TRANSPORTATION RESEARCH BOARDNATIONAL RESEARCH COUNCIL

TCRPTransit Cooperative Research Program

Sponsored by the Federal Transit Administration

LEGAL RESEARCH DIGESTSeptember 2001—Number 17

Subject Areas: IC Transportation Law, VI Public Transit

Guide to Federal Buy America Requirements

This report was prepared under TCRP Project J-5, “Legal Aspects of Transit and Intermodal Transportation Programs,” for which theTransportation Research Board is the agency coordinating the research. The report was prepared by Jaye Pershing Johnson. James B.

McDaniel, TRB Counsel for Legal Research Projects, was the principal investigator and content editor.

THE PROBLEM AND ITS SOLUTION

The nation’s transit agencies need to have access to aprogram that can provide authoritatively researched, spe-cific, limited-scope studies of legal issues and problemshaving national significance and application to theirbusinesses. The TCRP Project J-5 is designed to provideinsight into the operating practices and legal elements ofspecific problems in transportation agencies.

The intermodal approach to surface transportationrequires a partnership between transit and other trans-portation modes. To make the partnership work well,attorneys for each mode need to be familiar with the legalframework and processes of the other modes. Researchstudies in areas of common concern will be needed todetermine what adaptations are necessary to carry onsuccessful intermodal programs.

Transit attorneys have noted that they particularlyneed information in several areas of transportation law,including

• Environmental standards and requirements;

• Construction and procurement contract proceduresand administration;

• Civil rights and labor standards; and

• Tort liability, risk management, and system safety.

In other areas of the law, transit programs may involvelegal problems and issues that are not shared with othermodes; as, for example, compliance with transit

equipment and operations guidelines, FTA financinginitiatives, private-sector programs, and labor or envi-ronmental standards relating to transit operations. Em-phasis is placed on research of current importance andapplicability to transit and intermodal operations andprograms.

APPLICATIONS

The Buy America requirements, imposed on transitgrantees by federal law, have been misunderstood byfederal transit grantees and the focus of considerableconfusion in the transit industry. Essentially, transitagencies undertaking federally assisted procurements foritems containing steel must ensure that the item meetsstatutory and regulatory requirements concerning do-mestic steel origin and content.

Transit operators purchase hundreds of millions inmanufactured goods, and rolling stock-busses and trains.Confusion and uncertainty in the way federal require-ments apply can be costly and/or considerably delay thepurchase of essential equipment.

The purpose of this report is to provide an easy-to-useguide that provides all the Buy America requirementswith an emphasis on the specific requirements that applyboth to manufactured products and to rolling stock. Itshould be useful to attorneys, administrators, contractingofficers, engineers, and all officials that have purchasingresponsibilities.

CONTENTS

I. INTRODUCTION...............................................................................................................................................................3

II. HISTORY OF THE BUY AMERICA REQUIREMENTS ...........................................................................................4

A. The 1933 Buy American Act ...........................................................................................................................................4B. Urban Mass Transportation Act of 1964..........................................................................................................................4C. Congress Enacts Buy America for Transit .......................................................................................................................5D. Congress Strengthens Buy America for Transit ...............................................................................................................5E. Surface Transportation and Uniform Relocation Assistance Act of 1987 ........................................................................6F. Buy America in the 1990s ................................................................................................................................................8G. FTA Actions.....................................................................................................................................................................8

1. Fifteen-Passenger Chrysler Vans...................................................................................................................................82. Microcomputers and Software ......................................................................................................................................83. Small Purchases.............................................................................................................................................................94. FTA Publication of Waivers Granted to Manufacturers................................................................................................9

III. WHAT BUY AMERICA IS NOT...................................................................................................................................9

A. 1933 Buy American Act...................................................................................................................................................9B. The North American Free Trade Agreement..................................................................................................................10

IV. BUY AMERICA REQUIREMENTS—TESTS AND INTERPRETATIONS ..........................................................10

A. Generally—49 U.S.C. § 5323(j) (Buy America)............................................................................................................10B. State and Local Buy America Requirements..................................................................................................................10C. Iron and Steel in Infrastructure Projects.........................................................................................................................11D. Manufactured Products ..................................................................................................................................................12E. Rolling Stock..................................................................................................................................................................13

1. Components.................................................................................................................................................................142. Final Assembly............................................................................................................................................................153. Cost of Components and Subcomponents ...................................................................................................................164. Pre-award and Post-delivery Audits ............................................................................................................................17

V. WAIVERS AND EXEMPTIONS...................................................................................................................................18

A. How to Petition for a Waiver .........................................................................................................................................18B. General Waivers.............................................................................................................................................................19C. Public Interest Waivers ..................................................................................................................................................19D. Nonavailability Waivers.................................................................................................................................................20E. Price Differential Waivers..............................................................................................................................................21

VI. BUY AMERICA COMPLIANCE................................................................................................................................21

A. Who is Subject to the Buy America Requirements? ......................................................................................................21B. FTA Investigation of Buy America Compliance ............................................................................................................22C. Noncompliance With Buy America................................................................................................................................23D. Sanctions Against Vendors ............................................................................................................................................24

1. FTA Remedies.............................................................................................................................................................24 2. Grantee Remedies .......................................................................................................................................................24E. FTA Sanctions Against Grantees....................................................................................................................................24

VII. CONCLUSION.............................................................................................................................................................25

APPENDIX A ........................................................................................................................................................................27

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GUIDE TO FEDERAL BUY AMERICA REQUIREMENTS

By Jaye Pershing JohnsonKalkines, Arky, Zall & Bernstein LLP

I. INTRODUCTION

Buy America is a fact of the public transit indus-try and apparently it’s here to stay. This report isintended to assist transit attorneys and procure-ment officers in anticipating Buy America compli-ance pitfalls before they arise, thereby avoidingunnecessary Buy America-related delay, expense,and aggravation in federally funded procurements.

In order to shed some light on what Buy Americais intended to accomplish, Section II of this reportdiscusses the history and evolution of Buy America.This discussion provides perspective on the socialand economic purposes and priorities of Congressin enacting Buy America. Section III of the reportdiscusses, in light of its history, what Buy Americais not. There seems to be some confusion in thetransit industry as to whether, for example, theNorth American Free Trade Agreement (NAFTA)applies to transit procurements (it doesn’t). SectionIV of the report attempts to parse and clarify theincredibly dense provisions of the Buy Americaregulations. Section V discusses the circumstancesunder which a grantee may obtain a waiver fromBuy America, and Section VI considers Buy Amer-ica enforcement, including what remedies the FTAmight pursue against a grantee for noncompliance.

A questionnaire (a copy of which is attached inAppendix A) was circulated among various mem-bers of the public transit community in connectionwith the preparation of this report. The question-naire was intended to elicit anecdotal evidencefrom the public transit industry regarding the im-pact of Buy America. Responses are cited through-out, as are examples taken from Federal TransitAdministration (FTA) Buy America waiver lettersand letters of interpretation.1 Eighty responseswere received, and 29 of those were from transitagencies in urbanized areas with populations ex-ceeding 200,000. It is interesting to note that 44, ormore than half of the questionnaire responses, in-

1 FTA Buy America waivers and interpretations

are now posted on the Internet for informationalpurposes at www.fta.dot.gov/library/legal/buyamer/inltrs/batoc.html.

dicated no Buy America impact on transit pro-curements whatsoever. Twenty-five other re-sponses indicated that the impact of Buy Americahad been greatly reduced by the $100,000 “smallpurchase” and microcomputer exceptions. Only fiveof the respondents recounted their Buy Americawar stories in any detail; three of those five werefrom public transit agencies in urbanized areaswith populations exceeding 200,000.2

The impact of Buy America has been reduced formany public transit agencies as a result of (a) thethreshold of $100,000 for Buy America applicabil-ity, (b) the nonapplicability of Buy America to mi-crocomputer equipment, and/or (c) the eliminationof federal operating grants to agencies in urbanizedareas with populations exceeding 200,000.3 Severaltransit agencies indicated that problematic BuyAmerica procurements are funded with other thanfederal money (i.e. state or local monies appropri-ated for that purpose or tax-exempt bond funds) ifpossible.

Many respondents indicated Buy America wasnot an issue because the requirements are nowfamiliar to and have been accommodated by theindustry. As the Berks Area Reading Transporta-tion Authority noted in its questionnaire response,“Since this regulation has been around so long andall vendors are familiar with the requirements, it’sreally not a problem or an issue.”

What is not known is the number of public tran-sit agencies that fail to appreciate the nuance andcomplexity of Buy America compliance. FTA doesnot routinely initiate investigation of Buy Americacompliance. The bulk of compliance issues areraised by disappointed bidders who challenge theBuy America certifications of successful compet-tors.4 This report is for public transit attorneys andprocurement officers who may have reason to be-lieve they fall into this category, for those who may

2 Six other responses were not substantive, indi-

cating only that another public entity conductedtheir procurements.

3 49 U.S.C. § 5307.4 While FTA is authorized to initiate Buy Amer-

ica audits de novo, in practice, this seldom occurs.

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be conducting a procurement for something morecomplex than transit vehicles, and for anyone elsewho has ever been intrigued or burned by BuyAmerica.

II. HISTORY OF THE BUY AMERICA REQUIREMENTS

A. The 1933 Buy American Act

In 1875 Congress enacted one of the first statu-tory provisions, other than tariff acts, relating topreferential treatment of American material incontracts for public improvements.5 This act ap-plied only to materials purchased by the Depart-ment of War and was superseded in 1933 by legis-lation popularly referred to as the “Buy American”Act.6 The Buy American Act was enacted as part ofthe government’s response to the unemploymentcrisis of the Great Depression.

The legislative history of the Buy American Acthas been referred to as “sparse and confusing”;however, the protection of the American worker isthe dominant theme.7 Remarks of Senator Davis onthe Senate floor during the debate of the bill typifyCongress’s concern that the Act benefit the Ameri-can worker: “The adoption of this amendment willmean work for our workers. It will help stem thetide of foreign competition and thus prevent fur-ther reduction of wages for the American worker.”8

Similarly, Representative Eaton stated that theAct was designed as a device “to foster and protectAmerican industry, American workers and Ameri-can invested capital.”9

The Buy American provisions were originallyadded as a Senate amendment to a House appro-priations bill and consist of two key sections. First,unless a department head determines it to be in-consistent with the public interest, or the cost to be

5 Act of March 3, 1875, ch. 133, § 2, 18 Stat. 455

(1875) (codified at 41 U.S.C § 10, superseded by 41U.S.C. §§ 10(a) to 10(c)).

6 Buy American Act, ch. 212, tit. III, 47 Stat.1520 (1933) (codified as amended at 41 U.S.C. §§10(a) to 10(c)).

7 Allis Chalmers Corporation, Hydro-TurbineDivision v. Friedkin, 635 F.2d 248,257, n.17, 258(C.A. Pa. 1980).

8 Id. 76 CONG. REC. 1933 (1933) (remarks of Sen.Davis). See also Textron Inc., Bell Helicopter Tex-tron Division v. Adams, 493 F. Supp. 824 (D.C.Dist. Ct. 1980).

9 76 CONG. REC. 1896 (1933) (remarks of Rep.Eaton), cited in Textron Inc., Bell Helicopter Tex-tron Division v. Adams, 493 F. Supp. 824, 830 (D.C.Dist. Ct. 1980).

unreasonable, only unmanufactured materialsmined or produced in the United States and onlymanufactured materials manufactured in theUnited States substantially from all materialsmined, produced, or manufactured in the UnitedStates shall be acquired for public use.10 This provi-sion does not apply to materials for use outside theUnited States or if domestic materials are not pro-duced in sufficient quantity and of a satisfactoryquality. Second, every contract for public buildingor public work projects in the United States shalluse unmanufactured materials mined or producedin the United States and only manufactured mate-rials manufactured in the United States substan-tially from all materials mined, produced, or manu-factured in the United States.11 If a contractor failsto comply with this requirement, it will be barredfrom further government contracts for a period of 3years.12

The Buy American Act defines the terms publicuse, public building, and public work to mean onlyuse by, building of, and public work of the UnitedStates, the District of Columbia, Puerto Rico,American Samoa, the Canal Zone, and the VirginIslands.13 The Buy American Act is applicable onlyto purchases by federal agencies and departmentsand not to grants made by federal agencies anddepartments. Purchases by state and local govern-ments with federal funds are not subject to the BuyAmerican Act.

B. Urban Mass Transportation Act of 1964

The applicability of Buy American regulations totransit procurements in the 1930s was limited be-cause transit systems were controlled largely byprivate companies. Following World War II, theeconomics of the transit industry were changingand transit was no longer profitable. By 1955, pub-licly operated transit systems were carrying 35percent of the nation’s transit ridership; this per-centage rose to 50 percent by 1960.14 In 1964, Con-gress passed the Urban Mass Transportation Act of

10 41 U.S.C. § 10(a).11 41 U.S.C. § 10(b).12 For a comprehensive discussion of the legisla-

tive history of the Buy American Act, see LawrenceHughes’s Buy North America: A Revision to FTABuy America Requirements, 23 TRANSP. L.J., No. 2(1995).

13 41 U.S.C. § 10(c).14 Hughes, supra note 12, at 213.

