June 02, 2004
Mr. Thomas R. Denman
2665 Villa Creek Drive, Suite 105-A
Dallas, Texas 75234
Dear Mr. Denman:
Thank you for your April 17, 2004, letter following up on your earlier request that the Federal Transit Administration (FTA) review the Buy America requirements applicable to communications equipment. The Buy America provisions applicable to FTA-funded procurements require that all manufactured products be manufactured in the U.S. with 100 percent U.S. components. 49 C.F.R. 661.5(d). Rolling stock, which by statute includes communications equipment, must have 60 percent U.S. component and subcomponent content and undergo final assembly in the U.S. 49 C.F.R. 661.11.
To review our earlier correspondence in this matter, you requested an explanation of FTA’s position that the rolling stock provisions of Buy America, not the manufactured products provisions, apply to the purchase of communications equipment. I explained that the Buy America statute expressly includes communications equipment under the procurement of rolling stock but not elsewhere, and that FTA regulations require procurements of communications equipment to follow the Buy America requirements for rolling stock rather than the requirements for manufactured products. 49 U.S.C. 5323(j)(2)(C) and 49 C.F.R. 661.11. We also explained that FTA has consistently upheld this application and that to change it now would be inconsistent with our previous opinions.
You now ask why some of our grantees have applied the manufactured products standard, instead of the rolling stock standard, to communications system procurements, specifically, procurements by Albany CDTA, Omnitrans, and New York City Transit (NYCT). My staff has looked into these procurements and found that CDTA’s bid documents contained the correct rolling stock certificate. Omnitrans, however, did apply the manufactured products standard and we have alerted our regional office and the grantee to make sure that they understand the rule and will apply it properly in the future. We will also post this letter on our website and send out a general notice to all FTA regional offices alerting them of the proper application of this part of the regulation. Thank you for bringing this matter to our attention.
FTA reviewed NYCT’s Service Management and Customer Information System contract extensively after being asked to investigate the procurement for Buy America violations. We declined to investigate and concluded that while NYCT failed to initially specify which Buy America standard applied to the contract, they did not “chang[e] [the requirements] in mid-stream.” We also found that no prospective offeror contacted NYCT to question the lack of any initial designation or the rolling stock designation. Finally, we noted that after initial proposals were submitted, all offerors had nine months to make any necessary adjustments before their best and final offers were submitted. See Telephonics letter, dated June 18, 2003, on FTA’s web site.
You next ask how including communications equipment in the section governing rolling stock makes communications equipment rolling stock, noting that the definition of rolling stock does not include communications equipment. You argue that perhaps the statute (“when procuring rolling stock (including train control, communication, and traction power equipment . . .”) refers to the inclusion of this other equipment under that standard when vehicles are also being purchased. 49 U.S.C. 5323(j)(2)(C). In other words, you argue that the rolling stock standard applies to communications equipment only when purchased at the same time as vehicles.
While that is a possible interpretation, it is not the interpretation FTA made years ago and has followed since. At this point, such a change would require a rulemaking. It seems likely that a Buy America rulemaking will be necessary to implement the reauthorization act. We will consider your ideas during that process.
Thank you for articulating your position. Please contact Meghan Ludtke at (202) 366-1936 if you have any further questions.
Very truly yours,
Gregory B. McBride
Deputy Chief Counsel
cc: Letitia Thompson