Buy America Requirements for Federally Funded Rail Projects (2015) / Chapter Skim
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Pages 9-36
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9 funding for the project. Grant recipients must be aware of the potential consequences of a false Buy America certification made by their contractors, and adjust their own enforcement activities accordingly to avoid loss of federal funds.
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10 foreign content in a manufactured product (such as rolling stock) where the foreign content comprises less than half of the end product.
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11 Buy America provision still conceivably applies to contracts issued by FRA grant recipients with a value of less than $100,000, if those contracts are part of an overall "project" for which the total project costs reach $100,000. FRA grant recipients should not attempt to segment a project into a number of smaller contracts simply to avoid application of the FRA Buy America provision.60 • Price Differential The FRA grant recipient may request a waiver from the FRA Buy America provision if "including domestic material will increase the cost of the overall project by more than 25 percent."61 Note that this is much stricter than the BAA "unreasonable cost" exception, which allows federal government agencies to purchase foreign goods if the lowest responsible bid is still less than the lowest purely domestic bid even after adjusting the low bid upward via a 6 percent price differential applied to the cost of foreign goods in the low bid.
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12 sonable time."66 This "unreasonable delivery time" Nonavailability waiver may apply where, in response to a solicitation for rolling stock or power train equipment, the FRA grant recipient receives a bid to provide domestic products but the bidder does not presently manufacture those products. Due to concerns about project delay, the FRA grant recipient might prefer to award the contract to a foreign bidder with the existing capability to manufacture the products, but doing so could provoke a bid challenge from the domestic bidder.
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13 has stated that its grant recipients "should require that the bidder or offeror submit with the bid or offer a completed Buy America certificate" as a condition of bid responsiveness.77 If this requirement is specified in the solicitation, then the FRA grant recipient is obligated to reject bids that do not include either a completed Buy America compliance certificate or a "noncompliance" certificate indicating that the bidder qualifies for a waiver from the FRA Buy America provision. FRA has published "suggested" Buy America compliance certification forms.78 The FRA Buy America provision allows for "a manufacturer or supplier of steel, iron, or manufactured goods to correct after bid opening any certification of noncompliance or failure to properly complete the certification (but not including failure to sign the certification)
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14 FRA grant funds.87 In other words, FRA grant recipients can not circumvent the FRA Buy America provision by using FRA grant funds for one "segment" of the project and state DOT funds or other federal grant funds for another "segment" of the project. Multiple federal funding sources can lead to confusion because the FRA Buy America provision (and some other federal transportation grant Buy America provisions)
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15 gress repealed that earlier FRA Buy America provision in 1998.94 Today's FRA Buy America provision originated with a Senate bill introduced in January 2007 called the Passenger Rail Investment and Improvement Act (PRIIA) .95 The Senate version of PRIIA would have established an FRA grant program to support intercity passenger rail service capital projects for state and regional transportation agencies.96 The Senate version of PRIIA included a proposed FRA Buy America provision, with language very similar to the BAA and the existing Amtrak Buy America provision, which would apply to the proposed FRA intercity passenger rail grant program.97 Like the BAA and the Amtrak Buy America provision, the Senate's proposed FRA Buy America provision nominally would have applied to all products (both "manufactured articles, materials, and supplies" and "unmanufactured articles, materials, and supplies")
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16 Railroad Safety Improvement Act, 108 which had passed the House in October 2007 with no FRA Buy America provisions whatsoever. The Senate passed an amended version of the Railroad Safety Improvement Act on August 1, 2008,109 and notified the House of the need to resolve differences between the two bills.
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17 public comment in the Federal Register on the national rail plan authorized by PRIIA.121 A number of the comments received in response to these solicitations, as well as comments received in response to various notices of available funding for these programs, have related to the FRA Buy America provision. Potential FRA grant recipients and their potential suppliers expressed concerns about the FRA Buy America provision.
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18 delayed until February 2013.133 Finally, in June 2013, FRA announced that the NPRM for the FRA Buy America provision was "on hold" pending discussions between FRA and the Office of Management and Budget.134 b. Interim Guidance and Manufactured Products. -- Shortly after putting its formal rulemaking for the FRA Buy America provision on hold, FRA made available on its Buy America Web site in August 2013 an updated list of its answers to frequently asked questions concerning the FRA Buy America provision.135 At that time, FRA also made available a Webinar presentation explaining the FRA Buy America provision.136 This interim guidance primarily impacts the way that manufactured products (including rolling stock)
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19 single procurement, with the products assembled together into a larger system (in an attempt to have the foreign components of the individual manufactured products treated as subcomponents of the delivered system)
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20 components of the turnout, which include ties, switch rails, plates, clips, "frogs" (often manganese castings) , and switches.156 Therefore, FRA has determined that the process by which these components are combined to produce a turnout is "substantial transformation," not "mere assembly." Although "mere assembly" is insufficient to create a manufactured product for purposes of the FRA Buy America provision, assembly may account for most of the manufacturing process.
