METRO Magazine Logo
MenuMENU
SearchSEARCH

Balancing the risks of performance bonds

A letter from Jenna Dorn, FTA Administrator.

by Frank Di Giacomo, Publisher
February 1, 2004
3 min to read


It’s no secret that the transit industry is still swimming against the tide. Although economic recovery is ongoing, states and local governments are struggling to balance their budgets and, in many cases, are rolling back their funding of public transportation projects. The end result is tighter constraints on transit systems and, in a ripple effect, their subcontractors and equipment suppliers. Anything that adds to the burden of these contractors and suppliers, especially rolling stock manufacturers, is to be avoided. Bonding issue addressed That’s why I was pleased to see that Jenna Dorn, administrator of the Federal Transit Administration, recently released a Dear Colleague letter on performance and payment bonds that dispels the notion that these sureties are required in federally-assisted procurements. Jenna distributed the memorandum at a recent meeting of the American Public Transportation Association’s Business Members Board of Governors. It was favorably received by me and my associates on the board. Rather than describe the contents of Jenna’s letter, I thought it would be more appropriate to relay her important message in its entirety. So, here it is. . . Dear Colleague, In working with our grantees and their transit suppliers, we have found some misunderstanding about the FTA requirements regarding performance and payment bonds in federally-assisted procurements, particularly for rolling stock procurements. In short, FTA does not require bonding in any amount for rolling stock or any other non-construction contracts. FTA leaves to the good business judgment of our grantees the discretion to determine the appropriate amount of bonding — if any — to incorporate in non-construction contracts. With APTA’s assistance, FTA examined the prices rolling stock manufacturers pay for bonds and how those prices have reacted to changes in the broader bond market. We found wide variation in manufacturers’ experiences overall, but a strong indication that railcar manufacturers have been particularly hard hit in terms of bond pricing and availability. Needless to say, high bond costs and reduced availability directly impact both the grantee’s bottom line and competition within the industry. I challenge each of you to carefully assess the risks involved in any given procurement and carefully balance those risks against the cost and competitive impacts of bonding requirements. At FTA, we will continue to work with the industry to identify cost-effective ways to manage risk, and will share that information through our Best Practices Procurement Manual. Additionally, we will continue to work with both the public and private sectors to ensure our grantees have access to the information they need to make informed choices as they consider bonds in their procurement practices. Even in the area of construction contracts (where bonding is an FTA requirement), we remain willing to review and approve sensible alternatives and exceptions to the bonding levels identified as adequate to protect the federal interest in FTA Circular 4110.1E. The circular notes that “a Grantee may seek FTA approval of its bonding policy and requirements if they do not comply with these criteria,” and FTA has approved exceptions to the circular requirements. As responsible stewards of our public resources, it is incumbent upon each of us to maximize the benefits generated by every transit dollar. Please review your bonding practices to ensure that you are prudently utilizing this important tool. I look forward to sharing the sound and innovative practices that the transit industry always generates. Sincerely, Jenna Dorn.

Topics:Management
Subscribe to Our Newsletter

More Management

An Amtrak Acela train at New York Penn Station
Railby Alex RomanAugust 3, 2026

Amtrak Board Advances Plan to Restructure Organization, Seeks Public Input

The proposal, developed by Amtrak management and approved by the board for further consideration, is intended to modernize the organization's structure while improving accountability, operational efficiency, and customer service.

Read More →
Cover of a Strada 360 guide titled "Turn Transit Data Into Action: How to solve common transit agency pain points with connected technology." The cover features a blurred transit bus, a gray grid background with orange accents, and text describing how connected technology helps transit agencies improve visibility, operational efficiency, maintenance, scheduling, and data-driven decision-making. An orange callout highlights the challenges facing today's transit landscape.
SponsoredAugust 2, 2026

Turn Transit Data Into Action

Discover how leading agencies are using connected technology to gain real-time visibility across operations, improve service reliability, and reduce disruptions.

Read More →
An aerial image of SMU/Mockingbird Station with text reading "Transit-Oriented Development. Your Questions, Explained."
Managementby Elora HaynesAugust 1, 2026

What Transit-Oriented Development Means for the Future of Public Transportation

Once viewed primarily as transit operators, agencies are now leveraging land, partnerships, and long-term planning to boost ridership, expand housing, and strengthen communities.

Read More →
Ad Loading...
A graphic with an image of railroad track in the background and text reading: "$22 Million for Transit Innovation, Updates to High-Speed Rail Rules."
Managementby Staff and News ReportsJuly 31, 2026

USDOT Announces $22 Million for Transit Innovation, Updates High-Speed Rail Rules

New federal transit funding will support safety, accessibility, and technology projects as updated rail regulations establish new noise standards for high-speed trains.

Read More →
A blue graphic with text reading "TCC Unveils Case Studies Ahead of Federal Funding Deadline."
Managementby Elora HaynesJuly 29, 2026

Transportation Construction Coalition Unveils Infrastructure Case Studies Ahead of Federal Funding Deadline

The coalition noted the next surface transportation bill should provide sustained investment in highways and public transit to strengthen freight movement, improve safety, and support economic growth.

Read More →
Fred Ferguson, President/CEO of the American Bus Association
Managementby Alex RomanJuly 29, 2026

People Movement: American Bus Association Extends Ferguson and More

METRO’s People Movement highlights the latest leadership changes, promotions, and personnel news across the public transit, motorcoach, and people mobility sectors.

Read More →
Ad Loading...
Driving Change: Award Winners Redefine Industry Standards
Technologyby Staff and News ReportsJuly 29, 2026

METRO Magazine Announces 2026 Innovative Solutions Awards Winners

Projects Recognized for Advancing Mobility Through Technology, Accessibility, Workforce Innovation, and Operational Excellence

Read More →
 An MBTA bus
Managementby StaffJuly 28, 2026

MBTA Rolls Out Pilot Programs to Cut Costs, Simplify Travel

Three new fare pilots — including unlimited two-hour transfers, reduced express bus fares, and free transit for eligible seniors — will launch this fall as Massachusetts extends popular commuter rail discounts through November.

Read More →
A public transit bus at a pedestrian crosswalk with text reading "Federal Transit Administration Makes $610 Million Available for Bus Projects."
Managementby StaffJuly 27, 2026

FTA Opens $610 Million Funding Opportunity for Bus Infrastructure Projects

The latest Notice of Funding Opportunity provides transit agencies with funding for bus facilities, fleet modernization, and low- and no-emission vehicles, with applications due September 21.

Read More →
Ad Loading...
A photo of an Amtrak train with a logo
Managementby Alex RomanJuly 24, 2026

Biz Briefs: STV teams with Amtrak, Motorcoach Operators Boost Fleet and Land Contracts, and More

From manufacturers and suppliers to transit agencies and motorcoach operators, these updates offer a snapshot of the projects, partnerships and business moves driving the industry forward.

Read More →