Buy America Requirements for Federally Funded Rail Projects (2015)

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

9 funding for the project. Grant recipients must be aware of the potential consequences of a false Buy America certification made by their contractors, and adjust their own enforcement activities ac- cordingly to avoid loss of federal funds. 5. Multiple Funding Sources Finally, grant recipients must be cognizant of situations in which multiple Buy America provi- sions apply to a project. For example, there may be transportation grant Buy America provisions that apply to all grants made by a federal agency and (as with ARRA) separate Buy America provi- sions in the legislation that authorized the grant funds. Often there are state and local Buy Amer- ica provisions that apply to all contracts made by grant recipients such as state DOTs, and the transportation grant Buy America provisions typi- cally allow the application of more stringent state and local Buy America provisions. Furthermore, when projects receive grant funds from multiple federal agencies, there may be multiple Buy America provisions that apply to a single project. As the previous discussion indicates, there are significant variations in the Buy America re- quirements from one federal grant program to the next, so a grant recipient can not assume that a project that complies with one Buy America provi- sion complies with all other Buy America provi- sions that apply to the project. This potential problem is exacerbated by recent legislation that expands the definition of “project” in certain fed- eral transportation grant contracts.49 As will be discussed further herein, this recent legislation could apply the FHWA Buy America provision to contracts that are not funded by FHWA, including contracts funded by other transportation grant programs with their own Buy America provisions. All the issues previously presented are dis- cussed in depth in Sections II and III infra, in the context of each transportation grant Buy America provision applicable to passenger and freight rail development. The FRA and Amtrak Buy America provisions are discussed in Section II. The FHWA and FTA Buy America provisions are discussed in Section III. It is important to recognize, however, that Buy America provisions in federal law have been the subject of increased attention and scru- tiny since 2008. A number of rulemaking actions related to the Buy America provisions discussed herein are still pending as of this digest’s publica- tion. And in each new appropriations bill, Con- gress could strengthen the Buy America provi- 49 See infra § III.B.2. sions associated with any transportation grant program. It is the responsibility of grant recipi- ents to monitor changes in the Buy America pro- visions to ensure that grant recipients remain in compliance. II. BUY AMERICA PROVISIONS ADMINISTERED BY FRA FRA grant funds were not historically subject to significant domestic preferences or Buy Amer- ica requirements. In 2008, that changed when Congress enacted a Buy America provision (the FRA Buy America provision) applicable to FRA grants under the HSIPR program. However, since 1978, FRA has also been responsible for adminis- tering the Amtrak Buy America provision appli- cable to procurements made by Amtrak with funds from its capital grant. This section ad- dresses the two distinct Buy America provisions administered by FRA. A. FRA High-Speed Intercity Passenger Rail Buy America Provision 1. Statutory Language a. Coverage and Applicability.—The FRA Buy America provision50 was enacted by Congress in 2008. To date, FRA has not issued formal regula- tions implementing the statute. The statute re- quires, for all projects using FRA grant funds, that “all steel, iron, and manufactured goods used in the project are produced in the United States.”51 Therefore, unless an exception is appli- cable or a waiver is granted, no foreign steel or iron may be used in FRA-funded construction pro- jects, and no foreign manufactured products (such as rolling stock) may be purchased with FRA grant funds. Note that the FRA Buy America pro- vision requires manufactured products to be “pro- duced in the United States”; not “manufactured in the United States substantially all from” domestic components (as in the BAA). Therefore, unless a given purchase qualifies for a waiver, manufac- tured products such as rolling stock purchased using FRA funds must be comprised of 100 per- cent domestic components. b. Exceptions and Waivers.— • Domestic Content The FRA Buy America provision does not in- clude an allowance, express or implied, to excuse 50 49 U.S.C. § 24405(a) (2013). 51 49 U.S.C. § 24405(a)(1) (2013).

10 foreign content in a manufactured product (such as rolling stock) where the foreign content com- prises less than half of the end product. As previ- ously discussed, the word “substantially” in the BAA has been interpreted to require only 50 per- cent domestic content in manufactured products, but the word “substantially” does not appear in the FRA Buy America provision. Furthermore, unlike other transportation grant provisions that expressly provide for waivers when some specified percentage of the components of a manufactured product are domestic, there is no such express Domestic Content waiver in the FRA Buy Amer- ica provision. The FRA Buy America provision, therefore, has been interpreted as strictly requir- ing 100 percent domestic content.52 Note, however, that FRA has adopted FTA’s definition of a domestic end product as one where: (1) All of the manufacturing processes for the end prod- uct…take place in the United States; and (2) All of the components of the end product [are] of U.S. origin. A component is considered of U.S. origin if it is manufac- tured in the United States, regardless of the origin of its subcomponents.53 It is conceivable, then, that a component could be manufactured in the United States entirely of for- eign subcomponents and that component would be considered 100 percent domestic, even if all of its subcomponents are foreign. When the components are assembled or manufactured into the final end product in the United States, that end product would satisfy the FRA Buy America provision be- cause its final assembly location is in the United States and 100 percent of its components are “do- mestic,” even though its subcomponents may be substantially foreign. In that case, the foreign content is permitted under the FRA Buy America provision, and no waiver is required. It is important to note that FRA does not make a significant distinction between rail rolling stock and other manufactured products. As noted above, FRA has adopted FTA’s method for evaluating the domestic content of manufactured products and 52 See, e.g., FRA, Buy America and FRA’s High-Speed Intercity Passenger Rail Program: Answers to Fre- quently Asked Questions, at 2 (Aug. 30, 2013), available at https://www.fra.dot.gov/eLib/Details/ L02740 [hereinafter FRA Buy America FAQ]: FRA considers the need to grant waivers under these circum- stances as strictly temporary because it expects that achieving domestic manufacture and 100% domestic component content can and will occur in the very near future. By encouraging grantees to use manufacturers or suppliers who maximize do- mestic content, FRA hopes to achieve its goal of 100% domestic content in the near future. 53 Id. at 4; see also 49 C.F.R. § 661.5(d) (2013). applies that same method to evaluate the domes- tic content of rolling stock.54 FTA, on the other hand, has been required by Congress to adopt a separate method for evaluating the domestic con- tent of rolling stock, to account for the origin of subcomponents.55 Grant recipients should be mindful that rail rolling stock that satisfies the domestic content requirements of the FRA Buy America provision may not satisfy the domestic content requirements of the FTA Buy America provision and vice versa. • Small Purchase The FRA Buy America provision “shall only apply to projects for which the costs exceed $100,000.”56 For projects costing less than $100,000, therefore, FRA grant recipients can purchase foreign goods using FRA grant funds without requesting a waiver. Furthermore, under the FRA Buy America provision, “in calculating the components’ costs, labor costs involved in final assembly shall not be included in the calcula- tion.”57 FRA has interpreted this to mean that la- bor costs involved in final assembly may be sub- tracted from the project cost before determining whether the $100,000 Small Purchase cost threshold applies.58 It is conceivable, therefore, that FRA grant funds can be spent on foreign goods where the project cost exceeds $100,000, as long as the cost of goods after subtracting assem- bly labor is less than $100,000. Note, however, that the $100,000 Small Pur- chase cost threshold applies to the project, not the individual contract. FRA has not issued regula- tions defining “project,” and in 2012, Congress rejected an attempt by some legislators to expand what constitutes a “project” for purposes of the FRA Buy America provision.59 However, the FRA 54 See generally FRA Buy America FAQ, supra note 52. 55 49 U.S.C. § 5323(j)(2)(C) (2013). 56 49 U.S.C. § 24405(a)(11) (2013). 57 49 U.S.C § 24405(a)(3) (2013). 58 FRA Buy America FAQ, supra note 52, at 6. 59 See S. Amdt. 1766 to S. 1813, 112th Cong. (2012) (proposing to make the FRA Buy America provision applicable “to all contracts eligible for Federal funding for a project…, regardless of the funding source of such contracts, if at least 1 contract for the project is funded with amounts made available to carry out this title.”). This failed amendment, if enacted, would have imposed FRA Buy America requirements on contracts made by FRA grant recipients not using FRA grant funds, if the

11 Buy America provision still conceivably applies to contracts issued by FRA grant recipients with a value of less than $100,000, if those contracts are part of an overall “project” for which the total pro- ject costs reach $100,000. FRA grant recipients should not attempt to segment a project into a number of smaller contracts simply to avoid ap- plication of the FRA Buy America provision.60 • Price Differential The FRA grant recipient may request a waiver from the FRA Buy America provision if “including domestic material will increase the cost of the overall project by more than 25 percent.”61 Note that this is much stricter than the BAA “unrea- sonable cost” exception, which allows federal gov- ernment agencies to purchase foreign goods if the lowest responsible bid is still less than the lowest purely domestic bid even after adjusting the low bid upward via a 6 percent price differential ap- plied to the cost of foreign goods in the low bid. The FRA Buy America provision applies a much larger 25 percent price differential, and the price differential is applied to “the cost of the overall project,” not just the cost of foreign goods in the bid.62 The conditions justifying a Price Differential contract was closely related to work that was funded by FRA. 60 FRA has stated that the FRA Buy America provi- sion applies even to purchases made with funds other than FRA grant funds, if the purchases are used in a “project” funded in part with FRA grant funds. FRA, Buy America and Related Requirements Webinar Pres- entation, at 9 (Aug. 29, 2013), available at http://www. fra.dot.gov/eLib/details/L04747 [hereinafter FRA Buy America Webinar]. 61 49 U.S.C. § 24405(a)(2)(D) (2013). 62 Id. But see 49 U.S.C. § 24405(a)(3) (2013) (“[I]n calculating the components’ costs, labor costs involved in final assembly shall not be included in the calcula- tion.”). This suggests that the 25 percent price differen- tial is only to be applied to the cost of components in the end products, not the cost of labor to assemble compo- nents into end products. In some cases, it could be diffi- cult, if not impossible, to separate out costs of labor from costs of goods for purposes of applying the Price Differential waiver. In most cases, applying the 25 per- cent price differential to the total bid price (including labor) will demonstrate that the low foreign bid does not qualify for a Price Differential waiver. In the rare cir- cumstance where the lowest purely domestic bid is still larger than a foreign bid increased by 25 percent, FRA grant recipients should consider whether this would still be the case if final assembly labor costs are sub- tracted from both bids. Domestic labor will generally waiver under the FRA Buy America provision are only available in rare circumstances. • Nonavailability Under the FRA Buy America provision, an FRA grant recipient may request a waiver to purchase foreign steel, iron, or manufactured products if comparable domestic goods “are not produced in a sufficient and reasonably available amount or are not of a satisfactory quality.”63 This language is nearly identical to the Nonavailability exception to the BAA. Note, however, that FRA has not im- plemented regulations or other guidance adopting the FAR list of goods that are presumed to be un- available domestically under the BAA. Therefore, even if the FRA grant recipient wishes to pur- chase foreign goods that appear on the FAR list of unavailable domestic goods, the FRA grant recipi- ent must request a Nonavailability waiver from FRA. Likewise, even if the FRA grant recipient does not obtain a domestic bid in response to an open solicitation, the FRA grant recipient must request a Nonavailability waiver from FRA. FRA has indicated that it will not presume domestic sources are not available, and that grant recipi- ents should not expect that Nonavailability waiver requests will be granted.64 FRA has entered into an interagency agreement with the National Institute of Technology and Stan- dards, Manufacturing Extension Partnership (NIST-MEP) at the U.S. Department of Commerce to help it identify potential domestic manufactur- ing sources.65 When confronted with a Nonavail- ability waiver request, FRA will seek out domestic sources itself or via NIST-MEP before granting the waiver. The FRA Buy America provision includes a sec- ond potential justification for a Nonavailability waiver, which is only applicable to purchases of rolling stock and power train equipment. FRA may grant a waiver allowing the purchase of for- eign rolling stock or power train equipment if comparable domestic products “cannot be bought and delivered in the United States within a rea- cost more than foreign labor, so subtracting labor costs from the Price Differential evaluation will typically tip the balance even more in favor of the domestic bidder. 63 49 U.S.C. § 24405(a)(2)(B) (2013). 64 FRA Buy America Webinar, supra note 60, at 23, 27. 65 Id. at 25–26; FRA Buy America FAQ, supra note 52, at 2.

12 sonable time.”66 This “unreasonable delivery time” Nonavailability waiver may apply where, in re- sponse to a solicitation for rolling stock or power train equipment, the FRA grant recipient receives a bid to provide domestic products but the bidder does not presently manufacture those products. Due to concerns about project delay, the FRA grant recipient might prefer to award the contract to a foreign bidder with the existing capability to manufacture the products, but doing so could pro- voke a bid challenge from the domestic bidder. In that situation, the FRA grant recipient could re- quest a Nonavailability waiver on the grounds that the domestic bidder could not manufacture the products “within a reasonable time” to meet the FRA grant recipient’s project schedule. • Public Interest An FRA grant recipient may seek a waiver from the FRA Buy America provision where its application “would be inconsistent with the public interest.”67 FRA has not issued regulations or guidance describing the circumstances or objec- tive criteria that might justify a Public Interest waiver. Public Interest waivers for other Federal Buy America provisions have been the subject of criticism and scrutiny,68 because what is in the “public interest” can be a subjective determina- tion. Likewise, any Public Interest waiver from the FRA Buy America provision would likely re- ceive public scrutiny from industry interests such as organized labor and manufacturing trade asso- ciations, as well as from Congress. FRA has indi- cated that its grant recipients should not expect that such waivers will be granted.69 c. Notice-and-Comment.—If FRA decides to grant a waiver from the FRA Buy America provi- sion, before the waiver takes effect, FRA must publish its determination in the Federal Register, along with “a detailed written justification as to why the waiver is needed.”70 FRA must solicit and receive public comments on its proposed waiver “for a reasonable period of time not to exceed 15 days.”71 There is no statutory requirement for FRA to respond to the public comments or to pub- lish any “final determination” after the 15-day 66 49 U.S.C. § 24405(a)(2)(C) (2013). 67 49 U.S.C. § 24405(a)(2)(A) (2013). 68 See infra §§ III.C.3.c, III.C.4.a. 69 FRA Buy America Webinar, supra note 60, at 23, 27. 70 49 U.S.C. § 24405(a)(4)(A) (2013). 71 49 U.S.C. § 24405(a)(4)(B) (2013). notice-and-comment period—the waiver is pre- sumed to be effective after the 15-day notice-and- comment period has expired. FRA is only required to publish its determina- tion to grant a waiver—there is no statutory re- quirement for FRA to solicit public comments on waiver requests prior to making its determina- tion.72 In the past, however, FRA has published some waiver requests in the Federal Register to solicit public comments (e.g., to determine whether there is a source of comparable domestic goods) before making its determination.73 In re- cent years, FRA has informally published at least some of its open waiver requests on FRA’s Buy America Web site.74 The public can post comments related to each open waiver request via a form on the Web site, and posted comments are publicly visible.75 If FRA decides to grant a waiver after going through this informal notice-and-comment process, it is still obligated under the statute to publish its final determination in the Federal Reg- ister for an additional 15-day notice-and-comment period. Even where FRA does not publish waiver re- quests, FRA considers waiver requests submitted by its grant recipients to be public records, “which are thus subject to the FOIA and to public release in response to individual FOIA requests.”76 Fur- thermore, where grant recipients are state and local agencies, their waiver requests and related correspondence made to FRA, and any response received from FRA, may be subject to disclosure under state public records laws. d. Certification and Enforcement.—For FRA grant recipients to evaluate bid compliance with the FRA Buy America provision, the grant recipi- ents must often rely on domestic content repre- sentations or certifications made by the prospec- tive contractors or suppliers. However, the FRA Buy America provision does not address compli- ance certification by FRA grant recipients, and FRA has not issued regulations establishing the legal requirements for bidder certifications. FRA 72 See 49 U.S.C. § 24405(a)(4) (2013). 73 See infra notes 172–173, 182, 196, and accompany- ing text. 74 FRA, Buy America, https://www.fra.dot.gov/Page /P0185. 75 This is similar to the informal notice-and-comment procedure used by FHWA, which may be attributable to the fact that Congress required FHWA to assist FRA in developing a notice-and-comment procedure for its Web site. Pub. L. No. 110-432, Div. B, § 301(c) (2008). 76 FRA Buy America FAQ, supra note 52, at 9–10.

