National Academies Press: OpenBook

Updated Guide to Buy America Requirements—2015 Supplement (2017)

Chapter: IV. WAIVERS AND EXCEPTIONS

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Suggested Citation:"IV. WAIVERS AND EXCEPTIONS." National Academies of Sciences, Engineering, and Medicine. 2017. Updated Guide to Buy America Requirements—2015 Supplement. Washington, DC: The National Academies Press. doi: 10.17226/24780.
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Suggested Citation:"IV. WAIVERS AND EXCEPTIONS." National Academies of Sciences, Engineering, and Medicine. 2017. Updated Guide to Buy America Requirements—2015 Supplement. Washington, DC: The National Academies Press. doi: 10.17226/24780.
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Suggested Citation:"IV. WAIVERS AND EXCEPTIONS." National Academies of Sciences, Engineering, and Medicine. 2017. Updated Guide to Buy America Requirements—2015 Supplement. Washington, DC: The National Academies Press. doi: 10.17226/24780.
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Suggested Citation:"IV. WAIVERS AND EXCEPTIONS." National Academies of Sciences, Engineering, and Medicine. 2017. Updated Guide to Buy America Requirements—2015 Supplement. Washington, DC: The National Academies Press. doi: 10.17226/24780.
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Suggested Citation:"IV. WAIVERS AND EXCEPTIONS." National Academies of Sciences, Engineering, and Medicine. 2017. Updated Guide to Buy America Requirements—2015 Supplement. Washington, DC: The National Academies Press. doi: 10.17226/24780.
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Suggested Citation:"IV. WAIVERS AND EXCEPTIONS." National Academies of Sciences, Engineering, and Medicine. 2017. Updated Guide to Buy America Requirements—2015 Supplement. Washington, DC: The National Academies Press. doi: 10.17226/24780.
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Suggested Citation:"IV. WAIVERS AND EXCEPTIONS." National Academies of Sciences, Engineering, and Medicine. 2017. Updated Guide to Buy America Requirements—2015 Supplement. Washington, DC: The National Academies Press. doi: 10.17226/24780.
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Suggested Citation:"IV. WAIVERS AND EXCEPTIONS." National Academies of Sciences, Engineering, and Medicine. 2017. Updated Guide to Buy America Requirements—2015 Supplement. Washington, DC: The National Academies Press. doi: 10.17226/24780.
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Suggested Citation:"IV. WAIVERS AND EXCEPTIONS." National Academies of Sciences, Engineering, and Medicine. 2017. Updated Guide to Buy America Requirements—2015 Supplement. Washington, DC: The National Academies Press. doi: 10.17226/24780.
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Suggested Citation:"IV. WAIVERS AND EXCEPTIONS." National Academies of Sciences, Engineering, and Medicine. 2017. Updated Guide to Buy America Requirements—2015 Supplement. Washington, DC: The National Academies Press. doi: 10.17226/24780.
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Suggested Citation:"IV. WAIVERS AND EXCEPTIONS." National Academies of Sciences, Engineering, and Medicine. 2017. Updated Guide to Buy America Requirements—2015 Supplement. Washington, DC: The National Academies Press. doi: 10.17226/24780.
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28 various sizes, and fiber cables.”290 All of those compo- nents must be manufactured in the United States, although the origin of the subcomponents (which included straps, ties, connectors, splices, and clamps) may be disregarded. In October 2015, FTA confirmed that, because construction materials such as utility poles are considered components of the communica- tions network, the FTA Buy America provision requires construction materials other than iron and steel (e.g., wood poles or fiberglass poles) to be manu- factured in the United States.291 Because the origin of subcomponents is disre- garded, FTA Buy America compliance for a utility relocation effort depends on what FTA considers to be the components and subcomponents of the system end product. In 2014, FTA issued guidance to South- ern California Edison (SCE) with regard to the relo- cation of electrical utilities for several FTA-funded projects.292 FTA concluded that the transmission system and distribution system were both end prod- ucts, and that their components included the poles, wires, cables, switches, vaults, cabinets, and meters. SCE argued that the wires and cables were not components but subcomponents of the conductors and therefore (as subcomponents) did not have to be domestic. FTA concluded, however, that the wires and cables were actually the conductors themselves, and that they were components of the transmission system and distribution system because they were “directly incorporated” into the system end products at the final assembly location. Also in 2014, FTA issued guidance to the Sacra- mento Regional Transit District (SacRTD) with regard to the relocation of a gas transmission system.293 The gas transmission lines consisted of pipes, elbows, and control valves, with “valve lots” located at the junction of one or more gas transmis- sion lines. SacRTD proposed that the valve lot should be considered a component of the gas trans- mission system, so that the pipes and valves contained in the valve lot would be considered subcomponents whose origin could be disregarded. FTA concluded, however, that both the gas trans- mission system and the valve lot were end products. Therefore, pipes and valves were components of both the gas transmission system and the valve lot and must be manufactured in the United States regardless of whether the pipes and valves were contained within the valve lot or outside of it. Application of the FTA Buy America provision to utility relocation work has not been well received by utilities, especially when the utility relocation is not funded by FTA.294 Nevertheless, it illustrates the principle that construction projects may not be segmented into federally funded segments and locally funded segments to avoid application of the FTA Buy America provision. IV. WAIVERS AND EXCEPTIONS Waivers that may be obtained from FTA are discussed below. General waivers that have been granted by FTA, for which the FTA grant recipient need not request a project-specific waiver, are addressed in Section IV.A. Additional project-specific waivers, which the FTA grant recipient may request for products not already covered by a general waiver, are addressed in Section IV.B. The Domestic Content waiver for rolling stock, which was granted by Congress and which does not require a project- specific waiver from FTA, was discussed in Section III.B. A. General Waivers 1. Small Purchase Although the FTA Buy America provision nomi- nally applies to all steel, iron, and manufactured products purchased using FTA funds, in practice a significant amount of foreign products can be purchased via a Small Purchase waiver granted by FTA.295 Although the original FTA Buy America provision enacted as part of the 1978 STAA applied only to purchases that exceeded $500,000, this price threshold was repealed with the 1982 STAA.296 As a result, the FTA Buy America provision enacted by Congress applied to all purchases made with FTA funds of manufactured items, including office 290 Letter from Dana Nifosi, FTA Deputy Chief Counsel, to Sam Mayman, LACMTA, Re: Buy America—Subcom- ponent Compliance Confirmation (Aug. 21, 2013), avail- able at https://www.transit.dot.gov/regulations-and-guidance/ buy-america/ los-angeles-county-metropol itan- transportation-authority-august. 291 FTA, Buy America—Frequently Asked Questions, https://www.transit.dot.gov/funding/procurement/third- party-procurement/buy-america. 292 Letter from Dana Nifosi, FTA Deputy Chief Counsel, to Douglas Bauder, Southern California Edison (Apr. 30, 2014), available at https://www.transit.dot.gov/regulations- and-guidance/buy-america/southern-california-edison-sce- april-30-2014. 293 Letter from Dana Nifosi, FTA Deputy Chief Counsel, to Diane Nakano, SacRTD (Jul. 10, 2014), available at https://www.transit.dot.gov/regulations-and-guidance/buy- america/sacramento-regional-transit-district-july-10-2014. 294 Steven J. Troch, Baltimore Gas & Electric, Buy America for Utilities: Utility Perspective, 94th Annual Meeting of the Transportation Research Board (Jan. 13, 2015). 295 49 C.F.R. § 661.7, App. A(c) (2015). 296 See supra Sections II.A, II.B.

