Legal Aspects Relevant to Outsourcing Transit Functions Not Traditionally Outsourced (2011)

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13 fixed-price contract establishes a price that remains fixed without regard to the contractor’s actual cost of performing the work. The fixed price could be the total price for the work or could be a fixed rate (i.e., 200 hours of maintenance work per month at $ xx/hour). Typically, A&E type contracts are structured as cost reimbursable while contracts for work such as opera- tions or maintenance services are firm fixed price or fixed rate. However, there is no ironclad rule here; a range of services could be carried out under cost- reimbursement contracts. For federally-funded procurements, the Common Grant Rule expressly prohibits the use of the cost plus a percentage of cost and cost plus a percentage of con- struction cost methods of contracting. (These are con- tracts in which the fee is expressed as a percentage of cost, and thus the fee increases if and when the cost increases.) In addition, the Common Grant Rule per- mits the use of time and materials cost contracts only: 1) if the agency determines that no other contract type is suitable; and 2) if the contract specifies a ceiling price that the contractor may not exceed except at its own risk. Time and materials cost is sometimes used as the basis for the payment of change order work, but again a fixed-price or unit-price method is usually preferred. Overall, the transit agency needs to establish a cost/pricing mechanism in its contracts for outsourced work that will assure that 1) the agency has firm con- trols on the amount of costs that can be incurred by the contractor; and 2) the contractor is required to comply with applicable cost principles, including recordkeeping to document that compliance. SECTION III. PROTECTING THE FEDERAL INTEREST: FEDERAL TERMS AND CONDITIONS TO THIRD-PARTY CONTRACTS If a public transit system is a recipient of federal transit funds from the FTA and intends to outsource some or all of its activities, it will have to make certain that the outsourcing contract includes specific terms and conditions that identify and protect the federal in- terest.76 A. Background; FTA Master Agreement Activities financed in part with federal funds and performed by a third-party contractor and its subcon- tractors on behalf of a federal grantee must be carried out in accordance with federal requirements. FTA de- fines “Third Party Contract” as a “…recipient’s contract with a vendor or contractor, including procurement by 76 If a transit system receives only capital assistance from the FTA, it is possible that it could segment its federally- funded activities from nonfederally-funded activities, in which case locally-funded activities, if outsourced, might not be sub- ject to federal terms and conditions. We assume for purposes of this report that federal requirements apply to the activities of the transit recipient of federal transit funds. purchase order or purchase by credit card, which is fi- nanced with federal assistance awarded by FTA.”77 FTA recipients are subject to the Common Grant Rule.78 While authorized to do so under the Common Grant rules, FTA generally does not conduct pre-award reviews of its grantees third-party contracts but rather relies upon the validity of each recipient’s annual self- certification that its procurement system complies with FTA requirements; this is usually submitted in the first quarter of each federal fiscal year along with many other certifications of compliance with FTA require- ments.79 Nor does FTA substitute its judgment for that of its recipients by making third-party procurement decisions. FTA is required to perform a full review of recipients under its urbanized area formula program80 and per- forms procurement system reviews for recipients of ur- banized area formula funds that self-certify their pro- curement systems. FTA also provides technical assistance on procurement matters. It is important to emphasize, as FTA often does, that while a recipient may enter into a third-party contract in which the third-party contractor agrees to provide property or services in support of a federally-funded project, or even carry out project activities normally performed by the recipient, the recipient rather than the third-party contractor is ultimately responsible to FTA for compliance with all applicable federal laws and regulations, in accordance with applicable federal direc- tives, except to the extent that FTA determines other- wise in writing.81 The FTA Master Agreement is revised each year to reflect changes in law or policy. Each FTA grantee must agree to the Master Agreement. FTA notes that only entities that are signatories to its grant agreement are parties to that agreement but emphasizes that other entities, including third-party contractors, will be af- fected by the agreement. FTA thus requires the recipi- ent to take “…appropriate measures to ensure that all Project participants comply with all applicable federal laws and regulations, and follow applicable federal di- rectives affecting Project implementation, except to the extent FTA determines otherwise in writing.” 82 FTA further requires the recipient …to use a written document (such as a subagreement, lease, third party contract, or other similar document) in- cluding all appropriate clauses stating the entity’s (subre- cipient, lessee, third party contractor, or other partici- 77 FTA, supra note 72, at I-60. 78 49 C.F.R. pt. 19, Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments. These USDOT regulations apply to federal grants and cooperatives with governmental recipients of fed- eral assistance, including Indian tribal governments. 79 FTA, supra note 72, at I-8. 80 49 U.S.C. § 5307(h). 81 Fed. Transit Admin., Master Agreement (2009), at 15, http://www.fta.dot.gov/documents/15-Master.pdf. 82 Id. at 15.