13 has stated that its grant recipients “should re- quire that the bidder or offeror submit with the bid or offer a completed Buy America certificate” as a condition of bid responsiveness.77 If this re- quirement is specified in the solicitation, then the FRA grant recipient is obligated to reject bids that do not include either a completed Buy America compliance certificate or a “noncompliance” cer- tificate indicating that the bidder qualifies for a waiver from the FRA Buy America provision. FRA has published “suggested” Buy America compli- ance certification forms.78 The FRA Buy America provision allows for “a manufacturer or supplier of steel, iron, or manu- factured goods to correct after bid opening any certification of noncompliance or failure to prop- erly complete the certification (but not including failure to sign the certification)” only if “such manufacturer or supplier submitted an incorrect certification as a result of an inadvertent or cleri- cal error.”79 The authority to allow a bidder to cor- rect its Buy America certification lies with the Secretary of Transportation (or his or her dele- gate, FRA) under the statute,80 so an FRA grant recipient must ask FRA to permit the bidder to correct its certification. Because any such Buy America compliance cer- tification would be made to the FRA grant recipi- ent and not to FRA, a false Buy America certifica- tion probably does not expose the bidder to liability under the FCA.81 When the FRA grant recipient is a state agency, however, there may be state statutes similar to the FCA under which the bidder could be liable for a false certification to the FRA grant recipient. The FRA Buy America provision does not expressly establish any crimi- nal penalties for a false Buy America certification. However, a prospective contractor or supplier can become ineligible to receive FRA grant funds (ei- ther as a contractor in privity with an FRA grant recipient or as a subcontractor) if it represents that goods used in an FRA grant project are do- mestic when in fact they are not “produced in the 77 FRA Buy America FAQ, supra note 52, at 6. 78 Id. at 6–7; see also FRA Buy America Webinar, supra note 60, at 8. FRA’s “suggested” Buy America certification forms are similar to FTA’s mandatory Buy America certification forms. See 49 C.F.R. §§ 661.6, 661.12 (2013). 79 49 U.S.C. § 24405(a)(9) (2013). 80 Id. 81 See, e.g., United States ex rel. Totten v. Bombar- dier Corp., 380 F.3d 488, 502 (D.C. Cir. 2004). United States.”82 The prospective contractor or supplier becomes automatically ineligible to re- ceive FRA grant funds after a court or federal agency determines that its false representation was intentional.83 The FRA Buy America provision does not in- clude any express requirements for enforcement by FRA grant recipients. However, FRA has pub- lished a list of actions that FRA grant recipients “need to do” to demonstrate compliance with the FRA Buy America provision.84 These include: • Provide notice in solicitations and requests for proposals (RFPs) that the project is subject to the FRA Buy America provision. • Include “flow-down” requirements in con- tracts, requiring the contractor to put its own sub- contractors and suppliers on notice that they must comply with the FRA Buy America provision. • Maintain any Buy America compliance certi- fications received from contractors, manufactur- ers, and suppliers for all FRA grant-funded pro- jects. • Actively look for fraud and mistakes on the part of contractors, manufacturers, and suppliers. • Audit rolling stock procurements. e. Multiple Funding Sources.—The FRA Buy America provision recognizes that purchases made by FRA grant recipients may be subject to Buy America provisions in state law (e.g., where the grant recipient is a state agency or where the project is otherwise funded jointly by FRA and the state DOT).85 Therefore, the FRA Buy America provision permits the application of “more strin- gent requirements…on the use of articles, materi- als, and supplies mined, produced, or manufac- tured in foreign countries in projects carried out with” FRA grant funds.86 In other words, if the FRA grant recipient is subject to Buy America provisions in state law, then both the state Buy America provision and the FRA Buy America pro- vision must be satisfied. FRA takes the position that the FRA Buy America provision applies even to purchases made with funds other than FRA grant funds if the pur- chases are used in a “project” funded in part with 82 49 U.S.C. § 24405(a)(7) (2013). 83 Id. 84 FRA Buy America Webinar, supra note 60, at 8. 85 49 U.S.C. § 24405(a)(8) (2013). 86 Id.

14 FRA grant funds.87 In other words, FRA grant re- cipients can not circumvent the FRA Buy America provision by using FRA grant funds for one “seg- ment” of the project and state DOT funds or other federal grant funds for another “segment” of the project. Multiple federal funding sources can lead to confusion because the FRA Buy America provision (and some other federal transportation grant Buy America provisions) apply to a “project,” not nec- essarily the portion of the project that is funded by the federal transportation grant program. One fairly common situation might be rolling stock procurement projects funded by multiple sources, including FRA grant funds and FTA grant funds. Based on a textual reading of both Buy America statutes, the entire procurement project, not just the individual contracts funded by either FRA grant funds or FTA grant funds, would have to comply with both the FRA Buy America provision and the FTA Buy America provision.88 Some grant recipients advised this author that their policy is to ensure that the entire rolling stock procure- ment project conforms to the FRA Buy America provision, which is viewed as more stringent be- cause it requires the rolling stock to be 100 per- cent domestic. Note, however, that under the FTA Buy America provision, rolling stock is evaluated down to the subcomponent level (rather than the component level).89 Therefore, it is conceivable that certain rolling stock could satisfy the 100 percent domestic content requirement under the FRA Buy America provision but fail the 60 percent domestic content requirement under the FTA Buy America provision, as the FRA provision disregards the origin of rolling stock subcompo- nents.90 An alternate practice could be to identify 87 FRA Buy America Webinar, supra note 60, at 9 (“Buy America requirements also apply to items pur- chased with non-grant funds if used in a grant-funded project.”). 88 See 49 U.S.C. § 24405(a)(1) (2013) (“The Secretary of Transportation may obligate an amount that may be appropriated to carry out this chapter for a project only if the steel, iron, and manufactured goods used in the project are produced in the United States”) (emphasis added); 49 U.S.C. § 5323(j)(1) (2013) (“The Secretary may obligate an amount that may be appropriated to carry out this chapter for a project only if the steel, iron, and manufactured goods used in the project are pro- duced in the United States.”) (emphasis added). 89 49 U.S.C. § 5323(j)(2)(C) (2013). 90 FRA Buy America FAQ, supra note 52, at 4 (“A component is considered of U.S. origin if it is manufac- all potentially applicable Buy America provisions and perform an independent evaluation of the compliance of the entire project with each provision. 2. Legislative History To understand the legislative intent of the FRA Buy America provision, it is helpful to consider that it was enacted during the national financial crisis of 2007–2008, shortly before Congress ap- propriated ARRA stimulus funding for passenger rail development in early 2009. There is little re- corded debate on the FRA Buy America provision in Congress. Prior to 2008, Congress’s work on purchases of foreign goods with FRA funds is as follows. In 1978, the GAO reported to Congress that the FRA financial assistance programs did “not address the issue” of domestic preferences, “leaving such deci- sion to the recipients’ discretion.”91 At that time, FRA financial assistance was available in the form of grants, stock purchases, and loan guaran- tees under the Railroad Rehabilitation and Im- provement Financing (RRIF) program. In 1983, the GAO reported to Congress that probably less than 5 percent of FRA assistance funds were used to purchase foreign goods.92 In 1991, Congress passed an RRIF Buy America provision that would require high-speed rail facilities or equip- ment purchased with RRIF funds to have no more than 15 percent foreign content (with the possibil- ity of waivers based on Nonavailability, Price Dif- ferential, and Public Interest).93 However, Con- tured in the United States, regardless of the origin of its subcomponents.”). 91 Foreign Procurement 1978 Report, supra note 5, App. 1, at 14. 92 The GAO reported that three grant recipients ac- counted for 71 percent of FRA’s $634.2 million railroad assistance funding up to that point. Those three grant recipients identified $23.4 million in foreign purchases, about 5 percent of the $451.5 million in federal assis- tance they had received. FOREIGN SOURCE PROCUREMENT FUNDED THROUGH FEDERAL PROGRAMS BY STATES AND ORGANIZATIONS, REP’T NO. GAO/NSIAD- 83-9, App. 2, at 23, Docket No. B-208826 (1983) (here- inafter Foreign Procurement 1983 Report). However, some of those purchases of foreign goods were made using nonfederal funds, so the actual percentage of fed- eral funds spent on foreign goods by those grant recipi- ents was somewhat less than 5 percent. 93 Intermodal Surface Transportation Efficiency Act of 1991, Pub. L. No. 102-240, § 1036(e) (1991) (to be codified at 45 U.S.C. § 831(g)(7)).

15 gress repealed that earlier FRA Buy America pro- vision in 1998.94 Today’s FRA Buy America provision originated with a Senate bill introduced in January 2007 called the Passenger Rail Investment and Im- provement Act (PRIIA).95 The Senate version of PRIIA would have established an FRA grant pro- gram to support intercity passenger rail service capital projects for state and regional transporta- tion agencies.96 The Senate version of PRIIA in- cluded a proposed FRA Buy America provision, with language very similar to the BAA and the existing Amtrak Buy America provision, which would apply to the proposed FRA intercity pas- senger rail grant program.97 Like the BAA and the Amtrak Buy America provision, the Senate’s pro- posed FRA Buy America provision nominally would have applied to all products (both “manu- factured articles, materials, and supplies” and “unmanufactured articles, materials, and sup- plies”) purchased by FRA grant recipients.98 How- ever, there were broad exceptions. Like the Am- trak Buy America provision, the Senate’s proposed FRA Buy America provision would only apply to purchases greater than $1 million. Also, like the BAA, it would require manufactured products to be manufactured only “substantially” from domestic components, and there would be an exception for “unreasonable” costs, but those terms were not defined or quantified in the Sen- ate’s proposed FRA Buy America provision.99 There was very little recorded debate regarding the Senate’s provision. The bill passed the Senate on October 30, 2007.100 94 Transportation Equity Act for the 21st Century, Pub. L. No. 105-178, § 7203(a)(2) (1998). Despite the formal repeal of the RRIF Buy America provision, FRA announced in 2010 that its policy is to continue to im- pose domestic preference requirements, which are al- most identical to the FRA Buy America provision, on RRIF funds. Notice Regarding Consideration and Proc- essing of Applications for Financial Assistance Under the Railroad Rehabilitation and Improvement Financ- ing (RRIF) Program, 75 Fed. Reg. 60,165, 60,166 (Sep. 29, 2010). 95 Passenger Rail Investment and Improvement Act of 2007, S. 294, 110th Cong. (2007). 96 Id. § 301(a). 97 Id. 98 Id. 99 Id. 100 153 CONG. REC. S13,551–64 (Oct. 30, 2007). The House version of PRIIA was introduced by Representative James Oberstar on May 8, 2008.101 The House version of PRIIA would have estab- lished two FRA grant programs: one to support intercity passenger rail service capital projects for state and regional transportation agencies102 and one for high-speed rail corridor capital projects for state and regional transportation agencies.103 Both of the proposed FRA grant programs in the House version of PRIIA would have been subject to the language of the Senate’s proposed FRA Buy America provision, which (like the BAA) did not define or quantify what it meant to be manufac- tured “substantially” from domestic goods or what might constitute “unreasonable” cost of domestic goods.104 In the House version of PRIIA (like the Senate version), the FRA Buy America provision would only have applied to purchases of $1 mil- lion or more.105 There was little recorded debate in the House regarding the proposed provision that passed the House on June 11, 2008.106 Although both the House and Senate had passed the proposed FRA Buy America provision with language very similar to the BAA and Am- trak Buy America provision, neither the House bill nor the Senate bill ultimately became law, as the House and Senate failed to resolve other dif- ferences between their two bills.107 With negotia- tions stalled on resolving differences in PRIIA, attention turned to another bill known as the 101 Passenger Rail Investment and Improvement Act of 2008, H.R. 6003, 110th Cong. (2008). 102 Id. § 301. 103 Id. § 504. 104 Id. §§ 301(a), 504(a). 105 Id. Conversely, the House version of PRIIA also would have imposed new Buy America requirements on Amtrak for purchases as low as $100,000. Id. § 221. 106 153 CONG. REC. H5,264 (June 11, 2008). On July 22, 2008, the House also took up the Senate version of PRIIA, voting to amend it by replacing it with the House version. 153 CONG. REC. H6,756–73 (July 22, 2008). 107 At that time, the greatest point of contention be- tween the House and the Senate with respect to PRIIA was not related to the FRA Buy America provisions, but rather the House’s insistence that Buy America re- quirements should be imposed on Amtrak purchases as low as $100,000. See, e.g., 153 CONG. REC. H6,788–93 (July 22, 2008) (statement of Rep. Oberstar) (instruct- ing the House conferees to insist on a $100,000 “small purchase” threshold for Buy America requirements on Amtrak when resolving PRIIA differences in conference with the Senate).

