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Buy America Requirements for Federally Funded Airports (2013)

Chapter: III. BUY AMERICA AND FEDERAL GRANTEES

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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
×
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
×
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
×
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
×
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
×
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
×
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
×
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
×
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
×
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
×
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
×
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
×
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
×
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
×
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
×
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Suggested Citation:"III. BUY AMERICA AND FEDERAL GRANTEES." National Academies of Sciences, Engineering, and Medicine. 2013. Buy America Requirements for Federally Funded Airports. Washington, DC: The National Academies Press. doi: 10.17226/22635.
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24 AIP grant recipient to seek an Unavailability waiver. At any rate, because the Unreasonable Cost surcharge in the AIP Buy America provision is 25 percent (a major increase from the 6 to 12 percent surcharge in the BAA), it is much less likely that the conditions can be satisfied to justify an Unrea- sonable Cost waiver on an AIP project. F. Penalties/Enforcement On federal procurements of supplies, the con- tractor must provide a written list of all foreign goods that it supplies to the government, and the contractor must certify that all other goods sup- plied to the government not included on that list are domestic goods.211 Certifications that do not list all foreign goods supplied under the procurement are subject to action under the Federal False Claims Act.212 In that event, the contractor could be required to reimburse the government up to three times the government’s actual damages (e.g., the amount paid for the foreign goods), plus additional monetary penalties.213 Furthermore, there are criminal penalties for knowingly and willfully mak- ing a fraudulent certification, including possible imprisonment.214 On federal construction contracts, when it is al- leged that a construction contractor (or subcontrac- tor) has used foreign construction materials, the CO must conduct a review.215 First, the CO notifies the contractor, who is expected to respond to the allegation.216 The contractor may deny the allega- tion, in which case the CO must determine whether the construction material complies with the BAA.217 The contractor’s response may admit noncompli- ance and propose corrective action, such as removal and replacement of the foreign construction mate- rial.218 The CO may determine in writing that re- moval and replacement is unnecessary if it would be “impracticable, cause undue delay,” or be con- trary to the public interest.219 However, the CO’s decision not to remove and replace the foreign construction material does not absolve the contractor from responsibility. Non- compliance with the BAA may be considered de- fault, sufficient for the CO to terminate the con- tract.220 If the alleged noncompliance is sufficiently 211 48 C.F.R. § 52.225-2 (2012). 212 31 U.S.C. §§ 3729–3733 (2012). 213 31 U.S.C. § 3729(a)(1) (2012). 214 18 U.S.C. § 1001 (2012). 215 48 C.F.R. § 25.206(a) (2012). 216 48 C.F.R. § 25.206(b) (2012). 217 48 C.F.R. § 25.206(c)(1) (2012). 218 48 C.F.R. §§ 25.206(b), 25.206(c)(2) (2012). 219 48 C.F.R. § 25.206(c)(3) (2012). 220 48 C.F.R. § 25.206(c)(4) (2012). serious, the federal agency may suspend the con- tractor’s privilege to conduct business with the fed- eral government for up to 18 months while the claim is investigated.221 If the agency determines that serious noncompliance occurred, it may debar the contractor from conducting business with the federal government for up to 3 years.222 If the CO believes that the construction contrac- tor’s noncompliance with the BAA was fraudulent, then the CO must refer the matter to criminal in- vestigators.223 For example, if the contractor seeks a determination that foreign construction materials satisfy the Unreasonable Cost exception, the con- tractor must provide cost data for both the foreign and domestic construction materials.224 The con- tractor could commit fraud by knowingly providing false cost data with intent to deceive the govern- ment, and therefore be subject to criminal prosecu- tion. These penalties are largely speculative, how- ever. There is practically no public record of penal- ties being imposed on airport contractors for BAA violations. As the previous case summaries illus- trate, the BAA requirements and exceptions are sufficiently flexible that COs can typically justify awards to foreign contractors, or to domestic con- tractors offering to supply significant foreign com- ponents. III. BUY AMERICA AND FEDERAL GRANTEES A. Airport Grants Prior to Buy America Provisions (1978–1983) i. 1978 GAO Audit In the 1970s, there was growing realization that federal transportation funds were being used to procure foreign goods, unaffected by the BAA, be- cause the BAA requirements did not apply to fed- eral grants. In 1978, at the request of Representa- tive Charles Carney on behalf of the Congressional Steel Caucus, the U.S. General Accounting Office (GAO) performed an audit of the procurement of foreign goods with federal funds, including federal grant programs to states and other grantees.225 In the final audit report, the Comptroller General noted that the BAA did not apply to FAA grants, “leaving such decision to the recipients’ discre- 221 48 C.F.R. § 9.407-4 (2012). 222 48 C.F.R. § 9.406-4 (2012). 223 48 C.F.R. § 25.206(c)(4) (2012). 224 48 C.F.R. § 52.225-9(d) (2012). 225 FOREIGN-SOURCE PROCUREMENT FUNDED THROUGH FEDERAL PROGRAMS BY STATES AND ORGANIZATIONS, COMP. GEN. REP’T. NO. ID-79-1, B-162222, B-156489 (1978, http://www.gao.gov/products/ID-79-1).

25 tion.”226 The report also noted the existence of Buy National preferences in state and local law, and that federal grant recipients may apply state and local Buy National preferences to procurements made with federal grant funds.227 In the airport context, the 1978 GAO audit fo- cused primarily on Federal Airport Development Aid Program (ADAP) grants in the states of Ohio, Michigan, and Washington. The most significant findings were in the following areas: • Pavement construction materials. The focus of the investigation was on bulk construction materi- als such as aggregate, asphalt, and Portland ce- ment. In Washington, there were no procurements of these materials directly from foreign sources, and although the amount of foreign asphalt, ce- ment, and aggregate purchased was unknown, it was believed that aggregate and asphalt would be “normally purchased close to the construction site,” and therefore “not be subject to foreign competi- tion.”228 Likewise, it was believed that almost all asphalt, cement, and aggregate purchased in Ohio and Michigan were domestic goods, because those materials “are available in substantial quantities in Ohio and Michigan,” and “are normally purchased as close to the construction site as possible” due to their “bulky nature.”229 Therefore, the GAO did not identify any purchases of foreign pavement con- struction materials with ADAP funds. • Runway lighting fixtures. In Washington, ADAP grant recipients apparently purchased all lighting fixtures from a single firm in Syracuse, New York, there being no competitive foreign sup- plier. Furthermore, the ADAP grant recipients un- derstood that “the cost of any foreign material in an airport lighting package would be less than 10 per- cent.”230 In Ohio and Michigan, ADAP grant recipi- ents believed that lighting fixtures were “not sub- ject to foreign competition” because “[t]he lighting fixtures must be purchased from an FAA-approved list of domestic manufacturers.”231 Therefore, even though the BAA did not apply to airport grants, the GAO did not identify any significant purchases of foreign lighting fixtures, in part because the FAA allowed only domestic lighting fixtures to be pur- chased with ADAP funds. • Fencing. In Washington, one ADAP grant re- cipient believed that one of its fencing subcontrac- tors “may have used some imported pipe and fit- tings on a job,” but “[t]he cost of the material in 226 Id., App. 1, at 14. 227 Id., App. 1, at 12–13. 228 Id., App. 2, at 53. 229 Id., App. 2, at 55. 230 Id., App. 2, at 53. 231 Id., App. 2, at 55. question amounted to only $3,500.”232 In Ohio, one contractor determined that he had unwittingly used Korean-manufactured “metal fence posts and top rails, costing about $20,000,” which the contrac- tor procured from a domestic supplier, on an ADAP project.233 By all appearances, ADAP contractors generally attempted to purchase domestic fencing materials from domestic suppliers. • Snow removal equipment (SRE). In Michigan, the GAO determined that two German- manufactured snow removal vehicles were pur- chased using ADAP funds from a domestic supplier for the total cost of $151,560.234 One snow removal vehicle had been purchased using ADAP funds in Washington, although the grant recipient under- stood the vehicle to be domestically manufac- tured.235 The GAO expanded its review to other states in the Northwest Mountain Region, on the advice of FAA officials who believed there might be additional foreign purchases of snow removal vehi- cles with ADAP funds. However, the GAO identi- fied only one additional foreign bid to supply SRE. In that case, the ADAP grant recipient rejected a Canadian bid to supply a snow removal vehicle for $56,764 in favor of a higher domestic bid, “[b]ecause FAA officials mistakenly advised the grantee that only American-made products could be procured under ADAP projects.”236 Except for the two Michigan purchases, all evidence indicated that the FAA and its grant recipients intended to purchase only domestic SRE, even though the BAA did not apply to ADAP funds. • Aircraft Rescue and Fire Fighting (ARFF) ve- hicles. One ARFF vehicle had been purchased using ADAP funds in Washington, although it was be- lieved to be domestically manufactured.237 No such purchases were identified in Ohio and Michigan. However, in the course of its audit, the GAO learned that a British manufacturer had supplied U.S. airports with its ARFF vehicle. The GAO iden- tified 16 purchases of the British-manufactured ARFF vehicle using ADAP funds: 2 in Massachu- setts, 2 in California, and 12 in New York.238 Grant recipients in those states justified the procurement of the British ARFF vehicle as “the best available,” and the GAO estimated that 20 percent of the total cost of the British vehicle was attributable to do- mestic components. Of course, because the BAA did not apply to ADAP funds, there was no legal re- quirement to determine the percentage of domestic 232 Id., App. 2, at 53. 233 Id., App. 2, at 55. 234 Id., App. 2, at 55. 235 Id., App. II, at 53. 236 Id., App. II, at 54. 237 Id., App. II, at 53. 238 Id., App. II, at 52.

26 components or to determine that comparable do- mestic vehicles were unavailable domestically. The list above contains all of the purchases of foreign goods under airport grants identified in the 1978 GAO audit. These purchases represented a negligible percentage of the $500 million to $600 million granted annually under the ADAP pro- gram.239 For example, in Ohio and Michigan, for- eign purchases were believed to account for only “about three-tenths of one percent of the dollar value of the contracts reviewed.”240 Therefore, in 1978, there did not appear to be strong reasons to extend Buy America requirements to airport grants, although there was some evidence that pur- chases of foreign vehicles could become significant. The 1978 GAO report indicated that a signifi- cant percentage of ADAP funds were spent not on equipment or construction materials, but on pro- jects such as land acquisition for which there could typically be no realistic foreign source.241 Also, a large percentage of ADAP funds were spent not on goods but construction services, including the labor involved in paving runways and installing lighting fixtures at the airport site, which “are normally not subject to foreign competition.”242 Furthermore, even if the BAA applied to ADAP grants, it would apply only to purchases of goods, not construction services and land acquisition. The 1978 GAO report further noted that legisla- tion enacted shortly after the audit, namely the Surface Transportation Assistance Act of 1978,243 extended Buy America requirements to a number of federally funded transportation grant programs.244 Therefore, it was likely that there would be even fewer purchases of foreign goods with transporta- tion grant funds in the future. (However, Buy America requirements were not extended to federal airport grant funds at that time.) ii. 1983 GAO Audit The GAO updated its report in 1983 at the re- quest of Representative Joseph Gaydos on behalf of the Congressional Steel Caucus.245 Instead of focus- 239 Id., App. II, at 51. 240 Id., App. II, at 54. 241 Id., App. II, at 53. 242 Id., App. II, at 52, 55. 243 Pub. L. No. 95-599 (1978). 244 FOREIGN-SOURCE PROCUREMENT FUNDED THROUGH FEDERAL PROGRAMS BY STATES AND ORGANIZATIONS, COMP. GEN. REP’T. NO. ID-79-1, B-162222, B-156489, at 1 (1978), http://www.gao.gov/products/ID-79-1. 245 FOREIGN-SOURCE PROCUREMENT FUNDED THROUGH FEDERAL PROGRAMS BY STATES AND ORGANIZATIONS, COMP. GEN. REP’T. NO. GAO/NSIAD-83-9, B-208826 (1983), http://gao.justia.com/environmental-protection- ing on individual states as in the 1978 audit, the 1983 audit selected 50 ADAP grants at random from the 1,493 grants awarded in 1980–81. The GAO “did not identify any foreign purchases in the 50 grants reviewed,” which was “consistent with the minimal foreign purchases reported in Novem- ber 1978.”246 As in 1978, the 1983 report noted that a significant percentage of ADAP funding was used for land acquisition and contractor services “that are not readily amenable to foreign competition.” With respect to the categories of foreign purchases identified in the 1978 report, the 1983 audit found: • Pavement construction materials. “[B]ecause of their bulk and weight, [these] are generally pro- duced locally.”247 As in 1978, no foreign purchases of these materials were identified. • Airport lighting equipment. These items “must be made by FAA-approved manufacturers and only domestic manufacturers had been approved at the time of our review.”248 As in 1978, the GAO noted that the FAA did not allow foreign lighting fixtures to be purchased with ADAP funds, even though the BAA did not apply. • Fencing. Foreign-manufactured “[m]etal fenc- ing materials brought in via ocean transport re- quire anti-corrosion coating, which some view as undesirable”249 (emphasis added). Although the 1983 report did not identify any specific purchases of foreign steel and other metal materials, the find- ing was qualified to indicate that “some” opposed such purchases. This may indicate that, as in 1978, some ADAP grant funds were being spent on for- eign fencing. • Vehicles. “Although U.S. vehicles are higher priced than foreign vehicles, parts availability and lower labor and parts costs involved in maintaining U.S.-built vehicles makes them competitive”250 (em- phasis added). Once again, without identifying any specific purchases of foreign vehicles, the qualified language of the 1983 report suggests that pur- chases of foreign vehicles were taking place. As in 1978, it appeared that ADAP funds were most likely to be spent on foreign vehicles than on any other foreign goods. The 1983 report noted that the ADAP program expired in 1981, and was replaced with the Airport agency/1983/7/foreign-source-procurement-funded- through-federal-programs-by-states-and-organizations- nsiad-83-9/NSIAD-83-9-full-report.pdf. 246 Id., App. II, at 17–18. 247 Id., App. II, at 18. 248 Id., App. II, at 18. 249 Id., App. II, at 18. 250 Id., App. II, at 18.

27 and Airway Improvement Act of 1982,251 which has its own Airport Improvement Program (AIP).252 The report noted that AIP, like the ADAP, had no Buy America provision in 1983. At the time, there did not appear to be serious justification for attaching Buy America requirements to airport grant funds, as foreign purchases constituted an insignificant percentage of the overall program. However, there were indications that foreign goods were being pur- chased with airport grant funds—primarily vehi- cles, and to a lesser degree, steel and other metal construction materials. B. Buy America Provisions in Other Transportation Grant Programs (1978– Present) The 1978 GAO audit was conducted in part be- cause members of Congress had come to under- stand that the BAA did not apply to federal funds in transportation grant programs. By the time the 1978 GAO report was issued, Congress passed the first Buy America provision in transportation grant programs, although it did not apply to airport grant programs. As will be seen, the original 1978 trans- portation grant provision was only moderately dif- ferent from the BAA. Congress iteratively revised the provision in 1982 and 1987, before adopting Buy America requirements for the AIP in 1990. As will be seen, the AIP Buy America provision is ef- fectively an iteration of the Buy America require- ments first adopted for other transportation grant programs in 1978. Therefore, it is helpful to briefly review the evolution of the transportation grant Buy America provisions to better understand the AIP provision. i. Legislation 1. 1978 Surface Transportation Assistance Act.— The Surface Transportation Assistance Act (STAA) of 1978253 authorized appropriations for federally aided highways, which were defined at the time to include “access roads to public airports,”254 and mass transportation projects, including airport people movers, in urban areas. Although the STAA funded these projects to improve access to airports, it did not fund traditional airport development pro- jects covered elsewhere by the ADAP program. If grant funds for a single project under the 1978 STAA exceeded $500,000, only domestic unmanu- factured goods and domestic manufactured goods (those manufactured in the United States “substan- tially all” from domestic components) could be used 251 Pub. L. No. 97-248, 96 Stat. 324 (Sept. 3, 1982). 252 Id., App. II, at 17. 253 Pub. L. No. 95-599 (1978). 254 23 U.S.C. § 105(g) (1978). in the project,255 unless the Secretary of Transpor- tation determined that one of the following excep- tions was present: • Public Interest.256 This requirement was iden- tical to the BAA Public Interest exception. • Unavailability (goods “that are not mined, produced, or manufactured in the United States in sufficient and reasonably available quantities and of a satisfactory quality”).257 • Unreasonable Cost (where “inclusion of domes- tic material will increase the cost of the overall pro- ject contract by more than 10 per centum”).258 This 1978 STAA Buy America provision was very similar to the BAA in the absence of specific language or guidance regarding Substantial Do- mestic Manufacture, Public Interest, and Unavail- ability. The most notable change from the BAA was that the STAA provision codified a 10 percent differen- tial for the Unreasonable Cost exception, which was stricter than the standard 6 percent surcharge in the BAA. By codifying the 10 percent differential directly in the statute, Congress effectively pre- empted any administrative action to dilute the Un- reasonable Cost exception (as the 1954 executive order diluted the BAA).259 Also, Congress clarified that the Unreasonable Cost differential applies to “the cost of the overall project contract,” not just the individual line items of foreign goods as in the implementation of the BAA. The clarified language of the Unreasonable Cost exception in the STAA Buy America provision effectively preempted many of the issues raised in BAA bid protests. It also tended to make the STAA Buy America provision stricter than the BAA. On the other hand, the STAA Buy America pro- vision only applied to projects costing more than $500,000 (significantly higher than the BAA micro- purchase threshold of $3,000). Therefore, the STAA Buy America provision originally applied largely to significant construction projects, not individual purchases of equipment such as vehicles, despite its express application to manufactured goods. The $500,000 project threshold (plus the involvement of the Congressional Steel Caucus) indicates that the original intent of the STAA Buy America provision was to promote the use of domestic construction materials. 255 Surface Transportation Assistance Act of 1978, Pub. L. No. 95-599, § 401(a) (1978). 256 Id. § 401(b)(1). 257 Id. § 401(b)(3). 258 Id. § 401(b)(4). 259 See supra Pt. II.C.

