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									Best Practices Procurement Manual — Appendix A.2 - Dear Colleague Letters          Page 1



                FEDERAL TRANSIT ADMINISTRATION
                   BEST PRACTICES PROCUREMENT MANUAL

    TABLE OF CONTENTS (Appendix A.2 - Governing Documents – Dear Colleague Letters)

A.2 – Dear Colleague Letters
1. January 20, 2004: Performance and Payment Bonding Requirements
2. May 29, 2002: Policy Changes and Clarifications re: Procurement Transactions
3. June 15, 2001: Feedback on the Effectiveness of FTA‘s Third Party Contracting
   Requirements and Procurement Assistance Program
4. December 21, 1998: Joint Procurements, Y2K Compliance Requirements
5. October 1, 1998: Revenue Contracts, Piggybacking, Tag-ons
6. September 4, 1998: APTA‘s Standard Bus Procurement Guidelines
7. March 18, 1997: Buy America Requirements of Pre-Award and Post-Delivery
Best Practices Procurement Manual — Appendix A.2 - Dear Colleague Letters   Page 2
Best Practices Procurement Manual — Appendix A.2 - Dear Colleague Letters                      Page 3

1. January 20, 2004: Performance and Payment Bonding Requirements




U.S. Department                          Administrator                      400 Seventh St. S.W.
of Transportation                                                           Washington, D.C. 20590
Federal Transit
Administration                           January 20, 2004                           C-01-04



Dear Colleague:
In working with our grantees and their transit suppliers, we have found some misunderstanding
about the Federal Transit Administration (FTA) requirements regarding performance and
payment bonds in Federally-assisted procurements, particularly for rolling stock procurements.
In short, FTA does not require bonding in any amount for rolling stock or any other non-
construction contracts. FTA leaves to the good business judgment of our grantees the discretion
to determine the appropriate amount of bonding –– if any –– to incorporate in non-construction
contracts.
With APTA‘s assistance, FTA examined the prices rolling stock manufacturers pay for bonds
and how those prices have reacted to changes in the broader bond market. We found wide
variation in manufacturers‘‘ experiences overall, but a strong indication that rail car
manufacturers have been particularly hard hit in terms of bond pricing and availability. Needless
to say, high bond costs and reduced availability directly impact both the grantee‘s bottom line
and competition within the industry. I challenge each of you to carefully assess the risks involved
in any given procurement and carefully balance those risks against the cost and competitive
impacts of bonding requirements. At FTA, we will continue to work with the industry to identify
cost-effective ways to manage risks, and will share that information through our Best Practices
Procurement Manual. Additionally, we will continue to work with both the public and private
sectors to ensure our grantees have access to the information they need to make informed choices
as they consider bonds in their procurement practices.
Even in the area of construction contracts (where bonding is an FTA requirement), we remain
willing to review and approve sensible alternatives and exceptions to the bonding levels
identified as adequate to protect the Federal interest in FTA Circular 4220.1E. The Circular notes
that ―a Grantee may seek FTA approval of its bonding policy and requirements if they do not
comply with these criteria,‖ and FTA has approved exceptions to the circular requirements.
As responsible stewards of our public resources, it is incumbent upon each of us to maximize the
benefits generated by every transit dollar. Please review your bonding practices to ensure that
Best Practices Procurement Manual — Appendix A.2 - Dear Colleague Letters                  Page 4


you are prudently utilizing this important tool. I look forward to sharing the sound and
innovative practices that the transit industry always generates.


                                                      Sincerely,




                                                      Jennifer L. Dorn
Best Practices Procurement Manual — Appendix A.2 - Dear Colleague Letters                      Page 5

2. May 29, 2002: Policy Changes and Clarifications re: Procurement Transactions




U.S. Department                                  Administrator              400 Seventh St. S.W.
of Transportation                                                           Washington, D.C. 20590
Federal Transit
Administration                                   May 29, 2002                       C-08-02




Dear Colleague:

I am pleased to announce a number of Federal Transit Administration (FTA) policy changes and
clarifications that we believe will simplify your procurement transactions, as well as several
initiatives intended to identify and share successful procurement practices. The changes and
clarifications involve:

"   Rescission of five-year contract term limitations;
"   Use of E-commerce for procurements;
"   Rules on advance payments; and
"   The effect of using of various FTA funding sources for operating and preventive
           maintenance contracts.