16 Railroad Safety Improvement Act, 108 which had passed the House in October 2007 with no FRA Buy America provisions whatsoever. The Senate passed an amended version of the Railroad Safety Improvement Act on August 1, 2008,109 and noti- fied the House of the need to resolve differences between the two bills. The House responded on September 24, 2008, by passing a resolution (of- fered by Rep. Oberstar) to amend the Senate ver- sion by incorporating the entire text of the House version of PRIIA directly into the Railroad Safety Improvement Act.110 Like the version of PRIIA that had passed the House in June 2008, the amended Railroad Safety Improvement Act passed by the House in September 2008 would establish two FRA grant programs—intercity pas- senger rail and high-speed rail—subject to an FRA Buy America provision.111 However, the FRA Buy America provision in- cluded in the House amendment was significantly different than the proposed FRA Buy America provision that had previously passed both the House and Senate. This new FRA Buy America provision required FRA grant recipients to pur- chase only domestic steel, iron, and manufactured products—other foreign goods were excluded from coverage.112 There was no longer any allowance for manufactured products to be manufactured only “substantially” from domestic components— implying that 100 percent domestic content was required. Perhaps most significantly, the new FRA Buy America provision was not limited to purchases of at least $1 million—the cost thresh- old was revised downward to $100,000.113 Finally, the allowance for a waiver for “unreasonable” cost of domestic goods was replaced with a fixed 25 percent price differential that must be satisfied before cheaper foreign goods can be purchased in lieu of comparable domestic goods.114 There was no recorded debate in the House explaining why the FRA Buy America provision had changed so dramatically from the version that had already 108 H.R. 2095, 110th Cong. (2007). 109 153 CONG. REC. S8,003 (Aug. 1, 2008). 110 H.R. Res. 1492, 110th Cong. (2008). Notably, this House amendment did not include any provision to strengthen Buy America requirements on Amtrak, which had become a point of contention between the House and the Senate. 111 Id. Div. B, §§ 301(a), 501(a). 112 Id. Div. B, § 301(a) (2008). 113 Id. 114 Id. passed both the House and Senate.115 The Senate adopted the House amendment on October 1, 2008, with no recorded debate on the changes that had been made to the FRA Buy America provi- sion.116 The bill was signed into law on October 16, 2008,117 just 4 months before FRA grant funding would be made available via the ARRA stimulus bill. 3. Administrative History There is no doubt that FRA has actively re- quired its grant recipients to comply with the FRA Buy America provision ever since its enactment. However, as noted above, FRA has yet to issue regulations for administering the FRA Buy Amer- ica provision. This is somewhat problematic from a legal perspective, in part because waivers of the FRA Buy America provision are discretionary. In 1980, less than 2 years after Congress first im- posed a similar Buy America provision on FHWA grant funds, the U.S. District Court for the Dis- trict of Columbia ruled that “there can be no doubt that regulations must be promulgated to implement the statutory mandate,” where Buy America waivers involve the exercise of agency discretion.118 The court in that 1980 case ordered FHWA “to issue valid regulations” within 30 days.119 FRA, on the other hand, has not issued regulations in the more than 5 years since the enactment of the FRA Buy America provision. However, as discussed herein, FRA has solicited public comments on application of the FRA Buy America provision and has made preliminary guidance publicly available. a. Prerulemaking and Public Comments.—In December 2008, shortly after the enactment of PRIIA (including the FRA Buy America provision) in the Federal Register, FRA solicited public com- ments on its newly authorized HSIPR program, including whether there were additional legisla- tive actions needed to facilitate the program and whether there were other considerations that might dissuade private sector involvement in the program.120 In April 2010, FRA again solicited 115 See 153 CONG. REC. H9,325–64 (Sep. 24, 2008). 116 See 153 CONG. REC. S10,283–90 (Oct. 1, 2008). 117 Rail Safety Improvement Act of 2008, Pub. L. No. 100-432, Div. B, § 301(a) (2008). 118 Valiant Steel and Equipment, Inc. v. Goldschmidt, 499 F. Supp. 410, 412 (D.D.C. 1980). 119 Id. at 414–15. 120 Notice Requesting Expressions of Interest in Im- plementing a High-Speed Intercity Passenger Rail Cor- ridor, 73 Fed. Reg. 76,443, 76,446 (Dec. 16, 2008).

17 public comment in the Federal Register on the na- tional rail plan authorized by PRIIA.121 A number of the comments received in response to these so- licitations, as well as comments received in re- sponse to various notices of available funding for these programs, have related to the FRA Buy America provision. Potential FRA grant recipients and their poten- tial suppliers expressed concerns about the FRA Buy America provision. In July 2009, the Nevada Central Railroad stated that FRA had no admin- istrative procedures to register domestic manufac- turers and publish a list of compliant manufac- turers for FRA grant recipients.122 In September 2009, the California High-Speed Rail Authority stated that its foreign suppliers had expressed concerns related to the FRA Buy America provi- sion.123 In April 2010, the Oklahoma Passenger Rail Association proposed that the FRA Buy America provision “should be reasonably imple- mented, possibly utilizing a phased-approach. A product assembled and made up of 100% domestic components is laudable, but not practical at this time.”124 On the other side of the spectrum, labor or- ganizations and domestic manufacturing trade associations provided comments in favor of strict enforcement of the FRA Buy America provision. In July 2009, a joint response by numerous rail labor organizations expressed the opinion that no waivers of the FRA Buy America provision should be granted.125 In May 2010, a number of labor or- ganizations, including the Transportation Trades Division of the American Federation of Labor– Congress of Industrial Organizations (AFL-CIO) encouraged strict enforcement of the FRA Buy 121 National Rail Plan, 75 Fed. Reg. 17,203 (Apr. 5, 2010). 122 Comments, Nevada Central Railroad, Docket No. FRA-2009-0045 (July 20, 2009), available at http://www.regulations.gov/#!documentDetail;D=FRA- 2009-0045-0109. 123 Comments, California High Speed Rail Authority, Docket No. FRA-2009-0045 (Sep. 14, 2009), available at http://www.regulations.gov/#!documentDetail;D=FRA- 2009-0045-0111. 124 Comments, Oklahoma Passenger Rail Association, Docket No. FRA-2010-0020 (June 7, 2010), available at http://www.regulations.gov/#!documentDetail;D =FRA-2010-0020-0060. 125 Comments, Rail Labor Organization, Docket No. FRA-2009-0045 (July 10, 2009), available at http://www .regulations.gov/#!documentDetail;D=FRA-2009-0045- 0089. America provision.126 At that time, organizations such as the OneRail Coalition127 and Apollo Alli- ance128 cited AFL-CIO testimony to Congress in encouraging FRA to strictly enforce the FRA Buy America provision. The differences of opinion between FRA grant recipients on the one hand and labor organiza- tions and manufacturing trade associations on the other hand illustrate the difficulty FRA would face with any formal rulemaking to enact regula- tions. In September 2010, after receiving numer- ous comments and questions related to the FRA Buy America provision, FRA published a notice in the Federal Register indicating that it was making available on its Web site as interim guidance a list of answers to frequently asked questions con- cerning the FRA Buy America provision.129 At that time, FRA stated that it was “beginning the process of implementing regulations to govern the application of the Buy America statute to all PRIIA-authorized spending as part of the HSIPR program.”130 In December 2011, FRA announced that its Notice of Proposed Rulemaking (NPRM) for the FRA Buy America provision was on sched- ule to be published in early 2012.131 In April 2012, FRA announced that the NPRM had been up- graded from “insignificant” to “significant,” and that it was on schedule to be published in July 2012.132 However, in September 2012, FRA an- nounced that the NPRM’s publication had been 126 Comments, Transportation Trades Department, AFL-CIO, Docket No. FRA-2010-0020 (May 6, 2010), available at http://www.regulations.gov/#!document Detail;D=FRA-2010-0020-0020. 127 Comments, OneRail Coalition, Docket No. FRA- 2010-0020 (May 6, 2010), available at http://www. regulations.gov/#!documentDetail;D=FRA-2010-0020- 0029. 128 Comments, Appollo Alliance, Docket No. FRA- 2010-0020 (May 3, 2010), available at http://www. regulations.gov/#!documentDetail;D=FRA-2010-0020- 0005. 129 Notice of Availability of Answers to Frequently Asked Questions Regarding Buy America and FRA’s High-Speed Intercity Passenger Rail Program, 75 Fed. Reg. 59,322 (Sep. 27, 2010). 130 Id. at 59,323. 131 FRA, Regulatory Activity Update to the 45th Railroad Safety Advisory Committee Meeting (Dec. 8, 2011). 132 FRA, Regulatory Activity Update to the 46th Railroad Safety Advisory Committee Meeting (Apr. 26, 2012).

18 delayed until February 2013.133 Finally, in June 2013, FRA announced that the NPRM for the FRA Buy America provision was “on hold” pending dis- cussions between FRA and the Office of Manage- ment and Budget.134 b. Interim Guidance and Manufactured Prod- ucts.—Shortly after putting its formal rulemaking for the FRA Buy America provision on hold, FRA made available on its Buy America Web site in August 2013 an updated list of its answers to fre- quently asked questions concerning the FRA Buy America provision.135 At that time, FRA also made available a Webinar presentation explaining the FRA Buy America provision.136 This interim guid- ance primarily impacts the way that manufac- tured products (including rolling stock) are evalu- ated under the FRA Buy America provision. These documents indicate that FRA has adopted certain FTA regulations as an “interim” measure.137 Im- portantly, however, FRA has not adopted the FTA regulations regarding FTA’s Domestic Content waiver for rolling stock because Congress included that waiver in the FTA Buy America provision but did not include it in the FRA Buy America provi- sion.138 Under this interim guidance, FRA subjects all manufactured products (including rolling stock) to the two-part test used by FTA for manufactured products (excluding rolling stock): All components of the end product must be domestic, and all “manufacturing processes” of the end product must take place in the United States.139 Where the components themselves are manufactured products, the components are considered domestic as long as the manufacturing process to produce the component takes place in the United States— the origin of its subcomponents is not consid- ered.140 133 FRA, Regulatory Activity Update to the 47th Railroad Safety Advisory Committee Meeting (Sep. 27, 2012). 134 FRA, Regulatory Activity Update to the 48th Railroad Safety Advisory Committee Meeting (June 14, 2013). 135 FRA Buy America FAQ, supra note 52. 136 FRA Buy America Webinar, supra note 60. 137 FRA Buy America FAQ, supra note 52, at 3. 138 Id. at 2; FRA Buy America Webinar, supra note 60, at 24. 139 FRA Buy America FAQ, supra note 52, at 4; see also 49 C.F.R. § 661.5(d) (2013). 140 Id. Note that this represents a departure from FRA’s testimony to Congress shortly after the passage of the FRA Buy America provision, in which FRA testi- For all manufactured products except rolling stock, FRA has adopted the FTA definition of “manufacturing processes” to be “substantial transformation”—the “form or function” of the components must have been altered via processes that transform the components and add value, so that the manufactured product is “functionally different from that which would result from mere assembly of the” components.141 Likewise, a com- ponent of a manufactured product is itself consid- ered a domestic manufactured product as long as its “subcomponents have been substantially trans- formed or merged into a new and functionally dif- ferent article” in the United States, regardless of the origin of its subcomponents.142 Therefore, a manufactured product (including rolling stock) could comply with the FRA Buy America provi- sion even if its subcomponents are entirely of for- eign origin, as long as there are sufficient manu- facturing processes at both the component and end product levels. On the other hand, if the FRA grant recipient is procuring a system that is the result of “mere assembly” of other manufactured goods (as op- posed to “substantial transformation”), then FRA does not consider the assembled system to be a manufactured product for purposes of the FRA Buy America provision.143 Instead, the FRA Buy America provision is evaluated at the next level down—each manufactured product that has been assembled into the system must comply with the FRA Buy America provision (i.e., manufactured in the United States from domestic components).144 This is important because evaluation of domestic content is “cut off” at the component level—the origin of subcomponents is not considered under the FRA Buy America provision. A grant recipient might attempt to take advantage of this fact by “bundling” multiple manufactured products into a fied that it planned to require all subcomponents to be domestic. High-Speed Rail in the United States: Oppor- tunities and Challenges: Hearing Before the Subcomm. on Railroads, Pipelines, and Hazardous Materials of the H. Comm. on Transportation and Infrastructure, 111th Cong. 36 (2009) (statement of Mark Yachmetz, FRA Associate Administrator for Railroad Policy and Devel- opment). 141 FRA Buy America FAQ, supra note 52, at 4; see also 49 C.F.R. § 661.3 (2013). 142 FRA Buy America FAQ, supra note 52, at 4; see also 49 C.F.R. § 661.11(e) (2013). 143 FRA Buy America FAQ, supra note 52, at 4; see also 49 C.F.R. § 661.3 (2013). 144 See FRA Buy America Webinar, supra note 60, at 13.

19 single procurement, with the products assembled together into a larger system (in an attempt to have the foreign components of the individual manufactured products treated as subcomponents of the delivered system). However, because FRA defines “manufacturing processes” to be more than “mere assembly,” a grant recipient or sup- plier of manufactured products containing foreign components can not circumvent the FRA Buy America provision in that manner. Under FRA’s interpretation, this “bundling” practice is ineffec- tive because the FRA Buy America provision is evaluated at the manufactured product level, not at the level of a system resulting from “mere as- sembly” of other manufactured products.145 However, there is a relaxed standard for pro- curement of rolling stock (as opposed to other manufactured products) under the FRA Buy America provision. Like FTA, FRA considers the applicable manufacturing process for rolling stock to be “final assembly” of the rolling stock compo- nents146 (as opposed to “substantial transforma- tion” of the components into an end product). Unlike FTA, however, FRA considers rolling stock to be domestic as long as it is manufactured (i.e., assembled) in the United States from domestic components. If the rolling stock component is a manufactured product, then it is considered do- mestic as long as it is manufactured in the United States, regardless of the origin of its subcompo- nents.147 This is a key distinction from the FTA Buy America provision, which requires grant re- cipients to account for the origin of rolling stock subcomponents.148 FRA has adopted the FTA defi- nition of “component,” which is “any article, mate- rial, or supply, whether manufactured or un- manufactured, that is directly incorporated into the end product at the final assembly location.”149 Using this definition of “component” may make it easier to evaluate rolling stock under the FRA 145 Contrast this with FTA’s treatment of system pro- curements, where the FTA Buy America provision is evaluated at the system level, but FTA regulations de- fine systems to be collections of related products, “which are intended to contribute together to a clearly defined function.” 49 C.F.R. § 661.3 (2013). 146 FRA Buy America FAQ, supra note 52, at 4; FRA Buy America Webinar, supra note 60, at 11; see also 49 C.F.R. § 661.11 (2013). 147 FRA Buy America FAQ, supra note 52, at 4; FRA Buy America Webinar, supra note 60, at 11. 148 49 U.S.C. § 5323(j)(2)(C) (2013); 49 C.F.R. § 661.11 (2013). 149 FRA Buy America FAQ, supra note 52, at 5; see also 49 C.F.R. § 661.3 (2013). Buy America provision, rather than under the FTA Buy America provision, and to achieve 100 percent domestic content. However, unlike FTA, FRA considers rolling stock to consist of both components and “sys- tems.”150 FRA has provided examples of what it considers to be “systems” of rail cars: these in- clude “trucks, car shells, main transformers, inte- rior linings, HVAC.”151 FRA requires all compo- nents of rolling stock, as well as all components of its systems, to be domestic. FRA has provided a few examples of what it considers to be compo- nents of systems: e.g., wheels, axles, axle drivers, and shock absorbers are all considered compo- nents of truck systems.152 Under the FRA interim guidance, both the components of the rolling stock and the components of its systems must be do- mestic for the rolling stock end product to comply with the FRA Buy America provision.153 FRA states that it “has developed various lists of items FRA considers to be components of rolling stock. …Grantees should consult with FRA before issu- ing procurement notices for rolling stock.”154 In part this is to to obtain clarification on which items FRA will consider to be components (which must be domestic), subcomponents (which need not be domestic), or components of systems (which must be domestic). Likewise, with manufactured products other than rolling stock, identifying the components of the manufactured product can be less than straightforward, owing in part to the subjective nature of the distinction between “substantial transformation” and “assembly.” FRA’s interim guidance provides one example where the manu- factured product is a railroad turnout.155 To com- ply with the FRA Buy America provision, the turnout must be manufactured in the United States from domestic components. FRA lists the 150 FRA Buy America Webinar, supra note 60, at 11, 16, 18. 151 Id. at 16. In the FTA Buy America provision, these same items are considered rolling stock compo- nents. 49 C.F.R. § 661.11, App. C (2013). 152 FRA Buy America Webinar, supra note 60, at 17. In the FTA Buy America provision, most of these same items would probably be considered subcomponents of the rolling stock, since FTA considers trucks to be com- ponents of rolling stock rather than systems. 49 C.F.R. § 661.11, App. C (2013). 153 FRA Buy America Webinar, supra note 60, at 17– 18. 154 FRA Buy America FAQ, supra note 52, at 4. 155 FRA Buy America Webinar, supra note 60, at 14.

