Mr. Evan M. Eisland
Senior Vice President, General Counsel, and Secretary
Metropolitan Transportation Authority
Capital Construction Company
2 Broadway, A8.96
New York, NY 10004
Re: Buy America Compliance Second Avenue Subway Project
Dear Mr. Eisland:
It has come to my attention that the Metropolitan Transportation Authority (MTA) plans to install foreign-made concrete blocks as part of a "Low Vibration Track" (LVT) System for the Second Avenue Subway Project. I write to memorialize my comments during the Federal Transit Administration's (FTA) Executive Meeting with MIA's Capital Construction Company on May 16, 2013, and to instruct MTA on how to comply with FTA's Buy America rules.
Background
In the Final Environmental Impact Statement and the Record of Decision for the Second Avenue Subway Project, FTA and MTA identified operational noise and vibration as significant adverse impacts on the future Second Avenue Subway Line. To mitigate these impacts, MTA agreed to install resilient track fasteners, track support structures, or other similar measures along the subway line. MTA agreed to implement these mitigation measures as a condition to receiving $1.3 billion in FTA's Section 5309 "New Starts" funds when it executed the Full Funding Grant Agreement (FFGA) for the Project on January 10, 2008.
As a means of implementing these mitigation measures, MTA is installing an LVT System with specialized concrete blocks that will reduce vibration, reduce noise, and provide riding comfort for passengers utilizing the future Second Avenue Subway Line. MTA has procured these blocks through its "Track, Power, Signals and Communication Systems" Contract C-26009, otherwise referred to as contract "C-6." MTA used FTA's "New Starts" funds under 49 U.S.C. §5309 to support this procurement through Grant NY-03-0408-08.
The concrete blocks purchased by MTA consist of the following four components:
- An individual concrete block which is manufactured in the United States;
- A pad which is manufactured in Austria;
- A rubber boot which is manufactured in Costa Rica; and
- A plastic insert which is manufactured in the United States.
Once assembled, a concrete block is ready for installation on an LVT System.
Through its Certificate of Compliance with Buy America Requirements, MTA's contractor, Comstock/Skanska, certified that it would comply with FTA's Buy America requirements of 49 U.S.C. § 5323(j), as implemented at 49 C.F.R. Part 661.
Legal Framework for Buy America
Pursuant to FTA's authorizing statute at 49 U.S.C. § 5323(j)(1), FTA may not obligate funds for a "project" unless "the steel, iron, and manufactured goods used in the project are produced in the United States." The purpose of this requirement is to preserve and create jobs in the United States by ensuring that taxpayer-funded projects promote domestic manufacturing.
FTA has promulgated regulations that implement this statutory requirement. Pursuant to those regulations at 49 C.F.R. § 661.5, all "manufactured end products" must be produced in the United States. For a manufactured end product to be produced in the United States, "[a]ll of the manufacturing processes for the product must take place in the United States," and "all of the components must be of U.S. origin." [1] FTA considers a component to be of U.S. origin "if it is manufactured in the United States, regardless of the origin of its subcomponents." [2]
FTA defines a manufactured "end product" as "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)." [3] FTA defines "component" as "any article, material, or supply, whether manufactured or unmanufactured, that is directly incorporated into the end product at the final assembly location." [4]
In 2005, FTA initiated a rulemaking to amend its Buy America regulations by adding a "representative list" of manufactured end products. In 2007, FTA issued its Final Rule. Pursuant to that Final Rule, the representative list "was not meant to be all-inclusive, instead describe[ed] general 'representative' categories of end products consistent with the legislation." [5] FTA included on its representative list "infrastructure projects not made primarily of steel or iron, including ... ties and ballast." [6]
Additionally, in the Final Rule, FTA clarified that it takes a "non-shifting approach" to analyzing Buy America issues. [7] Instead of analyzing the issues on a contract-by-contract basis, FTA adopts the same categorization of manufactured goods as end products, components, or subcomponents for all FTA-funded projects. This non-shifting application ensures consistency from contract to contract, project to project, and from region to region across the country.
MTA agreed to be bound by these requirements through its execution of the FFGA for the Project and through FTA's Master Agreement.