28 2. 1982 Surface Transportation Assistance Act.— The Surface Transportation Assistance Act of 1982260 substantially modified the STAA Buy Amer- ica provision. Although this legislation created a supplemental discretionary fund for airport im- provement projects, the STAA Buy America provi- sion expressly applied only to highway and transit projects. Under the revised STAA Buy America provision, highway and transit grant funds were authorized for projects where only domestic steel, cement, and manufactured goods were used.261 The strict domestic goods requirement could be over- come if the Secretary of Transportation determined that one of the following exceptions was met: • Public Interest262 (unchanged from the 1978 version). • Unavailability263 (unchanged from the 1978 version). • Unreasonable Cost (determined by applying a 10 percent differential to compare foreign and do- mestic bids “for the acquisition of rolling stock,” and a 25 percent differential to “the cost of the overall project contract” to account for the use of foreign goods on all other types of projects).264 • Substantial Domestic Manufacture (for the ac- quisition of rolling stock only, defined as final as- sembly of the vehicle or equipment in the United States, and the cost of domestic components ex- ceeds 50 percent of the cost of all components).265 The 1982 revision of the STAA Buy America provision was stricter in many ways than both the original 1978 STAA provision and the BAA. First, the 1982 STAA provision applied to all highway and transit grants, not just those exceeding $500,000. Second, the “substantially all” language was re- moved from the definition of domestic manufac- tured goods. Instead, the legislation introduced for the first time a new Substantial Domestic Manu- facture exception. The language of the Substantial Domestic Manufacture exception was identical to the BAA two-part component test from the FAR, except that it only applied to the acquisition of roll- ing stock. The implication was that all manufac- tured goods except for rolling stock had to be com- posed entirely of domestic components, barring the applicability of any other exception. Even in the case of rolling stock, a waiver from the Secretary of Transportation would thereafter be required for the 260 Pub. L. No. 97-424 (1983). 261 Id. § 165(a). 262 Id. § 165(b)(1). 263 Id. § 165(b)(2). 264 Id. § 165(b)(4). 265 Id. § 165(b)(3). purchase of vehicles that contained less than 100 percent domestic components. (In the original 1978 version, rolling stock manufactured in the United States “substantially all” from domestic compo- nents was treated as domestic goods, similar to the BAA, for which no waiver was required.) Finally, the Unreasonable Cost exception in the 1982 STAA provision was significantly strength- ened, applying a 25 percent differential to compare domestic bids against bids that include some for- eign goods (except for rolling stock, which remained at 10 percent). In other ways, the 1982 STAA Buy America pro- vision was less strict than its predecessor or the BAA. Most importantly, the 1982 STAA provision expressly restricted the purchase only of steel, ce- ment, and manufactured goods. There was no longer a requirement that unmanufactured goods be domestic, so grant recipients were allowed to supply unmanufactured goods that were “mined” or otherwise produced in foreign countries for use on grant projects. The separate enumeration of steel, cement, and manufactured goods seems to imply that Congress did not consider manufactured goods to include steel and cement. Like the BAA, therefore, manu- factured goods in the 1982 STAA provision ap- peared to refer primarily to mechanical and elec- tronic equipment that was assembled, not to bulk construction materials that may have undergone some degree of production or processing. Further- more, the 1982 STAA provision, unlike the BAA, did not restrict the purchase or use of unmanufac- tured goods produced in other countries. These sub- tle differences in language suggest that Congress did not intend to restrict the purchase of foreign bulk construction materials (e.g., aggregate), except for steel and cement, with the 1982 STAA Buy America provision. The 1982 STAA provision was almost immedi- ately weakened in practice. In 1983, the Federal Highway Administration (FHWA) issued a Public Interest waiver for all manufactured goods except for steel and cement.266 The reasons offered by the FHWA were that manufactured goods (with the exception of construction materials) make up a small percentage of highway grant funds. The FHWA appeared to be of the opinion that manufac- tured goods included any bulk construction mate- rial (except for mined or “raw” goods), that had un- dergone some degree of processing or production. The FHWA noted that it had received a number of requests to waive the STAA Buy America require- ments for steel, Portland cement, and asphalt. The FHWA declined to waive the Buy America re- quirements for steel and Portland cement, since 266 48 Fed. Reg. 53,099 (Nov. 25, 1983).

29 steel and cement were expressly named in the stat- ute and were the focus of congressional debate re- garding the 1982 STAA provision. However, the FHWA determined that asphalt was a manufac- tured good, and that the FHWA waiver for manu- factured goods included asphalt. The FHWA justi- fied its decision because there was little concern shown by Congress to protect the domestic asphalt industry, despite the large amount of grant funds spent on asphalt. A few months later, in March 1984, Congress removed the express preference for domestic ce- ment from the STAA Buy America provision.267 Thereafter, the STAA Buy America provision only restricted the use of foreign steel on FHWA grant projects, or foreign steel and manufactured goods on Federal Transit Administration (FTA) grant projects. 3. 1987 Surface Transportation and Uniform Re- location Assistance Act.—The Surface Transporta- tion and Uniform Relocation Assistance Act (STURAA) of 1987268 updated the STAA Buy Amer- ica provision once again. The STAA Buy America provision still applied only to highway and transit grants, not airport development grants. However, STURAA rescinded $148 million of previously au- thorized AIP airport development funds269 and re- directed those funds into a number of highway pro- jects to improve access to specific airports.270 Therefore, this legislation effectively extended the STAA Buy America provision to certain airport improvement funds. The 1987 revisions included a number of changes to the STAA Buy America provision. First, the Unreasonable Cost differential in the STAA Buy America provision was increased to 25 percent for all projects, including the procurement of rolling stock.271 Second, the Substantial Domestic Manu- facture exception for rolling stock was modified to require an evaluation of the cost not just of compo- nents, but also subcomponents.272 Finally, the re- quired percentage of domestic components (and subcomponents) was increased from 50 to 60 per- cent of the total cost of the end product in order to satisfy the Substantial Domestic Manufacture ex- ception.273 These changes all had the effect of creat- ing a stricter domestic preference under the STAA Buy America provision. 4. 1991 Intermodal Surface and Transportation Efficiency Act.—The STAA Buy America provision 267 Pub. L. No. 98-229, § 10 (1984). 268 Pub. L. No. 100-17 (1987). 269 Id. § 209. 270 Id. §§ 138, 149. 271 Id. § 337(c). 272 Id. § 337(b). 273 Id. § 337(a)(1)(B). was revised again by the Intermodal Surface Transportation Efficiency Act (ISTEA) of 1991.274 This legislation authorized a number of both high- way and transit projects to improve access to spe- cific airports, and the STAA Buy America provision applied to those funds. However, the STAA Buy America provision did not apply to traditional air- port grant projects under the AIP. ISTEA amended the STAA Buy America provi- sion to expressly include iron (along with steel) as goods that must be of domestic origin on ISTEA projects.275 ISTEA also required the Secretary of Transportation to issue a report to Congress on all foreign goods that would be purchased as excep- tions to the STAA Buy America provision in fiscal years 1992 and 1993.276 ISTEA also established that contractors were subject to debarment, sus- pension, and ineligibility if they falsely represented that highway or transit grant funds were used to purchase domestic goods.277 These changes all tended to strengthen the domestic preference re- quirements. ii. Agency Regulations Although the identical STAA Buy America legis- lation applies to both highway and transit grants, there are significant differences in the way the leg- islation has been implemented in regulations ad- ministered by the FHWA and the FTA. The follow- ing discussion shows how the current STAA Buy America language, which is very similar to the AIP Buy America provision in most respects, has been interpreted or implemented differently by these agencies. 1. Federal Highway Administration.—Because of the FHWA waiver for manufactured products, cur- rent FHWA regulations implementing the STAA Buy America provision only require the use of do- mestic steel and iron on federally aided highway construction projects.278 Because the STAA Buy America provision has been waived for all manufac- tured goods, there is no need to consider whether goods on FHWA projects are manufactured sub- stantially all from domestic components. The FHWA regulations permit an exception for Unreasonable Cost where the use of domestic steel or iron increases the total bid by more than 25 per- cent.279 No waiver is required for FHWA grantees where the Unreasonable Cost exception is satisfied. FHWA grantees may request waivers for Public Interest or Unavailability of domestic steel and 274 Pub. L. No. 102-240 (1991). 275 Id. § 1048(a). 276 Id. § 1048(b). 277 Id. § 1048(b). 278 23 C.F.R. § 635.410(b)(1) (2011). 279 23 C.F.R. § 635.410(b)(3) (2011).

30 iron.280 The FHWA response to any such waiver request must be in writing and made available to the public upon request.281 The FHWA regulations do not require public disclosure of waivers for the Unreasonable Cost exception. 2. Federal Transit Administration.—FTA regula- tions implementing the identical STAA Buy Amer- ica legislation differ significantly from the FHWA regulations, primarily because the FTA regulations apply to grantee purchases of steel, iron, and manufactured goods.282 Manufactured goods are defined as those that result from a process in which its components are substantially transformed, “so that they represent a new end product functionally different” from the sum of the components.283 This is a broader definition of manufactured goods than that implied in the BAA, which specifically allows for a category of unmanufactured goods that are “produced,” which is differentiated from raw goods that are “mined.” For example, refined construction materials such as asphalt may be considered manu- factured goods under the FTA definition, whereas under the BAA they may be considered unmanufac- tured goods that are “produced” from raw goods. In the FTA regulations, manufactured goods are domestic goods if 100 percent of the manufacturing processes (not just final assembly) take place in the United States, and 100 percent of the components are domestic goods.284 Components are defined as “any article, material, or supply, whether manufac- tured or unmanufactured, that is directly incorpo- rated into the end product at the final assembly location.”285 Note that this is a very different defini- tion of domestic manufactured goods than the com- ponent test used in the BAA, in that it establishes a much stricter criterion for domestic content, and is more akin to the substantial transformation test of the TAA with regard to determining the location of manufacture. FTA grantees may request waivers for Public In- terest, Unavailability, and Unreasonable Cost.286 Unavailability is presumed where there is no do- mestic bid in response to an open solicitation.287 The Unreasonable Cost waiver will be granted if the lowest total bid, increased by 25 percent if any foreign goods are included in the bid, is still less than the lowest fully domestic bid.288 The FTA Ad- ministrator must issue a written response to any 280 23 C.F.R. § 635.410(c)(1) (2011). 281 23 C.F.R. § 635.410(c)(6) (2011). 282 49 C.F.R. § 661.5 (2011). 283 49 C.F.R. § 661.3 (2011). 284 49 C.F.R. § 661.5(d) (2011). 285 49 C.F.R. § 661.3 (2011). 286 49 C.F.R. § 661.9 (2011). 287 49 C.F.R. § 661.7(c)(1) (2011). 288 49 C.F.R. § 661.7(d) (2011). waiver request (including justification for the waiver decision), and must make that decision available for public inspection.289 In the case that a Public Interest waiver is granted, the FTA Admin- istrator must publish the written justification in the Federal Register.290 The FTA regulations include the Substantial Domestic Manufacture exception from the STAA Buy America provision for rolling stock where final assembly takes place in the United States, and the value of domestic components and subcomponents exceeds 60 percent of the value of the rolling stock.291 No waiver is required if that two-part test is satisfied (despite the statutory language that the Secretary of Transportation must determine that the Substantial Domestic Manufacture exception has been satisfied). The FTA regulations provide extensive guidance for computing the foreign and domestic portions of the cost of goods for purposes of the Substantial Domestic Manufacture exception. The costs of com- ponents and subcomponents are treated as domes- tic if Unavailability or Unreasonable Cost waivers have been granted for those components and sub- components.292 The entire cost of a component is treated as domestic if it was manufactured (i.e., “substantially transformed”) in the United States, and more than 60 percent of its subcomponents are of domestic origin.293 The subcomponents are con- sidered to be of domestic origin if they are merely manufactured in the United States, regardless of the origin of the sub-sub-components.294 The FTA’s implementation of the STAA Buy America provision is clearly stricter than the FHWA’s implementation, both because it applies to manufactured goods and because the FTA is re- quired to publish its rationale for any waivers. The FAA APP-500 Office informed the author that it has relied on the voluminous public record of FTA rulemaking in this area to guide FAA interpreta- tions of similar provisions in the AIP Buy America provision. C. Airport Improvement Program Buy America Provision i. Statutory Language Since 1990, there have been statutory Buy America requirements that apply to the use of FAA grant funds.295 This preference applies specifically 289 49 C.F.R. § 661.9(e) (2011). 290 49 C.F.R. § 661.7(b) (2011). 291 49 C.F.R. § 661.11(a) (2011). 292 49 C.F.R. § 661.7(f) (2011). 293 49 C.F.R. § 661.11(g) (2011). 294 49 C.F.R. § 661.11(h) (2011). 295 49 U.S.C. § 50101 (2010).

31 to FAA airport development grants under the AIP;296 but also to appropriations for FAA opera- tions (including infrastructure systems develop- ment for the aviation industry);297 site preparation work associated with acquiring, establishing, or improving an air navigation facility;298 demonstra- tion projects necessary for research and develop- ment activities299 (not including ground transporta- tion demonstration projects300); and appropriations from the Airport and Airway Trust Fund301 (except for air traffic controller performance research,302 airway science curriculum grants,303 civil aviation security research and development,304 and ad- vanced training facilities for air carrier aircraft maintenance technicians305). The AIP Buy America provision permits the ap- propriation of FAA funds “for a project only if steel and manufactured goods used in the project are produced in the United States.”306 Whereas the BAA created a domestic preference for both manu- factured goods and unmanufactured goods (those that had been mined or produced in the United States), the AIP Buy America provision (like the STAA Buy America provision at the time the AIP provision was enacted) only literally restricts the use of foreign steel and manufactured goods that have been produced in the United States. There- fore, at first glance, there is no restriction on pur- chases of foreign unmanufactured goods. However, AIP grant recipients should take heed of the waiver requirement for Substantial Domestic Manufac- ture. As described previously, the Secretary of Trans- portation may waive the AIP Buy America re- quirements so as to permit the use of foreign steel or manufactured goods in the following cases: • Public Interest. Where the use of domestic steel or manufactured goods would be “inconsistent with the public interest.”307 • Unavailability. Where domestic steel and manufactured goods “are not produced in a suffi- 296 49 U.S.C. ch. 471, subch. I (2011). 297 49 U.S.C. § 106(k) (2011). 298 49 U.S.C. § 44502(a)(2) (2011). 299 49 U.S.C. § 44509 (2011). 300 49 U.S.C. § 47127 (2011). 301 49 U.S.C. ch. 481 (2011). 302 49 U.S.C. § 48102(e) (2011). 303 49 U.S.C. § 48106 (2011). 304 49 U.S.C. § 48107 (2011). 305 49 U.S.C. § 48110 (2011). 306 49 U.S.C. § 50101(a) (2011). 307 49 U.S.C. § 50101(b)(1) (2011). cient and reasonably available amount or are not of a satisfactory quality.”308 • Unreasonable Cost. Where the use of domestic steel and manufactured goods “will increase the cost of the overall project by more than 25 per- cent.”309 • Substantial Domestic Manufacture. Where the project involves procurement of a facility or equip- ment, and final assembly of the facility or equip- ment occurs in the United States, and “the cost of components and subcomponents produced in the United States is more than 60 percent of the cost of all components of the facility or equipment.”310 The Public Interest and Unavailability excep- tions are repeated almost verbatim from the BAA and the STAA Buy America provision, with the same lack of clarity regarding what might consti- tute a public interest exception, insufficient quan- tity, or unsatisfactory quality. However, like the STAA Buy America provision and unlike the BAA, the AIP Buy America provision sets clear guidance, including numeric thresholds, for the following key elements. 1. Unreasonable Cost.—Unlike the BAA, the AIP Buy America provision replicates the STAA Buy America requirement that domestic goods must be used unless that would increase the total project cost by more than 25 percent.311 Recall that the BAA Unreasonable Cost surcharge that entered the FAR and AMS was a surcharge of only 6 percent, or at most 12 percent (if the domestic offeror was a small business), which applied to bids to supply foreign goods. Therefore, there is a stronger prefer- ence for domestic goods in the Buy America provi- sions for transportation grants (including AIP grants), even if those goods are substantially more expensive than what would be considered “unrea- sonable” under the BAA. 2. Substantial Domestic Manufacture.—The al- lowance in the BAA for some percentage of the final product to be foreign as long as the final product was manufactured in the United States “substan- tially all” from domestic goods has been encoded in the AIP Buy American provision as a situation re- quiring a waiver. The Substantial Domestic Manu- facture exception for rolling stock from the STAA Buy America provision was adopted in the AIP Buy America provision for all manufactured goods and facilities.312 This requires that more than 60 per- cent of the cost of all components (and subcompo- nents) of the final equipment or facility be attribut- 308 49 U.S.C. § 50101(b)(2) (2011). 309 49 U.S.C. § 50101(b)(4) (2011). 310 49 U.S.C. § 50101(b)(3) (2011). 311 49 U.S.C. § 50101(b)(4) (2011). 312 49 U.S.C. § 50101(b)(3) (2011).

32 able to domestic goods, and requires final assembly of the equipment or facility to take place in the United States. Therefore, although the AIP Buy America provision does not expressly prohibit the purchase of foreign unmanufactured goods, such goods must account for less than 40 percent of the cost of any equipment or facility procured with AIP funds. This Substantial Domestic Manufacture waiver requirement in the AIP Buy America provision ap- pears to create a more stringent requirement for airport grants than exists elsewhere in federal law. The application of the component test to facilities (rather than to manufactured construction materi- als) is unprecedented. Where the STAA Buy Amer- ica provision was weakened to the point that steel and iron were the only construction materials that it governed on FHWA projects,313 the AIP Buy America provision effectively governs all construc- tion materials because AIP building construction projects are to be evaluated at the facility level. The AIP grant recipient must either use only domestic construction materials in the construction of a facil- ity, or otherwise evaluate the cost of all components and subcomponents of the facility in order to obtain a Substantial Domestic Manufacture waiver.314 Based solely on the statutory language of the AIP Buy America provision, it appears that Con- gress intended to create a stronger domestic prefer- ence requirement for FAA-funded grant projects than for other transportation grant programs or direct procurements by the federal government. The following section investigates the congressional history of this provision. ii. Legislative History 1. Airport and Airway Safety and Capacity Ex- pansion Act of 1987.—The first Buy America provi- sion that expressly applied to airport development grants was enacted as part of the Airport and Air- way Capacity Expansion Act of 1987. This legisla- tion originated as an amendment to the AIP spon- sored by Senator Frank H. Murkowski entitled, “A 313 See supra Pt. III.B.i.2. 314 The FAA’s voluntary Buy America waiver request form for building construction projects (such as terminals, ARFF buildings, and SRE buildings) instructs the bidder that the “facility” in the AIP Buy America provision refers to the “AIP-funded building,” and that 60 percent of the cost of components and subcomponents of the facility must be produced in the United States. Fed. Aviation Admin., Buy America Waiver Request for Terminals, ARFF Build- ings, and SRE Buildings Funded Under the Airport Im- provement Program, available at http://www.faa.gov/airports/northwest_mountain/ engineering/design_resources/media/buy_america_waiver _building.doc and http://www.faa.gov/airports/central/ airports_resources/media/BA_Waiver_Building.doc. bill to deny funds for projects using products or services of foreign countries that deny fair market opportunities.”315 Senator Murkowski explained that the bill was motivated by the Japanese gov- ernment’s refusal to allow American firms to com- pete for Japanese airport construction projects. “Given the internationally competitive strength of the United States industry in the area of airport construction and a growing services trade deficit with Japan,” he said, “Japan’s unwillingness to deliver with specific contractural [sic] opportunities in this market is unacceptable.”316 Therefore, Sena- tor Murkowski proposed restricting AIP funds to U.S. “constructors and products,” unless the Secre- tary of Transportation and the U.S. Trade Repre- sentative determined that one of the following ex- ceptions was met:317 • Public Interest. • Unavailability (“the products are not produced in the United States”). • Unreasonable Cost (“exclusion of foreign goods or contractors would raise cost by 50 percent”). • Free Trade (“the country of origin of the prod- ucts or the bidder is offering fair reciprocity in ac- cess to public or substantially publicly funded con- struction projects”). Senator Murkowski’s speech makes clear that his primary purpose was to open access to foreign markets for domestic firms; therefore, unlike most Buy America provisions, the Free Trade exception here was paramount: “Mr. President, the Federal Aviation Administration plans to spend some $11 billion over the next decade on the rehabilitation of American airports. My amendment set forth a chal- lenge: Either cease unfair trade practices against American companies or forego participation in this project. The choice is simple.”318 The proposed legislation did not impose any Buy America restrictions against purchases from, or contracts with, contractors from countries that did not discriminate against American manufacturers and construction providers. In the case of countries that did discriminate against American products and services, there were very strict thresholds pro- posed. As originally envisioned, domestic goods would have to be absolutely unavailable (“not pro- duced in the United States”) to justify foreign pur- chases. This was stricter than the BAA, which qualified the Unavailability exception by permit- ting foreign goods where domestic goods were not produced in “sufficient quantities or adequate qual- 315 S. 764, 100th Cong. (1987). 316 132 CONG. REC. S13257-02 (1986). 317 Id. 318 Id.