20 components of the turnout, which include ties, switch rails, plates, clips, “frogs” (often manga- nese castings), and switches.156 Therefore, FRA has determined that the process by which these components are combined to produce a turnout is “substantial transformation,” not “mere assem- bly.” Although “mere assembly” is insufficient to create a manufactured product for purposes of the FRA Buy America provision, assembly may ac- count for most of the manufacturing process. “Substantial transformation” can be achieved by as little as “welding, soldering,” or “permanent adhesive joining” of components, or (in the case of electrical and mechanical equipment) the mere “collection, interconnection, and testing” of com- ponents.157 Likewise, FRA says that the turnout subcom- ponents (e.g., the “vee point” subcomponent of the frog) “[n]eed not be of U.S. steel.”158 This defini- tion may diverge from the treatment of turnout components by FTA and FHWA, as shown by case studies herein.159 In particular, the “frog” or man- ganese casting would typically be considered a “predominantly steel” product under the FHWA Buy America provision, which must be manufac- tured entirely from domestic steel.160 The “vee point” might not qualify as a “miscellaneous steel” subcomponent (like washers or screws), which could be disregarded under the FHWA Buy Amer- ica provision. Likewise, FTA has stated that its “requirements are clear: ‘all steel and iron manu- facturing processes must take place in the United States,’ whether the item is an end product, a component, or a subcomponent.”161 In short, there are subtle but potentially criti- cal distinctions between the FRA Buy America provision and other transportation grant Buy America provisions when it comes to railroad de- velopment projects and rolling stock procure- ments. In the absence of formal regulations or guidance covering a specific situation, FRA grant recipients should consult with FRA prior to issu- ing a solicitation, to confirm what is required to comply with the FRA Buy America provision. Some FRA waiver decisions are available on the agency’s Buy America Web site and may provide 156 Id. 157 FRA Buy America FAQ, supra note 52, at 4. 158 FRA Buy America Webinar, supra note 60, at 15. 159 See infra § III.B.4.a. 160 23 C.F.R. § 635.410(b)(1) (2013). 161 Buy America Requirements—End Product Analy- sis and Waiver Procedures, 71 Fed. Reg. 69,412, 69,419 (Nov. 30, 2006) (quoting 49 C.F.R. § 661.5(b)). illustrative guidance for a given situation. Some of the key FRA waiver decisions are discussed in the following section. 4. Waiver Case Studies a. Steel Roof Tiles.—The first known request for a waiver from the FRA Buy America provision was made by the Oregon Department of Transpor- tation (ODOT) to purchase foreign steel roof tiles. ODOT wanted to use a portion of the grant funds it received from FRA under the ARRA stimulus bill “to complete the rehabilitation of the historic Union Station roof in Portland, Oregon.”162 ODOT also obtained grant funds from FHWA under ARRA for the Union Station rehabilitation pro- ject.163 ODOT reported a price of approximately $1 million to purchase the tiles from a foreign manu- facturer.164 ODOT reported that it identified one domestic firm capable of manufacturing the tiles, but that firm had declined to bid on the work.165 Further, ODOT estimated that it could have the tiles custom manufactured in the United States for $1.5 million.166 Although this was 50 percent greater than the cost of foreign tiles, it did not trigger the Price Differential waiver under either the FRA or FHWA Buy America provisions be- cause it would not increase the cost of the total rehabilitation project by 25 percent to custom manufacture the tiles in the United States. There- fore, ODOT sought a Nonavailability waiver from both the FRA and FHWA Buy America provi- sions.167 Pursuant to the FHWA Buy America provision, FHWA conducted its own investigation to search for domestic sources of the steel roof tiles and 162 Notice of Buy America Waiver Request by Oregon Department of Transportation for Steel Roof Tiles To Be Used in Union Station Roof Rehabilitation, 75 Fed. Reg. 28,316 (May 20, 2010). 163 Buy America Waiver Notification, 74 Fed. Reg. 63,816 (Dec. 4, 2009). 164 Notice of Buy America Waiver Request by Oregon Department of Transportation for Steel Roof Tiles To Be Used in Union Station Roof Rehabilitation, 75 Fed. Reg. 28,316, 28,317 (May 20, 2010). 165 Id. 166 Id. 167 Because the tiles would be installed at the project site, for purposes of both Buy America provisions the individual tiles were evaluated as the end product, rather than as a component of a manufactured roof sys- tem.

21 found none.168 Then, pursuant to the informal no- tice-and-comment requirements of the FHWA Buy America provision, on October 22, 2009, FHWA posted on its Web site a notice of intent to grant a waiver for the foreign steel roof tiles and provided 15 days for public comment.169 FHWA stated that it “did not receive any substantive comments” in- dicating that the tiles were available domesti- cally.170 On December 4, 2009, FHWA published a notice in the Federal Register that it intended to grant ODOT’s Nonavailability waiver and invited public comment for 15 additional days.171 Five months after FHWA granted its waiver, on May 20, 2010, FRA published a notice in the Federal Register that ODOT had also requested a Nonavailability waiver from the FRA Buy Amer- ica provision.172 FRA is not obligated under the Buy America provision to publish waiver requests in the Federal Register for public comment, but did so in this case “in order to completely under- stand the facts surrounding ODOT’s request.”173 FRA received one comment in response to the no- tice, a joint response from railroad labor unions formally opposing the waiver request.174 While the unions did not dispute that the particular steel roofing tiles were not available domestically, they argued that ODOT should not be allowed to cir- cumvent the FRA Buy America provision based on an architectural design decision to specify roofing tiles that are available only from foreign manu- facturers. Instead, the unions argued that ODOT 168 Notice of Buy America Waiver Request by Oregon Department of Transportation for Steel Roof Tiles To Be Used in Union Station Roof Rehabilitation, 75 Fed. Reg. 28,316, 28,317 (May 20, 2010); Buy America Waiver Notification, 74 Fed. Reg. 63,816, 63,817 (Dec. 4, 2009). 169 Buy America Waiver Notification, 74 Fed. Reg. 63,816, 63,817 (Dec. 4, 2009). 170 Notice of Buy America Waiver Request by Oregon Department of Transportation for Steel Roof Tiles To Be Used in Union Station Roof Rehabilitation, 75 Fed. Reg. 28,316, 28,317 (May 20, 2010). 171 Buy America Waiver Notification, 74 Fed. Reg. 63,816, 63,817 (Dec. 4, 2009). 172 Notice of Buy America Waiver Request by Oregon Department of Transportation for Steel Roof Tiles To Be Used in Union Station Roof Rehabilitation, 75 Fed. Reg. 28,316, 28,317 (May 20, 2010). 173 Id. 174 Comments, United Transportation Union and Brotherhood of Locomotive Engineers and Trainmen, Docket No. FRA-2010-0085 (June 3, 2010), available at http://www.regulations.gov/#!documentDetail;D=FRA- 2010-0085-0002. should be required to redesign the roof “to utilize the large variety of roofing materials that do com- ply with the funding restrictions.”175 To date, FRA has not published a final deter- mination on this waiver request. Under the FRA Buy America provision, in order to grant the waiver, FRA was required to publish such finding in the Federal Register, along with a “detailed written justification” for granting the waiver.176 The failure to make such a determination was effectively a denial of ODOT’s waiver request, de- spite the fact that FHWA had already granted a waiver of the nearly identical FHWA Buy Amer- ica requirement for the same steel roofing tiles. This means that for the project to comply with the FRA Buy America provision, ODOT would either have to change its design to use domestic roofing materials or elect not to use FRA grant funds in the project. This illustrates that when a project is funded by multiple sources, each with its own Buy Amer- ica provision, the grant recipient must take steps to comply with all applicable Buy America provi- sions, including obtaining waivers from multiple federal grant agencies if necessary. Even where the statutory waiver requirements appear similar (or identical), agencies differ in their procedures and standards, so a waiver from one agency is no guarantee that another agency will grant a waiver. FRA waivers are rare. b. Steel Nuts.—In July 2010, FRA received a re- quest from the Northern New England Passenger Rail Authority (NNEPRA) to waive the FRA Buy America provision to allow NNEPRA to purchase 3,340 square steel nuts with a nominal diameter of 1 1/8 in.177 The nuts were to be used in combi- nation with compatible track bolts and washers in a construction project to extend an Amtrak rail line to add service between Portland, Maine, and Brunswick, Maine.178 The project received $35 million in grant funds from FRA through ARRA, making the FRA Buy America provision applica- ble. The nuts could be obtained from a foreign source at $0.75 apiece.179 The nuts were to be used 175 Id. 176 49 U.S.C. § 24405(a)(4) (2013). 177 Notice of Buy America Waiver Request by North- ern New England Passenger Rail Authority To Pur- chase 3,340 AREMA Specified Carbon Steel Standard 1 1⁄8 Nominal Diameter Nuts, 75 Fed. Reg. 45,197 (Aug. 2, 2010). 178 Id. at 45,198. 179 Id.

22 in combination with 3,340 compatible track bolts and washers that were domestically manufac- tured. Furthermore, all but 80 of the 3,340 bolt- and-nut combinations were eventually to be re- moved and replaced with joint welds, so that the cost of foreign nuts in the final project was esti- mated to be only $60.180 However, under the FRA Buy America provision, there is no Small Pur- chase exception for a de minimis amount of for- eign goods to be left in the project, so NNEPRA had to seek a waiver.181 Although not required by the FRA Buy Amer- ica provision, FRA published the waiver request in the Federal Register in August 2010 to solicit public comment.182 Comments received were gen- erally opposed to the request. A number of labor unions opposed the request on the basis that there were numerous domestic manufacturers of 1 1/8- in. diameter steel nuts compatible with the do- mestically manufactured track bolts.183 One labor union suggested that the problem was with the project specifications, which required nuts that were only available from foreign suppliers but could have been written to permit domestic 1 1/8- in. diameter steel nuts.184 A manufacturers trade 180 Id. 181 Under the FHWA Buy America provision, for ex- ample, the nuts could have been disregarded as a “small purchase” costing less than 0.1 percent of the contract value. 23 C.F.R. § 635.410(b)(4) (2013). Alternately, under the FHWA Buy America provisions, the nuts might be considered “miscellaneous steel” products that need not be domestic. See infra notes 363, 447–448, and accompanying text. In this case, presumably, since the nuts were to be installed at the project site and not de- livered to the site as a component or subcomponent of a manufactured product, the nuts themselves were treated as an end product that had to comply with the FRA Buy America provision. 182 Notice of Buy America Waiver Request by North- ern New England Passenger Rail Authority To Pur- chase 3,340 AREMA Specified Carbon Steel Standard 1 1⁄8 Nominal Diameter Nuts, 75 Fed. Reg. 45,197 (Aug. 2, 2010). 183 Comments, Brotherhood of Railroad Signalmen, Docket No. FRA-2010-0122 (Aug. 24, 2010), available at http://www.regulations.gov/#!documentDetail;D=FRA- 2010-0122-0004; Comments, Brotherhood of Mainte- nance of Way Employees Division (BMWED) of the Teamster Rail Conference, Docket No. FRA-2010-0122 (Aug. 24, 2010), available at http://www.regulations. gov/#!documentDetail;D=FRA-2010-0122-0003. 184 Comments, United Transportation Union and Brotherhood of Locomotive Engineers and Trainmen, Docket No. FRA-2010-0122 (Aug. 24, 2010), available at http://www.regulations.gov/#!documentDetail;D=FRA- association responded with a list of domestic manufacturers who could manufacture nuts satis- fying the specifications.185 Based on this informa- tion, FRA required NNEPRA to inquire of domes- tic manufacturers.186 The investigation confirmed that existing nuts manufactured in the United States were incompatible with NNEPRA’s instal- lation and maintenance equipment and thus did not satisfy the project specifications. Various do- mestic manufacturers indicated to NNEPRA that they could manufacture the square steel 1 1/8-in. diameter nuts satisfying the specifications. How- ever, the estimated cost ranged from $16,000 to $60,000 (as opposed to the foreign bid of $2,500), and the estimated time of delivery ranged from 10 to 18 weeks after award.187 FRA determined that these domestic estimates did not indicate that the goods were available from domestic sources in suf- ficient quantities. FRA published a notice of in- tent to grant a Nonavailability waiver in Novem- ber 2010188 and granted the waiver in December 2010189 (5 months after receiving the waiver re- quest). This illustrates FRA’s flexibility in granting Nonavailability waiver requests in the absence of any regulations implementing the FRA Buy America provision. First, although the lowest do- mestic offer for the nuts was 6.5 times the foreign bid, this purchase did not qualify for a Price Dif- ferential waiver because the purchase of domestic nuts would not increase the cost of the entire pro- ject by 25 percent. Under most transportation grant Buy America provisions, therefore, the higher price of domestic goods would have been irrelevant, at least for purposes of a Nonavailabil- ity waiver. However, FRA considered the in- creased cost as one factor that led it to conclude 2010-0122-0005 (“If the design of the track bolt requires foreign made nuts, then we suggest a design change.”). 185 Comments, Alliance for American Manufacturing, Docket No. FRA-2010-0122 (Aug. 24, 2010), available at http://www.regulations.gov/#!documentDetail;D=FRA- 2010-0122-0006. 186 Notice of Intent To Grant Buy America Waiver to Northern New England Passenger Rail Authority To Purchase 3,340 AREMA Specified Carbon Steel Stan- dard 1 1⁄8 Nominal Diameter Nuts, 75 Fed. Reg. 74,132, 74,133 (Nov. 30, 2010). 187 Id. 188 Id. at 74,134. 189 Letter from Karen Rae, FRA Deputy Administra- tor, to Marina Douglass, NNEPRA, regarding Request for Waiver of Buy America Requirement (Dec. 16, 2010), available at https://www.fra.dot.gov/eLib/Details/ L04369.