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1964,15 which authorized federal assistance for upto 80 percent of the cost of transit equipmentthrough the Urban Mass Transit Administration(UMTA). However, while Section 9(c) of the UrbanMass Transportation Act of 1964 originally mir-rored the intent of the Buy American Act and pro-vided for use by contractors of domestically manu-factured articles, this provision was repealed by theHousing and Urban Development Act of 1965.16

Further, in 1974, Congress amended the Act toprohibit discriminatory specifications.17

C. Congress Enacts Buy America for Transit

By the mid-1970s, a growing number of Congres-sional lawmakers were concerned at how muchsuccess foreign manufacturers were having inAmerican heavy industries markets; this concernwas especially high with the United States transitsupplier community.18 The Surface TransportationAssistance Act of 1978 (1978 STAA) included a BuyAmerica provision applicable to the UMTA pro-gram. The provision established a preference forproducts produced, mined, or manufactured in theUnited States. This initial provision only applied tocontracts of UMTA grantees exceeding $500,000. 19

As with the 1933 Buy American provisions, Sec-tion 401(b) of the 1978 STAA excepted the applica-tion of the new Buy America provisions where theSecretary of Transportation determined their ap-plication to be inconsistent with the public interest,if their application to rolling stock would result inunreasonable costs, if domestic supplies were un-available or were of unsatisfactory quality, or if theinclusion of domestic materials would increase thecost of the overall project contract by more than 10percent. In December 1978, UMTA issued regula-tions applicable only to UMTA grantees that im-plemented the 1978 STAA Buy America provisionsand instituted the requirement for all contractorsto complete a certificate of compliance with Buy

15 Urban Mass Transportation Act of 1964 (nowknown as the Federal Transit Act), P.L. 88-365, 78Stat. 302 (1964) (codified at 49 U.S.C. 1601 et seq.).

16 Housing and Urban Development Act of 1965,P.L. 89-117, § 1109 (1965).

17 Urban Mass Transportation Act § 3, P.L. 93-503, § 106, November 26, 1974.

18 Hughes, supra note 12, at 213–14; citing CliffHenke, Bye Bye, Buy America?, METRO, Sept.-Oct.1994, at A40.

19 Surface Transportation Assistance Act of 1978,P.L. 95-599, § 401, 92 Stat. 2689 (1978) (codified at49 U.S.C. § 1602—Title IV Buy America).

America (unless an appropriate waiver wasgranted).20

The 1978 STAA Buy America provision was en-acted in response to what was perceived at the timeas an uneven playing field that had been shaped byEuropean and Japanese protectionism.21 The HouseReport stated that the Buy America provision wasadded:

to protect American manufacturers and supplierswho have suffered substantial losses as a result ofcompetition from foreign imports which, in manycases, are underpriced because of governmental fi-nancial support and cheap labor costs. The loss ofbusiness by domestic companies adds to the tradedeficit, fuels inflation and leads to unemploymentand reduced productivity.22

D. Congress Strengthens Buy America for Transit

Section 165 of the Surface Transportation Assis-tance Act of 1982 (1982 STAA)23 deleted 1978 STAASection 401 and strengthened the Buy Americaprovisions for transit with the intent of curing theperceived inequity of trade laws in the face of highunemployment.24 The 1982 STAA prohibited theobligation of UMTA-administered grant funds un-less steel, cement, and manufactured products usedin transit projects were produced in the UnitedStates; cement was later deleted from the materi-als and products covered under 1982 STAA Section165.25 The 1982 STAA also eliminated the $500,000threshold for application of Buy America require-ments and permitted states to adopt more strin-gent Buy America requirements.

The 1982 STAA included four exceptions to theBuy America requirements. Like the 1978 STAA,

20 Buy America Requirements, 43 Fed. Reg.

57,144 (1978) (codified at 49 C.F.R. Part 660).21 Henke, supra note 18, at A42.22 H.R. REP. NO. 95-1485, 95th Cong., 2d Sess.,

at 68 (1978).23 Surface Transportation Assistance Act of 1982,

P.L. 97-424, § 165, 96 Stat. 2136 (1982) (codified at23 U.S.C. § 101 et seq.).

24 The House Report discusses at length a provi-sion that was not incorporated in the final 1982STAA and that would have prohibited the use offederal funds to purchase rolling stock if a signifi-cant portion of such rolling stock is a product of acountry with a trade deficit with the United States.H. R. REP. No. 97-555, 97th Cong., 2d Sess., at 44–45 (1982).

25 Section 10 of Public Law 98-229, enacted onMarch 9, 1984, amended § 165 by striking “cement”from § 165(a).

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the 1982 STAA permitted exceptions upon a de-termination by the Secretary of Transportationthat the application of Buy America would be in-consistent with the public interest, or if domesticsupplies were not produced in sufficient and rea-sonably available quantities and of a satisfactoryquality. The third exception provided that BuyAmerica would not apply if the inclusion of domes-tic material would increase the cost of the overallproject contract by more than 10 percent in thecase of projects for the acquisition of buses andother rolling stock, or 25 percent in the case ofother projects.

The fourth “exception” essentially established anentirely new Buy America program with its ownrequirements, applicable only to rolling stock. Thisexception provided that the Buy America provi-sions would not apply to the procurement of busesand other rolling stock if the cost of componentsproduced in the United States was more than 50percent of the cost of all components of the vehiclesor equipment, and if final assembly took place inthe United States. “Rolling stock” was defined toinclude train control, communications, and tractionpower equipment. Labor costs involved in the finalassembly were not to be counted for purposes ofcalculating the components’ costs.

In September 1983, UMTA issued revised BuyAmerica regulations consistent with the provisionsof the 1982 STAA.26

E. Surface Transportation and Uniform RelocationAssistance Act of 1987

The Surface Transportation and Uniform Reloca-tion Assistance Act of 1987 (1987 STURAA) madeadditional significant changes to UMTA’s BuyAmerica requirements for buses and other rollingstock. First, the 1987 STURAA required that morethan 50 percent of the cost of a component’s sub-components be of United States origin for the com-ponent to be considered of United States origin.Further, the domestic content requirement wasincreased from 50 percent to 55 percent as of Octo-ber 1, 1989, and to 60 percent as of October 1,1991.27 Finally, the project cost differential waiverfor rolling stock was increased from 10 percent to25 percent. One additional change, which has had atremendous impact on the timing, cost, and logis-tics of future rolling stock procurements, was Con-

26 48 Fed. Reg. 41,562 (1983).27 The House version of the bill sought an in-

crease to 85 percent. See H.R. CONF. REP. No. 27,100th Cong., 1st Sess. (1987).

gress’s direction to UMTA in Section 319 of the1987 STURAA to require pre-award and post-delivery audits to ensure compliance with federalmotor vehicle safety requirements, federal BuyAmerica requirements, and a grantee’s bid specifi-cations. Section 319 further provides that UMTArequire independent inspection and audits, notingthat a manufacturer’s certification of compliancewith certain requirements is not sufficient. Con-gress was concerned with the quality of masstransportation equipment purchased with federalfinancial assistance and the inspection and verifi-cation procedures used in the procurement proc-ess.28

In January 1991, UMTA adopted its final ruleimplementing the 1987 STURAA.29 UMTA’s finalrule enumerated the train control, communica-tions, and traction power equipment to be consid-ered rolling stock for purposes of the 1982 STAASection 165. Contact rail is expressly excluded, astraction power equipment and automatic door con-trol is excluded as part of the train control system.30

UMTA’s final rule also included, as appendices tothe regulation, listings of major components ofbuses and rail rolling stock set out in the Confer-ence Report to the 1987 STURAA.31 While the listsare not exhaustive, UMTA’s intent in includingthem as appendices to the regulation was to assistgrantees and manufacturers in distinguishing be-tween the terms “components” and “subcompo-nents” for the purpose of establishing Buy Americacompliance. (This concept of enumerating compo-nents and subcomponents may also be the source ofsome confusion as a “component” may, in certaininstances, be an end product and different rulesmay apply. This is addressed below in the Sectionentitled “Buy America Requirements—Tests andInterpretations—Rolling Stock—Components.”)The enumeration was also intended to prevent pos-sible abuse resulting from over-classifying vehicleparts as subcomponents.32

In September 1991, UMTA acted to require pre-award and post-delivery audits of rolling stock pur-chased by federal grantees pursuant to its author-

28 Surface Transportation and Uniform Reloca-

tion Assistance Act of 1987, P.L. 100-17, § 337(1987).

29 56 Fed. Reg. 926 (Jan. 9, 1991).30 Id.31 56 Fed. Reg. 926 (1991); 49 C.F.R. § 661.11,

Appendices B and C.32 Id.

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ity under 1987 STURAA.33 The final rule requiredeach grantee to certify to UMTA that it will con-duct pre-award and post-delivery audits to verifycompliance with its bid specification requirements,Buy America, and federal Motor Vehicle Safetyrequirements.34 For UMTA-funded procurements of10 or more buses and any number of railcars orother rolling stock, a resident inspector is requiredat the site of the vehicle manufacture. For 10 orfewer buses, a grantee would make its certificationafter visual inspection and road testing of the vehi-cles. UMTA noted in its general overview of com-ments to the proposed rule that most commenta-tors objected to the actual implementation schemeproposed as “burdensome, redundant and costly.”35

In a testimony to the confusion that generallyreigned after the institution of the pre-award andpost-delivery audit requirements, the FTA pub-lished a series of questions and answers regardingits 1991 rule less than 1 year after issuance of therule. The FTA made special note in this documentthat the legislative history of the 1987 STURAAindicated that it was the intent of the drafters thatthe paperwork requirements imposed by this provi-sion would not create a significant cost burden.36

In August 1994, the FTA issued “regulatoryguidance” regarding the small purchase exemptionto the pre-award/post-delivery audit regulations.This guidance clarified that the exemption from therequirement of an on-site inspector from procure-ments of 10 or fewer buses applies to subrecipientsunder a statewide procurement, emphasizing thatthe intent of the exception was to relieve FTAgrantees procuring a small number of vehicles fromthe cost burden associated with the requirement.37

On May 1, 1995, the FTA issued additional guid-ance on the pre-award and post-delivery audit pro-cess, publishing extensive guides. FTA-DC-90-7713-93-1, Revision B, Conducting Pre-Award andPost-Delivery Reviews for Bus Procurements, andFTA-DC-90-7713-94-1, Revision B, Conducting Pre-Award and Post-Delivery Reviews for Rail VehicleProcurements. These guides detail certificationsand documents needed to support the procurementprocess, suggest procedures for conducting the pre-award and post-delivery reviews, provide examples

33 56 Fed. Reg. 48,384 (Sept. 24, 1991).34 49 U.S.C. § 5323(l), 49 C.F.R. § 663.7.35 56 Fed. Reg. 48,384 (1991).36 57 Fed. Reg. 10,834, 10835 (1992).37 59 Fed. Reg. 43,778 (1994).

and other activities that may be helpful to thoseconducting such reviews, and provide more re-sponses to frequently asked questions.

Finally, as all of the preceding guidance appar-ently remained problematic, the FTA issued a“Dear Colleague Letter” dated March 18, 1997,which outlined procedures a grantee must use toensure that any vehicle it purchases complies withBuy America.38 Please note that this letter wasamended by a Dear Colleague Letter dated August5, 1997; however, the amendment was subsequentlyrescinded by a Dear Colleague Letter dated Septem-ber 25, 1997. The March 18, 1997, Dear ColleagueLetter provisions were later codified in the provi-sions of the Transportation Equity Act for the 21stCentury (TEA-21) (defined herein). The FTA notedthat many grantees and their contractors were notconducting adequate pre-award and post-deliveryreviews of the Buy America requirements, par-ticularly with respect to final assembly activities.The letter specifies the minimum activities re-quired of the final assembly process for rail carsand buses, respectively, and enumerates certainpost-delivery review requirements for grantees.

While the mission of this report is not intendedto suggest alternative approaches to Buy Americaadministration, the foregoing history, as well as asignificant transit industry response, suggests thatthere must be a better way.39 (Additional discussionon the pre-award and post-delivery audit process isdescribed below in the Section entitled “BuyAmerica Requirements—Tests and Interpreta-tions—Rolling Stock—Pre-award and Post-deliveryAudits.”)

38 “Dear Colleague Letters” are frequently issued

by the FTA Administrator to provide guidance tograntees on industrywide issues regarding FTApolicies and procedures. Dear Colleague Letters arenot rulemakings, but are more analogous to theFTA Best Practices Manual or FTA Circulars. Asnoted above, the March 18, 1997, Dear ColleagueLetter was given the force of law when it was codi-fied in TEA-21.

39 While more efficient and effective mechanismshave been suggested, such as centralizing respon-sibility for compliance with the manufacturersrather than the myriad transit properties, or insti-tuting a compliance certification process more akinto a DBE certification process, the FTA merely im-plemented Congressional direction; alternativeaudit suggestions should be scrutinized for theneed for legislative, as opposed to regulatory,change.

