Full-Funding Grant Agreements Guidance

Table of Contents

• General
• Dear Colleague
• Chapter I: Statutory and Regulatory Background
• Chapter II: Application and Supporting Documents
• Chapter III: Terms, Conditions, and Attachments
• Chapter IV: Recording the Full Funding Grant Agreement in Electronic Form
• Chapter V: Project Implementation
• Appendix A: Acronyms and Definitions
• Appendix B: Model Full Funding Grant Agreement and Examples of Attachments
• Appendix C: FFGA Application Document Checklist
• Appendix D: Application of FFGA Cost and Award Terminology

Number C 5200.1A
12-05-02
U.S. Department of Transportation
Federal Transit Administration

1. PURPOSE. This circular provides guidance and information on developing Full Funding Grant Agreements (FFGAs) and administering funds for major capital investment ("new starts") projects pursuant to these agreements. FFGAs are authorized under Federal transit law and are the designated means for providing new starts funds to projects with a Federal share of $25 million or more. An FFGA establishes the terms and conditions for Federal financial participation in a new starts project; defines the project; sets the maximum amount of Federal new starts funding for a project; covers the period of time for completion of the project; and facilitates efficient management of the project in accordance with applicable Federal statutes, regulations, and policy. Within the limits of law, an FFGA provides assurance and predictability of Federal financial support for a new starts project while strictly limiting the amount of that Federal financial support.
2. CANCELLATION. This circular cancels FTA Circular 5200.1, "Full Funding Grant Agreements Guidance," dated 7-2-93.
3. REFERENCES. [Note: in typing the address into a website, one should not type the brackets.]
   1. Federal Transit Administration enabling statutes codified at 49 U.S.C. Chapter 53. 49 U.S.C. Chapter 53 may be viewed at [49 U.S.C. Chapter 53 ] on FTA’s website.
   2. Federal-aid highway and surface transportation laws, Title 23, United States Code. See [http://www.fhwa.dot.gov/legsregs/directives/cfr23toc.htm].
   3. Transportation Equity Act for the 21^st Century (TEA-21), Pub. L. 105-178; 112 Stat. 107, June 9, 1998, as amended by the TEA-21 Restoration Act, Pub. L. No. 105-206, June 22, 1998. TEA-21 may be viewed at [ http://www.fhwa.dot.gov/tea21 ]. See Title III, Federal Transit Administration Programs.
   4. Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA), Pub. L. 102-240; 105 Stat. 1914, Dec. 18, 1991.
   5. Section 4(f) of the Department of Transportation Act of 1966, as amended, 49 U.S.C. § 303. See [ http://www.access.gpo.gov/uscode/uscmain.html ]. Select Title 49, Subtitle I, Chapter 3, Subchapter I, Sec. 303.
   6. National Environmental Policy Act of 1969, as amended, 42 U.S.C. §§ 4321 et seq. See [ The National Environmental Policy Act of 1969 ].
   7. Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended. See [ http://www.fhwa.dot.gov/realestate/act.htm ].
   8. U.S. Department of Transportation (DOT) regulations, "Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments," 49 C.F.R. Part 18.
   9. FTA regulation, "Major Capital Investment Projects," 49 C.F.R. Part 611. See [Major Capital Investment Projects].
   10. FTA regulation, "Project Management Oversight," 49 C.F.R. Part 633. See [Project Management Oversight].
   11. Joint FTA/Federal Highway Administration (FHWA) regulations, "Planning Assistance and Standards," 23 C.F.R. Part 450 and 49 C.F.R. Part 613 (specifically, Subpart B, "Statewide Transportation Planning," and Subpart C, "Metropolitan Transportation Planning and Programming"). See [http://www.fhwa.dot.gov/legsregs/directives/fapg/Cfr450c.htm], and select Subparts B and C.
   12. Joint FTA/FHWA regulations, "Environmental Impact and Related Procedures," 23 C.F.R. Part 771 and 49 C.F.R. Part 622. A summary of the environmental review process is presented on FTA’s website [See 23 C.FR. Part 771]. 
   13. U.S. DOT regulation, Uniform Relocation Assistance and Real Property Acquisition for Federal and Federally Assisted Programs," 49 C.F.R. Part 24. See [49 C.F.R. Part 24].
   14. U.S. Department of Labor guidelines, "DOL Guidelines, Section 5333(b), Federal Transit Law," 29 C.F.R. Part 215. See [http://www.access.gpo.gov/nara/cfr/waisidx_98/29cfr215_98.html].
   15. Office of Management and Budget Circular A-87, "Cost Principles for State, Local, and Indian Tribal Governments," dated 5-17-95. See [Cost Principles for State, Local, and Indian Tribal Governments].
   16. FTA Circular 4220.1D, "Third Party Contracting Requirements," dated 4-15-96, and Change 1, which may be viewed on FTA’s website at [Third Party Contracting Requirements].
   17. FTA Circular 5010.1C, "Grant Management Guidelines," dated 10-1-98, which may be viewed on FTA’s website at [Grant Management Guidelines].
   18. FTA Circular 9030.1C, "Urbanized Area Formula Program: Grant Application Instructions," dated 10-1-98, which may be viewed on FTA’s website at [Urbanized Area Formula Program: Grant Application Instructions]
   19. FTA Circular 9300.1A, "Capital Program: Grant Application Instructions," dated 10-1-98, which may be viewed on FTA’s website at [Capital Program: Grant Application Instructions].
   20. FTA Master Agreement, FTA MA(8), dated 10-1-01, which is updated annually and may be viewed on FTA’s website at [Master Agreement].
   21. FTA Notice, "Fiscal Year 2002 Annual List of Certifications and Assurances for Federal Transit Administration Grants and Cooperative Agreements," which is updated annually and may be viewed on FTA’s website at [Annual List of Certifications].
   22. FTA Federal Register Notice, "FTA Fiscal Year 2002 Apportionments, Allocations and Program Information," (67 Fed. Reg.,126 (January 2, 2002)). Apportionments are published annually.  The Notice may be viewed at [Federal Register Notice].
   23. FTA Guidance containing several New Starts-related documents may be viewed on FTA’s website at [Planning, Development, and Funding for New Starts Projects].
   24. FTA Report, "Annual Report on New Starts: Proposed Allocations of Funds for Fiscal Year 2003," which is issued annually and may be viewed on FTA’s website at [Annual Report on New Starts 2003].
   25. FTA Report, "Supplemental Report on New Starts," which is issued annually, may be viewed on FTA’s website at [Annual Report on New Starts].
   26. FTA Guidance, "Guidance for Transit Financial Plans," dated June 2000, which may be viewed on FTA’s website at [Guidance for Transit Financial Plans].
   27. FTA Guidance, "Reporting Instructions for the Section 5309 New Starts Criteria," dated July 2001. See [Reporting Instructions for the Section 5309 New Starts Criteria].
   28. FTA Guidance, "Interim Guidance on Design-Build" (September 20, 2000), which may be viewed on FTA's website at [Interim Guidance on Design-Build].
   29. FTA Guidance, "Quality Assurance and Quality Control Guidelines" (March 1992; under revision), which may be obtained from FTA Regional Offices.
   30. FTA Guidance, "Project and Construction Management Guidelines, 1996 Update," which may be viewed on FTA’s website at [
4. IMPACT ON DELEGATIONS OF AUTHORITY. This circular entails no delegations of authority.
5. APPLICABILITY. The FTA Full Funding Grant Agreement (FFGA) is the means mandated by statute for providing Federal financial assistance under 49 U.S.C. Section 5309 in the amount of $25 million or more for a major capital investment (new starts) project. In the Federal Transit Administrator’s discretion, the FFGA may also be used for providing Federal financial assistance to other types of major projects.
6. DEFINITIONS. Terminology particular to this circular is capitalized in the text and defined in Appendices A (Acronyms and Definitions) and B (Model Full Funding Grant Agreement).
7. OVERVIEW OF A FULL FUNDING GRANT AGREEMENT. The FTA Full Funding Grant Agreement (FFGA) is a special type of grant agreement FTA uses for making a major investment in a new fixed guideway system—rapid rail, light rail, commuter rail, exclusive bus/high occupancy vehicle lanes, or ferry service—or an extension to an existing fixed guideway system. In exchange for FTA’s commitment to provide $25 million or more in Federal funds under the 49 U.S.C. Section 5309 major capital investment program, over a multi-year construction schedule, the grantee commits to complete its new starts project on time, within budget, and in compliance with all applicable Federal requirements, and to bear any cost increases that might occur subsequent to award and execution of an FFGA.

   The FFGA has proven a useful tool for the Federal Transit Administration in managing the entire set of new starts projects for which Federal financial assistance is sought. It enables the FTA to contractually commit the "full" amount of Federal assistance that will be available to any one project, in balance with the total amounts of Federal new starts funding available at that time for all such large-scale projects across the United States, both during the current FTA authorization and beyond. Moreover, an FFGA benefits both parties to the agreement in that it defines the project scope, establishes a firm date for project completion, provides a mechanism for designating funds for future years, leads to the development of accurate cost estimates, and permits the use of state and local funding for early project activities without jeopardizing future Federal funding for those activities.

