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Procurement - Day 2

This page provides supplemental information about FTA procurement requirements that sooner or later you will need to know as a rural transit manager. If you have not already reviewed the Day 1 page, you are encouraged to do so before delving into the sections on this page, which build on the information you need on “day one” as a transit manager.

On this page you will find deeper information on the following topics:


Price and Cost Analysis

FTA requires a cost or price analysis for every procurement decision, to ensure you are getting a fair and reasonable price. The Independent Cost Estimate (ICE) required at the beginning of the procurement process is the first such analysis, necessary for deciding what type of procurement method to use. You will also need to conduct a cost or price analysis when reviewing offers (including contract options), and before deciding whether to execute options down the road, or to pursue a new procurement.

The ICE provides an important foundation for each of the decisions you may face.  Once you have an understanding of what the good or service should cost, you can use this information to analyze the price quotes in the bids or proposals you receive.  How does the proposer or bidder’s price quote compare to the price range you have put together? If it is much higher than your price range, you may overpay for the goods or services if you choose that contractor.  However, if the quote is significantly lower than your price range, you should carefully review the bid or proposal to ensure it contains all of the project elements you had requested.  The range you determine in your ICE will give you a baseline of comparison as you conduct your price/cost analysis when you are reviewing bids or proposals—as well as in reviewing contract options.

Cost analysis is the appropriate approach in several circumstances: when proposers have been asked to submit the elements of their proposed cost (for example, labor cost, overhead, direct expenses, and profit), as is typical when professional consulting or architectural and engineering (A&E) services are being procured; when price competition is insufficient to determine the reasonableness of a proposed cost; and for sole source procurements. To conduct a cost analysis, you must look at each cost element and how it was developed to determine if it is reasonable. In such cases, your ICE will need to be broken down into cost elements as well, in order to use it to evaluate the proposer’s price.

Price analysis may be used under other circumstances.  Price analysis considers the total proposed price without examining separate cost elements.  As explained in Section 4.6, “Cost and Price Analysis,” of the Best Practices Procurement Manual, the techniques for price analysis include:

  • adequate price competition, 
  • prices set by law or regulation, 
  • established catalog and market prices, 
  • comparison to previous purchases, 
  • comparison to a valid recipient independent estimate, and 
  • value analysis.  

More information about cost and price analysis and the different techniques can also be found in Section 4.6 of the Best Practices Procurement Manual and in FTA Circular 4220.1F.


Large Purchase Methods

If you are planning a purchase valued over $150,000, you need to conduct 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. These two processes are appropriate for different types of projects.  If you are developing a new facility or making improvements to an existing facility, you need to know about a third method specifically for procuring architectural and engineering services.  And under certain circumstances, it may be appropriate to conduct a non-competitive “sole source” procurement.  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.

  

Sealed bids, competitive proposals, architectural and engineering, and sole source procurements are described below, with more information found in Section 3, "Types of Contracts" and Section 4, “Evaluation of Proposals and Contract Award” of the Best Practices Procurement ManualFTA Circular 4220.1F, and APTA’s Standard Bus Procurement Guidelines.

 

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.  See FTA Circular 4220.1F (page 88/VI-9) and the Best Practices Procurement Manual (Sections 3.4 and 4.2) for more information about sealed bids. 

FTA Circular 4220.1F states that this is the most appropriate method of procurement under the following conditions:   

  • The description of what you are purchasing is complete, realistic and precise. 
  • There are at least two responsible bidders who are willing and able to compete for the business. 
  • Generally speaking, the procurement lends itself to a firm fixed price contract. In this type of contract, the final price is established in the contract, and, except for allowable adjustments or incentives, does not change regardless of what the contractor spends to deliver the good or service. 
  • You can select a successful bidder based on price and price-related factors. 
  • There will be no need for discussions with bidders after their proposals are submitted as the decision will be made on price. 