23 that domestic goods were not reasonably avail- able.190 Further, under the FRA Buy America pro- vision, FRA has the statutory authority to grant a Nonavailability waiver based on unreasonable delivery time only for rolling stock, not for other manufactured products or construction materials. In this case, however, FRA considered the “unrea- sonable delivery time” to deliver domestic nuts as a second factor in favor of determining that do- mestic nuts were not reasonably available.191 As will be seen, FRA has continued to consider the additional cost and delivery time of domestic goods as the primary factors in favor of determin- ing that domestic goods are not reasonably avail- able. c. Concrete Rail Ties.—In late 2011, the Wash- ington State Department of Transportation (WSDOT) and Burlington Northern Santa Fe (BNSF) Railway approached FRA concerning their plan to use a concrete rail tie with foreign components in the Northwest Corridor project between Eugene, Oregon, and Vancouver, British Columbia.192 At that time, the plan was to fund the entire $750 million project with ARRA grant funds and FRA HSIPR grant funds.193 However, the plan to use these concrete ties originated in 2008 before any federal grant funds were avail- able. Although the concrete ties were manufac- 190 Notice of Intent To Grant Buy America Waiver to Northern New England Passenger Rail Authority To Purchase 3,340 AREMA Specified Carbon Steel Stan- dard 1 1⁄8 Nominal Diameter Nuts, 75 Fed. Reg. 74,132, 74,133–34 (Nov. 30, 2010) (“NNEPRA concluded that…a cost of approximately $14,000 more than the lowest foreign bidder…did not mean that domestic track nuts are ‘reasonably available’ and the waiver should still be granted.”). 191 Id. at 74,134 (“FRA agrees with NNEPRA in that custom made fabricated track nuts that cannot be de- livered for 10–16 weeks are not ‘reasonably available’”). 192 Letter from Joseph C. Szabo, FRA Administrator, to David Smelzer, Washington State Department of Transportation (WSDOT), regarding Buy America Waiver Request Vossloh Ties Decision (June 19, 2012), available at https://www.fra.dot.gov/eLib/Details/ L04371. 193 Letter from Robert J. Boileau, Burlington North- ern Santa Fe (BNSF) Railway, to Joseph C. Szabo, FRA Administrator, regarding BNSF Railway Company Re- quest for Waiver from FRA's Buy America Require- ments for Vossloh 101-LV Concrete Ties (Mar. 19, 2012), available at http://www.regulations.gov/ #!documentDetail;D=FRA-2012-0037-0001. WSDOT would be the FRA grant recipient. BNSF was involved because it owned the infrastructure on which the Northwest Corridor improvements would be made. Id. tured in the United States by Vossloh, they in- cluded German-manufactured fasteners known as “tension clamps” (along with associated dowel in- serts) that would hold the rail to the concrete tie. According to BNSF, the foreign components con- stituted only 11 percent of the cost of the Vossloh concrete tie and only 0.15 percent of the cost of the Northwest Corridor project.194 In March 2012, BNSF submitted a formal re- quest for a Nonavailability waiver from the FRA Buy America provision to allow the purchase of Vossloh concrete ties by state DOTs on a number of rail development projects that would improve property owned by BNSF, including WSDOT’s Northwest Corridor project.195 BNSF said that there were no domestic manufacturers of the Vossloh ties’ foreign components, and that alter- native concrete ties from other domestic manufac- turers were incompatible with BNSF’s existing installation and maintenance equipment. In April 2012, FRA published notice of the waiver request in the Federal Register for public comment.196 No comments were received. In June 2012, FRA granted the Nonavailability waiver, finding that comparable domestic products were “not pro- duced in a sufficient and reasonably available amount.”197 However, the waiver was not prece- dential, applying only to the four state DOT rail improvement projects named in BNSF’s re- quest.198 It was “conditioned on BNSF's good faith efforts” to work with FRA, Vossloh, and NIST-MEP “to explore the feasibility” of manufac- turing the foreign components in the United States.199 Future waiver requests for the products would not be granted without such a showing. Shortly thereafter, Vossloh signaled that it was “presently taking steps to meet all the Buy Amer- 194 Id. 195 Id. 196 Notice of the Buy America Waiver Request for Vossloh 101–LV Concrete Ties, 77 Fed. Reg. 21,620 (Apr. 10, 2012). 197 Letter from Joseph C. Szabo, FRA Administrator, to David Smelzer, WSDOT, regarding Buy America Waiver Request Vossloh Ties Decision (June 19, 2012), available at https://www.fra.dot.gov/eLib/Details/ L04371; see also Notice of Decision to Grant Buy Amer- ica Waiver to Washington Department of Transporta- tion to Purchase Vossloh 101–LV Concrete Rail Ties, 77 Fed. Reg. 38,388, 38,390 (June 27, 2012). 198 Id. 199 Id.

24 ica requirements” and that it was getting “closer to meeting the Buy America requirements.”200 FRA’s processing of the Vossloh concrete tie waiver (roughly 2 months from formal waiver re- quest to final decision) took less processing time than the NNEPRA request 2 years earlier. How- ever, in testimony before the House Committee on Transportation and Infrastructure in December 2012, a WSDOT official said that “we have had some challenges in trying to get waivers for as much as 5 months on a clip for a rail tie that probably shouldn’t have taken that long.”201 Fur- ther, “FRA's inconsistent guidance on the ap- proval process almost delayed construction for a year as we nearly missed the construction season window for BNSF to schedule the track laying equipment.”202 In addition to the lack of formal published guidance from FRA, the WSDOT official said that the 100 percent domestic content crite- ria for manufactured products under the FRA Buy America provision and FRA’s “lack of Buy Amer- ica waivers” are a hindrance to rail develop- ment.203 d. Incremental Train Control System.—In Sep- tember 2012, the Illinois Department of Transpor- tation (IDOT) requested a waiver from the FRA Buy America provision to allow IDOT to purchase an Incremental Train Control System (ITCS) for its FRA-funded project to implement high-speed rail from Chicago, Illinois, to St. Louis, Mis- souri.204 The ITCS would provide continuous automated communications between highway–rail 200 Jennifer Nunez, Fascinating Fasteners for Keep- ing Track Tight: Small in Size, Fasteners Keep a Tight Grip on Track, RAILWAY TRACK & STRUCTURES (July 2012), available at 2012 WLNR 16167327. 201 An Update on the High Speed and Intercity Pas- senger Rail Program: Mistakes Made and Lessons Learned: Hearing Before the H. Comm. on Transporta- tion and Infrastructure, 112th Cong. (2012), available at 2012 WLNR 25961956 (statement of Paula Hammond, WSDOT Secretary); see also id. (“[E]arlier this year we worked with BNSF to submit a Buy Amer- ica waiver for two small parts used to attach rail to con- crete ties at a cost of $6 each…. Unfortunately the proc- ess to obtain the needed waiver took five months and required a justification of each individual part.”). 202 Id. 203 Id. 204 Letter from Joseph E. Shacter, IDOT, to Joseph C. Szabo, FRA Administrator, regarding the Illinois Department of Transportation’s Request for a Waiver from FRA’s Buy America Requirements (Sep. 26, 2012), available at http://www.fra.dot.gov/Elib/Document/ 2594. crossings and high-speed locomotives to activate crossings and ensure safe passage of trains. The ITCS was a system comprised of three “end prod- ucts,” two of which contained foreign compo- nents.205 Under FRA’s treatment of system pro- curements, the FRA Buy America provision is evaluated independently for each end product in the system.206 One of the ITCS end products, the on-board locomotive equipment, included an Ethernet cable and antenna that were not manu- factured domestically, representing about 2 per- cent of the cost of the on-board equipment.207 An- other component, the “departure equipment” located at Union Station in St. Louis, which was used to upload new databases to the on-board equipment and download log files, contained a foreign-manufactured router comprising about 5 percent of the cost of the departure equipment.208 The equipment was already installed and under- going testing at the time of IDOT’s waiver re- quest. Unlike its earlier waiver requests, FRA did not publish this request in the Federal Register for public notice-and-comment. Instead, in February 2013, 5 months after receiving the waiver request, FRA notifed IDOT that it intended to grant the Nonavailability waiver request.209 As with the NNEPRA waiver request, FRA expressly consid- ered the “costs in both time and money” as pri- mary factors in determining that the foreign com- ponents were not “reasonably available.”210 With respect to cost, IDOT estimated that only $20,000 of the $2.5 million ITCS cost was for foreign com- ponents.211 Further, the cost was negligible in comparison to the total $1.142 billion FRA grant for the Chicago-to-St. Louis corridor improve- ments.212 The ITCS manufacturer estimated that 205 Id. 206 See supra notes 143–144 and accompanying text. Contrast this with FTA’s approach, where FTA treats a train communication system as a typical rail rolling stock end product. 49 C.F.R. § 661.3, App. A(1) (2013). ITCS equipment treated as an end product by FRA might only be treated as a component of the ITCS sys- tem by FTA. 207 Letter from Joseph E. Shacter, supra note 204. 208 Id. 209 Letter from Joseph C. Szabo, FRA Administrator, to Joseph Shacter, IDOT, regarding Request for Waiver of Buy America Requirement (Feb. 12, 2013), available at http://www.fra.dot.gov/eLib/details/L04519. 210 Id. 211 Letter from Joseph E. Shacter, supra note 204. 212 Letter from Joseph C. Szabo, supra note 209.

25 it would cost an additional $1 million and 6 months to manufacture domestic components to replace the foreign components of the ITCS.213 Al- though this would increase the cost of the ITCS by 40 percent, IDOT would not qualify for the 25 per- cent Price Differential waiver because the ITCS cost was a small part of the overall Chicago-to- St. Louis improvement project. Further, it is un- clear whether the 6-month delay would qualify for the “unreasonable delivery time” Nonavailability waiver for rolling stock, since it is unclear whether the ITCS would qualify as rolling stock under the FRA Buy America provision.214 Regard- less, although it appeared that domestic compo- nents could have been made available, as with the NNEPRA waiver request, FRA considered the ad- ditional cost and delivery time to obtain domestic ITCS components as primary factors in determin- ing that comparable domestic goods were not rea- sonably available, thus justifying granting a Nonavailability waiver.215 As with the BNSF/WSDOT waiver for rail ties, FRA’s waiver for the ITCS was not precedential (applicable only to the Chicago-to-St. Louis pro- ject), and it was conditional. Future waivers for the ITCS would be conditioned on the manufac- turer showing “significant good faith efforts to secure all domestic components for the ITCS.”216 FRA encouraged the ITCS manufacturer to work with NIST-MEP (as Vossloh was doing with re- spect to the rail ties) to find ways to increase the domestic content of the ITCS.217 In March 2013, FRA published a notice of its intent to grant the waiver request in the Federal Register218 and on its Web site, soliciting public comment. Although the waiver had already been 213 Id. 214 FTA, on the other hand, has determined that “communication equipment” is a component of rail roll- ing stock for purposes of the FTA Buy America provi- sion. 49 C.F.R. § 661.11, App. C (2013). However, the FTA Buy America provision does not include the “un- reasonable delivery time” Nonavailability waiver for rolling stock. 215 Letter from Joseph C. Szabo, supra note 209 (“The FRA believes that such costs in both time and money make the components not ‘reasonably available’ and, therefore, a waiver is appropriate.”). 216 Id. 217 Id. 218 Notice of Intent to Grant Buy America Waiver to Illinois Department of Transportation to Use Three Non-Domestic Component Parts, in the Incremental Train Control System, 78 Fed. Reg. 14,152 (Mar. 4, 2013). granted, it could not become effective until publi- cation in the Federal Register,219 according to the statutory text of the FRA Buy America provision. This was a rare instance in which FRA did not provide any public notice-and-comment opportu- nity before making its waiver determination. With subsequent waiver requests, FRA has used its Web site (rather than the Federal Register) to pro- vide an informal public notice-and-comment op- portunity for the waiver requests, and then used the Federal Register only after deciding to grant the waiver request to satisfy its formal notice- and-comment requirement. e. Amtrak Waiver Request—Turnout Component Parts.—In August 2012, FRA received a waiver request from Amtrak related to an FRA grant- funded project for Amtrak to improve the ap- proach tracks at New York City’s Penn Station to support high-speed rail.220 Amtrak requested the waiver from the FRA Buy America provision to allow it to purchase turnouts manufactured by Nortrak in the United States that included for- eign components. Specifically, Amtrak stated that the switch point rail was rolled in Austria, roller assemblies and associated plates were manufac- tured in Switzerland, and the vee points were forged and machined in Germany.221 In September 2012, FRA published this waiver request on its Buy America Web site for a 15-day informal no- tice-and-comment period. Although all the public comments appeared to oppose the waiver request, none identified sources of comparable domestic components.222 FRA asked NIST-MEP to try to identify domestic sources. NIST-MEP identified domestic manufacturers of items similar to the Nortrak switch point rail, roller assemblies, and plates, but those domestic sources were not presently manufacturing items that matched Amtrak’s design specifications for the project.223 Although it appears the domestic 219 49 U.S.C. § 24405(a)(4) (2013). 220 Letter from Jeff Martin, Amtrak Chief Logistics Officer, to Joseph C. Szabo, FRA Administrator, regard- ing the National Railroad Passenger Corporation ("Am- trak") Request for a Waiver from the FRA's Buy Amer- ica Requirements to Purchase Nortrak Turnouts (Aug. 8, 2012). 221 Id. 222 Letter from Joseph C. Szabo, FRA Administrator, to Jeff Martin, Amtrak Chief Logistics Officer, regard- ing Request for Waiver of Buy America Requirement (Apr. 23, 2013), available at http://www.fra.dot.gov/eLib /details/L04520. 223 Id.

26 sources could manufacture the products, it would be more expensive than purchasing the compo- nents from the foreign manufacturers and proba- bly more time-consuming. For example, one po- tential domestic source said that it would take 6 months to 1 year to manufacture the switch point rail.224 In April 2013, more than 8 months after Amtrak’s waiver request, FRA published in the Federal Register notice of its intent to grant Nonavailability waivers for the switch point rails, roller assemblies, and plates.225 (FRA noted that it considers the vee point to be a subcomponent of the frog, which is a component of the turnout, and that FRA does not require a waiver for subcompo- nents such as the vee point, as long as the frog itself is manufactured in the United States.226) FRA granted the Nonavailability waiver for the switch point rails, roller assemblies, and plates because, although domestic manufacturers might be able to provide them, “it would happen too late to meet the tight project deadline.”227 This waiver case study illustrates a number of points. First, FRA’s notice-and-comment waiver process has evolved to mirror the process used by FHWA, where waiver requests are published for informal notice-and-comment on the agency Web site rather than the Federal Register; then only the decision to grant a waiver is published in the Federal Register for an additional notice-and- comment period.228 Second, although Amtrak is subject to its own Buy America provision, it must comply with the FRA Buy America provision when it is working on an FRA grant-funded pro- ject. Most importantly, FRA’s Nonavailability waiver for Nortrak turnouts (like its similar Nonavailability waivers for the ITCS, Vossloh concrete ties, and NNEPRA steel nuts) illustrates the unique nature of the waiver. FRA considers the higher cost of domestic goods to be a primary factor in favor of granting a Nonavailability waiver—in most other transportation grant Buy America provisions, the cost of domestic goods is irrelevant for purposes of a Nonavailability 224 Notice of Intent to Grant Buy America Waiver to Amtrak to Use Three Non-Domestic Component Parts in No. 32.75 136RE Special Turnouts Manufactured in the U.S. by voestalpine Nortrak, Inc., 78 Fed. Reg. 23,631, 23,633 (Apr. 19, 2013). 225 Id. 226 Id. at 23,632. 227 Id. at 23,633. 228 See infra § III.B.1.c. waiver. Also, although the FRA Buy America pro- vision only includes the “unreasonable delivery time” justification for granting a Nonavailability waiver for rolling stock, FRA considers the addi- tional time to deliver domestic manufactured products to be a primary factor in favor of grant- ing a Nonavailability waiver for manufactured products other than rolling stock. This is true even when the delay caused by domestic manufac- turing is on the same order of magnitude, or even shorter than, the time it takes FRA to make a de- cision on the waiver request. By allowing rela- tively moderate increases in price and delivery time for domestic goods to weigh strongly in favor of finding Nonavailability, FRA has adopted a Nonavailability standard different from other transportation grant programs (which often re- quire a showing that the products are actually not available domestically). On the other hand, these case studies demon- strate that FRA does not grant Nonavailability waiver requests lightly, regularly engaging NIST-MEP to seek out domestic sources. Fur- thermore, after spending several months deter- mining that a Nonavailability waiver is war- ranted for a specific product, FRA does not make that waiver effective for future purchases of the same product. FRA’s Nonavailability waivers are typically conditioned on efforts by the manufac- turer to increase the domestic content of its product (such efforts to include working directly with NIST-MEP) in order for future waiver requests to be considered. This is a unique prac- tice by FRA that is not typical of the other trans- portation grant agencies, which are addressed in Section III. B. Amtrak Buy America Provision 1. Statutory Language—49 U.S.C. § 24305(f) a. Coverage and Applicability.—Since 1978, Amtrak has been subject to a statutory domestic preference (the “Amtrak Buy America provi- sion”),229 which applies to Amtrak’s direct pur- chases using its federal funds. Under the Amtrak Buy America provision, Amtrak is allowed to pur- chase only: 229 49 U.S.C. § 24305(f) (2013).