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21 found none.168 Then, pursuant to the informal notice-and-comment requirements of the FHWA Buy America provision, on October 22, 2009, FHWA posted on its Web site a notice of intent to grant a waiver for the foreign steel roof tiles and provided 15 days for public comment.169 FHWA stated that it "did not receive any substantive comments" indicating that the tiles were available domestically.170 On December 4, 2009, FHWA published a notice in the Federal Register that it intended to grant ODOT's Nonavailability waiver and invited public comment for 15 additional days.171 Five months after FHWA granted its waiver, on May 20, 2010, FRA published a notice in the Federal Register that ODOT had also requested a Nonavailability waiver from the FRA Buy America provision.172 FRA is not obligated under the Buy America provision to publish waiver requests in the Federal Register for public comment, but did so in this case "in order to completely understand the facts surrounding ODOT's request."173 FRA received one comment in response to the notice, a joint response from railroad labor unions formally opposing the waiver request.174 While the unions did not dispute that the particular steel roofing tiles were not available domestically, they argued that ODOT should not be allowed to circumvent the FRA Buy America provision based on an architectural design decision to specify roofing tiles that are available only from foreign manufacturers. Instead, the unions argued that ODOT 168 Notice of Buy America Waiver Request by Oregon Department of Transportation for Steel Roof Tiles To Be Used in Union Station Roof Rehabilitation, 75 Fed.
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22 in combination with 3,340 compatible track bolts and washers that were domestically manufactured. Furthermore, all but 80 of the 3,340 boltand-nut combinations were eventually to be removed and replaced with joint welds, so that the cost of foreign nuts in the final project was estimated to be only $60.180 However, under the FRA Buy America provision, there is no Small Purchase exception for a de minimis amount of foreign goods to be left in the project, so NNEPRA had to seek a waiver.181 Although not required by the FRA Buy America provision, FRA published the waiver request in the Federal Register in August 2010 to solicit public comment.182 Comments received were generally opposed to the request.
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23 that domestic goods were not reasonably available.190 Further, under the FRA Buy America provision, FRA has the statutory authority to grant a Nonavailability waiver based on unreasonable delivery time only for rolling stock, not for other manufactured products or construction materials. In this case, however, FRA considered the "unreasonable delivery time" to deliver domestic nuts as a second factor in favor of determining that domestic nuts were not reasonably available.191 As will be seen, FRA has continued to consider the additional cost and delivery time of domestic goods as the primary factors in favor of determining that domestic goods are not reasonably available.
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24 ica requirements" and that it was getting "closer to meeting the Buy America requirements."200 FRA's processing of the Vossloh concrete tie waiver (roughly 2 months from formal waiver request to final decision) took less processing time than the NNEPRA request 2 years earlier.
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25 it would cost an additional $1 million and 6 months to manufacture domestic components to replace the foreign components of the ITCS.213 Although this would increase the cost of the ITCS by 40 percent, IDOT would not qualify for the 25 percent Price Differential waiver because the ITCS cost was a small part of the overall Chicago-toSt. Louis improvement project.
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26 sources could manufacture the products, it would be more expensive than purchasing the components from the foreign manufacturers and probably more time-consuming. For example, one potential domestic source said that it would take 6 months to 1 year to manufacture the switch point rail.224 In April 2013, more than 8 months after Amtrak's waiver request, FRA published in the Federal Register notice of its intent to grant Nonavailability waivers for the switch point rails, roller assemblies, and plates.225 (FRA noted that it considers the vee point to be a subcomponent of the frog, which is a component of the turnout, and that FRA does not require a waiver for subcomponents such as the vee point, as long as the frog itself is manufactured in the United States.226)
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27 • Domestic unmanufactured or "raw" goods (those "mined or produced in the United States") ,230 and • Domestic manufactured goods (those "manufactured in the United States substantially from" other domestic goods)
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28 passed a measure that would apply the Amtrak Buy America provision across multiple related contracts to prevent such segmentation.239 Although not enacted into law, Congress or FRA may nevertheless consider segmentation to violate the spirit, if not the text, of the Amtrak Buy America provision. When faced with the need to purchase foreign goods costing $1 million or more, Amtrak may consider whether any of the other exceptions are applicable before segmenting the procurement into smaller purchases.
