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TABLE OF CONTENTS
- Inadequate Policies and Procedures
- Lack of Effective Cost or Price Analysis
- Poor Sole Source Justifications
- Inadequate Contract Administration System
- Deficient Documentation of Procurement History
- Lack of Responsibility Determinations
- Use of Brooks Act Procedures for Non-Architect/Engineer Type Procurements
- Incomplete Inclusion of Required Federal Contract Clauses
- Contracts Found Not to be Sound and Complete Agreements
- Inadequate Evaluation of Options
- Grantee Comments
FTA Circular 4220.1E "Third Party Contracting Requirements" contains 54 mandatory procurement standards applicable to grantee procurement systems when contracting with Federal funds. The FTA's "Guide for Procurement System Reviews" is structured to review the grantee’s procurement system against these standards as well as the Buy America Requirements of the Pre-Award and Post-Delivery Reviews for bus and rail procurements and the Statutory and Regulatory Requirements (clauses). The FTA "Guide for Procurement System Reviews" breaks out the 54 standards for easy reference beginning on page 18.
The FTA has a vested interest in assisting grantees to maintain efficient and effective procurement systems as well as a legal responsibility to ensure that its grantees expend Federal funds in accordance with FTA regulations, the Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments (49 CFR Part 18), and the contractual agreements between FTA and the local grantee. To assist grantees to comply with the 54 procurement standards of FTA Circular 4220.1E, this self-assessment guide will list the top ten areas of deficiency most frequently found during oversight reviews. It will state the FTA standard, discuss the deficiencies found, provide references to guidelines in the Best Practices Procurement Manual and other resources, and list self-assessment questions. 1. INADEQUATE POLICIES AND PROCEDURES
Relevant FTA Circular requirements:
7.a. "Conformance with State and Local Law. Grantees and subgrantees shall use their own procurement procedures that reflect applicable State and local laws and regulations, provided that the procurements conform to applicable Federal law, including the requirements and standards identified in this circular."
Discussion:
The procurement system review examines all grantee written policies, procedures, forms, or any other written directives that determine its procurement system management and function. In order to meet the mandatory standards of the FTA Circular, the grantee's policies and procedures must direct its employees to perform the procurement function in a manner compatible with the Federal standard. That is not to say that its policies and procedures must contain the exact words of the FTA Circular. They must, however, achieve the same standard or purpose.
Procurement system reviews have found deficiencies in nearly all grantees' policies and procedures. They were lacking a significant number of the FTA standards. By reviewing their written policies and procedures against the standards of the FTA Circular and adding any missing requirements, grantees will meet this FTA requirement.
Self-Assessment Questions
- Do the grantee’s procurement policies and procedures include requirements for a contract administration system that ensures contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures require that the General Service Administration publication "List of Parties Excluded from Federal Procurement or Nonprocurement Programs (Debarred List)" be checked to ensure that the prospective contractor is not listed?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures require that awards be made only to responsible contractors possessing the ability to perform successfully under the terms and conditions of a proposed procurement? (Consideration shall be given to contractor integrity, compliance with public policy, record of past performance, and financial and technical resources.)
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures require that records are maintained detailing the history of a procurement? At a minimum, these records shall include:
- the rationale for the method of procurement,
- selection of contract type,
- reasons for contractor selection or rejection, and
- the basis for the contract price.