33 ity.” More noticeably, as originally envisioned, the legislation would impose a 50 percent evaluation differential on the total cost of any contract where any portion of the funds would go to foreign suppli- ers or contractors, in comparison to the 6 to 12 per- cent Unreasonable Cost line-item surcharge in the BAA. Senator Murkowski’s bill was unique among Buy America provisions in that it preferred domes- tic services (e.g., “constructors” and “contractors”) in addition to domestic goods (“products”). In a speech in the Senate on January 21, 1987, Senator Murkowski emphasized the need to amend the AIP in order to open the Japanese construction market to American contractors, including those providing “construction, architectural, and engineering de- sign” services.319 Shortly before the Senate voted on the provision on October 28, 1997, Senator Murkowski informed the Senate that the effect of the provision would be to “prohibit foreign firms from bidding on projects funded under the act unless their home country allows our design engi- neering, construction and architecture firms to par- ticipate on public works projects in their home market.”320 He stated that the legislation would “provide United States negotiators with important leverage in our efforts” to have U.S. contractors participate on the Kanzai airport project, “in addi- tion to approximately $62 billion in other major projects which will be built in Japan over the next decade.”321 Senator Alfonse D’Amato, speaking of Senator Murkowski, said, “If an American company ever does get to participate in that airport con- struction, they ought to name a runway after him.”322 By the time the legislation was introduced on March 18, 1987, it had been weakened significantly from Senator Murkowski’s original concept. How- ever, it still would deny AIP funds to “any project which uses any product or service of a foreign coun- try” that the U.S. Trade Representative had deter- mined failed to provide access to U.S. contrac- tors.323 No provision was made for even the insubstantial use of such foreign goods. By transforming the Free Trade language from an exception (in his original proposal) into the af- firmative purpose of the provision, Senator Murkowski argued, “This is not a ‘Buy America’ provision. It starts from the premise that our pro- jects are open to foreign participation, but places the stipulation that participation be based on recip- 319 133 CONG. REC. S997-02 (1987). 320 133 CONG. REC. S29538-01 (1987). 321 Id. 322 133 CONG. REC. S16641-01 (1987). 323 133 CONG. REC. S3327-02 (1987). rocal opportunities for U.S. firms overseas.”324 As introduced, the bill provided for exceptions only where the Secretary of Transportation determined that one of the following applied:325 • Public Interest. • Unavailability (where the same class or kind of goods or service is not produced or offered do- mestically or in a nondiscriminatory foreign coun- try “in sufficient and reasonably available quanti- ties and of a satisfactory quality”). • Unreasonable Cost (where the exclusion of the goods or services from the discriminatory foreign country “would increase the cost of the overall pro- ject contract by more than 20 percent”). Therefore, as introduced, unlike the BAA, the bill would treat goods and services from nondis- criminatory foreign trading partners as domestic, rather than as Public Interest exceptions requiring a waiver. Also, the Unreasonable Cost differential in the bill was reduced to 20 percent (from Senator Murkowski’s original proposal of 50 percent), which still represented a significant increase over the 6 to 12 percent surcharge in the BAA. Senator Murkowski’s bill was eventually incor- porated into the Airport and Airway Safety and Capacity Expansion Act (AASCEA),326 which passed both houses of Congress nearly unani- mously in October 1987. On December 2, 1987, a conference was initiated between members of the House and Senate to reconcile conflicting provi- sions of the versions of the AASCEA that had passed each house. Even though Senator Murkowski’s Buy America provision was identical in both versions, so that it did not need to be recon- ciled, the Conference Report on December 15, 1987, reconciling the two bills addressed the Buy Amer- ica provision: In order to focus limited resources on known signifi- cant barriers to U.S. trade, the conferees intend that the scope of USTR determinations for purposes of this Act be limited on[l]y to those foreign countries that are listed in the annual report as maintaining barriers to U.S. construction services for such pro- jects. The conferees expect the annual report will de- scribe significant barriers of any foreign country to such services and that existing authorities…will also be used against unfair trade practices.327 (emphasis added.) Therefore, despite the very strict language of the Buy America provision that had passed both houses of Congress, the conferees indicated that they in- tended its use to be limited, and implied that the 324 133 CONG. REC. S29826-01 (1987). 325 133 CONG. REC. S3327-02 (1987). 326 H.R. 2310, 100th Cong. (1987). 327 H.R. REP. NO. 100-484, at 69–70 (1987).

34 federal government had the existing legal authority to combat discrimination on airport construction projects by foreign countries without having to re- sort to this Buy America provision. Although clear majorities of both houses of Congress understood the legislation was intended to be used immediately to discriminate against goods and services from certain trading partners (specifically including Ja- pan), it has never been used for that purpose. Within days of the Conference report, the recon- ciled bill was signed into law by President Reagan,328 and it remains in effect today.329 How- ever, it only operates to restrict the purchase of goods and services from countries that the U.S. Trade Representative determines to deny fair mar- ket opportunities to U.S. contractors. On April 29, 2011, the U.S. Trade Representative announced that it had “determined not to list any countries as denying fair market opportunities for U.S. prod- ucts, suppliers, or bidders in foreign government- funded airport construction projects.”330 Therefore, the 1987 AIP Buy America legislation is not cur- rently effective in restricting AIP funds to foreign contractors. 2. Aviation Safety and Capacity Expansion Act of 1990.—The primary AIP Buy America provision today is the result of a multi-year effort by Repre- sentative James Traficant to impose Buy America requirements on federal funds (including grant funds) throughout the government. In 1989, Repre- sentative Traficant stated that the 1987 efforts by Senator Murkowski and others to gain access to the Japanese airport construction industry had “failed so far. In my district we have lost the whole steel industry.”331 Representative Traficant went on to state that the U.S. government helped Japan to build its own steel industry, in the process harming the U.S. economy. This was the impetus for Repre- sentative Traficant’s Buy America efforts. a. Unsuccessful Attempts at Legislation (1989– 1990).—In the AIP context, Representative Traficant’s Buy America efforts first appeared as an amendment to the Aviation Security Act of 1989,332 which would have authorized the FAA to provide grants for explosive detection equipment at airports. Representative Traficant’s amendment to the Aviation Security Act333 would have given the 328 Airport and Airway Safety and Capacity Expansion Act of 1987, Pub. L. No. 100-223, 101 Stat. 1486 (1987). 329 49 U.S.C. § 50104 (2011). 330 Notice with Respect to List of Countries Denying Fair Market Opportunities for Government-Funded Air- port Construction Projects, 76 Fed. Reg. 24,082 (Apr. 29, 2011). 331 135 CONG. REC. H2354-04 (1989). 332 H.R. 1659, 101st Cong. (1989). 333 H. Amdt. 256 to H.R. 1659, 101st Cong. (1989). FAA the discretion to prefer domestic suppliers for purchases of explosive detection equipment. Intro- ducing the amendment on the floor of the House, Representative Traficant stated, “I think an Ameri- can firm located in our country, hiring American people, keeping Americans working, should have a preference, and this amendment gives the Adminis- trator of the Federal Aviation Administration the opportunity to grant these awards to American firms. It does not compel it.”334 The Buy America amendment was agreed upon by voice vote in the House and it was added to the bill. The amended Aviation Security Act passed the House overwhelmingly by a 392–31 vote on Sep- tember 20, 1989, and was sent to the Senate, which never acted on the bill.335 On May 15, 1990, the President’s Commission on Aviation Security and Terrorism issued a report stating that the explosive detection equipment was immature. The report “recommended that the FAA defer the requirement for widespread application of [explosive detection] systems until the technology is developed further and that every possible effort be made to encourage the development of additional sources of [explosive detection] technology.”336 Immediately thereafter, on May 24, 1990, Rep- resentative Robert Torricelli introduced the FAA Research, Engineering, and Development Authori- zation Act (FAA R&D Act) of 1990,337 which appro- priated funding for FAA research grants. The bill was referred to the House Committee on Science, Space, and Technology, which was chaired by Rep- resentative Robert Roe. On June 13, 1990, Repre- sentative Roe’s Committee amended the bill by add- ing a Buy America provision that duplicated the language from Representative Traficant’s Buy America amendment to the Aviation Security Act. In reporting its amendment to Representative Torricelli’s bill, the Committee explained that it “authorizes the FAA to favor domestic firms over foreign firms in the awarding of research contracts” because the “Committee is interested in supporting American industry.”338 The amended bill was never acted upon by the House. b. Successful Legislation—Aviation Safety and Capacity Expansion Act (1990) i. FAA Research Grant Buy America Provision.— On June 27, 1990, Representative James Oberstar introduced the Aviation Safety and Capacity Ex- pansion Act (ASCEA) of 1990,339 which would au- thorize continued AIP funding through fiscal year 334 135 CONG. REC. H5781 (1989). 335 135 CONG. REC. H5787 (1989). 336 H.R. REP. NO. 101-585, at 9 (1990). 337 H.R. 4949, 101st Cong. (1990). 338 H.R. REP. NO. 101-585, at 12 (1990). 339 H.R. 5170, 101st Cong. (1990).

35 1992. On July 19, 1990, Representative Roe offered an amendment to ASCEA incorporating the entire text of the FAA R&D Act.340 This amendment in- cluded the Buy America provision for FAA research grants, which was originally drafted by Represen- tative Traficant for explosive detection technology, and which had been incorporated into the FAA R&D Act by Representative Roe’s Committee on Science, Space, and Technology. The research grant Buy America provision would give the FAA the discretion to favor domestic firms for the award of research grants. The FAA would be allowed to provide grants to domestic firms, even if a foreign firm was the low bidder, as long as both of the following criteria were satis- fied:341 • Substantial Domestic Manufacture. Any final product delivered under the research grant must be assembled in the United States of at least 50 per- cent domestic components. • Reasonable Cost. The domestic firm’s bid must be no more than 6 percent higher than the foreign bid. However, even if both conditions were satisfied, the FAA would still be obligated to award the grant to the low foreign bidder if appropriate authorities determined that any of the following situations required it:342 • Public Interest (to be determined by the FAA Administrator, taking “into account United States international obligations and trade relations”). • Free Trade (to be determined by the U.S. Trade Representative if the failure to award to the low foreign bidder would violate an international trade agreement). • National Security considerations. The legislation as proposed would also require the FAA to submit a report to Congress describing all FAA research grant awards in fiscal years 1990 and 1991, including the grants made to foreign firms, any exceptions invoked to justify awards to foreign firms, and any awards to domestic firms as a result of the research grant Buy America provi- sion.343 The research grant Buy America provision was unique among Buy America bills in that it did not mandate domestic preferences. Instead, it gave the FAA a defense against bid protests by foreign bid- ders in the event the FAA awarded a grant to a higher domestic bid. 340 H. Amdt. 583 to H.R. 5170, 101st Cong. (1990). 341 133 CONG. REC. H5075 (1990). 342 Id. 343 Id. One apparent problem with this provision, how- ever, is that its language was clearly drafted to apply to competitive equipment procurements (i.e., explosive detection equipment) rather than re- search grants. First, it required the domestic bidder to establish that its “final product” was manufac- tured substantially of domestic components.344 Generally, however, most research grant funds go toward research services rather than the cost of product manufacturing, so this requirement would not apply to most grants. Second, unlike procure- ment contracts, research grants typically do not have to be granted to the lowest competent bidder. The FAA could therefore reject a lower foreign bid to award the grant to a domestic bidder if the do- mestic grant application had more technical merit—the FAA did not need this Buy America authority to justify those domestic grant awards. The research grant Buy America provision would appear to have very little impact on FAA grant awards. Nevertheless, Representative Roe’s amendment (authorizing Buy America preferences for FAA research grants) was adopted by voice vote in the House with no recorded debate regarding the research grant Buy America provision.345 ii. AIP Buy America Provision.—Immediately af- ter the House adopted the research grant Buy America provision, Representative Traficant of- fered a second Buy America amendment to the ASCEA that would restrict AIP funds to projects where “steel and manufactured products used in such project are produced in the United States.”346 There were four exceptions: • Public Interest. • Unavailability (“materials and products are not produced in the United States in sufficient and reasonably available quantities and of a satisfac- tory quality”).347 • Unreasonable Cost (“inclusion of domestic ma- terial will increase the cost of the overall project contract by more than 25 percent”).348 • Substantial Domestic Manufacture (“final as- sembly of the facility or equipment” in the U.S., and “the cost of components and subcomponents which are produced in the United States is more than 60 percent of the cost of all components.”)349 (emphasis added.) This provision was markedly stricter than Rep- resentative Traficant’s earlier attempts to enact 344 Id. 345 133 CONG. REC. H5097 (1990). 346 H. Amdt. 584 to H.R. 5170, 101st Cong. (1990). 347 133 CONG. REC. H5097 (1990). 348 Id. 349 Id.

36 Buy America provisions regarding airport grants. Unlike Representative Trafficant’s earlier attempt to impose Buy America requirements on explosive detection equipment (which language was later adopted for FAA research grant funds), this new amendment adopted the STAA Buy America ap- proach of codifying the Substantial Domestic Manufacture requirement as an exception, requir- ing a waiver. Therefore, unlike the BAA, the AIP provision would require facilities and equipment to be composed entirely of domestic goods unless there was an affirmative finding that the facility or equipment was substantially composed of domestic goods. Also, like the STAA Buy America provision, the Substantial Domestic Manufacture in the AIP pro- vision adopted the criteria of 60 percent domestic manufacture (in terms of cost), and required the cost analysis to extend to the subcomponent level. However, whereas the Substantial Domestic Manu- facture exception to the STAA provision applied only to rolling stock, the AIP provision would apply to all equipment and facilities acquired with AIP grants. Although the bill only purported to restrict the purchase of foreign steel and manufactured goods, the cost of unmanufactured goods used as components (or subcomponents) of manufactured goods or facilities must be considered under the literal text of the Substantial Domestic Manufac- ture exception. Also, this AIP Buy America provision adopted the STAA Unreasonable Cost differential of 25 per- cent applied to the overall project cost. This was much stricter than the standard 6 percent sur- charge applied to foreign line items in the BAA, and also much stricter than Representative Trafi- cant’s own earlier attempts to enact Buy America provisions for airport funds. Despite the much stricter Buy America language of Representative Traficant’s AIP amendment in comparison to other Buy America requirements for federal transportation funds, there was very little debate on the amendment. The debate does not reflect that the legislators realized the revolution- ary nature of applying the Substantial Domestic Manufacture test to the overall cost of facilities. Representative Glenn Anderson spoke in favor of the AIP Buy American provision, stating that it was “very similar to the provisions that apply to our surface transportation programs [which] have worked well since adopted by the Congress in 1982. There is no reason why we should not apply these provisions to the aviation programs.”350 Likewise, Representative Oberstar stated that the provision “is now law and has been statutory law in the Fed- eral Highway Program since 1982. It has been tre- 350 133 CONG. REC. H5098 (1990). mendously successful in assuring that all of the steel that goes into the Federal Highway Program is American steel.”351 There were no remarks made in opposition to the amendment, and it was adopted by voice vote in the House on July 19, 1990.352 iii. Reconciliation and Passage.—On August 2, 1990, the amended ASCEA, containing the Buy America provisions for AIP grants and FAA re- search grants, overwhelmingly passed the House by a 405–15 vote and was sent to the Senate, where it was referred to the Committee on Commerce and never acted upon. However, on October 16, 1990, Representative Leon Panetta, Chairman of the House Committee on the Budget, introduced the Omnibus Budget Reconciliation Act of 1990 to re- solve differences in spending bills passed by the House and the Senate.353 This bill incorporated in its entirety the ASCEA, as approved by the House, including the two Buy America provisions for AIP grants and FAA research grants. In announcing the legislation, the House Committee on the Budget announced that it intended for the legislative his- tory of the ASCEA “to also serve as the legislative history for similar provisions in Reconciliation.”354 On October 27, 1990, a conference of House and Senate members reported a reconciled bill, adopt- ing the two FAA Buy America provisions previously passed by the House, in the absence of similar pro- visions in the Senate budget. In describing the FAA research grant Buy America provision, the Confer- ence Report stated that it “authorizes the Adminis- trator of the FAA to award a contract to a domestic firm under certain circumstances that under the use of competitive procedures would be awarded to a foreign firm.”355 In reality, however, the research grant Buy America provision applied to research grants, which were not necessarily bound by com- petitive bidding requirements. In describing the AIP Buy America provision, the Conference Report stated that it “[r]equires FAA to utilize products made in America, subject to exceptions,” and “prohibits FAA contracts with for- eign companies whose government is found by the President to be engaging in procurement practices which discriminate against U.S. companies.”356 This latter prohibition was not actually in the AIP Buy America provision, but rather had been federal law since 1987 by virtue of Senator Murkowski’s amendment to the AASCEA. There is therefore little indication that most congressional members 351 Id. 352 Id. 353 H.R. 5835, 101st Cong. (1990). 354 H.R. REP. NO. 101-881, at 167 (1990). 355 136 CONG. REC. H12706 (1990). 356 136 CONG. REC. H12703 (1990).

37 fully understood how these Buy America provisions would impact FAA grant programs. The reconciled budget was debated briefly in both houses, but there was no recorded debate re- garding the two FAA Buy America provisions. The measure narrowly passed the House by a 228–200 vote, and passed the Senate by a 54–45 vote, on October 27, 1990. The measure, including the two FAA Buy America provisions, was signed into law by President George H.W. Bush on November 5, 1990.357 Airport development appropriations by Congress in subsequent years expressed the “sense of the Congress that, to the greatest extent practicable, all equipment and products purchased with funds made available in this Act should be American- made,” and required the FAA to include a notice describing that sense of Congress in any grant in- strument.358 However, the FAA research grant pro- vision and the AIP provision remained the only substantive Buy America provisions binding on subsequent appropriations for research grants and AIP grants, respectively. iv. Regulatory Implementation.—After passage of the AIP Buy America provision, the FAA appears to have initially adopted the regulations imposed on FTA grantees implementing the STAA Buy Amer- ica provision. The C.F.R. still states that the proce- dures in 49 C.F.R. § 660 (corresponding to the 1978 STAA Buy America provision) and 49 C.F.R. § 661 (corresponding to the revised STAA Buy America provision) are applicable to recipients of FAA grant funds due to the enactment of the AIP Buy America provision.359 (The C.F.R. also states that “additional” nonregulatory Buy America guid- ance is available in FAA Order 5100.38, the AIP Handbook, and additional conditions may be con- tained in individual grant awards.360) It is unclear why the FTA grant regulations were initially adopted for FAA AIP grants. The 1978 STAA Buy America provision (which had a $500,000 threshold before it became applicable) was already obsolete when the AIP Buy America provision was enacted in 1990, and the require- ments of the two provisions were markedly differ- ent. (49 C.F.R. § 660 was formally removed from the C.F.R. in 1995 as obsolete.361) The revised STAA Buy America provision was very similar to the AIP Buy America provision (with no project cost threshold, a 25 percent Unreasonable Cost 357 Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, 104 Stat. 1388 (1990). 358 Department of Transportation and Related Agencies Appropriations Act, Pub. L. No. 104-50, § 329 (1995). 359 49 C.F.R. § 19.44(f)(1) (2011). 360 Id. 361 60 Fed. Reg. 65,597 (Dec. 20, 1995). surcharge, and a 60 percent Substantial Domestic Manufacture requirement for both components and subcomponents). However, the Substantial Domes- tic Manufacture exception in 49 C.F.R. § 661 ex- pressly applied only to rolling stock, whereas in the AIP Buy America provision it applied to all equip- ment and facilities. However, as discussed previously, the FAA was authorized in 1995 to adopt its own AMS, to which the FAR does not apply.362 The AMS includes a clause to be inserted in FAA contract instruments for FAA lines of business where 49 U.S.C. § 50101 “takes precedence” over the BAA for AIP grant pro- jects.363 Similar notices are required to be inserted into contract instruments between AIP grant re- cipients and their contractors on AIP-funded pro- jects. These notices require the contractor to certify that steel and manufactured products are produced domestically, and to treat components of unknown origin as if they are foreign goods. The contractor must identify foreign products in writing prior to contract award. 3. Trade Agreements and the AIP Buy America Provision.—In signing on to the WTO Agreement on Government Procurement, the United States defined “procurement” to exclude “non-contractual agreements or any form of government assistance, including cooperative agreements, grants, …and governmental provision of goods and services to persons or governmental authorities not specifically covered under U.S. annexes to this agreement.”364 Likewise, in NAFTA, “procurement” is defined to exclude “non-contractual agreements or any form of government assistance, including cooperative agreements, grants, …and government provision of goods and services to persons or state, provincial and regional governments.”365 Therefore, goods from foreign trading partners are not treated as domestic goods for purposes of the AIP Buy Amer- ica provision. In testimony before Congress on May 19, 1994, Allan Mendelowitz of the GAO explained that, dur- ing the 1993 Uruguay Round to improve the Agreement on Government Procurement, the European Union (E.U.) considered subjecting its telecommunications industry to the Agreement if the United States would eliminate Buy America requirements in its federally funded airport, high- 362 See supra Pt. II.D.ii. 363 Fed. Aviation Admin., Acquisition Mgmt. Guidance, T3.6.4-5 (Apr. 1996). 364 World Trade Org., Agreement on Government Pro- curement, App. 1, United States, General Notes, WT/Let/672 (Mar. 22, 2005), available at http://www.wto.org/english/tratop_e/gproc_e/usagen.doc. 365 North American Free Trade Agreement, Part IV: Government Procurement, ch. 10, § A, art. 1001.

