[Federal Register Volume 70, Number 227 (Monday, November 28, 2005)]
[Proposed Rules]
[Pages 71246-71258]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-23323]


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DEPARTMENT OF TRANSPORTATION

Federal Transit Administration

49 CFR Part 661

[Docket No. FTA-2005-23082]
RIN 2132-AA80


Buy America Requirements; Amendments to Definitions and Waiver 
Procedures

AGENCY: Federal Transit Administration, DOT.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Safe, Accountable, Flexible, Efficient Transportation 
Equity Act: A Legacy for Users (SAFETEA-LU) requires the Federal 
Transit Administration (FTA) to make certain changes to our Buy America 
requirements. Accordingly, this Notice of Proposed Rulemaking (NPRM) 
would clarify the Buy America requirements with respect to 
microprocessor waivers, remove two general waiver categories, allow for 
post-award waivers, require greater detail for public interest waivers, 
and specify that final decisions by FTA are subject to judicial review. 
In addition, this NPRM would clarify the definitions of end product, 
negotiated agreement, and contractor, and provide a list representative 
of those items. The NPRM also proposes addressing the procurement of 
systems under the definition of end product, negotiated agreement, and 
contractor to ensure that major system procurements are not used to 
circumvent the Buy America requirements. Finally, the NPRM would make a 
minor clarification to pre-award and post-delivery review of rolling 
stock purchases.

DATES: Comments requested by January 27, 2006. Late filed comments will 
be considered to the extent practicable.

ADDRESSES: You may submit comments [identified by DOT DMS Docket Number 
FTA-2005-23082] by any of the following methods:
    Federal Rulemaking Portal: Go to http://www.regulations.gov. Follow 
the online instructions for submitting comments.
    Web site: http://dms.dot.gov. Follow the instructions for 
submitting comments on the DOT electronic docket site.
    Fax: 202-493-2251.
    Mail: Docket Management Facility; U.S. Department of 
Transportation, 400 Seventh Street, SW., Nassif Building, PL-401, 
Washington, DC 20590-0001. Hand Delivery: Room PL-401 on the plaza 
level of the Nassif Building, 400 Seventh Street, SW., Washington, DC, 
between 9 a.m. and 5 p.m., Monday through Friday, except Federal 
holidays.
    Instructions: You must include the agency name (Federal Transit 
Administration and Docket number (FTA-2005-23082) or the Regulatory 
Identification Number (RIN) for this rulemaking at the beginning of 
your comments. You should submit two copies of your comments if you 
submit them by mail. If you wish to receive confirmation that FTA 
received your comments, you must include a self-addressed stamped 
postcard. Note that all comments received will be posted, without 
change, to http://dms.dot.gov including any personal information 
provided and will be available to

[[Page 71247]]

internet users. Please see the Privacy Act section of this document.
    Docket: For access to the docket to read background documents and 
comments received, go to http://dms.dot.gov at any time or to Room PL-
401 on the plaza level of the Nassif Building, 400 Seventh Street, SW., 
Washington, DC between 9 a.m. and 5 p.m., Monday through Friday, except 
Federal holidays.

FOR FURTHER INFORMATION CONTACT: Joseph Pixley, Chief Counsel's Office, 
Federal Transit Administration, 400 Seventh Street SW., Room 9316, 
Washington, DC 20590, (202) 366-4011 or <a href="/cdn-cgi/l/email-protection#aae0c5d9cfdac284fac3d2c6cfd3eaccdecb84cec5de84cdc5dc"><span class="__cf_email__" data-cfemail="a1ebced2c4d1c98ff1c8d9cdc4d8e1c7d5c08fc5ced58fc6ced7">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

I. Background

    In section 401 of the Surface Transportation Assistance Act of 1978 
(STAA) (Pub. L. 95-594, 92 Stat. 2689), Congress first enacted the Buy 
America legislation applicable to the expenditure of Federal funds by 
recipients under FTA grant programs. This legislation established a 
domestic preference for ``articles, materials, supplies mined, 
produced, or manufactured'' in the United States and costing more than 
$500,000. In January 1983, Congress repealed section 401 and 
substituted section 165 of the Surface Transportation Assistance Act of 
1982 (Pub. L. 97-424, 96 Stat. 2097), which eliminated the $500,000 
threshold and created four waiver exceptions. Section 165 is codified 
at 49 U.S.C. 5323(j). Congress further amended 49 U.S.C. Sec.  5323 (j) 
in a series of enactments between 1984 and 2003. See generally section 
227 of the Surface Transportation Assistance and Uniform Relocation Act 
of 1987 (STURAA) (Pub. L. 100-17, 101 Stat. 165); section 1048 of the 
Intermodal Surface Transportation Efficiency Act (ISTEA) (Pub. L. 102-
240); Section 3020(b) of the Transportation Equity Act for the Twenty-
First Century (TEA-21) (Pub. L. 105-178).
    Pursuant to 49 U.S.C. 5323 (j), FTA promulgated regulations to 
implement and administer the Buy America requirements at 49 CFR 661.
    SAFETEA-LU amends Section 5323(j) by redesignating paragraphs (3) 
through (7) as paragraphs (4) through (8) and by inserting after 
paragraph (2) and (8), respectively. Section 5323(j)(6) (as so 
redesignated) is also amended by striking ``Intermodal Surface 
Transportation Efficiency Act of 1991 (Public Law 102-240, 105 Stat. 
1914)'' and inserting ``Federal Public Transportation Act of 2005''.
    Furthermore, SAFETEA-LU repeals the general waiver found in 
Appendix A of 49 C.F.R 661.7 subsections (b) and (c) for 15 passenger 
vans and wagons produced by Chrysler Corporation.
    In addition, SAFETEA-LU requires that the Secretary issue a rule 
that clarifies the microprocessor waiver, defines end product, 
negotiated procurement, and contractor, allows for a post-award waiver, 
and includes a certification under a negotiated procurement process. 
Each of these legislative changes and requirements will be discussed in 
further detail, below.

II. Written Justification for Public Interest Waiver

    FTA's Buy America regulations provide for public interest waivers 
if the Administrator finds that the application of the Buy America 
requirements would be inconsistent with the public interest.
    The new provision in section 5323(j)(3) requires that the Secretary 
issue a detailed written justification, explaining why the waiver is in 
the public interest, and requiring that such justifications be 
published in the Federal Register for notice and comment by the public 
for a reasonable period of time. FTA considers this requirement to be 
self-explanatory. To implement the change in 5323(j)(3), therefore, FTA 
proposes to add the following language: ``When granting a public 
interest waiver, the Administrator shall issue a detailed written 
statement justifying why the waiver is in the public interest. The 
Administrator shall publish this justification in the Federal Register, 
providing the public with a reasonable period of time for notice and 
comment.''
    Note that this proposed language in the regulation requires written 
justification and publication in the Federal Register only in cases 
where the Administrator approves a waiver request, rather than denies 
such a request. FTA makes this distinction for two reasons. First, the 
statutory language indicates that only waiver approvals are required to 
be published in the Federal Register. See Section 5323(j)(3) (``shall 
issue a detailed written justification as to why the waiver is in the 
public interest''). Second, for some time FTA has placed all requests 
for public interest waivers on the Buy America section of its web site, 
http://www.fta.dot.gov/legal/buy_america/14328_ENG_HTML.htm, and has 
requested comment from the public. In addition, FTA notifies the 
American Public Transportation Association (APTA) when a waiver request 
is posted and APTA sends out a notice to all of its members, which 
include transit authorities and transit industry members. This process 
functions well. The relevant industries and grantees actively respond 
and provide valuable information to FTA. Following receipt of such 
comments, the FTA Office of Chief Counsel, through authority delegated 
by the Administrator, then issues ``detailed written statements'' 
either approving or disapproving public interest waiver requests. FTA 
proposes maintaining this in-house ``notice and comment'' process in 
cases where public interest waiver requests are denied. FTA requests 
public comment on whether we should continue with this process or 
whether there are other, more effective means, for accomplishing this 
task.

III. Administrative Review

    FTA's Buy America regulations provide for ``Rights of Third 
Parties'' to petition FTA for review of a decision and to pursue any 
other additional right at law or equity.
    The new Section 5323(j)(9) states that ``a party adversely affected 
by an agency action under this subsection shall have the right to seek 
review under section 702 of title 5 [the Administrative Procedure Act 
(APA)].'' FTA considers this provision to be self-explanatory. 
Moreover, FTA has always believed that its final agency actions are 
subject to judicial review under the APA. To clarify this, however, FTA 
proposes striking the word ``Third'' from the title heading ``Rights of 
Third Parties'' in section 661.20, to reflect that all parties have the 
right to judicial review under the APA. A new subsection (a) will be 
added as follows: ``(a) A party adversely affected by an FTA action 
under this subsection shall have the right to seek review under the 
Administrative Procedure Act (APA), 5 U.S.C. 702 et seq.''
    In addition, the existing provision in section 661.20, pertaining 
to the rights of third parties, will be designated as paragraph (b), 
with the following highlighted clause added at the beginning, to read: 
``(b) Except as provided in section 661.20(a), the sole right of any 
third party under the Buy America provision is to petition FTA under 
the provisions of Sec. 661.15 of this part. No third party has any 
additional right, at law or equity, for any remedy including, but not 
limited to, injunctions, damages, or cancellation of the Federal grant 
or contracts of the grantee.''
    FTA seeks comment on whether this proposed change is sufficient to 
clarify a party's appeal rights under the Buy America regulations.

