[Federal Register Volume 60, Number 198 (Friday, October 13, 1995)]
[Notices]
[Pages 53451-53453]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-25407]
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
Federal Transit Administration
[Docket No. 94-B]
Third Party Contracting Requirements
AGENCY: Federal Transit Administration, DOT.
ACTION: Notice of availability of Third Party Contracting Requirements,
Circular 4220.1C.
-----------------------------------------------------------------------
SUMMARY: On September 7, 1994, the Federal Transit Administration (FTA)
published a Notice in the Federal Register announcing its decision to
revise its Third Party Contracting Guidelines, Circular 4220.1B, to
incorporate new provisions included in the Intermodal Surface
Transportation Efficiency Act of 1991 (Pub. L. 102-240,
[[Page 53452]]
October 28, 1991) and to update and streamline third party procurements
made with FTA financial assistance. On December 19, 1994, FTA published
a Notice in the Federal Register extending the comment period to
January 18, 1995. This Notice announces the adoption and availability
of FTA's revised Circular 4220.1C, retitled ``Third Party Contracting
Requirements,'' and discusses changes FTA made as a result of comments
received in response to the two previous Notices.
EFFECTIVE DATE: FTA Circular 4220.1C is effective as of October 1,
1995.
FOR FURTHER INFORMATION CONTACT: Carolyn S. Thompson, Procurement
Analyst, Office of Procurement, (202) 366-5470. FTA will mail copies of
the Circular to all of its grantees. Other interested parties may
obtain a copy of the Circular by sending a self-addressed mailing label
to: Office of Procurement, Room 7405, 400 Seventh Street, S.W.,
Washington, D.C. 20590.
SUPPLEMENTARY INFORMATION:
I. Introduction
On September 7, 1994, FTA announced its intent to update its third
party procurement requirements in FTA Circular 4220.1B, ``Third Party
Contracting Guidelines,'' and solicited public comment (59 FR 46294).
On December 19, 1994, FTA extended the comment period until January 18,
1995, to allow interested parties additional time to comment (59 FR
65427).
FTA sought particular comment on two issues. First, FTA proposed to
continue its mandatory pre-award review and approval of certain
procurements to be made by FTA recipients. Second, FTA proposed to
continue to apply the revised circular to procurements made with
Federal operating assistance.
After reviewing the comments, FTA determined that most of the
difficulties faced by persons engaging in third party contracting
stemmed from uncertainty as to what procedures and policies were
required by Federal law and regulation and what procedures were
recommended but not mandatory. A related problem was the seemingly
haphazard way in which procurement information was disseminated to
grantees and contractors.
To resolve these difficulties, FTA has considered (1) whether it
should cancel Circular 4220.1B and simply require grantees to comply
with the Department of Transportation's ``Uniform Administrative
Requirements for Grants and Cooperative Agreements to State and Local
Governments,'' and ``Uniform Administrative Requirements for Grants and
Agreements with Institutions of Higher Education, Hospitals, and Other
Non-profit Organizations, 49 CFR Parts 18 and 19, respectively
(collectively, the common grant rules); (2) whether it should continue
to issue procurement alerts and oral guidance; (3) whether audits and
procurement system reviews are appropriate ways to ensure that grantees
understand FTA's third party contracting requirements; (4) whether it
should develop additional written guidance and training programs to
help grantees understand the applicable contracting requirements; and
(5) whether it should continue to require that grantees submit
extensive information for FTA's pre-certification and/or pre-award
review.
After review of the comments received, FTA has decided that its
third party contracting circular should contain only the minimum
requirements of the common grant rules, related Executive Orders, and
statutes, along with statements of FTA policy, and that provisions
interpreting the requirements and recommending practices should be
contained in a ``Third Party Procurement Manual,'' which would be
updated regularly. The revised Circular, FTA 4220.1C, has thus been
renamed ``Third Party Contracting Requirements.'' Consequently,
Circular 4220.1C is streamlined, straightforward, and much shorter than
its predecessor. The ``best practices'' manual, currently under
development, is to be supplemented by additional procurement training
for FTA staff and grantees.
For a detailed analysis of the changes reflected in the revised
Circular, see the following discussion.
