Dear Mr. Bernardi:
This responds to your letters of April 14, 2003, and April 28, 2003, in which you request that the Federal Transit Administration (FTA) review CoinCard International’s (CoinCard), application of the Buy America requirements to the manufacture of fare collection equipment purchased by three FTA grantees. These fare collection systems allow grantees to collect fares, read coin cards, display information, print transfers, and collect and store information about riders and routes. As discussed below, it appears that CoinCard has relied, in error, on an FTA ruling regarding microcomputer equipment; consequently, CoinCard is in violation of Buy America. These difficulties may be due, in part, to the certifications used by some of our grantees, which fail to use the language required by the regulation. According to the information you have provided, you work with Diamond Manufacturing, Inc., which is located in North Kansas City, Missouri, building fareboxes and sub-assemblies at the Diamond facility in the U.S.
The procurement of fare collection equipment is governed by the general requirements of the Buy America regulations that require that all manufactured products used in FTA-funded projects be produced in the U.S. FTA first identifies the "end product" of a procurement as the deliverable item specified by the grantee in the contract and then applies the manufactured products standard discussed below to that end product. FTA treats fare collection systems as end products, and the various items to be incorporated into the system are treated as components.1
A manufactured product is considered domestic if all of the manufacturing processes for the product take place in the U.S. and all of the components of the product are of U.S. origin. 49 C.F.R. 661.5(d)(1). A component "is considered of U.S. origin if it is manufactured in the United States, regardless of the origin of its subcomponents." 49 C.F.R. 661.5(d)(2). A component is "any article, material, or supply, whether manufactured or unmanufactured, that is directly incorporated into the end product at the final assembly location." 49 C.F.R. 661.3.
The Buy America requirements may be waived if the item or items being procured are not produced in the U.S. in sufficient and reasonably available quantities and of a satisfactory quality. There is a permanent waiver for microcomputer equipment and software. 49 C.F.R. 661.7, App. A(d). FTA has defined a microcomputer as
A computer system whose processing unit is a microprocessor. A basic microcomputer includes a microprocessor, storage, and input/output facility, which may or may not be on one chip. The same source defines computer system as: A functional unit consisting of one or more computers and associated software, that uses common storage for all or part of a program and also for all or part of the data necessary for the execution of the program; executes user-written or user-designated programs performs user-designated data manipulation, including arithmetic operations and logic operations; and that can execute programs that modify themselves during their executions. A computer system may be a stand-alone unit or may consist of several interconnected units. Synonymous with ADP system, computing system.
When the waiver is properly applied, a manufacturer may use foreign microcomputer equipment without violating the Buy America requirements. You state that while certifying compliance in these procurements, you applied the microcomputer waiver to all electronic components in reliance on FTA’s October 30, 2001, letter to the Capital District Transportation Authority (CDTA). In that decision, FTA determined that a Mobile Data Communication System was covered by the microcomputer waiver. FTA stated
According to the information you have provided, the hardware includes radio base stations, repeaters, control cad/avl equipment, and personal computers. The on board equipment includes radios, control data heads, passenger counting equipment, and ADA announcement equipment. Each of these components functions as an input/output unit, data storage or microprocessor integrated into the overall system. All this equipment and associated software is linked together to a computer system at your headquarters with additional interfaces to other CDTA computer systems.
As discussed below, CoinCard’s reliance on the October 30, 2001, CDTA decision may be understandable, given the broad language of that decision on what constitutes a microcomputer. Your reliance appears to have been made in good faith. I will now address these three contracts and a fourth matter involving a Request for Proposals.
Fargo-Moorhead Metropolitan Area Transit and Grand Forks City Bus System
The Fargo-Moorhead Metropolitan Area Transit and Grand Forks City Bus System (Fargo-Moorhead) contracts are for an Electronic Fare Collection System, installation, testing, and training. This Fare Collection System consists of fareboxes located on the bus that will take currency and display transaction data as well as software and hardware that enables the information to be transmitted to offboard equipment. As discussed above, this system is the deliverable specified by the grantee in the contract, and as such, it is the end product of the procurement. The items directly incorporated into the system are fareboxes, which will go on the buses; wireless access points, which are stand-alone controllers that receive and transmit data to the command module; and software. Consistent with our prior decisions, these items are components of the Fare Collection System and so, must be manufactured in the U.S.
The fareboxes and wireless access points are manufactured in the U.S. and are, therefore, compliant with Buy America. The software is specifically covered by the microcomputer waiver at 49 C.F.R. 661.7, App. A(d). With respect to these items, this procurement is compliant with Buy America. In addition to those items, Fargo-Moorhead is also purchasing unspecified spare parts. These spare parts must be manufactured in the U.S. unless they are subcomponents or subject to a waiver.
Lexington Kentucky Transit
Lexington Kentucky Transit (Lextran) has contracted with Diamond for the upgrade of its existing mechanical farebox, to an Electronic Revenue and Data Collection System. As part of the contract, Diamond will be supplying CoinCard parts. The manufacturer here is responsible for taking the old, mechanical fareboxes off the bus, and modifying them by adding new, electronic features and reinstalling the converted equipment. The upgraded system will allow for more sophisticated fare and information collection. The items purchased to create this system are command modules (CM200), fare transaction processors (CR200), bill and coin validators, printers, wireless access points, and software. The CM200 is a driver’s monitor and control station that displays transaction information. The CR200 interfaces with the command module and processes command protocols. The printer prints transfers. The bill and coin validators take in currency and read their value. The software enables the system. All of these elements, taken together, constitute the upgraded Electronic Revenue and Data Collection System. Therefore, the system is the deliverable specified by the grantee in the contract and the end product of the procurement. Consistent with our prior decisions, the CM200, CR200, bill and coin validators, printers, wireless access points, and software, are components of the Electronic Revenue and Data Collection System and must be manufactured in the U.S.
