09/06: FHWA Buy America Policy

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09/06: FHWA Buy America Policy

  1. 1. September 6, 2013 U.S. Department of Transportation Dockets Management Facility Room W12-140 1200 New Jersey Ave. SE Washington, D.C. 20590 Re: Federal Highway Administration, Buy America Policy, Docket No. FHWA-2013-0041 On behalf of the more than 5,000 members of the American Road & Transportation Builders Association (ARTBA), we respectfully offer comments on the Buy America program as it is administered by the Federal Highway Administration (FHWA). ARTBA’s membership includes public agencies and private firms and organizations that own, plan, design, supply and construct transportation projects throughout the country. Our industry generates more than $380 billion annually in U.S. economic activity and sustains more than 3.3 million American jobs. Currently, there is a strong expectation from highway improvement project owners, system users and the traveling public that these projects will be completed safely, efficiently, quickly and at a minimal cost. ARTBA’s highway and bridge contractor-members embrace these challenges, particularly to the extent that contractors can utilize innovation in meeting them. However, construction firms working on federal-aid highway improvement projects face a myriad of federal and state regulatory and compliance requirements. Many of them emanate from statutes and regulations reflecting public policy objectives unrelated to transportation or construction. In some cases, these requirements can result in higher project costs, greater inefficiencies and more delays, while doing little or nothing to achieve the policy objectives in question. With these general concerns in mind, ARTBA and its contractor-members are pleased to provide these comments on FHWA’s administration of the Buy America program. Applicability of Buy America to Miscellaneous Components and Manufactured Products FHWA’s long-standing Buy America policy requires a domestic manufacturing process for any steel or iron products (including protective coatings) that are permanently incorporated into a federal-aid highway construction project.
  2. 2. 2 As FHWA administers this policy and considers revisions to it, ARTBA’s contractor-members urge the agency to carefully consider any administrative or compliance costs that may be added to the process as a result. Unreasonably expansive or opaque interpretations of Buy America coverage can result in increased project costs and other negative effects. In particular, when bidding a project, general contractors incorporate and monetize various types of risk in their bid price. An overly- expansive application of Buy America will cause prime contractors to include increased costs relating to complying with these requirements, including tracking required certifications for all the fixtures and components in a project. Similarly, an unclear interpretation of Buy America coverage will cause many contractors to increase their bid prices under the belief that they will be potentially liable for complying with Buy America beyond a reasonable level. Either way, project costs would likely increase with the bid prices. As an example, in early 2012 numerous ARTBA members and affiliated chapters reported extreme interpretations in particular states of the Buy America waiver for manufactured products. Officials in certain FHWA division offices were reportedly requiring written Buy America certifications and other documentation for nuts, bolts, tie wires and other low-cost, miscellaneous components. Clearly, the administrative costs, project delays, and interrupted payments to contractors far outweighed the public policy achievements of such an interpretation. A recent experience in Michigan, as described in comments submitted to this docket by the Michigan Infrastructure & Transportation Association (an ARTBA affiliate chapter), showed the damaging economic ramifications of this approach. These included payments withheld from contractors pending the presentation of highly-detailed certification documents and a project deleted from a letting because of similar concerns. To its great credit, FHWA sought to rectify these outlying interpretations following an ongoing dialogue with ARTBA and various other stakeholder groups during much of 2012. Accordingly, the agency issued a memorandum on December 21, 2012 (HIPA-30), clarifying the applicability of the waiver to manufactured products. The memorandum stated – correctly – that these extreme interpretations of Buy America policy were inconsistent with FHWA’s 1983 waiver decision on this issue, and would not be cost-effective to administer. It restated the long- standing policy that miscellaneous steel or iron components, subcomponents and hardware, as well as manufactured products not predominantly made with iron or steel, are excluded from Buy America requirements for federal-aid highway projects. ARTBA’s contractor-members continue to support the clarifications presented in HIPA-30 and note this document has – to our knowledge – quieted the concerns and inconsistent interpretations that grew throughout 2012. We strongly urge FHWA to retain these explicit clarifications in any revised Buy America policy statements. Applicability of Buy America to Utility and Railroad Contracts FHWA has recently issued guidance interpreting the Buy America provision (Section 1518) in the Moving Ahead for Progress in the 21st Century Act (MAP-21), passed by Congress and signed by the president in 2012. The agency believes that Buy America coverage now extends to
  3. 3. 3 all construction, utility and railroad contracts relating to a federal-aid highway project, no matter the specific source of funding for a particular contract. However, this interpretation does not appear to contemplate an increased level of oversight (and related resources) by FHWA of federal-aid projects. This means the agency will need to somehow determine Buy America compliance on many utility and railroad contracts it would not review through its customary oversight responsibilities. The risk for prime contractors is obvious as project owners (i.e. state or local departments of transportation) and contractors will seek to comply to the extent possible, but FHWA may make a different determination at a later date through some sort of audit or late-stage review. Similarly, owners may delay construction of a project if there is uncertainty about the Buy America compliance of the utility or railroad contract. Delays and increased costs can easily result, to the detriment of the taxpayer. Another area of concern relating to utility contracts, of which FHWA is extremely aware, is the longstanding supply chains for utility companies, most of which have not previously needed to comply with Buy America. FHWA has recognized this difficulty by delaying the compliance date for this utility provision, but we are afraid this is merely a temporary reprieve for all parties who will soon have to deal with an entirely new area of Buy America coverage. Utility relocations are a notoriously difficult facet of highway construction projects, and this interpretation of Buy America will make many of them even more problematic. Applicability of Buy America to Construction Equipment In seeking comments on Buy America, FHWA inquires about its applicability to construction equipment purchased with Construction Mitigation and Air Quality (CMAQ) Improvement Program funds. The agency notes that state and local governments are purchasing more vehicles and equipment with clean fuel technologies under the guise of the CMAQ program. However, discussion questions 5 and 6 refer to vehicles, equipment and vehicle retrofits more generally, perhaps exceeding the scope of the earlier narrative in the context of CMAQ. To be clear, ARTBA strongly cautions against any interpretation of Buy America that would cover contractors’ vehicles and equipment. The related costs and administrative challenges would engulf the construction process. Minimum Threshold Provisions Finally, ARTBA’s contractors continue to support the Buy America program’s minimum threshold provisions and would also support periodic upward adjustments. The rationale is similar to that expressed for excluding miscellaneous components from coverage—without the minimum use threshold, compliance costs would far outweigh policy achievement. ARTBA’s contractor-members support clarity and reasonableness in Buy America policy. This will help the industry build projects as efficiently as possible, which is critical in these fiscally constrained times. It is also consistent with FHWA’s significant efforts to accelerate project delivery, such as through the Every Day Counts initiative. Extreme interpretations of Buy America can lead to a dysfunction in compliance, which in turn can delay projects and undercut
  4. 4. 4 the efforts of FHWA, state agencies and contractors to meet and exceed the public’s expectations. We appreciate this opportunity to offer comments on the Buy America program. ARTBA also commends FHWA for its ongoing dialogue on Buy America issues. This is a policy area in which key FHWA officials have shown a willingness to discuss the latest developments with ARTBA members. These types of exchanges benefit all concerned, and we would recommend further dialogue on these issues when this comment period closes, perhaps in live discussion. Numerous ARTBA members would be pleased to participate. Thank you for your consideration of these comments. Sincerely, T. Peter Ruane President & C.E.O

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