically allows such payment method.

**5.3** Without exception, the Purchase card may only be used to pay for
authorized District purchases.

**5.4** Under no circumstances, will the Purchase card be used for cash
advances.

**6.0 SETTING UP THE PURCHASE CARD ACCOUNT**

> The contractor will provide Procurement Administration with all the
> necessary application forms (cardholder, approving official, disputes,
> destruction notice etc.).
>
> The Sponsoring Department will request that Procurement issue purchase
> card(s) to named District employee(s) and assure funding of such
> purchases by using the Bulk funding procedure in BART\'s Procurement
> Manual, Chapter V.
>
> Subject to the procurement authority delegation procedures in the
> Procurement Manual, Chapter I, Procurement Administration will
> distribute the forms to selected cardholders and approving officials
> for completion.
>
> The Cardholder(s) and Approving Official will complete the forms
> indicating they understand the terms of its use and will agree to
> abide by these procedures. The cards are issued for a one year period
> and will be subject to review by the Procurement Department each year
> prior to renewal. (Other organizational functions at BART, such as
> Internal Audit or Civil Rights, may review usage of the purchase card
> by the Sponsoring Department.)
>
> Upon completion, Procurement Administration shall process and forward
> the forms to the contractor and then issue the cards to the sponsoring
> department when received.
>
> The contractor is capable of providing various reports to meet
> management and administrative needs. During the account setup process,
> Procurement Administration will discuss the various reports available
> with Sponsoring Department management personnel.

**7.0 SIGNATURE CARDS**

> When the account information is submitted to Procurement
> Administration, a signature card must be completed by each approving
> official that states the approving official may approve the accuracy
> of the Statement of Account for payment. The signature card will be
> forwarded to the Controller\'s office by Procurement Administration
> after completion.
>
> Sponsoring departments are responsible for delegating Approving
> Official authority as necessary to avoid statement processing delays
> and late payment penalties.

**8.0 DOLLAR LIMITS ASSOCIATED WITH THE PURCHASE CARD**

> Use of the purchase card by a cardholder is subject to a single
> purchase limit and a monthly cardholder limit. The purpose of these
> dollar limits is as follows
>
> \"Single Purchase Limit\" is a limitation on the procurement authority
> (\"micropurchase authority\") delegated to the cardholder by the
> Department Manager, Procurement consistent with the requirements of
> the District\'s Procurement Manual, Chapter I. This limit cannot be
> exceeded unless a revised delegation of authority is issued by the
> Department Manager, Procurement or his or her designee, raising the
> limit.
>
> (A \"single purchase\" using the card may include multiple items.
> However, no single purchases may exceed the authorized single purchase
> limit established for each cardholder.)
>
> \"Monthly Cardholder Limit\" is a budgetary limit assigned by the
> approving official and may be modified if necessary by the Procurement
> Department. The approving official shall coordinate with Procurement
> Administration when determining a monthly limit and should reflect
> spending history as well as budgetary trends. The total dollar value
> of purchases when using the card for any single month may not exceed
> the monthly purchase limit set by the approving official subject to
> concurrence by the Procurement Department.

**9.0 AUTHORIZED USE OF THE CARD**

**9.1** The unique Purchase card VISA card that the cardholder receives,
may be used only by that cardholder.

**9.2** No other person is authorized to use the card and the card may
only be issued to District employees. The card was specially designed
showing the District logo imprinted upon it to avoid being mistaken for
a personal purchase card.

**9.3** When issuing this card to an employee, authorization codes will
be established by Procurement Administration and will be incorporated in
the card. Under normal circumstances, merchants are required to obtain
authorization from the contractor for purchases over \$50.00. However,
many merchants now use electronic authorization methods allowing them to
obtain authorization for all purchases regardless of amount.

> When authorization is sought for a purchase by the merchant, the
> contractor authorization system will electronically check each
> individual cardholder\'s single purchase and monthly limits, the
> monthly office limit, and the type of merchant where the cardholder is
> making the purchase before authorization for the transaction will be
> granted.

**9.4** Use of the card must meet the following conditions:

> \(1\) The total of a single purchase to be paid for using the card may
> be comprised of multiple items and cannot exceed the authorized single
> purchase limit. Purchases will be denied if the authorized single
> purchase limit is exceeded. Payment for purchases may not be split in
> order to stay within the single purchase limit.
>
> \(2\) All items purchased over the counter to be paid for using the
> card must be immediately available. No back ordering is allowed as
> well as deposits for special orders.
>
> \(3\) All items purchased by a telephone order that will not be
> confirmed with a written order and be paid for using the card should
> generally be delivered by the merchant within the 30-day billing
> cycle. However, a longer period (up to 120 days for delivery) may be
> utilized by Sponsoring Departments. If the longer period is elected,
> procedures need to be established by the Sponsoring Department for
> proper reconciliation of the monthly bills, allowing for the carrying
> forward of items ordered but not received.
>
> \(4\) All items purchased during one telephone transaction that will
> not be confirmed by a written order should generally be delivered in a
> single delivery. If a Sponsoring Department elects to allow partial
> deliveries, Sponsoring Department procedures must be implemented to
> ensure proper reconciliation of all such orders.
>
> (5)The Purchase card may not be used to purchase personal property
> items over \$1,000 in value unless purchased with the Controller\'s
> office concurrence prior to purchase; so the proper tagging can be
> done and the required accountability established.
>
> \(6\) When purchasing items by phone or over the counter, the
> cardholder should inform the merchant that the purchase is subject to
> state and local tax. Contact the Controller\'s office for questions in
> this area.
>
> \(7\) At the beginning of each District fiscal year and prior to the
> use of the purchase cards, the Sponsoring Department shall certify
> that funds as available using the bulk funding procedures in the
> District\'s Procurement Manual, Chapter V.

**10.0 UNAUTHORIZED USE OF THE CARD**

> Unless otherwise approved in writing by the Department Manager,
> Procurement, the card must not be used for the following:
>
> \(1\) Cash advances;
>
> \(2\) Rental or lease of motor vehicles;
>
> \(3\) Rental or lease of land or buildings;
>
> \(4\) Purchase of airline, bus, train, or other travel related
> tickets;
>
> \(5\) Purchase of meals, drinks, lodging, or other travel or
> subsistence costs;
>
> \(6\) Purchase of gasoline or oil for District automotive vehicles;
>
> \(7\) Repair of District automotive vehicles; and
>
> \(8\) Telephone calls

**11.0 ACQUISITION PROCEDURES FOR USE WHEN PAYING WITH THE PURCHASE
CARD**

**11.1** When making purchases that will be paid for using the Purchase
card, all the applicable acquisition regulations apply. Regardless of
whether the open market purchase is made using oral procedures or using
a written purchase order or contract, the cardholder must:

> \(1\) Ensure that funds are available and certified to pay for the
> items being purchased. A funded Purchase Request (PR) shall support
> each credit card purchase. The PR may be bulk funded.
>
> \(2\) Be aware of the District\'s commitment to DBE firms and they
> will be held accountable for their DBE participation during the fiscal
> year.
>
> \(3\) Solicit competition for purchases

**11.2.1** Users should be aware that it is common commercial practice
for banks to charge merchants for their participation in purchase card
programs by \"discounting\" their payment by 2 to as much as 15% of the
total charge. A \$100 bill to the customer and paid to the bank in a
monthly statement may only represent \$98 to \$85 in actual revenue to
the merchant from the bank. Merchants are aware of this and restrained
only by competition, will adjust their pricing to reflect these costs;
or they will offer their customers a cash discount.

**11.2.2** It is against District policy to pay any type of a
\"surcharge\" to a Merchant, offsetting the bank discount. Likewise,
users should not agree to a Merchant\'s request to revise the price
above what the general public pays for an item in order to make up for
the bank\'s discount.

**11.3.1** Users should also be aware that proper functioning of this
program rests upon timely payments to the Contractor. Disputes should be
handled through the Merchant, not the Contractor. Users must know the
refund, exchange and warranty terms offered by the Merchant prior to
making the purchase. Adjustment of purchases of defective materials from
merchants is the responsibility of the sponsoring department and not the
Procurement Department, or the Contractor.

**11.3.2** It is District policy to purchase goods, materials, or
equipment only from those Merchants that offer the District full refund
or exchange rights at the District\'s discretion. Such rights shall be
in writing, either transmitted to the District employee, or otherwise
publicly noticed.

**11.4**   Oral solicitations should be used whenever possible within
the local trade area. \"Local trade area\" is defined as the three
county area that encompasses the District.

**11.5   ** Written solicitations are recommended to be used when (I) a
large number of line items are included in a single proposed
acquisition, (ii) obtaining oral quotations is not considered economical
or practical, (iii) special specifications are required because items or
services cannot be easily explained or (iv) Merchants are located
outside the local trade area

**11.6  ** Purchases not in excess of \$2,500 may be accomplished
without securing competition if the cardholder (functioning as the
contracting officer) considers the prices to be reasonable.

**11.6.1** Generally speaking, the District\'s pricing objective in
making micropurchases, is to obtain the same price that the general
public would pay for the item if they were buying such an item in
similar circumstances and quantities.

> If the item is not a broadly distributed commercial product, then the
> District\'s pricing objective is to achieve the same terms as that of
> the Merchant\'s most favored customer if possible.

**11.6.2** These purchases are to be distributed equitably among
qualified Merchants by means of Merchant rotation. If practical, other
than the previous Merchant should be solicited when placing repeat
orders.

**11.7  ** A reasonable number of sources must be solicited (at least
three) for purchases over \$2,500. If practical, two of these sources
shall not have been previously solicited. If merchants furnish standing
price quotations or catalog prices on a recurring basis, verifying the
quotations or prices for individual purchases is not necessary, but the
prices should be periodically confirmed as current. When determining the
number of sources to solicit, consider (I) the nature of the item or
service to be purchased and whether it is highly competitive, (ii)
information from recent purchases of the same or similar item or
service, (iii) the urgency of the purchase, (iv) the dollar value of the
purchase, and (v) past experience concerning merchants\' prices.

**11.8 ** Cardholders are not required to document their purchases under
\$2,500 with respect to competition or reasonableness of price unless
(1) The District employee has reasonable basis to suspect or has other
information to indicate the price may not be reasonable or (2) it is the
purchase of an item for which no comparable pricing information is
available.

> The monthly invoice approval package transmitted to the approving
> official must contain an explanation of how price reasonableness was
> determined in those instances.

**11.9  ** Oral Purchase Procedures

> Oral procedures may be used to acquire supplies or services that can
> be described in sufficient detail so that the parties to the agreement
> have a clear understanding of what is being acquired; and a purchase
> order or contract is not required by either the Merchant or the
> District.
>
> When placing a telephone order to be paid using the Purchase card, the
> cardholder will:
>
> \(1\) Notify the Merchant that the purchase is subject to state and
> local taxes.
>
> \(2\) Confirm that the Merchant is aware of all required District
> terms and conditions.
>
> \(3\) Confirm that the Merchant agrees to charge the purchase card
> when shipment is made so that receipt of the supplies may be certified
> on the monthly Statement of Account.
>
> \(4\) Instruct the Merchant to include the following information with
> the shipping documents or packing slip:
>
> \(i\) Cardholder name and mail code;
>
> \(ii\) Building number, room number, street address, city and state;
>
> \(iii\) Cardholder telephone number;
>
> \(iv\) The term: Purchase card;
>
> \(v\) Purchase Request or Purchase Order Number.
>
> This information will alert the receiving offices and the
> requisitioner that the supplies have been purchased with the purchase
> card.
>
> A log should be used to document or record telephone purchase card
> orders of \$2,500 or less when competitive quotes are not solicited.
> If competitive quotes are solicited for purchases of \$2,500 or less,
> or if the purchase exceeds \$2,500 and therefore requires competition
> (Procurement staff only), the record shall be documented.
>
> The documentation should be held until the monthly billing statement
> is received and then attached to the statement when it is submitted to
> the approving official.

**11.10** Purchases Requiring the Issuance of a Written Order or
Contract

> If the Purchase card is used to pay for a purchase made by using one
> of the purchase order or contract forms, the Merchant should be
> provided the necessary information from the card orally, either in
> person or by telephone, and the statement \"Payment to be made by
> purchase card\" should be inserted on the form. Do not include
> specific information from the card on the purchase order. If the
> Merchant requires an order, an authorized Sponsoring Department form
> may be used. The Merchant is given its copy of the purchase order and
> the cardholder maintains a copy.

**12.0 DOCUMENTATION, RECONCILIATION AND PAYMENT PROCEDURES**:

**12.1  ** Any time a purchase is made that will be paid using the card,
whether it is done over the counter or by telephone, a document must be
retained as proof of purchase. These documents will later be used to
verify the purchases shown on the cardholder monthly statement.

> \(1\) When a purchase is made over the counter, the cardholder is to
> obtain a customer copy of the charge slip, which will become the
> accountable document (make sure all carbons are destroyed).
>
> \(2\) When making purchases by phone, the cardholder is to document
> the transaction on a log, annotate the PR, and attach any shipping
> documents associated with the order.

**12.2    ** The contractor will provide and distribute three monthly
statements within five working days after the end of the 30-day billing
cycle.

> \(1\) Cardholder - will receive a statement showing all purchases,
> credits and other data on transactions the cardholder has made in the
> 30-day billing cycle.
>
> \(2\) Approving official - will receive a copy of all cardholder
> statements for which he/she has approving authority and a summary
> sheet for these statements.
>
> \(3\) Controller\'s Office - will receive a statement providing
> summary data by cardholder and approving official.

**12.3    ** At the end of each monthly billing cycle, the cardholder
must reconcile the information on his/her statement. The cardholder must
fill in the appropriate accounting classification in the accounting code
block, if not the same as the Master Accounting Code, the organization
or individual for whom the purchase was made, and a description, if not
provided, for each purchase. The cardholder must then sign the
statement, attach all supporting documentation and forward it to the
approving official or designated alternate. It is important that the
cardholder check each purchase on the statement to verify the accuracy.
If an item has been returned and a credit voucher received, the
cardholder will verify that the credit is reflected on the statement. If
purchased items and credits are not on the next monthly statement, the
transaction documentation will be retained by the cardholder until the
purchase or credit appears on the statement. If the purchase or credit
does not appear on the next monthly statement, the cardholder or
approving official must notify the Administrative Office Contact to
resolve and reconcile the statement.

**12.4    ** If for some reason the cardholder does not have
documentation of the transaction to send with the statement, he/she must
attach an explanation that includes a description of the item, date of
purchase, merchant\'s name and why there is not supporting
documentation.

**12.5   ** The cardholder must sign the monthly statement and forward
it to the approving official within five working days of receipt. If the
cardholder cannot review the statement at the time that it is received,
the approving official is responsible for reviewing and certifying the
cardholder\'s statement. The approving official will go over the
cardholder\'s statement with the cardholder upon his/her return.

**12.6  ** The approving official is responsible for the following:

> \(1\) Supplying the appropriate financial management office with the
> date services provided by the contractor were received and the date
> services were accepted. The date services were received will be the
> last day of the monthly billing cycle for the contractor. The date
> services were accepted will be the date the approving official signs
> the reverse side of the statement of account. If the approving
> official takes more than seven calendar days to accept the services,
> acceptance (for determining payment due date for compliance with
> prompt payment regulations only) will be deemed to occur seven
> calendar days after receipt of the services. If any purchased items
> have not been received or accepted by the time the statement is
> received, the items should be disputed using the procedures in
> paragraph 13, in order to prevent payment delays. It is critical that
> this information be supplied in order to avoid late payment penalties.
>
> \(2\) Certifying and signing monthly cardholder-signed statements and
> summary statements;
>
> \(3\) Forwarding signed cardholder statements and finance copies of
> receiving reports and supporting documents to the District\'s
> Controller\'s office for payment.
>
> \(4\) Forwarding monthly summary statements, and the cardholder
> statements to the District Controller\'s office in time to be received
> within 15 working days of receipt by the approving official to avoid
> late payment penalties;
>
> \(5\) Retaining copies of summary statements and fund certification,
> solicitation and award documentation as supporting documentation on
> purchases. Records retention and disposition procedures in BART\'s
> Procurement Manual, Chapter V, should be followed for documentation of
> purchases paid for using the purchase card.

**13.0 BILLING ERRORS AND DISPUTES:**

**13.1  ** If a cardholder receives a statement that lists a transaction
for merchandise that has not been received, the cardholder (or the
approving official) must first attempt to resolve the issue with the
Merchant Generally speaking, this will mean that the bill gets paid in
full, including the disputed charge and the merchant credit will clear
in the following billing cycle This is somewhat of a departure from the
normal business practices of the District. The reason is the
administrative effort required on the part of the Contractor,
Procurement department and Controller\'s office to track disputed items.
(See also 11.3.1 and 11.3.2 of this Procedure requiring Sponsoring
departments to conduct business only with those merchants that offer
full refunds or exchanges.)

> In those instances where these procedures are not effective,
> Sponsoring Departments will notify Procurement Administration and
> complete the Cardholder Questioned item form. The contractor will
> credit the transaction until the dispute is resolved. In addition, a
> copy of the form must be attached to the cardholder\'s monthly
> statement and sent to the Controller\'s office.

**13.2    ** If items purchased with the card are found to be defective,
the cardholder has the responsibility to obtain replacement or
correction of the item as soon as possible using the same procedures in
Section 13.1 above. (See also 11.3.1 and 11.3.2 of this Procedure
requiring Sponsoring departments to conduct business only with those
merchants that offer full refunds or exchanges.)

> If the merchant refuses to replace or correct the faulty item, then
> the purchase of the item will be considered in dispute. Items in
> dispute are handled in the same manner as billing errors.

**13.3  ** If items purchased with the card don\'t include the
appropriate amount of sales tax, the Sponsoring Department will
communicate to the Controller\'s office with the monthly billing that
the sales tax needs to be accrued for this item.

**14.0  CONTACT WITH THE CONTRACTOR**

> The contractor should be contacted only to report a LOST OR STOLEN
> card using the telephone numbers given below in Section 15.0. All
> other questions should be directed to either Procurement
> Administration or the Controller\'s office.

**15.0  LOST OR STOLEN CARDS**

**15.1**    If the card is lost or stolen, it is important that the
cardholder immediately notify Rocky Mountain BankCard System, Inc., at
the following numbers:

> \(1\) 24 hours a day, 7 days a week (Ask for I.M.P.A.C. customer
> service)
>
> (A)     1-800-227-6736
>
> \(2\) Automated authorization service number for use by merchants only
>
> (A)     1 - 800 - 525 - 5093

**15.2**     The cardholder must also notify the approving official of
the lost or stolen card within one workday after discovering the card
missing. The approving official must also notify BART Police at the same
time they receive notice.

**15.3**    The approving official shall submit a written report to
Procurement Administration within five workdays. The report will
include:

> \(1\) the card number
>
> \(2\) the cardholder\'s complete name
>
> \(3\) the date and location of the loss
>
> \(4\) the date reported to BART police
>
> \(5\) date and time the contractor was notified
>
> \(6\) any purchase(s) made on the day the card was lost/stolen
>
> \(7\) any other pertinent information

**15.4   ** A card that is subsequently found by the cardholder after
being reported lost or stolen will be cut in half and given to his/her
approving official. The approving official will complete the destruction
notice and forward the notice to Procurement Administration and BART
Police.

**16.0 CARD SECURITY**

> It is the cardholder\'s responsibility to safeguard the purchase card
> and account number at all times. The cardholder must not allow anyone
> to use his/her card or account number. A violation of this trust will
> require that the card be withdrawn from the cardholder with the
> possibility of subsequent disciplinary action.

**17.0 SEPARATION OF CARDHOLDER**

> Upon separation of a cardholder, the cardholder must surrender the
> card to his/her approving official who will complete the destruction
> notice and forward the notice to Procurement Administration.

**18.0 TRANSFER OF CARDHOLDER TO ANOTHER APPROVING OFFICIAL**

> If a cardholder is transferred to another Department or Division with
> a different approving official, the new approving official must
> determine if the employee will continue to be a cardholder within
> his/her Department or Division. If it is determined that the card
> should be kept by the cardholder, the master file can be changed by
> requesting, in writing, that Procurement Administration have the
> contractor add the cardholder to the new approving official\'s
> responsibility and delete him/her from the old file without issuing a
> new card.

**19.0  UNAUTHORIZED PURCHASES OR CARELESS USE OF THE PURCHASE CARD**

> A cardholder who makes unauthorized purchases or carelessly uses the
> card may be liable to BART for the total dollar amount of unauthorized
> purchases made in connection with the misuse or negligence. Also, the
> cardholder may be subjected to disciplinary action for unauthorized or
> careless use.

BART will be liable for the use of Purchase cards by authorized users
(cardholders)

**APPENDIX B.6**

**PRENEGOTIATION POSITION**

** **

**PROFESSIONAL ARCHITECTURAL/ENGINEERING DESIGN SERVICES**

**ADDICKS PARK & RIDE LOT SECOND EXPANSION**

**REQUEST FOR PROPOSAL 94A072P**

  

[Date Prepared]{.underline}: July 28, 1994

[Purpose and Background]{.underline}: The purpose of this document is to
establish a Prenegotiation Position with respect to the Consultant\'s
proposal for design of the Addicks Park and Ride Lot Second Expansion.
On December 20, 1993, METRO Board Resolution No. 93-213 was passed
authorizing and directing the General Manager to negotiate, execute and
deliver a Contract with \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ for
architectural/ engineering design of the Addicks Park and Ride Lot
Second Expansion.

[Scope of Services]{.underline}: The proposed Consultant shall perform
preliminary architectural-engineering design (Phase I) and final
architectural-engineering design of the Second Expansion of the Addicks
Park & Ride (Phase II) and design support services during construction.
It is currently intended that a firm fixed price Contract be negotiated
for providing the required design services and that a not-to-exceed
amount and unit rates be negotiated for the required design support
services during construction.

Request for Proposal: A Request For Proposal No. 94A072P was
subsequently issued to \_\_\_\_\_\_\_\_\_\_\_\_ On January 14, 1994.
During the proposal period,\_\_\_\_\_\_\_\_\_\_\_\_ was requested to
consider three (3) alternatives for the pedestrian crossing from the
expansion facility to the existing facility: an at-grade crossing, an
overhead crossing, and an underground crossing. Their initial proposal
was received January 31, 1994. Subsequent to receipt of the
Consultant\'s initial proposal, it was decided that the Consultant would
ultimately be directed to perform to the \"Underground Crossing\"
Alternative, and therefore, only this alternative was considered in the
computation of this Prenegotiation Position. Additional information was
required and was requested with respect to their proposal for an
underground crossing and this was received on March 21, 1994.

[Proposal]{.underline}: The Consultant\'s firm fixed price proposal for
design of the facility with an underground pedestrian crossing was
\$302,095.00 plus a Not-to-Exceed allowance of \$45,000.00 for design
support services during construction, for a total Not-to-Exceed
\$347,095.00. Please see Attachment \"A\" for a summary breakdown of the
Consultant\'s proposal for this alternative.

[METRO Estimate]{.underline}: The Contract Acquisition Request (CAR)
contained the Project Manager\'s initial estimate based on an at-grade
or overhead crossing. The Project Manager subsequently prepared an
estimate of \$289,000.00 for design of the facility with an underground
pedestrian crossing plus a Not-to-Exceed allowance of \$45,000.00 for
design support services during construction, for a total Not-to-Exceed
\$334,000.00. For a Discipline comparison of the Project Manager\'s
revised estimate with the Consultant\'s proposal, please see Attachment
\"B\".

[Audit]{.underline}: On February 1, 1994, an audit of the Consultant\'s
payroll and overhead rates was requested. The verbal audit results were
received on February 21, 1994, as requested. The Audit-supported
overhead rate for the Consultant was determined to be 133.68% versus the
Consultant\'s proposed rate of 171%. Audit disallowed that portion of
the overhead attributable to \_\_\_\_\_\_\_\_\_\_\_\_\'s corporate
headquarters. The audit of the Consultant\'s payroll determined that the
majority of the Consultant\'s actual direct labor rates were equal to or
greater than those proposed.

An audit was also requested for \_\_\_\_\_\_\_\_\_\_\_\_, the structural
design subconsultant. \_\_\_\_\_\_\_\_\_\_\_\_ has performed almost
\$200,000 of work for METRO without an audit. The verbal audit results
were received on or about February 25, 1994. Audit determined that \'s
proposed overhead rate of 172.7% was not substantiated by any
documentation and that therefore an approximate industry average
overhead rate of 150% was used by the Contract Administrator to develop
his position. Audit also determined that \_\_\_\_\_\_\_\_\_\_\_\_\'s
Civil Engineer was a contract employee, for which, in accordance with
Audit\'s interpretation, is not entitled to overhead and profit.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, the Civil subconsultant;
\_\_\_\_\_\_\_\_\_\_\_\_, the Landscaping subconsultant;
\_\_\_\_\_\_\_\_\_\_\_\_, the Geotechnical subconsultant; and
\_\_\_\_\_\_\_\_\_\_\_\_, the Surveying subconsultant, have all been
audited in the recent past in conjunction with other contracts and
therefore they were not audited for this procurement. For the most part,
each of these subconsultants\' proposals conformed to available audit
information, with the exception of the base design profit margin
proposed by \_\_\_\_\_\_\_\_\_\_\_\_, which exceeded Audit allowable
profit of 10% by an additional 5%. This, as well as a portion of
\_\_\_\_\_\_\_\_\_\_\_\_\'s reimbursables, were regarded as unallowable
or excessive, respectively, by the Contract Administrator.

Please see Attachment \"C\" for a Summary breakdown reflecting all
Audit/Contract Administrator derived disallowances with respect to the
Consultant\'s proposal. For a Discipline comparison of the Contract
Administrator\'s computations with respect to the Consultant\'s proposal
please see Attachment \"D\".

[METRO\'S Prenegotiation Position]{.underline}: The METRO Project
Manager and Contract Administrator met to discuss their two (2)
positions of from \$289,000.00 to \$279,472.00, respectively, for
design, when compared with the Consultant\'s proposal of \$302,593.00.
Both were agreed that the Not-to-Exceed figure of \$45,000.00 for design
support services during construction, as proposed by the Consultant, was
adequate and appropriate for the Project. They ultimately agreed to a
position totaling \$282,920.00 for design.

This position represents a slight reduction in the Contract
Administrator\'s position with respect to \_\_\_\_\_\_\_\_\_\_\_\_\'s
proposal for their own services, to allow for somewhat excessive
reimbursables and ultimately conform to the Project Manager\'s revised
estimate; a compromise position with respect to
\_\_\_\_\_\_\_\_\_\_\_\_\'s proposal for Civil Services; a compromise
position with respect to \_\_\_\_\_\_\_\_\_\_\_\_\'s proposal for
Structural Services; to allow for additional man hours deemed necessary
by the Project Manager; and a slight reduction in both positions with
regard to \_\_\_\_\_\_\_\_\_\_\_\_\'s proposal for Landscaping, to make
their figure more appropriately comparative with that of the other
participants. Both agreed to accept \' proposal for Geotechnical
Services and \_\_\_\_\_\_\_\_\_\_\_\_\'s proposal for Surveying exactly
as submitted. For a Discipline comparison of the Negotiation Position
agreed to by the Project Manager and Contract Administrator, as compared
with the Consultant\'s proposal, please see Attachment \"E\".

[Conclusion]{.underline}: Based on the information provided above, the
METRO negotiation position of \$282,920.00 for the design of the Addicks
Park & Ride Lot Second Expansion plus a Not-to-Exceed allowance of
\$45,000.00 for design support services during construction, for a
Not-to-Exceed total of \$327,920.00 is deemed to be fair and reasonable.
Negotiations will commence immediately upon approval of this plan.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\
Contracts Administrator

 

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\
Project Manager

 

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\
Division Director

 

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\
Manager of Contracts

######## APPENDIX B.7

**OFFER AND ACCEPTANCE FORM**

**1.2 OFFER**

***The following is an example Offer/Award form to be modified as
appropriate by the Procuring Agency and included in the RFP.***

Offeror shall complete the following form and include same in the price
proposal.

+-----------------------------------------------------------------------+
| **OFFER**                                                             |
|                                                                       |
| By execution below Offeror hereby offers to furnish equipment and     |
| services as specified in (*Procuring Agency insert name*) Request for |
| Proposals No. (*Procuring Agency insert RFP Number*) including the    |
| General Provisions (Section 2), Quality Assurance Provisions (Section |
| 3), Warranty Provisions (Section 4) and Technical Specifications      |
| (Section 5), therein.                                                 |
+-----------------------------------------------------------------------+
| Offeror: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ |
|                                                                       |
| > Name                                                                |
| >                                                                     |
| > \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_            |
| >                                                                     |
| > Street Address                                                      |
| >                                                                     |
| > \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_            |
| >                                                                     |
| > City, State, Zip                                                    |
| >                                                                     |
| > \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_            |
| >                                                                     |
| > Signature of Authorized Signer                                      |
| >                                                                     |
| > \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_            |
| >                                                                     |
| > Title                                                               |
| >                                                                     |
| > \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_            |
|                                                                       |
| Phone                                                                 |
+-----------------------------------------------------------------------+

**1.3 AWARD**

**NOTICE OF AWARD**

By execution below, Procuring Agency accepts Offer as indicated above.