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F. Buy America in the 1990s

The Buy America provisions applicable to transitprocurements were generally untouched by Con-gress in the 1990s, even as they were subject toseveral regulatory revisions and clarifications. TheIntermodal Surface Transportation Efficiency Actof 1991 (ISTEA)40 amended the Buy America re-quirements by adding “iron” to the products cov-ered, thereby extending Buy America protection toiron and iron products, in addition to steel andmanufactured products, which were previouslyprotected. ISTEA also added a provision that wouldmake any person who intentionally misrepresentsthat a product was made in the United States in-eligible to receive funds authorized under ISTEA.Last, but not least, ISTEA changed UMTA’s nameto the FTA. The term “FTA” will be used hereafterin this report. With the passage of ISTEA, Con-gress finally codified the Buy America require-ments.41

When the FTA enacted regulations implement-ing ISTEA, it also updated and clarified the regula-tions by adding a definition of “component,” whichis applicable to both manufactured products androlling stock. Further, FTA clarified that for amanufactured product to be produced in the UnitedStates, its components must be of United Statesorigin. A component is considered to be of UnitedStates origin if it is manufactured in the UnitedStates, regardless of the origin of its subcompo-nents.

The most recent Congressional action to impactBuy America was TEA-21.42 The amendments madeto Buy America in TEA-21 were slight. Section3020(b) of TEA-21 permits bidders to correct inad-vertent errors in their Buy America certificationsafter bid opening and Section 3035 provides thatall buses manufactured after September 1, 1999,that are purchased with FTA funds must conformto the March 18, 1997, Dear Colleague Letter (dis-cussed above under “Surface Transportation andRelocation Assistance Act of 1987”). In February1999, the FTA issued a notice of proposed rule-making regarding implementation of Section3020(b).43

40 Intermodal Surface Transportation Efficiency

Act of 1991, P.L. 102-240, 105 Stat. 1914.41 See Pub. L. No. 103-272, 108 Stat. 745 (codi-

fied at 49 U.S.C. § 5323 (j)).42 TEA-21, Pub. L. No. 105-178, 112 Stat. 107

(1998).43 64 Fed. Reg. 8051 (1999).

G. FTA Actions

In addition to issuing regulations implementingfederal statutory Buy America provisions as dis-cussed above, FTA, pursuant to its statutoryauthorization, issues waivers from the Buy Amer-ica provisions when the Secretary of Transporta-tion makes a determination that (i) applying theBuy America provisions would be inconsistent withthe public interest, (ii) the steel, iron, and goodsproduced in the United States are not produced ina sufficient and reasonably available amount or arenot of satisfactory quality, or (iii) including domes-tic material will increase the cost of the overallproject by more than 25 percent.44 FTA’s publishedwaiver determinations are reviewed here chrono-logically.

1. Fifteen-Passenger Chrysler VansIn 1984, FTA granted its first public interest

waiver at the request of Chrysler Corporation,along with several states, which petitioned FTA togrant such a waiver for Chrysler’s 15-passengervans, which are assembled in Canada. This waiverwas subsequently included as a General Waiver inAppendix A to 49 C.F.R. § 661.7. Chrysler arguedthat since only it and the Ford Motor Companymanufactured the vans, the waiver was necessaryin the interest of competition.45 This waiver appliesto 15-passenger vans and wagons only. It does notapply to any other Chrysler-manufactured vehicle,including mini-vans. (See the discussion under Sec-tion VI.E below, “Buy America Compliance—FTASanctions Against Grantees,” regarding the Mis-souri Department of Transportation’s procurementof Dodge Caravans.)

2. Microcomputers and SoftwareIn 1986, FTA granted its first permanent “un-

availability” waiver from Buy America for micro-computers and software after the Secretary ofTransportation concluded that many hardware andsoftware components are manufactured abroad andit is difficult to estimate when, if ever, microcom-puter component manufacturing will relocate to theUnited States. FTA reserved the right to reassess

44 U.S.C. 49 § 5323(j)(2).45 49 Fed. Reg. 13,944 (1984); 49 C.F.R. § 661.7,

Appendix A. Fifteen-passenger wagons produced byChrysler Corporation also received a public interestexemption from the requirement that final assem-bly of the wagons take place in the United States.(Letter to Chrysler Corporation from FTA datedMay 13, 1987.)

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the need for a permanent waiver if, for example,international market conditions were to change.This waiver was subsequently included as a Gen-eral Waiver in Appendix A to 49 C.F.R. § 661.7.46

FTA currently is considering whether the waivershould be retained, revoked, or modified in re-sponse to a petition made in 1999, which assertsthat (i) the state of the microcomputer and micro-processor industry in the United States today issignificantly different than when the waiver wasoriginally issued; (ii) the original intent of thewaiver was to address significantly differentequipment (i.e., traditional “desk-top” computers)than the recent application by the FTA of thewaiver to digital recording equipment; and (iii)FTA’s definition of microcomputer may not be ap-propriate for the number of products to which theFTA now applies the waiver. The FTA soughtcomment on this matter in December 1999, but todate has made no determination on this issue.47

3. Small PurchasesIn 1995, the FTA established a general public in-

terest waiver for “small purchases” (as defined inthe “common grant rule,” at 49 C.F.R. § 18.36(d),currently set at $100,000) made by FTA granteeswith capital, planning, or operating assistance.48

The FTA found itself inundated with nonavailabil-ity waiver requests for such items as office suppliesand maintenance items needed for routine opera-tions, often involving purchases of less than $20.The volume of the waiver requests resulted in sig-nificant delays in the grantees’ procurement proc-esses. Several FTA grantees had stated that tocomply with Buy America requirements, procure-ment staffs had to be increased. “The goal of thispublic interest waiver [was] to eliminate some ofthe procurement delays, ‘red tape’ and paperworkfrom FTA grantees’ procurement processes.”49 Bothlarge and small transit properties report that insti-

46 51 Fed. Reg. 36,126 (October 8, 1986); 49

C.F.R. 116.7, Appendix A.47 64 Fed. Reg. 54,855 (October 8, 1999). Com-

ments were to be submitted to the FTA by Decem-ber 7, 1999.

48 56 Fed. Reg. 932 (1991), as amended at 60 Fed.Reg. 37,930 (July 24, 1995), 61 Fed. Reg. 6300(February 16, 1996).

49 60 Fed Reg. 14,178 (1995—Notice of proposedwaiver from Buy America requirements for smallpurchases and for purchases with operating assis-tance).

tution of the small purchase waiver has signifi-cantly reduced the impact of Buy America on theiroperations.

4. FTA Publication of Waivers Granted toManufacturers

The FTA recently made an informal policy de-termination to publish waivers granted to manu-facturers in the Federal Register to ensure that thepublic, particularly potential manufacturers, isaware of such waivers. The intent of such publica-tion is to raise the awareness of domestic manufac-turers and encourage domestic production of theseitems. The first such published waiver was grantedMay 1, 2000, to Orion Bus Industries and allowsOrion to count the axle used in the Orion II para-transit vehicle as a domestic component for pur-poses of calculating overall domestic content. Thewaiver was predicated on the nonavailability of theitem domestically.50

III. WHAT BUY AMERICA IS NOT

As may be evident from the discussion of legisla-tive history above, the statutory requirements ofthe Buy America provisions applicable to transitprocurements may be easily confused with othersimilar or apparently inconsistent provisions offederal law. The following federal statutory provi-sions are not applicable to FTA grant-funded tran-sit procurements:

A. 1933 Buy American Act

The 1933 Buy American Act codified, asamended, at 41 U.S.C. §§ 10(a) et seq., and imple-mented pursuant to Part 25 of the Federal Acquisi-tion Regulation,51 applies only to purchases by fed-eral agencies and departments. Even thoughfederal participation in a transit project may be ashigh as 80 percent, purchases by state and localgovernments with federal funds are not subject tothe 1933 Buy American Act. Purchases made bythe United States Department of Transportationfor its own use are subject to the 1933 Buy Ameri-can provisions; purchases by FTA grantees andtheir contractors are not. Confusing the FTA BuyAmerica requirements with the 1933 Buy Ameri-can Act is problematic because application of the1933 Buy American Act requires the cost of domes-tic components to exceed 50 percent of the cost of

50 65 Fed. Reg. 25,419 (2000).51 64 Fed. Reg. 72,416 (1999).

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all components, as opposed to the FTA Buy Amer-ica requirement of 100 percent (or 60 percent forrolling stock). A vendor that certifies compliancewith reference to the 1933 Act clearly could not becompliant with the FTA Buy America require-ments. Until or unless there is a complaint, agrantee is unlikely to look behind a vendor’s BuyAmerica certification to verify that the entitysigning the certification understood the require-ment.52

B. The North American Free Trade Agreement53

FTA grantees are not subject to the provisions ofNAFTA. While the general rule of Chapter 10 ofNAFTA is that the three NAFTA countries, theUnited States, Mexico, and Canada, must treatgoods and services, and suppliers of such goods andservices, from another NAFTA country “no lessfavorably” than domestic goods, services, and sup-pliers with respect to purchases by covered gov-ernment entities, NAFTA expressly excepts fromgovernment procurements “non-contracturalagreements or any form of government assistance,including cooperative agreements, grants, loans,equity infusions, guarantees, fiscal incentives, andgovernment provision of goods and services to per-sons or state, provincial and regional govern-ments.”54

Products manufactured in Canada are consid-ered foreign goods and are entitled to no specialtreatment under Buy America.55 While the objec-tives of NAFTA are to open the North Americanmarket to free trade, the Buy America barriers to

52 FTA noted 1933 Buy American Act confusion

in its notice of proposed waiver from Buy Americarequirements for small purchases. 60 Fed Reg.14,178 (1995).

53 North American Free Trade Agreement Im-plementation Act, Pub. L. No. 103-182, 107 Stat.2057 (1993).

54 North American Free Trade Agreement Im-plementation Act, Article 1001(5)(a). The State-ment of Administrative Action that accompaniedthe NAFTA Implementation Act also expresslystated that the rules of Chapter 10 of NAFTA donot apply to certain kinds of purchases by the U.S.government, among them state and local govern-ment procurements, including procurementsfunded by federal grants, such as those made byFTA. H.R. DOC. No. 103-159, Vol. 1, 103d Cong.,1st Sess., 584–85 (1993).

55 NAFTA negotiations were based largely on theU.S.-Canada Free Trade Agreement (CFTA). FTAexpressly noted in 56 Fed. Reg. 926 (1991), “the[CFTA] does not exempt Canadian-made productsfrom the [FTA] Buy America requirements.”

the free trade of transit equipment still exist andremain applicable to FTA grantee procurements.56

IV. BUY AMERICA REQUIREMENTS—TESTS ANDINTERPRETATIONS

A. Generally—49 U.S.C. § 5323(j) (Buy America)

Buy America applies across the board to all FTAgrantee purchases of steel, iron, and manufacturedgoods exceeding $100,000, regardless of whetherthey involve capital, operating, or planning funds.There are no statutory exceptions to Buy America;however, the Secretary of Transportation isauthorized to grant waivers under certain circum-stances. All waivers are made on a case-by-casebasis, unless they have been codified in the regula-tions as general waivers. (See the discussion belowin Section V.) A few pithy truisms on Buy Americainclude the following:

• The Buy America requirements apply to inter-governmental agreements, or otherwise jointlypurchased manufactured products.

• The Buy America requirements do not apply toservice contracts. Grantees are required to pass therequirements down to contractors.

• The requirements are applicable to any granteepurchase of more than $100,000.

• End product” is always the item to be procured bya grantee as specified in the overall project con-tract.57

While rolling stock procurements are consideredan exception to the general Buy America require-ment, any attorney or procurement officer who hasbeen involved in a rolling stock procurement willtell you that rolling stock is a creature unto itselfand, as such, will be treated as a creature untoitself for purposes of this report. This Section ana-lyzes the applicability of Buy America to the threediscrete categories of (i) iron and steel in infra-structure projects, (ii) manufactured goods, and (iii)rolling stock.

B. State and Local Buy America Requirements

Individual states are not precluded from adopt-ing their own State and local Buy National or Buy

56 Commentators have noted that the United

States has taken an inherently inconsistent posi-tion regarding its application of Buy America andNAFTA: transit is a federal function, so BuyAmerica may be applied and transit is a state orlocal function so NAFTA does not apply. SeeHughes, supra note 12.

57 49 C.F.R. § 661.11(s).

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America restrictions. Forty-nine U.S.C 5323 (j)(6)expressly prohibits the Secretary of Transportationfrom restricting any state from imposing morestringent requirements than Buy America or fromrestricting a recipient of that assistance from com-plying with those State-imposed requirements.58

Further, 49 C.F.R § 661.21 prohibits FTA fromfunding any contract governed by (1) State BuyAmerica or Buy National preference provisionsthat are less strict than the federal requirements;(2) State and local Buy National or Buy Americapreference provisions that are not explicitly set outunder State law; and (3) State and local Buy Localpreference provisions.59

Procurement officers and attorneys are advisedto review and analyze the impact of applicableState and local Buy America and Buy National andState and local Buy Local preference requirementsbefore proceeding with a federally funded transitprocurement.