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29 the taxpayer of the United States."248 Furthermore, at the time the Amtrak Buy America provision was enacted in 1978, Amtrak did not typically use a price differential to evaluate foreign bids, and in the few instances where Amtrak purchased foreign goods based on cost, comparable domestic goods were 28 percent to 109 percent more expensive.249 If Amtrak considers the cost of domestic goods to be unreasonable with respect to comparable foreign goods, it must seek a waiver of the Amtrak Buy America provision from FRA.250 However, FRA recognizes that the "unreasonable cost" waiver under the Amtrak Buy America provision is "similar" to that in the BAA and "less stringent" than the 25 percent Price Differential waiver in the FRA Buy America provision.251 Therefore, among the transportation grant programs, the Amtrak Buy America provision may offer the best possibility of obtaining a Price Differential or "unreasonable cost" waiver. However, there is no known instance of FRA ever granting such a waiver from the Amtrak Buy America provision.
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30 Presumably, the "unreasonable delivery time" justification for a Nonavailability waiver is useful to defend against a potential bid protest from a domestic manufacturer who does not presently manufacture the product sought, but who nevertheless argues that the product could be manufactured domestically given enough time. If seeking a Nonavailability waiver for rolling stock or power train equipment, Amtrak should try to make both arguments: that the products are not domestically available in sufficient quantity and satisfactory quality and also that such products can not be made available domestically in a reasonable time.
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31 HSIPR program grantee."269 The key determination for which the Buy America provision (if any) applies is "the source of funds."270 In a project jointly funded, for example, by FRA (with HSIPR grant funds)
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32 rolling stock, there were suggestions that foreign governments were subsidizing their own rail car industries and then selling the rail cars in the United States below cost (i.e., "dumping") , making it difficult for domestic rail car manufacturers to compete.280 Congress responded to the perceived unfair foreign competition by imposing domestic preferences across multiple federal programs in 1978, including Amtrak, a significant consumer of both rail rolling stock281 and steel.282 In fact, as passed by the Senate, the Amtrak Buy America provision would only have applied to purchases of "steel and rolling stock for fixed rail service," where the total project cost (not just the cost of steel and rolling stock)
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33 between $100,000 and $1 million.290 However, this change was not included in the version of PRIIA that was passed by the Senate and thus was never enacted.291 In 2012, there was an effort in the Senate to prohibit "segmentation" of large procurements into smaller contracts to avoid application of the Amtrak Buy America provision. The version of the 2012 USDOT appropriations bill that passed the Senate would have applied the Amtrak Buy America provision to Amtrak contracts of less than $1 million, where multiple contracts could be considered to constitute a single "project" and the combined value of the "project" contracts reached the cost threshold of $1 million.292 However, the compromise version that ultimately passed both houses of Congress prohibited "segmentation" of Buy America requirements only with respect to FHWA projects, not Amtrak projects.293 Amtrak should take note of these and other recent legislative efforts to ensure that the various transportation grant Buy America provisions are strictly and consistently applied.
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34 take place at Bombardier's New York facility, although significant manufacturing processes for components or subcomponents would take place outside the United States.301 • Compliance Issues Issues related to domestic manufacturing arose early in the performance of the contract. Amtrak stated that it originally anticipated having Bombardier and Alstom manufacture the trainsets using existing designs for trains in use in Europe, such as the Alstom TGV bullet train.302 However, in 1999, FRA issued crashworthiness regulations requiring high-speed trains to be able to potentially withstand impacts with freight trains that would share the Northeast Corridor track.303 This was more stringent than the requirements for European trains, and it required Amtrak, Bombardier, and Alstom to come up with a customized, heavier design for the Acela trains.304 It has been suggested that the decision to forego the lighter European design in favor of a more traditional U.S.
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35 nonconforming313 and that responsibility for complying with the Amtrak Buy America provision rested solely with the Bombardier and Alstom consortium.314 Amtrak filed a counterclaim against Bombardier in November 2002, seeking damages in part for Bombardier's alleged violation of the Amtrak Buy America provision that was incorporated into its contract.315 Ultimately, the lawsuit was settled in March 2004 when Amtrak agreed to pay the Bombardier and Alstom consortium $42.5 million out of $70 million that Amtrak had previously withheld from the consortium's invoices, with neither party admitting liability.316 While it will never be clear exactly the extent to which these extra costs can be attributed to strict application of the Amtrak Buy America provision, strict application of the FRA crashworthiness regulations, or other factors, one should expect Buy America enforcement to increase project costs. Further, in the Northeast Corridor, the failure to achieve a European-style high-speed rail system was attributed in part to strict application of domestic preferences.
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36 an important decision, illustrating that a contractor for a federal transportation grant recipient, who is required to certify compliance with a transportation grant Buy America provision, is probably not liable under the FCA for false Buy America certifications made to a grant recipient such as Amtrak, a state DOT, or a local transit agency. • Waiver Request In November 2011, Amtrak requested a waiver from the Amtrak Buy America provision to allow Amtrak to purchase two power car central block assemblies from Alstom for the Acela trainsets.321 Each central block would cost more than $1 million, so there was no question that the Amtrak Buy America provision applied.
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