The wireless access points are manufactured in the U.S. and are, therefore, compliant with Buy America. The CM200 and the CR200 are properly classified as microcomputer equipment and subject to the waiver because they run on the Windows CE operating system, complete with a microprocessor, memory, USB Port, Printer Port, and a PC card slot. The software is covered by the waiver because software is specifically listed in the definition. The bill and coin validator, and the printer, are not, themselves, microcomputers, although they may each contain embedded microprocessors. This determination is consistent with our treatment of microcomputers, as stated in the Federal Register:
It should be noted that FTA does not apply the waiver to an entire product because it contains a microcomputer. The parameters of the waiver as it currently exists are that if the end product is itself a microcomputer or software as defined above, Buy America is waived. If, however, the end product contains a microcomputer (e.g., a farecard system), that microcomputer is exempt from the requirements of Buy America, but the rest of the end product must be in compliance.
68 Fed. Reg. 9810 (Feb. 28, 2003). The bill and coin validators and the printers, as components not subject to the waiver, must be manufactured in the U.S. According to the information submitted, these components are not manufactured in the U.S.; therefore, we find CoinCard in violation of the Buy America requirements. However, we find that you relied in good faith on FTA’s CDTA decision, and we find that Lextran had no reason to look behind CoinCard’s certification. Consequently, we will not penalize Lextran by withholding federal participation or require any remedial action on the part of CoinCard with respect to this contract.
Flint Michigan Mass Transportation Authority
Flint Michigan MTA has purchased only the CM200, or command module; therefore, the CM200 is the end product of the procurement, and as discussed above, it is properly classified as microcomputer equipment and subject to the waiver. This purchase is compliant with Buy America.
Anaheim Resort Transit
CoinCard is the apparent successful offeror in a contract with Anaheim for an Automated Fare Collection System and certified compliance with Buy America. The grantee has specified that the system shall include the CM200, the CR200, software, coin cards, and the automated passenger counter (APC). In addition to the CM200 and the CR200, which are discussed above, the coin cards are a form of payment and provide access to the system for the rider and the APC is an infrared sensor that counts passengers as they board the vehicle. All of these elements, taken together, constitute the Automated Fare Collection System. Therefore, the system is the deliverable specified by the grantee in the contract and the end product of the procurement. Consistent with our prior decisions, the CM200, the CR200, the APC, coin cards, and software, are components of the Electronic Revenue and Data Collection System that must be manufactured in the U.S.
The CM200, the CR200, and the software are subject to the microcomputer waiver, and therefore, in compliance with Buy America. The coin cards are manufactured in the U.S., and are also in compliance. The APC, however, is not a domestic component and not in compliance with Buy America. However, FTA has no information about the other offerors in this procurement and whether or not they too misapplied the requirements when certifying. Before award, Anaheim must review the state of the certifications of the other offerors in the competitive range in light of this decision in order to determine whether or not the apparent ambiguity of CoinCard’s offer will affect the outcome of the procurement.2
In future procurements, if CoinCard intends to use the same non-compliant equipment, it must request a non-availability waiver for any foreign components in advance; 3 certify non-compliance with Buy America on the particular bid or offer and allow the grantee to request a waiver if it is justified; or find domestic or waived components and certify compliance.
By copy to the grantees, I hereby notify each that the certifications included in all future solicitations must correctly reflect the applicable Buy America requirements. See, 49 C.F.R. 661.6, 661.12, and 661.13. The proper certifications, indicating whether the general or rolling stock requirements apply to the procurement, must be included.
If you have any questions, please contact Meghan Ludtke at (202) 366-1936.
Very truly yours,
Gregory B. McBride
Deputy Chief Counsel
cc: Jerry Franklin, Region 4 Administrator
Joel Ettinger, Region 5 Administrator
Leslie Rogers, Region 9 Administrator
Todd R. Cull, General Manager, Diamond Manufacturing
Julie Bommelman, City of Fargo Transit Department
Michael Pence, Transit Authority of Lexington, Kentucky
Arthur Leahy, Orange County Transportation Authority
Dale Feldpausch, Mass Transportation Authority, Flint Michigan
1 See FTA’s letter to the Massachusetts Bay Transportation Authority, dated November 14, 2002 (the fare collection system in this procurement consisted, in part, of the following components: fare vending machine; fare box; fare gates; smart card reader; ticket office machines; station information center; retail sales terminal; central computing system); December 6, 2002 letter to Cubic Transportation Systems; May 22, 1995, letter to Schlumberger Technologies (the fare collection system of this procurement consisted of the following components: ticket vending machines, ticket validators, a central data collection and information system, related data communication networks, and various spare parts, tools, and testing equipment.); and May 12, 1994, letter to Lanny J. Davis (the fare collection system consisted of the following components: ticket vending machines, fare gates, ticket validators, revenue collection equipment, and computer and communications equipment).
2 The Comptroller General has determined that ambiguous bids need not be found nonresponsive if the ambiguity does not affect the outcome and the bid is the low bid under either interpretation. B-203871 (1981).
3 The Buy America requirements may be waived if the item or items being procured are not produced in the U.S. in sufficient and reasonably available quantities and of a satisfactory quality. A waiver may be requested "for a specific item or material that is used in the production of a manufactured product." 49 C.F.R. §661.7(g). If such a waiver is granted for a component, that component may be counted as domestic. Id. FTA has granted three waivers in the recent past for the manufacture of certain fare collection equipment components, specifically for a bill handling unit manufactured by Mars Electronics, a bill processing unit made by Toyocom U.S.A., and a coin hopper made by Asahi Seiko U.S.A. Therefore, Coincard may use any of the products covered by those waivers without violating Buy America.