In addition, you will find information on a new Best Practices initiative, as well as the
introduction of the Experimental Procurement Laboratory initiative. Through these initiatives,
we hope to persuade you to share what works well and encourage new thinking about how
procurement practices can be simplified and improved.

This information will also be made available on the FTA public website, and I encourage you to
share it with your procurement staff. I also want to thank the many transit agencies that have
offered comments on how to improve procurement practices, and particularly those who
responded to our recent survey.

POLICY CHANGES AND CLARIFICATIONS

A. FTA C 4220.1D, Paragraph 7(m) -- Contract Term Limitation

The five-year contract term limitation for FTA-funded contracts, including "revenue contracts,"
awarded by grant recipients is hereby rescinded. Revenue contracts are those that utilize FTA-
funded real estate, equipment and facilities to generate revenue. With this rescission, grant
recipients no longer need to obtain FTA approval for contract terms exceeding five years. Please
Best Practices Procurement Manual — Appendix A.2 - Dear Colleague Letters                     Page 6

note, however, that contracts for rolling stock and replacement parts are still limited to not more
than five years, as required by statute. (49 United States Code Section 5326(b))

Grantees are expected to continue to be judicious in establishing and extending their contract
terms. Good procurement practice dictates that grantees enter into contract terms no longer than
minimally necessary to accomplish the purpose of the contract.

B. E-Commerce

E-Commerce has been and continues to be an allowable means to conduct procurements. If a
grantee chooses to utilize E-Commerce, written procedures must be developed and all
requirements for full and open competition must be met.

C. FTA C4220.1D, Paragraph 12.a. -- Advance Payments

There continues to be some confusion about FTA policy with respect to advance payments,
stemming from the interpretation of American Public Transportation Association‘s Standard Bus
Procurement Guidelines and subsequent FTA Dear Colleague Letters. The clarification of
requirements regarding advance payments provided in the Dear Colleague Letter of June 15,
2001, remains accurate, but is further clarified as follows:

FTA C 4220.1D, Paragraph 12, "Payment Provision in Third Party Contracts," states: "FTA does
not authorize and will not participate in funding payments to a contractor prior to the incurrence
of costs by the contractor unless prior written concurrence is obtained from FTA." This policy
remains unchanged: FTA funds may not be used to make advance payments unless prior written
concurrence is obtained from FTA. There is no prohibition on a grant recipient‘s use of local
funds for advance payments. However, advance payments made with local funds before a grant
has been awarded, or before the issuance of a letter of no prejudice or other pre-award authority,
are ineligible for reimbursement.

D. FTA C 4220.1D, Paragraph 4 – Applicability (Regarding Operating Assistance and
Preventive Maintenance)

FTA grant recipients who utilize FTA formula funds for operating assistance are required to
follow the requirements of the FTA C 4220.1D for all operating contracts. Since FTA formula
funds pay a percentage of the net operating deficit, such contracts cannot be segregated and FTA
C 4220.1D must be applied.

Congestion Mitigation and Air Quality (CMAQ) and Job Access/Reverse Commute (JARC)
project funds may be used for operations. Grantees must follow the Circular requirements for
any specific contracts that utilize CMAQ or JARC funds. However, the use of CMAQ and JARC
funds for operations does not trigger the applicability of the Circular to all other operating
contracts.
Best Practices Procurement Manual — Appendix A.2 - Dear Colleague Letters                    Page 7

Grantees who utilize formula capital funds for preventive maintenance contracts are subject to
the following requirements under the Circular. If the FTA formula funds are allocated to discrete
contracts identified in the grant application for preventive maintenance, then FTA C 4220.1D
will apply only to those specific contracts. If the FTA formula funds are not allocated to discrete
contracts in the grant application, then all preventive maintenance contracts are subject to the
requirements of the Circular.

