FTA issues Dear Colleague letter outlining guidance to bolster U.S. bus manufacturing

Feb. 8, 2024
Transit stakeholders held a meeting at the White House Feb. 7 to discuss the capacity of the U.S. market to manufacture clean transit buses to meet the demand and pace of the market.

The Federal Transit Administration (FTA) issued a Dear Colleague letter that provides guidance and outlines several tools available to U.S. transit agencies procuring transit vehicles with federal funds.

The Dear Colleague letter follows discussions between FTA, transit vehicle manufacturers, industry associations, transit agencies and supply companies on the challenges facing bus manufacturing, particularly lower and zero-emission bus manufacturing. 

These challenges include hyperinflation and supply chain issues that have reduced the number of heavy- duty transit vehicle manufacturers (TVM) in the U.S. from five a year ago to two. FTA’s letter notes its discussions with stakeholders placed attention on the increased costs to transit vehicle manufacturers of financing vehicle production from award of a contract through delivery and acceptance of the vehicles by transit agencies. 

The letter explains the following tools can be used by transit agencies and TVMs:

  • Contract modifications for price adjustments are allowed depending on factors, including contract terms, applicable local, state or tribal procurement law, the terms of a price adjustment and the scope of the contract modification. 
  • FTA grant recipients can seek additional federal funds to cover contract price increases while FTA formula and certain other federal funds can be used to cover contract modifications for price increases. 
  • New procurement clauses such as price adjustment clauses and a “brand name or equivalent” clause.
  • Advance payments, which allows a contractor to receive payments prior to the contractor incurring costs.
  • Progress payments, also known as milestone payments, allow a contractor to receive payments prior to all work being completed. 
  • If no advance payments or progress payments are being made, no performance bond or letter of credit is required under federal law. However, if advance or progress payments are being utilized, security is required. 

FTA’s letter also encourages federal funding recipients to utilize procurement strategies such as state contracts and performance-based specifications to lower costs of the procurement. 
Additional actions by FTA to strengthen the bus manufacturing industry include:

  • A new bus procurement webpage, with updated FAQs  
  • New priority considerations in the Fiscal Year 2024 Buses and Bus Facilities and Low or No Emission Notice of Funding Opportunity  
  • An FTA-hosted bus procurement best practices webinar 
  • National Transit Institute procurement courses
  • Formation of a new FTA Acquisition Oversight Division, with a team dedicated to technical assistance and resources supporting third-party procurements. 


White House roundtable

The FTA’s Dear Colleague letter was issued on the same day that industry stakeholders gathered in Washington, D.C., for a discussion on clean bus manufacturing. The roundtable was held to highlight progress in transitioning to low- and zero-emission public transit buses in the U.S. and to help address challenges facing the U.S. bus manufacturing industry during the transition. 

About the Author

Mischa Wanek-Libman | Editor in Chief

Mischa Wanek-Libman serves as editor in chief of Mass Transit magazine. She is responsible for developing and maintaining the magazine’s editorial direction and is based in the western suburbs of Chicago.

Wanek-Libman has spent more than 20 years covering transportation issues including construction projects and engineering challenges for various commuter railroads and transit agencies. She has been recognized for editorial excellence through her individual work, as well as for collaborative content. 

She is an active member of the American Public Transportation Association's Marketing and Communications Committee and serves as a Board Observer on the National Railroad Construction and Maintenance Association (NRC) Board of Directors.  

She is a graduate of Drake University, where she earned a Bachelor of Arts degree in Journalism and Mass Communication with a major in magazine journalism and a minor in business management.