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Procurement - Day 1

Introduction

As a subrecipient of federal funds, each time your organization makes a purchase or awards a contract using federal funds, how you go about deciding to which vendor to give your business is subject to federal procurement requirements (as well as any state or local requirements that apply to your organization). This is true for anything you purchase or contract for with FTA funding: vehicles and equipment, outsourced maintenance and repairs, materials and supplies, computer technology, professional services, construction, etc.  

Each FTA subrecipient is required to have its own written procurement procedures and to follow them. Your procurement policies and procedures are expected to comply with FTA requirements, as well as any requirements or guidelines from your state DOT. The federal guidelines ensure that your agency uses federal funding to obtain the best and most appropriate product or service at the best price. The guidelines are also designed to ensure that all vendors capable of providing a good or service are given an opportunity to compete for a contract. In addition, your agency needs to maintain written standards of conduct governing employees engaged in the awarding and administering third-party contracts, so as to prevent personal conflicts of interest or the acceptance of gifts or favors.

This Procurement Day 1 page offers an introduction to the FTA requirements and the general steps to take before making a purchase or awarding a contract. The Day 2 page provides information you will likely need to know within your first few months as a rural transit manager, as well as links to additional trainings and resources. You are encouraged to review Day 1 in its entirety first, to gain an overall understanding of the federal procurement requirements and where the supplemental information in Day 2 fits in. 

Keep in mind this not a comprehensive guide to procurement, and you should consult the outside documents provided for further guidance. FTA procurement requirements and guidelines are lengthy and complex, and as a new manager, you may find it easier to get an overview first, and then delve deeper when it comes time to make a purchase.

Much of the information here comes from Circular 4220.1F, “Third Party Contracting Guidance”  and the “Best Practices Procurement Manual” (revised fall 2016) on the FTA website. In addition, this page has been updated to incorporate changes from the “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” (2 CFR Part 200, commonly known as the “Super Circular”). The Super Circular consolidated eight circulars into uniform regulations located in Title 2 of the Code of Federal Regulations. It applies to all federal grants and cooperative agreements awarded for fiscal years beginning on or after its effective date of December 26, 2014. Per the FTA's FY 2017 Comprehensive Review Guide, the Super Circular requirements should be the point of reference over Circular 4220.1F where there is conflicting information between the two.
 

General Information and Key Terms

In reviewing the requirements and recommended practices on this page, keep in mind the following:

In general, the dollar amount of your purchase or contract impacts how much effort must be put into finding and evaluating the potential choices.  As an introduction, the following three ranges are specified by the FTA. These dollar ranges/thresholds and the requirements they invoke, as well as what is meant by a formal competitive solicitation, will be discussed under “Procurement Process Steps.” 

  • $3,500 or less is considered a “micro-purchase,” which involves the fewest federal requirements, effective October 1, 2015.
  • Over $3,500 up to $150,000 is considered a “small purchase” and triggers additional requirements, including comparing costs from multiple vendors.
  • Over $150,000 is considered a larger purchase, and triggers the need for a formal competitive solicitation and other additional requirements.

There must be a cost or price analysis, to ensure you are getting a fair and reasonable price.

The type of goods or services you are procuring also impacts when certain federal requirements are triggered. For example, buying a vehicle entails special requirements, while construction contracts have different requirements.

Your state DOT may have additional requirements or lower dollar thresholds for when requirements are triggered, and new transit managers are advised to ask their state representatives about state requirements before purchasing or procuring anything that might make use of federal or state transit funds. If your transportation program is part of a local government, you will also need to follow applicable local requirements.

Ensuring that your written procurement procedures comply with applicable federal, state, and local levels of requirements, following your own procedures, and maintaining well-organized documentation of each procurement will help you avoid potential issues in the event your procurement system comes under scrutiny. The FTA places emphasis on oversight of grantees’ procurement practices, and requires states to ensure that their subrecipients are following the FTA rules.

Also, here are a few key procurement terms you will need to know along the way:

  • A solicitation is a purchasing entity's request for offers, including a telephone request for price quotations, an invitation for bids, or a request for proposals.
  • An offer is a promise to provide goods or services according to specified terms and conditions in exchange for material compensation.
  • Acceptance is agreement to the terms of an offer. In most jurisdictions, ‘award’ by a public agency can constitute acceptance, and may create an enforceable contract.