38 way, and transit projects.366 The parties did not achieve a compromise, because “in the end the two sides considered these areas too sensitive to be in- cluded.”367 However, in a subsequent 1994 United States–E.U. bilateral agreement in Marrakesh, Morocco, the E.U. agreed to subject its electric utili- ties and ports to the Agreement, in return for the United States granting preferential treatment for E.U. contractors at “several port authorities (in- cluding their airports).”368 Although the FAA is expressly excluded from the Agreement on Gov- ernment Procurement, a number of government- controlled entities including Port Authorities are required to adhere to the Agreement. However, with respect to those entities, “the Agreement shall not apply to restrictions attached to Federal funds for airport projects.”369 Therefore, the AIP Buy America provision continues to restrict purchases of goods from foreign trading partners using AIP funds, even if the airport sponsor is a port author- ity who is otherwise bound by the Agreement. 4. Vision 100—Century of Aviation Reauthoriza- tion Act of 2003.—The AIP Buy America provision was revisited in 2003 when Congress reauthorized funding for the FAA with the Century of Aviation Reauthorization Act370 (Vision 100), introduced by Representative Don Young and cosponsored by Representative Oberstar, Representative Peter DeFazio, and Representative John Mica. On June 11, 2003, Representative Don Manzullo introduced an amendment that would require the Secretary of Transportation to report to Congress on all waivers granted under the AIP Buy America provision.371 As introduced, the legislation would have required the report to list all waivers granted since the 1990 enactment of the AIP Buy America provision and the reason for each waiver, including the specific exception that was invoked and the rationale for granting each specific waiver. In introducing the legislation, Representative Manzullo expressed his concerns about subjective applications of the Substantial Domestic Manufac- ture requirement in most Buy American legislation: Most people would say that term “substantially all” means 80 to 90 percent or even 99 percent. However, 366 ALLAN MENDELOWITZ, INTERNATIONAL TRADE: EFFORTS TO OPEN FOREIGN PROCUREMENT MARKETS, REP. NO. GAO/T-GGD-94-155, at 7 (1994), http://www.gao.gov/assets/110/105571.pdf. 367 Id. at 7. 368 Id. at 4. 369 World Trade Org., Agreement on Government Pro- curement, U.S. App. 1, Annex 3, WT/Let/672 (Mar. 19, 2010), available at http://www.wto.org/english/tratop_e/gproc_e/usa3.doc. 370 H.R. 2115, 108th Cong. (2003). 371 H. Amdt. 161 to H.R. 2115, 108th Cong. (2003). the regulators at the Federal Government say “sub- stantially all” means only 50 percent. I am glad to say that at the Federal Aviation Administration, “substantially all” is defined as 60 percent for the acquisition of steel or manufactured goods according to the 1995 acquisition regulations which the FAA authorized back then.372 Although Representative Manzullo was pleased that the AIP 60 percent Substantial Domestic Manufacture requirement was encoded in the legis- lation and implementing regulations, he was con- cerned that the lack of an oversight mechanism created the possibility of subjective application of the requirements: I am disturbed…at the instance of waivers allowed by the FAA. …It has been 8 years since the Secre- tary of Transportation was last required to report to Congress on procurements that were not domestic products. This amendment will require a report that will bring us current information on this subject.373 The amendment was agreed upon without oppo- sition by a 426–0 vote in the House on June 11, 2003. However, many members of Congress (includ- ing possibly Representative Manzullo and the Vi- sion 100 sponsors) appeared to be under the im- pression that this legislation was directed toward the procurement of aircraft. Speaking in support of the legislation, Representative Manzullo com- plained that “[c]ivil aircraft and aircraft compo- nents purchased by the FAA are not subject to the Buy American Act.” Representative Manzullo en- couraged passage because the FAA was soliciting bids for a “research and development multi-engine jet aircraft at $14.9 million that could be bought with U.S. taxpayers’ dollars from foreign countries at a time when tens of thousands of air and space workers in this country are unemployed.”374 Repre- sentative DeFazio, speaking in support of the amendment, complained that domestic aircraft en- gine manufacturers were not eligible for certain “subsidies and development grants” made available to their foreign counterparts, and that the federal government was “using taxpayer resources to out- source to foreign vendors in this very critical sec- tor.”375 Likewise, Representative Mica stated, “We have lost about half of the large aircraft manufac- turing, we produce no regional jets in the United States, and I think the very least we can do is have a Buy America provision that has teeth, that has provisions that will ensure that our manufactured goods are respected by the mandates set down by Congress to Buy America.”376 Representative 372 145 CONG. REC. H5227 (2003). 373 Id. 374 Id. 375 Id. 376 Id.

39 Oberstar cautioned that an overly protective Buy America provision might cause foreign aircraft manufacturers to avoid using U.S. manufacturers, pointing to a decline in U.S. manufactured parts being used by Airbus.377 In reality, the AIP Buy America provision has nothing to do with federal procurement of aircraft. Immediately after voting to approve Representa- tive Manzullo’s amendment, Vision 100 passed the House by a 418–8 vote and was sent to the Senate. The following day, the Senate took up its version of the FAA reauthorization,378 introduced by Senator John McCain without any provisions addressing the AIP Buy America provision. A conference be- tween House and Senate members was arranged to resolve the differences between the two bills. The Conference Report reconciling the two bills adopted Representative Manzullo’s provision, in the absence of any similar provision in the Senate version, but weakened it. The Conference Report indicates that the conferees agreed to insert Representative Manzullo’s provision, but limited the scope of the report to be produced by the Secretary of Transpor- tation “to waiver[s] granted during the previous 2 years,”379 rather than all waivers ever granted un- der the AIP Buy American provision. The reconciled bill, including the requirement for FAA to report on all AIP Buy American waivers over the previous 2 years, narrowly passed the House on October 30, 2003, by a 211–207 vote. Vi- sion 100 passed the Senate by unanimous consent on November 21, 2003, and was signed into law by President George W. Bush on December 12, 2003.380 The author was unable to locate the FAA report to Congress covering all AIP Buy America waivers from 2002–03. The FAA’s annual reports to Con- gress on the AIP program for that timeframe do not address AIP Buy America waivers.381 However, in response to an inquiry from the author, in August 2011, the APP-500 Office contacted a now-retired employee, who confirmed that the report on AIP Buy America waivers was prepared and submitted to Congress in 2004 as required. 377 Id. 378 S. 824, 108th Cong. (2003). 379 H.R. REP. NO. 108-334, at 178 (2003). 380 Pub. L. No. 108-176, 117 Stat. 2490 (2003). 381 FED. AVIATION ADMIN., REPORT TO CONGRESS: TWENTIETH ANNUAL REPORT OF ACCOMPLISHMENTS UNDER THE AIRPORT IMPROVEMENT PROGRAM—FISCAL YEARS 2001, 2002, AND 2003 (May 2004), http://www.faa.gov/airports/aip/grant_histories/media/ annual_report_2001-03.pdf. D. American Reinvestment and Recovery Act i. Statutory Language In 2009 Congress passed ARRA,382 known popu- larly as the “stimulus bill.” ARRA appropriated $200 million “for necessary investments in [FAA] infrastructure,” including “improvements to power systems, air route traffic control centers, air traffic control towers, terminal radar approach control facilities, and navigation and landing equipment”383 (emphasis added). According to the statutory lan- guage, the AIP Buy America provision applied to the $200 million for investments in FAA infrastruc- ture.384 ARRA also appropriated $1.1 billion for the FAA “to make grants for discretionary projects,” including “the procurement, installation and com- missioning of runway incursion prevention devices and systems at airports”385 (emphasis added). Ac- cording to the statutory language, the AIP Buy America provision appeared not to apply to the $1.1 billion in airport development grants.386 However, ARRA included its own Buy American provision that applied specifically to the use of funds “appro- priated or made available” as a result of ARRA, which included the discretionary grants.387 The ARRA Buy American provision prohibited the use of ARRA funds “for a project for the con- struction, maintenance, alteration, or repair of a public building or public work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States.”388 One impor- tant distinction between the ARRA Buy American provision and both the BAA and AIP provision is that the ARRA Buy American provision applied only to construction projects, not procurement of supplies or equipment. Like the AIP Buy America provision (and unlike the BAA), the ARRA Buy America provision does not expressly apply to un- manufactured goods. Furthermore, like the AIP provision, the ARRA provision specifically applies to steel. Like the 1991 revision to the STAA Buy America provision, the ARRA provision extends domestic preferences to iron. The ARRA Buy American provision included a number of waivers, which generally paralleled the 382 Pub. L. No. 111-5, 123 Stat. 115 (2009). 383 Id., Div. A, Tit. XII. 384 Id. (providing that “section 50101 of title 49, United States Code, shall apply to funds provided under this heading”). 385 Id., Div. A, Tit. XII. 386 Id. (providing that “the amount made available un- der this heading shall not be subject to any limitation on obligations for the Grants-in-Aid for Airports program set forth in any Act”). 387 Id. § 1605. 388 Id. § 1605(a).

40 exceptions to the BAA and the waivers to the AIP Buy America provision. According to the text of the statute, the head of the federal department or agency could waive the domestic preference so as to permit the use of nondomestic iron, steel, or manu- factured goods in the following cases: • Public Interest. Where the use of domestic steel or manufactured goods would be “inconsistent with the public interest.”389 • Unavailability. Where domestic iron, steel, and manufactured goods “are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality.”390 • Unreasonable Cost. Where the use of domestic iron, steel, and manufactured goods “will increase the cost of the overall project by more than 25 per- cent.”391 It is important to note that there is no Substan- tial Domestic Manufacture exception in the ARRA Buy American provision. The implication is that all manufactured construction materials on projects subject to the ARRA provision must be made en- tirely of domestic components, unless another ex- ception is satisfied, making this requirement ap- pear to be stricter than the AIP Buy America provision. However, unlike the AIP provision, the ARRA Buy American provision contains no re- quirement to evaluate the cost of all components and subcomponents of the constructed facility. Therefore, it is conceivable that, in a project subject only to the ARRA provision, the constructed facility could be composed substantially of unmanufactured foreign goods (e.g., aggregate and Portland cement) so long as the reinforcing steel is domestic. In that regard, the ARRA Buy American provision may be weaker than the AIP Buy America provision for some construction projects. The Public Interest exception is repeated almost verbatim from the BAA and the AIP Buy America provision. In addition, the ARRA provision makes clear that it “shall be applied in a manner consis- tent with United States obligations under interna- tional agreements.”392 This may indicate that some members of Congress intended goods from trading partners to be treated as domestic goods. If so, this would be a weaker domestic preference require- ment than the AIP provision, which does not ex- tend domestic treatment to goods from foreign trad- ing partners. The Unavailability exception differs from the AIP Buy America provision in its use of the word 389 Id. § 1605(b)(1). 390 Id. § 1605(b)(2). 391 Id. § 1605(b)(3). 392 Id. § 1605(d). “and” rather than “or.” Literally, it would appear that this imposes a two-part test for demonstrating that domestic goods are unavailable for ARRA- funded projects: insufficient quantities and unsatis- factory quality. If so, then this would be a some- what stronger domestic preference requirement than the AIP provision, which only literally re- quires one of the conditions to be met. Identical to the AIP Buy America provision, the ARRA provision imposes a fixed numeric value on the Unreasonable Cost differential, such that do- mestic goods must be used unless that would in- crease the total project cost by more than 25 per- cent. Unlike the AIP Buy America provision, if a waiver to the ARRA provision is granted for any reason, the head of the federal department or agency is required to publish “a detailed written justification” for the waiver in the Federal Regis- ter.393 Although this requirement has long applied to other transportation grants, publication of Buy America waivers was a new requirement for FAA grants. Based solely on the statutory language, it is un- clear whether Congress intended to create a stronger or weaker domestic preference require- ment for ARRA-funded projects than that which applied generally to AIP grants. The following sec- tion investigates the congressional history of this provision. ii. Legislative History 1. Reporting.—Prior to ARRA, there was very lit- tle publicly available information about Buy Amer- ica requirements or waivers regarding airport grants. However, due to the magnitude of the ARRA stimulus package, paramount concerns for Congress were transparency and public disclosure (including the ARRA Buy America provision). Speaking in favor of the stimulus bill in the House, Representative Oberstar stated that it would create American jobs—“jobs that cannot be outsourced to another country, because the work must be done here in the U.S. on our roads, bridges, transit and rail systems, airports….”394 Representative Ober- star indicated that both the supplemental transpor- tation grant funding and the ARRA Buy American provision originated with a proposal he made in December 2008. He said that grant recipients would be held accountable for creating American jobs, as the bill would “require reporting by every State DOT, every transit agency, every airport au- thority, every 30 days on the contract awarded.”395 393 Id. § 1605(c). 394 155 CONG. REC. H 556, 572 (2009). 395 Id.

41 An architect of the Senate version of the ARRA Buy American provision, Senator Sherrod Brown, stated that public accountability was an important component of it. He said that 84 percent of Ameri- cans supported the Buy American provision: “They ask three things: first, that we be accountable in doing this right; second, they ask that the jobs be in the United States; third, they ask that the materi- als used for this infrastructure also be made in the United States.”396 Senator Brown stated that the executive branch in the past “simply turned its back” on other Buy America requirements in federal law: “They simply did not enforce it. They granted waivers, waivers that were not even public.”397 Publicizing all waiv- ers was an important part of the public accountabil- ity component of the ARRA Buy American provi- sion. 2. Manufactured Goods and Unmanufactured Construction Materials.—As originally introduced in the House on January 26, 2009, the ARRA Buy American provision would require “all of the iron and steel used in the project [to be] produced in the United States.”398 Therefore, the original bill did not extend domestic preferences to other construc- tion materials or manufactured goods, which probably explains why it contained no Substantial Domestic Manufacture exception (to allow manu- factured goods that contain insubstantial foreign components). The original bill expressly referenced the BAA, and expressly stated that the new ARRA Buy American provision, like the BAA, applied to con- tracts for the construction, alteration, maintenance, or repair of airports.399 Unlike the BAA, however, the stimulus bill did not extend to equipment pro- curement. The bill was introduced with support of the National Association of Manufacturers (NAM). A letter from John Engler, President and Chief Executive Officer of NAM, was read on the floor of the House, which specifically endorsed the aviation grant funds: Providing additional funding to states and localities struggling to make progress on the growing backlog of transportation infrastructure projects will go a long way to strengthen our nation’s transportation infrastructure, a critical priority for manufacturers. Similarly, funding a 21st century satellite-based air traffic control system will significantly enhance safety and energy efficiency while relieving conges- tion at our nation’s crowded airports.400 396 155 CONG. REC. S2103 (2009). 397 Id. 398 H.R. 1, § 1110, 111th Cong. (2009). 399 Id. 400 155 CONG. REC. H623 (2009). However, the bill as introduced in the House ap- peared to have no funding for air traffic control equipment. Furthermore, because the House ver- sion did not extend Buy American protection to manufactured goods, there was no requirement for such equipment to be domestic. During debate in the House, Representative Oberstar stated that his original proposal would have required “the steel, iron, and manufactured goods required for these projects [to] be manufac- tured in the United States,” although he noted that the bill as introduced “does not include everything I had proposed.”401 Representative Tim Murphy also complained that Buy American amendments he proposed regarding software and construction ma- terials were “mysteriously” omitted from the ver- sion of the bill introduced in the House.402 He said that his construction materials amendment was targeted at avoiding “loopholes” that would permit the use of “Chinese steel. Our concrete, our re- bar…ought to be made in America. From the iron mines to the manufacturers, to the mills, let’s use it to buy America. Let’s return those amendments to this bill.”403 Likewise, Representative Carolyn Kilpatrick complained that she “hoped for stronger ‘Buy American’ language for our automobile manu- facturers and steel, concrete, asphalt, and aggre- gate suppliers.”404 She wanted to extend the ARRA Buy American requirements to “make sure that 100 percent of the stimulus plan dollars uses American steel, lumber, electronics, cement, asphalt, and other materials, services, and workers.”405 However, aside from these complaints that the provision did not go far enough, there was no seri- ous opposition recorded in the House to the ARRA Buy American provision. The House passed its ver- sion of ARRA 244–188 on January 28, 2009, with- out extending domestic preferences to additional construction materials or to manufactured goods. The version of ARRA that was introduced in the Senate on January 30, 2009, extended the Buy American provision to manufactured goods in addi- tion to iron and steel.406 Senator John McCain led opposition to the ARRA Buy America provision in the Senate. “The Senate version of the stimulus bill goes beyond the stark protectionism of its House counterpart in a way that risks serious damage to our economy,” he stated, because the Senate ver- sion extended Buy American requirements to manufactured goods.407 To counter the support of 401 155 CONG. REC. H572 (2009). 402 155 CONG. REC. H573 (2009). 403 Id. 404 155 CONG. REC. H633 (2009). 405 155 CONG. REC. H634 (2009). 406 S. Amdt. 98 to H.R. 1, § 1604, 111th Cong. (2009). 407 155 CONG. REC. S1392 (2009).

