Q = Question; A = Answer
A. FTA encourages grantees to produce revenue that can be used to offset program costs. However, FTA requires that revenue contracts be competitively awarded in order to give all businesses an opportunity to participate when a federally funded asset is being used as a revenue-enhancing source for the grantee. FTA distinguishes between competition necessary when there are limited contract opportunities and competition necessary when there are many contract opportunities.
If your agency intends to produce revenue from advertising on its bus shelters, opportunities to obtain advertising space on those shelters would be limited. For that reason, your agency should use a competitive process to permit interested parties an equal chance to obtain access to that space; see especially, FTA guidance concerning revenue contracts is contained in Chapter II, Subparagraph 2.b(4)(a) of FTA Circular 4220.1F, “Third Party Contracting Guidance,” available online. Additional guidance is available in FTA’s “Best Practices Procurement Manual” (BPPM), Section 188.8.131.52 – Revenue Contracts. (Revised: July, 2010)
A. FTA does not have any construction or installation requirements or specifications for bus shelters. If the shelters are to be purchased with Federal grant funds, and will be revenue producing, FTA does require grantees to compete the advertising contract in order to give all interested parties an equal opportunity obtain use of the federally assisted shelters. Revenue contracts with limited opportunities for participation, such as advertising on bus shelters, are discussed in the Chapter II, Subparagraph 2.b(4)(a) of FTA Circular 4220.1F, “Third Party Contracting Guidance,” available online. (Revised: July, 2010)
A. We would agree that a competitive RFP could be an effective method of soliciting offers leading to the ultimate award of a concession-type revenue contract. FTA does in fact require that concession-type revenue contracts generally be competed but does not specify the method of competition. Grantees have the discretion to choose the best method for soliciting bids or proposals. FTA guidance on procurement procedures is located in Chapter VI, Sections 2 and 3 of FTA Circular 4220.1F, “Third Party Contracting Guidance,” available online. (Revised: July, 2010)
A. We would agree that a competitive RFP could be an effective method of soliciting offers leading to the ultimate award of a concession-type revenue contract. FTA does in fact require that revenue contracts be competed but does not specify the method of competition. Grantees have the discretion to choose the best method for soliciting bids or proposals. FTA guidance on procurement procedures in Chapter VI, Sections 2 and 3 of FTA Circular 4220.1F, “Third Party Contracting Guidance,” available online. Additional guidance is available in FTA’s Best Practices Procurement Manual (BPPM), Section 4, “Methods of Solicitation and Selection.” (Revised: July, 2010)
A. Because the building was financed with Federal grant funds, even if the land were not, the building would qualify as a federally funded asset. Consequently, any revenue contracts associated with the building's use would have to be competitively awarded in order to provide all interested parties an equal opportunity to obtain that use if business opportunities can be expected to be limited. See, Chapter II, Subparagraph 2.b(4)(a) of FTA Circular 4220.1F, “Third Party Contracting Guidance,” available online. Additional guidance is available in FTA’s “Best Practices Procurement Manual” (BPPM), Section 4, “Methods of Solicitation and Selection.” (Revised: July, 2010)
A. The FTA Circular 4220.1F, “Third Party Contracting Guidance,” addresses revenue contracts in Chapter II, Paragraph 2.b(4)(a). But specific guidance about DBE participation is found in FTA’s “Best Practices Procurement Manual” (BPPM). The BPPM discusses revenue contracts in Section 184.108.40.206.
The BPPM advises that FTA policy requires revenue contracts to be competed so that all business entities have an equal opportunity for award, including DBEs. The following language is taken from the BPPM:
Disadvantaged Business Enterprises — DBEs should have the maximum opportunity to participate in both contracts and subcontracts that use any federal funds. The grantee is responsible for taking all necessary and reasonable steps to ensure that DBEs have maximum opportunity to compete for revenue contracts since these contracts are considered business opportunities.
The requirement concerning DBEs is an equal opportunity to compete with other firms with respect to revenue contracts. (Revised: July, 2010)
A. If the bus shelters are constructed entirely with non-Federal funds, then there is no Federal interest in the advertising revenues. Because the bus shelters are not assets in which the Federal Government has provided Federal funding, the provisions of FTA Circular 4220.1F would not apply to advertising revenue contracts applicable to those bus shelters. (Revised: July, 2010)
A. Competition - The most important principle is that the competitive selection procedures described in FTA Circular 4220.1F apply to all business opportunities including all revenue producing contracts. The competitive process usually consists of a formal bid or proposal process but it does not always have to. Grantees may use their own judgment about how to meet the intent of the competition requirement, but they must document the record to show how competition requirements were met.
Unsolicited proposals may appear when companies see an opportunity to use the transit system (an FTA-funded activity) to enhance their business interest. It may appear from such proposals that no other company could offer the same product or service. However, this does not justify a sole source contract. If the idea or activity is interesting, the concept should be evaluated on its own merit and revenue producing potential. If the decision is to implement it, then a competitive process should be used to select the contractor, unless you determine that the proposed concept itself is proprietary. It is always important to always keep in mind the requirement for competition.
Flow-down Requirements - Generally, if federal funds (not assets) are not used to produce revenues, then there are no requirements to include federal clauses in the revenue contract itself. Nevertheless, you should not overlook opportunities to support the various Federal civil rights and disadvantaged business enterprise objectives.