27 • Domestic unmanufactured or “raw” goods (those “mined or produced in the United States”),230 and • Domestic manufactured goods (those “manu- factured in the United States substantially from” other domestic goods).231 Since Amtrak is not a federal government agency, it is not in a position to issue federal regu- lations governing the Amtrak Buy America provi- sion. Amtrak shares responsibility with FRA for administering the Amtrak Buy America provision. FRA has recently explained, “Generally, Amtrak administers its own domestic buying preference program, except that interpretations of applicabil- ity are decided by FRA’s Chief Counsel and any waivers are decided by the FRA Administrator.”232 As will be discussed further in this digest, FRA has interpreted the Amtrak Buy America provi- sion to apply only “when Amtrak is spending funds from its own capital or operating grant”233— funds appropriated by Congress specifically for Amtrak. When Amtrak receives funds from other sources (e.g., where Amtrak receives HSIPR grant funds from FRA, either as the FRA grant recipi- ent or as a contractor for the FRA grant recipi- ent), then the Amtrak Buy America provision does not apply, but other Buy America provisions may apply.234 The Amtrak Buy America provision mirrors the language of the BAA, in that it establishes a do- mestic preference for all manufactured goods and unmanufactured goods. Therefore, it potentially has much broader coverage than the other Buy America provisions applicable to rail procure- ments (which are generally limited to steel, iron, and manufactured products). Under the Amtrak Buy America provision, all construction materials are potentially covered, including cement prod- ucts, wood products, and even raw materials like sand and aggregate,235 not just steel. 230 49 U.S.C. § 24305(f)(2)(A) (2013). 231 49 U.S.C. § 24305(f)(2)(B) (2013). 232 FRA Buy America FAQ, supra note 52, at 11. 233 Id.; see also FRA Buy America Webinar, supra note 60, at 9 (stating that the Amtrak Buy America provision “[a]pplies to Amtrak capital grants”). 234 FRA Buy America FAQ, supra note 52, at 10; see also FRA Buy America Webinar, supra note 60, at 9 (stating that the FRA Buy America provision “applies when Amtrak is operating under a PRIIA-authorized grant or performing a contract for another grantee”). 235 See 124 CONG. REC. H5,900 (June 21, 1978) (statement of Rep. Mikulski) (“It would mandate that Likewise, the statutory exceptions to the Am- trak Buy America provision mirror those in the BAA, and are distinct from those in other trans- portation grant Buy America provisions (which tend to provide objective, quantitative criteria for determining whether a waiver is warranted). Therefore, even though the default coverage of the Amtrak Buy America provision is very broad, there may be more opportunities to obtain a waiver or exception from Buy America require- ments in the case of direct procurements by Am- trak. b. Exceptions and Waivers.— • Small Purchase The Amtrak Buy America provision applies only to Amtrak purchases costing at least $1 mil- lion.236 Therefore, while the Amtrak Buy America provision applies to most significant construction projects or multivehicle rolling stock procure- ments, many large equipment procurements by Amtrak are exempt simply because the equipment costs less than $1 million. The $1 million thresh- old was established by Congress in 1978 because it was understood that Amtrak regularly pur- chased expensive equipment (“costing considera- bly more than $100,000”) that was not manufac- tured domestically.237 When the procurement is less than $1 million, the Amtrak Buy America provision does not apply, so no waiver is required. The $1 million cost threshold in the Amtrak Buy America provision applies to the purchase, not necessarily the project.238 In situations where it is difficult or expensive to obtain comparable domes- tic goods, Amtrak might be tempted to segment a large procurement into related smaller purchases of foreign goods that are below the $1 million threshold, in order to avoid application of the Am- trak Buy America provision. In 2012, the Senate Amtrak must buy unmanufactured articles, such as stone, types of ore, mined or produced in the United States.”). 236 49 U.S.C. § 24305(f)(3) (2013). 237 124 CONG. REC. H10,131 (Sep. 19, 1978) (state- ment of Rep. Rooney). The version of the Amtrak Buy America provision that was originally passed by the House would have applied to any purchase of at least $100,000. See H.R. REP. NO. 95-1182, at 5, 15, 17 (1978). 238 However, the version of the Amtrak Buy America provision that was originally passed by the Senate would have applied to any expenditure representing “any part” of a project as long as the total grant funds for the project exceeded $1 million. See 124 CONG. REC. S7,253 (May 10, 1978).

28 passed a measure that would apply the Amtrak Buy America provision across multiple related contracts to prevent such segmentation.239 Al- though not enacted into law, Congress or FRA may nevertheless consider segmentation to violate the spirit, if not the text, of the Amtrak Buy America provision. When faced with the need to purchase foreign goods costing $1 million or more, Amtrak may consider whether any of the other exceptions are applicable before segmenting the procurement into smaller purchases. • Domestic Content With respect to manufactured products, the Amtrak Buy America provision requires Amtrak to purchase only those that are “manufactured in the United States substantially from” domestic components.240 The statute does not define what it means to be “substantially” domestic, and there are no regulations implementing the statute. However, the statutory language closely tracks the BAA, which has been interpreted to require 50 percent domestic content (based on cost of compo- nents), plus final assembly of the end product in the United States.241 The legislative history of the Amtrak Buy America provision indicates that Congress understood in 1978 that it was not establishing a specific numeric domestic content requirement (much less a strict 100 percent domestic content requirement) for Amtrak pro- curements.242 Furthermore, in 1993, Congress re- jected an attempt to establish an 80 percent do- mestic content “goal” for Amtrak, instead directing Amtrak to implement the Amtrak Buy America provision “consistent with the provisions 239 S. 1813, 112th Cong. § 35210 (2012) (proposing to make the Amtrak Buy America provision applicable “to all contracts eligible for Federal funding for a project…, regardless of the funding source of such contracts, if at least 1 contract for the project is funded with amounts made available to carry out this chapter.”). 240 49 U.S.C. § 24305(f)(2)(B) (2013). 241 48 C.F.R. § 25.003 (2013) (defining “domestic end product” to include “[a]n end product manufactured in the United States, if…[t]he cost of its components mined, produced, or manufactured in the United States exceeds 50 percent of the cost of all its components.”). 242 124 CONG. REC. H6,005 (June 23, 1978) (state- ment of Rep. Conte) (“[T]he only thing wrong with the language…is that it does not go far enough—it does not impose an absolute buy American requirement and it does not require the application of not less than a 50- percent differential.”). of the” BAA.243 FRA has confirmed that it applies the BAA test (final assembly in the United States and 50 percent domestic content, measured by cost of components) in its interpretation of what constitutes “substantially” domestic manufac- tured goods under the Amtrak Buy America pro- vision.244 If these criteria are satisfied, then the manufactured product is considered “substan- tially” domestic and its purchase is not restricted by the Amtrak Buy America provision, so Amtrak is not required to obtain a waiver in that situa- tion.245 Even if Amtrak determines that a waiver is not required, Amtrak may consider requesting and retaining documentation of domestic content from the manufacturer, to withstand any bid pro- tests based on the Amtrak Buy America provision. • Price Differential Amtrak may obtain a waiver from the require- ments of the Amtrak Buy America provision if “the cost of imposing those requirements is unrea- sonable.”246 The statute does not define “unrea- sonable” cost, and there are no regulations im- plementing the statute. However, the statutory language closely tracks the BAA, which has been interpreted to allow the purchase of foreign goods where comparable domestic goods are as little as 6 percent more expensive (determined by increas- ing the price of foreign goods by 6 percent for pur- poses of bid evaluation).247 This is substantially lower than the price differential specified by Con- gress for other transportation grant Buy America provisions. The legislative history suggests that Congress did not intend to prescribe any specific numeric price differential in evaluating whether the cost of domestic goods was “unreasonable,” instead leaving it to the discretion of the Secre- tary of Transportation (or the FRA as his or her delegate) to make the determination “after he takes into consideration the real and total costs to 243 H.R. REP. NO. 103-300 (1993), available at 1993 WL 414121, at *27. 244 Letter from Joseph Szabo, FRA Administrator, to Jeff Martin, Amtrak, regarding Request for a Buy American Exemption for Acela Power Car Central Block Assemblies (Mar. 7, 2012), available at https://www.fra.dot.gov/eLib/Details/L04370. 245 49 U.S.C. § 24305(f)(2) (2013) (allowing Amtrak to purchase products “manufactured in the United States substantially from” domestic components without ob- taining a waiver). 246 49 U.S.C. § 24305(f)(4)(A)(ii) (2013). 247 48 C.F.R. §§ 25.105(b), 25.204(b) (2013).

29 the taxpayer of the United States.”248 Further- more, at the time the Amtrak Buy America provi- sion was enacted in 1978, Amtrak did not typi- cally use a price differential to evaluate foreign bids, and in the few instances where Amtrak pur- chased foreign goods based on cost, comparable domestic goods were 28 percent to 109 percent more expensive.249 If Amtrak considers the cost of domestic goods to be unreasonable with respect to comparable foreign goods, it must seek a waiver of the Amtrak Buy America provision from FRA.250 However, FRA recognizes that the “unreasonable cost” waiver under the Amtrak Buy America pro- vision is “similar” to that in the BAA and “less stringent” than the 25 percent Price Differential waiver in the FRA Buy America provision.251 Therefore, among the transportation grant pro- grams, the Amtrak Buy America provision may offer the best possibility of obtaining a Price Dif- ferential or “unreasonable cost” waiver. However, there is no known instance of FRA ever granting such a waiver from the Amtrak Buy America pro- vision. • Nonavailability As with the FRA Buy America provision, there are actually two distinct justifications for a Nonavailability waiver under the Amtrak Buy America provision. The first, which is applicable to all purchases, is that a waiver may be granted if the products (or their components) “are not mined, produced, or manufactured in the United States in sufficient and reasonably available commercial quantities and are not of a satisfac- tory quality.”252 The statute does not define such key terms as “sufficient quantity” or “satisfactory quality,” although the statutory language closely tracks the BAA. Under the regulations imple- menting the BAA, this Nonavailability waiver may be easy to obtain. First, the FAR contains a list of goods that have been determined to be gen- erally unavailable domestically,253 effectively cre- ating general nationwide waivers from the BAA for entire classes of goods. Second, federal agen- cies under the BAA are entitled to presume that 248 124 CONG. REC. S7,247 (May 10, 1978) (statement of Sen. Bayh). 249 Foreign Procurement 1978 Report, supra note 5, App. 1, at 43. 250 FRA Buy America Webinar, supra note 60, at 24. 251 Id. 252 49 U.S.C. § 24305(f)(4)(A)(iii) (2013). 253 48 C.F.R. §§ 25.103(b)(1)(i), 25.104 (2013). domestic goods are not reasonably available if there are no domestic responses to a full and open solicitation.254 There are no such regulations im- plementing the nearly identical statutory lan- guage of the Amtrak Buy America provision. Un- der the Amtrak Buy America provision, FRA has announced that there are no “blanket” general nationwide waivers, and that all waivers must be granted on a project-specific, case-by-case basis.255 Therefore, Amtrak is probably not entitled to rely on the FAR list of unavailable goods. Further, even if Amtrak does not receive a bid for domestic goods in response to a solicitation, Amtrak must request and obtain a waiver from FRA in order to purchase foreign goods from the low bidder.256 Based on its recent history with Nonavailability waivers,257 FRA may require evidence from Am- trak that comparable domestic goods are not rea- sonably available and conduct its own independ- ent investigation for domestic sources before granting such a waiver. The second potential justification for a Nonavailability waiver under the Amtrak Buy America provision applies only to purchases of rolling stock or power train equipment. A waiver may be obtained if such equipment “cannot be bought and delivered in the United States within a reasonable time.”258 This additional waiver justi- fication was added by Congress in 1979,259 1 year after the Amtrak Buy America provision was originally enacted. There is very little recorded discussion of this amendment in the legislative history, so it is not clear why the amendment was made. However, the amendment aligned the statutory Amtrak Buy America provision with Amtrak’s preexisting internal Buy America policy, which permitted the purchase of foreign products where the products “will not be available in this country in time to meet schedule requirements.”260 254 48 C.F.R. § 25.103(b)(2) (2013). 255 FRA Buy America Webinar, supra note 60, at 7, 23. 256 49 U.S.C. § 24305(f)(4) (2013) (clarifying that the Secretary of Transportation, or FRA as his or her dele- gate, “may exempt Amtrak from” the Amtrak Buy America provision “[o]n application of Amtrak,” if the conditions are satisfied for a Public Interest, Price Dif- ferential, or Nonavailability waiver). 257 See supra § III.A.4. 258 49 U.S.C. § 24305(f)(4)(B) (2013). 259 Amtrak Reorganization Act of 1979, Pub. L. No. 96-73, § 109 (1979). 260 Foreign Procurement 1978 Report, supra note 5, App. 1, at 43.

