[Federal Register Volume 71, Number 230 (Thursday, November 30, 2006)]
[Proposed Rules]
[Pages 69412-69427]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-20166]
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Part VI
Department of Transportation
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Federal Transit Administration
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49 CFR Part 661
Buy America Requirements; End Product Analysis and Waiver Procedures;
Proposed Rule
Federal Register / Vol. 71, No. 230 / Thursday, November 30, 2006 /
Proposed Rules
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DEPARTMENT OF TRANSPORTATION
Federal Transit Administration
49 CFR Part 661
[Docket No. FTA-2005-23082]
RIN 2132-AA90
Buy America Requirements; End Product Analysis and Waiver
Procedures
AGENCY: Federal Transit Administration (FTA), DOT.
ACTION: Second notice of proposed rulemaking.
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SUMMARY: The Safe, Accountable, Flexible, Efficient Transportation
Equity Act: A Legacy for Users (SAFETEA-LU) requires the Federal
Transit Administration (FTA or the Agency) to make certain changes to
the Buy America requirements. This Second Notice of Proposed Rulemaking
(SNPRM) proposes a publication process for public interest waivers to
provide an opportunity for public comment; a clarification of Buy
America requirements with respect to microprocessor waivers; new
provisions to permit post-award waivers; clarifications in the
definition of ``end products'' with regards to components and
subcomponents, major systems, and a representative list of end
products; a clarification of the requirements for final assembly of
rolling stock and a list of representative examples of rolling stock
items; expanding FTA's list of eligible communications, train control,
and traction power equipment; and an update of the debarment and
suspension provisions to bring them into conformity with statutory
amendments made by SAFETEA-LU.
DATES: Comments must be submitted by January 29, 2007. Late filed
comments will be considered to the extent practicable. FTA will also
hold a public hearing in Washington, DC, to receive comments for the
docket. The date and time of that hearing will be published as a
separate Federal Register document.
ADDRESSES: You may submit comments [identified by DOT DMS Docket Number
FTA-2005-23082] by any of the following methods:
Federal Rulemaking Portal: Go to http://www.regulations.gov. Follow
the online instructions for submitting comments.
Web Site: http://dms.dot.gov. Follow the instructions for
submitting comments on the DOT electronic docket site.
Fax: 202-493-2251.
Mail: Docket Management Facility; U.S. Department of
Transportation, 400 Seventh Street, SW., Nassif Building, PL-401,
Washington, DC 20590-0001.
Hand Delivery: Room PL-401 on the plaza level of the Nassif
Building, 400 Seventh Street, SW., Washington, DC, between 9 a.m. and 5
p.m., Monday through Friday, except Federal holidays.
Instructions: You must include the agency name (Federal Transit
Administration) and Docket number (FTA-2005-23082) or the Regulatory
Identification Number (RIN) for this rulemaking at the beginning of
your comments. You should submit two copies of your comments if you
submit them by mail. If you wish to receive confirmation that FTA
received your comments, you must include a self-addressed stamped
postcard. Note that all comments received will be posted, without
change, to http://dms.dot.gov including any personal information
provided and will be available to internet users. Please see the
Privacy Act section of this document.
FOR FURTHER INFORMATION CONTACT: Richard Wong, Office of the Chief
Counsel, Federal Transit Administration, 400 Seventh Street, SW., Room
9316, Washington, DC 20590, (202) 366-4011 or [email protected].
SUPPLEMENTARY INFORMATION:
I. Background
On November 28, 2005, the Federal Transit Administration (FTA)
published a Notice of Proposed Rulemaking (NPRM) in the Federal
Register (70 FR 71246) that discussed several proposals mandated by the
Safe, Accountable, Flexible, Efficient Transportation Equity Act: A
Legacy for Users (SAFETEA-LU) (Pub. L. 109-59, August 10, 2005), and
proposed to provide further clarification of existing FTA decisions on
Buy America. Due to the complexity of many of the Buy America issues
addressed in the NPRM and the divergence of opinion in important areas,
FTA issued a final rule that addressed fewer subjects than addressed in
the NPRM. (71 FR 14112, Mar. 21, 2006.) These more routine topics
covered in the final rule included: (1) Administrative review; (2) the
definition of ``negotiated procurement;'' (3) the definition of
``contractor;'' (4) repeal of the general waiver for Chrysler vans; (5)
certification under negotiated procurements; (6) pre-award and post-
award review of rolling stock purchases; and (7) miscellaneous
corrections and clarifications to the Buy America regulations.
This Second Notice of Proposed Rulemaking (SNPRM) will address six
issues identified in the NPRM but not covered in the final rule, and
one new one: (1) A publication process for public interest waivers to
provide an opportunity for public comment; (2) a clarification of Buy
America requirements with respect to microprocessor waivers; (3) new
provisions to permit post-award waivers; (4) clarifications in the
definition of ``end products'' with regards to (a) components and
subcomponents, (b) major systems, and (c) a representative list of end
products; (5) a clarification of the requirements for final assembly of
rolling stock and a list of representative examples of rolling stock
items; (6) expanding FTA's list of eligible communications, train
control, and traction power equipment; and (7) an update of the
debarment and suspension provisions to bring them into conformity with
statutory amendments made by SAFETEA-LU.
1. Published Justification for Public Interest Waivers
In the first NPRM, FTA proposed amending 49 CFR 661.7(b) to
implement the SAFETEA-LU requirement that FTA publish justifications
for public interest waivers in the Federal Register and provide for
notice and comment.
A. Comments Received
FTA received ten comments, two of which were identical. Four
commenters stated that FTA's proposal created a two-step process of
waiver review. These commenters expressed concern that a two-step
process would cause delay. One commenter noted in particular that the
proposed process would have the effect of providing multiple
opportunities for filing comments, would significantly lengthen the
procurement process, would adversely affect the contract schedule, and
would introduce additional uncertainty in the procurement process. One
commenter stated an unduly long processing time would have a negative
impact on cost and competition. Another commenter expressed concern
that in cases involving construction contracts, where design and/or
construction might be underway, and the ``notice and comment process''
would delay projects, inducing engineers and builders to offer less
effective substitutes in order to avoid the delay from a notice and
comment process.
B. Commenter Proposals
Four commenters provided alternatives to FTA's proposal. One
[[Page 69413]]
commenter recommended FTA post ``notification of every public interest
waiver request received by FTA in the Federal Register, with
information on finding the request on the FTA Internet site and
submitting comments. After a suitable public comment period has passed,
FTA should post its decision to the FTA Internet site.'' Similarly, two
other commenters recommended FTA post notification of all requests for
public interest waivers in the Federal Register at one time, along with
a request for public comment, thus, creating a single comment period
rather than two. Each of these four commenters, however, omitted any
mention of SAFETEA-LU's requirement to publish waiver ``justification''
in the Federal Register for notice and comment. Two other commenters
noted this, stating that ``the legislators clearly wanted the waiver's
justification to be published'' with an opportunity to comment on it.
Commenters offered additional suggestions for streamlining the
waiver application process. One commenter recommended the following:
FTA should restrict receipt of comments on the initial waiver request
to immediately affected parties; to handle comments by e-mail; to
commit to a fixed time period for releasing the written justification
in the event a waiver request is granted; to limit the comment period
to one week after the publication date in the Federal Register; and to
limit the time for confirmation of FTA's determination to one week.
Another commenter recommended FTA limit the comment period to ten days
after Federal Register publication, and that FTA post its final
decision on the FTA Web site within seven days. One commenter suggested
that 30 days would be a reasonable time for review of FTA's proposed
waiver decision with supporting justification.
Two commenters recommended that FTA publish grantees' written
waiver requests and justifications in the Federal Register, with an
opportunity to comment on them. Two other commenters expressed concern
that FTA not release confidential or proprietary information, which
might be provided to support a waiver request, during the waiver
application process. One commenter noted the importance of protecting
the names of prospective contractors while procurement is underway.
This commenter specifically recommended FTA not disclose names of any
prospective contractors in the notice and comment process.
The majority of commenters also recommended FTA continue its
internal practice of publishing all waiver decisions on the FTA Web
site (http://www.fta.dot.gov/legal/buy_america/14328?ENG_HTML.htm),
including denials. One commenter noted that lessons learned from
disapprovals lead to a better understanding and application of the Buy
America requirements.
C. FTA Response
FTA agrees that SAFETEA-LU requires it to publish its
``justification'' in the Federal Register for notice and comment. FTA
disagrees, however, that it should also publish grantees' written
justifications in the Federal Register. SAFETEA-LU does not require
this. Moreover, FTA notes that several commenters expressed a
legitimate concern that publishing a grantee's waiver request and
justification in the Federal Register could result in an unwanted
dissemination of confidential business information. Furthermore, FTA
disagrees with the comment that it should post ``notification of every
public interest waiver request received in the Federal Register, with
information on finding the request on FTA's Internet site and
submitting comments.'' This and other comments that recommend FTA
publish all requests for public interest waivers in the Federal
Register, misconstrue the unequivocal language in SAFETEA-LU, which
requires FTA to publish only a written justification in the Federal
Register.
While several commenters complain of a ``two-step'' process for
waiver approval, none explain how FTA can simultaneously publish a
notice of waiver request and the justification for it in a single
Federal Register notice while still providing the public an opportunity
to comment on the waiver request. As a matter of fact, combining these
processes would negate any comments received on the waiver request
because FTA would have already made a decision. Therefore, FTA declines
to adopt this proposal.
In addition, as explained in the NPRM, FTA believes the plain
language of SAFETEA-LU, and its legislative history, expressly requires
FTA to issue a written justification and publish it in the Federal
Register, only in instances where the justification supports a waiver
request. See 49 U.S.C. 5323(j)(3); see also H.R. Conf. Rep. No. 109-
203, at 952 (2005).
FTA shares the concern of many commenters who state that the
proposed rule could cause delay by creating a so-called ``two-step''
process for waiver approvals. FTA will endeavor to implement a rule in
a way that minimizes delays. It should be noted that any potential
delay resulting from the requirement to publish a justification in the
Federal Register applies only in instances where the justification
supports granting the waiver, as explained earlier.
Under the current Buy America process, FTA's Chief Counsel has been
delegated with the responsibility to issue public interest waivers,
soliciting comments via the FTA Web site and concurrent notification to
the American Public Transportation Association (APTA). As FTA explained
in the first NPRM: ``This process functions well. The relevant
industries and grantees actively respond and provide valuable
information to FTA.'' In fact, FTA relies heavily on the public
comments it receives during the comment period for waiver requests. For
this reason, FTA disagrees with a commenter's suggestion FTA should
limit the receipt of comments on the waiver request to ``immediately-
affected parties.'' To the contrary, FTA finds that frequent and wide-
ranging public comment is an invaluable part of the Buy America
process.
Because FTA relies on public input in making Buy America
determinations, SAFETEA-LU's requirement to publish justifications of
public interest waivers in the Federal Register necessarily creates a
multi-step process. FTA interprets the term ``justification'' in this
context as a preliminary decision, which explains the rationale for
granting a waiver. FTA believes that in order to issue a well reasoned
justification, it should first receive preliminary comment from the
public on the waiver request. Such comments would form the basis of the
justification.