   An FFGA is composed of both text and attachments. The text of an FFGA is a set of standardized contractual terms and conditions applicable to all new starts projects, including definitions, obligations of completion and local share, cost eligibility, project management oversight, and labor protection. The attachments to an FFGA are tailored to each specific project. The attachments address the scope of work, project description, baseline cost estimate, baseline construction schedule, prior grants and related documents for the project, schedule of Federal funds, environmental mitigation, studies to measure the project’s success after it has opened to revenue service, and any special conditions applicable to the project.

8. CONTENTS OF THIS CIRCULAR. Chapter I traces FTA’s historical use of FFGAs; notes the Congressional adoption and revision of FFGA policy through the enactment of FTA’s most recent authorizing statutes, ISTEA and TEA-21; outlines FTA’s major capital investments rule and annual report to the Congress that contains recommendations on the allocation of new starts funding for the coming fiscal year; summarizes FTA’s standards for project readiness as prerequisite to the execution of an FFGA; and addresses the 60-day notice that must be given to Congressional authorization and appropriations committees before FTA may enter into an FFGA.

Full Funding Grant Agreement Guidance

Number C-02-16
12-05-02

Sincerely,
Jennifer L. Dorn

Chapter I: Statutory and Regulatory Background

1. HISTORICAL USE OF FULL FUNDING GRANT AGREEMENTS. Since the early 1970s, the Federal government has provided a large share of the Nation’s capital investment in urban mass transportation, particularly for "new starts" projects, that is, major new fixed guideway systems or extensions to existing fixed guideway systems. Always, however, the demand for Federal new starts funding has exceeded supply. By the late 1970s, FTA’s predecessor agency, the Urban Mass Transportation Administration (UMTA), recognized the need to adopt policies to ensure that the available Federal funds would be used in the most prudent and effective manner. Moreover, UMTA recognized the need to limit the total Federal participation in any one project to maximize the availability of funding for other eligible projects. Thus, UMTA developed the device of a Full Funding Grant Agreement (FFGA), a special form of contractual obligation between the Federal government and a transit agency. An FFGA limits the amount of Federal new starts funds available for any one project, in balance with the total amount of new starts funds available at that time for all such projects throughout the United States.

   As UMTA gained experience in the use of FFGAs, the agreements became more sophisticated. UMTA began setting terms and conditions by which a grantee became committed to completing a project within a discrete budget and a definitive schedule, in compliance with all applicable Federal statutes, regulations, and program requirements. Given UMTA’s limited mission as an investor, moreover—UMTA did not manage or make any decisions in the design or construction of a project—the FFGA explicitly limited the Federal government’s exposure to cost increases attributable to inadequate project design, engineering, or planning at the local level. Only in the event of "extraordinary" costs (such as Acts of God, excessive inflation, or unanticipated expense for eminent domain or compliance with subsequent Federal law) would UMTA entertain a request to provide funds beyond the amount specified in an FFGA.

   Too often, however, FFGAs were negotiated on an individual, ad hoc basis. During the 1980s, in particular, the lack of an exacting protocol for putting a new starts project under an FFGA led to inconsistent contractual terms and conditions, confusion over UMTA grant requirements, and inequity among applicants seeking and competing for Federal funding. By the late 1980s, UMTA recognized the need to ensure a uniform approach in developing FFGAs and in administering projects under FFGAs, to achieve a greater consistency and equity in the national new starts program. In particular, UMTA saw the need to establish a more rigorous project development process and to provide explicit guidance to applicants for FFGAs.

   Thus, in 1990, UMTA drafted a model FFGA and an accompanying circular, UMTA C 5200.1. UMTA used the 1990 draft in negotiating FFGAs during the last years of the agency’s authorization under the Surface Transportation and Uniform Relocation Assistance Act of 1987. The Congress consulted the draft circular and model FFGA in crafting several provisions of the Intermodal Surface Transportation Act of 1991 (ISTEA).

2. FEDERAL TRANSIT ACT AMENDMENTS OF 1991. In Title III of ISTEA (the Federal Transit Act Amendments of 1991), Congress renamed UMTA the Federal Transit Administration (FTA). At the same time, Congress expressly authorized FTA to: enter into FFGAs; to establish the terms and conditions of Federal financial participation in new starts projects and the maximum amounts of Federal financial assistance for these projects; to cover the periods of time for completion of these projects, including any periods beyond FTA’s current authorization; and to facilitate timely and efficient management of these projects in accordance with Federal law.

   In enacting ISTEA, Congress made significant changes to the criteria for evaluating new starts projects. Specifically, ISTEA required that a new starts project be "justified, based on a comprehensive review of its mobility improvements, environmental benefits, cost-effectiveness, and operating efficiencies," as a prerequisite to FTA’s award of an FFGA. In effect, through ISTEA, Congress gave FTA an explicit means of comparing the merits of new starts candidates for an FFGA.

   Shortly thereafter, in July 1993, FTA formally issued the circular as FTA C 5200.1, together with a model FFGA. The circular set forth the procedure for making an application for an FFGA, consistent with ISTEA; described the purpose of certain terms and conditions in the model agreement; and summarized FTA’s project management oversight following the execution of an FFGA. The circular also effected a change of policy concerning "extraordinary" costs; FTA omitted any provision for "extraordinary" costs in the model FFGA, thus signaling that the agency would no longer reimburse those types of costs. Consistent with the circular and model FFGA, FTA awarded nearly 30 FFGAs with funding authorized by ISTEA.

3. FEDERAL TRANSIT ACT AMENDMENTS OF 1998. In Title III of the Transportation Equity Act for the 21^st Century (TEA-21)—the Federal Transit Act Amendments of 1998—Congress left much of the past law and new starts policy intact, including the basic criteria for project justification and award of an FFGA. TEA-21 made some significant changes to the new starts program, however, including the following:
   1. TEA-21 requires FTA to promulgate a regulation on the manner in which new starts projects will be evaluated and rated (Published on December 7, 2000, the regulation is discussed in Section 4 of this chapter).
   2. TEA-21 requires FTA to rate every new starts project as "highly recommended," "recommended," or "not recommended," in accordance with the criteria and procedures set by the new starts regulation, and to publish those ratings in an annual report to Congress, together with FTA’s recommendations on the allocation of new starts funding for the coming fiscal year.
   3. TEA-21 requires a project sponsor to obtain FTA’s approval to advance a new starts project into final design.
   4. TEA-21 requires FTA and a project sponsor to enter into an FFGA for any project for which FTA will award more than $25 million in new start funds.
   5. TEA-21 requires FTA to provide notice to its Congressional authorization and appropriations committees of its intention to award an FFGA for a new starts project at least 60 days before awarding that FFGA.

   Previously, FTA had administered the national new starts program through a series of policy statements, not a regulation. FTA had not assigned ratings, per se, to individual new starts projects; and as a rule of thumb, FTA had awarded FFGAs only in those instances in which the agency was committing more than $100 million in new starts funds for any one project.

4. THE MAJOR CAPITAL INVESTMENTS RULE. On December 7, 2000, FTA published a final rule on Major Capital Investments (new starts) Projects at 49 C.F.R. Part 611 (65 Fed. Reg. 76864-84). As mandated by TEA-21, the rule sets forth the criteria by which FTA will evaluate a project on its merits and on its local financial commitment. Further, the rule sets forth the procedure by which FTA will assign a rating of "highly recommended," "recommended," or "not recommended" to each new starts project at least once a year. These ratings denote overall project merit; thus, they enable FTA and Congress to identify those new starts projects that warrant consideration for funding, in part, by the Federal government. The new starts rule includes an Appendix that is a detailed, narrative explanation of the several measures FTA uses for evaluating both project justification and local financial commitment. FTA also, from time to time, publishes technical guidance related to the several project justification and local financial commitment criteria. FTA issued the most recent such guidance, titled "Technical Guidance on Section 5309 New Starts Criteria," in July 2001.
5. THE ANNUAL REPORT ON NEW STARTS PROJECTS. FTA is required by 49 U.S.C. § 5309(o)(1) to submit an annual report to Congress "that includes a proposal on the allocation of amounts to be made available to finance" new starts projects in the coming fiscal year. Further, the statute requires FTA to publish in this report its evaluation and rating of each new starts project as "highly recommended," "recommended," or "not recommended." This Annual Report on New Starts serves as a collateral document to the President’s annual submission to Congress. Typically, the Secretary of Transportation and FTA use the Annual Report on New Starts, together with the President’s annual budget submittal, as the means to identify those projects that are strong candidates for FFGAs in the near future. They also use the report to identify those projects deserving of new starts funding for further design and engineering, and to summarize the status of projects already under FFGA’s and in varying stages of final design and construction.