> Contracting Officer:
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Signature

::: Definition-Term
Date of Award: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
:::

######## APPENDIX B.9

**MEMORANDUM OF NEGOTIATIONS**

**Date Prepared:** July 28, 1994

**Consultant:** DEB Architects

**Contract No.:** A30678C

**Project Title:** Final Design Services for the Central Control
Facility

**Project Description:** Provide final architectural/engineering design
services and design support services during construction of the Central
Control Facility in accordance with METRO\'s Scope of Services.

**Contract Value:** Lump Sum (L.S.) Facility Design \$484,023

L.S. Furnishings \$ 22,452

Total L.S. Final Design \$506,475

Design Support Services (NTE) \$115,000

Total NTE \$621,475

**CAR Amount:** \$490,000 (Order of Magnitude)

**Source of Funds:** 50% Federal/50% METRO

**Contract Type:** Firm Fixed Lump Sum Price (FFLSP) for final
architectural/engineering design services, with Firm Fixed Unit Prices
(FFUP) for design support services during construction, for a total
Contract Not-to-exceed (NTE) Price.

**Performance Period:** The final architectural/engineering design
schedule is for a total of one hundred twenty (120) calendar days from
the Notice-to-proceed, not counting METRO review time. Design support
services during construction will begin upon receipt of another separate
Notice-to-proceed and continue throughout construction, as required by
the METRO Project Manager.

**Insurance:** See Proposed Contract Article 23, \"Consultant\'s
Insurance\".

**DBE Participation:** The Request for Proposal (RFP) specified 21% in
accordance with the Contract Acquisition Request (CAR). Consultant
currently intends to utilize D.E.F. Associates, Inc. (BF) for structural
design, at 9.63% of the total estimated not-to-exceed price; TAB
Engineering Company (AM) for civil engineering and survey, at 9.34%; and
CDE Associates, Inc. (CF) for landscaping, at 2.92%; for a total of
21.89% of the total estimated not-to-exceed price for DBE participation.

**Selection Process and Criteria:** A-E Qualifications. See Summary of
Procurement dated for information regarding Consultant selection.

**Authorization:** The authorization for this Contract is Contract
Acquisition Request (CAR) AG2141R93172 and METRO Board Authorization
92-90, dated June 25, 1993, which authorizes design of the Central
Control Facility. Preliminary architectural/engineering design for this
project was accomplished under Contract No. A30132C. The authorization
for that Contract was CAR AL0213P92101 and the METRO Board Authorization
referenced above.

**Cost/Price Analysis-Negotiation Results:**

Subsequent to the Board Action described above and receipt of a CAR and
Scope of Services for final architectural/engineering design of this
project on June 18, 1993, Request for Proposal (RFP) No. 93A390P for
these services was prepared and transmitted to the Consultant on June
29, 1993, with a due date of July 12, 1993. The Consultant\'s initial
proposal (attached) was received on July 15, 1993. The proposal was for
a firm lump sum of \$629,151 (10,299 man-hours) for facility design and
\$22,484 (438 man-hours) for furnishings design, for a total firm lump
sum of \$651,635 (10,737 man-hours) for final design, and apparently did
not address itself to design support services during construction (See
Attachment \"A\" for a Summary of this Proposal, as well as Attachment
\"A.1\" for a Detailed Summary of the Consultant\'s Proposal).

Prior to being furnished the Consultant\'s initial proposal for final
architectural/ engineering design, the Project Manager furnished
Contracts a project management man-hour estimate. The Project Manager\'s
man-hour estimate (attached) was received on August 2, 1993. The Project
Manager\'s (and resident staff specialists\') estimate was for a firm
lump sum of \$683,514 (12,896 man-hours) for facility design and
\$22,640 (424 man-hours) for furnishings design, for a total firm lump
sum of \$706,154 (13,320 man-hours) for final design, with a
Not-to-Exceed (NTE) total of \$45,000 (800 man-hours) for design support
services during construction, for a total NTE of \$751,154 (14,120
man-hours) (See Attachment \"B\" for a Summary of this Project
Manager\'s Estimate, as well as Attachment \"B.1\" for a Detailed
Summary of the Project Manager\'s Estimate). Upon receipt of the
proposal, a METRO prenegotiation position of NTE \$635,000.00 was
developed (See Attachment B.2).

Upon review, the Consultant\'s proposal for furnishings design was
accepted as submitted, subject to audit disallowances, inasmuch as it
conformed so closely to the Project Manager\'s Estimate. However, there
was some concern that some of the Consultant\'s subconsultants had not
included all required services in their respective proposals for
facility design (See Attachment \"C\" for a Summary Comparison of the
Consultant\'s initial proposal for facility design with the Project
Manager\'s estimate for facility design) and there was also the question
of design support services during construction, which had not been
specifically addressed in the Consultant\'s proposal, but which appeared
to be included in certain subconsultant proposals. It was decided that a
Scoping meeting should be held to discuss the Consultant\'s proposal for
facility design. The Scoping meeting was held in the AGM for Capital and
Long Range Planning\'s Conference Room on the 21st floor at 1201
Louisiana on Thursday, August 5, 1993, at 10:00 a.m., with the following
participants in attendance:

+-------------------------------------+--------------------------------+
| **(Full Time)**                     |                                |
+-------------------------------------+--------------------------------+
| [ABC]{.underline}                   | [METRO]{.underline}            |
|                                     |                                |
| R. Case                             | Ed Fanning                     |
|                                     |                                |
|                                     | Jim Schmid                     |
+-------------------------------------+--------------------------------+
| **(Part Time)**                     |                                |
+-------------------------------------+--------------------------------+
| [TVC]{.underline}                   | Michael Williams               |
|                                     |                                |
| Petula Clark                        |                                |
|                                     |                                |
| S. Caminski                         |                                |
+-------------------------------------+--------------------------------+
| [D.I.Y.]{.underline}                | David Lentz                    |
|                                     |                                |
| D. Morry                            |                                |
+-------------------------------------+--------------------------------+
| [TSC]{.underline}                   | Hameed Merchant                |
|                                     |                                |
| Tony Change                         |                                |
|                                     |                                |
| Roy Canoe                           |                                |
+-------------------------------------+--------------------------------+
| [TSY]{.underline}                   | Joe Misrahi                    |
|                                     |                                |
| Swimming Pool                       | Sol Abdulla                    |
+-------------------------------------+--------------------------------+

At this meeting, all of the participants were advised that METRO
intended to alter the Scope of Services to provide for drawings at 20th
scale in lieu of 40th scale, so that the half sized drawings required
for the project would be readable. All of the participants agreed that
this would not be a problem, inasmuch as all drawings were being
produced on CADD. At this meeting, Project Management satisfied itself
that all major participants in the project, with the possible exception
of the Civil/Traffic subconsultant, had properly estimated their work
scopes (It was suggested that the Civil/Traffic subconsultant reduce
their survey time and increase their traffic design time slightly and
the need for some additional geotechnical borings were suggested to the
Prime Architect and Civil/Traffic subconsultant). However, it was also
determined that the Prime Architect, Structural subconsultant, and
Landscaping subconsultant (as per their proposal), had included design
support services during construction into their proposals for design of
the facility. They were advised that the RFP had requested a separate
NTE proposal for such services to be performed on an \"as required\"
time and material basis, and were requested to submit such an NTE
Proposal and reduce their design proposals accordingly. While ABC and
XYZ had not included any such Design Support Services monies or time in
their original proposals, ABC was asked to review and revise their
proposal to reflect the revisions referenced above, and XYZ was advised
that, because of the risks associated with a lump sum proposal, they
were entitled to a profit factor of 10%, in lieu of the 5% factor they
initially proposed. ABC and XYZ had been limited to a 5% profit factor
in the original Cost Plus Fixed Fee (CPFF) Contract for Preliminary
Engineering, in light of their limited risk in the project, and XYZ had
assumed that METRO simply would not accept a higher factor under any
circumstances. DEB was also advised that their method of applying a 10%
profit factor to their subconsultants, as well as themselves,
constituted fee on top of fee, and as such was unacceptable to METRO.
They were advised that METRO would, however, consider the addition of a
reasonable number of appropriate man-hours for contract administration
as an acceptable substitution for computation of fee in this fashion,
and Morris agreed to restructure their Proposal accordingly. DEB
ultimately agreed to revise and resubmit their entire proposal in
accordance with the understandings reached at this meeting.

Their revised proposal for facility design and design support services
during construction (attached) was received on August 11, 1993. This
revised proposal was for a firm lump sum of \$500,129 (8,736 man-hours)
for facility design, with an NTE total of \$150,304 (2,944 man-hours)
for design support services during construction (See Attachment \"D\"
for a Summary of the Consultant\'s revised proposal for facility design
as well as Attachment \"E\" for a Summary Comparison of their initial
proposal for facility design with their revised proposal for facility
design; and Attachment \"F\" for a Summary of their NTE proposal for
design support services during construction as well as Attachment \"G\"
for a Summary Comparison of their NTE proposal for design support
services during construction with the Project Manager\'s NTE estimate,
as alluded to above).

Upon review, the Consultant\'s revised proposal for facility design was
accepted as submitted, subject to audit disallowances, but the design
support services NTE and man-hours were still significantly more than
that originally estimated by the Project Manager. The Project Manager
reevaluated design support service requirements for the project, and
came up with a revised estimate (attached) NTE \$113,043 (1,708
man-hours); this figure was adopted as a negotiation position for such
services; and DEB was advised of this position.

DEB\'s acceptable revised man-hour proposal for facility design was then
subjected to METRO Audit and Contract Administrator disallowances. While
no audits were requested for this particular procurement, the major
participants, DEB, XYZ & Associates and ABC Engineering had already
recently been audited by METRO in conjunction with the preliminary
engineering contract referenced above, and those audit reports
(attached) were utilized for computation of these disallowances. DEB\'s
initial proposal had contained a 145% overhead factor, in lieu of their
METRO audited overhead of 140.89%, and this had been questioned by Mr.
Schmid during the Scoping Meeting referenced above. Mr. Case had replied
that he had essentially employed it as a salary escalator, and inasmuch
as its employment here rather than at the direct salary level would
certainly net much less of an actual increase, this matter was not
pursued further. However, other disallowances netted reductions in
DEB\'s proposal and that of their Civil/Traffic subconsultant, XYZ, as
well their Accessibility Consultant\'s computation of profit, for a
total reduction of \$20,141, or 4.03%, from the Consultant\'s revised
proposal of \$500,129, for a negotiation position of \$479,988 for
facility design (See Attachment \"H\" for a Summary of the Consultant\'s
revised proposal for facility design, less Audit and Contract
Administrator disallowances as well as Attachment \"I\" for a Summary
Comparison of their revised proposal for facility design with their
revised proposal with Audit and Contract Administrator disallowance
applied.

DEB\'s original man-hour proposal for furnishings design was also
subjected to METRO Audit and Contract Administrator disallowances, for a
reduction of \$108, or 8.08%, from the Consultant\'s initial proposal of
\$22,484, for a negotiation position of \$22,276 for furnishings design
(See Attachment \"I.1\").

A negotiation meeting was held with DEB in the Real Estate Conference
Room on the 19th floor at 1201 Louisiana on Monday, August 23, 1993, at
11:00 a.m., with the following participants in attendance:

**[DEB]{.underline} [METRO]{.underline}**

Ed Fanning

Jim Schmid

At that meeting, DEB furnished a revised proposal NTE \$115,000 for
design support services during construction, and this was accepted as
submitted, inasmuch as it conformed closely to the Project Manager\'s
revised estimate of \$113,043, as alluded to above.

DEB accepted the majority of METRO\'s Audit disallowances with regard to
their revised proposal for facility design and furnishings design, with
the exception of METRO\'s actual direct rate computation for DEB\'s
principals. Mr. advised that DEB\'s principals had had their pay rates
restored to their 1992 rates (the principals had taken a voluntary pay
cut effective January 1, 1993) subsequent to the audits referenced
above, and therefore METRO\'s computations in that regard were
incorrect. Mr. Schmid recomputed disallowances using the principals\'
original direct rates, and METRO and DEB ultimately agreed to the
resultant reductions in their proposal, as well as that applied to the
two (2) subconsultants under facility design. The resultant firm lump
sum for facility design was \$484,023, a reduction of \$16,106, or
3.22%, from the Consultant\'s revised proposal of \$500,129 (See
Attachment \"K\" , for a Summary of the Consultant\'s final proposal for
facility design, as ultimately negotiated, as well as Attachment \"K\"
for a Summary Comparison of their revised proposal for facility design
with their final proposal, as ultimately negotiated). The resultant firm
lump sum for furnishings design was \$22,452, a reduction of \$32, or
.14%, from the Consultant\'s original furnishings design proposal (See
Attachment \"K.1\").

The only items that remained to be negotiated were the rates for design
support services during construction, inasmuch as Morris had not
included any such proposed rates in their proposal(s). Mr. Schmid
furnished Mr. a \"Proposed Contract Attachment \"B," based upon DEB\'s
and ABC\'s audited rates, as well as existing design support service
rates for the remaining participants, and Mr. accepted these, with the
exception of the rate for DEB\'s Principals, which were revised to take
the aforementioned salary reinstatements into consideration.

**Contract Articles (Terms and Conditions)**: The Consultant took no
exception to the Contract Articles, and therefore the Proposed Contract
Terms contained in the RFP have been incorporated into the Contract
verbatim.

**Summary and Recommendations**: Based on cost/price analysis and
negotiations, as called out in the Memorandum of Negotiations, the firm
lump sum prices of \$484,023 for facility design and \$22,452 for
furnishings design, for a total firm lump sum of \$506,475 for all final
architectural-engineering design services; and an NTE of \$115,000 for
design support services during Construction, for an overall
Not-to-exceed price of \$621,475 for this proposed Contract are
considered fair and reasonable.

Approval of this Contract with DEB Architects for the total lump sum
price of \$506,475 for final design and an overall amount Not-to-exceed
\$621,475 is therefore recommended.

Contracts Administrator Project Manager

Division Director Affirmative Action

Manager of Contracts

######## APPENDIX B.10

**DISCLOSURE OF CONFLICTS OF INTEREST**

**(OCT 1994)**

It is the Department of Transportation\'s (DOT) policy to award
contracts to only those offerors whose objectivity is not impaired
because of any related past, present, or planned interest, financial or
otherwise, in organizations regulated by DOT or in organizations whose
interests may be substantially affected by Departmental activities.
Based on this policy:

\(a\) The offeror shall provide a statement in its proposal which
describes in a concise manner all past, present or planned
organizational, financial, contractual or other interest(s) with an
organization regulated by DOT, or with an organization whose interests
may be substantially affected by Departmental activities, and which is
related to the work under this solicitation. The interest(s) described
shall include those of the proposer, its affiliates, proposed
consultants, proposed subcontractors and key personnel of any of the
above. Past interest shall be limited to within one year of the date of
the offeror\'s technical proposal. Key personnel shall include any
person owning more than 20% interest in the offeror, and the offeror\'s
corporate officers, its senior managers and any employee who is
responsible for making a decision or taking an action on this contract
where the decision or action can have an economic or other impact on the
interests of a regulated or affected organization.

\(b\) The offeror shall describe in detail why it believes, in light of
the interest(s) identified in (a) above, that performance of the
proposed contract can be accomplished in an impartial and objective
manner.

\(c\) In the absence of any relevant interest identified in (a) above,
the offeror shall submit in its proposal a statement certifying that to
its best knowledge and belief no affiliation exists relevant to possible
conflicts of interest. The offeror must obtain the same information from
potential subcontractors prior to award of a subcontract.

\(d\) The Contracting Officer will review the statement submitted and
may require additional relevant information from the offeror. All such
information, and any other relevant information known to DOT, will be
used to determine whether an award to the offeror may create a conflict
of interest. If any such conflict of interest is found to exist, the
Contracting Officer may (1) disqualify the offeror, or (2) determine
that it is otherwise in the best interest of the United States to
contract with the offeror and include appropriate provisions to mitigate
or avoid such conflict in the contract awarded.

\(e\) The refusal to provide the disclosure or representation, or any
additional information required, may result in disqualification of the
offeror for award. If nondisclosure or misrepresentation is discovered
after award, the resulting contract may be terminated. If after award
the Contractor discovers a conflict of interest with respect to the
contract awarded as a result of this solicitation, which could not
reasonably have been know prior to award, an immediate and full
disclosure shall be made in writing to the Contracting Officer. The
disclosure shall include a full description of the conflict, a
description of the action the contractor has taken, or proposes to take,
to avoid or mitigate such conflict. The Contracting Officer may,
however, terminate the contract for convenience if he or she deems that
termination is in the best interest of the Government.

######## 

######## 

APPENDIX B.11

**NEW YORK CITY TRANSIT AUTHORITY**

**Division of Materiel**

**Procurement Sub-Division**

**Schedule J**

**BIDDER\'S QUALIFICATION QUESTIONNAIRE**

**[PART I - INSTRUCTIONS]{.underline}**

1 a. All Bidders/Proposers submitting a Bid/Proposal for public work
contracts (IFB & RFP); personal service (including Architectural and
Engineering) contracts (RFP); RFPs for supply, material, equipment
(including transit vehicles and rolling stock); RFPs for miscellaneous
procurement and service contracts; non-competitive/sole source contracts
(including preferred source and existing public contracts) equal to or
in excess of \$10,000 are to complete and submit Parts I, II, III, IV
and VIII with their Bid or Proposal.

b\. PUBLIC WORK CONTRACTS (IFB & RFP)

> If this Questionnaire is submitted in response to an Information for
> Bidders (IFB), the apparent low bidder will receive written
> notification requesting submission of Parts V, VI and VII. If this
> Questionnaire is submitted in response to a Request for Proposal
> (RFP), and the proposal submitted equals or exceeds \$25,000 all
> Proposers are to complete and submit all Parts of the Questionnaire
> with their Proposal.

c.  PERSONAL SERVICE INCLUDING ARCHITECTURAL AND\
    ENGINEERING CONTRACTS (RFP)

> Where the proposal submitted equals or exceeds \$20,000 for a personal
> service (consultant) contract, all Proposers are to complete and
> submit all Parts of the questionnaire with their Proposal.

d\. RFPs FOR SUPPLY, MATERIAL, OR EQUIPMENT (INCLUDING\
TRANSIT VEHICLES AND ROLLING STOCK), AND MISCELLANEOUS PROCUREMENT AND
SERVICE CONTRACTS

> Where the proposal submitted equals or exceeds \$250,000 for supplies,
> materials, or equipment (including transit vehicles and rolling
> stock), and miscellaneous procurement and service contracts all
> Proposers are to complete and submit all Parts of the questionnaire
> with their Proposal.

e\. NON-COMPETITIVE/SOLE SOURCE CONTRACTS (INCLUDING\
PREFERRED SOURCE AND EXISTING PUBLIC CONTRACTS

> Where the proposal submitted equals or exceeds \$25,000 for
> non-competitive public work contracts, \$20,000 for non-competitive
> personal service (Consultant) contracts, and \$250,000 for all other
> non-competitive contracts, all Proposers are to complete and submit
> all Parts of the questionnaire with their Proposal.

2\. Please state \"not applicable\" in questions clearly not applicable
to Bidder/Proposer in connection with this solicitation. Do not omit any
question. If any representation is not accurate and complete at the time
Bidder/Proposer signs this Questionnaire, Bidder/Proposer must, as part
of its Bid/Proposal, identify the provision and explain the reason in
detail in the space provided below. If additional space is needed, add
additional sheet(s) to this Questionnaire. If this space is left blank,
Bidder/Proposer shall be deemed to have represented and warranted the
accuracy and completeness of the representations on this Questionnaire:

3.  All information must be legible.

4\. Completed Questionnaire must be sworn to by a partner (if
partnership), a duly authorized officer or individual (if a
corporation), or a principal (if a sole proprietorship).

5\. The term \"Proposer\" includes the term \"Bidder\" and also refers
to the firm awarded the Contract. The term \"Proposal\" includes the
term \"Bid\".

6\. If during the performance of this Contract, either of the following
occurs, Bidder shall promptly give notice in writing of the situation to
the Authority's Chief Procurement Officer, and therefore cooperate with
the Authority\'s review and investigation of such information.

i\) Proposer has reason to believe that any representation or answer to
any question contained in this Questionnaire was not accurate or
complete at the time this Questionnaire was signed; or

> ii\) events occur or circumstances changes so that an answer to any
> question in Part IV is no longer accurate or complete.
>
> In the Authority\'s sole discretion, the following shall constitute
> grounds for the Authority to take remedial action up to and including
> immediate termination of the Contract for convenience without payment
> for profit and overhead for work not performed if: i) Proposer fails
> to notify the Chief Procurement Officer as required by \"6\" above:
> ii) Proposer fails to cooperate with the Authority\'s request for
> additional information as required by \"6\" above.

7\. The Authority reserves the right to inquire further with respect to
Proposer\'s responses; and Proposer consents to such further inquiry and
agrees to furnish all relevant documents and information as requested by
the Authority. Any response to this document prior or subsequent to
Proposer\'s Proposal which is or may be construed as unfavorable to
Proposer will not necessarily automatically result in a negative finding
on the question of Proposer\'s responsibility or a decision to terminate
the Contract if it is awarded to Proposer.

# 

# **PART II - IDENTITY OF PROPOSER**

1\. Proposer\'s Full Legal Name:

::: Definition-Term
2\. The Proposer represents that it operates as the following form of
legal entity: (Check
:::

whichever applies and fill in any appropriate blanks.)

 an individual or sole proprietorship

 a general partnership

 a limited partnership

 a joint venture consisting of:

and

(List all joint venturers on a separate sheet if this space is
inadequate.)

 a non-profit organization

>  a corporation organized or incorporated under the laws of the
> following state or country:

on the following date:

3\. Proposer\'s federal taxpayer identification number:

4\. Proposer\'s legal address:

Telephone Number: (\_\_\_\_) \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Fax
Number: (\_\_\_\_)

5\. Proposer\'s local or authorized point of contract address:

Name: Title:

Address:

Telephone Number: (\_\_\_\_) \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Fax
Number: (\_\_\_\_)

6\. a. If Proposer is a corporation, has a Certificate of Incorporation
been previously filed with the New York City Transit Authority?

YES  NO  If answer is \"NO," attach a certified copy.

b\. Attach a certified copy of the By-Laws and Resolution of the
Corporation giving the names and titles of the corporate officers other
than President, as well as non-officer employees, who are authorized to
sign contracts, bonds, bills of sale and other legal instruments in
connection with the Contract, if the same have not been previously
filed.

c\. If a foreign corporation, has proof of authority to transact
business in the State of New York been previously filed with the New
York City Transit Authority?

YES  NO  If answer is \"NO,\" attach a certified copy.

> In the event that any of Proposer\'s previous submissions to the
> Transit Authority in response to the above (questions a-c) no longer
> represent the Proposer\'s current corporate status, Proposer must
> attach a certified copy of any documents amending its previous
> submissions.

7\. a. How long has the Proposer been in business?

b\. Have Proposer\'s major shareholders, officers or principals been in
business under another name? If so, identify name and dates used.

c\. How many years experience as a prime contractor/consultant?
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

> d\. How many years experience as a subcontractor/subconsultant?
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

8\. List below the names, business addresses, titles, and telephone
numbers of the following

people: if a corporation, identify the president, executive officers,
and any other officers directly responsible for this Proposal; if a
partnership, identify the partners directly responsible for this
Proposal; or, if another form of business entity, identify the
principals directly responsible for this Proposal.

> [Name]{.underline} [Address]{.underline} [Title]{.underline}
> [Telephone No.]{.underline}

9\. If your firm considers itself to be an MBE, WBE or DBE, then within
the past three years has the Proposer had any MBE, WBE, or DBE
certification (or application for such certification) revoked or, if you
made application for such certification during such period was same
denied?

YES  NO  If answer is \"NO,\" attach a certified copy.

## [PART III-PROPOSER\'S REPRESENTATIONS]{.underline}

1.  By submission of this Proposal, the undersigned and each person
    signing on behalf of the undersigned certifies, and in the case of a
    joint proposal each party thereto certifies, as to its own
    organization, as required by Section 2878 of the Public Authorities
    Law of the State of New York, under penalty of perjury, that to the
    best of its knowledge and belief:

    a\. the prices in this Proposal have been arrived at independently
    without collusion, consultation, communication, or agreement for the
    purpose of restricting competition, as to any matter relating to
    such prices with any other proposer or with any competitor;

> b\. unless otherwise required by law, the prices which have been
> quoted in this Proposal have not been knowingly disclosed by the
> Proposer arid will not knowingly be disclosed by the undersigned prior
> to opening, directly or indirectly, to any other proposer or to any
> competitor prior to the closing date for proposals;

c\. no attempt has been or will be made by the Proposer to induce any
other person, partnership or corporation to submit or not to submit a
proposal for the purpose of restricting competition;

> A Proposal shall not be considered for award nor shall any award be
> made where a, b, and c, above, have not been complied with provided,
> however, that if in any case the Proposer cannot make the foregoing
> certification, the Proposer shall so state and shall furnish with the
> Proposal a signed and notarized statement which sets forth in detail
> the reasons therefor. Where a, b, and c, above, have not been complied
> with, the Proposal shall not be considered for award nor shall any
> award be made unless the Vice President, Division of Materiel of the
> Authority, or his/her designee, determines that such disclosure was
> not made for the purpose of restricting competition.
>
> The fact that a Proposer (i) has published price lists, rates, or
> tariffs covering items being procured; (ii) has informed prospective
> customers of proposed or pending publication of new or revised price
> lists for such items; or (iii) has sold the same items to other
> customers at the same prices being proposed, does not constitute,
> without more, a disclosure within the meaning of a, b, and c above

2\. Statement of no-conflict of interest

> a\. No appointed or elected official, member or other officer or
> employee of the City or State of New York, or of the Metropolitan
> Transportation Authority (\"MTA\"), or MTA\'s affiliates arid
> subsidiaries which consist of the New York City Transit Authority,
> Manhattan & Bronx Surface Transit Operating Authority, Staten Island
> Rapid Transit Operating Authority, Metro-North Commuter Railroad, Long
> Island Rail Road, Triborough Bridge and Tunnel Authority, Metropolitan
> Suburban Bus Authority, and Metropolitan Transportation Authority Card
> Company: i) is interested directly or indirectly, in any manner
> whatsoever in or in the performance of the Contract or in the
> supplies, work or business to which it relates or in any portion of
> the profits thereof; or ii) has been or will be offered or given any
> tangible consideration in connection with this Proposal/Contract.

b.  Proposer covenants that neither Proposer nor, to the best of the
    Proposer\'s knowledge after diligent inquiry, any director, officer,
    owner or employee of the Proposer has any interest nor shall they
    acquire any interest, directly or indirectly, which would conflict
    in any manner or degree with the faithful performance of the
    Contract hereunder.

c.  In the event Proposer has no prior knowledge of a conflict of
    interest as set forth in \"a\" and \"b\" above and hereafter
    acquires information which indicates that there may be an actual or
    apparent violation of any of the above, Proposer shall promptly
    bring such information to the attention of the Authority\'s Chief
    Procurement Officer, Proposer shall thereafter cooperate with the
    Authority\'s review and investigation of such information, and
    comply with any instruction it receives from the Chief Procurement
    Officer in regard to remedying the situation.

3\. The following statements apply to any proposal or contract between
Proposer and the City or State of New York, any other state, any public
authority or other public entity, the United States government, the
Metropolitan Transportation Authority (\"MTA\"), and MTA\'s affiliates
and subsidiaries which are the New York City Transit Authority,
Manhattan & Bronx Surface Transit Operating Authority, Staten Island
Rapid Transit Operating Authority, Metro-North Commuter Railroad, Long
Island Rail Road, Triborough Bridge and Tunnel Authority, Metropolitan
Suburban Bus Authority, and Metropolitan Transportation Authority Card
Company.

> a\. Statements b, c, d. e, f and g below also apply to i) Proposer\'s
> parent, subsidiaries and affiliates (if any), ii) any joint venture
> (including its individual members and any other form of partnership
> (including its individual members) which includes Proposer or
> Proposer\'s parent, subsidiaries, or affiliates; iii) Proposer\'s
> directors, officers, principals, and managerial employees and any
> person or entity with a 10% or more interest in Proposer; iv) any
> legal entity controlled, or 10% or more of which is owned, by
> Proposer, or by any director, officer, principal or managerial
> employee of Proposer, or by any person or entity with a 10% or more
> interest in Proposer; or v) any parent, subsidiary or affiliate of any
> legal entity controlled, or 10% or more of which is owned, by
> Proposer, or by any director, officer, principal or managerial
> employee of Proposer, or any person or entity with a 10 % or more
> interest in Proposer.

b\. Has the Proposer been declared not responsible. (Check \"YES\" or
**\"**NO,**\"** as appropriate.)