[[Page 71248]]

IV. Repeal of General Waiver for Chrysler Vans

    Appendix A to section 661.7 provides for general waivers for 15 
passenger Chrysler vans and wagons. SAFETEA-LU repeals these two 
general waivers for Chrysler vehicles in Appendix A. Accordingly, 
subsections (b) and (c) of Appendix A, 49 CFR 661.7, will be stricken 
and subsection (d), the general waiver pertaining to microcomputers, 
will be re-designated as subsection (b).

V. Microprocessor Waiver

    FTA's existing regulations provide for a general waiver of 
microcomputer equipment. SAFETEA-LU requires that the Secretary issue a 
rule to ``clarify'' the microcomputer/microprocessor waiver as follows:

    (A) Microprocessor waiver.--To clarify that any waiver from the 
Buy America requirements issued under section 5323(j)(2) of such 
title [49 U.S.C.A. 5323(j)(2)] for a microprocessor, computer, or 
microcomputer applies only to a device used solely for the purpose 
of processing or storing data and does not extend to a product 
containing a microprocessor, computer, or microcomputer.

    This ``clarification'' in SAFETEA-LU actually reflects current FTA 
practice with respect to implementing the general waiver for 
microcomputer, microprocessor, and related equipment. For example, FTA 
has previously defined a ``microcomputer'' as

    A computer system whose processing unit is a microprocessor. A 
basic microcomputer includes a microprocessor, storage, and input/
output facility, which may or may not be on one chip. The same 
source defines computer system as: A functional unit consisting of 
one or more computers and associated software, that uses common 
storage for all or part of a program and also for all or part of the 
data necessary for the execution of the program executes user-
written or user-designated programs; performs user-designated data 
manipulation, including arithmetic operations and logic operations; 
and that can execute programs that modify themselves during their 
executions. A computer system may be a stand-alone unit or may 
consist of several interconnected units. Synonymous with ADP system, 
computing system.

50 FR 18760 (May 2, 1985).

    Applying this definition, FTA determined that a manufacturer may 
use foreign microcomputer equipment without violating the Buy America 
requirements. For example, FTA determined that a Mobile Data 
Communication System was covered by the microcomputer waiver, and found 
that ``[a]ll this equipment and associated software is linked together 
to a computer system at your headquarters with additional interfaces to 
other CDTA computer systems.'' Capital District Transportation 
Authority letter, August 30, 2001. Following that decision, FTA 
withdrew an outstanding advance notice of proposed rulemaking on the 
microcomputer waiver, and stated as follows:

    It should be noted that FTA does not apply the waiver to an 
entire product because it contains a microcomputer. The parameters 
of the waiver as it currently exists are that if the end product is 
itself a microcomputer or software as defined above, Buy America is 
waived. If, however, the end product contains a microcomputer (e.g., 
a fare card system), that microcomputer is exempt from the 
requirements of Buy America, but the rest of the end product must be 
in compliance.

68 FR 9810 (Feb. 28, 2003).

    FTA applied this reasoning to subsequent Buy America decisions, 
finding for example, that some components of a fare collection system 
were subject to the waiver, but others were not. Specifically, FTA 
found that ``[t]he bill and coin validator, and the printer, are not, 
themselves, microcomputers, although they may each contain embedded 
microprocessors.'' CoinCard letter, May 23, 2003. See also, MTA letter, 
September 23, 2003, and Vansco Electronics letter, September 15, 2003. 
All of these letters are available on FTA's Web site at http://fta.dot.gov. In FTA's most recent Buy America decision addressing the 
microcomputer waiver in a procurement for Monitoring and Diagnostic 
equipment, FTA stated:

    Some of the Monitoring and Diagnostic system is microcomputer 
equipment subject to the waiver; however, some of it is not. As 
discussed in the definition, a microcomputer is a computer based on 
a microprocessor. A microprocessor is a computer whose central 
processing unit is contained on one or a small number of integrated 
circuits. Microcomputers may be stand-alone units or they may be 
embedded in other equipment. They must have, or be, controllers or 
communication processors and be capable of processing, storage, 
programming, and have input/output facilities. Microcomputers may be 
grouped within larger systems or equipment, consisting of several 
interconnected units each functioning as either stand-alone units or 
embedded equipment, or a mix of both. Related hardware and equipment 
that may be controlled by a microprocessor is not covered by the 
microcomputer waiver.

Questor Tangent Letter, August 2, 2004.

    To reflect FTA's current understanding of this general waiver and 
to implement the specific requirements of SAFETEA-LU, is clarified to 
read as follows: ``(b) Under the provisions of Sec. 661.7 (b) and (c) 
of this part, a general public interest waiver from the Buy America 
requirements applies to microprocessors, computers, microcomputers, or 
software, or other such devices, which are used solely for the purpose 
of processing or storing data. This general waiver does not extend to a 
product or device which merely contains a microprocessor or 
microcomputer, or is controlled by a microprocessor, and is not used 
solely for the purpose of processing or storing data.'' FTA seeks 
comment on whether this change adequately clarifies the microprocessor 
waiver.

VI. Proposed Revisions to Buy America Definitions

A. Negotiated Procurement

    SAFETEA-LU requires that the Secretary issue a rule to define the 
term ``negotiated procurement.'' In public contracting two basic 
methods of procurement are used: sealed bidding and negotiated 
procurement. Generally, sealed bidding is a formal process marked by 
five phases: (1) Preparation of the Invitation for Bids (IFB) by the 
contracting agency; (2) Publicizing the IFB; (3) Submission of bids by 
interested contractors; (4) Evaluation of bids by the contracting 
agency; and (5) Contract award. In sealed bidding, contract 
specifications are clear, complete and definite. There are no 
``discussions'' or ``negotiations'' between the parties, other than 
what is contained in the IFB and submitted bids. There are strict 
requirements that bids comply in all material respects with the 
invitation for bids, to include the method and time of bid submission. 
A contracting agency may only accept a responsive bid from a 
responsible bidder. A bid is considered ``responsive'' if it 
unequivocally offers to provide the requested supplies or services at a 
firm, fixed price, in accordance with the terms of the IFB. Finally, 
contracting agencies evaluate bids on price and non-price-related 
factors, but with award generally made on the basis of lowest price 
offered.
    By contrast, negotiated procurements are marked by greater 
flexibility and variety than sealed bid solicitations. Generally, in 
negotiated contracting the contracting agency issues a Request for 
Proposal (RFP). RFPs include a description of the work to be performed, 
a section describing the information that offerors need to provide in 
their proposals, and a section describing how the agency will evaluate 
proposals. Interested contractors, called offerors, submit offers or 
proposals in response to the RFP. Unlike in sealed bidding, negotiated 
procurements may include ``discussions'' or ``negotiations''

[[Page 71249]]

between agency and offerors, if the agency so chooses. Also, unlike in 
sealed bidding, which is marked by a one-time, all or nothing 
submission of bids, negotiated procurements may include multiple offers 
by each contractor, with the ``best and final'' offer or ``final 
revised'' offer controlling, unless award is to be made on receipt of 
initial proposals. In addition, negotiated procurements may be either 
competitive or non-competitive, as in the case of sole-source 
procurements. In negotiated procurements, contracting officers 
generally have discretion to weigh non-price factors to a greater 
extent than in sealed bidding. In so-called ``best value'' contracting, 
price may even be the low ranking factor.
    Because negotiated procurements are marked by so much variety and 
provide contracting officials with great discretion to implement 
different procurement mechanisms (e.g. award with discussions versus 
award without discussions), the term ``negotiated procurement'' is 
difficult to define. See e.g., Gallagher, the Law of Federal Negotiated 
Contract Formation at p. 39 (CGA Publications, Inc., 1981) (``Providing 
a nutshell description of ``negotiation'' is much more difficult [than 
sealed bidding]).'' For this reason, contract law scholars have defined 
negotiated procurement by what it is not. For example, Professors Nash 
and Cibinic describe a negotiated contract as one that is awarded 
without the use of a sealed bid. See Formation of Government Contracts, 
Second Edition, George Washington University, 1986. The drafters of the 
Federal Acquisition Regulation (FAR), which governs direct Federal 
procurement, have adopted a similar definition. FAR Part 15--
Contracting By Negotiation, defines negotiated procurement as follows: 
``A contract awarded using other than sealed bidding procedures is a 
negotiated contract.'' 48 CFR 15.000.
    There is no FTA requirement that grantees use a specific 
procurement method such as sealed bidding or negotiated procurement, or 
a particular methodology of negotiations, for any particular 
procurement. Indeed, the Buy America regulations in 49 CFR Part 661 
refer to both ``bids'' and ``bidders'' and ``offers'' and ``offerors,'' 
reflecting the two basic methods of procurement available to grantees.
    Recognizing that procurement practices are established locally, and 
to define ``negotiated procurement'' in such a way as not to overtly 
contradict or limit local practices of grantees, FTA proposes adopting 
the ``flexible'' definition of negotiated contracts in FAR Part 15. The 
proposed definition to be added would be as follows: ``Negotiated 
Procurement means a contract awarded using other than sealed bidding 
procedures.''
    FTA seeks comment on whether this definition sufficiently captures 
the concept of negotiated procurement and whether there are other 
definitions available that more accurately capture this concept.