29 supplies and maintenance items.297 This proved impractical due to the general lack of domestic manufactured products, the lack of vendors that would certify that manufactured products complied with the FTA Buy America provision, and the cost to FTA grant recipients and FTA staff of generating and processing the volume of waiver requests.298 Accordingly, in 1995,299 FTA issued a general Public Interest waiver for all “small purchases,” as defined by the USDOT’s “common grant rule.”300 USDOT defined small purchases as procurements that do not cost more than the “simplified acquisition threshold” for direct procurements by the federal government301 (which was $100,000302). In December 2013, the Office of Management and Budget promulgated new regulations for federal funding of nonfederal entities (such as state and local transit agencies).303 These regulations increased the simplified acquisition threshold to $150,000 for nonfederal entities (although the $150,000 threshold is subject to periodic adjustment for inflation).304 In December 2015, Congress formally defined small purchases for purposes of the FTA Buy America provision as those purchases “of not more than $150,000.”305 As a result, the Small Purchase waiver is no longer tied to the simplified acquisition threshold (and thus is not subject to periodic adjustment for inflation, absent further action by Congress). Nevertheless, increasing the small purchase threshold from $100,000 to $150,000 significantly expands the scope of purchases that are exempted from the FTA Buy America provision. This Small Purchase waiver is intended to ensure that the FTA Buy America provision is applied “only to large purchases, such as buses and trains.”306 The Small Purchase waiver is applied on a per- contract basis307—which means that the Small Purchase waiver cannot be used to purchase a foreign manufactured product that costs less than the small purchase threshold if the total contract price (including other products and services bundled into the procurement) exceeds the small purchase threshold.308 Furthermore, FTA grant recipients may not avoid the FTA Buy America provision by “segmenting” requirements into multiple contracts or work orders, in order to get the contract price below the small purchase threshold.309 2. Non-Availability The FTA Buy America provision may be waived if certain steel, iron, or manufactured products are not produced in the United States “in a sufficient and reasonably available amount or are not of a satisfac- tory quality.”310 In accordance with this authority, FTA has expressly granted a general Non-Availability waiver311 for all products that have been determined to be unavailable domestically for purposes of direct federal procurements subject to the BAA.312 There- fore, FTA grant recipients need not seek a project- specific waiver to use those products on an FTA grant-funded project. Although this list of products is subject to change, at present it includes a number of materials, such as tin, manganese, rubber, and petroleum products,313 which might constitute components of infrastructure projects or compo- nents of manufactured products procured by FTA grant recipients. Under the general Non-Availability waiver, those materials from foreign sources may be counted as domestic content of the end product. 306 Hughes, supra note 9, at 221. 307 Buy America Requirements, 60 Fed. Reg. 37,930, 37,931 (Jul. 24, 1995) (“[F]or the purposes of this Buy America general public interest waiver, ‘contract price’ will be the measure for determining whether a procure- ment is a ‘small purchase.’”). 308 FTA Guidance Letter on Buy America Small Pur- chase Waivers (Sept. 16, 2016), available at https://www. transit.dot.gov/regulations-and-guidance/buy-america/ fta-guidance-letter-buy-america-small-purchase-waivers. 309 Id.; see also Letter from Dana Nifosi, FTA Deputy Chief Counsel, to Douglas Bauder, Southern California Edison (Apr. 30, 2014) (“FTA does not permit work to be split into multiple contracts for purposes of avoiding Buy America requirements.”), available at https://www.transit. dot.gov/regulations-and-guidance/buy-america/southern- california-edison-sce-april-30-2014. 310 49 U.S.C. § 5323(j)(2)(B) (2016). 311 49 C.F.R. § 661.7, App. A(a) (2015). 312 48 C.F.R. § 25.104(a) (2015). 313 Id. 297 Buy America Requirements, 60 Fed. Reg. 14,178 (Mar. 15, 1995). 298 Id. 299 Buy America Requirements, 60 Fed. Reg. 37,930 (Jul. 24, 1995); see also Buy America Requirements, 60 Fed. Reg. 14,174, 14,175 (Mar. 15, 1995) (waiving the FTA Buy America provision for purchases of $2,500 or less). 300 49 C.F.R. § 661.7, App. A(c) (2015). This Small Pur- chase waiver was briefly deleted from the Code of Federal Regulations beginning in 2007, but was reinstated in 2009 as its deletion was apparently unintentional. Buy Amer- ica Requirements; Bi-Metallic Composite Conducting Rail, 74 Fed. Reg. 30,237, 30,239 (Jun. 25, 2009) (reinstat- ing the Small Purchase waiver); Buy America Require- ments; End Product Analysis and Waiver Procedures, 72 Fed. Reg. 53,688, 53,696 (Sep. 20, 2007) (deleting the Small Purchase waiver). 301 49 C.F.R. § 18.36(d) (2015). 302 Id.; see also 41 U.S.C. § 134 (2016). 303 Uniform Administrative Requirements, Cost Princi- ples, and Audit Requirements for Federal Awards, 78 Fed. Reg. 78,590 (Dec. 26, 2013). 304 2 C.F.R. § 200.88 (2015). 305 Fixing America’s Surface Transportation Act, Pub. L. No. 114 94, § 3011(2)(E), 129 Stat. 1312, 1475 (Dec. 4, 2015) (codified at 49 U.S.C. § 5323(j)(13)).