> YES  NO 
>
> c\. Has the Proposer been debarred, suspended, proposed for debarment,
> declared ineligible, voluntarily excluded, or otherwise disqualified
> from bidding, proposing, or contracting. (Check \"YES\" or \"NO,\" as
> appropriate.)
>
> YES  NO 
>
> d\. Has the Proposer been a defaulter, as principal, surety or
> otherwise. (Check \"YES\" or \"NO,\" as appropriate.)
>
> YES  NO 
>
> e\. Has the government or other public entity requested or required
> enforcement of any of its rights under a surety agreement on the basis
> of a Proposer default or in lieu of declaring Proposer in default.
> (Check \"YES\" or \"NO," as appropriate.)
>
> YES  NO 
>
> f\. Is the Proposer in arrears upon a contract or debt. (Check \"YES\"
> or \"NO," as appropriate
>
> YES  NO 

g.  Are there any proceedings pending relating to Proposer\'s
    responsibility, debarment, suspension, voluntarily exclusion or
    qualification to receive a public contract. (Check \"YES\" or
    \"NO\". as appropriate.)

> YES  NO 
>
> h\. List the name and business address of each person or legal entity
> which has a 10% or more ownership or control interest in Proposer
> (attach additional pages as needed).
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

i.  Explain any \"YES\" answers to b, c, d, e, f and g in the space
    provided below (attach additional pages as needed).

**[\
]{.underline}**

**[PART IV]{.underline} - [QUESTIONS WHICH MUST BE]{.underline}
[ANSWERED]{.underline} \"[YES\"]{.underline} [OR]{.underline}
\"[NO]{.underline}\"**

(In the event of a \"YES,\" the Authority reserves the right to inquire
further with respect thereto.)

> To the best of your knowledge after diligent inquiry, in connection
> with the business of proposer or any other firm which is related to
> Proposer by any degree of common ownership, control, or otherwise, do
> any of the following statements apply to: i) Proposer; ii) Proposer\'s
> parent; iii) any Proposer subsidiary or affiliate; iv) any joint
> venture (including its individual members) or any other partnership
> (including its individual members) which includes Proposer or
> Proposer\'s parent, subsidiaries, or affiliates, v) any legal entity,
> or parent, subsidiary or affiliate of any legal entity, controlled. or
> 10% or more of which is owned, by Proposer, or by any director,
> officer, principal or managerial employee of Proposer, or by any
> person or entity with a 10% or more interest in Proposer. or vi) any
> person who is a director, officer, principal, or, managerial employee,
> or person or entity with a 10% or more interest in any of the
> aforesaid:
>
> 1\. Has been convicted by a plea or verdict of guiltily of, or pleaded
> nolo contendere to, a misdemeanor or felony in any federal, state or
> local court. (Check \"YES\" or \"NO," as appropriate.)
>
> YES  NO 
>
> 2\. Have pending any state or federal grand jury or court an
> indictment or information for the commission of a crime which has riot
> been favorably,\' terminated. (Check \"YES\" or \"NO," as
> appropriate.)
>
> YES  NO 

3\. Is the subject of any pending investigation by any grand jury,
commission, committee or other entity or agency or authority of any
state or the federal government in connection with the commission of a
crime. (Check \"YES\" or \"No," as appropriate.)

> YES  NO 
>
> 4\. Is currently disqualified from selling or submitting
> bids/proposals to or receiving awards from or entering into any
> contracts with any federal, state or local governmental entity, any
> public authority or any public entity (Check \"YES\" or \"NO," as
> appropriate.)
>
> YES  NO 
>
> 5\. Within the past five years, has refused to testify or to answer
> any question concerning a bid or contract with any federal, state, or
> local governmental entity, any public authority or other public entity
> when called before a grand jury or other committee, agency or forum
> which is empowered to compel the attendance of witnesses and examine
> them under oath, upon being advised that neither the person\'s
> statement nor any information or evidence derived from such statement
> will be used against that person in any subsequent criminal
> proceeding. (Check \"YES\" or \"NO\" as appropriate.)
>
> YES  NO 
>
> 6\. Is currently disqualified from selling or submitting a bid to, or
> receiving an award from, or entering into any contract with any public
> entity or public authority within the State of New York because,
> within the past five years, such entity or person refused to testify
> or to answer any relevant question concerning a transaction or
> contract with the State of New York, any political subdivision of the
> State of New York, or a public authority or a public department,
> agency or official of the State of New York or of a political
> subdivision of the State of New York, when called before a grand jury
> or other state or local department, commission or agency which is
> empowered to compel the attendance of witnesses and examine them under
> oath. upon being advised that neither that person\'s statement nor any
> information or evidence derived from such statement will be used
> against that person in any subsequent criminal proceeding, (Check
> \"YES\" or \"NO," as appropriate.)
>
> YES  NO 
>
> 7\. Has within a three year period preceding this Proposal been
> convicted of or had a civil judgment rendered against them for
> commission of fraud or a criminal offense in connection with
> obtaining, attempting to obtain. or performing a public (Federal,
> State or local) transaction or contract under a public transaction;
> violation of Federal or State antitrust statutes or commission of
> embezzlement, theft, forgery, bribery, falsification or destruction of
> records, making false statements, or receiving stolen property. (Check
> \"YES\" or \"NO," as appropriate.)
>
> YES  NO 
>
> 8\. Explain any \"YES\" answers to 1, 2, 3, 4, 5, 6 or 7, in the space
> provided below (attach additional pages as needed).

### PART V-TECHNICAL

> 1\. List the name, title and business address of each director and
> principal officer of Proposer.
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

2\. Number of employees: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ including
\_\_\_\_\_\_\_\_\_\_\_\_ employees in the Greater New York Metropolitan
Area.

3\. Does the Proposer have any outstanding bids or proposals for
contracts ([i]{.underline}.[e]{.underline}., bids or proposals pending
where no contract has yet been awarded) with the State or City of New
York, or any other public authority of the State of New York, or the
Metropolitan Transportation Authority (\"MTA\"), and MTA\'s affiliates
and subsidiaries which are the New York City Transit Authority,
Manhattan & Bronx Surface Transit Operating Authority, Staten Island
Rapid Transit Operating Authority, Metro-North Commuter Railroad, Long
Island Rail Road, Triborough Bridge and Tunnel Authority, Metropolitan
Suburban Bus Authority, and Metropolitan Transportation Authority Card
Company? If none, state \"None\". If yes, please list them and provide
the name of the requesting agency, the contract number, a brief
description of the work effort and the status of the bid or proposal.
Indicate if the bid/proposal was submitted by the Bidder as prime
contractor or joint venture.

> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

4\. Has the Proposer been awarded any contracts within the last three
years by the State or City of New York, or any other public authority of
the State of New York, or the Metropolitan Transportation Authority
(\"MTA\"), and MTA\'s affiliates and subsidiaries which are the New York
City Transit Authority, Manhattan & Bronx Surface Transit Operating
Authority, Staten Island Rapid Transit Operating Authority, Metro-North
Commuter Railroad, Long Island Rail Road, Triborough Bridge and Tunnel
Authority, Metropolitan Suburban Bus Authority, and Metropolitan
Transportation Authority Card Company? If none, state \"None\". If yes,
describe those contracts beginning with the most recent. State the name
of the contracting entity; give a brief description of the contract and
the contract number; state the contract period, the status of the
contract, and the name, address, and telephone number of a contact
person at the agency. Indicate if award was made to Proposer as prime
contractor or joint venture. Proposer need not provide more than six
such descriptions.

> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

5\. Does the Proposer have any current private sector projects? If none,
state \"None.\" If yes, provide name and address of owner, a brief
description of work, status of contracts and name, address and telephone
number of contact person as to each, beginning with the most recent.
Indicate if Proposer is acting as prime contractor or joint venture.
Proposers need not provide more than six such descriptions.

> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

6\. For each of the following contracts, provide a brief description of
the work performed, the contract number, the dollar amount at award and
at completion, date completed, and the name and telephone number of the
owner\'s representative.

a.  Each contract completed during the last three years or, if less than
    three contracts have been completed during the last three years,
    list the last three contracts completed.

b.  Each contract completed during the last three years or, if less than
    three contracts have been completed during the last three years,
    list the last three contracts completed, for which liquidated
    damages or penalty provisions were assessed against you for failure
    to complete the work on time or for any other reason.

7\. List each contract which, during the last three years, the
person/entity contracting with you: i) terminated for default; ii) sued
to compel performance; iii) sued to recover damages, including, without
limitation, upon alleged breach of contract, misfeasance, error or
omission or other alleged failure on your part to perform as required by
your contract; or iv) called upon a surety to perform the work.

> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

8\. Describe whether any present or anticipated commitments and/or
contractual obligations might have an influence on the capabilities of
the Proposer to perform the work called for by this Contract. Any
apparent conflicts as between the requirements/commitments for this
Contract and the matters listed in items 3, 4, 5 or 6, above, with
respect to the use of Proposer\'s resources, such as management or
technical expertise or financing, should be explained. If none, state
\"None\".

> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

9\. Describe any litigation in which the Proposer is involved, which:

a.  has or may have an impact on the Proposer\'s ability to perform any
    work called for by this solicitation; or

b\. the demand or potential exposure is for more than \$250,000,
exclusive of personal injury litigation where the liability is covered
by insurance.

If none, state \"None.\"

10\. During the past three years, has the Proposer\'s firm ever been a
party to a bankruptcy or

reorganization proceeding?

> YES  NO  If answer is \"YES,\" explain below.

11\. a. If any professional or other licenses, permits, or
certifications are required to perform the work/services called for by
this solicitation, list the license, permit, or certification that the
Proposer or Proposer\'s employees or agents possess. If none, state
\"None\".

[License or Permit]{.underline} [Issuing]{.underline}

[or Certification]{.underline} [Name of Holder]{.underline} [State or
Entity]{.underline}

b.  Have any of the Proposer\'s officers, partners, owners, managers or
    employees had any project related licenses, permits or
    certifications revoked or suspended in the past three years.

YES  NO  If answer is \"YES,\" explain details below.

12\. Does the Proposer\'s firm share office space, staff or equipment
(including telephone exchanges) with any other business or organization?

> YES  NO  If answer is \"YES,\" list firm name, address and nature of
> shared facilities.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

13\. Has Proposer\'s safety practices/procedures been evaluated or rated
as less then satisfactory by the City or State of New York, any other
state, any public authority or other public entity, the United States
government, the Metropolitan Transportation Authority (\"MTA\"), and
MTA\'s affiliates and subsidiaries which are the New York City Transit
Authority, Manhattan & Bronx Surface Transit Operating Authority, Staten
Island Rapid Transit Operating Authority, Metro-North Commuter Railroad,
Long Island Rail Road, Triborough Bridge and Tunnel Authority,
Metropolitan Suburban Bus Authority, and Metropolitan Transportation
Authority Card Company within the past five years?

> YES  NO  If answer is \"YES," explain details below.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

14\. Is your firm\'s Workers Compensation Experience Rating 1.2 or
greater?

> YES  NO  If answer is \"YES," explain details below.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

15\. Does Proposer have either a history of claims loss or any
substantial individual claim loss

within the past five years due to general liability or workers
compensation claims?

> YES  NO  If answer is \"YES," explain details below.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

> 16\. List the names, titles and attach resumes which indicate the
> record of skill and experience of your proposed project management
> team. (See Specifications or the Scope - of - Work for the functions
> of the project management team, as applicable, and other requirements
> in regard to project management.)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

17\. Which of the individuals named in item 16, above, will be utilized
exclusively on this Contract on a full-time basis? (The Specification or
the Scope - of - Work may indicate requirements for certain dedicated
staff.)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

18\. Which of the individuals named in item 16, above, are not presently
officers, partners, owners or employees of the firm?

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

19\. Attach an outline of your proposed Quality Control program (see
appropriate section of the Specifications or the Scope-of-Work) for this
Contract. Where the Specifications or the Scope-of-Work set out required
elements for the program, such outline must cover each element.

**[PART VI - ADDITIONAL QUESTIONS]{.underline}**

1\. List all Proposer\'s employees:

a.  who are currently employees of the Metropolitan Transportation
    Authority (\"MTA\"), or any MTA subsidiary or affiliate (New York
    City Transit Authority, Manhattan & Bronx Surface Transit Operating
    Authority, Staten Island Rapid Transit Operating Authority,
    Metro-North Commuter Railroad, Long Island Rail Road, Triborough
    Bridge and Tunnel Authority, Metropolitan Suburban Bus Authority,
    and Metropolitan Transportation Authority Card Company).

b.  who within the past two years have been MTA or MTA subsidiary or
    affiliate employees who were involved on behalf of Proposer with the
    preparation of this Proposal or would be involved in the performance
    of the Contract if it is awarded to Proposer.

2\. Does Proposer have a subsidiary or affiliate?

YES  NO  If answer is \"YES," list firm name, address and affiliation

3\. Is Proposer a subsidiary of another entity?

YES  NO  If answer is \"YES," list firm name, address and affiliation

4\. Does Proposer, any director, officer, principal or managerial
employee of Proposer, or any other person or entity with a 10% or more
interest in Proposer have an interest of 10% or more in any other firm
or legal entity?

YES  NO  If answer is \"YES," list individuals name and firm or entity

5\. If the answer to 2, 3 or 4 is \"YES," would Proposer\'s answers
pertaining to Parts III and IV be the same for each such parent,
subsidiary, affiliate, firm or legal entity?

YES  NO  If answer is \"NO," explain below

####### PART VII -- FINANCIAL

1\. Provide certified financial statements for the last three fiscal
years. If certified financial\
statements are not available, provide financial statements sworn to by
the firm\'s Chief Financial Officer.

2\. The Proposer may submit its prior 3 years\' financial statements in
lieu of completing Section 1 (Balance Sheet), Section 2 (Comparative
Statement of Income & Retained Earnings), and Section 3 (Comparative
Statements of Cash Flows). However, Section 1, Schedules A, B, C, D, E
and F and Sections 4, 6 and 7 must be completed. If the Proposer is
required to submit a performance bond, Section 5 must also be completed.

**[SECTION 1]{.underline}**

COMPARATIVE BALANCE SHEET

as of[                     ]{.underline}

(\$000) 19\_\_\_ 19\_\_\_ 19\_\_\_

\$ \$ \$

I. [CURRENT ASSETS:]{.underline}

Cash \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

Marketable Securities \_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

Notes Receivable (Schedule A) \_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

Accounts Receivable (Schedule B) \_\_\_\_ \_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

Bid Deposits (Schedule C) \_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

Inventories \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

Prepaid Expenses \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

Other Current Assets:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

TOTAL CURRENT ASSETS \$\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_

II\. [OTHER ASSETS:]{.underline}

Investment in Affiliates \_\_\_\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_

Other Non-Current Assets:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

TOTAL OTHER ASSETS \$\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_

III\. [PROPERTY, PLANT & EQUIPMENT:]{.underline}

NET PROPERTY, PLANT & EQUIPMENT

(Net of Depreciation) \$\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_

**TOTAL ASSETS** \$\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_

[LIABILITIES]{.underline}

(\$000) 19\_\_\_ 19\_\_\_ 19\_\_\_

\$ \$ \$

I. [CURRENT LIABILITIES]{.underline}

Notes Payable (Schedule D) \_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

Accounts Payable (Schedule E) \_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

Loans Payable (Schedule F) \_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

Taxes Payable \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

Current Portion of Long Term Debt \_\_ \_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

Accrued Liabilities \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

Other Current Liabilities:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

TOTAL CURRENT LIABILITIES \$\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_

II\. [NON-CURRENT LIABILITIES]{.underline}

Long Term Debt \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

Other:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

TOTAL NON-CURRENT LIABILITIES \$\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_

TOTAL LIABILITIES \$\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_

III\. [EQUITY]{.underline}

Capital Stock Paid Up:

Common \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\$\_\_\_\_\_\_\_\_\_

Preferred \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\$\_\_\_\_\_\_\_\_\_

Surplus (net worth) \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\$\_\_\_\_\_\_\_\_\_

TOTAL EQUITY \$\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\$\_\_\_\_\_\_\_\_\_

**TOTAL LIABILITIES AND EQUITY \$\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_**\_**\_\_\_\$\_\_\_**\_**\_\_\_\_\_**

**[\
]{.underline}**

**[DETAILS RELATIVE TO ASSETS]{.underline}**

**SCHEDULE A**

+--------------------------+----------+----------+----------+----------+
| > \(a\) due within 90    |          |          |          |          |
| > days                   |          |          |          |          |
| > \_\_\_                 |          |          |          |          |
| \_\_\_\_\_\_\_\_\_\$\_\_ |          |          |          |          |
| \_\_\_\_\_\_\_\_\_\_\_\_ |          |          |          |          |
| >                        |          |          |          |          |
| > **Notes Receivable**   |          |          |          |          |
| > (b) due after 90 days  |          |          |          |          |
| > \_\_\_                 |          |          |          |          |
| \_\_\_\_\_\_\_\_\_\$\_\_ |          |          |          |          |
| \_\_\_\_\_\_\_\_\_\_\_\_ |          |          |          |          |
| >                        |          |          |          |          |
| > \(c\) past due         |          |          |          |          |
| >                        |          |          |          |          |
| \_\_\_\_\_\_\_\_\_\_\_\_ |          |          |          |          |
| \_\_\_\_\_\_\_\_\_\$\_\_ |          |          |          |          |
| \_\_\_\_\_\_\_\_\_\_\_\_ |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
| > Receivable From:       | Purpose  | Date of  | How      | Amount   |
| >                        |          |          |          |          |
| > Name                   |          | Maturity | Secured  |          |
+--------------------------+----------+----------+----------+----------+
|                          |          |          |          | \$       |
+--------------------------+----------+----------+----------+----------+
|                          |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
|                          |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
|                          |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
|                          |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
|                          |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
|                          |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
|                          |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
| **TOTAL**                |          |          |          | \$       |
+--------------------------+----------+----------+----------+----------+

**SCHEDULE B**

+---------------+----------+----------+----------+----------+----------+
| **Aging of    |          |          |          |          |          |
| Accounts      |          |          |          |          |          |
| Receivable P  |          |          |          |          |          |
| A S T D U E** |          |          |          |          |          |
+---------------+----------+----------+----------+----------+----------+
| Current       | 1 to     | 31 to    | 61 to    | Over     | Total    |
|               |          |          |          |          |          |
|               | 30 days  | 60 days  | 90 days  | 90 Days  |          |
+---------------+----------+----------+----------+----------+----------+
| > Trade \$    | \$       | \$       | \$       | \$       | \$       |
+---------------+----------+----------+----------+----------+----------+
| > Other \$    | \$       | \$       | \$       | \$       | \$       |
+---------------+----------+----------+----------+----------+----------+
| > **Total     | \$       | \$       | \$       | \$       | \$       |
| > \$**        |          |          |          |          |          |
+---------------+----------+----------+----------+----------+----------+

SCHEDULE C

+--------------------------+--------------------------+---------------+
| **Bid Deposit**          | Description              | Amount        |
|                          |                          |               |
| Holder of Deposit: Name  |                          |               |
+--------------------------+--------------------------+---------------+
|                          |                          | \$            |
+--------------------------+--------------------------+---------------+
|                          |                          |               |
+--------------------------+--------------------------+---------------+
|                          |                          |               |
+--------------------------+--------------------------+---------------+
| **TOTAL**                |                          | \$            |
+--------------------------+--------------------------+---------------+

**[\
\
]{.underline}**

**[DETAILS RELATIVE TO LIABILITIES]{.underline}**

**SCHEDULE D**

+---------------------+----------+---------------+----------+----------+
| **Notes Payable**   | \(a\)    |               |          |          |
|                     | Not Past |               |          |          |
|                     | Due      |               |          |          |
|                     | \_\_     |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \$       |               |          |          |
|                     | \_\_\_   |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     |          |               |          |          |
|                     | \(b\)    |               |          |          |
|                     | Past Due |               |          |          |
|                     | \_\_     |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \$       |               |          |          |
|                     | \_\_\_   |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
+---------------------+----------+---------------+----------+----------+
| To Whom: Name       |          | Purpose       | When Due | Amount   |
+---------------------+----------+---------------+----------+----------+
|                     |          |               |          | \$       |
+---------------------+----------+---------------+----------+----------+
|                     |          |               |          |          |
+---------------------+----------+---------------+----------+----------+
|                     |          |               |          |          |
+---------------------+----------+---------------+----------+----------+
| **TOTAL**           |          |               |          | \$       |
+---------------------+----------+---------------+----------+----------+

**SCHEDULE E**

+---------------------+----------+---------------+----------+----------+
| **Accounts          | \(a\)    |               |          |          |
| Payable**           | Not Past |               |          |          |
|                     | Due      |               |          |          |
|                     | \_\_     |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \$       |               |          |          |
|                     | \_\_\_   |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     |          |               |          |          |
|                     | \(b\)    |               |          |          |
|                     | Past Due |               |          |          |
|                     | \_\_     |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \$       |               |          |          |
|                     | \_\_\_   |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
+---------------------+----------+---------------+----------+----------+
| To Whom: Name       |          | Purpose       | Date     | Amount   |
|                     |          |               |          |          |
|                     |          |               | Payable  |          |
+---------------------+----------+---------------+----------+----------+
|                     |          |               |          | \$       |
+---------------------+----------+---------------+----------+----------+
|                     |          |               |          |          |
+---------------------+----------+---------------+----------+----------+
|                     |          |               |          |          |
+---------------------+----------+---------------+----------+----------+
|                     |          |               |          |          |
+---------------------+----------+---------------+----------+----------+
| **TOTAL**           |          |               |          | \$       |
+---------------------+----------+---------------+----------+----------+

**SCHEDULE F**

+---------------------+----------+---------------+----------+----------+
| **Loans Payable**   | \(a\)    |               |          |          |
|                     | Not Past |               |          |          |
|                     | Due      |               |          |          |
|                     | \_\_     |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \$       |               |          |          |
|                     | \_\_\_   |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     |          |               |          |          |
|                     | \(b\)    |               |          |          |
|                     | Past Due |               |          |          |
|                     | \_\_     |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \$       |               |          |          |
|                     | \_\_\_   |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
|                     | \_\_\_\_ |               |          |          |
+---------------------+----------+---------------+----------+----------+
| To Whom: Name       |          | Purpose       | Date     | Amount   |
|                     |          |               |          |          |
|                     |          |               | Payable  |          |
+---------------------+----------+---------------+----------+----------+
|                     |          |               |          | \$       |
+---------------------+----------+---------------+----------+----------+
|                     |          |               |          |          |
+---------------------+----------+---------------+----------+----------+
|                     |          |               |          |          |
+---------------------+----------+---------------+----------+----------+
|                     |          |               |          |          |
+---------------------+----------+---------------+----------+----------+
| **TOTAL**           |          |               |          | \$       |
+---------------------+----------+---------------+----------+----------+

**[\
SECTION 2]{.underline}**

COMPARATIVE STATEMENT OF INCOME & RETAINED EARNINGS

STATEMENT FOR PERIODS ENDED[                        ]{.underline}

19\_\_\_ 19\_\_\_ 19\_\_\_

SALES\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_

Less:

COST OF SALES:

Labor \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

Material \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

Depreciation \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

Other Overhead \_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

GROSS MARGIN \$\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_

Less: Selling, General and

Administrative Expenses \_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

Income Before Taxes \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

Less: Income Taxes \_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

NET INCOME \$\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_

Retained Earnings Beginning

of Period \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_

Less: Cash Dividends Paid \_\_\_\_ \$\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_

Other:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_

Net Retained Earnings End

of Period \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ **\$\_\_\_\_\_\_\_\_\_**
**\$\_\_\_\_\_\_\_\_\_** **\$\_\_\_\_\_\_\_\_\_**

**[SECTION 3]{.underline}**

COMPARATIVE STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED[                   ]{.underline}

Increase (Decrease) in Cash

19\_\_\_ 19\_\_\_ 19\_\_\_

Cash flows from operating activities:\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_

Cash received from customers \_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

Cash paid to suppliers & employees \_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

Interest Paid \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

Income Taxes Paid \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

Miscellaneous receipts (payments) \_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_

Net cash provided by operating. activities \_\_\_ \$\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_

Cash flows from investing activities: \_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_

Proceeds from sale of equipment:\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_

Payments for purchase of equipment:\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_

Net Cash Used in Investing activities:\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_

Cash flows from financing activities: \_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_

Net increase in short-term debt: \_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_

Proceeds from issuance of long-term debt \_\_\_ \_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_

Repayment of long-term debt \_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_

Payment of Dividends \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_

Net Cash provided by (used in) financing

activities \$\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_

Net increase (decrease) in cash \_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_

Cash at beginning of year \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_

Cash at end of year \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_

**[SECTION 4 - IDENTITY OF OWNERS]{.underline}**

> Who are the principal owners or shareholders of the business
> enterprise and approximately what percentage does each own?

  ------------------------------------------------- ---------------------
  Name                                              Percent Owned

                                                    

                                                    

                                                    

                                                    

                                                    

                                                    

                                                    
  ------------------------------------------------- ---------------------

**[SECTION 5 - PERFORMANCE BOND INFORMATION]{.underline}**

> Section 5 is only applicable to solicitations in which the Proposer is
> required to provide a performance bond.
>
> Names and addresses of bonding company or companies that have agreed
> to furnish the performance bond required by the Contract.

  --------------------- --------------------- ------------- -------------
  Name                  Address               Amount        Expiration
                                                            Date

                                              \$            

                                                            

                                                            

                                                            

                                                            
  --------------------- --------------------- ------------- -------------

**[SECTION 6 - SUBCONTRACTS]{.underline}**

> What parts of this Contract, if any, does Proposer expect to
> subcontract?

+-----------------------+-----------------------------------------------+
| Portion of Work       | Name and Address of Proposed                  |
|                       |                                               |
|                       | Subcontractor, if known                       |
+-----------------------+-----------------------------------------------+
|                       |                                               |
+-----------------------+-----------------------------------------------+
|                       |                                               |
+-----------------------+-----------------------------------------------+
|                       |                                               |
+-----------------------+-----------------------------------------------+
|                       |                                               |
+-----------------------+-----------------------------------------------+

**[SECTION 7 - CERTIFICATION]{.underline}**

> I certify that the attached financial statements for this Proposal
> properly reflect the financial position of the company for the periods
> indicated on the financials.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Chief Financial Officer Date

**[PART VIII -VERIFICATION AND ACKNOWLEDGMENT]{.underline}**

> **STATE OF
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_**
>
> **COUNTY OF \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_**
>
> On the \_\_\_\_\_\_ day of \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ 199\_\_,
> before me personally came and appeared.
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
> by me known to be said person, who swore under oath as follows:
>
> 1\. He/she is \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ of
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Print title) (Print name of firm)

> 2\. He/she is duly authorizes to sign this Questionnaire on behalf of
> said firm and duly signed this document pursuant to said
> authorization.
>
> 3\. The answers to the questions set forth in this Questionnaire are
> true, accurate and complete.

4.  He/she acknowledged and understands that the Questionnaire includes
    provisions which are deemed included in the Contract if awarded to
    the firm.

> Sworn to before me this \_\_\_\_\_\_\_\_\_\_\_ day of
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 199\_\_
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Notary Public)

**APPENDIX B.12**

**NEGOTIATION MEMORANDUM SAMPLE FORMAT**

Where the price was established based on an evaluation of cost elements
and fee in the offeror's proposal, the negotiation memorandum should
clearly set forth the various amounts as they were proposed, evaluated,
and negotiated. For example:

+-------------+------------+--------------+-------------+------------+
| **[Cost     | **[Pro     | **[In        | **[Pre-Neg. | **[Negot   |
| El          | posed]{.un | dependent]{. | Plan]{.u    | iated]{.un |
| ements]{.un | derline}** | underline}** | nderline}** | derline}** |
| derline}:** |            |              |             |            |
|             |            | **[Cost      |             |            |
|             |            | Est.]{.      |             |            |
|             |            | underline}** |             |            |
+-------------+------------+--------------+-------------+------------+
| Direct      | \$         | \$           | \$          | \$         |
| Labor:      |            |              |             |            |
|             |            |              |             |            |
| Engr.       |            |              |             |            |
|             |            |              |             |            |
| Mfg.        |            |              |             |            |
+-------------+------------+--------------+-------------+------------+
| Overhead:   |            |              |             |            |
|             |            |              |             |            |
| Engr.       |            |              |             |            |
|             |            |              |             |            |
| Mfg.        |            |              |             |            |
+-------------+------------+--------------+-------------+------------+
| Materials   |            |              |             |            |
+-------------+------------+--------------+-------------+------------+
| G&A         |            |              |             |            |
+-------------+------------+--------------+-------------+------------+
| Total Costs | \_\_\_\_\_ | \_\_\_\_\_\_ | \_\_\_\_\_\ | \_\_\_\_\_ |
|             | \_\_\_\_\_ | \_\_\_\_\_\_ | _\_\_\_\_\_ | \_\_\_\_\_ |
+-------------+------------+--------------+-------------+------------+
| Fee         | \_\_\_\_\_ | \_\_\_\_\_\_ | \_\_\_\_\_\ | \_\_\_\_\_ |
|             | \_\_\_\_\_ | \_\_\_\_\_\_ | _\_\_\_\_\_ | \_\_\_\_\_ |
+-------------+------------+--------------+-------------+------------+
| Total Price | \$         | \$           | \$          | \$         |
+-------------+------------+--------------+-------------+------------+

*Note***:** your narrative should discuss each of the cost elements and
the fee/profit, describing how the final negotiated amount for each
element and profit was determined. You should reference the
Pre-Negotiation Plan objectives (if one was prepared), or the
Independent Cost Estimate, in your narrative.