If you decide that the sealed bid process is appropriate for your procurement, you must advertise an invitation for bids (IFB) that includes a detailed description of the property or goods desired, and you must give an adequate amount of time for bidders to prepare their responses before the bid opening date.  You must open and record the bids at the time you advertised on the IFB - bids should not be opened before this point. You must ensure you receive bids from at least two sources, and a firm fixed price contract is awarded in writing to the successful bidder.

 

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. This includes the following circumstances:

  • The services or goods you need are described using “performance or functional specifications,” and price is not the only deciding factor. There may also be detailed technical specifications or the need for discussions.
  • You do not know how many potential bidders there are, and you are not allowed, by law, to enter into a contract if there is only one bidder.
  • You will not base your decision on price alone.
  • You expect that there will be discussions with bidders after they have submitted their proposals.

If you decide that a competitive proposal process is appropriate for your purchase, you must publicly advertise your request for proposals (RFP), and this advertisement must include the evaluation factors (and their relative importance) you will use when you receive the proposals.  Before you can begin the evaluation process, you must ensure you have an adequate number of proposals, and a system in place to evaluate the proposals.  The successful proposal should be the most advantageous to your program when price and other factors are considered. 

More information about Competitive Proposals can be found in the Best Practices Procurement Manual Sections 3.4-3.7 and 4.3.


Architectural and Engineering (A&E) Services Procurements

According to FTA Circular 4220.1F, A&E services include “program management, construction management, feasibility studies, preliminary engineering, design, architectural, engineering, surveying, mapping or related services.”  You must use the qualifications-based method of procurement when these types of services are directly connected with the “construction, alteration or repair of real property.”  This means that the contract must be awarded to the most qualified proposer, and you can only consider the cost of the proposals after you have identified the most qualified proposer(s).  If you are not able to come to agreement with the most qualified proposer on a reasonable price for the service or good, at that point you can move on to the next most qualified proposer.  This process continues until you have found a proposer that can provide the product or service at a reasonable price.

More information can be found in FTA Circular 4220.1F, APTA’s Standard Bus Procurement Guidelines, and the Best Practices Procurement Manual Section 3.4.9.

Sole Source (Noncompetitive) Procurements 

If you require supplies or services that are only available from only one source, and solicit a proposal from this single source, this is considered a “sole source” (noncompetitive) procurement, which FTA allows only in very limited circumstances.  Amendments to existing contracts that were not in the original scope are also considered sole source procurements.  Because there are very specific requirements for sole source procurements and very few instances that qualify, it is not recommended that you use this procurement method.  A discussion of the rules, as well as best practices, can be found in Section 3.4.10 of the Best Practices Procurement Manual.

Joint Procurements and Piggybacking

Whichever competitive procurement method you use, in some circumstances it may be appropriate to share in a procurement effort with another organization.

In certain cases, more than one agency will simultaneously go through the procurement process and collaboratively produce a solicitation that addresses the needs of all of the agencies involved.  These are joint procurements, and a great deal of advance planning is needed to do this successfully.

However, there are instances when an agency unintentionally acquires more than is needed through a contract.  In those cases, if the original contract includes an “assignability” clause, it is permissible for another agency to take on the contract rights for the additional goods or services after ensuring the price is fair and it can abide by the original terms of the contract. This is called piggybacking, and it is defined in FTA Circular 4220.1F as “an assignment of existing contracts rights to purchase supplies, equipment, or services.” 

The FTA gives specific cases in which piggybacking is acceptable, and they are listed on the “Piggybacking” page of the FTA website. Purchasing vehicles through another FTA grantee’s contract is one of the more frequent uses of the piggybacking. While this is a legal option, due to the complexity and specific requirements of the process, including ensuring that the original procurement meets all FTA requirements, the FTA discourages this as a common practice.

To read more about joint procurements and piggybacking, please see FTA's “Piggybacking” page; the Piggybacking Worksheet and Section 3.3, “Rolling Stock Contracts” of the Best Practices Procurement Manual; and the Administrator’s Policy Letter, “Clarification on Joint Procurements and Piggybacking.”

