Procurement - Beyond 101
This section provides supplemental information about Federal Transit Administration (FTA) procurement requirements that rural transit managers will need to know sooner or later. Review the Procurement 101 section of this toolkit before delving into this section, which build on the procurement information transit managers need on “day one.”
This section is organized in the following subsections:
The primary sources of information for this section were the FTA Best Practices Procurement and Lessons Learned Manual and FTA Circular 4220.1F, Third Party Contracting Guidance.
FTA requires a cost or price analysis for every procurement decision, to ensure subrecipients are getting a fair and reasonable price. Two examples of forms used to document a cost or price analysis can be found in Appendix B, of the FTA Best Practices Procurement and Lessons Learned Manual, pages B-51 to B-53. FTA has also prepared a Pricing Guide for FTA Grantees. (Note that this guide does not reflect current federal micro-purchase and small purchase thresholds at the time of publication of this toolkit.)
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. An example of a form used to document an ICE can be found in Appendix B, page B-49 of FTA's Best Practices Procurement and Lessons Learned Manual. Subrecipients 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 an understanding is reached about what the good or service should cost, use this information to analyze the price quotes in the bids or proposals received. How does the proposer or bidder’s price quote compare to the expected price range (the price range determined through the ICE)? If it is much higher than the expected price range, there is a risk of overpaying for the goods or services by choosing that contractor. However, if the quote is significantly lower than the expected price range, carefully review the bid or proposal to ensure it contains all of the project elements requested. The range determined in the ICE provides a baseline of comparison to conduct a price/cost analysis, review bids or proposals and review contract options.
Cost analysis is the appropriate approach in several circumstances:
- when proposers have been asked to submit the elements of their proposed cost, as is typical when professional consulting or architectural and engineering (A&E) services are being procured. Examples of proposed cost elements include:
- direct expenses
- when price competition is insufficient to determine the reasonableness of a proposed cost
- for sole source procurements
To conduct a cost analysis, look at each cost element and how it was developed to determine if it is reasonable. In such cases, the 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 and Lessons Learned 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
- 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 and Lessons Learned Manual and in FTA Circular 4220.1F.
For purchases valued over $250,000 (effective June 20, 2018), a competitive procurement must be conducted, 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 a transit agency is developing a new facility or making improvements to an existing facility, a third method specifically for procuring architectural and engineering services should be used. 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 and Lessons Learned Manual, FTA Circular 4220.1F, and APTA’s Standard Bus Procurement Guidelines.
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 and Lessons Learned 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.
- A successful bidder can be selected 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 the sealed bid process is used for a procurement, the agency must advertise an invitation for bids (IFB) that includes a detailed description of the property or goods desired, and an adequate amount of time must be provided for bidders to prepare their responses before the bid opening date. Bids must be opened and recorded at the time they are advertised on the IFB; bids should not be opened before this point. Ensure that bids are received from at least two sources, and a firm fixed price contract is awarded in writing to the successful bidder.
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 needed 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.
- The agency does not know how many potential bidders there are, and is not allowed, by law, to enter into a contract if there is only one bidder.
- The agency will not base its decision on price alone.
- The agency expects that there will be discussions with bidders after they have submitted their proposals.
If a competitive proposal process is appropriate for a purchase, the request for proposals (RFP) must be publicly advertised with an adequate amount of time provided for proposers to prepare their responses before the proposal submission deadline. The RFP advertisement must include the evaluation factors (and their relative importance) used to evaluate the proposals received. Before the evaluation process begins, ensure there are an adequate number of proposals, and a system in place to evaluate the proposals. The successful proposal should be the most advantageous to the program when price and other factors are considered.
More information about Competitive Proposals can be found in the Best Practices Procurement and Lessons Learned Manual Sections 3.4-3.7 and 4.3.
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.” 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 cost of the proposals can only be considered after the most qualified proposer(s) have been identified. If an agency is not able to come to agreement with the most qualified proposer on a reasonable price for the service or good, at that point it can move on to the next most qualified proposer. This process continues until the agency has found a proposer that can provide the product or service at a reasonable price.
If supplies or services that are only available from only one source are required, and a proposal is solicited 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, this procurement method is not recommended. A discussion of the rules, as well as best practices, can be found in Section 3.4.10 of the Best Practices Procurement and Lessons Learned Manual.
Whichever competitive procurement method is used, 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.
Section 3019 of the Fixing America’s Surface Transportation (FAST) Act expanded joint procurement opportunities by
- Allowing states and transit agencies to participate in cooperative interstate procurements of capital assets (rolling stock and related equipment). Subrecipients should contact the State DOT for information about cooperative interstate procurements in which they may be able to participate.
- Creating a pilot program through which nonprofit organizations can participate in cooperative procurement contracts. As stated in the FAST Act, a pilot program will be established and carried out to demonstrate the effectiveness of cooperative procurement contracts administered by at least three nonprofit entities. In August 2017, FTA requested expressions of interest from nonprofit entities in participating in the Pilot Program for Nonprofit Cooperative Procurements. Eligible nonprofits included nonprofit cooperative purchasing organizations (that are not an FTA grantee or subgrantee) and consortiums of eligible nonprofit cooperative purchasing organizations. To date, selection of nonprofits under this pilot program has not been announced.
