[Federal Register Volume 59, Number 164 (Thursday, August 25, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-20979]


[[Page Unknown]]

[Federal Register: August 25, 1994]


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DEPARTMENT OF TRANSPORTATION
49 CFR Part 663

 

Small Purchase Exception to Resident Inspector Requirement Under 
Pre-Award and Post-Delivery Audits of Rolling Stock Purchases

AGENCY: Federal Transit Administration, DOT.

ACTION: Regulatory guidance.

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SUMMARY: This document provides guidance on the Federal Transit 
Administration's (FTA) regulation requiring audits of rolling stock 
purchased with FTA funds to assure compliance with the bid 
specification requirements. For procurements of 11 or more vehicles, 
the regulation requires that an inspector be present during 
construction of the vehicles at the manufacturing site to assure 
compliance with the bid specifications; an exception is thus provided 
for purchases of ten or fewer vehicles. FTA explains in this document 
that the exception also applies to the purchase of ten or fewer 
vehicles by a subrecipient under the umbrella of a Statewide 
procurement.

EFFECTIVE DATE: August 25, 1994.

FOR FURTHER INFORMATION CONTACT: George Izumi, Office of Grants 
Management, Federal Transit Administration, (202) 366-6475; or Daniel 
Duff, Office of Chief Counsel, Federal Transit Administration, (202) 
366-4011.

SUPPLEMENTARY INFORMATION:

Background

    In accordance with section 12(j) of the Federal Transit Act, as 
amended, FTA issued a regulation requiring a pre-award and post-
delivery audit for an FTA grant involving the purchase of buses and 
other rolling stock. Under the regulation, a recipient of Federal 
financial assistance under sections 3, 9, 16, or 18 of the Act must 
certify that its rolling stock procurements comply with the bid 
specifications.
    Section 12(j) provides that ``manufacturer certification shall not 
be sufficient, and independent inspections and auditing shall be 
required.'' Accordingly, as part of the post-delivery certification 
process, 49 CFR 663.37(a) requires the recipient to have a ``resident 
inspector'' at the manufacturing site during the period of manufacture 
to assure such compliance, and provides that the inspector cannot be an 
agent or employee of the manufacturer.
    Section 663.37(c) provides, however, that the ``resident 
inspector'' requirement under the regulation does not apply to the 
purchase of ten or fewer vehicles, in which case the recipient itself 
must assure compliance with the specifications.

Issue

    FTA's section 18 (nonurbanized area formula) and section 16 
(elderly and persons with disabilities formula) programs are 
administered by the States. States also may receive funds under the 
section 3 (capital) program. The States receive grant funds from FTA, 
and in turn make the funds available to subrecipients that provide 
transportation services at the local level.
    Some States make arrangements with vehicle manufacturers on behalf 
of a number of local subrecipients. These smaller operators prefer the 
efficiency and convenience of this process, through which they can 
purchase vehicles in a more timely manner and at a more reasonable cost 
than if each acted independently. However, the question has arisen 
whether, when a subrecipient purchases 10 or fewer vehicles under such 
a Statewide procurement, it must employ a resident inspector at the 
manufacturing site. Affected States and subrecipients have expressed 
concern that the application of the resident inspector requirement in 
this situation would impose a considerable cost burden on them. They 
contend that the exception in section 663.37(c) covers such small 
purchases under a Statewide procurement.

Clarification

    As the preamble to the final rule (56 FR 48384, September 24, 1991) 
indicates, the purpose of the exception at 49 CFR 663.37(c) is to 
provide a recipient of FTA funds procuring a small number of vehicles 
relief from the cost burden associated with the requirement that an 
inspector be present at the manufacturing site; indeed, a section of 
the preamble addresses the rule's economic impact on small entities, 
and concludes that it will not have a significant impact on a 
substantial number of such entities because of policies adopted in the 
final rule, including the exception to the in-plant inspection 
requirement provided for small purchases. This rationale applies 
equally to a purchase of ten or fewer vehicles by a subrecipient of a 
State, even where the purchase or purchase order is made under the 
umbrella of a Statewide procurement. Moreover, the unique role of the 
States in administering the FTA's nonurbanized and elderly and persons 
with disabilities programs should not prevent a subrecipient under 
those programs from being afforded the same relief from a regulatory 
cost burden currently available to larger recipients under the formula 
and capital programs. Accordingly, we intend this guidance to make 
clear that the existing exception from the resident inspector 
requirement for purchases of ten or fewer vehicles at 49 CFR 663.37(c) 
applies to separate purchases of ten or fewer vehicles by a 
subrecipient under a Statewide procurement using section 3,16, or 18 
funds.
    We emphasize that the exception does not relieve grantees from the 
audit requirement altogether. Instead, recipients or subrecipients must 
verify, independent of the manufacturer, that the vehicles meet the bid 
specification requirements by road testing and visually inspecting the 
vehicles to make certain that they comply with the bid specifications.

    Issued on: August 22, 1994.
Gordon J. Linton,
Administrator.
[FR Doc. 94-20979 Filed 8-24-94; 8:45 am]
BILLING CODE 4910-57-U