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Advance and Progress Payments

Yes, if certain conditions are met.  Advance payments (sometimes called mobilization payments) are payments made to a contractor, including a transportation vehicle manufacturer, before the contractor incurs contract costs.

Pre-Award: A recipient may use local funds for advance payments before receiving an FTA grant. FTA formula grant programs usually come with automatic authority to incur costs pre-award. However, if there is no automatic pre-award authority for the procurement, then to maintain eligibility for FTA reimbursement after grant award, the recipient must obtain a letter of no prejudice or other pre-award authority from FTA before making an advance payment using local funds.

Post-Award: After FTA grant award, a recipient may use FTA assistance to make advance payments under a bus contract before the contractor has incurred costs under the contract if:

  • The recipient can provide sound business reasons for doing so, such as a reduction in the cost of the contract as a result of the advance payment and has obtained advance written concurrence from its FTA Regional Office.
  • An essential pre-condition to FTA’s concurrence is that the recipient must obtain adequate security from the contractor in the amount of the advance payment. For a rolling stock procurement, adequate security for an advance payment typically takes the form of a performance bond or a letter of credit.

Yes. Progress payments (sometimes called milestone payments) are payments made to the contractor prior to the completion of all contract work. Progress payments are a common practice for construction contracts and railcar procurements, and are permissible for bus procurements.

A recipient may use local funds for progress payments before receiving an FTA grant and maintain eligibility for FTA reimbursement after grant award if it has pre-award authority, or use FTA funds after FTA grant award, provided that (1) the recipient has sufficient written documentation to substantiate the basis for making progress payments and the completion of the work for which progress payments are requested; and (2) the recipient obtain adequate security from the contractor for the progress payments to safeguard against performance difficulties. For a rolling stock procurement, adequate security typically takes the form of a performance bond or letter of credit, but may be other types of security negotiated by the parties, such as receipt of title to the vehicles at an appropriate point in the manufacturing process. Recipients should consult with their FTA Regional Offices on the adequacy of alternative forms of security other than a bond or letter of credit.

With respect to documentation for rolling stock contracts, tying progress payments to the percentage of completion of the contract is not permissible.  Permissible bases for rolling stock progress payments includes the completion of discrete activities necessary to the performance of the contract. A recipient should be as specific as possible in its contract when describing the activities or milestones for which progress payments will be made.

FTA encourages the use of advance and progress payments to support a reasonable payment schedule for large capital purchases, and to reduce the financing costs that transit agencies ultimately pay as part of the contract price.  These payments are common for railcar contracts.

In the FY 2024 Buses and Bus Facilities and Low or No Emission Notice of Funding Opportunity, FTA is providing priority consideration to applicants who commit to using advance or progress payments. FTA will weigh this priority consideration more heavily than other priority considerations.

Bonding Requirements

FTA does not generally impose bonding requirements for bus procurements. FTA only requires a bond (or other form of security) for buses and equipment when a transit agency makes advance or progress payments with Federal funds in advance of receipt of the rolling stock. The advance or progress payments represent a Federal interest in the rolling stock that must be secured. Adequate security for advance and progress payments for rolling stock typically takes the form of a performance bond or letter of credit. For progress payments, other types of security also may be negotiated by the parties, such as transfer of title to the vehicles at an appropriate point in the manufacturing process upon receipt of a progress payment. Recipients should consult with their FTA Regional Offices on the adequacy of alternative forms of security other than a bond or letter of credit.

Transit agencies may choose to voluntarily impose bonding requirements for a bus procurement. Prior to doing so, agencies should consider the potential benefits and drawbacks.

Bonding costs can be expensive, increasing the cost of each bus for the transit agency and financing costs for a manufacturer. Some manufacturers have limited capacity to secure bonds simultaneously. Purchasing bonds also requires cash flow; thus, imposing bonding requirements can force some manufacturers to forgo an RFP depending on their overall financial capabilities when the RFP is released.

Under the Uniform Requirements, requiring excessive bonding is restrictive of competition (2 CFR 200.319(b)(2)). The costs of the bonds are also ultimately passed on to the customer (transit agencies).

Bus Grant Set Aside for Workforce Development

Transit agencies are encouraged to discuss training needs with their workforce and to develop training plans in collaboration with unions and other workforce representatives, as well as with workforce boards, community colleges, and other workforce organizations.

