Introduction
This is the third in our series of Build America, Buy America (“BABA”) compliance at the U.S. Department of Transportation (“DOT”). See Smith Currie Oles’ previous FHWA and FAA BABA posts. Like other DOT agencies, the Federal Transit Administration (“FTA”) has implemented BABA requirements to promote domestic manufacturing, support American workers, and ensure that federal investments in infrastructure projects deliver maximum benefit to the U.S. economy. Because agencies had existing Buy America requirements prior to BABA, BABA’s requirements apply only to the extent that an agency does not already apply Buy America preferences to iron and steel, manufactured products, and construction materials.
For instance, FTA’s existing regulations exceed BABA domestic preference requirements for manufactured products and rolling stock as described below. This fact can create confusion when contractors certify BABA compliance. What follows is practical guidance to include a comprehensive overview of the key compliance obligations, certification processes, and waiver provisions under FTA regulations.
The application of these FTA and BABA requirements has significant implications for project costs, procurement timelines, and administrative burdens to include:
Increased Costs
The use of domestic products and services may be more expensive, and the administrative effort required to ensure compliance or secure waivers can be substantial;
Early Engagement
Contractors must engage with their supply chains early and in detail to obtain the necessary information for compliance or waiver requests;
Heightened Scrutiny
The FTA is closely monitoring compliance, and the risk of enforcement actions or funding delays is real for those who fail to meet the requirements; and
Documentation and Recordkeeping
Contractors must maintain comprehensive records of their compliance efforts, waiver applications, and communications with suppliers and the FTA.
Core BABA Requirements for FTA Projects
BABA imposes domestic production requirements on three primary categories of materials:
- Iron & Steel
- Manufactured Products
- Construction Materials
FTA requirements remain consistent with prior domestic FTA procurement standards for iron and steel materials: all manufacturing processes must occur in the U.S., except for metallurgical processes involving refinement of steel additives. 49 C.F.R. § 661.5. Specifically, all manufacturing processes for these materials, including the application of coating, must occur in the U.S. Similarly, for manufactured products all the manufacturing processes must take place in the U.S., and all components of the product must be of U.S. origin. Id. However, a component is considered of U.S. origin if it is manufactured domestically, regardless of the origin of its subcomponents. 49 C.F.R. 661.5(d).
The FTA implements BABA’s “construction materials” requirement that articles, materials, or supplies that (1) consist of non-ferrous metals, plastic and polymer-based products, glass, lumber, and drywall and (2) are consumed in, incorporated into, or affixed to the infrastructure project be produced in the U.S. Office of Mgmt. & Budget Memorandum M-24-02: Implementation Guidance on Application of Buy America Preference in Federal Financial Assistance Programs for Infrastructure. This requirement, however, does not apply to materials brought to the construction site and removed before completion, like tools and temporary scaffolding.
Rolling Stock Exception
For the FTA, a notable exception exists for rolling stock (such as buses and railcars) under its domestic preference rules. Rolling stock components may be exempt from FTA requirements if more than 70 percent of the cost of all components is attributable to U.S.-produced components and final assembly occurs in the United States. 49 U.S.C. § 5323(j)(2)(C)(III.) These requirements apply to all federally funded state and local transit projects, and compliance is closely scrutinized by the FTA.
Certification and Compliance Procedures Require Early Communication with Subs and Suppliers
Bidders must certify at the time of bid submission whether they can comply with FTA regulations, or whether they may qualify for an exception. If a contractor cannot certify compliance, it must submit a certificate of non-compliance and be prepared to request a waiver from the FTA in a timely manner. While there is no exact timing requirement for waiver submissions, contractors should contact the FTA as soon as it becomes apparent that a waiver may be necessary.
This process requires contractors to gather detailed information from subcontractors and suppliers—often including those several tiers down the supply chain—early in the procurement process. Failure to comply or timely request a waiver can jeopardize contract awards and project funding.