42 NAM, Senator McCain presented over 100 industry signatories to a statement that the ARRA Buy American provision would damage the U.S. econ- omy, and he presented statements from world lead- ers, including President Barack Obama, in opposi- tion to the ARRA Buy American provision.408 Senator McCain’s opposition to coverage for manufactured goods was ineffective, and the final version of ARRA extends domestic preferences to iron, steel, and manufactured goods. However, be- cause the ARRA Buy American provision applied only to construction projects, its domestic prefer- ence for manufactured goods could only protect manufactured construction materials, not equip- ment procurement. The question naturally arises, then, whether manufactured goods include such common construction materials as asphalt, Port- land cement, and lumber. Under the BAA, these might fit the category of unmanufactured goods that are “produced” (as opposed to either manufac- tured goods or raw goods that are “mined”). Some members of Congress clearly wanted the ARRA Buy American provision to apply to cement and asphalt. However, those same members wanted the ARRA Buy American provision to apply to mined goods such as aggregate. The term “manufactured goods” was simply not defined in the statute, nor was the definition debated in Congress, and differ- ent members of Congress undoubtedly had differ- ent opinions as to what it meant. 3. Grants vs. Direct Procurements.—As originally introduced in the House on January 26, 2009, ARRA would have provided $3 billion for federal airport grants.409 In the original version, there was no express application of the AIP Buy America pro- vision to those funds. It may have been implied because the funds were for discretionary airport development grants, subject to “the conditions, cer- tifications, and assurances required for grants un- der” the “Airport Improvement” subchapter of the U.S. Code.410 Although the AIP Buy America provi- sion itself is not found in that subchapter, it applies to grants under that subchapter. Regardless of whether the ARRA authors intended to apply AIP Buy America requirements to airport grant funding under ARRA, they certainly intended to apply the ARRA Buy American provision to purchases of iron and steel with ARRA funds. In the version of ARRA introduced in the Senate on January 30, 2009, funding for discretionary air- port grants was reduced from $3 billion (in the House bill) to $1.1 billion for airport development grants.411 However, the Senate version allocated an 408 155 CONG. REC. S1529 (2009). 409 155 CONG. REC. H665 (2009). 410 Id. 411 155 CONG. REC. S1153 (2009). additional $200 million for direct investment in FAA infrastructure, including “air route traffic con- trol centers, air traffic control towers, terminal ra- dar approach control facilities, and navigation and landing equipment.”412 The original Senate version of ARRA expressly stated that the AIP Buy Amer- ica provision would apply to both types of airport funds (airport development grants and FAA infra- structure investments) appropriated under ARRA.413 On February 4, 2009, Senator McCain proposed an amendment that would not only strike the ARRA Buy American provision in its entirety, but also stated affirmatively that ARRA funds “shall not be subject to any Buy American requirement,” such as the AIP Buy America provision or the BAA.414 Senator McCain’s amendment was rejected by a vote of 65–31. The following day, Senator McCain proposed a substitute version of ARRA that also contained no Buy American provision.415 This version would have increased discretionary airport grant funding to $1.5 billion, and further expressly provided that those funds would not be subject to any Buy American restriction in any statute, in- cluding the AIP Buy America provision and the BAA.416 Speaking in favor of his proposal, Senator McCain said that “airport infrastructure improve- ments are necessary.”417 However, he said that the ARRA Buy American provision would be counter- productive: “We alarmed the world with the ‘Buy American’ provisions which are included in this bill.”418 Senator McCain’s proposed substitute was rejected by a 57–40 vote in the Senate.419 Therefore, the Senate twice rejected attempts to remove either the ARRA Buy American provision or the AIP Buy America provision from airport funding under ARRA. On February 11, 2009, a conference was initi- ated between members of the House and Senate to reconcile conflicting provisions of the versions of ARRA that had passed each house. The reconciled bill that emerged from the conference adopted the Senate-approved appropriations of $1.1 billion for airport development grants (“to repair and improve 412 Id. 413 Id. 414 S. Amdt. 297 to H.R. 1, 111th Cong. (2009); 155 CONG. REC. S1494 (2009). 415 S. Amdt. 364 to H.R. 1, 111th Cong. (2009); 155 CONG. REC. S1692–S1707 (2009). 416 155 CONG. REC. S1703 (2009) (providing that “the amount made available under this heading shall not be subject to any limitation on obligations for the Grants-in- Aid for Airports program set forth in any Act”). 417 155 CONG. REC. S1619 (2009). 418 155 CONG. REC. S1619 (Feb. 5, 2009). 419 155 CONG. REC. S1659 (Feb. 5, 2009).

43 critical infrastructure at our nation’s airports”) and $200 million in supplemental FAA funding (to up- grade, modernize, and replace FAA air traffic con- trol towers and equipment; power systems; and lighting, navigation, and landing equipment).420 Curiously, the version of ARRA that emerged from the conference dropped the express require- ment for the AIP Buy America provision to apply to the $1.1 billion appropriated for airport develop- ment grants. Instead, the Conference Report adopted Senator McCain’s proposed language (which had been twice rejected in the Senate) that the $1.1 billion in airport improvement grants would “not be subject to any limitation on obliga- tions for the Grants-in-Aid for Airports program set forth in any Act.”421 However, the Conference Re- port retained the requirement for the AIP Buy America provision to apply only to the $200 million in supplemental FAA funding (which ordinarily would be subject to the BAA rather than the AIP provision). This may suggest that the conferees intended there to be no Buy American require- ments (either the AIP provision or the ARRA provi- sion) attached to the $1.1 billion in airport devel- opment grants. However, the conference changes to the airport improvement funding were not ad- dressed in further recorded congressional debate. 4. Free Trade.—Senator McCain’s primary oppo- sition to the ARRA Buy American provision was his contention that it violated several international agreements, including the WTO Agreement on Government Procurement and the government pro- curement provisions of NAFTA, and he expected foreign trading partners to retaliate.422 Senator Byron Dorgan, one of the authors of the Senate version of the ARRA Buy American provi- sion, responded to this criticism by saying that the ARRA provision “does not violate trade agreements because it will largely come from State grants for public works projects,”423 implying that trade agreements do not apply to grants. Senator Dorgan questioned how the ARRA Buy American provision could possibly violate U.S. trade agreements since it was similar to the BAA and other Federal Buy America requirements such as the AIP Buy Amer- ica provision.424 In response to the criticism, Senator Dorgan in- troduced an amendment that replaced the express reference to the BAA with a statement that the ARRA Buy American provision “shall be applied in a manner consistent with United States obligations 420 H.R. REP. NO. 111-16, at 469 (2009). 421 H.R. REP. NO. 111-16, at 92 (2009). 422 155 CONG. REC. S1494–S1496 (2009). 423 155 CONG. REC. S1389 (2009). 424 155 CONG. REC. S1530 (2009). under international agreements.”425 However, this did not directly address Senator McCain’s position that the ARRA Buy American provision itself was inconsistent with such obligations. Opponents of domestic preferences could interpret the language to mean that the ARRA Buy American provision did not restrict purchases from trading partners using grant funds. Supporters of domestic prefer- ences could interpret it to mean that the ARRA Buy American provision does restrict purchases from foreign trading partners using grant funds, because international trade agreements do not apply to grants. (For example, the AIP Buy America provi- sion does not confer domestic goods status on goods from foreign trading partners.) Senator McCain clearly believed that the Dor- gan amendment was a subterfuge and a “direct contradiction” to the ARRA Buy American provi- sion itself.426 However, Senator Charles Grassley, an opponent of domestic preferences, spoke in favor of it. Senator Grassley said he understood that the ARRA Buy American provision would “carveout” an “exemption for countries that provide reciprocal access for the United States in the area of govern- ment procurement.”427 The Dorgan amendment was adopted by voice vote in the Senate on February 4, 2009, although it is unclear whether most Senators understood it to mean that goods from foreign trad- ing partners would be treated as domestic goods where grant funds are concerned. The Senate ver- sion of ARRA, containing Senator Dorgan’s amended Buy American provision, passed the en- tire Senate by a 61–37 vote on February 10, 2009. The Conference Report of February 12, 2009, reconciling the House and Senate versions, adopted the Dorgan amendment. The Conference Report stated that the conferees understood the ARRA Buy American provision to be subject to the Trade Agreements Act, the WTO Agreement on Govern- ment Procurement, and other “U.S. free trade agreements and so that [the ARRA Buy American provision] will not apply to least developed coun- tries to the same extent that it does not apply to the parties to those international agreements.”428 Therefore, members of Congress voting on the rec- onciled version of ARRA were put on notice that the domestic preference in the ARRA Buy American provision probably did not restrict purchases from foreign trading partners. In congressional debate on the reconciled ver- sion of ARRA, Senator McCain reiterated his opin- ion that the ARRA Buy American provision might trigger retaliation from trading partners of the 425 S. Amdt. 300 to H.R. 1, 111th Cong. (2009). 426 155 CONG. REC. S1528 (2009). 427 Id. 428 H.R. REP. NO. 111-16, at 512 (2009).

44 United States.429 However, Senator Richard Durbin responded that any concerns had been alleviated by Senator Dorgan’s amendment requiring “whatever we do [to] be consistent with our international trade agreements.”430 On February 13, 2009, the reconciled version of ARRA was approved by the House on a 246–183 vote, and approved by the Senate on a 60–38 vote. The bill was signed into law by President Barack Obama on February 17, 2009.431 iii. Federal Regulations The ARRA Buy American provision was encoded in the FAR, which purports to govern all of the funds appropriated or otherwise made available by ARRA for construction projects, specifically includ- ing construction projects involving airports and terminals.432 Presumably this includes both the FAA discretionary funds and airport development funds in ARRA, despite the 1995 statute making the FAR inapplicable to most FAA procurements. The FAR confirms that, because the ARRA Buy American provision only applies to construction projects, it only restricts the use of foreign “iron, steel, and manufactured goods used as construction material in the project.”433 The FAR states that the BAA (rather than the ARRA Buy American provi- sion) applies to the purchase of unmanufactured construction material used on ARRA-funded con- struction projects.434 However, the BAA probably applies only to construction contracts made by the federal government, because nothing in the ARRA statute would apply the BAA to contracts made by airport grant recipients. 1. Manufactured Goods.—Because there was no explicit Substantial Domestic Manufacture excep- tion in the ARRA Buy American provision, one might expect this to mean that manufactured con- struction materials must be assembled in the United States entirely of domestic components. This would be consistent with interpretations of other Buy America provisions in federal law, which permitted some components to be foreign only be- cause there was a Substantial Domestic Manufac- ture exception in those statutes. However, the FAR interpretation of the absence of any Substantial Domestic Manufacture exception in ARRA is that “[t]here is no restriction on the origin or place of production or manufacture of components or subcomponents that do not consist 429 155 CONG. REC. S2261 (2009). 430 155 CONG. REC. S2265 (2009). 431 Pub. L. No. 111-5, 123 Stat. 115 (2009). 432 48 C.F.R. §§ 25.600, 25.601, 25.602-1(a) (2011). 433 48 C.F.R. § 25-602-1(a)(1) (2011). 434 48 C.F.R. § 25.602-2 (2011). of iron or steel.”435 Therefore, only the location of assembly, production, or manufacture must be in the United States to satisfy the ARRA Buy Ameri- can provision. Where components of the manufac- tured construction material are made of iron or steel, those iron or steel components must also be “produced in the United States” only if the manu- factured construction material consists “wholly or predominantly of iron or steel.”436 For example, in the case of a wooden window frame that is delivered to the construction site pre- assembled in the United States, “there is no restric- tion on any of the components, including the steel lock on the window frame.”437 Therefore, all of the components (and subcomponents) could potentially be of foreign origin, and the manufactured con- struction material would still be compliant with the ARRA Buy American provision so long as final as- sembly took place in the United States. This method of determining whether manufactured goods are domestic is unique in federal law, and is a very liberal interpretation of the ARRA Buy American provision. 2. Free Trade.—Most federal agencies take the position that concrete poured at the construction site is excluded from the ARRA Buy American pro- vision. The logic for this exclusion is that the con- crete is transformed into a manufactured construc- tion material when all the components of concrete (e.g., Portland cement, aggregate, sand, water) are mixed, which typically takes place domestically—at or near the construction site.438 Under the FAR implementation of the ARRA Buy American provi- sion, the origin of the components does not matter, so there is no limitation on foreign Portland cement incorporated into an ARRA-funded construction project. The FAR interprets the Free Trade language of the ARRA Buy American provision to mean that manufactured construction materials that are “wholly the product of or [are] substantially trans- formed” within the borders of a trade agreement partner will be treated as domestic manufactured construction materials, “[i]f trade agreements ap- 435 48 C.F.R. § 25.602-1(a)(1)(iii) (2011). 436 48 C.F.R. § 25.602-1(a)(1)(ii) (2011). 437 48 C.F.R. § 25.602-1(a)(1)(iv)(B) (2011). 438 See, e.g., NAT’L INST. OF STANDARDS & TECH., AMERICAN RECOVERY AND REINVESTMENT ACT (ARRA) SUPPLEMENTAL BUY AMERICAN GUIDANCE FOR NIST CONSTRUCTION GRANTS 10 (2011), available at http://www.nist.gov/recovery/upload/FINAL-NCG- SBAG.pdf; U.S. ENVTL. PROTECTION AGENCY, BUY AMERICAN PROVISIONS OF ARRA SECTION 1605— QUESTIONS AND ANSWERS PART 2 at 6 (2009), available at http://water.epa.gov/aboutow/eparecovery/upload/2009_11 _20_eparecovery_2009_11_18_BA_Q-As_Part2-final.pdf.

45 ply.”439 Since trade agreements typically do not ap- ply to airport development grant funds, this quali- fying language could be interpreted to mean that grant recipients are not to extend domestic status to goods from foreign trading partners. However, the legislative history seems clear that Congress intended to extend domestic status to goods from foreign trading partners purchased with ARRA funds.440 Also, according to the FAR, “if trade agreements apply, unmanufactured construction material mined or produced in a designated country may also be used.”441 Since the ARRA Buy American provision does not apply at all to unmanufactured construction materials, this latter provision ap- pears to be surplusage. However, it is worth noting that Congress appeared to make the AIP Buy America provision inapplicable to airport develop- ment grant funds appropriated under ARRA. Therefore, for ARRA-funded airport development projects, there was no requirement to evaluate the domestic and foreign content of the constructed facility, so there was no limitation on purchases of foreign unmanufactured construction materials. 3. Other Exceptions.—Aside from the Free Trade exception, the FAR lists the following exceptions that could permit the purchase of foreign goods on an ARRA-funded airport development project: • Unavailability. The FAR expressly adopts the BAA list of unavailable items, as well as the BAA procedural requirements for the purchasing entity to first perform market research to ensure that items on the list are not available domestically.442 Under the AIP Buy America provision, there was no market research requirement. Therefore, there is a somewhat heightened burden on airport devel- opment grant recipients to demonstrate Unavail- ability when ARRA funds are involved. • Unreasonable Cost. The FAR requires the 25 percent evaluation surcharge to be applied to the total bid price if the bid incorporates any foreign construction material.443 This is identical to the AIP provision, but very different from the BAA, where the surcharge would only apply to the foreign goods incorporated in the offer. On ARRA-funded projects also subject to the BAA, in addition to the 25 per- cent ARRA Buy American surcharge on the total contract, the FAR imposes an additional 6 percent BAA surcharge to the cost of any foreign unmanu- factured construction material incorporated into 439 48 C.F.R. § 25.602-1(a)(2) (2011). 440 See supra Pt. III.D.ii.4. 441 48 C.F.R. § 25.602-2 (2011). 442 48 C.F.R. § 25.603(a)(1)(i) (2010). 443 48 C.F.R. § 25.605(a)(1) (2010). the bid.444 However, this double tax on foreign pur- chases with ARRA funds would not apply to airport development grants, which are not subject to the BAA. • Public Interest. This determination must be made by the head of the federal agency.445 No guid- ance is provided for when a Public Interest excep- tion may be warranted. However, it is clearly dis- tinct from either the Free Trade exception or Impracticability. The FAR expressly states that Impracticability can be used only to justify the pur- chase of foreign unmanufactured construction ma- terials,446 which are not addressed in any way by the ARRA Buy American provision. It is unclear what conditions would have to exist to justify the Public Interest exception. 4. Reporting.—If any exception to the ARRA Buy American provision is invoked on a project (except for the Unavailability exception where the materi- als are included on the BAA list of unavailable items), the head of the federal agency is required to publish a notice of exception. The notice is to be published in the Federal Register within 3 days after its determination, and is to include a “detailed justification as to why the [ARRA Buy American] restriction is being waived.”447 More than anything else, it is the reporting requirement in the ARRA Buy American provision that appears to be respon- sible for the information that is publicly available today regarding Buy America waivers for airport development grants. E. Penalties/Enforcement Under the AIP program, the FAA provides air- port development grants directly to the airport sponsor, with the condition that the sponsor will not purchase foreign steel or manufactured goods without a waiver from the FAA. In turn, the airport sponsor enters into procurement contracts or con- struction contracts with the private contractor. The sponsor is required to make AIP Buy American compliance a term of the contract. The private con- tractor must either certify to the airport sponsor that its bid complies with the AIP Buy American provision, or prepare a waiver request, which the airport sponsor will forward to the FAA for ap- proval. If the contractor is unable to perform the contract in compliance with these terms, the air- port sponsor would be justified in terminating the contract. In fact, the airport sponsor is probably obligated to terminate the contract under the terms of its AIP grant from the FAA. 444 48 C.F.R. § 25.605(a)(3) (2010). 445 48 C.F.R. § 25.603(a)(1)(iii) (2010). 446 48 C.F.R. § 25.603(a)(2) (2010). 447 48 C.F.R. § 25.603(b)(2) (2010).