For transit agencies seeking Buses and Bus Facilities or Low-No funding for any project related to zero-emission vehicles (including vehicles, facilities, equipment, etc.), five percent of the total requested Federal amount attributable to zero-emission project components, including the workforce development activities but not including the required local share, must be used for workforce development unless the recipient certifies a smaller percentage is necessary to carry out their fleet transition plan. The dedicated five percent is to retrain the existing workforce and develop the workforce of the future, including registered apprenticeships and other joint labor-management training programs, as outlined in the applicant’s Zero-Emission Transition Plan, as well as supportive services.

Applicants must identify the proposed use of workforce development funds in the project proposal and identify them separately in the project budget. The amounts are additional, not a take-down, from other eligible project expenses. For example, if an application includes a Federal request of $95,000 for total capital costs of zero-emission vehicles and associated equipment, an additional Federal request of $5,000 should be included in the budget for workforce development expenses for a total Federal request of $100,000. The local share for the vehicles, equipment, and workforce development is in addition to the $100,000 Federal request.

Contract Adjustments

Yes. Under certain circumstances, FTA recipients may adjust existing contracts to address price increases.  All recipients should take every reasonable measure to control costs and be good stewards of Federal dollars wherever possible. The applicable Federal requirements on adjusting existing contracts are contained in the OMB Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Requirements”, codified at 2 CFR Part 200). In certain circumstances, the OMB Uniform Requirements permit the parties with an existing federally funded contract to modify the contract for several reasons, including price adjustments.  When permitted to modify a contract, FTA recipients are responsible, in accordance with good administrative practice and sound business judgment, for the settlement of all contractual and administrative issues arising out of procurements. 2 CFR 200.318(k).

Whether a particular modification is permissible—and what Federal requirements apply—will depend on a variety of factors, including the terms and conditions of that contract (e.g., change clauses, Producer Price Index adjustment clauses, and Consumer Price Index adjustment clauses); applicable state, local, or tribal procurement law; the terms of a price adjustment; and the scope of the contract modification.

For example, before a recipient modifies a contract, it must perform a cost or price analysis if the modification will exceed the simplified acquisition threshold (currently $250,000) (2 CFR 200.324(a)). If a modification will include profit for the vendor, the recipient must negotiate profit as a separate element of the price (2 CFR 200.324(b)).
Related online FTA resources include: 

Yes, FTA formula funding programs and certain other Federal funding may be available to contribute funding to cover an increase in price due to a contract modification. Local match requirements of the various programs would apply. For example, FTA’s Urbanized Area Formula Program, State of Good Repair Formula Program, and Rural Area Formula Program, along with the Federal Highway Administration’s flexible funding programs eligible for public transportation projects, such as the Surface Transportation Block Grant and Congestion Mitigation and Air Quality programs, may be available if the contract would be eligible under those respective programs.

Whether a price adjustment to a fixed price contract would be permissible, or would be an impermissible cardinal change is a fact-specific determination that will depend on all the relevant facts, such as applicable state, local, and tribal procurement law, the terms of any change clause, whether or not the contract has a price adjustment clause, and the terms of the RFP.

Recipients should consider these factors and consult with their FTA Regional Offices on allowability prior to reopening a fixed-price contract, particularly if there is no price adjustment clause.


Customizations

Agencies procuring base model buses are more likely to have their buses delivered faster, at a lower unit cost, and with less risk than agencies procuring highly customized buses.

Like any manufactured product, higher levels of bus customization can introduce greater risks to long-term reliability. Manufacturers cannot rigorously test every custom configuration and may not have the technical history with many of the requested custom components. Presenting higher risks for warranty coverage, and in turn, warranty costs. Thus, procuring a base model bus can lower both initial purchase costs as well as long-term maintenance risks, and improve overall service reliability.

In the FY 2024 Buses and Bus Facilities and Low or No Emission Notice of Funding Opportunity, FTA is giving priority consideration to competitive program applicants that commit to undertaking a joint procurement with 3 or more total transit agencies or using a base vehicle model and including a letter from the vehicle manufacturer certifying the applicant will use the manufacturer’s base model. FTA will weigh this priority consideration more heavily than other priority considerations.

