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35–914 PDF 2007

BUY AMERICA

(110–32)

HEARING

BEFORE THE

SUBCOMMITTEE ON 

HIGHWAYS AND TRANSIT

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

APRIL 24, 2007

Printed for the use of the 

Committee on Transportation and Infrastructure

(

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

JAMES L. OBERSTAR, Minnesota, Chairman 

NICK J. RAHALL, II, West Virginia 

PETER A. DEFAZIO, Oregon 

JERRY F. COSTELLO, Illinois 

ELEANOR HOLMES NORTON, District of 

Columbia 

JERROLD NADLER, New York 

CORRINE BROWN, Florida 

BOB FILNER, California 

EDDIE BERNICE JOHNSON, Texas 

GENE TAYLOR, Mississippi 

ELIJAH E. CUMMINGS, Maryland 

ELLEN O. TAUSCHER, California 

LEONARD L. BOSWELL, Iowa 

TIM HOLDEN, Pennsylvania 

BRIAN BAIRD, Washington 

RICK LARSEN, Washington 

MICHAEL E. CAPUANO, Massachusetts 

JULIA CARSON, Indiana 

TIMOTHY H. BISHOP, New York 

MICHAEL H. MICHAUD, Maine 

BRIAN HIGGINS, New York 

RUSS CARNAHAN, Missouri 

JOHN T. SALAZAR, Colorado 

GRACE F. NAPOLITANO, California 

DANIEL LIPINSKI, Illinois 

DORIS O. MATSUI, California 

NICK LAMPSON, Texas 

ZACHARY T. SPACE, Ohio 

MAZIE K. HIRONO, Hawaii 

BRUCE L. BRALEY, Iowa 

JASON ALTMIRE, Pennsylvania 

TIMOTHY J. WALZ, Minnesota 

HEATH SHULER, North Carolina 

MICHAEL A. ACURI, New York 

HARRY E. MITCHELL, Arizona 

CHRISTOPHER P. CARNEY, Pennsylvania 

JOHN J. HALL, New York 

STEVE KAGEN, Wisconsin 

STEVE COHEN, Tennessee 

JERRY MCNERNEY, California 

VACANCY 

JOHN L. MICA, Florida 

DON YOUNG, Alaska 

THOMAS E. PETRI, Wisconsin 

HOWARD COBLE, North Carolina 

JOHN J. DUNCAN, JR., Tennessee 

WAYNE T. GILCHREST, Maryland 

VERNON J. EHLERS, Michigan 

STEVEN C. LATOURETTE, Ohio 

RICHARD H. BAKER, Louisiana 

FRANK A. LOBIONDO, New Jersey 

JERRY MORAN, Kansas 

GARY G. MILLER, California 

ROBIN HAYES, North Carolina 

HENRY E. BROWN, JR., South Carolina 

TIMOTHY V. JOHNSON, Illinois 

TODD RUSSELL PLATTS, Pennsylvania 

SAM GRAVES, Missouri 

BILL SHUSTER, Pennsylvania 

JOHN BOOZMAN, Arkansas 

SHELLEY MOORE CAPITO, West Virginia 

JIM GERLACH, Pennsylvania 

MARIO DIAZ-BALART, Florida 

CHARLES W. DENT, Pennsylvania 

TED POE, Texas 

DAVID G. REICHERT, Washington 

CONNIE MACK, Florida 

JOHN R. ‘RANDY’ KUHL, JR., New York 

LYNN A WESTMORELAND, Georgia 

CHARLES W. BOUSTANY, JR., Louisiana 

JEAN SCHMIDT, Ohio 

CANDICE S. MILLER, Michigan 

THELMA D. DRAKE, Virginia 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

(II)

SUBCOMMITTEE ON HIGHWAYS AND TRANSIT 

PETER A. DEFAZIO, Oregon, Chairman 

NICK J. RAHALL II, West Virginia 

JERROLD NADLER, New York 

ELLEN O. TAUSCHER, California 

TIM HOLDEN, Pennsylvania 

MICHAEL E. CAPUANO, Massachusetts 

JULIA CARSON, Indiana 

TIMOTHY H. BISHOP, New York 

MICHAEL H. MICHAUD, Maine 

BRIAN HIGGINS, New York 

GRACE F. NAPOLITANO, California 

MAZIE K. HIRONO, Hawaii 

JASON ALTMIRE, Pennsylvania 

TIMOTHY J. WALZ, Minnesota 

HEATH SHULER, North Carolina 

MICHAEL A ARCURI, New York 

CHRISTOPHER P. CARNEY, Pennsylvania 

JERRY MCNERNEY, California 

BOB FILNER, California 

ELIJAH E. CUMMINGS, Maryland 

BRIAN BAIRD, Washington 

DANIEL LIPINSKI, Illinois 

DORIS O. MATSUI, California 

STEVE COHEN, Tennessee 

ZACHARY T. SPACE, Ohio 

BRUCE L. BRALEY, Iowa 

HARRY E. MITCHELL, Arizona 

VACANCY 

JAMES L. OBERSTAR, Minnesota 

(Ex Officio) 

JOHN J. DUNCAN, JR., Tennessee 

DON YOUNG, Alaska 

THOMAS E. PETRI, Wisconsin 

HOWARD COBLE, North Carolina 

RICHARD H. BAKER, Louisiana 

GARY G. MILLER, California 

ROBIN HAYES, North Carolina 

HENRY E. BROWN, JR., South Carolina 

TIMOTHY V. JOHNSON, Illinois 

TODD RUSSELL PLATTS, Pennsylvania 

JOHN BOOZMAN, Arkansas 

SHELLEY MOORE CAPITO, West Virginia 

JIM GERLACH, Pennsylvania 

MARIO DIAZ-BALART, Florida 

CHARLES W. DENT, Pennsylvania 

TED POE, Texas 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

JEAN SCHMIDT, Ohio 

CANDICE S. MILLER, Michigan 

THELMA D. DRAKE, Virginia 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

JOHN L. MICA, Florida 

(Ex Officio) 

(III)

(V)

CONTENTS Page

Summary of Subject Matter .................................................................................... vi

TESTIMONY 

Capka, Hon. J. Richard, Administrator, Federal Highway Administration ....... 3

Catoe, Jr., John B., General Manager, Washington Metropolitan Area Transit 

Authority ............................................................................................................... 25

Iwasaki, Randall, Chief Deputy Director, California Department of Transportation ..................................................................................................................... 25

Luffy, Robert H., President and CEO, American Bridge Company ..................... 25

Simpson, Hon. James S., Administrator, Federal Transit Administration ........ 3

Trenery, Richard, Vice President, Northeast Region, Cubic Transportation 

Systems ................................................................................................................. 25

PREPARED STATEMENT SUBMITTED BY MEMBERS OF CONGRESS 

Mitchell, Hon. Harry E., of Arizona ....................................................................... 43

PREPARED STATEMENTS SUBMITTED BY WITNESSES 

Capka, Hon. J. Richard ........................................................................................... 45

Catoe, Jr., John B. ................................................................................................... 50

Simpson, Hon. James S. .......................................................................................... 64

Trenery, Richard ...................................................................................................... 68

SUBMISSIONS FOR THE RECORD 

Iwasaki, Randall, Chief Deputy Director, California Department of Transportation, Statement of Will Kempton ..................................................................... 54

Oberstar, Hon. James L., a Representative in Congress from the State of 

Minnesota, Buy America: Federal Highway Administration, 100th Cong. 

1-11 (1988) ............................................................................................................ 58

ADDITIONS TO THE RECORD 

American Iron and Steel Institute, Committee on Pipe and Tube Imports, 

Steel Manufacturers Association ........................................................................ 72

National Steel Bridge Alliance, Conn Abnee, Executive Director, Statement .... 76

vi


35914.001
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35914.002
viii


35914.003
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35914.004
x


35914.005
(1)

HEARING ON BUY AMERICA 

Tuesday, April 24, 2007, 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, 

SUBCOMMITTEE ON HIGHWAYS AND TRANSIT

Washington, DC. 

The Subcommittee met, pursuant to call, at 2:00 p.m., in Room 

2167, Rayburn House Office Building, the Honorable Peter DeFazio 

[Chairman of the Subcommittee] presiding. 

Mr. DEFAZIO. The Subcommittee will come to order. 

I want to welcome the two Administrators here today and I have 

a very brief opening statement. 

There are ongoing issues regarding Buy America provisions. This 

is a long and hallowed tradition in the United States, dating back 

to 1933. It has always been an issue for the creation of jobs, with 

the expenditure of public funds. This has been revisited most recently in SAFETEA-LU, but only with report language. And there 

are ongoing questions about the interpretations of the existing law, 

its limitations and how it might be improved to better accomplish 

the objectives which we have had over time. 

I could go on with a much longer summation of the history, but 

I don’t think that is necessary. We will certainly be enlightened by 

the two Administrators. With that, I will yield to the Ranking 

Member. 

Mr. DUNCAN. Thank you very much, Mr. Chairman. I am very 

pleased that you have called a hearing on this Buy America subject. The Federal Highway Administration and the Federal Transit 

Administration have similar but different Buy America requirements that are applied to project construction and other procurements using Federal funds. These requirements were passed by the 

Congress in surface transportation laws in the 1970s and 1980s, to 

foster and protect American industry and workers, something that 

we all want to do. 

Both Federal highway and transit law includes certain waivers 

for Buy America requirements, based on public interest, non-availability, and cost differential. These waivers are very seldom necessary. In fact, in an average year, FHWA funds 13,000 projects 

and receives requests for Buy America waivers for only 7 projects. 

However, some people have criticized FHWA’s application of the 

cost differential waiver. I believe that the agency is striking a good 

balance between supporting American businesses and making the 

best use of taxpayer dollars, something else that we all want to do. 

Breaking up large highway projects into segments or phases encourages more companies to bid on these highway projects, espeVerDate 0ct 09 2002 11:24 Apr 07, 2008 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 P:\DOCS\35914 HTRANS1 PsN: JASON
2

cially smaller businesses. More competition translates directly into 

cost savings and efficiencies. 

If projects could not be broken up into separate contracts, and if 

the Buy America cost differential test was not applied on a contract 

basis, only very big companies would be able to compete for these 

contracts, and the total project cost could be substantially higher. 

On the transit side of Buy America enforcement, my understanding is that the transit agencies and transit manufacturers are 

all generally pleased with the changes made in SAFETEA-LU and 

with the FTA’s implementation of these changes. I look forward to 

exploring these issues further with the two agency administrators 

who are here with us today and also with the users and manufacturers who are represented on the second panel. 

Thank you, Mr. Chairman. 

Mr. DEFAZIO. I thank the gentleman. Mr. Baird, do you have an 

opening statement? 

Mr. BAIRD. I thank the Chair for holding this important hearing. 

As the Chairman has mentioned, the original Buy America Act 

was put in place to protect our domestic industry and to ensure we 

can always produce our own steel. This is especially important for 

America’s economic competitiveness, as well as for our national security. The domestic steel industry is a huge contributor to our 

economy. In 2005, it was valued at $50 billion and employed 95,000 

people. Buy America is a big part of the success of this economic 

sector. 

A vibrant steel industry domestically is important for our security as well. Over-reliance on imports could leave us in peril should 

we face major natural disasters or security incidents. We may well 

need steel in a hurry to rebuild infrastructure or even quickly enhance our armed forces. That is not a situation in which we want 

to be held over a barrel by a foreign government, but I fear our 

Country is heading in precisely that direction. 

Unfortunately, the Administration’s policies are undermining our 

domestic steel industry. I have learned about this first-hand from 

a Federal Highways Administration memorandum and conversations with then-Secretary Mineta. Despite clear sense of Congress 

language in SAFETEA-LU, the Administration has decided to encourage States to break projects into smaller components to circumvent Buy America. The most recent example of this we know 

about is the San Francisco Oakland Bay Bridge project. 

Regardless of the particulars, CalTrans’ decisions and the Administration’s approval have already had dramatic consequences. 

Universal Structural, Inc. (USI), a steel fabricator from my district, 

has linked massive layoffs and its closure in part to the loss of the 

California bridge potential. While one bridge alone did not shut 

down USI, this is symptomatic of the effect the Administration’s 

views have on the industry at large. 

I have introduced legislation, along with my good friend and colleague from Pennsylvania, Mr. Altmire, to close loopholes in Buy 

America and ensure that the Transportation Department, as well 

as State transportation agencies, are complying with the law. First, 

the legislation would make clear that Federal funding would not go 

toward any project not in compliance with the Buy America statVerDate 0ct 09 2002 11:24 Apr 07, 2008 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 P:\DOCS\35914 HTRANS1 PsN: JASON
3

ute, even if the violation took place before Federal funding was received. 

Second, the legislation would make clear that bridge projects 

cannot be broken into components for the purpose of Buy America. 

With these two loopholes closed, we can ensure that Federal transportation dollars are being spent on projects using American steel 

as intended by Buy America. 

I am happy to have the support of the Subcommittee Chairman, 

Mr. DeFazio, the chair of the Steel Caucus, Mr. Visclosky, the Steel 

Bridge Alliance and others. I hope the Subcommittee, after hearing 

the testimony today, will tackle this issue and mark up this important legislation. 

Again, I thank the Chairman very, very much for holding this 

hearing, and I look forward to the testimony. I yield back. 

Mr. DEFAZIO. I thank the gentleman for his leadership on this 

issue. 

No further requests for opening statements, so at this point, we 

would turn to the Honorable J. Richard Capka, Administrator of 

the Federal Highway Administration. Mr. Capka. 

TESTIMONY OF THE HONORABLE J. RICHARD CAPKA, ADMINISTRATOR, FEDERAL HIGHWAY ADMINISTRATION; THE HONORABLE JAMES S. SIMPSON, ADMINISTRATOR, FEDERAL 

TRANSIT ADMINISTRATION 

Mr. CAPKA. Thank you, Mr. Chairman and Ranking Member 

Duncan, for the opportunity to testify today. 

Before I begin my statement, I would like to express our most 

sincere condolences on behalf of the Federal Highway Administration and the Department of Transportation to the family of Congresswoman Millender-McDonald, and to the Members of the Committee for the loss of their colleague. Representative MillenderMcDonald was a tireless advocate for transportation improvements 

for her constituents. We in the U.S. Department of Transportation 

were privileged to have worked with her and will miss her. 

Mr. DEFAZIO. I want to thank the gentleman. I was remiss in not 

mentioning Ms. Millender-McDonald’s passing. She was an esteemed Member of the Committee, and I thank the gentleman for 

making the remarks, which I should have led off with. Thank you. 

Mr. CAPKA. Yes, sir. 

