3/8/2013

Dear Colleague:

A recent review by FTA of several large-quantity bus contracts indicated widespread errors in how FTA recipients are conducting joint procurements and the assignment of options (a practice commonly referred to as “piggybacking”) to purchase buses.  This review also determined that there have been shortcomings in FTA’s oversight of such matters.  There appears to be a general misunderstanding in the transit industry regarding how to conduct a joint procurement and when it is permissible to piggyback.  

Generally speaking, FTA encourages recipients to use joint procurements, particularly among smaller transit agencies.  Recipients often can obtain better pricing by combining their requirements into larger joint purchases.  However, they must limit their joint procurement to the amount of property and services required to meet each of their reasonably expected needs, and are prohibited from improperly expanding the procurement to include excess capacity simply for the purpose of assigning contract rights to others at a later date.  Accordingly, FTA permits the assignment of unneeded contract rights to another transit agency—piggybacking—only when a recipient has unintentionally acquired more goods or options than it needs to support its transit system.

FTA’s requirements regarding joint procurements and piggybacking are set forth in our Common Grant Rule, 49 C.F.R. Part 18, and FTA Circular 4220.1F.  Transit agencies should carefully review these requirements before purchasing buses through a joint procurement or an assignment of options.  I also encourage any transit agency to consult with their FTA Regional Counsel before making commitments under these types of contracts. 

Sincerely,

Peter Rogoff