Fleet Transition Plans

The Grants for Buses and Bus Facilities Competitive Program (49 U.S.C. § 5339(b)) and the Low or No Emission Program (49 U.S.C. § 5339(c)) include a requirement that any application for projects related to zero-emission vehicles include a Zero-Emission Transition Plan.

The Joint Office of Energy and Transportation offers technical assistance for transit agencies seeking to plan for and deploy clean transit buses. Your agency should reach out if it needs assistance completing a transition plan.

The cost of developing a transition plan is not eligible under the Buses and Bus Facilities or Low-No Program, but is eligible under the planning programs (49 U.S.C. § 5305) as well as under the urbanized area formula (49 U.S.C. § 5307) and rural area formula programs (49 U.S.C. § 5311).

As defined in statute, 49 U.S.C. 5339(c)(3)(D), a Zero-Emission Transition Plan must at a minimum:

  • Demonstrate a long-term fleet management plan with a strategy for how the applicant intends to use the current request for resources and future acquisitions.
  • Address the availability of current and future resources to meet costs for the transition and implementation.
    Consider policy and legislation impacting relevant technologies.
  • Include an evaluation of existing and future facilities and their relationship to the technology transition.
  • Describe the partnership of the applicant with the utility or alternative fuel provider.
  • Examine the impact of the transition on the applicant's current workforce by identifying skill gaps, training needs, and retraining needs of the applicant’s existing workers to operate and maintain zero-emission vehicles and related infrastructure and avoid displacement of the existing workforce.

Additional information, resources, and a guidebook are available at FTA’s fleet transition planning website and the Joint Office of Energy and Transportation Transit Technical Assistance page.


Joint Procurements

Joint procurement is a method of contracting in which two or more purchasers agree from the outset to use a single solicitation document and enter into a single contract with a vendor for delivery of property or services in a fixed quantity, even if expressed as a total minimum and total maximum. A lead agency conducts the procurement on behalf of itself and others (usually smaller agencies that may not have the resources needed to conduct a major procurement effectively). Unlike a State or local government purchasing schedule or contract, a joint procurement is not drafted to accommodate the needs of other parties that may later choose to participate in the benefits of that contract.

Additional information on the limitations of Joint Procurements and when they are encouraged can be found in Section 3 of FTA’s Best Practices Procurement & Lessons Learned Manual.

Yes. In joint bus procurements the term “joint procurement” means a method of contracting in which two or more purchasers agree from the outset to use a single solicitation document and enter into a single contract with a vendor for delivery of property or services in a fixed quantity, with a jointly developed technical specification as described in the RFP. Furthermore, while quantities in a contract may be expressed as a minimum and potential maximum order, a recipient must limit its procurements to the amount of property and services required to meet its reasonably expected needs without adding excess capacity for the purpose of assigning contract rights to others at a later date. FTA expects the recipient to be able to justify the quantities it procures.

Leasing

The Fixing America’s Surface Transportation (FAST) Act Section 3019(c) included language on leasing arrangements that highlights capital leasing procedures and requirements for rolling stock, related equipment, and the leasing of zero emission vehicle components.  Under the leasing program, grantees can acquire removable power sources such as batteries or fuel cells separately through a capital lease.

The leasing of the removable power source should not be included as part of the overall cost of the vehicle if the removable power source was acquired using a capital lease separate from the acquisition of the vehicle.

Other Topics

Yes, even though you received only one response, your documentation must support your efforts to solicit known sources. This should include a review of the solicitation notice and your Request for Proposal to ensure the solicitation was not unnecessarily restrictive. Also, your file documentation should state you followed up with all sources that requested the solicitation and asked why they did not propose.

Yes you can.

Yes, a transit agency can procure an indefinite quantity of vehicles by specifying a minimum order and a potential maximum order in its contract. Some agencies further allocate their order quantities by contract year.

In all cases, a recipient may contract only for its current and reasonably expected needs, and may not add excessive quantities to its contracts with the intention of assigning those contract rights to another entity at a later date.

Some recipients may have difficulty projecting their available funds far into the future. Nonetheless, recipients should realize that extreme spreads between minimum and maximum orders (e.g., minimum order of 10 buses, with a potential maximum of 200 buses) make it difficult for vendors to plan accordingly, and may cause the recipient to miss out on more advantageous pricing that could come from guaranteed orders. Therefore, FTA encourages recipients carefully to consider their actual likely orders and structure their contracts as nearly as possible to that likelihood.