Again, Mr. Chairman and Ranking Member and Members of the 

Committee, Federal Highways supports the goal of the Buy America Act and understands the issues that have been raised about its 

implementation. We in the Federal Highway Administration take 

seriously our responsibilities to enforce the requirements of the 

law, and have consistently ensured that States comply with the 

provisions of Buy America whenever Federal aid funds are obligated on a project. 

As provided in Section 313 of Title 23, it is a State’s obligation 

of Federal Highway funds that triggers the provisions of Buy 

America. Federal funds are obligated to a project through the execution of a specific project agreement that describes the work and 

scope of the project being constructed. 

Each of these individual contracts, for the purpose of the Federal-Aid highway program, is considered to be an individual project 

4

and is considered independently for Buy America purposes. As you 

have observed, there may be a number of separate contracts that 

constitute a large project, like the San Francisco Oakland Bay 

Bridge. 

Since its enactment, Federal Highways has interpreted Buy 

America to apply on a contract by contract basis and only applies 

when States use Federal funds in a construction contract. Federal 

Highways’ interpretation is in keeping with Section 145 of Title 23, 

which provides for the State’s right to decide on which projects to 

use Federal-Aid highway funding. 

The State DOTs have the discretion to develop transportation 

projects and programs, including decisions regarding contract scope 

and contract size. Also, the State DOTs have always had the discretion of using or not using Federal-aid on any given construction 

contract. 

Section 313 of Title 23 does provide for waivers of the Buy America requirements under certain circumstances. First, a waiver may 

be granted if Buy America would be inconsistent with the public 

interest. Second, a waiver may be granted if the required steel and 

iron materials or products are not produced in the United States 

or are not in sufficient or reasonably available quantities. Finally, 

a waiver may be granted if inclusion of domestic material will increase the cost of the overall project contract by more than 25 percent. 

Federal Highways’ review of waiver requests, based on availability, involve coordination with the appropriate industry associations to verify the industry’s inability to respond. When this informal coordination process results in the identification of a domestic 

supplier, the State generally no longer pursues a Buy America 

waiver. 

The cost differential between domestic and foreign products can 

be grounds for a waiver. The use of foreign steel or iron may be 

justified as a result of a special bidding procedure where the 

project’s bid identifies two alternatives, one based on foreignsourced products and one based on domestic products. If the total 

contract cost for the domestic product alternative is 25 percent 

higher than the cost of the foreign product alternative, a waiver 

may be granted to use the foreign product. 

We understand the concerns that have arisen about how the law 

has been defined and what projects are applicable under Buy 

America. We have had very productive discussions with industry 

representatives. Let me assure you that Federal Highways remains 

very respectful of Congressional direction and the sense of Congress that was provided in SAFETEA-LU. Consequently, the Federal Highway Administration sought diligent and careful legal interpretation of all applicable statutes. Notwithstanding the sense of 

Congress, our legal review determined that since Buy America was 

first enacted in the early 1980s, the Federal Highway Administration has consistently and correctly ensured that States adhere to 

the requirements of the law and that we do not have the legal authority to modify that application of law. 

We strongly support the aim of Buy America requirements to 

strengthen the national economy, and understand very clearly 

5

what it means to our Nation to remain competitive in a global marketplace. 

We appreciate our role in the Buy America process. Mr. Chairman, Members, thank you for this opportunity to testify, and I look 

forward to answering your questions. 

Mr. DEFAZIO. Thank you. The Honorable James Simpson, Administrator, Federal Transit Administration. 

Mr. SIMPSON. Thank you. 

Good afternoon, Chairman DeFazio, Ranking Member Duncan, 

Congressman Oberstar and Members of the Subcommittee. Thank 

you for the opportunity to testify today regarding the Federal Transit Administration’s implementation of the Buy America amendments initiated by SAFETEA-LU. This is my first appearance before this Subcommittee since taking office in August, and it is a 

great honor for me to be here today. 

FTA split its rulemaking into two parts: one part to address routine matters and the second part to address the more complex 

issues that deserve further consideration and public comment. To 

address routine matters, FTA issued a final rule on March 21st, 

2006, implementing several SAFETEA-LU mandates which removed the general waiver for Chrysler vehicles, provided a definition for negotiated procurement and contractor, required certification under a negotiated procurement process, allowed administrative and judicial review of decisions and streamlined pre-award 

and post-award review of rolling stock purchases. 

To address the more complex issues, such as the definition of end 

product, the definition of system and whether a system can be an 

end product, FTA issued a second NPRM on November 30th, 2006. 

The comment period for the second NPRM closed on February 

28th, 2007, and we are currently working on responding to comments and developing a final rule. 

Mr. Chairman, I would like to make two important points about 

our final rule and the second NPRM. First, neither our final rule 

nor our second NPRM changes the requirements for steel and iron 

manufactured products. Specifically, Federal funds may not be obligated unless steel, iron and manufactured products other than rolling stock used in FTA-funded projects are produced in the United 

States, unless a waiver has been granted by FTA or the product 

is subject to a general waiver. The Buy America steel and iron requirements apply to all construction materials made primarily of 

steel or iron and used in infrastructure projects, such as transit or 

maintenance facilities, rail lines, including third rail and bridges. 

These items include, but are not limited to, structural steel or iron, 

steel or iron beams, running rail and contract rail. 

Second, our final rule and second NPRM also do not change the 

procurement requirements for rolling stock. That is rail cars, buses, 

train control equipment, communication equipment and traction 

power equipment as end products. Sixty percent of all components 

in rolling stock must still be of U.S. origin and final assembly of 

all vehicles must take place in the United States. 

We are still considering two open items: the treatment of end 

products and system. With respect to end products, we agree with 

the comments we received from the first NPRM that expressed concern with the current shift approach for end products. In our secVerDate 0ct 09 2002 11:24 Apr 07, 2008 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 P:\DOCS\35914 HTRANS1 PsN: JASON
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ond NPRM, we proposed adopting a non-shift methodology. Under 

our non-shift proposal, using the procurement as a bus, for example, procurement replacement items such as an engine, which 

would be a component, or a piston, which would be a sub-component, would no longer shift to being an end product, but would instead remain a component or a sub-component for the life of the 

item. We believe this non-shift approach will provide the necessary 

consistence, stability and favorable price structures for the transit 

industry and streamline procurement practices. 

With respect to our proposed treatment of a system, FTA agreed 

with comments submitted on the first NPRM that it should continue its longstanding practice of including system as a definable 

end product. To ensure that major system procurements are not 

used to circumvent Buy America requirements, FTA’s second 

NPRM proposed to define a system as the minimum set of components and inter-connections needed to perform all the functions 

specified by the granting in its procurement. We believe this proposed definition will avoid the creation of supersystems and thwart 

potential abuses. 

Mr. Chairman, we believe our proposals address the concerns 

raised by Chairman Oberstar and Representatives Young and 

LaTourette in their February 7th, 2006 letter, which emphasized 

the need to develop a clearer and more consistent definition of end 

product, and to ensure that major system procurements are not 

used to circumvent the Buy America requirements. 

In conclusion, Chairman DeFazio, Ranking Member Duncan and 

Members of the Subcommittee, FTA’s program takes a holistic approach to funding transit projects. In other words, we look at 

projects in their entirety and apply the Buy America requirements 

to the project as a whole. We also look at our rulemaking proposal 

as an opportunity to fine tune our regulation to ensure consistency, 

predictability, transparency and to stimulate competition. 

I look forward to working with Congress on this and other issues 

facing our Nation’s transit systems, and I would be pleased to respond to your questions. Thank you. 

Mr. DEFAZIO. Thank you. 

We have 6 minutes 15 seconds until the vote. Unless the Chairman would like to make some really brief remarks now, we would 

just adjourn until after those. Unfortunately there are five votes, 

so this will take a bit of time. Can both of you gentlemen remain? 

Mr. CAPKA. Yes. 

Mr. SIMPSON. Yes. 

Mr. DEFAZIO. That would be great. Thank you. Sorry for the inconvenience. 

Mr. OBERSTAR. [Presiding.] Mr. Chairman, may I just make a 

brief—and I will keep it to a minute. 

Twenty years ago, almost to the month, the Subcommittee on Investigations and Oversight of this Committee held an extensive 

hearing, a three-part hearing on Buy America, to inquire into the 

operation and effectiveness of the Buy America law that I originated in the 1982 Surface Transportation Assistance Act. We didn’t 

have fancy names for them in those days, just called it the Surface 

Transportation Assistance Act. 

7

I would like to ask, Mr. Chairman, unanimous consent to include 

in the record for the first few pages, the first 11 pages of that hearing, because I think it is instructive, it reflects from back then to 

where we are today. The Federal Highway Administration in those 

hearings was doing a superb job of implementing the Buy America 

Act, and not segmenting projects, as we found them trying to do 

at the time, do just the center arch span and say, oh, that is a 

project, and do another thing and say, that is a project, instead of 

the whole bridge being a project, instead of the whole 20 mile highway length a project. 

The Federal Transit Administration was not doing so well. One, 

because in the neglect of transit over 30 years, much of the industry that had been American had moved offshore. It was gone. And 

there wasn’t much left with which to contract. 

Third was the Corps of Engineers, and we found them putting 

pilings, steel sheathings, around the caissons where they were 

building bridge structures, buying foreign steel and putting it in 

place, and then leaving it after the project was constructed and 

saying, oh, this is wonderful, it is protecting the bridge structure. 

Oh, but it becomes a permanent part. So you are escaping the Buy 

America. We caught the Corps of Engineers doing that and we 

tightened that up. 

So today’s hearing is both a retrospective and a prospective. Our 

purpose here is to get a better understanding of how the law is 

being implemented. I think it is instructive to quote from my thenCommittee colleague, Ranking Member Bill Clinger of Pennsylvania, who said that ‘‘The erosion of our industrial base in this 

Country cannot be allowed to continue without running the risk of 

making the United States much less than a world power. You cannot be a world power or a significantly player in the world scene 

if you don’t have a healthy, viable steel industry.’’ Bill Clinger, no 

longer a Member of Congress, still living. I think he would subscribe to that statement today. 

Mr. Baird has raised the bar on this issue in the last session of 

Congress, as we crafted SAFETEA-LU, and raised some of these 

very issues. So we will return after this series of votes to pursue 

the inquiry, and appreciate your remaining with us. 

The Committee will stand in recess until after this series of 

votes. 

[Recess.] 

Mr. DEFAZIO. [Presiding] The Subcommittee will come back to 

order. 

I appreciate the indulgence of the witnesses. There should not be 

any votes for about an hour and a half, so hopefully we can move 

both through this panel and the remaining panels. 

As we concluded, both witnesses had presented their testimony 

and we are now going to move to questions. 

First, to Mr. Capka. You stated how, I think you said respectful 

of the direction that Congress has indicated, but sort of that respect falls short of doing what Congress indicated it wanted to do, 

because of the feeling that you are constrained by the conflict between the statute and the direction which was only provided as 

non-binding in the SAFETEA-LU, is that correct? 

Mr. CAPKA. That is correct, yes, sir. 

8

Mr. DEFAZIO. So if we wanted, what direction do you think we 

were attempting to provide in terms of our report language? 

Mr. CAPKA. Mr. Chairman, when we took a look at the report 

language, the sense of Congress indicated that preference not to 

break up large, specifically bridge projects, specifically the San 

Francisco Oakland Bay Bridge. And that a Federal investment on 

any one part of the bridge would attach Buy America to the entire 

Project, big P, Project. 

So that was the intent that I think that was being expressed by 

Congress in the sense of Congress. 

Mr. DEFAZIO. How would you recommend we accomplish that 

goal? I agree with you on the stated intent. 

Mr. CAPKA. Yes, sir. Of course, that put us in conflict with the 

letter of the statute that attaches Buy America when there is an 

obligation of Federal dollars. And that obligation of Federal dollars 

occurs legally in a contract. 

So the sense of Congress was not significant enough to have us 

re-look or re-assess our interpretation of our legal opinion of what 

the statute requires. In order of precedent, our interpretation of 

statute supersedes the sense of Congress in this particular case. 

Mr. DEFAZIO. But you see what Congress was attempting to get 

at in the sense of Congress and what I think we will attempt to 

get at again, perhaps in a statutory manner, is the idea that, I 

mean, what is the logical or illogical extent to which someone could 

go in segmenting? I could do a contract on my bridge for the bolts. 

I could do a contract for the cable. I could do a different contract 

for each diameter of cable. I am going to do a contract for the footings, I can do a contract for the cement that goes in the footings. 

At some point, it seems to me you are creating something that 

attempts to try and circumvent Buy America for segments of a 

project while taking Federal funds, it becomes sort of wasteful administratively and illogical. It is really, you are not limiting their 

discretion. Right now you say the law doesn’t limit their discretion 

in segmenting a project, does it? 

Mr. CAPKA. Sir, when we look at how a contract is broken up, 

we would make a judgment call and determine whether or not the 

breaking up of the contract was being done to evade the Buy America or any other Federal requirement, as opposed to doing something from a very practicable engineering construction management. 

Mr. DEFAZIO. So then, we are not here to pick on them, but you 

are saying in the case, because I believe they follow your direction 

and what your interpretation of the law is, but so you are saying 

that it wasn’t done for the project in the Bay area to evade Buy 

America, it was done, that was the most logical engineering way 

to do it? 

Mr. CAPKA. It was a very logical way to break up a very large 

project. Then it is up to the State to determine where they want 

to invest their Federal dollars, for whatever reason. For an example, on the Woodrow Wilson bridge, we went through a stage where 

we were looking at a very large contract. The construction industry, the bonding community could not handle a job quite that large, 

and the initial bid came in very, very high. 

9

So we broke that contract up into three pieces and were very successful with it. It had nothing to do with any of the Federal statutes that attach to Federal funding. It was a matter of doing something that was practicable from an engineering and construction 

management perspective. 

Mr. DEFAZIO. But given what you understand as the stated intent or at least the non-statutory intent of Congress, wouldn’t it be 

the State’s right just not to accept Federal dollars and then contract as they wish? 

Mr. CAPKA. Mr. Chairman, that is absolutely correct. They would 

not have to accept or apply Federal dollars to any project they 

would wish not to apply it to. 

Mr. DEFAZIO. Right. But when you are putting Federal dollars 

into a project, I think the average American would think of a 

project is a bridge which gets me from this shore to this shore. 

That is a project. Not, well, the decking is a project, the supports 

are a project, superstructure is a project. So if one was going to 

take money for that project from the Federal Government, I mean, 

the case that I would make is if you want to the Federal money 

for that project as defined by the bridge that goes across the water, 

then certain obligations come with that, and one of them being that 

we want to, as best as we can, protect our critical infrastructure 

in this Country, our manufacturing infrastructure, our steel infrastructure, our jobs. 

