Transit Agencies Can Now Pay 20% Upfront for New Buses Without Manufacturer Guarantees

This legislation changes the rules for how local transit agencies—the folks who run your city buses—can pay for new vehicles. Specifically, it allows them to use federal assistance money to make an advance payment to a bus manufacturer even if that manufacturer hasn’t provided a traditional financial safeguard, like a performance bond. Think of a performance bond as insurance that guarantees the manufacturer will actually deliver the bus as promised; normally, you need that insurance to pay early. This bill overrides that requirement, including parts of the Code of Federal Regulations (2 CFR part 200), to give agencies more flexibility in their procurement process.

The Trade-Off: Flexibility vs. Financial Security

Removing the requirement for a performance bond is a big deal because it changes who bears the risk. Previously, the bond protected federal funds if the manufacturer went belly-up or couldn't finish the job. Now, transit agencies can send taxpayer money upfront without that safety net. This can be a huge benefit for bus manufacturers, especially smaller ones, who get a much-needed cash injection early in the production process, potentially speeding up delivery of those new buses your city needs.

However, this flexibility comes with strict conditions to mitigate the risk. An agency can only make this type of unsecured advance payment if it has a fully executed contract and a purchase order that explicitly allows for the advance payment. Crucially, the payment is capped at 20 percent of the total cost of the purchase order. So, if a new electric bus costs $500,000, the maximum advance payment allowed is $100,000. This 20% limit acts as a guardrail, ensuring that if a manufacturer defaults, the federal government isn't on the hook for the entire cost, just a fraction.

What Happens When the Wheels Fall Off?

For the average person, this bill is about getting new, reliable buses on the road faster. If manufacturers get paid sooner, their cash flow improves, and maybe, just maybe, production timelines shrink. But there’s a flip side: if a manufacturer takes that 20% advance and then fails to deliver—say, they go bankrupt—that federal money is now at risk. That loss ultimately gets absorbed by the federal assistance program, which is funded by taxpayers.

Transit agencies also need to be meticulous. To use this new authority, they must satisfy several other existing requirements laid out in separate sections of law (subsection (m) and section 5318(e)). Failing to meet these specific, detailed compliance requirements could lead to significant audit issues down the line. In short, this bill offers transit agencies a shortcut around a financial safeguard, but only if they follow a very narrow, well-marked path, making sure every piece of paperwork is in perfect order. It's a classic policy trade-off: trading a bit of financial security for procurement speed, with the hope that the 20% cap keeps the downside manageable.