II. Analysis and Comments
FTA received 52 comments in response to its Federal Register
Notices:
Transit Agencies................................................... 35
Cities and Counties................................................ 6
State DOTs......................................................... 3
Trade Associations................................................. 3
Private Businesses................................................. 3
Labor Unions....................................................... 1
Individual Citizens................................................ 1
A. Self-certification. FTA proposed to continue 4220.1B's self-
certification process whereby certain recipients are required to submit
a self-certification and summary description of their procurement
procedures. However, recognizing that 49 CFR Part 18 has been in place
for nearly a decade and that a reduction of process and paper is
desirable, FTA is establishing in Circular 4220.1C a new self-
certification process, applicable to all grantees, which does not
require submission of supporting documents. The certification will be
made through the ``Certifications and Assurances for FTA Assistance''
checklist, which is submitted to FTA at the beginning of each fiscal
year and updated and published annually in the Federal Register. In
place of reviewing written documents, FTA will verify compliance with
FTA's requirements through ``Triennial Reviews'' and ``Procurement
System Reviews,'' in which a grantee's procurement procedures are
reviewed on-site and in-depth.
B. Pre-award Review of Contracts. FTA proposed to continue to
review certain procurement contracts before grantee award to the
successful bidder. While the majority of commenters did not respond to
this proposal, one commenter argued persuasively that FTA should not
conduct pre-award reviews of third party contracts. This commenter
wrote that as a State agency it
operat[es] to a well established procurement law and regulations
that are based on the Model Procurement Code for State and Local
Governments. All procurements over $10,000, including sole source
and single bids, are subject to considerable public scrutiny and
public notice. Adding FTA review to such a process is totally
redundant and amounts to wasted resources on the part of FTA.
FTA agrees and has eliminated all routine pre-award reviews of
third party contracts in favor of periodic, post-grant reviews. Under
this new process, FTA may still conduct pre-award reviews if
appropriate in a given situation, and grantees may request such
reviews.
C. Multi-Year Contracting. FTA had proposed to add a provision
addressing ``multi-year contracts,'' a contracting method designed to
reduce costs by promising a contractor work over a number of years,
even though Federal funds are appropriated for only one year. This
technique is intended to save money by enabling the contractor to
amortize start-up costs and requiring the same price-per-unit over the
life of the contract. FTA further proposed to require an FTA recipient
to address the possibility of cancellation.
Commenters expressed some concerns and sought clarification. For
instance, one commenter noted that requiring constant unit prices over
the life of a contract would cause vendors to inflate their prices
during the early years of a multi-year contract. Another asked that the
term ``cancellation costs'' be clarified. This proposal has not been
adopted in Circular 4220.1C because it is not a mandatory requirement;
the use of ``multi-year contracts'' will be addressed in the ``Third
Party
[[Page 53453]]
Procurement Manual'' in which FTA will discuss the benefits of using
this process and include model contract clauses.
D. Bonding Requirements. FTA proposed two general bonding
requirements. For construction or facility improvement contracts or
subcontracts exceeding $100,000, a grantee could use its own bonding
policy if approved by FTA. If not approved by FTA, the grantee would be
required to obtain from contractors: (1) A bid guarantee equivalent to
5 percent of the bid price; (2) a performance bond for 100 percent of
the contract price; and (3) a payment bond for 50 percent of the
contract price for contracts less than $1 million, 40 percent of the
contract price for contracts between $1 million and $5 million, and
$2.5 million for contracts over $5 million. Although FTA did not
propose specific requirements regarding the use of bonds in non-
construction contracts, we discouraged their use.
The commenters who responded to this issue generally favored its
adoption. Thus, in 4220.1C, FTA addresses construction or facility
improvement contracts or subcontracts exceeding $100,000. Whether a
grantee requires bonds for non-construction contracts is a matter left
to local discretion. Guidance on this subject may be included in the
``Third Party Procurement Manual.''
E. Options. Although only one grantee commented on the proposal
regarding the use of options, we are aware that this is a controversial
issue. Instead of adopting this proposal, 4220.1C provides that if a
grantee chooses to use options, three requirements apply: (1) the
option must have been evaluated as part of the contract award
(otherwise it is a sole source procurement); (2) the option must be
exercised in accordance with contractual terms and conditions at the
time the contract is awarded; and (3) at the time it is exercised, the
option price must be determined to be the most advantageous for the
grantee. Moreover, FTA has removed the restriction that an option may
not be greater than 50 percent of the base line item quantity. The
discretion to determine option quantities will now reside with the
grantee.
