Applicability of FTA Circular 4220.1E to Grantee Contractors

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Third Party Procurement

Frequently Asked Questions

Q = Question; A = Answer

Q. Is an agency required to display a sign identifying FTA as a grant participant at a construction site? If so, what should be on the sign?

A. FTA Circular 4220.1E paragraph 14 controls. You do not have to make announcements or put up signs, but if you do, FTA must be credited. Following is the pertinent portion of the Circular:

  1. CONTRACT AWARD ANNOUNCEMENT. If a grantee announces contract awards with respect to any procurement for goods and services (including construction services) having an aggregate value of $500,000 or more, the grantee shall:
    1. Specify the amount of Federal funds that will be used to finance the acquisition in any announcement of the contract award for such goods or services; and
    2. Express the said amount as a percentage of the total costs of the planned acquisition.

Q. For a JARC project we are seeking to pass a sub grant to a third party non-profit operator. There will be no capital costs, just operating. They are currently not receiving Federal funds, but they do receive operating funds from the State of ND. What are the main items that this operator would have to do to contract with JARC funds?

Also how can contracts be made for late night cab service if the cab company is not currently a federal contractor?

We are in the process of implementing our first JARC program. Since we are the MPO and the funds will pass directly to us, we have to contract or pass the funds through to third parties for operating.

A. The agency that actually spends the Federal JARC funds via third party contracts/procurements will have to comply with FTA's Procurement Circular 4220.1E for those contracts that are funded with federal funds. We would especially mention the requirement for competitive contract awards by the sub-grantee and the responsibility of the original grantee (your agency) for overseeing the sub-grantee's use of funds. In your sub-grant terms and conditions you must therefore include the Circular as a requirement to be met by the sub-grantee. Failure to comply with the requirements of this Circular could render the sub-grantee's contracts as non-reimbursable (i.e., FTA could disallow these costs). The current FTA Procurement Circular Table of Contents. FTA has also developed a Best Practices Procurement Manual (BPPM) for the guidance of grantees and sub-grantees that are awarding contracts in accordance with the Circular. The BPPM is also available at the ftahelpline site above.

As far as awarding contracts to a "non-federal" contractor, we are not sure what you are referring to. The Circular requirement is that a prospective contractor be "responsible," and the awarding agency must evaluate the prospective contractor and document its determination that the contractor is indeed responsible. This determination must include the various aspects of integrity, past performance, and technical/financial capability to perform. For a full discussion of the topic and what is required, you should refer to the BPPM, Section 5.1 - Responsibility of Contractor. A final note regarding the sub-grantee's third party contracts that are federally funded - they must contain the required federal clauses and certifications. These may also be found in the BPPM - for contract clauses, see Chapter 8 and Appendix A.1; for certifications required from offerors with their bids and proposals, see Section 4.3.3.2 - Federally Required Submissions With Offers. One note of caution regarding the cab contract you mention - be sure to contact the regional FTA grant manager to ensure that the cab contract is an acceptable use of these federal funds. Cabs are normally considered outside the bounds of transit.

Q. If you receive federal funding, is it not true that all your procurements are considered to include federal funds unless you can clearly show that your funds are kept segregated? Is this written anywhere?

A. The FTA Procurement Circular 4220.1E discusses the applicability of the Circular's requirements to grantee contracts in section 4.

Q. Do procurements relating to Job Access Reverse Commute (JARC) have to comply with FTA Circular 4220.1E?... There was some misunderstanding during a recent Procurement System Review regarding the procurement of Public Art (Due to the fact that Public Art has its own circular now, i.e. FTA Circular Number C 9400.1A).

A. The FTA Circular 4220.1E, paragraph 4 applies the Circular requirements to JARC contracts: "Congestion Mitigation and Air Quality (CMAQ) and Job Access/Reverse Commute (JARC) funds may be used for operations by all grantees. The circular must be applied to all contracts that are funded, in part, by CMAQ or JARC funds. Using CMAQ or JARC funds for a specific operating contract or contracts does not trigger the requirement to apply the circular to other operating contracts. This is because the calculation required to use formula funds for operations contracts is not required as a prerequisite to using CMAQ or JARC funds for operating contracts."