   The annual project funding recommendations depend a great deal on the amount of new starts funding then available under Section 5309(g)(4), both annually and over the remaining term of FTA’s authorization. Further, Federal new starts commitments must not exceed the overall level of commitment authority authorized for the program. For TEA-21, this commitment authority is equivalent to the guaranteed new starts annual level of funding over the authorization period plus three additional years. With respect to any individual project, the Secretary’s and FTA’s decision to recommend the project will depend on the progress of project development, geographical factors, and any unresolved issues affecting the viability of that project. At a minimum, for a new starts project to be a strong candidate for an FFGA, the project sponsor must have completed a sufficient level of final design to ensure that the cost estimates are firm and must have in place a fully committed financial plan, and the project must have a recommended rating.

6. PROJECT READINESS. In the Conference Reports accompanying both the Fiscal Year 1999 and 2000 Department of Transportation and Related Agencies Appropriations Acts, the surface transportation subcommittees of the House and Senate Committees on Appropriations addressed project readiness for an FFGA. Specifically, the appropriations subcommittees directed FTA to enter into an FFGA for any given project only when there are no outstanding issues that would have a material effect on the estimated costs of the project or the local financial commitment to complete the project. The appropriations subcommittees directed FTA to consider the degree of certainty and any remaining risks in capital cost estimates, and the availability of adequate contingency funds to cover increases in capital costs due to uncertainties; any unresolved issues with respect to non-Federal sources of funding for the project; and the need for acquisition of railroad rights-of-way. The subcommittees also directed that FTA not award an FFGA unless the project had entered final design.

   Regardless of whether the appropriations subcommittees continue to issue these directives, FTA intends to make them a standard practice. With regard to cost estimates, FTA will ensure that final design and engineering have been carried out to a level appropriate to the complexity of the project and that the cost estimate incorporates contingencies commensurate with the remaining risks in particularly difficult activities, such as tunneling and real estate acquisition. Further, FTA will direct its Project Management Oversight contractor to make a spot report on the adequacy of the cost estimate and its contingencies and the reasonableness of the project schedule. Additionally, with respect to the sponsor’s technical capacity, FTA and its Project Management Oversight contractor will assess the adequacy of the sponsor’s project management plan, quality control/quality assurance plan, value engineering, construction schedule, fleet management plans—both bus and rail—and document control plan. With regard to railroad rights-of-way, FTA will insist that the project sponsor has entered into any necessary agreements with freight carriers for shared use of a corridor or assets, facilities, and equipment. With regard to project financing, FTA will ensure that all local sources of funding are in place and that there are no local initiatives that jeopardize the local match. Further, FTA will direct its Financial Management Oversight contractor to assess the sponsor’s financial capacity and the reasonableness of the sponsor’s financing assumptions, including the completeness of the sponsor’s financial plan, and the stability and reliability of the sponsor’s financing for both the capital costs of the project and the operation and maintenance costs of the overall transit system.

   Included as Attachment C is a sample checklist used by FTA to support the FFGA application process. The actual checklist for each project is to be developed in consultation with the FTA Regional Office; it should reflect the status and particular needs of the participants in the FFGA development process.

7. CONGRESSIONAL NOTICE. FTA is required by 49 U.S.C. § 5309(g)(1)(B) to provide the Committee on Transportation and Infrastructure of the United States House of Representatives, the Committee on Banking, Housing and Urban Affairs of the United States Senate, and the House and Senate Transportation Subcommittees of the Committees on Appropriations 60 days’ notice of the agency’s intention to award an FFGA. FTA provides this notice by letter to the committees, together with (1) a copy of the draft FFGA the agency proposes to award; (2) a schedule of the total and yearly congressional appropriations FTA believes necessary and appropriate to facilitate the project construction schedule; (3) an analysis of the yearly and total congressional appropriations that can be reasonably planned and anticipated for future FFGAs through FTA’s current authorization; and (4) an analysis of FTA’s annual commitments for current and anticipated FFGAs as compared with the new starts program authorization.

Chapter II: Application and Supporting Documents

1. MAJOR CAPITAL INVESTMENTS--STEPS IN PROJECT DEVELOPMENT. A new starts project becomes a candidate for a Full Funding Grant Agreement (FFGA) when the appropriate steps in FTA’s major capital investment planning and project development process have been completed. Competing new starts projects are evaluated on the basis of how well they meet the project justification and financial criteria found at 49 U.S.C. §§ 5309(e)(2)-(7). The statutory criteria, and the means by which FTA evaluates a project against those criteria, are set forth in full in FTA’s major capital investment rule at 49 C.F.R. Part 611. The technical methods, assumptions, and calculations that FTA applies in evaluating new starts projects are addressed in detail in the most recent version of FTA’s "Technical Guidance on Section 5309 New Starts Criteria," generally updated annually. Project sponsors and applicants for FFGAs should contact the appropriate Regional Office to discuss the planning and project development process as early in that process as practicable. They can also find an overview of the process in FTA’s Circular 9300.1, "Capital Program: Grant Application Instructions," at Chapter V, "New Starts."

   FTA applies the statutory criteria for project justification and financing at several separate steps of the project development process. Specifically, the criteria are applied: (a) upon an applicant’s request to enter into preliminary engineering; (b) upon an applicant’s request to enter into final design; (c) upon FTA’s development of recommendations for allocating Section 5309 new starts funds in the coming fiscal year in the Annual Report on New Starts; and (d) immediately before execution of an FFGA.

   In brief, the new starts project development process includes the following steps:

   1. Alternatives Analysis. New starts projects, like all major transportation improvements in metropolitan areas, must emerge from a multi-modal transportation planning and analysis process to be eligible for Federal funding. The joint FTA/Federal Highway Administration (FHWA) rule on metropolitan planning is codified at 23 C.F.R. Part 450 Subpart C. A new starts project must arise from a planning-level "alternatives analysis" that evaluates appropriate modal and alignment options in addressing mobility needs within the area of study. The planning-level alternatives analysis is either input to, or is part of, the evaluation of all reasonable alternatives required by the National Environmental Policy Act (NEPA).

      An alternatives analysis is complete once local and regional officials adopt a "locally preferred alternative" (LPA) and the cognizant metropolitan planning organization (MPO) incorporates the LPA into its financially constrained long-range plan.

   2. Preliminary Engineering. Once alternatives analysis is complete, it is appropriate for the sponsor of a new starts project to request FTA’s approval for entry into preliminary engineering. FTA’s decision on that request will depend on whether the project sponsor has demonstrated adequate technical capacity to carry out preliminary engineering for the proposed new starts project and whether all other applicable Federal and FTA program requirements have been met. FTA must evaluate and rate the project as "recommended" or "highly recommended" to allow entry into preliminary engineering.

      During preliminary engineering the project sponsor continues to refine the design of the locally preferred alternative and any other surviving alternatives. The refinements respond to public comments received during the NEPA review and incorporate measures to mitigate any adverse environmental and community impacts of the proposed project. The more comprehensive engineering work allows the project sponsor to develop more precise estimates of cost and, together with FTA, complete the NEPA process and issue the final environmental document (Final Environmental Impact Statement (FEIS) or Environmental Assessment (EA)). During the NEPA process, the sponsor addresses certain activities that require long lead times to resolve. Examples of long-lead-time items are (1) safety considerations, such as the sharing of railroad right-of-way with freight trains, highway-railroad grade crossings, provisions for pedestrian facilities, transit-airport interfaces, and design of community fences, walls, and noise barriers; (2) utility relocation planning, including the identification of affected utilities, estimation of relocation costs, and the negotiation of agreements; and (3) planning for replacement of wetlands that cannot be avoided. In the later stages of preliminary engineering the sponsor also develops a detailed, comprehensive project management plan to ensure construction quality and financial control, and a financing plan that includes commitments from the sponsor’s non-Federal funding partners.

      Publication of an FEIS and FTA’s issuance of an environmental Record of Decision occur near the conclusion of preliminary engineering.

   3. Final Design. Upon completion of preliminary engineering and upon compliance with all applicable environmental requirements, a project sponsor may request FTA’s approval for entry into final design. The sponsor’s request must include information sufficient to demonstrate its technical capability and financial capacity to undertake final design. Like the approval to enter into preliminary engineering, FTA must evaluate and rate the project as "recommended" or "highly recommended" to allow entry into final design.

      Again, this approval or disapproval will be based upon a review and evaluation of the project costs, benefits, and impacts in accordance with the statutory project evaluation criteria of Section 5309(e)(2)-(7). FTA will approve or disapprove entry into final design within 120 days of receiving a formal request from the project sponsor.

      Entry into final design has a higher threshold than entry into preliminary engineering. A project sponsor requesting entry into final design must provide stronger evidence of local financial and land use commitments, in particular, to obtain an overall "recommended" or "highly recommended" rating at this stage. Moreover, as a project proceeds through final design, FTA will expect the sponsor to continue to refine its cost estimates, shore up its local funding sources, and prepare specific plans for construction and project management.

