2011-15294. Notice of Buy American Waiver Under the American Recovery and Reinvestment Act of 2009

AGENCY:

National Science Foundation (NSF).

ACTION:

Notice.

SUMMARY:

NSF is hereby granting a limited exemption of section 1605 of the American Recovery and Reinvestment Act of 2009 (Recovery Act), Public Law 111-5, 123 Stat. 115, 303 (2009), with respect to the purchase of the Heating Ventilating and Air Conditioning (HVAC) system steam generators that will be used in the Alaska Region Research Vessel (ARRV). Steam generators provide added humidity for the HVAC system.

DATES:

June 20, 2011.

ADDRESSES:

National Science Foundation, 4201 Wilson Blvd., Arlington, Virginia 22230.

FOR FURTHER INFORMATION CONTACT:

Mr. Jeffrey Leithead, Division of Acquisition and Cooperative Support, 703-292-4595

SUPPLEMENTARY INFORMATION:

In accordance with section 1605(c) of the Recovery Act and section 176.80 of Title 2 of the Code of Federal Regulations, the National Science Foundation (NSF) hereby provides notice that on May 25, 2011, the NSF Chief Financial Officer, in accordance with a delegation order from the Director of the agency, granted a limited project exemption of section 1605 of the Recovery Act (Buy American provision) with respect to the HVAC system steam generators that will be used in the ARRV. The basis for this exemption is section 1605(b)(2) of the Recovery Act, in that HVAC system steam generators of satisfactory quality are not produced in the United States in sufficient and reasonably available commercial quantities. The cost of the six (6) required HVAC system steam generators (~$15,000) represents less than 0.1% of the total $148 million Recovery Act award provided toward construction of the ARRV.

I. Background

The Recovery Act appropriated $400 million to NSF for several projects being funded by the Foundation's Major Research Equipment and Facilities Construction (MREFC) account. The ARRV is one of NSF's MREFC projects. Section 1605(a) of the Recovery Act, the Buy American provision, states that none of the funds appropriated by the Act “may be used for a project for the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States.”

The ARRV has been developed under a cooperative agreement awarded to the University of Alaska, Fairbanks (UAF) that began in 2007. UAF executed the shipyard contract in December 2009 and the project is currently under construction. The purpose of the Recovery Act is to stimulate economic recovery in part by funding current construction projects like the ARRV that are “shovel ready” without requiring projects to revise their standards and specifications, or to restart the bidding process again.

Subsections 1605(b) and (c) of the Recovery Act authorize the head of a Federal department or agency to waive the Buy American provision if the head of the agency finds that: (1) Applying the provision would be inconsistent with the public interest; (2) the relevant goods are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality; or (3) the inclusion of the goods produced in the United States will increase the cost of the project by more than 25 percent. If the head of the Federal department or agency waives the Buy American provision, then the head of the department or agency is required to publish a detailed justification in the Federal Register. Finally, section 1605(d) of the Recovery Act states that the Buy American provision must be applied in a manner consistent with the United States' obligations under international agreements.

II. Finding That Relevant Goods Are Not Produced in the United States in Sufficient and Reasonably Available Quality

Section 512.5.4 of the technical specifications for the ARRV (Rev E., October 2009) require installation of steam generators in the HVAC system. This is necessary to provide needed interior humidity for environmental quality and health of personnel in the dry air of the Polar regions. The HVAC specifications are based on the Society of Naval Architects and Marine Engineers (SNAME) Technical and Research Standard R 4-16 and establish the minimum acceptable standards for a sustained living and work environment at sea. The resulting technical requirements for selecting the HVAC system steam generators include:

1. Maintain 50% relative humidity at the compartment's interior design temperature of 70 °F during winter conditions.

2. Make steam for humidity from the ship's potable water using electricity rather than engine waste heat to save weight with piping systems.