 

Developing Competitive Solicitations

When drafting an invitation for bids (IFB) or request for proposals (RFP), it is important to be clear about what you need from the procurement and how the respondent should present his/her offer.  Bids or proposals that are submitted in response to a clear and simple IFB or RFP are more likely to accurately address the needs of your agency and present you with competitive options.

According to FTA's Best Practices Procurement Manual, the following elements should be included in every IFB or RFP:

  • A form which acts as the solicitation document (this is signed by the bidder and if his/her offer is accepted it serves as a binding contract).
  • A description of the various representations and certifications that are required to be made by the bidder or offeror in conjunction with the procurement at the time of bid or proposal submission. The bidder/offeror signs these representations and certifications (which may indicate such things as what type of business the offeror is, their DBE status, their agreeing to comply with FTA requirements, etc.).
  • Solicitation instructions and conditions. This should include:
    • Any requirements related to preparing the submission (Addressing such items as: When is the deadline for submission? Where should it be delivered? How many copies? Is there a page limit? What items must be included and is there a required sequence that must be followed?)
    • Instructions relating to acknowledging amendments to the solicitation
    • Rules related to late submissions, modifications or withdrawals of offers, etc.
  • Special contract requirements or provisions (as opposed to general provisions) relating to this particular solicitation and contract that are not addressed elsewhere in the solicitation.  Examples of special contract requirements include bonding, insurance requirements, special permits or licenses required, liquidated damages, etc.
  • Special provisions required by the FTA through FTA Circular 4220.1F or the Master Agreement which must be included in the solicitation and the contract. FTA-required contract clauses vary by contract type. See the Day 1 page for more on Federal Clauses and Certifications.
  • The contractual requirements of your organization’s DBE program, if applicable to your organization. 
  • General provisions (often called "boilerplate") which are typically part of every contract your organization awards, such as termination for default and convenience, excusable delay, variation in quantity, disputes, governing law, payment terms, etc.
  • Specifications, statement of work, or scope of work describing what it is that you are buying.
If you would like to read more detail about any of these components, please see Section 3, "Types of Contracts" and Section 4, "Evaluation of Proposals and Contract Award" of  FTA’s Best Practices Procurement Manual.  Links to sample RFPs and IFBs are provided under “Additional Resources” below.

There are several things to avoid in developing your specifications (because they limit competition):

  • Overly restrictive description – FTA encourages specifications to be functional rather a detailed description of all features, to avoid exclusionary or unreasonably restrictive specifications.  For guidance on developing appropriate specifications, see Section 3.5.2, “Develop contract terms and conditions, including technical requirements” in the Best Practices Procurement Manual (BPPM).
  • Requiring a specific brand name product – this is usually problematic as an overly restrictive description, and could potentially result in a sole source procurement. Instead, specifying “brand name or equal” can be an effective alternative.  See Section 2.5.1 “Brand Names” in the BPPM for more information.
  • Geographic preference – unless you are procuring architectural and engineering (A&E) services, geographic preferences are prohibited by FTA (even if imposed by state or local laws).  A&E contracts are the exception, because knowledge of local conditions and building codes are important for a contractor’s qualifications.  For further information, see BPPM Section 2.5.2 "Geographic Restrictions."

Protest Procedures

According to FTA Circular 4220.1F, you must have written protest procedures for both the sealed bid and competitive proposal methods, and a protester must go through these procedures before he/she can appeal your decision to FTA.  The Best Practices Procurement Manual, Section 4.9, details the type of information that should be included in your written protest procedures.

  • Difference in procedures for pre-bid, pre-award and post award protests.
  • Specific deadlines (in working days) for filing a protest, filing a request for reconsideration and for your agency’s response to a protest.
  • Specific contents of a protest (name of protester, solicitation/contract number or description, statement of grounds for protest).
  • Location where protests are to be filed.
  • Statement that your agency will respond, in detail, to each substantive issue raised in the protest.
  • Identification of the responsible official who has the authority to make the final determination.
  • Statement that your agency’s determination will be final.
  • Statement that FTA will only entertain a protest that alleges your agency failed to follow your protest procedures and that such a protest must be filed in accordance with the FTA’s Third Party Contracting Guidance Circular 4220.1F.
  • Allowance for request reconsideration (if data becomes available that was not previously known, or there has been an error of law or regulation).