 

Procurement Process Steps

While there are many different ways you can procure goods and services, there are general steps you should consider before you begin the procurement process, and should include such steps within your written procurement procedures. According to the APTA Standards Development Program, there are six major steps in a typical procurement process:

  1. Identify and explore the need
  2. Evaluate options and establish need for procurement
  3. Select procurement method
  4. Develop final solicitation
  5. Execute solicitation
  6. Contract administration

The sections below highlight some key issues of which you’ll need to be aware as you embark on a procurement process using federal funds.   

Steps 1 & 2 - Establish Need for Procurement and Evaluate Options

The first two steps in the APTA Standards Development Program’s recommended transit procurement process involve 1) determining what good or service your transit agency needs in order to achieve a goal, and 2) whether you need to procure that good or service or obtain it in some other way (for example, by relying on in-house staff to conduct market research rather than contracting with a consultant).

The following sections assume that you have already completed these two steps (see the APTA Standards Development Program's document for more detail) and know that you need to procure a particular good or service. For the most common types of procurements of rural transit operations, these steps can be relatively straightforward. For more complex projects, such as special technology or developing a new facility, a lot more study is needed to determine whether or not you need something, this need analysis may even be necessary to justify grant funding. 

Step 3 - Select Procurement Method

If you determine that a procurement is necessary, you next need to decide which procurement method is appropriate. Factors to be considered in this decision include:

  • Type of project (for example, vehicles, professional services, architectural engineering, etc.);
  • Estimated cost (based on your independent cost estimate, discussed next in this section); and
  • Federal and state requirements.

This section of the toolkit will be a general discussion about how each of these factors dictates which method you will use for your procurement and what each method involves. Please note that this is not a comprehensive guide to procurement, and you should consult the supplemental information page when referenced, the documents presented in this section, and the resources section for further guidance.

Since your procurement method options depend in large part on the dollar value of the eventual contract, an important step—and one required by FTA—is to conduct an Independent Cost Estimate (ICE) for the good or service you will be buying. Once you have a realistic estimated budget, you can move on to selecting the most appropriate procurement method.    

Independent Cost Estimate (ICE)

Conducting an ICE, to establish a reasonable price range for the goods or services you are procuring, should be done regardless of the size of the procurement.  As introduced earlier, FTA requires a price or cost analysis with every procurement action. The ICE serves as the first price/cost analysis required in every procurement process. Read more about Price or Cost Analysis on the Day 2: Supplemental Information page.

After bids or proposals are received (which happens in step 5, Execute Solicitations), the ICE can be used as the basis for the cost or price analysis that is required for all procurements. It is important for the integrity of the ICE that it be prepared before you receive bids or proposals. More about cost and price analysis can also be found in Section 4, “Evaluation of Proposals and Contract Award,” in FTA's Best Practices Procurement Manual and in FTA Circular 4220.1F.

To develop an ICE, you can use information such as: current market prices for commercial items; estimates based on previous, similar purchases or projects; informal cost estimates from manufacturers for the type and number of items you are procuring; or prices received by other transit agencies for goods or services comparable to your project. 

More information about conducting an Independent Cost Estimate can be found on the “Independent Cost Estimate” page on the FTA website. National RTAP’s ProcurementPRO web app includes an Independent Cost Estimate spreadsheet that you can use to organize the data used to develop your ICE (you can also access this file in the ‘Related Links’ section of the ProcurementPRO dashboard). You can access ProcurementPRO by going to the National RTAP website and either creating a new National RTAP in the Cloud account or logging into an existing account. 

Federal Procurement Methods

This section describes the federal procurement methods which are related to the dollar amount of the procurement: micro-purchases, small purchases, and large purchases. Please note that your state may have a lower threshold for each category, and if this is the case you should use the state thresholds. Your state may also have different names for these methods, or additional methods. It should also be noted that grantees should not split a larger purchase into two or more smaller purchases in order to avoid the competitive proposal process.