D. FTA Proposal
Accordingly, FTA believes SAFETEA-LU requires the following
process: (1) Post notification of the public interest waiver request on
FTA's Web site and solicit comments on the request; (2) based on the
comments received, prepare a justification that explains the rationale
for approving a waiver request; (3) publish the justification in the
Federal Register for notice and comment within a reasonable time; and
(4) issue a final decision on FTA's Web site regarding the waiver
request, based on comments received in response to the published
justification. It should be noted that upon review of the Federal
Register comments, FTA may ultimately determine that a waiver is not in
the public interest, and deny the request. FTA believes that this
methodology would create a total processing time of about 30 calendar
days. FTA requests comment on this
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new process for granting public interest waiver requests, including the
proposed processing time.
2. Microcomputer/Microprocessor Waivers
In the NPRM, FTA requested comment on its proposal to implement the
SAFETEA-LU requirement to ``clarify'' that any waiver of the Buy
America requirements for a microprocessor, computer, or microcomputer,
applies ``only to a device used solely for the purpose of processing or
storing data'' and does not extend to the product or device containing
a microprocessor, computer, or microcomputer.
A. Comments Received
FTA received sixteen comments on this issue, three of which
concurred outright with FTA's proposed change to the regulation without
further substantive comment. Nine commenters appeared to endorse FTA's
proposed change to the microcomputer waiver, but raised an additional
issue about ``input/output'' facilities or devices. For example, one
commenter noted that ``FTA has dropped a significant phrase, `input/
output,' facility from past practices.'' This commenter then
recommended that ``existing regulatory practices must be continued to
avoid significant disruption in the industry.'' Four other commenters
similarly recommended that FTA make clear that input/output devices or
facilities are covered by the waiver. Citing the Conference Report for
SAFETEA-LU (H.R. Conf. Rep. No. 109-203, supra), one of these
commenters noted that in directing FTA to clarify the microprocessor
waiver, Congress did not intend for FTA to change its current
regulatory treatment of microcomputer equipment.
On the other hand, four other commenters opposed including ``input/
output'' devices in the microcomputer waiver and provided comments that
interpreted this matter entirely differently. The commenters
congratulated FTA for purportedly ``dropping'' input/output facilities
or devices from waiver coverage, or, recommended that FTA drop such
devices from the scope of the waiver. Two of these comments also
recommended FTA not include ``software'' in the proposed ``definition''
of computers, microcomputers, and other equipment covered by the
waiver. The two comments also appeared to request that FTA clarify that
what is ``exempt'' under the microprocessor waiver can not be counted
as either foreign or domestic for purposes of Buy American content
calculations in rolling stock procurements.
B. Commenter Proposals
One commenter proposed amending Appendix A to 49 CFR 661.7(b) by
adding a sentence clarifying that if an ``end product (e.g., a fare
card system) contains a microcomputer,'' the microcomputer is exempt
from the requirements of Buy America, but the rest of the end product
is not. This commenter also recommended that if a microcomputer is
exempt from Buy America, FTA should make clear whether the device is
counted as domestic or foreign when calculating the costs of an end
product.
Another commenter proposed an alternative version of the
microcomputer waiver that includes a ``hardware definition'' of
microprocessor, as follows: ``[t]his general waiver does not extend to
a product or device which merely uses microprocessor circuit chip(s)
imbedded in the material or uses one or more printed circuit board
assemblies consisting of microprocessor circuit chip(s) either as a
group of separate items or as a single integrated microcomputer unit
for controlling its end function which is not used solely for the
purpose of processing or storing data.'' A final comment made note of
FTA's proposed changes to the microcomputer waiver, but did not appear
to either approve or disapprove of FTA's proposal.
C. FTA Response
Regarding the ``input/output'' facility issue raised by nine
commenters, it is unclear why so many of these commenters believe FTA
``dropped'' input/output devices from the microcomputer waiver in the
first NPRM. The current version of the general waiver at 49 CFR 661.7,
Appendix A, does not include the term ``input/output'' facility. It
merely states that, ``microcomputer equipment, including software, of
foreign origin can be procured by grantees.'' 49 CFR 661.7, Appendix A.
Likewise, FTA's proposed language in the first NPRM does not mention
``input/output'' facilities or devices. Rather, that term is mentioned
in a separate definition of a microcomputer, which FTA referred to in
the NPRM. See 50 FR 18760, May 2, 1985 (``A basic microcomputer
includes a microprocessor, storage, and input/output facility, which
may or may not be on one chip.'') (Emphasis added.)
In clarifying that the waiver applied to devices ``used solely for
the purpose of processing or storing data,'' as required by SAFETEA-LU,
commenters may have interpreted this to mean that ``input/output''
facilities were somehow excluded from waiver coverage. Such is not the
case. FTA agrees with the commenter who noted that in directing FTA to
clarify the microcomputer waiver, Congress did not intend for FTA to
change its current regulatory treatment of microcomputer equipment. See
H.R. Conf. Rep. No. 109-203, at 952 (2005) (``In directing the
Secretary to issue new regulations regarding microprocessors,
computers, or microcomputers, there is no intent to change the existing
regulatory treatment of software or of microcomputer equipment.'')
While it is arguable whether FTA's definitions of ``computer system''
and ``microcomputer'' are outdated and should be modified to reflect a
twenty-year advance in technology, FTA believes Congress' clear intent
is not to change these definitions in this rulemaking.
D. FTA Proposal
Accordingly, since FTA's existing regulatory definition of a
microcomputer already includes an ``input/output facility'' as one of
its component items, consistent with Congressional intent not to change
the definitions in this rulemaking, FTA believes it is unnecessary to
further amend the regulation to reiterate that input/output facilities
or devices are covered by the waiver. Furthermore, in keeping with the
above Congressional guidance, FTA does not agree with recommendations
to eliminate ``software'' from the scope of the microcomputer waiver.
FTA also disagrees with the recommendation that it should clarify
whether equipment subject to the microcomputer waiver is counted as
foreign or domestic in calculating component content in rolling stock
procurements. That change is unnecessary because FTA's regulation
already dictate that components subject to the microcomputer waiver are
counted as domestic in rolling stock procurements. See, 49 CFR
661.7(f).
3. Post-Award Waivers
FTA sought comment in the first NPRM on its proposal to create a
post-award non-availability waiver. Under FTA's current regulation, a
bidder or offeror that certifies compliance with Buy America is ``bound
by its original certification'' and ``is not eligible for a waiver of
those requirements.'' 49 CFR 661.13(c). The proposed language would
allow grantees to request a non-availability waiver after contract
award where a bidder or offeror had originally certified compliance
with the Buy
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America requirements in good faith, but can no longer comply with its
certification and contractual obligations due to commercial
impossibility or impracticability. To implement the SAFETEA-LU
requirement for post-award waivers, FTA proposed amending 49 CFR
661.7(c)(3).
A. Comments Received
FTA received eight comments on this proposal, one of which
concurred with FTA's proposed change to the regulation, without further
substantive comment. A second commenter noted some minor variations in
language between the proposed rule in the ``Supplementary Information''
section of the NPRM, and the actual proposed amendment of 49 CFR part
661. This commenter then stated that the actual proposed amendment,
``appears to address this requirement.'' FTA presumes the commenter is
referring to the requirement of SAFETEA-LU.
B. Commenter Proposals
The six remaining commenters endorsed the concept of a post-award
waiver, but felt that FTA's proposal was unnecessarily complex or
unduly restrictive. Three commenters proposed the following alternative
language:
Waivers based on non-availability may be granted when the
Administrator or the Administrator's designee is satisfied that the
applicable certificate of Buy America compliance was made reasonably
and in good faith and that intervening circumstances have made
compliance with that certification impossible or commercially
impracticable.
Another commenter proposed similar language, as follows:
The Administrator may grant a non-availability waiver under
section 661.7(c) in any case in which a contractor has originally
certified compliance with the Buy America requirements in good
faith, but can no longer comply with its certification. The
Administrator will grant this non-availability waiver only if the
grantee provides sufficient information which indicates that the
original certification was made in good faith and that the item to
be procured cannot now be obtained domestically due to commercial
impossibility or impracticability.
Five commenters stated that in deciding whether to grant a post-
award waiver, FTA's consideration of the status of other competitors
was immaterial and beyond the statutory intent of SAFETEA-LU. These
commenters argued that FTA's proposal forecloses a potential waiver
when, after contract award and discovery that supplies are unavailable,
another bidder or offeror who certified compliance is still able to
supply domestic products or materials. The five commenters argued that
this would force a grantee and its winning contractor, in spite of
their good faith, to be ``held economic hostage'' to a frustrated
competitor who had obtained limited remaining domestic supplies through
exclusive distribution agreement or other arrangement. According to
these commenters, the situation would result in significant cost
increases, as the grantee would be forced to terminate its contract and
procure with the compliant contractor, with no effective competition to
assure reasonable pricing.
Two commenters noted that FTA's discussion of the waiver proposal
encompassed both commercial impossibility and impracticability ``due to
price.'' These two commenters argued that the provision should allow
waiver under any commercial impracticability, not just due to price. A
third commenter suggested that in determining the monetary value of the
``commercially impracticable'' criteria, the ``current 25 percent price
differential figure within the waivers might be a reasonable benchmark
for consideration.''
None of the commenters discussed or questioned the meaning of the
term ``impossibility.'' However, a fourth commenter argued that FTA
should not require grantees to produce evidence of changed market
conditions that demonstrate the non-availability of materials or
supplies after contract award in order to obtain a post-award waiver.
Furthermore, this commenter stated that the grantee should not have to
demonstrate the impossibility or impracticability of completing the
third party contract. The commenter emphasized that such a requirement
would prove burdensome to grantees, and goes beyond the stated
provisions of SAFETEA-LU.
C. FTA Response
FTA agrees with the commenters who recommended that the proposed
language in the NPRM should be simplified. In fact, FTA favors the
alternative post-award waiver provision proposed by one commenter, as
it matches in tone and language the existing non-availability waiver
found in 49 CFR 661.7(c).
The intent of Buy America is to safeguard American jobs by
requiring that ``steel, iron, and manufactured goods used in the [FTA-
funded] project are produced in the United States.'' 49 U.S.C. 5323(j).
Buy America is not intended to protect any particular contractor or
supplier. In deciding whether to grant a post-award waiver, therefore,
FTA should not deliberately ignore the status of other bidders or
offerors who are Buy America compliant and can furnish domestic
material or products on an FTA-funded project. Concluding otherwise
would violate the legislative intent behind Buy America.
Therefore, commenters' disagreement notwithstanding, FTA believes
the status of other bidders or offerors on an FTA-funded procurement
may be a relevant factor in deciding whether to grant a post-award
waiver. For example, if a winning contractor is unable to comply with
its Buy America certification due to commercial impossibility or
impracticability, but a second low bidder who certified compliance is
available to provide domestic material or products at a reasonable
price, FTA believes it would be appropriate to take that into account
when deciding whether to grant the waiver request.
Moreover, FTA is mindful that a decision on a post-award waiver
could adversely impact a grantee's project schedule and budget, as
several commenters have stated. Therefore, it is FTA's intent to
consider ``all appropriate factors on a case-by-case basis,'' in
deciding whether to grant a post-award waiver. Such factors may include
project schedule and budget. It will be the grantee's responsibility to
point out such factors to FTA in requesting a post-award waiver.
FTA disagrees with the comment suggesting FTA not require grantees
to produce evidence of ``impossibility or impracticability of
completing the third party contract,'' i.e., evidence of changed market
conditions, which would demonstrate the non-availability of materials
or supplies after contract award. FTA notes no other commenter made
this suggestion or otherwise disagreed with the concept of using
commercial impossibility or impracticability as the applicable standard
for granting a post-award waiver. In addition, while the commenter
would have FTA do away with requiring a grantee to produce specific
evidence of commercial impossibility or impracticability in support of
a waiver request, the commenter offered no alternative methodology or
standard which would guard against potential abuse of the post-award
waiver. Accordingly, FTA does not adopt the commenter's
recommendations.