######## 

**APPENDIX B.13**

######## WARRANTY & GUARANTEE REGISTER 

# **MARTA**

CPB -- Senoia Intermodal Facility Date: 7/10/97

+-------+------+---------------+--------------+-------+--------------+
| ## I  | ###  | War           | Providing    | Expir | Company      |
| tem N | Spec | ranty/Grantee | Company      | ation | Address      |
| umber |  Sec | Description   |              | Date  |              |
|       | tion |               |              |       |              |
+-------+------+---------------+--------------+-------+--------------+
| 1     | ##   | General       | Beers        | 6/    | 70 Ellis     |
|       |  XXX | Construction  | Construction | 15/97 | Street, N.E. |
|       |      |               |              |       |              |
|       |      |               |              |       | Atlanta, GA  |
|       |      |               |              |       | 30303        |
+-------+------+---------------+--------------+-------+--------------+
| 2     | ##   | Water         | Metro        | 6/    | 2935 Alcove  |
|       | 7180 | Repellant     | Wa           | 15/01 | Drive        |
|       |      | Coatings      | terproofing, |       |              |
|       |      |               | Inc.         |       | Scottdale,   |
|       |      |               |              |       | GA 30079     |
+-------+------+---------------+--------------+-------+--------------+
| 3     | ##   | Performed     | Installer:   | 6/    | 470 Bakers   |
|       | 7411 | Metal Roofing | Yancey &     | 15/16 | Ferry Road   |
|       |      |               | Jamison      |       |              |
|       |      |               |              |       | Atlanta, GA  |
|       |      |               |              |       | 30362        |
+-------+------+---------------+--------------+-------+--------------+
| 3     | ##   | Metal Roofing | M            | 6/    | 3449         |
|       | 7411 |               | anufacturer: | 15/16 | Hempland     |
|       |      |               | Fabral       |       | Road         |
|       |      |               |              |       |              |
|       |      |               |              |       | Lancaster,   |
|       |      |               |              |       | PA 17601     |
+-------+------+---------------+--------------+-------+--------------+
| 4     | ## 7 | Loose Laid    | Installer:   | 6/    | Post Office  |
|       | 532  | Membrane      | Standard     | 14/16 | Box 48124    |
|       |      | Roofing       | Roofing      |       |              |
|       |      |               |              |       | Atlanta, GA  |
|       |      |               |              |       | 30362        |
+-------+------+---------------+--------------+-------+--------------+
| 4     | ##   | Membrane      | M            | 6/    | Post Office  |
|       | 7532 | Roofing       | anufacturer: | 14/16 | Box 1404     |
|       |      |               | TAMKO        |       |              |
|       |      |               |              |       | Joplin, Miss |
|       |      |               |              |       | 64802        |
+-------+------+---------------+--------------+-------+--------------+
| 5     | ##   | Modified      | Installer:   | 6/    | Post Office  |
|       | 7525 | Bituminous    | Standard     | 14/16 | 48124        |
|       |      | Sheet Roofing | Roofing      |       |              |
|       |      |               |              |       | Atlanta, GA  |
|       |      |               |              |       | 30362        |
+-------+------+---------------+--------------+-------+--------------+
| 5     | ##   | Bituminous    | M            | 6/    | Post Office  |
|       | 7252 | Sheet Roofing | anufacturer: | 14/16 | 1404         |
|       |      |               | TAMKO        |       |              |
|       |      |               |              |       | Joplin, Miss |
|       |      |               |              |       | 64802        |
+-------+------+---------------+--------------+-------+--------------+
| 6     | ##   | Sealants      | Metro        | 6/    | 2935 Alcove  |
|       | 7920 |               | Wa           | 15/97 | Drive        |
|       |      |               | terproofing, |       |              |
|       |      |               | Inc.         |       | Scottdale,   |
|       |      |               |              |       | GA 30079     |
+-------+------+---------------+--------------+-------+--------------+
| 7     | ## 8 | Sliding Steel | Overhead     | 6/    | 511 Stephens |
|       | 311  | Door          | Door Company | 15/97 | Road         |
|       |      |               |              |       |              |
|       |      |               |              |       | Atlanta, GA  |
|       |      |               |              |       | 30310        |
+-------+------+---------------+--------------+-------+--------------+
| 8     | ##   | Counter Fire  | Overhead     | 6/    | 511 Stephens |
|       | 8331 | Door          | Door Company | 15/97 | Road         |
|       |      |               |              |       |              |
|       |      |               |              |       | Atlanta, GA  |
|       |      |               |              |       | 30310        |
+-------+------+---------------+--------------+-------+--------------+
| 9     | ##   | Insulated     | Overhead     | 6/    | 511 Stephens |
|       | 8332 | Sectional     | Door Company | 15/97 | Road         |
|       |      | Doors         |              |       |              |
|       |      |               |              |       | Atlanta, GA  |
|       |      |               |              |       | 30310        |
+-------+------+---------------+--------------+-------+--------------+
| 10    | ##   | Hardware      | Atlantic     | 6/    | 5695         |
|       | 8710 |               | Hardware &   | 15/97 | Oakbrook     |
|       |      |               | Supply       |       | Parkway      |
|       |      |               | Company      |       |              |
|       |      |               |              |       | Norcross, GA |
|       |      |               |              |       | 30093        |
+-------+------+---------------+--------------+-------+--------------+
| 11    | ##   | Installing    | Glasstream   | 6/    | 884 Kurtz    |
|       | 8000 | Glazing       |              | 15/01 | Road         |
|       |      |               |              |       |              |
|       |      |               |              |       | Marietta, GA |
|       |      |               |              |       | 30066        |
+-------+------+---------------+--------------+-------+--------------+

######## APPENDIX B.14

######## CONTRACT CLOSEOUT CHECK LIST

# Memorandum 

**Date: 3-Jan-98**

**To: Director of Construction and Contract Administration**

##### From: Resident Engineer 

**Subject: Contract CF720, North Point Station and Parking Deck Contract
Closeout**

This is to advise that Contract CF720, North Point Station and Parking
Deck, is ready for formal closeout by the ARTA Board. The Contract
completion date was December 7, 1997. The final Contract amount is
\$42,657,320.00, leaving a Contingency balance of \$226,181.00.

The tabulation below is a complete checklist of closeout actions,
reflecting their current status.

**ITEM STATUS**

1.  Certificates of Beneficial Occupancy/Substantial Completion Complete
    6/2/97

2.  Punch List Complete 7/17/97

3.  Liquidated Damages N/A N/A

4\. Temporary Construction Easement Signoffs Complete 5/20/97

5\. Change Orders Issued Complete 6/18/97

6\. Claims Closed 4/6/97

7\. Final Quantities Agreed 5/2/97

8\. Equipment/System Testing Accepted 7/8/97

9\. Spare Parts/Spare Materials Received 8/14/97

10\. Operation & Maintenance Manuals Received 7/27/97

11\. Warranties Accepted 8/24/97

12\. Project Record Documents Accepted 9/2/97

13\. Final Corrected Shop Drawings Accepted 10/12/97

14\. Product Data Book Accepted 10/12/97

15\. Final Labor Summary Received 11/14/97

16\. List of Subcontractors Received 11/14/97

17\. Affidavit of Final Payment Received 12/7/97

18\. Final Payment Processed 12/20/97

19\. Final Marta Audit Complete 11/21/97

20\. Certificate of Completion Complete 12/7/97

21\. Sign Offs by County & State County Pending

22\. Contract Files & Closeout Book Forecast Comp. 1/15/98

######## 

**EXHIBIT A**

######## APPENDIX B.15

**REQUEST FOR PROPOSAL NO. 89964**

**FLEET VEHICLE SERVICES**

**SPECIAL TERMS AND CONDITIONS**

**I. [BACKGROUND]{.underline}**

A. Vanpool Incentive Program (VIP) Fleet

> The Pace Vanpool Incentive Program (VIP) officially launched in
> November 1991 is a subsidized program available within the suburban
> six county Northeastern Illinois area. VIP trips can either originate
> or terminate within the Pace service area. Through October 1999 the
> VIP service fleet size was approximately 375 vans with a total of 320
> vans in operation. Vans are utilized primarily to take employees to
> and from work.

Pace anticipates a minimum annual growth rate of 40 vans per year, which
would place the fleet size at approximately 500 vans with a total of 440
vans in operation by the end of 2002. However, Pace is not committed to
having any minimum number of vans in operation.

B. Pace Non-Revenue Fleet

Pace's non-revenue fleet consists of approximately 130 owned and leased
passenger sedans and service vehicles that are located and operated at
various Pace-owned facilities within the six county Northeastern
Illinois area. The majority of vehicles are utilized by Pace staff to
conduct Pace related business activities.

**II. [SCOPE OF WORK]{.underline}**

Pace, the Suburban Bus Division of the Regional Transportation
Authority, is seeking proposals from qualified companies to provide
fleet vehicle services for its Vanpool fleet and non-revenue fleet.
These services will include vehicle leasing, fleet vehicle management,
fuel credit card and accident management/subrogation services. All firms
wishing to submit proposals may do so for any or all of the services
required.

Pace will evaluate each completed proposal submitted and select either a
total package or select elements of a particular proposal which provide
Pace with the most cost effective and efficient means of operating its
vanpool and non-revenue fleet vehicle program.

The elements of the scope of work are:

-   Vehicle Leasing Services

-   Management Services

-   Fuel Credit Card Services

-   Accident Management/Subrogation Administration

    **III. [PROPOSAL FORMAT AND VENDOR RESPONSE]{.underline}**

    Responses to this RFP must correlate with the alpha numeric
    characters in the RFP. Each item in the RFP should be addressed in
    the proposal.

    **IV. [COMPANY INFORMATION]{.underline}**

    All information requested in this section must be addressed in the
    offeror's proposal with the exception of vendors submitting a
    proposal for vehicle leasing services only. Please limit your
    responses to two or three pages. Offerors must provide information
    on the following:

    A.  A history and overview of your firm to include number and
        location of offices in the U.S., list the total number of
        customers, list the number of customers with a fleet size
        greater than 500 vehicles and your average fleet size. The legal
        name of your company, if doing business under some name other
        than that by which the company is commonly recognized. If the
        company is owned or controlled by a parent organization,
        offerors are requested to provide the name of that organization,
        its address and the name and title of the person responsible for
        your business unit.

        B. Provide three current contacts with telephone numbers and
        addresses from clients for each of the elements listed in Scope
        of Work that closely reflects Pace's fleet management
        requirements. Include one contact from each of the following
        categories: oldest, largest and newest.

C.  A description of the firm's experience and a description of the
    experience and training of all key individuals associated with the
    project. Proposals should detail all firm and individual experience
    relevant to the types of service described in this RFP.

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D.  An organizational chart with job descriptions of key individuals
    assigned to the project. Job descriptions should be specific to the
    project.

E.  Identify the unique strengths of your company and how they can
    provide the best fleet vehicle services for Pace.

F.  Discuss the top three (3) distinctions between your company and its
    competitors.

G.  Identify the number of customers and average fleet size that each of
    your salesman/representative oversees. How many calls per day does
    he/she average and response time.

H.  Provide the company name, contact, phone number and fleet size of at
    least two (2) accounts that have left your company within the past
    two years.

I.  Describe how your company performs quarterly, semi or annual fleet
    reviews with your clients and the process of how these reviews are
    conducted.

J.  Describe in detail all charges, administrative fees, processing
    fees, mark-ups, etc. in a "fee schedule". This should include, as
    examples, subrogation fees, accident report fees, etc.

K.  Describe the mediation procedure for a customer complaint about one
    of your employees or vendors.

L.  Identify how many of your clients use each of the following
    services:

-   Preventative Maintenance

-   Vehicle Maintenance Assistance

-   Emergency Roadside Assistance

-   Accident Management/Subrogation Service

-   Fuel Service

    **V. [VEHICLE LEASING]{.underline}**

    All companies submitting proposals for this portion of the current
    RFP must comply with the specifications listed below in their
    proposal to assure an accurate and fair evaluation:

    **[Quantity and Term]{.underline}**

     The number of vehicles to be considered as part of the leasing
    portion of this RFP will be a minimum of 41 vehicles up to a maximum
    of 45 vehicles for the 2000 model year (up to 5 of which may be
    station wagons) and up to an additional 8 vehicles for the 2001
    model year). Vehicles may be leased up to the end of the two year
    contract with complete two year lease periods guaranteed at the
    proposed pricing.

     Vehicle lease terms shall be for a base period of 24 months with
    an option to extend the lease period for an additional 12 months if
    Pace chooses to do so and informs the leasing agent at least three
    months prior to the end of the current lease period.

    **[Pricing]{.underline}**

     Pricing quoted in the proposal shall be for the duration of the
    contract period and for the length of any lease entered into during
    the contract period. It shall include all costs associated with the
    preparation of all paperwork necessary to procure and the actual
    procurement of all vehicle titles, licenses, and any other
    miscellaneous fees.

     The lease pricing will be based on an annual usage of 15,000
    miles. The proposal will specify any additional per mile charges
    should this mileage be exceeded.

    **[Specifications]{.underline}**

     Leased vehicles shall be those of the current model year as
    determined by the date on which the vehicles are formally requested.

     Vehicle warranty will be bumper to bumper for a minimum of 3 years
    or 36,000 miles and a 24 hour/7 day roadside driver assistance
    program will be provided.

     All pre-delivery vehicle servicing will be performed in accordance
    with accepted new car delivery preparation standards.

 Vehicle specifications listed below are for a mid-size, 5 passenger, 4
door sedan, (or station wagon) front wheel drive, gasoline powered,
automobile that fully complies with the Clean Fuel Fleet Program
Requirements of the Illinois Environmental Protection Agency.
**Specifically, the engine [must]{.underline} be certified by the United
States Environmental Protection Agency (EPA) to be a gasoline powered,
Low Emission Vehicle (LEV) to comply with required clean air
specifications**.

-   All standard equipment with no deletions

-   Engine will be LEV compliant, gasoline powered

-   Transmission: 4 speed automatic

-   Steering: power

-   Brakes: power disc

-   Air Conditioning: To include factory installed air conditioning ,
    complete tinted glass, and all heavy duty equipment normally
    required as part of a manufacturer's air conditioning installation.

-   Cruise control

-   Rear window defroster, electric

-   Mirrors: interior rearview (day/night), exterior LH & RH remote\
    Seating: cloth, front buckets with console, rear full width bench

-   Full interior carpeting with floor mats

-   Radio: AM / FM stereo

-   Tires: new all season, steel belted radials (BSW) with standard
    wheels / covers and a space saver spare

-   Body side molding

-   Multi speed windshield washers with intermittent and washers

-   Tilt steering wheel

-   Power windows

-   Power door locks

-   Air bags: driver and front passenger

-   Color of interior and exterior to be selected at time of order from
    manufacturer's standard selections

    **This element will be awarded on the lowest responsive and
    responsible total price of all items listed in Exhibit C for
    (Vehicle Leasing).**

    **VI**. **[VEHICLE MAINTENANCE AND MANAGEMENT
    SERVICES]{.underline}**

    Firms are to submit monthly per vehicle cost quotations and identify
    any discounts that they can offer associated with providing Fleet
    Maintenance and Fleet Administration for approximately 580 revenue
    and non-revenue passenger type vehicles and service vans. (See the
    attached schedule of vehicles.) Firms are to submit pricing based on
    services listed below and may list additional services that they are
    capable of providing along with per unit pricing for each additional
    service in Exhibit C. Pace may choose to select additional proposed
    services, but will not be required to do so.

    The scope of services Pace is seeking under this section include the
    following:

A.  Driver support to coordinate repairs and minimize vehicle downtime

B.  Cost and quality controls for vehicle repairs

C.  Fleet management support and recommendations

D.  Driver DMV reviews/checks

E.  Emergency roadside assistance

F.  Quarterly metrics for costs and services

    Services listed below will be considered minimum and must be
    identified and addressed in your proposal:

    A. [VEHICLE RELATED]{.underline}

    Vendor will assume oversight responsibility for all scheduled and
    unscheduled maintenance of Pace owned and leased revenue and
    non-revenue passenger and service vehicles.

    1\. [Preventive Maintenance (PM)]{.underline}

    a.  How is the PM schedule determined and documented?

    b.  How would PM exceptions be handled and at what point would Pace
        be notified?

    c.  Does your firm issue PM coupons?

    d.  How are these coupons issued?

    e.  How is a customer notified when a PM is due?

    f.  What controls do you have in place to preclude unauthorized use
        of services, such as a lost maintenance coupon?

    g.  How is PM service documented (PMA, PMB)?

    h.  Describe the support process for a repair discovery during a PM
        service. (Who contacts your company - the vendor or the
        customer, what if another vendor is required to do the service -
        how is this accomplished/handled?)

    i.  Describe the process of documenting the PM from initiation to
        closure.

    j.  Describe in detail your firm's procedure on how you would
        monitor maintenance work being performed on a vehicle without
        the use of the maintenance coupon book. Describe how your firm
        identifies that the work was performed so it will not appear,
        via the exception report, that the driver did not have the work
        done.

2\. [Maintenance and Repair]{.underline}

> a\. Include service providers for various types of repair and
> maintenance work and any applicable discounts that Pace would realize
> when using these vendors.

b.  Describe your firm's capabilities for providing 24 / 7 driver's aide
    with regards to emergency roadside assistance. How do you handle
    after normal business hour maintenance problems?

c.  Furnish a description of how your vehicle maintenance procedures
    work and what types of services are included in your firm's
    maintenance program: (loaner vehicle service, rental vehicle
    service, vehicle drop off, driver pick up, etc.).

d.  Describe your firm's criteria for evaluating suggested repairs,
    verifying the fairness of pricing, and authorizing unscheduled
    repairs.

e.  Describe what a driver should do if there is not a dealership or
    repair facility that is an authorized facility under your program.
    What steps are necessary to add a dealership or repair facility as
    an authorized facility under your program.

> f\. Describe your billing procedures for non-approved participating
> repair facilities.

g\. Describe how a repair facility used by Pace which is not a national
account or approved by your company become approved and direct bill your
company.

> h\. Describe how you track services provided for reporting services
> and describe the billing for any maintenance markups.

i\. Describe the process for documenting the vehicle repair service from
initiation to closure.

j\. How do you insure the quality of your program and services?

k\. Do you screen companies in your body shop network? If so, describe
the process.

l\. Describe what controls you have in place to ensure that only
necessary maintenance is performed on Pace's vehicles.

m.  Describe your firm's strategies for minimizing repair times and
    driver downtime.

n.  Describe your firm's process for monitoring the repair process
    (time, labor rates, parts used, quality of repair and driver
    satisfaction).

o.  Describe the support process in the event that a vehicle requires
    repair service but is under a manufacturer or repair facility
    warranty.

p.  Describe what government pricing you can provide for tires through
    your fleet vendors.

q.  The company selected is required to provide the following
    maintenance and repair related information/reports for Pace:

-   [Monthly Reports]{.underline}

    Summary cost reports (body repairs, mechanical repairs, glass, car
    rentals, etc.)

-   [Custom Reports as Requested]{.underline}

-   [Information Processing]{.underline}

    Accept weekly download of driver information from Pace.

    Accept monthly download of vehicle odometer readings from Pace.

-   [Quarterly Metrics]{.underline}

    Pace trends (average cost of repairs, average number of days for
    repairs, etc.)

    Pace performance vs. other accounts.

    Vendor performance vs. Industry (average cost of repairs, average
    number of days for repairs, etc.).

-   [Semi-Annual Review]{.underline}

    Pace trends.

    Industry trends.

    Pace opportunities.

    3\. [Warranty Related]{.underline}

    a.  Describe your firm's warranty monitoring and management warranty
        claim

    b.  service. How does your firm secure extended warranty (out of
        warranty) non-warranty items?

        c\. Describe your recovery rate for the above? Identify how many
        warranty claims were submitted, and the number returned and
        amount received.

        4\. [Sales Related]{.underline}

        a\. Describe your firm's ability to provide vehicle disposal and
        your firms remarketing procedures. Is it done geographically?

        b\. How do you compare to AMR clean regarding sale of vehicles.

        c\. Describe what percentage of vehicles sold are sent to
        auction for resale.

d\. Provide your process for insuring that Pace's liability for bodily
injury and property damage ends once a vehicle is released to your
firm's auto salvager or disposal vendor. Describe when Pace's liability
ends on the sale of vehicle and provide any existing contract language
which describes this process.

B. [BILLING]{.underline}

1\. Describe your firm's billing procedures along with any reserve
deposits or initial fee requirements.

2\. Describe your firm's ability to provide tax-exempt billing for Pace,
or to provide reports to Pace that will show all taxes paid in a format
that will aid Pace in retrieving these taxes from the taxing agencies.

3\. Describe your service level regarding vendor payment of national
chains and independent vendors.

4\. Describe your process of billing Pace on a monthly basis.

5\. Describe in detail your billing format. Is your firm able to provide
summary billing? And is your summary billing Pace-defined or canned?

6\. Describe how your company provides electronic auditing and payment
of maintenance billing to your vendors in detail.

7\. Pace requires that all monthly charges appearing on the monthly
billing statement are fully explained, either within the bill or in a
supplementary schedule. Describe how your firm is able to address this
concern.

C. [COMPUTER SOFTWARE/REPORTS AND INFORMATION PROCESSING]{.underline}

1.  Vendor will maintain detailed, computerized maintenance records on
    each vehicle and current data on the entire fleet.

2.  Describe the various types of service and management reports
    available through your company, as well as your ability to provide
    customized report. Identify any additional cost for customized
    reports.

3.  Describe your firm's ability to perform maintenance analysis
    identifying excessive consumption or repair volumes (exception
    reports). Identify their frequency, what percentage of the fleet is
    sampled, and the ability to provide personalized reports. Does your
    system allow Pace to be immediately notified as soon as a vehicle is
    outside the acceptable standard/range established by Pace? If so,
    how is it done?

4.  Describe your firm's ability to provide information to and collect
    information from clients via the Internet: i.e. on-line report
    generation, account access, inputting of client vehicle information
    such as mileage or extra vehicle services.

5.  Describe your firm's ability to accept reports from different
    companies, i.e. fuel card programs, prior maintenance services etc.
    into your system for the purpose of generating accurate and complete
    vehicle history reports.

> 6\. Describe the type and number of maintenance/management reports
> available and their frequency. Describe and provide samples of the
> type of "standard" fleet reports available on your system.

7.  Describe how your firm would handle the transition of Pace fleet
    information from Pace's present fleet management provider into your
    program? Describe your company's strategy to ensure a seamless
    transition if your company is selected.

8.  Describe how the computer system you provide will operate as a
    standalone system to support all fleet operations activity
    regardless of the programs utilized by your company.

9.  Describe in detail how your computer system you provide to Pace
    accepts data downloads from other sources other than your own?

    D. [CUSTOMER SERVICE RELATED]{.underline}

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1.  Explain your company's toll free number for customers to access
    repair service.

2.  Explain what hours and days these services are in operation.

3.  Describe the qualifications and experience of your employees
    regarding these services.

4.  Identify what other responsibilities your maintenance personnel has
    other than handling maintenance related calls in detail.

5.  Describe the average number of calls your maintenance management
    department receives each day and each week.

6.  Describe the service levels regarding:

    When calls are answered?

    Response time?

    Both national chains and independent vendors

7.  Describe if your company performs quarterly, semi or annual fleet
    reviews with your clients.

8.  Describe what type of documentation is presented at these reviews.
    Who conducts these reviews? Please provide samples of these reports.

9.  Describe your capabilities in providing in-house reports to Pace on
    a monthly, quarterly, semi or annual basis.

10. Describe the mediation procedure for a customer complaint about one
    of your employees or one of your vendors.

    E. [ADMINISTRATION]{.underline}

    1.  Pace prefers that the selected vendor's staff (not a third
        party) handle the initial call from Pace VIP drivers, even after
        normal business hours . Describe your call center.

    2.  Describe your capabilities in providing Pace with a dedicated
        toll-free number for its VIP drivers.

    3.  Describe your firm's capabilities in providing Internet
        capabilities for retrieving fleet related information, sending
        driver/fleet related information, etc.

    4.  Describe your customers' data retrieval capabilities on fleet
        related costs, services, information, etc.. How long does it
        take for maintenance and/or fuel related purchases to become
        available (12 hours, 24 hours, 2 days, etc.). Do you have modem
        based on-line informational retrieval capabilities?

    5.  Describe information contained in your vehicle maintenance
        coupon booklet. Can it be customized, specific to a vehicle,
        etc.

    6.  Describe how you survey your customers to determine satisfaction
        with staff, fleet vendor services, etc.

    7.  Describe your firm's ability to offer Visa or Mastercard type
        charge capabilities for Pace. A card would not be issued to Pace
        but would be available via your firm for certain services;
        rental car, limo service, repair facility requires immediate
        payment, etc. A Pace staff person would be contacted by your
        firm to authorize a charge for a Pace driver via this mechanism.

    8.  Describe your firm's process in providing base monthly per
        vehicle cost and schedule of discounts based on incremental
        volume associated with fleet management

    9.  Describe your firm's emergency roadside assistance program. How
        do you evaluate and/or grade vendors utilized in your companies
        emergency roadside assistance program?

    10. Describe whether your firm offers more than one maintenance or
        gas card program, and identify them and their associated costs
        in Exhibit C.

    11. Describe all controls built into your program(s) and the nature
        of your review process.

    12. Describe the process to remove a vehicle from service.

    13. Describe how Pace's fleet information (fuel consumption/cost,
        maintenance repair history/costs, accident history, etc.) can be
        integrated into other industry fleet software management systems
        (i.e., E:Track).

        **This element of the RFP as part of the overall evaluation,
        technical factors will be worth 60% and price is worth 40%.**

        **VII.** **[FUEL CARD MANAGEMENT SERVICES]{.underline}**

        Firms submitting proposals for this portion of the RFP should be
        certain to provide information concerning their ability to
        comply with all of the requirements listed below as well as any
        other information regarding their ability to initiate and
        maintain a program that will satisfy Pace's needs. The fuel
        cards which are provided by your firm must be vehicle specific
        with the vehicle license number and/or Pace assigned number
        appearing on the card. In addition, Pace requires that the card
        be tax (federal motor fuel, state and county) exempt and
        minimally, have the ability to purchase fuel at two (2)
        different oil company service stations.

    ```{=html}
    <!-- -->
    ```
    1.  Describe your ability to offer a single/universal fueling charge
        card that is tax exempt and accepted at a variety of name brand
        stations throughout Pace's six county service area. List the
        different companies that will accept your card.

    2.  Describe your companies ability to provide assistance to drivers
        that may experience problems with your card through a 24 / 7
        customer service 1-800 help line.

    3.  Describe your companies identification and verification
        capabilities for drivers who will be using your fuel card, i.e.,
        ID#, single card multiple PIN #, etc.

    4.  Describe your billing procedures with respect to the types of
        information you are capable of providing and your ability to
        provide Pace with billing that will exclude sale tax.

    5.  Describe your selection of reports and your ability to custom
        design reports should Pace require a different format.

    6.  Describe your tracking program that would highlight excessive
        fuel purchases on any card and your method of notifying your
        client.

    7.  Describe your ability to forward information concerning fuel
        purchases and related reports to a third party fleet
        administration vendor for the purpose of maintaining all vehicle
        information at a central location for comprehensive reporting
        purposes.

    8.  If your company is notified to cancel a fuel card, how long does
        it take before the card is shut-off with the fuel card company
        provider? Describe the steps required to cancel fuel cards. When
        does Pace's liability end and what is the maximum dollar amount
        that Pace is responsible for during that period.

    9.  Describe procedures you have in place to prevent as ell as
        detect abuse/misuse of fuel cards.

    10. From the time your company is notified to order a fuel card for
        a vehicle, how long does it take to receive the card?

    11. List all fuel cards (including tax exempt) your company is able
        to interface and receive data from.

    12. List all data you are able to receive and formats needed to
        receive it.

    13. Describe your company's ability to provide real-time card usage
        information via Internet or software driven electronic
        communications.

        **This element of the RFP as part of the overall evaluation,
        price is worth 60% and technical factors are worth 40%.**

        **VIII. [ACCIDENT/SUBROGATION SERVICES]{.underline}**

        Furnish a description of how you firm would manage all
        administrative details for all accident reports/repairs and
        subrogation processes including:

        1.  Towing arrangements

        2.  Car/van rental arrangements

        3.  Appraisals and photographs

        4.  Salvage

        5.  Claims recovery assistance

        6.  Coordination of subrogation and loss recovery

        7.  Third party physical damage claims

        8.  Reporting associated with accident, repair, subrogation
            claims, recoveries and legal proceedings

        9.  Accident activity reports

            Included in the description should be an estimate of
            expenses for a complete year, including fees, subrogation
            recoveries etc., based on the "applicable fee schedule" and
            100 accidents/incidents per year. As part of the accident
            administration, the vendor will be required to receive
            telephonic reports of all accidents involving property
            damage. The associated costs for this service must be
            identified in Exhibit C. Pace prefers that the selected
            vendor have the capability of providing immediate on-line
            access to all information, including accident damage
            photographs.

            Minimally, the selected vendor will be required to provide
            the following information:

    ```{=html}
    <!-- -->
    ```
    1.  Monthly listing of all accidents that have been reported with an
        indication of liability.