14 pant) responsibilities under applicable Federal law and regulations, in accordance with applicable federal direc- tives, except to the extent that FTA determines otherwise in writing.83 Under the FTA Master Agreement, a recipient is re- quired to include in each such written document any necessary provisions requiring the third-party contrac- tor to impose applicable federal requirements and direc- tives on its third-party contractors and other partici- pants in the project “…at the lowest tier necessary….” as well as “…appropriate provisions that would be ap- plicable to the Recipient as set forth in the Grant Agreement or Cooperative Agreement for the Project or this Master Agreement, and extend those provisions to….third party contractors and other Project partici- pants to the lowest tier necessary….”84 It thus should be no surprise that FTA also requires a recipient to agree that, absent FTA’s express written consent, the federal government shall not be subject to any obligations or liabilities to any subrecipient, lessee, third-party contractor, or any other participant at any tier of the project. B. Key FTA Documents: Circular 4220.1F; Best Practices Procurement Manual In addition to the FTA Master Agreement, FTA Cir- cular 4220.1F, “Third Party Contracting Guidance,” is a key document regarding FTA procurements. It provides contracting guidance for recipients of FTA assistance when using those funds to finance their third-party procurements. In addition, the FTA has developed a Best Practices Procurement Manual to assist FTA grantees in meeting the standards in Circular 4220.1F. Note that third-party contractors are not directly cov- ered by the Circular, FTA’s Best Practices Procurement Manual, or by the Common Grant Rule at 49 C.F.R. Part 18 in awarding their subcontracts.85 Third-party contractors and subcontractors are, however, required to comply with the terms of their third-party contracts or subcontracts, including any federally-required clauses that have been extended to them. Thus Circular 4220.1F, the Common Grant Rule, and the Best Prac- tices Procurement Manual do present very critical in- formation about federal requirements to a third-party contractor. The Circular applies to most federally-funded capital contracts. It does not apply to the procurement of land and buildings and structures, but does apply to FTA- assisted construction of buildings, structures, or appur- tenances that were not on the land to be used for the project when the land was acquired or to any altera- tions or repairs to such elements that were on the land at the time of purchase. 83 Id. at 16. 84 Id. at 16. 85 FTA, supra note 72, at II-3. C. Federal Terms and Conditions—Required Third-Party Contract Provisions Circular 4220.1F includes as an appendix a list of federally-required third-party contract provisions.86 These are listed and discussed below. Another document is FTA’s Best Practices Procure- ment Manual, which also includes an appendix with a list of federally-required and other model contract clauses.87 The Manual’s appendix provides a summary of the requirements of each required clause; which con- tracts it is applicable to; its flow down requirements; and model clause language. Note, however, that the Manual may not always be up-to-date. As FTA notes in Circular 4240.1F: [a]lthough the BPPM can be a good resource for the re- cipient to use in conducting FTA assisted procurements, it is not the source of any FTA or federal requirements and, as such, is not binding on FTA recipients although the underlying federal laws and regulations from which the BPPM’s advice and recommendations are derived will apply. As such, the text of the BPPM is not and should not be treated as an official description of any FTA or fed- eral requirement. Moreover, while FTA does revise and update the BPPM periodically, FTA cautions each recipi- ent that relying solely on the BPPM may not ensure com- pliance with all applicable FTA and federal require- ments.88 While the drafting of each third-party contract should be considered on its own, it is not uncommon for a third-party contract to have the federal terms and conditions included as a separate appendix to the agreement rather than as part of the terms and condi- tions of the agreement itself. (Of course, in including the federal terms and conditions as an appendix to an outsourcing contract, it is important to include only those that apply to the particular contract.) This makes it easy to make certain that all of the federal terms and conditions are included in the third-party contract. Be- cause this is often done, we include a discussion below of all of the federally-required third-party contract clauses but point out and underline which ones apply to outsourcing contracts. We also discuss below which requirements flow down to contractors and subcontractors. To assure compliance with these requirements, a recipient typically will, as part of its procurement process, put contractors on no- tice of the general terms and conditions, including fed- erally-required clauses, that will be included in the con- tract that the recipient and contractor will enter into; typically the procurement documents would further note that the transit system reserves the right to mod- 86 FTA, supra note 72. Note that App. D is divided into four useful sections: A. Third Party Contract Provisions; B. Appli- cability of Third Party Contract Provisions; C. Certifications, Reports, and Forms; and D. Other Matters. 87 FED. TRANSIT ADMIN., BEST PRACTICES PROCUREMENT MANUAL (2008), available at www.fta.dot.gov/funding/ thirdpartyprocurement/grants_financing_6037.html. 88 FTA, supra note 72, at I-9.