B. Contractor

    SAFETEA-LU requires that the Secretary issue a rule to define the 
term ``contractor.'' To implement this requirement, FTA proposes two 
alternative definitions adopted from direct Federal procurement. The 
first proposed definition to be added would state as follows: 
``Contractor means any individual or other legal entity that directly 
or indirectly (e.g., through an affiliate), submits bids or offers for 
or is awarded, or reasonably may be expected to submit bids or offers 
for or be awarded, a federally funded third party contract or 
subcontract under a federally funded third party contract; or, conducts 
business, or reasonably may be expected to conduct business, with an 
FTA grantee, as an agent or representative of another contractor.'' 
This proposed definition comes from the definition of ``contractor'' in 
FAR 9.403 (suspension & debarment section). The term contractor could 
also be defined as follows: ``Contractor means any party to a third 
party government contract other than the government.'' This definition 
is based on the definition of ``contractor'' in the Contract Disputes 
Act (CDA), 41 U.S.C. 601(4).
    FTA seeks comment on the relative merits and demerits of selecting 
one of the above definitions over the other. FTA would also like to 
receive information on whether there are other definitions available 
for this situation that would better serve our purpose. If a commenter 
proposes an alternative definition, please include as much supporting 
information as possible for the alternative definition.

C. End Product

    SAFETEA-LU requires that the Secretary issue a rule to define the 
term ``end product,'' and to develop a list of representative items 
that are subject to the Buy America requirements. To implement this 
requirement, FTA proposes two alternative definitions of ``end 
product.'' The first is based on the definition of end product 
currently used by FTA. To examine this current definition, FTA will 
first review its history in Buy America practice.
    FTA's first regulatory implementation of the Surface Transportation 
Assistance Act of 1978 (STAA) (Pub. L. 95-594, 92 Stat. 2689) made 
clear that ``[t]he legislative history of the Buy America provision 
indicates that Congress intended it to be interpreted in the light of 
the Buy American Act of 1933, 41 U.S.C. 10a-10d, to the extent the Act 
is applicable.'' The Buy American Act (BAA), in fact, is an entirely 
different statute from Buy America, applicable to direct purchases by 
federal agencies and departments. As implemented in FAR Part 25, the 
BAA establishes a preference for ``domestic end products,'' which are 
defined as follows:

    An unmanufactured end product which has been mined or produced 
in the United States, or an end product manufactured in the United 
States if the cost of its components mined, produced and/or 
manufactured in the United States exceeds 50 percent of the cost of 
all its components.

    The STAA of 1978 and its implementing regulation retained this 
``preference'' for ``domestic end products'' from the BAA, but tailored 
the requirements to FTA's grant making process. FTA's first Buy America 
regulation issued in December 1978 defined ``end product'' as follows: 
``(e) `End product' means an article, material or supply, whether 
manufactured or unmanufactured, that is to be acquired by the grantee, 
with financial assistance derived from UMTA, and that is to be 
delivered to the grantee, as specified by the third party contract. (f) 
`Foreign end product' means an end product other than a domestic end 
product.'' Like the FAR Part 25 provisions implementing the BAA, the 
original Buy America regulation also included a ``50 percent'' 
requirement for domestic components. (See section 660.22 Determination 
of Origins stating: ``(a) In order for a manufactured end product to be 
considered a domestic end product--(1) the cost of the domestic 
components must exceed 50 percent of the cost of all its components; 
and (2) the final assembly of the components to form the end product 
must take place in the United States.'')
    Subsequently, Congress eliminated the ``preference'' for domestic 
products in Buy America and the ``50 percent'' domestic component 
requirement, making compliance with Buy America an absolute 
``requirement'' (unless a waiver applies) and increasing the domestic 
content threshold to 100 percent in the case of steel and iron products 
and manufactured products, and 60 percent in the case of rolling stock. 
Over the years, FTA modified its Buy America regulations to reflect 
these

[[Page 71250]]

changes. Nevertheless, from December 1978 to this day, FTA has retained 
some variation of ``end product'' as originally defined in the first 
Buy America regulation: `` `End product' means an article, material or 
supply * * * that is to be delivered to the grantee, as specified by 
the third party contract.'' Section 660.13. This definition comes from 
case law interpreting the Buy American Act. For example, in Brown 
Boveri Corp., the then U.S. General Accounting Office [now the U.S. 
Government Accountability Office] (GAO) defined ``end product'' as 
follows: ``As to a given contract the end product is the item to be 
delivered to the Government as specified in the contract.'' B-187252, 
56 Comp. Gen. 596, May 10, 1977 (emphasis in original).
    Consistent with this precedent, FTA currently defines ``end 
product,'' in part, as ``any item subject to 49 U.S.C. 5323(j) that is 
to be acquired by a grantee, as specified in the overall project 
contract.'' (Emphasis added). 49 CFR 661.11(s). In the current version 
of the Buy America regulations, this definition of ``end product'' 
migrated from the definition section at 661.3 to the rolling stock 
section at 661.11, creating some confusion that the term ``end 
product'' is only relevant to rolling stock procurements. Nevertheless, 
the term ``end product'' remains in the definition of ``component'' in 
section 661.3, indicating the general applicability of the term in Buy 
America analysis. See 49 CFR 661.3: ``Component means any article, 
material, or supply * * * that is directly incorporated into the end 
product at the final assembly location.''
    Moreover, although section 661.11 applies specifically to rolling 
stock procurements, FTA has consistently applied the definition at 
section 661.11(s) and similar definitions of ``end product'' to steel 
and iron and manufactured products as well. In a letter to the Santa 
Clara Valley Transportation Authority dated October 18, 2001, for 
example, FTA addressed whether a ``cable trough'' was an end product in 
a procurement for a section of the Tasman Corridor East light rail 
construction project. The letter stated, in part, as follows:

    FTA has consistently applied the following reasoning to the end 
product question: ``[A]n end product is `any item' * * * that is to 
be acquired by a grantee, as specified in the overall project 
contract. The key determinant is the grantee's specification. For 
example, if a grantee is procuring a new rail car, the car is the 
end product and the propulsion motor would be a component of the end 
product. If that same grantee is procuring a replacement propulsion 
motor for an existing rail car, that propulsion motor would be the 
end product.'' 56 FR 928 (Jan. 9, 1991). (Emphasis added.)
    Similarly, in 1981 FTA determined that ``the procurement of 
construction is treated as procurement of a manufactured product in 
that the deliverable of the construction contract is considered as 
the end product and the construction materials used therein are 
considered components of the end product.'' 46 FR 5808 (Jan. 19, 
1981). Further, when asked to clarify the definition of ``end 
product,'' FTA concluded that, ``the deliverable item specified in 
the contract is the end product. For example, in a contract for 10 
buses that must contain 500 h.p. engines, the 10 buses are the end-
products.'' Id. (Emphasis added.)

    Under FTA's long standing ``end product'' analysis, where the end 
product of a procurement is the deliverable item specified by the 
grantee in the third party contract, not only the ``end product,'' but 
also the components, subcomponents, and even the applicable Buy America 
standard are subject to ``shift,'' for lack of a better term, depending 
on the article being procured. In the earlier example, cited above, if 
a grantee is procuring a new rail car, the car is the end product and 
the propulsion motor would be a component of the end product. For this 
hypothetical rail car end product, the rolling stock standard (e.g. 60 
percent domestic components by cost) at 661.11 would apply. However, if 
that same grantee is procuring a replacement propulsion motor for an 
existing rail car, that propulsion motor would be the end product (with 
different resulting components), and the manufactured products standard 
(100 percent U.S. content) would apply.
    Again, this so-called ``shifting'' end product analysis is long-
standing at FTA, beginning with the original implementation of Buy 
America in 1978. Moreover, this methodology is based on decisions 
interpreting the Buy American Act. In the case of Brown v. Boveri, 
cited previously, GAO recognized a similar ``shifting'' analysis of end 
product under the BAA:

    We have held that there is no inconsistency between a given 
article's classification as an end product under a particular 
procurement and its subsequent classification as a component under 
another contract under which that article will be incorporated into 
a different end product.

56 Comp. Gen. 596 (1977). In a decision letter from April 2000, FTA 
explained the advantages of this ``shifting'' end product methodology 
as avoiding having to classify literally thousands of parts, due to the 
enormous administrative burden:

    Depending on the particular procurement at issue, literally 
thousands of individual manufactured items, themselves made up of 
many thousand more manufactured sub-items, may go into the ultimate 
product being procured by an FTA grant recipient. Indeed, the 
question is one of perspective: any given item, from a screw to a 
maintenance garage, may be viewed as an end product, a component, a 
subcomponent, or less. Accordingly, FTA's rule looks at the end 
product being acquired in a given case. Here, the procurement 
contract was for the garage; accordingly, the vehicle lift to be 
installed in the garage was a component. Further, the end product 
must be the result of a manufacturing process. In this case, the 
hoist will ultimately be a fixture of the garage, and installation 
of the hoist is part of the manufacturing process. The construction 
of the garage as a whole, is the subject of the procurement and the 
end product.

    June 8, 2000 decision letter to Macton-Joyce and Whiting 
Corporation.
    Based on this long standing ``end product'' methodology and 
precedent, FTA proposes moving its existing definition of end product 
at 661.11(s) to the definition section of Part 661.3, for universal 
applicability. In keeping with the Congress's mandate to include a 
``representative list'' of end product items, FTA proposes the 
following general definition: ``End product means any item subject to 
49 U.S.C. 5323(j) that is to be acquired by a grantee, as specified in 
the overall project contact. A list of representative end product items 
is included at Appendix A.'' FTA seeks public comment on this proposal.
    FTA proposes an alternative definition of ``end product'' as 
follows:

    End product means any article, material, supply, or system, 
whether manufactured or unmanufactured, that is acquired for public 
use under a federally funded third party contract. A list of 
representative end products is included at Appendix A.