Micro-Purchases    

Effective for purchases on or after October 1, 2015, the micro-purchase threshold increased from $3,000 to $3,500, per FTA's FY 2017 Comprehensive Review Guide, page 137.  A purchase of $3,500 or less is considered a micro-purchase and does not require obtaining competitive quotations, if you determine that the price to be paid is fair and reasonable. It should be noted that construction contracts exceeding $2,000 do trigger the requirements of the Davis-Bacon Act and the Copeland “Anti-Kickback” Act, both of which protect construction employees. 

While you are not required to have a competitive process, it is a good practice to informally compare prices from different vendors to ensure the price you were quoted is in fact fair and reasonable. For more information on micro-purchasing, see the FTA Circular 4220.1F

Small Purchases 

In the Best Practices Procurement Manual, the FTA defines a small purchase as the “acquisition of services, supplies or other property that cost less than the federal simplified acquisition threshold.” This threshold is currently fixed at $150,000 in the Super Circular, which applies to the administration of all federal grants and cooperative agreements awarded for fiscal years beginning on or after December 26, 2014. (NOTE: for prior federal grants, the threshold for a Small Purchase procurement was $100,000.  Since some state DOTs may still be administering FTA grants from previous years, the $100,000 threshold may still apply to some subrecipient grants.) 

For Small Purchases, you do not have to conduct a full competitive proposal process, but you do have to get solicitations and quotations from at least two sources. This can be done either in writing or orally. For more information about small purchases, please see the Best Practices Procurement Manual, Section 3.4, "Procurement Methods” and Circular 4220.1F

Large Purchases 

Any purchase that is above the small purchase threshold is considered a large purchase and must have a competitive procurement, most commonly either through a sealed bid (also referred to as “invitation for bid method” or “formal competition”) or competitive proposal (also referred to as “request for proposals method” or “competitive negotiation”) process.

  • Sealed Bids - According to FTA Circular 4220.1F, the sealed bid process is one in which “bids are publicly solicited, and a firm fixed price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming to all the material terms and conditions of the invitation for bids, is lowest in price.”  An example of this is the purchase of diesel fuel.
  • Competitive Proposals - According to FTA Circular 4220.1F, the competitive proposal process should be used when “the nature of the procurement does not lend itself to sealed bidding and the recipient expects that more than one source will be willing and able to submit an offer or proposal.” Examples of this would be contracting for professional services such as consulting or operations management, or purchasing dispatching software.

Other special types of procurements may be used depending on what is being procured and the specific circumstances. While there is no overarching federal requirement that dictates that a particular method must be used when purchasing a particular good or service, some states may have a law with this requirement. 

More information about competitive procurement methods can be found in the Large Purchase section of the Procurement – Day 2 page of this toolkit, in FTA Circular 4220.1F (page 88/VI-9), and the Best Practices Procurement Manual, Section 3, “Types of Contracts.” 

Whichever method you use, in some circumstances it may be appropriate to share in a competitive procurement effort with another organization, through a collaborative process known as a joint procurement, or by purchasing through another organization’s FTA-compliance contract through an approach referred to as “piggybacking.”  Refer to the Day 2 page for more information on Joint Procurements and Piggybacking.

Step 4 - Develop Final Solicitation

For Micro-Purchases and Small Purchases

As noted above, purchases below the micro-purchase threshold ($3,500 effective October 1, 2015) have relatively few federal requirements (although your state may have its own set of requirements for projects of this size).   There are no federally-required solicitation documents for micro-purchases.

For small purchases (currently those valued between $3,501 and $150,000), it is a good practice (though not federally required) to prepare a written request for quotations that details the specifications for what you need—with such variables as quantity, size, function, when needed, etc.—so that you can share consistent information with all of vendors from whom you solicit quotes.  

Small purchases require certain contract clauses, with additional clauses triggered when contracts exceed $10,000, $25,000, and $100,000.  Also, construction contracts exceeding $2,000 must require your contractor to comply with the Davis-Bacon Act and the Copeland “Anti-Kickback” Act, both of which protect the wages of construction employees.  It is a good practice to prepare the appropriate contract clauses for your specific procurement and include them with your purchase request or request for quotes, in case they may impact a vendor’s price, willingness, or eligibility to provide you with the goods or services you are seeking.  