    2.  Set-up sheet for each subrogation file that is opened.

    3.  Quarterly subrogation activity report showing the current status
        of each file.

    4.  Monthly report showing damages recovered for the reporting
        period and the cost of repairs for each vehicle. Funds recovered
        should accompany this report.

    5.  Semi-annual report to include total cost of repairs and total of
        recovered damages.

    6.  Semi-annual report showing Pace trends, industry trends, and
        Pace opportunities.

        **For this phase of the RFP as part of the overall evaluation,
        price is worth 50% and technical factors are worth 50%.**

        **IX. [PROPOSAL EVALUATION]{.underline}**

        Pace staff will evaluate the proposals and develop a list of
        firms to interview on the basis of the following criteria,
        listed in descending order of importance, however, for each of
        the services to be provided as identified in the scope of work.
        As noted on the previous pages Vehicle Leasing will be
        determined on 100% price. Vehicle Maintenance and Management
        Services will be evaluated 60% technical and 40% cost, Fuel Card
        Management Services will be evaluated 60% cost and 40% technical
        and Accident/Subrogation Services will be evaluated 50% cost and
        50% technical.

```{=html}
<!-- -->
```
A.  The quality and comprehensiveness of each element, i.e., Vehicle
    Leasing Services, Vehicle Maintenance and Management Services, etc.
    that your firm is addressing in this proposal.

    B The firm's experience and history on comparable projects, client
    relationship records, and references on similar projects.

```{=html}
<!-- -->
```
C.  The firm's understanding of the requirements, deliverables,
    technical approach and an explanation of what services your firm
    will provide to meet Pace's needs.

D.  Procedures describing firm's monitoring controls, reporting methods,
    report detail and documentation and electronic data interchange
    capabilities between Pace, and service vendors and your firm or
    other firms.

E.  Quality of your firm's surveys, procedures, past practices in
    monitoring customer needs and providing quality and responsive
    customer service (including problem intervention, resolution,
    follow-up, satisfaction, etc).

F.  Price (Factors vary for type of services to be provided as
    identified in the proposal).

##### X. AWARD OF CONTRACT

Pace reserves the right to award one contract or multiple contracts
without discussion. Offerors should take this into consideration and
provide their best proposal at their most competitive price. Proposals
can be submitted for individual elements of this procurement.

##### XI. DURATION OF CONTRACT

The contract term with the exception of the Vehicle Leasing element will
be for three (3) years from the date of award and include two one (1)
year options.

###### XII. PROPOSAL SUBMITTAL REQUIREMENTS

Please limit your responses to three or four pages for each element
proposed.

A.  Price proposal to be filled in and submitted separately but
    concurrently in the #10 envelope marked "Price Proposal".

B.  FTA/IDOT/RTA requirements must be submitted with proposal (Pages
    13-18 in Exhibit B).

C.  Non-Collusion Affidavit and Contractor Certification must be signed
    and notarized as indicated.

D.  Submit four (4) copies of your proposal These copies will be
    distributed to the evaluation team. DO NOT INCLUDE YOUR PRICING
    INFORMATION with your technical proposal.

E.  Only one copy of the contract, affidavits, compliance requirements
    and price proposal are needed.

##### XIII. CONTRACT DOCUMENTS

Exhibit A: Special Terms and Conditions.

Exhibit B: Instructions to Contractors & General Contract Provisions.

Exhibit C: Price Proposal Page.

Exhibit D: Insurance Requirements.

APPENDIX B.16

PIGGYBACKING WORKSHEET

Definition: *Piggybacking is the post-award use of a contractual
document/process that allows someone who was not contemplated in the
original procurement to purchase the same supplies/equipment through
that original document/process.* (\"FTA Dear Colleague\" letter, October
1, 1998).

In order to assist in the performance of your review, to determine if a
situation exists where you may be able to participate in the
piggybacking (assignment) of an existing agreement, the following
considerations are provided. Ensure that your final file includes
documentation substantiating your determination.

  ------------------------------------------------------------------------
  WORKSHEET                                                    YES   NO
  ------------------------------------------------------------ ----- -----
  1\. Have you obtained a copy of the contract and the               
  solicitation document, including the specifications and any        
  Buy America Pre-award or Post- Delivery audits?                    

  2\. Does the solicitation and contract contain an express          
  "assignability" clause that provides for the assignment of         
  all or part of the specified deliverables?                         

  3\. Did the Contractor submit the "certifications' required        
  by Federal regulations? See BPPM Section 4.3.3.2.                  

  4\. Does the contract contain the clauses required by              
  Federal regulations? See BPPM Appendix A1.                         

  5\. Were the piggybacking quantities included in the               
  original solicitation; i.e., were they in the original bid         
  and were they evaluated as part of the contract award              
  decision?                                                          

  6\. If this is an indefinite quantity contract, did the            
  original solicitation and resultant contract contain both a        
  minimum and maximum quantity, and did these represent the          
  reasonably foreseeable needs of the parties to the contract?       

  7\. If this piggybacking action represents the exercise of         
  an option in the contract, is the option provision still           
  valid or has it expired?                                           

  8\. Does your State law allow for the procedures used by the       
  original contracting agency: e.g., negotiations vs. sealed         
  bids?                                                              

  9\. Was a cost or price analysis performed by the original         
  contracting agency documenting the reasonableness of the           
  price? Obtain a copy for your files.                               

  10\. Does the contract term comply with the five-year term         
  limit established by FTA?                                          

  11\. Was there a proper evaluation of the bids or proposals?       
  Include a copy of the analysis in your files.                      

  12\. If you will require changes to the vehicles                   
  (deliverables), are they "within the scope" of the contract        
  or are they "cardinal changes"? See BPPM Section 9.2.1.            
  ------------------------------------------------------------------------

[Note]{.underline}: This worksheet is based upon the policies and
guidance expressed in (a) the FTA Administrator\'s \"Dear Colleague\"
letter of October 1, 1998, (b) the *Best Practices Procurement Manual*,
Section 6.3.3---*Joint Procurements of Rolling Stock and
"Piggybacking,"* and (c) FTA Circular 4220.1E.

APPENDIX B.17

EXAMPLE OF STATEMENT OF QUALIFICATION OF SUBCONTRACTOR

FROM NEW YORK CITY TRANSIT AUTHORITY --

ENGINEERING AND CONSTRUCTION DEPARTMENT

The statements herein are confidential and made solely for the
information of the New York City Transit Authority in connection with
the proposed subcontract with

Name of General Contractor

Address City State Zip Code

Under its general Contract No. \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_with
the New York City Transit Authority.

GENERAL INFORMATION

1.  Name of proposed subcontractor:
    \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

2\. Address:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(principal office) Address City State Zip Code

3\. If a corporation: If a partnership:

When Incorporated \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Date of Organization
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Vice-President's name \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Names and addresses
of partners \_\_\_\_\_\_\_\_

Secretary's name \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Treasurer's name \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

4.  Description of work to be done under proposed subcontract. Indicate
    clearly whether work involves labor only or labor and material. List
    principal items of materials, if any to be furnished.

5.  Total amount of proposed subcontract: \$
    \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

EXPERIENCE

6.  How many years of experience?
    \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

7.  Give, briefly, previous experience of directing officers including
    chief engineer and general superintendent on similar work.

  ------------------- ------------- -------------- --------------- ----------
  NAME                PRESENT       YRS. OF        MAGNITUDE AND   WHAT
                      POSITION      CONSTRUCTION   TYPE OF WORK    CAPACITY
                                    EXPERIENCE                     

                                                                   

                                                                   

                                                                   

                                                                   
  ------------------- ------------- -------------- --------------- ----------

8.  List principal contracts completed by present organization.

  --------------- ---------- ---------- ----------- -------------------------
  LOCATION        CONTRACT   CLASS OF   PERCENT     NAME AND ADDRESS OF
                  PRICE      WORK       COMPLETED   AWARDING PARTY

                                                    

                                                    

                                                    

                                                    
  --------------- ---------- ---------- ----------- -------------------------

9.  List contracts, if any, that present organization has on hand.

  --------------- ---------- ---------- ----------- -------------------------
  LOCATION        CONTRACT   CLASS OF   PERCENT     NAME AND ADDRESS OF
                  PRICE      WORK       COMPLETED   AWARDING PARTY

                                                    

                                                    

                                                    

                                                    
  --------------- ---------- ---------- ----------- -------------------------

10. Give references of at least two engineers or architects for whom
    present organization has done similar work.

  ------------------- ----------- ----------------------------- ----------
  NAME                TELEPHONE   ADDRESS                       POSITION
                      NUMBER                                    

                                                                

                                                                

                                                                

                                                                
  ------------------- ----------- ----------------------------- ----------

11. Labor employed through
    \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

12. Give any supplemental information that the undersigned desires to
    submit.

> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

The undersigned agrees to furnish the New York City Transit Authority
additional or supplemental information concerning its financial and/or
technical qualifications, when and as required.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Name Date

APPENDIX B.18

HIAWATHA LINE PUBLIC ART & DESIGN BUDGET

+---+--------------------------+--------+---------+----------+---------+
| : |                          | :      | ::: D   | :::      | ::: D   |
| : |                          | :: Def | efiniti |  Definit | efiniti |
| : |                          | initio | on-Term | ion-Term | on-Term |
|   |                          | n-Term | **Es    | **Fab    | **      |
| D |                          | **     | timated | rication | Maximum |
| e |                          | Design | Add     | and      | Total   |
| f |                          | Phase  | itional | Inst     | Commi   |
| i |                          | Alloca | All     | allation | ssion** |
| n |                          | tion** | ocation | Phase    | :::     |
| i |                          | :::    | for     | Max      |         |
| t |                          |        | Const   | Allo     |         |
| i |                          |        | ruction | cation** |         |
| o |                          |        | Dra     | :::      |         |
| n |                          |        | wings** |          |         |
| - |                          |        | :::     |          |         |
| T |                          |        |         |          |         |
| e |                          |        |         |          |         |
| r |                          |        |         |          |         |
| m |                          |        |         |          |         |
| * |                          |        |         |          |         |
| * |                          |        |         |          |         |
| D |                          |        |         |          |         |
| e |                          |        |         |          |         |
| s |                          |        |         |          |         |
| c |                          |        |         |          |         |
| r |                          |        |         |          |         |
| i |                          |        |         |          |         |
| p |                          |        |         |          |         |
| t |                          |        |         |          |         |
| i |                          |        |         |          |         |
| o |                          |        |         |          |         |
| n |                          |        |         |          |         |
| o |                          |        |         |          |         |
| f |                          |        |         |          |         |
| C |                          |        |         |          |         |
| o |                          |        |         |          |         |
| m |                          |        |         |          |         |
| m |                          |        |         |          |         |
| i |                          |        |         |          |         |
| s |                          |        |         |          |         |
| s |                          |        |         |          |         |
| i |                          |        |         |          |         |
| o |                          |        |         |          |         |
| n |                          |        |         |          |         |
| * |                          |        |         |          |         |
| * |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
+---+--------------------------+--------+---------+----------+---------+
| : | ::: Definition-Term      | :      | ::: D   | :::      | ::: D   |
| : | System-Wide Interactive  | :: Def | efiniti |  Definit | efiniti |
| : | Artwork                  | initio | on-Term | ion-Term | on-Term |
|   | :::                      | n-Term | \$5,000 | Not      | \       |
| D |                          | \$     | :::     | Ap       | $50,000 |
| e |                          | 45,000 |         | plicable | :::     |
| f |                          | :::    |         | :::      |         |
| i |                          |        |         |          |         |
| n |                          |        |         |          |         |
| i |                          |        |         |          |         |
| t |                          |        |         |          |         |
| i |                          |        |         |          |         |
| o |                          |        |         |          |         |
| n |                          |        |         |          |         |
| - |                          |        |         |          |         |
| T |                          |        |         |          |         |
| e |                          |        |         |          |         |
| r |                          |        |         |          |         |
| m |                          |        |         |          |         |
| 1 |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
+---+--------------------------+--------+---------+----------+---------+
| : | ::: Definition-Term      | :      | ::: D   | :::      | ::: D   |
| : | Design Platform Surface  | :: Def | efiniti |  Definit | efiniti |
| : | Patterns                 | initio | on-Term | ion-Term | on-Term |
|   | :::                      | n-Term | \$5,000 | Not      | \       |
| D |                          | \$     | :::     | Ap       | $28,500 |
| e |                          | 23,500 |         | plicable | :::     |
| f |                          | :::    |         | :::      |         |
| i |                          |        |         |          |         |
| n |                          |        |         |          |         |
| i |                          |        |         |          |         |
| t |                          |        |         |          |         |
| i |                          |        |         |          |         |
| o |                          |        |         |          |         |
| n |                          |        |         |          |         |
| - |                          |        |         |          |         |
| T |                          |        |         |          |         |
| e |                          |        |         |          |         |
| r |                          |        |         |          |         |
| m |                          |        |         |          |         |
| 2 |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
+---+--------------------------+--------+---------+----------+---------+
| : | ::: Definition-Term      | :      | ::: D   | :::      | ::: D   |
| : | System-Wide Lighting     | :: Def | efiniti |  Definit | efiniti |
| : | Elements Color Scheme    | initio | on-Term | ion-Term | on-Term |
|   | for Platform & Skyway    | n-Term | \$8,500 | Not      | \       |
| D | Restoration of           | \$     | :::     | Ap       | $85,000 |
| e | "Franklin" Marquee       | 76,500 |         | plicable | :::     |
| f | :::                      | :::    |         | :::      |         |
| i |                          |        |         |          |         |
| n |                          |        |         |          |         |
| i |                          |        |         |          |         |
| t |                          |        |         |          |         |
| i |                          |        |         |          |         |
| o |                          |        |         |          |         |
| n |                          |        |         |          |         |
| - |                          |        |         |          |         |
| T |                          |        |         |          |         |
| e |                          |        |         |          |         |
| r |                          |        |         |          |         |
| m |                          |        |         |          |         |
| 3 |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
+---+--------------------------+--------+---------+----------+---------+
| : | ::: Definition-Term      | :      | ::: D   | :::      | ::: D   |
| : | Sequential Gateway       | :: Def | efiniti |  Definit | efiniti |
| : | :::                      | initio | on-Term | ion-Term | on-Term |
|   |                          | n-Term | \$8,500 | Not      | \       |
| D |                          | \$     | :::     | Ap       | $40,000 |
| e |                          | 31,500 |         | plicable | :::     |
| f |                          | :::    |         | :::      |         |
| i |                          |        |         |          |         |
| n |                          |        |         |          |         |
| i |                          |        |         |          |         |
| t |                          |        |         |          |         |
| i |                          |        |         |          |         |
| o |                          |        |         |          |         |
| n |                          |        |         |          |         |
| - |                          |        |         |          |         |
| T |                          |        |         |          |         |
| e |                          |        |         |          |         |
| r |                          |        |         |          |         |
| m |                          |        |         |          |         |
| 4 |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
+---+--------------------------+--------+---------+----------+---------+
| : | ::: Definition-Term      | :      | ::: D   | :::      | ::: D   |
| : | Landmark                 | :: Def | efiniti |  Definit | efiniti |
| : | :::                      | initio | on-Term | ion-Term | on-Term |
|   |                          | n-Term | \$5,000 | \        | \$      |
| D |                          | \$     | :::     | $110,000 | 130,000 |
| e |                          | 15,000 |         | :::      | :::     |
| f |                          | :::    |         |          |         |
| i |                          |        |         |          |         |
| n |                          |        |         |          |         |
| i |                          |        |         |          |         |
| t |                          |        |         |          |         |
| i |                          |        |         |          |         |
| o |                          |        |         |          |         |
| n |                          |        |         |          |         |
| - |                          |        |         |          |         |
| T |                          |        |         |          |         |
| e |                          |        |         |          |         |
| r |                          |        |         |          |         |
| m |                          |        |         |          |         |
| 5 |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
+---+--------------------------+--------+---------+----------+---------+
| : | ::: Definition-Term      | :      | ::: D   | :::      | ::: D   |
| : | Masonry Icons            | :: Def | efiniti |  Definit | efiniti |
| : | :::                      | initio | on-Term | ion-Term | on-Term |
|   |                          | n-Term | \$1,500 | \$10,000 | \       |
| D |                          | \      | :::     | :::      | $15,000 |
| e |                          | $3,500 |         |          | :::     |
| f |                          | :::    |         |          |         |
| i |                          |        |         |          |         |
| n |                          |        |         |          |         |
| i |                          |        |         |          |         |
| t |                          |        |         |          |         |
| i |                          |        |         |          |         |
| o |                          |        |         |          |         |
| n |                          |        |         |          |         |
| - |                          |        |         |          |         |
| T |                          |        |         |          |         |
| e |                          |        |         |          |         |
| r |                          |        |         |          |         |
| m |                          |        |         |          |         |
| 6 |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
+---+--------------------------+--------+---------+----------+---------+
| : | ::: Definition-Term      | :      | ::: D   | :::      | ::: D   |
| : | Special Platform Surface | :: Def | efiniti |  Definit | efiniti |
| : | Treatment                | initio | on-Term | ion-Term | on-Term |
|   | :::                      | n-Term | \$4,000 | \$90,000 | \$      |
| D |                          | \$     | :::     | :::      | 110,000 |
| e | ::: Definition-Term      | 16,000 |         |          | :::     |
| f | Glass Windscreen         | :::    |         |          |         |
| i | Treatment                |        |         |          |         |
| n | :::                      |        |         |          |         |
| i |                          |        |         |          |         |
| t | ::: Definition-Term      |        |         |          |         |
| i | Landmark                 |        |         |          |         |
| o | :::                      |        |         |          |         |
| n |                          |        |         |          |         |
| - |                          |        |         |          |         |
| T |                          |        |         |          |         |
| e |                          |        |         |          |         |
| r |                          |        |         |          |         |
| m |                          |        |         |          |         |
| 7 |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
+---+--------------------------+--------+---------+----------+---------+
| : | ::: Definition-Term      | :      | ::: D   | :::      | ::: D   |
| : | Community Tiles          | :: Def | efiniti |  Definit | efiniti |
| : | :::                      | initio | on-Term | ion-Term | on-Term |
|   |                          | n-Term | \$2,500 | \$30,000 | \       |
| D |                          | \$     | :::     | :::      | $45,000 |
| e |                          | 12,500 |         |          | :::     |
| f |                          | :::    |         |          |         |
| i |                          |        |         |          |         |
| n |                          |        |         |          |         |
| i |                          |        |         |          |         |
| t |                          |        |         |          |         |
| i |                          |        |         |          |         |
| o |                          |        |         |          |         |
| n |                          |        |         |          |         |
| - |                          |        |         |          |         |
| T |                          |        |         |          |         |
| e |                          |        |         |          |         |
| r |                          |        |         |          |         |
| m |                          |        |         |          |         |
| 8 |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
+---+--------------------------+--------+---------+----------+---------+
| : | ::: Definition-Term      | :      | ::: D   | :::      | ::: D   |
| : | Integrated Artwork       | :: Def | efiniti |  Definit | efiniti |
| : | :::                      | initio | on-Term | ion-Term | on-Term |
|   |                          | n-Term | \$2,000 | \$68,000 | \       |
| D |                          | \$     | :::     | :::      | $80,000 |
| e |                          | 10,000 |         |          | :::     |
| f |                          | :::    |         |          |         |
| i |                          |        |         |          |         |
| n |                          |        |         |          |         |
| i |                          |        |         |          |         |
| t |                          |        |         |          |         |
| i |                          |        |         |          |         |
| o |                          |        |         |          |         |
| n |                          |        |         |          |         |
| - |                          |        |         |          |         |
| T |                          |        |         |          |         |
| e |                          |        |         |          |         |
| r |                          |        |         |          |         |
| m |                          |        |         |          |         |
| 9 |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
+---+--------------------------+--------+---------+----------+---------+
| : | ::: Definition-Term      | :      | ::: D   | :::      | ::: D   |
| : | Translucent Photo Images | :: Def | efiniti |  Definit | efiniti |
| : | :::                      | initio | on-Term | ion-Term | on-Term |
|   |                          | n-Term | \$3,000 | \        | \$      |
| D | ::: Definition-Term      | \$     | :::     | $100,000 | 120,000 |
| e | Etched Glass for Towers  | 17,000 |         | :::      | :::     |
| f | and Windscreens          | :::    |         |          |         |
| i | :::                      |        |         |          |         |
| n |                          |        |         |          |         |
| i |                          |        |         |          |         |
| t |                          |        |         |          |         |
| i |                          |        |         |          |         |
| o |                          |        |         |          |         |
| n |                          |        |         |          |         |
| - |                          |        |         |          |         |
| T |                          |        |         |          |         |
| e |                          |        |         |          |         |
| r |                          |        |         |          |         |
| m |                          |        |         |          |         |
| 1 |                          |        |         |          |         |
| 0 |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
+---+--------------------------+--------+---------+----------+---------+
| : | ::: Definition-Term      | :      | ::: D   | :::      | ::: D   |
| : | Metal Objects/Text in    | :: Def | efiniti |  Definit | efiniti |
| : | Canopy Joist Structure   | initio | on-Term | ion-Term | on-Term |
|   | :::                      | n-Term | \$3,000 | \$90,000 | \$      |
| D |                          | \$     | :::     | :::      | 110,000 |
| e | ::: Definition-Term      | 17,000 |         |          | :::     |
| f | Canopy & Bus Shelter     | :::    |         |          |         |
| i | Pergola Sculpture        |        |         |          |         |
| n | :::                      |        |         |          |         |
| i |                          |        |         |          |         |
| t |                          |        |         |          |         |
| i |                          |        |         |          |         |
| o |                          |        |         |          |         |
| n |                          |        |         |          |         |
| - |                          |        |         |          |         |
| T |                          |        |         |          |         |
| e |                          |        |         |          |         |
| r |                          |        |         |          |         |
| m |                          |        |         |          |         |
| 1 |                          |        |         |          |         |
| 1 |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
+---+--------------------------+--------+---------+----------+---------+
| : | ::: Definition-Term      | :      | ::: D   | :::      | ::: D   |
| : | Metal Tree Grates        | :: Def | efiniti |  Definit | efiniti |
| : | :::                      | initio | on-Term | ion-Term | on-Term |
|   |                          | n-Term | \$2,000 | \$35,000 | \       |
| D | ::: Definition-Term      | \$     | :::     | :::      | $47,000 |
| e | Utility Access Covers    | 10,000 |         |          | :::     |
| f | :::                      | :::    |         |          |         |
| i |                          |        |         |          |         |
| n | Design Platform Surface  |        |         |          |         |
| i | Pattern                  |        |         |          |         |
| t |                          |        |         |          |         |
| i | ::: Definition-Term      |        |         |          |         |
| o | Metal Paver Inserts &    |        |         |          |         |
| n | Inlay Imagery            |        |         |          |         |
| - | :::                      |        |         |          |         |
| T |                          |        |         |          |         |
| e |                          |        |         |          |         |
| r |                          |        |         |          |         |
| m |                          |        |         |          |         |
| 1 |                          |        |         |          |         |
| 2 |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
+---+--------------------------+--------+---------+----------+---------+
| : | ::: Definition-Term      | :      | ::: D   | :::      | ::: D   |
| : | Design Platform Surface  | :: Def | efiniti |  Definit | efiniti |
| : | Pattern                  | initio | on-Term | ion-Term | on-Term |
|   | :::                      | n-Term | \$3,000 | \$68,500 | \       |
| D |                          | \$     | :::     | :::      | $83,500 |
| e | Metal Paver Inserts &    | 12,000 |         |          | :::     |
| f | Inlay Imagery            | :::    |         |          |         |
| i |                          |        |         |          |         |
| n | Canopy Drain Scuppers    |        |         |          |         |
| i | and Grills               |        |         |          |         |
| t |                          |        |         |          |         |
| i |                          |        |         |          |         |
| o |                          |        |         |          |         |
| n |                          |        |         |          |         |
| - |                          |        |         |          |         |
| T |                          |        |         |          |         |
| e |                          |        |         |          |         |
| r |                          |        |         |          |         |
| m |                          |        |         |          |         |
| 1 |                          |        |         |          |         |
| 3 |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
+---+--------------------------+--------+---------+----------+---------+
| : | ::: Definition-Term      | :      | ::: D   | :::      | ::: D   |
| : | Metal Railing            | :: Def | efiniti |  Definit | efiniti |
| : | Augmentation             | initio | on-Term | ion-Term | on-Term |
|   | :::                      | n-Term | \$3,000 | \        | \$      |
| D |                          | \$     | :::     | $142,000 | 162,000 |
| e | Metal Windscreen Overlay | 17,000 |         | :::      | :::     |
| f |                          | :::    |         |          |         |
| i |                          |        |         |          |         |
| n |                          |        |         |          |         |
| i |                          |        |         |          |         |
| t |                          |        |         |          |         |
| i |                          |        |         |          |         |
| o |                          |        |         |          |         |
| n |                          |        |         |          |         |
| - |                          |        |         |          |         |
| T |                          |        |         |          |         |
| e |                          |        |         |          |         |
| r |                          |        |         |          |         |
| m |                          |        |         |          |         |
| 1 |                          |        |         |          |         |
| 4 |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
+---+--------------------------+--------+---------+----------+---------+
| : | ::: Definition-Term      | :      | ::: D   | :::      | ::: D   |
| : | Landmark                 | :: Def | efiniti |  Definit | efiniti |
| : | :::                      | initio | on-Term | ion-Term | on-Term |
|   |                          | n-Term | \$2,000 | \$68,000 | \       |
| D |                          | \$     | :::     | :::      | $80,000 |
| e |                          | 10,000 |         |          | :::     |
| f |                          | :::    |         |          |         |
| i |                          |        |         |          |         |
| n |                          |        |         |          |         |
| i |                          |        |         |          |         |
| t |                          |        |         |          |         |
| i |                          |        |         |          |         |
| o |                          |        |         |          |         |
| n |                          |        |         |          |         |
| - |                          |        |         |          |         |
| T |                          |        |         |          |         |
| e |                          |        |         |          |         |
| r |                          |        |         |          |         |
| m |                          |        |         |          |         |
| 1 |                          |        |         |          |         |
| 5 |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
+---+--------------------------+--------+---------+----------+---------+
| : | ::: Definition-Term      | :      | ::: D   | :::      | ::: D   |
| : | Bas-Relief or Ti1e       | :: Def | efiniti |  Definit | efiniti |
| : | Murals                   | initio | on-Term | ion-Term | on-Term |
|   | :::                      | n-Term | \$4,000 | \        | \$      |
| D |                          | \$     | :::     | $190,000 | 220,000 |
| e |                          | 26,000 |         | :::      | :::     |
| f |                          | :::    |         |          |         |
| i |                          |        |         |          |         |
| n |                          |        |         |          |         |
| i |                          |        |         |          |         |
| t |                          |        |         |          |         |
| i |                          |        |         |          |         |
| o |                          |        |         |          |         |
| n |                          |        |         |          |         |
| - |                          |        |         |          |         |
| T |                          |        |         |          |         |
| e |                          |        |         |          |         |
| r |                          |        |         |          |         |
| m |                          |        |         |          |         |
| 1 |                          |        |         |          |         |
| 6 |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
| : |                          |        |         |          |         |
+---+--------------------------+--------+---------+----------+---------+

######## 

APPENDIX B.19

**MANDATORY PROCUREMENT STANDARDS WORKSHEET**

  --------- ----------------------- ------------- ------------------------------
  **No.**   **Element**             **FTA         **Grantee Procurement
                                    Circular      Policy/Procedure Reference**
                                    4220.1E       
                                    Paragraph     
                                    No.**         

  1\)       Written Standards of    7.c.          
            Conduct                               

  2\)       Contract Administration 7.b.          
            System                                

  3\)       Written Protest         7.l.          
            Procedures                            

  4\)       Prequalification System 8.d.          

  5\)       System for Ensuring     7.d.          
            Most Efficient and                    
            Economic Purchase                     

  6\)       Procurement Policies    7.a.          
            and Procedures                        

  7\)       Independent Cost        10\.          
            Estimate                              

  8\)       A&E Geographic          8.b.          
            Preference                            

  9\)       Unreasonable            8.a.(1)       
            Qualification                         
            Requirements                          

  10\)      Unnecessary Experience  8.a.(2)       
            and Excessive Bonding                 

  11\)      Organizational Conflict 8.a.(5)       
            of Interest                           

  12\)      Arbitrary Action        8.a.(7)       

  13\)      Brand Name Restrictions 8.a.(6) and   
                                    8.c.          

  14\)      Geographic Preferences  8.b.          

  15\)      Contract Period of      7.m.          
            Performance Limitation                

  16\)      Written Procurement     8.c.          
            Selection Procedures                  

  17\)      Solicitation            8.d.          
            Prequalification                      
            Criteria                              

  18\)      Award to Responsible    7.h.          
            Contractors                           

  19\)      Sound and Complete      15\.          
            Agreement                             

  20\)      No Splitting            9.a.          
            \[Micro-purchase\]                    

  21\)      Fair and Reasonable     9.a.          
            Price Determination                   
            \[Micro-purchase\]                    

  22\)      Micro-Purchase Davis    9.a.          
            Bacon                                 

  23\)      Price Quotations        9.b.          
            \[Small Purchase\]                    

  **No.**   **Element**             **FTA         **Grantee Procurement
                                    Circular      Policy/Procedure Reference**
                                    4220.1E       
                                    Paragraph     
                                    No.**         

  24\)      Clear, Accurate, and    8.c.(1),      
            Complete Specification  9.c.(2)(b) &  
                                    9.c.(1)(a)    

  25\)      Adequate Competition -  9.c.(1)(b)    
            Two or More Competitors               

  26\)      Firm Fixed Price        9.c.(1)(c)    
            \[Sealed Bid\]                        

  27\)      Selection on Price      9.c.(1)(c)    
            \[Sealed Bid\]                        

  28\)      Discussions Unnecessary 9.c.(1)(d)    
            \[Sealed Bid\]                        

  29\)      Advertised/Publicized   9.c. & d.     