C. Iron and Steel in Infrastructure Projects60

Under the provisions of Buy America, federalfunds may not be obligated unless steel, iron, andmanufactured products, other than rolling stock,used in FTA-funded projects are produced in theUnited States, unless a waiver has been granted byFTA or the product is subject to a general waiver.61

All steel and iron manufacturing processes musttake place in the United States except for metal-lurgical processes involving refinement of steeladditives.62

The Buy America steel and iron requirementsapply to all construction materials made primarilyof steel or iron and used in infrastructure projectssuch as transit or maintenance facilities, rail lines(including third rail), and bridges. These items in-clude, but are not limited to, structural steel oriron, steel or iron beams or columns, running rail,and contact rail. These requirements do not applyto steel or iron used as components or subcompo-nents of other manufactured products or rollingstock.63 FTA preferred not to clarify its use of theword “primarily” in 49 C.F.R. § 661.5(c) since the

58 49 U.S.C. 5323 (j)(6).59 49 C.F.R. § 661.21; 56 Fed. Reg. 932 (1991).60 49 C.F.R. § 661.5.61 49 U.S.C. 5323(j), 49 C.F.R. § 661.5(a).62 49 C.F.R. § 661.5(b).63 49 C.F.R. § 661.5(c); see also the FTA Best

Practices Procurement Manual, § 8.1.4.

percentage of steel or iron in a particular item mayvary according to an individual producer’s refine-ment or manufacturing processes. FTA explained:

Generally, the definition refers to construction orbuilding materials made either principally or en-tirely from steel or iron. All other manufacturedproducts, even though they may contain some steelor iron elements, would not be covered. Therefore,steel girders would fall within the definition whilebuses with frames made partially from steel, wouldnot be covered.64

Anecdotal evidence suggests that American steelmanufacturers are not equipped to provide the do-mestic steel required under Buy America on atimely basis. New Jersey Transit Corporation(NJT) responded to the questionnaire that its expe-rience has been that, during the construction oflarge projects that are substantially under way, asupplier or fabricator of steel may stop producing anecessary gauge of steel. Under those circum-stances FTA is unable to issue a waiver to pay forforeign replacement steel products in the event ofdomestic unavailability. NJT has been forced to useother than federal money for replacement steelproducts not manufactured in the United States.

Similarly, in 1999 the Chicago Department ofTransportation (CDOT) sought a public interestwaiver when its prime contractor for the procure-ment of two structural steel roof beams that hadcertified compliance was unable to procure thebeams domestically. CDOT indicated that domesticfabrication would add 6 to 10 months to the project.FTA was asked to consider the impact of the delayon the surrounding school community as well asthe riding public. FTA found that the prime con-tractor was negligent in signing the Buy Americacertification and that CDOT had not provided suffi-cient grounds to grant the requested waiver. FTAadvised that it could not authorize the use of FTAfunds for the beams. However, FTA also advisedthat should CDOT formally terminate that portionof the overall contract and do a separate non-FTAprocurement for the beams, then the balance of theproject could continue to use FTA funds. FTA fur-ther advised that should CDOT decide to use FTAfunds on the separate steel procurement, it couldapply for a nonavailability waiver at the appropri-ate time.

The Brockton Area Transit Authority ofBrockton, Massachusetts, reported granting a 32-day extension pursuant to its contract with the

64 61 Fed. Reg. 6,300 (Feb. 16, 1996).

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contractor building its Intermodal TransportationCentre due to the unavailability of domestic steelsupplies during the construction of the project. Thecontractor found that domestic steel deliveries wererunning approximately 2 months behind schedule.The contractor documented its detailed search forthe materials, including its calls to the threeAmerican mills that make the size pieces requiredfor the project and four other large steel fabricatorsand suppliers that could possibly have had surplussteel. Two of these companies were Canadian andwere contacted on the theory that they would havemore American steel in their shops than Canadian,based on the value of the Canadian dollar at thetime. The Authority granted the extension but thecontractor was responsible for additional projectcosts.

D. Manufactured Products65

Buy America prohibits the obligation of FTAfunds unless “manufactured products,” other thanrolling stock, used in FTA-funded projects are pro-duced in the United States. There are exceptions ifa waiver has been granted by FTA or the product issubject to a general waiver.66 For a manufacturedproduct to be considered produced in the UnitedStates, (i) all of the “manufacturing processes” forthe end product must take place in the UnitedStates, and (ii) all of the components of the endproduct must be of U.S. origin. A component is con-sidered to be of U.S. origin if it is manufactured inthe United States, regardless of the origin of itssubcomponents.67

At the time the applicable regulation, 49 C.F.R. §661.5, was proposed, commentators argued thatnothing in the 1982 STAA or existing FTA regula-tions required a manufactured product to contain aminimum domestic content and that the statutoryrequirement would be met so long as the manufac-turing process took place in the United States. FTAmade reference to language in Section 401(a) of the1978 STAA and the Buy American Act of 1933 assupport for its determination that Congress in-tended manufactured products to be held to a stan-dard of 100 percent domestic content.68

65 49 C.F.R. § 661.5.66 49 U.S.C. 5323(j); 49 C.F.R. § 661.5(a).67 49 C.F.R. § 661.5.68 Likewise, the FTA contrasts the domestic con-

tent requirements for subcomponents as well ascomponents for rolling stock in support of its de-termination that it will look only to where a com-ponent is manufactured and will not look to theorigin of the various materials included in the

FTA defines “manufactured product” to mean anitem produced as a result of the manufacturingprocess.69 The “manufacturing process” alters theform or function of materials or of elements of theproduct so as to add value and transform thosematerials or elements so that they represent a newand functionally different end product. The manu-facturing process is more than mere assembly. FTAhas explained its concept of alteration as follows:“The processes of alteration may include forming,extruding, material removal, welding, soldering,etching, plating, material deposition, pressing,permanent adhesive joining, shot blasting, brush-ing, grinding, lapping, finishing, vacuum impreg-nating and, in electrical and electronic pneumatic,or mechanical products, the collection, interconnec-tion, and testing of various elements.”70

NJT responded to the questionnaire with an FTAinterpretation of manufacturing process that re-sulted in the disqualification of the low bidder fornoncompliance with Buy America. In 1992 Hop-pecke Battery Systems, Inc., the second lowest bid-der, lodged a protest against the low bidder, Saft-Nife, Inc., in an NJT procurement for transit carstorage batteries. Saft-Nife had included in its do-mestic content calculations the cost of “cell assem-blies,” including freight, recycling, labor, admini-stration, overhead costs, and allowance for profit.FTA determined that the fitting together of batteryparts to create “cell assemblies” did not meet thedefinition of manufacture, but constituted “mereassembly.”

NJT also responded to the questionnaire that itsought FTA’s interpretation in the case of a con-tractor that purchased steel in the United States,but sought to fabricate (i.e., drill, cot, and flange)the steel in Canada. The cost of this process wasminimal compared to the cost of the project and thesteel itself. FTA verbally advised it considered fab-rication to be a manufacturing process required tobe done in the United States.

FTA treats the procurement of construction proj-ects as the procurement of a “manufactured prod-uct” for purposes of 49 C.F.R. § 661.5. In regula-tions promulgated January 19, 1981, FTAdiscussed construction contracts specifically. FTA

product during the manufacturing process. 56 Fed.Reg. 926 (1991).

69 49 C.F.R. § 661.3.70 This explanation of the nature of “manufac-

ture” is made in 56 Fed. Reg. 926 (1991) with refer-ence to rolling stock, but is applicable to manufac-tured products as well.

13

determined that the procurement of construction istreated as procurement of a manufactured productin that the deliverable of the construction contractis considered the end product and the constructionmaterials used therein are considered componentsof the end product.71 Foreign manufacture of com-ponents for use in FTA-funded construction proj-ects is prohibited under the Buy America regula-tions at 49 § 661.5(d)(2).72

Final assembly takes place at the constructionsite and the main elements incorporated into theproject at the job site are the components. For ex-ample, if the deliverable under a particular con-tract is the construction of a passenger terminal,the terminal itself is the end product and the mainelements incorporated into the terminal, e.g., shel-ters, elevators, and platforms, are the componentsof the end product. These main elements are gen-erally specified in the grantee’s construction con-tract.73

Some confusion has arisen with respect to theterms “manufactured product” and “end product.”The term “end product” is used in the FTA regula-tions solely in the context of rolling stock and doesnot appear in the text applicable to manufacturedproducts. Nevertheless, FTA takes the positionthat “end product” applies to manufactured prod-ucts as well as rolling stock. While the nomencla-ture may not be absolutely clear, keep in mind thata manufactured product may be an end product.74

Understanding whether a manufactured productis an end product or a component depends on thetype of procurement at issue. To illustrate, considerthe February 10, 2000, FTA response to a petitionby the Macton Corporation challenging the pro-curement by the Bay Area Rapid Transit (BART)system of lift and hoist equipment for BART’s Con-cord Shop Expansion Project. FTA made it clearthat the lift and hoist equipment to be manufac-tured in Albany, New York, by Pfaff, a Canadiancorporation, was a component of the Shop Expan-

71 46 Fed. Reg. 5,808, 5,809 (1981).72 See letter dated Sept. 15, 2000, to the Presi-

dent of Stertil-Koni from the FTA Deputy ChiefCounsel.

73 FTA Best Practices Procurement Manual, §8.1.4.

74 In a questionnaire response submitted by theMontachusett Regional Transit Authority, theAuthority reported FTA advice that office supplieswould be considered manufactured products forpurposes of Buy America.

sion Project. The Shop Expansion Project itself wasconsidered the end product.75

In a June 2000 affirmation of its February re-sponse to Macton, the FTA clearly articulated itsanalysis as follows:

Indeed, the question is one of perspective: any givenitem, from a screw to a maintenance garage, may beviewed as an end product, a component, a subcom-ponent, or less. Accordingly, FTA’s rule looks at theend product being acquired in a given case. Here,the procurement contract was for the garage; ac-cordingly, the vehicle lift to be installed in the ga-rage was the component. Further, the end productmust be the result of a manufacturing process. Inthis case, the hoist will ultimately be a fixture of thegarage, and installation of the hoist is part of themanufacturing process. The construction of the ga-rage as a whole, is the subject of the procurementand the end product.76

E. Rolling Stock77

As discussed above in the legislative history ofBuy America, rolling stock procurements were firstdifferentiated from Buy America as an exception tothe 100 percent domestic content rule applicable tomanufactured products. The area of rolling stockprocurements has, however, evolved into a mazewith its own detailed regulatory scheme. “Rollingstock” is considered to be “transit vehicles such asbuses, vans, cars, railcars, locomotives, trolley cars,ferry boats and vehicles used for supportive serv-ices.78 It also applies to train control, communica-tions, and traction power equipment. The FTAregulations at 49 C.F.R. §§ 661.11(t), (u), and (v)are nonexhaustive listings of the train control,communications, and traction power equipmentconsidered to be rolling stock.79 Rolling stock in-cludes both onboard and wayside equipment. Whilethe regulations are not absolutely clear on this

75 See letter dated Feb. 10, 2000, from FTA Dep-

uty Chief Counsel to David R. Perkins, President,Macton Corporation and David M. Cunningham,Manager, Transportation Sales, Whiting Corpora-tion.

76 See letter dated June 8, 2000, from FTA Act-ing Administrator to David R. Perkins, President,Macton Corporation.

77 49 C.F.R. § 661.11, including Appendices A, B,and C.

78 49 C.F.R. § 661.3.79 Contact rail is expressly excluded as traction

power equipment and automatic door control isexcluded as part of the train control system. See 56Fed. Reg. 926 (1991); 49 C.F.R. § 661.11(w).

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point, this equipment is always to be procured asrolling stock and not as manufactured products.

NJT provided an instructive FTA opinion letterdifferentiating the procurement of rolling stockfrom manufactured products in the context ofNJT’s Arrow III overhaul program. The letter,dated August 2, 1988, from the FTA Deputy ChiefCounsel, reiterated FTA’s position that in a reha-bilitation or overhaul project like the Arrow IIIprogram, Buy America will be applied to individualpieces or systems that are being installed in theoverhauled cars, rather than to the car as a whole.

FTA’s review of the program’s specifications indi-cated that NJT would be procuring both manufac-tured products (subject to Section 165(a) of the1987 STURAA) and various items of equipmentthat fell into one of the three categories of traincontrol, traction power, or communications equip-ment (subject to Section 165(b)(3) of the 1987STURAA).

FTA then went on to identify, either by item orsystem, whether the various elements of the over-haul project constituted manufactured products orrolling stock. FTA originally determined the doorcontrol system to be a manufactured product; how-ever, it noted it would reconsider this determina-tion if NJT presented a persuasive argument thatthe door control system is so connected (e.g., thetrain’s movement is controlled by the closing ofdoors) as to be considered “train control equip-ment.”

FTA differentiated the provision of a new propul-sion system from the overhaul of the truck anddetermined the truck by itself to be a manufac-tured product. In the case of the procurement of anew rail car, the propulsion system is usually apart of the truck and thus the entire truck is con-sidered a component of the traction power equip-ment for purposes of Buy America. Since for pur-poses of the Arrow III program the truck wasconsidered to be a manufactured product, a numberof truck parts, including the wheels, were requiredto be 100 percent of U.S. origin to comply with BuyAmerica. FTA also specified that Buy America onlyapplied if a new item or new equipment were beinginstalled. Buy America would not apply to the re-habilitation of existing equipment.

