2011-21230. Notice of Regional Waiver Pursuant to Section 1605 (Buy American Requirement) of the American Recovery and Reinvestment Act of 2009, to Mason County, WA

AGENCY:

Environmental Protection Agency (EPA).

ACTION:

Notice.

SUMMARY:

The Regional Administrator of EPA Region 10 is hereby granting a waiver request from the Buy American requirements of ARRA Section 1605 under the authority of Section 1605(b)(1). This waiver request is being granted because EPA believes it is in the public interest to allow Mason County, Washington (the County) to utilize and install six specific turbo aeration blower units as part of the County's Belfair Wastewater and Water Reclamation Facilities project. This is a project specific waiver and only applies to the use of the specified product for the ARRA project being proposed. Any other ARRA recipient that wishes to use the same product must apply for a separate waiver based on project specific circumstances. The Membrane Bioreactor (MBR) system was selected and procured by the County in 2008 using non-ARRA funding and prior to enactment of ARRA. However, since the MBR equipment is being installed by an ARRA funded contract, the new Buy American requirements of ARRA apply. As ARRA was enacted after the County's procurement actions, the County could not be aware of the need to purchase and install a Buy American compliant MBR system and could not reasonably foresee the need for a waiver.

Requiring the installation of domestically manufactured turbo aeration blower units will extend the time frame of the project significantly (by at least four months), due to the redesign, procurement, submittal delivery, submittal review, fabrication, delivery, and replacement of the aeration blower installation at the construction site. Redesign, reconstruction, and replacement of the blowers will likely cost at least an additional $620,000 and could also void the three year manufacturer warranty for the MBR that is valid only if system components identified in the manufacturer's proposal are utilized. A significant delay in the project schedule could push the project past the anticipated September 2011 project completion into the fall rainy season, and could cause runoff over areas of failing septic systems and pose a risk to environmental and water quality protection. This additional cost and delay is inconsistent with the public interest, and a waiver of the Buy American provisions in these circumstances is justified. This action allows the installation of the six specified turbo aeration blower units that have already been delivered to the construction site as noted in Mason County's May 27, 2011, request and additional follow up documentation.

DATES:

Effective Date: August 9, 2011.

FOR FURTHER INFORMATION CONTACT:

Bryan Fiedorczyk, CWSRF ARRA Program Management Analyst, Grants and Strategic Planning Unit, Office of Water & Watersheds (OWW), [phone], U.S. EPA Region 10 (OWW-137), 1200 Sixth Avenue, Suite 900, Seattle, WA 98101.

SUPPLEMENTARY INFORMATION:

In accordance with ARRA Section 1605(c), the EPA hereby provides notice that it is granting a project waiver of the requirements of Section 1605(a) of Public Law 111-5, Buy American requirements, to Mason County, Washington, for the utilization and installation of six specific turbo aeration blower units as part of the County's Belfair Wastewater and Water Reclamation Facilities project. Based on the information provided by the County and its consultant project manager, EPA has determined that it is inconsistent with the public interest for the County to further delay the project and incur significant additional costs to pursue the purchase and installation of domestic manufactured turbo aeration blower units.

Section 1605 of the ARRA requires that none of the appropriated funds may be used for the construction, alteration, maintenance, or repair of a public building or a public works project unless all of the iron, steel, and manufactured goods used in the project are produced in the United States, or unless a waiver is provided to the recipient by the head of the appropriate agency, in this case, the EPA. A waiver may be provided under Section 1605(b) if EPA determines that (1) applying these requirements would be inconsistent with the public interest; (2) iron, steel, and the relevant manufactured goods are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality; or (3) inclusion of iron, steel, and the relevant manufactured goods produced in the United States will increase the cost of the overall project by more than 25 percent.

Consistent with the direction of OMB's regulation at 2 CFR 176.120, the EPA will generally consider a waiver request with respect to components that were specified in the bid solicitation or in a general/primary construction contract or those made after obligating ARRA funds for a project to be a “late” request. However, in this case EPA has determined that the County's request, though made after the date the contract was signed, can be evaluated as timely because of the extenuating circumstances surrounding this on-going project.

The Membrane Bioreactor (MBR) system works using a combination of filtration and biological processes and is a critical component of the treatment process to remove nutrients (nitrogen) and other pollutants from the wastewater. The MBR system is comprised of MBR filtration cassettes, aeration and membrane scouring blowers, and several other auxiliary components integral to the efficient operation of the system. The County decided the MBR process was the most environmentally sound and cost effective solution to treat the wastewater to the “Class A” reuse standards in order to meet the County's water reuse goal and the anticipated regulatory and permit requirements. The MBR system was procured by the County for use at the new wastewater treatment plant prior to enactment of ARRA with non ARRA funding. The KUBOTA Submerged Membrane Unit® system and accompanying MBR components were selected and contracted with Enviroquip (now Ovivo USA) in March 2008 during the early phases of design. The design for the treatment plant was based on this pre-selected MBR equipment and continued until project construction went to bid in late 2009. As a result of a value engineering study during the design process, a change order was signed in October 2009 to incorporate specific components including energy-efficient blowers and feed pumps as part of the MBR system.

