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Q. Our question specifically relates to eligible maintenance costs under a service contract, including both facility and vehicle maintenance. The grantee owns the facilities from which the contractor operates. The facilities were constructed with 80 percent FTA funds. Vehicles and facility are owned by the grantee and purchased with FTA funds. The service contractor is responsible for maintenance of the facility within the scope of the service contract. The contractor is also responsible for maintenance of buses that are acquired with 80 percent FTA funds.
Chapter III.4.c. in the grant management guidelines for urbanized areas states in part that "If a grantee purchases service instead of operating service directly, and maintenance is included in the contract for that purchased service, then the grantee may apply for preventive maintenance capital assistance under the capital cost of contracting policy.” The capital cost of contracting policy states, "Only the costs attributable to privately owned assets are eligible under this policy. Items purchased with Federal, state, or local government assistance are not eligible.” The combined effect of these two conditions is that no affirmative statement is found specifying maintenance costs eligible for capitalization where an agency purchases service from a contractor on a contract that includes maintenance with grantee provided vehicles IN A FEDERALLY FUNDED FACILITY. Please advise.
A. The situation in Colorado Springs is not consistent with the assumptions built into the table in Exhibit III-1 since the grantee owns the maintenance facility. Thus, the blanket values assumed in the table cannot be used. Thus, the grantee will need to calculate the proportion of the contract that actually represents allowable capital costs. These include (1) all vehicle maintenance costs, and (2) all costs to maintain the facilities. In this case, since the facility is already owned by the grantee, depreciation of the facility cannot be included as an eligible cost, since to do so would be double counting (FTA and grantee funds have already been used to cover the capital costs of the maintenance facility itself).
The values in Exhibit III-1 are applicable in situations where the maintenance facility is owned by the contractor as reimbursement for the capital value of the facility is assumed in those values. Since the facility is owned by the grantee, while the Capital Cost of Contracting does apply, the eligible amount will have to be determined based on the contract itself. The amount of the contract costs attributed to the vehicle maintenance and facility maintenance is eligible for federal capital funds at 80% as Preventive Maintenance.
References:
1. Circular 9030.1C Section III of the Grant Management Guidelines (Eligible Grant Activities), Section III.4.c. states in part that "If a grantee purchases service instead of operating service directly, and maintenance is included in the contract for that purchased service, then the grantee may apply for preventive maintenance capital assistance under the capital cost of contracting policy."
2. Under the Capital Cost of Contracting (III.4.f.), paragraph two states "Only the costs attributable to privately owned assets are eligible under this policy. Items purchased with Federal, state, or local government assistance are not eligible."
3. Finally, paragraph five states that "The table of Exhibit III-1 is based on the assumption that the contractor provides the assets. Thus, for example, if a contractor provides maintenance, it is assumed in the calculations that the contractor does so in a facility provided by the contractor."
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