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures require that "Time and Materials Type Contracts" may only be used:
- after a determination that no other type of contract is suitable, and
- if the contract specifies a ceiling price that the contractor shall not exceed except at its own risk?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures require that the contract period of performance for rolling stock and replacement parts not exceed five (5) years inclusive of
options without prior written FTA approval when FTA funds are involved? |
_____YES _____ NO |
- Do the grantee’s procurement policies and procedures require that all procurement transactions will be conducted in a manner providing full and open competition?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures prohibit unreasonable requirements from being placed on firms in order for them to qualify to do business (e.g. unnecessary experience and excessive bonding requirements)?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures define Organizational Conflicts of Interest and provide means for eliminating or mitigating such conflicts?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures prohibit any arbitrary action in the procurement process (e.g. in the competitive selection of contractors)?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures prohibit the use of statutorily or administratively imposed in-State or local geographical preferences in the evaluation of bids or proposals unless Federal statutes expressly mandate or encourage geographic preference?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures contain contractor selection procedures?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures require clear and accurate contract specifications (or statements of work) that do not unduly restrict competition and identify all requirements that offerors must fulfill and all factors to be used in evaluating bids or proposals?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures provide requirements for using "Brand Name or Equal" purchase descriptions:
(a) only when an adequate specification cannot be provided without performing an inspection and analysis in time for the acquisition under consideration, and
(b) minimum needs are carefully identified and those salient physical and functional characteristics of the brand name product are clearly set forth in the solicitation? |
_____YES _____ NO |
- Do the grantee’s procurement policies and procedures provide requirements for micro-purchases (under $2,500) that:
(a) competition is not required,
(b) the determination that price is fair and reasonable be documented and how the determination was derived,
(c) splitting of procurements to avoid competition is prohibited, and
(d) when competition is not obtained, require equitable distribution among qualified suppliers? |
_____YES _____ NO |
- Do the grantee’s procurement policies and procedures applicable to the simplified small purchase ($2,500 to $100,000) method of procurement require:
(a) price or rate quotations be obtained from an adequate number of qualified sources, and
(b) the file be documented that price is fair and reasonable?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures contain requirements applicable to sealed bid method of procurement which:
(a) defines conditions for sealed bid,
(b) requires public advertising,
(c) allows sufficient time to prepare bids prior to bid opening
(d) requires awards be made to the lowest responsive and responsible bidder, and
(e) documents sound business reason if any or all bids are rejected?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures include requirements that, unless State law provides procedures for procurement of A&E services, the Brooks Act procedures apply and may only be used when procuring A&E services? The Act requires that the grantee:
(a) evaluate qualifications excluding price as a factor,
(b) negotiate only with the most qualified offeror, and
(c) failing agreement on price, negotiate with the next most qualified offeror until agreement is reached on a price that is determined to be fair and reasonable?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures include sole source documentation requirements as follows:
(a) when the award of a contract is infeasible under small purchase, sealed bid, or competitive procedures, and at least one of the following applies:
(i) item is available only from one source,
(ii) the public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation,
(iii) FTA authorizes noncompetitive negotiations,
(iv) after solicitation of a number of sources, competition is
determined inadequate, or
(v) the item is an associated capital maintenance item as defined in 49 U.S.C.
§5307(a)(1) that is procured directly from the OEM. Must certify to FTA that this is the only source and the price is no higher than for like customers.
(b) cost and profit analysis are required?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures provide for the use of options and require:
(a) option quantities be evaluated to determine contract award,
(b) when exercising options, ensure it is in accordance with the contract and that the price is better than prices available in the market or is more advantageous at the time the option is exercised,
(c) options not evaluated as part of the price evaluation of offers must be treated as sole source awards? |
_____YES _____ NO |
- Do the grantee’s procurement policies and procedures include requirement that cost or price analysis must be performed in connection with every procurement action, including contract modifications?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures contain requirements that independent cost or price estimates must be made before receiving bids or proposals?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures include requirements that cost and profit analysis must be performed when adequate price competition is lacking?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures require that cost and profit be negotiated?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures require that if award is made without negotiations, the file be documented that all costs and profit have been analyzed and considered fair and reasonable?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures contain requirements that its cost principles for evaluation of proposed costs are consistent with Federal cost principles?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures prohibit cost plus percentage of cost type contract?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures require bonding requirements for construction contracts above $100,000 that meet the following minimums:
(a) 5% bid guarantee,
(b) 100% performance bond, and
(c) Payment bonds as follows:
- 50% on contracts under $1 million
- 40% on contracts between $1 million and $5 million, or
- $2.5 million on contracts over $5 million? |
_____YES _____ NO |
- Do the grantee’s procurement policies and procedures prohibit advance payments utilizing FTA funds unless prior written concurrence is obtained from FTA?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures include requirements that progress payments may only be made on the basis of costs incurred and the grantee must obtain title to property for which progress payments are made?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures contain requirements that liquidated damages assessment be at a specific rate per day for each day of overrun, be specified in the contract, and any damages recovered be credited to the project involved unless the FTA permits otherwise?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures require that contracts above the small purchase threshold contain remedies for breach of contract?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures require that contracts in excess of $10,000 have termination for cause and termination for convenience provisions?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures contain requirements that address Federal statutory and regulatory requirements for contracts funded under Federal grants?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures contain provisions that assure all contracts are a sound and complete agreement?