More discussion of federally required contract clauses is found later on this web page, and you can obtain recommended clause language through National RTAP’s ProcurementPRO tool. Again, your state may have a lower small purchase threshold, and if your ICE exceeds the state-imposed threshold, you should plan on conducting a competitive procurement. 

For Large Purchases: Drafting an IFB/RFP 

If your purchase will exceed the federal (or state) small purchase threshold, you will need to develop a formal solicitation package.  This will usually be an invitation for bids (IFB) for the “sealed bid” method, or request for proposals (RFP) for the “competitive proposal” method.  More information about these types of solicitations can be found in the Developing Competitive Solicitations section of the Procurement – Day 2 page of this toolkit.

Federal Clauses and Certifications

When procuring goods with federal funds, you must ensure that all federal clauses and certifications are included in your contract (as these requirements are passed down to your contractor), and the clauses and certifications you must include will depend on your particular procurement project.  National RTAP has developed a web app, ProcurementPRO, that uses the project information you provide to determine, and list, the required federal clauses and certifications that must be included in your procurement document.  This web app is free to use with a National RTAP in the Cloud account.  For more information about creating your account and accessing ProcurementPRO, please see the National RTAP website.  

The Best Practices Procurement Manual also has a list of federal clauses and certifications in Appendix A, but it is important to note that many of these need updating. Until this manual is updated, National RTAP’s ProcurementPRO contains more recent information, and the most recent FTA certifications and assurances and Master Agreement contain the most recent information.  The FTA Certifications and Assurances and FTA Master Agreement are typically updated every year, and you can find the most current FTA requirements, many of which apply to procurements, in these two documents. The most current Certifications and Assurances on the “Certifications & Assurances” page of the FTA website and the most current Master Agreement on the “FTA Grant Agreements” page of the FTA website.

Buy America Requirements 

According to the FTA’s Buy America requirements, all procurements costing more than $150,000 of iron, steel and manufactured products used in FTA-funded projects must be made in the United States, using at least the minimum required percentage of domestic content, and you are responsible for ensuring that all of the materials your contractor or bidder uses are in compliance with this requirement. While it is possible under the law to apply for and receive waivers for this requirement, it is rare that they will be granted. 

For more information, see FTA's "Buy America" webpage and the Buy America Handbook, which lays out the necessary steps to meet pre-award and post-delivery audit requirements. For more information about FTA’s policy on Buy America waivers, see this policy letter on the FTA website as well as the "Buy America" page.

Disadvantaged Business Enterprise (DBE) Requirements

FTA has a national goal of ensuring 10 percent of all contracts go to DBE contractors, and each time a grantee enters into a contract with a DBE contractor it is counted toward this goal.  To read more about DBE requirements, please see the Civil Rights section of this toolkit.

Preparing Vehicle Specifications 

Many states procure vehicles for their subrecipients by entering into a contract with a vehicle manufacturer and placing orders based on the needs of all of the agencies in the state. However, if you find yourself conducting your own procurement, there are some considerations to keep in mind. When considering what type of vehicle you need, you should ensure that it can cover both your current and projected needs. There are many questions you should ask yourself to fully understand what you need in a vehicle, and National RTAP’s “How to Buy a Vehicle” presents some of these questions in its first chapter. Such questions include what size vehicle do you need in terms of numbers of riders and efficiency for the routes it will serve? Are there specific environmental characteristics that will impact the type of vehicle needed? What is the capability of your maintenance staff and are there particular warranty concerns? Lastly, you will need to consider your budget for this purchase. 

After you have established baseline requirements for the vehicle, you can begin to research what the various manufacturers offer (your state vehicle procurement program may have helpful information and negotiated prices). If you determine that you will conduct an independent procurement process, you must list the specifications for your vehicle and include a description of how the vehicle will be used. Based on this written list and description, your next step should be to review any state or federal regulations that would apply. Requirements that should be considered are Buy America, Disadvantaged Business Enterprise, pre- and post-award audits, and ADA. It is important to do this to avoid procuring a vehicle that will raise issues down the road. For more information about preparing vehicle specifications, please see National RTAP's “How to Buy a Vehicle” training module and its MAP-21 Updates.