Do you think that would be unreasonable in an engineering or 

other sense? 

Mr. CAPKA. Certainly not from an engineering sense. If the 

project was assembled in a way that made good practical sense, I 

would agree with you that if we wanted to achieve that kind of an 

arrangement, right now the statute does not provide us the latitude 

to make that kind of a judgment. 

Mr. DEFAZIO. Okay. You made that clear. 

Mr. Simpson, you are going to get off easy, because nobody can 

understand what it is you are doing. 

[Laughter.] 

Mr. DEFAZIO. I don’t know if you have been privy to the testimony. There is one subsequent witness who will raise concerns. 

They think you are not quite there as a second NPRM. Are you 

aware of those concerns? 

Mr. SIMPSON. There are a multitude of concerns on both sides. 

You can be specific, Mr. Chairman. 

Mr. DEFAZIO. Well, it is on the technology. When we get into 

sub-components, components, things like that. 

Mr. SIMPSON. Right. 

Mr. DEFAZIO. This has to do particularly with the manufacture 

of fare equipment and what constitutes a component or sub-component. 

Mr. SIMPSON. I am very well familiar with it. 

Mr. DEFAZIO. Do you think you can thread the needle yet? Of 

course, you are in the midst of rulemaking, so I guess it’s not fair 

to belabor the point. 

Mr. SIMPSON. I could delineate the issue, if you would like that. 

Mr. DEFAZIO. Sure, why don’t you do that simply, so everybody 

in the audience understands. 

10

Mr. SIMPSON. Sure. A lot of it has to do with technology. Let’s 

say we went back 30 years, when you had fare systems that didn’t 

talk to each other, where you had a standalone turnstile. Basically 

that was an end product. 

Today, you have inter-dependent products where you have a synergistic relationship where the whole is greater than the individual 

parts. A perfect example of that is an automated fare collection system, where you are buying a whole bunch of integrated parts that 

in and of themselves in most cases won’t work alone but they work 

as an integrated unit to achieve and end. We know what our automated fare structure systems are, our automated fare card systems. You are not buying a turnstile. You are not buying a com device. You are buying an integrated system. 

And we have history on this with the Massachusetts case, where 

it was clear at the time at the FTA that this was indeed a system. 

So the system could be procured. So the system becomes the end 

product. 

And I am not going to make it complicated, you have three 

things. You have the end product and you have your components. 

So if your automated fare collection system is the end product, then 

your component would be any one of those things that you see in 

Metro, the ticket vending machine——

Mr. DEFAZIO. The turnstile——

Mr. SIMPSON. You have got it, any of those boxes. Now, it is the 

stuff inside the boxes that are the sub-components. 

Mr. DEFAZIO. Right, okay. 

Mr. SIMPSON. However, sub-components, as we know, sub-components can be forced on a foreign basis. You can have foreign 

sourcing. When you have the automated fare collection system, you 

are moving what was maybe previously, if it was a standalone 

product, a component that had been sourced in the United States. 

Now because you are procuring a fare collection system, rather 

than one of those boxes, you are moving the guts, some of the guts 

in that box down one rung on the food chain and it can be source 

on a foreign basis. 

Mr. DEFAZIO. So if we said that the turnstile was a——

Mr. SIMPSON. End product. 

Mr. DEFAZIO. If that was a component, not a sub-component, 

then the things of which it was made would have to be domestically sourced. 

Mr. SIMPSON. No. If we said that the turnstile——

Mr. DEFAZIO. I had this yesterday, I lost it. 

Mr. SIMPSON. Guess what? We had it yesterday, too. 

[Laughter.] 

Mr. SIMPSON. The turnstile would be end product. Then the component has to be sourced in the U.S. 

Mr. DEFAZIO. Okay. 

Mr. SIMPSON. The end component, which would be like the ticket 

handling——

Mr. DEFAZIO. So you would say that the turnstile then has to be 

classified as a system? 

Mr. SIMPSON. Yes, really end product. What we are saying is the 

whole system is the end product for procurement. Then we are——

11

Mr. DEFAZIO. The Ranking Member understands fully, so I am 

going to defer to him at this point in time. Thank you, Mr. Simpson. 

Mr. DUNCAN. Thank you, Mr. Chairman. Will both of you gentlemen give me some idea about how many waivers get requested 

each year? 

Mr. SIMPSON. Prior to SAFETEA-LU, we had no ability to grant 

post-award waivers, which yo have now given us the ability to. In 

those cases, it is for non-availability. We have issued none yet. In 

our history, we have had no price differential waivers, we have had 

none. And public interest waivers, every now and then we would 

have a public interest waiver. 

Mr. DUNCAN. So it is very rare? 

Mr. SIMPSON. Very rare, yes, sir. 

Mr. DUNCAN. What about you, Administrator Capka? 

Mr. CAPKA. Sir, on the order of about seven a year. That is out 

of about 12,000 to 14,000 contracts that are being worked at any 

given point in time. So it averages about seven a year, requests 

that come in for waivers to Buy America. 

Mr. DUNCAN. Is it accurate to say that if you break up these 

projects or these contracts into segments or phases, that that does 

open up the process more to small or medium size companies? 

Mr. CAPKA. Sir, from our perspective, there are advantages like 

that to breaking up a larger project. Certainly, those kinds of decisions are made at the State level. We support the States’ freedom 

to exercise their engineering judgment as they most efficiently do. 

Mr. DUNCAN. The estimate on this Oakland San Francisco Bay Bridge waiver, you say that it produced a savings of over $400 million, is that correct? 

Mr. CAPKA. Sir, there was an alternative form of bidding on that 

main span at one point in time. And I would defer to the gentleman who will be testifying in a moment from CalTrans to provide the specifics for it. But there was one bid that was based upon 

foreign steel, and then there was one bid based upon domestic 

steel. The foreign steel was about $1.4 billion, the domestic steel 

bid was about $1.8 billion. That was on the entire contract, not just 

the steel, but the entire contract. 

So the difference between the two bids was about $400 million. 

Mr. DUNCAN. Is there any other waiver that has ever produced 

that much in savings or close to it? Do you have any other examples like that? 

Mr. CAPKA. Sir, we never waived Buy America in that situation, 

because even the low bid exceeded what the State was willing to 

sign up for. So there was a redesign that followed that particular 

bid. 

Mr. DUNCAN. Okay. The waivers that you have granted, these 

seven or so waivers that you are granting in a year, have those 

saved substantial amounts of money? 

Mr. CAPKA. Most of those waivers were the result of materials 

not being available. 

Mr. DUNCAN. Not being available. 

Mr. CAPKA. Not being available, as opposed to the cost differential. 

Mr. DUNCAN. So there wasn’t a choice? 

12

Mr. CAPKA. That is correct, sir. 

Mr. DUNCAN. All right. Mr. Simpson, your November 30th, 2006 

proposed rule stated that the FTA already employs a model to determine if a system is too large to be a single end product. Can you 

describe for us the model that the FTA currently uses to determine 

whether a system is so large that it would potentially circumvent 

this Buy America requirement? 

Mr. SIMPSON. Yes, we are defining it as the minimum amount of 

parts necessary in order to have a benefit. And also, items that are 

normally procured as part of a system. Going forward, what the 

proposal is, part of the proposal is to look at it, and since technology is changing so rapidly, what is not a system today may be 

a system tomorrow, to look at it on a case by case basis to make 

sure we don’t get any of these ‘‘supersystems,’’ like for somebody 

to go out and procure and entire transit system. Because if you 

look closely at the definition on system, one could easily construe 

that a transit system would qualify. 

So we are very cognizant of that, and we are aware that through 

a lot of the outreach that we have had, we are getting there. We 

still have more comment, but we believe that we have gotten our 

hands around the adequate definition of system. 

Mr. DUNCAN. All right. Thank you, Mr. Chairman. 

Mr. DEFAZIO. Mr. Baird was next in order of arrival. 

Mr. BAIRD. I thank the Chair, and would ask unanimous consent, 

if I may, to submit the statement of Conn Abnee, who is Executive 

Director of the National Steel Bridge Alliance, as part of the testimony for the record. 

Mr. DEFAZIO. Without objection, so ordered. 

Mr. BAIRD. Thank you. 

Mr. Capka, have you ever been to a steel mill? 

Mr. CAPKA. Yes, sir, I have. 

Mr. BAIRD. How about a steel fabricator? 

Mr. CAPKA. Yes, sir, I have. 

Mr. BAIRD. Are you aware of the immense cost in terms of capital 

and investment and land that goes into these places? 

Mr. CAPKA. I am. 

Mr. BAIRD. And the trained work force that it takes to put together these really extraordinarily complex and expensive structures? 

Mr. CAPKA. Yes, sir. 

Mr. BAIRD. Do you believe it is in the national interests of the 

United States of America to have a vibrant domestic steel industry, 

including production and fabrication? 

Mr. CAPKA. Yes, sir, I believe that capability is important to a 

nation. 

Mr. BAIRD. Do you believe the Buy America Act is incentive to 

support that industry? 

Mr. CAPKA. I believe the Buy America Act was intended to support the industry, and is. 

Mr. BAIRD. Do you believe that facilitating or encouraging people 

who are involved or entities who are involved in construction to circumvent the Buy America will strengthen or weaken the U.S. domestic steel industry? 

13

Mr. CAPKA. Sir, I know of no one who is encouraging the States 

to bypass Buy America. Certainly, we are not, at the Federal Highway Administration. 

Mr. BAIRD. Well, the United States Congress, in a sense of Congress resolution in SAFETEA-LU, set out some standards, which 

we are actually working with here, legislation introduced by Mr. 

Altmire and myself. Internal memos from your folks seem to suggest to the States that they didn’t necessarily have to apply to the 

sense of Congress resolution, they didn’t have to comply with the 

sense of Congress resolution, that there were ways they could work 

around that. That seems to me to be not consistent with the intent 

of the Congress. 

Mr. CAPKA. Sir, the memo that you are referring to was a product of our legal investigation or legal opinion into——

Mr. BAIRD. Was Attorney General Gonzales part of that? 

Mr. CAPKA. Sir, that was Federal Highways. 

Mr. BAIRD. You could have said, I don’t recall, that would have 

been sufficient. 

Mr. CAPKA. But we were well aware of your interest, of other 

Members’ interest in Buy America. So we did diligent and careful 

legal work to determine exactly where we in the Federal Highway 

Administration would have to be in executing our primary mission, 

and that was to enforce the statute, the law that was in place. 

Mr. BAIRD. Well, it seems to me this Administration, through 

signing statements and a host of other ways, has found all kinds 

of ways to fudge around the intent of the Congress. The purpose 

here is this: we believe, we the Congress, on behalf of the American 

people believe a domestic steel industry is essential to our economy 

and our national security. Point one. We believe that if U.S. taxpayer dollars are spent on domestic highway projects, they ought 

to go toward U.S. made goods, because that employs U.S. workers 

and maintains a vibrant infrastructure, which we just might need 

one day. 

We believe that if you start parceling these things out in contracts, that you circumvent the intent of the Buy America Act, the 

intent of the Buy America Act, and you weaken the domestic steel 

industry. That is going to have both immediate and long-term consequences. So I have to tell you, and it will come as no surprise, 

many of us believe that you are undermining the national security 

and the economy of this Country, in the long haul, through your 

interpretation. 

Mr. CAPKA. Sir, we disagree on that point, but I do agree with 

you that the approach that you are taking is the right one to 

change the statute that governs what we enforce at the Federal 

Highway Administration. I think that is what it will take to change 

the situation with the implementation of the Buy America Act. 

Mr. BAIRD. When you drive across a bridge, do you like to have 

a start, a middle and an end to a bridge, or do you like to jump 

like they do in the movies and just sort of jump that middle section? 

Mr. CAPKA. Sir, we drive when the bridge is complete and the 

shore to shore is intact. 

Mr. BAIRD. The purpose is that there are some semantics here. 

As Mr. DeFazio said, the Chairman said, when we think of a 

14

project, we think of the bridge as the project. And yes, of course 

there are smaller contracts that go into that. But if you purposefully break that up into smaller projects, as a way to circumvent 

the cost ceilings on Buy America, you are encouraging portions of 

that bridge to be outsourced, I believe. Do you share that? 

Mr. CAPKA. Sir, we are not encouraging anything to be 

outsourced with respect to allowing a State to break up a very 

large project into manageable pieces, which I think we have 

learned from experience, it is the practicable way to deliver these 

very large projects. 

Mr. BAIRD. Let me, if I may, I want to respond to——

Mr. DEFAZIO. We are about to run the clock on you. You have 

one more. 

Mr. BAIRD. I won’t take the remaining five, in deference to my 

comments. But I do want to address Mr. Duncan’s statement. Mr. 

Duncan raised the question about whether breaking these projects 

into smaller components was advantageous to smaller companies. 

I would submit that it is not, in the manner in which you have 

done it. I have living, or actually dying proof of that in my district. 

The problem is, when uncertainty is created in the contracting 

process, when gimmicks are used about breaking things into contracts instead of bigger projects, when delays in use of Federal 

funds create uncertainty about whether Buy America provisions 

will be adhered to or not, small companies cannot have the scratch, 

the up-front capital, to bid on these big projects. They go belly-up. 

That happened to a company in my district. They tried to put forward, it was a bet the company strategy. The uncertainty created 

on the Bay Bridge project cost us several hundred jobs and a very 

vibrant industry. 

I think there is a real problem, and I respect you immensely, as 

you know. But I really would encourage you to look into this. Because an enormous company and multi-nationals may have the facilities and the capital to take advantage of this uncertainty. 

Smaller companies perish because of the uncertainty you folks have 

created. I think that is why the Steel Bridge Alliance and many 

others have endorsed this legislation by Mr. Altmire and myself. 

I think what you are doing is contributing, whether intentionally 

or not, it is hard for me to imagine you are doing it intentionally, 

there will be, one day, a major, massively destructive earthquake 

on the West Coast. On that day, if we have to call China and Korea 

and Japan up and say, can you come rebuild our infrastructure, because we have nobody here who can do it any more, we are going 

to be in big trouble. And I think it is going to be on your watch, 

and we are going to try to stop that, as a Congress. 

I yield back the balance of my time. 

Mr. DEFAZIO. I thank the gentleman. 

Mr. Boozman. 

Mr. BOOZMAN. Thank you, Mr. Chairman. I don’t have any questions. 

Mr. DEFAZIO. Mrs. Schmidt. 

Mrs. SCHMIDT. Yes, thank you. I arrived late, so this might be 

redundant. 

