Mr. John Trotta
Chicago Transit Authority
Merchandise Mart Plaza
P.O. Box 3555
Chicago, Illinois 60654
Dear Mr. Trotta:
This responds to the Chicago Transit Authority’s (CTA) letters dated April 5, 2004, and August 2, 2004, requesting three Buy America waivers and Federal Transit Administration’s (FTA) concurrence that certain foreign materials used in the Blue Line Douglas Branch Rehabilitation are permitted under the Buy America requirements. You ask for a waiver for steel angles and lattice members; steel bearing plates; and horizontal bar channels. You ask for FTA concurrence on the subcomponent designation for caulk sealant, escalator fittings, RPZ valves, air conditioner units, irrigation control panels, elevator guide rails, and steel doorframes.
FTA's requirements concerning domestic preference for federally funded transit procurements are set forth in 49 U.S.C. §5323(j) and 49 C.F.R. 661. These requirements may be waived under 49 U.S.C. 5323(j)(2) for non-availability and public interest. You ask for a waiver of the Buy America requirements for three items: the steel angles and lattice members; the steel bearing plates; and the horizontal bar channels.
You explain that the value of the Canadian angles and lattice members, used in the canopies, is $2,169. You request a public interest waiver because these materials were unintentionally incorporated into the construction, and CTA would have to close the station for approximately seven weeks to replace them with domestic materials. You also ask for a public interest waiver for the steel bearing plates, valued at $4,212 and used throughout the project, because their replacement would inconvenience the public by delaying completion of the station. Finally, you request a non-availability waiver for the channels used in the fencing, which you explain are not available in the U.S. The value of these channels is $2,808.
Under FTA regulations, grantees must ensure that contractors certify in their bids, as a condition of responsiveness, that they will comply with Buy America. 49 C.F.R. 661.13(b). The regulations further provide that a bidder or offeror that certifies compliance with Buy America, is not eligible for a waiver of those requirements. 49 C.F.R. 661.13(c). In this case, because the contractor had certified compliance with Buy America as part of its bid, I will not a grant a waiver for these materials and they must be treated as impermissible foreign materials.
You next ask for FTA concurrence that certain materials are permissible foreign subcomponents. When applying the Buy America requirements to construction projects, you must first satisfy the steel and iron requirements, as discussed in 661.5(b) and (c), which require that "[a]ll steel and iron manufacturing processes must take place in the United States. . ." 49 C.F.R. 661.5(b). This requirement applies to "all construction materials made primarily of steel or iron and used in infrastructure projects such as transit or maintenance facilities, rail lines, and bridges. These items include, but are not limited to, structural steel or iron, steel or iron beams and columns, running rail and contact rail." 49 CFR 661.5(c).
After the steel and iron requirements are satisfied, FTA treats the procurement of a construction project as the procurement of a “manufactured product” subject to 49 C.F.R. 661.5(d) and items directly incorporated into the project at the job site are considered “components.” Components must be manufactured in the U.S., while subcomponents may be foreign. It is therefore important to distinguish between components and subcomponents. FTA’s Best Practices Procurement Manual explains:
For instance, if the deliverable under a particular contract is the building of a passenger terminal, the terminal itself is the end product, and the main elements incorporated into the terminal, e.g., shelters, elevators, and platforms, are components of the end product. These main elements are generally specified in the construction contract.
You ask that FTA concur that the following foreign materials are subcomponents, and therefore, may be of foreign origin: caulk sealant, escalator fittings, RPZ valves, air conditioner unit, irrigation control panel, elevator guide rail, and steel door frames.
First, in the construction of a building, the elevator guide rails and the steel door frames are construction materials made primarily of steel or iron, and therefore, must be manufactured in the U.S. in accordance with 661.5(b). Therefore, the doorframes and the guide rails are impermissible foreign materials.
However, I do agree that the air conditioner unit, irrigation control panel, caulk sealant, escalator fittings, and RPZ valves are subcomponents of the project because none can be considered “main elements” of the structure. Therefore, I find they are permissible foreign materials.
These procurements of foreign steel constitute a violation of the Buy America requirements that should be remedied promptly. Should CTA formally terminate the relevant portions of the contract and do a separate non-FTA funded procurement for the non-compliant materials noted above, the balance of the project could continue to use FTA funds.
If you have any questions, please contact Joseph Pixley at (202) 366-1936.
Very truly yours,
Gregory B. McBride
Deputy Chief Counsel
cc: Nancy-Ellen Zusman, Regional Counsel
Reginald B. Lovelace, CTA