Buy America Requirements for Federally Funded Rail Projects (2015)

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72 a conversion of an abandoned rail bed into a paved trail that was being constructed in seg- ments. The low bid included foreign construction materials, necessitating a waiver. After multiply- ing the entire low bid by 1.25, FTA concluded that the surcharged low bid was still lower than the lowest “domestic, compliant bid,” qualifying for the Price Differential waiver.731 However, the Price Differential was applied to the entire low bid, not just the cost of foreign steel and iron con- struction materials in the bid.732 Applying the Price Differential to the entire low bid, rather than solely to the cost of foreign construction ma- terials as is done with the BAA, can make it harder to qualify for a Price Differential waiver. FTA, however, evaluated the Price Differential waiver only on the cost of the contract to construct this segment (Phase III) of the project, not for the overall Harlem Valley Rail Trail project. This is consistent with FTA’s regulations, which call for the Price Differential waiver to be applied to “the cost of the contract between the grantee and its supplier,”733 rather than to the overall project cost. This made it possible to obtain a Price Differential waiver—it would have been much harder, if not impossible, to demonstrate that selecting the low- est domestic bidder for the Phase III contract would increase the cost of the overall Harlem Val- ley Rail Trail project by 25 percent. In recent years, FTA has indicated that for fu- ture Price Differential waiver requests, it will evaluate the FTA Buy America provision across all contracts that comprise an overall project, even to include contracts not funded by FTA. This revised approach is illustrated by a 2012 Price Differential waiver request from Metro North to purchase foreign steel frogs using its own funds.734 _law/12316_618.html. 731 Id. 732 Note also that FTA has said that it evaluates con- struction projects as manufactured products, so that all “components”—i.e., all construction materials—must be domestic to comply with the FTA Buy America provi- sion. 46 Fed. Reg. 5,808 (Jan. 19, 1981). Therefore, the low bid may have been noncompliant even if it con- tained no foreign steel or iron, based solely on a pro- posal to incorporate foreign paving materials. 733 49 C.F.R. § 661.7(d) (2013) (emphasis added). 734 Letter from Michael L. Culotta, FTA Regional Counsel, to Anthony J. Bombace, Metro North Senior Director of Procurement and Material Management, regarding Buy America Waiver Request, Metro-North Railroad Bid Inquiry 1-11623, Frogs (July 5, 2013), available at http://www.fta.dot.gov/legislation_law/ legislation_law_15608.html. Metro North received a noncompliant low bid of $219,950, and the lowest compliant bid was $371,152. Multiplying the noncompliant low bid by 1.25, it was less than the lowest compliant bid, which would appear to satisfy the Price Differen- tial requirements in FTA’s regulations.735 How- ever, FTA denied the waiver request because Metro North failed to evaluate the impact on the cost of the overall development project on which the frogs would be used.736 The purpose of the supply contract was to stock Metro North’s inven- tory, so Metro North had not even identified any specific development projects on which the frogs would be used. Because FTA denied the waiver request, Metro North could only purchase the frogs from the low bidder using its own funds, and the frogs could only be used on projects not funded with FTA assistance.737 FTA grant recipients should be mindful that the trend is to apply transportation grant Buy America provisions across entire development projects, not just to fed- erally funded contracts or individual segments of a project. This makes a Price Differential waiver unlikely. IV. CONCLUSIONS The transportation grant Buy America provi- sions potentially applicable to rail projects are deceptively similar and simple in appearance. The reality is that despite nearly identical statutory language, there are key differences in the way different federal grant-making agencies apply the provisions to their railroad construction projects and rail rolling stock procurements. There are even differences in the ways that individual fed- eral agencies have applied the Buy America re- quirements over the years, as practices have evolved in response to perceived abuses and legis- lative mandates. With some federal agencies (like FRA), there are no regulations and little formal guidance for grant recipients. With other federal agencies (like FTA), the regulations and adminis- trative history are so voluminous that research is often required to determine how to apply the vari- ous waivers to a given procurement. This digest combines into a single resource a comprehensive synthesis of each of the four transportation grant Buy America provisions applicable to rail pro- grams. Grant recipients should first identify which transportation grant Buy America provi- 735 49 C.F.R. § 661.7(d) (2013). 736 Letter from Michael L. Culotta, supra note 734. 737 Id.