Q = Question; A = Answer
A. The FTA Best Practices Procurement Manual (BPPM) discusses warranties in section 6.3.5 - Warranties. We believe it will answer your questions about extended warranties. The language you cited is from an outdated Triennial Handbook that no longer reflects FTA's policy regarding extended warranties. (Revised: June 2010)
A. Under Federal transit law, operating assistance and capital assistance are funded at different Federal shares. Historically FTA interpreted extended warranties as falling under maintenance and therefore an operating expense ineligible as a capital expense. However, under current law at 49 U.S.C. § preventive maintenance is an eligible capital expense.
Therefore, extended warranties are still eligible as an operating expense for those recipients receiving operating assistance, and should be an eligible capital expense if the grantee is receiving capital assistance for "preventive maintenance." (Revised: June 2010)
A. FTA Circular 9030.1D, Urbanized Area Formula Program: Program Guidance and Application Instructions, states at Ch. III, §6.e. that an extended warranty is an eligible capital expense. (Revised: June 2010)
A. FTA does not have an engineering standard on fleet defects. Many grantees use "fleet defect" clauses in their procurements such as those contained in APTA's "White Book" in the section on general terms and conditions. However, FTA would expect the grantee to maintain continuing control over equipment, correct defects, enforce its contractual rights and maintain the equipment properly to protect the Federal investment as set forth in its grant application circulars and its grant management circular. (Revised: June 2010)
A. FTA Circular 5010.1D, Grant Management Requirements, at Ch. IV, §3.k.(8) provides:
Warranty standards, when part of rolling stock and equipment contracts, should provide for correction of defective or unacceptable materials or workmanship. These should specify coverage and duration and meet currently available industry standards. General warranty incorporating industry standards and extended warranty are eligible capital costs.
(Revised: June 2010)
A. If certain conditions are met, extended warranties could be eligible capital expenses – see page IV-24 of FTA’s Circular 5010.1D, which references Section 6.3.5 of FTA’s Best Practices Procurement Manual. (Posted: December, 2014)