2019 02 11 buy american presentation - nssga 2019 aggi …
TRANSCRIPT
Buy American Hire American-2019• Buy American Act (BAA)—Government
Contracts• Buy America—Federal Transit Administration
(FTA) Funded Projects• Compliance Strategies• Recent developments—EO and
BuyAmerican.gov Act
Buy American Act• Supplies (41 U.S.C. 8302, FAR 52.225-1 to -8• Applies to “unmanufactured articles, materials, and
supplies . . . acquired for public use . . . .”– Preference for:
• End products that are mined or produced in the USA; or • End products that are manufactured in the USA and:
– at least 50% of the component costs are for products mined, produced, or manufactured in USA; or
– the end product is a “commercially available off-the-shelf” (COTS) item (“bulk cargo” is not a COTS under this provision)
Buy American Act• Construction materials (41 U.S.C. 8303, FAR 52.225-9 to -12)
– Applicable to any “contract for construction, alteration, or repair of any public building or public work in [the USA] . . . .”
– Preference for use of “domestic construction materials”• Unmanufactured articles, materials, and supplies that have been mined or
produced in US• Construction materials that are manufactured in the USA, and:
– at least 50% components cost mined, produced, or manufactured in the United States; or
– end product is a “commercially available off-the-shelf “ (COTS) item; or– emergency life safety systems
Buy American Act—Exceptions• The cost of domestic construction material is
“unreasonable” (i.e. 6% higher)• Applying BAA would be “impracticable or inconsistent
with the public interest”• Domestic materials are not available in sufficient
quantities and satisfactory quality• Information technology that is a commercial item
Trade Agreements Act• Trade Agreements treat products and materials
from certain countries as equivalent to “domestic” for BAA purposes
• Different trade agreements have different dollar thresholds
• No Procurement Agreements with China or Malaysia
Trade Agreements Act• Free Trade Agreement Countries: Australia, Bahrain, Canada,
Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Korea (Republic of), Mexico, Morocco, Nicaragua, Oman, Panama, Peru, & Singapore
• World Trade Organization GPA Countries: Armenia, Aruba, Austria, Belgium, Bulgaria, Canada, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hong Kong, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea (Republic of), Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Singapore, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Taiwan, and the United Kingdom
Trade Agreements Act – cont.• Least Developed Countries: Afghanistan, Angola, Bangladesh, Benin, Bhutan,
Burkina Faso, Burundi, Cambodia, Central African Republic, Chad, Comoros, Democratic Republic of Congo, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Haiti, Kiribati, Laos, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Nepal, Niger, Rwanda, Samoa, Sao Tome and Principe, Senegal, Sierra Leone, Solomon Islands, Somalia, South Sudan, Tanzania, Timor-Leste, Togo, Tuvalu, Uganda, Vanuatu, Yemen, and Zambia
• Caribbean Basin Countries: Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, Bonaire, British Virgin Islands, Curacao, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, Saba, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Sint Eustatius, Sint Maarten, and Trinidad and Tobago
FTA Buy America• Federal Public Transportation Law
– 49 U.S.C. § 5323(j)• DOT Regulations
– 49 C.F.R. Part 661• Guidance
– FTA Buy America Website• https://www.transit.dot.gov/buyamerica• Regulations, Waiver Letters, Best Practices
FTA Buy America—generally
• 49 CFR § 661.5 General Requirements– (a) “no funds may be obligated by FTA for a grantee project
unless all iron, steel, and manufactured products used in the project are produced in [US].”
– (b) “steel and iron manufacturing processes must take place in [US], except metallurgical processes involving refinement of steel additives.”