    FTA bases this alternative definition on the definition of end 
product under the Buy American Act in FAR Part 25. What FTA proposes 
under this second, alternative version is to abandon its long standing 
``shifting'' end product methodology described earlier, in favor of one 
where the end products do not ``shift.'' In other words, where a bus, 
rail car, or other major procurement items are always designated as end 
products--and their components are always designated as components, 
even if purchased as replacement parts. In the earlier example, cited 
above, if a grantee is procuring a new rail car, the car is the end 
product and the propulsion motor would be a component of the end 
product. Again, for this hypothetical rail car end product, the rolling 
stock standard (e.g. 60 percent domestic components by cost) at 661.11 
would

[[Page 71251]]

apply. However, under the new end product definition and methodology, 
if that same grantee is procuring a replacement propulsion motor for an 
existing rail car, which propulsion motor would still be a component of 
the rail car end product, and the rolling stock standard applicable to 
the rail car would apply to its component. Such a new methodology would 
necessarily place greater reliance on the accompanying list of end 
product items. In addition, procurements under this new Buy America 
methodology may result in multiple end products or components. In such 
instances, each distinct end product or component procured with federal 
funds must separately and independently comply with applicable Buy 
America standards.
    FTA seeks comment on which approach should be adopted and why one 
approach is favored over the other.

D. End Product as System

    In defining terms like ``end product,'' SAFETEA-LU requires that 
the Secretary issue a final rule addressing ``the procurement of 
systems * * * to ensure that major system procurements are not used to 
circumvent the Buy America requirements.'' FTA has long considered 
``systems'' as definable end products. For example, in decisions dating 
from 1994, 1995, and 2002, FTA has taken the position that automated 
fare collection systems (AFC) systems constitute end products. Indeed, 
section 661.11(s) states, in part, that ``[i]f a system is being 
procured as the end product by the grantee, the installation of the 
system qualifies as final assembly.'' (Emphasis added). In 1991, FTA 
also issued a Federal Register notice describing the procurement of an 
entire system under a design-build, or turn-key procurement:

    One commenter questioned how UMTA applies the Buy America 
requirements when a grantee procures an entire system (a turn-key 
project). In purchasing systems, it is industry practice to have a 
contract broken down by sub-systems. As just mentioned, UMTA has 
defined end product as ``any item or items * * * to be acquired by a 
grantee, as specified in the overall project contract.'' (Emphasis 
supplied.) (See Sec.  661.11(u).) Accordingly, each sub-system 
identified in the contract is an end product and subject to the Buy 
America requirement.
    For example, UMTA has determined in the past that an entire 
people mover system has six sub-systems to be supplied by the 
contractor (under the terms of a particular contract) and that each 
sub-system is an individual end product. The six sub-systems are: 
the guideway surfaces and equipment; the vehicles; the traction 
power system; the command and control system; the communications 
system; and the maintenance facility and equipment. This means that 
six separate products must meet the Buy America requirements.

    56 FR 926.

    Furthermore, decisions interpreting the Buy American Act have also 
recognized ``systems'' as end products. In Brown Boveri Corp., the 
``end product'' to be delivered was a sodium pump-drive system in a 
nuclear power plant. 56 Comp. Gen. 596 (1997). Similarly, in Matter of: 
Dictaphone Corp., B-191,383, May 8, 1978, 78-1 CPD 343, GAO held that 
where an agency purchased a ``Central Dictation System'' the various 
elements of the system, such as transcribers and recorders, were not 
independent end products, but rather components of a system. 
Furthermore, in the case of Bell Helicopter Textron, Inc. v. Adams, the 
U.S. District Court for the District of Columbia held that complete 
helicopters were not individual end products but components of a system 
(``Short Range Recovery (SRR) Helicopter System . . . define[d] the 
contract end product of this procurement''). 493 F. Supp. 824, 833 
(D.C. D.C. 1980). There is thus a long standing precedent both within 
the agency and without indicating that procurement of ``systems'' 
constitute end product items. Beginning in the mid-1990's and today, 
especially, transit projects are increasingly automated and have 
integrated ``systems'' of various types within their core 
functionality. For these reasons, FTA proposes to retain this 
application of ``systems'' in the end product definition adopted in 
this rule. Nevertheless, to better implement Congress's mandate in 
SAFETEA-LU to ``address the procurement of systems under the definition 
[of end product] to ensure that major system procurements are not used 
to circumvent the Buy America requirements,'' FTA proposes defining the 
term ``system.''
    In Bell Helicopter Textron, Inc. v. Adams, cited previously, the 
U.S. District Court acknowledged that ``presently [in 1980] there are 
no uniform guidelines interpreting such critical terms as * * * 
`system.' '' 493 F. Supp. 824, 831 (D.D.C. 1980). However, within law 
applicable to the Customs Service, analogous principles support 
characterizing individual machines or pieces of equipment integrated 
together to provide a single defined function as a single system. For 
example, the Customs Service in a case in New York concluded that a 
``Flexipark Parking System'' consisting of entry machines, exit 
machines, automated cashier stations, and ``pay on foot'' automated 
paying machines represented a single system under a single tariff 
heading, and not separately classified components. NY H88649, 2002 U.S. 
Customs NY Lexis 2030 (March 8, 2002). Treas. Dec., 2002 U.S. CUSTOM NY 
LEXIS 2030; NY H88649 (Mar. 8, 2002).
    Moreover, the Harmonized System of tariff classification used by 
the United States specifically recognizes that fare machines, cash 
registers and similar calculating devices may be combined with other 
units to comprise a single system. See Harmonized Tariff Schedule of 
the United States (HTSUS), 19 U.S.C. 1202, heading 8470. The 
explanatory notes that govern Chapter 84 expressly require that 
machines which work in combination to perform a specific function are 
to be classified as a single system under a single tariff heading. 
These notes provide:

    Where a machine (including a combination of machines) consists 
of individual components (whether separate or interconnected by 
piping, by transmission devices, by electrical cables or by other 
devices) intended to contribute together to a clearly defined 
function covered by one of the headings in Chapter 84 * * *, then 
the whole falls to be classified in the heading appropriate to that 
function.

    HTSUS, Section XVI, Note 4. Based on this ``functional test'' for 
interconnected systems from customs law, FTA proposes a definition of 
``system,'' as follows:

    System means a machine, product, or device, or a combination of 
such equipment, consisting of individual components, whether 
separate or interconnected by piping, transmission devices, 
electrical cables or circuitry, or by other devices, which are 
intended to contribute together to a clearly defined function.

    Under this proposed new definition the system would be the end 
product and the individual machines, products, or devices that 
constitute the system would be components. Certainly some equipment 
designated as part of a ``system'' in a third party contract may, in 
fact, prove to be ancillary to the core functionality of the system, 
and would be a separate end product. Using the proposed ``functional'' 
definition of system, above, therefore, FTA will carefully review 
system procurements to determine whether a system exists and if so, 
which items of equipment constitute the system.
    End product systems may be proprietary, where connections and 
interfaces between devices are marked by proprietary rights or license. 
Or, depending on the requirements of the grantee, system procurements 
may require open architecture that permits interface between non-
proprietary devices. FTA seeks comment as to

[[Page 71252]]

whether the Buy America requirements should apply equally for these two 
types of system end products, or whether different Buy America 
standards should apply to proprietary versus open architecture systems. 
FTA seeks comment on its proposed approach for defining system.
    In keeping with the Congress's mandate to include a 
``representative list'' of end product items, FTA proposes the 
following list:

    The following is a list of items, as specified by grantees in 
third party contracts, that are representative end products that are 
subject to the requirements of Buy America. This list is not all-
inclusive.
    (1) Rolling stock end products: All individual items identified 
as rolling stock in Section 661.3 (buses, vans, cars, railcars, 
locomotives, trolley cars, ferry boats, as well as vehicles used for 
support services); train control equipment or systems; communication 
equipment or systems; traction power equipment or systems.
    (2) Steel and iron end products: Products and infrastructure 
projects made primarily of steel or iron or involving track work, 
including bridges; steel or iron structures; running rail and 
contact rail; turnouts.
    (3) Manufactured end products: Fare collection equipment [non-
system equipment] or systems; computers and computer systems; 
information, security, and data processing equipment or systems; 
lifts, hoists, and elevators; infrastructure projects not made 
primarily of steel or iron, including structures (terminals, depots, 
garages, and bus shelters), ties and ballast; contact rail not made 
primarily of steel or iron.

    This proposed list is not meant to be all-inclusive, but rather 
describes general categories of end product items. Some of these items 
are easy to identify as discreet end products, such as buses. Other 
products are not so easily categorized. For example, the proposed list 
identifies the following types of equipment as either discreet end 
products or as system end products: Train control equipment or systems; 
communication equipment or systems; traction power equipment or 
systems; information, security, and data processing equipment or 
systems. This approach is meant to be flexible, to account for a range 
of procurement requirements. To illustrate this, if a grantee procures 
hand-held radios, which are one of the items enumerated in 49 CFR 
661.11(u)(3), the radios would be discreet end products, under the 
category of ``communication equipment.'' However, if the grantee 
procures a hypothetical, wayside ``surveillance system,'' which 
includes interconnected video cameras, microcomputers, alarms, and 
remote relay capability, then the ``surveillance system'' would be the 
end product, and the individual items that make up the system would 
constitute components. At this stage, it is not practical to pre-define 
what type of equipment would go into such systems, as transit operators 
may seek to mix and match different types of system equipment to obtain 
different functionalities. Therefore, a grantee's specifications in the 
third party contract will continue to remain important in determining 
what constitutes discreet end product ``equipment'' or system end 
products.
    FTA considers any proposed list of representative end products to 
be very important in future Buy America determinations. FTA seeks 
comment on this proposed list.