30 original 1985 waiver request). More than 3 years later, in February 2003, FTA announced that it had deter- mined that microcomputer components (primarily microchips) were still not available domestically in sufficient quantities of satisfactory quality, and that the general waiver for microcomputers and software remained in place.321 FTA clarified, however, that it did not consider the general waiver to permit the purchase of all foreign manufactured products containing a microprocessor or microchip. If a manufactured prod- uct such as “a farecard system” contained a microcom- puter, then the waiver only applied to the microcomputer; “the rest of the end product must be in compliance” with the FTA Buy America provision.322 FTA’s 2003 clarification of the microcomputer waiver came in the midst of a legal dispute over whether fare collection equipment purchased by the Massachusetts Bay Transportation Authority (MBTA) complied with the FTA Buy America provi- sion. In Cubic Transportation Systems, Inc. v. Mineta,323 an unsuccessful bidder challenged MBTA’s purchase of an automated fare collection system. In November 2002, FTA notified MBTA that the fare collection system complied with the FTA Buy America provision, in part because it deter- mined that one foreign-manufactured component (a “smart card reader”) was a microcomputer that qualified for the microcomputer waiver. The unsuc- cessful bidder filed a lawsuit in 2003 to challenge the application of the microcomputer waiver to this component of fare collection equipment.324 Shortly after FTA’s 2002 determination that MBTA’s smart card reader qualified for the micro- computer waiver, FTA received a request from Coin- Card International, Inc., to interpret the microcomputer/software waiver to exempt Coin- Card’s fare collection equipment. In May 2003, just 2 weeks after the Cubic lawsuit was filed challenging FTA’s determination on the MBTA fare collection equipment,325 FTA responded to CoinCard with its determination that CoinCard’s fare collection equip- ment did not comply with the FTA Buy America provision and was not exempted by the waiver.326 For products that are not available domestically in sufficient quantities of satisfactory quality, but which are not covered by the general Non-Availability waiver, the FTA grant recipient must request a project-specific Non-Availability waiver, as discussed in Section IV.B.1.a).314 3. Microcomputers and Software Compliance with the FTA Buy America provision is streamlined significantly by FTA’s longstanding general waiver for “microprocessors, computers, microcomputers, of software, or other such devices, which are used solely for the purpose of processing or storing data.”315 Over the years, this waiver has been the subject of considerable FTA rulemaking and guidance, as FTA has taken steps to prevent abuse of the waiver by manufacturers seeking to characterize a wide range of equipment as comput- ers subject to the waiver.316 The waiver originated in the mid-1980s, as the use of “microcomputers” by transit agencies was increas- ing. Because some components of the computers, primarily microchips, were not available from domes- tic sources, in 1985 FTA granted a temporary Non- Availability waiver for microcomputers,317 and in 1986 FTA made the microcomputer waiver perma- nent.318 For purposes of the waiver, FTA defined a microcomputer to be a “computer system” that “includes a microprocessor, storage, and input/output facility, which may or may not be on one chip,” and FTA recognized that a microcomputer includes “associated software,” such as its operating system.319 FTA thus has interpreted the microcomputer waiver to include software, regardless of whether the soft- ware resides on a microchip, allowing FTA grant recipients to treat foreign software as domestic for purposes of the FTA Buy America provision. In 1999, FTA received a request to clarify the micro- computer waiver.320 Specifically, the petitioner asked FTA to explain whether the waiver applied to any manufactured product that contains a microprocessor or microchip (specifically referencing “fare collection equipment”), or whether the waiver should apply only to desktop computers (which was the focus of the 314 49 C.F.R. § 661.7(c) (2015). 315 49 C.F.R. § 661.7, App. A(b) (2015). 316 For a detailed history of the microprocessor waiver, see NCRRP LRD 1, supra note 3, at 67–69. 317 Exemption from Buy America Requirements, 50 Fed. Reg. 18,760 (May 2, 1985). 318 Buy American Requirements—Permanent Waiver, 51 Fed. Reg. 36,126 (Oct. 8, 1986). 319 Exemption from Buy America Requirements, 50 Fed. Reg. 18,760 (May 2, 1985). 320 Buy America Requirements—Permanent Waiver for Microcomputers, 64 Fed. Reg. 54,855 (Oct. 8, 1999). 321 Buy America Requirements—Permanent Waiver for Microcomputers, 68 Fed. Reg. 9,801 (Feb. 28, 2003). 322 Id. 323 Cubic Transp. Sys., Inc. v. Mineta, 357 F. Supp. 2d 261 (D.D.C. 2004). 324 The court ultimately dismissed the lawsuit based on the unsuccessful bidder’s lack of standing, without deter- mining whether the microcomputer waiver was properly applied to the fare collection equipment. Id. 325 Complaint, Cubit Transp. Sys., Inc. v. Mineta, No. 03 CV 01023 (D.D.C. May 9, 2003). 326 Letter from Gregory B. McBride, FTA Deputy Chief Counsel, to Denis Bernardi, CoinCard International Inc. (May 23, 2003).

31 microchip is part of the purchase. Furhtermore, when purchasing manufactured products, any components of those products that may fairly be considered computers, microprocessors, storage, input and output devices, or software, may be treated as domestic when evaluating the domestic content of the manufactured product. As recently as 2014, FTA confirmed that system components such as “routers, radios, and processors” qualify for the microcom- puter waiver “if used solely for the purpose of process- ing or storing data.”333 No general waiver is available for the remainder of the manufactured product, however, simply because some of its components may be classified as computer equipment or software— the remainder of the product still must be domestic to comply with the FTA Buy America provision. 4. Vans and Minivans For many years, there was a general waiver for Chrysler passenger vans included in FTA’s regula- tions that implemented the FTA Buy America provi- sion.334 Over the years, the van and minivan waiver in its various forms has been repealed, reinstated, and repealed again.335 FTA reinstated a partial waiver of the FTA Buy America provision for vans and minivans as recently as October 2016.336 In April 1984, FTA granted a general waiver for 15-passenger Chrysler vans, allowing those vans to be purchased using FTA grant funds despite the fact that they did not satisfy the FTA Buy America provi- sion.337 Because there were domestic manufacturers of minivans, a Non-Availability waiver was not warranted. Therefore, FTA couched the Chrysler van waiver as a Public Interest waiver, justified on the grounds that it would provide for more competi- tive pricing in vehicle procurements by FTA grant recipients.338 FTA noted that the vans contained 74 percent domestic content,339 which would have qual- ified them for the rolling stock Domestic Content waiver but for the fact that the final assembly loca- tion was in Canada. Individual components of CoinCard’s fare collection equipment were covered by the waiver, including the software and selected hardware components, such as command modules and transaction processors, which contained microprocessors, input and output slots, internal storage, operating systems, and memory. However, FTA determined that other hardware components, such as passenger counters, farecard printers, and bill and coin validators, “are not, them- selves, microcomputers, although they may each contain embedded microprocessors.”327 All compo- nents of the fare collection systems that were not subject to a general waiver, such as microprocessors or software, had to be manufactured domestically for the fare collection equipment to comply with the FTA Buy America provision. Over the next 15 months, citing its CoinCard determination, FTA ruled that several other manufactured products (including automated passenger and customer information systems328 and monitoring and diagnostic equip- ment329), were not themselves microcomputers eligi- ble for the waiver, although certain components of these products were eligible microcomputers to the extent that they were “capable of processing, storage, programming, and have input/output facilities.” In 2005 (with SAFETEA-LU), Congress required FTA to issue a rule confirming that the microcom- puter waiver “applies only to a device used solely for the purpose of processing or storing data and does not extend to a product containing a microprocessor, computer, or microcomputer.”330 In November 2005, FTA issued an NPRM, which confirmed that the stat- utory language “actually reflects current FTA prac- tice with respect to implementing the general waiver for microcomputer, microprocessor, and related equip- ment.”331 In November 2006, FTA confirmed that the waiver continues to apply to microcomputers, input and output devices, and software.332 As a result, FTA grant recipients can acquire soft- ware and input and output devices from foreign sources, regardless of whether a microprocessor or 327 Id. 328 Letter from Gregory B. McBride, FTA Deputy Chief Counsel, to Martin B. Schnabel, MTA New York City Tran- sit (Sept. 23, 2003); Letter from Gregory B. McBride, FTA Deputy Chief Counsel, to Kevin Berry, Vansco Electronics Ltd. (Sept. 15, 2003). 329 Letter from Gregory B. McBride, FTA Deputy Chief Counsel, to Stephen McKay, Quester Tangent Corp. (Aug. 2, 2004). 330 SAFETEA-LU, supra note 108, at § 3023(i)(5)(A). 331 Buy America Requirements—Amendments to Defini- tions and Waiver Procedures, 70 Fed. Reg. 71,246 (Nov. 28, 2005). 332 Buy America Requirements—End Product Analysis and Waiver Procedures, 71 Fed. Reg. 69,412, 69,414 (Nov. 30, 2006). 333 Letter from Dana Nifosi, FTA Deputy Chief Counsel, to Douglas Bauder, Southern California Edison (Apr. 30, 2014), available at https://www.transit.dot.gov/regulations- and-guidance/buy-america/southern-california-edison-sce- april-30-2014. 334 49 C.F.R. § 661.7, App. A(b),(c) (2005). 335 For a detailed history of the Chrysler minivan waiver, see NCRRP LRD 1, supra note 3, at 65 66 (2015). 336 Notice of Buy America Waiver of Domestic Content Requirement for Minivans and Vans, 81 Fed. Reg. 72,667 (Oct. 20, 2016); see also Notice of Proposed Buy America Waiver for Minivans, 81 Fed. Reg. 30,602 (May 17, 2016). 337 Exemption from Buy America Requirements, 49 Fed. Reg. 13,944 (Apr. 9, 1984). 338 Id. 339 Id.