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_____YES _____ NO |
- Do the grantee’s procurement policies and procedures assign responsibility to a specific individual or unit, such as general counsel’s office, to keep current the list of required clauses and their applicability?
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_____YES _____ NO |
2. LACK OF EFFECTIVE COST OR PRICE ANALYSIS
Relevant FTA Circular requirements:
¶ 10. "Contract Cost and Price Analysis for Every Procurement Action. Grantees must perform a cost or price analysis in connection with every procurement action, including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, grantees must make independent estimates before receiving bids or proposals.
- Cost Analysis. A cost analysis must be performed when the offeror is required to submit the elements (i.e., Labor Hours, Overhead, Materials, etc.) of the estimated cost, e.g., under professional consulting and architectural and engineering services contracts.
A cost analysis will be necessary when adequate price competition is lacking and for sole source procurements, including contract modifications or change orders, unless price reasonableness can be established on the basis of a catalog or market price of a commercial product sold in substantial quantities to the general public or on the basis of prices set by law or regulation.
- Price Analysis. A price analysis may be used in all other instances to determine the reasonableness of the proposed contract price.
- Profit. Grantees will negotiate profit as a separate element of the price for each contract in which there is no price competition and in all cases where cost analysis is performed. To establish a fair and reasonable profit, consideration will be given to the complexity of the work to be performed, the risk born by the contractor, the contractor's investment, the amount of subcontracting, the quality of its record of past performance, and industry profit rates in the surrounding geographical area for similar work.
- Federal Cost Principles. Costs or prices based on estimated costs for contracts under grants
will be allowable only to the extent that costs incurred or cost estimates included in negotiated prices are consistent with Federal cost principles. Grantees may reference their own cost principles that comply with applicable Federal cost principles."
Discussion:
Procurement system reviews are consistently finding a lack of contract file documentation to demonstrate that effective cost or price analysis is being performed. This is reflected in several areas. Grantees are not beginning their analysis with an independent cost estimate developed prior to receipt of proposals. Some grantees are not requesting complete cost breakdown data when required. Others are not evaluating elements of cost that are submitted. There appears to be little attempt to verify proposed overhead rates with other governmental agencies that had done business with the contractor. Fully loaded labor rates proposed for service contracts are not broken down into labor, overhead and profit for analysis. When profit is shown as a separate element of cost, there is little evidence that it is analyzed relative to the complexity of work, the risk, contractor's investment, amount of subcontracting, past performance, or industry rates.
Procurement system reviews regularly note that grantees are awarding contracts without negotiations or discussions with the offerors. It may be simply that discussions are not being documented. It is difficult to imagine that after receiving and analyzing a cost and profit breakdown that questions would not arise. If negotiations are not necessary, the file should be documented to reflect the analysis that led to that conclusion.
Modifications to competitively awarded contracts are not being priced using complete cost breakdown proposals from the contractor. When cost analysis is performed, it often does not show that Federal cost principles were used to determine unallowable costs. Some grantees have used as a price analysis technique previous prices that were established in contracts awarded non-competitively without appropriate cost analysis.
Reference:
Best Practices Procurement Manual Chapter 5, Section 5.2.
The National Transit Institute (NTI) at Rutgers University offers a course for FTA grantees titled "Cost and Price Analysis and Contract Negotiation." The online address for NTI is http://www.ntionline.com/.
Self-Assessment Questions
- Are independent cost estimates prepared for each procurement action before receipt of proposals, and made a part of the contract file?
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_____YES _____ NO |
- Is a cost or price analysis conducted for every procurement action and documented in the contract file?
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_____YES _____ NO |
- Is cost data requested and cost analysis performed and documented in all cases when price competition is lacking, e.g. sole source, contract modifications or change orders, professional consulting, architectural and engineering services, and competitive RFPs where technical approach and quality are the primary evaluation factors?