In fact, FTA believes further clarification of what constitutes
``commercial impracticability'' is warranted but disagrees with the
several commenters who suggested that impracticability should not be
limited ``due to price,'' but should apply to any
[[Page 69416]]
commercial impracticability and with the one commenter who suggested
that in determining the monetary value of what constitutes ``commercial
impracticability,'' that the ``current 25 percent price differential
figure,'' referring to the price-differential waiver at 49 CFR
661.7(d), ``might represent a reasonable benchmark.''
As stated in this SNPRM, FTA prefers to base any regulatory
requirements on existing precedents in public contracting law and
practice. For example, in Raytheon Co. v. White, 305 F.3d 1354, 1667
(Fed. Cir. 2002), the U.S. Court of Appeals for the Federal Circuit
defined ``commercial impracticability,'' in part, as follows:
A contract is commercially impracticable when performance would
cause ``extreme and unreasonable difficulty, expense, injury, or
loss to one of the parties.'' Restatement (Second) of Contracts
Sec. 261 cmt. d (1981). * * *
A contract is said to be commercially impracticable when,
because of unforeseen events, ``it can be performed only at an
excessive and unreasonable cost,'' Int'l Elecs. Corp. v. United
States, 227 Ct.Cl. 208, 646 F.2d 496, 510 (1981), or when ``all
means of performance are commercially senseless,'' Jennie-O Foods,
Inc. v. United States, 217 Ct.Cl. 314, 580 F.2d 400, 409 (1978).
Whether performance of a particular contract would be commercially
senseless is a question of fact. Cf. Maxwell Dynamometer Co. v.
United States, 181 Ct.Cl. 607, 386 F.2d 855, 870 (1967). A
contractor is not entitled to relief ``merely because he cannot
obtain a productive level sufficient to sustain his anticipated
profit margin.'' Natus Corp. v. United States, 178 Ct.Cl. 1, 371
F.2d 450, 457 (1967).
FTA believes this ``commercially senseless'' standard, as
articulated in Federal case law, represents the appropriate standard
for determining commercial impracticability in Buy America post-award
waivers. Therefore, when questions arise as to what constitutes
commercial impracticability or impossibility in a specific post-award
waiver request, FTA will rely on the precedents established in Federal
contract law for guidance.
D. FTA Proposal
In the new proposal, FTA steps away from the language in the first
NPRM because it is persuaded by the issues raised by commenters who
stated the language included in the first NPRM should not be included
in a final rule. FTA agrees and believes the better approach is to
require the grantee, in making a request for a post-award waiver, to
provide specific evidence of a contractor's good faith and evidence
justifying the post-award waiver. This evidence may include information
about the origin of the product or materials, invoices, or other
relevant solicitation documents as requested and that the item to be
procured cannot now be obtained domestically due to commercial
impossibility or in practicability. Additionally, when determining
whether conditions exist to grant a post-award waiver, FTA will
consider all appropriate factors on a case-by-case basis. FTA requests
comments on this new proposal to modify the post-award waiver
procedures.
4. ``End Products''
FTA's initial NPRM sought comments on two alternative definitions
of the term ``end product.'' The first proposed definition comes from
FTA's current, long-standing practice whereby the end product of a
procurement is the deliverable item specified by the grantee in the
third party contract. Under this so-called ``shifting'' methodology,
the same item may be an end-product, a component, or a subcomponent,
depending on the article specified in the third party contract, with
resulting differences in the applicability of Buy America requirements
to the same item based on its characterization as an end product,
component or subcomponent. Applying this shifting approach, FTA's first
proposed definition stated: ``End product means 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.''
The second proposed definition was based on the definition of end
product in the Buy American Act, 41 U.S.C. 10a-10d, as implemented in
the Federal Acquisition Regulation (FAR) Part 25. Under this second
definition, FTA proposed to abandon the ``shifting'' methodology in
favor of one where the end products do not shift, and components and
subcomponents retain their designation. FTA's second proposed
definition stated: ``End product means any article, material, supply,
or system, whether manufactured or unmanufactured, that is acquired for
public use under a federally funded third party contract.'' A list of
representative end products is included at Appendix A to this section.
FTA's second proposed definition includes the term ``system'' and
mentions a ``list of representative end products.'' FTA will address
these two important issues separately in the SNPRM; that is, whether a
``system'' should be included as an end product, and what items should
be included on a representative list of end products.
4a. ``End Product'' Under the Non-Shift Approach
A. Comments Received
FTA received twenty-one comments on the definition of ``end
product.'' Four commenters expressly endorsed retaining some form of
FTA's current ``shifting'' methodology. All four of these commenters
are transit operators receiving FTA funds, three of whom are among the
largest transit operators in the country.
One of the commenters who specifically supported FTA's first
proposed definition noted a discrepancy between the proposed rule in
the ``Supplementary Information'' section of the NPRM, and the actual
proposed amendment of 49 CFR part 661, to the effect that the proposed
amendment omits the clause, ``A list of representative end products is
included at Appendix A to this section.'' FTA agrees that this sentence
should have been included in the proposed amendment. Furthermore, this
same commenter stated that the second ``non-shifting'' proposed
definition of end product ``would substantially reduce much of the
current flexibility in the Buy America program.'' A second commenter
stated that to ``rigidly fix the nature of a component at the time a
vehicle is purchased would create massive uncertainty in the
marketplace.''
A third commenter, a large transit operator, expressed ``grave
concerns'' about abandoning FTA's long standing shifting methodology in
favor of one where the end products do not shift. According to the
commenter, such a change in methodology would undermine the basic
purpose of the Buy America rule, which is to encourage the creation of
American jobs. The commenter explained that the shifting methodology
encourages American job creation by providing an incentive for
manufacturers of end product components to invest in domestic
facilities for after market support. A manufacturer of rail car
equipment, for example, would have an incentive to invest in domestic
facilities in order to achieve Buy America compliance when selling
former ``components'' as ``end products'' in an after market
procurement.
The commenter also stated that the alternative proposal cannot be
practically implemented. Such a new methodology would necessarily place
great reliance on the accompanying list of end product items. The
commenter explained that the burden for transit agencies to track the
status of rolling stock component items (as either foreign
[[Page 69417]]
or domestic) from the time of their original purchase would be
untenable given that ``the useful life of a rail car can exceed 30
years.''
This commenter argued that the ``non-shift'' methodology would not,
in fact, create consistency. Again, using the example of a rail car
manufacturer, the commenter explained that it is the manufacturer who
decides in each particular case whether a given component should be of
domestic or foreign manufacture in order for the end product to meet
the sixty percent domestic content requirement for rolling stock [forty
percent of the components, by cost, may be foreign]. Thus, any typical
component of a rail car could be ``of foreign manufacturer in one
specific instance and * * * of domestic manufacturer in another, even
when foreign cars are manufactured by the same rail car builder.''
A fourth commenter, also a large transit operator, raised similar
arguments to support its endorsement of the shifting approach to end
products. This commenter also stated that abandonment of the shifting
methodology would create a disincentive for manufacturers to establish
domestic facilities to support after market purchases, but added that
the lack of domestic facilities ``will create longer lead times on
acquiring replacement parts.''
B. Commenter Proposals
One commenter suggested FTA revisit its application of the end
product definition as it applies to construction projects,
specifically, that the ``deliverable of the project'' as described in
the contract should be viewed as the end product, with structures such
as terminals and stations to be considered as components. Furthermore,
the commenter suggested that FTA should not apply the Buy America
requirements ``for the minimal use of iron or steel products where the
cost of the foreign sourced item is less than a particular dollar
threshold.'' Such an approach, according to the commenter, would be
consistent with the application of Buy America used by the Federal
Highway Administration, and would foster uniformity within the U.S.
Department of Transportation.
Another commenter appeared to endorse the ``shift'' approach to end
product analysis and suggested the following definitions:
``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 and which
is ready to provide its intended end function or use without any
further manufacturing or assembly change(s).'' Or,
``End product means any article, material, supply, or system,
whether manufactured or unmanufactured, that is acquired for public
use under a federally funded third party contract and which is ready
to provide its intended end function or use without any further
manufacturing or assembly change(s). A list of representative end
products is included at Appendix A.''
This commenter stated that this proposed definition would clarify
that an end product is something that will not require further changes
and can function with appropriate mounting and interconnection for its
input and output without further manufacturing or assembly.
Of the sixteen remaining commenters, three did not specifically
comment on the issue of ``shift/non-shift,'' but focused instead on
whether a ``system'' should be included as an end product, or
recommended that certain products be included in the list of
representative end products. Another commenter requested FTA ``strike
the end product definition as written,'' but did not identify which of
the two proposed definitions to strike.
Twelve commenters expressly favored the second definition--the
``non-shift'' approach--to end product analysis. The primary reason
given for eliminating the shift methodology, as this commenter put it,
is to ``achieve reasonable predictability for the business community.''
Commenters also stated that knowing particular items will always be
designated as an end product, a component, or a subcomponent would
enhance stability in the transit industry, enable proposers to plan and
price proposals more accurately, and would allow transit agencies to
obtain better prices.
One of the twelve commenters addressed the concerns of some
grantees that abandonment of the ``shift'' approach in rolling stock
procurements would discourage manufacturers from establishing domestic
facilities for after market support; and would thereby create an
overwhelming recordkeeping burden on public transit agencies and
suppliers. Specifically, the commenter recommended that in adopting a
``non-shift'' methodology to end product analysis, FTA should retain
its current practice of treating replacement parts as manufactured
products rather than as rolling stock.
The commenter stated that treating replacement parts under the
rolling stock standard, instead, would prove unworkable and would
impose crushing recordkeeping requirements on transit agencies. This is
so because transit agencies would have to track the origins of every
component and sub-component of their rolling stock end products, no
matter how old, to determine if they should replace foreign and
domestic components and subcomponents with like foreign and domestic
replacement parts--a task that becomes impossible or excessively
burdensome where vehicles and components may each contain a varied
combination of foreign and domestic parts.
On the other hand, treating replacement parts under the
manufactured product standard rather than the rolling stock standard
would obviate the need to maintain detailed parts lists, according to
the commenter. While acknowledging that some in the transit community
advocate treating replacement parts as manufactured end products, per
the terms of a contract and current FTA practice, the commenter
advocated a different approach. Using the example of a replacement bus
engine, the commenter would treat this as ``a manufactured product
component, regardless of the individual contract terms.''
For rolling stock replacement parts, the commenter stated that the
optimal course of action for maintaining consistency and avoiding undue
administrative burden ``is in consistently applying the end product,
component, and sub-component labels.'' Because replacement parts
manufacturers are already accustomed to having their products treated
as manufactured products, the commenter states that its approach ``will
not represent the kind of sea change likely to disrupt the supply
industry.''
Addressing the topic of replacement parts, another commenter
recommended that ``all spare parts be exempt from the Buy America
requirements.'' While acknowledging that such an approach may
circumvent the objectives of Buy America, the commenter argued that
``it will increase competition and should result in lower costs to the
grantee.''
Twelve commenters who supported a ``non-shift'' approach expressed
differences of opinion on a proposed definition of end product. For
example, five commenters favored FTA's proposed non-shift definition of
end product, which is based on the Buy American Act, used for direct
Federal procurements. Three of these commenters stated that consistency
of definitions in publicly funded contracts is a benefit.