32 Initially, it appeared that a minivan waiver was no longer necessary. In July 2013, FTA notified two domestic manufacturers that it had determined that their manufacturing processes “to convert an incom- plete Chrysler or Dodge minivan into” a domestic minivan “are sufficient to meet the Buy America final assembly requirements.”349 However, in November 2013, FTA granted a project-specific Non-Availability waiver to a public transit agency, allowing it to purchase 25 seven-passenger Chrysler minivans after determining that there were no domestic sources.350 The waiver was justified in part by FTA’s determina- tion that the Chrysler minivans satisfied the domestic content requirement for rolling stock under the FTA Buy America provision, although final assembly did not take place in the United States. In other words, FTA waived only the final assembly requirement and not the domestic content requirement. However, FTA recently concluded, that “the market for non-ADA accessible minivans has changed since 2013.”351 Chrysler and Dodge mini- vans no longer meet the domestic content require- ment for rolling stock under the FTA Buy America provision, and the domestic manufacturer of the MV-1 wheelchair-lift-equipped minivan does not manufacture non-ADA-accessible minivans.352 Therefore, in October 2016, FTA granted a general waiver of only the domestic content requirement for all non-ADA-accessible minivans (typically 7-passenger vehicles) as well as vans (up to 15-passenger vehicles).353 Under the new partial waiver, final assembly still must take place in the United States.354 The van and minivan waiver is limited to contracts executed by FTA grant recipi- ents “before September 30, 2019 or until a fully- compliant domestic source becomes available, whichever is earlier.”355 However, if history is any indication, and with the domestic content A few years later, FTA concluded that the Public Interest waiver was to “be utilized in extremely limited situations”340 and that improving the competi- tive position of foreign products does not qualify, as that “is contrary to the clear intent of the statutory provision.”341 Accordingly, in 2004, FTA denied a Public Interest waiver requested by Chrysler that would have allowed FTA grant recipients to purchase the chassis and drive train of Chrysler’s smaller 8-to-10-passenger cargo vans.342 In 2005, under SAFETEA-LU, Congress formally repealed the general Public Interest waiver for Chrysler’s 15-passenger vans343 and imposed heightened notice-and-comment requirements for future Public Interest waivers.344 However, in June 2010, FTA granted a general, nationwide Non-Availability waiver (rather than a Public Interest waiver) for all minivans and mini- van chassis because no domestic source was identi- fied.345 This was a blanket waiver that applied to all minivans and minivan chassis from all manufactur- ers, although the waiver was specifically requested by Chrysler (for both its chassis and for its mini- vans) and by domestic manufacturers using the Chrysler chassis.346 However, FTA rescinded the minivan/chassis waiver in December 2012, after determining that Vehicle Production Group, manu- facturer of the MV-1 wheelchair-lift-equipped mini- van, was able to manufacture minivans and minivan chassis that conformed to the FTA Buy America provision.347 In doing so, FTA rejected the argument that a waiver was necessary to provide “increased competition,” concluding that the Price Differential waiver offers protection against one domestic manu- facturer abusing a monopoly position.348 340 Determination Concerning Request for Public Interest Waiver of Buy America Requirements, 53 Fed. Reg. 22,418 (Jun. 15, 1988). 341 Id. 342 Letter from Gregory B. McBride, FTA Deputy Chief Counsel, to W. Alvin Jackson, DaimlerChrysler (Apr. 7, 2004). 343 SAFETEA-LU, supra note 108, at § 3023(i)(4). FTA removed the Chrysler waivers from its regulations in March 2006. Buy America Requirements—Amendments to Definitions, 71 Fed. Reg. 14,112, 14,113 (Mar. 21, 2006). 344 SAFETEA-LU, supra note 108, at § 3023(i)(1)(B). 345 Notice of Buy America Waiver for Minivans and Minivan Chassis, 75 Fed. Reg. 35,123, 35,124 (Jun. 21, 2010). 346 Id.; see also Notice of Buy America Waiver Request by ElDorado National for Minivan Chassis, 74 Fed. Reg. 15,048 (Apr. 2, 2009). 347 Decision To Rescind Buy America Waiver for Mini- vans and Minivan Chassis, 77 Fed. Reg. 71,673 (Dec. 3, 2012). 348 Id. at 71,676 (“If limited competition results in a product ceasing to be available to FTA-funded transit agencies at a competitive price…, the appropriate action would be for the grantee to apply for a waiver based on price-differential.”). 349 Letter from Peter Rogoff, FTA Administrator, to Andrew Imanse, Thor Industries Group President (Jul. 1, 2013); Letter from Peter Rogoff, FTA Administrator, to Nick Gutwein, BraunAbility President (Jul. 1, 2013). 350 Notice of Buy America Waiver, 78 Fed. Reg. 71,025 (Nov. 27, 2013). 351 Notice of Proposed Buy America Waiver for Minivans, 81 Fed. Reg. 30,602, 30,604 (May 17, 2016). 352 Id.; see also Notice of Buy America Waiver of Domes- tic Content Requirement for Minivans and Vans, 81 Fed. Reg. 72,667, 72,668 (Oct 20, 2016) (summarizing pre-award audit results for the Dodge Caravan, which “showed a 57.4% domestic content for 2015 model year minivans and a 52% domestic content for model year 2016 minivans”). 353 Notice of Buy America Waiver of Domestic Content Requirement for Minivans and Vans, 81 Fed. Reg. 72,667, 72,669 (Oct 20, 2016). 354 Id. at 72,670. 355 Id.