Recipients with small needs should consider procuring off of a State schedule, or combining their orders in a joint procurement, to reduce administrative burdens and present a more attractive order volume.

 Yes.

Partnership Provisions in Notices of Funding Opportunity for Competitive Bus Programs for Low-No Vehicles

As permitted under Federal public transportation law (49 U.S.C. 5339(b)(10), (c)(8)), an applicant proposing a low or no emission project under the competitive Buses and Bus Facilities Program or the Low-No Program may include partnerships with other entities that intend to participate in the implementation of the project, including, but not limited to, specific vehicle manufacturers, equipment vendors, owners or operators of related facilities, or project consultants.

If an application that involves such a partnership is selected for funding, the project will be deemed to satisfy the requirement for a competitive procurement under 49 U.S.C. 5325(a) for the named entities.  Applicants are advised that any changes to the proposed partnership will require FTA written approval, must be consistent with the scope of the approved project, and may necessitate a competitive procurement.

No, an applicant must also submit the application under the Low-No program in order to use the partnership provision for the Buses and Bus Facilities Program application. A competitive low- or no-emission bus project using the partnership provision can apply under the Low-No Program or both programs, but not just the Buses and Bus Facilities Program.

The applicant must use the vendor proposed in the application. Any changes to the proposed partnership will require FTA written approval, must be consistent with the scope of the approved project, and may necessitate a competitive procurement.

Possible Actions to Accelerate Vehicle Delivery, Contain Costs and Risks

Transit agencies have several options. For example, they can avoid excessive customizations, prescriptive design-based specifications, and unnecessary bonding requirements. Agencies may consider:

  • Issuing performance specifications rather than design specifications in RFPs, allowing manufacturers to compete to deliver the best performing vehicle at a lower price without your agency prescribing how they are to achieve that performance.
    Performance-based specifications are a preferred procurement approach in OMB guidance and in FTA’s third-party procurement circular (4220.1F).
  • Performance-based specifications may be easier to develop and evaluate for agency staff, which may result in a faster procurement cycle.
  • Unduly restrictive, design-based specifications can run afoul of federal full and open competition requirements. E.g., 2 CFR 200.319(d)(1).
  • Transit agencies also can procure off a state schedule or use a joint procurement with a shared technical specification.
    Since it was authorized in 2015 by Section 3019 of the FAST Act (P.L. 114-94), many transit agencies are procuring off state schedules, even those not in their home state, to minimize their expenses in administering a procurement and get a more standardized bus at a better price that is able to be manufactured quicker.
  • On the payment side, progress payments are eligible for federal reimbursement and are a way to reduce manufacturers’ financing costs associated with contract, which should be reflected in a lower price.
  • Only require bonds or a letter of credit when necessary and at the minimum amount needed. FTA does not generally impose security requirements for bus procurements. FTA only requires adequate security for buses and equipment when a transit agency makes advance or progress payments with Federal funds in advance of receipt of the rolling stock.

Performance specifications are based on the function and performance of a product or service under specified conditions. By contrast, design specifications are based on the design of a product or service. Typical design specifications may include:

  • Dimensions, materials to be used, commonly and competitively available components, and non-proprietary manufacturing methods.

As a result, design specifications tend to be far more detailed and prescriptive.

In short, performance specifications encourage competition and innovation and may minimize workload on the agency developing the technical specifications within the RFP. Performance specifications place the greatest degree of responsibility on the contractor to deliver the promised performance.

Performance specifications are a preferred procurement approach in the Uniform Requirements, e.g., 2 CFR 200.319(d)(1), and in FTA’s third-party procurement circular (4220.1F).  Whether procuring a bus or vehicle component, performance-based specifications allow manufacturers to compete to deliver the best-performing vehicles at a lower price without agencies prescribing how they are to achieve that performance.


State Schedules

A “ State cooperative procurement schedule” (also known as a state schedule) means a cooperative contract between a State government or and 1 or more vendors under which the vendors agree to provide an option to purchase rolling stock and related equipment to the State government and any other participant, and the State government acts throughout the term of the contract as the lead procurement agency. The contract term may be for an initial term of not more than two years and may include three optional extensions of one year each. The State procurement agency in such a procurement may charge participants in the contract no more than one percent of the total value of the contract.