FTA Buy America—generally
• 49 CFR § 661.5 General Requirements– (c) “steel and iron requirements apply to all construction
materials made primarily of steel or iron and used in infrastructure projects” (ex. transit or maintenance facilities, rail lines, & bridges)
• E.g. structural steel, beams, columns, running rail, contact rail• Does not apply to steel or iron used as components or
subcomponents of manufactured products or rolling stock
FTA Buy America—generally
• 49 CFR § 661.5 General Requirement– (d) Manufactured product
• All manufacturing processes take place in the US• All components must be of US origin
– A component is considered US origin if manufactured in the US, regardless of subcomponents origins
Buy America—Manufacturing• Manufacturing is more than mere assembly • 49 CFR § 661.3, Definitions:
– Manufacturing process means the application of processes to alter the form or function of materials or of elements of the product in a manner adding value and transforming those materials or elements so that they represent a new end product functionally different from that which would result from mere assembly of the elements or materials.
Buy America—Manufacturing
• “End Product” Definition—49 C.F.R. § 661.3– [A]ny vehicle, structure, product, article, material, supply, or
system, which directly incorporates constituent components at the final assembly location, that is acquired for public use under a federally-funded third-party contract, and which is ready to provide its intended end function or use without any further manufacturing or assembly change(s).
Buy America—Manufacturing
49 CFR § 661.3, Appendix A– Manufactured end products: Infrastructure projects not made
primarily of steel or iron, including structures (terminals, depots, garages, and bus shelters), ties and ballast; contact rail not made primarily of steel or iron; fare collection systems; computers; information systems; security systems; data processing systems; and mobile lifts, hoists, and elevators.
Elevators & EscalatorsFTA 12/7/2010 letter to SF Muni• FTA considers elevators and escalators to be
COMPONENTS of an end product (station)• Manufacturing processes for components must occur
in US• Escalator drive & reversing stations = subcomponents
Elevators & Escalators
FTA 4/9/12 letter to Kone• Installing escalator at project ≠ manufacturing• If no manufacturing processes occur at the
component level then those processes must occur in the US at the subcomponent level– Escalator manufactured in China and then disassembled
• Installation at the project = mere assembly
Elevators & EscalatorsFTA 8/23/2013 letter to Otis Elevator• Installation, integration, interconnection, and testing of
escalator subcomponents = manufacturing• Extensive activities off-site at Florence, SC plant
Elevators & EscalatorsFTA 1/8/2015 letter to Kone• Elevator door frames and guide rails are
subcomponents• Elevator door frames and guide rails are not a
construction material made primarily of steel or iron– Not structural or loadbearing element of a building
FTA Certification Requirements
• For any contract for steel or manufactured products
• Bidders / Offerors must submit a signed certificate that they either – comply – they do not comply, but they qualify for a waiver of the
requirements
Buy America Waivers
• Four statutory waivers (48 USC § 5323(j)(2)) – Public interest– Non-availability– Rolling stock – Price-differential
Non-availability Waiver• Goods or materials not produced in US in sufficient and reasonably
available quantities and of a satisfactory quality – No offers in response to a solicitation– Appendix A to 49 CFR § 661.7
– FAR 25.104 list of unavailable items applies here– General waiver for microprocessors, computers, software used
for processing or storing data– Small purchases – below the simplified acquisition threshold -
$150,000 (FAR 2.101)
Price Differential Waiver
• Use of domestic material would increase the cost of the overall project by more than 25%– Look at OVERALL PROJECT COST– Not the cost of the item– Difficult to meet
Obtaining a Waiver• Offeror seeks through Grantee• Grantee submits to FTA with detailed facts & justification• FTA decides• FTA publishes waivers and decision letters at
www.fta.dot.gov/legislation_law/12921_598.html
Obtaining a Waiver• Offeror seeks through Grantee• Grantee submits to FTA with detailed facts & justification• FTA decides• FTA publishes waivers and decision letters at
www.fta.dot.gov/legislation_law/12921_598.html
Buy American Act 41 USC § 8303;
48 CFR 25
FTA Buy America49 USC § 5253(j);
49 CFR 661
FHWA Buy America23 USC § 313;
23 CFR 635.410
FAA Buy American49 USC § 50101;
49 CFR 501
Applies to Construction, alteration, or repair of public buildings or public works; does not apply to maintenance contracts
Public transportation projects funded by FTA (metro stations, bus stations, rail lines, bridges, etc.)