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_____YES _____ NO |
- Is proposed profit analyzed, negotiated and documented in all procurements where cost analysis is conducted?
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_____YES _____ NO |
- Is the contract file clear that cost and profit were negotiated, and if award is to be made without negotiations, the file should be documented to reflect that all costs and profit have been analyzed and in both cases are considered fair and reasonable?
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_____YES _____ NO |
- Are Federal cost principles used in all cost analyses to determine allowable and unallowable costs?
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_____YES _____ NO |
3. Poor Sole Source Justifications
Relevant FTA Circular requirements:
¶ 9.f. (1) "Procurement by Noncompetitive Proposals (Sole Source). Sole Source procurements are accomplished through solicitation or acceptance of a proposal from only one source, or after solicitation of a number of sources, competition is determined inadequate. A contract amendment or change order that is not within the scope of the original contract is considered a sole source procurement that must comply with this subparagraph.
- Procurement by noncompetitive proposals may be used only when the award of a contract is infeasible under small purchase procedures, sealed bids, or competitive proposals and at least one of the following circumstances applies:
- The item is available only from a single source;
- The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation;
- FTA authorizes noncompetitive negotiations;
- After solicitation of a number of sources, competition is determined inadequate; or
- The item is an associated capital maintenance item as defined in 49 U.S.C. §5307(a)(1) that is procured directly from the original manufacturer or supplier of the item to be replaced. The grantee must first certify in writing to FTA: (i) that such manufacturer or supplier is the only source for such item; and (ii) that the price of such item is no higher than the price paid for such item by like customers."
Discussion:
All grantees have State or local requirements regarding competition and justification required for a sole source procurement. However, nearly every Procurement System Review finds a certain percent of sole source contracts or new work contract amendment files do not contain the required justifications for these procurement actions. In other cases, the written justifications found were inadequate. Simple statements such as, "This is the only source" or "Time did not permit competition" or " This was the original manufacturer" are not sufficient. Each of these situations must be explained in detail in order to be used as a justification for sole source. Were any attempts made to find additional sources? Were requirements written restrictively? Does the requirement represent the grantee's minimum need? Was the urgency caused by the grantee's delay or poor planning? What public harm will be caused by the delay? Has certification been made to FTA regarding OEM parts? A good sole source justification tells the complete story and contains all required approvals or certifications.
Reference:
Best Practices Procurement Manual Chapter 4, Section 4.6.
Self-Assessment Questions
- Are complete sole source justifications prepared, approved, and made a part of the contract file when required?
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_____YES _____ NO |
- Is specific responsibility assigned to review sole source justifications for completeness and compliance with regulations, including the FTA Circular?
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_____YES _____ NO |
- When required, does the contract file contain a written certification to FTA regarding OEM equipment?
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_____YES _____ NO |
4. Inadequate Contract Administration System
Relevant FTA Circular requirements:
¶ 7,b. "Contract Administration System: Grantees shall maintain a contract administration system that ensures that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders."
Discussion:
Having a contract administration system means that the grantee has documented (in administrative directives, regulations, or job descriptions) the authorities, responsibilities and procedures within its organization to carry out the contract administration function. Many grantees do not have a documented contract administration system. Their procurement manuals only address the procurement process from inception of the requirement up to the point of contract award. Procurement reviews have found that, in practice, contract administration functions are typically shared among the contracting office, engineering, construction management, Disadvantaged Business Enterprise, safety, and finance offices. However, these divisions of authority and responsibility are not documented in the grantee's written regulations or procedures. This results in confusion regarding responsibility for these functions, causing many responsibilities to go unperformed, or in some cases, duplication of effort.
The contract administration system should also establish the contract administration file documentation requirements. When responsibilities are shared, recorded actions tend to be scattered throughout the organization. Procurement reviews often find the grantee is unable to retrieve necessary documentation. The system should result in an official contract administration
file that contains documentation of all official actions under the contract, up to and including contract close-out. A separate Contract Administration Manual or a chapter on Contract Administration in the Procurement Manual which contains all the functions of contract administration with corresponding authorities, responsibilities and record keeping requirements is a good method to achieve the purposes of the FTA standard for contract administration.