Q. Could you please clarify? FTA Circular 4220.1D does not address Art. However, FTA Circular 4220.1E (with footnotes) does address art. The BPPM states that 4220.1E does not apply and grantees should reference FTA Circular 9400.1A. However, FTA Circular 9400.1A references FTA Circular 4220.1B (which I assume is now FTA Circular 4220.1E).

In March 2004 the City received a deficiency regarding Public Art. It stated, "A review of the contract files revealed that the City of Tucson did not meet the FTA requirements dealing with 4220.1E. When using progress payments adequate security must be obtained. Both purchase agreements stated that the "title of the artwork shall pass to the City upon final acceptance and final payment to the artists". The files did not reveal that the grantee took steps to protect its interest in the progress payments." FTA Circular 4220.1E (MS Word) (with footnotes): states, "Procurements of real property and art are beyond the scope of Circular 4220.1E and covered in separate guidance. [added October 2003 - Real property acquisition is covered in 49 CFR, Part 24. FTA Circular 9400.1A discusses art in transit projects. The Best Practices Procurement Manual includes extensive non-binding guidelines for applying C.9400.1A and related requirements.]". Furthermore, the BPPM (Ch 6, Sec. 7 - Titled "Artwork") states, "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." ...But then another contradiction as FTA Circular 9400.1A actually references 4220.1B (which is 4220.1E...I assume).

A. FTA Circular 4220.1E was published on 6/13/2003, and it clearly stated that the procurement of art was not subject to its requirements. If the procurement in question was conducted after that date, then it was not subject to 4220.1E. If it was conducted prior to 6/13/03 then the requirements of 4220.1D applied. If you feel the PSR was mistaken in applying 4220 to your procurement, then you should refer the matter to Mr. Jim Muir at FTA Headquarters (202-366-2507).

Q. The City of Tucson recently issued a solicitation for public relations services. We are in the final award stages and discovered a typographical error on the solicitation. Under the FTA Terms and Conditions portion of the solicitation, the City inaccurately referenced circular "4220.1D" rather than "4200.1E". The City has urgent need for these services, therefore, we need to continue with the award as quickly as possible. As we recognize that the contractor will be required to abide by the current circular (4220.1E), our recommended solution is as follows:

  1. Continue with the award process and issue the contract to the successful contractor;
  2. Immediately following the official award notification, issue a Contract Amendment that corrects the inaccurate reference. This amendment would specify that the contractor must adhere to Circular 4220.1E and the amendment is signed by both parties. The effective date would be the start date of the term of the contract. All work performed under the contract would then be bound by the Contract Amendment.
  3. As the error of referencing the older circular would have had no impact on the competitive process (i.e. - evaluation criteria, pricing, etc. would not change as a result of this correction), we feel this post-award correction would have no competitive impact. Please advise on whether you find this solution acceptable.

A. We would see nothing wrong in correcting the reference after award; however, we would point out that grantee contractors are not required to follow 4220.1D or E in their subcontracting activities. The Best Practices Procurement Manual (BPPM), Section 1.3 - "Applicability of Federal Requirements," says this clearly. The requirements that must be followed by grantee contractors are those set forth in your required contract clauses, as discussed in the BPPM Appendix A.1, where instructions and suggested language for each of the 31 clauses may be found. Note that not all clauses are required for all contracts. (The BPPM may be accessed online.). We would suggest, therefore, that you simply issue an amendment deleting the reference to 4220.1D entirely.

Q. To what extent do the FTA Third-Party Procurement requirements and required contract clauses apply to non-residential relocation self moves that are caused by real estate acquisitions?

A. The FTA Third-Party Procurement requirements in FTA Circular 4220.1E do not apply to real estate transactions or relocations arising because of them (see 4220.1E, paragraph 4.a, and related footnote). 49 CFR Part 24 governs these transactions, as noted in the Circular footnote. Clauses required for third-party procurement contracts are not required.

Q. To what extent must an FTA grantee require another government entity, such as a city government, to comply with FTA Circular 4220.1E when the grantee transfers FTA funds to the city for performance of pubic works related to transit facilities? Is it just limited to proof of a competitive procurement that results in a contract with all required FTA clauses and certification included? We are beginning to work with local municipalities on a bus stop improvement program and some want to control the construction of the improvements through their own procurement processes and just accept our federal dollars. What is the minimum that we must do in these circumstances as an FTA grantee?