30 Presumably, the “unreasonable delivery time” jus- tification for a Nonavailability waiver is useful to defend against a potential bid protest from a do- mestic manufacturer who does not presently manufacture the product sought, but who never- theless argues that the product could be manufac- tured domestically given enough time. If seeking a Nonavailability waiver for rolling stock or power train equipment, Amtrak should try to make both arguments: that the products are not domestically available in sufficient quantity and satisfactory quality and also that such products can not be made available domestically in a reasonable time. When FRA grants a Nonavailability waiver, it may use both justifications to support its deci- sion.261 Amtrak should keep in mind, however, that the FRA waiver approval process is expected to take 6 months to 1 year for a given waiver re- quest,262 and this delay should be factored into what Amtrak considers to be a “reasonable time” for comparable domestic products to be delivered. • Public Interest Finally, Amtrak may obtain a waiver allowing the purchase of foreign goods when enforcement of the Amtrak Buy America provision would be “inconsistent with the public interest.”263 In part because there have been no regulations issued to implement the statute, it is unclear what would justify a Public Interest waiver. In the past, FRA has granted Public Interest waivers to Amtrak where the public interest has been expressed loosely to encompass “important public benefits associated with the development of improved high speed rail service across the country and the pres- ence in the American market of competing equip- ment manufacturers.”264 Under that standard, of course, most purchases of foreign products by Amtrak could be justified. Since 2008, however, there has been enhanced scrutiny and enforce- ment of most transportation grant Buy America provisions, with special attention focused on Pub- 261 See Letter from Jolene M. Molitoris, FRA Admin- istrator, to George D. Warrington, Amtrak, regarding Grant of Exemption (Sep. 7, 2000), available at http://www.regulations.gov/#!documentDetail;D=FRA- 1999-6405-0004. 262 FRA Buy America Webinar, supra note 60, at 7. 263 49 U.S.C. § 24305(f)(4)(A)(i) (2013). 264 See Letter from Jolene M. Molitoris, FRA Admin- istrator, to George D. Warrington, Amtrak, regarding Grant of Exemption (Sep. 7, 2000), available at http://www.regulations.gov/#!documentDetail;D=FRA- 1999-6405-0004. lic Interest waivers.265 Amtrak should anticipate that future Public Interest waivers will be rare. c. Notice-and-Comment.—The Amtrak Buy America provision does not include any statutory requirement for publication or a public notice- and-comment opportunity for waivers. FRA has rarely, but occasionally, published waiver re- quests and waiver determinations related to the Amtrak Buy America provision in the Federal Register for public notice-and-comment. Amtrak is not a federal government agency, so its waiver requests to FRA, and FRA’s responses, are pre- sumably public records subject to availability un- der FOIA. In general, however, the absence of a notice-and-comment requirement means that there has been little public scrutiny of the appli- cation of the Amtrak Buy America provision, and there are few case studies to illustrate its applica- tion. d. Multiple Funding Sources.—According to the plain statutory text, the Amtrak Buy America provision applies to all direct purchases made by Amtrak, without regard to the source of funds.266 FRA has long taken the position, however, that the Amtrak Buy America provision does not apply to purchases made by Amtrak with funds other than its capital grant (i.e., its direct congressional appropriations), such as FRA grant funds.267 FRA has recently clarified that the Amtrak Buy Amer- ica provision applies only “when Amtrak is spend- ing funds from its own capital or operating grant.”268 The FRA Buy America provision rather than the Amtrak Buy America provision “applies when Amtrak is operating under a HSIPR pro- gram grant or performing a contract for another 265 See infra §§ III.C.3.c, III.C.4.a. 266 49 U.S.C. § 24305(f)(2) (2013) (“Amtrak shall buy only – (A) unmanufactured articles, material, and sup- plies mined or produced in the United States; or (B) manufactured articles, material, and supplies manufac- tured in the United States substantially from articles, material, and supplies mined, produced, or manufac- tured in the United States.”). 267 See Application of Washburn Wire Products, Inc., DOTCAB No. 85-804-13 (1981), available at 1981 WL 10234 (upholding FRA’s interpretation that a supplier to a construction contractor for Amtrak was not subject to Buy America requirements and was allowed to sup- ply foreign steel for a Northeast Corridor improvement project, where the project was funded with FRA grant funds). 268 FRA Buy America FAQ, supra note 52, at 11; see also FRA Buy America Webinar, supra note 60, at 9 (stating that the Amtrak Buy America provision “[a]pplies to Amtrak capital grants”).

31 HSIPR program grantee.”269 The key determina- tion for which the Buy America provision (if any) applies is “the source of funds.”270 In a project jointly funded, for example, by FRA (with HSIPR grant funds) and Amtrak (with funds from its own capital grant), Amtrak should ensure compliance with both Buy America provisions. 2. Legislative History The Amtrak Buy America provision was en- acted in 1978 at a time when Congress was ac- tively seeking to protect the domestic steel indus- try through enhanced Buy America provisions in federal grant programs. A May 1978 study per- formed by the GAO, at the request of the Con- gressional Steel Caucus, determined that the BAA applied only to direct federal procurements, not to federally assisted procurements by state and local governments or other organizations such as Am- trak, unless the statute authorizing federal assis- tance expressly provided for application of the BAA.271 There were no such BAA requirements imposed by Congress on the Amtrak capital grant program up to that time.272 However, Amtrak was operating on an internal policy that required the prior written approval of an Amtrak executive in order to make any procurement “from foreign sources.”273 Furthermore, under this policy: No procurements from foreign sources are to be submitted for approval until it can be shown that the product or ser- vice is not available in this country or will not be avail- able in this country in time to meet schedule require- ments and, further, that all possible alternatives to foreign procurement, including specification changes and schedule relief, have been explored.274 The language of this policy was more stringent than any Buy America provision in federal law, because 1) it applied to all goods (and services), 2) it required written waivers for any deviation, 3) the only waiver was for Nonavailability (within a reasonable time), and 4) even if the product was 269 FRA Buy America FAQ, supra note 52, at 10 ; see also FRA Buy America Webinar, supra note 60, at 9 (stating that the FRA Buy America provision “applies when Amtrak is operating under a PRIIA-authorized grant or performing a contract for another grantee”). 270 FRA Buy America FAQ, supra note 52, at 10; see also FRA Buy America Webinar, supra note 60, at 9 (“Check your grant for funding source.”). 271 Federal Assistance 1978 Report, supra note 6, En- closure II, at 6. 272 Foreign Procurement 1978 Report, supra note 5, at 14. 273 Id. at 43. 274 Id. not available domestically, the policy required Amtrak to explore “all possible alternatives” to avoid foreign procurement. At the time the Amtrak Buy America provision was enacted, Congress was aware that Amtrak was already operating under this stringent Buy America policy.275 Foreign goods constituted 3.7 percent of Amtrak’s total purchases in its exis- tence from May 1971 through December 1977.276 There was some evidence that Amtrak’s foreign purchases were steadily decreasing over time, from 7.5 percent of Amtrak’s total purchases in 1974 down to 1.4 percent in 1977.277 At this time, Amtrak was lauded by legislators as a model grant recipient with respect to its internal Buy America requirement.278 With respect to steel, Congress was concerned about the ability of the domestic steel industry to withstand foreign competition, as foreign steel was believed to be cheaper in part due to foreign government subsidies.279 Likewise, with respect to 275 124 CONG. REC. H5,899 (June 21, 1978) (state- ment of Rep. Mikulski) (“Amtrak itself has, by its own executive order, a very similar, or, in fact, even more stringent executive order already in place.”); see also 134 CONG. REC. H2,259 (Apr. 20, 1988) (statement of Rep. Carney) (“Amtrak has functioned well under a buy American policy which is very similar to the language included in this bill.”). 276 Foreign Procurement 1983 Report, supra note 92, at 24; Foreign Procurement 1978 Report, supra note 5, at 44; see also 124 CONG. REC. S7,247 (May 10, 1978) (statement of Sen. Long) (“They contend that about 96.3 percent of their purchases are American bought pur- chases the way it is now.”). 277 Foreign Procurement 1978 Report, supra note 5, at 44; see also 124 CONG. REC. S7,250 (May 10, 1978) (statement of Sen. Long) (“During the last year only 1.4 percent of their purchases were foreign purchases.”). 278 134 CONG. REC. H2,259 (Apr. 20, 1988) (statement of Rep. Carney) (“On March 23, 1978, Amtrak officials testified as a ‘good example’ during ‘buy American’ hearings….”); 124 CONG. REC. S7,247 (May 10, 1978) (statement of Sen. Bayh) (“Amtrak does not solicit for- eign bids to the extent which municipalities do under the grants made by” FTA.); 124 CONG. REC. S7,249 (May 10, 1978) (statement of Sen. Cannon) (“I think it is certainly clear they are trying to carry out a policy of ‘Buy American.’”); 124 CONG. REC. S7,250 (May 10, 1978) (statement of Sen. Long) (“Amtrak does have a good record on this. Their record is very good.”). 279 124 CONG. REC. H6,004 (June 23, 1978) (state- ment of Rep. Rooney) (“This importation has a disas- trous effect on American steel producers.”); 124 CONG. REC. S7,247 (May 10, 1978) (statement of Sen. Bayh) (“[T]he domestic steel industry was gravely threatened

32 rolling stock, there were suggestions that foreign governments were subsidizing their own rail car industries and then selling the rail cars in the United States below cost (i.e., “dumping”), making it difficult for domestic rail car manufacturers to compete.280 Congress responded to the perceived unfair foreign competition by imposing domestic preferences across multiple federal programs in 1978, including Amtrak, a significant consumer of both rail rolling stock281 and steel.282 In fact, as passed by the Senate, the Amtrak Buy America provision would only have applied to purchases of “steel and rolling stock for fixed rail service,” where the total project cost (not just the cost of steel and rolling stock) was greater than $1 million.283 Project expenditures for foreign goods other than steel and rolling stock were not prohibited under the Senate version. The House version, on the other hand, would have applied to all purchases (both manufactured and unmanu- factured goods) of $100,000 or more.284 A compro- mise reached in conference was to adopt the House’s broad application of Buy America re- quirements to all goods purchased by Amtrak (not just steel and rolling stock), while adopting the Senate limitation that the Buy America require- ments would not apply to any purchase less than last year in large part due to competition with foreign steel firms, often heavily subsidized by their own gov- ernments.”). 280 124 CONG. REC. S7,247 (May 10, 1978) (statement of Sen. Bayh) (“I remember an Italian consortium that was involved in selling some railcars, with Italian Gov- ernment subsidization.… The only way they got the sale was because they were able to dump in here and put our workers out of work.”). 281 124 CONG. REC. H5,884 (June 21, 1978) (state- ment of Rep. Rooney) (“[T]his so-called buy-American provision is essential for normal engine and car pro- curements, and also because of the magnitude of the procurement program for the Northeast Corridor im- provement project. Congress has authorized $1.75 bil- lion for this project.”). 282 124 CONG. REC. H5,902 (June 21, 1978) (state- ment of Rep. Carney) (“In calendar year 1977, Amtrak purchased over 43,000 tons of steel—at a cost of over $15 million. By the end of 1978, Amtrak plans to have purchased over 64,000 tons of steel for over $25 mil- lion.”). 283 124 CONG. REC. S7,253 (May 10, 1978). 284 H.R. REP. NO. 95-1182, at 4–5 (1978). $1 million.285 This compromise version was en- acted into law on October 5, 1978.286 Although the intent of the House version was to extend Buy America requirements to Amtrak’s purchases of all types of goods (not just steel and rolling stock), the compromise cost threshold of $1 million effectively limited the Amtrak Buy America provision to larger construction projects and rolling stock procurements. Despite this limi- tation, purchases of foreign goods by Amtrak con- tinued to decline, from 1.4 percent of all Amtrak purchases in 1977 (the year prior to enactment of the Amtrak Buy America provision) to 0.5 percent of all Amtrak purchases over the 5 years after its enactment.287 However, over the years, some in Congress have attempted to lower the $1 million cost threshold of the Amtrak Buy America provision in order to reduce Amtrak purchases of foreign goods using federal assistance. By 2001, there was con- cern that most manufactured products being pur- chased by Amtrak were of foreign origin.288 There- fore, in the USDOT appropriations bill for fiscal year 2002, Congress expressly applied the BAA (rather than the Amtrak Buy America provision) to $521,476,000 that was appropriated for the Amtrak capital grant.289 Since the language of the BAA is very similar to the Amtrak Buy America provision, the main effect of this was to temporar- ily remove the compromise $1 million cost thresh- old and impose domestic preferences on Amtrak purchases as small as the BAA Small Purchase cost threshold (presently $3,000). However, this change applied only to the $521,476,000 that was appropriated for Amtrak in the 2001 legislation. Subsequent efforts to permanently reduce the Small Purchase cost threshold for the Amtrak Buy America provision have failed. In 2008, the version of PRIIA passed by the House would have modified the Amtrak Buy America provision to ensure that the BAA applies to Amtrak purchases 285 H.R. REP. NO. 95-1478, at 18 (1978). 286 Amtrak Improvement Act of 1978, Pub. L. No. 95-421, § 10 (1978), 287 Foreign Procurement 1983 Report, supra note 92, at 24. 288 154 CONG. REC. H6,788 (July 22, 2008) (statement of Rep. Oberstar) (“[O]ur domestic rail transit, rail pas- senger transit systems were in decline. …[M]anufac- turers were drying up in America, and the new sourcing was coming from foreign manufacturers.”). 289 Id.; Pub. L. No. 107-87, § 326 (2001).

33 between $100,000 and $1 million.290 However, this change was not included in the version of PRIIA that was passed by the Senate and thus was never enacted.291 In 2012, there was an effort in the Senate to prohibit “segmentation” of large pro- curements into smaller contracts to avoid applica- tion of the Amtrak Buy America provision. The version of the 2012 USDOT appropriations bill that passed the Senate would have applied the Amtrak Buy America provision to Amtrak con- tracts of less than $1 million, where multiple con- tracts could be considered to constitute a single “project” and the combined value of the “project” contracts reached the cost threshold of $1 mil- lion.292 However, the compromise version that ul- timately passed both houses of Congress prohib- ited “segmentation” of Buy America requirements only with respect to FHWA projects, not Amtrak projects.293 Amtrak should take note of these and other re- cent legislative efforts to ensure that the various transportation grant Buy America provisions are strictly and consistently applied. The Amtrak Buy America provision is notably distinct from other transportation grant Buy America provisions, both with respect to the very large Small Pur- chase threshold and to the lack of specific numeric criteria (e.g., for Domestic Content and Price Dif- ferential waivers). In the future, legislative efforts may be undertaken to address those differences and streamline requirements across federal pro- grams. 3. Case Studies a. Northeast Corridor.— • Background Several issues related to the Amtrak Buy America provision are best illustrated by Am- trak’s procurement of the Acela trainsets. In 1993, Congress appropriated funding for Amtrak to pur- chase high-speed trainsets for the Northeast Cor- ridor.294 As originally passed by the Senate, the funds would have been subject to an enhanced 290 H.R. 6003, § 221, 110th Cong. (2008). Under this proposal, the existing Amtrak Buy America provision would continue to apply to purchases of $1 million or more. 291 See supra notes 107, 110, and accompanying text. 292 S. 1813, 112th Cong. § 35210 (2012). 293 See infra § III.B.2. 294 H.R. REP. NO. 103-300 (1993), available at 1993 WL 414121, at *27. Buy America provision, including a specific 80 percent domestic content requirement.295 Ulti- mately, however, Congress decided to keep the funds subject to the existing Amtrak Buy America provision (which only required that products be manufactured in the United States “substantially from” domestic components), and asked Amtrak to establish a “general goal…to maximize the U.S. content of the new trainsets.”296 In consultation with FRA, Amtrak established a “goal” of 70 per- cent domestic content for the trainsets.297 The goal was to be implemented by considering domestic content commitments from manufacturers when evaluating proposals, with deductions for domes- tic content below 70 percent and bonus points for domestic content above 70 percent.298 In March 1996, Amtrak awarded the Acela manufacturing contract to a consortium of Bombardier Corporation, a Canadian manufac- turer, and Alstom Transportation, Inc., the French manufacturer of the TGV “bullet train.”299 Bombardier would be primarily responsible for manufacturing the passenger rail cars, and Alstom would be primarily responsible for manu- facturing the locomotives or “power cars.” To com- ply with both the Amtrak Buy America Provision and the FTA Buy America provision, Bombardier had already established a passenger rail car manufacturing facility in Plattsburgh, New York, and a transit rail car manufacturing facility in Barre, Vermont.300 For the Northeast Corridor project, final assembly of the passenger rail cars would take place at Bombardier’s Vermont facil- ity, and final assembly of the power cars would 295 Id. 296 Id. 297 S. 2002, The Amtrak Investment Act of 1994 and S. 1942, The Local Rail Freight Assistance Reauthoriza- tion Act of 1994: Hearing before the Subcomm. on Sur- face Transportation of the S. Comm. on Commerce, Sci- ence, and Transportation, 103d Cong. 102 (1994) (statement of Jolene M. Molitoris, FRA Administrator). 298 Amtrak Underscores Buy America Pledge, RAILWAY AGE (Dec. 1994), available at 1994 WLNR 5347839. 299 Bombardier Corp. v. Nat’l Railroad Passenger Corp., 298 F. Supp. 2d 1, 1 n.1 (D.D.C. 2002); see also Brian Hutchinson, Train to Trouble: Teetering on the Edge of Insolvency, Amtrak is Being Sued by Bombar- dier over a Problem-Plagued US $611M Project Funded by Canadian Taxpayers, NAT’L POST (Sep. 21, 2002), available at 2002 WLNR 8208133. 300 Don Phillips, Maker of High-Speed Train Sues Amtrak for $200 Million, WASH. POST, Nov. 9, 2001, available at 2001 WLNR 13167084.