46 Unlike procurement contracts and construction contracts subject to the BAA, the contractor on an AIP-funded project is not in privity with the federal government. The contractor’s certification of com- pliance with the AIP Buy America provision is made directly to the airport sponsor, not to the fed- eral government. Therefore, it is unlikely that a contractor could be held liable under the Federal False Claims Act for false certifications of compli- ance. A more interesting question is whether the contractor could be liable for false statements in its waiver request (e.g., false claims of origin of some components and subcomponents in order to qualify for the Substantial Domestic Manufacture excep- tion). The contractor is generally aware that only the FAA (not the airport sponsor) may grant waiv- ers, so it is at least arguable that the waiver re- quest could contain a false statement made to the federal government. At any rate, contractors should be aware that individual states may have their own false claims statutes that would make the contrac- tor liable for false certifications to a public airport sponsor. State false claims statutes may be stricter than the Federal False Claims Act, in that the con- tractor could be held liable for unknowingly making false statements (e.g., concerning the origin of com- ponents supplied by its subcontractor) and then failing to correct the information after becoming aware that it is false. Penalties under the AIP Buy America provision are largely speculative, however, because the public record of enforcement is very sparse. There are no known instances of contracts being terminated for noncompliance, nor of additional penalties (e.g., suspension, debarment, or criminal charges) being pursued. As will be shown, however, the FAA has recently stepped up its efforts to enforce Buy Amer- ica requirements on airport grant projects. There- fore, contractors should not rely on the FAA’s en- forcement history as a guide for the future. i. Increased Investigation by the APP-500 Office In the summer of 2008, the APP-500 Office se- lected 10 AIP projects at random to determine how the AIP Buy America provision was being en- forced.448 The audit showed that only 2 of the 10 projects satisfied the AIP Buy America require- ments.449 The APP-500 Office has not provided de- tails of specific types of violations that were uncov- ered. Instead, it says that it found “an almost universal misapplication of the requirements” of 448 Nancy S. Williams, Buy American, Complying with the Buy American Preference Requirements for AIP Grant Projects 6 (Oct. 16, 2008), available as a download at http://conference.iesalc.org/technical-papers- documents/. 449 Id. at 7. the AIP Buy America provision by grant recipi- ents.450 There is no public record of any disciplinary measures taken in response to the violations. How- ever, as a result of this audit, the APP-500 Office began to prepare the written guidance that eventu- ally became PGL 10-02.451 Also, the APP-500 Office began to review products of certain manufacturers, to establish which products contained sufficient domestic content to qualify for nationwide waiv- ers.452 The APP-500 Office’s increased role in enforcing AIP Buy America requirements is displayed in re- cent litigation between competing manufacturers of asphalt sealant,453 which is the only known judicial or administrative case involving the AIP Buy America provision. In 2007, K.A.E. Paving Con- sultants (KAE) reported to the FAA that the as- phalt sealant produced by its competitor, Pavement Rejuvenation International (PRI), did not comply with the AIP Buy America provision. According to KAE, the FAA confirmed that there were “viola- tions” of the AIP provision involving the PRI prod- uct, but took no action in response.454 In July 2009, KAE again reported to the APP-500 Office its belief that the PRI product did not comply and that PRI had made false certifications of its Buy America compliance.455 This time, the APP-500 Office con- tacted PRI directly and asked PRI to complete a cost calculation worksheet to determine whether its product was domestic or qualified for a Substantial Domestic Manufacture waiver.456 PRI’s response on July 31, 2009, suggests that it believed that its product was only required to comply with the less stringent requirements of the BAA or the FAR, which do not apply to AIP projects.457 For example, 450 Id. 451 Id. at 9. 452 Id. 453 Pavement Rejuvenation Int’l, L.P. v. K.A.E. Paving Consultants, Inc., No. SA-09-CA-853-H (W.D. Tex. Sep. 3, 2010). 454 Complaint, Exh. DD, Pavement Rejuvenation, No. SA-09-CA-853-H (W.D. Tex. Sep. 3, 2010), available at 2009 WL 3636862. 455 Complaint at 54-55, Pavement Rejuvenation, No. SA-09-CA-853-H (W.D. Tex. Sep. 3, 2010), available at 2009 WL 3636862. 456 Pl.’s First Mot. for Partial Summary Judgment, Decl. of Brian Becker, Pavement Rejuvenation, No. SA-09-CA-853-H (W.D. Tex. Sep. 3, 2010), available at 2010 WL 4633651. 457 Pl.’s First Mot. for Partial Summary Judgment, Decl. of Brian Becker, Exh. A, Pavement Rejuvenation, No. SA-09-CA-853-H (W.D. Tex. Sep. 3, 2010), available at 2010 WL 4633651 (providing the cost calculation work- sheet “solely for the purpose of determining the Federal Aviation Administration’s compliance with the BAA and the FAR”).

47 PRI only listed the components, not subcompo- nents, of its product. It said that those three com- ponents (coal tar, refined coal tar, and petroleum distillate) all qualified as domestic construction materials under the FAR because they all were manufactured (i.e., “refined”) domestically. PRI declined to provide the country of origin of the raw goods that were inputs to the refinement process. Therefore, PRI appeared to rely on the “substantial transformation” test used in the FAR implementa- tion of ARRA to determine whether manufactured goods are domestic, which ignores the country of origin of the components.458 Nevertheless, the APP-500 Office approved the submission on August 5, 2009, concluding that PRI’s product “meets the Buy American Preference requirements in 49 USC 50101” based on PRI’s “breakdown,” and that “[a]dditional waiver paperwork is not required for AlP or ARRA projects.”459 (It is unclear why the APP-500 Office did not require PRI to demonstrate the country of origin of its raw goods or subcompo- nents—it may have determined that some of those subcomponents qualified for Unavailability waivers as “petroleum products” or otherwise.) In this case, the APP-500 Office directly con- tacted a party that was not an AIP grant recipient or direct contractor to an AIP grant recipient, but may have been a subcontractor or supplier on an AIP-funded project, to verify that party’s compli- ance with AIP Buy America requirements. The FAA confirmed to the author that it is not unusual for the FAA to reach out directly to a manufacturer. In some cases, the FAA has asked manufacturers to provide documentation from their subcomponent suppliers articulating the domestic content per- centage of those subcomponents. AIP grant recipi- ents should take note that the FAA will not rely solely on the grant recipients to verify the Buy America certifications of their contractors. Fur- thermore, in this case, the APP-500 Office made a proactive determination for the manufacturer’s product, without considering the competitor’s alle- gation in the context of a specific project or con- tract. For example, the PRI product would typically only be a subcomponent of a single contract for fa- cility construction (or maintenance). In that con- text, even if the PRI product was foreign, it could typically qualify for a Substantial Domestic Manu- facture waiver if 60 percent of the remaining com- ponents and subcomponents of the AIP-funded con- struction contract were domestic. However, that approach would require each contractor who pro- 458 See 48 C.F.R. §§ 25.602-1(a)(1)(iii) and 25.602- 1(a)(2) (2011). 459 Pl.’s First Mot. for Partial Summary Judgment, Decl. of Brian Becker, Exh. B, Pavement Rejuvenation, No. SA-09-CA-853-H (W.D. Tex. Sep. 3, 2010), available at 2010 WL 4633651. posed to supply the PRI product to request a waiver for each such contract. By proactively making a determination that this product complied with the AIP Buy America provision, the APP-500 Office eliminated future waiver requests involving this product—contractors could thereafter simply treat the product as domestic. Furthermore, on August 21, 2009, the FAA informed airport sponsors that no Unavailability waivers would be granted for asphalt sealants because it had identified two qualified domestic suppliers—PRI and KAE.460 This newly proactive approach taken by the APP-500 Office helps airport sponsors by avoiding duplica- tive waiver requests and reducing the uncertainty about the compliance of specific products. ii. Other Federal Investigation Mechanisms In addition to the more proactive role taken by the FAA, airport grant recipients may be subject to other investigations and audits by the federal gov- ernment regarding Buy America compliance on federally funded projects. For example, in the ARRA stimulus bill, Con- gress created a Recovery, Accountability, and Transparency (RAT) Board to ensure transparency and prevent fraud regarding those funds.461 The RAT Board would appear to have the authority to investigate whether expenditures of ARRA funds on airport development projects satisfied the ARRA Buy American provision. Also, the Office of Management and Budget (OMB) has the authority to conduct audits of re- cipients of federal funds, including airport grants.462 In one case, the OMB hired auditors to investigate the use of transportation grant funds by the City and County of San Francisco in fiscal year 2009.463 The audit included $22.0 million in AIP grant funds and $1.8 million in ARRA airport de- velopment funds.464 The auditor did not identify any violations involving San Francisco’s use of transportation grant funds.465 However, in its qual- ity control review of the audit, the Department of 460 Pl.’s First Mot. for Partial Summary Judgment, Decl. of Mark Miller, Exh. A, Pavement Rejuvenation, No. SA-09-CA-853-H (W.D. Tex. Sep. 3, 2010), available at 2010 WL 4633651. 461 American Reinvestment and Recovery Act of 2009, Pub. L. No. 111-5, §§ 1521–1530, 123 Stat. 115, 289–94 (2009). 462 Single Audit Act Amendments of 1996, Pub. L. No. 104-156, 110 Stat. 1396 (1996); OFFICE OF MGMT. AND BUDGET CIRCULAR NO. A-133 (2003). 463 Earl C. Hedges, U.S. Dept. of Transportation, Memorandum, Quality Control Review of Single Audit on the City and County of San Francisco (Feb. 23, 2011), available at http://www.oig.dot.gov/library-item/5504. 464 Id. at 1. 465 Id. at 2.

48 Transportation Office of Inspector General indi- cated that documents examined by the auditor were insufficient to determine whether San Fran- cisco complied with the Buy America requirements attached to those funds.466 The auditor was directed to better document Buy America compliance in fu- ture audits.467 Airport sponsors should be prepared to provide documentation of Buy America compli- ance in the event that they are audited. Clearly, the ARRA bill, with its focus on trans- parency, is responsible for much of the federal gov- ernment’s increased interest and enforcement of transportation grant Buy America provisions. Al- though the ARRA provisions do not apply to new funding, there is no sign that the federal govern- ment plans to relax its enforcement of Buy America provisions. Airport grant recipients should enforce applicable Buy America requirements in their grant projects, and be prepared to document their enforcement actions to the federal government. F. Guidance for FAA Grantees i. Airport Improvement Program Handbook As mentioned previously, the FAR directs AIP grant recipients to FAA Order 5100.38 and the AIP Handbook for additional Buy America guidance. The most recent version of the AIP Handbook468 contains only limited guidance for compliance with the AIP Buy America provision. First, the Hand- book clarifies that “steel and manufactured prod- ucts used for AIP-assisted projects must be pro- duced in the United States.”469 Limited guidance is provided for applying the “four exceptions:”470 • Public Interest (“This is reserved for signifi- cant public interest determinations”). • Unavailability (“this refers to the manufactur- ing capability of the United States and whether it can meet demand”). • Unreasonable Cost (“applying this provision would increase the cost of the overall project by more than 25 percent”). • Substantial Domestic Manufacture (“the cost of components and subcomponents produced in the United States is more than 60 percent of the total components of a facility or equipment, and final assembly has taken place in the United States”). 466 Id. at 2. 467 Id. at 3. 468 FED. AVIATION ADMIN. Order No. 5100.38C, http://www.faa.gov/airports/resources/publications/orders/ media/aip_5100_38c.pdf (Jun. 28, 2005). 469 Id. at 162, § 922(h). 470 Id. Discussion of the Substantial Domestic Manu- facture exception in the AIP Handbook clarifies that, for equipment purchases, “‘final assembly’ for purposes of this provision should be substantial rather than a light bulb put in a vehicle.”471 The Handbook also clarifies that the term “component” is project-specific, and depends on whether the pro- ject is facility construction or equipment procure- ment. On a construction project, “the components would cover things such as rebar, lights, etc.” How- ever, for a standalone procurement of runway light- ing equipment, “the components would be the lenses, etc.” The Handbook does not provide guid- ance regarding subcomponents. The Handbook includes the following Special Condition that applies to any AIP grant: Buy American Requirement: Unless otherwise ap- proved by the FAA, the Sponsor will not acquire or permit any contractor or subcontractor to acquire any steel or manufactured products produced outside the United States to be used for any project for air- port development or noise compatibility for which funds are provided under this grant. The Sponsor will include in every contract a provision implement- ing this special condition.472 The Special Condition makes it clear that, if any airport sponsor or its contractor believes that an exception to the AIP Buy America provision is sat- isfied, it must obtain a waiver from the FAA. The Handbook also clarifies that it is the responsibility of the FAA to ensure that the airport sponsor in- serts AIP Buy America requirements (i.e., “the ap- propriate Federal clauses”) into its contracts and solicitations.473 The Handbook is currently undergoing a major revision, and it is expected that the Buy America guidance will be significantly updated. ii. FAA Program Guidance Letter 10-02 On February 24, 2010, the APP-500 Office is- sued PGL 10-02, directed toward compliance with both the AIP Buy America provision and the ARRA Buy American provision.474 The PGL was intended to expand upon the guidance in the AIP Handbook, in response to questions from FAA field offices. The PGL clarifies that all steel or manufactured products acquired or used on either an AIP- or ARRA-funded project must be “wholly produced in 471 Id. § 922(h)(3). 472 Id., App. 7, § T, at 5. 473 Id. at 162, § 922(h). 474 FED. AVIATION ADMIN., PROGRAM GUIDANCE LETTER NO. 10-02, GUIDANCE FOR BUY AMERICAN ON AIRPORT IMPROVEMENT PROGRAM (AIP) OR AMERICAN RECOVERY AND REINVESTMENT ACT (ARRA) PROJECTS (Feb. 24, 2010), http://www.faa.gov/airports/aip/guidance_letters/media/ PGL_10_02.pdf.

49 the US of US materials,” or else a waiver must be obtained.475 The PGL states that waivers are avail- able only for the following four reasons: • Public Interest. • Unavailability. • Substantial Domestic Manufacture. • Unreasonable Cost. The PGL states that only FAA Headquarters can issue a Public Interest or Unavailability waiver. FAA field offices (Airport District Offices (ADO), or Regional Offices where there is no ADO) may issue the Substantial Domestic Manufacture and Unreasonable Cost waivers.476 The PGL mainly addresses the Substantial Domestic Manufacture exception. The process for obtaining a waiver fol- lows. The airport sponsor, upon receiving an AIP grant for a project, issues requests for bids. The selected contractor must either certify to the air- port sponsor that it can comply with the AIP Buy America provision, or otherwise submit waiver re- quests to the airport sponsor, who forwards the requests to the ADO or Regional Office. The num- ber of AIP grants issued in a given year ranges from 2,500 to 4,000, and each grant may include from 5 to 10 projects. The PGL estimates that the majority of projects will require at least one waiver.477 Because there are so many project- specific waiver requests or waiver certifications in any given year, and because the AIP Buy America provision (unlike the STAA Buy America provision or the ARRA Buy American provision) does not require all waivers to be published or made public, there is no public record of AIP waivers and waiver requests. Therefore, when an airport sponsor or contractor makes a project-specific waiver request, they do not know whether waivers have been granted in similar situations at other airports. Also, final decision-making authority for most pro- ject-specific waiver requests is delegated down to the field office level, and it is possible that one field office might grant waivers in situations where an- other field office would not. In the absence of a pub- lic record of precedential decisions, the PGL was intended to provide additional guidance for both the field offices and airport sponsors to ensure more consistent application of the AIP Buy America re- quirements nationwide. The PGL guidance is summarized below. 1. Equipment.—Regarding equipment purchases, the PGL directs grant recipients to the “nationwide waiver list” (also known as the Buy American con- 475 Id. at 1. 476 Id. 477 Id. formance list) maintained by the APP-500 office.478 The airport sponsor need not request a project- specific waiver for equipment on the list.479 The list indicates whether a particular manufacturer’s equipment has been determined to satisfy the AIP Buy America requirements (or an exception to the AIP Buy America provision), whether no determi- nation has been made regarding a particular manu- facturer’s equipment, or whether no determination has been made because the FAA has been unable to obtain necessary information from the manufac- turer. There is no indication if specific equipment has been determined to not satisfy the AIP Buy America requirements. If equipment is not on the list, or if the list does not indicate that the equip- ment satisfies the Buy America requirements, then the contractor must either certify that the equip- ment satisfies the Buy America requirements or else seek a waiver for the equipment. Most items on the list are airfield lighting equipment items from the FAA’s Airport Circular (AC) 5345-53C, which lists airfield lighting equip- ment that has been certified to meet the FAA’s technical requirements. Recall that, in the 1978 and 1983 GAO audits, the FAA only certified light- ing equipment from domestic manufacturers. How- ever, the PGL makes it clear that today the list of FAA-certified equipment only “certifies that techni- cal standards have been met,” not that the equip- ment complies with the AIP Buy America provi- sion.480 Although airfield lighting equipment items from AC 5345-53C constitute most items on the nation- wide waiver list, the list has been expanded to in- clude Daimler trucks, AWOS equipment, airport lighting and control systems (ALCMS), snow re- moval equipment, bituminous pavement rejuvena- tors, dynamic friction testers and dynamic friction decelerometers, foreign object debris (FOD) detec- tion systems, windows, and even bolts and washers. All determinations are manufacturer-specific. The APP-500 office informed the author that all prod- ucts on the list that received waivers were deter- mined to meet the Substantial Domestic Manufac- ture exception, except for the AWOS equipment and some transformers that were determined to meet the Unavailability exception. 2. Construction Materials a. Steel.—The PGL takes the position that waiv- ers are not available for steel because “[s]teel is specifically identified in the statute.”481 Therefore, 478 Id. 479 The list is currently available in spreadsheet form at http://www.faa.gov/airports/aip/buy_american/media/ buyAmericanConformance.xls. 480 FED. AVIATION ADMIN., supra note 474, at 5. 481 Id. at 3.

50 domestic steel apparently must be used even if one of the exceptions to the AIP or ARRA provisions would otherwise apply (e.g., even if domestic steel would increase the cost of the project by 25 per- cent). Also, according to the PGL, all reinforcing steel used in concrete (including specifically rebar, ties, and stirrups) must be domestically manufac- tured even if the finished concrete product would otherwise qualify for the Substantial Domestic Manufacture exception in the AIP Buy America provision.482 Likewise, all “discrete, identifiable steel components” of equipment purchased under an AIP grant must be domestically manufactured even if the equipment would otherwise qualify for the Substantial Domestic Manufacture exception.483 This appears to be a much stricter preference for steel than Congress intended, since the text of the AIP Buy America provision appears to allow waiv- ers for both steel and manufactured goods. Also, the FAR implementation of the ARRA provision, as described above, permits foreign steel components in domestically assembled construction materi- als.484 This is also stricter than the BAA’s prefer- ence for domestic components of manufactured con- struction materials. Recall that in the Strand Hunt Construction dispute under the BAA, foreign rein- forcing steel in concrete was permitted as long as the Substantial Domestic Manufacture exception was satisfied.485 However, unlike the BAA, waivers to the AIP Buy America provision and the ARRA Buy American provision are not automatically granted when one of the exceptions is satisfied. It is within the FAA’s discretion under the statutes to decide, as it apparently has, that waivers will not be permitted for foreign steel. AIP grant recipients are cautioned not to rely on guidance provided by other federal agencies, concerning other statutes, regarding the use of foreign steel. b. Paving Materials— i. Asphalt.—Although the FAA takes a very strict position with regard to steel, it is less strict regard- ing other construction materials. Although the PGL states that only FAA Headquarters may grant an Unavailability waiver, the PGL appears to adopt the BAA list of unavailable items from the FAR. For example, the PGL takes the position that as- phalt has been “waived” under the AIP Buy Amer- ica provision486 because “petroleum, crude oil, un- finished oils, and finished products” are on the FAR list of unavailable items, and because the FAA’s AMS defines asphalt as a finished petroleum prod- 482 Id. 483 Id. 484 See 48 C.F.R. §§ 25.602-1(a)(1)(ii) and 25.602-1(a)(2) (2011). 485 See supra Pt. II.E.i.2.a. 486 FED. AVIATION ADMIN., supra note 474, at 3. uct.487 The PGL effectively constitutes publication of a nationwide Unavailability waiver for asphalt, allowing AIP grant recipients to treat foreign as- phalt as domestic when reporting the cost of foreign and domestic components of constructed facilities. It is within the FAA’s discretion under the AIP Buy America provision to determine that asphalt is do- mestically unavailable in sufficient quantities or satisfactory quality. This waiver for asphalt is con- sistent with the FAA’s implementation of the BAA in the AMS. Furthermore, this publication of the asphalt waiver in the PGL exceeds the FAA’s publi- cation requirements under the AIP Buy America provision. However, this position (that asphalt qualifies for the Unavailability exception as a “petroleum prod- uct”) appears to be unique to the FAA. Recall that the FHWA excluded asphalt from the identically worded STAA Buy America requirements as part of its blanket Public Interest waiver for all manufac- tured goods published in the Federal Register.488 Under the AIP Buy America provision, however, there has been no such waiver for all manufactured goods. Also, there is evidence that, by expanding the ARRA Buy American provision to include manufactured construction materials, some indi- vidual members of Congress intended it to impose domestic preferences on asphalt. However, there is sufficient room for interpretation in both the terms “manufactured goods” and “petroleum products” in the various statutes and regulations to justify the FAA’s waiver for asphalt products, even though it is a unique position. AIP grant recipients are re- minded not to rely on guidance provided by other federal agencies, concerning other statutes, regard- ing the use of foreign asphalt. ii. Portland Cement.—The PGL also takes the position that Portland cement and concrete (except for the reinforcing steel) are “excluded” from the AIP Buy America provision, but does not cite any authority for this waiver.489 Unlike asphalt, Port- land cement is not readily classified under any category on the BAA list of unavailable items. It is likely that the FAA relied on the decision by Con- gress to remove the express Buy America require- ment for Portland cement from the STAA Buy America provision. Like the revised STAA Buy America provision, the AIP Buy America provision and the ARRA Buy America provision name steel and manufactured goods, but not cement, as items that must satisfy domestic preferences. The FAA’s position that Portland cement and concrete are “excluded” from Buy America requirements is con- 487 Fed. Aviation Admin., Acquisition Mgmt. Guidance, T.3.6.4 § 13.y.2(a) (Jan. 2011). 488 See 48 Fed. Reg. 53,099 (Nov. 25, 1983). 489 FED. AVIATION ADMIN., supra note 474, at 3.