33 domestic products are truly not available in suffi- cient quantities of satisfactory quality before FTA will grant a post-award Non-Availability waiver in that situation.361 A Non-Availability waiver will “almost certainly be denied” where there is an avail- able “domestic source of the material.”362 In 2013, FTA entered into an interagency agree- ment with the National Institute of Standards and Technology, Manufacturing Extension Partnership (NIST-MEP) of the U.S. Department of Commerce to help it identify potential domestic manufacturing sources.363 When confronted with a Non-Availability waiver request, FTA may seek out domestic sources by itself or via NIST-MEP before granting the waiver. Furthermore, recent waiver decisions suggest that FTA also expects the FTA grant recipi- ent to seek out domestic sources prior to requesting a Non-Availability waiver. The level of effort that may be required to support a Non-Availability waiver is illustrated by 2015 waivers of the FTA Buy America provision granted to the Long Island Rail Road (LIRR) for certain turnout components. In February 2014, LIRR issued a competitive solicitation for five turnouts, including movable point frogs, for its East Side Access proj- ect.364 The only bidder certified noncompliance with the FTA Buy America provision. In May 2014, LIRR awarded a procurement contract for turnouts to a different supplier for its Jamaica Station Capacity Improvement project.365 After the contract award, LIRR revised its specifications to require movable point frogs at the Jamaica Station project as well, and its contractor advised that it could not certify compliance with the FTA Buy America provision given the revised specifications. Movable point frogs were considered critical due to their durability.366 Therefore, LIRR requested Non-Availability waiv- ers for certain turnout components, including the movable point frogs, steel switch point rail sections, roller assemblies, and plates, for both the East Side Access project and Jamaica Station project.367 In requirement for rolling stock scheduled to increase to 70 percent beginning in October 2019, the van/ minivan waiver will remain an issue beyond 2019. B. Project-Specific Waivers 1. Types of Waivers Available When a general waiver does not apply, an FTA grant recipient may request a project-specific waiver on one of the following grounds. a. Non-Availability.—If the FTA grant recipient receives a responsive and responsible bid to provide domestic products in response to an open solicita- tion, and that bidder certifies compliance with the FTA Buy America provision, then the presumption is that those products are available domestically and a Non-Availability waiver will not be provided later.356 However, if the FTA grant recipient does not receive any bids to supply entirely domestic products, but instead receives only bids that include foreign products (but the bids are otherwise responsive and responsible), then FTA will presume that a Non- Availability waiver is warranted.357 However, if the FTA grant recipient seeks to purchase foreign products via a sole source procure- ment rather than an open solicitation, then FTA will require its grant recipient to provide evidence that comparable domestic products are truly unavailable in sufficient quantities of satisfactory quality before FTA will grant a Non-Availability waiver.358 There is no express requirement in the FTA Buy America provision for FTA grant recipients to perform an investigation to identify potential sources of compa- rable domestic goods when using an open solicitation process. However, because a Non-Availability waiver is discretionary,359 FTA grant recipients should provide as much information as possible to support a claim that domestic products are unavailable. In either open solicitations or sole source procure- ments, if the FTA grant recipient’s contractor or supplier certifies compliance with the FTA Buy America provision in the accepted bid, but after the award seeks to provide foreign materials, the bidder is bound by the Buy America compliance certifica- tion submitted with its bid.360 FTA will require its grant recipient to provide evidence that comparable 356 49 C.F.R. § 661.15(a) (2015). In the case of rolling stock, however, the FTA grant recipient still has an obliga- tion to perform its own investigation of the bidder’s com- pliance with the FTA Buy America provision. See Section V.B infra. 357 49 C.F.R. § 661.7(c)(1) (2015). 358 49 C.F.R. § 661.7(c)(2) (2015). 359 A Non-Availability waiver “may” be granted. 49 U.S.C. § 5323(j)(2) (2016); 49 C.F.R. § 661.7(c) (2015). 360 49 C.F.R. § 661.13(c) (2015). 361 49 C.F.R. § 661.7(c)(3) (2015). 362 Conti Enters., Inc. v. Se. Pa. Transp. Auth., No. 03 CV 05345, 2003 U.S. Dist. LEXIS 19848, at *3 (E.D. Pa. Oct. 14, 2003). 363 Interagency Agreement Between U.S. Department of Transportation, Federal Transit Administration, and U.S. Department of Commerce, National Institute of Standards and Technology (2013), available at http://www. fta.dot.gov/documents/2013-9-24_IAA.pdf. 364 Notice of Buy America Waiver for Track Turnout Components, 80 Fed. Reg. 8,753, 8,754 (Feb. 18, 2015). 365 Notice of Buy America Waiver for Track Turnout Component, 80 Fed. Reg. 52,081, 52,082 (Aug. 27, 2015). 366 Id. 367 Notice of Proposed Buy America Waiver for Track Turnout Components, 79 Fed. Reg. 75,857 (Dec. 19, 2014).

34 quantities and satisfactory quality, and provide a list of known domestic manufacturers from which the product can be obtained.374 FTA is required to publish its waiver denials and certifications of prod- uct availability on the USDOT website. It remains to be seen whether this will result in more project- specific Non-Availability waivers being granted. b. Price Differential.—The FTA Buy America provision may be waived if “including domestic material will increase the cost of the overall project by more than 25 percent.”375 The FTA regulations that implement this provision provide that the 25 percent Price Differential is analyzed at the level of the prime contract between the FTA grant recipient and its presumptive contractor or supplier.376 This Price Differential waiver may be requested in order to award a contract in response to a proposal that does not comply with the FTA Buy America provi- sion but is the lowest responsible and otherwise responsive bid (herein, the “low bid”). If the low bid in response to a solicitation by the FTA grant recipient does not comply with the FTA Buy America provision, but the bid is otherwise responsible and responsive, then the FTA grant recipient may apply a 25 percent surcharge (for evaluation purposes only) to the noncompliant low bid to determine whether the procurement qualifies for a Price Differential waiver. This is accomplished by multiplying the bid price for the noncompliant end product by 1.25.377 The price differential or surcharge is applied to the low bid price of the noncompliant end product, not just to the cost of its noncompliant components or subcomponents.378 The FTA grant recipient then compares this surcharged bid price with the lowest responsible and responsive bid to supply a comparable domestic end product. If the surcharged low bid is still lower than the lowest responsive and responsible bid to supply a domestic end product, then the FTA grant recipient may request a Price Differential waiver to contract with the low bidder.379 Note that the 25 percent Price Differential requires that there be a relatively large margin between the price of foreign and domestic end products to justify a waiver. The bid to supply the foreign end product would have to be less than 80 percent of the lowest Buy America–compliant bid to qualify. Accordingly, the support of its waiver request, LIRR pointed to a NIST-MEP report that identified potential domestic manufacturers of the components. LIRR had contacted each of the potential domestic manufac- turers identified in the NIST-MEP report and concluded that none was willing or capable of produc- ing the components.368 The domestic manufacturers who responded to LIRR did not currently manufac- ture the components, and it did not appear economi- cally feasible for them to supply the quantities needed by LIRR.369 FTA published a notice of the waiver request in the Federal Register for public comment in December 2014. In February 2015, before FTA had responded to LIRR’s waiver request, LIRR notified FTA that it had become aware of alternate turnout designs that may become available from a domestic source in the future, and accordingly, narrowed its waiver request to only those phases of its projects that were on the critical path to meet the construction schedule.370 On February 18, 2015, based largely on “LIRR’s good faith efforts to identify potential domestic manufac- turers for these track turnout components,” FTA granted LIRR a Non-Availability waiver for the four turnout components for just five turnouts that were on the critical path of the East Side Access project.371 In June 2015, LIRR further narrowed its waiver request with respect to the Jamaica Station project, after determining that domestic manufacturers could supply alternatives to the switch point rail sections, roller assemblies, and plates.372 On August 27, 2015, again based on “LIRR’s good faith efforts to identify domestic manufacturers for the turnout components and redesign the project,” FTA granted LIRR a Non- Availability waiver for just the movable point frog and for just two turnouts that were on the critical path of the Jamaica Station project.373 The history of this waiver request indicates that Non-Availability waivers will be highly scrutinized, will only be granted to the extent absolutely necessary, and that the FTA grant recipient bears the burden of proving that domestic products are truly unavailable. In December 2015, with passage of the FAST Act, Congress provided that whenever FTA denies a project-specific waiver request, FTA must certify that the product for which a waiver was requested is available from domestic manufacturers in sufficient 368 Id. at 75,858. 369 Notice of Buy America Waiver for Track Turnout Components, 80 Fed. Reg. 8,753, 8,754 (Feb. 18, 2015). 370 Id. at 8,753. 371 Id. at 8,754. 372 Notice of Buy America Waiver for Track Turnout Component, 80 Fed. Reg. 52,081, 52,083 (Aug. 27, 2015). 373 Id. 374 Fixing America’s Surface Transportation Act, Pub. L. No. 114 94, § 3011(2)(C), 129 Stat. 1312, 1474 75 (Dec. 4, 2015) (codified at 49 U.S.C. § 5323(j)(6)). 375 49 U.S.C. § 5323(j)(2)(D) (2016) (emphasis added). 376 49 C.F.R. § 661.7(d) (2015). 377 49 C.F.R. § 661.7(d) (2015). 378 BPPM, supra note 107, at 45 (“This waiver cannot be applied to components or subcomponents”). 379 Id.