34 take place at Bombardier’s New York facility, al- though significant manufacturing processes for components or subcomponents would take place outside the United States.301 • Compliance Issues Issues related to domestic manufacturing arose early in the performance of the contract. Amtrak stated that it originally anticipated having Bombardier and Alstom manufacture the train- sets using existing designs for trains in use in Europe, such as the Alstom TGV bullet train.302 However, in 1999, FRA issued crashworthiness regulations requiring high-speed trains to be able to potentially withstand impacts with freight trains that would share the Northeast Corridor track.303 This was more stringent than the re- quirements for European trains, and it required Amtrak, Bombardier, and Alstom to come up with a customized, heavier design for the Acela trains.304 It has been suggested that the decision to forego the lighter European design in favor of a more traditional U.S. passenger train design was also motivated in part by Amtrak’s goal to maxi- mize domestic content, so that the Acela trains would incorporate more domestic parts.305 At any rate, a combination of heavier trains and “crucial differences between American and European rails” prevented the Bombardier and Alstom con- sortium from using wheels identical to those that Alstom traditionally used in its European trains, necessitating a redesign.306 The redesigned, heav- ier trains experienced problems, including exces- sive wheel wear, cracks in the suspension system, and cracks in the brakes. The manufacturer of the brakes blamed the problems on redesigns, ap- proved by Amtrak and Bombardier in 1998, that 301 High-Speed Rail: Finally on Track, RAILWAY AGE, Apr. 1998, available at 1998 WLNR 7707095. 302 Janice D’Arcy, Acela: Lessons Learned Too Late: Amtrak’s High-Speed Rail Service Dogged by Design Disputes and Equipment Failures, HARTFORD COURANT, Sep. 29, 2003, available at 2003 WLNR 15214802. 303 Id. 304 Id. 305 Bryce Nesbitt, Cracks in the “Buy American” Rules, BOSTON GLOBE, Apr. 22, 2005, available at 2005 WLNR 6287723; Lin Garber, Congress Forced Amtrak’s Hand, BOSTON GLOBE, Aug. 26, 2002, available at 2002 WLNR 2584884. 306 Raphael Lewis & Mac Daniel, Acela Troubles Seen as Pattern for Amtrak: Missteps Tied to Need for New Identity, Revenue, BOSTON GLOBE, Sep. 1, 2002, avail- able at 2002 WLNR 2609833. were required “partly to help satisfy so-called Buy America requirements set by Amtrak.”307 Anthony Perl, a prominent transportation policy scholar, suggested that the design problems with Acela were due to a flaw in the Amtrak Buy America provision itself, which (like most Buy America provisions) requires domestic manufacturing but not domestic engineering: “What we have is de- sign teams from France and Canada, and the trains are put together from kits in this country to satisfy Buy American rules. The labor is Ameri- can, but the know-how is not.”308 In 2000, when final delivery of the Acela train- sets was nearing completion, Amtrak announced that it intended to seek damages “in the dozens of millions of dollars” from Bombardier and Alstom due to the extensive delays and cost increases caused by the various redesigns.309 Bombardier preemptively filed suit against Amtrak in Novem- ber 2001, seeking $200 million in damages. Bom- bardier alleged that Amtrak interfered with its design by imposing more stringent specifications after the contract was executed, that Amtrak de- layed in approving Bombardier’s redesigns to ad- dress the stringent requirements, and that Am- trak failed to upgrade its own tracks to accommodate the initially planned foreign de- signs.310 Bombardier alleged that, in part to sat- isfy Amtrak’s domestic content goals, “large num- bers of already completed components have had to be discarded or retrofitted.”311 Amtrak conceded that the delays arose at least in part from making the new trainsets conform to the Amtrak Buy America provision, specifically citing the delays in redesigning the brakes.312 However, Amtrak con- tended that it properly rejected the components as 307 Daniel Machalba & Christopher J. Chipello, Am- trak Brake Probe Scrutinizes Early Change in Spokes’ Design, WALL ST. J., June 27, 2005, available at 2005 WLNR 10139610. 308 Lewis & Daniel, supra note 306. 309 Francois Shalom, Full Tilt Ahead: The First High- Speed Rail Link in North America is Set to Make its Debut, MONTREAL GAZETTE, Oct. 7, 2000, available at 2000 WLNR 5498976. 310 Bombardier Corp. v. Nat’l Railroad Passenger Corp., 298 F. Supp. 2d 1, 2 (D.D.C. 2002). 311 Hutchinson, supra note 299. 312 Bombardier Corp. v. Nat’l Railroad Passenger Corp., 298 F. Supp. 2d 1, 2 (D.D.C. 2002) (“Amtrak, in turn, argues that any delay is attributable to Bombar- dier as subcontractors that Bombardier selected were late in delivering brakes and other train components to Bombardier.”).

35 nonconforming313 and that responsibility for com- plying with the Amtrak Buy America provision rested solely with the Bombardier and Alstom consortium.314 Amtrak filed a counterclaim against Bombardier in November 2002, seeking damages in part for Bombardier’s alleged viola- tion of the Amtrak Buy America provision that was incorporated into its contract.315 Ultimately, the lawsuit was settled in March 2004 when Amtrak agreed to pay the Bombardier and Alstom consortium $42.5 million out of $70 million that Amtrak had previously withheld from the consortium’s invoices, with nei- ther party admitting liability.316 While it will never be clear exactly the extent to which these extra costs can be attributed to strict application of the Amtrak Buy America provision, strict ap- plication of the FRA crashworthiness regulations, or other factors, one should expect Buy America enforcement to increase project costs. Further, in the Northeast Corridor, the failure to achieve a European-style high-speed rail system was at- tributed in part to strict application of domestic preferences. Although the trainsets were manu- factured domestically using a large number of standard domestic parts, no true European-style high-speed rail manufacturing capability was de- veloped in the United States as a result of the Acela procurement. Also, as part of its settlement with Bombardier, Amtrak agreed to take on maintenance responsi- bilities for the Acela trainsets as early as 2006. Under the terms of the original contract, the con- sortium created the Northeast Corridor Manage- ment Service Corporation—a domestic corpora- tion—to provide replacement components through 2013.317 Often, a key selling point for rail Buy America provisions is the promise of long-term American jobs, by incentivizing foreign manufac- turers to establish a domestic presence both for initial manufacturing and long-term mainte- nance. However, the Buy America provisions have 313 Id. (“Amtrak maintains that the trainsets Bom- bardier delivered do not meet the Contract's specifica- tions.”). 314 Phillips, supra note 300. 315 Barrie McKenna, Amtrak Files Suit, TORONTO GLOBE & MAIL, Nov. 22, 2002, available at 2002 WLNR 12085575. 316 U.S. GOV’T ACCOUNTABILITY OFFICE, INTERCITY PASSENGER RAIL: ISSUES ASSOCIATED WITH THE RECENT SETTLEMENT BETWEEN AMTRAK AND THE CONSORTIUM OF BOMBARDIER AND ALSTOM 1, 23 (2004). 317 Id. at 26. mixed results in establishing new domestic rail manufacturing capability, in part because they establish preferences for component parts that are presently manufactured in the United States. Amtrak may consider using waivers to introduce innovative foreign technology into the domestic rail system and incentivize domestic manufactur- ers to develop components compatible with the new technology. For the Amtrak Buy America provision, both the Nonavailability and Price Dif- ferential waivers could be realistic options for purchasing innovative foreign technologies, and they do not have the abuse concerns that accom- pany some of the other types of waivers. • False Claims Act Applicability While the Bombardier–Amtrak litigation was ongoing, Bombardier was also contending with lengthy qui tam litigation brought in 1998 by a former Amtrak employee, who claimed that Bom- bardier violated the FCA by submitting invoices to Amtrak for trainset parts that failed to comply with the contract specifications. In 2001, the U.S. District Court for the District of Columbia ini- tially indicated that FCA liability might arise from the contractor’s false certifications to a fed- eral grant recipient like Amtrak,318 but the court dismissed the relator’s lawsuit for failure to make the claim with specificity. On appeal in 2002, the U.S. Court of Appeals for the D.C. Circuit re- versed, allowing the relator to amend his com- plaint but withholding judgment as to whether a contractor’s certifications made to a federal grant recipient could subject the contractor to FCA li- ability.319 After the relator amended his com- plaint, the District Court again dismissed the lawsuit in 2003, and the D.C. Circuit affirmed in 2004, holding that a claim made by a contractor to a federal grant recipient like Amtrak is not a claim made to the federal government subject to the FCA, even if the claimant contractor is seek- ing to be paid with federal grant funds.320 This is 318 United States ex rel. Totten v. Bombardier Corp., 139 F. Supp. 2d 50, 52 n.1 (D.D.C. 2001) (“Requesting payment for noncompliant products which satisfy nei- ther their contracts nor Amtrak's regulations is not a violation of the False Claims Act. Only the false certifi- cation of compliance, where certification is a prerequi- site to obtaining payment, would suffice.”). 319 United States ex rel. Totten v. Bombardier Corp., 286 F.3d 542, 553 (D.C. Cir. 2002). 320 United States ex rel. Totten v. Bombardier Corp., 380 F.3d 488, 502 (D.C. Cir. 2004) (“[C]laims were pre-

36 an important decision, illustrating that a contrac- tor for a federal transportation grant recipient, who is required to certify compliance with a transportation grant Buy America provision, is probably not liable under the FCA for false Buy America certifications made to a grant recipient such as Amtrak, a state DOT, or a local transit agency. • Waiver Request In November 2011, Amtrak requested a waiver from the Amtrak Buy America provision to allow Amtrak to purchase two power car central block assemblies from Alstom for the Acela trainsets.321 Each central block would cost more than $1 mil- lion, so there was no question that the Amtrak Buy America provision applied. Although Alstom planned to assemble the central blocks in Hornell, New York, more than 50 percent of the compo- nents, by cost, would come from France.322 The foreign components included power modules, logic controllers, and electronics controllers that were proprietary to Alstom, and thus not available from any domestic source. Therefore, in March 2012, FRA granted a Nonavailability waiver to Amtrak, allowing it to purchase the central block assemblies.323 However, FRA granted the waiver on the condition that Amtrak and Alstom collabo- rate with NIST-MEP to increase the domestic content of power car central blocks. FRA stated that future waivers for power car central blocks would not be granted unless Amtrak and Alstom documented their efforts to increase domestic con- tent.324 FRA’s standard approach with Nonavail- ability waivers in recent years, with respect to both the FRA Buy America provision and the Am- trak Buy America provision, has been to attach conditions to the waiver requiring the manufac- turer to work with NIST-MEP to increase domes- tic content for future purchases.325 b. Northwest Corridor.—Amtrak’s Northwest Corridor (between Eugene, Oregon, and Vancou- sented only to Amtrak for payment or approval, and Amtrak is not the Government.”). 321 Letter from Joseph Szabo, FRA Administrator, to Jeff Martin, Amtrak, regarding Request for a Buy American Exemption for Acela Power Car Central Block Assemblies (Mar. 7, 2012), available at https://www.fra.dot.gov/eLib/Details/L04370. 322 Id. 323 Id. 324 Id. 325 See supra § II.A.4. ver, Washington), like the Northeast Corridor, was intended to provide high-speed rail service in the Northwest, but was developed at a smaller scale and much more incrementally than the Northeast Corridor project.326 Beginning in 1994, WSDOT leased two trainsets from Spanish manu- facturer Talgo, to be operated by Amtrak.327 As a result of that experiment, the decision was made to purchase three trainsets from Talgo.328 At least one of the trainsets was to be purchased directly by Amtrak and was thus subject to the Amtrak Buy America provision. To allay concerns about the Amtrak Buy Amer- ica provision, as well as a comparable “Buy Wash- ington” provision applicable to WSDOT, the train- sets were to be assembled in Washington.329 However, the Railway Progress Institute (a trade association for domestic rail industry suppliers) testified before Congress that the trainsets did not contain sufficient domestic content to satisfy the Amtrak Buy America provision.330 In July 1996, upon request from Amtrak, FRA granted a waiver from the Amtrak Buy America provision to permit the purchase. This appears to have been a Public Interest waiver, where the public interest justification was “the opportunity to further evaluate the potential of modern rail passenger equipment in the U.S.”331 The further evaluation of Talgo trainsets was apparently successful, because in 1999, Amtrak petitioned FRA for waivers to allow it to purchase two additional Talgo trainsets for the Northwest Corridor.332 Amtrak estimated that the new Talgo 326 Amtrak Leads America into the Age of High Speed, RAILWAY AGE, May 1996, available at 1996 WLNR 6215624. 327 Letter from George D. Warrington, Amtrak Presi- dent and CEO, to Jolene M. Molitoris, FRA Administra- tor, regarding Request for Domestic Buying Preference Exemption (Aug. 23, 1999), available at http://www. regulations.gov/#!documentDetail;D=FRA-1999-6405- 0001. 328 Id. 329 Clinton Clouds the High Speed Picture, RAILWAY AGE, Apr. 1997; A Renfe Talgo Plant in the U.S.?, RAILWAY AGE, Aug. 1996. 330 Department of Transportation and Related Agen- cies Appropriations for 1998: Hearings before a Sub- comm. of the H. Comm. on Appropriations, 105th Cong. (1997) (statement of Dennis S. Sullivan). 331 Letter from George D. Warrington, supra note 327. 332 Id.; Petition for Buy American Exemption— National Railroad Passenger Corporation, 64 Fed. Reg. 59,230 (Nov. 2, 1999). At the same time, Amtrak peti-