Seven commenters disagreed with FTA's proposed definition. Some of
these commenters characterized FTA's proposed definition as overly
broad or insufficiently descriptive. One commenter proposed an
alternative definition, as follows:
[[Page 69418]]
``a structure, vehicle, or similar item that has a distinct use,
function, or purpose, consistent with the representative list at
Appendix A.''
However, several commenters specifically disagreed with this
proposed definition, as it did not include the term ``system.''
A second commenter proposed a ``non-shift'' definition of end
product, by specifically amending 49 CFR 661.11(s) to read as follows:
``an end product is a system, structure, vehicle, or similar item
that has a distinct use, function, or purpose, consistent with the
representative list at Appendix A subject to 49 U.S.C. 5323(j) that
is to be acquired by a grantee, as specified in the overall project
contract.''
Two commenters, in identical fashion, proposed the following
definition:
``any material item or assembly that is manufactured or assembled
for the purpose of performing a specific function, and is usually
specified as a separate or stand alone assembly or line item
component in a system, and it is covered by its own individual
performance warranty and can function independently in differing
operating environments. A list of representative end products is
included in Appendix A.''
In proposing this definition, these two commenters stated that end
products are usually specified as stand alone assemblies (line item or
separate descriptions) and are sold with individual performance
warranties and can function independently in differing service
environments.
Two commenters criticized the ``shift'' approach to end product
analysis, but did not propose alternative definitions. One of these
commenters stated that FTA's proposed ``shift'' definition is not
consistent with Congressional intent, as it allows for system end
products. The other commenter advocated eliminating the ``shift''
approach. While not offering a definition of end product, the commenter
suggested that an ``individual items'' may be considered as end
products if any of the following criteria are present: (1) Separate
line item pricing for individual elements is involved; (2) Performance
warranties for individual or separable product elements are involved;
(3) The procured items are regularly sold separately; and (4) The
procured items can function separately.
C. FTA Response
Upon careful analysis and review of the comments received on the
end product issue, FTA concurs with the majority of commenters who
recommended FTA adopt a ``non-shift'' approach to end product analysis.
FTA finds the commenters'' argument especially compelling that such an
approach would (1) Foster reasonable predictability and stability in
the transit business community, (2) enable offerors and bidders to
price proposals more accurately, and (3) allow transit agencies to
obtain better prices to be especially compelling. Further, FTA is
mindful of the concerns expressed by commenters who opposed abandoning
the current ``shift'' approach, as this change could lead to enormous
administrative burdens on grantees and result in the potential loss of
American jobs. FTA believes there is a straightforward solution that
can address these concerns.
The commenters who opposed the ``non-shift'' approach focused their
comments almost entirely on the effect of such a change in the market
for rolling stock replacement parts. FTA agrees with the ``grave
concerns'' expressed by some commenters on this issue. Keeping track of
after market rolling stock components would not only prove to be an
impossible burden for grantees, it also and could very well discourage
parts suppliers from sourcing in the United States. However, these
concerns rest on the assumption that FTA would treat replacement parts
under the rolling stock standard (i.e., where sixty percent of the
subcomponents of a component, by cost, must be domestic, but forty
percent may be foreign-sourced). The better approach, as one commenter
suggested and others endorsed, is for FTA to continue to treat rolling
stock replacement parts under the manufactured products standard, which
requires that one hundred percent of components be of domestic
manufacture. FTA agrees with this recommendation.
By continuing to treat replacement parts under the manufactured
products standard in 49 CFR 661.5, suppliers must still manufacture
replacement components in the United States, thus preserving American
jobs. In addition, grantees will not have to engage in the burdensome
recordkeeping requirements that a change to a rolling stock standard
for replacement parts would entail. As one commenter stated,
``[r]eplacement parts manufacturers are already accustomed to their
products being treated as manufactured products so this will not
represent the kind of sea change likely to disrupt the supply
industry.'' FTA agrees, and believes that this approach should
alleviate grantees' concerns about procuring replacement parts under a
``non-shift'' end product standard.
D. FTA Proposal
Here is how FTA believes a ``non-shift'' approach to end product
analysis would work in rolling stock procurement. First, when procuring
end products such as rail cars or buses, there would be little or no
difference in the Buy America requirements under a ``non-shift''
approach from the current ``shift'' method. In either case, under FTA's
Buy America requirements for rolling stock, 49 U.S.C. 5323(j)(2)(C) and
49 CFR 661.11, sixty percent of all components, by cost, must be of
U.S. origin, and final assembly of the vehicle must take place in the
United States. Furthermore, FTA's audit requirements, which state that
a recipient purchasing rolling stock must conduct, or cause to be
conducted, a pre-award and a post-delivery audit to verify compliance
with Buy America would remain the same. See 49 CFR part 663.
Any change between the ``non-shift'' and ``shift'' approaches to
end product analysis would occur primarily in the procurement of
replacement parts. Under FTA's current Buy America methodology, if a
grantee procures a replacement part for a bus, rail car, or other
rolling stock end product, then the general requirements for
manufactured products found at 49 CFR 661.5 apply. In that case, the
replacement part component, such as a bus engine, ``shifts'' to become
an end product and all manufacturing processes for the engine must take
place in the United States. All of the components of the engine must be
manufactured domestically, regardless of the origin of the
subcomponents. See decision letter from FTA to Hubner Manufacturing
Corporation (stating the current Buy America standard for rolling stock
replacement parts) (March 14, 2000).
Under the proposed ``non-shift'' methodology, what would change
specifically is that the replacement part, in this example a bus
engine, would always remain a component instead of ``shifting'' to
being an end product. Using the manufactured product standard, this
would mean the replacement part component, i.e., the bus engine, would
still have to be manufactured in the United States, but its
subcomponents could be foreign sourced. To further illustrate this
concept, under FTA's current ``shift'' methodology, a replacement bus
engine acquired for a mid-life overhaul is the end product; the pistons
assemblies are components; and connecting rods are subcomponents, which
may be foreign sourced. Under the proposed ``non-shift'' model, the
replacement bus engine remains a component, which
[[Page 69419]]
must be manufactured in the United States. But the replacement piston
assemblies are now subcomponents, which may be foreign sourced.
With adoption of a ``non-shift'' approach to manufactured end
products, similar results would apply. For example, when procuring a
manufactured end product such as a mobile vehicle lift, there would be
little or no difference in the Buy America requirements under a ``non-
shift'' approach from the current ``shift'' method. In either case, all
of the manufacturing processes for the vehicle lift end product must
take place in the United States and all of the components of the
product must be of U.S. origin. See 49 CFR 661.5(d)(1). Additionally, a
component ``is considered of U.S. origin if it is manufactured in the
United States, regardless of the origin of its subcomponents.'' 49 CFR
661.5(d)(2).
As with the example of the bus engine, however, there would be a
change in the subcomponent requirements for replacement parts for
manufactured end products such as a mobile vehicle lift. What would be
considered a component under the current ``shift'' approach would
become a subcomponent under the ``non-shift'' approach, and may be
foreign-sourced.
With products that are made primarily of steel and iron such as
track-work or a steel bridge, there would be absolutely no change in
the Buy America requirements between the current ``shift'' approach and
the proposed ``non-shift'' methodology. In either case, the
requirements are clear: ``all steel and iron manufacturing processes
must take place in the United States,'' whether the item is an end
product, a component, or a subcomponent. See 49 CFR 661.5(b)(emphasis
added).
In short, FTA foresees a change in the Buy America requirements
resulting from adoption of the ``non-shift'' approach to end product
analysis primarily in the procurement of replacement parts for rolling
stock and manufactured products. While this change may permit an
increase in the level of foreign sourced subcomponents for replacement
parts, FTA believes the benefits of the new approach more than outweigh
the possible disadvantages. FTA agrees with one commenter who stated
that for rolling stock replacement parts, in particular, the proposed
``non-shift'' approach represents ``the optimal course of action for
balancing consistency and administrative burden.''
To conclude, FTA believes a ``non-shift'' approach to end product
analysis will achieve the goals of enhancing consistency, stability,
and favorable price structures in the transit industry with minimal
disruption to current practices while still maintaining the legislative
intent of Buy America.
Having proposed adoption of the ``non-shift'' methodology, the task
remains to shape a workable definition of end product. Additionally, in
drafting a definition of end product, FTA believes the end product
definition should be consistent with the current definition of
``component'' in 49 CFR 661.3, which states: ``Component means any
article, material, or supply, whether manufactured or unmanufactured,
that is directly incorporated into the end product at the final
assembly location.'' Thus, FTA seeks comments on its proposal to modify
the definition of end product in 49 CFR 661.3.
4b. ``System'' as an ``End Product''
In defining the term ``end product,'' SAFETEA-LU requires that
``the procurement of systems'' be addressed ``to ensure that major
system procurements are not used to circumvent the Buy America
requirements.'' In light of this requirement, the NPRM sought comment
on whether FTA should continue its longstanding practice of including
``systems'' as definable end products. Furthermore, FTA sought comment
on a proposed definition of system, which is based on the ``functional
test'' for interconnected systems from the Harmonized Tariff Schedule
of the United States (HTSUS), 19 U.S.C. 1202, heading 8474, used in
customs law. FTA's proposed definition of system stated: ``System means
a machine, product, or device, or a combination of such equipment,
consisting of individual components, whether separate or interconnected
by piping, transmission devices, electrical cables or circuitry, or by
other devices, which are intended to contribute together to a clearly
defined function.''
In addition, FTA also sought comment on whether the same or
different Buy America requirements should apply to open architecture
versus proprietary system end products.
A. Comments Received
FTA received nineteen comments on the issue of system end products.
Eight commenters opposed including systems as end products. Two
comments, which were identical, expressed concern that FTA's proposed
definition could be ``stretched to include a whole `system' of
disconnected but related end products, such as buses, garages, access
roads, bus shelters,'' which could lead to distortions in the Buy
America requirements. Another commenter objected that including a
system in the end product definition could result in ``gamesmanship,''
thereby eliminating American jobs. A fifth commenter offered similar
views that including a system as an end product allows ``foreign
suppliers to circumvent the intent of Congress with respect to Buy
America compliance.''
One other commenter, whose views were fully endorsed by a yet
another commenter, stated that including a system as an end product
would violate Congress' stated intent in SAFETEA-LU that ``system
procurements not be used to circumvent Buy America requirements.'' The
commenter explained that under FTA's historical interpretation of the
Buy America requirements, ``end products'' are made up of components
and subcomponents. For manufactured products, components must be
domestically produced, but subcomponents may be foreign sourced.
Using the example of fare collection equipment, the commenter
pointed out that an automated fare collection system is comprised of
ticket vending machines, fare gates, computers, software, and like
items. By designating an automated fare collection system as an end
product, the ticket vending machine, for example, would be a component,
and must be manufactured domestically. The ticket handling assembly
that goes into the ticket vending machine would be a subcomponent, and
may be foreign sourced. Under a ``non-system'' approach to Buy America
analysis, however, the ticket vending machine is the end product and
the ticket handling assembly is a component, and both items would have
to be manufactured domestically.
The commenter went on to state that including a ``major system'' as
an end product results in designation of critical equipment as
components, rather than as end products, thereby dramatically
increasing the quantity of foreign-manufactured equipment that may be
incorporated into a procured system. This is so where systems are end
products and an item ``should be designated properly as a component is
pushed `downstream' and becomes a subcomponent,'' that may be foreign
sourced. It is this situation, according to the commenter, that
Congress sought to avoid.
