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Capital Cost of Contracting
In General…
One way to provide a subsidy program for vanpooling with VPSI is through the use of the FTA’s Capital Cost of Contracting Policy. This policy allows grant recipients the option of using FTA capital assistance rather than operating assistance to fund the cost of privately-owned capital components of vanpool services obtained in a competitive solicitation.
We’re successfully receiving pass-through funds in five public/private sector projects around the country as a means of lowering the monthly charges to vanpool groups. So we’re capable and very willing to work closely with you to prepare an FTA funding grant application to be considered for inclusion in the TIP/STIP of annual projects.
Typically, the mechanics of a Capital Cost of Contracting arrangement are as follows:
- VPSI owns the vehicles and provides them to the vanpool groups under our normal 30-day Volunteer Driver Agreement.
- The public agency makes monthly subsidy payments to VPSI based on the number of vehicles operating in the program but only for the capital portion of the vehicle cost.
- In these projects we pass along 100% of the financial benefit received to the end user.
- All other costs are collected by VPSI from the vanpool groups.
The Nitty Gritty…
The policy applies to grant funds made available under Section 5307 and 5311 of the Transportation Equity Act for the 21st Century (TEA-21). It may also apply to grant funds made available under other sections, e.g. Section 5313(b), 5310, interstate transfer, or on a case-by-case basis with FTA approval. A section of TEA-21, entitled “Increased Federal Share for Certain Safety Projects,” authorizes the federal share for capital used in carpool/vanpool projects to be funded with 100% federal monies. The FTA has previously approved the use of ISTEA/CMAQ grant funds for Capital Cost of Contracting applications for vanpool services.
By separating the capital and operating components of transit service contracts and allowing reimbursement of the capital portion at the capital rate, the policy permits a grantee to apply additional federal resources to these activities than previously permitted. Grantees may take advantage of the private sector resources available to them via competitive procurement of services.
Under the capital Cost of Contracting policy, federal assistance is given to the grantee, not directly to the private vanpool service providers. The FTA pays for the capital consumed in the service. The FTA does not obtain nor assert any legal interest in the private operator’s assets (that is, the capital intended to be consumed in mass transit service) for authorized grant purposes does not change under this policy, e.g. vehicles cannot be used for charter or school transportation.
Eligibility for the purposes of this policy is limited to capital costs allowed under the FTA Section 5307 program and OMB Circular A-87. Accordingly, taxes and insurance costs are not eligible except under limited circumstances set forth in those documents (e.g. Section 5311 funds). Under this FTA policy, subsidy for capital costs is limited to the lower of actual depreciation or a fixed percentage of the total contract cost (not to exceed 35% for vanpool services).
The capital component of overhead, e.g. offices and equipment is eligible. For the sake of simplicity, these expenses are assumed to be 2% of the total contract cost (private capital and operating expenses, but excluding public contract management costs) in calculating the capital expense eligibility under this policy.