BEST PRACTICES INITIATIVES

A. Best Practices Contest

While the Best Practices Procurement Manual (BPPM) contains some excellent examples of
grantee "best practices," we are eager to encourage the sharing of many more of these practical
ideas among grantees. Everyone who submits a best practice that is incorporated into the Manual
will be publicly recognized at American Public Transit Association‘s Annual Meeting. In
addition, one individual/agency will be recognized at the annual Awards Ceremony, and APTA
will waive the conference registration fee for the person who submits the winning "best
practice."

B. Experimental Procurement Laboratory

FTA also is creating an experimental "procurement laboratory." The goal of this initiative is to
allow and encourage grantees to improve or streamline their contracting processes through
innovative approaches. Grantees are invited to propose procurement innovations for
consideration and approval by FTA. If the experiment is successful, the practice will be
published in the Best Practices Procurement Manual.

More information about the Best Practices Contest and the Experimental Procurement
Laboratory initiative will be published soon on the FTA website, the BPPM website, and the
APTA website, and will be made available at FTA conferences and National Transit Institute
procurement courses.

I appreciate your continued support, and look forward to working with you to further improve
procurement practices in the transportation industry. Regional Office.


                                                      Sincerely,




                                                      Jennifer L. Dorn
Best Practices Procurement Manual — Appendix A.2 - Dear Colleague Letters                      Page 8

3. June 15, 2001: Feedback on the Effectiveness of FTA’s Third Party Contracting
Requirements and Procurement Assistance Program




U.S. Department
Of Transportation                                                           400 Seventh St. S.W.
Federal Transit                                                             Washington, D.C. 20590
Administration                        Deputy Administrator

                                                                            C-08-01
                                       June 15, 2001

Dear Colleague:

In May 1999, the Federal Transit Administration (FTA) issued a survey inviting feedback on the
effectiveness of FTA‘s Third Party Contracting Requirements and Procurement Assistance
Program. Based on comments and suggestions in the survey responses, FTA implemented certain
changes to these two areas of our program. These changes include offering an increased number
and variety of procurement courses; adding to and refining the "Best Practices Procurement
Manual;" and posting procurement questions and answers on the Internet.

During a workshop held on May 9, 200l, at the American Public Transportation Association
(APTA) Bus and Paratransit Conference in Calgary, Canada, FTA provided an update on the
actions it has undertaken. The participants felt it was necessary to work collaboratively to
address the 5-year term limitation issue at a workshop dedicated solely to this topic at the Fall
APTA Bus Equipment and Maintenance/Procurement and Materials Management Conference in
Ft. Worth, Texas. Both FTA and APTA agreed to this recommendation.

It was also agreed that in the interim, FTA would exempt certain classes of contracts from the
requirement to obtain prior FTA approval for periods of performance in excess of a 5-year term,
and that FTA would clarify other areas of Circular 4220.1D, "FTA Third Party Contracting
Requirements," that the survey revealed were in need of further clarification.

A. FTA Circular 4220.1D, Paragraph 7(m) – Contract Period of Performance Limitation

Paragraph 7(m) states, "grantees shall not enter into either service or supply contracts with a
period of performance exceeding five years inclusive of options without prior written FTA
approval. A maximum of five years‘ requirements may be acquired under a single contract
without prior FTA approval (including rolling stock), even though delivery may occur beyond
five years after the date of contract award. FTA approval is required for contract extensions or
renewals beyond a five-year term. This limitation does not apply to construction contracts or to
leases of real property for the life of a transit asset to be constructed on such property (which
Best Practices Procurement Manual — Appendix A.2 - Dear Colleague Letters                        Page 9

period will extend beyond five years in order to fulfill the statutory requirements that grantees
have ‗satisfactory continuing control.‘)"

Further, a blanket waiver is granted to exempt the following class of contracts from the
requirement to obtain FTA prior approval for a contract term in excess of five years:

        Non-construction related contracts such as proprietary software maintenance, consulting
        and other professional services contracts (except contracts for general engineering
        services) awarded for a discrete, identifiable item, e.g., a particular piece of litigation, a
        discrete tort claim, and audit of a particular transaction or fiscal year.

