§ 7.l. of FTA Circular 4220.1E states:
Reviews of protests by FTA will be limited to: (1) a grantee’s failure to have or follow its protest procedures, or its failure to review a complaint or protest; or (2) violations of Federal law or regulation. 2
An appeal to FTA must be received by the cognizant FTA regional or Headquarters Office within five (5) working days of the date the protester learned or should have learned of an adverse decision by the grantee or other basis of appeal to FTA. 3
You can adopt protest procedures that will provide an outlet for supplier concerns that cannot be informally resolved. These procedures will help you resolve these concerns on a schedule that minimizes the ultimate cost to your agency. Consider including the procedures or key requirements of the procedures in your solicitations. If you adopt and adhere to these procedures, FTA's involvement will be very limited.
A protest is a potential bidder's or contractor's remedy for correcting a perceived wrong in the procurement process. A protest must be accepted and reviewed with the understanding that the integrity of the procurement process as well as the procurement office may be at stake.
If an offeror does not have a satisfactory means of resolving his/her disagreement with you, his/her efforts to obtain satisfaction, including the possibility of litigation, may substantially interfere with the procurement process and be costly to the agency. One aspect of the protest process is an acknowledgment that public procurement officials are making major public decisions, can conceivably err on occasion, and that there should be some process short of litigation to remedy such an error. The success of this process enables FTA to discharge its responsibility while seldom becoming directly involved in a procurement dispute.
There are three basic types of protests, based on the time in the procurement cycle when they occur.
Content of Procedures - To ensure that protests are received and processed effectively, all grantees must have adequate written bid protest procedures. It is recommended that these procedures be included or referenced in the solicitation document. If they are referenced, information must be included on how a copy of the procedures may be acquired by any interested party. When the procedures are requested, they should be provided immediately. The written procedures typically address the following elements:
Effect on Pending Actions - One of the concerns that may arise in administering a protest is the effect on the award or contract. The decision to open a bid or to award a contract prior to resolution of a protest rests with you. However, should the grounds for the protest be found valid by FTA, FTA may choose not to participate in the contract. You must weigh this risk against the cost to the agency for terminating the contract or providing alternative funding.
FTA Circular 4220.1E paragraph 7.k reads as follows:
k. Responsibility for Settlement of Contract Issues/Disputes. Grantees alone will be responsible in accordance with good administrative practice and sound business judgment for the settlement of all contractual and administrative issues arising out of procurements. These issues include, but are not limited to, source evaluation, protests, disputes, and claims. These standards do not relieve the grantee of any contractual responsibility under its contracts.
FTA will not substitute its judgment for that of the grantee or subgrantee, unless the matter is primarily a Federal concern. Violations of the law will be referred to the local, State, or Federal authority having proper jurisdiction.
The FTA Master Agreement MA(12), 10-1-05, Section 44-Disputes, Breaches, Defaults, or Other Litigation states that FTA has a vested interest in the settlement of any dispute, breach, default, or litigation involving the Project. Accordingly:
FTA Circular 4220.1E paragraph 7.k gives grantees the authority to settle protests, claims and disputes with their third-party contractors. The Circular stipulates "FTA will not substitute its judgment for that of the grantee or subgrantee, unless the matter is primarily a Federal concern." The types of situations that constitute a Federal concern are discussed below in the paragraph entitled FTA Review and Concurrence.
Notification of FTA - The FTA Master Agreement MA(12), Section 44a, requires grantees to notify FTA of any current or prospective major dispute, breach, default, or litigation pertaining to the Project. And if the Recipient seeks to name the Federal Government as a party to the litigation for any reason, the Recipient must inform the FTA before doing so.
FTA Circular 5010.1C, Chapter I, Section 7b(1)(d) requires grantees to notify FTA of any current or prospective litigation or major disputed claim in excess of $100,000 relating to any third party contract. This Circular also requires grantees to provide a list of all outstanding claims exceeding $100,000 and a list of all claims settled during the reporting period as part of each quarterly progress report. A brief description and reasons for each claim should accompany this list.
FTA Review and Concurrence - The FTA Master Agreement MA(12), Section 44d, states that FTA reserves the right to concur in any compromise or settlement of any claim involving the Project and the grantee. FTA Circular 5010.1C, Chapter I, Section 7b(4), FTA Review and Concurrence, requires grantees to secure FTA review and concurrence in a proposed claim settlement before using Federal funds in the following instances:
Freedom of Information Act - Grantees are cautioned that the written materials furnished to FTA with notifications of disputed claims or relating to proposed settlements of claims and disputes, are subject to release to the public under the Freedom of Information Act (FOIA). Therefore, when the dispute is still in the evaluation/negotiation stage, and a settlement has not yet been reached, a prudent approach would be for grantees to include in their quarterly written reports to FTA only information that, if released, would not prejudice the grantee's negotiation or settlement strategy.
Steps to be Taken Prior to Negotiations - When a claim and/or grievance is initiated by one of the parties, the grantee should take the following steps:
Negotiations - Negotiations should be on an item-by-item basis with written arguments for each side. The grantee should aggressively pursue all claims and counterclaims as well as defend against all claims and counterclaims of the contractor. The final position arrived at through the negotiations should be set forth and justified in writing.
If diligent efforts to settle the claims and/or disputes on an item-by-item basis have failed to resolve all the items, then a determination can be made regarding the feasibility of a total cost or other type settlement. If the determination is made by the parties to go to a total cost or other type settlement, the grantee should write a detailed explanation of how the parties arrived at the conclusion that the total cost or other type settlement was the best way to proceed. In addition, the grantee should provide a complete explanation of how the final settlement figure was reached, and how each item in the claim/dispute was considered.