Though the MBR equipment was procured by a pre-ARRA contract before ARRA was enacted, the actual installation is being completed through Mason County's ARRA Clean Water State Revolving Fund (CWSRF) loan (#L100026). Due to EPA's ARRA Buy American implementation guidance dated April 28, 2009, that defines a project as all work “closely related in purpose, time and place,” this previously contracted MBR equipment needs to meet Buy American requirements as an integral component of the Belfair Wastewater and Water Reclamation Facilities project. There is not a mechanism authorizing previously contracted, purchased, or owned equipment as exempt from Buy American requirements. As context, the entire project cost is estimated at $28.8 million—$9.6 million is ARRA funded, $3.8 million is paid by an EPA Special Appropriations Act Project grant (for the MBR equipment), and $15.4 million is non-federally funded. The KTurbo blowers, which are the subject of this waiver, are estimated to cost approximately $345,900.

The initial procurement of the MBR system occurred well in advance of ARRA, and the fact that the MBR equipment was not being reimbursed by ARRA funds created a complex situation that State, EPA regional and EPA headquarters staff had to thoroughly review and research to determine the applicability of ARRA. Therefore, it is understandable that the County was unaware of the need to purchase and install a Buy American compliant MBR system and could not reasonably foresee the need for a waiver until recently. Also of note, KTurbo is currently suspended from participating in procurement and nonprocurement transactions pending the termination of the suspension or implementation of a debarment proceeding. However, this suspension does not invalidate transactions entered into prior the suspension date of April 19, 2011. The KTurbo blowers being utilized in the County project were clearly procured well in advance of April 19, 2011, thus the procurement transaction is not covered by the temporary suspension. Additionally, these blowers were identified as Korean/Canadian made and not claimed to be manufactured in the U.S., thus there is no evidence of false claim pertaining to the Mason County project.

The MBR system contract with Enviroquip/Ovivo USA requires 95% payment to the supplier (of the $2.1 million contract) for equipment delivered. Therefore the County would be obligated to pay for at least most of the KTurbo blowers cost, plus an estimated $540,000 extra for replacement domestic blowers, an estimated $80,000 for redesign and reconstruction costs, and up to $30,000 per month for construction delay costs per the prime contractor's agreement. Additionally, the three year warranty for the MBR system identified in the project specifications would be voided, as the manufacturer stipulated the warranty for the MBR system is valid only if system components identified in the manufacturer's proposal are utilized.

Furthermore, not allowing the installation of the six specified turbo aeration blower units that have been delivered to the site could cause a significant time delay to the project. The County would need to completely redesign, procure, and have domestic manufactured turbo aeration blower units delivered to the site. According to the County, the construction completion date could be delayed by four months or more. Of significant note, the County is scheduled to complete the project in September 2011. Increased delays in to the project schedule could push completion into the rainy season, during which the typical wet weather associated with October through January could cause runoff over areas of failing septic systems and pose a risk to environmental and water quality protection.

Finally, the purpose of the ARRA is to stimulate economic recovery by funding current infrastructure construction, not to delay or require the substantial redesign of projects that are “shovel ready”, such as this project in Mason County, Washington. The implementation of the ARRA Buy American requirements in this case would result in an unreasonable delay in its completion. Such delay would also directly conflict with a fundamental economic purpose of ARRA, which is to create or retain jobs. More importantly, the imposition of the Buy American requirement would result in additional risk to water quality protection.

The Grants and Strategic Planning Unit of EPA has reviewed this waiver request and has determined that the supporting documentation provided by the County established a proper basis to specify that using the domestic manufactured good would be inconsistent with the public interest of Mason County, Washington. The March 31, 2009, Delegation of Authority Memorandum provided Regional Administrators with the authority to issue exceptions to Section 1605 of ARRA within the geographic boundaries of their respective regions and with respect to requests by individual grant recipients.

Having established both a proper basis to specify the particular good required for this project and that using a domestically available alternative manufactured good would be inconsistent with the public interest, Mason County, Washington, is hereby granted a waiver from the Buy American requirements of Section 1605(a) of Public Law 111-5. This waiver permits use of ARRA funds for the installation and utilization of the six specified turbo aeration blower units that have already been delivered to the construction site as noted in the County's May 27, 2011 request and additional follow up documentation. This supplementary information constitutes the detailed written justification required by Section 1605(c) for waivers based on a finding under subsection (b).

Authority: Pub. L. 111-5, section 1605.

Dated: August 9, 2011.

Dennis J. McLerran,

Regional Administrator, EPA, Region 10.