      Once a project has been approved to enter preliminary engineering or final design, FTA will automatically extend "pre-award authority" to that phase of project development. After completion of the NEPA process, grantees also have pre-award authority for real estate acquisition activities. Under pre-award authority, the project sponsor is authorized to incur costs (that are eligible under FTA grant programs) prior to grant approval and retain the eligibility of those costs for subsequent reimbursement by FTA after grant approval. Upon approval to enter into final design, in addition to design work, FTA also extends pre-award authority to costs incurred for real estate acquisition and utility relocation. There are conditions attached to the authority to incur pre-award costs. A full discussion of pre-award authority and Letters of No Prejudice appears in Chapter III, Section 2, "Pre-award and No Prejudice Authority for Costs Incurred in Advance of a Full Funding Grant Agreement."

      In the event that a sponsor has selected the design-build contracting method for all or part of a new starts project, the sponsor may use the process described in FTA guidance entitled "Interim Guidance on Design-Build," dated September 20, 2000. The guidance can be found on the FTA website at [www.fta.dot.gov/office/public/c0015.html]. Of particular note, no existing FTA requirements have been changed or waived to accommodate the design-build or design-build-operate-maintain process.

   4. Project Ratings in FTA’s Annual Report on New Starts. Each new starts project earning a "recommended" or "highly recommended" rating may enter into preliminary engineering or final design when the project is ready for that particular phase of project development. All new starts projects are evaluated and rated as "highly recommended," "recommended," or "not recommended" for FTA’s Annual Report on New Starts. Once each year, FTA updates the status of every new starts project that has completed alternatives analysis and for which entry into preliminary engineering has been requested. FTA publishes a profile of that project, together with profiles of all other new starts projects, in the Annual Report on New Starts. By law, the report is to be submitted to Congress in February, at the time of release of the President’s Budget for the following year. Each profile features a narrative exposition of the project; a map;, the status of the project;, a description of funding sources;, a summary of the reasons for the overall project rating;, and key data on costs, ridership, mobility improvements, environmental benefits, operating efficiencies, cost effectiveness, transit-supportive land use and future patterns, and the stability and reliability of both the capital and operating finance plans.
      
      
   5. Project Ratings in FTA’s Supplemental New Starts Report. By law, each August FTA must publish a Supplemental New Starts Report in which the agency presents information on those new starts projects that have advanced to preliminary engineering or final design since publication of the most recent Annual Report on New Starts. Like the Annual Report on New Starts, the Supplemental New Starts Report contains an evaluation and rating of "highly recommended," "recommended," or "not recommended" for each such project, together with a profile of that project.
      
      
   6. Award of a Full Funding Grant Agreement. 49 U.S.C. § 5309(e)(7) requires that an FFGA be "based on the evaluations and ratings" required by 49 U.S.C.§§ 5309(e)(1)-(6); thus, a new starts project must be rated as "recommended" or "highly recommended" immediately prior to award to be eligible for an FFGA. The recital ("whereas") clauses introducing an FFGA will include an explicit finding that the new starts project is "justified based on a comprehensive review of its mobility improvements, environmental benefits, cost effectiveness, and operating efficiencies," and is "supported by an acceptable degree of local financial commitment, including evidence of stable and dependable financing sources to construct, maintain, and operate the system or extension." (See the "Whereas" clauses in the Model FFGA, Appendix B to this circular.)
   
   
   
2. SELECTION OF PROJECTS FOR FULL FUNDING GRANT AGREEMENTS. A rating of "recommended" or "highly recommended" does not directly translate into the award of an FFGA. Rather, the decision to award an FFGA for a particular project, and the total amount of new starts funds to be made available for that project, are at FTA’s discretion. These decisions depend principally on the relative merits of the projects competing for new starts funding; they depend, also, on the availability of new starts funding, both in the current and coming fiscal year and over the term of FTA’s authorization. Thus, the selection of a project may be influenced by "overmatch"—an instance in which the project sponsor willingly commits local funding beyond the required non-Federal share of project costs.

   Simply put, a new starts project in final design that is rated "recommended" or "highly recommended" and is sufficiently developed to ensure its viability may be eligible for an FFGA; should FTA choose to execute an FFGA for that project, it will contact the project sponsor to initiate negotiations for an FFGA.

   Typically, FTA announces its intention to award an FFGA for a particular project at the same time the President’s budget request for the coming Federal fiscal year is submitted to Congress, usually the first week of February. Both the President’s budget request and the Annual Report on New Starts set forth FTA’s recommendations for the allocation of Section 5309 new starts funds in the coming Federal fiscal year, project by project.

3. APPLICATION REQUIREMENTS AND TIMING. The process for developing an FFGA is initiated by FTA and is dependent upon the recommendations made in the President’s Budget. Once FTA contacts a project sponsor to initiate development of an FFGA, the next step will be the project sponsor’s submittal of an application supporting the request for Federal financial assistance. Thus, the project sponsor becomes an "applicant." Ultimately, when accepted by FTA, the application will be incorporated by reference into the FFGA. Generally, application procedures for capital investment projects, including FFGA projects, are described in full in FTA’s Circular 9300.1A, "Capital Program: Grant Application Instructions;" see, in particular, Chapter V of C 9300.1A, "New Starts." Those procedures and requirements specific to an FFGA are addressed in this circular.

   Consistent with the procedure for all applications for FTA grants, the application for an FFGA must include all documentation required by law and FTA policy. Many of the basic, uniform documents an applicant must submit are listed and described in an annual FTA notice, published in the Federal Register, entitled "Fiscal Year 20-- Annual List of Certifications and Assurances for Federal Transit Grants and Cooperative Agreements." This notice is available on FTA’s website at [http://www.fta.dot.gov/grant_programs/applying_for_managing_grants/3946_ENG_HTML.htm].

   An applicant’s failure to disclose significant information or submittal of erroneous statements in an application may constitute a breach of the FFGA, leading to the withdrawal of Federal funds or a requirement to repay Federal funds previously awarded, or both. "Application" is defined in the text of an FFGA, in pertinent part, as "those documents and written submissions filed by or on behalf" of the applicant "pursuant to its request for Federal financial assistance…and relied upon by the Government as satisfaction of the legal and policy requirements of Grant award. The Application includes all explanatory, supporting, or supplementary documents related to the Project that the Government relied upon in its determination to obligate and award Federal funds for the Project…." (Emphasis added.)

   The "explanatory, supporting, or supplementary documents" referenced in the definition of an "application," above, are of two types: those prepared during preliminary engineering and final design in anticipation of an FFGA, and those that ultimately become one of the attachments to the text of an FFGA. The first type of document includes the environmental and historic preservation studies supporting the project, and the applicant’s project management plan, quality control and quality assurance plans, safety and security management plan, fleet management plans (both rail and bus), and financing plans for capital and for operating and maintenance costs. These documents are briefly described in this chapter. The second type of document includes the applicant’s narrative explanation of the scope of the project and the applicant’s project description, baseline cost estimate, budget, baseline schedule, and environmental mitigation commitments. These documents are described in Chapter III, and examples are provided in Appendix B.

4. ENVIRONMENTAL AND COMMUNITY IMPACT STUDIES. The objective of FTA’s environmental review process is threefold: to develop and evaluate alternatives to the proposed action that would accomplish the transportation purpose and minimize the cost to the community and natural environment; to fully disclose the probable environmental impacts of a proposed project; and to develop measures to avoid or mitigate adverse environmental effects. Before FTA may award an FFGA or any other type of grant under the Section 5309 capital program, FTA must find that "no adverse environmental effect is likely to result from the project, or no feasible and prudent alternative to the effect exists and all reasonable steps have been taken to minimize the effect." 49 U.S.C. § 5324(b)(3). The steps for environmental review of an FTA-funded project are set forth in full in the joint FTA/FHWA regulations at 23 C.F.R. Part 771. Project sponsors and applicants for FFGAs can also find an overview of the process on FTA’s website at www.fta.dot.gov/office/planning/ep/index.html.

   Almost always, a new starts project entails significant social, economic, or environmental impacts and requires preparation of an Environmental Impact Statement (EIS), leading to FTA’s issuance of an environmental Record of Decision (ROD). In a limited number of cases, a project can be sited and designed in such a way as to avoid significant impacts, and an Environmental Assessment (EA), leading to FTA’s issuance of a Finding of No Significant Impact (FONSI), is appropriate. The FTA Regional Office will decide whether to prepare an EIS or an EA for a particular new starts project, in consultation with the applicant and other interested agencies. The EIS or EA submitted with the application for an FFGA will be incorporated by reference into the terms and conditions of the FFGA, together with any related agreements with third parties regarding environmental protection or historic preservation. Additionally, the mitigation measures identified in FTA’s environmental ROD or FONSI will be explicitly incorporated into Attachment 7 of the FFGA, "Measures to Mitigate Environmental Impacts."