Finally, the grantee should not accept a contractor's claim for its cost without having conducted an appropriate review/analysis. If the grantee is unable to verify the cost prior to accepting it, the grantee should conditionally accept it subject to later audit verification.
When FTA Concurrence Is Required - Should FTA request to review the proposed settlement before it is implemented between the grantee and its contractor, the grantee should send to the FTA Regional Office a detailed summary of the settlement, and include as backup the negotiation memorandum and all the pre-negotiation analyses, described above, that led up to the negotiations. In addition, the grantee should provide a written opinion of counsel explaining why the proposed settlement is fair and reasonable, consistent with State law, and in the best interests of the grantee and the Government.
Engaging Outside Counsel - If it becomes necessary for the grantee to engage outside counsel to handle the settlement negotiations or, if necessary, to litigate or arbitrate the case, the grantee must, if grant funds are requested to cover the legal costs, obtain FTA's concurrence in advance. Grantees must demonstrate to FTA that their own legal resources are inadequate to handle the issues at hand, whether because of the nature of the claim, the training and experience of its personnel, or the potential drain on the grantee's staff resources. Outside counsel must be selected through a competitive process that may range from being very informal to very formal. Note that a qualifications-based selection procedure, such as is permitted for A-E procurements, is not permitted for legal services; cost/price proposals must be requested and evaluated as part of the selection process. The fee arrangement with outside counsel cannot be based upon a contingency or percentage of recovery methodology.
Avoiding Disputes Through Proper Documentation - "Documentation of significant events as they occur in the form of correspondence, daily diary entries, inspector's daily reports, photographs, memoranda of telephone conversations and meetings, etc., creates a project record that is absolutely essential in evaluating claims reaching litigation. Absolute attention to documentation is vital in both discouraging submittals of invalid claims and properly analyzing any claims filed." 4
Daily logs - The daily reports/logs of the grantee's inspector may be the most important source for claim research and defense. Inspectors and field engineers must be trained to spot change/claim situations and they must be instructed on what to include in their reports, both on a routine basis and when they sense a real or potential problem. The daily reports should track the construction progress against the approved schedule (CPM Schedule). The daily reports should also track the equipment on site as well as the utilization of equipment. These inspector reports must be monitored carefully by the inspector's supervisor to maintain high quality.
Documentation of meetings and telephone conversations - In order to avoid misunderstandings regarding agreements reached during meetings and telephone conversations with the Contractor and/or between grantee personnel, it is critical to prepare minutes of the meetings and distribute them to all of the attendees. All important telephone conversations should be recorded on a Telephone Call Record, noting the pertinent issues discussed, how the issues were resolved, who is responsible for taking the required action, etc. The other party to the call should always be sent a copy of the completed Telephone Call Record.
Photographs - Frequently, photographs are a valuable form of documentation in a claim situation. The grantee's resident engineer must make an adequate photographic record of the progress of the contract. The photographs must be dated, properly identified, annotated as to who took the photograph and the weather conditions at the time, and filed. Photographs should cover the following items:
The construction contract itself should contain provisions requiring the contractor to provide monthly progress photographs. The grantee's resident engineer must participate in the choosing of locations, angles, and subjects in order to maximize the usefulness of the photographs for progress records.
Alternative Dispute Resolution- The FTA Master Agreement MA(12), Section 44e, encourages grantees to use alternative dispute resolution procedures, as may be appropriate. The alternatives to litigation that are most commonly used are arbitration and mediation. Grantees are advised to be cautious in their decisions to use arbitration. In cases that are complex, arbitration may not be preferable over litigation because arbitrators frequently have limitations on the amount of time they can devote to any individual case. As a result, if the case is complex and time-consuming, it may be necessary to change arbitrators during the proceedings, and this may be very disruptive to the parties and their case. Arbitration may be more advisable for disputes that are not complex and do not involve a great deal of facts that must be determined in order to settle the claim. Grantees are advised to think the case through carefully before deciding not to litigate.Click here to return to the top of the document.
Chapter Footnotes1 - Prior versions of the Circular contained the language in this paragraph related to "disclos[ing] information regarding protests to FTA." FTA noted that this provision allowed for widely differing interpretations but found itself bound by the Common Grant Rule. FTA believes this provision requires grantees to, at a minimum, informally notify their FTA regional offices when they receive a protest related to a contract required to comply with the Circular and to similarly keep their regional offices apprised of the status of those protests. Regional offices may require grantees to forward copies of particular protests or all protests for information or review purposes at any time.
2 - This paragraph has been aligned with the Common Grant Rule and practice by adding "violations of Federal law or regulation" to the basis of FTA protest jurisdiction. FTA will continue to limit its review of grantee protest decisions and will read this Common Grant Rule provision in conjunction with the provisions that express its intent to avoid substituting FTA’s judgment for those of its grantees. FTA will not consider each and every appeal of grantees’ protest decisions simply because a federal law or regulation may be involved. Instead, FTA will exercise discretionary jurisdiction over those cases deemed to involve issues important to the overall third party contracting program.
3 - Additionally, we have noted that requiring an appeal to be filed within five days of "the violation" yet also requiring protestors to extinguish their local remedies before filing with FTA led to some confusion. FTA has attempted to clarify this standard by starting the protestor’s clock when it receives actual or constructive notice of an adverse decision or that a grantee failed to have or follow its procedures or review a complaint.
4 - MARTA Resident Engineer's Manual, Section 5.17 Contractor Claims.