Reference:
Best Practices Procurement Manual Chapter 9.
Self-Assessment Questions
- Do written policies, regulations, and procedures establish a contract administration system which contains all the functions of contract administration with corresponding authorities, responsibilities and record keeping requirements?
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_____YES _____ NO |
- When offices other than the contracting office are delegated contract administration functions, are they given clear direction regarding the limits of that authority as well as reporting, approval and record keeping requirements, and the file so documented?
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_____YES _____ NO |
- Is a contract administration file maintained which includes all official contract actions?
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_____YES _____ NO |
- At contract close-out is the contract administration file made a part of the official contract file?
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_____YES _____ NO |
5. Deficient Documentation of Procurement History
Relevant FTA Circular Requirements:
¶ 7. i. "Written Record of Procurement History. Grantees shall maintain records detailing the history of a procurement. At a minimum, these records shall include;
- the rationale for the method of procurement,
- selection of contract type,
- reasons for contractor selection or rejection, and
- the basis for the contract price."
Discussion:
One of the most consistent findings in all procurement system reviews is that the contract file, in whatever form or location, does not contain adequate documentation of decisions and determinations made, the rationale/justifications used, reviews and analyses completed, approvals and all other official contract actions taken. The minimum procurement history requirements stated in this FTA standard relate to the public policy of fair and open competition and achieving the most efficient and economical use of public funds. However, all of the FTA standards, in one way or another, require documentation. This documentation may be in the form of written policies, directives, procedures and forms or in the written record contained in the official contract file. If some contract documentation, such as technical analyses or contract administration actions, are located in another division, such as engineering, a reference to it should be contained in the official contract file. This will ensure that the public record is complete for every acquisition using Federal, State and local public funds. A contract file checklist is a good method for both the preparer and the reviewer to ensure the completeness of the contract file.
Reference:
Best Practices Procurement Manual, Chapter 2, Section 2.4.1 and Chapter 5, Section 5.2 (to be republished in July 2003).
Self-Assessment Questions
- Is a written record prepared for all official contract actions?
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_____YES _____ NO |
- Are these records either made a part of the official contract file or referenced therein?
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_____YES _____ NO |
- Is responsibility assigned and a review made to ensure that each contract file is complete?
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_____YES _____ NO |
- Is a contract check list used to assist both the preparer and the reviewer of the contract file?
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_____YES _____ NO |
- Does the contract file contain a history of the procurement?
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_____YES _____ NO |
- Is there a requirement to prepare a negotiation memorandum that explains how the contractor’s proposal was evaluated and negotiated?
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_____YES _____ NO |
6. Lack of Responsibility Determinations
Relevant FTA Circular Requirements: ¶ 7.h. "Awards to Responsible Contractors. Grantees shall make awards only to responsible contractors possessing the ability to perform successfully under the terms and conditions of a proposed procurement. Consideration shall be given to such matters as contractor integrity, compliance with public policy, record of past performance, and financial and technical resources."
Discussion:
Procurement system reviews have consistently found a lack of written responsibility determinations in contract files. Discussion is not found regarding the prospective contractor's financial and technical ability to perform the contract, its ability to meet the required delivery schedule, its prior performance record, its record of integrity, business ethics, and compliance with public policy, its organization, accounting, and internal controls, its compliance with applicable licensing and tax laws and regulations, and its ability to meet any special standards of responsibility stated in the solicitation. Regarding public policy, the record should reflect that the grantee checked the General Services Administration publication titled List of Parties Excluded form Federal Procurement or Nonprocurement Programs. These debarred contractors are not eligible for Federal funds. Small purchase awards for off-the-shelf items may in themselves be considered implicit affirmative responsibility determinations.
References:
Best Practices Procurement Manual, Chapter 5 Section 5.1.
Self-Assessment Questions
- Is the determination of contractor responsibility in writing and made a part of the contract file?
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_____YES _____ NO |
- Does the contract file reflect that the General Services Administration publication titled List of Parties Excluded from Federal Procurement or Nonprocurement Programs (Debarred List) was checked to ensure that the prospective contractor was not listed?