Executing Competitive Solicitations

Advertising Your Solicitation

In order to promote full and open competition for your procurement, you must advertise your requests for bids or proposals, and any information that is included in the solicitation, such as dates and requirements, must remain consistent throughout the procurement process.  Note that your state might have its own laws about how a solicitation must be advertised, and if it does you must follow those requirements.

Examples of ways you can advertise your solicitation are:

  • Posting it on the homepage of your agency’s website;
  • Posting to your local classified section;
  • Sharing with the trade association specific to the type of good or service you are procuring;
  • Inquiring with your state DOT to obtain a list of DBE contractors;
  • Posting in industry newsletters and websites such as APTA’s Passenger Transport; and
  • Talking to your peers about who they have worked with in the past.
Most importantly, when considering where to advertise your project, you should keep in mind your target audience and the places it might look for business opportunities.

Allowing Questions / Pre-Bid or Pre-Proposal Conference

If you think there are aspects of the project that might raise questions or warrant verbal explanations, it is a good idea to schedule a pre-bid or pre-proposal conference or meeting (which can be conducted in person or by conference call). The information about the meeting should be included in your solicitation, and it is a good practice to encourage interested bidders to submit questions before the meeting. This will give you time to prepare your answers and ensure the proper staff members are included. Based on the questions and answers discussed, you may choose to amend the solicitation. The names of participants and a record of the meeting should be shared with all prospective bidders, not just those who attended.

Regardless of whether or not you host a pre-bid/pre-proposal conference, you may wish to allow questions to be submitted in writing, that you then respond to in writing and share with all potential offerors (typically posting the questions and responses to your website as an addendum to the IFB/RFP). You should specify a date by which questions must be submitted that gives you enough time to answer and share with potential offerors in time to adjust their bid or proposal if appropriate.

For more information about the pre-bid or pre-proposal conference, or how to add an amendment to your solicitation, please see the Best Practices Procurement Manual, Section 3.5 "Common Elements of the Solicitation Process.”

Evaluating Proposals

According to FTA Circular 4220.1F, you can only use the factors that were stated in the solicitation documents when evaluating competitive proposals, and these factors cannot be changed after you have started accepting bids or proposals without re-opening the solicitation.  You should also ensure that you choose evaluators that have appropriate knowledge of and experience with the items or services involved in the procurement.

During your review you should look for the bidder or proposal that provides the best value. According to FTA, “best value requires tradeoffs between price and non-price factors to select the best overall value to the recipient.” For more information about determining best value, please see Section 4.3, “Competitive Proposals Evaluation Process,” of FTA’s Best Practices Procurement Manual (BPPM). In order to rank the proposals, there are many systems you can use: colors, numbers, adjectives, etc. Regardless of how you express your rankings, you should ensure that reviewers make note of the strengths, weaknesses, deficiencies, and risks of each proposal. The BPPM, Section 4.3.4, recommends that you include the following evaluation criteria, (follow the link above for detailed information about each one):

  • Past performance
  • Technical criteria
  • Key personnel
  • Cost or price
  • Relative importance of price and non-price factors

It is important to remember that the proposal with the highest technical ranking or lowest price ranking might not necessarily be the best fit for your needs.  All factors should be taken into consideration in order to make the best decision for your agency.

Additional Resources

Section Sources

 

Procurement Training

General

Vehicle Procurement

Technology Procurement

 

Templates and Outlines

APTA Sample Contract Outlines

Templates Developed by State DOTs

Please note that these procurement template examples reflect state-specific requirements in addition to FTA requirements, and may not reflect the most recent federal guidelines.

Arizona DOT 

Iowa DOT Office of Public Transit 

Texas DOT 

Wisconsin DOT 

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