I understand sometimes that contracts have to be broken up into 

smaller contracts simply to be able to get a manageable contract 

15

regardless of Buy America provisions or not. In my limited role in 

my past life as a local government official, sometimes we couldn’t 

get people to actually answer the contract until we broke it up into 

smaller feats. 

But I really want to go back. I briefly read a little bit about the 

Oakland San Francisco Bay Bridge waiver. I understand that the 

savings was over $400 million. 

I do support American-made products and American businesses. 

But I also understand the use of prudent tax dollars. Could you 

walk me a little bit through that waiver process and how that 

worked in that case? 

Mr. CAPKA. Yes, ma’am, and I would like to characterize it first 

by saying that the situation never evolved to the point where we 

had to grant a waiver. Even the low price associated with the foreign steel was too much for CalTrans, the California State Highway Department there to accept. So they did not accept the bid and 

they did something different. 

But when they got to the point, they elected to use an alternative 

form of bidding, which is authorized under the Buy America procedures, where a contractor would submit a bid based upon the use 

of foreign steel, and then a second bid based on the use of domestic. 

And at the end, take a look at the bottom line price of both bids, 

which is more than just steel, but the entire contract. In this particular case, there was a difference of about $400 million. The low 

bid, which was based on foreign steel product, was about $1.4 billion; the domestic alternative was about $1.8 billion. So the difference was $400 million. 

But even the $1.4 billion was too high for the contract to be 

awarded. So we were never posed with an official Buy America 

waiver on that. 

Mr. BAIRD. Would the gentlelady yield for just five seconds? I 

would just suggest that you really look with great scrutiny about 

that figure. I am well aware of data suggesting that the $400 million was not the Buy America difference. That is a gross exaggeration of the actual cost differential between U.S. steel and foreign 

steel. I would be happy to share with you that for the record. I 

don’t want to leave that statement unchallenged, because it is not 

a fact. 

Mrs. SCHMIDT. My second question is, if we make it so impossible 

to ever get a waiver granted, knowing that the tax dollars for infrastructure in States is not keeping up, the way tax dollars are collected for infrastructure in States, especially in my State of Ohio, 

it is not keeping up with the demand to just maintain the roads 

and the bridges as well as expand new roads and bridges. Where 

will the potential cost of narrowing the field to a limited supply 

source come from, and would this be something that the Federal 

Government would pay for the additional cost, the State government? How would that be managed? Would the States think this 

was an unfunded mandate? 

Mr. CAPKA. Ma’am, if I understand your question correctly, if we 

narrow down the requirements to limit the source——

Mrs. SCHMIDT. The bidding process itself, which you can’t break 

it down, if we limit it to the point where it is 100 percent Buy 

American, and that might limit the resources to be able to produce 

16

bridges, highway bill construction, because there is a supply and 

demand issue. That cost is then going to go back to the States, like 

ODOT, Ohio Department of Transportation. Where are they going 

to get the additional dollars, when they are seeing their revenue 

sources not keep pace with the inflationary cost of building the 

roads and the bridges, as well as the need to continue to build 

more roads and more bridges? 

Mr. CAPKA. I am not aware that there would be additional funding. It is hard to speculate there. I am not aware that there would 

be additional funding. I think normally what the States would do 

when presented with something like that would be to look internally, re-prioritize, delay projects and make the adjustments in 

order to pay for the project at the bid opening time. 

Mrs. SCHMIDT. My final thing, and it will be quick, is that Ohio 

continues to be a donor State when it comes to Federal dollars. We 

are the fifth highest use for traffic. So whatever we do to improve 

the Buy America bill, I would hope that it compensates for the dilemma that Ohio faces. Thank you. 

Mr. DEFAZIO. I thank the gentlelady for her questions and comments. 

Mr. Altmire? 

Mr. ALTMIRE. Thank you, Mr. Chairman. 

For Mr. Capka, how much does the Federal Highway Administration expect to save over the next five years by purchasing foreign steel over domestic steel in the construction of bridge projects 

and through the application of the 25 percent test on the piece by 

piece basis? 

Mr. CAPKA. Sir, we have no figures and there is no expectation 

or anticipation that there will be any savings. It is entirely up to 

the States to manage their contracts within the limits of the law. 

Mr. ALTMIRE. So I guess your opinion on this question, if there 

is no estimated cost savings to the taxpayer, the estimate has not 

been provided, then what is the point of dividing up the project and 

circumventing the Buy America Act? 

Mr. CAPKA. Sir, the projects that we look at are not broken up 

to circumvent the Buy America Act. The decisions made at the 

State level are made with a number of different variables that help 

decision makers determine a course of action to take. Provided that 

course of action is within the law, the law that we are required to 

enforce, we have no problem with the States taking their discretion 

and making those decisions. 

Mr. ALTMIRE. Can you talk, perhaps Mr. Simpson can weigh in 

on this as well, just about philosophically, what the balance is? You 

hear the different discussion points and we know what is at work 

here. What is the balance between the appropriateness of cost savings by sending American tax dollars overseas, and at what point 

are we hurting our domestic production and our domestic industries, as Mr. Baird talked about, versus the importance of lowering 

the cost? In your opinion, at what point is it not worth the effort 

to move in the direction that you have chosen to move? 

Mr. CAPKA. Sir, I am not an expert in that area by any means. 

I do know that it is important for decisions to be made at the level 

at which the consequences can be best understood. And certainly 

at the State level, where they are faced with the challenges that 

17

all State departments of transportation are faced with, as long as 

those decisions and the discretion being used fits the statute, we 

will support that at the Federal level. 

Mr. ALTMIRE. Do you want to call it, Mr. Simpson? 

Mr. SIMPSON. The only thing that I will comment on at a philosophical level, I guess you have to look at the cost and benefits to 

society and somehow enumerate them in dollars, the taxpayers saving a billion dollars on one side and on the other side maybe some 

jobs have been lost, and maybe that is at a $100 million level. I 

think that is part of our rulemaking process, to try and vett out 

what is happening in the economy, to try to determine, to try to 

come up with informed decisions. 

Mr. ALTMIRE. Thank you. Mr. Capka, do you have confidence, 

when the States are making these decisions, when you are allowing 

them to make the determination, that they are thinking in the 

long-term interest of the domestic steel industry as well as just a 

potential short-term gain with a specific project? 

Mr. CAPKA. We haven’t looked philosophically at what each State 

does and the basis for the decisions that are made. Certainly the 

Buy America Act is there to encourage the investment domestically. Again, the way the statute is constructed right now, it attaches to the obligation instrument, which is the single contract, as 

opposed to a collection of contracts. 

Mr. ALTMIRE. Do you want to comment, Mr. Simpson? 

Mr. SIMPSON. No, thank you, sir. 

Mr. ALTMIRE. Thank you both, and thank you, Mr. Chairman. 

Mr. DEFAZIO. I thank the gentleman. 

Mr. Arcuri. 

Mr. ARCURI. Just one question, actually two. Wouldn’t you agree 

that it is the role of the Federal Government to determine what is 

best for the Country, for the United States as a whole? 

Mr. CAPKA. I believe the Federal Government has a perspective 

that is broader than those that you would find in the States, for 

the obvious reasons. 

Mr. ARCURI. Isn’t buying domestic steel good for the Country as 

a whole? 

Mr. CAPKA. I would say that strengthening any one of our industries would certainly be beneficial for the Nation. 

Mr. ARCURI. Taking it to the next logical step, then, wouldn’t it 

be the kind of thing that the Federal Government should do to promote purchasing of domestically produced steel? 

Mr. CAPKA. And I think within the law, that is correct. As the 

Federal Highway Administrator, I am required to enforce the law 

as it has been written. In this particular case, the Buy America Act 

has been written in a manner that we feel as though we have been 

enforcing accurately and correctly. 

Mr. ARCURI. Based upon how your agency interprets it. 

Mr. CAPKA. How it has been interpreted since about 1982 

through a number of Administrations. We haven’t changed from 

Administration to Administration during the enforcement of Buy 

America. So it has been rather consistent since 1982. 

Mr. ARCURI. Thank you, sir. 

Mr. DEFAZIO. I thank the gentleman for his questions. 

18

We are going to do a second round—oh, Mr. Hayes. You sneaked 

in, you are so quiet. Your turn, sir. 

Mr. HAYES. Thank you, Mr. Chairman. Thank you for holding 

the hearing. 

Mr. Capka, thank you for being here, and Mr. Simpson as well. 

This is a subject that is very near and dear to my heart. Mr. 

DeFazio mentioned that a strong industrial base is crucial for our 

future. If you wouldn’t mind speculating a bit, as we compete in 

various areas, steel is certainly critical. As you compete with the 

Chinese, who get a 40 percent cut for currency manipulation, right 

off the bat, if nothing else, do you have any suggestions from your 

perspective, having to make this work, how we can maintain an attitude, and be careful to use the words, this is not about protectionism. Our steel is better, our workers are better. 

How do we work within those parameters to maintain this vital 

part of our industrial base and still acknowledge and recognize the 

importance of squeezing every ounce we can out of the taxpayer 

dollars? You have had to work this thing for some time. Can you 

suggest to the Committee something that we can do to help move 

this process forward? Again, it is not about protectionism. It is 

about good, common sense business practices that keeps our industries and the people that make them run viable. 

Mr. CAPKA. Sir, that is a challenge that I think all of us are very 

concerned about. The fact that the global marketplace is changing 

every day, that we are competing globally, and whether the playing 

field is level or not, the impacts are certainly being felt. With respect to Buy America, I think the intention of the Act was to provide some leveling of that playing field. But the way the statute is 

written, from my perspective, has directed the Federal Highway 

Administration to make those calls the way we have been making 

them with respect to Buy America. Whether there needs to be a 

strengthening of the Buy America Act or the provisions, I think 

that is something for the public debate as we go forward. 

But I would not argue with you at all that having a strong industrial base is to the advantage of the Nation’s economic strength. 

Mr. HAYES. Well, if I might suggest, Mr. Chairman, and a partial 

answer on the question, if the USTR and other Administration 

folks would be a lot more serious and committed to enforcing trade 

agreements, putting safeguards in place and countervailing tariffs, 

as you have seen some limited emphasis on doing, then again, I 

think that helps to make us appropriately competitive in a global 

marketplace. 

Mr. Simpson, would you like to add anything to that? 

Mr. SIMPSON. Yes, the only thing I would like to add that maybe 

will allay some of your fears with respect to how DOT is implementing Buy America, currently, there are about $25 billion worth 

of new starts of transit projects in the Country, and there is no foreign steel there. It is all with American steel. Additionally, the 

FTA spends about, I think it is in the area of $4 billion or $5 billion between our urbanized money and our rail mod money. Once 

again, we meet the Buy America requirements. 

Mr. HAYES. I thank you for your answers, and Mr. Chairman, I 

yield back. Thank you. 

19

Mr. DEFAZIO. I thank the gentleman for his excellent line of 

questions. 

If I could just follow up, Mr. Simpson, again on this system component, sub-component issue. This is from a letter that was directed to you, not to you, sorry, to before you were there, to the 

chief counsel at the FTA, February 7th, 2006. I just want to make 

certain that you believe the SNPRM has addressed this issue, if I 

can just read from the letter. It was sent by then-Chairman Young, 

Mr. Oberstar and Mr. LaTourette. ‘‘We are concerned that an end 

product system could be so large and incorporate so many different 

levels and types of equipment, that eh sub-components, which are 

not subject to Buy America compliance analysis, would be relatively major items.’’

Was it the intent of your second NPRM to address that issue? 

Mr. SIMPSON. Yes, it was, and we have had outreach with Chairman Oberstar’s office, Congressman LaTourette and, I forgot the 

third Congressman. Congressman Young. And it is my understanding that the staff is comfortable with what our proposals, we 

haven’t made any decisions yet. We are comfortable that in the direction we are moving, we have the system well balanced. 

Mr. DEFAZIO. Is this going to require some extraordinary encyclopedia of what constitutes components, sub-components, end products? 

Mr. SIMPSON. No, it is not, because SAFETEA-LU directed us to 

have a representative list and also to look, as new issues come up, 

to take a look at it in a regular basis and to have transparency and 

have an open door policy. 

Mr. DEFAZIO. Okay. What is a fare card? 

Mr. SIMPSON. A fare card would be probably—the card itself? 

Mr. DEFAZIO. Yes. 

Mr. SIMPSON. A sub-component. 

Mr. DEFAZIO. All right. That is good. That is what I thought, but 

I just wanted to make sure I had grasped this. I hope we aren’t 

going to print our fare cards overseas. 

Thank you for that. 

Mr. Baird? 

Mr. BAIRD. I want to go back to this memorandum. Mr. Capka, 

you continually refer to this memorandum, and with respect, it is 

baloney. I will tell you why I think is baloney. It is because you 

are basically saying that project is synonymous, not basically, that 

is what you are saying in this memorandum, or your attorney, supposedly is saying, project is synonymous with contract. As you look 

at SAFETEA-LU and the couple hundred billion bucks that were 

allocated to various projects and what-not, did we, for example, say 

we want $100 million to go to project X or did we say, let’s say it 

is a bridge. Let’s say $100 million for the bridge, or did we say, we 

want $20 million to go to the paving of the bridge and $40 million 

to go to the concrete of the bridge? Did we break the projects out 

that way, or did we build the project as a bridge? 

Mr. CAPKA. Sir, those project designations in SAFETEA-LU were 

scope and description driven, as opposed to component driven. 

Mr. BAIRD. So when the Congress allocates money to a project, 

we are not saying that the project is an amalgam of sub-contracts, 

20

we are saying the project is the project, finish the bridge, are we 

not? 

Mr. CAPKA. The——

Mr. BAIRD. We certainly are not. Have you seen it as standard, 

let me ask it this way, is it standard in language in SAFETEA-LU 

or in transportation appropriations to break projects into sub-contracts, or do we refer to the project as the project? 

Mr. CAPKA. In SAFETEA-LU, the designation is the project. 

Mr. BAIRD. Then how can you justify the logic of this memorandum saying that the sub-contracts are in fact the project, when 

the Congress doesn’t itself allocate the money that way? 

Mr. CAPKA. Section 313 of Title 23 defines the attachment of the 

Federal requirements to the obligation document. That is attached 

to the contract itself. So the application of the Buy America Act 

that we are enforcing has nothing to do with how the project designations occur in the legislation. But the attachment of the obligation occurs at the contract level. And that is where the Buy America——

Mr. BAIRD. I just really disagree with that. The Federal Government, when we make decisions here, we say, we basically say this: 

we have deemed as this Committee, as the elected representatives 

of the people, that completing X bridge or repairing X highway is 

in the best interest of this public, and that is why we commit the 

dollars to it. We do it, writ large. Nobody comes before this Committee and says, I want to parcel out this project into component 

parts, so that the contracts can be written in a sub-way. 