  30\)      Adequate Solicitation   9.c.(2)(a) &  
                                    9.d.(2)       

  31\)      Sufficient Bid Time     9.c.(2)(a)    
            \[Sealed Bid\]                        

  32\)      Bid Opening \[Sealed    9.c.(2)(c)    
            Bid\]                                 

  33\)      Responsiveness \[Sealed 9.c.(2)(d)    
            Bid\]                                 

  34\)      Lowest Price \[Sealed   9.c.(2)(d)    
            Bid\]                                 

  35\)      Rejecting Bids \[Sealed 9.c.(2)(e)    
            Bid\]                                 

  36\)      Evaluation \[RFP\]      9.d.(1) &     
                                    9.d.(3)       

  37\)      Price and Other Factors 9.d.(4)       
            \[RFP\]                               

  38\)      Sole Source if Other    9.h.          
            Award is Infeasible                   

  39\)      Cost Analysis Required  9.h.(2)       
            \[Sole Source\]                       

  40\)      Evaluation of Options   9.i.(1)       

  41\)      Cost or Price Analysis  10\.          

  42\)      Written Record of       7.i.          
            Procurement History                   

  43\)      Exercise of Options     9.i.(2)       

  44\)      Out of Scope Changes    9.h.          

  45\)      Advance Payments        12.a.         

  46\)      Progress Payments       12.b.         

  47\)      Time and Materials      7.j.          
            Contracts                             

  48\)      Cost Plus Percentage of 10.e.         
            Cost                                  

  49\)      Liquidated Damages      13\.          
            Provisions                            

  50\)      Qualifications Exclude  9.e.          
            Price \[A&E\]                         

  51\)      Serial Price            9.e.          
            Negotiations \[A&E\]                  

  **No.**   **Element**             **FTA         **Grantee Procurement
                                    Circular      Policy/Procedure Reference**
                                    4220.1E       
                                    Paragraph     
                                    No.**         

  52\)      Bid Security            11.a.         
            \[Construction over                   
            \$100,000\]                           

  53\)      Performance Security    11.b.         
            \[Construction over                   
            \$100,000\]                           

  54\)      Payment Security        11.c.         
            \[Construction over                   
            \$100,000\]                           
  --------- ----------------------- ------------- ------------------------------

[^1]: \- <http://www.fta.dot.gov/16874_16882_ENG_HTML.htm>.

[^2]: \- Grantees are required to use the Federal cost principles in FAR
    Part 31 to determine allowable costs on cost-type contracts and when
    negotiating (fixed) prices for contracts and modifications that are
    based on estimated costs. See BPPM Sections 2.4.3.1 and 2.4.3.2.

[^3]: \- Contact Michael Flores, LACMTA Audit Manager, at 213-922-6345
    or floresm@mta.net.

[^4]: \- FAR 2.101.

[^5]: \- Form FTA MA(12), October 1, 2005.

[^6]: \- Id. at Section 1.m.

[^7]: \- Id. at Section 1.p.

[^8]: \- See Paragraph 6.b., FTA Circular 4220.1E for definition of
    \"State.\" Note that the definition in both this paragraph of the
    Circular and 49 CFR Part 18.3 specifically excludes \"local
    governments\" (as defined therein as well) from the definition of a
    \"State.\" Thus, if you are a city government and a
    recipient/grantee, and if your state has a procurement statute that
    applies to \"local government\" procurements, you still must comply
    with the Circular and the provisions of 49 CFR Part 18.36(b) through
    (t). However, if you are a subrecipient/subgrantee of your state,
    you shall follow state law and procedures. The differences between
    these two instances may be subtle, but they are real differences
    that should be considered and addressed.

[^9]: \- *Id.* at Paragraph 7.a.

[^10]: \- The flow-down of clauses is not an absolute requirement; e.g.
    Drug and Alcohol Testing requirements apply only to the work of the
    prime contractor.

[^11]: \- Paragraph 4, FTA Circular 4220.1E.

[^12]: \- Letter from FTA Administrator to Executive Director, Dallas
    Area Rapid Transit dated March 3, 1992, page 2.

[^13]: \- In discussing statutory and regulatory requirements, Paragraph
    16 of FTA Circular 4220.1E advises grantees to contact other Federal
    agencies for specific guidance concerning the cross‑cutting
    requirements of those agencies. Section 8.1 of the BPPM, which
    discusses the federal contract clauses, will cross‑reference other
    agencies requirements, whenever possible.

[^14]: \- MA(12), dated October 1, 2005.

[^15]: \- Sub-paragraph (1) looks primarily to State government
    contracts that allow subordinate government agencies to buy from
    established schedules akin to the GSA schedules in Federal practice.
    FTA believes grantees may buy through these contracts provided all
    parties agree to append the required Federal clauses in the purchase
    order or other document that effects the grantee's procurement. When
    buying from these schedule contracts, grantees should obtain Buy
    America certification before entering into the purchase order. Where
    the product to be purchased is Buy America compliant, there is no
    problem. Where the product is not Buy America compliant, the grantee
    will still have to obtain a waiver from FTA before proceeding.

[^16]: \- Sub-paragraph (2) reflects FTA's belief that grantees should
    consider combining efforts in their procurements 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 grantee's requirements. We believe
    this is superior to the practice of 'piggybacking' since
    'piggybacking' does not combine buying power at the pricing stage
    and may limit a grantee's choices to those products excess to
    another grantee's needs.

[^17]: \- Sub-paragraph (3) reflects grantees' continuing ability to
    assign contractual rights to others -- 'piggybacking.' FTA believes
    it is extremely important that grantees ensure they contract only
    for their reasonably anticipated needs and do not add quantities or
    options to contracts solely to allow them to assign these quantities
    or options at a later date.

[^18]: \- FTA's definition of "Piggybacking" in 4220.1E differentiates
    this practice from joint procurements or other intergovernmental
    agreements.

[^19]: \- Metropolitan Atlanta Rapid Transit Authority (MARTA), contact
    Mr. Durham Hamilton, Director of Program Management, at (404)
    848-4409, to discuss Atlanta's fiber optic cable contracts.

[^20]: \- Metropolitan Atlanta Rapid Transit Authority (MARTA), contact
    Ms. Lisa DeGrace, Director of Contracts, Procurement and Materials
    at (404) 848‑5467, to discuss Atlanta's transit oriented development
    and other revenue contracts.

[^21]: Equipment with a unit market value of \$5,000 or less, or
    supplies with a total aggregate value of \$5,000 or less, may be
    retained, sold or otherwise disposed of with no obligation to
    reimburse FTA, providing useful service life requirements have been
    met.

[^22]: The situations covered by the Circular include more than those
    listed above, and grantees need to carefully review the Circular
    instructions.

[^23]: \- New York City Transit. Contact Mike Zacchea, (646) 252-6204.

[^24]: \- If the material to be sold does not meet the criteria for
    competitive bidding, solicitation and advertising of individual
    items offered for sale would be a responsibility of the Sales
    Department, not Procurement.

[^25]: \- As a general rule, the circular, along with the underlying
    requirements in the Federal transit laws and regulations, applies
    whenever Federal funds are involved. Those grantees authorized to
    use formula funds for operating assistance must apply the circular
    to all operating contracts -- even if they are able to
    administratively segregate the federal funds to non-contract
    operating expenses. The ability to use formula funds for operating
    assistance hinges upon a grantee's total operating expenses and the
    portion of those expenses not offset by operating income. Since the
    entire range of operating expenses is considered in this
    calculation, each segment of those operating expenses must be
    subject to Federal standards. Grantees that are not authorized to
    use formula funds for operating assistance are not required to apply
    the circular to their operating contracts.

[^26]: \- Congestion Mitigation and Air Quality (CMAQ) and Job
    Access/Reverse Commute (JARC) funds may be used for operations by
    all grantees. The circular must be applied to all contracts that are
    funded, in part, by CMAQ or JARC funds. Using CMAQ or JARC funds for
    a specific operating contract or contracts does not trigger the
    requirement to apply the circular to other operating contracts. This
    is because the calculation required to use formula funds for
    operations contracts is not required as a prerequisite to using CMAQ
    or JARC funds for operating contracts.

[^27]: \- Grantees who use formula capital funds for preventative
    maintenance contracts must apply the circular to those contracts.
    If, through their accounting procedures, these grantees are able to
    allocate the Federal funds to discrete maintenance contracts, only
    those discrete contracts must adhere to the circular. If unable to
    allocate federal funds to discrete maintenance contracts, the
    circular applies to all maintenance contracts. Capital projects that
    don't include Federal funding are not required to conform to the
    circular.

[^28]: \- For formal assistance in implementing a team process see
    Howard, Jennifer M. and Miller, Lawrence M., *Team Management:
    Creating Systems and Skills for a Team-Based Organization* (The
    Miller Consulting Group, Inc., 1994) or Leinberger Robin et al, *The
    Art of Business Process Management: A guidebook*, (KPMG Peat
    Marwick, LLP, 1993).

[^29]: **-** The limitation is expressed in terms of buying no more than
    five years' requirements even though delivery may occur beyond five
    years from the date of the contract.

[^30]: ^-^This limitation did not apply to construction contracts or to
    leases of real property for the life of the transit asset to be
    constructed on such property.

[^31]: ^-^ FTA *Dear Colleague Letter* C-08-02 dated May 29, 2002.

[^32]: **-** Contact Mr. John Trotta, Vice President,
    Purchasing/Warehousing, Chicago Transit Authority, at (312)
    222-6113.

[^33]: **-** Geographic preference is permitted in certain narrow
    situations, including principally where part of a legal licensing
    requirement and for architects and engineers; FTA Circular 4220.1E §
    8.b.

[^34]: **-** The Council of State Governments, National Association of
    State Purchasing Officials, Law Enforcement Assistance
    Administration, and Peat Marwick Mitchell & Co., *State and Local
    Government Purchasing* (1975) p. 6.2.

[^35]: **-** United States v. John C. Grimberg Co., 702 F.2d 1362, 1367
    (Fed. Cir. 1983) (in banc).

[^36]: **-** FTA Circular 4220.1E § 8.c.(1).

[^37]: **-** FTA Circular 4220.1E § 9.h.(1).

[^38]: **-** *Id.*

[^39]: **-** FTA Master Agreement Sections 3(a) and 3(a)(1); 49 CFR §
    18.36(3); FTA Circular 4220.1E Paragraph 7(c). In addition, many
    state and local jurisdictions have laws and regulations, which
    address both the conduct of public employees and the relationship
    between public entities and private businesses. These vary in
    nature, and may impose both civil and criminal sanctions on
    violators.

[^40]: **-** See FTA Master Agreement Section 3(a)(1).

[^41]: \- This interpretation applies to both subcontractors and general
    contractors providing procurement-related services to a grantee.

[^42]: **-** A personal conflict also arises where a person whose
    financial interests are attributed to the employee has a conflict --
    either because that person is an employee, prospective employee,
    officer, director, or agent of a contractor or competing entity, or
    because that person has a financial interest in the contractor or
    competing entity. The financial interests of the following are
    attributed to an employee: **a member of the employee's immediate
    family, his partner, or his outside employer or prospective
    employer.** FTA Circular 4220.1E Paragraph 7(c).

[^43]: **-** [See]{.underline} FTA Circular 4220.1E Paragraph 7(c); 18
    CFR § 18.36(3)(iv); FTA Master Agreement Section 3(a). However,
    "\[t\]he Recipient may set minimum rules where the financial
    interest is not substantial, or the gift is an unsolicited item of
    nominal intrinsic value." FTA Master Agreement Section 3(a); see
    also FTA Circular 4220.1E Paragraph 7(c); 18 CFR § 18.36(3)(iv).
    These are known as "de minimus" gifts, and do not result in either a
    real or apparent conflict of interest. For FTA and other Federal
    employees, the level is set at \$20 per occasion, with a maximum of
    \$50 per calendar year from the same source (including affiliates).
    In many cases, however, the best response to a gift offered is a
    simple, "Thank you, but no thank you." Section 3(a) of the FTA
    Master Agreement requires that grantees include in the standards of
    conduct penalties, sanctions, or other disciplinary actions for
    violations of the code, to the extent permitted by state or local
    law.

[^44]: **-** [See]{.underline} FTA Circular 4220.1E Paragraph 8(a)(5).
    The Federal Acquisition Regulations also provide a helpful
    definition of organizational conflict of interest: "Organizational
    conflict of interest means that because of other activities or
    relationships with other persons, a person is unable or potentially
    unable to render impartial assistance or advice to the Government,
    or the person's objectivity in performing the contract work is or
    might be otherwise impaired, or a person has an unfair competitive
    advantage." 48 CFR § 9.501.

[^45]: \- Generally, an organizational conflict arises because a person
    or entity has or appears to have loyalties to, or a financial
    interest in, two organizations that may have competing or differing
    interests from each other \-- one of them being the grantee. For
    example, an organizational conflict would arise if an employee or a
    consultant serves as a member of a public or quasi-public body with
    regulatory authority over a project or has a stake in its outcome.
    This arises most often where architects sit on design review or
    zoning boards.

[^46]: **^19^** - Federal transit law requires grantees to award
    contracts through a process of full and open competition.
    Organizational conflicts of interest that give any party an unfair
    competitive advantage impede full and open competition, and thus are
    considered "restrictive of competition" under Paragraph 8(a)(5) of
    FTA Circular 4220.1E.

[^47]: **-** Mergers and acquisitions have had a strong effect on
    contracts in the environmental area, thus warranting a separate
    discussion of this topic.

[^48]: **-** This is consistent with the approach used in Federal
    contracting as set forth in FAR 9.504(e), where a contract can be
    awarded in spite of a conflict when the contracting officer
    determines that it is in the best interest of the Government to do
    so.

[^49]: **-** Recommendation of the ABA Model Procurement Code, §
    R12-202.01.

[^50]: **-** BART Procurement Manual, Attachment B.

[^51]: \- Each grantee also should consult with its counsel before
    requiring annual financial disclosure statements to confirm that the
    requirement complies with any labor agreements applicable to the
    grantee.

[^52]: \- In large undertakings, this may involve multiple, related
    consulting, planning, design, technical oversight or technical
    evaluation contracts. Grantees can work with persons experienced in
    the field to decide how to segment the procurements and what
    restrictions to impose.

[^53]: **-** 40 CFR § 1506.5. Note that if a contractor has a financial
    interest in the outcome of the proposed project, the contractor
    should inform the grantee of its interest. Under appropriate
    circumstances, the grantee may choose to waive the conflict of
    interest after careful consideration (see Discussion Section I).

[^54]: \- Los Angeles County Metropolitan Transportation Authority.
    Procurement Manual Section 908(e).

[^55]: \- Ibid., Section 2314.

[^56]: \- Ibid., Section 407.5. Also San Francisco Bay Area Rapid
    Transit District (BART). Procurement Manual, Section II-7.

[^57]: \- FAR 9.202.

[^58]: \- Los Angeles County Metropolitan Transportation Authority.
    Procurement Manual, Section 407.5 (1)(a).

[^59]: \- FAR, Section 9.202 (e).

[^60]: \- Many state laws require construction contracts to be awarded
    at a firm fixed price.

[^61]: \- It is important that the grantee's project budget reflect an
    allowance for any potential increase in volatile commodity prices
    (e.g., steel).

[^62]: \- The FAR price escalation clauses in FAR 52.216-2,3,4 include a
    maximum aggregate price increase of 10 percent; however, the FAR
    also gives the Contracting Officer latitude to increase this maximum
    percent if circumstances warrant.

[^63]: \- When using a steel escalation article only the cost of
    material is escalated or deescalated and no other costs such as
    labor or machinery.

[^64]: **^34^** - FAR 52.216.-7 -- *Allowable Cost and Payment*.

[^65]: **^35^** - FAR 52.216-8 -- *Fixed Fee*.

[^66]: **^36^** - FAR 52.216-8 -- *Fixed Fee*.

[^67]: **^37^** - Advance agreements cannot provide for the allowability
    of costs that the cost principles have determined to be unallowable
    (e.g., interest).

[^68]: \- If a cost type subcontract is to be awarded by the prime, the
    subcontractor's accounting system must also be adequate.

[^69]: **^39^** - 10 U.S.C. 2306(a) and 41 U.S.C. 254(b).

[^70]: \- 46 Comp. Gen. 612 (B-159713) (1967).

[^71]: FTA has redrafted the paragraph related to progress payments to
    account for the practical reality that taking title to work in
    progress may not be desirable in some cases.

[^72]: Progress payments in construction contracts may be made on a
    percentage of completion method in accordance with 49 CFR 18.21(d).
    This payment method may not be used in non-construction contracts.

[^73]: "Adequate security" should reflect the practical realities of
    different procurement scenarios and factual circumstances. For
    example, adequate security may consist of taking title to work in
    progress in a rolling stock procurement, receiving a draft document
    in a consulting contract, or receiving some portion of recurring
    services under a services contract. Grantees 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 they consider what
    constitutes adequate security for a given procurement.

[^74]: \- The term *progress payments* does not apply to cost-type
    contracts, and is to be distinguished from *advance payments,* which
    are payments made before work begins (see BPPM section 4.4.4.2).

[^75]: \- Both of the conditions noted are almost always present on
    construction projects.

[^76]: \- FAR Clause 52.232-5 *Payments Under Fixed-Price Construction
    Contracts.*

[^77]: \- 49 CFR 18.21(d) authorizes the percentage of completion method
    for construction contracts only.

[^78]: \- Appendix A.1, Clause 16.

[^79]: \- Appendix A.1, Clause 17.

[^80]: \- Norair Eng\'g Corp., GSBCA 3539, 75-1 BCA, paragraph 11,062.

[^81]: \- Bailey v. Secretary of Labor, 810 F. Supp. 261 (D. Alaska
    1993).

[^82]: \- FAR Clause 52.232-9.

[^83]: **^1^** - United States v. Spearin, 248 U.S. 132 (1918).

[^84]: **^2^** - Monitor Plastics Co., ASBCA 14447, 72-2 BCA ¶ 9626 at
    44,971.

[^85]: \- J. L. Simmons Co. V. United States, 188 Ct. Cl. 684, 412 F.d.
    1360 (1969) at 689.

[^86]: **^4^** - Engineering Technology Consultants, ASBCA 43600, 92-3
    BCA ¶ 25,133, recons. Denied, 93-1 BCA ¶ 25,507.

[^87]: **^5^** - J. L. Simmons Co., id.

    **^6^** - Harrison Western/Franki-Denys, Inc., ENGBCA 5523, 92-1 BCA
    ¶ 24,582.

[^88]:

[^89]: \- Hobbs Constr. & Dev., Inc., ASBCA 34890, 91-2 BCA ¶ 23,755.

[^90]: \- Maitland Bros. Co., ASBCA 23849, 83-1 BCA ¶ 16,434.

[^91]: \- Huber, Hunt & Nichols, Inc., GSBCA 4311, 75-2 BCA ¶ 11,457.

[^92]: \- Southern Paving Corp., AGBCA 74-103, 77-2 BCA ¶ 12,813 at
    62,363.

[^93]: **^11^** - Aleutian Constructors v. United States, 24 Cl. Ct. 372
    (1991).

[^94]: **^12^ -** Intercontinental Mfg. Co. V. United States, 4 Cl. Ct.
    591 (1984) at 595.

[^95]: \- Ahern Painting Contractors, Inc., DOTCAB 67-7, 68-1 BCA ¶
    6949.

[^96]: \- Inlet Co., ASBCA 9095, 1964 BCA ¶ 4093.

[^97]: \- Transportation Acquisition Regulation (TAR) Clause 1252.209-71
    DISCLOSURE OF CONFLICTS OF INTEREST (Oct 1994).

[^98]: \- Prepared by Office of Procurement, The Metropolitan Transit
    Authority, Harris County, Texas, dated January 1987.

[^99]: \- MPC § 3-203.

[^100]: \- The George Washington University\'s National Law Center\'s
    Government Contracts Program has published a number of excellent
    books dealing with Government contracting. One such book is
    *Construction Contracting* (The George Washington University:
    Washington, D. C., 1991). For a complete catalogue of
    contracting-related texts contact: The GW Bookstore, 800 21st. St.,
    N.W., Washington, D. C. 20052, Phone: (202)994-6870, Fax:
    (202)296-9445,
    [http://www.gwu.bkstr.com](http://www.gwu.bkstr.com/).

[^101]: \- *Construction Contract Administration Manual*, Port Authority
    of Allegheny County, Procurement Department, 2235 Beaver Avenue,
    Pittsburgh, PA 15233-1080, Phone: (412)237-7000, FAX: (412)237-7101.
    This Manual contains many worthwhile things, such as procedures for
    bid document preparation, bidding, contract award, and contract
    administration; General Contract Provisions; a multitude of forms
    for reporting, evaluating, administering, etc.

[^102]: \- Gorn Corp. V. U. S., 424 F 2d 588 (Ct. Cl. 1970), noted at
    592.

[^103]: \- FTA MA(12) § 15g.

[^104]: \- FTA MA(12) § 30.

[^105]: \- FTA MA(12) § 23e.

[^106]: \- FTA MA(12) § 25.

[^107]: \- FTA MA(12) § 12g.

[^108]: \- *See* Section 1.3.2, \"Federal Contractual Sphere.\"

[^109]: \- United States v. John C. Grimberg Co., 702 F.2d 1362, 1367
    (Fed Cir. 1983) (in banc).

[^110]: \- See Chapter 6 for a discussion of the procurement methods
    commonly used for each object of procurement.

[^111]: \- FTA Circular 4220.1E § 7.f.

[^112]: \- 49 CFR § 661.7, Appendix A to § 661.7, subparagraph (e).

[^113]: \- As a practical matter, you may wish to adopt the statutory
    threshold for the Davis Bacon Act of \$2,000 as the micro‑purchase
    threshold for construction services. This is what has been done with
    the Federal Acquisition Regulation ‑‑ see, FAR § 13.601(a) which
    defines micro‑purchases for construction as being limited to
    \$2,000. However, if you have a requirement for \$2,300 of
    construction, you no longer need competitive quotations, but you
    still need Davis-Bacon wage rate submissions and compliance.

[^114]: \- FTA Circular 4220.1E § 8.c.

[^115]: \- You must not split a procurement that would be in excess of
    \$2,500 (three widgets worth \$1,500 apiece for a total of \$4,500)
    into smaller purchases (three sequential purchases of \$1,500) in
    order to use this method of procurement.

[^116]: \- Although it is written for the more detailed \"price
    analysis\" required in competitive procurements, FAR § 15.805
    discusses price analysis techniques that may be used or adapted to
    support your determinations for these micro‑purchases.

[^117]: \- FAR § 13.106(a)(3).

[^118]: \- These changes were published as part of Federal Acquisition
    Circular 90‑40 in Volume 61 of the Federal Register on pages 39189
    through 39199 (61 Fed. Reg. 39189‑39199 (July 26, 1996)).

[^119]: \- FAR § 13.103(e).

[^120]: \- FAR § 13.106(a)(3)(i) and 1.603‑3(b). See also Section
    2.1.2, \"Autonomy\" regarding decentralization, generally.

[^121]: \- FAR § 13.106(b).

[^122]: \- GAO/NSIAD‑96‑138 (8/6/96). GAO Reports are available on the
    Internet at the Government Printing Office web site:
    [www.access.gpo.gov](http://www.access.gpo.gov/).

[^123]: \- For further information contact Ms. Sandra Kuykendall at
    <skuykendall@islandtransit.org>.

[^124]: \- *See* FTA Circular 4220.1E § 9.e ‑‑ \"Grantees [shall
    use]{.underline} \[the Brooks Act\] for contracting for A&E
    services. . . (emphasis supplied)\" *See* Section 6.5 -
    *Architect-Engineering Services* for a complete discussion.

[^125]: \- *See* Section 6.5 - *Architect-Engineering Services*.

[^126]: \- *See* discussion of these requirements in Section 8.1.3,
    \"Davis Bacon Act.\"

[^127]: \- A \"delivery order\" as opposed to a purchase order, is
    issued typically under the terms of a requirements type contract
    that has been competitively procured under formal procedures. The
    delivery order is simply an ordering mechanism under that contract
    and is not an independent contract like a purchase order.

[^128]: \- FTA Circular 4220.1E § 9.

[^129]: \- FTA Circular 4220.1E § 9.c.(1).

[^130]: \- FTA Circular 4220.1E § 9.c.(3).

[^131]: \- *See* [Section 4.4, \"Sealed Bids]{.underline},\" and FTA
    Circular 4220.1E § 9.c.(2).

[^132]: \- *See* [Section 4.5, \"Competitive Proposals]{.underline},\"
    and FTA Circular 4220.1E § 9.d.

[^133]: \- *See* Chapter 3, \"Specifications\" for a discussion of these
    and other specification issues.

[^134]: \- The Brooks Act procedures, required for Architectural and
    Engineering services and described in Section 6.5, go one step
    further by prohibiting price competition and requiring selection
    based solely on technical criteria.

[^135]: \- In 1990, the FTA published *Procurement Guidelines for Third
    Party Contracting* which included, in Chapter II, Paragraph 7.I, a
    statement that \"All IFBs should be advertised in a manner that
    promotes participation in the bidding by all qualified and capable
    firms. Advertising only in the local news media is not normally
    adequate.\" This document was canceled by the publication of FTA
    Circular 4220.1C in 1995 and no further guidelines have been issued.
    The concept of \"all qualified and capable firms\" is a viable one
    under federal law, and suggests that you should tailor your
    publicity programs to the supply markets for your procurement. This
    is why we have discussed national and local advertisement in the
    text of this subsection and why, under the subsequent discussion of
    mailing lists, it is important that all known firms that provide the
    item or service being procured be solicited.

[^136]: \- If you are interested in more details about the *CBD* and
    other federal government policies relating to publicizing contract
    actions, those details are spelled out in FAR Part 5. FAR § 5.207
    details with the specifics of preparing and transmitting the notices
    for inclusion in the *CBD*.

[^137]: \- If you are not satisfied with the performance of the current
    contractor, the appropriate remedy is not to arbitrarily decide not
    to issue the firm a solicitation for the follow‑on procurement. If
    your performance concerns are well documented, you have two
    alternatives. First, include the firm on the list, address
    performance record under any appropriate technical criteria. If it
    is ultimately the apparent awardee, address your performance
    concerns as part of the responsibility determinations ‑‑ the firm
    may be able to address your concerns at this time to your
    satisfaction. Second, if the performance concerns are irretrievably
    deep, it may even be possible to initiate debarment or suspension at
    the local, state, or Federal level. Debarments and Suspensions as
    well as Responsibility Determinations are specific topics that are
    discussed in subsequent sections of this Manual.

[^138]: \- If you do receive names of firms from the consultant that
    prepared the specifications, it is recommended you try to ensure
    there are no conflict of interest situations existing (e.g., the
    recommended firm is wholly‑owned subsidiary of the specification
    preparer) or that the specifications are not drafted in such a
    manner as the only product that will meet the specification
    requirement is the product of the firm they want added to the list.
    Don\'t let this caveat discourage your solicitation of
    recommendations from that consultant (they are a very good source),
    just be sensitive to the firms provided.

[^139]: \- While the IFB requirements of  9.c.(2) are good practices
    for both IFBs and RFPs, the evaluation criteria requirement of §
    9.d.(1) is relevant only to RFPs and is discussed in Section 4.5.1,
    \"Solicitation & Receipt of Proposals.\"

[^140]: \- As a matter of information only, reference is made to the FAR
    § 14.201‑1 and 15.406‑1 for the \"Uniform Contract Format\" and FAR
    § 14.201‑9 for the \"Simplified Contract Format\" used in bidding
    fixed price contracts. These are optional formats used by Federal
    departments which include a good discussion of what is included in
    those formats and why.

[^141]: \- A very helpful item to include with your solicitation package
    is an address label which includes the exact address you want offers
    mailed to and a separate address label which includes your street
    address and room number for offers that are delivered to you. With
    these labels, offerors can affix the applicable one to their offer
    and you will be assured it is coming to the right place. It is also
    a good idea for you to include the solicitation number on the labels
    which is of aid to your mailroom and your staff responsible for
    receipt of offers.

[^142]: \- These representations and certifications have legal
    significance that should not be overlooked by either the offeror or
    the agency. The offeror certifies, for instance, that it is not
    presently debarred or suspended by any federal agency. The
    contracting officer can rely on that certification and does not have
    to \"look behind it\" in determining the firm\'s responsibility. If
    it is later discovered that the firm was in fact debarred by a
    federal agency, it has made a false certification. There are
    administrative sanctions that can be imposed (contract terminated
    for default) and possible criminal sanctions under either federal or
    state laws (or both) for submitting a false statement.