E. Final Assembly

    FTA proposes amending the definition of ``final assembly'' in Part 
661 to incorporate agency guidance. Under FTA's Buy America 
requirements for rolling stock, 49 U.S.C. 5323(j)(2)(C) and 49 C.F.R. 
661.11, 60 percent of all components, by cost, must be of U.S. origin, 
and final assembly must take place in the U.S. ``Final assembly'' is 
defined as follows: ``Final Assembly is the creation of the end product 
from individual elements brought together for that purpose through 
application of manufacturing processes. If a system is being procured 
as the end product by the grantee, the installation of the system 
qualifies as final assembly.'' This definition of ``final assembly'' in 
the regulation proved to be insufficiently detailed in practice. 
Grantees and contractors frequently sought FTA guidance on what 
constituted ``final assembly'' in rolling stock procurements. For this 
reason, FTA created a Dear Colleague letter of March 18, 1997, which 
described the minimum requirements for final assembly of rail car 
vehicles and buses. Section 3035 of the Transportation Equity Act for 
the 21st Century incorporated these requirements into law. The March 
18, 1997 letter states, in part, the following:

    In the case of the manufacture of a new rail car, final assembly 
would typically include, as a minimum, the following operations: 
Installation and interconnection of propulsion control equipment, 
propulsion cooling equipment, brake equipment, energy sources for 
auxiliaries and controls, heating and air conditioning, 
communications equipment, motors, wheels and axles, suspensions and 
frames; the inspection and verification of all installation and 
interconnection work; and the in-plant testing of the stationary 
product to verify all functions. In the case of a new bus, final 
assembly would typically include, at a minimum, the installation and 
interconnection of the engine, transmission, axles, including the 
cooling and braking systems; the installation and interconnection of 
the heating and air conditioning equipment; the installation of 
pneumatic and electrical systems, door systems, passenger seats, 
passenger grab rails, destination signs, wheelchair lifts; and road 
testing, final inspection, repairs and preparation of the vehicles 
for delivery.

    The letter also provides that ``[i]f a manufacturer's final 
assembly processes do not include all the activities that are typically 
considered the minimum requirements, it can request an FTA 
determination of compliance.'' Id.
    Subsequent to the publication of the March 19, 1997 Dear Colleague 
letter, FTA still frequently received requests for guidance from 
grantees and contractors on ``final assembly.'' These requestors either 
were not aware of the Dear Colleague letter, or had questions about 
fabrication processes which did not fit within the parameters of the 
1997 letter. For these reasons, FTA proposes amending the definition of 
``final assembly'' in section 661.11, to incorporate the ``minimum 
requirements'' of final assembly in the March 18, 1997 letter, and to 
further clarify those requirements. FTA proposes to do this by creating 
an additional appendix that would state the following:

    Rail Cars: In the case of the manufacture of a new, 
remanufactured, or overhauled rail car, final assembly would 
typically include, as a minimum, the following operations: 
Installation and interconnection of car bodies or shells, propulsion 
control equipment, propulsion cooling equipment, brake equipment, 
energy sources for auxiliaries and controls, heating and air 
conditioning, communications equipment, pneumatic and electrical 
systems, door systems, passenger seats, passenger interiors, 
destination signs, wheelchair lifts, motors, wheels, axles, and gear 
units, suspensions, frames, and chassis; the inspection and 
verification of all installation and interconnection work; and the 
in-plant testing of the stationary product to verify all functions.
    Buses: In the case of a new, remanufactured, or overhauled bus, 
final assembly would typically include, at a minimum, the 
installation and interconnection of car bodies or shells, the engine 
and transmission (drive train), axles, chassis, and wheels, 
including the cooling and braking systems; the installation and 
interconnection of the heating and air conditioning equipment; the 
installation of pneumatic and electrical systems, door systems, 
passenger seats, passenger grab rails, destination signs, wheelchair 
lifts; and road testing, final inspection, repairs and preparation 
of the vehicles for delivery.

    FTA seeks public comment on whether this appendix sufficiently 
clarifies what FTA considers ``final assembly.''

[[Page 71253]]

VII. Post-Award Non-Availability Waiver

    Under FTA's current Buy America regulations, grantees are required 
to ensure that contractors certify in their bids, as a condition of 
responsiveness, that they will comply with Buy America. 49 CFR 
661.13(b). The regulations specifically provide that a bidder or 
offeror that certifies compliance with Buy America is ``bound by its 
original certification'' and ``is not eligible for a waiver of those 
requirements.'' 49 CFR 661.13(c). These regulatory provisions, in 
effect, eliminated so-called ``post-award'' waivers--waivers issued 
after contract award.
    SAFETEA-LU requires that the Secretary issue a rule to ``permit a 
grantee to request a non-availability waiver * * * after contract award 
in any case in which the contractor has made a certification of 
compliance with the requirements in good faith.'' This requirement will 
allow FTA the flexibility to consider non-availability waivers in those 
rare instances where materials or supplies become unavailable, through 
no fault of the contractor or grantee, after contract award, to the 
extent that complying with the terms of the third party contract 
becomes commercially impossible or impracticable (due to price).
    Such a post-award waiver could be subject to abuse, however. To 
guard against this, and to limit approval of post-award waivers to 
legitimate situations, FTA will require evidence of bidders' and 
offerors' good faith in originally certifying compliance. Such evidence 
may include price quotes indicating the availability of domestic 
material at the time the contractor certified compliance. Bidders or 
offerors who negligently certify compliance, for example, by not 
adequately researching the availability of domestic material or by 
mistakenly concluding that domestic supplies are available, prior to 
certifying, would be denied a post-award waiver. FTA will also require 
grantees to produce evidence of changed market conditions, 
demonstrating the non-availability of materials or supplies after 
contract award, and the impossibility or impracticability of completing 
the third party contract. FTA will also consider the status of other 
bidders or offerors who participated in the procurement and the effect 
of any waiver on them. For example, a post award waiver will not be 
granted where other bidders or offerors who certified compliance are 
able to supply domestic products or material.
    To implement the requirement for post-award waivers in SAFETEA-LU, 
FTA proposes to add the following clause to non-availability waivers: 
``In those situations where materials become unavailable after contract 
award due to unforeseen circumstances beyond the control of the 
contractor or grantee, the Administrator may grant a non-availability 
waiver under section 661.7c, in any case in which a contractor has 
originally certified compliance with the Buy America requirements in 
good faith, but can no longer comply with its certification and 
contractual obligations due to commercial impossibility or 
impracticability. In making such a waiver request, the grantee will 
submit evidence of the contractor's good faith and evidence justifying 
the post-award waiver, such as information about the origin of the 
product or materials, invoices, and other relevant solicitation 
documents to the FTA Chief Counsel, as requested. In determining 
whether the conditions exist to grant this post-award non-availability 
waiver, the Administrator will consider all appropriate factors, 
including the status of other bidders or offerors in the procurement 
and the effect of any waiver on them, on a case-by-case basis.'' To 
reflect this change, and to clarify the distinctions in Buy America 
certification between sealed bidding and negotiated procurements, FTA 
proposes to add paragraph (c) that would state: ``A bidder or offeror 
certifies that it will comply with the applicable requirement and such 
bidder or offeror is bound by its original certification (in the case 
of a sealed bidding procurement) or its certification submitted with 
its final offer (in the case of a negotiated procurement) and is not 
permitted to change its certification after bid opening or submission 
of a final offer, except for inadvertent or clerical error, as 
described in section 661.13(b)(1). Where a bidder or offeror certifies 
that it will comply with the applicable Buy America requirements, the 
bidder, offeror, or grantee is not eligible for a waiver of those 
requirements, except as provided in section 661.7(c)(3) in the case of 
a post-award non-availability waiver.'' FTA seeks comment on these 
proposed changes.

VIII. Certification Under Negotiated Procurement

    As stated previously, under FTA's current Buy America regulations, 
grantees are required to ensure that contractors certify in their bids, 
as a condition of responsiveness, that they will comply with Buy 
America. 49 CFR 661.13(b). Moreover, contractors are not permitted to 
change their certifications ``after bid opening.'' 49 CFR 661.13(c). 
However, FTA allows bidders or offerors to correct an incomplete Buy 
America certificate or an incorrect certificate of noncompliance made 
through inadvertent or clerical error.
    Reflecting the practice in public contracting that offerors may 
submit multiple offers in negotiated procurement processes, unlike in 
sealed bidding, FTA has issued the following guidance on its public Buy 
America Web site:

    In competitive negotiated procurements (i.e., requests for 
proposals), certifications submitted as part of an initial proposal 
may be superseded by subsequent certifications submitted with 
revised proposals, and the certification submitted with the 
offeror's final revised proposal (or best and final offer) will 
control. However, where the grantee awards on the basis of initial 
proposals without discussion, the certification submitted with the 
initial proposal will control.

    See ``Buy America: Frequently Asked Questions'' <greek-i> 6 http://www.fta.dot.gov/legal/buy_america/14422_17793_ENG_HTML.htm
    Consistent with FTA's current guidance, SAFETEA-LU requires that 
the Secretary issue a rule reflecting that, ``in any case in which a 
negotiated procurement is used, compliance with the Buy America 
requirements shall be determined on the basis of the certification 
submitted with the final offer.'' To implement this requirement, FTA 
proposes adding the following provision: ``(2) In the case of a 
negotiated procurement, a certification submitted as part of an initial 
proposal may be superseded by a subsequent certification(s) submitted 
with a revised proposal or offer. Compliance with the Buy America 
requirements shall be determined on the basis of the certification 
submitted with the final offer or final revised proposal. However, 
where a grantee awards on the basis of initial proposals without 
discussion, the certification submitted with the initial proposal shall 
control.'' FTA seeks comment on this proposal.