Then you are allowing the States to take Federal dollars which 

went to a big project which this Committee and the full Congress 

has said matters as a full project, and you are allowing the States 

to then parse that out as if we considered the projects in form of 

sub-contracts. I just think that is faulty reasoning. I think it is 

logically inconsistent. 

Mr. CAPKA. Sir, it is the way the law was written. 

Mr. BAIRD. No, it is the way you are interpreting the law, is 

what I am telling you. I believe it is clearly the way you are interpreting the law, and I would assert that a far better, more consistent matter with how this Congress functions and the intent of 

this Congress functions is to say, the project is what we are after. 

This Congress does not say, we are going to authorize tiny subsections. We authorize big projects. And to then say that the contract is synonymous with the project I think is inconsistent with 

how the Congress functions and the intent of Congress. 

What I find troubling is, it seems to me that you went out of 

your way with legal legerdemain to say, we are going to try to find 

a way to redefine this. It is really pretty astonishing in this memo. 

You go through this whole thing, once the project agreement is executed, the State will then proceed to award a construction contract, 

a construction contract for the project, work covered by the project 

agreement through competitive bidding. But you have again 

conflated project with contract. I don’t think that is how it works. 

I think you just found a way to do it because you really want to 

undermine Buy America. 

I sure don’t see that you honored, and clearly the sense of Congress, the reason we do a sense of Congress is to say, no, that ain’t 

21

right, people. That is not the interpretation this Congress wants. 

And you went ahead and did it. And so to hide behind this memo, 

which is flawed on the face of it, I think is it disingenuous for you 

to say, oh, we were sincerely, as I think you said in your testimony, 

implied you sincerely wanted to honor the spirit of Buy America. 

I don’t think you do. I think you went out of your way to violate 

the spirit of it. I think that is undermining our industry. 

Mr. CAPKA. Sir, we have been consistent, since the early 1980s, 

in our approach to Buy America. So there has been nothing inconsistent during that time frame. It is not just this Administration, 

but every one——

Mr. BAIRD. Well, I would assert that Mr. Oberstar, perhaps he 

will have time to join us, would see it a good bit differently. 

Mr. DEFAZIO. Could I ask the Administrator, has there been, has 

this issue been litigated, or are we just relying upon, you are relying upon advice of counsel? 

Mr. CAPKA. I am not aware of any litigation that has occurred. 

But I do rely upon the advice of legal opinion and my counsel. 

Mr. DEFAZIO. Are you bound by that? 

Mr. CAPKA. When it comes to the statute, sir, I listen very carefully to my legal opinion with respect to what our requirements 

are. 

Mr. DEFAZIO. Right. So even though you understand what Congress intended in the sense of Congress, or the report language, 

you feel that, and you certainly made that clear at the outset, that 

your higher duty is to follow the advice of your counsel, whose ultimate conclusion disagrees with what Congress would prefer to have 

done. As I think you stated earlier, the only way we can give you 

a higher direction is with statutory language. 

Mr. CAPKA. That is correct, sir. I am aware of other situations 

where the language of the statute has caused problems and had to 

be corrected that way as well. 

Mr. DEFAZIO. It was probably written by the Senate, that is 

probably the problem. It is not as clear as it should be. 

[Laughter.] 

Mr. DEFAZIO. Chairman Oberstar had expressed a strong desire 

to have one very gentle round with the two of you before you left, 

I am certain, since he has only been working on this issue for at 

least 20 years. So if we could just sit here quietly, unless Mr. 

Hayes wants another round. 

Mr. HAYES. Thank you, Mr. Chairman. I am smiling, Mr. Baird, 

I agree with your conclusion but I don’t agree with what gave you 

that gleam. We need to be more clear if we agree, and we do. If 

we want to use American steel, then we need to say that. A bridge 

is no different than an interstate highway going from Lexington to 

Charlotte, because Lexington to Salisbury, that is one segment, 

Salisbury to Concorde is another segment. 

But again, this issue comes up over and over again, how do we 

keep America strong. I really don’t fault your interpretation in 

what you are seeing, but I would like to see us get together and 

make i ta little bit more clear, at the same time, make sure that 

our industries are competitive as they need to be, in order to protect the taxpayer, who is footing the bill for everything. Your assistance in helping us do that would be much appreciated. 

22

Mr. BAIRD. Would the gentleman yield for a second? 

Mr. HAYES. I will try to. 

Mr. BAIRD. I appreciate it. The thing is this, Mr. Hayes, had the 

Administration sincerely wanted to do this, an equal form of reasoning could have been, whereas the Congress of the United States 

appropriates money and authorizes funding for projects writ large 

as whole, therefore it is intended that the total amount of funding 

for that project is intended for the whole project. Therefore, breaking those projects into sub-contracts for the purpose of finding ways 

that might exceed the 125 percent cutoff for Buy America is inconsistent. 

In other words, that is what is going on here. They are breaking, 

entities are breaking up their projects, for which they get a lot of 

Federal money, into smaller contracts and saying, well, this portion 

of the project, this contract doesn’t have to adhere to Buy America 

because this portion would exceed the 125 percent. We are saying, 

if you look at it as a project as a whole, then you no longer exceed 

the 125 percent cap and the entire thing must be governed by Buy 

America. My point being, Mr. Hayes, that instead of going out of 

their way to do exactly as you say, and I know you are sincere in 

this, instead of going out of their way, or not even out of their way, 

instead of offering, I think, a more logically consistent and wellreasoned argument that would support the Buy America Act, they 

are in fact going out of their way to allow contractual structures 

that circumvent Buy America. That is the problem I have. 

Where I am trying to say, they should be helping us here, they 

are going out of their way to undermine it, I think. 

Mr. HAYES. Again, I appreciate the gentleman’s conclusion. As 

the number one proponent of the very amendment, this is the same 

thing in a different arena, we need to get our heads together and 

give some assistance and clear direction to these gentlemen in 

Highways and at Department of Defense. I would welcome the opportunity, as always, to do that with you. 

Mr. Oberstar is here. I yield back. 

Mr. DEFAZIO. I thank the gentleman. 

We would now hear from the esteemed Chairman of the Full 

Committee, with a lengthy history and knowledge, he can probably 

even explain systems components and sub-components in great detail and how that law would apply. But we won’t ask him to do 

that. 

Mr. OBERSTAR. Thank you. I will refrain, Mr. Chairman, thank 

you very much. 

I appreciate the panel being here. Administrator Capka and Administrator Simpson, I didn’t realize this was your first visitation 

before the Committee. We will have you back frequently. 

Mr. SIMPSON. I am looking forward to it. 

[Laughter.] 

Mr. OBERSTAR. Look, common sense tells you, when you are 

building a bridge, you don’t just build a center arch span. It is a 

whole project. The bridge is a project. I don’t want to hear parsing 

of construction projects about, you can get a thousand angels dancing on the point of a pin to discuss some fine point of tautological 

inquiry. We don’t need to do that. Highway construction, bridge 

construction is common sense stuff. You build a whole bridge. 

23

You know what happened between Duluth and Superior, 26 year 

ago? The State of Wisconsin wanted to avoid buying American 

steel. So they let the bid first on the center arch span, 10,000 tons 

of steel come into the harbor in Duluth. And under this bridge that 

they want to build with Japanese steel that came on a journey of 

10,000 miles, will go iron ore from my district to lower lake steel 

mills to make American steel, pass under a Japanese steel bridge. 

Outrageous. 

And they are going to sell it for $100 a ton less than it could be 

produced 500 miles away at South Works of U.S. Steel in Chicago? 

Common sense tells you that steel is subsidized. 

I had the economic staff of the Japanese embassy in my office, 

and I looked them right square in the eye and I said, I know what 

you are doing, I know how you are subsidizing this, I know how 

you are skirting the law, and here is how you did it, and I won’t 

go through all that now, these big subsidies that they did through 

the Bank of Japan. But if this contract isn’t withdrawn, I will tell 

you, we have a $2 billion steel bridge program in the current Surface Transportation bill that I will make sure there won’t be another pound of Japanese steel in the U.S. marketplace. Oh, consultation with Tokyo. But the Japanese came back and said, if the 

contract is rebid, we won’t submit Japanese steel. But the Governor 

of Wisconsin said, oh, we will save money on building this bridge. 

It was a shared bridge, Minnesota and Wisconsin. But Wisconsin, 

in the trade-off that we do between our two States, had the authority to do this bridge. So the center arch span went up with Japanese steel. The other 70,000 tons of steel were American steel, because I put a provision in the 1982 Surface Transportation Assistance Act that said it was going to be all American steel. 

But that was the first instance of segmenting projects. Then in 

1988, as I said earlier, I think Mr. Hayes, you weren’t in the room 

at the time, but I quoted from my statement in 1988, when I was 

chairing Investigations and Oversight hearings, and that of my Republican partner on the Committee, Congressman Bill Clinger from 

Pennsylvania, who was very, very clear that we need to have a domestic steel industry. His statement was very, very clear, I won’t 

go back and repeat it. It is in the record. 

So now we are coming back again and seeing this segmenting 

again of contracts. That defies common sense. I heard your defense 

of it, Mr. Capka, but I don’t accept that. You have lawyers dancing 

on the head of a pin to try to achieve a result. Do you have any 

idea how much steel China produces today? 

Mr. CAPKA. Sir, I know they produce a lot. 

Mr. OBERSTAR. Yes, a lot. The highest raw steel production in the 

history of the industrial revolution was in 1979, the U.S. domestic 

steel industry poured 129 million tons of raw steel. Last year, Chinese steel industries poured 450 million tons of raw steel, 95 percent of it for domestic consumption. They are building ports and 

railways and highways and airports. They are investing a trillion 

dollars in their infrastructure. They have completed a rail line from 

Beijing to Lhasa, Tibet, 2,500 miles. You can travel it in 48 hours, 

14,000 feet altitude, pressurized rail cars. We can hardly go across 

the United States in Amtrak limping along. 

24

But they are investing in their future and they are doing it with 

their steel industry. What do you think they are going to do in 

time? Dump that steel into the U.S. marketplace at some point. 

Steel is the basic building block of an industrial society. We have 

an obligation to support our steel, just as they are supporting 

theirs. We put that 26 percent in the law because that was the 

margin by which the International Trade Commission found foreign governments were subsidizing steel to be dumped in the U.S. 

marketplace, International Trade Commission finding under the 

Reagan Administration. Subsidizing their exports to the United 

States at 26 percent below domestic market prices, what I said in 

my opening statement 19 years ago. So I picked that out and said, 

that is the benchmark. 

Now, to shift over to the transit program, the problem there was 

that we had neglected transit so badly in America, and made such 

a cultural shift to the highway, that the domestic component production industry withered. And at the time, there wasn’t, in the 

1980s, there were only a handful of industries capable of supplying 

the needs, because there wasn’t demand. The demand is there now, 

and it is going to be up in the future. We are going to increase and 

build on the 18 percent out of the Highway Trust Fund for transit 

in the next authorization, we are going to expand upon that. We 

will have a more robust transit sector and a more robust production industry and build light rail and trolleys and commuter rail 

and streetcars and whatever it takes to move America more efficiently. And we are going to do it with American goods. These are 

American taxpayer dollars. When I hear from people who say, oh, 

it is cheaper to buy it from overseas, that steel isn’t paying Social 

Security, it isn’t paying unemployment compensation, it isn’t paying into workers comp. It isn’t paying the resources for trade adjustment assistance. Take into context the total economic consequence of out-sourcing our steel. 

I don’t think you ought to have your job out-sourced to India, to 

a call center. We don’t want our steelworker jobs out-soured to 

China or Japan or Korea or Taiwan, or the European Community, 

which is subsidizing until just recently. That is the fundamental 

that I bring to this issue. If you don’t administer the law in a common sense way, then we will write it even tighter. But we shouldn’t 

have to do that. 

I will leave a moment for your response, if you wish. 

Mr. CAPKA. Sir, I don’t take exception to anything that you have 

said. I think there have been some excellent observations made. I 

do think that in order to tighten up Buy America the way that the 

Members have suggested this afternoon, we do need to look at the 

statute and see how we can tighten it up. 

It has not just been this Administration’s interpretation that has 

attached the Buy America to the contract document, it has been, 

as far as I know, back into the 1980s when the bill first was passed 

and you were involved in the initial stages of the bill. So we in the 

Administration, in the Department, have been consistent with 

what the interpretations have been in the past. Being consistent in 

that interpretation is important for the whole dynamic of working 

with the States, of delivering the highway requirements. It is important that we have a consistent interpretation of the law. 

25

So if a law needs to be changed, a law would need to be changed, 

sir. 

Mr. OBERSTAR. I know there is history, I know there is. But 

those are aberrations, past practices are aberrations from common 

sense, and we need to get back on a common sense track. Until we 

get to the next law, let’s try to impose common sense. 

Administrator Simpson, I just wanted to thank your staff for 

their splendid work on the Northstar Corridor project. 

Mr. SIMPSON. Thank you. 

Mr. OBERSTAR. The bid came in under expectations and we will 

be able to move ahead with it. 

Mr. SIMPSON. My staff has been out there this week, I just 

signed yesterday a letter of no prejudice for the purchase of the locomotives, the diesel locomotives. 

Mr. OBERSTAR. I would yield to the gentleman from North Carolina. 

Mr. HAYES. Thank you, Mr. Oberstar. You presented the case 

very accurately as always. The only little thing I want to make 

sure you include in there is that 40 percent discount on that however many millions of tons of Chinese steel for currency manipulation. 

Mr. OBERSTAR. Yes, that is a Treasury issue. Darned right. I am 

with you on that. 

Mr. HAYES. It is a Treasury issue, but it translates into a huge 

subsidy, as you mentioned. 

Mr. OBERSTAR. That is right. 

Mr. HAYES. Thank you for bringing that up. 

Mr. OBERSTAR. Thank you. 

Mr. DEFAZIO. I thank the Chairman. In fact, in clarifying definitively the statute, we might have to deal with that issue in terms 

of the percentage allowance that is given for foreign bids, since now 

they have a built-in advantage that is so large, because of currency 

manipulation. We might want to, that 25 percent figure which was 

valid 20 year ago, may not be valid today for a competing bid. 

I thank the two Administrators for their testimony and look forward to continuing a productive relationship as we try and rebuild 

and better build America’s infrastructure. Thank you. 