15 ify those terms and conditions or to add to or delete them. Separately, note also that bidders may be re- quired to submit certifications as part of the bid process (e.g., lobbying, debarment). 1. No Federal Obligation to Third Parties As noted above, this is a key term and condition from FTA’s perspective. It is included in FTA’s Master Agreement at Section 2.f, The requirement is applicable to all third-party contracts. In its Best Practices Pro- curement Manual, FTA notes that while it is not re- quired by statute or regulation for either primary con- tractors or subcontractors, “…this concept should flow down to all levels to clarify, to all parties to the con- tract, that the federal government does not have con- tractual liability to third parties, absent specific written consent.”89 The recipient must agree that under the project the federal government will not be subject to any obliga- tions or liabilities to any third-party contractor or other participant at any tier of the project, or any other entity or person that is not a party to the Grant Agreement. This is true regardless of whether the FTA may have concurred in or approved any third-party contract at any tier. There is no federal obligation to third parties not a party to the Grant Agreement. Period. FTA lan- guage makes the point explicit “absent the Federal Government’s express written consent.”90 2. False or Fraudulent Statements or Claims—Civil and Criminal Fraud This is referenced at Section 3.f of the FTA Master Agreement, and the requirements are applicable to all third-party contracts. The requirements flow down to contractors and subcontractors who make, present, or submit covered claims and statements. A third-party contractor must acknowledge that the provisions of the Program Fraud Civil Remedies Act of 1986, as amended,91 apply to its actions, as do the re- lated USDOT regulations (Program Fraud Civil Reme- dies).92 Essentially the contractor certifies or affirms the truthfulness and accuracy of any statement it makes relating to the FTA-assisted work. The contractor fur- ther acknowledges that if it makes a false, fictitious, or fraudulent claim, submission, or certification to the Federal Government under an FTA-funded contract, the Government reserves the right to impose penal- ties.93 3. Access to Third-Party Contract Records Under Section 15.t of the FTA Master Agreement, the recipient must agree to require its third-party con- 89 FED. TRANSIT ADMIN., supra note 87, App. A.1, at 31. 90 Id. 91 31 U.S.C. § 3801 et seq. 92 49 C.F.R. pt. 31. 93 Penalties could be imposed under 18 U.S.C. § 1001 and 49 U.S.C. § 5307(n)(1). tractors and third-party subcontractors at each tier to provide the U.S. Secretary of Transportation and Comptroller General, or their authorized representa- tives, access to all third-party contracts as required by 49 U.S.C. § 5325(g), and to provide sufficient access to third-party procurement records as needed for compli- ance with federal laws and regulations or to assure proper project management as determined by FTA. This requirement applies to all third-party contracts. Note that the Best Practices Procurement Manual has a chart showing requirements for access to records and reports by type of contract.94 It primarily shows how certain public entities, such as states, may not be sub- ject to this requirement. But professional services con- tracts clearly are covered by the provision. 4. Changes to Federal Requirements Under Section 2.c(1) of the Master Agreement, FTA notes that to accommodate changing federal require- ments, the recipient must agree to include in each third-party agreement and other similar document im- plementing the project, notice that federal laws, regula- tions, and directives may change and that the changed provisions will apply to the project except to the extent that FTA determines otherwise in writing. This requirement applies to all third-party contracts and flows down to subcontracts. 5. Civil Rights (Title VI, Equal Employment Opportunity, Americans with Disabilities Act) Under Section 12 of the Master Agreement, the re- cipient must agree to comply with all applicable civil rights laws and regulations in accordance with applica- ble federal directives. These requirements apply to all third-party contracts and flow down to all third-party contractors and their contracts at every tier (unless oth- erwise noted). The requirements include— a. Nondiscrimination in federal public transportation programs. The recipient agrees to comply, and assures the compliance of each third-party contractor or other participant at any tier of the project, with 49 U.S.C. § 5322, which prohibits discrimination on the basis of race, color, creed, national origin, sex, or age, and pro- hibits discrimination in employment or business oppor- tunity. b. Nondiscrimination—Title VI of the Civil Rights Act. Under the Master Agreement, the recipient agrees to comply, and assures the compliance of each third- party contractor or other participant at any tier of the project, with all provisions prohibiting discrimination on the basis of race, color, or national origin of Title VI of the Civil Rights Act of 1964, as amended;95 with USDOT regulations, “Nondiscrimination in Federally- Assisted Programs of the Department of Transporta- 94 FED. TRANSIT ADMIN., supra note 87, at 16. 95 42 U.S.C. § 2000(d) et seq.

