[Federal Register Volume 74, Number 152 (Monday, August 10, 2009)]
[Notices]
[Pages 39959-39960]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-19069]


-----------------------------------------------------------------------

ENVIRONMENTAL PROTECTION AGENCY

[FRL-8939-1]


Notice of Revised Nationwide Waiver of Section 1605 (Buy American 
Requirement) of American Recovery and Reinvestment Act of 2009 (ARRA) 
Based on Public Interest for de minimis Incidental Components of 
Projects Financed Through the Clean or Drinking Water State Revolving 
Funds Using Assistance Provided Under ARRA

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice.

-----------------------------------------------------------------------

SUMMARY: The EPA is hereby granting a nationwide waiver of the Buy 
American requirements of ARRA Section 1605 under the authority of 
Section 1605(b)(1) (public interest waiver) for de minimis incidental 
components of eligible water infrastructure projects funded by ARRA 
This action revises the terms under which incidental components qualify 
for coverage under the public interest de minimis waiver signed and 
effective on May 22, 2009, and permits the use of non-domestic iron, 
steel, and manufactured goods when they occur in de minimis incidental 
components of such projects funded by ARRA that may otherwise be 
prohibited under section 1605(a).

DATES: Effective Date: July 24, 2009.

FOR FURTHER INFORMATION CONTACT: Jordan Dorfman, Attorney-Advisor, 
Office of Wastewater Management, (202) 564-0614, or Philip Metzger, 
Attorney Advisor, Office of Ground Water and Drinking Water, (202) 564-
3776, Environmental Protection Agency, 1200 Pennsylvania Avenue, NW., 
Washington, DC 20460.

SUPPLEMENTARY INFORMATION: In accordance with ARRA Section 1605(c), the 
EPA hereby provides notice that it is granting a nationwide waiver of 
the requirements of section 1605(a) of Public Law 111-5, Buy American 
requirements, based on the public interest authority of section 
1605(b)(1), to allow the use of non-domestic iron, steel, and 
manufactured goods when they occur in de minimis incidental components 
of eligible projects for which a Clean or Drinking Water State 
Revolving Fund (SRF) has concluded or will conclude an assistance 
agreement using ARRA funds where such components cumulatively comprise 
no more than a total of 5 percent of the total cost of the materials 
used in and incorporated into a project.
    Among the General Provisions of the American Recovery and 
Reinvestment Act of 2009 (ARRA), Section 1605(a) requires that ``all of 
the iron, steel, and manufactured goods used in'' a public works 
project built with ARRA funds must be produced in the United States, 
unless the head of the respective Federal department or agency 
determines it necessary to waive this requirement based on findings set 
forth in Section 1605(b). In addition, expeditious construction of SRF 
projects is made a high priority by a provision in the ARRA Title VII 
appropriations heading for the SRFs, which states ``[t]hat the 
Administrator shall reallocate funds * * * where projects are not under 
contract or construction within 12 months of'' ARRA enactment (February 
17, 2010). The finding relevant to this waiver is that ``applying 
[ARRA's Buy American requirement] would be inconsistent with the public 
interest'' (1605(b)(l)).
    EPA originally issued this waiver on May 22, 2009. This notice 
revises the terms under which that waiver may be applied, and, in 
accordance with the requirements of Section 1605(c) that all waivers 
granted must include a ``detailed written justification'', adds new 
information and repeats relevant information that continues to justify 
this revised waiver.
    In implementing ARRA section 1605, EPA must ensure that the 
section's requirements are applied consistent with congressional intent 
in adopting this section and in the broader context of the purposes, 
objectives, and other provisions of ARRA applicable to projects funded 
under the Clean Drinking Water State Revolving Funds (SRF), 
particularly considering the SRFs' 12 month ``contract or 
construction'' requirement. Further, in the context of ARRA's SRF 
``contract or construction'' deadline, Congress' overarching directive 
to

[t]he President and the heads of Federal departments and agencies 
[is that they] shall manage and expend the funds made available in 
this Act so as to achieve the purposes [of this Act], including 
commencing expenditures and activities as quickly as possible 
consistent with prudent management. [ARRA Section 3(b)]

    Water infrastructure projects typically contain a relatively small 
number of high-cost components incorporated into the project that are 
iron, steel, and manufactured goods, such as pipe, tanks, pumps, 
motors, instrumentation and control equipment, treatment process 
equipment, and relevant materials to build structures for such 
facilities as treatment plants, pumping stations, pipe networks, etc. 
In bid solicitations for a project, these high-cost components are 
generally described in detail via project specific technical 
specifications. For these major components, utility owners and their 
contractors are generally familiar with the conditions of availability, 
the potential alternatives for each detailed specification, the 
approximate cost, and the country of manufacture of the available 
components.
    Every water infrastructure project also involves the use of 
literally thousands of miscellaneous, generally low-cost components 
that are essential for, but incidental to, the construction and are 
incorporated into the physical structure of the project, such as nuts, 
bolts, other fasteners, tubing, gaskets, etc. For many of these 
incidental components, the country of manufacture and the availability 
of alternatives is not always readily or reasonably identifiable prior 
to procurement in the normal course of business; for other incidental 
components, the country of manufacture may be known but the 
miscellaneous character in conjunction with the low cost, individually 
and (in total) as typically procured in bulk, mark them as properly 
incidental.
    EPA undertook multiple inquiries to identify the approximate scope 
of these de minimis incidental components within water infrastructure 
projects. EPA consulted informally with many major associations 
representing equipment manufacturers and suppliers, construction 
contractors, consulting engineers, and water and wastewater utilities, 
and a contractor performed targeted interviews with several well-
established water infrastructure contractors and firms who work in a 
variety of project sizes, and regional and demographic settings. The 
contractor asked the following questions:

--What percentage of total project costs were consumables or incidental 
costs?
--What percentage of materials costs were consumables or incidental 
costs?
--Did these percentages vary by type of project (drinking water vs. 
wastewater treatment plant vs. pipe)?