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_____YES _____ NO |
7. Use of Brooks Act Procedures for Non-Architect/Engineer Type Procurements
Relevant FTA Circular Requirements:
¶ 9.e. "Procurement of Architectural and Engineering Services (A&E). Grantees shall use competitive proposal procedures based on the Brooks Act when contracting for A&E services as defined in 40 U.S.C. §541. Other types of services considered A&E services include program management, construction management, feasibility studies, preliminary engineering, design, surveying, mapping, and services which require performance by a registered or licensed architect or engineer.
The Brooks Act requires that:
- An offeror's qualifications be evaluated;
- Price be excluded as an evaluation factor;
- Negotiations be conducted with only the most qualified offeror; and
- Failing agreement on price, negotiations with the next most qualified offeror be conducted until a contract award can be made to the most qualified offeror whose price is fair and reasonable to the grantee.
This "qualifications based procurement method" can only be used for the procurement of A&E services. This method of procurement cannot be used to obtain other types of services even though a firm that provides A&E services is also a potential source to perform other types of services.
These requirements apply except to the extent any state adopts or has adopted by statute a formal procedure for the procurement of architectural and engineering services."
Discussion:
Procurement system reviews have found the Brooks Act (qualifications based) procurement method being used for professional services that are clearly not related to A&E services such as legal and accounting. The Brooks Act is very clear in its requirement that its qualifications based selection method only be used for A&E and related services and that it not be used for other professional services. The confusion may stem from the list of services considered A&E services. Public Law 92-582 makes it clear that this list is of A&E related services:
"Such other professional services of an architectural or engineering nature, or incidental services, which members of the architectural and engineering professions (and individuals in their employ) may logically or justifiably perform, including studies, investigations, surveying and mapping, tests, evaluations, consultations, comprehensive planning, program management, conceptual designs, plans and specifications, value engineering, construction phase services, soils engineering, drawing reviews, preparation of operation and maintenance manuals, and other related services."
Reference:
Best Practices Procurement Manual Chapter 6 Section 6.5.
Self-Assessment Questions
- Is it made clear in the contract file that due consideration had been given for the use of this procurement method and it is appropriate for the type of requirement being procured?
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_____YES _____ NO |
- Is it clear in the contract file that price was excluded as an evaluation factor?
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_____YES _____ NO |
- Does the contract file contain the documentation to support the selection of the most highly qualified offeror, performance of a cost analysis, and a final negotiated agreement which is considered fair and reasonable?
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_____YES _____ NO |
- Has a determination been made regarding geographic preferences, and if it is to be a selection criteria the file is so documented?
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_____YES _____ NO |
8. Incomplete Inclusion of Required Federal Contract Clauses
Relevant FTA Circular requirements:
¶ 16. "Statutory and Regulatory Requirements. A current but not all-inclusive list of statutory and regulatory requirements applicable to grantee procurements (such as Davis-Bacon Act, Disadvantaged Business Enterprise, Clean Air, and Buy America) is contained in the FTA Master Agreement. Grantees are responsible for evaluating these requirements for relevance and applicability to each procurement. For example, procurements involving the purchase of iron, steel and manufactured goods will be subject to the ‘Buy America’ requirements in 49 C.F.R. Part 661. Further guidance concerning these requirements and suggested wording for contract clauses may be found in FTA's Third Party Procurement Manual."
Discussion:
Procurement system reviews consistently find grantee contracts with Federal funds that do not contain the required Federal clauses. These clauses are mandated by the Master Agreement as well as Federal Law and regulation. All of the clauses are not required for all contracts. Some have a dollar threshold applicability, where others are made applicable to the type of contract, such as construction, A&E, or the procurement of rolling stock. The grantee should have a system in place to ensure that the applicable clauses are included in the appropriate contract types.
References:
Best Practices Procurement Manual, Appendix A.1 - Federally Required and Other Model Contract Clauses.
The interagency committee responsible for assisting FTA in developing the Best Practices Procurement Manual is currently working on a Matrix of Federally required contract clauses, which will help grantees determine the applicability of each clause to various contracting situations.
Self-Assessment Questions
- Does the contract file reflect that a review has been performed prior to execution to ensure that all appropriate Federal clauses have been included?
