Announcement of Procurement Initiatives

U.S. Department
Of Transportation
Federal Transit

The Administrator

400 Seventh St. S.W.
   Washington, D.C. 20590

October 1, 1998 

Dear Colleague:

I am pleased to announce the procurement initiatives underway in the Federal Transit Administration (FTA) and to provide recent FTA policy on some key areas which will impact your procurement transactions.

First, the FTA has initiated steps to conduct a survey of its customers whose operations and business transactions are impacted by the FTA Circular 4220.lD (Page Change), Third Party Contracting Requirements. As you may recall, the circular, as amended, was issued on October 1, 1995. The circular was well received, and the feedback has been consistently favorable. However, as we strive to enhance customer satisfaction through the continuous improvement in the delivery of services, the survey will enable us to measure the degree to which the needs of our grantees and industry have been met.

Second, the FTA plans to issue the Third Party Contracting Requirements as a formal rule following a Notice of Proposed Rule Making (NPRM). The NPRM will afford both grantees and industry representatives the opportunity to partner with the FTA through the exchange of ideas and recommendations to influence and shape the final rule.

Third, in response to numerous requests for FTA policy and guidance in some key areas, the following policy-and guidance is effective immediately relating to transactions in the categories identified:

  1. "Tag-ons" are not permitted. This term is defined as the adding on to the contracted quantities (base and option) as originally advertised, competed, and awarded, whether for the use of the buyer or for others and then treating the add-on portion as though it met the requirement of competition.

  2. The term "piggybacking" is defined as the post-award use of a contractual document/process that allows someone who was not contemplated in the original procurement to purchase the same supplies or equipment through the original document/process.

    Piggybacking is permissible when: (a) the solicitation document and the resultant contract contain an assignability clause that provides for the assignment of all or part of the specified deliverables as originally advertised, competed, evaluated, and awarded. This includes the base and option quantities. In addition, the original solicitation and resultant contract must contain both a minimum and a maximum quantity, which represent the reasonably foreseeable needs of the parties to the solicitation.

  3. Revenue contracts are defined as third party contracts whose primary purpose is to either generate revenues in connection with a transit related activity, or to create business opportunities utilizing an FTA funded asset. FTA requires that these contracts be awarded utilizing competitive selection procedures and principles. The extent of and type of competition required is within the discretionary judgment of the grantee. In addition, FTA requires that the contract term be limited to a period of 5 years, except in those instances where FTA has waived this requirement. Requests for waivers from the term limitation may be submitted to your Regional Office. In those situations where FTA may provide prior approval on a project (e.g., Transit Oriented Development projects, Cross Border leases) the waiver for a revenue contract in excess of five years may be obtained as part of the initial FTA approval of the project.

Guidance on each of these procurement categories will be published in the Best Practices Procurement Manual within the next few months.

Finally, the Office of Federal Procurement Policy is currently re-examining the procurement requirements in the Common Grant Rules which form the basis for the requirements contained in 4220.lD. If you wish to suggest ideas or changes to the Common Grant Rules, please contact the Office of Acquisition and Grant Management, Office of the Secretary at the address below or call area code (202) 366-4289.

Mr. Robert G. Taylor
Chief, Grants Management Division, M-60
Office of the Secretary of Transportation
Washington, DC 20590

I look forward to your continued support and invaluable contributions toward these efforts.


Gordon J. Linton