35 This suggests that a Price Differential waiver is guaranteed to be granted if the conditions are satis- fied and if the waiver is requested in a timely fash- ion. The FTA grant recipient still is generally under no obligation to request a waiver from FTA in that situation and might not (e.g., if state or local Buy America rules attached to the procurement impose a stricter domestic preference than the FTA Buy America provision). The difficulty of obtaining a Price Differential waiver is illustrated by a 2013 denial to New York MTA’s Metro-North Railroad.388 Metro-North sought to purchase frogs for inventory, using local funds and not FTA funds, but with the intention of using the frogs on future FTA-funded projects. The low bidder, at $219,950, submitted a certification of noncompliance, whereas the next-lowest bidder, at $371,152, certified compliance with the FTA Buy America provision. Although the cost of procuring domestic products would increase the cost of this supply procurement by well more than 25 percent, and despite the fact that Metro-North was not using FTA funds for the procurement, FTA denied the Price Differential waiver request. Only once the frogs were to be incorporated in a specific FTA- funded construction project would FTA be able to determine whether the cost of domestic frogs would increase the cost of the overall project by more than 25 percent. Metro-North was left with the choice of either buying domestic frogs at $371,152 or buying the noncompliant frogs at $219,950 and ensuring that they are only incorporated into projects that do not receive FTA funding. FTA grant recipients should be aware that there is older FTA guidance that suggests that the 25 percent Price Differential waiver is not necessarily evaluated at the contract or project level, but rather may be granted for individual foreign “items” offered in the low bid.389 In 1988, in the Federal Register, UMTA first stated its position that the 25 percent Price Differen- tial was not to “be applied to the overall contract between the grantee and its supplier but to the comparative costs of each individual item being supplied.”390 In 1991, UMTA issued a final rule confirming that “the price differential waiver is applied only to the comparative costs of the items for which both foreign and domestic bids were received,” and not Price Differential waiver is rarely used, in comparison to the Non-Availability waiver.380 FTA strictly enforces the 25 percent Price Differential standard imposed by Congress and rarely grants waivers based on the cost of domestic goods. In 2010, a motor coach manufac- turer requested a Public Interest waiver from FTA on the grounds that there was only one Buy America– compliant manufacturer with a monopoly position, and that it would be in the public interest to allow foreign competition.381 FTA denied the request, however, because the domestic supplier made its products avail- able “at a competitive price (measured by a greater than 25 percent differential between foreign-produced and Buy America–compliant vehicles).”382 When there is a compliant domestic product, competitors must try to get a Price Differential waiver (rather than a Public Interest or Non-Availability waiver), which will not be granted unless the domestic product is at least 25 percent more expensive than the foreign product.383 In L.B. Foster Co. v. Southeastern Pennsylvania Transportation Authority,384 the Commonwealth Court of Pennsylvania, construing the statutory language of the FTA Buy America provision, concluded that FTA is under no obligation to grant a Price Differ- ential waiver even when domestic products increase the cost of the overall project by more than 25 percent.385 “Such unusual flexibility in pricing public bidding projects emphasizes the intent of Congress to underscore the importance of encouraging govern- mental transportation units to buy steel products produced in America whenever available.”386 Although both the statute and FTA’s regulations provide that the Price Differential waiver “may” be granted when domestic goods would increase the price of the project by 25 percent, suggesting that it is discretionary, FTA’s regulations further provide, that it will grant this price-differential waiver if the amount of the lowest responsive and responsible bid offering the item or material that is not produced in the United States multi- plied by 1.25 is less than the amount of the lowest respon- sive and responsible bid offering the item produced in the United States.387 380 Buy America Requirements, 60 Fed. Reg. 14,174, 14,178 (Mar. 15, 1995) (“FTA receives Buy America waiver requests for thousands of items, the great major- ity for reasons of nonavailability…with a few based on price differential…”). 381 Decision to Rescind Buy America Waiver for Mini- vans and Minivan Chassis, 77 Fed. Reg. 71,673, 71,676 (Dec. 3, 2012). 382 Id. 383 Id. 384 705 A.2d 164 (Pa. Commonw. Ct. 1997), rev. denied, 557 Pa. 633 (1998). 385 Id. at 169 n.3. 386 Id. 387 49 C.F.R. § 661.7(d) (2015) (emphasis supplied). 388 Letter from Michael L. Culotta, FTA Regional Coun- sel, to Anthony J. Bombace, Metro-North Railroad, NYMTA, Re: Buy America Waiver Request, Metro-North Railroad Bid Inquiry 1-11623, Frogs (Jul. 5, 2013), available at https://www.transit.dot.gov/regulations-and-guidance/buy- america/metro-north-railroad-july-05-2013. 389 See TCRP LRD 31, supra note 2, at 26. 390 Buy America Requirements—Amendments, 53 Fed. Reg. 32,994 (Aug. 29, 1988).