The commenter stated further that if equipment must be domestically
made when not purchased as part of a system, but may be foreign sourced
when part of a system procurement, then the system procurement ``has
been used to
[[Page 69420]]
circumvent the Buy America requirement.'' The risk of such
circumvention is more pronounced when procuring manufactured goods, as
distinct from rolling stock products. The commenter added that
``enshrining'' system end products in regulation would induce
manufacturers to source cheaper products off shore, resulting in ``the
exportation of American jobs and capital.'' Similarly, the commenter
faulted FTA's proposed list of representative end products for
including systems.
B. Commenter Proposals
The above commenter asserted that the definition of ``end product''
is not objectionable if it includes only those items which may be
considered as a single manufactured product if manufactured in a U.S.
facility. To facilitate this approach, the commenter proposed
clarifying the existing regulatory definition of end product as ``any
item subject to 49 U.S.C. 5323(j) that is to be acquired by the
grantee, as specified in the overall project contract,'' by adding the
following language to the regulatory text:
Notwithstanding the characterization of a system as an end
product by a grantee in its project contract procuring manufactured
products, the system shall not be considered the end product where
(1) The solicitation provides separate line item pricing for
individual product elements and the owner retains the right to
materially add or subtract quantities of individual product
elements, (2) the solicitation provides for performance warranties
for individual or separable product elements (other than warranties
relating to degraded mode operation), thereby demonstrating that
individual elements can fully perform independently, or (3) items
identified in the solicitation that constitute the system are
regularly sold separately (other than in the context of replacement
parts) and can function independently of the system. In
solicitations where circumstances described in (1), (2), or (3)
above are present, then those individual items or elements
identified in the solicitation shall be considered end products
rather than part of any system.
In addition, the commenter suggested FTA consider the following
clarifying language:
Example of manufacturing products that have sometimes been
treated by grantees as end products, based upon a system
characterization, which would no longer be treated as end products
under this definition include fare collection and distribution,
security and access control, vehicle location, passenger information
and signage products (unless such signage provides system-wide
information rather than just location specific information).
Further, FTA should eliminate fare collection systems from the
proposed list of end products in the appendix to the regulation; so
that it is clear that separable fare collection products with
separable performance warranties do not constitute an end product
merely because they are purchased as part of a larger procurement
described as a ``system.''
The commenter proposed a representative list of ``proper end
products'' to include in the regulation, which FTA has summarized, as
follows:
End Products: transit/coach/shuttle buses; trolley replicas;
subway rail cars; light rail cars; destination displays or signs;
audio annunciation devices; wheelchair restraint devices; mobile
video surveillance equipment; vehicle power generation devices;
vehicle fire suppression devices; route or run displays or signs;
video recorders and cameras; audio recorder, player, or transmission
device; GPS and vehicle location devices; electrical control and
multiplexing devices; voice enunciation devices; operator input/
output displays and devices; automatic passenger counting equipment;
automated gates and turnstiles; vehicle location devices; fareboxes;
automated ticketing/fare card machines; ticket/fare card validators;
ticket/fare card encoding equipment.
Another commenter offered similar views that an end product system
could be so large, and incorporate so many different levels and types
of equipment that relatively major items now considered to be
components, and subject to the Buy America requirements, would become
subcomponents not subject to the Buy America requirements. The
commenter added that FTA's proposal is ``contrary to the statutory
requirement that the definition of end product ensure major system
procurements are not used to circumvent the Buy America requirements.''
In contrast to the foregoing, the ten remaining commenters
recommended including a system as a definable end product. Six
commenters endorsed FTA's proposed definition of system, which limits
system end products to those that are intended to provide a ``clearly
defined function.'' One commenter recommended that the following
language be added after the clause ``clearly defined function,'' to
wit: ``necessary to fulfill the function as defined.'' The commenter
suggested this change would ``minimize the tendency to add ancillary
items to a ``system.'' Another commenter noted simply that ``[a]ddition
of this definition [of system] reflects the requirements of SAFETEA-
LU.''
Of the reasons given in support of FTA's proposal, several
commenters noted that the concept of system end products has long
precedent in FTA-funded procurements for both rolling stock and
manufactured products. These commenters also stated that nothing in
SAFETEA-LU or its legislative history indicates that Congress intended
to preclude a system as an end product. Referring to the legislative
history of SAFETEA-LU, one of these commenters pointed out that
Congress specifically rejected at least two proposals that would have
effectively treated all identifiable items or discrete elements of a
system procurement as end products. According to the commenter,
Congress rejected these proposals so as not to substantially alter
current FTA practice. Rather, SAFETEA-LU instructed FTA to develop a
rule that would cure potential abuses without eliminating system
procurements, or fundamentally change the agency's long-standing Buy
America practices.
This commenter endorsed FTA's proposed definition of ``system,''
which employs a functional test to make clear that a system is an end
product only where the system provides a ``clearly defined function.''
The commenter felt FTA's definition ``protects against the bundling of
a host of unrelated independent functions into a `super system' that
would undermine the Buy America rules.'' The commenter agreed with
another comment which recommended FTA provide some examples (based on
FTA precedents) of ``super systems'' that would not qualify as end
products. Furthermore, the commenter stated that for manufactured
items, requiring the end product, ``and all components'' be of U.S.
manufacture, would ensure that substantial processing and labor all
occur in the United States.
A third commenter, who also endorsed FTA's proposed definition of
system, recommended that FTA make clear in its regulatory guidance that
if products in a particular application, which must necessarily perform
on an integrated basis with other products constitute a portion of the
same acquisition, then the products together constitute a system end
product. The commenter offered the following examples of ``high-end
systems'' that should be referenced as end products: (1) Communication
based train control systems; (2) automatic train supervision systems;
(3) passenger information and communication systems; (4) CCTV (closed
circuit television) systems; (5) traction power systems; (6) automatic
interlocking systems; (7) access control systems; (8) intelligent video
systems; and (9) intrusion detection systems. Such systems may be
covered by performance warranties for the system as a whole. The
commenter stated, however, that discrete elements of a system may also
be covered by
[[Page 69421]]
warranties, which are intended to ensure a level of functionality in a
degraded mode that results from the failure of another product in the
same system. The commenter stated that the existence of such
``separable warranties'' should not defeat an end product
characterization. The commenter recommended FTA consider such warranty
information as an indication that a system is an end product.
The above commenter also recommended FTA not make any distinction
between open architecture and proprietary systems. The commenter stated
the key question to consider is whether products perform and operate on
an integrated basis. The intellectual property rights, if any, which
pertain to products is a separate legal question that does not
necessarily relate to integration of system equipment.
Another commenter recommended a two-pronged approach to defining
``system,'' in order to provide a ceiling on what may be bundled into a
particular end product and to discourage any gamesmanship that
sidesteps the Buy America requirements. First, the commenter stated the
representative listing of products in Appendix A of the current 49 CFR
part 661 should include proper end products, whether or not referred to
as ``systems.'' Second, the commenter recommended the definition of
``system'' be expanded to provide guidance on what is not a proper end
product. For example, ``an entire transit `system' '' that includes
stations, track work, and vehicles, would constitute an impermissibly
broad end product system according to the commenter. The commenter
added that providing such ``negative definitions'' of system in the
rule would prove more instructive than any positive definition and
would reinforce the ceiling on bundling. Another commenter fully
concurred with these comments.
In similar fashion, one commenter recommended FTA develop a ``list
of high level systems or end products that are commonly purchased and
require that systems or end products on this list must be treated as
end products for the purpose of meeting Buy America requirements even
if the contract calls for a higher level system of which two or more
listed items would be components.'' To meet these criteria, the
commenter recommended that the end product definition be revised to
read: ``The following is a list of items * * * that are representative
end products subject to the requirements of Buy America as end products
even if they are to be acquired by a grantee as part of a larger
overall project.'' The commenter stated that adoption of its
recommendation would prevent a grantee from acquiring a
``transportation system'' of trains, buses, and fare collection
equipment, and treating these major items as components of system
procurement. The commenter also suggested that based on its
recommendations, FTA would have ``no reason'' to distinguish between
proprietary and open architecture systems.
Another commenter similarly recommended against creation of ``super
system'' end products that do not meet the Buy America requirements.
Such a situation could lead to foreign ``dumping'' of manufactured
products into the U.S. transit market.
C. FTA Response
FTA agrees with the majority of commenters who recommended FTA
should continue its longstanding practice of including a ``system'' as
a definable end product. Based on the plain language of SAFETEA-LU and
its legislative history, FTA also agrees with those commenters who
stated that by requiring FTA to develop a rule to ``ensure that major
system procurements are not used to circumvent the Buy America
requirements,'' Congress did not intend to expressly prohibit the
designation of system end products. Rather, SAFETEA-LU instructs FTA to
develop a rule that would cure potential abuses, without eliminating
system procurements or drastically changing FTA's long-standing Buy
America practices. FTA proposes to contain the potential for abuse by
defining a ``system'' as the minimum set of components and
interconnections needed to perform all of the functions specified by
the grantee in its procurement. All second and subsequent system
elements proposed by the supplier to meet the site capacity specified
by the grantee would be additional end products applied to the original
system. In addition, the second and subsequent sites in a procurement
addressing multiple geographic sites would be additional end products
applied to the original system.
Furthermore, as FTA explained in the NPRM, and as commenters
subsequently noted, the concept of system end products is of long
standing at FTA, and is a concept well grounded in Federal public
contract law. See FTA's Buy America regulation at 49 CFR 661.11(r),
which addresses ``[i]f a system is being procured as an end product''
(emphasis added). See also, Brown Boveri Corp., B-187252, 56 Comp. Gen.
596, May 10, 1997 (a Government Accountability Office (GAO) case
involving the Buy American Act, where the end product of the
procurement was a sodium pump-drive system in a nuclear power plant);
Matter of: Dictaphone Corp., B-191,383, May 8, 1978, 78-1 CPD 343 (GAO
decision under the Buy American Act where the end product of the
procurement was a ``Central Dictation System,'' and the various
elements of the system, such as transcribers and recorders were
components of the system, rather than separate end products); and Bell
Helicopter Textron, Inc. v. Adams, 493 F. Supp. 824, 833 (D.D.C. 1980)
(the court ruled that the contract end product under the Buy American
Act was a helicopter ``system'' consisting of five components).
D. FTA Proposal
For the foregoing reasons, FTA proposes to retain the application
of a ``system'' in the definition of ``end product.'' FTA agrees with a
commenter who noted FTA's proposed definition will ``protect against
the bundling of a host of unrelated independent functions into a `super
system' that would undermine the Buy America rules.'' Most importantly,
as FTA explained in the NPRM, FTA will carefully review system
procurements in Buy America cases to determine whether an integrated
system actually exists, and, if so, which items of equipment constitute
the system. This review process will further serve to avoid the problem
of ``super systems.'' FTA already employs a longstanding model to
determine if a system is ``too large'' and must be broken down into
separate, multiple end products. Thus, the concerns expressed by
commenters that an end product system could be so large, and
incorporate so many different levels of equipment such as stations,
track, vehicles, fare collection equipment, etc., so as to circumvent
the requirements of Buy America, are adequately addressed. Under FTA's
Buy America methodology, if a purported end product is too large, i.e.,
composed of what FTA traditionally considers as separate end products
such as structures, vehicles, fare collection equipment, etc., FTA will
break it down into constituent end products. This reflects FTA's
understanding that a single procurement may indeed contain multiple end
products, each of which must independently meet the requirements of Buy
America. Nonetheless, FTA is mindful that heightened scrutiny of Buy
America requirements is warranted in the area of system procurements.