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_____YES _____ NO |
9. Contracts Found not to be Sound and Complete Agreements
Relevant FTA Circular requirements:
¶ 15. "Contract Provisions. All contracts shall include provisions to define a sound and complete agreement. In addition, contracts and subcontracts shall contain contractual provisions or conditions that allow for:
- Administrative, contractual, or legal remedies in instances where contractors violate or breach contract terms, including sanctions and penalties as may be appropriate. (All contracts in excess of the small purchase threshold.)
- Termination for cause and for convenience by the grantee or subgrantee including the manner by which it will be effected and the basis for settlement. (All contracts in excess of $10,000.)"
Discussion:
Procurement system reviews have found contracts with no remedies clauses for breach of contract or for termination for convenience or for cause. In addition, in nearly every review a few contracts are found to be missing a critical element resulting in a contract that is not a sound or complete agreement. Examples of these are:
- Missing delivery dates
- Conflicting labor rates between contract line items and exhibit items
- Liquidated damages included without a date certain for its application - another without the dollar damages stated
- Unpriced option years, or option quantities
- No performance period in a contract for services - another with conflicting periods of performance
- No time period or mechanics for exercising options
- Ambiguities between contract terms and conditions and documents included with no "Order of Precedence" clause or other means to resolve the ambiguities
- No payment provisions or progress payment provisions including title to property
- Purchase Orders for high dollar amounts thus lacking all the normal contract terms and conditions
- Failure to specifically identify the basis for annual price adjustment
- Different start dates were listed in different parts of the contract
- Fixed price contract with a dollar amount included for "unforeseen conditions" without provisions for implementation or price adjustment, etc.
- Not including clear, accurate and complete contract specifications or statements of work
References:
Best Practices Procurement Manual, Chapters 1 and 8 and Appendix A.
Self-Assessment Questions
- Has a contract review been performed that assures all contracts are sound and complete agreements?
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_____YES _____ NO |
- Does the contract include remedies for breach of contract and provisions covering termination for cause and convenience?
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_____YES _____ NO |
10. Inadequate Evaluation of Options
Relevant FTA Circular Requirements:
¶ 9.g. "Options. Grantees may include options in contracts. An option is a unilateral right in a contract by which, for a specified time, a grantee may elect to purchase additional equipment, supplies, or services called for by the contract, or may elect to extend the term of the contract. If a grantee chooses to use options, the requirements below apply:
- Evaluation of Options. The option quantities or periods contained in the contractor's bid or offer must be evaluated in order to determine contract award. When options have not been evaluated as part of the award, the exercise of such options will be considered a sole source procurement.
- Exercise of Options. (a) A grantee must ensure that the exercise of an option is in accordance with the terms and conditions of the option stated in the initial contract awarded. (b) An option may not be exercised unless the grantee has determined that the option price is better than prices available in the market or that the option is the more advantageous offer at the time the option is exercised."
Discussion:
Procurement system reviews have found deficiencies in each of the elements of the options requirements. Contractors must bid on the option and the option bid must be evaluated in combination with the base quantity to determine the low bidder. Procurement system reviews have found both that the option price is not bid and when it is bid that it was not included with the base quantity bid price to determine the low bidder. Reviews have also found that when exercising unpriced options grantees have negotiated the terms and price of the option. This was done without a sole source justification. Finally, when exercising an option, the file generally does not contain any evidence that a cost or price comparison has been made to determine that the option price is the more advantageous offer at the time the option is exercised.
References:
Best Practices Procurement Manual, Chapter 8. Section 8.2.2.
Self-Assessment Questions
- When options are required, does the contract file document that option prices be bid and that the option bid prices be evaluated in combination with bid prices for the base quantity to determine the low bidder?
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_____YES _____ NO |
- Is the contract file clear that options must be priced and exercised as stated in the contract, otherwise any unpriced options or changes are considered to take place in a sole source atmosphere and must be treated as a new sole source procurement?
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_____YES _____ NO |
- Does the contract file reflect the requirement to compare current market prices to ensure that the option price is still the more advantageous offer at the time the option is exercised?
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_____YES _____ NO |
- Is there a contract review performed and documented at the time options are exercised that would ensure all contractual requirements are met?
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_____YES _____ NO |
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