This blanket waiver, however, does not cover the following class:

        All contracts for general engineering consultant services are non-exempt. Task order type
        arrangements for engineering, architectural, legal, accounting, non-proprietary software
        maintenance or other professional services not tied directly to a related construction
        contract or a discrete identifiable item, require prior FTA approval for periods of
        performance in excess of five years.

B. Revenue Contracts – Five-Year Term Limitation

It is FTA‘s policy that all persons be afforded an equal opportunity to benefit from business
opportunities arising from use of FTA-funded assets. It is also FTA‘s policy to encourage FTA
recipients to maximize non-farebox revenues through contractual and other appropriate
arrangements involving non-interfering uses of such FTA-funded assets. The establishment of a
five-year contract term limitation is one means by which FTA seeks to balance these potentially
conflicting policies. A review of recent requests for exemption from the 5-year limitation in the
area of "revenue contracts," however, suggests that prior FTA approval is not required under
certain conditions. Accordingly, prior FTA approval of the following categories of "revenue
contracts" in excess of five years is no longer required:

        1). Non-exclusive revenue contracts: Revenue contracts involving business opportunities,
        that due to their nature and the capacity of the transit system, are not limited by physical
        constraints or grantee policy to any specific number of entrants do not require prior FTA
        approval. For example, if a grantee allows any vendor to install fiber optic cable within
        the grantee‘s right-of-way on reasonable terms and conditions, until such time as the
        grantee decides to limit the number of entrants due to capacity of the system or other
        factors, there is no need for prior FTA review. Another example might be allowing
        multiple vendors to put transmission towers or antennas on grantee property.

        2). Exclusive revenue contracts under certain conditions: Revenue contracts involving
        business opportunities due to their nature and the capacity of the transit system which are
        limited to a specific number of entrants, whether due to physical constraints or grantee
        policy, do not require prior FTA approval where the following conditions exist and are
        documented in the grantee‘s files:
Best Practices Procurement Manual — Appendix A.2 - Dear Colleague Letters                    Page 10

                a). Contracts are awarded through a competitive process;
                b). Economic analysis shows that a contract term longer than five years is
                necessary to allow the contractor to recover any required capital investment and a
                reasonable return on investment taking into account both tax (depreciation) and
                economic/business considerations.

        3). Transit Oriented/Joint Development Revenue Contracts. Transit Oriented
        Developments and Joint Development projects undertaken in conformance with FTA
        joint development policies may subsequently give rise to revenue contracts. Prior FTA
        concurrence in a contract term in excess of five years is governed by the same criteria as
        described in paragraphs 1) and 2) above. Note that FTA routine oversight and
        concurrence in transit oriented development and joint development projects remains
        unchanged by this exemption.

C. FTA Circular 4220.1D, Paragraph 12 - Payment Provisions in Third Party Contracts

The survey results indicated that there is some confusion concerning the use of advance
payments. With regard to advance payments, the Circular states, "FTA does not authorize and
will not participate in funding payments to a contractor prior to the incurrence of costs by the
contractor unless prior written concurrence is obtained from FTA." This policy is unchanged. To
clarify, however, there is no prohibition on a Grantee‘s using local funds for advance payments
where a grant has been awarded or the project is covered by a letter of no prejudice, or other pre-
award authority. Please note that advance payments made before a grant has been awarded or
before the project is covered by a letter of no prejudice or other pre-award authority, will be
ineligible for reimbursement.

