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*.[^1] 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.[^2] 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*.
[^3] 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.[^4]

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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.**[^5]

**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.\" [^6] 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.\" [^7]

**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. [^8]

**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. [^9]

**[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. [^10]
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**.** [^11] 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. [^12] 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), Section 15 (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. [^13]

**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.\"
[^14] 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. [^15]

**[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. [^16]             |
+-----------------------------------------------------------------------+

+-----------------------------------------------------------------------+
| > 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. [^17]                                                    |
| >                                                                     |
| > 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. [^18]                                                   |
| >                                                                     |
| > 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. [^19]

**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.* [^20]
>
> *"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). [^21]

[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. **[^22]

**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.... [^23]                                          |
|                                                                      |
| [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. [^24]                                                 |
|                                                                      |
| 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. [^25] |
+----------------------------------------------------------------------+

# 

# 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.** [^26]

**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.**
[^27] **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.** [^28] **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). [^29] 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. [^30]
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. [^31] For
architectural or engineering services, Texas mandates a \"Brooks Act\"
process [^32] and concludes this Act with the public policy statement
that contracts entered into in violation of these provisions are void.
[^33] 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. [^34]                     |
|                                                                       |
| 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. [^35]                                  |
|                                                                       |
| > 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. [^36]                            |
|                                                                       |
| ##### The FTA Master Agreement, FTA MA(12), Sec                       |
| tion 15i -- *Architectural, Engineering, Design or Related Services*, |
|  requires grantees, when awarding contracts for architectural, engine |
| ering, or related services, to accept undisputed audits conducted by  |
| other governmental agencies for the purpose of establishing indirect  |
| cost rates if such rates are not currently under dispute. This requir |
| ement to accept undisputed audits conducted by other governmental age |
| ncies 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 a |
| s precluding grantees from imposing (requiring) ceilings (or "caps")  |
| on overhead rates in contracts for architect-engineer services. [^37] |
+-----------------------------------------------------------------------+

##### 

##### 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.** [^38] **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}** [^39]

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.* [^40] 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*. [^41] 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. [^42] 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** [^43]
:::

[]{.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 construction 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.** [^44]

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. [^45] 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. [^46] 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. [^47]

[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. [^48] 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. [^49]

[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. [^50]

[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.
[^51] 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. [^52] 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.
[^53]

[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.**
[^54] **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:**

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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. [^55]

##### 

##### 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 [^56] 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. [^57]

##### 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. [^58]

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)**.**[^59]

[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.

[^1]: \- This document may be obtained from FTA, Office of Program
    Management, Engineering and Management Division, TPM-42, at (202)
    366-2440.

[^2]: ^2^ - See *Project and Construction Management Guidelines 1996
    Update*, Section 3.2.2 *Configuration*, Constructability Reviews.

[^3]: ^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.

[^4]: ^4^ - Contact Department Manager-Procurement, BART at (510)
    464-6380.

[^5]: ^5^ - See note 1.

[^6]: ^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.

[^7]: ^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.

[^8]: [http://construction-institute.org](http://construction-institute.org/).

[^9]: New York City Transit. Contact Ms. Judi Gibson, Assistant Chief
    Procurement Officer \-- Engineering, Construction & Capital Division
    of Materiel at (718) 694-4113.

[^10]: \- See note 11.

[^11]: \- For information, contact the Purchasing Section Manager at
    (847) 228-3573.

[^12]: \- For information about New York City's leasing of cranes with
    operators contact Stan Grill at (718) 694-4350.

[^13]: \- MTA, Houston, TX. Contact Don Murphy at (713) 739-4843 or Paul
    Como at (713) 739-4803.

[^14]: \- 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.

[^15]: \- MARTA Rail Car procurement, contact Mr. Robert June, Acting
    Director of Systems Engineering, at (404) 870-3203.

[^16]: \- 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.

[^17]: \- 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.

[^18]: \- 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.

[^19]: \- NY State DOT (518) 457-8343.

[^20]: \- 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.

[^21]: \- 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.

[^22]: \- *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>.

[^23]: \- FTA C 9030.1C, Chapter III, paragraph 4.c.

[^24]: \- FTA C 9030.1C, Chapter V, paragraph 9.b.3.

[^25]: \- C5010.1C in Chapter II Management of Real Property, Equipment
    and Supplies, Subsection 3.e(6).

[^26]: \- See generally Federal Acquisition regulations at 48 CFR
    Subpart 46.7 - Warranties.

[^27]: \- 48 CFR Subpart 46.7 - Warranties.

[^28]: \- May be accessed at:
    <http://www.fta.dot.gov/legal/guidance/circulars/9000/433_1152_ENG_HTML.htm>.

[^29]: \- 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>.

[^30]: \- Texas Government Code, Section 2254.002.

[^31]: \- Texas Government Code, Section 2254.003(a).

[^32]: \- Texas Government Code, Section 2254.004.

[^33]: \- Texas Government Code, Section 2254.005.

[^34]: \- 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).

[^35]: \- 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.

[^36]: \- 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).

[^37]: \- 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/index.htm) under the Frequently
    Asked Questions tab (see Architect & Engineering Contracts).

[^38]: 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.

[^39]: \- 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:

[^40]: \- FAR 53.301-330.

[^41]: \- FAR 53.301-330.

[^42]: \- 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.

[^43]: \- For additional information, contact Ms. Ann Geter, Central
    Ohio Transit Authority, at 614-275-5903.

[^44]: \- For an example of a grantee\'s third-party contract *Insurance
    Specifications*, contact Mr. Harry Hower, Manager of Insurance,
    MARTA, at (404) 848-4504.

[^45]: \- See footnote above.

[^46]: \- *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.

[^47]: \- 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.

[^48]: \- 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.

[^49]: \- 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.

[^50]: \- 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.

[^51]: \- Workers' compensation insurance pays claimants in case of
    injury, disability, or death of employees resulting from work on the
    job.

[^52]: \- 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.

[^53]: \- For FTA Region 1 experience with the Central Artery Project in
    Boston (\$11B), contact Mr. Richard Cole at (617) 494-2395.

[^54]: \- Grantees may access this Circular at:
    <http://www.fta.dot.gov/legal/guidance/circulars/9000/433_1313_ENG_HTML.htm>.

[^55]: \- 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>.

[^56]: \- LAMTA, NYMTA, SEPTA, Metropolitan Council of Minneapolis, MN.

[^57]: \- For further information about this public art program contact
    Mr. David Allen, Metropolitan Council Hiawatha Public Art and Design
    Manager at (612) 215-8221.

[^58]: \- For further information, contact Elizabeth Mintz, Manager of
    SEPTA's Art-In-Transit program, at (215) 580-3633.

[^59]: \- 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.