Essentially, there are two requirements for a busor rolling stock to qualify as a domestic productunder Buy America: (1) the cost of its componentsproduced in the United States must exceed 60 per-

cent of the cost of all its components, and (2) finalassembly must take place in the United States.80

1. ComponentsA “component” is any article, material, or supply,

whether manufactured or unmanufactured, that isdirectly incorporated into an “end product” at the“final assembly location.”81 The FTA has deter-mined that Buy America applies only to “majorcomponents” and “primary subcomponents” ofrolling stock and related equipment.82 “Major com-ponents” of buses and rail cars are listed in Appen-dices B and C, respectively, to 49 C.F.R. § 661.11.While the lists are not intended to be exhaustive,they are intended to clarify the distinction betweencomponents and subcomponents.83 A “subcompo-nent” is any article, material, or supply, other thanraw materials produced in the United States andthen exported for incorporation into a component,that is (i) one step removed from a component inthe manufacturing process, and (ii) incorporateddirectly into a component.84

In a Dear Colleague Letter dated March 30,2001, restated and explained in the Federal Regis-ter on June 14, 2001, the FTA addressed inquiriesregarding 49 C.F.R. § 661.11 and its Appendices.85

The FTA expressed concern that grantees wereidentifying the entire propulsion system in rollingstock procurements as a single component withoutreference to the regulations. The Dear ColleagueLetter and the Federal Register Notice reiterateand clarify that all items included in the list ofmajor components in the Appendices of the rollingstock regulations are components and not subcom-ponents. Standards for designation as domestic aremore rigorous for components than for subcompo-nents and distinction between the two is impor-tant.

For a component to be domestic, more than 60percent of the subcomponents of that component,by cost (as determined by reference to 49 C.F.R. §§661.11(m), (n) and (p)), must be of domestic origin,and the manufacture of the component must takeplace in the United States. If a component is de-termined to be domestic, its entire cost may beused in calculating the cost of the domestic content

80 49 C.F.R. § 661.11(a).81 49 C.F.R. § 661.11(c).82 56 Fed. Reg. 926 (1991).83 Id.84 49 C.F.R. § 661.11(f), (k).85 66 Fed. Reg. 32,412–32,413 (June 14, 2001).

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of an end product.86 FTA has concluded that theorigin of subcomponents and sub-subcomponents isimmaterial and that to be considered domestic, asubcomponent need only be manufactured in theUnited States.87 A component is considered to bemanufactured if there are sufficient activities tak-ing place to substantially transform or merge thesubcomponents into a new and functionally differ-ent article.88 As discussed above under Section IV,“Buy America Requirements—Tests and Interpre-tations—Manufactured Products,” manufacture ofa component must be more than mere assembly.89

If a subcomponent is manufactured in the UnitedStates and then exported for incorporation in acomponent manufactured outside of the UnitedStates, it retains its domestic identity and can beincluded in the domestic content of an end productif it receives tariff exemptions as provided in Cus-toms Service regulations set forth in 19 C.F.R. §§10.11 through 10.24. This is so even if the subcom-ponent represents less than 60 percent of the costof a particular component. Conversely, if it does notreceive such tariff exemptions, it loses its domesticidentity and cannot be included in the calculationof the domestic content of an end product.90

As discussed above in Section IV, “Buy AmericaRequirements—Tests and Interpretations—Manu-factured Products,” the key determinant for pur-poses of analyzing whether an item of rolling stockis an end product, a component, or a subcompo-nent, is the grantee’s specification.91 A March 14,2000, letter from the FTA Deputy Chief Counsel toHubner Manufacturing Corporation, a manufac-turer of bellows for articulated buses, illustratesthis point. Hubner had asked for a clarification ofthe applicability of the Buy America provisions toits product. The FTA responded that, while thegrantee is responsible for doing the calculations toverify compliance, the analysis applied depends onthe procurement at issue. If the grantee’s contractspecifies the purchase of a bus and the bellows is tobe sold to the bus manufacturer, then the manufac-turer and the grantee would likely count the bel-lows as a component of an end product. If, however,

86 49 C.F.R. § 661.11(g).87 49 C.F.R. § 661.11(h), 56 Fed. Reg. 926 (1991).88 49 C.F.R. § 661.11(e).89 56 Fed. Reg. 926 (1991).90 49 C.F.R. § 661.11(i), (j); 56 Fed. Reg. 926

(1991).91 56 Fed. Reg. 926 (1991).

the bellows is being procured as a replacement partfor a bus and is purchased by the FTA grantee di-rectly from Hubner, the procurement is not forrolling stock but for the bellows itself, a manufac-tured product subject to the general requirementsfound at 49 C.F.R. § 661.5. In that case, all manu-facturing processes for the bellows must take placein the United States and all the components of thebellows must be of United States origin, i.e., manu-factured in the United States, regardless of theorigins of its subcomponents.92

With respect to the procurement of an entirepublic transportation system (a turn-key project),the FTA has determined that each subsystem iden-tified in the contract is a separate end product. Forexample, FTA has determined in the past that anentire people mover system is comprised of six sub-systems to be supplied by the contractor and thateach subsystem is an individual end product. Ac-cordingly, six separate end products and their com-ponents must be analyzed as to whether they con-stitute manufactured products or rolling stock forapplication of the correct Buy America require-ments.93

2. Final Assembly“Final assembly” is the creation of the end prod-

uct from individual elements brought together forthat purpose through the application of manufac-turing processes. If a transportation system is be-ing procured as the end product by the grantee, theinstallation of the system qualifies as final assem-bly.94 Adequate final assembly is an issue FTA hashad some difficulty with. Prior to 1991, FTA hadpresumed sufficient final assembly if the cost offinal assembly was at least 10 percent of the over-all project contract cost. In 1991, FTA abandonedthe 10 percent test as arbitrary, recognizing thatseveral manufacturers of rolling stock were per-forming adequate final assembly requirements, butnot meeting the 10 percent test. The “manufactur-ing processes” test was adopted at that time. TheFTA suggested that these manufacturing processesmay include joining, welding, installing, intercon-necting (wire, fibers, or tube), filling, finishing,cutting, trimming, inspecting, and testing. The

92 See letter dated March 14, 2000, from the FTA

Deputy Chief Counsel to Hubner ManufacturingCorporation.

93 56 Fed. Reg. 926 (1991).94 49 C.F.R. § 661.11(r).

16

FTA also suggested minimum operations for thefinal assembly of a rail car.95

In a letter to NJT dated August 14, 1992, fromthe FTA Administrator, FTA took the position thata rebuild or overhaul of a rail car that prolongs itsuseful life under the terms of Chapter IV, Para-graph IV (3)(a) of FTA Circular 9030.1A, is a roll-ing stock procurement and final assembly musttake place in the United States. The FTA explainedthat although the agency had imposed no specificcost requirement or test for final assembly, “signifi-cant operations” must take place and made refer-ence to the language cited above from 56 FederalRegister 928, 930 (January 9, 1991).

FTA’s March 18, 1997, Dear Colleague Lettersets out minimum operations for the final assemblyof rail cars and buses as follows:

In the case of the manufacture of a new rail car, fi-nal assembly would typically include, as a mini-mum, the following operations: installation and in-terconnection of propulsion control equipment,propulsion cooling equipment, brake equipment, en-ergy sources for auxiliaries and controls, heatingand air conditioning, communications equipment,motors, wheels and axles, suspensions and frames;the inspection and verification of all installation andinterconnection work; and the in-plant testing of thestationary product to verify all functions.

In the case of a new bus, final assembly would typi-cally include, at a minimum, the installation and in-terconnection of the engine, transmission, axles, in-cluding the cooling and braking systems; theinstallation and interconnection of the heating andair conditioning equipment; the installation ofpneumatic and electrical systems, door systems,passenger seats, passenger grab rails, destinationsigns, wheelchair lifts; and road testing, final in-spection, repairs and preparation of the vehicles fordelivery.

The March 18, 1997, Dear Colleague Letterstates that if a manufacturer’s final assembly proc-esses do not include all of the activities that aretypically considered the minimum requirements,then the manufacturer can request an FTA deter-mination of compliance. FTA will review these re-quests on a case-by-case basis.

3. Cost of Components and Subcomponents49 C.F.R. § 661.11, largely reiterated here, is the

road map to follow in determining compliance withthe cost element of the Buy America domestic con-tent requirements and should be followed step-by-step in that process.96 The cost of a subcomponent

95 56 Fed. Reg. 926 (1991).96 FTA Best Practices Procurement Manual,

that retains its domestic identity shall be the costof the subcomponent when last purchased, freighton board (f.o.b.) United States port of exportationor point of border crossing as set out in the invoiceand entry papers or, if no purchase was made, thevalue of the subcomponent at the time of its ship-ment for exportation, f.o.b. United States port ofexportation or point of border crossing as set out inthe invoice and entry papers.97 If a component ismanufactured in the United States, but containsless than 60 percent domestic subcomponents, bycost, the cost of (a) the domestic subcomponentsand (b) manufacturing the component may be in-cluded in the calculation of the domestic content ofthe end product.98

The following provisions of Buy America relate tothe determination of the cost of components andsubcomponents:

• The cost of a component or a subcomponent isthe price that a bidder or offeror must pay to a sub-contractor or supplier for that component or sub-component.99

• Transportation costs to the final assembly loca-tion must be included in calculating the cost of for-eign components and subcomponents.100

• If a component or subcomponent is manufac-tured by the bidder or offeror, the cost of the com-ponent is the cost of labor and materials incorpo-rated into the component or subcomponent, anallowance for profit, and the administrative andoverhead costs attributable to that component orsubcomponent under normal accounting princi-ples.101

• The cost of a component of foreign origin is setusing the foreign exchange rate at the time thebidder or offeror executes the appropriate BuyAmerica certificate.102

• Labor costs involved in final assembly shall notbe included in calculating component costs.103

• The actual cost, not the bid price, of a compo-nent is to be considered in calculating domesticcontent.104

§ 8.1.4.97 49 C.F.R. § 661.11(o).98 49 C.F.R. § 661.11(l).99 49 C.F.R. § 661.11(m)(1).100 Id.101 49 C.F.R. § 661.11(m)(2).102 49 C.F.R. § 661.11(n).103 49 U.S.C. 5323(j), 49 C.F.R. § 661.11(p).104 49 C.F.R. § 661.11(q).

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4. Pre-award and Post-delivery AuditsEach grantee must certify to FTA that it will

conduct pre-award and post-delivery audits to ver-ify compliance with its own bid specification re-quirements, Buy America, and Federal Motor Vehi-cle Safety requirements.105 The FTA has publishedtwo extensive guides on bus and rail vehicle pro-curement reviews entitled Conducting Pre-Awardand Post-Delivery Reviews for Bus Procurements(FTA-DC-90-7713-93-1, Revision B) and Conduct-ing Pre-Award and Post-Delivery Reviews for RailVehicle Procurements (FTA-DC-90-7713-94-1, Revi-sion B). These guides detail certifications anddocuments needed to support the procurement pro-cess, suggest procedures for conducting the pre-award and post-delivery reviews, provide examplesand other activities that may be helpful to thoseconducting such reviews and provide more re-sponses to frequently asked questions.

The Buy America pre-award and post-deliveryaudit requirements elicited the most comment fromthe questionnaire respondents. At least 12 ques-tionnaire respondents indicated some additionalcost and delay of awards. NJT and San Diego’sMetropolitan Transit Development Board (MTDB)both reported that certain manufacturers were un-willing to release the proprietary information nec-essary for department staff to conduct the audits.This unwillingness subjects the procurement to theadditional delay and expense caused by the need tohire an independent audit firm. In contrast, NJTalso reported that in most cases, manufacturers arewilling to provide the necessary cost data when theagency executes a confidentiality agreement. TheRed Rose Transit Authority of Lancaster, Pennsyl-vania, reported that its experience has been thatvendors provide the requested cost data in advance,allowing sufficient time to review the necessarydocumentation.

Grantees must also make reference to the March18, 1997, Dear Colleague Letter, which (i) specifiesthe minimum activities required of the final as-sembly processes for rail cars and buses and (ii)enumerates certain post-delivery review require-ments for grantees. The Dear Colleague letterguidance addresses only the Buy America require-ments of the pre-award and post-delivery reviews;the grantee’s bid requirements and Federal MotorVehicle Safety requirements must also be met.

105 49 U.S.C. § 5323(l), 49 C.F.R. § 663.7.

Grantee contract files should contain the follow-ing certifications and supporting documentation foreach procurement of rolling stock:

• Pre-Award Audit—A grantee purchasing reve-nue service rolling stock with FTA funds must en-sure that a pre-award audit is completed beforeentering into a formal contract with the manufac-turer. The pre-award audit must list (a) the com-ponent and subcomponent parts of the rolling stockto be purchased, identified by (i) the manufacturer,(ii) country of origin, and (iii) costs; and (b) the fi-nal assembly location, final assembly activities,and final assembly costs. The pre-award audit is tobe used by grantees as a basis for the Pre-AwardBuy America Certification. The Pre-Award BuyAmerica Certification and the Pre-Award Pur-chaser's Requirements Certification described asfollows must be prepared and retained by thegrantee.106

Pre-Award Buy America Certification—The grantee is required to certify that either theFTA has granted a Buy America waiver for thevehicle or the grantee has satisfied itself (either byits own review or with an audit prepared bysomeone other than the manufacturer) that themanufacturer intends to build vehicles that meetthe Buy America content and final assemblyrequirements.107

Pre-Award Purchaser's Requirements Cer-tification—The grantee is required to certify thatthe vehicles are consistent with a grantee’s specifi-cations and the proposed manufacturer is respon-sible and capable of producing the vehicles.108

• Post-delivery Audit Requirements—Followingconstruction of the vehicles, a grantee must com-plete a post-delivery audit before title to the rollingstock can be transferred to ensure that the manu-facturer has complied with the Buy America re-quirements. The post-delivery audit must list (a)the component and subcomponent parts of therolling stock identified by (i) the manufacturer, (ii)country of origin, and (iii) costs; and (b) the actualfinal assembly location, final assembly activities,and final assembly costs. A grantee shall use thepost-delivery audit as a basis for completing thePost-Delivery Certification. The Post-Delivery Cer-tification and the Post-Delivery Purchaser's Re-

106 49 C.F.R. §§ 663.21, 663.23, 663.25; FTA,

BEST PRACTICES PROCUREMENT MANUAL, ch. 8,§ 8.1.4.