IX. Pre-Award and Post-Delivery Review of Rolling Stock Purchases

    Under FTA's regulations at 49 CFR 663.37, generally, for purchases 
of more than 10 buses or rail vehicles, grantees must certify that an 
onsite inspector was present throughout the manufacturing process and 
that the grantee has received an inspector's report that accurately 
records all vehicle construction activities and explains how 
construction and operation of the vehicle meets specifications. 
However,

[[Page 71254]]

for orders of 10 or fewer buses, there is no requirement for a resident 
factor inspector, pursuant to 49 CFR 663.37(c). Under this provision, a 
grantee is only required to certify that it has visually inspected and 
road tested the vehicles and has determined that the vehicles meet 
contract specifications.
    SAFETEA-LU amends section 5323(m) by mandating, in effect, that for 
rolling stock procurements of 20 vehicles or less serving rural (other 
than urbanized) areas, or urbanized areas of 200,000 people or less, 
then the same post-delivery certification requirements which apply to 
procurements of ``10 or fewer buses,'' i.e. no resident factory 
inspector, shall likewise apply. FTA considers this requirement to be 
self-explanatory. To implement the change in section 5323(m), 
therefore, FTA proposes the following amendment: ``For procurements of 
(1) Ten or fewer buses; or (2) procurements of 20 vehicles or fewer 
serving rural (other than urbanized) areas, or urbanized areas of 
200,000 people or fewer; or (3) any number of primary manufacturer 
standard production and unmodified vans, after visually inspecting and 
road testing the vehicles, the vehicles meet the contract 
specifications.'' FTA seeks comment on this proposed change.

X. Miscellaneous

    In addition to the requirements mandated in SAFETEA-LU, FTA 
proposes several changes to the Buy America regulations. The first of 
these involve minor corrections and clarifications. The second involve 
substantive changes.

A. Corrections and Clarifications

    In Section 661.3 ``Definitions'' for the term ``act,'' FTA proposes 
deleting the clause ``section 337 of the Surface Transportation and 
Uniform Relocation Assistance of 1987 (Pub. L. 100-17),'' which follows 
``as amended by,'' and replacing this with the clause ``the Safe 
Accountable, Flexible, Efficient Transportation Act: A Legacy for Users 
(Pub. L. 109-59). Similarly, under Section 661.3, FTA proposes deleting 
the phrase ``STURRA means the Surface Transportation and Uniform 
Relocation Assistance Act of 1987 (Pub. L. No. 100-17) and replacing 
this with ``SAFETEA-LU means the Safe Accountable, Flexible, Efficient 
Transportation Act: A Legacy for Users (Pub. L. 109-59).''
    In Section 661.6 ``Certification requirement for procurement of 
steel or manufactured products,'' FTA proposes adding the word 
``iron,'' after the word ``steel'' to reflect that iron, as well as 
steel and manufactured products, are subject to the certification 
requirement.
    Moreover, the word ``offeror'' is a term of art for contractors who 
participate in negotiated procurements. The words ``or offeror'' are 
added after ``bidder,'' wherever it appears in Part 661, to reflect 
that grantees may elect to use negotiated methods of procurement on FTA 
funded projects. The term ``or offeror,'' is added, therefore, as 
follows: (1) In the example ``Certificate of Compliance With Section 
165(a) and the ``Certificate for Non-Compliance With Section 165(a) in 
section 661.6; (2) in section 661.9(b) and (d); (3) in the example 
``Certificate of Compliance With Section 165(b)(3) and the 
``Certificate for Non-Compliance With Section 165(b)(3) in Section 
661.12; (4) in section 661.13(b)(1), and in subparagraph (b)(1) a(i) 
(as redesignated); (4) in section 661.15(a), (b), (d), and (g); in 
section 661.17--in addition, the clause ``or the price of its final 
offer'' is added after ``original bid price'' in the second sentence; 
(5) in section 661.19.
    Similarly, the words ``or offer'' are added after ``bid'' in Part 
661, as follows: (1) in section 661.7(c)(1) and (d). In section 
661.13(b), the clause ``or request for proposal (RFP)'' is added after 
the word ``bid'' in the first sentence. The words ``or offer'' are 
added after the word ``bid'' in the second sentence. In section 
661.13(b)(1), the words ``of submission of a final offer,'' are added 
after the words ``bid opening'' in the first sentence. These proposed 
changes are made to reflect that grantees may elect to use negotiated 
methods of procurement on FTA funded projects. FTA seeks comment on 
these proposed changes.

B. Substantive Change Proposals

Communication Equipment
    49 U.S.C. 5323(j)(2)(C) states that rolling stock includes ``train 
control, communication, and traction power equipment.'' (Emphasis 
added). Pursuant to this requirement, FTA drafted representative 
examples of train control, communication, and traction power equipment 
in the rolling stock section of the Buy America regulations as follows:

    Train control equipment includes, but is not limited to, the 
following equipment:
(1) Mimic board in central control
(2) Dispatcher's console
(3) Local control panels
(4) Station (way side) block control relay cabinets
(5) Terminal dispatcher machines
(6) Cable/cable trays
(7) Switch machines
(8) Way side signals
(9) Impedance bonds
(10) Relay rack bungalows
(11) Central computer control
(12) Brake equipment
(13) Brake systems

    Communication equipment includes, but is not limited to, the 
following equipment:

(1) Radios
(2) Space station transmitter and receivers
(3) Vehicular and hand-held radios
(4) PABX telephone switching equipment
(5) PABX telephone instruments
(6) Public address amplifiers
(7) Public address speakers
(8) Cable transmission system cable
(9) Cable transmission system multiplex equipment
(10) Communication console at central control
(11) Uninterruptible power supply inverters/rectifiers
(12) Uninterruptible power supply batteries
(13) Data transmission system central processors
(14) Data transmission system remote terminals
(15) Line printers for data transmission system
(16) Communication system monitor test panel
(17) Security console at central control

    Traction power equipment includes, but is not limited to the 
following:

(1) Primary AC switch gear
(2) Primary AC transformer rectifiers
(3) DC switch gear
(4) Traction power console and CRT display system at central control
(5) Bus ducts with buses (AC and DC)
(6) Batteries
(7) Traction power rectifier assemblies
(8) Distribution panels (AC and DC)
(9) Facility step-down transformers
(10) Motor control centers (facility use only)
(11) Battery chargers
(12) Supervisory control panel
(13) Annunciator panels
(14) Low voltage facility distribution switch board
(15) DC connect switches
(16) Negative bus boxes
(17) Power rail insulators
(18) Power cables (AC and DC)
(19) Cable trays
(20) Instrumentation for traction power equipment
(21) Connectors, tensioners, and insulators for overhead power wire 
systems
(22) Negative drainage boards
(23) Inverters
(24) Traction motors
(25) Propulsion gear boxes
(26) Third rail pick-up equipment
(27) Pantographs

    In years past, FTA offered guidance on a proposed federally funded 
contract for a public address/customer information screen (PA/CIS) to 
be awarded to the New York City Transit Authority (NYCT), which 
generated some controversy. In that case, FTA opined:

    The Buy America provisions for rolling stock (which includes 
buses, rail cars, and ferries) require that at least 60 percent of 
the cost of all components and subcomponents

[[Page 71255]]

be of domestic origin and that final assembly of vehicles occur in 
the United States. The statutory provisions of Buy America expressly 
define rolling stock to include ``communication equipment.'' FTA 
regulations further provide a nonexhaustive listing of certain 
communication equipment considered to be rolling stock components, 
including public address amplifiers and speakers.
    It is our understanding that the PA/CIS equipment will be placed 
in fixed transit stations, rather than on vehicles. However, 
pursuant to statute and regulation, communications equipment need 
not be on a vehicle, and is procured under the ``rolling stock'' 
rule not the ``manufactured products'' rule.

    FTA's decision on the PA/CIS equipment procurement is consistent 
with longstanding agency precedent, including a Federal Register Notice 
from September 1983 which indicated that the particular equipment 
listed in section 661.11 ``include[s] both on-board and wayside 
equipment.'' 48 FR 41562. Nevertheless, FTA seeks public comment on 
whether the agency should continue to interpret the items listed in 
661.11 as including wayside equipment. FTA also seeks public comment as 
to whether any items of equipment listed in section 661.11(t) (u) and 
(v), should be deleted, and whether any new items should be added to 
these lists, to reflect new technology.
    In addition, FTA seeks public comment as to what constitutes 
``communication equipment'' within the meaning of 5323(j)(2)(c) and 
section 661.11, and whether these terms should be defined in the 
regulation. FTA's concern on this matter arises as the technology 
utilized in the transit industry becomes more complex and 
sophisticated, and as categorical distinctions between product 
functions become increasingly blurred. To illustrate this point, it 
undoubtedly raises little or no dispute that an on-board radio or 
public address system constitutes ``communication equipment.''
    However, FTA has also been called on to review for Buy America 
compliance such procurements as: a ``Mobile Data Communication 
System,'' ``Monitoring and Diagnostic equipment,'' a ``Service 
Management and Customer Information System,'' ``on-board and wayside 
LED signage systems,'' ``Automated Passenger Information System,'' etc. 
Such equipment often includes sophisticated networked microcomputers, 
processors, data screens, and other devices which ``communicate'' 
information to customers or transit personnel (such as for fares or 
schedules) in a broad sense--but also serves other functions such as 
counting passengers, tabulating revenues, and then ``communicating'' 
such information automatically by remote transmission to stakeholders 
for later processing and storage.
    A review of this prior FTA guidance reveals instances where 
equipment which has as its primary function communication ``with or 
between people,'' such as for radios, constituted ``communication 
equipment'' under the rolling stock standard. Other cases demonstrate 
that where ``machine to machine'' interface constituted the primary 
function of the equipment, the manufactured product standard at section 
661.7 applied. In determining what constitutes communication equipment, 
FTA believes that this distinction in the primary purpose of the 
equipment (e.g. ``with or between people'' versus ``machine to 
machine'' interface) should be maintained, with the former constituting 
communication equipment under the rolling stock standard. Nevertheless, 
to foster clarity in this area, FTA invites public comment and opinion 
on what constitutes ``communication equipment.''