Application of FTA's Buy America Requirements to the Concrete Blocks
The threshold issue in this case is whether the concrete blocks are manufactured end products. To be a manufactured end product, the good must satisfy a three-part test: (1) it must be a product that directly incorporates constituent components, (2) it must be acquired for public use, and (3) it must be ready to provide its intended use when assembled.
In this case, the concrete blocks directly incorporate four parts when they are assembled—an individual concrete block, a pad, a rubber boot, and a plastic insert. The blocks are being used for the expansion of public transportation on the New York City subway system. Once assembled, the blocks do not need any additional changes to perform their main function of absorbing noise and vibration from trains moving over track.
Furthermore, in its representative, non-exclusive list of manufactured end products, FTA includes "ties and ballast," with both "ties" and "ballast" being treated as separate manufactured end products. "Ties" have the same functionality as concrete blocks. Each item supports track, with the latter technology providing improved absorption of noise and vibration. Thus, as with "ties," FTA has categorized concrete blocks as manufactured end products.
Because the concrete blocks are manufactured end products, each of its parts is considered to be a component. Consequently, the individual concrete block, the pad, the rubber boot, and the plastic insert must be produced in the United States.
Two components—the pad and the rubber boot—are not manufactured in the United States. Since the pad is manufactured in Austria and the rubber boot is manufactured in Costa Rica, FTA finds that the blocks that MTA intends to use on the Second Avenue Subway Project are not compliant with FTA's Buy America requirements.
I understand that MTA's staff has reached out to the industry and researched whether a United States manufacturer is capable and willing to produce the pad and the rubber boot components of the concrete blocks. Based on this research, MTA has taken the position that no manufacturer in the United States is capable and willing to produce these components. In light of these assertions, FTA is willing to entertain a non-availability waiver request from MTA pursuant to 49 C.F.R.§ 661.7(c) for the pad and the rubber boot components of the concrete blocks for the Second Avenue Subway Project. I must emphasize, a willingness to entertain a request should not be construed as a guarantee that a waiver will be granted.
If MTA submits a waiver request, then please ensure that the request includes, at a minimum, the following information: (1) the history of the procurement, including the technical specifications for the concrete blocks; (2) the technical feasibility of using other replacement parts manufactured in the United States; and (3) MTA's market research demonstrating the extent to which manufacturers in the United States are capable and willing to produce the pad and the rubber boot.
Please note that under FTA's most recent authorizing legislation, the Moving Ahead for Progress in the 21st Century Act (MAP-21), Congress included a provision at 49 U.S.C. § 5323G)(3)(A) which requires FTA to publish a notice of proposed waivers in the Federal Register. FTA must provide the public with a reasonable period of time for notice and comment. Depending on the responses to the notice, FTA has the discretion to grant or deny the waiver request.
If FTA grants MTA a non-availability waiver for the pad and the rubber boot on the Second Avenue Subway Project, then that waiver will be limited to this procurement. Subsequent waivers would be conditioned on MTA's good faith efforts to identify United States manufacturers for the pad and the rubber boot, and MTA's good faith efforts to encourage the production of these components in the United States through its solicitations on future projects.
Finally, I must note, because FTA is statutorily charged with applying its Buy America requirements to an entire "project," MTA may not segment its concrete block procurement from the Second Avenue Subway Project to comply with Buy America.
If you have any questions or concerns regarding this matter, please do not hesitate to contact me by telephone at (212) 668-2170 or by electronic mail at Michael.Culotta@dot.gov.
Sincerely,
Michael L. Culotta
Regional Counsel
Cc: Dr. Michael Horodniceanu, MTA
Dorval R. Carter, Jr., FT A
Marilyn G. Shazor, FT A
Dan Creighton, FT A
[1] 49 C.F.R.§ 661.5(d) (2012).
[2] 49 C.F.R. § 661.5(d)(2).
[3] 49 C.F.R.§ 66!.3.
[4] 49 C.F.R.§ 661.3.
[5] 72 Federal Register 53,693 (September 20, 2007).
[6] 49 C.F.R. Appendix A to § 661.3.
[7] 72 Federal Register 53,692.