I would call the next panel. Mr. Randall Iwasaki, Mr. John 

Catoe, Mr. Richard Trenery, and Mr. Robert Luffy. 

Again, I thank you for your patience. We will move right ahead 

with your testimony. Mr. Iwasaki, you would be first. 

TESTIMONY OF RANDALL IWASAKI, CHIEF DEPUTY DIRECTOR, 

CALIFORNIA DEPARTMENT OF TRANSPORTATION; JOHN B. 

CATOE, JR., GENERAL MANAGER, WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY; RICHARD TRENERY, VICE 

PRESIDENT, NORTHEAST REGION, CUBIC TRANSPORTATION 

SYSTEMS; ROBERT H. LUFFY, PRESIDENT AND CEO, AMERICAN BRIDGE COMPANY 

Mr. IWASAKI. Thank you, Mr. Chairman, Members of the Subcommittee. This is actually my first time that I have testified here 

as well. It is an honor to be here. Thank you for inviting the Department to testify. Director Kempton sends his regrets; however, 

26

Governor Schwarzenegger asked him to stay in Sacramento and 

testify in front of the State legislature, so he couldn’t be here. 

I am going to give you a quick snapshot of CalTrans, the California Department of Transportation. Current year budget is 

around $12.8 billion. We have more than 22,000 employees. Currently we just hit a milestone in the history of California and we 

have $10 billion worth of contracts under construction in the State, 

on the highway system that we oversee. 

The State’s transportation system is comprised of over 50,000 

lane miles of highway, 12,000 State-owned bridges, 2 of the top five 

largest transit operators and 2 of the busiest ports in the Nation. 

Even with all that, the State is still growing. It is projected by 

2020 to grow by 29 percent from 34 million people to about 44 million people. 

The vehicle miles traveled on an annual basis is projected to 

grow 38 percent. We are in love with the car out west. So we are 

growing from 344 billion miles to 475 billion miles. And the trade 

volume will double on top of all that. 

So in response to that, we not only have our Federal dollars, we 

also have our Federal dollars, but we have State dollars as well. 

We recently passed the Governor’s strategic growth plan. The voters of the great State of California passed a proposition, in my 

case, or CalTrans’ case, Proposition 1A, which safeguarded Prop 42, 

which is the sales tax on gasoline. It used to go to the general fund, 

now it goes to the State highway account. Proposition 1D was a 

$19.925 billion general obligational bond initiative for transportation. 

Even though we passed that bond initiative, we still need more 

money. The first segment of money was the corridor mobility improvement account. It was $4.5 billion. The key thing on the Governor’s strategic growth plan is that projects have to be under construction by 2012. For that $4.5 billion, we had $11.5 billion worth 

of ready projects to use those dollars. 

So what I am trying to say is that the needs outstrip the available funding in California, and I am sure the rest of the Nation. 

So we have another program we call the ICE program, or Industry 

Capacity Expansion. So we are concerned that we need the labor 

to put all this money to work, we need the materials, we need contractors and we need suppliers. So we are taking a look at the 

whole gamut to ensure that when al this money hits the street, 

that we can adequately use it in the most efficient and effective 

manner. 

We also partner with the Federal Highway Administration, as 

Administrator Capka said. We are very close partners with the 

Federal Highway Administration. They are with us every step of 

the way. 

We also adhere to the Buy America requirements. Current year, 

the STIP, the State Transportation Improvement Program and the 

State Highway Operation and Protection Program, is about $2.89 

billion, which includes $1.6 billion of Federal money. having said 

that, the Federal share of funding in California is declining, because we have self-help counties where the sales tax on goods are 

used for transportation. In San Diego County, TransNet was extended for 40 years, it generates about $15 billion. Then we have 

27

our Governor’s strategic growth plan, which is more bonds. We 

plan to put $107 billion to work over the next 10 years. 

Once again, when we use Federal funding, we are in compliance 

with the Buy America provisions under the current Federal law. 

We have asked for six waivers in the last five years and were 

granted six waivers in the last five years for specialty items. One 

wa sa local bridge, three for double slide, which is a tunnel slide, 

then two for the San Francisco Oakland Bay Bridge. There has 

been a total of five waivers granted since 2001 for the San Francisco Oakland Bay Bridge, so the last five years only goes to 2002. 

Buy America continues to apply for a majority of the work in 

which the waivers were granted. It only applies when you have 

Federal funding. So if you have State funding, there are no Buy 

America provisions. If it is a State-only funded project, it is not a 

requirement. However, much or all of the materials are purchased 

out of American vendors. 

The number of State-only contracts is increasing due to the fact 

hat many counties are helping themselves and in our bond initiative. But once again, American products still will be the most likely 

source with regards to the funding source. And domestic reinforcing 

steel, we build a lot of concrete bridges, is very competitive. 

There were a lot of questions about the toll bridge seismic retrofit program. Basic ally, we had an earthquake in 1989 in Loma 

Prieta, which damaged the east span, which is a cantilevered truss 

section going from Yerba Buena Island to Oakland. So the retrofit, 

the earthquake then generated a seismic retrofit program. We retrofitted all the bridges that we deemed vulnerable. The last bridges 

are the toll bridges, which are the most complex. They are large 

span, they span water and you need to have a long span between 

the frames. So we used steel in many cases, because it is lighter 

and you can span greater distances with steel structures. The program is about $8.7 billion, of which $500 million of it is 

Federal. The Buy America is included in all contracts that have 

Federal funding. 

The Bay Bridge is important to us, because if you look at a shake 

map, an AASHTO seismic map, the State of Texas is rated at a 2, 

this location is 60. So it is a very seismic reactive area. 

I think in closing, the contract that we are talking about, the 

south anchor suspension contract, so what we do is we split these 

contracts up. After 9/11, the contractors are having problems getting bonding and getting insurance. It has raised the cost of all 

these things to do business. And so we have gone out with a number of peer reviews to say, okay, how do we deliver this program 

in the most safe and efficient and effective manner. So we have determined that splitting these contracts up is one of the ways. 

You do not want to split these contracts up for the sake of splitting them up, because you will have contractors walking on contractors. So it is really critical that you stage the work, it makes 

a lot of sense. But the goal is to make these contracts more biddable. 

We advertised the SAS, the south anchor suspension contract in 

2003, with Buy America requirements. We asked for two estimates 

that Administrator Capka talked about, one domestic and one 

international. One bid was $1.8 billion domestic and $1.4 billion 

28

international. And when you take a look at it, it was greater than 

25 percent. So if we had the money to award, we would more than 

likely award it, International Steel bid. But we didn’t, because we 

didn’t have the money. So we went back and worked with our partners, the Metropolitan Transportation Commission and the legislation and the administration, and we crafted new legislation. It was 

determined that are going to State fund the SAS. So Buy America 

provisions do not apply to a non-Federal project. 

Some of the construction community input is that when you have 

a complex contract like this, and we don’t split every contract up 

in the State of California. It is these big bridge projects that we are 

taking a look at, specifically this east span. And so it was determined that it would probably get us more bidders. We added stipends, we added stipends of $5 billion for each responsible bidder 

that would bid the south anchor suspension bridge. We also required a $350 million performance bond on a $1.4 billion project 

and a $350 million bond for materials. 

Mr. DEFAZIO. If you could summarize very quickly, you are considerably over at this point. 

Mr. IWASAKI. I am sorry about that. 

So State-funded projects, market forces will prevail. You still 

have high level domestic products. Special requirements may result 

in a distinct advantage for foreign products, especially in cost differentials. So you have to look at your specialty requirements of 

your structures. Then you need to do what is financially prudent. 

We will continue to follow the Federal process for federalization of 

projects. 

I want to thank you for your time. 

Mr. DEFAZIO. I thank the gentleman. 

Mr. Catoe. 

Mr. CATOE. Thank you, Mr. Chairman and Members of the Committee, for inviting me here and giving me this opportunity to testify. 

I look forward to the future, as Chairman Oberstar mentioned, 

when the funding for transit in future years will be far greater 

than what it is today, because that is a necessity for the communities in this Country. 

First, a little bit of background about WMATA, the Washington 

Metropolitan Transit Authority. We are the largest public provider 

of transportation in the region. We carry 1.2 million people on a 

daily basis. We are the second largest subway system in the Nation 

and the fifth largest bus system. Sometimes we have been called 

‘‘America’s transit system.’’

I want to commit to you, Mr. Chairman and Members of this 

Committee, that we will become America’s best bus system. There 

have been many issues that have confronted us in the last few 

months. We are going to overcome those and we will come back 

and be America’s best. 

As an FTA grantee, WMATA includes Buy America requirements 

in all procurements over $100,000 that utilize Federal funds. Buy 

America regulations distinguish between procurement of steel, iron 

or manufactured goods, and of rolling stock. For example, when 

WMATA procures steel for the construction and maintenance of its 

29

facilities, or for track work, the contract must certify that that 

product is of 100 percent domestic origin. 

On the other hand, when we produce or procure buses or rail 

cars, the contractor must certify that more than 60 percent of the 

components by cost are produced in the United States, and that 

final assembly takes place in the United States. The marketplace 

has changed significantly since WMATA acquired the four regional 

bus systems in 1973 and since it procured its first 300 rail cars in 

1976. There are fewer manufacturers of bus and rail rolling stock 

today and, in fact, only one domestic manufacturer of buses that 

is owned by an American company. WMATA has been able, though, 

to purchase equipment and materials and to comply with the Buy 

America requirements. 

WMATA thanks the Committee for its direction in the 

SAFETEA-LU Act to update the Buy America regulations. We believe this will result in increased clarity for manufacturers and 

transit providers. With regard to the current FTA rulemaking, 

WMATA supports the FTA’s approach and the changes that they 

propose to the existing regulations. 

As concerns the end product definition, WMATA believes that it 

is most important that the final rule provide clarity, consistency 

and predictability for the transit industry. We believe by removing 

the so-called shifting methodology, as the FTA now proposes, there 

will be more predictability and competition in the marketplace, 

benefiting both the transit industry and American manufacturers. 

We also believe that the representative list of end products 

should balance the purpose of Buy America—to promote the domestic industry—with the needs of transit industries—to obtain high 

quality products at a reasonable price. We believe that balance can 

be achieved. 

WMATA’s goal is a representative list that would add clarity and 

consistency as to whether a particular item is an end product for 

the application of the Buy America rules. Therefore, we encourage 

the FTA to provide an additional comment period on the proposed 

list and suggest that the FTA revise this list periodically. 

Again, we commend the FTA for its efforts. We thank this Committee for your efforts and we thank you for the opportunity to appear before you today. 

Mr. DEFAZIO. Thank you, Mr. Catoe. 

Mr. Trenery. 

Mr. TRENERY. Mr. Chairman and Members of the Committee, my 

name is Richard Trenery, and I am Vice President and Regional 

General Manager for Cubic Transportation Systems. Cubic is based 

in San Diego, and we are the world’s largest turnkey solution provider of automated fare collection systems for public transport. 

I also serve in the capacity as President of the U.S. Transit Suppliers Coalition, a trade association consisting of more than two 

dozen manufacturers, composed of both large and small firms that 

supply products for the mass transit programs. The Coalition 

strongly supports the Buy America statutory requirements for the 

purchase of products manufactured in the U.S. in federally-funded 

transit contracts. 

Since its inception, Buy America has served as the basis for hundreds of millions of dollars in American manufacturing facilities in 

30

the creation of a highly trained work force composed of thousands 

of manufacturing jobs. Several years ago, the U.S. Transit Suppliers Coalition was formed out of necessity. Despite Buy America’s 

obvious value, it becomes increasingly clear to many observers that 

Buy America, as administered, has become increasingly mis-interpreted, exploited and manipulated to the detriment of U.S. workers 

and the economy. 

The Coalition responded with a positive approach designed to 

clarify Buy America and make it more open and accountable. Our 

Coalition advocated a common sense solution centered around 

three key improvements to the law. First, keep Buy America up 

with the times. Amend the law to eliminate any confusion and reflect the current marketplace. Close existing loopholes. Eliminate 

the temporary and overly broad microprocessor exception and minimize the use of any ambiguous and broadly defined complex system 

as an end product. These loopholes often allow companies that do 

not manufacture public transit equipment in the U.S. to profit from 

taxpayer dollars. 

Lastly, put teeth into the law. Require open and accountable enforcement procedures. In passing SAFETEA-LU, Congress made it 

clear that it too wanted the FTA to specifically promulgate regulations that would assure that the Buy America requirements and 

goals would not be circumvented by an expansive use of the microprocessor waiver and the bundling of complex systems in the socalled end products as a means to circumvent Buy America compliance. 

I want to congratulate this Committee, and particularly Mr. 

Oberstar and Mr. LaTourette for their steadfast leadership efforts 

to continue in its careful and thoughtful consideration of our views, 

and the issuance of specific reform language, both legislation and 

by letter, to direct the FTA to follow Congressional guidance in its 

rulemaking process. 

Mr. Chairman, we strongly believe that the FTA’s second notice 

of proposed rulemaking is a step in the right direction toward compliance with the letter and spirit of the Congressional direction as 

it applies to Buy America. However, we continue to have some concerns with two specific elements of the second proposed rulemaking. 

First, FTA’s proposed rulemaking offers factors that can be used 

to distinguish between a system that would be truly as an end 

product and what is designated as an end product as a way to 

avoid Buy America requirements. Indeed, this is an acknowledgement of the past problem and a step in the right direction toward 

a workable definition. 

However, in its proposed rulemaking, FTA continues to propose 

a definition of end product that includes undefined systems classification. This will clearly undermine the spirit intended by Buy 

America. The inherent problem with the proposal is that it does not 

definitively state how these factors will be used to determine 

whether a system is being properly designated as an end product. 

As an aid, we have recommended to the FTA the following simple test to identify an end product. The solicitation should provide 

separate line item pricing for individual products, or if a procurement provides for individual performance warranties for individual 

31

or separate performance, products, other than warranties related to 

degraded modes. Therefore it can demonstrate a clear independence. 

Or if items that are identified in the solicitation that constitute 

a system originally sold separately and can function independently 

of a system. Put simply, Congress perceived the old interpretation 

of major system end products as a circumvention of Buy America 

directed at FTA to redefine the end product way that a major system cannot be used to reduce other items that must be manufactured in the U.S. 

Again, we suggest a mandatory bright line test is required to put 

an end to the confusion. 

Secondly, we propose that FTA clarify the description of the 

microprocessor waiver. But we would like to see the input/output 

facility of that to be readjusted. These devices do more than just 

process data. 

Mr. Chairman, our industry and thousands of tax-paying U.S. 

workers applaud and appreciate the strong work this Committee 

has done for its inspired leadership role in reforming Buy America. 