36 when the 25 percent Price Differential is satisfied,394 for example, when the bidder’s cost of supplying domestic products increases 25 percent after bid time due to changed market conditions, but the bidder could honor its original bid price if allowed to furnish foreign products. In rejecting the 25 percent Price Differential for post-award commercial impractica- bility waivers, FTA proposed to adopt the definition of “commercial impracticability” expressed in Raytheon Co. v. White:395 “A contract is said to be commercially impracticable when, because of unforeseen events, ‘it can be performed only at an excessive and unreason- able cost,’ …or when ‘all means of performance are commercially senseless.”396 In its 2007 final rule allowing for post-award commercial impracticability waivers, FTA concluded that the strict standard for commercial impracticability proposed in 2006 “forms a reasonable approach,” but left open the possibility that a post-award waiver could be granted based on a 25 percent Price Differential, to be determined on a case-by-case basis.397 c. Public Interest.—The FTA Buy America provi- sion may be waived when its application “would be inconsistent with the public interest.”398 Neither the FTA Buy America statute nor FTA’s regulations provide specific criteria for determining whether a Public Interest waiver is warranted; rather, FTA “will consider all appropriate factors on a case-by- case basis.”399 to the overall bid price.391 Note that this approach could allow Price Differential waivers to be granted when certain domestic materials are 25 percent more expensive than comparable foreign materials, even though inclusion of the domestic materials would not increase the overall project cost by 25 percent as the FTA Buy America statute appears to require. In subsequent years, Price Differential waivers were occasionally granted for individual materials without evaluating the impact to the overall project. For example, as recently as 2008, FTA granted the Utah Transit Authority (UTA) a Price Differential waiver for a steel procurement contract to support UTA’s Mid-Jordan light rail line project, because the price of foreign steel ($990/ton) multiplied by 1.25 was less than the price of domestic steel ($1,300.77/ ton).392 The steel procurement contract had been segmented from UTA’s overall design-build contract for the Mid-Jordan light rail line project, and FTA did not consider whether domestic steel would have increased the price of the overall project by 25 percent. This appears inconsistent with the approach taken by FTA in its 2013 Metro-North Railroad decision that was previously discussed. In 2016, FTA removed from its Buy America website the 1988–1991 UMTA guidance that suggested that the Price Differential waiver may be applied to individ- ual “items” in a bid rather than the overall bid price. In 2016, FTA also removed from its Buy America website the older Price Differential waiver decisions that did not evaluate the impact of domestic mate- rial to the overall project cost. FTA grant recipients should presume that domestic material must increase the cost of the overall project by 25 percent to receive a Price Differential waiver in the future. For a post-award waiver, the standard may be even stricter than the 25 percent Price Differential. In 2005, in response to SAFETEA-LU, FTA proposed to grant post-award waivers “in those rare instances” in which market conditions change after the contractor certifies compliance at bid time, so that the contractor discovers after contract award that Buy America compliance has become “commercially impossible or impracticable (due to price).”393 In 2006, FTA appeared to expressly reject suggestions that a post-award “commercial impracticability” waiver is warranted 394 Buy America Requirements—End Product Analysis and Waiver Procedures, 71 Fed. Reg. 69,412, 69,416 (Nov. 30, 2006) (FTA expressly disagreeing “with the one commenter who suggested that in determining the monetary value of what constitutes ‘commercial impracticability,’ that the ‘current 25 percent price differential figure…might repre- sent a reasonable benchmark.’”). 395 Id. (citing Raytheon Co. v. White, 305 F.3d 1354, 1667 (Fed. Cir. 2002)). 396 Raytheon Co. v. White, 305 F.3d 1354, 1367 (Fed. Cir. 2002) (internal citation omitted). 397 Buy America Requirements—End Product Analysis and Waiver Procedures, 72 Fed. Reg. 53,688, 53,691 (Sept. 20, 2007). In addressing post-award waiver requests shortly after adopting this final rule, FTA occasionally granted post-award waivers based on changed market conditions using the 25 percent Price Differential standard without determining whether compliance had become commercially impracticable. See Letter from Severn E.S. Miller, FTA Chief Counsel, to John M. Inglish, Utah Transit Authority, Re: Request for Buy America Waiver (May 28, 2008), avail- able at https://web.archive.org/web/20141227065529/http:// www.fta.dot.gov/legislation_law/legislation_law_8241.html. Also notable in that case, FTA applied the 25 percent Price Differential surcharge to an individual supply contract, without deciding whether the supplier’s price increase would increase the cost of the overall project by 25 percent. 398 49 U.S.C. § 5323(j)(2)(A) (2016); see also 49 C.F.R. § 661.7(b) (2015). 399 49 C.F.R. § 661.7(b) (2015). 391 Buy America Requirements, 56 Fed. Reg. 926 (Jan. 9, 1991). 392 Letter from Severn E.S. Miller, FTA Chief Counsel, to John M. Inglish, UTA, Re: Request for Buy America Waiver (May 28, 2008), available at https://web.archive.org/ web/20150918093227/http://www.fta.dot.gov/legislation_ law/legislation_law_8241.html. 393 Buy America Requirements—Amendments to Defini- tions and Waiver Procedures, 70 Fed. Reg. 71,246, 71,253 (Nov. 28, 2005).

37 procurement, arguing that the waiver would allow the foreign bidder to “submit a competitive bid with respect to price and schedule,” thus expanding the number of competitive bidders.406 The waiver request, published in the Federal Register pursuant to the new notice-and-comment requirements, met with consid- erable public opposition, including opposition from numerous members of Congress.407 Shortly thereafter, FTA denied the request, concluding that a Public Interest waiver is not available “to allow for a compet- itive bid on price and schedule alone.”408 In denying MBTA’s waiver request, FTA indi- cated that a Public Interest waiver request for proto- type vehicles might be available for “the introduction of significant new technology.”409 For example, also in 2008, FTA granted a Public Interest waiver of the FTA Buy America provision for all projects funded through its Fuel Cell Bus Program, concluding that “the U.S. market for fuel cell bus technology and related infrastructure is not fully developed” and allowing its grant recipients to adopt “foreign tech- nologies” would allow for “[q]uick and successful deployment of fuel cell bus technology and infra- structure… in the public interest.”410 Aside from the introduction of new technology, Public Interest waivers have been granted in recent years only in rare circumstances that are not widely applicable. For example, in 2011, FTA used a Public Interest waiver to allow a bidder to correct its Buy America certification from noncompliance to compli- ance.411 In granting the waiver, FTA noted that it Although the Public Interest waiver may appear to be a broad, catch-all category that could be used to allow foreign purchases under many sets of circumstances, it has not been widely used aside from “small purchases” (as discussed in Section IV.A.1). FTA has historically taken the position that Public Interest waivers should “be utilized in extremely limited situations.”400 Nevertheless, as discussed in Section IV.A.4, a Public Interest waiver was issued in 1984 to allow FTA grant recipients to purchase Chrysler mini- vans.401 Congress formally repealed that waiver in 2005, however, as part of SAFETEA-LU.402 In that legislation, Congress also established a new require- ment for FTA to publish in the Federal Register a “detailed written explanation” justifying any Public Interest waiver and to allow the public to comment on the proposed Public Interest waiver before its issuance.403 Prior to the new notice-and-comment requirements in 2005, FTA routinely granted Public Interest waiv- ers for prototype vehicles from foreign manufacturers, with the understanding that the remainder of the procurement would be manufactured in the United States.404 Due to increased scrutiny of Public Interest waivers since 2005, however, Public Interest waivers appear to be harder to obtain for prototypes.405 For example, in October 2008, MBTA requested a Public Interest waiver on behalf of a foreign bidder for 2 prototype locomotives out of a 28-locomotive 400 Determination Concerning Request for Public Interest Waiver of Buy America Requirements, 53 Fed. Reg. 22,418, 22,419 (Jun. 15, 1988) (denying Public Interest waiver requested on the basis of increasing market competition). 401 Exemption from Buy America Requirements, 49 Fed. Reg. 13,944 (Apr. 9, 1984). 402 SAFETEA-LU, supra note 108, at § 3023(i)(4). FTA removed the Chrysler waivers from its regulations in March 2006. Buy America Requirements—Amendments to Definitions, 71 Fed. Reg. 14,112, 14,113 (Mar. 21, 2006). 403 SAFETEA-LU, supra note 108, at § 3023(i)(1) (codi- fied at 49 U.S.C. § 5323(j)(3)). 404 TCRP LRD 31, supra note 2, at 25 (“Generally, FTA’s policy is to grant a waiver for one prototype vehicle. Any- thing beyond one prototype will be subject to close scru- tiny.”); see also Letter from Patrick W. Reilly, FTA Chief Counsel, to John C. Segerdell, Sacramento Regional Tran- sit District, Re: Light Rail Vehicle Procurement Request for Buy America Waiver for Second Pilot Car File (Oct. 20. 1999) (granting Public Interest waiver for one prototype vehicle but denying as to the second prototype), available at https://web.archive.org/web/20141227065635/http://www. fta.dot.gov/legislation_law/legislation_law_763.html. 405 See, e.g., Letter from Scott A. Biehl, FTA Chief Coun- sel, to Frank J. Wilson, Houston METRO (Apr. 14, 2009) (denying a Public Interest waiver for prototype light rail vehicles, and stating that procurement of prototype vehi- cles “cannot be separated” from the contract for produc- tion and assembly of vehicles). 406 Notice of Buy America Waiver Request by the Mas- sachusetts Bay Transportation Authority for Final Assem- bly of Rail Rolling Stock, 73 Fed. Reg. 62,587, 62,588 (Oct. 21, 2008). 407 See Notice of Buy America Waiver Request by the MBTA, Docket No. FTA 2008 0047 (Oct. 21, 2008), available at https://www.regulations.gov/docket?D=FTA-2008-0047. 408 Letter from Sherry E. Little, FTA Deputy Adminis- trator, to Daniel A. Grabauskas, MBTA (Nov. 14, 2008), available at https://www.transit.dot.gov/regulations-and- guidance/buy-america/massachusetts-bay-transportation- authority-november-14-2008. 409 Id.; see also Letter from Dorval R. Carter, Jr., FTA Chief Counsel, to Shanker A. Singham, Volvo Bus Corpora- tion (Mar. 16, 2011) (“FTA will deny requests that do not include factors like safety or the introduction of significant new technology.”), available at https://www.transit.dot.gov/ regulations-and-guidance/buy-america/volvo-bus- corporation-prevost-coach-march-16-2011. 410 Notice of Buy America Waiver for the National Fuel Cell Bus Technology Development Program, 73 Fed. Reg. 46,350, 46,352 (Aug. 8, 2008). 411 Letter from Dorval R. Carter, Jr., FTA Chief Counsel, to Jay H. Walder, NYMTA (Aug. 3, 2011), available at https:// www.transit.dot.gov/regulations-and-guidance/buy-america/ nymta-august-03-2011; see also Notice of Proposed Buy America Waiver To Allow Bidder To Certify Compliance, 76 Fed. Reg. 40,447 (Jul. 8, 2011).