    The responses were consistent across the variety of settings and 
project types, and indicated that the percentage of

[[Page 39960]]

total costs for drinking water or wastewater infrastructure projects 
represented by these incidental components is generally not in excess 
of 5 percent of the total cost of the materials used in and 
incorporated into a project. In drafting this waiver, EPA has 
considered the de minimis proportion of project costs generally 
represented by each individual type of these incidental components 
within the hundreds or thousands of types of such components comprising 
those percentages, the fact that these types of incidental components 
are obtained by contractors in many different ways from many different 
sources, and the disproportionate cost and delay that would be imposed 
on projects if EPA did not issue this waiver.
    Subsequent to the issuance of the original public interest de 
minimis waiver on May 22, 2009, EPA has received many, similar waiver 
requests from numerous assistance recipients (located in a few States 
that have issued a substantial number of SRF assistance agreements 
funded by ARRA) on a variety of low-cost components whose national 
origin can be identified. Even as typically procured in bulk (several 
dozen for small projects), the total cost of these components is much 
less than 5 percent of the total materials cost of these projects. 
These types of components would properly be considered subject to the 
previous nationwide public interest de minimis waiver but for the 
requirement in that waiver that the national origin of these low-cost, 
miscellaneous components ``not [be] readily or reasonably identifiable 
prior to procurement in the normal course of business.'' It also 
appears that when EPA inquired of various parties to develop the 
percentage limit on the waiver, the percentages were identified with 
the inclusion of these types of components in mind.
    Due to the diverse characteristics of the specific configurations 
of these individually low-cost components, the analysis and 
consideration of waiver requests for them--and particularly of 
ascertaining whether U.S.-made products exist or can be made to meet 
these diverse configurations--is already becoming a demanding and time-
consuming task far out of proportion to the percentage of total project 
materials cost they comprise. As a rapidly increasing number of States 
begin to issue numerous assistance agreements, EPA recognizes the 
prospect of considering dozens of differently framed waivers in most if 
not all States for each of these types of components, in addition to 
those for major components that are most appropriately the focus of the 
waiver process set forth in Section 1605. Because the established 
practices of specification and use of these low-cost components appear 
to be widely varied by Region and to some extent by State and 
individual recipient, it is unlikely to be practicable to formulate 
categorical waivers for such components, even if justified. If this 
pattern of waiver requests is allowed to expand to a national scale, 
the resources and capacities of the waiver program, for EPA and 
assistance recipients alike, will be so consumed by necessary analysis 
of the minute variations in circumstances among these low-cost items 
that this will become a serious obstacle to ensuring that all 
recipients will be able to sign construction contracts by February 17, 
2010.
    Assistance recipients who do not have their compliance with respect 
to section 1605 clarified may in many cases be unable to sign contracts 
by the February 17, 2010 date, causing these communities to lose their 
ARRA assistance and requiring EPA to reallocate to other States all 
ARRA funds not under contract by that date. This in turn will lead to 
further delay in placing the reallotted funds into other projects, 
which is inconsistent with the public interest and the intent and 
purpose of ARRA. It would be further inconsistent with ARRA to deprive 
of ARRA assistance these States and communities whose funds are 
reallocated due to a waiver process that would have become backlogged 
under the complexity of investigating waiver requests for incidental 
components costing a fraction of the 5 percent of the materials cost of 
a project.
    Under these circumstances, EPA must place the highest priority on 
enabling States and their assistance recipients to meet this February 
17, 2010 deadline set by Congress for the SRFs specifically. As the 
situations described above would be effectively addressed by a more 
comprehensive application of the de minimis waiver, EPA has found that 
it would be inconsistent with the public interest--and particularly 
with ARRA's directives to ensure expeditious SRF construction 
consistent with prudent management, as cited above--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. Accordingly, EPA is hereby issuing 
a national waiver from the requirements of ARRA Section 1605(a) for any 
components described above as incidental that comprise in total a de 
minimis amount of the project, that is, 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 wish to use this waiver should in 
consultation with their contractors determine the items to be covered 
by this waiver, must retain relevant documentation as to those items in 
their project files, and must summarize in reports to the State 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 should consider that 
all SRF-funded construction projects by definition require the 
expenditure of a certain amount of project funds on the literal ``nuts 
and bolts''-type components whose origins cannot readily be identified 
prior to procurement. As described above, EPA has determined the 5 
percent limit based on research and informed professional judgment as 
to the maximum total amount of incidental goods used in most water and 
wastewater projects. In a few, exceptional cases, assistance recipients 
using this waiver may have multiple types of low-cost components which, 
when combined and in conjunction with those literal ``nuts and bolts''-
type components, 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, and will include the 
type and amount of such items covered in the reports to the State as 
required above. Components which the recipient is unable to include 
within the 5 percent limit of this waiver must comply with the 
requirements of section 1605 by appropriate means other than coverage 
under this waiver.
    Therefore, for the foregoing reasons, imposing ARRA's Buy American 
requirements for the category of de minimis incidental components 
described herein is not in the public interest. This supplementary 
information constitutes the ``detailed written justification'' required 
by Section 1605(c) for waivers ``based on a finding under subsection 
(b).''

    Authority: Public Law 111-5, section 1605.

    Dated: July 24, 2009.
Michael H. Shapiro,
Acting Assistant Administrator for Water.
[FR Doc. E9-19069 Filed 8-7-09; 8:45 am]
BILLING CODE 6560-50-P