A. We forwarded your question to FTA Chief Counsel's Office and received the following response. "Whether the municipality is acting as a sub-grantee or simply as an agent for the grantee, the 4220 requirements continue to apply to the Federal dollars. If we have some idea of what the submitter expects may be lacking in the process undertaken by the municipalities, we could address specific circumstances. Some general requirements that come to mind (that a municipality might not ordinarily see) include the Davis-Bacon Act and Buy America." If you need additional assistance, please contact Jim LaRusch at FTA, (202) 366-1936.

Q. As a third-party contractor, are we required to follow the procurement guidelines in FTA Circular 4220.1E and the Master Agreement when we are asking an institution of higher learning to conduct a research project as a subcontractor to us?

A. It is our understanding that you are a third-party contractor under contract with the City of Phoenix who is the FTA grantee. The work you are contemplating to subcontract with the University of Arizona will use the funds of your contracts with the city and be in furtherance of that contract's objectives. The University of Arizona will therefore be a subcontractor under your prime contract with the city.

Third-party contractors are not required to follow the requirements of FTA Circular 4220.1E or the Master Agreement in awarding subcontracts. However, they are required to follow the clauses in their prime contracts, including the flow-down of those clauses that require flow-down to subcontractors. You may, of course, use the principles of 4220.1E as well as the best practices discussed in the Best Practices Procurement Manual. You may also want to read the regulations in 49 CFR Part 19 that pertain to institutions of higher education. These are the common grant rules that grantees must follow in their award of grants. Yours is not a grant with the university and you do not have to follow these rules but they may contain things that are helpful to you as you structure your subcontract. For example, subpart 19.27 - Allowable Costs, would appear to be of particular interest if you are using a cost-reimbursement subcontract with the university since you will need to specify what cost principles will govern the allowability of costs under the subcontract.

Q. When a transit authority awards a contract to a third party and the contract is funded by federal dollars, does the firm receiving the contract have to comply with the requirements of 4220.1E? What about other subtier suppliers?

A. Third-party contractors and their subcontractors do not have to comply with FTA Circular 4220.1E. That Circular describes requirements that grantees must comply with in their award of third-party contracts. The only requirements imposed on third party contractors are imposed by way of clauses in their contracts; e.g., Buy America, Davis-Bacon, Disadvantaged Business Enterprises, etc. These contract clauses in some cases must be flowed-down to subcontractors who receive subcontracts from the prime contractor. The Best Practices Procurement Manual (BPPM) describes various third-party contract clauses and flow-down requirements in Appendix A.1 - Federally Required and Other Model Contract Clauses.

There are no requirements regarding subcontracting in the BPPM except those in Appendix A.1 dealing with contract clauses and flow-down requirements to subcontractors, and the guidance in Chapter 7 which deals with Disadvantaged Business Enterprise.

The management of subcontracts by grantees is largely a matter of good business practices, and the extent of your involvement would depend on the circumstances of each case. For example, in a firm fixed price contract for commercial items awarded as a result of adequate price competition, you would not normally be concerned about how the prime chose its subcontractors because the price being offered to you is presumably competitive and reasonable, and the prime is assuming 100% of the risk for its subcontractors' performance. Where, however, you are awarding a prime contract that involves the assumption of risk by the grantee for the prime contractor's performance as well as its subcontractors, you will want to take a more active role in negotiating with the prime concerning the subcontract than you would where the prime contractor is assuming 100% of the risk of performance. The former case would include cost reimbursement, time and materials, and labor hour contracts. In these cases you are assuming the risk of cost overruns and the risk of otherwise poor performance, and you will want to ensure that the prime has selected competent subcontractors and that it has adequately determined and documented the reasonableness of the subcontract prices through cost or price analysis. The subcontractors should be selected through competition to ensure that the best team has been assembled at the best combination of price and performance, or the prime should adequately explain why competition is infeasible. If the subcontractor in these cases has not been determined at the time of the prime contract award, you may want to include a provision in the prime contract requiring the prime to submit the proposed subcontract for your consent prior to its award by the prime. You may want to examine the Federal policies in FAR Part 44 - Subcontracting Policies and Procedures, and the contract clause at FAR 52.244-2, Subcontracts. You are not required to follow the FAR but the guidance here may be useful.

Q. As a third-party contractor, are we required to follow the procurement guidelines in FTA Circular 4220.1E and the Master Agreement when we are asking an institution of higher learning to conduct a research project as a subcontractor to us?