3. Have the required steam generation capacity to maintain the specified level of humidity.

4. Demonstrate a Marine-grade and designed to withstand ship's motions

5. Fit within the required space.

Failure to meet any of these technical requirements would have severe negative consequences for the project. This includes potential nonperformance of the HVAC system and the resulting impacts on human health. It also includes significant added program cost if replacement is required during operations, or if additional space and weight allowances are needed to accommodate non-marine equipment. Given the availability of the steam generators for shore-side commercial applications as described below, the two most important factors quickly became the ability to operate at sea with the ship in motion (heave, pitch, and roll) and for the unit to fit within the available space. If system components are not specifically designed for use on a moving platform they can operate improperly and therefore not meet specification requirements, wear out pre-maturely and require more frequent replacement, or completely malfunction and become a warranty or major re-design issue. Most HVAC components designed for stationary applications ashore simply cannot be used on board ships. Most vendors recognize this and will not accept the risk of installing their systems unless they have experience with marine applications. The cost of the six steam generators required for the design is relatively low ($15,000). If non-compliant units were initially installed, the cost to re-design the system and re-install proper marine units after the compartments are closed and the vessel delivered would likely result in additional costs that exceed the initial costs of the units themselves. Similarly, making space for non-compliant units would also lead to significant additional costs: a change request with the shipyard at this point in construction to re-arrange interior walls and other system components in order to make space for non-compliant units would be expected to cost on the order of $150,000—or roughly 10 times the purchase price of the steam generators themselves.

Space and weight considerations are vitally important for the ARRV to ensure the ship comes within acceptable operational limits for draft (depth from the waterline to the bottom of the keel), freeboard (height from the waterline to the main deck), and stability (the ability for the ship to right itself). Space for installation of system components was carefully considered in all aspects of the design of the ARRV. It is not possible to keep enlarging the spaces, or the vessel itself, without impacting other critical spaces or increasing total project cost. In most instances, it is far more cost-effective to purchase more expensive system components specifically designed for marine applications with size and weight limitations in mind, than to keep making the vessel larger.

The market research for availability of steam generators for the HVAC system was conducted by the shipyard during late 2010 and early 2011. A total of twenty eight (28) possible US manufacturers of commercial-grade steam generators were located. However, all of these manufacturers supplied steam generators for stationary applications in the building industry. Recognizing the special requirements involved related to the limited space and the mobile, marine operating environment, all but one declined to bid. The vendor that chose to submit a quote proposed a unit that had never been proven in a marine application and was too large to fit in the required space.

As noted in UAF's request for this exemption, the shipyard and their HVAC sub-contractor performed market research in late 2010 and early 2011 by reviewing industry publications and the Internet in order to assess whether there exists a domestic capability to provide HVAC system steam generators that meet the necessary requirements. Based on the information acquired, twenty eight (28) potential vendors were sent Request for Quotation (RFQ) packages and all were contacted either by phone or e-mail to determine suitability with regard to marine application and size. This effort reduced the list to one (1) possible US manufacturer. Technical review of the product quoted found that it had never been used in a marine application, was twice the sized required, and was deck-mounted as opposed to bulkhead mounted.

The project's conclusion is that there are no US manufacturers who produce a suitable HVAC system steam generator that meets all of the ARRV requirements, so an exemption to the Buy American requirements is necessary.

In the absence of a domestic supplier that could provide requirements-compliant HVAC system steam generators, UAF requested that NSF issue a Section 1605 exemption determination with respect to the purchase of foreign-supplied, requirements-compliant HVAC system steam generators, so that the vessel will meet the specific design and technical requirements that, as explained above, are necessary for this vessel to be able to perform its mission successfully. Furthermore, the shipyard's market research indicated that HVAC system steam generators compliant with the ARRV's technical specifications and requirements are commercially available from foreign vendors within their standard product lines.

NSF's Division of Acquisition and Cooperative Support (DACS) and other NSF program staff reviewed the UAF exemption request submittal, found that it was complete, and determined that sufficient technical information was provided in order for NSF to evaluate the exemption request and to conclude that an exemption is needed and should be granted.

III. Exemption

On May 25, 2011, based on the finding that no domestically produced HVAC system steam generators met all of the ARRV's technical specifications and requirements and pursuant to section 1605(b), the NSF Chief Financial Officer, in accordance with a delegation order from the Director of the agency signed on May 27, 2010, granted a limited project exemption of the Recovery Act's Buy American requirements with respect to the procurement of HVAC system steam generators.

Dated: June 14, 2011.

Lawrence Rudolph,

General Counsel.