51 sistent with the position of most federal agencies that Portland cement and concrete are excluded from the ARRA Buy American provision.490 How- ever, the AIP Buy America provision (unlike the STAA provision or the ARRA provision) effectively defines manufactured goods to include constructed facilities, in that it requires a facility to be com- posed of domestic components. Based on the statu- tory text, it appears that Congress intended to pro- hibit the use of all foreign construction materials (including cement and concrete), unless compen- sated by other domestic construction materials so that 60 percent of the cost of the overall facility is attributable to domestic construction materials. Congress did not exclude Portland cement and con- crete from this requirement for AIP-funded con- struction projects. Nevertheless, the PGL again effectively constitutes publication of a nationwide waiver for Portland cement and concrete (including aggregate). It would be within the FAA’s discretion to issue a nationwide waiver for these materials, if the FAA determined that these materials satisfy the statutory requirements for the Unavailability, Unreasonable Cost, or Public Interest waivers. AIP grant recipients are reminded not to rely on guid- ance provided by other federal agencies, concerning other statutes, regarding the use of foreign Port- land cement and concrete. 3. Substantial Domestic Manufacture.—The pri- mary focus of the PGL is to provide guidance for applying the two-part component test to obtain a waiver for the Substantial Domestic Manufacture exception to the AIP Buy America provision. There is no such exception in the ARRA Buy American provision, so this only applies to AIP projects. The PGL guidance differs depending on whether AIP funds are granted for a construction project or for procurement of equipment, since the two-part com- ponent test is applied to either the “facility” or the “equipment.” a. Facilities.—For construction projects involving buildings (such as a terminal or an ARFF building), the “facility” is “the portion of the building that is being funded under the AIP or ARRA grant.”491 (The reference to ARRA appears to be in error, as the Substantial Domestic Manufacture require- ment only applies to the AIP Buy America provi- sion, and expressly does not apply to grant projects funded by ARRA.) Often it may take several years to complete the project, and funding for the com- plete project may come from multiple grants over a period of several years. In such cases, it is impossi- ble for the contractor to know at the start of the project what proportion of the project costs will be attributable to foreign goods. Therefore, the FAA 490 See supra note 438 and accompanying text. 491 Id. at 2. has limited the definition of the facility to the por- tion of construction for which bids are requested at a given time. AIP Buy America compliance is not evaluated across multiple construction contracts, even though construction of a single facility may continue for multiple years and involve multiple contracts. For construction projects, the location of “final assembly” is “the airport building site.”492 There- fore, for construction projects, the requirement of final assembly in the United States is typically sat- isfied. The more difficult determination will be whether 60 percent of the cost of the components and subcomponents of the facility is attributable to domestic goods. The PGL says that for a construc- tion project, the total facility cost is computed as “the costs of the materials as they are delivered to the airport site,” not including the cost of construc- tion labor at the job site.493 Likewise, the FAA’s voluntary Buy America Waiver Request Form for construction projects advises the contractor to use “delivered costs at the ‘facility site’” and to exclude “assembly costs at the ‘facility site’” when reporting the costs of components and subcomponents.494 This guidance is based on the statutory mandate in the AIP Buy America provision that “labor costs in- volved in final assembly shall not be included in the calculation” of component costs.495 The PGL does not provide guidance for deter- mining what constitutes a component or subcom- ponent of a construction project. However, the vol- untary Buy America Waiver Request Form for construction projects states, “The component breakout shall be along major specification divi- sions or building systems.” The APP-500 Office con- firmed to the author that it considers the major specification divisions to be the components of a constructed facility. (Note that this is different from the guidance in the AIP Handbook, which says that components include such things as rebar.) Al- though the major specification divisions or building systems constitute the components of the facility, the FAA does not specify how to define the subcom- ponents. Instead, the FAA leaves it up to the AIP grant recipient (or its contractor) to document the materials incorporated into the facility, within each major specification division or building system, in a manner that is appropriate for the project. As shown in Figure 2, the AIP grant recipient (or its 492 Id. 493 Id. 494 Fed. Aviation Admin., Buy America Waiver Request for Terminals, ARFF Buildings, and SRE Buildings Funded Under the Airport Improvement Program (2010), available for download at http://www.faa.gov/search/?omni=MainSearch&q=Buy+ America+Waiver+Request+for+Terminals&x=22&y=16. 495 49 U.S.C. § 50101(c) (2011).

52 contractor) must report the cost of all such materi- als and report what portion of the cost is of domes- tic origin and what portion of the cost is of foreign origin. Therefore, the AIP grant recipient (or its contractor) effectively must further divide each subcomponent (e.g., construction material) into its sub-subcomponents to report the cost of domestic materials and foreign materials that comprise each subcomponent of a facility. For purposes of the Substantial Domestic Manu- facture cost calculation, the contractor may treat foreign subcomponents as domestic goods if the FTA has granted a waiver for those subcompo- nents. For example, under the PGL guidance, for- eign cement has been waived, so the cost of all for- eign cement in the facility contributes to the portion of the facility cost that is attributed to do- mestic goods. Also, where equipment listed on the FAA nationwide waiver/conformance list is incorpo- rated into the construction project as a subcompo- nent of the overall facility, the entire cost of that equipment is attributed to domestic goods even if it includes a significant amount of foreign constituent parts. AIP grant recipients are cautioned that (unless the FAA has granted a waiver for a particular con- struction material or equipment item), the Sub- stantial Domestic Manufacture cost calculation is based on the domestic and foreign percentage of the cost of each subcomponent, as shown in Figure 2. This is very different from the approach used else- where in federal law. Recall that, under the BAA, if a component satisfies the two-part component test (i.e., final assembly in the United States and 50 percent domestic content), then the entire cost of the component is treated as domestic for purposes of the Substantial Domestic Manufacture cost cal- culation.496 The FAR implementation of the ARRA Buy America provision is even more liberal, in that a construction material is considered to be domes- tic, regardless of the origin of its components and subcomponents, as long as the construction mate- rial is finally assembled in the United States.497 However, the FAA takes a much stricter approach to the Substantial Domestic Manufacture cost cal- culation in the AIP Buy America provision. The foreign and domestic composition of a facility is calculated from the actual foreign and domestic compositions of all of the facility components (i.e., major specification divisions or building systems), which in turn are calculated from the actual foreign and domestic composition of all subcomponents (e.g., construction materials) that comprise the ma- jor specification divisions or building systems. AIP 496 See 48 C.F.R. § 25.101(a) (2011). 497 See 48 C.F.R. §§ 25.602-1(a)(1)(ii), (iii), and (iv)(B) (2011). grant recipients should not rely on guidance pro- vided by other federal agencies, concerning other statutes, regarding how to determine the domestic cost of a component or subcomponent. b. Equipment.—In standalone procurements of manufactured goods (where the goods are not themselves components or subcomponents of a con- struction project), the PGL provides guidance for defining the “equipment” for which a waiver must be requested. For the procurement of an individual large equipment item, such as snow removal equipment or an ARFF vehicle, it is clear that the large item is the equipment for which a cost calcu- lation must be performed.498 For procurements of multiple items, a cost calculation must be per- formed for the individual bid items. The bid items will typically be those that are defined in FAA Ad- visory Circular (AC) 5370-10, or in the case of air- field electrical equipment, in the Addendum to AC 5345-53C.499 For equipment procurement, the PGL states that “the final assembly location is the location where the equipment is assembled, not the project site itself.”500 Furthermore, “final assembly” is de- fined as “the substantial transformation of the various components and subcomponents into the equipment.”501 This appears to adopt the FTA defi- nition of manufactured goods as goods that have been “substantially transformed,” which is broader than the BAA definition of manufactured goods as mechanical or electronic equipment that has been “assembled.” According to the APP-500 Office, the substantial transformation test was adopted in the PGL based on the FAR definition of manufactured goods for the ARRA Buy American provision. How- ever, the APP-500 Office is reconsidering whether that test is appropriate. The FAA is moving toward a unique test that focuses on whether final assem- bly involves skilled labor (e.g., whether training is required for the task of final assembly). In some instances, the APP-500 Office has sent people to the final assembly site to see whether it appears that skilled labor was actually involved. In all such cases, the APP-500 Office has concluded that final assembly was actually in the United States (based on job complexity, training, etc.). In addition to showing that final assembly of the equipment took place in the United States, the AIP grant recipient must demonstrate that 60 percent of the cost of all components and subcomponents is of domestic origin. The FAA has not issued any guidance on how to determine the origin of sub- 498 FED. AVIATION ADMIN., supra note 474, at 2. 499 Id. 500 Id. 501 Id.

53 components and has typically left that determina- tion to manufacturers and their suppliers. In determining whether the equipment qualifies for a Substantial Domestic Manufacture waiver, the AIP grant recipient (or the manufacturer) must report the domestic and foreign portion of the cost of all components and subcomponents. This is very different from the approach used elsewhere in fed- eral law. For example, in the FTA implementation of the STAA Buy America provision, the entire cost of a component of rolling stock equipment is counted as domestic as long as the component was finally assembled in the United States and 60 per- cent of its subcomponents (measured by cost) are of domestic origin.502 The FTA thus treats as domestic the cost of any foreign subcomponents as long as the Substantial Domestic Manufacture test is satis- fied at the component level. Also, in the FTA ap- proach, the subcomponents themselves are consid- ered entirely domestic as long as they were manufactured in the United States, regardless of the origin of their sub-subcomponents.503 However, the FAA takes a much stricter approach to the Sub- stantial Domestic Manufacture cost calculation in the AIP Buy America provision. The AIP grant recipient (or the manufacturer) must identify the domestic and foreign percentages of the cost of all subcomponents, and use those per- centages to compute the domestic and foreign per- centages of the cost of the equipment. For example, in Figure 2, Subcomponent 1C is clearly composed of greater than 60 percent domestic content. If the entire cost of Subcomponent 1C were considered to be domestic (as it might be under other Federal Buy America provisions), then 60 percent of the Total Cost of the overall equipment would be con- sidered domestic. However, under the FAA’s method of applying the AIP Buy America provision, the domestic and foreign portions of the cost of all subcomponents must be reported, and those sub- component costs are used to calculate the domestic and foreign percentages of the overall cost. In this example, less than 60 percent of the cost of the overall equipment is considered domestic, so no Substantial Domestic Manufacture waiver can be granted. 502 49 C.F.R. § 661.11(f) (2010). 503 49 C.F.R. § 661.11(g) (2010). Domestic Foreign TOTAL COST $ 46,000 $ 35,000 (Percentage) (57%) (43%) Component 1 $41,000 $29,000 Subcomponent 1A $5,000 $8,000 Subcomponent 1B $20,000 $15,000 Subcomponent 1C $12,000 $3,000 Subcomponent 1D $4,000 $3,000 Component 2 $5,000 $6,000 Subcomponent 2A $5,000 $0 Subcomponent 2B $0 $6,000 Figure 2. Sample cost calculation for the Sub- stantial Domestic Manufacture waiver under the AIP Buy America provision, showing the portion of foreign and domestic cost attributed to all subcom- ponents. Under the AIP Buy America provision, the FAA is under no obligation to grant a waiver, even if the AIP grant recipient (or manufacturer) shows that the Substantial Domestic Manufacture cost calcula- tion would justify a waiver. The FAA may elect not to grant a waiver if the cost calculation involves questionable judgment calls as to whether certain subcomponents are foreign or domestic. In some cases, the FAA has asked manufacturers for letters from their subcomponent suppliers articulating the domestic content percentage of those subcompo- nents. This typically occurs when a manufacturer identifies subcomponents as largely of domestic origin although such materials are not typically manufactured in the United States (e.g., electronic subcomponents). iii. Unpublished Guidance 1. Mixed Projects (Facility Construction and Equipment Procurement).—Although not directly addressed in the PGL, the APP-500 Office has to deal with a number of AIP projects involving both facility construction and significant equipment pro- curement. In those cases, the APP-500 Office must decide whether to evaluate AIP Buy America com- pliance at the facility level (e.g., have the airport sponsor seek a Substantial Domestic Manufacture waiver based on the costs of all components and subcomponents of the entire project) or at the equipment level (e.g., have the airport sponsor seek a Substantial Domestic Manufacture waiver based on the costs of the components and subcomponents of each equipment item). In particular, airfield development projects such as runway construction or rehabilitation often in- volve significant amounts of both paving and instal- lation of lighting equipment. Because the FAA has waived the domestic preference requirements for both asphalt and Portland cement, the cost of do- mestic goods plus waived goods (asphalt and ce-

54 ment) in any such runway project involving pave- ment will easily exceed 60 percent of the cost of the project even if there are significant purchases of foreign equipment. Therefore, the APP-500 Office says that it does not consider the entire runway project to be the “facility” for purposes of applying the Substantial Domestic Manufacture exception. Instead, the office says that it has determined that congressional intent is better satisfied by defining the facility according to the approval requirements of AC 5345-53C. In other words, for construction projects that involve installation of lighting equip- ment, AIP Buy America compliance is evaluated for each individual lighting fixture. Effectively, these construction projects are evaluated instead as equipment procurements. By shifting the Buy America focus away from pavement construction materials and instead toward mechanical and elec- trical equipment, the FAA’s approach ensures that, to the maximum extent possible, airfield lighting equipment is domestic. However, in other types of mixed construction and procurement projects, such as installation of in-ground snow removal equipment, the FAA takes the opposite approach of including the cost of bulk construction materials in its evaluation of the pro- ject cost. These projects involve installing the snow removal equipment in a pit below ground. A large percentage of the cost of these projects is the cost of concrete. In this case, the FAA defines the “facility” to include both the snow removal equipment and the concrete. Any reinforcing steel in the concrete must be domestic under the FAA’s interpretation of its Buy America requirements. However, the FAA has waived Buy America requirements for Portland cement (and concrete), effectively treating those products as domestic goods. Therefore, the entire cost of concrete will be attributed to domestic goods even if the cement and aggregate are of foreign origin. As long as the cost of the concrete accounts for 60 percent of the cost of the entire project, then the snow removal equipment could be foreign and the FAA would still consider the project to satisfy the Substantial Domestic Manufacture exception. Therefore, the FAA’s decision to evaluate Buy America compliance at either the facility or equip- ment level can be critical in determining whether an airport can obtain foreign equipment under a mixed construction and procurement project. The APP-500 Office has developed a rule of thumb to determine whether to evaluate a mixed construction and procurement project as facility construction (e.g., in-ground snow removal equip- ment) or as equipment procurement (e.g., runway development) for purposes of the Substantial Do- mestic Manufacture exception. First, figuratively remove the equipment (e.g., the lighting equipment or the snow removal equipment) from the project. In the case of a runway development project, if you remove the lighting equipment, you are left with a usable project (an unlighted runway). In those cases, the procured equipment is evaluated inde- pendently, without considering the cost of the con- struction materials. However, in the case of in- ground snow melting equipment, if you remove the equipment, all that is left is an unusable hole in the ground with some concrete. In those cases, project cost is evaluated as a facility, and its subcompo- nents include both the equipment and the construc- tion materials. 2. Software.—Although not directly addressed in the PGL, AIP grants often cover airport purchases of software (e.g., computer-controlled lighting). Al- though Congress excluded software from the BAA in 2004, it did not provide similar exclusions for Buy America provisions in federal transportation grants. It is unclear whether software should be considered goods, and if so, how to define the com- ponents and subcomponents of the software. Where grants cover multiple procurements, or where the software is a component of equipment or a facility, airports may attempt to list the cost of domesti- cally-produced software, or exclude the cost of for- eign software, in order to achieve 60 percent do- mestic content for purposes of the Substantial Domestic Manufacture exception. The APP-500 Office acknowledges that it is unclear how to han- dle these purchases. The approach taken in the Print-O-Tape bid protest under the BAA (before software was formally excluded from the BAA) was to disregard the cost of foreign software— effectively treating it as a service rather than a good.504 This would be a reasonable approach for the FAA to take in evaluating AIP Buy America compliance. 3. Reimbursable Agreements.—Often FAA-owned and –operated equipment (purchased under pro- curement regulations and subject to the BAA, not subject to the AIP Buy America provision) must be relocated to make room for an AIP-funded con- struction project. In some cases, the FAA equip- ment must be operated continuously, so the airport must first install new equipment before it can move the existing equipment. In those cases, the airport sponsor enters into a reimbursable agreement with the FAA Facilities and Equipment (F&E) group. The airport sponsor purchases the new equipment, to be reimbursed by the FAA, and often that equipment is not domestically manufactured. This presents a challenge for the APP-500 Office, since it is unclear whether the replacement equipment must comply with the BAA or the much stricter AIP Buy America provision, since it is not a direct federal procurement but is a substitute for a direct federal procurement. If the procurement is subject 504 See supra Pt. II.E.ii.1.a.