5. PROJECT MANAGEMENT PLAN. The Project Management Plan is central to FTA’s determination of whether an applicant has the technical capacity and capability to build, operate, and maintain a new starts project. The project sponsor initiates a Project Management Plan during preliminary engineering, and, thereafter, the Project Management Plan is an evolving document that follows the project through preliminary engineering, entry into final design, the application for an FFGA, construction, and testing for revenue operations. The requirement for a Project Management Plan as a prerequisite to an FFGA is set forth at 49 U.S.C. § 5327(a) and in FTA’s Project Management Oversight regulation at 49 C.F.R. Part 633. Within 60 days of receiving a Project Management Plan, FTA will decide whether to approve or disapprove the plan, or will notify the applicant that FTA is not yet able to complete its review. In making this determination, FTA may be assisted by a Project Management Oversight contractor. Should FTA disapprove a Project Management Plan, FTA will inform the applicant of the reasons for disapproval.

   By the time of submittal of the application for an FFGA, the Project Management Plan must explicitly address, at a minimum, each of the following: the applicant’s staffing and organization, budget, schedule, document control, change orders, construction staffing, quality control and quality assurance, materials testing, internal reporting, property acquisition, operational systems testing, and safety and security. Also, the Project Management Plan must require that the plan itself will be updated periodically. The Project Management Plan also must require the applicant to submit a project schedule and budget to FTA each month.

   Detailed assistance pertaining to the Project Management Plan can be found in FTA guidance, "Project and Construction Management Guidelines, 1996 Update," which is available on FTA’s website; "Quality Assurance and Quality Control Guidelines," which is available from FTA; and in Section 6 of this chapter, below, "Safety and Security Management Plan."

6. SAFETY AND SECURITY MANAGEMENT PLAN. The Safety and Security Management Plan is a component of the Project Management Plan. When a systematic approach to safety and security is applied during the planning, design, construction, testing and acceptance phases of a transit project, it ensures design decisions involving safety and security are logically evaluated and documented and that determinations regarding risk acceptance are clearly communicated and understood. More importantly, it reduces the likelihood and severity of operational hazards to an acceptable level. This process helps assure that the highest practical level of operational safety is achieved.

   A safety and security management plan documents the technical and management strategies for the identification, assessment, prevention, and control of hazards associated with transit operations, including hazards to transit users, the public at large, and transit employees. The safety and security management plan establishes and manages safety and security activities intended to serve as countermeasures to minimize risk and loss of transit agency resources, and to maximize the safety and security of the public during operations.. Accordingly, the safety management plan is a critical component of successful transit operations.

   In the Safety and Security Management section of the Project Management Plan, the applicant should identify potential hazards and the safety and security activities to be carried out during each phase of the transit project, including:

   1. Commitment and philosophy to actively sustain safe and secure transit operations;
   2. Integration of the safety and security function during design, construction, testing, and start-up phases of the project;
   3. Assignment of organizational safety and security responsibilities for the project;
   4. Development of safety and security design criteria;
   5. Hazard management process;
   6. Process for verifying conformance with specified safety and security requirements during design, in equipment and materials procurements, and during testing/inspection and start-up phases;
   7. Formal, final safety certification to enter the revenue phase;
   8. Construction safety management activities;
   9. Implementation schedule for meeting State Safety Oversight (SSO) requirements and approvals; and
   10. Waiver application to Federal Railroad Administration (FRA) for transit operations sharing corridors with the general railroad system.

   In summary, the plan should define the process for the identification and effective communication of hazards associated with both the construction and operational phases of the transit project, and for verifying the incorporation of safety and security requirements and specifications into each of the development phases to reduce the likelihood and severity of safety hazards and security vulnerabilities to an acceptable level.

7. RAIL AND BUS FLEET MANAGEMENT PLANS. Together with the Project Management Plan, an applicant must submit rail and bus fleet management plans. FTA will not approve or disapprove the applicant’s fleet management plans, per se, but the FTA Regional Office and the Program Management Oversight contractor will review the adequacy of those plans as part of FTA’s assessment of the applicant’s technical and financial capacity.
   
   
   1. General. The purpose of fleet management plans submitted in support of an application for an FFGA is to ensure that the applicant’s transit service will not be degraded as a consequence of the design and construction of the new starts project, and that the applicant will have adequate service to meet the transit demand for the years leading up to and following construction of the new starts project.
      
      
   2. Rail Fleet Management. A rail fleet management plan should enable a transit operator to properly plan for and carry out the overall management of its entire fleet of locomotives and rail cars. An effective plan will address all the factors that are relevant to the operator’s determinations of current and future equipment needs in light of demand, focusing on (a) vehicle life expectancy, (b) the requirements for peak and spare vehicles, (c) strategies for acquisition of new vehicles, and (d) strategies for maintenance and operations. Basic FTA policy on service life, replacement, and overhaul of fixed guideway rolling stock, including spare ratio, early disposition, and like-kind exchange, is set forth in FTA’s Circular 9030.1C, "Urbanized Area Formula Program: Grant Application Instructions," at Chapter V, paragraph15.

      At a minimum, the rail fleet management plan submitted in support of a new starts project should reflect a 10-year time frame. Logically, the historical and empirical data compiled through past and current operations of a rail fleet will set the starting point for certain portions of the plan. A rail fleet management plan should address in detail the composition of the fleet, operating conditions, maintenance, facilities, peak vehicle demand, and spare ratio. Guidance on rail fleet management plans may be obtained from FTA Regional Offices.

      FTA recognizes that every rail fleet is unique to the environment in which it operates. Several years may pass from the development of technical specifications through the bid process, technical reviews, contractor award, engineering, prototype testing and analysis, to actual production and, ultimately, revenue service. Thus, the rail fleet management plan is a dynamic, not static, document. When a plan needs to be revised, however, whatever the reason, a draft of the revised plan should be submitted to the FTA Regional Office for review and comment.

   3. Bus Fleet Management. An effective plan will address all factors relevant to an applicant’s abilities to maintain its current bus fleet, facilities, and levels of service throughout its service area and to provide the requisite capital and operating funds for that service. Additionally, the plan will establish measures for quality of bus service and adequate monitoring of that service. The plan should describe the applicant’s entire bus fleet for periods of three-to-five years prior to construction of the new starts project, over the duration of new starts construction, and for at least one-to-three years after commencement of new start revenue operations. If possible, the applicant’s data for past years’ operations should closely reflect the data reported to the National Transit Database, and the applicant should provide estimates for future years’ operations. Guidance concerning a Bus Fleet Management Plan may be obtained from FTA Regional Offices.
   
   
   
8. FINANCING PLANS—CAPITAL, OPERATING, AND CASH FLOW. 49 U.S.C. Section 5309(d) states that "No grant or loan shall be provided under this section unless the Secretary determines that the applicant has or will have the legal, financial, and technical capacity to carry out the proposed project." Moreover, 49 U.S.C. Section 5309(e)(1) requires FTA to evaluate proposed major capital investments to ensure that they are supported by an acceptable degree of local financial commitment and that local resources are available to operate the full transit system without reducing existing services.

   Responding to these statutory requirements, FTA has developed Guidance for Transit Financial Plans, dated June 2000, to guide transit agencies developing financial plans. The guidance is available on FTA’s web site at http://www.fta.dot.gov/office/planning/gftfp/gftfp.pdf. Revisions to the guidance will be added to FTA’s web site as issued. FTA requires that applicants requesting or receiving Federal funding through FTA’s major capital investment program submit a financial plan that has been prepared in accordance with this guidance. The guidance defines the format, key elements, and scope of an acceptable financial plan, providing detailed examples of each. The financial plan will provide FTA the information needed to evaluate the financial capacity of the applicant to construct, operate, and maintain the proposed project and to continue to provide existing transit services, over a 20-year planning horizon.

   FTA conducts financial capacity assessments prior to signing an FFGA. The financial capacity assessment is usually the final and most detailed review of an applicant’s financial plan prior to entering into an FFGA. It is conducted to determine whether all aspects of the project are clearly defined, including detailed cost estimates and funding schedules, and whether all funding commitments are in place. This review addresses two distinct items: the financial plan of the project proposed for new starts funding and the overall financial condition of the applicant. In this review FTA considers the applicant’s ability to construct and operate the new starts project and also to fund the operations and maintenance of the existing system as well as other improvements in the applicant’s capital plan. The financial capacity assessment results in a published baseline report that is forwarded to Congressional appropriating and authorizing committees to use for their 60-day review of the proposed FFGA. Subsequent to the award of an FFGA, periodic spot reports are prepared by FTA as warranted to update the baseline financial capacity report. These updates reassess the applicant’s financial condition if significant changes occur relating to the new starts project or if external factors affect the applicant’s overall financial outlook.

