2010-14812. Notice of Buy American Exception Under the American Recovery and Reinvestment Act of 2009

AGENCY:

Rural Housing Service, USDA.

ACTION:

Notice.

SUMMARY:

The Rural Housing Service (RHS) hereby gives notice of a nationwide exception to the Buy American requirements of Section 1605 of the American Recovery and Reinvestment Act of 2009 (“ARRA”) under the authority of Section 1605(b)(1) (public interest waiver) for de minimis incidental components of eligible publicly owned essential community facilities projects using assistance provided under ARRA. This action permits the use of non-domestic iron, steel and manufactured goods when they occur in de minimis incidental components that may otherwise be prohibited under Section 1605(a). As used in this Notice, “de minimis incidental components” means those components otherwise prohibited under Section 1605(a) that cumulatively comprise no more than a total of 5 percent of the total cost of the materials used in a project funded in whole or in part with ARRA assistance.

DATES:

Effective Date: June 18, 2010.

ADDRESSES:

Send any correspondence regarding this notice to William R. Downs, Program Support Staff, Rural Housing Service, U.S. Department of Agriculture, 1400 Independence Avenue, SW., STOP 0761, Washington, DC 20250-0761.

FOR FURTHER INFORMATION CONTACT:

William R. Downs, Program Support Staff, Rural Housing Service, U.S. Department of Agriculture, 1400 Independence Avenue, SW., STOP 0761, Washington, DC 20250-0761, Telephone: [phone], e-mail: [e-mail].

SUPPLEMENTARY INFORMATION:

In accordance with section 1605(c) of ARRA and Section 176.80 of the rules of the Office of Management and Budget (OMB) (2 CFR 176.80), RHS hereby provides notice that it is granting a nationwide exception to Section 1605 the Recovery Act with respect to de minimis incidental components of eligible Community Programs projects funded under ARRA. The basis for this waiver is a public interest determination pursuant to Section 1605(b)(1) of ARRA.

I. Background

The American Recovery and Reinvestment Act of 2009 made funding available to RHS to make direct loans and grants for essential community facilities authorized by Sections 306(a)(1) and (a)(19) of the Consolidated Farm and Rural Development Act (7 U.S.C. 1926(a)(1) and (a)(19), respectively). Section 1605(a) of ARRA, the “Buy American” provision, states that “none of the funds appropriated or otherwise made available by this 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.”

Section 1605(b) of ARRA authorizes the head of a Federal department or agency to waive the Buy American provision by one of the following three determinations: (1) Applying the Buy American provision would be inconsistent with the public interest; (2) the iron, steel, and relevant manufactured 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 iron, steel, and manufactured goods produced in the United States will increase the cost of the project by more than 25 percent.

If a determination is made to waive the requirements of Section 1605(a) based on a finding under Section 1605(b), then Section 1605(c) requires the head of the department or agency to publish a detailed justification in the Federal Register as to why the provision is being waived. Finally, Section 1605(d) requires that the Buy American provision must be applied in a manner consistent with the United States' obligations under international agreements.

II. Public Interest Finding

RHS has determined that, as applied to Community Programs projects, the application of the Buy American restrictions to de minimis situations would be inconsistent with the public interest.

Community Programs projects typically contain a relatively small number of high-cost components incorporated into the project that are iron, steel and manufactured goods, such as electrical and mechanical equipment, concrete and masonry products, wood and steel framing products, interior and exterior materials and finishes, and specialty equipment as well as other relevant materials to build structures for facilities such as community hospitals and clinics, fire stations, police stations and schools. In bid solicitations for Community Programs projects, these high-cost components are generally described in detail in project-specific technical specifications, and public owners and their contractors are generally familiar with the conditions of availability, the potential alternatives for each detailed specification, the approximate cost and, most relevant to this Notice, the country of manufacture of such components.

Every Community Programs project also involves the use of thousands of miscellaneous, generally low-cost components that are essential for, but incidental to, construction of the project. During construction, these components (for example, nuts, bolts, fasteners, screws and nails), are incorporated into the physical structure of the project. For many of these incidental components, the country of manufacture and the availability of alternatives are not always readily or reasonably identifiable prior to procurement in the normal course of business. More importantly, even if for some of these incidental components the country of manufacture may be known, the miscellaneous character of these components, together with their low cost (both individually and when procured in bulk), characterize them as incidental to the facility or project.

RHS finds that it would be inconsistent with the public interest to apply the Buy American requirement to incidental components when they, in total, comprise no more than 5 percent of the total cost of the materials used in and incorporated into a project. While individual components may have the same function (e.g. brackets), the specific manufacturer and configuration may vary from project to project; the analysis and consideration of individual waiver requests for them, including determining whether or not U.S. made products exist; therefore, is expected to be time-consuming and labor intensive far out of proportion to the percentage of total project materials they comprise. Further, since the specific use of these low-cost components can be expected to be widely varied, formulating categorical waivers for specific types of components would be impractical. Because the situations described above, i.e., a high number of low-cost, miscellaneous components, can be effectively addressed by a comprehensive application of a nationwide de minimis waiver.

Rural Development reviewed an industry-wide survey regarding these incidental components prepared by an independent contractor on behalf of the Environmental Protection Agency (EPA). The survey results indicated that the percentage of total costs represented by these incidental components is generally not in excess of 5 percent of the total cost of the materials incorporated into a project. Rural Development then took the added step to verify the EPA findings by making similar inquiries to likely Rural Development project construction contractors to identify the approximate scope and cost of incidental components within these projects. The responses received by Rural Development were consistent with the EPA data.

RHS has decades of experience in financing Community Programs projects in rural America and shares the rationale established by previous de minimis waivers authored by EPA and Rural Utilities Service, with respect to incidental components used in similar projects. Requiring individual waivers for incidental components would be time prohibitive and overly-burdensome for applicants and RHS. The purpose of ARRA is to stimulate economic recovery by funding current public construction. Therefore, a de minimis waiver of incidental components totaling no more than 5 percent of the total cost of the materials used in and incorporated into a project is in the public interest.

III. Waiver

Based on the public interest finding discussed above and pursuant to Section 1605(c), USDA hereby issues a national waiver from the requirements of ARRA Section 1605 for any incidental components of the type described above that comprise in total a de minimis amount of the project, specifically, for any such incidental components up to a limit of no more than 5 percent of the total cost of the materials used in and incorporated into a project.

Assistance recipients who elect to use this waiver shall, in consultation with their contractors, determine the items to be covered by this waiver, retain relevant documentation as to those items in their project files, and be able to summarize in reports to RHS, if so requested, the types and/or categories of items to which this waiver is applied, the total cost of incidental components covered by the waiver for each type or category, and the calculations by which they determined the total cost of materials used in and incorporated into the project.

In using this waiver, assistance recipients must consider that there may be circumstances where there are multiple types of low-cost components which, when combined with the incidental components described above, may total more than 5 percent. Assistance recipients in such cases will have to choose which of these incidental components will be covered by the waiver and which will not. Components that the recipient is unable to include within the 5 percent limit of this waiver must comply with the requirements of Section 1605 of ARRA by appropriate means other than reliance on this waiver.

This supplementary information constitutes the “detailed written justification” required by Section 1605(c) of ARRA and Section 176.80 of the Office of Management and Budget's rules for waivers of the Buy American provisions.

Dated: May 6, 2010.

Dallas P. Tonsager,

Under Secretary, Rural Development.

May 11, 2010.

Thomas Vilsack,

Secretary, Department of Agriculture.