55 to the BAA, the replacement equipment would ei- ther have to be manufactured in the United States from at least 50 percent domestic components, or else satisfy one of the BAA exceptions (such as the 6 percent Unreasonable Cost surcharge). On the other hand, if subject to the AIP provision, then the replacement equipment would either have to be manufactured in the United States from at least 60 percent domestic components, or else satisfy one of the AIP exceptions (such as the 25 percent Unrea- sonable Cost surcharge). Once again, the APP-500 Office acknowledges that it is unclear how to han- dle these purchases. However, because the re- placement equipment is supplied by the F&E of- fices, the cost of that equipment is not part of the contractor’s bid for the AIP-funded construction project. Therefore, the contractor preparing a Sub- stantial Domestic Manufacture waiver request form for the construction project generally need not concern itself with the origin of the replacement equipment. G. Federal Register Notices Because there was no statutory requirement for publication of waivers in the AIP Buy America pro- vision, and the number of annual waivers is poten- tially very large, the waivers have not historically been made publicly available by the FAA. However, due to the ARRA requirement to publish all waiv- ers granted under the ARRA Buy American provi- sion, the FAA has recently begun to make use of the Federal Register to publish waivers and other notices regarding Buy America compliance. i. ARRA Project-Specific Waivers On November 27, 2009, the APP-500 Office pub- lished a notice in the Federal Register of the “hand- ful” of project-specific waivers that had been granted out “of the over 300 airport projects” funded under ARRA.505 The notice reiterated that ARRA requires “the use of American iron, steel, and manufactured goods.” The notice stated that the FAA applied the AIP Buy America provision to ARRA-funded airport grant projects. This probably was stricter than Congress intended, since ARRA expressly stated that the AIP Buy America provi- sion was not to apply to ARRA-funded airport grants. 1. Project-Specific Waivers.—The Federal Regis- ter notice stated that items on the FAA’s nation- wide waiver list had been previously determined to be eligible to receive a Substantial Domestic Manu- facture waiver. Therefore, under the FAA’s inter- pretation, the ARRA grant recipient was not re- 505 Notice of Waivers to Buy American Under the American Reinvestment and Recovery Act for Grants-in- Aid for Airports, 74 Fed. Reg. 62,388 (Nov. 27, 2009). quired to seek a waiver for equipment on the na- tionwide waiver list, even though there is no Sub- stantial Domestic Manufacture waiver in the ARRA Buy American provision. In other words, the FAA would provide waivers for manufactured goods that contained up to 40 percent foreign components and subcomponents, even though Congress made no such provision for manufactured goods with foreign content in ARRA. However, the FAA’s interpreta- tion was stricter than the FAR implementation of the same ARRA Buy American provision, which could treat some manufactured goods as “domestic” even if they were composed entirely of foreign com- ponents and subcomponents. 2. Nationwide Waivers.—The Federal Register notice then listed 11 products for which the FAA granted Substantial Domestic Manufacture waivers on specific ARRA projects. The products were mainly airfield lighting equipment (light bases, conduit) and ARFF vehicles (at Muskegon County Airport in Michigan and Mid-Continent Airport in Kansas). The notice stated that nationwide waivers had subsequently been granted for nearly all of the products. Recall that the ARRA Buy American pro- vision only applied to construction projects and not to direct purchases of equipment. Therefore, the term “manufactured goods” in the ARRA Buy American provision refers to manufactured con- struction materials. This would probably include airfield lighting equipment, which would typically be purchased as part of an improvement project. However, Congress probably did not intend the ARRA Buy American provision to extend to pur- chases of ARFF vehicles. Furthermore, Congress expressly stated that the AIP Buy America provi- sion did not apply to ARRA grants. Therefore, the FAA probably imposed a much stricter requirement on grant recipients by applying Buy America re- quirements to ARFF vehicle purchases by ARRA grant recipients. Notably, the Federal Register notice did not state which exception was used to waive each prod- uct, much less provide the detailed justification for each individual waiver, which is required by ARRA. However, all of the products were said to have a “final assembly location” in the United States, so presumably the FAA determined that all of these products satisfied the Substantial Domestic Manu- facture exception to the AIP Buy America provi- sion. Once again, there is no such statutory excep- tion for ARRA grants. However, the Substantial Domestic Manufacture waiver in the AIP Buy America provision (which requires over 60 percent of the components and subcomponents of manufac- tured goods to be domestic) is a much stronger do- mestic preference than that used by other federal agencies for manufactured construction materials under ARRA. Therefore, it was reasonable for the

56 FAA to impose this requirement to manufactured goods purchased under ARRA. Most importantly, this Federal Register notice would help AIP grant recipients in the future by letting them know that equipment on that list could be purchased with AIP funds. Regardless of whether it was appropriate to apply the Substan- tial Domestic Manufacture waiver to ARRA grants, the requirement certainly applied to AIP funds. Without ARRA’s requirement to publish waivers in the Federal Register, AIP grant recipients would have had no notice that these equipment items could be purchased with AIP funds. Therefore, the 2009 Federal Register notice could be the most use- ful formal guidance provided to AIP grant recipi- ents to date. ii. Foreign Object Debris (FOD) Detection Equipment On September 30, 2009, the FAA Airport Engi- neering Division (AAS-100) published an AC 150/5220-24 containing performance specifica- tions for airport FOD detection equipment procured with AIP funds.506 The FAA said that, during preparation of AC 150/5220-24, it was unable to identify enough domestic manufacturers to produce sufficient quantities of FOD detection equipment and make the equipment reasonably available. Therefore, on August 5, 2010, the APP-500 Office published a notice in the Federal Register request- ing all manufacturers (foreign and domestic) of FOD detection equipment to advise the FAA of equipment they manufactured that would satisfy the performance specifications in AC 150/ 5220-24.507 The notice indicated that the FAA would consider issuing a nationwide Unavailability waiver under the AIP Buy America provision for FOD detection equipment if it was unable to iden- tify enough domestic manufacturers who could sat- isfy the technical performance requirements. Manufacturers were asked to complete a request for qualifications (RFQ) form508 to demonstrate that their equipment satisfied the technical performance requirements. Manufacturers were required to demonstrate that their products met all required specifications in AC 150/5220-24, but not necessar- ily some of the recommended specifications related 506 FED. AVIATION ADMIN. ADVISORY CIRC. NO. 150/5220-24 (Sept. 30, 2009), http://www.faa.gov/ documentLibrary/media/Advisory_Circular/150_5220_ 24.pdf. 507 Notice to Manufacturers of Foreign Object Debris (FOD) Detection Equipment, 75 Fed. Reg. 47,344 (Aug. 5, 2010). 508 Fed. Aviation Admin., Foreign Object Debris (FOD) Detection Equipment Request for Qualifications, available at http://www.faa.gov/airports/aip/buy_ american/media/buyAmericanFODDetectionRequest.pdf. to more computationally intensive features such as digital recording, data display, and image storage and retrieval. As part of their response to the RFQ, manufacturers were also asked to prepare a cost calculation worksheet509 similar to the one that an airport sponsor or its contractor would prepare if seeking a Substantial Domestic Manufacture waiver for equipment procurement under the AIP Buy America provision. Manufacturers were in- structed that their FOD detection equipment would be treated as the equipment for which waiver is sought. In other words, the FOD detection equip- ment was not to be evaluated as a component or subcomponent of a constructed facility, and manu- facturers were instructed to provide costs of all components and subcomponents of the FOD detec- tion equipment. Manufacturers were instructed to exclude their own costs for labor, installation, as- sembly, overhead, and profit. Also, manufacturers were not required to include the cost of any com- mercial off-the-shelf computer system used to re- ceive and record data. On December 28, 2010, the APP-500 Office pub- lished a second Federal Register notice regarding FOD detection equipment.510 This notice indicated that the FAA had identified “two manufacturers with products containing 60% or more U.S. content and U.S. final assembly [who] are able to produce sufficient and reasonable amounts of FOD detec- tion equipment meeting the requirements of FAA Advisory Circular 150/5220–24.” One manufacturer was a California firm and the other was a foreign firm with a Massachusetts manufacturing location. Therefore, because there were two sources of do- mestically manufactured FOD detection equip- ment, the FAA determined it could not justify issu- ing a nationwide Unavailability waiver for FOD detection equipment. The FAA indicated that this decision was consistent with its internal standard for issuing a nationwide Unavailability waiver for airfield lighting equipment and AWOS equipment, which was whether there were at least two domes- tic manufacturers. Although the FAA could not issue an Unavail- ability waiver for FOD detection equipment, the Federal Register notice announced a nationwide Substantial Domestic Manufacture waiver for FOD detection equipment manufactured by the two do- mestic sources. Based on information submitted in response to the RFQ, the FAA determined that the 509 Fed. Aviation Admin., Foreign Object Debris (FOD) Detection Equipment Percent Calculation Worksheet, available at http://www.faa.gov/airports/aip/procurement /federal_contract_provisions/media/fod_percent_ calculation.xls. 510 Notice of Decision To Issue Buy American Waivers for Foreign Object Debris (FOD) Detection Equipment, 75 Fed. Reg. 81,708 (Dec. 28, 2010).

57 two manufacturers both had a final assembly loca- tion in the United States and that their FOD detec- tion equipment was composed of more than 60 per- cent domestic components and subcomponents. Therefore, airport sponsors or contractors seeking to purchase FOD detection equipment with AIP funds could purchase the equipment manufactured by those two manufacturers without seeking a pro- ject-specific Buy America waiver. This use of the Federal Register was not re- quired under the AIP Buy America provision, but it provided a great deal of public visibility and credi- bility to the FAA’s Buy America waiver process. Without going through the public notice process, the APP-500 Office may have simply issued an Un- availability waiver because it was unaware of the existence of domestic manufacturers. Also, by hav- ing the manufacturers submit information regard- ing the cost of their components and subcompo- nents, AIP grant recipients were effectively relieved of the responsibility of gathering that data. AIP grant recipients wishing to purchase FOD de- tection equipment know that there are two compli- ant sources. The nationwide waiver for these two manufacturers should incentivize their competitors to demonstrate directly to the FAA that their own products qualify for the Substantial Domestic Manufacture exception, or else forego future sales to AIP grant recipients. iii. Additional Notices The FAA’s successful experience with Federal Register notices regarding FOD detection equip- ment has apparently led the FAA to increase the use of this approach. On October 28, 2011, the APP-500 Office issued two notices seeking qualified manufacturers of equipment to be purchased with AIP funds. The first notice requested all manufacturers (foreign and domestic) of airport avian radar systems to advise the FAA of equipment they manufactured that would satisfy the performance specifications in AC 150/5220-25.511 The second notice requested all manufacturers of airport in-pavement stationary runway weather information systems to advise the FAA of equipment they manufactured that satisfied both the technical requirements of AC 150/5220-30 (“Airport Winter Safety and Operations”) and SAE Aerospace Recommended Practice 5533 (“Station- ary Runway Weather Information System (In- Pavement)”).512 511 Notice to Manufacturers of Airport Avian Radar Systems, 76 Fed. Reg. 67017 (Oct. 28, 2011). 512 Notice to Manufacturers of Airport In-Pavement Stationary Runway Weather Information Systems, 76 Fed. Reg. 67018 (Oct. 28, 2011). On December 13, 2011, the APP-500 Office is- sued another notice seeking qualified manufactur- ers of various types of airport lighting equipment and navigation aid equipment that incorporates light-emitting diode (LED) lighting.513 This notice requested manufacturers (foreign and domestic) to advise the FAA of all equipment they manufac- tured that would satisfy the technical requirements in either AC 150/5345–46D (“Specification for Run- way and Taxiway Light Fixtures”), AC 150/5345– 51B (“Specifications for Discharge-Type Flashing Light Equipment”), or AC 150/5345–28G (“Preci- sion Approach Path Indicator (PAPI) Systems Safety and Operations”). As of this writing, the FAA has not published notices of waivers for any of the above-mentioned equipment. However, the technical requirements of the various ACs are mandatory for AIP grant re- cipients. Therefore, if this process does not identify equipment satisfying the technical requirements that is manufactured domestically entirely of do- mestic content, the FAA will probably issue Buy America waivers of some sort. Presumably, if the FAA does not identify at least two domestic manu- facturers of any of the types of equipment, it will issue blanket Unavailability waivers for those items. Otherwise, if the FAA identifies domestically manufactured equipment that contains less than 40 percent foreign components and subcomponents, it may issue Substantial Domestic Manufacture waivers for the equipment supplied only from spe- cifically-identified manufacturers. This process is far removed from the conditions identified in the 1978 and 1983 GAO audits, where the FAA’s list of technically-approved equipment included only domestic manufactured goods. Since that time, AIP grant recipients have been required to seek out domestic goods that also satisfy the FAA’s technical specifications. If AIP recipients could not identify domestic manufactured goods, then they were required to seek waivers from the FAA, and they had no public record of waivers for similar foreign equipment obtained by other AIP grant recipients. With this new approach to pub- lishing RFQs in the Federal Register, the FAA has relieved AIP grant recipients of the burden of searching for domestic sources. Also, by publishing in the Federal Register the results of its RFQs as justification for nationwide waivers, the FAA re- lieves AIP grant recipients from having to repeat the waiver process on each project. 513 Notice to Manufacturers of Airport Lighting and Navigation Aid Equipment, 76 Fed. Reg. 77585 (Dec. 13, 2011).

58 H. Grantee Experiences (Questionnaire Results) The author delivered the questionnaire in Sec- tion V to 500 randomly selected airport sponsors who received AIP and ARRA grants in fiscal years 2005 through 2009. Twenty-three questionnaires were completed and returned. The author was also contacted by telephone by two airport consultants on behalf of airports who received the survey but declined to respond in writing. Because of the low number of questionnaires that airport sponsors completed and returned, responses cannot be inter- preted as generalizable to the population of spon- sors. Rather, responses should be interpreted as anecdotal evidence. Survey responses tended to come from airport sponsors who received a higher than average amount of federal grant funding. The 500 question- naire recipients represented a wide distribution of funding amounts, which closely tracked the fund- ing distribution of all AIP/ARRA grant recipients, as shown in Figure 3. The questionnaire recipients received, on average, $7.63 million in combined ARRA and AIP grants from the FAA in fiscal years 2005 through 2009, with the median (50th percen- tile) grantee receiving $1.35 million in that period. The 23 survey respondents, on the other hand, re- ceived, on average, $17.34 million in FAA grants in fiscal years 2005 through 2009, with the median (50th percentile) grantee receiving $3.92 million in that period. Therefore, the survey responses may skew somewhat toward airport sponsors who re- ceive a higher-than-average amount of AIP fund- ing. Those airports are more likely to engage in significant construction projects or purchase state- of-the-art equipment for which Buy America ques- tions are more likely to arise.

59 Figure 3. Cumulative distribution of survey recipients, survey respondents, and all airport grant recipients by airport grant funding. Most of the survey respondents (15 out of 23) in- dicated that Buy America requirements had no impact (or negligible impact) at their airports. The remaining eight respondents described the follow- ing issues: i. Construction Projects 1. Steel.—Only one respondent indicated that it had any issues purchasing domestic steel. That respondent indicated that it experienced delay costs in excess of 30 days due to fabrication backlogs of domestic structural steel. Also, the respondent in- dicated that the use of domestic steel rather than foreign steel increased the cost of construction by more than $100,000. Because the FAA takes the position that all steel must be domestic, grant re- cipients may experience significantly higher costs and can not avail themselves of the Unreasonable Cost exception in the AIP Buy America provision. 2. Pavement Construction Materials.—None of the respondents were of the impression that they had ever taken advantage of waivers for the list of domestically-unavailable goods that is published in the FAR and the AMS. One respondent said, “None of the waivered items have any relevance to con- struction contracts we enter.” In reality, of course, the FAA has determined that asphalt is waived as a “petroleum product,” which is on the list of un- available goods. Therefore, the list of unavailable goods actually applies to many (perhaps most) runway development projects. Any airport that has used foreign asphalt on an AIP-funded construction project has taken advantage of the Unavailability waiver. There was some evident confusion among the survey respondents regarding the various excep- tions and lists of waived goods. One respondent was of the impression that “petroleum products” and “cement and cement products” are on the FAA’s nationwide waiver/conformance list. However, those items are not on the FAA waiver/conformance list, which primarily includes manufactured equipment for which a Substantial Domestic Manu- facture waiver has been granted. The FAA has de- termined that asphalt qualifies for an Unavailabil- ity waiver as a petroleum product. The FAA has also effectively waived the AIP Buy America re- quirements for Portland cement, although it is un- clear what authority supports that waiver. Most respondents were of the opinion that the AIP Buy America provision has little impact on pavement construction materials. Two respondents stated that all construction materials typically 10000 100000 1000000 10000000 100000000 1E+09 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 A IP / A RR A G ra nt F un di ng p er A ir po rt ($ ) AIP / ARRA Grant Recipients Survey Recipients Survey Respondents

60 comply with Buy America requirements, so no waiver is necessary. Two other respondents said that the AIP Buy America provision has no impact on pavement rehabilitation projects because those bidders typically fully comply with Buy America requirements. One survey respondent indicated that state law also imposes Buy National require- ments so its bidders supply only domestic construc- tion materials. Due to the large amounts of foreign Portland cement and foreign constituents in as- phalt used in construction today, these survey re- spondents may be overly confident about the do- mestic content of their construction materials. However, because the FAA effectively issued a na- tionwide waiver for foreign asphalt and Portland cement on AIP projects in PGL 10-02, it is reason- able for AIP recipients to focus Buy America atten- tion elsewhere. Only one respondent indicated that it had ever sought an FAA interpretation regarding the appli- cability of Buy America requirements to asphalt and cement. That respondent stated “large amounts of cement come from Canada,” and indi- cated that existing FAA guidance did not fully ad- dress how to handle “raw materials,” apparently referring to asphalt and cement. As mentioned above, PGL 10-02 appears to indicate that foreign asphalt and cement may be treated as domestic goods for purposes of the AIP Buy America provi- sion. Because there is some confusion among grant recipients, and the FAA’s treatment of asphalt and Portland cement is unique, these goods probably warrant more guidance than the brief treatment in PGL 10-02. Specifically, such additional guidance would address how asphalt and cement are to be considered in evaluating the cost of a facility and its components and subcomponents under the Sub- stantial Domestic Manufacture exception. The pub- lished guidance would clarify the FAA’s test for whether to include the cost of asphalt and cement in mixed procurement and construction contracts. This may be an appropriate topic for a future Fed- eral Register notice. ii. Equipment Procurement 1. Airfield Lighting Equipment.—Only one sur- vey respondent indicated that it ever sought an FAA interpretation regarding Buy America compli- ance of airfield lighting equipment. Two other re- spondents indicated that they had taken advantage of FAA nationwide waivers to purchase airfield lighting equipment. (One of those respondents had also purchased an AWOS from the FAA nationwide list.) As the APP-500 Office has observed, there is some evident confusion regarding the various lists of waived goods and FAA-certified equipment that may be purchased with AIP funds. Unlike the con- ditions observed in the 1978 and 1983 GAO audits, equipment that has been technically approved by the FAA is not necessarily domestically manufac- tured. However, one airport consultant who con- tacted the author in response to the questionnaire stated that he was under the impression that prod- ucts on the lists of FAA-certified equipment are also certified to comply with Buy America require- ments. Since the questionnaire was sent out, the FAA has issued numerous Federal Register notices indi- cating that equipment that satisfies FAA technical specifications does not necessarily satisfy AIP Buy America requirements. Therefore, the FAA has taken steps both to increase awareness of this issue and to identify equipment that satisfies both tech- nical specifications and domestic preferences. 2. Vehicles.—One survey respondent noted that its attempt to use AIP grant funds for the “pur- chase of electric vans has been stymied by Buy America rules.” It noted that it originally applied to its ADO for a Substantial Domestic Manufacture waiver for a Ford/Azure Dynamics van, but subse- quently concluded that the van did not satisfy the two-part component test. Therefore, the grant re- cipient appealed to FAA Headquarters for an Un- availability waiver. It anticipated that the FAA would begin the process by publishing a Federal Register notice “any day,” and hoped to receive ap- proval in fiscal year 2011. However, as of this writ- ing, there has been no notice in the Federal Regis- ter regarding the van. Another respondent sought a Substantial Do- mestic Manufacture waiver for a runway friction testing system (continuous friction measuring equipment (CFME)). The selected contractor com- pleted the component cost tabulation for the sys- tem, which showed “The Ford truck has some com- ponents manufactured outside the U.S. The printer and laptop were manufactured outside the U.S.” However, apparently the contractor was able to demonstrate that 60 percent of the cost of compo- nents and subcomponents was attributable to do- mestic goods. The respondent stated that the FAA approved the waiver request “within a working day.” However, as of this writing, the FAA does not appear to have included the CFME on its nation- wide waiver/conformance list. Another respondent sought and obtained a Sub- stantial Domestic Manufacture waiver for a John Deere tractor with a loader and snow bucket, based on final assembly in Waterloo, Iowa, and 60 percent domestic components and subcomponents. This respondent indicated that the FAA needs to provide a “clearer definition of what documentation is needed on equipment to determine the 60% cost of components and assembly in the USA.” This re- spondent noted that it had to request bids for the

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TRB’s Airport Cooperative Research Program (ACRP) Legal Research Digest 18: Buy America Requirements for Federally Funded Airports discusses the legislative history pertaining to Buy America, the applicable federal regulations, and how it has been applied at airports. The report includes suggested guidance that airport counsel may find useful as it pertains to airport construction and equipment purchases to help ensure compliance with U.S. Federal Aviation Administration regulations.

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