16 tion—Effectuation of Title VI of the Civil Rights Act”;96 and with related circulars and directives. c. Equal Employment Opportunity (EEO). Under the Master Agreement, the recipient agrees to comply, and assures the compliance of each third-party contractor or other participant at any tier of the project, with all EEO provisions of federal transit law;97 with Title VII of the Civil Rights Act of 1964, as amended;98 and implement- ing federal regulations and applicable Federal EEO directives. The Master Agreement provides further re- quirements for projects deemed to qualify as “construc- tion” by the DOL, namely, that the recipient agrees to comply and assures the compliance of each third-party contractor or other participant at any tier of the project with all applicable equal employment opportunity re- quirements of DOL regulations.99 d. Disadvantaged Business Enterprise (DBE). To the extent authorized by law, the Master Agreement re- quires the recipient to agree to facilitate participation by DBEs in the project and to assure that each third- party contractor at any tier of the project will also fa- cilitate such participation. The recipient must assure that it will not discriminate on the basis of race, color, sex, or national origin in the award and performance of any third-party contract supported with federal assis- tance derived from USDOT in the administration of its DBE program and shall comply with relevant require- ments.100 The Master Agreement also requires the re- cipient to agree that implementation of its approved DBE program is a legal obligation, and that failure to carry out that DBE program shall be treated as a viola- tion of the grant agreement and Master Agreement. e. Nondiscrimination on the Basis of Sex. The recipi- ent agrees to comply with applicable requirements of Title IX of the Education Amendments of 1972, as amended,101 and implementing requirements. The Mas- ter Agreement does not mention flow-down require- ments in this regard. f. Nondiscrimination on the Basis of Age. The Master Agreement provides that the recipient agrees to comply with applicable requirements of the Age Discrimination Act of 1974, as amended,102 and The Age Discrimination in Employment Act.103 The Master Agreement does not mention flow-down requirements in this regard. g. Access for Individuals with Disabilities. The Mas- ter Agreement requires the recipient to agree to comply with the whole range of laws and regulations applicable to individuals with disabilities.104 The Master Agree- 96 49 C.F.R. pt. 21. 97 49 U.S.C. § 5332. 98 42 U.S.C. § 2000(e). 99 41 C.F.R. pts. 60 et seq., which implement Exec. Orders No. 11246 and No. 11375. 100 49 C.F.R. pt. 26. 101 20 U.S.C. § 1681 et seq. 102 42 U.S.C. § 6101 et seq. 103 29 U.S.C. § 621–34. 104 See 49 U.S.C. § 5301(d), regarding federal policy to the effect that elderly individuals and persons with disabilities ment does not mention flow-down requirements with respect to these requirements. h. Drug or Alcohol Abuse Confidentiality and Other Civil Rights Protections. To the extent applicable, the Master Agreement requires the recipient to comply with the confidentiality and civil rights protections of various relevant laws.105 i. Access to Services for Persons with Limited Eng- lish Proficiency. Under the Master Agreement, the re- cipient agrees to facilitate compliance with the policies of Executive Order No. 13166, “Improving Access to Services for Persons With Limited English Proficiency,” 42 U.S.C. § 2000d-1 note, and follow applicable provi- sions of USDOT Notice, “DOT Policy Guidance Con- cerning Recipients’ Responsibilities to Limited English Proficiency (LEP) Persons,” 70 Federal Register 74087, December 14, 2005, except to the extent that FTA de- termines otherwise in writing. The Master Agreement does not mention flow-down requirements in this re- gard. j. Environmental Justice. The recipient agrees to fa- cilitate compliance with the policies of Executive Order No. 12898, “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Popu- lations,” 42 U.S.C. § 4321 note, except to the extent that the Federal Government determines otherwise in writ- ing. (Note that Environmental Justice requirements flow through Title VI requirements.)106 k. Other Nondiscrimination Laws. The recipient agrees to comply with applicable provisions of other federal laws and regulations, and follow applicable fed- eral directives prohibiting discrimination, except to the extent the federal government determines otherwise in writing. 6. Incorporation of FTA Terms Both Circular 4220.1F and the Master Agreement (at Section 15.a) require the recipient to agree to comply with third-party procurement requirements of federal transit law,107 USDOT third-party procurement regula- tions,108 and other applicable federal regulations relat- ing to third-party procurements and any amendments thereto, including FTA Circular 4220.1F, and any later have the same rights as other persons to use public transporta- tion services and facilities; 29 U.S.C. § 794, prohibiting dis- crimination on the basis of disability; 42 U.S.C. § 12101 et seq., requiring accessible facilities and services to be made available to individuals with disabilities; and 42 U.S.C. § 4151 et seq., requiring that buildings and public accommodations be acces- sible to individuals with disabilities. 105 The Drug Abuse Office and Treatment Act of 1972, as amended, 21 U.S.C. §§ 1101 et seq.; the Comprehensive Alcohol Abuse and Alcoholism Prevention, Treatment and Rehabilita- tion Act of 1970, as amended, 42 U.S.C. §§ 4541 et seq.; the Public Health Service Act of 1912, as amended, 42 U.S.C. §§ 290dd through 290dd-2; and any amendments thereto. 106 See FTA Circular 4702.1A, ch. IV. 107 49 U.S.C. ch. 53. 108 49 C.F.R. § 1836 and §§ 19.40–19.48.