State cooperative purchasing contracts or state schedules are subject to federal requirements, including, but not limited to, full and open competition, no geographic preferences, Disadvantaged Business Enterprise (DBE). Buy America, and bus testing, and must include all FTA required clauses and certifications with its purchase orders issued under the State contract.

State cooperative purchase contracts are authorized by Section 3019 of the Fixing America’s Surface Transportation (FAST) Act of 2015.

Yes, an FTA grantee may purchase rolling stock and related equipment from any State’s cooperative procurement contract or schedule, if the grantee’s state allows it.

It depends on the terms of the specific state schedule. Generally, State schedules include base model buses with a series of available add-on options or configurations. Some customizations may not be allowable under the terms of the state schedule. A significant deviation from the terms of the State schedule contract may make the order subject to allegations it is a “cardinal change” from the State’s original procurement. Agencies should consult their FTA Regional Office to determine if their desired change is permissible.

That depends on the circumstances and needs of your agency. State schedules offer both benefits and drawbacks.

Procuring from a State schedule can help an individual agency avoid the full stand-alone competitive RFP process while still meeting federal procurement requirements. This can ease the workload on procurement teams, minimize administrative costs of undertaking a procurement, allow agencies to place their bus orders much faster, and help smaller agencies benefit from “volume” discounts. State schedules also allow agencies to easily compare pricing and specifications for base model buses, add-ons, and other configurations.

However, agencies procuring off a State schedule will not have the same control over a vehicle’s technical specification as agencies that issue their own competitive RFPs.

Useful Life Benchmarks

Per FTA’s Award Management Requirements Circular 5010.1E, the 12-year minimum useful life applies to the vehicle as a whole – not specific parts or supporting components like a charger.

Security cameras, fare-card readers, etc. may be replaced as needed and are eligible for assistance under most FTA formula programs, such as the urbanized area or rural formula programs.

Transit agencies should consider whether it makes more sense to procure these items separately from the vehicle purchase so that the technology is standardized across the agency and vehicle make/models.  Some agencies prefer to work directly through and contract with a technology provider rather than having a vehicle manufacturer(s) as a middle party.

Transit agencies should first seek all appropriate recourses from the vehicle manufacturer, including claims under any warranties.  If all recourses have been exhausted, transit agencies should discuss other options with their FTA Regional Office.

Per FTA’s Award Management Requirements Circular 5010.1E, the minimum useful life requirements are as follows:

Buses:

  • Large, heavy-duty transit buses including over-the-road buses (approximately 35' – 40' or larger including articulated buses): At least 12 years of service or an accumulation of at least 500,000 miles.
  • Small size, heavy-duty transit buses: At least 10 years or an accumulation of at least 350,000 miles.
  • Medium-size, medium-duty transit buses: At least seven years or an accumulation of at least 200,000 miles.
  • Medium-size, light-duty transit buses: At least five years or an accumulation of at least 150,000 miles.

Light Duty Vehicles:

Other light-duty vehicles used as equipment or to transport passengers (revenue service), such as regular and specialized vans, sedans, and light-duty buses including all bus models exempt from bus testing under 49 CFR part 665:

  • At least four years or an accumulation of at least 100,000 miles.

ZEBs and Spare Ratios

First, FTA’s 20% spare ratio requirement applies to fleets of 50 or more fixed route buses.  Smaller fleets do not have a fixed percentage, but the ratio should be reasonable.

Second, the spare ratio requirement applies at the time of a grant application to ensure the buses to be procured are needed.  If an agency anticipates that it may temporarily (up to 2 years) deviate from the spare ratio requirement with the purchase of new vehicles, it can seek approval for the deviation from its FTA Regional office.

Third, if an agency needs more electric buses operating than diesel buses during its peak service, -that becomes its new base. For example, if previously a grantee had 100 diesel buses operating in maximum fixed route service, it could have 20 spares for a total of 120 buses. If it needs 110 electric buses operating in maximum fixed route service, it can have 22 spares, for a total of 132 buses.

Finally, FTA permits grantees to retain vehicles that have met their useful life in contingency fleets, which do not count towards a grantee’s spare ratio.  Contingency fleets are permitted for emergency use and specifically for the introduction of zero-emission vehicles.

See FTA’s Spare Ratio page for additional FAQs.