9. VALUE ENGINEERING. Value engineering is the systematic application of recognized techniques that identify the function of a product or service, establish a value for that function, and determine a way to provide that function reliably at the lowest possible life-cycle cost (capital, operating, and maintenance), consistent with appropriate requirements for performance, maintainability, safety, and esthetics. In short, value engineering is a multi-disciplined approach to optimizing the use of each dollar spent. Value engineering is not a design review procedure; rather, it is a means for developing ideas for new cost savings and combinations of ideas for consideration and acceptance by both the project designer and owner.

   In accordance with FTA Circular 5010.1C, "Grant Management Guidelines," a transit agency must apply value engineering techniques to new starts projects and all other FTA-funded major capital projects. Thus, FTA expects an applicant for an FFGA to identify cost savings during planning, preliminary engineering, and final design of a new starts project, and to achieve those cost savings during construction of the project, as the result of value engineering. Should an applicant decide to use a higher cost product or service when a more reasonable cost alternative has been identified, FTA will reserve the right to determine that Federal funds cannot be used to finance the additional costs. Both the costs of carrying out value engineering and training staff in value engineering techniques are eligible for Federal reimbursement.

   An applicant should describe its value engineering efforts in a report submitted in support of the application for an FFGA. The FTA Regional Office, supported by the Program Management Oversight contractor assigned to the new starts project, will review the applicant’s efforts and offer comments, if appropriate, during the Regional Office’s evaluation of the FFGA application. FTA’s guidance, "Value Engineering Process Overview," dated January 1988, presents many useful suggestions for the development of a value engineering program in the context of transit; measuring the effectiveness of a value engineering program; and the application of value engineering in cost and energy modeling and analyses of industrial, manufacturing, and construction methods and materials.

10. UTILITY RELOCATION. The construction of transit systems may require the relocation or rearrangement of privately and publicly owned utilities. These utilities include, but are not limited to, systems and physical plants for producing, transmitting or distributing communications, electricity, gas, oil, crude oil products, water, steam, waste storm water, or other substances; and publicly owned fire and police signal systems. Relocating or rearranging utilities and facilities necessary to accommodate an FTA-funded transit system may be considered an eligible cost as part of an FTA-funded project. If, however, the applicant were prohibited by State or local law from financing utility relocation or rearrangements, such relocation or rearrangement costs would be ineligible for reimbursement under the project.
    
    
    1. Eligibility for FTA Funding. To ensure the eligibility of utility relocation for Federal reimbursement, an applicant must enter into agreements (utility relocation agreements) for relocating or rearranging those utilities with the entities responsible for those utilities, prescribing the procedures for relocation or rearrangement for the purpose of constructing the Project and in accordance with the Uniform Relocation requirements of 49 C.F.R. Part 24. As part of its documentation, the applicant must inform FTA of the number of agreements necessary for the Project and the status of the negotiations for those agreements, before FTA can award an FFGA. Moreover, FTA will examine whether any uncertainties regarding utility relocation may have a material effect on the estimated costs of the Project or the local financial commitment to complete the Project; if so, FTA may require that the negotiations be brought to closure before FTA will award the FFGA.
       
       
    2. Utility Relocation Agreements. These agreements are distinguishable from third party contracts in that only actual allowable, allocable, and reasonable costs are reimbursable. Where the work is to be performed by the public utility's forces, no profit is allowed, and reimbursement is limited to the amount necessary to relocate or rearrange the facilities to effectuate a condition equal to the existing utility facilities. Generally, reimbursement would not provide for greater capacity, capability, durability, efficiency or function, or other betterments, except for meeting current state and local codes. Indirect costs of governmental entities incurred under a utility relocation agreement are eligible for FTA reimbursement only in accordance with an approved Cost Allocation Plan as prescribed in Office of Management and Budget Circular A-87, "Cost Principles for State, Local, and Indian Trial Governments."

       In general, FTA practices on utility relocation coincide with those of the Federal Highway Administration, including those practices set forth at the following sources:

       1. General information at 49 CFR 24.307, "Discretionary Utility Relocation Payments" at [http://www.fhwa.dot.gov/legsregs/directives/fapg/cfr4924d.htm] and
       2. FHWA policy guidance for its regulations, "Utility Relocations, Adjustments, and Reimbursements," at 23 C.F.R. Part 645, Subpart A at [http://www.fhwa.dot.gov/legsregs/directives/fapg/cfr0645a.htm].

11. BEFORE AND AFTER STUDY PLAN. FTA’s final rule on major capital investment projects (49 CFR Part 611) requires that project sponsors seeking Full Funding Grant Agreements submit a complete plan for the collection and analysis of information to identify the impacts of their projects and the accuracy of their forecasts. This requirement originates with the Government Performance and Results Act (GPRA), and reflects FTA’s desire to develop a greater understanding of (a) the actual benefits of New Starts projects, once implemented and in operation; and ( b) the degree to which forecasts prepared as part of project planning and development are realized, and the reasons why. FTA refers to the comparison and analysis of planning assumptions, forecast results, and existing transit system characteristics "before" implementation of the New Start project with the project costs and benefits realized "after" two years of revenue service as the "Before and After" Study. FTA further refers to the development of a plan which outlines data collection and analysis activities in support of the Study as the "Before and After Study Plan."

• collect information on existing and future transit service and travel characteristics in a manner which ensures comparability;
• perform the analysis of before and after data to discern the effects of the project on the Grantee’s costs, overall transit services, and ridership;
• assess the consistency between predicted project characteristics and performance and its actual characteristics and performance; and
• identify the reasons for any disparity (should any exist) between predicted and actual outcomes.

Chapter III: Terms, Conditions, and Attachments

1. PREPARATION OF A FULL FUNDING GRANT AGREEMENT. Once an applicant submits a satisfactory application for a Full Funding Grant Agreement (FFGA), and FTA concurs in all of the supporting documents summarized in the preceding chapter, FTA will invite the applicant to prepare the following items that will become "attachments" to an FFGA: the scope of the project, a colored map of the Project, a project description, a baseline cost estimate, a budget, a baseline schedule, and measures to mitigate environmental impacts. At that same time, FTA will draft the text of an FFGA and the following three additional items to become attachments: a summary of prior grants and related documents, a schedule of Federal funding for the project, and a description of the commitment to carry out a "New Starts Before and After" study. FTA will then merge the applicant’s and FTA’s draft documents into a working draft of an FFGA.

   This chapter summarizes the standardized terms and conditions that constitute the text of an FFGA and the attachments to an FFGA, all of which will govern the Grantee and its Project. First, however, this chapter will address certain activities a Grantee may wish to undertake prior to the award of an FFGA; explain the relationship between an FFGA and previous grants for the Project; and note the use of cost data terminology, certain information about the grant award, and FTA’s Master Agreement in relation to an FFGA.

2. PRE-AWARD AND NO PREJUDICE AUTHORITY FOR COSTS INCURRED IN ADVANCE OF A FULL FUNDING GRANT AGREEMENT. Often an applicant will want to preserve the eligibility of certain activities for Federal reimbursement, the costs of which are incurred well in advance of an FFGA. Recently, FTA has established the use of pre-award authority for environmental studies, preliminary engineering, final design, and certain land acquisition activities; and as appropriate, FTA may issue a Letter of No Prejudice (LONP) for capital items that require a long lead-time. The reader should refer to the Federal Register Notice, "FTA Fiscal Year 2002 Apportionments, Allocations and Program Information," of January 2, 2002 (67 Fed. Reg. 126 et seq (2002)) or the most recent apportionments notice for guidance concerning pre-award authority. The notice can be accessed from [http://www.fta.dot.gov/legal/guidance/circulars/5000/324_1065_ENG_HTML.htm] and from [http://www.fta.dot.gov/library/legal/federalregister/2002/fr1202a.pdf].

   Applicants should keep in mind that their exercise of automatic pre-award or LONP authority is not a guarantee of Federal reimbursement of those costs; FTA can make a commitment of Federal funding for a Project only through the award of a grant or an FFGA. Also, applicants should be aware that the use of Section 5309 new starts funds for costs incurred under pre-award or LONP authority will be counted toward the "Maximum Federal New Starts Financial Contribution" established by the FFGA. Specifically:

   1. Environmental and Historic Preservation Studies. In publishing its Fiscal Year 2002 Notice of Apportionments, Allocations and Program Information (67 Fed.Reg. 126,

      Jan. 2, 2002), FTA extended automatic pre-award authority for costs incurred to conduct studies necessary for compliance with the National Environmental Policy Act (NEPA), Section 4(f) of the DOT Act, the National Historic Preservation Act, and related Federal environmental statutes and regulations, including, specifically, the costs of preparing an Environmental Impact Statement (EIS) or Environmental Assessment (EA) in accordance with NEPA. This pre-award authority applies to Section 5309 new starts funds as well as other Federal funding sources for the Project. It is automatic in the sense that it does not require the issuance of any documents. It is effective as of the date of the Federal approval of the relevant Statewide Transportation Improvement Program (STIP) or STIP amendment that includes the Project. This pre-award authority is strictly limited to costs incurred to conduct the NEPA process and prepare environmental and historic preservation documents.