107 49 C.F.R. § 663.25.108 49 C.F.R. § 663.27.

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quirements Certifications must be completed andretained on file by a grantee.109

Post-Delivery Buy America Certification—The grantee is required to certify that the vehicleeither meets Buy America domestic content andfinal assembly requirements or the FTA hasgranted a Buy America waiver for the vehicle.110

Post-Delivery Purchaser's RequirementsCertification—For vehicle orders of more than 10buses or rail vehicles, the grantee must certify thatan onsite inspector was present throughout themanufacturing period and that the grantee hasreceived an inspector's report that accurately rec-ords all vehicle construction activities and explainshow construction and operation of the vehiclemeets specifications. For orders of 10 or fewerbuses, a grantee must certify it has visually in-spected and road tested the delivered vehicles anddetermined that the vehicles meet contract specifi-cations.111

• Certification of Compliance with the FederalMotor Vehicle Safety Standards (FMVSS)—If avehicle is subject to the FMVSS issued by the Na-tional Highway Traffic Safety Administration (49C.F.R. § 571), a grantee must keep on file a certifi-cation that it has received, at both the pre-awardand post-delivery stages, a copy of the manufac-turer’s self-certification information that the vehi-cles comply with the FMVSS. If a vehicle, otherthan rolling stock that is not a motor vehicle, is notsubject to FMVSS, a grantee is required to keep onfile its certification that it received a statement tothat effect from the manufacturer.112

V. WAIVERS AND EXEMPTIONS

At this point, the reader should be fairly clearthat the FTA Buy America provisions are applica-ble to all FTA-funded contracts in all instancesexcept when a waiver has been obtained or a gen-eral waiver is applicable. This section of the reportdiscusses who may seek a waiver and how; generalwaivers, as set forth in Appendix A to 49 C.F.R. §661.7; and the types of waivers that may begranted on a case-by-case basis by the Secretary ofTransportation, including public interest,nonavailability, and price differential waivers.

109 49 C.F.R. §§ 663.31, 663.33.110 49 C.F.R. § 663.35.111 49 C.F.R. § 663.37.112 49 C.F.R. §§ 663.41, 663.43.

A. How to Petition for a Waiver

If a general interest waiver has been granted, noindividual application for a waiver is required.Otherwise, generally only an FTA grantee mayrequest a waiver from the applicability of the FTABuy America requirements. A waiver requestwould typically be submitted prior to contractaward when the need for a waiver has been deter-mined by the grantee. While FTA is concerned withmaintaining strict uniformity in the granting ofwaivers, requests made by grantees for nonavail-ability and price-differential waivers are now han-dled through the regional offices, while public in-terest waivers, all waivers sought by potentialbidders or suppliers, as discussed below, and allWashington, D.C., area waivers must be approvedat FTA headquarters. Except as set forth below,contractors seeking to establish grounds for awaiver must seek the waiver through the FTAgrantee.113

FTA will consider a request for a waiver from apotential bidder or supplier only if the waiver isbeing sought as a public interest or nonavailabilitywaiver for (a) components or subcomponents ofrolling stock, or (b) specific items or material thatare used in the production of a manufactured prod-uct. As discussed above, FTA now publishes waiv-ers granted to foreign manufacturers in the FederalRegister in an attempt to inform domestic manufac-turers of gaps in the domestic market. Examplesinclude nonavailability waivers presented to OrionBus Industries to permit the axle used in the OrionII paratransit vehicle as a domestic component, toMars Electronics International and Giesecke &Devrient America, Inc., for bill handling units andbanknote identification modules used in ticketvending machines, and to Steril-Koni, Inc., forOmer heavy-duty parallelogram bus lifts. Thesewaivers are limited in duration and are typicallygranted after industry surveys confirm that onlythe foreign manufacturers produce the items insufficient and reasonably available quantities andof satisfactory quality.

Steril-Koni was granted a public interest waiveron February 14, 2001, on the grounds that therewere only two suppliers active in the U.S. market,of which only one could certify compliance with BuyAmerica.114 The waiver was granted for the earlierof a period of 2 years or until such time as a seconddomestic manufacturer for this type of lift becomes

113 49 C.F.R. § 661.9(b), (c), 56 Fed. Reg. 932(1991).

114 60 Fed. Reg. 20,027–20,028 (April 18, 2001).

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available. By letter dated July 3, 2001, the FTAadvised that the waiver had expired by its termsbecause the FTA had received verified informationthat Mohawk Resources, Inc., is now a secondUnited States marketer of the heavy duty lifts.115

FTA has also considered and denied a public in-terest waiver request from the Michelin Tire Cor-poration to permit the procurement of bus tiresproduced at several locations in Europe in order toallow increased competition in the bus tire supplyindustry.116 The Pinellas Suncoast Transit Author-ity (PSTA) indicated in its survey response that,with respect to tire procurements, Buy America hasthe effect of limiting competition. PSTA sent out aproposal for a tire lease for which it received oneresponse from Goodyear and one response fromFirestone. Firestone was declared non-responsivebecause one of the tires did not comply with BuyAmerica, leaving PSTA with only one proposal.

B. General Waivers

General waivers available to FTA grantees areset forth in Appendix A to 49 C.F.R. § 661.7. Agrantee need not make a written request to theFTA should it wish to take advantage of a generalwaiver. General waivers include the following:

• A waiver of all articles, materials, and suppliespublished in 48 C.F.R. § 25.104 that have been de-termined to be nonavailable in accordance with 48C.F.R. § 25.103 for purposes of the 1933 BuyAmerican Act.117

• Fifteen-passenger vans produced by ChryslerCorporation are exempt from the requirement thatfinal assembly of the vans take place in the UnitedStates.118

• Fifteen-passenger wagons produced by Chrys-ler Corporation are exempt from the requirementthat final assembly of the wagons take place in theUnited States.119

115 Letter dated July 3, 2001, from FTA Deputy

Chief Counsel to Frost, Brown, Todd LLC.116 53 Fed. Reg. 22,418 (1988).117 49 C.F.R. § 661.7, Appendix A. Please note

that the reference in the Appendix is to the waiversset forth in 48 C.F.R. § 25.108; this reference hasnot been updated to reflect that this section of theC.F.R. was rewritten and renumbered in 64 Fed.Reg. 72,416, 72,422–72, 423.

118 49 Fed. Reg. 13,944 (1984).119 Letter dated May 13, 1987, from FTA to

Chrysler Corporation.

• Microcomputer equipment, including software,of foreign origin.120

• “Small purchases” (as defined in the “commongrant rule,” at 49 C.F.R. § 18.36(d), currently set at$100,000) made by FTA grantees with capital,planning, or operating assistance.121

An additional general waiver, applicable to roll-ing stock, is set forth in Appendix A to 49 C.F.R. §661.11, and applies to foreign sourced spare partsfor buses and other rolling stock (including traincontrol, communication, and traction power equip-ment) whose total cost is 10 percent or less of theoverall project contract cost procured as part of thesame contract for the major capital item.

C. Public Interest Waivers

The Administrator of FTA or a designee maywaive the general requirements of Buy America ifthe Administrator finds that application of the re-quirements would be inconsistent with the publicinterest. All appropriate factors will be consideredon a case-by-case basis.122 The FTA has made itclear that public interest waivers are very difficultto obtain. As FTA noted when it rejected the publicinterest waiver petition of the Michelin Tire Corpo-ration (discussed supra), “It is [FTA]’s position thatCongress intended that the public interest waiverprovision of the 1982 STAA be utilized in extremelylimited situations.”123 In that case, Michelin arguedthat the public interest would be best served byincreased competition in the marketplace.Firestone and Goodyear, the two principal suppli-ers of domestic tires for buses, argued that suffi-cient competition existed. FTA took the positionthat case-by-case waivers were always availableand that a general waiver was not intended to beused to allow a product manufactured outside ofthe United States to be market-tested in theUnited States while the manufacturer of suchproduct made a marketing determination concern-ing the economic feasibility of initiating full scaleproduction in the United States.124 (See the discus-sion, supra, concerning the public interest waiverobtained by the Chrysler Corporation permitting

120 50 Fed. Reg. 18,760 (1985) and 51 Fed. Reg.

36,126 (1986); see discussion, supra.121 56 Fed. Reg. 932 (1991), as amended at 60

Fed. Reg. 37,930 (1995), 61 Fed. Reg. 6,300 (1996).122 49 C.F.R. § 661.7(b).123 53 Fed. Reg. 22,418, 22,419 (1988).124 Id.

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the assembly of 15-passenger vans outside of theUnited States.)

FTA’s recent public interest waivers for proto-type vehicles illustrate FTA’s requirement for aclear nexus between the item requested and thebeneficial impact on the public. The FTA has ex-pressly declined to grant a general waiver for pro-totype vehicles to be procured by grantees for pur-poses of testing and evaluation, although it willconsider such waivers on a case-by-case basis.125

FTA has allowed that the need for first articletesting and inspection before full domestic produc-tion justifies a public interest waiver for a proto-type.126 In a December 1999 letter to the Washing-ton Metro Area Transit Authority (WMATA), whichhad requested a waiver of the final assembly re-quirement for a prototype, the FTA approved thewaiver and included a detailed explanation of theinformation supplied by WMATA, including specif-ics as to how the expedited schedule permitted bysuch a waiver would enable WMATA to put newcars into service faster, thereby increasing cus-tomer satisfaction. FTA noted increased ridershipstatistics, service increases, and the impact on on-going rehabilitation programs as important factorsto be considered when making a public interestdetermination regarding prototypes.127

Generally, FTA’s policy is to grant a waiver forone prototype vehicle. Anything beyond one proto-type will be subject to closer scrutiny. A granteewill be required to articulate how a second publicinterest waiver for a second prototype will advancethe public interest. For example, a grantee maydetail how technical issues will affect the deliveryschedule or why a single prototype cannot be cou-pled with existing vehicles. In an October 1999letter from the FTA Chief Counsel to the Sacra-mento Regional Transit District (SRTD), FTA de-nied SRTD’s request for a second prototype pilot

125 56 Fed. Reg. 926 (1991).126 See letters from FTA Deputy Chief Counsel

dated August 12, 1999, to the Sacramento RegionalDistrict for one prototype Light Rail Vehicle andAugust 20, 1999, to Metropolitan Atlanta RapidTransit Authority for two married pairs of prepro-duction rail cars.

127 Letter dated December 17, 1999, from FTAChief Counsel to WMATA; see also letter datedAugust 20, 1999, from FTA Chief Counsel to Met-ropolitan Atlanta Rapid Transit Authority (“[b]othan understanding of the need for first article test-ing and inspection and the inevitable negative ef-fect of a five-month delay on the riding public pres-ent the conditions necessary for a ‘public interest’waiver”).

car because the second request merely restated thereasoning present in the first waiver request.128

D. Nonavailability Waivers

The Administrator of FTA or a designee maywaive the general requirements of Buy America ifthe Administrator finds that the materials forwhich a waiver is requested are not produced in theUnited States in sufficient and reasonably avail-able quantities and of a satisfactory quality.129 FTAregional counsel have been delegated the authorityto consider nonavailability waivers. FTA will pre-sume that the conditions exist to grant a nonavail-ability waiver if no responsive and reasonable bidis received that offers an item produced in theUnited States.130 When a public transit agency re-quests a nonavailability waiver, the FTA will scru-tinize the agency’s procurement process for compli-ance with appropriate competitive principles. Thisis apparent in a letter dated June 12, 2000, fromFTA’s Deputy Chief Counsel to the Deputy GeneralManager of the MBTA. MBTA sought a nonavail-ability waiver in connection with a procurement of30 low-floor electric trolley buses and 32 low-floorarticulated duel mode buses. FTA noted MBTA’sextensive due diligence process during the 2-yearperiod prior to formal advertisement for these vehi-cles, MBTA’s issuance of detailed technical specifi-cations to every major vehicle supplier for com-ment, and formal advertisement of a Request forProposals based on the comments. Only one of 15bus manufacturers and suppliers that attended apreproposal conference, Neoplan, responded with aformal proposal. The small size of the order andunique technology and manufacturing processesnecessitate manufacture in Germany. FTA foundthat appropriate competitive principles had beencomplied with and granted the waiver.

FTA will only approve Buy America waivers forsole source procurements upon a showing ofnonavailability. MTDB reported requesting a solesource waiver for a Light Rail Vehicle Coupler Kit,which was denied. The item was then put out tobid. Four bidders responded and a waiver was thenrequested on nonavailability. In the case of a solesource procurement, the grantee must provide suf-ficient evidence to indicate that the item to be pro-cured is only available from a single source or that

128 See letter dated October 20, 1999, from FTA

Chief Counsel to Sacramento Regional Transit Dis-trict.