FTA Waivers: Types and Considerations
The FTA may grant waivers to BABA requirements under limited circumstances, as set forth in 49 C.F.R. § 661.7 and § 661.9. The waiver process is rigorous and subject to close scrutiny by the FTA. There are four primary waivers, commonly referred to as Types 1, 2, 3, and 4.
Type 1: Public Interest Waiver
A Type 1 waiver may be granted when the FTA determines that the application of domestic preference requirements would be inconsistent with the public interest. For example, if strict adherence would significantly delay a critical infrastructure project, the FTA may find that a public interest waiver is warranted.
Type 2: Non-Availability Waiver
A Type 2 waiver may be issued when the required items are not produced in the United States in sufficient and reasonably available quantities or of satisfactory quality. This waiver is particularly relevant for specialized or technologically advanced components that may not be manufactured domestically.
Type 3: Price Differential Waiver
A Type 3 waiver is available when the inclusion of domestic materials would increase the overall project cost by more than 25 percent. This waiver is designed to prevent situations where the cost premium associated with domestic sourcing would make a project economically unfeasible.
Type 4: FTA Specific Rules Rolling Stock and Associated Equipment Waiver
Type 4 waivers are specific to FTA and rolling stock and associated equipment, such as buses, railcars, and related components. Rolling stock components may be exempt from the strict domestic production requirements if more than 70 percent of the cost of all components is attributable to U.S.-produced components and final assembly occurs in the United States, or if including domestic material will increase the cost of the overall project by more than 25 percent.
Waiver Application Process and Documentation
Regardless of the type of waiver sought, the application process is rigorous and time sensitive. Contractors must submit comprehensive documentation supporting their waiver request, including:
- Detailed descriptions of the products or materials for which the waiver is sought
- Evidence supporting the basis for the waiver (e.g., market analysis for non-availability, cost analysis for price differential)
- Information on efforts made to source domestically
- Any additional information requested by the FTA
Waiver requests must be submitted in a timely manner if the contractor cannot certify compliance at the time of bid.
Strategic Considerations for Navigating FTA Compliance
Given the complexity and rigor of FTA BABA compliance, contractors and suppliers should consider the following strategies:
Start Early
Begin gathering information from all tiers of the supply chain as soon as possible. Early engagement is critical to ensuring compliance or determining whether a waiver may be necessary.
Develop Internal Protocols
Establish clear internal processes for tracking compliance, collecting documentation, and preparing waiver applications. Designate responsible personnel and provide training on FTA requirements.
Engage Legal and Compliance Experts
Given the evolving regulatory landscape, consult with legal counsel and compliance professionals who are experienced in federal procurement and domestic preference laws.
Monitor Regulatory Developments
The regulatory environment is dynamic, and new interpretations or requirements may emerge. Smith Currie Oles’ newsletter regularly highlights these changes. You can sign up to receive our newsletter here.
Conclusion
The FTA’s domestic preference regulations as updated under BABA have far-reaching consequences for contractors, subcontractors, and suppliers involved in federally funded transit projects. The waiver provisions—encompassing public interest, non-availability, price differential, and rolling stock waivers—offer important, but limited, avenues for relief from the FTA’s strict requirements. FTA’s requirements for manufactured products and rolling stock are stricter than BABA’s statutory requirements.
For more information and any questions, please contact the Smith Currie Oles domestic preference team members, Howard Roth (hwroth@smithcurrie.com), Jake Scott (jwscott@smithcurrie.com), or Robin Kovis (rkovis@smithcurrie.com).
Watt Tieder is one of the largest construction boutique law firms in the United States, with a diverse and experienced team of attorneys representing many of the world’s leading corporations, developers and contractors on both domestic and international projects. We represent more than half of the Top 30 Engineering News Record contractors and most of the nation’s top sureties. With offices in six cities in the United States, the firm is a dynamic, mid-size boutique that provides knowledgeable and practical legal representation to the construction, surety, government contracts and bankruptcy industries world-wide.
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