17 revisions. This requirement applies to all third-party contracts and flows down to all tiers. The Master Agreement notes that the recipient must agree that it may not use FTA funds to support its third-party procurements unless there is satisfactory compliance with federal law and regulations. Interest- ingly, in this section of the Master Agreement, the FTA notes that the FTA Best Practices Procurement Manual is focused on procurement processes and examples; FTA then requires the recipient to agree that the Manual “…may omit certain Federal requirements applicable to specific third party contracts,” which seems to be an indirect way of stating that the Manual may not legally be relied upon. 7. Right of Federal Government to Terminate Under Section 11 of the Master Agreement, the re- cipient agrees that the Federal Government may, upon written notice, suspend or terminate all or part of any federal assistance to be provided for the project if the recipient has violated the terms of the grant agreement, or if the Government determines that the purposes of the laws authorizing the project would not adequately be served by the continuation of federal funding for the project.109 This right of the Government to terminate underlines the importance of a termination-for- convenience provision in a third-party contract.110 This requirement applies to all third-party contracts in excess of $10,000, and flows down to all contracts in excess of $10,000. The Master Agreement notes that generally a termi- nation would not invalidate obligations properly in- curred by the recipient before the termination date to the extent the obligations cannot be cancelled but fur- ther notes the right of the Government, in certain in- stances, to require the recipient to refund, in whole or part, the federal assistance provided for the project. Notably, expiration of any project time period estab- lished for the project does not by itself constitute a ter- mination of the grant agreement for the project. 8. Suspension and Debarment Under Section 11 of the Master Agreement, the re- cipient agrees to comply for awards exceeding $25,000, and assures the compliance of each third-party contrac- tor or other participant at any tier of the project, with Executive Orders Numbers 12549 and 12689 (Debar- ment and Suspension)111 and USDOT regulations (Non- procurement Suspension and Debarment).112 This re- quirement applies to all third-party contracts at any level expected to equal or exceed $25,000. The recipient further agrees to, and assures that its third-party contractors and other participants at any tier of the project will, review the “Excluded Parties 109 49 U.S.C. pt. 18. 110 See the discussion in § IV.T below in this regard. 111 31 U.S.C. § 6101, note, and 49 C.F.R. pt. 29. 112 2 C.F.R. pt. 1200. Listing System”113 before entering into any third-party contract or other arrangement in connection with the project. 9. Buy America Under Section 14.a of the Master Agreement, the re- cipient agrees to comply to the extent applicable—that is, for contracts for acquisition of goods or rolling stock valued at more than $100,000—with Buy America statutory language and implementing regulations.114 Basically, for awards exceeding the simplified acquisi- tion threshold of $100,000, any steel, iron, or manufac- tured products used in the FTA-funded project must be produced in the United States. For outsourcing contract purposes, note that this pro- vision only applies in the case of contracts for the acqui- sition of goods or rolling stock valued at more than $100,000. The requirements flow down from FTA recipients to first-tier contractors, who are responsible for ensuring that lower-tier contractors are in compliance. Note that there are certification requirements for procurement of steel, iron, or manufactured products or for the pro- curement of buses, other rolling stock, and associated equipment. A bidder or offeror must submit to the re- cipient the appropriate Buy America certification. Unlike two other domestic preferences discussed be- low, the Federal Buy America provision is specifically applicable only to federal transit and highway grants. 10. Cargo Preference—Use of United States Flag Vessels This is the second of the trio of domestic preference requirements, referenced at Section 14.b of the Master Agreement. To the extent applicable, the recipient agrees to comply with relevant law and U.S. Maritime regulations.115 Essentially, U.S. flag vessels should be used for any FTA-funded grant should cargo shipment be necessary. The requirements apply to all subcontracts if such contracts may involve cargo shipment of equipment, material, or commodities. 11. Fly America This is the third and final domestic preference re- quirement; it is referenced at Section 14.c of the Master Agreement. The recipient must agree that the Federal Government will not participate in the costs of interna- tional air transportation of any individuals involved in or property acquired for the project unless that air transport is provided by U.S. flag carriers, if that ser- vice is available, and in accordance with applicable law and regulations.116 113 http://epls.gov/. 114 49 U.S.C. § 5323(j) and 49 C.F.R. pt. 661. 115 46 U.S.C. § 55305 and 46 C.F.R. pt. 381. 116 49 U.S.C. § 40118 and 41 C.F.R. §§ 301-10.131 to 301- 10.143.