129 49 C.F.R. § 661.7(c).130 49 C.F.R. § 661.7(c)(1).

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the item is not produced in the United States insufficient and reasonably available quantities andof a satisfactory quality.131 Prior to approving anonavailability waiver for a sole source procure-ment, the FTA will require evidence that thegrantee has solicited equivalent domestic supplierson an “or equal” basis.132 For example, FTA willconsider an original equipment manufacturer as asole source supplier when the grantee producesevidence that such manufacturer owns proprietaryrights and design for the item and that no domesticmanufacturers are able to provide equivalentitems.133

The FTA sought comments on whether a generalnonavailability waiver should be granted to audio-visual training equipment produced outside of theUnited States, but received inadequate informationon which to base a determination to do so. FTA hasgranted a number of nonavailability waivers foraudio-visual equipment and has indicated its in-tention to reconsider granting a general waiver ifchanged conditions warrant.134

E. Price Differential Waivers

The Administrator of FTA or a designee maywaive the general requirements of Buy America ifthe Administrator finds that the inclusion of a do-mestic item or domestic material will increase thecost of the contract by more than 25 percent. TheAdministrator will grant this price-differentialwaiver if the amount of the lowest responsive andresponsible bid offering the item or material that isnot produced in the United States, multiplied by1.25, is less than the amount of the lowest respon-sive and responsible bid offering the item or mate-rial produced in the United States. FTA regionalcounsel have been delegated the authority to con-sider price-differential waivers. The price differen-tial waiver is applied as follows:

131 49 C.F.R. § 661.7(c)(2).132 Letter dated December 17, 1999, from FTA

Chief Counsel to Metro-North Rail Road (publicsolicitation allowing for an approved equal to allknown bidders in industry resulted in only one bid,which was not compliant with Buy America).

133 Letter dated January 28, 2000, from the FTADeputy Chief Counsel to the Southeastern Penn-sylvania Transportation Authority; letter datedApril 14, 2000, from FTA Deputy Chief Counsel toKing County Department of Transportation; letterdated September 7, 1999, from FTA Chief Counselto Pinellas Suncoast Transit Authority.

134 56 Fed. Reg. 926 (1991).

• In the case of a contract for a single end prod-uct, the 25 percent price differential applies to theoverall price of the foreign bid.

• If a grantee is purchasing multiple manufac-tured products and some bidders offer items of bothforeign and domestic origin, the price differentialapplies only to the foreign items. The foreign bid-der’s overall price is then adjusted accordingly andcompared to the lowest responsive and responsiblebid offering all domestic items; the price differen-tial is not to be applied to the overall contract be-tween the grantee and the supplier, but to thecomparative costs of each individual item beingsupplied.135

An NJT request for a price differential waiverwas granted by FTA in a letter dated January 28,1991. FTA’s analysis was simple and straightfor-ward:

In evaluating the bids for your procurement, thelargest responsive and responsible bid, from Mar-coni Instruments, Inc., was multiplied by 1.25 andthe resulting amount was less than the amount ofthe bid from Hewlett Packard, the lowest responsiveand responsible bid offering all items produced inthe United States. Since inclusion of the domesticpreference will increase the cost of the overall proj-ect contract by more than twenty-five percent, thegrounds for a price differential waiver properly ex-ist.

Questionnaire respondents pointed out that the25 percent price differential results in higher pricesfor domestic goods when a foreign-made product isless expensive but does not meet the 25 percentthreshold.

VI. BUY AMERICA COMPLIANCE

A. Who is Subject to the Buy America Requirements?

Every FTA grantee is a party to FTA’s officialMaster Agreement, which documents the standardterms and conditions of FTA funding.136 Pursuantto Section 14(a) of the Master Agreement, agrantee agrees to comply with 49 U.S.C. § 5323(j),FTA regulations, "Buy America Requirements," 49C.F.R. Part 661, and implementing guidance FTAmay issue. The Buy America requirements flowdown from FTA grantees to first tier contractors,who are responsible for ensuring that lower tiercontractors and subcontractors are in compliance.

135 Id.; FTA, BEST PRACTICES PROCUREMENT

MANUAL, ch. 8, § 8.1.4.136 The version of the Master Agreement referred

to herein is dated October 1, 2000.

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49 C.F.R. § 661.13 requires a grantee to includein its bid specification for procurements of steel,iron, manufactured products, and rolling stock anappropriate notice of the Buy America provision.The second model clause in Appendix A-I in theFTA Best Practices Procurement Manual suggestslanguage to meet the appropriate notice require-ment of 49 C.F.R. § 661.13(b). This suggested lan-guage is written as a preamble to the certificationsrequired by 49 C.F.R. §§ 661.6 and 661.7, discussedin greater detail below. Other grantees have satis-fied the notice requirement in their general or spe-cial provisions by including language as substan-tially set forth in the FTA Best PracticesProcurement Manual, Section 8.1.4.

A grantee’s bid specifications shall require, as acondition of responsiveness, that the bidder or of-feror submit a completed Buy America certificatewith the bid in accordance with 49 C.F.R. § 661.6 or§ 661.12, as applicable.137 Forms of certificates ofcompliance can be found in Appendix A-1 of theFTA Best Practices Procurement Manual. A bidderor offeror is bound by its original certification andis not permitted to change its certification after bidopening except to correct inadvertent errors.138

If Buy America certifications are not completedand submitted with a bid, that bid is nonresponsiveand cannot be considered by the grantee. If thebidder or offeror certifies that it will comply withthe applicable Buy America requirements, it willnot be eligible later for a waiver of those require-ments.139 Certification for steel, iron, or manufac-tured products is required under 49 C.F.R. §661.6.140 A bidder or offeror may certify either thatit will comply with the provisions of 49 U.S.C. §5323(j)(1) and the applicable provisions in 49C.F.R. Part 661, or that it cannot comply with theprovisions of 49 U.S.C. § 5323(j)(1) but may qualifyfor an exception pursuant to 49 U.S.C. §

137 49 C.F.R. § 661.13(b).138 49 C.F.R. § 661.13(c), TEA-21 § 3020(b).139 49 C.F.R. § 661.13(c).140 Please note that the form of certification in

the C.F.R. refers to the sections of the 1982 STAA(steel and manufactured products) and has notbeen updated to reflect the addition of iron, as codi-fied in 49 U.S.C. 5323(j). The form of certificationattached as Appendix A-1 to the FTA BESTPRACTICES PROCUREMENT MANUAL accurately refer-ences the correct statutory provision and should beused by grantees pending the publication of techni-cal corrections to the C.F.R. by the FTA. (FTA,BEST PRACTICES PROCUREMENT MANUAL, ch. 4, §4.3.3.2.2.

5323(j)(2)(B) or 49 U.S.C. § 5323(j)(2)(D) and theapplicable provisions in 49 C.F.R. Part 661. In thiscase, the grantee or the bidder, as appropriate pur-suant to 49 C.F.R. § 661.9, must seek a waiver.

Certification for buses and rolling stock (includ-ing train control, communication, and tractionpower equipment) is required under 49 C.F.R. §661.12.141 A bidder or offeror may certify either thatit will comply with the provisions of 49 U.S.C. §5323(j)(2)(C) and the applicable provisions in 49C.F.R. Part 661, or that it cannot comply with theprovisions of 49 U.S.C. § 5323(j)(2)(C) but mayqualify for an exception pursuant to 49 U.S.C. §5323(j)(2)(B) or 49 U.S.C. § 5323(j)(2)(D) and theapplicable provisions in 49 C.F.R. Part 661. In thiscase, the grantee or the bidder, as appropriate pur-suant to 49 C.F.R. § 661.9, must seek a waiver.Model Buy America contract language can be foundin Appendix A-1 of the FTA Best Practices Pro-curement Manual.

B. FTA Investigation of Buy America Compliance

A third party may petition FTA to investigatethe compliance of a successful bidder with the bid-der’s FTA certification. The petitioning party muststate the grounds of the petition and include anysupporting documentation. The FTA presumes thatany bidder who has supplied the required BuyAmerica certificate is complying with the BuyAmerica requirements. In a letter dated September30, 1999, from the FTA Chief Counsel to QuakerRubber Company responding to Quaker’s protest ofa WMATA procurement for outdoor escalator hand-rails, FTA indicated that upon receipt of the pro-test it had directed WMATA to make inquiresabout the facilities and equipment of the winningbidder, Escalator Handrail, Inc. FTA learned thatthe plant at issue was located in Iowa and had suf-ficient equipment and personnel to complete thework. FTA’s presumption of compliance was notovercome because FTA had no reason to believethat Escalator Handrail had erroneously certifiedcompliance and Quaker Rubber had supplied noinformation to support the presumption that Es-calator Handrail intended to act in violation of its

141 Like the § 661.6 certification, the C.F.R. certi-

fication language refers to the 1982 STAA and notmore recent statutory language. The certificationlanguage attached as Appendix A-1 to the FTABest Practices Procurement Manual, accuratelyreferences the correct statutory provision andshould be used pending FTA revision of the C.F.R.(FTA BEST PRACTICES PROCUREMENT MANUAL, ch. 4,§ 4.3.3.2.2).

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certification. However, once a showing is made suf-ficient to overcome that presumption, FTA willinitiate an investigation.142

Other than the aforementioned right to petitionthe FTA to investigate the compliance of a success-ful bidder, a third party has no rights under BuyAmerica.143 In one of the very limited number ofcases involving Buy America, the United StatesDistrict Court for the Western District of New Yorkheld that the 1982 STAA makes no provision for aprivate right of action, nor may any such right beimplied.144 The Ar-Lite litigation arose out of theconstruction of a pedestrian mall and passengerstations for the Niagara Frontier TransportationAuthority (NFTA). NFTA had requested a BuyAmerican nonavailability waiver from FTA withrespect to NFTA’s Light Rail Rapid Transit System(LRRT), based on NFTA’s determination that theplaintiff’s product had not met the project’s specifi-cations and requirements. FTA granted NFTA apartial waiver subject to further testing of theplaintiff’s product. After further testing, the plain-tiff’s product still failed to meet project specifica-tions and FTA granted a full waiver. Plaintiff suedfor, among other things, violation of Buy America.The Court held that this claim was to be dismissedfor failure to state a claim, stating “the statute doesnot create a federal right in favor of the plaintiff,and there is no indication of legislative intent tocreate such a right.”145

In appropriate circumstances, FTA may deter-mine on its own to initiate an investigation.146

When FTA determines to conduct an investigation,it requests that the grantee require the successfulbidder to document its compliance with its BuyAmerica certificate. FTA specifies the requisitedocumentation on a case-by-case basis. The suc-cessful bidder has the burden of proof to establishthat it is in compliance.147 The grantee must re-spond to the FTA’s request within 15 working daysof the request. The bidder under investigation maycorrespond directly with FTA, but only if it notifiesthe grantee in writing, the grantee agrees in writ-

142 49 C.F.R. § 661.15(a), (b).143 49 C.F.R. § 661.20.144 Ar-Lite Panelcraft, Inc. v. Siegfried Construc-

tion Co., Inc., et al, No. Civ-86-525C, 1989 U.S.Dist., Lexis 6394 (W.D. N.Y. March 10, 1989) (un-published).

145 Id.146 49 C.F.R. § 661.15(c).147 49 C.F.R. § 661.15(d).

ing, and the grantee notifies the FTA in writing.The FTA may conduct site visits to the manufac-turing site with adequate notice to the parties.148

FTA will, upon request, make the informationsubmitted to it during an investigation public, ex-cept to the extent withholding the information ispermitted or required by law or regulation. A partysubmitting proprietary material may advise theFTA that such material should be withheld. Confi-dential or proprietary material is any material ordata whose disclosure could reasonably be expectedto cause substantial competitive harm to the partyclaiming that the material is confidential or pro-prietary.149

When a petition for investigation has been filedbefore a grantee has awarded a contract, thegrantee will not make an award before the resolu-tion of the investigation unless (a) the items to beprocured are urgently required, (b) delivery of per-formance will be unduly delayed by failure to makethe award promptly, or (c) failure to make a promptaward will otherwise cause undue harm to thegrantee or the federal government.150 In the eventthe grantee makes an award during an investiga-tion, it must notify the FTA; FTA reserves the rightto withhold funding from a project during the pen-dency of an investigation.

Initial decisions by the FTA will be in writing. Arequest for reconsideration of the initial decisionmay be made by any party involved in the investi-gation not later than 10 working days after theinitial decision. FTA will reconsider an initial deci-sion only if a party requesting reconsiderationsubmits new matters of fact or points of law thatwere not known or available to the party duringthe investigation.

C. Noncompliance With Buy America

If a successful bidder fails to demonstrate that itis in compliance with its certification, it will berequired to take the necessary steps in order toachieve compliance. If a bidder takes these neces-sary steps, it will not be permitted to change itsoriginal bid price. If a bidder does not take the nec-essary steps, it will not be awarded the contract ifthe contract has not yet been awarded; if a contracthas been awarded, the contractor will be in breach

148 49 C.F.R. § 661.15(e), (i).149 49 C.F.R. § 661.15(j), (k), (l).150 49 C.F.R. § 661.15(m).

