Local vs. Federal Funds
Third Party Procurement
Frequently Asked Questions
Q = Question; A = Answer
Q. Our City advertised a solicitation for transit management services that contained FTA required clauses and requirements. We subsequently awarded the contract with all required FTA clauses. We later learned that FTA funds have never, and probably will never be used to fund this service. However, now I have a contract with FTA requirements, when there didn't need to be any and am probably paying a higher price for services because of the additional work required by the contractor to be in compliance with FTA rules and regulations. Can I remove the FTA requirements via amendment if FTA funds are never to be used for this service? Is there any harm just leaving the requirements in the contract though FTA funds are not being used? Lastly, if there is a remote chance that FTA funds could be used for this contract, how do we handle the Contract Award Announcement where we have to give the dollar amount and percentage of FTA funds being used for this service, when currently there are none and future use is unknown?
A. Your contract does not need the FTA required clauses if there are no FTA funds allocated to the contract. However, if you remove the clauses now and later decide to use FTA funds, you may have a problem with adding them back in. The safest course would be to get FTA approval before you modify the contract to add back the clauses if you decide you need to use FTA funds. We would not assume you will save money by deleting the clauses. We suggest you ask the contractor to review the clauses in question and give an assessment (a price credit proposal) before you delete the clauses. If there are no FTA funds you do not need to announce FTA participation when the contract is awarded. There would be no harm in leaving the clauses in the contact, and this might be the best decision if there is a possibility of adding FTA funds later. (Revised: May 2010)
Q. Our city and its subgrantees are not authorized to use formula funds for operating contracts. One of the city’s subgrantees used 100% local funds to procure a service contract that uses trolleys purchased with 80% FTA funds. The service contract originally was for a downtown circulator; however, the subgrantee subsequently modified the contract to include neighborhood circulator service, which doubled the scope of the contract. Such a change was not in the scope of the original competition, and the changes clause did not describe such a change. Did the city violate FTA requirements?
A. Since the city is using 100% local funds for the operational trolley-service contract, there would be no FTA rules applicable to that contract, meaning that the city could enlarge the scope to include the neighborhood circulator without any FTA involvement in the decision. As to the use of the Federally funded trolleys, if there is a question as to the permissibility of using the trolleys for the expanded neighborhood service, the regional FTA grant manger should be consulted for a ruling. (Reviewed: May 2010)
Q. If a transit property is in search for a General Manager and the search includes both management firms who would supply a GM under a management contract and an individual who would become an employee of the transit property, does the requirement for competitive procurement apply? Is the answer the same if federal funds are used?
A. If Federal dollars are not used to pay for the GM's salary, no FTA requirements apply regardless of whether you use an employment contract or whether you use a third party procurement contract with a consulting firm. Any procurement not involving FTA assistance would, of course, have to be conducted in accordance with state and local procurement laws. If FTA assistance is involved, the rule is if you are looking to a Contractor to furnish the services of one of its employees under a contract between your agency and the Contractor, then the procurement is subject to the requirements of FTA Circular 4220.1F, which includes the requirement for competition. But if you are looking to employ an individual as an employee of your agency under an employment contract, then the action is not a "third party contract" within the meaning of 4220.1F and does not have to comply with the competition requirements. The Best Practices Procurement Manual discusses "Employment Contracts" in section 220.127.116.11 - Employment Contracts. (Revised: May 2010)