18 This provision applies to all contracts involving the transportation of persons or property by air to a place outside the United States, and it is possible an outsourc- ing contract could trigger this provision. The requirements flow down from FTA recipients and subrecipients to first-tier contractors, who are re- sponsible for ensuring that lower-tier contractors are in compliance. 12. Resolution of Disputes, Breaches, or Other Litigation Under Section 52 of the Master Agreement, the re- cipient agrees for all contracts in excess of $100,000 that the Federal Government has a vested interest in the settlement of any dispute, default, or breach involving any federally-assisted third-party contract. The recipi- ent agrees to pursue all legal rights available under any third-party contract involving FTA funds. The Federal Government reserves the right to concur in any com- promise or settlement of any claim by the recipient in- volving any third-party contract. Accordingly, the recipient agrees to notify FTA in writing of any current or prospective major dispute, breach, default, or litigation that may affect the FTA’s interest in the project or its administration of federal laws and regulations. Before naming the Federal Gov- ernment as a party to litigation, the recipient will first inform FTA in writing before doing so. These requirements should be reflected in contract provisions or conditions and flow down to all tiers. 13. Lobbying Under Section 3.d of the Master Agreement, for awards of $100,000 or more, the recipient agrees that it will comply with applicable federal laws and regula- tions prohibiting the use of federal assistance for activi- ties designed to influence Congress or a state legisla- ture with respect to legislation or appropriations, except through proper, official channels. More to the point for third-party contract purposes, the recipient also agrees that it will comply, and will assure the compliance of each third-party contractor or other participant at any tier of the project, with USDOT regulations on restric- tions on lobbying. There are lobbying certification and disclosure requirements for third-party contractors.117 These provisions apply to construction/A&E/acqui- sition of rolling stock/professional service con- tract/operational service contract/turnkey contracts. There are also certification requirements for contractors who apply or bid for an award of $100,000 or more un- der a provision known as the “Byrd Amendment.”118 Each tier must certify to the tier above that it will not use and has not used federal appropriated funds to pay any person or organization for influencing or attempt- ing to influence an officer or employee of any agency, or a member of Congress, or an officer or employee of Con- gress in connection with obtaining a federal grant, con- 117 49 C.F.R. § 20.110(d). 118 31 U.S.C. § 1352, 2 U.S.C. § 1601 et seq. tract, or other award, and each tier must disclose the name of any registrant under the Lobbying Disclosure Act who has made contact on its behalf with nonfederal funds regarding that grant, contract, or award. 14. Clean Air (Air Quality) Under Section 25.b of the Master Agreement, the re- cipient agrees to comply with all applicable federal laws, regulations and directives implementing the Clean Air Act, as amended, 119 as well as related trans- portation planning and U.S. Environmental Protection Agency (EPA) conformity requirements, including any specific air quality mitigation or control measure incor- porated into the project to support its requisite air qual- ity conformity finding for the project. EPA also imposes requirements that may apply to public transit opera- tors, particularly those of large public transit bus fleets.120 These requirements apply to all contracts exceeding $100,000, and flow down to all subcontracts exceeding $100,000. 15. Clean Water Under Section 25.c of the Master Agreement, the re- cipient agrees to comply with applicable federal laws, regulations, and directives implementing the Clean Water Act, as amended.121 The recipient agrees to pro- tect underground sources of drinking water as provided by the Safe Drinking Water Act of 1974, as amended,122 and to comply with the notice of violating facility provi- sions of Section 508 of the Clean Water Act and facili- tate compliance with Executive Order No. 11738, “Ad- ministration of the Clean Air Act and the Federal Water Pollution Control Act with Respect to Federal Contracts, Grants, or Loans.”123 The requirements apply to each contract and subcon- tract in excess of $100,000, and flow down to every tier. 16. Construction Activities Under Section 24 of the Master Agreement, while not applicable to professional services/A&E or opera- tions/management contracts, there are a number of requirements regarding construction activities, includ- ing construction employee protections under the Davis Bacon Act124 (for contracts exceeding $2,000), the Con- tract Work Hours and Safety Standards Act125 (for con- 119 42 U.S.C. §§ 7401–7671q. 120 40 C.F.R. pt. 85, Control of Air Pollution from Mobile Sources; 40 C.F.R. pt. 86, Control of Air Pollution from New and In-Use Motor Vehicles and New and In-Use Vehicle En- gines; and 40 C.F.R. pt. 600, Fuel Economy of Motor Vehicles. 121 33 U.S.C. §§ 1251–1377. 122 42 U.S.C. §§ 300f–300j-6. 123 42 U.S.C. § 7606, note. 124 40 U.S.C. § 3141 et seq. and 29 C.F.R. pt. 5. 125 40 U.S.C. § 3701 et seq. and 29 C.F.R. pt. 5, and the safety requirements at 40 U.S.C. § 3704 and 29 C.F.R. pt. 1926.