   2. Preliminary Engineering. As noted in Chapter II, once FTA approves a Project’s entry into preliminary engineering, FTA will automatically extend pre-award authority for the Project costs of preliminary engineering.
   3. Real Property and Property Rights Acquisition. In publishing its Fiscal Year 2002 Notice of Apportionments, Allocations and Program Information (67 Fed.Reg. 126; Jan. 2, 2002), FTA extended automatic pre-award authority for the acquisition of real property and real property rights for a new starts Project upon FTA’s issuance of an environmental Record of Decision (ROD) following the publication of an EIS or upon FTA’s issuance of a Finding of No Significant Impact (FONSI) following the publication of an EA. The issuance of an environmental ROD or FONSI signifies completion of the NEPA review for a Project. This notice represented a fundamental change in FTA’s management of the new starts program. Previously, an applicant had been obliged to obtain a Letter of No Prejudice to preserve the eligibility of real property expenses for Federal reimbursement.

      Like the pre-award authority for environmental and historic preservation studies, preliminary engineering, and final design, the pre-award authority for real property and property rights acquisition is automatic in the sense that it does not require the issuance of any documents other than the environmental ROD or a FONSI. This pre-award authority is strictly limited, however, to the costs an applicant incurs to acquire real property and real property rights and to provide relocation assistance in accordance with the Uniform Relocation Assistance and Real Property Acquisition Policies Act (URA) and the implementing rule at 49 C.F.R. Part 24. Moreover, this pre-award authority is restricted to the acquisition of real property and property rights that are explicitly identified in the EIS or EA as needed for the selected alternative that is the subject of the environmental ROD or FONSI for the Project. This pre-award authority does not extend to site preparation, demolition, or any other activity that is not strictly necessary for compliance with the URA.

      Many new starts require the acquisition of business and residential properties and relocation of the occupants. FTA recognizes that the acquisition of real property and compliance with the URA require substantial lead-time. Properties must be appraised, displaced persons must be informed of their relocation rights, and new housing must be secured. In some cases, the remediation of contaminated soils or groundwater, the removal of underground storage tanks, or the negotiations for railroad access, will be lengthy and complicated. Thus, FTA’s extension of pre-award authority for acquisition of real property and property rights is intended to streamline the project delivery process, enhance relocation services for businesses and residents, and mitigate any escalation in costs. In extending this pre-award authority, FTA notes that the risk taken by the applicant in acquiring real property in advance of an FFGA is mitigated by the re-sale value of the property in the event that FTA does not award an FFGA and the Project is abandoned.

   4. Final Design and Utility Relocation. As noted in Chapter II, once FTA approves a Project’s entry into final design, FTA will automatically extend pre-award authority for the Project costs of final design and utility relocation. This pre-award authority is strictly limited, however, to final design and utility relocation; it does not extend to construction or any capital acquisition for a Project.
   5. Letters of No Prejudice for Other Capital Acquisition. Letter of No Prejudice (LONP) authority allows an applicant at its own risk to incur costs for a Project using its own funding sources with the understanding that the costs incurred subsequent to the issuance of the LONP may be eligible for Federal reimbursement or as credit toward the Grantee’s local match should FTA award an FFGA for the Project at a later date. In principle, LONP authority applies to any type of Project activity not covered by automatic pre-award authority. FTA guidance on LONP authority is on FTA’s website at [http://www.fta.dot.gov/legal/guidance/circulars/5000/324_1065_ENG_HTML.htm ].
   6. Compliance with Federal Requirements. In exercising any automatic pre-award or LONP authority, applicants should ensure compliance with all Federal requirements before incurring the costs for which they expect to seek Federal reimbursement. With respect to capital acquisitions, in particular, applicants should ensure compliance with FTA’s third-party contracting requirements (see Chapter V Section 4 of this circular), real property acquisition and relocation requirements (see Chapter V Section 5 of this circular), and utility relocation requirements (see Chapter II Section 10 of this circular). It should once again be noted that exercise of automatic pre-award or LONP authority is not a guarantee of Federal reimbursement of those costs.

   NOTE: Earlier, it was stated that a project sponsor becomes an "applicant" upon filing an application for an FFGA. As a result, the term "applicant" has been used in this section of the circular. Upon award of an FFGA, however, an "applicant" becomes a "Grantee" and the proposed new starts project becomes the "Project." Thus, this circular will use the terms "Grantee" and "Project," when appropriate.

3. RELATIONSHIP OF PRIOR GRANTS TO THE FULL FUNDING GRANT AGREEMENT. Section 3 of an FFGA defines the relationship between that FFGA and all prior grants and documents related to the Project. This section has three provisions of special note. First, in Section 3 of the FFGA, the Grantee explicitly assures FTA that all certifications, assurances, and documents supporting previous grants and Letters of No Prejudice related to the Project remain valid. Second, this section reiterates that the terms and conditions of the prior grants continue in force and effect, but establishes the FFGA as the controlling contractual agreement for all actions related to the Project from this point forward. Third, this section prohibits the Grantee from adding funds to prior grants related to the Project if the funds will finance activities within the scope of the Project, as defined by the FFGA. Thus, the third provision of this section guards against any circumvention of the limit set as the Maximum Federal New Starts Financial Contribution of capital new starts funds to the Project established by the FFGA.
   
   
4. COST TERMINOLOGY. In developing cost estimates and the budget for a Project under an FFGA, a Grantee should take care to properly identify and compute the various cost elements of the Project. Section 1 of an FFGA, "Definitions," sets forth the terminology that will govern the eligibility for Federal reimbursement of the Grantee’s costs. FTA recognizes, of course, that only estimated costs, not actual costs, are available at the time an FFGA is awarded. Thus, the Grantee’s estimated figures will comprise the "Baseline Cost Estimate" as defined in Section 1 and depicted in Attachment 3. The Baseline Cost Estimate, however, will remain constant through the close of the Project. Many of the terms and conditions of the FFGA are linked to the Baseline Cost Estimate. Other terms and conditions of the FFGA address the mechanics of either the award of Federal funds for the Project or reimbursement of the Grantee’s costs. An example applying the cost terminology is presented in Appendix D. The most notable terms in the FFGA are the following:
   1. Baseline Cost Estimate (BCE). The Baseline Cost Estimate is a calculation of all costs of the Project necessary to complete the scope of work under the FFGA and eligible for Federal assistance. It is established at the time of the Government’s award of the FFGA. The BCE reflects escalation, contingencies, and schedule dates pertaining to the individual cost elements or contract units. Cost escalation may be based either on year of expenditure or mid-point of construction. The BCE forms Attachment 3 of the FFGA. FTA prefers that Attachment 3 be composed of three separate tables, as illustrated in Appendix B of this circular: (1) a table identifying the individual cost elements or contract units and the amount estimated for that element or unit; (2) a table laying out the calculations for cost escalations; and (3) a table demonstrating the source(s) of funding for each individual cost element or contract unit within the BCE, whether local (a combination of, for example, sales tax revenue, bond revenue, general funds) or Federal (e.g., Section 5309 new starts funds, Section 5309 fixed guideway modernization funds, funds transferred to the Project under the Surface Transportation Program (STP) and Congestion Mitigation and Air Quality (CMAQ) program).
   2. Estimated Total Project Cost. The Estimated Total Project Cost reflects the total anticipated costs of the Project at the time of the FFGA award. Usually it will be the same amount as the BCE. Occasionally, however, a Grantee will choose to pursue activities or pay for items within the Project scope of work that are not eligible for Federal assistance; in that instance, the Estimated Total Project Cost will be larger than the BCE.
   3. Estimated Net Project Cost. Federal transit law at 49 U.S.C. § 5309(h) requires FTA to estimate the portion of the cost of a Project that reasonably cannot be financed from a grant recipient’s own revenues; that portion is then eligible for Federal financial assistance. Thus, the Estimated Net Project Cost of a Project under an FFGA is that portion of the Baseline Cost Estimate that FTA estimates reasonably cannot be financed from the Grantee’s revenues. Often, the Estimated Net Project Cost, the Estimated Total Project Cost, and the Baseline Cost Estimate will be the same number.
   4. Estimated Contributions From Other Federal Sources. Funds from Federal sources other than the new starts portion of the Section 5309 capital program may be made available to help finance the Estimated Net Project Cost. Most notably, Grantees may seek to apply funds transferred from the Federal Highway Administration under the STP or the CMAQ program to help finance their Projects. When appropriate, Grantees with existing fixed guideway systems may seek to apply their Section 5309 fixed guideway modernization funding to defray certain types of Project costs. Grantees may also apply their Section 5307 urbanized area formula funds toward the costs of a Project.
   5. Local Share. Local share denotes the Grantee’s contractually required share of the Net Project Cost.
   6. Maximum Federal New Starts Financial Contribution. The Maximum Federal New Starts Financial Contribution denotes the limit on the amount of Section 5309 new starts funds that will ever be made available for the Project. The Section 5309 new starts fund is the only source of funding for which the total amount is explicitly limited upon award of the FFGA by the terms and conditions of the Agreement.
   7. Maximum New Starts Amount Awarded. This term identifies the total amount of Section 5309 new starts funds awarded for a Project as of a date certain. Usually, the term is used in conjunction with the words "prior to this amendment," or "with this amendment," or "total, including this amendment." Specifically, "Maximum New Starts Amount Awarded Prior to this Amendment" means the amount of Section 5309 funds that have been awarded prior to the date of the FFGA amendment at hand; "Maximum New Starts Amount Awarded With This Amendment" means the amount of Section 5309 new starts funds awarded under the FFGA amendment at hand; and "Maximum New Starts Amount Awarded Total, Including This Amendment" means the sum total of the Section 5309 new starts funds awarded prior to the FFGA amendment at hand and the Section 5309 new starts funds awarded under the amendment at hand.
   8. Maximum FTA Amount Awarded. This term identifies the total amount awarded of Federal funds administered by FTA from all sources, including those funds transferred from FHWA (e.g., STP and CMAQ), as of a date certain. Usually, the term is used in conjunction with the words "prior to this amendment," or "with this amendment," or "total, including this amendment" (see "Maximum New Starts Amount Awarded," above).
   9. Maximum Percentage of New Starts Participation. This term denotes the portion of Project costs which the Section 5309 new starts funds will support. Specifically, the Maximum Percentage of New Starts Participation is calculated by dividing the Maximum Federal New Starts Financial Contribution by that portion of the Estimated Net Project Cost that will be financed by Section 5309 new starts funds.
   10. Maximum Percentage(s) of FTA Participation. This term reflects the maximum percentage of FTA participation in the Estimated Net Project Cost for each Federal funding source for the Project. FTA determines the maximum percentage that is appropriate for each Federal funding source. FTA calculates these amounts by comparing each of the Estimated Contributions From Other Federal Sources with the portion of the Estimated Net Project Cost to be financed by that source of funding. The Grantee must not exceed the percentage limitation for each particular funding source.
   11. Anticipated Maximum FTA Funds. The Anticipated Maximum FTA Funds reflects the sum total of the Maximum Federal New Starts Financial Contribution and the Estimated Contributions From Other Federal Sources.
   12. New Starts Share. The New Starts Share of the costs of a Project is a percentage calculated by dividing the Maximum Federal New Starts Financial Contribution by the Estimated Net Project Cost.
   13. Overall Federal Share of the Net Project Cost. This is a percentage calculated by dividing the Anticipated Maximum FTA Funds by the Estimated Net Project Cost.
       