[^143]: \- This certification is discussed in more detail in Section
    4.3.3.2.3, \"Lobbying Certification.\"

[^144]: \- This certification is discussed in more detail in Section
    4.3.3.2.1, \"Certification Regarding Debarment, Suspension, and
    Other Responsibility Matters.\"

[^145]: \- This certification is discussed in more detail in Section
    4.3.3.2.2, \"Buy America Certification.\"

[^146]: \- FAR Part 15.201(f), for example, requires the CO to make
    available to "all potential offerors," upon request, any information
    distributed at a pre-solicitation conference. The clear presumption
    of the FAR is that "potential offerors" may not be (and need not be)
    present at the conference.

[^147]: \- If you cannot identify who the offeror is in this situation
    without opening the bid or proposal, it is recommended that you open
    it in the presence of a witness. Write down the name and address of
    the offeror only, and reseal the envelope or package. Return it to
    the offeror with a cover letter that the package was opened only so
    the offeror could be identified. It is also recommended that a
    memorandum to the file be made by you and your witness describing
    what happened and why. You might want to copy the outside of the
    envelope to show no identification but it is recommended that no
    copies be made of any of the offer documentation.

[^148]: \- *See* Section 9.2, \"Changes\" for a more general discussion
    of the costs of changes.

[^149]: \- *See* also the discussion of timeliness in Section 4.4.2,
    \"Bid Opening.\"

[^150]: \- As a matter of reference, your attention is invited to FAR §
    52.214‑7 and 52.215‑10 for language addressing late submissions,
    modifications, and withdrawals of offers that is incorporated in
    FAR‑covered solicitations for IFBs and RFPs respectively. For
    commentary in the FAR itself relating to those solicitation clauses,
    *see* FAR § 14.304 and 15.412 respectively. Primarily because of the
    body of law that has developed interpreting these clauses, many
    transit properties have either adopted this language or have
    modified it slightly to meet their individual requirements.

[^151]: \- Some practitioners erroneously refer to the consequences of a
    late offer as one of \"non‑responsiveness.\" In fact, you never open
    the offer (unless needed to for identification purposes) and thus
    cannot determine whether it is responsive to the material
    requirements of the solicitation (the general definition of
    responsiveness). Had the offer been received on time, it may well
    have been responsive but, in this case, the offer is not even
    considered!

[^152]: \- These requirements and applicable clauses are discussed in
    depth in Chapter 8.

[^153]: \- *See* also Chapter 8*,* \"Contract Clauses,\" and Appendix
    A.1, \"Federally Required Model Clauses.\"

[^154]: \- 49 CFR Part 29, \"Debarment and Suspension (Nonprocurement)
    and Governmentwide Requirements for Drug‑Free Workplace (Grants).\"

[^155]: \- \"*Debarment*. An action taken by a debarring official in
    accordance with these regulations to exclude a person from
    participating in covered transactions. A person so excluded is
    \'debarred\'.\" 49 CFR § 29.105.

[^156]: \- \"*Suspension*. An action taken by a suspending official in
    accordance with these regulations that immediately excludes a person
    from participating in covered transactions for a temporary period,
    pending completion of an investigation and such legal, debarment, or
    Program Fraud Civil Remedies Act proceedings as may ensue. A person
    so excluded is \'suspended\'.\" 49 CFR § 29.105.

[^157]: \- 49 CFR § 29.115(b).

[^158]: \- 49 CFR § 29.115(a).

[^159]: \- *See* § 3b of the Master Agreement, Form FTA MA(12).

[^160]: \- Because it is discussed as an aspect of responsibility, and
    can be objectively determined at any time up to the time of award,
    late submission of the debarment certification can be permitted.

[^161]: \- You may subscribe by writing the Superintendent of Documents,
    U.S. Government Printing Office, Washington, DC 20402 or by calling
    the Government Printing Office Inquiry and Order Desk at (202)
    783‑3238.

[^162]: \- The list can be accessed 7 days a week, 24 hours per day and
    aside from normal costs of local or long‑distance telephone calls,
    the access is free to the user. To obtain a copy of the user\'s
    manual for accessing the system, contact GSA at (202) 501‑4740.

[^163]: \- GSA advises that responses to these inquiries should be
    furnished within one working day.

[^164]: \- *See* § 3b of the Master Agreement, Form FTA MA(12).

[^165]: \- The text of the regulation refers to Part 25.108, but this
    section has been moved to Part 25.104.

[^166]: \- The payment to any \"person\" to influence or attempt to
    influence an officer or employee of any federal department or
    agency, a member of Congress, an officer or employee of Congress, or
    an employee of a member of Congress in connection with the awarding
    of any federal contract, the making of any Federal grant, the making
    of any federal loan, the entering into of any cooperative agreement,
    and the extension, continuation, renewal, amendment, or modification
    of any federal contract, grant, loan, or cooperative agreement. 49
    CFR § 20.100(a).

[^167]: \- Because the language of the regulations refers to needing the
    certification and applicable disclosures at time of award, unless
    your solicitation specified otherwise, failure to submit the
    executed certification with the offer would probably not be
    considered a responsiveness issue in a competitive bidding
    procurement, and would not disqualify the offer.

[^168]: \- The \"Lobbying Disclosure Act of 1995\" (Pub. L. 104‑65) made
    some amendments to 31U.S.C. § 1352, which simplified the information
    that needed to be disclosed on this Form. Those changes are detailed
    at 61 *Fed. Reg.* 1412 (January 19, 1996) and will be eventually
    incorporated into a new Standard Form. Three items of the SF‑LLL are
    impacted: Item 10a is amended by revising \"Name and Address of
    Lobbying Entity\" to read \"Name and Address of Lobbying
    Registrant\"; in Item 10, the statement \"(attach Continuation
    Sheet(s) SF‑LLL‑A, if necessary)\" is removed; and Items 11 through
    15 are removed.

[^169]: \- *See* discussion at Section 4.3.2.5, \"Amendment of
    Solicitations.\"

[^170]: \- *See* discussion at Section 4.3.2.3, \"Solicitation.\"

[^171]: \- The requirements of § 15.m of the Master Agreement mirror
    those of § 11 of FTA Circular 4220.1E and refer the grantee to the
    provisions of 49 CFR § 18.36(h).

[^172]: \- *See* Section 6.1, \"Construction.\"

[^173]: \- *See* Section 6.2, \"Equipment and Supplies.\"

[^174]: \- *See* Section 6.3 \"Rolling Stock.\"

[^175]: \- *See* discussion in Section 4.5.4, \"Discussions and
    Clarifications.\"

[^176]: \- As an example of how these and other situations have been
    addressed in the federal environment, *see* FAR § 28.101‑4.

[^177]: \- *See* Chapter 3*,* \"Specification\" for guidance on
    specification development.

[^178]: \- *See* Section 2.4.2.1, \"Full and Open Competition
    Principle,\" for a discussion of full and open competition and the
    effect of restraints on competition.

[^179]: \- *See* discussion of advertisement and publicizing invitations
    in Section 4.3.2.1, \"Advertising and Publicizing Solicitation.\"

[^180]: \- One instance requiring discussion is the evaluation of
    apparent errors; *see* Section 4.4.5, \"Bid Mistakes.\"

[^181]: \- *See* discussion in Section 4.4.3, \"Responsive Bidder.\"

[^182]: \- As stated in the Requirements discussion, discounts, such as
    prompt payment discounts, should only be used in the calculation of
    low bid if the history within your agency indicates discounts
    offered are usually taken advantage of.

[^183]: \- FTA Circular 4220.1E § 9.c.(2)(c).

[^184]: \- You should understand that if an unsuccessful bidder
    discovers an error, they will likely file a protest (or formal
    query) almost immediately. It is very important, therefore, that you
    proceed very carefully. Some procedures, to discourage false hopes
    and resulting arguments, prohibit the reading of bids that are
    clearly defective (e.g., missing bid guaranty).

[^185]: \- *See* the extensive discussion of this in Section 4.3.3.1,
    \"Receipt of Offers,\" where we addressed the considerations that
    are typically weighed when policies are adopted concerning the
    receipt of offers. The FAR provision typically used as a \"model\"
    is FAR § 52.214‑7.

[^186]: \- *See, e.g., J. C. Kimberly Co.*, Comp. Gen. B‑255018.2, 94‑1
    CPD 182 79 (A bid that was hand carried to the bid opening room
    seconds after the bid opening officer declared that time had arrived
    was properly rejected as late.) One of the exceptions addressed in
    FAR §52.214‑7 and elaborated upon in FAR § 14.304‑1(a)(2) addresses
    the situation when late receipt of the bid is due solely to
    mishandling by the agency after receipt at the agency location.

[^187]: \- *Id.* *See also, Swinerton & Walberg Co.*, Comp. Gen.
    B‑242077.3, 91‑1 CPD 318.

[^188]: \- This paragraph was changed from prior versions of the
    circular to eliminate the phrase "or acceptance" of a single
    proposal when discussing what constitutes a sole source procurement.
    FTA believes that, upon receiving a single bid (or proposal) in
    response to a solicitation, the grantee should determine if
    competition was adequate. This determination may include a review of
    the specifications to determine if they were unduly restrictive or
    contacting sources that chose not to submit a bid or solicitation.
    It is only if the grantee determines that competition was inadequate
    that the procurement should proceed as a sole source procurement.
    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.

[^189]: \- Section 5.2 - *Cost and Price Analysis* discusses various
    price analysis techniques, and they include (among others)
    comparison to previous purchases, comparison to a valid grantee
    independent cost estimate, and value analysis.

[^190]: \- You may have, for example, data from previous purchases, an
    independent cost estimate, etc. with which to compare the bid price,
    but not have a "catalogue or market price of a product sole in
    substantial quantities to the general public' as required by
    paragraph 10.a of the Circular.

[^191]: \- \"Bid responsiveness involves the question of whether the bid
    as submitted, represents an unequivocal offer to do exactly what the
    government has specified, so that acceptance of the bid will bind
    the contractor to meet the government\'s requirements in all
    material aspects.\" *Hankins Lumber Co.*, Comp. Gen. B‑248101, 92‑2
    CPD ;50.

[^192]: \- FAR § 14.301(a).

[^193]: \- FAR § 14.404‑2.

[^194]: \- *Northwestern Motor Co.*, Comp. Gen. B‑244334, 91‑2 CPD 249.

[^195]: \- *Record Press, Inc.*, Comp. Gen. B‑229570.2, 88‑1 CPD 161.

[^196]: \- 49 CFR § 661.13(b) provides: The grantee shall include in its
    bid specification for procurement within the scope of these
    regulations an appropriate notice of the Buy America provision. Such
    specifications shall require, [as a condition of
    responsiveness]{.underline}, that the bidder or offeror submit with
    the bid a completed Buy America certificate in accordance with §
    661.6 or § 661.12 of this part, as appropriate. (emphasis added)

[^197]: \- The Comptroller General, in *Staples‑Hutchinson & Associates,
    Inc.*, Comp. Gen. B‑245007, 91‑2 CPD 491 stated: Whereas bid
    responsiveness concerns whether the bid itself as of the time of bid
    opening unequivocally offers to perform in accordance with all
    material terms and conditions of the solicitation, responsibility
    refers to a bidder\'s ability to perform the contract requirements
    and is determined not at bid opening but at any time prior to award
    based on information received by the agency up to that time.

[^198]: \- *EDT Construction, Inc., et al.*, Comp. Gen. B‑240343, 91‑1
    CPD 374.

[^199]: \- Although unusual, it is possible that before the time and
    date set for receipt of bids, a bidder may discover a mistake in a
    bid it has already submitted to you. If you have included a clause
    in the solicitation (or adopted a policy) as suggested in our
    earlier discussion on \"Receipt of Offers\" (*see* Section 4.3.3.1)
    and the problems with late submissions, modifications and
    withdrawals of offers, they should be followed. Essentially, the
    bidder is advised that modification of its bid would be treated the
    same as the original bid ‑‑ must be received timely and should
    clearly identify the bid it is modifying.

[^200]: \- *See* FAR § 14.406.

[^201]: \- *See* § R3‑202.13 (Mistakes in Bid), *Recommended
    Regulations* approved August 2, 1980, implementing *The Model
    Procurement Code for State and Local Governments*, approved by the
    American Bar Association on February 13, 1979 (hereinafter referred
    to as the *Recommended Regulations*).

[^202]: \- For instance, Amendment Number 1 to the solicitation changed
    the quantities for line item 4 on the Schedule from 5 to 12. The bid
    included a Schedule that showed the quantity for line item 4 to be
    12. No other amendments were issued and the bidder did not formally
    acknowledge Amendment No. 1. There was no way it could have used the
    correct Schedule page unless it had received the Amendment ‑‑ clear
    from the bid that it received Amendment No. 1.

[^203]: \- *See* discussion at Section 4.3.3.2, \"Federally Required
    Submissions with Offers.\"

[^204]: \- The *Recommended Regulations* to the *Model Procurement Code*
    \[at § R3‑202.13.4(b)\] refers to this type of mistake as \"mistakes
    where intended correct bid is evident.\" The mistake and the
    intended bid are clearly evident on the face of the bid document.

[^205]: \- The *Recommended Regulations* to the *Model Procurement Code*
    \[at § R3‑202.13.4(c)\] refers to this type of mistake as \"mistakes
    where intended correct bid is not evident.\"

[^206]: \- You should consider all the long run costs of forcing the
    bidder to perform unwillingly.

[^207]: \- For an extended treatment of this topic (and also as the
    source for most policies of transit properties on the matter), it is
    recommended that you review FAR § 14.406‑4 and the *Recommended
    Regulations* at § R3‑202.13.5.

[^208]: \- *See* FAR § 14.406‑4(e) for recommended procedures to follow
    in the event this type of mistake has been alleged or disclosed.

[^209]: \- This is the position taken in the *Recommended Regulations*
    at § R3‑202.13.5.

[^210]: \- *See* FAR § 14.604‑4(a) and (b).

[^211]: \- FAR § 52.214‑15.

[^212]: \- *W. A. Scott v. United States*, 44 C.Cl. 524, 527 (1909).

[^213]: \- *See, e.g.*, § 2.205 of the *Texas Business and Commerce
    Code* which provides: § 2.205. Firm Offers.

    An offer by a merchant to buy or sell goods in a signed writing
    which by its terms gives assurance that it will be held open is not
    revocable, for lack of consideration, during the time stated or if
    no time is stated for a reasonable time, but in no event may such
    period of irrevocability exceed three months; but any such term of
    assurance on a form supplied by the offeree must be separately
    signed by the offeror.

[^214]: \- *Nation‑Wide Reporting and Convention Coverage*, GSBCA No.
    8309, 88‑2 BCA 20,521 at 103,741.

[^215]: \- FTA Circular 4220.1E § 9.d.(1).

[^216]: \- FTA Circular 4220.1E § 9.d.(1).

[^217]: \- FTA Circular 4220.1E § 9.d.(2).

[^218]: \- FTA Circular 4220.1E § 7.h.

[^219]: \- FTA Circular 4220.1E § 9.d.(4).

[^220]: \- FTA Circular 4220.1E § 9.e.

[^221]: \- Sub-paragraph (5), like paragraph 6.g., recognizes the
    concept of *best value*. Once again, FTA does not wish to dictate
    any particular factors or analytic process. Solicitations must, of
    course, tell potential competitors for the contract what the basis
    for award will be.

[^222]: \- FTA Circular 4220.1E § 9.e.

[^223]: This new definition was intended to recognize the concept of
    best value. The language is intended neither to limit nor dictate
    qualitative measures grantees may employ.

[^224]: \- Federal Register Vol. 62, No. 189, Sept. 30, 1997.

[^225]: \- FAR Part 15 was reissued by Federal Acquisition Circular
    (FAC) 97-02 dated October 10, 1997.

[^226]: \- The FAR now sees lowest price technically acceptable proposal
    selection as one end of the best value spectrum but we have
    distinguished it from best value for clarity of discussion purposes.

[^227]: \- FAR Subpart 15.101 -- *Best Value Continuum*.

[^228]: \- See Section 6.5 -- *Architect-Engineering Services*.

[^229]: New York City Transit -- for more information call Mr. William
    DeSantis at 718-694-4339.

[^230]: \- FTA Circular 4220.1E § 9.d.(3).

[^231]: \- *See* discussion in Section 4.5.4, \"Discussions and
    Clarifications.\"

[^232]: \- *See* discussion in Section 4.5.3, \"Competitive Range.\"

[^233]: \- Multiple rounds of best and finals tend to create suspicion
    in the minds of offerors about what the motive is for the subsequent
    requests, particularly if does not appear that negotiations are
    being reopened for a discussion of substantive matters. The
    preparation of proposals can be a very time‑consuming and expensive
    process and it is possible that, for one of these or some other
    reason, an offeror may decide not to submit a response to a 3rd or
    4th request for a best and final offer. Also, if you make a practice
    of multiple BAFOs, you may not receive \"best\" offers in the first
    round during future procurements.

[^234]: \- FTA Circular 4220.1E § 7.h.

[^235]: \- FTA Circular 4220.1E § 9.d.(4).

[^236]: \- A very significant caveat must be issued at this time. If
    your governing body (city council, county commissioners, board of
    directors, etc.) has reserved unto itself the sole authority to
    reject bids for whatever reason, you, as the procurement official,
    have no authority to make that final determination and notify the
    bidder until your governing body has concurred with your
    recommendation.

[^237]: \- *See* Section 4.5.2, \"Evaluation of Proposals.\"

[^238]: \- *See, e.g.*, FTA Circular 4220.1E § 8.a.: \"All procurement
    transactions will be conducted in a manner providing full and open
    competition.\"

[^239]: \- *See* discussion of small purchase procedures in Section 4.2,
    \"Small Purchases.\"

[^240]: \- *See* discussion of sealed bidding procedures in Sections 4.3
    and 4.4.

[^241]: \- *See* discussion of competitive proposals in Sections 4.3 and
    4.5.

[^242]: \- *See* discussion of the submission of cost and pricing data
    in Section 5.2, \"Cost and Price Analysis.\"

[^243]: \- *See* discussion of negotiations under competitive proposal
    method at Section 4.5.2, \"Evaluation of Proposals.\"

[^244]: \- FTA Circular 4220.1E § 9.h.(1)(e).

[^245]: \- 49 U.S.C. § 5307(a)(1).

[^246]: \- This is also the position taken in the FAR § 14.502.

[^247]: \- *See* discussion at Section 4.4.1, \"Solicitation.\"

[^248]: \- One variation that could be used if time is particularly
    tight, would be to ask, as part of Phase One, that the bidders
    include a sealed bid in a separate envelope that would only be
    opened in the event the technical offer was considered acceptable.
    This creates some additional security on the part of the procurement
    staff because you would want to ensure that the technical
    acceptability determination was made without knowledge of the prices
    for the different offers.

[^249]: \- *See* Section 4.3.2.5, \"Amendment of Solicitation.\"

[^250]: \- If, in the opinion of the Contracting Officer, a contemplated
    amendment would significantly change the nature of the procurement
    to the extent that other entities (who did not submit unpriced
    technical offers) would likely become a proposed offeror as a result
    of the amendment, consideration should be given to canceling the
    solicitation and issue a new solicitation.

[^251]: \- Documentation of an unacceptable finding cannot be over
    stressed. Disputes over this determination are the most common area
    of bid protest in the multi‑step process.

[^252]: \- Codified at 40 U.S.C. § 481(b).

[^253]: \- Public Law 104‑106, § 4309, 110 Stat. 186, 670 (1996).

[^254]: \- *See, e.g.*, Chapter 741, Texas Government Code, V.T.C.A.

[^255]: \- *See, e.g.*, Chapter 791, Texas Government Code, V.T.C.A.

[^256]: \- FTA Circular 4220.1E § 7.e.

[^257]: \- FTA Circular 4220.1E § 4.

[^258]: \- Navy can be contacted by phone at (215) 697-2850. Navy web
    site info for reverse auctions is:
    [http://www.abm.rda.hq.navy.mil/navyaos/acquisition_topics/contracting\_/reverse_auctioning/reverse_auctioning](../%20http://www.abm.rda.hq.navy.mil/navyaos/acquisition_topics/contracting_/reverse_auctioning/reverse_auctioning).

[^259]: \- Army Source Selection Guide, June 2001, may be found at:
    <http://www.amc.army.mil/amc/rda/rda-ap/docs/assg-2001.pdf>. Click
    on Appendix I for information on On-Line Reverse Auctions.

[^260]: \- Contact Mr. Geoff Gauger at Treasury for additional
    information: (202) 622-0203.

[^261]: \- *Electronic Bazaar -- Reverse Auctions Save Buyers Time,
    Money* by Geoff Gauger. Federal Times, November 4, 2002. This
    article may be accessed at:
    <http://federaltimes.com/index.php?S=1264522>

[^262]: \-
    <http://www.gsa.gov/Portal/gsa/ep/contentView.do?contentType=GSA_OVERVIEW&contentId=10655>

[^263]: \- Grantees are not required to follow the FAR. However, they
    are required to follow FTA Circular 4220.1E, which would apply to
    procurements using reverse auctions.

[^264]: \- <http://www.firstgov.gov/index.shtml>.

[^265]: \- T*he Strategic Need for Real-Time Competitive Bidding in the
    Public Sector Procurement Process*, by David C. Wyld and Randall P.
    Settoon, September 2002, p.18. This paper may be accessed at:
    <http://learningcenter.ariba.com/wp_resource.cfm>.

[^266]: \- *Reverse Auctions* -- *Strategies and Lessons Learned from a
    Successful Implementation* by Gillian Verga, Jan 2002. This article
    may be accessed at: [www.apics.org](http://www.apics.org/).

[^267]: *- When to Use an Auction* by Ed Goetting, September 4, 2002.
    This article may be accessed at:
    [www.line56.com/print/default.asp?ArticleID=3983](http://www.line56.com/print/default.asp?ArticleID=3983)

[^268]: \- For information re LAMTA call the Director of Purchasing at
    213-922-7210.

[^269]: \- For information about SEPTA's pilot program, call
    215-580-8251.

[^270]: \- For information about Houston MTA, call Paul Como at:
    713-739-4803.

[^271]: \- If Federal funds are not involved check local and state laws
    to determine whether a contractor that has been debarred by an
    agency of the Federal government may be considered \"responsible.\"

[^272]: \- Normally, the prime contractor is responsible for determining
    the responsibility of its subcontractors. However, as indicated in
    FAR  9.104-4, it may be necessary for you as the procurement
    official to determine a prospective subcontractor\'s responsibility
    such as when the prospective contract involves urgent requirements
    or substantial subcontracting.

[^273]: \- American Public Transit Association (APTA) *Standard Bus
    Procurement Guidelines*, Section 1.1.4.3.1 *Qualification
    Requirements* (III), January 1997.

[^274]: \- Internet address for Code of Federal Regulations is:
    <http://www.arnet.gov/far/>

[^275]: \- <http://www.acq.osd.mil/dpap/contractpricing/index.htm>

[^276]: \- Contact NTI at (732) 932-1700 or online at
    [www.ntionline.com](http://www.ntionline.com/)

[^277]: \- FTA C4220.1E paragraph 10.d.

[^278]: \- FTA C4220.1E paragraph 10.

[^279]: \- FTA C4220.1E paragraph 7.i.

[^280]: \- APPENDIX C: Negotiation & Documentation.

[^281]: \- FTA C4220.1E paragraph 9.i. (1).

[^282]: \- FTA C4220.1E paragraph 7.i.(2).

[^283]: \- APTA, Standard Bus Procurement Guidelines, January 1997, p.
    30.

[^284]: \- The Federal debriefing procedures may be found in the FAR at
    subpart 15.505 and 15.506.

[^285]: \- As a rule, proposals should not be rejected on the basis of
    past performance information without allowing the proposer an
    opportunity to respond to unfavorable references (from inside or
    outside the agency). To do so would almost certainly be grounds for
    protest.

[^286]: \- If an oral debriefing is conducted, it might be advisable to
    create a transcript to memorialize what was discussed in the
    debriefing in the event there is a protest.

[^287]: \- FTA Circular 4220.1E Paragraph 9.d.(4).

[^288]: \- Metropolitan Transit Authority, Houston, TX. Procurement
    Manual, Exhibit 9, dated August 1, 1994.

[^289]: \- BART Procurement Manual, Rev. 4, dated July 20, 1994, p. 297,
    \"Price Positions.\"

[^290]: \- MTA, Houston, TX, Procurement Manual, Exhibit 10, dated
    August 1, 1994.

[^291]: \- This document may be obtained from FTA, Office of Program
    Management, Engineering and Management Division, TPM-42, at (202)
    366-2440.

[^292]: ^2^ - See *Project and Construction Management Guidelines 1996
    Update*, Section 3.2.2 *Configuration*, Constructability Reviews.

[^293]: ^3^ - Transportation Research Circular Number 483, March 1998.
    Transportation Research Board, National Research Council, National
    Academy of Sciences, 2101 Constitution Avenue, N.W., Washington,
    D.C. 20418.

[^294]: ^4^ - Contact Department Manager-Procurement, BART at (510)
    464-6380.

[^295]: ^5^ - See note 1.

[^296]: ^6^ - Metropolitan Atlanta Rapid Transit Authority (MARTA),
    General Conditions-1988, Clause 49 *Value Engineering Proposals*. To
    discuss MARTA\'s approach, contact Mr. Wayner Crowder, Director of
    Contracts and Procurement, at (404) 848-5587.

[^297]: ^7^ - San Francisco Bay Area Rapid Transit District (BART),
    General Conditions for Construction Contracts, February 1, 1998,
    Clause GC4.8.1 *Application of VECP*. To discuss BART's approach,
    contact Department Manager - Procurement, at (510) 464-6380.

[^298]: [http://construction-institute.org](http://construction-institute.org/).

[^299]: New York City Transit. Contact Ms. Judi Gibson, Assistant Chief
    Procurement Officer \-- Engineering, Construction & Capital Division
    of Materiel at (718) 694-4113.

[^300]: \- See note 11.

[^301]: \- For information, contact the Purchasing Section Manager at
    (847) 228-3573.

[^302]: \- For information about New York City's leasing of cranes with
    operators contact Stan Grill at (718) 694-4350.

[^303]: \- MTA, Houston, TX. Contact Don Murphy at (713) 739-4843 or
    Paul Como at (713) 739-4803.

[^304]: \- American Public Transit Association, 1201 New York Avenue,
    N.W., Suite 400, Washington, D.C. 20005-6141. Copies may be ordered
    by phone at (202) 898-4089. Technical questions may be answered at
    (202) 898-4087.

[^305]: \- MARTA Rail Car procurement, contact Mr. Robert June, Acting
    Director of Systems Engineering, at (404) 870-3203.

[^306]: \- Sub-paragraph (1) looks primarily to State government
    contracts that allow subordinate government agencies to buy from
    established schedules akin to the GSA Schedules in Federal practice.
    FTA believes grantees may buy through these contracts provided all
    parties agree to append the required Federal clauses in the purchase
    order or other document that effects the grantee's procurement. When
    buying from these schedule contracts, grantees should obtain Buy
    America certification before entering into the purchase order. Where
    the product to be purchased is Buy America compliant, there is no
    problem. Where the product is not Buy America compliant, the grantee
    will still have to obtain a waiver from FTA before proceeding.

[^307]: \- Sub-paragraph (2) reflects FTA's belief that grantees should
    consider combining efforts in their procurements 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 grantee's requirements. Joint
    procurements are considered superior to the practice of
    "piggybacking" since "piggybacking" does not combine buying power at
    the pricing stage and may limit a grantee's choices to those
    products excess to another grantee's needs.

[^308]: \- Sub-paragraph (3) reflects grantees' continuing ability to
    assign contractual rights to others -- "piggybacking." FTA believes
    it is extremely important that grantees ensure they contract only
    for their reasonably anticipated needs and do not add quantities or
    options to contracts solely to allow them to assign these quantities
    or options at a later date.

[^309]: \- NY State DOT (518) 457-8343.

[^310]: \- FTA has introduced a limited definition of "piggybacking"
    and, to differentiate vastly different policies, has separated this
    practice of assigning contractual rights among grantees from joint
    procurements or other intergovernmental agreements. See Circular,
    paragraph 7.e.

[^311]: \- FTA has similarly attempted to limit the definition of
    "tag-on" and align it with the concept of a "cardinal change" or
    "out-of-scope change." FTA believes that earlier attempts to
    categorize virtually any change in quantity, for example, as a
    forbidden "tag-on," failed to account for the realities of the
    marketplace and unnecessarily limited grantees from exercising
    reasonable freedom to make those minor adjustments "fairly and
    reasonably within the contemplation of the parties when the contract
    was entered into." *Freund v. United States*, 260 U.S. 60 (1922).

    In applying the concept of "cardinal change" to third party
    contracts, FTA recognizes that this is a difficult concept, not
    easily reduced to a percentage, dollar value, number of changes, or
    other objective measure that would apply to all cases. FTA also
    recognizes that the various Boards of Contract Appeals, Federal
    courts, and Comptroller General have wrestled with these issues over
    many years and built an extensive array of case law differentiating
    in-scope from out-of-scope or cardinal changes. FTA does not imply
    that the Board of Contract Appeals cases are controlling, only that
    they will look to their collective wisdom in judging where changes
    in grantee contracts fall along the broad spectrum between clearly
    in-scope and clearly out-of-scope changes. It is FTA's intent to
    monitor its grantees and oversight contractors to ensure this
    concept is well understood and uniformly applied, and to issue
    additional guidance as necessary to assist grantees in exercising
    this authority.