F. Bid Protest Procedures. FTA will continue to review protests
alleging that a grantee failed to have written bid protest procedures
or to follow them. Grantee protest decisions must be in writing;
protests to FTA must be in writing and submitted within five working
days of the date the protester knew or should have known of the
violation. All other information which describes the process FTA will
follow in reviewing bid protests has been removed for reissuance, as
appropriate, in the ``Third Party Procurement Manual.''
G. Payment Provisions. Although FTA received only two comments
concerning the provisions addressing advance and progress payments, FTA
has decided to make the following changes. Under Circular 4220.1C,
advance payments may now be used if prior written concurrence-is
received from FTA. Progress payments may also be used as long as the
grantee obtains title to the property being constructed or acquired or
an equivalent security equal in value to the progress payment amount.
The use of progress payments is at the grantee's discretion.
H. Small Purchase Threshold. FTA did not propose raising the small
purchase dollar threshold because we were aware at the time that the
Office of Management and Budget (OMB) was considering such a change. In
the interim, the common grant rules have been changed to increase the
threshold. The Circular has been revised accordingly, and grantees may
raise their small purchase threshold to $100,000 if they wish.
I. General Services Administration (GSA) Federal Supply Schedule
(FSS). Although the proposal did not contain any provision regarding
the use of the FSS in procuring goods, FTA recipients have repeatedly
requested permission to use it. FTA supports this request and notes
that as soon as GSA has established the requisite procedures, eligible
grantees will be able to use them.
J. Operating Assistance. FTA had proposed to continue to require
recipients of operating assistance to apply the Circular to all
operating procurements. All but one commenter opposed the proposal. Due
to the complexity of the legal and policy issues surrounding this
particular requirement, no change has been made. FTA does intend,
however, to continue to study the issue to determine what, if any,
changes can be made consistent with the principles of Federalism and
the National Performance Review.
K. Commercial Services. FTA proposed a specific provision
applicable to the purchase of ``commercial services'' for the provision
of transit, maintenance, or management services. Commenters responding
to this proposal were uniformly opposed. One commenter, for example,
wrote that ``[t]he essential `make or buy' question--that is inherent
to any sound procurement process--by definition applies to both goods
and services.''
We agree with the commenters; a separate provision on the
procurement of ``commercial services'' is inappropriate and
unnecessary, since such procurements are covered by section 8 of
Circular 4220.1C entitled ``Competition,'' which requires that ``all
procurement transactions . . . be conducted in a manner providing full
and open competition.''
L. Attachment A. FTA proposed to identify and list all of the
statutes and regulations that address third party contracting issues.
Instead of adopting this proposal, however, FTA decided that recipients
should be referred to the ``Master Agreement,'' which contains a
comprehensive list of the requirements applicable to the FTA program,
including procurement. Unlike the Circulars, the ``Master Agreement''
is updated annually. Moreover, as mentioned above, FTA is developing a
``Third Party Procurement Manual'' which will give FTA recipients
detailed guidance on the applicability of various statutes and
regulations addressing third party contracting matters.
M. The Use of the Metric System. In our proposal, FTA ``encouraged
[grantees] to begin using the metric system of measurement * * * at the
earliest possible date in their procurements and other business
activities.'' Although grantees would be merely encouraged to use the
metric system, the commenters were adamantly opposed. Given FTA's
decision to focus on contracting requirements, this provision is not
included in Circular 4220.1C. FTA notes, however, that 49 U.S.C.
sections 205a et seq., E.O. 12770, ``Metric Usage in Federal Government
Programs,'' 15 U.S.C. section 205a, and the ``Master Agreement''
require the use of the metric system by 1997. FTA recipients should
note, however, that the use of the metric system is not required in
every instance; 49 CFR 19.44(a)(3)(v) exempts its use when not
``practicable and economically feasible.''
N. Architectural and Engineering Contracts. Although FTA has
reworded the provisions concerning the requirements for architectural
and engineering contracts, the basic requirements have not been
changed.
-Issued: October 10, 1995.
Gordon J. Linton,
Administrator.
[FR Doc. 95-25407 Filed 10-12-95; 8:45am]
BILLING CODE 4910-57-U