We trust that you will continue to monitor the FTA as it finalizes 

its Buy America regulations. 

Cubic and our 29 member firms in the U.S. transit supply area 

look forward to continuing to manufacture products that will help 

keep our Country on the move. Thank you, sir. 

Mr. DEFAZIO. I thank the gentleman. 

Mr. Luffy. 

Mr. LUFFY. Thank you, Chairman DeFazio and Members of the 

Subcommittee. Thank you for inviting me here today. 

I first want to apologize for not having written comments. I got 

word of this while I was overseas in China visiting some of the facilities that Chairman Oberstar talked about and just got back into 

town Monday. So I have been out and have not had an opportunity 

to give written documentation. But I will provide it afterward, naturally. 

I would like to tell you that I am President and CEO of American 

Bridge Company. We have been building steel bridges around the 

world, particularly in the United States, for over 140 years. We are 

a heavy civil contractor and there is probably not a major bridge 

to be built anywhere in the world today, with the exception of the 

Far East, that we would not be in pursuit of the project. We currently are the lead in two contracts on the Woodrow Wilson Bridge, 

two main crossings, we are the contractor there. And we are the 

lead of the joint venture that has the SAS project that was the subject of questions here with the last group. 

So I have, I think, the facts on many of your questions, and I am 

going to cut my comments short, so that you have the opportunity 

to ask me whatever. I do want to say that we as a company are 

pretty unique. We not only are a large civil contractor bridge builder, but we are a steel fabricator. We have facilities in Western 

Pennsylvania, in Pittsburgh, also in Reedsport, Oregon. So we support, in a large way, Buy America, and applaud the efforts of Congressman Baird and Congressman Altmire. 

But I can tell you, and I can go into detail, that is not enough. 

This has been in effect for over 20 years now. I have been in this 

32

business 35 or 40 years, and I can tell you that the steel fabrication 

capability in the United States has deteriorated over the last 20 

years. It has not gotten stronger. It probably would not exist were 

it not for Buy America. 

But still today, bridges without Federal money or, I don’t even 

understand how this works, bridges by the Corps or the Coast 

Guard are open to Buy America, or are not subject to Buy America. 

In fact, we just completed a Florida Avenue bridge down in the 

Port of New Orleans for the Coast Guard, and that steel went to 

a foreign provider. Huey P. Long Bridge, it will be a $60 million to $100 million 

steel contract. It is bidding in June in New Orleans. It will definitely go to a foreign steel fabricator. 

This is not an issue often of dollars. Ultimately it is, but until 

the issues of capacity and capability in guarantees are addressed, 

you won’t be changing much. This is where the problem lies. The 

SAS project that everybody got into, and you were tied up over this 

$400 million difference, I put those numbers together personally, so 

I can tell you exactly how they were arrived at, was not an issue 

of the steel being more expensive. It was the issue of nobody in the 

United States could do the job. The capacity is not here. It could 

simply not be done. There is a requirement by the law that you 

cannot bid the foreign price unless you bid the domestic price when 

you bid the contract like that both ways. 

So we had to ourselves bid the domestic end of that job. We 

would not normally have gone after that job. And that difference 

in price reflects the investment in the infrastructure we would 

have to have made in order to drastically expand our facilities, to 

hire and train people and the liquidated damages that would have 

been necessary, because we would have been late. There is no way 

we could have done the job on time. And nobody else in the United 

States was interested in the job because of the constraints of the 

project itself. 

Any major project that requires a fast delivery, you are going to 

have this problem, whether you have Federal money in it or not. 

There is not capacity. The largest steel fabricating facility in the 

United States for bridges, I don’t know if Conn Abnee is still in the 

room, but I am guessing, because I know the industry so well, is 

probably 300 or 400 people on the floor working. I was in a facility 

that is going to fabricate the steel for the Oakland Bay Bridge all 

last week. They have 32,000 people in that facility. It is not even 

a contest. It is not even a contest. 

Anyway, we are in support of Buy America. We would like to see 

it a lot more strongly enforced. There is some ambiguity, obviously, 

and that needs to be straightened out. It should apply to the whole 

project. 

The details of a job will require that the job be broken into various segments, just so they can be bid and make more competition 

and therefore a better price to the State or the letting agency. But 

you have to look at the Buy America provision across the whole 

project, and that can still be done. 

So I will cut my comments off there. I really appreciate being 

here. I have a lot of first-hand knowledge to this particular issue 

and I will answer any questions you have. Thank you. 

33

Mr. DEFAZIO. I thank the gentleman. That was excellent testimony, very informative for the Committee. 

We have a vote in five minutes, so I am going to ask one quick 

question, and then each of you, I don’t know what your schedules 

are for planes or whatever, if you can remain, we will come back 

for a few questions. And anybody that has to leave, we understand. 

Mr. Luffy, if the language was in place, a more stringent Buy 

America, and we certainly know if our infrastructure deficit, one 

could project forward with it, would there then be more fabricators 

willing to make the investments here, knowing that there was a 

potential for business out into the future? 

Mr. LUFFY. Well, it is a good question. That is something else I 

was going to address. Because we personally, our company has invested $20 million, these two facilities are new, they are not old facilities that we have as a company. And we invested in the late 

1990s up through 2003 in both these facilities. 

We believe that Buy America, didn’t think we were going to see 

a lot of change. But now, I think if we had the decision to make 

today, we would not invest. There needs to be a clear signal that 

the steel bridge structures will go to U.S. fabricators. 

Mr. DEFAZIO. Right. But if we tighten the law so that we are 

sending a signal that it will be fabricated——

Mr. LUFFY. Absolutely. Absolutely. 

Mr. DEFAZIO. I had heard that actually the Chinese didn’t have 

the capacity for this particular structure, either, and they had to 

either modify or build a plant to do it? 

Mr. LUFFY. Believe me, they have capacity. It is beyond your 

comprehension if you haven’t been there. 

What they did is, we insisted that they segregate this bridge, because the requirements are so stringent with regard to quality that 

they segregate this completely from everything else they do. 

Mr. DEFAZIO. Okay. 

Mr. LUFFY. To give you an idea how fast they work, they were 

given a contract in June. They are building a completely new facility that I just visited last week. It will be open for business and 

producing steel the beginning of this June. In 11 months time from 

inception to completion to producing steel, in 11 months time. 

Mr. DEFAZIO. Okay, thank you. 

With that, we are going to have to recess until—we should be 

back hopefully in about 20 minutes. Thank you. 

[Recess.] 

Mr. DEFAZIO. All right, the Committee will come back to order. 

Other Members will be along shortly. Again, I appreciate your indulgence in terms of the schedule and length of this hearing. 

Mr. Luffy, if I could just pursue the line of questioning just before recessed for the votes on the Floor, as I understand it, at the 

time the project was proposed, there was no one domestically who 

could produce the components. 

Mr. LUFFY. Within the time constraints that they required, that 

is correct. There are two issues there, not to interrupt you. One is 

the capacity to get it there with regard to schedule and people. The 

other is the guarantee that you have to give in order to get the contract. There are not fabricators today in the United States that 

have the capital, the balance sheet that can get the guarantees 

34

needed, the bonding needed to guarantee the project on these 

mega-projects. 

So if there is a steel sub-contractor you are going to give to a 

steel supplier, if it is more than $100 million, other than ourselves, 

I don’t think there is another fabricator in the United States that 

would be able to provide a bond, which is the surety bond that is 

required as part of the construction process. 

Mr. DEFAZIO. Okay. But in response to, I mean, we will get this, 

I find it odd that you bid both the domestic bid and the foreign bid. 

Mr. LUFFY. That was a requirement. That was required by the 

contracts. 

Mr. DEFAZIO. So basically, you said okay, for bidding it domestically, we know we are going to have to acquire the steel from overseas? 

Mr. LUFFY. Yes, you actually go through a separate pricing process, one doing it with domestic steel and one doing it with foreign 

steel. Because there are implications on delivery and timing and 

size of components and on and on. It affects the whole job. 

Mr. DEFAZIO. But at the $1.8 billion, you would have been building some additional capacity here in the U.S.? 

Mr. LUFFY. A lot of additional capacity. 

Mr. DEFAZIO. Right. So in a sense, because of the way Buy 

America is set up, we are investing in capacity in China. 

Mr. LUFFY. No doubt about it. 

Mr. DEFAZIO. And the way we can turn that around for the future would be statutory change that makes it much more definitive 

that we are not going to allow this segmentation and these major 

projects will be required to be sourced here in the United States. 

And at that point, either your company or perhaps some other new 

entrants might be willing to take a risk on the investment necessary to meet that, what would be a fairly substantial projected 

demand into the future, very substantial demand? 

Mr. LUFFY. Yes, it would be a pretty safe prediction that that 

would happen. You would have significant investment. 

Mr. DEFAZIO. So we have a great chance to bring some capacity 

and jobs home here, potentially, if we revise this law? 

Mr. LUFFY. Absolutely. 

Mr. DEFAZIO. Okay, thank you. 

Mr. Trenery, I heard your concerns at the end. I couldn’t get very 

specific, unfortunately, with Mr. Simpson, because he is in the middle of a rulemaking, so he is in the quasi-judicial mode, et cetera. 

So he can’t really comment on exactly what he is doing. 

Did you propose, I assume you submitted comments, and in those 

comments, did you propose specifically how they might address 

your continuing concerns? You don’t think he has quite gotten to 

the point of resolving the issues I raised in the letter I read to him? 

Mr. TRENERY. That is correct, sir. 

Mr. DEFAZIO. Could you explain those in layman’s terms? 

Mr. TRENERY. We prefer the common sense approach to it. We 

try and look very pragmatically at what is the end result, does it 

create jobs or does it not create jobs. In the particular instance of 

the second notice of proposed rulemaking, we gave a set of formal 

approach, very simple, and said that we in the industry would this 

35

as a way you could determine whether something is an end product 

or isn’t. 

Mr. DEFAZIO. Would you do it with all these specific lists, or 

would you do it more with a generic kind of test? 

Mr. TRENERY. I think there are two answers to that. We definitely applaud the representative list. That puts clarity with everybody you know right from the get-go, what is an end product. And 

if it isn’t in there, because times will change, there should be a set 

of tests that you can go through with clarity, so you as a manufacturer and you as a buyer would know exactly what was on there. 

So we laid out in our comments, in both the original rulemaking 

and we echoed again in the second rulemaking a set of specific approaches to be able to offer. And that was done from a coalition 

standpoint of 29 member firms. 

Mr. DEFAZIO. Okay. Mr. Catoe, I appreciate your determination 

to improve the service here locally. That is grand. But on the specific topic here before us, has Buy America presented any particular challenges to your organization? 

Mr. CATOE. I would say there have been challenges to this organization and other organizations, because we have had the same 

experience across the Country. We have been able to not only meet 

the guidelines but in a lot of cases, particularly with buses, to exceed the guidelines. 

Part of the problem we have been confronted with, though, because of the peaks and valleys, valleys of Federal Transit appropriations, is that the bus industry has left the United States. As 

I mentioned earlier, there is only one truly domestic manufacturer 

of buses, and that has provided a challenge from a competitiveness 

standpoint. There are fewer manufacturers. It is really not tied into 

the United States, it is just the way the funding has occurred. 

Buy America has limited some of the manufacturers, since they 

don’t exist in the United States, from being able to bid here. So we 

have less competition, and when you have less competition, you 

have costlier products, or you don’t find the technology that you 

want in the few providers that exist. 

Mr. DEFAZIO. But in the aggregate, the amount of Federal funding that is going in at this point isn’t enough to create or induce 

someone to produce domestically? 

Mr. CATOE. The problem is the long-term certainty of it. It takes 

an enormous capital investment to build the capacity to build a 

transit vehicle. It is an assembly line type of operation. What the 

industry has seen over the last decade or two has been the peaks 

and valleys. When it is good, it is great. But when it is slow, it is 

real slow, to the point that we have all three domestic bus manufacturers, one from Michigan, one from New Mexico and one from 

California, that have gone out of business, that went bankrupt as 

a result of the valleys. It looks good today. If, as Congressman 

Oberstar mentioned, there will be increased funding in the future, 

and it is a long-term funding source, I think you would see more 

domestic providers coming into the market or start-ups. But today, 

again, there is some uncertainty on the amount of monies that 

would be appropriated for rolling stock. 

Mr. DEFAZIO. So the more certainty we could provide in the next 

iteration of the surface transportation reauthorization over the 

36

longest period of time, in addition to strictures on out-sourcing, 

could bring manufacturing? 

Mr. CATOE. Yes. 

Mr. DEFAZIO. I would just reflect that in the last reauthorization 

bill, I did get in a provision regarding domestic manufacture of 

street cars, since we are about to have the rebirth of the street car 

industry in America, and the domestic manufacturer has stepped 

up and is working now on the first prototype. They did license 

some Czechoslovakian technology, but they have actually improved 

on it. This is a company that produces a lot of exotic things for 

DOD. It happens to be in Oregon, too. I am quite confident that 

we are going to have state of the art streetcars available. I would 

hope that we can get back to buses, too. 

Just back to Mr. Luffy for a second, we have had a series of hearings, and I will continue to hold hearings on private-public partnerships. I am not sure how much you followed the debate. I draw distinctions between greenfield projects, new capacity, enhanced capacity and then the third iteration, which is essentially just monetizing an asset and having someone run the existing capacity. 

Mr. LUFFY. Right. 

Mr. DEFAZIO. The last area I am very skeptical of. 

But you raise kind of a new concern with me here. As much as 

PPPs don’t require Buy America, clearly, unless an individual 

State negotiated those terms in the contract with the—is that correct? 

Mr. LUFFY. Yes, this is a major concern, and I voiced it in the 

break. We see the trend, we are involved in a couple PPPs right 

now outside of the Country. We see the trend in the United States 

will be on the increase. By their very nature, they are free to go 

and buy where they like. Major structures are done this way and 

there is a shortfall in the revenue from the DOTs. This is how the 

problem is going to be solved, in our opinion. Then those bridges 

will go to foreign steel. 

If the dividing line is about 5,000 tons or so, if a project has more 

than that, there is a very good chance it would be in its open competition and it would go to a foreign supplier. And when we say foreign today, forget, the Japanese are no longer competitive, really. 

The Koreans are no longer competitive. What you are talking about 

is mainland China and Canada. Canada has three major fabricators up there that take work from us every day. So when you talk 

foreign, I think you can be specific. You are really talking about 

mainland China on major structures and Canada. 

Mr. DEFAZIO. I assure the gentleman that we are shining a spotlight on PPPs. Even the most enthusiastic proponents of PPPs realize that it is going to be a small percentage of our future investment. We will continue to do that. 