       
5. FULL FUNDING GRANT AGREEMENT FORMAT: INITIAL PAGES. In Fiscal Year 2001, FTA adopted a new format for the Full Funding Grant Agreement, in which a modified version of FTA’s standard two-page Grant Agreement was combined with the uniform terms and conditions that comprise the text of a Full Funding Grant Agreement. A discussion of this format follows, and an illustration of the format is set forth in the model FFGA at Appendix B to this circular.

   First, an FFGA has a Cover Page in which the Name of the Grantee, Project Title, and Project Numbers must be entered. The Cover Page is followed by a Table of Contents in which page numbers must be entered. The next two pages (in which Project specific data must be entered) present much of the same data that is presented within the "FTA Award" portion of FTA’s standard two-page "Grant Agreement." Like the standard FTA "Grant Agreement," these pages of an FFGA identify certain key elements of the grant award, including the Project number, the name of the Grantee, the citation of statutes that authorize Federal funding for the Project, the Maximum FTA Amount Awarded (the total amount of Federal funds awarded for the Project, including any amendments), the Amount of This FTA Award, the Maximum Percentage(s) of FTA Participation, the dates of the U.S. Department of Labor’s certifications of transit employee protective arrangements for the Project, and the Estimated Net Project Cost.

   In addition, these pages identify the Maximum Federal New Starts Financial Contribution to the Project, the Maximum Percentage of New Starts Participation, and the Revenue Operations Date. The Maximum Federal New Starts Financial Contribution is identified to emphasize the ceiling placed on FTA’s allocation of capital new starts funds for this particular Project. The Maximum Percentage of New Starts Participation is set forth to emphasize the ceiling placed on FTA’s proportionate contribution of new starts funding for the Project. The Revenue Operations Date is set forth to emphasize the importance FTA ascribes to the Grantee’s commitment to complete the Project on schedule. Also, the FFGA identifies documents that are incorporated by reference into the FFGA, such as the Master Agreement. Further, these initial provisions of the FFGA note that FTA or the Federal Government may withdraw its obligation to provide financial assistance for the Project if the Grantee does not execute the FFGA within 90 days of the specified date of the FTA Award.

6. FTA MASTER AGREEMENT. The Master Agreement is a set of standard terms and conditions that govern any type of project for which FTA provides financial assistance. It is prepared by FTA, revised and published once a year, and available at FTA’s website. The Master Agreement is both referenced and incorporated by reference into the FFGA.

   The Master Agreement is the means by which FTA imposes all applicable Federal laws and regulations upon the Grantee under an FFGA or under any other instrument of FTA funding. Additionally, the Master Agreement is the means by which a Grantee becomes obliged to establish appropriate clauses in third party contracts stating third party contractors’ responsibilities under Federal law and regulation, and to require the contractors to extend applicable Federal requirements to their subcontractors, as necessary.

   Among the Federal statutes and regulations explicitly addressed by the Master Agreement are those pertaining to audits; bonding; civil rights; copyrights; disadvantaged business enterprise; drug and alcohol abuse; environmental protection; ethics (e.g., criteria for debarment or suspension of contractors, restrictions on lobbying); exclusionary or discriminatory specifications in procurement; fraud; patents; preferences for domestic products and services (e.g., Buy America, Cargo Preference); record retention; State safety oversight; and use of federally funded property, equipment, and supplies. Except for the government-wide regulation for land acquisition and relocation requirements, all FTA regulations and most relevant USDOT regulations are accessible through the internet at [http://www.fta.dot.gov/legal/regulations/511_ENG_HTML.htm ]. The regulations for acquiring land,

   49 CFR Part 24, are located at [http://www.fta.dot.gov/office/program/re.htm ]. Regulations of all other Federal agencies are accessible through the Government Printing Office’s Federal Register homepage: [http://www.access.gpo.gov/su_docs/regulatory.html ]. Federal statutes are accessible through the Library of Congress website at [http://thomas.loc.gov/].

   Not every provision of the Master Agreement may apply to a Grantee or a Project under an FFGA. The nature of the Project and the statutory or regulatory mandate will determine which requirements apply. A Grantee uncertain about the applicability of any particular requirement referenced by the Master Agreement should contact its FTA Regional Office.

7. TERMS AND CONDITIONS. The model document for an FFGA is set forth in Appendix B to this circular. Nearly the entire text of the model FFGA is composed of uniform terms and conditions that are not negotiable. The reader will note, however, a number of blanks in the model FFGA terms and conditions that call for specific facts and data about a Grantee and its Project. Moreover, Section 8 of the model FFGA, which prescribes the limit on Federal capital new starts funds for the Project, sets forth alternative provisions to account for any new starts funds previously awarded for the Project.

8. ATTACHMENT 1: SCOPE OF THE PROJECT. Attachment 1 to the FFGA, the "Scope of the Project," should be a brief narrative statement of the purpose and objective of the Project, an explanation of its key elements, and a summary of its basic operational functions. Typically, for a fixed guideway, Attachment 1 will identify the location of the Project, the length of the guideway, the mode of transit, the number and type of stations, the approximate number of transit vehicles, the location and type of maintenance facilities, and the installation of communication and control systems. Attachment 1 should also describe the Project in relation to the Grantee’s existing transit system.
   
   
9. ATTACHMENT 1A: PROJECT MAP. Attachment 1A should be an 8 ½ x 11-inch color map of the Project, showing the Project alignment, a north arrow, major streets and highways the line intersects, existing tracks and proposed tracks, type and location of facilities, stations, and location of proposed improvements.
   
   
10. ATTACHMENT 2: PROJECT DESCRIPTION. Attachment 2 to the FFGA, "Project Description," should identify and describe individual contract units for each of the discrete activities necessary to accomplish the stated purpose, objective, and transportation functions of the Project. All contract units can then be carried forward into Attachment 3 (Baseline Cost Estimate) and, as appropriate, Attachment 4 (Baseline Schedule), thus providing FTA and the Grantee a convenient means of tracking each activity through design and construction towards implementation, and comparing actual to estimated costs.

    A Grantee should ensure that Attachment 2, "Project Description," not extend or alter the Project that was the subject of study in FTA’s environmental record and the findings and determinations in FTA’s environmental Record of Decision or Finding of No Significant Impact. Otherwise, FTA and the Grantee must conduct a supplemental environmental study and evaluation before the parties can enter into an FFGA.

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