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Buy America Act and Transit Projects

Other Key Information

1. Buy America(n) Essentials

1.1 American Recovery and Reinvestment Act

1.2 Canada-U.S. Agreement on Government Procurement

1.3 Sector Specific Information

1.4 Exceptions and Waivers

Most transit projects (e.g. construction of subway systems, procurement of ferries, etc.) are funded by the Federal Transit Administration (FTA) with money from the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (known as SAFETEA-LU). This funding brings with it Buy America restrictions that require all iron, steel and manufactured products used in the project to be made in the U.S. All steel and iron manufacturing processes must take place in the U.S., except metallurgical processes involving refinement of steel additives. For manufactured products to be considered produced in the U.S., all manufacturing processes for the product must take place in the U.S., and all components must be of U.S. origin.

Companies pursuing transit procurements funded with federal money should familiarize themselves with provisions of FTA Circular 4220.1E Third Party Contracting Requirements and Title 49 Part 661 of the Code of Federal Regulations (CFR).

Additionally, Canada and the United States have recently signed a government procurement agreement that gives Canadian companies access to certain state level procurement.

Procurement

Someone wants to use your service or product on a transportation project in the United States. It might mean a big contract, but would it result in good business? It can for firms that identify and address potential problems at the start. Here's why:

Federal funding of transit projects

Over 80% of state and local transportation project receive funds from one or more U.S. federal departments or agencies. If the project authority receives ANY funding from U.S. Department of Transportation (DOT) agencies, the transit authority that receives the grant must:

How to find out:

Beating Buy America

To meet Buy America requirements, rolling stock (this includes busses, subways, light rail, commuter rail, monorail, passenger ferryboats, trolleys, inclined railways, and people movers) requirements are:

The FTA realizes that U.S. suppliers are not capable of fulfilling all manufacturing needs and will grant waivers to allow the use of foreign materials. Depending on the type of waiver sought, waivers must be requested by the grantee, the prime contractor, or suppliers and should be sought early in the bidding process. Waivers may be granted on one of the following grounds:

General waivers exist for some products, e.g. microprocessors and software.

Buy America doesn't always mean "complete prohibition." Sometimes it does, but other times, many Canadian firms overcome such, American content and manufacturing requirement restrictions and succeed in providing products and professional services on U.S. federal-funded public transportation projects.

Keys to Buy America success

Your nearest Canadian Trade Commissioner – In Canada or Abroad, can assist firms in planning to effectively:

Types of contracts for Canadian firms

In federally-funded prime contracts under US$100,000 no Buy America provisions apply – Canadian goods and services may be provided without any special waivers. If a state or local government wants to include state or local preferences in a transit contract, it's not eligible for federal funds.

In rolling stock procurements (e.g. rail cars, busses, vans, ferries, other vehicles) grant recipients must certify whether or not their project meets Buy America requirements, as noted in regulations 49 CFR Subpart 661.12. According to regulations, either condition "a" or condition "b" must be certified:

  1. The cost of components produced in the U.S. must be more than 60% of the cost of all components; and final assembly is done in the United States.

    or

  2. The grant recipient (and contractors and subcontractors involved in the grantee's project) must provide a certificate of compliance or the ultimate buyer (usually the transit authority) obtains a waiver of the Buy America requirement to permit inclusion of specified Canadian products.

Buy America waivers

BAA waiver requests are fairly common in rolling stock procurements. The FTA's Washington, D.C. office, can advise grant recipients on foreign content issues.

To request a waiver, the grant recipient, contractor and subcontractor involved must:

The Administrator of the FTA may waive Buy America provisions at the request of the grant recipient based on:

Work in which Canadian participation may be difficult

Federally-funded transit-related projects other than rolling stock (e.g. bus shelters, subway station elevators). These projects require both:

The conditions for waivers are the same as for rolling stock, but are much less commonly granted (detailed rules: 49 CFR Part 661).

The rolling stock calculation

In response to many questions involving the "60%" calculation, the FTA issued a "Dear Colleague" letter on 30 March 2001 to address the issue. A simple calculation to illustrate the point follows:

Assume that the aggregate cost of all components of a bus is $100. In order to comply with Buy America, more than $60 worth of the components must be of domestic origin. To determine which components count as domestic, the origin of the components must be reviewed. If a component has a cost of $10 and more than $6 worth of its subcomponents are manufactured in the US, then the entire $10 cost of the component is considered domestic and counts toward the required domestic content of more than $60.

The Buy America analysis begins with the identification of the end product being procured. From that determination flows the discussion of which items are components and which are subcomponents and whether the procurement is governed by the general requirements found at 49 CFR Subpart 661.5 or the rolling stock requirements found at 49 CFR Subpart 661.11. An end product is "any item that is to be acquired by a grantee as specified in the overall project contract." 49 CFR Subpart 661.11(s). If a grantee is procuring a new rail car, the car is the end product and the traction motor would be a component of the end product. If that same grantee procures a replacement traction motor for an existing rail car, then the traction motor would be the end product for purposes of Buy America analysis.

Issues specific to Amtrak

The National Railroad Passenger Corporation (Amtrak) is a passenger railroad, owned by the United States government through the U.S. Department of Transportation (DOT). Amtrak was incorporated in 1971 pursuant to the Rail Passenger Service Act of 1970 and is authorized to operate a nationwide system of passenger rail transportation.

As a recipient of federal assistance, Amtrak is required to conduct contracting and procurement activities involving FTA funds in conformance with the fundamental principles of competitive procurement which requires full and open competition, as stated in the Office of Management and Budget Circular A-102, Grants and Cooperative Agreements with State and Local Governments, and its implementing common rule which is codified by the DOT in 49 CFR Part 18. This is a guiding principle in all federally funded procurements and is intended to ensure that a grantee obtains its minimum needs at a fair and reasonable price and that all responsible sources have an opportunity to compete.

Amtrak is a for-profit corporation and not a department, agency or instrumentality of the U.S. government. On contracts worth over US$1.0 million, Amtrak is legally obliged to purchase only :

The Secretary of Transportation may exempt Amtrak from these requirements if:

Amtrak entered into various agreements with states, cities and other local transportation authorities and private companies for railroad facility and infrastructure improvements and for the remanufacture and supply of railroad passenger equipment. Amtrak has a current commitment of approximately US$32.0 million for infrastructure improvements whose term extends through project completion.

Minority and disadvantaged business enterprise

The U.S. Federal government requires grant recipients to foster participation by American minority business enterprises and small disadvantaged business in funded projects.

Canadian firms legally do not qualify for business reserved under such programs. However, if a Canadian firm is pursuing a place on a project team, and the prime contractor proposes to give to a minority business enterprise all, or a portion of work that you propose to bid, as a Canadian firm you might consider:

For more information:

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