[[Page 69422]]
In response to FTA's request for comment on whether different Buy
America requirements should apply to open architecture versus
proprietary system end products, one commenter recommended FTA not make
any distinction between the two. The commenter stated that the key
question to consider is whether products perform and operate on an
integrated basis. The intellectual property rights, if any, which
pertain to products is a separate legal question that does not
necessarily relate to integration. FTA agrees with these comments, and
will not implement a distinction in regulation between open
architecture versus proprietary system end products.
FTA received many helpful comments on its proposed definition of
``system'' to further refine it. For example, commenters suggested FTA
should consider whether performance warranties apply to an integrated
system (regardless of whether components are separately warranted);
whether products perform on an integrated basis with other products in
a system, or are operated independently of associated products in the
system; or whether transit agencies routinely procure a product
separately (other than as replacement or spare parts). Based on these
suggestions, FTA seeks comments on its proposal to revise the
definition of ``system'' in 49 CFR 661.3.
4c. Representative List of End Products
To comply with the SAFETEA-LU requirement to include a
``representative list'' of end products, FTA sought comment on a
proposed list of representative end products. As FTA explained in the
first NPRM, the proposed list is not meant to be all-inclusive. Rather,
it describes general ``representative'' categories of end products.
A. Comments Received
FTA received thirteen substantive comments on this issue. Of these,
nine commenters proposed their own lists of end products, components,
or subcomponents, which were often extensive and reflected particular
industries. Comments offering such lists may be viewed online at http://dms.dot.gov/ or physically in the DOT's Docket Management Facility,
supra, Docket Number 23082, entries: 3-4, 9, 11-13, 16, and 21-22.
Two comments, which were identical, stated FTA's representative
list ``in Appendix A can quickly be outdated by technology (e.g., the
current list refers to wheelchair lifts, but most buses now use
ramps).'' A third commenter suggested that for ``manufactured end
products,'' FTA clarifies whether ``infrastructure projects'' include
``[a]luminum and elastomaric/non-metal products.'' A fourth commenter
stated FTA's proposed list of end products is ``far from comprehensive
and is itself subject to interpretation.'' The commenter noted that for
construction procurements, by including ``lifts, hoists and elevators''
as end products along with building structures, the question is raised
as to the status of ``building components such as roofs, HVAC
equipment, etc.''
B. Commenter Proposals
One commenter stated FTA's proposed representative list was overly
broad, without instructional value, and, therefore, insufficient.
Instead, the commenter recommended FTA implement a ``comprehensive''
list of representative end products, components, and subcomponents in
Appendix A to 49 CFR part 661. The commenter further stated that
Appendix A should be ``regularly supplemented as new or changing end
products, components, sub-components, and manufacturing processes enter
the marketplace.'' Such proposed supplemental changes should be posted
for public comment, prior to final decision. The commenter also
suggested that the list of items in Appendix A should consist of
concrete examples, rather than mere descriptive terms. The commenter
proposed a new version of Appendix A, which can be found in the docket
at entry number 21.
Three commenters disagreed with the proposal that FTA adopt a
``comprehensive'' list of end products, components, and subcomponents
to be constantly updated. These commenters felt that attempting to
identify a ``comprehensive list'' from the universe of potential end
products, components, and subcomponents typically acquired in transit
procurements, and then constantly updating this list, is unrealistic
and burdensome to grantees. In substantially similar statements, two
commenters noted that the previous commenter was unable to achieve
consensus from its membership on this issue, or on its proposed
``comprehensive list.''
Instead of a ``comprehensive list,'' the three commenters agreed
with FTA's inclusion of a ``representative'' list of end products in
Appendix A. The commenters supported the suggestion FTA include some
``illustrative'' examples of end products in Appendix A. Commenters
stated that these examples should be drawn from published FTA
decisions.
C. FTA Response and Proposal
FTA agrees with the commenters who recommended FTA implement a
``representative'' list of end products rather than a ``comprehensive''
list as some commenters suggested for two reasons. First, SAFETEA-LU
requires the Secretary to ``develop a list of representative items that
are subject to the Buy America requirements'' (emphasis added). By use
of the term ``representative'' rather ``comprehensive,'' FTA believed
that Congress did not intend that the list be exhaustive. Second, FTA
agrees that it would be unrealistic to develop a comprehensive list and
keep it ``constantly updated'' as some commenters suggested. The
examples of ``comprehensive'' lists offered by commenters, which were
often very lengthy, highly detailed, and seldom uniform, exemplify the
difficulty of creating such a list.
FTA believes it is impractical to attempt to produce an exhaustive
``comprehensive'' list of every conceivable end product, component, and
subcomponent in the transit industry. Instead, the better approach is
to develop a representative list that is not meant to be all-inclusive.
An example of this practical approach are the representative lists of
typical bus and rail car components found in Appendices B and C to 49
CFR 661.11. FTA's proposed representative list of end products is
similarly reflective of the broad scope of transit end products with
which Buy America is concerned.
Several commenters recommended FTA provide ``illustrative''
examples of typical end products. In fact, FTA believes that its
proposed list accurately reflects the type of end products FTA
typically reviews in its Buy America practices. For example, FTA
recently reviewed a procurement for a ``hybrid-electric shuttle bus.''
Rather than enumerate this specific vehicle type in the regulation, a
``hybrid-electric shuttle bus'' is clearly a ``vehicle,'' and, thus, a
rolling stock end product within the meaning of 49 CFR 661.3 and the
proposed representative list of end products in Appendix A. Thus, FTA
believes it is unnecessary to enumerate every conceivable type of bus
in the list of end products, whether the bus is a trolley replica,
hybrid-electric, or standard diesel model, as one commenter
recommended.
In another example from an actual procurement that underwent Buy
America review, ``manganese steel frogs'' are a type of special track-
work, and thus, a steel end product. Again, FTA sees no need to
specifically add the
[[Page 69423]]
term ``manganese steel frog'' or even ``frog'' to the list of
representative end products, as this type of product is already covered
under the term ``track-work.'' In short, FTA's proposed representative
list of general end products is intended to cover innumerable
designations of specific items.
FTA seeks comments on its proposal to add an Appendix A to 49 CFR
661.1 to include a representative list of end products.
5. Definition of ``Final Assembly''
In the first NPRM, FTA sought comment on its proposal to amend the
definition of ``final assembly'' in 49 CFR part 661 for rolling stock
procurements; to incorporate the ``minimum requirements'' of final
assembly for rail cars and buses as stated in the March 18, 1997, Dear
Colleague letter, C-97-03 (incorporated as section 3035 of the
Transportation Equity Act for the 21st Century (TEA-21) (Pub. L. 105-
178)); and to further clarify those requirements. FTA based its
proposed definition on its March 18, 1997, Dear Colleague letter.
A. Comments Received and Commenter Proposals
FTA received nine comments on this issue. One comment, which three
other comments endorsed, recommended several changes to FTA's proposed
definition, to make it consistent with the lists of typical components
for rail cars and buses in 49 CFR 661.11(b) and (c). The comment
proposed the following revisions to FTA's proposed rule (the
commenter's proposed inserted text is underlined; proposed deletions
are in brackets):
Rail Cars: In the case of the manufacture of a new,
remanufactured, or overhauled rail car, final assembly would
typically include, as a minimum, [the following operations:]
installation and interconnection of the typical Rail Car Components
listed in 661.11 (c), including but not limited to the following
items: car bodies or shells, car-body wiring, car-borne power
plants, if any, propulsion control equipment, propulsion cooling
equipment, friction brake equipment, energy sources for auxiliary
equipment and controls, heating and air conditioning equipment,
interior and exterior lighting equipment, coupler equipment and
coupler control system, communications equipment, pneumatic and
electrical systems, door and door control systems, passenger seats,
passenger and cab interiors, destination signs, wheelchair lifts, or
other equipment required to permit handicapped access to the rail
car, motors, wheels, axles, [and] gear [units]boxes or integrated
motor/gear units, suspensions, truck frames and chassis. Final
Assembly activities shall also include the inspection and
verification of all installation and interconnection work; and the
in-plant testing of the [stationary product] rail car to verify all
functions. In the case of articulated vehicles, the interconnection
of the car bodies or shells shall also be included as work to be
performed at the final assembly site.
Buses: In the case of a new, remanufactured, or overhauled bus,
final assembly would typically include, at a minimum, the
installation and interconnection of the typical Bus Components
listed in 661.11 (b), including but not limited to the following
items: car bodies or shells, the engine and transmission (drive
train), axles, propulsion control system, axles. chassis, and
wheels, including the cooling and braking systems; the installation
and interconnection of the heating and air conditioning equipment;
the installation of pneumatic and electrical systems, door systems,
passenger seats, passenger grab rails, destination signs, wheelchair
lifts; and road testing. Final Assembly activities shall also
include final inspection, repairs and preparation of the vehicles
for delivery. In the case of articulated vehicles, the
interconnection of the car bodies or shells shall also be included
as work to be performed at the final assembly site.
Two other comments, which are identical, recommended the following
changes to the Bus section of FTA's proposed definition by: (1) Moving
the word ``chassis'' just after the word ``shells;'' (2) replace the
words ``suspensions, steering mechanisms and wheels,'' where chassis
had been; (3) replace the words ``(drive train)'' by ``(propulsion
components, including inverters and controllers) and energy storage
device (if used)''--to accommodate hybrid electric buses; and (4)
replace ``wheelchair lift'' to ``wheelchair lift/ramp''--to accommodate
low floor bus components. Another commenter recommended FTA's proposed
reference to ``motors'' and ``gear units'' be modified to read
``motors, gear units or integrated motor/gearbox.''
Additionally, a commenter noted that the March 18, 1997, Dear
Colleague letter contained the following provision, which the commenter
recommended should be added to the proposed definition of final
assembly in Appendix D of 49 CFR 661.11:
If a manufacturer's final assembly processes do not include all
the activities that are typically considered the minimum
requirements, it can request a Federal Transit Administration (FTA)
determination of compliance. FTA will review these requests on a
case-by-case basis to determine compliance with Buy America.
This commenter also found the following language in FTA's proposed
definition to be ambiguous: ``installation and interconnection of car
bodies or shells.'' The commenter felt that this language could be
interpreted to mean that various sections of the car body or bus shell
are to be assembled at the final assembly location. The commenter
recommended FTA either delete the language or replace it with the
phrase, ``the installation and interconnection of intercar or bus
articulations or coupling systems.'' The commenter suggested that the
term ``suspensions, frames and chassis'' should be clarified. The
commenter also recommended that the term ``door control systems''
replace the current ``door systems.'' Finally, the commenter
recommended FTA consider a previously rescinded Dear Colleague letter
issued on September 25, 1997, C-97-18, as it raised ``valid issues
concerning the need for flexibility in determining compliance with
final assembly requirements.''
B. FTA Response and Proposal
FTA concurs with the comment, which FTA quoted in full above,
recommending several changes to FTA's proposed definition of ``final
assembly'' for rail cars and buses. FTA notes that several of the
proposed changes were also mentioned by other commenters, such as using
the terms ``door control systems'' and ``integrated motor/gear units''
in lieu of the designations proposed in the first NPRM. In addition,
FTA agrees that the definition of final assembly should refer back to
49 CFR 661.11(b) and (c) for the bus and rail car components that must
be incorporated into the end product at the final assembly location.