38 has taken issue with FTA’s stance, suggesting that a Public Interest waiver should be available when domestic prices are as little as five to 10 percent higher than comparable foreign products.417 Never- theless, FTA’s position is that Congress established the criteria for market competition considerations with the Price Differential and Non-Availability waivers, and Congress did not intend for Public Interest waivers to be used to circumvent those criteria.418 2. Waiver Request Procedure Generally, only an FTA grant recipient, rather than its potential contractor or supplier, may request a waiver from the FTA Buy America provision,419 preferably prior to contract award. The potential contractor or supplier who seeks a waiver typically must do so through the FTA grant recipient.420 FTA’s regulations provide that FTA will consider a waiver request “from a potential bidder, offeror, or supplier” only in two cases:421 (1) where the waiver request is for a rolling stock component or subcomponent422 (as opposed to a waiver request for the rolling stock end product), or (2) where the waiver request is for “a specific item or material that is used in the produc- tion of a manufactured product”423 (as opposed to a waiver request for the manufactured end product). The waiver request must be in writing and must include “facts and justification to support the waiver.”424 The written waiver request is “submitted to the [FTA] Administrator through the appropriate [FTA] Regional Office.”425 Prior to 2012, FTA Regional Offices handled Non-Availability and Price Differen- tial waivers from FTA grant recipients, whereas all waiver requests from potential bidders as well as all Public Interest waivers required the approval of FTA Headquarters.426 However, with MAP-21 in 2012, Congress made all waivers of the FTA Buy America was “[u]nlike other requests for public interest waiv- ers,” which typically allow FTA grant recipients to purchase foreign products—rather, this 2011 waiver allowed the FTA grant recipient “to award a contract to a low bidder that will perform wholly in compliance with the substantive Buy America requirements.”412 In September 2016, FTA granted partial Public Interest waivers for rolling stock contracts made prior to FY 2017,413 so that such contracts are subject to the 60 percent domestic content requirement rather than the heightened FAST Act domestic content criteria. FTA’s justification for the Public Interest waiver is that the short notice and retroactive effective date of the FAST Act created a hardship for FTA grant recipi- ents who had entered into procurement contracts, or solicited procurements, prior to enactment of the FAST Act, with the expectation that the procurement would be subject to the 60 percent domestic content criterion.414 In the Public Interest waiver published in September 2016, following a notice-and-comment period, FTA determined that the 60 percent domestic content criterion (rather than the heightened FAST Act criteria) will apply to: (1) contracts made prior to December 4, 2015 (the enactment date of the FAST Act); (2) contracts made after December 4, 2015, on the basis of solicitations made prior to December 4, 2015; and (3) contracts made on or before October 31, 2016, on the basis of solicitations made on or after December 4, 2015.415 Note that this Public Interest waiver is only a partial waiver, as rolling stock subject to the waiver still must satisfy all FTA Buy America requirements that were in effect in FY 2015. What is clear is that a Public Interest waiver will generally not be granted on the basis of market competition issues, such as the low quality or high price of domestic products. In such cases, the FTA grant recipient’s option is to pursue either a Price Differential or Non-Availability waiver; unless FTA’s criteria for one of those waivers are satisfied, a waiver based on market competition issues will not be granted.416 The Federal Trade Commission 412 Id. 413 Notice of Policy on the Implementation of the Phased Increase in Domestic Content Under the Buy America Waiver for Rolling Stock and Notice of Public Interest Waiver of Buy America Domestic Content Requirements for Rolling Stock Procurement in Limited Circumstances, 81 Fed. Reg. 60,278, 60,284–85 (Sept. 20, 2016). 414 Id. at 60,279. 415 Id. at 60,284–85. 416 Letter from Dorval R. Carter, Jr., FTA Chief Counsel, to Shanker A. Singham, Volvo Bus Corporation (Mar. 16, 2011) (“FTA will deny requests based on policy consider- ations—non-availability and price differential—for which other waivers are available.”), available at https://www. transit.dot.gov/regulations-and-guidance/buy-america/ volvo-bus-corporation-prevost-coach-march-16-2011. 417 Letter from William E. Kovacic, FTC Commissioner, to Dorval Carter, FTA Chief Counsel, Re: Public Interest Waiver of the Federal Transit Authority’s Buy American Requirements as Applied to Motor Coach Purchase (Dec. 7, 2010), available at https://www.ftc.gov/public- statements/2010/12/letter-william-e-kovacic-dorval- carter-chief-counsel-federal-transit. 418 Determination Concerning Request for Public Inter- est Waiver of Buy America Requirements, 53 Fed. Reg. 22,418, 22,419 (Jun. 15, 1988) (“It is [F]TA’s position that Congress intended that the public interest waiver provi- sion…be utilized in extremely limited circumstances.”). 419 49 C.F.R. § 661.9(c) (2015). 420 49 C.F.R. § 661.9(b) (2015). 421 49 C.F.R. § 661.9(d) (2015). 422 49 C.F.R. § 661.7(f) (2015). 423 49 C.F.R. § 661.7(g) (2015). 424 49 C.F.R. § 661.9(c) (2015). 425 Id. 426 TCRP LRD 31, supra note 2, at 21.

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TRB's Transit Cooperative Research Program (TCRP) Legal Research Digest 49: Updated Guide to Buy America Requirements—2015 Supplement examines various statutory and regulatory Buy America requirements that a state or local governmental entity must examine when receiving funds for a public transportation project from one or more USDOT agencies. The purpose of this Legal Research Digest is to update the earlier TRB legal research to provide a comprehensive and current summary of the FTA Buy America provision.

TRB first published its Guide to Federal Buy America Requirements in 2001 as TCRP Legal Research Digest 17. A 2009 supplement to the guide was published as TCRP Legal Research Digest 31, which addressed significant legislative changes to the FTA Buy America provision enacted by Congress in 2005, as well as FTA’s 2007 final rule implementing those changes. In 2015, the FTA Buy America provision was addressed again in National Cooperative Rail Research Program (NCRRP) Legal Research Digest 1, along with other federal transportation grant Buy America provisions that are applicable to federally funded rail projects.

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