    Before attempting any change in quantity or major items (e.g.,
    buses, rail cars), grantees should review their contract clauses to
    ensure they allow for such changes. For instance, in Federal
    practice, the "changes" clause from the Federal acquisition
    Regulation has been interpreted not to allow changes in quantity of
    major items. Federal contracting officers use additional clauses
    specific to this desired flexibility when they anticipate that there
    may be a need to add quantities of these major items.

[^312]: \- *Conducting Pre-Award and Post-Delivery Reviews for Bus
    Procurements*. Document No: FTA DC -90-7713-93-1, Rev. B, dated May
    1, 1995. *Conducting Pre-Award and Post-Delivery Reviews for Rail
    Vehicle Procurements*. Document No: FTA DC-90-7713-94-1, Rev. B,
    dated May 1, 1995. These documents may be obtained from FTA, Office
    of Program Management at 202-366-4020 or by e-mail at
    <buyamerica@fta.dot.gov>.

    The FTA Office of Chief Counsel website address for Buy America
    matters is:
    <http://www.fta.dot.gov/legal/buy_america/14328_ENG_HTML.htm>.

[^313]: \- FTA C 9030.1C, Chapter III, paragraph 4.c.

[^314]: \- FTA C 9030.1C, Chapter V, paragraph 9.b.3.

[^315]: \- C5010.1C in Chapter II Management of Real Property, Equipment
    and Supplies, Subsection 3.e(6).

[^316]: \- See generally Federal Acquisition regulations at 48 CFR
    Subpart 46.7 - Warranties.

[^317]: \- 48 CFR Subpart 46.7 - Warranties.

[^318]: \- May be accessed at:
    <http://www.fta.dot.gov/legal/guidance/circulars/9000/433_1152_ENG_HTML.htm>.

[^319]: \- To order this book, call APTA at (202) 496-4800. Document is
    also available via Internet at:
    <http://www.apta.com/info/online/index.htm>.

[^320]: \- Texas Government Code, Section 2254.002.

[^321]: \- Texas Government Code, Section 2254.003(a).

[^322]: \- Texas Government Code, Section 2254.004.

[^323]: \- Texas Government Code, Section 2254.005.

[^324]: \- FTA has expanded this section to better explain the breadth
    of this statutorily prescribed procurement method. FTA recognizes
    that most of the services listed (e.g., surveying) are not performed
    by architectural or engineering services companies.
    Qualifications-based competitive proposals (i.e., Brooks Act
    procedures) still must be applied to these procurements because of
    the statutory directive in 49 U.S.C. § 5325(b).

[^325]: \- If a project is jointly funded with FTA and FHWA grant funds,
    grantees should seek the advice of counsel since the FHWA and FTA
    statutes differ in when and how the Federal requirements defer to
    state laws.

[^326]: \- FTA added this paragraph to explain the requirements that
    apply to design-build procurements because they involve significant
    architectural, engineering, or other services that normally require
    qualifications-based competitive proposals but also include
    significant work that does not require this extraordinary
    procurement method. Grantees should determine which portion of the
    work is predominant and follow the method for that type of
    procurement. It would normally be expected that the construction
    portion of a design-build procurement would be predominant and, in
    that case, normal procurement methods can be used in lieu of
    qualifications-based competitive proposals (the Brooks Act method).

[^327]: \- Letter from G. B. McBride to New York MTA, dated Feb 2, 2001.
    The issues addressed in this letter may be found on the FTA HelpLine
    (http://www.fta.dot.gov/ftahelpline) under the Frequently Asked
    Questions tab (see Architect & Engineering Contracts).

[^328]: 49 USC 5325(b) demands that Brooks act procedures be used for
    these services even though they are not routinely done by A&E firms
    (e.g., surveying) and do not require licensed architects or
    engineers.

[^329]: \- The Transportation Equity Act for the 21st Century (TEA-21)
    imposed regulations affecting the administration of contracts
    awarded by grantees for architectural and engineering services. The
    regulations affecting the Federal Highway Administration (FHWA) may
    be found in 23 U.S.C. § 112 and the corresponding regulations for
    FTA grantees may be found in 49 U.S.C. § 5325(b). FHWA implemented
    the TEA-21 requirements its final rule, \"Administration of
    Engineering and Design Related Services Contracts,\" dated June 12,
    2002
    (<http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=2002_register&docid=02-14751-filed>).
    This final rule had been preceded by a Notice of Proposed
    Rulemaking, \"Administration of Engineering and Design Related
    Services Contracts\" published in 65 FR 44486, July 18, 2000
    (<http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=2000_register&docid=00-17774-filed>).
    Because the language in FTA\'s section of the Code was substantially
    similar to that of FHWA, FTA\'s Office of Chief Counsel has
    interpreted the language of 49 U.S.C. § 5325(b) in a manner that is
    consistent with the provisions adopted by FHWA in its Notice of
    Proposed Rulemaking and its final rule. There are several important
    aspects of these contracting requirements that affect the grantee\'s
    administration of A&E contracts:

[^330]: \- FAR 53.301-330.

[^331]: \- FAR 53.301-330.

[^332]: \- Grantees should consider using a two-step procedure in order
    to narrow the number of firms allowed to submit design proposals (to
    those with a realistic chance of success) and thus to control the
    cost to the grantee. Step one might be based on qualifications
    statements such as are normally used to select A&E firms, from which
    a limited number of firms would be selected and requested to submit
    design proposals in step two.

[^333]: \- For additional information, contact Ms. Ann Geter, Central
    Ohio Transit Authority, at 614-275-5903.

[^334]: \- For an example of a grantee\'s third-party contract
    *Insurance Specifications*, contact Mr. Harry Hower, Manager of
    Insurance, MARTA, at (404) 848-4504.

[^335]: \- See footnote above.

[^336]: \- *Transportation Infrastructure:* *Advantages and
    Disadvantages of Wrap-Up Insurance for Large Construction Projects,*
    B-281480, June 1, 1999. The GAO report may be accessed at
    <http://www.gao.gov/archive/1999/rc99155.pdf>. Orders may also be
    placed by calling (202) 512-6000.

[^337]: \- Some project owners share the insurance rebates with their
    contractors. For example, the Boston Artery project will share 20
    percent of any savings with contractors in the form of safety
    incentive awards.

[^338]: \- GAO also notes that in 1998 an FTA *Transit Construction
    Roundtable* study of 18 members indicated that savings of 28 percent
    were realized by purchasing wrap-up insurance for major projects.

[^339]: \- GAO noted that large labor-intensive projects with
    construction costs between \$50 million and \$100 million would be
    in a better position (i.e., buying power) to obtain wrap-up
    insurance.

[^340]: \- The *Boston Artery* project cited a loss ratio of 23 percent
    compared to a historic national average of about 65 percent for that
    type of project. The *Michigan Blue Water Bridge* project cited a
    loss ratio of 10 percent compared to a national average of 50
    percent for that type of project.

[^341]: \- Workers' compensation insurance pays claimants in case of
    injury, disability, or death of employees resulting from work on the
    job.

[^342]: \- According to a 1997 GSA study of wrap-up insurance, North
    Dakota, Ohio, Washington, West Virginia, and Wyoming have a state
    fund into which all contractors must pay and a project owner cannot
    obtain separate workers' compensation insurance coverage.

[^343]: \- For FTA Region 1 experience with the Central Artery Project
    in Boston (\$11B), contact Mr. Richard Cole at (617) 494-2395.

[^344]: \- Grantees may access this Circular at:
    <http://www.fta.dot.gov/legal/guidance/circulars/9000/433_1313_ENG_HTML.htm>

[^345]: \- These case studies may be found at:
    <http://www.fta.dot.gov/transit_data_info/reports_publications/reports/art_in_transit/2260_ENG_HTML.htm>.

[^346]: \- LAMTA, NYMTA, SEPTA, Metropolitan Council of Minneapolis, MN.

[^347]: \- For further information about this public art program contact
    Mr. David Allen, Metropolitan Council Hiawatha Public Art and Design
    Manager at (612) 215-8221.

[^348]: \- For further information, contact Elizabeth Mintz, Manager of
    SEPTA's Art-In-Transit program, at (215) 580-3633.

[^349]: \- R.S. Means Company, *Square Foot Costs*, 23^rd^ Edition, p.
    438. However, artists may not necessarily base their compensation
    rates on providing the same types of professional design services as
    practiced in an architectural office, but by the track record of
    unique, one-of-a-kind commissions that respond to curatorial forces
    operating in the curatorial world of the gallery, the museum and the
    broader art market.

[^350]: As of January 29, 1999.

[^351]: <http://osdbu.dot.gov/>

[^352]: [http://www.fta.dot.gov/office/civil]{.underline}

[^353]: As of April 1, 1999.

[^354]: \- For an example of a clause, see BART Clause SC7.1.10
    "Ombudsperson." Contact BART at (510) 464-6380.

[^355]: For further information contact Mr. Donald Mayes, Manager, DBE
    Contract Compliance at 312-664-7200, ext. 3519.

[^356]: We would note that five business days to pay subcontractors may
    not be realistic in all cases and could lead to complaints from
    subcontractors that the grantee enforce this timeframe.

[^357]: Other transit agencies have imposed a 30-day requirement for
    payment of retainage.

[^358]: The five-day requirement may not be realistic. Some agencies
    require subcontracts with DBEs within 60 days of contract award if
    the contract term is less than one year, or within 30 days of
    commencement of work for a contract that is for one year or more.
    The commencement of work rather than initial contract award is more
    realistic in the case of multiyear contracts where work may not
    start for another year or so.

[^359]: \- The TVM must certify that it has complied with the DBE goal
    requirements of § 26.49.

[^360]: \- See the APTA *Guidelines* sections 1.1.3.5 for the
    *solicitation provision* and 1.1.5.7 for the DBE *certification.*

[^361]: \- The Internet address for Pro-Net is:
    [http://pro‑net.sba.gov/]().

[^362]: \- Contact King Elliott, Metro-Dade Transit Agency, 111 N.W.
    First St., Suite 910, Miami, FL 33128 at (305) 375-3634.

[^363]: New York City Transit. Contact Stan Grill at (718) 694-4350.

[^364]: 49 CFR § 26.53(b)(3).

[^365]: For further information contact Mr. Donald Mayes, Manager, DBE
    Contract Compliance at 312-664-7200, ext. 3519.

[^366]: \- Paragraph (d).

[^367]: \- For further information contact Mr. Donald Mayes, Manager,
    DBE Contract Compliance at 312-664-7200, ext. 3519.

[^368]: The CTA requirement is more restrictive than the CFR.

[^369]: \- Although the relevance of that law will vary from state to
    state, most individual states will not have interpreted federal
    statutes and clauses and will frequently look to the federal common
    law, as interpreted by the Comptroller General of the United States
    and the various boards and courts, for guidance in interpreting that
    law and those clauses.

[^370]: \- The Model Procurement Code and recommended Regulations may be
    available in your local public library or may be purchased from the
    American Bar Association. It is recommended that you contact the
    following for further information: Member Services, P.O. Box 10892,
    Chicago, Illinois 60612‑0892.

[^371]: \- Act of March 3, 1931, 46 Stat. 1491, as amended; codified at
    40 U.S.C. § 276a et seq.

[^372]: \- For a thorough discussion of the labor standards for
    contracts involving construction, *see* FAR Subpart 22.4.

[^373]: \- See generally, FAR § 22.404‑2(c) for discussion of the
    different types of construction.

[^374]: \- In a *Federal Register* Notice of June 14, 1996, the Chief,
    Branch of Construction Wage Determinations advised that wage
    determinations issued under the Davis‑Bacon and related Acts are
    available electronically by subscription to the FedWorld Bulletin
    Board System of the National Technical Information Service (NTIS) of
    the U.S. Department of Commerce. A telephone contact is (703)
    487‑4630.

[^375]: \- The same Notice advised that hard-copy subscriptions may be
    purchased from the Superintendent of Documents, U.S. Government
    Printing Office, Washington, DC 20402 with a telephone contact at
    (202) 512-1800.

[^376]: \- The cost of the hard‑copy subscription (between \$440 and
    \$830 per volume) is a minuscule investment for your project library
    when considering the contractual impacts of the wage determinations
    which will be discussed below.

[^377]: \- The procedures to be followed in requesting these
    determinations are found in 29 CFR Part 1 and in FAR § 22.404‑3.

[^378]: \- In this case, the grantee has the discretion, depending upon
    the terms of their solicitation documents, to either award to the
    low bidder at the price bid, or to equitably adjust the contract
    price for any increased or decreased cost of performance resulting
    from any changed wage rates.

[^379]: \- Rules relating to expiration of wage determinations are
    discussed in detail at FAR § 22.404‑5.

[^380]: \- If award of the contract is not made within 90 days after bid
    opening, the modification becomes effective unless the Wage and Hour
    Division Administrator extends the 90 day period. If an extension is
    not granted, the modification is treated the same as a new wage
    determination and the same procedures as discussed above apply.

[^381]: \- Rules relating to actions to be taken by the contracting
    officer in the event wage determinations are modified may be found
    in FAR § 22.404‑6.

[^382]: The Miller Act does not apply to grantees. Bonding requirements
    for grantees are prescribed in the common grant rule, 49 CFR
    §18.36(h).

[^383]: The National Association of Surety Bond Producers (NASBP) web
    site address is: [www.nasbp.org](http://www.nasbp.org/).

[^384]: An unforeseen bankruptcy by the contractor is especially
    troublesome, in that the bankruptcy court could freeze the funds
    committed by the LOC, rendering the LOC of no value to the grantee*.
    The grantee must be diligent to monitor the contractor's condition,
    and call the funds under the LOC if financial trouble is expected.
    There is no such danger with surety bonds.*

[^385]: It is not until one goes to the 20% level that premium rates may
    change.

[^386]: This appears to be true for bus manufacturers in the current
    business environment.

[^387]: To locate a state insurance department contact the National
    Association of Insurance Commissioners at
    [www.naic.org](http://www.naic.org/). See also the U.S. Treasury
    List at
    [www.fms.treas.gov/c570/index.html](http://www.fms.treas.gov/c570/index.html)

[^388]: The Treasury List may be downloaded on the Internet at
    [www.fms.treas.gov/c570/index.html](http://www.fms.treas.gov/c570/index.html).
    The Treasury List identifies the various states where the listed
    bonding companies are licensed and the state insurance departments
    with their phone numbers.

[^389]: For more information about the SAA's Model Contractor
    Development Program, contact the Surety Association of America at
    202-463-0600 or their Web site:
    [www.surety.org](http://www.surety.org/).

[^390]: For this and other materials, contact the Surety Information
    Office at 202-686-7463 or their Web site:
    [www.sio.org](http://www.sio.org/).

[^391]: Information and prices are available at
    [www.ambest.com](http://www.ambest.com/).

[^392]: [www.dunandbradstreet.com/us](http://www.dunandbradstreet.com/us).

[^393]: [www.fitchratings.com](http://www.fitchratings.com/).

[^394]: [www.moodys.com](http://www.moodys.com/).

[^395]: <http://www2.standardandpoors.com/servlet/Satellite?pagename=sp/Page/HomePg>.

[^396]: [www.weissratings.com](http://www.weissratings.com/).

[^397]: The language in this section has been amended from prior
    versions of the circular to better explain that FTA will accept a
    local bonding policy that meets the minimums of paragraphs a, b, and
    c but that a policy that does not meet these minimums still may be
    accepted where the local policy adequately protects the Federal
    interest. Grantees who wish to adopt less stringent bonding
    requirements generally, for a specific class of projects, or for a
    particular project may submit the policy and rationale to their
    regional office for approval.

[^398]: See FTA Dear Colleague Letter C-01-04, dated Jan. 20, 2004 --
    *Performance and Payment Bonding Requirements.*

[^399]: Transit agencies procuring rolling stock tend to ask for ten
    year warranties on parts.

[^400]: At [www.surety.org](http://www.surety.org/), click on "About the
    Industry," then "Bond Authenticity Program."

[^401]: A *conditional letter of credit* may require some burden of
    proof by the owner that the contractor has failed to perform before
    the bank will pay on the letter of credit. Most letters of credit
    are *irrevocable*, which means that both parties must agree to any
    changes to the letter of credit. Changes must be documented by an
    amendment signed by both parties.

[^402]: See BPPM Sections 2.4.4.2 -- *Advance Payments* and 2.4.4.3 --
    *Progress Payments* where adequate security for these payments is
    discussed.

[^403]: \- Bay Area Rapid Transit District (BART) Procurement Manual,
    Rev 4, July 20, 1994, Attachment Y.

[^404]: \- Theon v. United States, 765 F.2d 1110 (Fed. Cir. 1985);
    Central Ohio Bldg. Co., PSBCA 2742, 92-1 BCA ¶ 24,399.

[^405]: \- Electrical Enters., Inc., IBCA 972-9-72, 74-1 BCA ¶ 10,400.

[^406]: \- American Public Transit Association, 1201 New York Avenue, N.
    W., Suite 400, Washington, D. C. - *Standard Bus Procurement
    Guidelines* § 2.2.6.1, January 1997. Phone: (202) 898-4089 to order
    copies.

[^407]: \- Washington Metropolitan Area Transit Authority - *Procurement
    Procedures* *Manual* § 1311.2, Dec. 1994.

[^408]: \- See the discussion of how this publication may be obtained in
    Note 3. under Section 8.1.1.

[^409]: \- Wheeler Bros., ASBCA 20465, 79-1 BCA § 13,642.

[^410]: \- John Cibinic, Jr. and Ralph Nash, Jr. *Administration of
    Government Contracts.* Third Ed. Washington, D.C.: George Washington
    University, 1995.

[^411]: \- See § 7.i., FTA Circular 4220.1E, and discussion in Section
    2.4.1, \"File Documentation.\"

[^412]: \- § 7.k. FTA Circular 4220.1E. See also the discussion of the
    documentation required for the settlement of claims and disputes
    found in Paragraph 7, Chapter I, FTA Circular 5010.1C, \"Grant
    Management Guidelines,\" dated 10/1/98. As appropriate, some of
    these requirements will be discussed later in the \"Best Practices\"
    portion of this section.

[^413]: \- FAR § 42.302.

[^414]: \- It is important that the files stand on their own because at
    the time a matter comes into controversy or at the time of a
    post-contract performance audit or review. The key characters may
    not be available (dead, moved away, terminated from employment,
    etc.) to respond to those issues.

[^415]: \- National Transit Institute, 120 Albany Street, Suite 705, New
    Brunswick, NJ 08901-2163. Phone (732) 932-1700. FAX (732) 932-1707.
    Courses include: *An Effective Change Order Process*, *Management of
    Transit Construction Projects* and *Contract Administration*.

[^416]: \- MPC § R6-101.03 *Changes Clause* (supplies), and § R5-401.03
    *Changes Clause* (construction).

[^417]: \- Freund v. United States, 260 U.S. 60 (1922).

[^418]: \- Aragona Constr. Co. v. United States, 165 Ct. Cl. 382 (1964).

[^419]: \- Air-A-Plane Corp. v. United States, 187 Ct. Cl. 269, 408 F.2d
    1030 (1969).

[^420]: \- See Aragona above.

[^421]: \- Peter Kiewit Sons Co. v. Summit Constr. Co., 422 F.2d 242
    (8th Cir. 1969).

[^422]: \- Atlantic Dry Dock Corp. v. United States, 773 F. Supp. 335
    (M.D. Fla. 1991).

[^423]: \- Neil Gross & Co., 69 Comp. Gen. 247 (B-237434), 90-1 CPD 
    212.

[^424]: \- Coley Properties Corp., PSBCA 291, 75-2 BCA  11,514.

[^425]: \- Reliance Ins. Co. v. United States, 20 Cl. Ct. 715 (1990).

[^426]: \- J.D. Hedin Constr. Co. v. United States, 171 Ct. Cl. 70, 347
    F.2d 235 (1965).

[^427]: \- Liebert Corp., 70 Comp. Gen. 448 (B-232234.5), 91-1 CPD 
    413.

[^428]: \- American Air Filter Co., 78-1 CPD 136.

[^429]: \- MPC R5-401.03 *Changes Clause*.

[^430]: \- A-66501, 15 Comp. Gen. 573 (1935); B-95069, 30 Comp. Gen. 34
    (1950).

[^431]: \- Saddler v. U.S., 287 F. 2d 411 (Ct. Cl. 1961).

[^432]: \- General Contracting & Constr. Co. v. U.S., 84 Ct. Cl. 570
    (1937); McMasters v. State, 15 N.E. 417 (N.Y. 1888).

[^433]: \- ABA Model Procurement Code clause R5-401.06 *Differing Site
    Conditions Clause*. FAR 52.236-2 *Differing Site Conditions.*

[^434]: \- Kenny Constr. Co. v. Metropolitan Sanitary Dist., 309 N.E. 2d
    221 (Ill. 1974).

[^435]: \- Courses of this nature are offered by Management Concepts,
    Inc., the U.S. Agriculture Department, (888) 744-GRAD, and the
    National Transit Institute at Rutgers University, (732) 932-1700.

[^436]: \- FAR 52.236-2 *Differing Site Conditions Clause*, and FAR
    52.243-4 *Changes Clause*.

[^437]: \- FAR 52.242-14.

[^438]: \- Modern Foods, Inc., ASBCA 2090, 57-1 BCA § 1229.

[^439]: \- Noblebrook Contractors, Inc., ASBCA 9736, 1964 BCA § 4283,
    1964 BCA & 4408.

[^440]: \- S.N. Nielsen Co., v. U.S., 141 Ct. Cl. 793 (1958).

[^441]: \- B-E-C-K Christensen Raber-Kief & Assocs., ASBCA 16467, 73-1
    BCA § 9884.

[^442]: \- Gregory & Reilly Assoc., Inc., FAACAP 65-30, 65-2 BCA § 4918.
    Holtzen Constr. Co., AGBCA 413, 75-2 BCA § 11,378.

[^443]: \- Bruce Constr. Corp. v. U.S., 324 F.2d 516 (Ct. Cl. 1963).

[^444]: \- L.G. Lefler, Inc. v. U.S., 6 Cl. Ct. 514 (1984).

[^445]: \- Nager Elec. Co. v. U.S., 442 F.2d 936 (Ct. Cl. 1971). S.W.
    Elecs. & Mfg. Corp. ASBCA 20698, 77-2 BCA § 12,631 (1977), aff'd.,
    655 F.2d 1078 (Ct Cl. 1981).

[^446]: \- Bruce Constr. Corp. v. U.S., 324 F.2d. 516 (Ct Cl. 1963).

[^447]: \- Wunderlich Contracting Co. v. U.S., 351 F.2d 956 (Ct. Cl.
    1965). Turnbull, Inc. v. U.S., 389 F.2d 1007 (Ct. Cl. 1967).

[^448]: \- Paul Hardeman, Inc. v. U.S., 406 F.2d 1357 (Ct. Cl. 1969).

[^449]: \- Clarke Baridon, Inc. v. Meritt-Chapman & Scott Corp., 311
    F.2d 389 (4th Cir. 1962).

[^450]: \- Laburnum Contrs. Corp. v. U.S., 325 F.2d 451 (Ct. Cl. 1963).

[^451]: \- CFR § 18.22 (b).

[^452]: \- FAR 31.105 and FAR 31.2.

[^453]: \- FTA Circular 4220.1E paragraph 10.d.

[^454]: \- This method is named after the landmark 1960 decision in
    Eichleay Corp., ASBCA 5183, 60-2 BCA § 2688, aff'd., 61-1 BCA §
    2894.

[^455]: \- Capital Elec. Co. v. U.S., 729 F.2d 743 (Fed. Cir. 1984).

[^456]: \- The formula as stated in *Construction Contracting*, The
    George Washington University, 1991.

[^457]: \- FTA Circular 4220.1E paragraph 10.e.

[^458]: \- FAR 52.211-18. MPC R5-401.04.

[^459]: \- Brezina Constr., Inc., ENGBCA 3215, 75-1 BCA  10,989.

[^460]: \- Victory Constr. Co. v. U.S., 510 F.2d 1379 (Ct. Cl. 1975).

[^461]: \- Bay Area Rapid Transit District (BART), *General Conditions
    For Construction Contracts*, Articles GC4.5 *Increased or Decreased
    Quantities*, and GC9.3 *Force Account*.

[^462]: \- FAR 52.249-10, *Default (Fixed-Price Construction).*

[^463]: \- Dicon, Inc. v. Marben Corp., 618 F.2d 40 (8th Cir. 1980).

[^464]: \- Southern Flooring & Insulation Co., GSBCA 1360, 1964 BCA 
    4480.

[^465]: \- Kaufman DeDell Printing, Inc., ASBCA 19268, 75-1 BCA 
    11,042.

[^466]: \- Panzieri-Hogan Co. v. Bender, 143 N.E. 739 (N.Y. 1923).

[^467]: \- BART, Clause GC.8.5.1.4 \-- *Anticipated Non-Work Weather
    Days*.

[^468]: \- Peter Kiewit Sons Co. v. Summit Constr. Co., 422 F2d 242 (8th
    Cir. 1969).

[^469]: \- Davho Co., VACAB 1005, 72-2 BCA  9683 at 45,214.

[^470]: \- U.S. ex. Rel. Heller Elec. Co. v. William F. Klingensmith,
    Inc., 670 F2d 1227, 1231 (D.C. Cir. 1982).

[^471]: \- Aetna Casualty & Sur. Co. v. Butte-Meade Sanitary Water
    Dist., 500 F. Supp. 193, 197 (D.S.D. 1980).

[^472]: \- Canon Constr. Corp., ASBCA 16142, 72-1 BCA  8622.

[^473]: \- Contracting & Material Co. v. City of Chicago, 314 N.E. 2d
    598 (Ill App. Ct. 1974).

[^474]: \- Norair Eng'g. Corp v. U.S., 666 F. 2d 546 (Ct. Cl. 1981).

[^475]: \- William Lagnion, ENGBCA 3778, 78-2 BCA  13,260. Lewis
    Constr. Co., ASBCA 5509, 60-2 BCA  2732.

[^476]: \- Pathman Constr. Co., ASBCA 14285, 71-1 BCA  8905.

[^477]: \- Electrical Enters., Inc., IBCA 971-8-72, 74-1 BCA  10,528.

[^478]: \- Pan-Pacific Corp., ENGBCA 2479, 65-2 BCA  4984.

[^479]: \- Varo, Inc., ASBCA 15000, 72-2 BCA  9717.

[^480]: **-** The grantee may find it helpful to review the Federal
    policies and procedures concerning subcontracting in the FAR Part
    44. Grantees are not required to follow these Federal procedures.

[^481]: \- FAR 44.201-1.

[^482]: \- A copy of this Qualification Statement is included in this
    Manual as Appendix B. 17 -- *Statement of Qualification of
    Subcontractor.*

[^483]: ^-^ For a complete contract clause and further information
    dealing with Subcontracts, contact Stan Grill of NYCT at (718)
    694-4350.

[^484]: \- Some states or jurisdictions have established minimum
    requirements.

[^485]: \- The Federal policy is to retain these reports for not more
    than three years \[FAR Part 42.1503(e)\].

[^486]: **^2^** - See FTA Master Agreement MA(12), 10-1-05, Section 10,
    for Single Annual Audit requirements.

[^487]: These terms are defined in the MA, Section 1.m and 1.p. Grantees
    must ensure their contract terms and procurement policies clearly
    require record retention for three years after the final contract
    payment is made and not after completion of work.

[^488]: 49 CFR 18.36 (i)(11).

[^489]: \- Prior versions of the Circular contained the language in this
    paragraph related to \"disclos\[ing\] information regarding protests
    to FTA.\" FTA noted that this provision allowed for widely differing
    interpretations but found itself bound by the Common Grant Rule. FTA
    believes this provision requires grantees to, at a minimum,
    informally notify their FTA regional offices when they receive a
    protest related to a contract required to comply with the Circular
    and to similarly keep their regional offices apprised of the status
    of those protests. Regional offices may require grantees to forward
    copies of particular protests or all protests for information or
    review purposes at any time.

[^490]: \- This paragraph has been aligned with the Common Grant Rule
    and practice by adding \"violations of Federal law or regulation\"
    to the basis of FTA protest jurisdiction. FTA will continue to limit
    its review of grantee protest decisions and will read this Common
    Grant Rule provision in conjunction with the provisions that express
    its intent to avoid substituting FTA\'s judgment for those of its
    grantees. FTA will not consider each and every appeal of grantees\'
    protest decisions 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 the overall third
    party contracting program.

[^491]: \- Additionally, we have noted that requiring an appeal to be
    filed within five days of \"the violation\" yet also requiring
    protestors to extinguish their local remedies before filing with FTA
    led to some confusion. FTA has attempted to clarify this standard by
    starting the protestor\'s clock when it receives actual or
    constructive notice of an adverse decision or that a grantee failed
    to have or follow its procedures or review a complaint.

[^492]: **^^** - MARTA resident Engineer's Manual, Section 5.17
    *Contractor Claims.*