FTA also agrees with the comment recommending that the following
language from the March 18, 1997, Dear Colleague Letter should be added
to the definition of ``final assembly:''
If a manufacturer's final assembly processes do not include all
the activities that are typically considered the minimum
requirements, it can request an Federal Transit Administration (FTA)
determination of compliance. FTA will review these requests on a
case-by-case basis to determine compliance with Buy America.
FTA, however, disagrees with the commenter who stated that the
phrase ``installation and interconnection of car bodies or shells'' is
ambiguous. FTA also declines to adopt the language of a previously
rescinded Dear Colleague letter of September 25, 1997, C-97-18, as the
commenter suggested.
Based on the above, FTA seeks comments on its proposal to adopt
Appendix D to 49 CFR 661.11 per the above commenter's recommendation.
[[Page 69424]]
6. Communication, Train Control, and Traction Power Equipment
FTA sought comment on three substantive proposals to the Buy
America requirements for rolling stock in 49 CFR 661.11. In the first
of these proposals, FTA sought comment on whether it should continue to
find that the items of communication equipment listed in 49 CFR 661.11
include wayside equipment, i.e., communication equipment that is not in
or on a vehicle, but nevertheless subject to the rolling stock
standard. FTA also sought comment on whether the items of train
control, communication, and traction power equipment listed in 49 CFR
661.11(t), (u), and (v) should be deleted and whether any new items
should be added to these lists to reflect new technology.
In addition, FTA sought comment on whether the term ``communication
equipment'' should be clarified in the Buy America regulations to
reflect continuing changes in technology and advances in systems
integration. In particular, FTA posed the question whether
``communication equipment'' should be limited to equipment whose
primary function is communication ``with or between people'' versus
``machine to machine'' interface.
A. Comments Received
FTA received eight comments on these three proposals. Three
commenters urged FTA not to modify its interpretation of communication
equipment listed in 49 CFR 661.11 as including wayside equipment. No
commenter opposed this interpretation.
Two commenters, who submitted identical comments, agreed with FTA's
proposal that ``communication equipment'' should be limited to
equipment whose primary function is to facilitate communication ``with
or between people'' versus ``machine to machine'' interface. Three
commenters opposed this proposal. These commenters argued that such a
distinction is unnecessary, ineffective, or illogical. Several
commenters pointed out that many communications networks often support
both capabilities; and that it cannot be said whether equipment
primarily supports one purpose or the other.
B. Commenter Proposals
One commenter recommended that FTA change or delete the following
listed items in 49 CFR 661.11(t), (u), and (v): Under 49 CFR
661.11(v)(2), ``Primary AC transformer rectifiers'' be changed to
``Primary AC Rectifier Transformers;'' the language ``at central
control'' be deleted from 49 CFR 661.11(v)(4), which states ``Traction
power console and CRT display system at central control;'' and the
language ``Power rail'' be deleted from 49 CFR 661.11(v)(17), which
states ``Power rail insulators.'' The commenter also recommended that
FTA delete the following pieces of equipment entirely in section
661.11(v): (9) Facility step down transformers; (10) Motor control
centers (facility use only); (21) Connectors, tensioners, and
insulators for overhead power wire systems; and (22) Negative drainage
boards.
The above commenter and another recommended that the following
items be added to the lists of equipment in 49 CFR 661.11(t), (u), and
(v), as follows:
49 CFR 661.11(t) [train control equipment]: (1) Propulsion Control
Systems; (2) Cab Signaling; (3) ATO Equipment; (4) ATP Equipment; (5)
Wayside Transponders; (6) Trip Stop Equipment; (7) Wayside Magnets; (8)
Cab Displays; (9) Speed Measuring Devices; (10) Car Axle Counters; and
(11) Communication Based Train Control (CBTC).
49 CFR 661.11(u) [communication equipment]: (1) Antennas; (2)
Wireless Telemetry Equipment; (3) Passenger Information Displays; (4)
Communications Control Units; (5) Communication Control Heads; (6)
Wireless Intercar Transceivers; (7) Multiplexers; (8) SCADA Systems;
(9) LED Arrays; (10) [APTA added] Screen Displays such as LEDs and
LCDs; (11) Fiber-optic transmission equipment; (12) Frame or cell based
multiplexing equipment; and (13) Communication system network elements.
49 CFR 661.11(v) [traction power equipment]: (1) Surge Arrestors;
(2) Protective Relaying; and (3) Bimetallic Power Transmission System
(BPTS) Equipment.
One commenter recommended that the following items be added to the
list of traction power equipment in 49 CFR 661.11(v): Main
transformers, transfer switches, bonds, and power rail. Another
commenter suggested the following items be added to the list of
communications equipment in 49 CFR 661.11(u): (1) Fiber Optic
Transmission Equipment; (2) Frame or cell-based multiplexing equipment;
and (3) Communication system network elements. This commenter also
recommended that aluminum conducting rail, which is referred to as
Bimetallic Power Transmission System (BPTS), be added to the list of
traction power equipment in 49 CFR 661.11(v).
A final commenter proposed various miscellaneous ``corrections and
clarification'' on such issues as (1) FTA's Buy America Web site be
binding; (2) a standard ``tariff exemption'' form be added to 49 CFR
661.11; (3) spare parts be 60% domestic; (4) a U.S. components'
domestic manufacturing costs count toward a vehicle; (5) administrative
and overhead costs be counted towards components; (6) the general
requirements of Sec. 661.5 not apply to remanufactured or overhauled
vehicles; (7) manufacturers not be required to provide recipients with
hard copies of Buy America calculations; and (8) grantees not be
allowed to require both 49 CFR 661.5 and 661.11 requirements on rolling
stock contract. FTA views these comments to be non-responsive.
C. FTA Response
FTA agrees with the commenters who recommended that FTA continue
its longstanding interpretation that items of communication equipment
listed in 49 CFR 661.11 include wayside equipment, and, thus, are
subject to the rolling stock standard. FTA notes that no commenter
opposed this interpretation.
FTA also concurs with the commenters who argued that
``communication equipment'' should not be limited to equipment whose
primary function is to facilitate communication ``with or between
people'' versus ``machine to machine'' interface. FTA finds commenters'
argument particularly convincing that communication networks frequently
support both capabilities (i.e., human to human interaction and machine
to machine interface) either directly or indirectly and that it cannot
always be said whether communication equipment primarily supports one
purpose or the other. FTA's review of prior Buy America decisions
involving communication equipment support these conclusions. Therefore,
FTA will not make such a distinction in the Buy America regulations at
this time. FTA will continue to carefully scrutinize, on a case-by-case
basis, whether technology may properly be characterized as
``communication equipment'' within the meaning of the rolling stock
provisions of 49 U.S.C. 5323(j) and 49 CFR 661.11.
Regarding proposed changes to train control, communication, and
traction power equipment in 49 CFR 661.11(t), (u), and (v),
respectively, FTA notes that only one commenter recommended deleting
enumerated items. FTA declines to do so, absent a specific showing as
to why specific items of equipment should be deleted from the lists in
49 CFR 661.11.
However, FTA agrees to add certain items of equipment, as
recommended by several commenters. With respect to two
[[Page 69425]]
proposed items of equipment, ``Propulsion Control Systems'' and ``Cab
Displays,'' FTA believes the former functions more as part of traction
power equipment, rather than as train control equipment. With respect
to ``Cab Displays,'' this type of equipment is already an integral part
of a vehicle, and does not need to be separately listed.
D. FTA Proposal
Accordingly, FTA seeks comments on its proposal to amend 49 CFR
661.11(t), (u), and (v), respectively, by adding the following: (t)
train control equipment; cab signaling, ATO equipment, ATP equipment,
wayside transponders, trip stop equipment, wayside magnets, speed
measuring devices, car axle counters, communication based train control
(CBTC); (u) communication equipment; antennas, wireless telemetry
equipment, passenger information displays, communications control
units, communication control heads, wireless inter-car transceivers,
multiplexers, SCADA systems, LED arrays, screen displays such as LEDs
and LCDs, fiber-optic transmission equipment, frame or cell based
multiplexing equipment, communication system network elements; and (v)
traction power equipment; propulsion control systems, surge arrestors,
protective relaying.
FTA notes that several commenters recommended that aluminum
composite conducting rail, otherwise known as Bimetallic Power
Transmission (BPTS) Equipment, which is a combination of an aluminum
conductor and a stainless steel abrasion-resistant cap, be considered
as traction power equipment, and added to the list of items at 49 CFR
661.11(v). FTA's current regulation at 49 CFR 661.11(w) states that
``[t]he power or third rail is not considered traction power equipment
and is thus subject to the requirements of 49 U.S.C. 5323(j) and the
requirements of 49 CFR 661.5.'' Regardless whether BPTS equipment is
made primarily from aluminum, steel, or some other material, 49 CFR
661.11(w) expressly precludes it from being considered as traction
power equipment if it is used as the ``power or third rail''. If BPTS
third rail is not made primarily of steel, it would be treated as a
``manufactured product'' under 49 CFR 661.5(d).
7. Statutory Update
Section 3023 of SAFETEA-LU amended 49 U.S.C. 5323(j)(6) (as
redesignated by SAFETEA-LU) by striking ``Intermodal Surface
Transportation Efficient Act of 1991 (Public Law 102-240, 105 Stat.
1914)'' and inserting ``Federal Public Transportation Act of 2005''.
This SNPRM proposes to amend 49 CFR 661.18 to conform to this statutory
change.
XI. Regulatory Analyses and Notices
A. Statutory/Legal Authority for This Rulemaking
This SNPRM is authorized under the Safe, Accountable, Flexible,
Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU)
(Pub. L. 109-59), which amended section 5323(j) and (m) of title 49,
United States Code and required FTA to revise its regulations with
respect to Buy America requirements.
B. Executive Order 12866 and DOT Regulatory Policies and Procedures
This SNPRM is a nonsignificant regulatory action under section 3(f)
of Executive Order 12866 and, therefore, was not reviewed by the Office
of Management and Budget. This SNPRM is also nonsignificant under the
Regulatory Policies and Procedures of the Department of Transportation
(44 FR 11034, Feb. 26, 1979). This SNPRM imposes no new compliance
costs on the regulated industry; it merely clarifies terms existing in
the Buy America regulations and adds terms consistent with SAFETEA-LU.
C. Executive Order 13132
This SNPRM has been analyzed in accordance with the principles and
criteria contained in Executive Order 13132 (``Federalism''). This
SNPRM does not include any regulation that has substantial direct
effects on the States, the relationship between the national government
and the States, or the distribution of power and responsibilities among
the various levels of government. Therefore, the consultation and
funding requirements of Executive Order 13132 do not apply.
D. Executive Order 13175
This SNPRM has been analyzed in accordance with the principles and
criteria contained in Executive Order 13175 (``Consultation and
Coordination with Indian Tribal Governments''). Because this SNPRM does
not have tribal implications and does not impose direct compliance
costs, the funding and consultation requirements of Executive Order
13175 do not apply.
E. Regulatory Flexibility Act and Executive Order 13272
The Regulatory Flexibility Act (5 U.S.C. 601-611) requires each
agency to analyze regulations and proposals to assess their impact on
small businesses and other small entities to determine whether the rule
or proposal will have a significant economic impact on a substantial
number of small entities. This SNPRM imposes no new costs. Therefore,
FTA certifies that this proposal does not require further analysis
under the Regulatory Flexibility Act. FTA requests public comment on
whether the proposals contained in this SNPRM have a significant
economic impact on a substantial number of small entities.