A. It is our understanding that you are a third-party contractor under contract with the City of Phoenix who is the FTA grantee. The work you are contemplating to subcontract with the University of Arizona will use the funds of your contracts with the city and be in furtherance of that contract's objectives. The University of Arizona will therefore be a subcontractor under your prime contract with the city.

Third-party contractors are not required to follow the requirements of FTA Circular 4220.1E or the Master Agreement in awarding subcontracts. However, they are required to follow the clauses in their prime contracts, including the flow-down of those clauses that require flow-down to subcontractors. You may, of course, use the principles of 4220.1E as well as the best practices discussed in the Best Practices Procurement Manual. You may also want to read the regulations in 49 CFR Part 19 that pertain to institutions of higher education. These are the common grant rules that grantees must follow in their award of grants. Yours is not a grant with the university and you do not have to follow these rules but they may contain things that are helpful to you as you structure your subcontract. For example, subpart 19.27 - Allowable Costs, would appear to be of particular interest if you are using a cost-reimbursement subcontract with the university since you will need to specify what cost principles will govern the allowability of costs under the subcontract.

Q. This agency is a sub-recipient to the FTA Grantee (City of Phoenix Public Transit Department). To what degree are our third-party contractors required to follow the same federal procurement practices and standards that we must follow? For example, are they required to utilize competitive procurement for sub-contracts? Are they required to maintain the same files as we do? Are they required to perform and document Cost or Price Analysis?

A. Third-party contractors are not required to follow the same requirements as grantees or their sub-recipients. For example, grantees and sub-recipients are required to follow the requirements of FTA Circular 4220.1E in their procurement activities. Their third-party contractors, however, are not required to follow this Circular. Contractors are required to follow whatever clauses grantees place in their contracts. Grantees must require their contractors to comply with certain Federal laws and regulations, and the method of requiring compliance with these laws/regulations is through the incorporation of clauses in their contracts. These clauses are contained in the Best Practices Procurement Manual (BPPM), Appendix A1**. Not all clauses are required for all contracts, and you must review each one individually for applicability to any given contract.

Beyond the required contract clauses in the BPPM, Appendix A.1, you may wish to consider additional requirements from a good business perspective. For example, if you are awarding a cost-reimbursement contract, you must include an "Allowable Cost and Payment" clause citing the cost principles of FAR Part 31 (or your jurisdiction's cost principles if you have them), that will be used to determine final allowable costs on the contract. You may also wish to incorporate a "Subcontracts" clause that requires the prime to compete subcontracts and do a cost or price analysis to determine reasonableness of the vendor's price. You may also require the prime to submit certain subcontracts for your consent prior to their being placed. FAR Part 44 - Subcontracting Policies and Procedures contains policies that the Federal government uses that may be useful to you. For example, Subpart 44.204 - Contract Clauses, notes clauses at FAR Subpart 52.244-2 - Subcontracts, and 52.244-5 - Competition in Subcontracting, that you might want to modify and use as necessary. The FAR is available online.

Q. I am about to proceed with the purchase of some handheld radios and battery chargers (approximate cost of $10,000). We will NOT be using FTA funds to make this purchase. However, this purchase is being made as part of a larger project for a Bus Maintenance and Storage Facility. The larger project is partially funded by FTA funds. This $10,000 purchase of radios and chargers will not utilize any FTA funds. My question is: Does this purchase of radios and chargers need to follow the FTA guidelines/procedures or not? Since the radios/chargers will be used in conjunction with a larger project that is partially funded by FTA funds, does that necessitate the use of the FTA procedures?

A. The FTA Circular 4220.1F says in Chapter II, paragraph 2.b (1) (a), that the circular does not apply to capital contracts financed entirely without federal assistance even if those contracts supplement an FTA assisted capital project. You should also determine that this radio procurement does not fall within the sphere of "preventive maintenance contracts," discussed in Chapter II, Para. 2. b. (3) of the circular, and thus become subject to the circular by virtue of the language in that section. (Posted: March, 2010)

Q. Can an agency purchase gasoline buses using FTA funding and then convert them to Compressed Natural Gas power using local funding?

A. If no FTA $ is used then the FTA procurement requirements do not apply. We assume there is no programmatic issue with the terms of the grant about modifying the buses. (Posted: May, 2010)

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