I have a question the staff gave me. What volume of work on an 

annual basis would be needed to sustain a viable domestic steel 

fabricator industry in the United States? How many fabricators 

would be in such an industry? 

Mr. LUFFY. I don’t know that I am confident, that I could answer 

that off the top of my head. I can tell you that it would be tough 

to have a facility that had the wherewithal, the technical skills to 

develop a facility where you have people that can do major bridges. 

37

Then you would have to have a facility that is drawing roughly $50 

million in revenues a year, and if you could use a number of about 

$3,000 a ton to $4,000 a ton, that would tell you the capacity, if 

somebody can do that arithmetic. 

That is about what you would need to maintain an ongoing entity. Again, the Steel Bridge Alliance probably has more accurate figures than my guess. But there are two or three, depending on 

which part of the Country you are in, because transportation has 

something to do with this, if you don’t have a facility, there are two 

or three competitors in existence in most areas today. The problem 

is that if the job is significantly large, and the schedule is challenging enough, they just can’t be competitive. 

Mr. DEFAZIO. So the scheduling, the bonding, the predictability 

of demand, the total dollar value of demand, all those would be the 

major factors. It would be helpful if we got some analysis of our 

answer to that question subsequent to the hearing from either you 

or the Alliance, just because if we are making a real objective in 

the next reauthorization bill to really bring this industry home, we 

just need to know what we have to be protecting in terms of investment in order to perhaps accomplish that goal. 

Mr. LUFFY. We will get you accurate numbers. In fact, we are 

one of the few that probably have them, because we have investment in two new facilities here. 

Mr. DEFAZIO. I thank you. 

With that, I have some people waiting patiently in my office, but 

this was a compelling panel and I had to come back. I am going 

to ask Mrs. Napolitano to assume the Chair for the remainder of 

the questions, and I am not certain whether Chairman Oberstar is 

coming back or not. She will assume the Chair and we won’t keep 

you here much longer, I promise. 

Mrs. NAPOLITANO. Thank you very much. 

We would like to continue. I thank the Chair for allowing me to 

come up here, because I do have questions, and I told him, don’t 

make promises I can’t keep. 

Part of what I wanted to ask was, for many years, because I have 

been through the different levels of government, city council, and 

we wanted to put in a Buy America, because back in the 1980s, we 

started losing manufacturing, losing the ability to create, to make 

the rail cars, to do many things that we knew the industries were 

going abroad. We weren’t training personnel. We were not investing in being able to keep up the infrastructure to maintain. And 

everybody was not of the opinion that we should invest or that we 

would be able to remain competitive and be able to get things done 

cheaper. 

What it really boiled down to was, bottom line was the money 

and how much it was going to cost, and where can you cut corners, 

or how can that be made at a cheaper price for the taxpayer. In 

the end, the taxpayer did lose, and we know that. 

Following the Chairman’s line of questioning, how do we begin 

to rebuild that which we have allowed to erode, knowing full well 

that yes, we don’t have a lot of the ability to do the major projects, 

because we don’t have the infrastructure we once had. How do we 

together, the industries, the labor, everybody, work together, work 

towards that aim. I would like to pose that to all three of you. 

38

Mr. CATOE. Thank you very much. I will attempt to respond from 

a transit operator’s perspective. 

As I discussed earlier, one of the issues that has happened to the 

rolling stock industry. For example, there is no American or domestic manufacturer of a rail car. From a bus standpoint, there is only 

one remaining domestic manufacturer of a heavy duty bus that we 

use in the transit industry, the 40 and the 60 foot vehicle. 

Again, some of the issues have been the inconsistencies in the demand and the funding for vehicles, and that the businesses did not 

survive in the United States. Instead, you have businesses that are 

owned by firms in Europe, because there is a consistency in the demand that came into the market. 

So if there is a way that, from an industry perspective, and we 

as operators have to be a part of this, to plan out the needs over 

the next ten years, to schedule those needs out and then look, from 

a funding perspective, a Federal funding and local funding perspective, to ensure that the dollars are there, there is the opportunity 

for someone to come in to invest and to make a profit. Because no 

business is going to come here and manufacture a product just for 

patriotic duty. There is a profit involved in this also. That is one 

way. 

As an industry, as we look at the aspect of the Federal regulations, the FTA, and we are here today to support those, if we continue that support, because you are right, there is a direct relationship. With regard to the transit industry and ridership, between 

those individuals who have jobs and the ridership in the transit organization, my job is to pick up people and carry people. I want as 

many people as possible out there to use the system. 

So I want jobs in this Country because jobs in this Country support everything that we do. So from a personal perspective, I support Buy America. But from an industry perspective, again, we 

need to define and clarify our demands, through the American Public Transportation Association. The work of Congress is to ensure 

that funding is there to fund those needs for a sustained period of 

time. 

Mrs. NAPOLITANO. Thank you. 

Mr. TRENERY. From the transit suppliers’ perspective, let me just 

echo and agree with Mr. Catoe’s remarks. I think funding is key 

and important. But also, there is a lot of funding out there. Congress allocates a lot of funding each year to this. So there is funding there. 

What is also needed is consistent regulations. So the field is level 

and plain. From a supplier standpoint, we need to know what the 

interpretation is going to be, and not that it changes. Because we 

make investments, and those investments have to be equitable for 

all parties. We don’t want to make a $100 million investment in 

plant and supplies and then find out the next year we didn’t need 

to do that, all we needed to do was interpret the regulations in 

such a way we could offshore it. That doesn’t help our manufacturing capacity and capabilities. 

So it is not only funding, it is also consistency of the regulations 

and clarity that is necessary. 

Mr. LUFFY. From the steel fabricators’ perspective, it is a similar 

answer. At the heart of this is that you have to create a level playVerDate 0ct 09 2002 11:24 Apr 07, 2008 Jkt 000000 PO 00000 Frm 00048 Fmt 6633 Sfmt 6633 P:\DOCS\35914 HTRANS1 PsN: JASON
39

ing field. As I said, I was just in China looking at steel fabricators. 

They are paying their people a buck, a buck and a half a day. Our 

cost of labor is $30 an hour. So it is not competition when you are 

going head to head. It just doesn’t exist. 

Something has to be done about that. If you are going to allow 

them to compete here without any requirements that they do anything to level things out, then they are going to have the work and 

we won’t have the fabricating capability in the United States. That 

is the long and short of it. This is not a very complicated issue. We 

can help with the Buy America clauses, of course, in that in some 

portions of the steel fabrication industry, we can maintain a steady 

revenue stream, projects. If that is the case, and we can see it out 

there in the future, people will invest in facilities. So you maintain 

some fabricating capability. 

But there is an awful lot of steel produced in the United States 

that is not subject to this, and of course, that will go foreign and 

will further diminish the steel fabrication capacity in the U.S. 

Mrs. NAPOLITANO. Can you elaborate a little more on the level 

playing field aspect of it? 

Mr. LUFFY. Well, I think the labor, cost of labor is a big issue. 

We are paying 20 times what they pay for labor. So their cost to 

produce the steel is a heck of a lot cheaper than ours. 

Mrs. NAPOLITANO. What about quality? Is the quality comparable? Is it better? 

Mr. LUFFY. They solve quality with labor. They just keep, they 

will do it over five times until they get the quality right and it is 

still way cheaper than us. 

Mrs. NAPOLITANO. Well, but that brings to point the safety issue. 

Because we hold our standards much higher than China. 

Mr. LUFFY. No, no. This is not the case. Because, and CalTrans 

is a good example, the requirements are very specific. The quality 

standard has to be met. They will meet the quality standard. So 

this is not an issue where we are buying an inferior product. 

Somebody made the statement earlier that their steel is not as 

good as ours. Steel is a chemical composition. Anybody can do a 

spectrographic analysis and look at it and determine whether the 

steel is steel or not, and if it meets the standards of the specification. Their steel is exactly the same as ours, it is exactly the same. 

The fact is that the government subsidizes their steel production. 

So if you are a steel fabricator from China, you buy your raw materials cheaper and your labor is cheaper. How can we compete? 

Mrs. NAPOLITANO. Well, that also brings to mind the difference 

between the dollar which plays a major part in that. 

Mr. LUFFY. Right. Absolutely. And you put them all together and 

again, it is not a level playing field. If there is open competition, 

they will always win. 

Mrs. NAPOLITANO. One of the areas that has really played a big 

part in the resurgence of American economy, if you will, back in 

the 1930s, when there was recession and you had dams being built, 

bridges, highway construction, why is it we can’t begin to look at 

transportation as being one of the cogs of rebuilding America’s 

economy? Anybody? 

Mr. CATOE. Thank you. You are preaching to the choir here. Absolutely. 

40

Mrs. NAPOLITANO. But I want it for the record, sir. 

[Laughter.] 

Mr. CATOE. I support that. That is something that we can look 

at, and as we look to the future, with the growth here in the Metropolitan Washington area. 

An example, today we are very quickly approaching capacity on 

our rail system. We will be able to add additional cars. That would 

give us some additional capacity. But as you look five, ten years 

out, the increase in the population growth and jobs will again exceed that capacity. 

While we have said this is a system that is completed, because 

it is 106 miles, plus some additional miles in a plan for Dulles, 

there are many more corridors where we could enhance the transportation and the transit system in this area and around the Country. So if there is any proposal to have a public works program for 

transportation, I volunteer our agency and I volunteer this area, 

because the need will be there. There is a way of creating jobs and 

a way of creating an industry that will continue after the project 

is completed, if we revitalize the rail car industry, as well as the 

tracks and all the other components that we use on an ongoing 

basis. 

Mrs. NAPOLITANO. Anyone else? 

Mr. Luffy, you did make a statement that we cannot compete because of inequity, the cost or the price. Then what should we, or 

what can we do to sustain or improve our steel industry? 

Mr. LUFFY. It is not going to happen without a steady revenue 

stream. Nobody is going to invest in a production facility unless 

you have a buyer for the product. And it is just not going to happen 

here, because our product will cost more. 

The result is that you are not only losing industry and basic jobs, 

you are losing a lot of engineering talent. I happen to sit on the 

board of an engineering school. This is a major problem we talk 

about constantly, is that the engineering jobs are leaving with the 

manufacturing jobs. So you are losing, you have everybody wanting 

to be a consultant, and at the end of the day here, we are all going 

to consult with each other, we are not going to produce anything. 

Something has to be done to stem the tide. This is a good place to 

start, because it affects us. 

Mrs. NAPOLITANO. Thank you. 

Is it also a factor that we are not providing enough training for 

our young people to become the engineers? 

Mr. LUFFY. This is a whole other issue. I can speak to it with 

some knowledge, having been involved in these programs. The 

issue is the attractiveness of an engineering education. We are as 

a Nation, if you turn on your television tonight, you will see seven 

shows about attorneys and not one about an engineer. The fact is 

that kids go to school and want to do everything but be an engineer. 

Yet today the highest starting salaries out of any university are 

for engineering. This story isn’t getting to kids. Unfortunately because of the high math requirement, you have to get kids in grade 

school. In high school, it is too late. Sixth or seventh grade, you 

have to get their attention. 

41

There are a lot of privately funded programs ongoing to make 

this happen, but the Government is doing nothing to support it 

that I know of. 

Mrs. NAPOLITANO. I hate to pick on you, but the next question, 

will not the open competition take all the projects away, even with 

higher investment expenditure? 

Mr. LUFFY. Well, even with Buy America—I didn’t understand 

the question. 

Mrs. NAPOLITANO. The reference is to the foreign competition, because they can’t underbid. The competition, because they will come 

in and it will be open, foreign companies can still come in and underbid, would that affect it? 

Mr. LUFFY. Even with the Buy America in place, you are saying? 

Well, it depends on the limits of Buy America, obviously. Right now 

it is 25 percent higher. If that percentage was increased, no. As a 

matter of fact, it is pretty close, even at that, depending on the 

project. The complications here is that there are some jobs, even 

today, because there is a lot of capacity, say, in steel girder making, steel girders are the steel that is on the Wilson Bridge. There 

is a local supplier up in Lancaster, Pennsylvania, that is very competitive. Even with steel competition from a foreign country, High 

Steel is the name of the company, they would still be low, in my 

opinion, given an advantage of Buy America. 

But there are other jobs like SAS and other major projects where 

25 percent isn’t enough. It needs to be higher. 

Mrs. NAPOLITANO. Then would you suggest that that be part of 

the actual Federal requirement, is that certain areas that you 

know are a necessity have a higher percentage? 

Mr. LUFFY. Yes, absolutely. I think we could define specific types 

of projects. But the percentage needs to be higher on almost all 

types of bridge structures. 

Mrs. NAPOLITANO. Do you gentlemen agree? 

Mr. TRENERY. If I could amplify on one comment. The 25 percent 

criteria between U.S. and foreign, we applaud that. But we have 

come across so many instances where that is not applied. We have 

the systems procurement approach being applied, which so-called 

levels the playing field, and therefore there is no 25 percent. I have 

had companies that are under our coalition that have lost contracts 

to a foreign firm that is producing overseas for less than 10 percent, because they will get a waiver or get put under a systems 

procurement. So therefore, the 25 percent differential doesn’t even 

get to be applied. 

So that is why we talk about leveling the playing field and making sure the regulations are fully applied to everybody. 

Mr. LUFFY. I just want to add one thing. The point specifically 

on, say, the Oakland Bay Bridge project, where they break these 

projects up, if that percentage would have been applied across the 

whole project, it would have gone to a domestic fabricator. 

Mrs. NAPOLITANO. Across the project, instead of being broken up 

and considered separately? 

Mr. LUFFY. Yes, it had to be a 25 percent improvement across 

the whole project, well, then it would have become a domestic fabrication project. The arithmetic can get complicated, but it is a 

42

matter of, you are increasing the size of the denominator when you 

apply it across the whole project. 

Mrs. NAPOLITANO. There are a lot of issues connected with it. 

When I was reading some of the material given to us to review 

prior to the hearing, it leaves a lot of questions unanswered. Because we continue to say to the American public, we are trying to 

improve our economy, trying to provide jobs, trying to provide more 

funding for job training, and there are no jobs. Somewhere along 

the line, we need to include the business sector, as you have indicated, together with education, together with companies who, I am 

sorry, the bottom line is the money, that we need to ensure that 

we protect our American jobs and that we continue having hearings where we will bring this to the forefront, so people understand 

what really is important to us and to this Country. 

So with that, unless you have any further statements, gentlemen, we thank you for your participation and thank you very much 

for being so patient. This meeting is adjourned. 

[Whereupon, at 5:40 p.m., the Subcommittee was adjourned.]

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