D. Preventive Maintenance

Preventive maintenance is an eligible expense under FTA‘s capital and operating assistance
programs depending upon the size of the population served by the grantee. Grantees have asked
how the requirements of FTA Circular 4220.1D apply when preventive maintenance activities
are contracted to third parties under a capital assistance program rather than an operating
assistance program. The question arises because of the different treatment of capital and
operating contracts by the Circular in accordance with applicable law. There are two options.
Under the capital assistance program, the grantee may apply the Circular only to the specific
preventive maintenance contracts identified in the grant application, but not others. Alternatively,
the grantee may elect to receive preventive maintenance funds as a certain percentage of total
maintenance costs. Under this alternative, the requirements of the Circular apply across the board
to all of the grantee‘s maintenance contracts. Please note that under the latter option, grantees
may not selectively exclude certain maintenance contracts from the total operations amount on
which they base their percentage calculation.
All of the changes reflected in this "Dear Colleague" letter are effective immediately.
Best Practices Procurement Manual — Appendix A.2 - Dear Colleague Letters               Page 11

FTA does appreciate your feedback. Please continue to give us your suggestions for improving
our procurement program.


                                                     Sincerely,
                                                      Signed
                                                     Hiram J. Walker
                                                     Acting Deputy Administrator
Best Practices Procurement Manual — Appendix A.2 - Dear Colleague Letters                     Page 12

4. December 21, 1998: Joint Procurements, Y2K Compliance Requirements




U.S. Department
Of Transportation                                                           400 Seventh St. S.W.
Federal Transit                                                             Washington, D.C. 20590
Administration                          The Administrator

                                                                            C-98-39
                                      December 21, 1998



Dear Colleague:

Recently, there have been several requests for more insight and guidance on the Federal Transit
Administration's (FTA) policy and philosophy on various aspects of procurement, and
specifically on the use of different strategies and approaches in fulfilling Year 2000 (Y2K)
compliance requirements. The minimum requirements applicable to FTA funded procurements
are set forth in FTA Circular 4220.1D, "Third Party Contracting Guidelines." The Circular has
been designed to provide grant recipients maximum flexibility to operate within the framework
of the minimum requirements.

In keeping with the discretionary powers and authority which are vested in grant recipients
through the Circular, the FTA fully supports the use of creative and innovative procurement
techniques and strategies. Grant recipients may utilize these tools to procure their actual needs
and for the purpose of leveraging bargaining power, achieving economies-of-scale and/or
fulfilling Y2K compliance requirements. Further, recipients are afforded the freedom to
collaborate and to partner with each other in order to facilitate and to maximize the use of
innovative procurement techniques. This includes, but is not limited to, conducting joint
procurements; proceeding with awards that result from proper "piggybacking" transactions;
and/or developing standard specifications for consolidated purchases to address common needs
for equipment and services such as escalators, Y2K technology, hardware and software. FTA
recently clarified its position on "piggybacking" and "tag-one" in a "Dear Colleague" letter dated
October 1, 1998, a copy of which is attached. Presently, that policy applies to rolling stock
procurements only; however, consideration is being given to expanding the policy to cover other
procurements in the near future.

Joint procurements may be conducted on a regional, statewide or national basis pursuant to the
needs and applicable regulatory and statutory requirements of the parties to the procurement. The
FTA has specifically encouraged the use of joint procurements for rolling stock. Guidance on
innovative procurement techniques, such as joint procurements, will be covered in the next issue
of the "Best Practices Procurement Manual" (BPPM). Currently, the BPPM contains an example
Best Practices Procurement Manual — Appendix A.2 - Dear Colleague Letters                    Page 13

of a statewide acquisition of buses which was provided by the New York Department of
Transportation to facilitate and to assist others in use of the joint procurement concept.

