Mr. Paul Forquer, PE
Vice President Powell/TPS
8967 Pleasantwood Avenue, NW
North Canton, Ohio 44720-4761
Dear Mr. Forquer:
This letter responds to your correspondence of October 20, 2004 and November 5, 2004 (pertaining to the Phoenix Valley Metro Rail Contract No. LRT-04-014-TES) and October 25, 2004 (pertaining to Seattle Sound Transit’s contract for Traction Electrification for Central Light Rail, RTA/LR 82-03/C807) in which you request that the Federal Transit Administration (FTA) investigate the Buy America compliance of the winning bidders in these two substantially similar procurements for traction power systems. For the reasons detailed below, I will not be initiating an investigation.
Applicable Law and Policy
As a starting point, Buy America analysis begins with determining the end product of the procurement. 49 C.F.R. 661.11(s) defines “end product” as "any item subject to 49 U.S.C. 5323(j) that is to be acquired by a grantee, as specified in the overall project contract." Once the end product is identified, the next major elements are the components. For example, “if a grantee is procuring a new rail car, the car is the end product and the propulsion motor would be a component of the end product. If that same grantee is procuring a replacement propulsion motor for an existing rail car, that propulsion motor would be the end product." 56 Fed. Reg. 928 (Jan. 9, 1991).
Section 5323(j)(2)(C) sets forth the general requirements for the procurement of rolling stock. This section provides that when rolling stock is procured with FTA funds, the cost of the components and subcomponents produced in the United States must be at least 60 percent of the cost of the components of the rolling stock; and the vehicle must undergo final assembly in the United States. FTA’s regulation specifically includes traction power equipment under the rolling stock standard. 49 C.F.R. 661.11(v) 49 C.F.R. 661.11(v).
FTA’s Buy America investigative procedures, 49 C.F.R. 661.15, establish a presumption that a bidder that has submitted a Buy America certificate is in compliance with that regulation. The regulations allow a third party to protest the bidder’s certification, but require that the protest include both a statement of the grounds on which it rests and any supporting documentation. FTA will then determine if the presumption of compliance has been overcome and if so, an investigation will be initiated. A third party has no other rights under the Buy America provisions. 49 C.F.R. 661.20.
The procurements by Valley Metro and Seattle Sound Transit for traction power systems are substantially similar. In each case, the winning bidder was Mass Electric Co., and Siemens Transportation Systems, Inc., is the major equipment supplier. In the case of the Valley Metro procurement, the contract calls for the awardee to “design, furnish, and install a Traction Electrification System for the Central Phoenix/East Valley Light Rail Transit Project.” The traction electrification system, therefore, is the end product of this procurement. Similarly, for the Seattle Sound Transit procurement, the end product is the “Traction Electrification System for Central Light Rail,” which also calls for the awardee to design, furnish, and install the traction power system. See also 49 C.F.R. 661.11(r)
(“If a system is being procured as the end product by the grantee, the installation of the system qualifies as final assembly”).
You allege, however, that in each of these procurements you believe that “the rectifiers, transformers and DC switchgear, while being final assembled in the US, do not meet the requirement that 60% of the subcomponents of those assemblies be of US origin.” You further contend that these three items are “components of the Traction Electrical System and therefore subject to the 60% content rule in and of themselves.” I do not find evidence to support these assertions.
In each of these procurements, the grantees state that the traction power substations are the components of the traction power system end product, while the rectifiers, transformers and switchgear that go into the substations are subcomponents. I find merit in this characterization, for in two prior decisions dated September 5, 1990 and
February 26, 1986, FTA specifically found that “power substations” were components of a “traction electrification system.”
While the grantees acknowledge that certain subcomponents are foreign-sourced (e.g., the Thyristor Controlled Rectifiers), they argue that more than sixty percent of the subcomponents, by cost, of the substation components are of domestic origin and that the manufacture of the substation components will take place in the United States. You have presented nothing that would call these assurances into question.
After reviewing the information you presented, along with information from Valley Metro and Seattle Sound Transit, I have concluded the presumption stated in 49 C.F.R. 661.15(a) has not been overcome with respect to these two procurements; accordingly, FTA will not initiate an investigation at this time.
If you have any questions, please contact Joseph A. Pixley at (202) 366-1936.
Very truly yours,
Gregory B. McBride
Deputy Chief Counsel