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of its Buy America obligations under the contract.151

FTA grant recipients should be sure that their con-tracts have obligated the contractor to assume allcosts of Buy America compliance. Enforcementrights of the grantee regarding vendor liability forBuy America compliance should be clearly articu-lated in the contract.

D. Sanctions Against Vendors

1. FTA RemediesA successful bidder’s willful refusal to comply

with certification may lead to the initiation ofdebarment or suspension proceedings under 49C.F.R. Part 29. Further, a person shall be ineligibleto receive any contract or subcontract made withfederal funds if it has been determined by a courtor federal agency that the person intentionallymisrepresented, by label bearing a “Made inAmerica” inscription or otherwise, that any suchproduct was produced in the United States.152

2. Grantee RemediesA grantee may exercise any legal rights it may

have under the contract or at law or equity. If aviolation is discovered after the award, the contrac-tor is responsible for performing the contract, in-cluding satisfying the Buy America requirements,even if that requires a determination of default andsubstitute performance. A typical resolution is topermit the contractor to substitute a differentproduct that meets the specifications, including theBuy America requirement, at the contractor’s ex-pense. In rare instances, FTA may approve a publicinterest waiver.153 In the event Buy America com-pliance is not possible, application may be made fora nonavailability waiver or the noncompliant itemmay be severed and funded through nonfederalfunding sources.

Remedies may also include conditional accep-tance of rolling stock the pending manufacturer’scorrection of deviations within a reasonable time atno additional cost to the grantee.154 If a granteecannot complete the post-delivery audit becausethe grantee or its agent cannot certify Buy Americacompliance or that the rolling stock meets thegrantee’s specification requirements, the rolling

151 49 C.F.R. § 661.17.152 49 C.F.R. § 661.18.153 FTA, BEST PRACTICES PROCUREMENT MANUAL,

§ 8.1.4.154 49 C.F.R. § 663.39(b).

stock may be rejected and final acceptance by thegrantee will not be required.155

Finally, a grantee may be able to pursue a rem-edy for false certification, a criminal act in viola-tion of 18 U.S.C. § 1001.156 Criminal or administra-tive pursuit of the violation can usually be handledin consultation with FTA.

It bears repeating that the grantee’s contractualrelationship with the vendor must articulate theBuy America obligations of the contractor andspecify the obligations of the contractor for costs ofcompliance.

E. FTA Sanctions Against Grantees

In the event an FTA grantee is found to be inviolation of Buy America, Section 11 of the MasterAgreement is very clear that the federal govern-ment may suspend or terminate all or part of thefederal financial assistance provided. Further, ifFTA determines that the grantee has willfullymisused federal assistance funds by failing to com-ply with the terms of the Master Agreement (in-cluding Buy America), FTA reserves the right, pur-suant to Section 11 of the Master Agreement, torequire the grantee to refund the entire amount offederal funds provided for the project, or any lesseramount as the FTA may determine. These draco-nian remedies are, however, the exception and notthe rule.

Typically, the FTA will subject the grantee’s BuyAmerica compliance to a higher level of scrutiny fora certain period. In December 1999, the FTAgranted a conditional public interest waiver to theMissouri Department of Transportation (MoDOT)for noncompliant vehicles. MoDOT had purchased59 Dodge Caravans as part of a blanket state con-tract and the dealer had certified compliance withBuy America. Noncompliance was not discovereduntil after the vehicles had already been placed inrevenue service. MoDOT demonstrated that unlessthe waiver was granted, the burden would havenegatively affected the riding public. As a conditionto granting the waiver, FTA required the granteeto send the following information to FTA Head-quarters and its regional office prior to vehicle so-licitations for a period of 2 years: bid packages forFTA review prior to publication; bid summarysheet and pre-award audit prior to entering intoany contracts; written process for implementingpre-award and post-delivery audits; and completed

155 49 C.F.R. § 663.39.156 49 C.F.R. § 661.15(a).

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post-delivery audit within 30 days of vehicle accep-tance.157

VII. CONCLUSION

Some would argue that the conditions favoringprotectionism that prompted the enactment of the1933 Buy American Act and the 1987 STURAA nolonger apply to transit procurements in NorthAmerica.158 Nevertheless, while the causality hasnever been analyzed (to the knowledge of thisauthor), it is a fact that several major Europeanand Japanese railcar builders and European andCanadian bus manufacturers have located assem-bly plants in the United States, arguably for pur-poses of Buy America compliance.159 In a recentFTA response to a certification protest, FTA notedthat Pfaff Silberblau, a Canadian supplier of liftand hoist equipment, had entered into a businessagreement with Simmons Machine Tool Corpora-tion in Albany, New York, to provide a domesticmanufacture location for its hoist systems. Wher-ever your sympathies may lie, Buy America com-pliance is firmly established in the FTA statutoryand regulatory scheme and cannot be avoided whenFTA funding of steel, iron, manufactured products,or rolling stock is involved.

Always keep in mind the following Buy Americaessentials:

• Always identify the end product before decidingwhich provision of Buy America applies.

157 Letter dated December 14, 1999, from FTA

Chief Counsel to Missouri Department of Trans-portation.

158 Hughes, supra note 12.159 A partial list includes Nova Bus, a Canadian

subsidiary of the Swedish Volvo Bus Corporation,which has manufacturing plants in Schenectady,New York, and Roswell, New Mexico; NeoplanUSA, an American licensee of the German NeoplanGroup, which has a bus manufacturing facility inLamar, Colorado; New Flyer, a Canadian bus com-pany that has manufacturing plants in Crookstonand St. Cloud, Minnesota; North American BusIndustries, Incorporated, a subsidiary of a Hun-garian parent, which has a facility in Anniston,Alabama; Orion Bus Industries, a Canadian sub-sidiary of Daimler Chrysler that has a bus manu-facturing facility in Oriskany, New York; and Bom-bardier, Inc. (Canada), Breda (Italy), GEC Alsthom(France), Kawasaki (Japan), Kinki-Sharyo (Japan)and Siemens Transportation Systems (Germany),which all have rail manufacturing facilities in theUnited States.

• Make sure you correctly differentiate betweenmanufactured products and rolling stock.

• If you plan to award to a bidder that has certi-fied noncompliance, request a waiver before youaward the contract.

• Follow 49 C.F.R. § 661.11 step-by-step in de-termining compliance with the cost element of theBuy America domestic content requirements.

• Make sure the contractor is contractually liablefor costs of Buy America compliance.

When grappling with Buy America you will needin your arsenal the following essential materials:

• 49 U.S.C. § 5323(j).• 49 C.F.R. §§ 661.1 et seq. and 663.1 et seq.• March 18, 1997, FTA Dear Colleague Letter.• Sections 4 and 8 of the FTA Best Practices Pro-

curement Manual (Feb. 2000).• FTA-DC-90-7713-93-1, Revision B, Conducting

Pre-Award and Post-Delivery Reviews for Bus Pro-curements and FTA-DC-90-7713-94-1, Revision B,Conducting Pre-Award and Post-Delivery Reviewsfor Rail Vehicle Procurements.

• The name, address and phone number of yourFTA Regional Counsel and the following contact atthe FTA Office of the Chief Counsel:

Meghan G. Ludtke (or successor)

Office of Chief Counsel

Federal Transit Administration

Department of Transportation

400 Seventh Street, SW, Suite 9316

Washington, D.C. 20590

202-366-1936

www.fta.dot.gov/library/legal/buyamer/

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APPENDIX A

NATIONAL ACADEMY OF SCIENCESTRANSPORTATION RESEARCH BOARDSUBJECT: TCRP J-5, STUDY TOPIC 5-03

A GUIDE TO THE BUY AMERICA REQUIREMENTSBUY AMERICA SURVEY

The Transportation Research Board has retained a consultant to do a study with the goal of producing aneasy to use guide for implementation of Buy America for use by attorneys and procurement officers.

The purpose of this survey is to elicit information from transit systems, companies and other institutions in-volved in the transit industry to develop an industry-wide perspective on the impact of Buy America on transitprocurements with the goal of identifying areas where streamlining of the federal statutory and regulatory re-quirements could be accomplished without jeopardizing the public policy goals of Buy America.

1. Please provide the name and address of your agency or firm.

2. Please provide the name, telephone number and e-mail number of an appropriate contact personwho is primarily responsible for Buy America matters for your agency or firm.Name:_______________________________________________________________Telephone:___________________________________________________________E-Mail:______________________________________________________________

3. Please describe the impact, if any, which Buy America has on your transit procurement proc-esses, making reference to specific procurements if necessary. What, if any, project delays andadditional project costs would you attribute directly to Buy America compliance? Please spec-ify any Buy America compliance issues which arose as a result of change orders or other fac-tors. Please estimate your agency’s cost of compliance with Buy America._____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

4. Have you sought an FTA waiver or other interpretation regarding steel and iron, other than roll-ing stock?Yes No

If yes, please describe the request and the FTA response.________________________________________________________________________________________________________________________________________________________________________________________________________________________

5. Have you sought a waiver or other interpretation regarding manufactured products or manufac-turing processes?Yes No If yes, please describe the request and the FTA response.__________________________________________________________________________________________________

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_____________________________________________________________________________________________________________

6. Have you sought a waiver or other interpretation regarding FTA’s application of the concept of“manufactured product” to a construction project?Yes No If yes, please describe the request and the FTA response.

________________________________________________________________________________________________________________________________________________________________________________________________________________________

7. Have you sought, in connection with a specific rolling stock procurement, a waiver or other FTAinterpretation regarding:

• Component: Yes No • Subcomponent: Yes No • End Product: Yes No • Turn key project: Yes No • Final Assembly: Yes No • “Manufacture” of a component: Yes No • Export of subcomponents: Yes No

If yes, please describe the request and the FTA response.________________________________________________________________________________________________________________________________________________________________________________________________________________________

8. Have you sought an FTA interpretation regarding the determination of project costs for pur-poses of the 60% domestic content calculation?Yes No If yes, please describe the request and the FTA response._______________________________________________________________________________________________________________________________________________________________________________________________________________

9. Have sought any of the following waivers, which you may not have discussed above:Public interest waiver: Yes No Non-availability waiver: Yes No Price-differential waiver: Yes No If yes, please describe the request and the FTA response._______________________________________________________________________________________________________________________________________________________________________________________________________________

10. Have you ever assumed a general waiver for “microcomputer equipment”?Yes No If yes, please describe the item procured._______________________________________________________________________________________________________________________________________________________________________________________________________________

11. Have you taken advantage of the recent change set forth in TEA-21, which permits the correc-tion of inadvertent errors after bid opening?Yes No If yes, please describe the circumstances and any challenges to this determination.

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_______________________________________________________________________________________________________________________________________________________________________________________________________________

12. Have you sought an FTA investigation into the compliance of a successful bidder with the bid-der’s Buy America certification?Yes No If yes, please describe the FTA’s role and articulate, if possible, the standard used by FTA to determine suf-ficient evidence to overcome the FTA presumption of compliance._______________________________________________________________________________________________________________________________________________________________________________________________________________

13. Has the requirement for pre-award audits significantly impacted your transit procurementprocess?Yes No If yes, please elaborate. Please articulate specific recommendations you may have for streamlining thisprocess._______________________________________________________________________________________________________________________________________________________________________________________________________________

14. Has the requirement for post-delivery audits significantly impacted your transit procurementprocess?Yes No If yes, please elaborate. Please articulate specific recommendations you may have for streamlining thisprocess.’_______________________________________________________________________________________________________________________________________________________________________________________________________________

15. Have you litigated against a vendor using Buy America as part of your litigation strategy?Yes No

If yes, please elaborate. Please attach any relevant motion papers._______________________________________________________________________________________________________________________________________________________________________________________________________________

Please mail or fax completed surveys no later than March 31, 2000 to the attention of:

Jaye Pershing JohnsonKalkines, Arky, Zall & Bernstein LLP1675 BroadwayNew York, New York 10019FAX: 212-541-9250PHONE: 212-830-7241E-MAIL: JJOHNSON@KAZB.COM

To the extent you may have written responses of the FTA or other publicly available information or corre-spondence with regard to any of the matters discussed above, please fax any of these materials to the attentionof Ms Johnson. Thank you very much for your responses to this survey.

ACKNOWLEDGMENTSThis study was performed under the overall guidance of TCRP Project Committee J-5. The

Committee is chaired by DENNIS C. GARDNER, Ogletree, Deakins, Nash, Smoak & Stewart,Houston, Texas. Members are ARTHUR P. BERG, Port Authority of New York and New Jersey;RICHARD W. BOWER, California Department of Transportation; DORVAL RONALD CARTER, JR.,Chicago Transit Authority; CLARK JORDAN-HOLMES of Stewart, Joyner, & Jordan-Holmes,P.A., Tampa, Florida; ALAN S. MAX, City of Phoenix Law Department; ROBIN M. REITZES,City Attorney’s Office, San Francisco, California; and JEANETTE J. CLARK, Washington Met-ropolitan Transit Authority. SHARON GREENE provides liaison with TOPS, and GWEN

CHISHOLM represents the TCRP staff..

TRANSPORTATION RESEARCH BOARDNational Research Council2101 Constitution Avenue, N.W.Washington, DC 20418

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