19 tracts exceeding $100,000), and the Copeland Anti- Kickback Act.126 There are also bonding requirements for construction activities exceeding $100,000127 and seismic safety requirements for construction contracts for new buildings or for existing buildings.128 17. Transit Employee Protective Arrangements Under Section 24.d of the Master Agreement, if the project involves transit operations, the recipient agrees to implement the project in accordance with the terms and conditions that the Secretary of Labor has deter- mined to be fair and equitable to protect the interests of any employees affected by the project.129 Capital projects funded by FTA grants are also subject to 13(c) require- ments. The terms and conditions are identified in the DOL’s certification of public transportation employee protective arrangements to FTA. The recipient agrees to implement the project in accordance with the condi- tions in the DOL certification. Note that the require- ments are somewhat different if grants are under 49 U.S.C. § 5310(a)(2) (for Elderly Individuals and Indi- viduals with Disabilities) or 49 U.S.C. § 5311 (Nonur- banized Area grants, which are subject to a 13(c) Spe- cial Warranty). The provisions are applicable to all contracts and subcontracts at every tier, and thus contractors may be obligated to 13(c) terms in an outsourcing contract. 18. Charter Bus Operations Also under the transit operations category, Section 28 of the Master Agreement requires a recipient to agree that neither it nor any public transit operator performing work for a transit project financed under federal transit or highway law will engage in charter bus operations except as authorized by law or regula- tion.130 These requirements flow down to first-tier service contractors. 19. School Transportation Operations Similar to the charter bus requirements, and also under the transit operations category, Section 29 of the Master Agreement requires a recipient to agree that neither it nor any public transportation operator per- forming work for a transit project financed under fed- eral transit or highway law will engage in school trans- portation operations for the transportation of students or school personnel exclusively in competition with pri- vate school operators, except as authorized by law or regulation.131 These requirements flow down to first-tier service contractors. 126 18 U.S.C. § 874 and 29 C.F.R. pt. 3. 127 FTA, Master Agreement § 15. 128 Id. § 23.e. 129 49 U.S.C. § 53339(b). Before its codification in the U.S. Code, the provision was § 13(c) of the Federal Transit Act, as amended, and is still referred to as “13(c).” 130 49 U.S.C. § 5323(d) and 49 C.F.R. pt. 604. 131 49 U.S.C. § 5323(f) or (g) and 49 C.F.R. pt. 605. 20. Prohibited Drug Use and Alcohol Misuse and Testing Under the transit operations category, Section 32.b of the Master Agreement requires the recipient to com- ply with FTA’s drug and alcohol prohibited use law and regulations.132 These requirements apply to operational service contracts and to anyone who performs a safety sensitive function for the recipient, subrecipient, opera- tor, or contractor. Of particular interest in the case of nontraditional outsourcing, note that there are certain exceptions for contracts involving maintenance contracts. Note also that the rules do not apply to maintenance subcontrac- tors. For a variety of reasons, maintenance is an area that often is considered for outsourcing. Finally, if a recipient outsources its security func- tions and contractor personnel carry a firearm for secu- rity purposes, there is a possibility that such personnel would be subject to the FTA drug and alcohol testing regulation. A “safety-sensitive function” is defined un- der FTA’s “Prevention of Alcohol Misuse and Prohibited Drug Use in Transit Operations” regulation as various duties when performed by recipients or by its contrac- tors, including “carrying a firearm for security pur- poses.”133 21. Privacy Act Note that when a recipient maintains files on drug and alcohol enforcement activities for FTA in such a way that information could be retrieved by personal identification, Privacy Act requirements apply to all contracts.134 The Privacy Act requirements flow down to each third-party contractor and all tiers. 22. Bus Testing Note that only in the instance of the acquisition of rolling stock under a turnkey project would the FTA’s bus testing requirements apply. A third-party contrac- tor under such a turnkey project would have to ensure compliance with FTA’s law and regulations on bus test- ing.135 There are specific requirements and certifications that a contractor or manufacturer would have to pro- vide. 23. Pre-Award and Post-Delivery Audits As with bus testing, these requirements would apply only in the case of acquisition of rolling stock under a turnkey project. The contractor would agree to comply with the applicable law and regulations136 on these au- dits, including certification of compliance with Buy America and Federal Motor Vehicle Safety Standards. 132 49 U.S.C. § 5331 and 49 C.F.R. pt. 655. 133 49 C.F.R. § 655.4 (2009). 134 5 U.S.C. § 552. 135 49 U.S.C. § 5323(c) and 49 C.F.R. pt. 665. 136 49 U.S.C. § 5323(l) and 49 C.F.R. pt. 663.