Interstate highways and bridges, if at least one project contract is funded by FHWA
FAA-funded construction such as airports
Basic requirement
Articles, materials, supplies must be mined, produced, or “manufactured” in US
“Steel, iron, and manufactured goods” used in the project must be “produced” in US
For “steel or iron materials,” all manufacturing processes, including application of a coating, must occur in US
Steel and manufactured goods used in the project must be produced in the US
Component test
Except for COTS items; 50% of cost of components must be US-sourced
“Components” must be manufactured in US; except for rolling stock, no origin requirement for “subcomponents”
Steel or iron materials must be manufactured in US, regardless of status as an end product, component, or subcomponent
“wholly produced in America and are of 100% US materials;” FAA may waive if 60% of cost of components and subcomponents are of US origin
Cost differential for domestic materials
“Unreasonable” costs – 6% for construction materials
Requirement may be waived if domestic goods increase cost of entire project by 25%
Requirement may be waived if domestic goods increase cost of entire project by 25%
Requirement may be waived if domestic goods increase cost of entire project by 25%
Trade Agreements?
For construction contracts over specified thresholds, materials “substantially transformed” in designated countries can be used
Not applicable Not applicable Not applicable
Non-Compliance• If no fraud suspected, then:
– Request corrective action from contractor– Consider removal and replacement– Contractual Adjustment– Possible termination, suspension or debarment
• If fraud suspected or serious noncompliance:– Terminate for default– Report to Agency Suspension and Debarment Official– Refer to appropriate agency officials for investigation
Compliance Strategies• Know the source of the requirement• Seek clarifications / waivers early
– Before submission of offers!
• Establish a posture of compliance– Inform– Bind– Administer– Enforce
Recent Developments• E.O. 13858—Strengthening Buy-American Preferences for
Infrastructure Projects (Jan. 31, 2019)• United States Mexico Canada Agreement (Nov. 30, 2018)
(NAFTA 2.0)• E.O. 13788—Buy American and Hire American (Apr. 18,
2017)• Legislative changes under consideration• The infrastructure plan?
Buy American and Hire American • Executive Order No. 13788, signed April 18, 2017• Scrupulously monitor, enforce and comply with existing
Buy American laws• Agency heads directed to study compliance and develop
new policies• OMB and Dep’t of Commerce to report to the President
Strengthening Buy-American Preferences for Infrastructure Projects• Executive Order No. 13858, signed Jan. 31, 2019• Applies to federally-funded infrastructure construction, including
buildings, internet infrastructure, energy projects that are not covered by a “comparable” domestic preference
• Not mandatory. By May 1, 2019, agencies are to “encourage” recipients of federal funds to maximize use of domestic products
• By May 31, agencies are to report to President on “tools, techniques, terms and conditions” that have been or could be used to maximize use of domestic products.
BuyAmerican.gov Act • Introduced January 9, 2018 (S. 2284)• Bipartisan bill (Murphy, Portman, Graham, Brown)• Limit availability of public interest waivers
– Agency head decision– Requirement for detailed justification for use of foreign products– Certificate of good-faith effort to solicit bids for domestic items– No approval of waiver without making proposed waiver publicly
available for comment
Buy America 2.0 Act• Introduced March 8, 2018 (H.R. 5137)• Brendan Boyle (D. Pa 13) & 21 D cosponsors• Increases Buy America percentage thresholds for rolling
stock and aviation facilities– Public transportation (49 USC § 5323(j))– Aviation facilities (49 USC § 50101)
• Extension of Buy America requirements for construction of public water systems (42 USC § 300j-12)
USMCA (NAFTA 2.0)• United States Mexico Canada Agreement (USMCA)• Increases minimum wage requirements for non-US workers—30% of labor
must be done by workers earning $16/hour.• Increases domestic content requirements for automobiles to 75%.• Increased safety requirements for Mexican trucks.• No change in “substantial transformation” standard in Trade Agreements Act.• Canada removed from Chapter 13 on Government Procurement; Mexico
remains.• Executed November 30, 2018, but won’t be effective unless ratified by
Congress.
Buy American Hire American – 2019
Brian Waagner202.378.2355
Hal J. Perloff202.378.2354