XI. Regulatory Analyses and Notices

A. Statutory/Legal Authority for This Rulemaking

    This NPRM is authorized under the Safe, Accountable, Flexible, 
Efficient Transportation Equity Act: A Legacy for Users (Pub. L. 109-
59) amended Section 5323(j) and (m) of Title 49, United States Code and 
requires FTA to revise its regulations with respect to Buy America 
requirements.

B. Executive Order 12866 and DOT Regulatory Policies and Procedures

    This NPRM is a nonsignificant regulatory action under section 3(f) 
of Executive Order 12866 and, therefore, was not reviewed by the Office 
of Management and Budget. This NPRM is also nonsignificant under the 
Regulatory Policies and Procedures of the Department of Transportation 
(44 FR 11034). This NPRM imposes no new compliance costs on the 
regulated industry; it merely clarifies terms existing in the Buy 
America regulations and adds terms consistent with SAFETEA-LU.

C. Executive Order 13132

    This NPRM has been analyzed in accordance with the principles and 
criteria contained in Executive Order 13132 (``Federalism''). This NPRM 
does not include any regulation that has substantial direct effects on 
the States, the relationship between the national government and the 
States, or the distribution of power and responsibilities among the 
various levels of government. Therefore, the consultation and funding 
requirements of Executive Order 13132 do not apply.

D. Executive Order 13175

    This NPRM has been analyzed in accordance with the principles and 
criteria contained in Executive Order 13175 (``Consultation and 
Coordination with Indian Tribal Governments''). Because this NPRM does 
not have tribal implications and does not impose direct compliance 
costs, the funding and consultation requirements of Executive Order 
13175 do not apply.

E. Regulatory Flexibility Act and Executive Order 13272

    The Regulatory Flexibility Act (5 U.S.C. 601-611) requires each 
agency to analyze regulations and proposals to assess their impact on 
small businesses and other small entities to determine whether the rule 
or proposal will have a significant economic impact on a substantial 
number of small entities. This NPRM imposes no new costs. Therefore, 
FTA certifies that this proposal does not require further analysis 
under the Regulatory Flexibility Act. FTA requests public comment on 
whether the proposals contained in this NPRM have a significant 
economic impact on a substantial number of small entities.

F. Unfunded Mandates Reform Act of 1995

    This NPRM does not propose unfunded mandates under the Unfunded 
Mandates Reform Act of 1995. If the proposals are adopted into a final 
rule, it will not result in costs of $100 million or more (adjusted 
annually for inflation), in the aggregate, to any of the following: 
State, local, or Native American tribal governments, or the private 
sector.

G. Paperwork Reduction Act

    This NPRM proposes no new information collection requirements.

H. Regulation Identifier Number (RIN)

    A regulation identifier number (RIN) is assigned to each regulatory 
action listed in the Unified Agenda of Federal Regulations. The 
Regulatory Information Service Center publishes the Unified Agenda in 
April and October of each year. The RIN number contained in the heading 
of this document may be used to cross-reference this action with the 
Unified Agenda.

[[Page 71256]]

I. Environmental Assessment

    The National Environmental Policy Act of 1969 (NEPA), as amended 
(42 U.S.C. 4321-4347), requires Federal agencies to consider the 
consequences of major federal actions and prepare a detailed statement 
on actions significantly affecting the quality of the human 
environment. There are no significant environmental impacts associated 
with this NPRM.

J. Privacy Act

    Anyone is able to search the electronic form for all comments 
received into any of our dockets by the name of the individual 
submitting the comments (or signing the comment, if submitted on behalf 
of an association, business, labor union, etc.). You may review DOT's 
complete Privacy Act Statement in the Federal Register published on 
April 11, 2000 (Volume 65, Number 70; Pages 19477-78) or you may visit 
http://dms.dot.gov.

List of Subjects in 49 CFR Part 661

    Grant programs--transportation, Mass transportation, Reporting and 
recordkeeping requirements.

Amendment of 49 CFR Part 661

    Accordingly, for the reasons described in the preamble, part 661 of 
Title 49 of the Code of Federal Regulations is proposed to be amended 
as follows:

PART 661--[AMENDED]

    1. The authority citation for part 661 is revised to read as 
follows:

    Authority: 49 U.S.C. 5323(j) (formerly sec. 165, Pub. L. 97-424; 
as amended by sec. 337, Pub. L. 100-17, sec. 1048, Pub. L. 102-240, 
sec. 3020(b), Pub. L. 105-178, and sec. 3023(i) and (k), P.L. 109-
59); 49 CFR 1.51.

    2. Revise Sec.  661.3 to read as follows:


Sec.  661.3  Definitions.

    As used in this part:
    Act means the Surface Transportation Assistance Act of 1982 (Pub. 
L. 97-424), as amended by the Safe, Accountable, Flexible, Efficient 
Transportation Act: A Legacy for Users (Pub. L. 109-59).
    Administrator means the Administrator of FTA, or designee.
    Component means any article, material, or supply, whether 
manufactured or unmanufactured, that is directly incorporated into the 
end product at the final assembly location.
    Contractor means:
    (1) Any individual or other legal entity that directly or 
indirectly (e.g., through an affiliate), submits bids or offers for or 
is awarded, or reasonably may be expected to submit bids or offers for 
or be awarded, a federally funded third party contract or subcontract 
under a federally funded third party contract; or, conducts business, 
or reasonably may be expected to conduct business, with an FTA grantee, 
as an agent or representative of another contractor; or
    (2) Any party to a third party government contract other than the 
government.
    End Product means:
    (1) Any item subject to 49 U.S.C. 5323(j) that is to be acquired by 
a grantee, as specified in the overall project contract; or
    (2) Any article, material, supply, or system, whether manufactured 
or unmanufactured, that is acquired for public use under a federally 
funded third party contract. A list of representative end products is 
included at Appendix A to this section.
    FTA means the Federal Transit Administration.
    Grantee means any entity that is a recipient of FTA funds.
    Manufactured product means an item produced as a result of 
manufacturing process.
    Manufacturing process means the application of processes to alter 
the form or function of materials or of elements of the product in a 
manner adding value and transforming those materials or elements so 
that they represent a new end product functionally different from that 
which would result from mere assembly of the elements or materials.
    Negotiated Procurement means a contract awarded using other than 
sealed bidding procedures
    Rolling stock means transit vehicles such as buses, vans, cars, 
railcars, locomotives, trolley cars and buses, and ferry boats, as well 
as vehicles used for support services.
    SAFETEA-LU means the Safe, Accountable, Flexible, Efficient 
Transportation Act: A Legacy for Users (Pub. L. 109-59).
    Subcomponent means any article, material, or supply, whether 
manufactured or unmanufactured, that is one step removed from a 
component in the fabrication process and that is incorporated directly 
into a component.
    United States means the several States, the Commonwealth of Puerto 
Rico, the District of Columbia, Guam, American Samoa, the Virgin 
Islands, and the Commonwealth of the Northern Mariana Islands.

Appendix A to Sec.  661.3--Representative End Products

    The following is a list of items, as specified by grantees in 
third party contracts, which are representative end products that 
are subject to the requirements of Buy America. This list is not 
exclusive.
    (1) Rolling stock end products: All individual items identified 
as rolling stock in Sec.  661.3 (buses, vans, cars, railcars, 
locomotives, trolley cars, ferry boats, as well as vehicles used for 
support services); train control equipment or systems; communication 
equipment or systems; traction power equipment or systems.
    (2) Steel and iron end products: Products and infrastructure 
projects made primarily of steel or iron or involving track work, 
including bridges; steel or iron structures; running rail and 
contact rail; turnouts.
    (3) Manufactured end products: Fare collection equipment [non-
system equipment] or systems; computers and computer systems; 
information, security, and data processing equipment or systems; 
lifts, hoists, and elevators; infrastructure projects not made 
primarily of steel or iron, including structures (terminals, depots, 
garages, and bus shelters), ties and ballast; contact rail not made 
primarily of steel or iron.

    3. Revise Sec.  661.6 to read as follows:


Sec.  661.6  Certification requirements for procurement of steel or 
manufactured products.

    If steel, iron, or manufactured products (as defined in Sec. Sec.  
661.3 and 661.5 of this part) are being procured, the appropriate 
certificate as set forth below shall be completed and submitted by each 
bidder or offeror in accordance with the requirement contained in Sec.  
661.13(b) of this part.

Certificate of Compliance With Section 165(a)

    The bidder or offeror hereby certifies that it will comply with 
the requirements of section 165(a) of the Surface Transportation 
Assistance Act of 1982, as amended, and the applicable regulations 
in 49 CFR part 661.