F. Unfunded Mandates Reform Act of 1995
This SNPRM does not propose unfunded mandates under the Unfunded
Mandates Reform Act of 1995. If the proposals are adopted into a final
rule, it will not result in costs of $100 million or more (adjusted
annually for inflation), in the aggregate, to any of the following:
State, local, or Native American tribal governments, or the private
sector.
G. Paperwork Reduction Act
This SNPRM proposes no new information collection requirements.
H. Regulation Identifier Number (RIN)
A regulation identifier number (RIN) is assigned to each regulatory
action listed in the Unified Agenda of Federal Regulations. The
Regulatory Information Service Center publishes the Unified Agenda in
April and October of each year. The RIN number contained in the heading
of this document may be used to cross-reference this action with the
Unified Agenda.
I. Environmental Assessment
The National Environmental Policy Act of 1969 (NEPA), as amended
(42 U.S.C. 4321-4347), requires Federal agencies to consider the
consequences of major Federal actions and prepare a detailed statement
on actions significantly affecting the quality of the human
environment. There are no significant environmental impacts associated
with this SNPRM.
J. Privacy Act
Anyone is able to search the electronic form for all comments
received into any of our dockets by the name of the individual
submitting the comments (or signing the comment, if submitted on behalf
of an association, business, labor union, etc.). You may review DOT's
complete Privacy Act Statement in the Federal Register published on
April 11, 2000 (Volume 65, Number 70; Pages 19477-78) or you may visit
http://dms.dot.gov.
[[Page 69426]]
List of Subjects in 49 CFR Part 661
Grant programs-transportation, Public transportation, Reporting and
recordkeeping requirements.
Accordingly, for the reasons described in the preamble, 49 CFR part
661 of the Code of Federal Regulations is proposed to be amended as
follows:
PART 661--BUY AMERICA REQUIREMENTS--SURFACE TRANSPORTATION
ASSISTANCE ACT OF 1982, AS AMENDED
1. The authority citation for part 661 continues to read as
follows:
Authority: 49 U.S.C. 5323(j) (formerly sec. 165, Pub. L. 97-424;
as amended by sec.337, Pub. L. 100-17; sec.1048, Pub. L. 102-240;
sec.3020(b), Pub. L. 105-178; and sec. 3023(i) and (k), Pub. L. 109-
59); 49 CFR 1.51.
2. Revise Sec. 661.3 to read as follows:
Sec. 661.3 Definitions.
As used in this part:
Act means the Surface Transportation Assistance Act of 1982 (Pub.
L. 97-424), as amended.
Administrator means the Administrator of FTA, or designee.
Component means any article, material, or supply, whether
manufactured or unmanufactured, that is directly incorporated into the
end product at the final assembly location.
Contractor means a party to a third party contract other than the
grantee.
End product means any vehicle, structure, product, article,
material, supply, or system, which directly incorporates constituent
components at the final assembly location, that is acquired for public
use under a Federally-funded third party contract, and which is ready
to provide its intended end function or use without any further
manufacturing or assembly change(s). A list of representative end
products is included at appendix A to this section.
FTA means the Federal Transit Administration.
Grantee means any entity that is a recipient of FTA funds.
Manufactured product means an item produced as a result of the
manufacturing process.
Manufacturing process means the application of processes to alter
the form or function of materials or of elements of the product in a
manner adding value and transforming those materials or elements so
that they represent a new end product functionally different from that
which would result from mere assembly of the elements or materials.
Negotiated procurement means a contract awarded using other than
sealed bidding procedures.
Rolling stock means transit vehicles such as buses, vans, cars,
railcars, locomotives, trolley cars and buses, and ferry boats, as well
as vehicles used for support services.
System means a machine, product, or device, or a combination of
such equipment, consisting of individual components, whether separate
or interconnected by piping, transmission devices, electrical cables or
circuitry, or by other devices, which are intended to contribute
together to a clearly defined function. In determining whether a system
constitutes an end product, or is instead made up of independent end
products, the Administrator will consider all appropriate factors on a
case-by-case basis. Such factors may include whether performance
warranties apply to an integrated system (regardless of whether
components are separately warranteed); whether products perform on an
integrated basis with other products in a system, or are operated
independently of associated products in the system; or whether transit
agencies routinely procure a product separately (other than as
replacement or spare parts).
United States means the several States, the Commonwealth of Puerto
Rico, the District of Columbia, Guam, American Samoa, the U.S. Virgin
Islands, and the Commonwealth of the Northern Mariana Islands.
Appendix A to Sec. 661.3--End Products
The following is a list of representative end products that are
subject to the requirements of Buy America. This list is
representative, not exhaustive.
(1) Rolling stock end products: All individual items identified
as rolling stock in Sec. 661.3 (e.g., buses, vans, cars, railcars,
locomotives, trolley cars and buses, ferry boats, as well as
vehicles used for support services); train control, communication,
and traction power equipment that meets the definition of end
product at Sec. 661.3 (e.g., a communication or traction power
system).
(2) Steel and iron end products: Items made primarily of steel
or iron such as structures, bridges, and track work, including
running rail, contact rail, and turnouts.
(3) Manufactured end products: Infrastructure projects not made
primarily of steel or iron, including structures (terminals, depots,
garages, and bus shelters), ties and ballast; contact rail not made
primarily of steel or iron; fare collection equipment; computers;
information, security, and data processing equipment; mobile lifts,
hoists, and elevators.
3. In Sec. 661.7:
a. Revise paragraph (b) and add new paragraph (c)(3) to read as set
forth below; and
b. Amend appendix A to Sec. 661.7 by removing paragraphs (b) and
(c) and adding new paragraph (b) to read as set forth below.
Sec. 661.7 Waivers.
* * * * *
(b) Under the provision of section 165(b)(1) of the Act, the
Administrator may waive the general requirements of section 165(a) if
the Administrator finds that their application would be inconsistent
with the public interest. In determining whether the conditions exist
to grant this public interest waiver, the Administrator will consider
all appropriate factors on a case-by-case basis, unless a general
exception is specifically set out in this part. When granting a public
interest waiver, the Administrator shall issue a detailed written
statement justifying why the waiver is in the public interest. The
Administrator shall publish this justification in the Federal Register,
providing the public with a reasonable time for notice and comment of
not more than seven calendar days.
(c) * * *
(3) After contract award, the Administrator may grant a non-
availability waiver under this paragraph, in any case in which a bidder
or offeror originally certified compliance with the Buy America
requirements in good faith, but can no longer comply with its
certification. The Administrator will grant a non-availability waiver
only if the grantee provides sufficient evidence that the original
certification was made in good faith and that the item to be procured
cannot now be obtained domestically due to commercial impossibility or
impracticability. In determining whether the conditions exist to grant
a post-award non-availability waiver, the Administrator will consider
all appropriate factors on a case-by-case basis.
* * * * *
Appendix A to Sec. 661.7--General Waivers
* * * * *
(b) Under the provisions of Sec. 661.7 (b) and (c) of this
part, a general public interest waiver from the Buy America
requirements applies to microprocessors, computers, microcomputers,
or software, or other such devices, which are used solely for the
purpose of processing or storing data. This general waiver does not
extend to a product or device which merely contains a microprocessor
or microcomputer and is not used solely for the purpose of
processing or storing data.
4. Amend Sec. 661.11 by removing and reserving paragraph (s),
adding paragraphs (t)(14) through (t)(22), (u)(18)
[[Page 69427]]
through (u)(30), and (v)(28) through (30), and adding a new Appendix D,
to read as follows:
Sec. 661.11 Rolling stock procurements.
* * * * *
(t) * * *
(14) Cab Signaling;
(15) ATO Equipment;
(16) ATP Equipment;
(17) Wayside Transponders;
(18) Trip Stop Equipment;
(19) Wayside Magnets;
(20) Speed Measuring Devices;
(21) Car Axle Counters;
(22) Communication Based Train Control (CBTC).
(u) * * *
(18) Antennas;
(19) Wireless Telemetry Equipment;
(20) Passenger Information Displays;
(21) Communications Control Units;
(22) Communication Control Heads;
(23) Wireless Intercar Transceivers;
(24) Multiplexers;
(25) SCADA Systems;
(26) LED Arrays;
(27) Screen Displays such as LEDs and LCDs for communication
systems;
(28) Fiber-optic transmission equipment;
(29) Fiber-optic transmission equipment;
(30) Frame or cell based multiplexing equipment; 13) Communication
system network elements.
(v) * * *
(28) Propulsion Control Systems;
(29) Surge Arrestors;
(30) Protective Relaying.
* * * * *
Appendix D to Sec. 661.11-Minimum Requirements for Final Assembly
(a) Rail Cars: In the case of the manufacture of a new,
remanufactured, or overhauled rail car, final assembly would
typically include, as a minimum, installation and interconnection of
the typical Rail Car Components listed in Sec. 661.11, Appendix C,
including but not limited to the following items: car bodies or
shells, chassis, carbody wiring, car-borne power plants or power
pick-up equipment, energy management and storage devices,
articulation equipment, propulsion control equipment, propulsion
cooling equipment, friction brake equipment, energy sources for
auxiliary equipment and controls, heating and air conditioning
equipment, interior and exterior lighting equipment, coupler
equipment and coupler control system, communications equipment,
pneumatic systems, electrical systems, door and door control
systems, passenger seats, passenger interiors, cab interiors,
destination signs, wheelchair lifts (or other equipment required to
permit handicapped access to the rail car), motors, wheels, axles,
gear boxes or integrated motor/gear units, suspensions, truck frames
and chassis. Final Assembly activities shall also include the
inspection and verification of all installation and interconnection
work; and the in-plant testing of the rail car to verify all
functions. In the case of articulated vehicles, the interconnection
of the car bodies or shells shall be included as work to be
performed by the manufacturer as part of vehicle delivery.
(b) Buses: In the case of a new, remanufactured, or overhauled
bus, final assembly would typically include, at a minimum, the
installation and interconnection of the typical Bus Components
listed in Sec. 661.11, Appendix B, including but not limited to the
following items: car bodies or shells, the engine and transmission
(drive train), axles, energy management and storage devices,
articulation equipment, propulsion control system, chassis, and
wheels, cooling system, and braking systems; the installation and
interconnection of the heating and air conditioning equipment; the
installation of pneumatic system and the electrical system, door
systems, passenger seats, passenger grab rails, destination signs,
wheelchair lifts or ramps and other equipment required to make the
vehicle accessible to persons with disabilities, and road testing.
Final Assembly activities shall also include final inspection,
repairs and preparation of the vehicles for delivery. In the case of
articulated vehicles, the interconnection of the car bodies or
shells shall be included as work to be performed by the manufacturer
as part of vehicle delivery.
(c) If a manufacturer's final assembly processes do not include
all the activities that are typically considered the minimum
requirements, it can request a Federal Transit Administration (FTA)
determination of compliance. FTA will review these requests on a
case-by-case basis to determine compliance with Buy America.
Sec. 661.18 [Amended]
5. Amend Sec. 661.18 introductory text by removing ``the
Intermodal Surface Transportation Efficiency Act of 1991'' and in its
place add, ``the Federal Public Transportation Act of 2005''.
Issued in Washington, DC this 22nd day of November, 2006.
James S. Simpson,
Administrator.
[FR Doc. E6-20166 Filed 11-29-06; 8:45 am]
BILLING CODE 4910-57-P