Los Angeles County Metropolitan Transportation Authority

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May 22, 2012


G. Kent Woodman, Esq.
Thompson Coburn LLP
1909 K Street, N.W. Suite 600
Washington, D.C. 20006-1167
United States of America

Re: Determination regarding final assembly of light rail vehicles

Dear Mr. Woodman:

During a public meeting on April 30, 2012, the Los Angeles County Metropolitan Transportation Authority's (LACMTA) Board voted to award a contract to Kinkisharyo International LLC (KI) to produce and deliver at least 78 light rail vehicles (LRVs) to LACMTA, with options for up to 157 more. In the week preceding the Board meeting, I contacted you, in your capacity as counsel to LACMTA, to discuss KI's plan for complying with the Buy America requirements. During our discussions, you asked me to determine, in writing, whether KI's plan complies with the Federal Transit Administration's (FTA) minimum requirements for final assembly. I write to inform you of FTA's decision.

However, before discussing that decision, I want to clarify two issues. First, during the Board meeting, several parties represented that FTA had in some way justified or approved their actions. Many of these statements were general and inaccurate. I want to take this opportunity to make it clear that no one outside of FTA has authority to speak on behalf of this agency and it is FTA's practice to provide legal opinions on significant matters in writing. Therefore, any statements made by LACMTA staff suggesting that their discussions with FTA, whether orally or by informal email, could adequately represent FTA's formal position are both incorrect and inappropriate.

Second, this letter applies to the limited question of whether KI' s production plan complies with the final assembly requirements outlined at Appendix D to 49 C.F.R. § 661.11. It does not answer questions regarding the LRV procurement that have been raised by LACMT A and various interested parties. FTA reserves the right to review other aspects of LACMTA's LRV procurement at a future time, including but not limited to whether LACMTA complied with FTA's procurement rules, and whether KI's production plan complies with other Buy America requirements.

I note that FTA has received letters from labor organizations, economic advocacy groups, and the two non-selected proposers-CAP USA, Inc. (CAF) and Siemens Industry, Inc. (Siemens)-complaining about various aspects of LACMTA's procurement process. Among other things, these letters allege that LACMTA failed to evaluate proposals properly and may have violated FTA's procurement rules. The letters from CAF and Siemens informed FTA of their intention to appeal LACMTA's decision on bid protests currently pending before LACMTA to FTA as soon as it is administratively final.

In particular, CAF questioned whether LACMTA required climate room testing on all LRVs to be delivered under the contract (KI does not plan to perform climate room testing on all production vehicles). Inasmuch as FTA's Buy America rule does not require climate room testing, should FTA decide to take up this issue, it will do so within the context of a bid protest appeal, not this determination regarding compliance with the final assembly requirement.

Based on the representations you made during our discussions and my review of the documents you provided, I find that KI's plan complies with the minimum final assembly requirements outlined at Appendix D to 49 C.F.R. § 661.11.

For railcars and all "rolling stock," FTA's Buy America requirements are twofold:

  1. Domestic Content. At least 60% of the components of each railcar must be manufactured in the United States.
  2. Final Assembly. The final assembly of each railcar must take place in the United States.1

FTA's minimum requirements for final assembly are outlined at Appendix D to 49 CFR § 661.11. In the case of the manufacture of a new rail car, final assembly typically would include, at a minimum, the following operations:

  • Installation and interconnection of propulsion control equipment, propulsion cooling equipment, brake equipment, energy sources for auxiliaries and controls, heating and air conditioning, communications equipment, motors, wheels and axles, suspensions and frames;
  • The inspection and verification of all installation and interconnection work; and
  • The in-plant testing of the stationary product to verify all functions.

If a recipient of FTA funds or a manufacturer has questions about the requirements for final assembly, it may ask FTA to make a determination of compliance.2 FTA makes such determinations in writing.

The information you provided indicates that KI's production plan is to

  • (1) Manufacture and assemble test vehicles in Japan;
  • (2) Perform necessary "Vehicle Level Design Conformance Tests," including "Climate Room Testing" in Japan;
  • (3) Ship the shells of the disassembled vehicles to the United States; and
  • (4) Perform final assembly and in-plant testing on all cars, including the disassembled cars, with all new components, in the United States.

LACMTA asserts that KI's plan is identical to the plan being used by Kawasaki Rail Car, Inc. (Kawasaki) to produce railcars for the Washington Metropolitan Area Transit Authority (WMATA). FTA approved the Kawasaki-WMATA plan by letter dated July 23, 2010. Based on this assertion, I assume that aside from the car shells no other parts from the test vehicles will leave Japan.

Based on the assertions made and the documentation provided by LACMTA, KI's plan appears to be identical in all material respects to the Kawasaki-WMATA plan I approved in 2010. Thus, so long as the car shells are the only component KI ships to the United States to be incorporated into production LRVs and are counted as part of the 40 percent foreign content allowed by law, KI' s approach complies with the minimum Buy America final assembly requirements outlined at Appendix D to 49 C.F.R. § 661.11.

Feel free to contact Jayme Blakesley at (202) 366-0304 or jayme.blakesley@dot.gov with questions.

Sincerely,

Dorval R. Carter, Jr.

Cc: Arthur T. Leahy, Chief Executive Officer, LACMTA



1 49 U.S.C. § 5323G)(2)(C), as implemented at 49 CFR § 661.11.

2 Paragraph (c) of appendix D to 49 CFR § 661.11.

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