Regardless of the procurement methodology or strategy chosen, the controlling requirement is
that FTA funded procurements must conform to the requirements of FTA Circular 4220.ID. The
guiding principle of the Circular is that procurements must be conducted in a manner that
provides for full and open competition. However, this does not preclude the award of contracts
on a non-competitive basis when supported by sound reasons documented in the recipients' files.
For example, sound reasons may exist to either conduct a limited competition among a few
known sources or to make award to a single source on a noncompetitive basis in order to fulfill
the Y2K compliance requirements. Specifically, the award of a noncompetitive contract to
address a Y2K problem would be permissible if circumstances existed where time is of the
essence to avoid creating a safety hazard in the operation of your transit system.

Should you have questions or desire assistance in addressing procurement issues relating to
fulfilling Y2K compliance requirements, please contact your respective FTA Regional Office.


                                                      Sincerely,




                                                     Gordon J. Linton
Best Practices Procurement Manual — Appendix A.2 - Dear Colleague Letters                            Page 14

5. October 1, 1998: Revenue Contracts, Piggybacking, Tag-ons




U.S. Department                                                             400 Seventh St. S.W.
Of Transportation                                                           Washington, D.C. 20590
Federal Transit                  The Administrator
Administration                                                                      C-98-25

                                  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, 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.
Best Practices Procurement Manual — Appendix A.2 - Dear Colleague Letters                     Page 15

        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.

                                                        Sincerely,




                                                        Gordon J. Linton
Best Practices Procurement Manual — Appendix A.2 - Dear Colleague Letters                            Page 16


6. September 4, 1998: APTA’s Standard Bus Procurement Guidelines




U.S. Department                                                             400 Seventh St. S.W.
Of Transportation                                                           Washington, D.C. 20590
Federal Transit                  The Administrator
Administration                                                                      C-98-16


                                 September 4, 1998


Dear Colleague:

With the Publication of the Standard Bus Procurement Guidelines (SBPG), I issued a letter
pronouncing my support of the collaborative efforts of the American Public Transit Association
(APTA) and the Federal Transit Administration (FTA). In that letter I assured APTA members
that any FTA funded procurement in conformance with the Phase I guidelines would be deemed
to comply with FTA's third party procurement guidelines with respect to the areas addressed.

Recently, it has come to my attention that my letter has created some confusion regarding its
application and impact on the requirements of third party contracting set forth in the FTA
Circular 4220.lD. To clarify this issue, I wish to reiterate that the requirements for FTA funded
procurements are covered in FTA Circular 4220.ID. I strongly urge grantees desiring to conduct
FTA funded bus procurements utilizing the SBPG to ensure there are no conflicts with the FTA
circular. Should clarification be required, grantees should contact their appropriate FTA regional
office for guidance.

In closing, I hope this clarifies any confusion relating to FTA procurement requirements, and I
offer my continued support to this effort and those in the future.

                                                        Sincerely,




                                                       Gordon J. Linton
Best Practices Procurement Manual — Appendix A.2 - Dear Colleague Letters                            Page 17


7. March 18, 1997: Buy America Requirements of Pre-Award and Post-Delivery




U.S. Department                                                             400 Seventh St. S.W.
Of Transportation                                                           Washington, D.C. 20590
Federal Transit                  The Administrator
Administration                                                                      C-97-03

                                 March 18, 1997

Dear Colleague:

A Buy America problem and follow-up surveys of several Pre-Award and Post-Delivery
Reviews of bus procurements indicates that many grantees and their contractors are not
conducting adequate reviews of the Buy America requirements. The Pre-Award and Post-
Delivery Reviews are designed to ensure that any vehicle purchased with Federal Transit
Administration funds has at least a 60 percent domestic content and undergoes final assembly in
the United States.