- Establishing a Joint Procurement Clearinghouse through which procurement partners can be identified. The clearinghouse can be accessed FTA’s Transit Award Management System (TrAMS). Section 5311 subrecipients do not have access to TrAMS, and should contact the State DOT for more information on participating in the FTA Joint Procurement Clearinghouse.
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.”
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 web page; the Piggybacking Worksheet and Section 3.3, Rolling Stock Contracts of the Best Practices Procurement and Lessons Learned Manual; and the Administrator’s Policy Letter, Clarification on Joint Procurements and Piggybacking.
When drafting an invitation for bids (IFB) or request for proposals (RFP), it is important to be clear about what is needed 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 an agency and present competitive options.
According to FTA's Best Practices Procurement and Lessons Learned 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 FTA which must be included in the solicitation and the contract. FTA-required contract clauses vary by contract type. See the Procurement 101 page for more on Federal Clauses and Certifications.
- The contractual requirements of an organization’s DBE program, if applicable. DBE requirements are discussed in the Civil Rights section of the toolkit.
- General provisions (often called "boilerplate") which are typically part of every contract an 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 is being purchased.
For more detail about any of these components, see Section 3, "Types of Contracts" and Section 4, "Evaluation of Proposals and Contract Award" of FTA’s Best Practices Procurement and Lessons Learned Manual. Links to sample RFPs and IFBs are provided in National RTAP's Procurement topic guide.
There are several things to avoid in developing 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 and Lessons Learned Manual.
- 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 Best Practices Procurement and Lessons Learned Manual for more information.
- Geographic preference – unless architectural and engineering (A&E) services are being procured, 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 Best Practices Procurement and Lessons Learned Manual Section 2.5.2 Geographic Restrictions.
According to FTA Circular 4220.1F, written protest procedures for both the sealed bid and competitive proposal methods must be in place, and a protester must go through these procedures before he/she can appeal a decision to FTA. The Best Practices Procurement and Lessons Learned Manual, Section 4.9, details the type of information that is typically included in 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 an 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 an 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 the agency’s determination will be final
- Allowance for request reconsideration (if data becomes available that was not previously known, or there has been an error of law or regulation)
In order to promote full and open competition for your procurement, requests for bids or proposals must be advertised with adequate time provided to develop a bid or proposal before the submission deadline, and any information that is included in the solicitation, such as dates and requirements, must remain consistent throughout the procurement process. Note that states might have additional laws about how solicitations must be advertised, and if so, those requirements must also be followed.
Examples of ways to advertise solicitations include:
- Posting it on the homepage of the agency website
- Posting to the local newspaper classified section
- Sharing with the trade association specific to the type of good or service that is being procured
- Inquiring with State DOTs to obtain a list of DBE contractors
- Posting in industry newsletters and websites such as APTA’s Passenger Transport, CTAA’s online classifieds, and Transit Talent’s procurement web page
- Talking to peers about who they have worked with in the past
Most importantly, when considering where to advertise a solicitation, keep in mind the target audience and the places it might look for business opportunities.
If there may be 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 the solicitation, and it is a good practice to encourage interested bidders to submit questions before the meeting. This will provide time to prepare answers and ensure the proper staff members are included. Based on the questions and answers discussed, the solicitation may be amended. 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 a pre-bid/pre-proposal conference is hosted, questions can be submitted in writing. The transit agency should respond to the questions in writing and share with all potential offerors (such as by posting the questions and responses to the agency’s website as an addendum to the IFB/RFP, or emailing to organizations that downloaded or requested the solicitation). Specify a date by which questions must be submitted that provides 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, see the Best Practices Procurement and Lessons Learned Manual, Section 3.5 "Common Elements of the Solicitation Process.”
According to FTA Circular 4220.1F, only factors that were stated in the solicitation documents can be used when evaluating competitive proposals. These factors cannot be changed after the agency has started accepting bids or proposals without re-opening the solicitation. Also ensure that evaluators have appropriate knowledge of and experience with the items or services involved in the procurement.
During the review, 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 and Lessons Learned Manual. In order to rank the proposals, there are many systems that can be used in a document or spreadsheet: colors, numbers, adjectives, etc. Regardless of how rankings are expressed, ensure that reviewers make note of the strengths, weaknesses, deficiencies, and risks of each proposal. Section 4.3.4of the Best Practices Procurement and Lessons Learned Manual recommends following evaluation criteria, (follow the link above for detailed information about each one):
- Past performance
- Technical criteria
- Key personnel
- 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 the agency’s needs. All factors should be taken into consideration in order to make the best decision for the organization.
A variety of additional resources, including trainings and templates, can be found on National RTAP’s Procurement topic guide.
Updated June 28, 2019