20 24. Patent Rights Under the Master Agreement, at Section 17, a re- cipient is to notify FTA if it or a third-party contractor develops or creates something “patentable.” FTA pro- vides for all contracts that if any improvement, inven- tion, or discovery of the recipient or any third-party contractor or other participant at any tier of the project is conceived or first actually reduced to practice under the project, and such invention, improvement, or dis- covery is patentable under U.S. law or the law of a for- eign country, the recipient agrees to notify FTA imme- diately and provide a detailed report. Further, the recipient is to agree that its rights and responsibilities and those of each subrecipient and third-party contractor relative to that invention, discov- ery, or improvement will be determined in accordance with applicable federal laws and regulations in that regard. 25. Rights in Data/Copyright Requirements Both Circular 4220.1F and the Best Practices Pro- curement Manual stress that the Rights in Data/Copyright Requirements apply only to planning, research, development, and demonstration projects and thus would not apply to outsourcing contracts. When data are first produced in the performance of a project, the recipient, other than for its internal use, may not publish or reproduce such data without FTA’s written consent unless FTA has previously released such data to the public. Data that are delivered under a project include such things as computer software, stan- dards, specifications, engineering drawings, process sheets, manuals, and technical reports. (This does not apply in the case of a grant agreement with an institu- tion of higher learning.) Moreover, the recipient agrees to provide to FTA a royalty-free, nonexclusive, and irrevocable license to reproduce, publish, or use and authorize others to use for Federal Government purposes such data. Without the copyright owner’s consent, FTA may not provide or otherwise extend to other parties the FTA’s license to any data developed under the project or under a third- party contract or other arrangement at any tier of the project supported with federal assistance derived from the project, whether or not a copyright has been ob- tained, and any rights of copyright to which a recipient, third-party contractor, or other participant at any tier of the project purchase ownership with federal assis- tance. Note that in the case of a research, development, demonstration, or special studies project, the recipient generally must agree that FTA has the right to broadly make available FTA’s license in the copyright or a copy of the data. The recipient agrees to hold harmless and indemnify the Federal Government against any liability resulting from any willful or intentional violation by the recipient of proprietary rights, copyrights, or right of privacy. 26. Energy Conservation Pursuant to Section 26 of the Master Agreement, the recipient agrees to comply with applicable mandatory energy efficiency standards and policies of applicable state energy conservation plans issued under the En- ergy Policy and Conservation Act,137 except to the extent the government determines otherwise in writing. To the extent applicable, the recipient agrees to perform an energy assessment for any building constructed, recon- structed, or modified with FTA assistance as provided for under FTA regulations.138 The Best Practices Procurement Manual notes that the Energy Conservation requirements are applicable to all contracts, and that they extend to all third-party contractors and subcontractors and their contracts at every tier. 27. Recycled Products Under Section 15.k of the Master Agreement, the re- cipient agrees, to the extent practicable, to comply with EPA procurement guidelines for products containing recovered materials.139 The provision is applicable if the purchaser or contractor procures $10,000 or more of these items during the fiscal year using federal funds or did so during the previous fiscal year. Thus the recipi- ent agrees to provide a competitive preference for prod- ucts and services that conserve natural resources, pro- tect the environment, and are energy efficient, except to the extent the government determines otherwise in writing. These requirements flow down to all contractor and subcontractor tiers. 28. Conformance with National Intelligent Transportation Systems Architecture Under Section 15.m of the Master Agreement, to the extent applicable, the recipient agrees to conform to the National Intelligent Transportation Systems Architec- ture and Standards as required by the 2005 transit and highway reauthorization law.140 29. Americans with Disabilities Act Access Under Section 12.g of the Master Agreement, the re- cipient agrees to comply with the full range of laws and regulations applicable to access for individuals with disabilities. 30. Assignability Clause Circular 4220.1F at Appendix D lists “Assignability Clause” and references Section 15.a of the Master Agreement. But that section restates the recipient’s 137 42 U.S.C. § 6321 et seq. 138 49 C.F.R. pt. 622, subpt. C, Requirements for Energy As- sessments. 139 40 C.F.R. pt. 247, which implements § 6002 of the Re- source Conservation and Recovery Act, as amended, 42 U.S.C. § 6962. 140 23 U.S.C. § 512, note.