In general, we have found that, particularly in the case of final assembly activities, the grantees
surveyed did not provide a description of the manufacturer's final assembly activities and an
evaluation of whether Buy America requirements were met. When a grantee receives
information from a manufacturer, it must review this information to determine whether it is
sufficient to determine if the manufacturer has met the Buy America requirements. If the
information is insufficient, the grantee must take whatever steps are necessary to satisfy itself
that the manufacturer is complying with the Buy America requirements. This will usually
involve seeking additional information from the manufacturer. Otherwise, the grantee certifies
compliance with Buy America at its own risk.
In order to assist you in conducting reviews in accordance with the Pre-Award and Post-Delivery
Review Regulation, 49 CFR Part 663, I have outlined in the enclosure the procedures a grantee
must use to ensure that any vehicles it purchases comply with Buy America. If you have any
questions regarding Buy America compliance, please contact your Regional Office.
                                                       Sincerely,




                                                      Gordon J. Linton
Enclosure
Best Practices Procurement Manual — Appendix A.2 - Dear Colleague Letters                    Page 18



                   FEDERAL TRANSIT ADMINISTRATION
     GUIDANCE ON BUY AMERICA REQUIREMENTS OF THE PRE-AWARD AND
                       POST-DELIVERY REVIEWS

This guidance only addresses the Buy America requirements of the Pre-Award and Post-Delivery
Reviews. The Purchaser's Requirements and the Federal Motor Vehicle Safety Standards
requirements must still be met.

I.      Pre-Award Review (before contract award)

        Review data and information on Buy America compliance submitted by the
        manufacturer, including

        Proposed domestic content of vehicle components to determine that the 60 percent United
        States content requirement is met;

                - Proposed final assembly location; and

                - Manufacturing activities that will take place during final assembly.

        The manufacturer should provide enough detail about these activities to allow for the
        determination that these activities would constitute adequate final assembly under Buy
        America requirements. If the manufacturer does not provide sufficient information, the
        grantee must seek additional information. If the grantee determines that the activities are
        not adequate, the manufacturer must be asked to submit a revised manufacturing plan. A
        contract may not be awarded until the grantee is assured that the Buy America
        requirements will be met.

        Final assembly is defined in 49 CFR Part 661 Buy America Requirements; Final Rule as
        "the creation of the end product from different elements brought together for that purpose
        through the application of manufacturing processes." In the case of the manufacture of a
        new rail car, final assembly would typically include, as a minimum, the following
        operations: installation and interconnection of propulsion control equipment, propulsion
        cooling equipment, brake equipment, energy sources for auxiliaries and controls, heating
        and air conditioning, communications equipment, motors, wheels and axles, suspensions
        and frames; the inspection and verification of all installation and interconnection work;
        and the in-plant testing of the stationary product to verify all functions. In the case of a
        new bus, final assembly would typically include, at a minimum, the installation and
        interconnection of the engine, transmission, axles, including the cooling and braking
        systems; the installation and interconnection of the heating and air conditioning
        equipment; the installation of pneumatic and electrical systems, door systems, passenger
        seats, passenger grab rails, destination signs, wheelchair lifts; and road testing, final
        inspection, repairs and preparation of the vehicles for delivery.
Best Practices Procurement Manual — Appendix A.2 - Dear Colleague Letters                    Page 19

        If a manufacturer's final assembly processes do not include all the activities that are
        typically considered the minimum requirements, it can request a Federal Transit
        Administration (FTA) determination of compliance. FTA will review these requests on a
        case-by-case basis to determine compliance with Buy America.

        The information reviewed supports a Pre-Award Buy America Certification that the
        proposed procurement meets the domestic content, the final assembly location and final
        assembly activities requirements.

II.     Post-Delivery Review Requirements (during and after manufacturing)

        The grantee is required to:

         -      Review actual component content to ensure that the vehicle meets the 60 percent
                Buy America domestic content requirement;

        -       Check that the final assembly location is in the United States and the
                manufacturer's final assembly activities meet the requirements outlined in
                paragraph I above; and

        -       Have an on-site inspector for rail car procurements and bus procurements of
                greater than 10 vehicles.

        The inspector must verify that the actual manufacturing processes are consistent with the
        information provided by the manufacturer or with the grantee's own assessments. The
        post-delivery reviews verifies a grantee's Post-Delivery Buy America Certification that
        the domestic content, final assembly location and final assembly activities requirements
        are met. Any questions or uncertainties concerning these activities should be referred
        immediately to FTA.

								
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