We refer you to the Best Practices Procurement Manual (BPPM), which discusses revenue contracts in Section 220.127.116.11. (Revised: July, 2010)
A. If the ATM machine had been placed in the transit facility as an amenity or for the convenience of transit riders, there would not be any need for a competitive bid or RFP. However, ATM machines are big money producers for their owner/operators. Although the financial cost and benefit to the transit agency may be small, the potential revenue stream for the vendor may be significant, particularly if the right of placement is an exclusive one. We would therefore recommend that you advertise the ATM machine placement as you would any other revenue contract. If, however, you are willing to accommodate all or nearly all owner/operators that wish to place ATM machines in your facility, then you would not need to use a competitive procurement process. See, Chapter II, Paragraph 2.b(4) of FTA Circular 4220.1F, “Third Party Contracting Guidance,” available online. (Revised: July, 2010)
A. While there is a requirement for competition, FTA also allows grantees latitude as to the form of competition. The normal rules that would apply to procurements do not apply as rigidly to revenue contracts. The important objective with revenue contracts is to give each prospective vendor an equal opportunity to compete for the award, and thus fairness (not formality) is paramount. You appear to have been fair to every vendor that might have a possible interest in this opportunity.
We would advise, then, that you could accept and negotiate a late proposal without compromising the principle of fairness. If you are still concerned, however, you could advise the prospective vendors that you are extending the period for proposals in order to allow for reconsideration on their part. If you approach one vendor to negotiate a contract, you could approach the others you invited to submit proposals, or approach those who responded when you contacted them after the procurement closed.
The Best Practices Procurement Manual (BPPM) discusses revenue contracts in Section 18.104.22.168 online. (Revised: July, 2010)
A. While this is not a matter in which FTA can become involved, we do agree with your position that it is more equitable for the contract to provide for payments to be made on the basis of revenues actually received.
We would advise appealing to the agency General Manager (and then to the Board of Directors if necessary), for a change to the terms of the contract. (Revised: July, 2010)
Background: Transit Advertising Sales are being brought in-house by agencies rather than using professional contracting services thru a RFP to secure competitive firms that guarantee income to the agency and are experts in that business. Ultimately, when agencies do this, the sales go down.
A. FTA's only requirement with respect to revenue (advertising) contracts is that they be awarded competitively. This is to give all U.S. taxpayers an equal opportunity to participate in the business use of a U.S. funded asset. FTA does not encourage or discourage grantees (transit agencies) from using consultants to assist them (or to offer income guarantees such as you suggest) with respect to advertising revenue. It leaves this to the discretion of the grantee. If a grantee were to use the approach you recommend, they would of course have to compete the award of the contract for transit advertising services. The transit agency could not simply select a firm such as yours for a sole source contract award without advertising the contract and giving other firms an opportunity to submit proposals. You might wish to communicate your thoughts and corporate experiences to APTA since they have a great deal of influence with APTA transit agency members and they are always anxious to advise constituents of "Best Practices" that might enhance the APTA members' business operations. (Posted: December, 2010)
Background: Subrecipient wants to put out an RFP for firms that will solicit advertising for sub recipient buses with County getting revenue from the money made by the third party contract.
A. The FTA Circular 4220.1F, II.2.b. (2), requires only that grantees (recipients & sub recipients) compete revenue contracts so as to give all interested parties an equal business opportunity related to an FTA funded asset. Since the sub recipient plans to compete the award of the third party revenue contract, it will satisfy the FTA requirements with respect to the award of that contract. There are no contract clauses required in that third-party contract since there will be no payments made to the contractor. However, if the third party contractor will be awarding subcontracts to firms wishing to advertise on the buses, the third party contractor must also be required (by the sub recipient) to solicit revenue proposals competitively in order to comply with FTA policy regarding equal opportunities for FTA funded assets (buses). (Posted: February 18, 2011)
A. FTA has no term limits for grantee third party contracts except for rolling stock and replacement parts, which are limited by statute to five-years of requirements. FTA expects grantees to use good business judgment when structuring contract terms. We would also note, however, that the FTA Circular 4220.1F, Chapter II. 2.b. (4) requires that revenue contracts be competed in order to give all interested parties (i.e., taxpayers) an equal opportunity to access a publicly funded asset, such as a bus. Grantees may not accept unsolicited proposals for revenue contracts and make awards without competition. The method of competition is left to the grantee's judgment. (Posted: June, 2011)
A. "Program Income" is addressed at 49 CFR 18.25 and in FTA Circular 5010.1D, Page VI-9. The circular is available online. (Posted: August, 2013)
A. We are interpreting your question as one that pertains to the award of a revenue contract; i.e., a contract to lease a federally funded asset for the purpose of producing revenue. FTA has only one requirement for revenue contracts and that is that they be competitively awarded. How the grantee accomplishes the competition is not prescribed by FTA. We do not know whether competition is feasible in this instance, but we would advise you to contact the FTA Region 10 Office (Steve Saxton at 206-220-4311) to discuss your question. We would also note that the Regional Office could advise you as to how the revenue from this lease should be handled. (Posted: November, 2015)