Protest Procedures   

According to Circular 4220.1F, you must have written protest procedures for both the sealed bid and competitive proposal methods (not needed for small purchases), and a protester must go through these procedures before he/she can appeal your decision to FTA or your state DOT.  More information on what should be included in your written protest procedures can be found on the Procurement – Day 2 page of this toolkit.

Step 5 - Execute Solicitation

Micro-Purchases and Small Purchases

For micro-purchases, FTA requires only that you need to determine that the price to be paid is fair and reasonable (based upon your ICE), and you need to be able to document how this determination was made. This could be accomplished by simply researching prices published through vendor websites, or by calling a couple of vendors and asking for prices or verbal quotes. Whichever approach you take, it is a good idea to keep written notes or screen printouts in your procurement files. And, because FTA Circular 4220.1F indicates that micro-purchases should be equitably distributed among local suppliers, a good practice is to work with different vendors on a rotating basis.

For small purchases, FTA requires subrecipients to obtain price or rate quotations from “an adequate number of qualified sources” (at least two, according to the Best Practices Procurement Manual). This can be accomplished in writing or orally; just be sure you maintain some form of written documentation in your procurement files.  Your state may have additional requirements.

Large Purchases

Large purchases (competitive solicitations) require a formal process that includes advertising your solicitation well in advance of the bid or proposal due date (allowing sufficient time for responses), typically allowing questions to be submitted. Sealed bids must be publicly opened at the time and place prescribed in the invitation for bids and are awarded to the lowest qualified bidder. Competitive proposals typically must be submitted by a specific date and time and are evaluated based on the factors specified in the solicitation document (technical factors in addition to price).  

Further important information on executing large purchase solicitations can be found on the Procurement – Day 2 page of this toolkit.

Awarding to a Qualified and Responsible Contractor

Before awarding a contract, you need to ensure that intended contractor has not been disqualified to conduct federal-funded projects. As detailed in Circular 4220.1F, FTA requires that ‘FTA-assisted contract awards be made only to “responsible” contractors possessing the ability, willingness, and integrity to perform successfully under the terms and conditions of the contract. Responsibility is a procurement issue that is determined by the recipient after receiving bids or proposals and before making contract award.’ Ability and willingness will generally be demonstrated by information submitted as part of the bid or proposal. Integrity is harder to verify, but two important activities are checking references and checking to make sure the organization and its principals have not been excluded from work under federally-funded contracts. 

Contracts valued over $25,000 specifically require a contract clause (“suspension and debarment”) certifying that the contractor and its principals have not been excluded or disqualified from participating in federally-funded contracts. Regardless of the size of your purchase, for your own protection, it is a good practice to check for potential exclusions on the System for Award Management at www.sam.gov as well as on your state’s list of contractors who have been barred from doing business with a public organization in the state.

Step 6 - Contract Administration

Procurement Contract Files

According to the Common Grant Rules (to read more about the Common Grant Rules, please see the 5311 Grant Management Requirements section of this toolkit), anytime you go through the procurement process you must keep records pertaining to various aspects of the project, and these files must be keep for three years after the project is closed. The FTA, on their “Contract Files” webpage, states that the minimum information that must be kept in the project file includes: “the rationale for the method of procurement; selection of contract type; reasons for contractor selection or rejection; and the basis for the contract price.” On this same page, the FTA also gives a detailed list of specific items that should be kept in your contract file:

  • A signed copy of the complete contract
  • All signed amendments including rationale for the contract change and justification for the resulting cost/price or delivery date change
  • All correspondence with the contractor
  • Approvals or disapprovals of contract deliveries
  • Requests for waivers or deviations and the associated responses
  • Documentation regarding settlement of claims and disputes
  • Documentation regarding stop work or suspension of work orders
  • Contract closeout documentation
  • Written record of Procurement History

For more information about the procurement contract file, you can also see Sections 4.7, “Documentation of Procurement Actions" and Section 5 "Contract Administration,” of the Best Practices Procurement Manual.

 

Section Sources

A variety of Additional Resources, including trainings and templates, can be found on the Procurement – Day 2 page of this toolkit.

 

The content on this page was updated by Beth Hamby of KFH Group, Inc. on 10/24/16.