 Date------------------------------------------------------------------
 Signature-------------------------------------------------------------
 Company Name----------------------------------------------------------
 Title-----------------------------------------------------------------

Certificate for Non-Compliance With Section 165(a)

    The bidder or offeror hereby certifies that it cannot comply 
with the requirements of section 165(a) of the Surface 
Transportation Assistance Act of 1982, as amended, but it may 
qualify for an exception to the requirement pursuant to section 165 
(b)(2) or (b)(4) of the Surface Transportation Assistance Act of 
1982 and regulations in 49 CFR 661.7.

 Date------------------------------------------------------------------
 Signature-------------------------------------------------------------
 Company Name----------------------------------------------------------
 Title-----------------------------------------------------------------

    4. In Sec.  661.7:
    a. Revise paragraphs (b), (c)(1), and (d) and add new paragraph 
(c)(3) to read as set forth below; and
    b. Amend appendix A to Sec.  661.7 by removing paragraphs (b) and 
(c) and adding new paragraph (b) to read as set forth below.

[[Page 71257]]

Sec.  661.7  Waivers.

* * * * *
    (b) Under the provision of section 165(b)(1) of the Act, the 
Administrator may waive the general requirements of section 165(a) if 
the Administrator finds that their application would be inconsistent 
with the public interest. In determining whether the conditions exist 
to grant this public interest waiver, the Administrator will consider 
all appropriate factors on a case-by-case basis, unless a general 
exception is specifically set out in this part. When granting a public 
interest waiver, the Administrator, as delegated, shall issue a 
detailed written statement justifying why the waiver is in the public 
interest. The Administrator shall publish this justification in the 
Federal Register, providing the public with a reasonable period of time 
for notice and comment.
    (c) * * *
    (1) It will be presumed that the conditions exist to grant this 
non-availability waiver if no responsive and responsible bid or offer 
is received offering an item produced in the United States.
* * * * *
    (3) In those situations where materials become unavailable after 
contract award due to unforeseen circumstances beyond the control of 
the contractor or the grantee, the Administrator may grant a non-
availability waiver under this paragraph (c), in any case in which a 
contractor has originally certified compliance with the Buy America 
requirements in good faith, but can no longer comply with its 
certification and contractual obligations due to commercial 
impossibility or impracticability. In making such a waiver request, the 
grantee will submit evidence of the contractor's good faith and 
evidence justifying the post-award waiver, such as information about 
the origin of the product or materials, invoices, or other relevant 
solicitation documents to the FTA Chief Counsel, as requested. In 
determining whether the conditions exist to grant this post-award non-
availability waiver, the Administrator will consider all appropriate 
factors, including the status of other bidders or offerors in the 
procurement and the effect of any waiver on them, on a case-by-case 
basis.
    (d) Under the provision of section 165(b)(4) of the Act, the 
Administrator may waive the general requirements of section 165(a) if 
the Administrator finds that the inclusion of a domestic item or 
domestic material will increase the cost of the contract between the 
grantee and its supplier of that item or material by more than 25 
percent. The Administrator will grant this price-differential waiver if 
the amount of the lowest responsive and responsible bid or offer 
offering the item or material that is not produced in the United States 
multiplied by 1.25 is less than the amount of the lowest responsive and 
responsible bid or offer offering the item or material produced in the 
United States.
* * * * *

Appendix A to Sec.  661.7--General Waivers

* * * * *
    (b) Under the provisions of Sec.  661.7 (b) and (c) of this 
part, a general public interest waiver from the Buy America 
requirements applies to microprocessors, computers, microcomputers, 
or software, or other such devices, which are used solely for the 
purpose of processing or storing data. This general waiver does not 
extend to a product or device which merely contains a microprocessor 
or microcomputer and is not used solely for the purpose of 
processing or storing data.
* * * * *

    5. In Sec.  661.9, revise paragraphs (b) and (d) to read as 
follows:


Sec.  661.9  Application for waivers.

* * * * *
    (b) A bidder or offeror who seeks to establish grounds for an 
exception must seek the exception, in a timely manner, through the 
grantee.
* * * * *
    (d) FTA will consider a request for a waiver from a potential 
bidder, offeror, or supplier only if the waiver is being sought under 
Sec.  661.7 (f) or (g) of this part.
* * * * *
    6. In Sec.  661.11, remove and reserve paragraph (s) and add a new 
Appendix D to read as follows:


Sec.  661.11  Rolling stock procedures.

* * * * *

Appendix D to Sec.  661.11--Minimum Requirements for Final Assembly

    (a) Rail Cars: In the case of the manufacture of a new, 
remanufactured, or overhauled rail car, final assembly would 
typically include, as a minimum, the following operations: 
Installation and interconnection of car bodies or shells, propulsion 
control equipment, propulsion cooling equipment, brake equipment, 
energy sources for auxiliaries and controls, heating and air 
conditioning, communications equipment, pneumatic and electrical 
systems, door systems, passenger seats, passenger interiors, 
destination signs, wheelchair lifts, motors, wheels, axles, and gear 
units, suspensions, frames, and chassis; the inspection and 
verification of all installation and interconnection work; and the 
in-plant testing of the stationary product to verify all functions.
    (b) Buses: In the case of a new, remanufactured, or overhauled 
bus, final assembly would typically include, at a minimum, the 
installation and interconnection of car bodies or shells, the engine 
and transmission (drive train), axles, chassis, and wheels, 
including the cooling and braking systems; the installation and 
interconnection of the heating and air conditioning equipment; the 
installation of pneumatic and electrical systems, door systems, 
passenger seats, passenger grab rails, destination signs, wheelchair 
lifts; and road testing, final inspection, repairs and preparation 
of the vehicles for delivery.

    7. Revise Sec.  661.12 to read as follows:


Sec.  661.12  Certification requirement for procurement of buses, other 
rolling stock and associated equipment.

    If buses or other rolling stock (including train control, 
communication, and traction power equipment) are being procured, the 
appropriate certificate as set forth below shall be completed and 
submitted by each bidder in accordance with the requirement contained 
in Sec. 661.13(b) of this part.

Certificate of Compliance With Section 165(b)(3)

    The bidder or offeror hereby certifies that it will comply with 
the requirements of section 165(b)(3), of the Surface Transportation 
Assistance Act of 1982, as amended, and the regulations of 49 CFR 
661.11.

 Date------------------------------------------------------------------
 Signature-------------------------------------------------------------
 Company Name----------------------------------------------------------
 Title-----------------------------------------------------------------

Certificate for Non-Compliance with Section 165(b)(3)

    The bidder or offeror hereby certifies that it cannot comply 
with the requirements of section 165(b)(3) of the Surface 
Transportation Assistance Act of 1982, as amended, but may qualify 
for an exception to the requirement consistent with section 
165(b)(2) or (b)(4) of the Surface Transportation Assistance Act, as 
amended, and regulations in 49 CFR 661.7.

 Date------------------------------------------------------------------
 Signature-------------------------------------------------------------
 Company Name----------------------------------------------------------
 Title-----------------------------------------------------------------

    7. In Sec.  661.13, revise paragraphs (b) introductory text, 
(b)(1), (b)(2), and (c), add new paragraph (b)(1)(i), and add and 
reserve paragraph (b)(1)(ii) to read as follows:


Sec.  661.13  Grantee responsibility.

* * * * *
    (b) The grantee shall include in its bid or request for proposal 
(RFP) specification for procurement within the scope of this part an 
appropriate notice of the Buy America provision. Such specifications 
shall require, as a condition of responsiveness, that the bidder or 
offeror submit with the bid or

[[Page 71258]]

offer a completed Buy America certificate in accordance with Sec. Sec.  
661.6 or 661.12 of this part, as appropriate.
    (1) A bidder or offeror who has submitted an incomplete Buy America 
certificate or an incorrect certificate of noncompliance through 
inadvertent or clerical error (but not including failure to sign the 
certificate, submission of certificates of both compliance and non-
compliance, or failure to submit any certification), may submit to the 
FTA Chief Counsel within ten (10) days of bid opening of submission of 
a final offer, a written explanation of the circumstances surrounding 
the submission of the incomplete or incorrect certification in 
accordance with 28 U.S.C. 1746, sworn under penalty of perjury, stating 
that the submission resulted from inadvertent or clerical error. The 
bidder or offeror will also submit evidence of intent, such as 
information about the origin of the product, invoices, or other working 
documents. The bidder or offeror will simultaneously send a copy of 
this information to the FTA grantee.
    (i) The FTA Chief Counsel may request additional information from 
the bidder or offeror, if necessary. The grantee may not make a 
contract award until the FTA Chief Counsel issues his/her 
determination, except as provided in Sec.  661.15(m).
    (ii) [Reserved]
    (2) In the case of a negotiated procurement, a certification 
submitted as part of an initial proposal may be superseded by a 
subsequent certification(s) submitted with a revised proposal or offer. 
Compliance with the Buy America requirements shall be determined on the 
basis of the certification submitted with the final offer or final 
revised proposal. However, where a grantee awards on the basis of 
initial proposals without discussion, the certification submitted with 
the initial proposal will control.
    (c) Whether or not a bidder or offeror certifies that it will 
comply with the applicable requirement, such bidder or offeror is bound 
by its original certification (in the case of a sealed bidding 
procurement) or its certification submitted with its final offer (in 
the case of a negotiated procurement) and is not permitted to change 
its certification after bid opening or submission of a final offer. 
Where a bidder or offeror certifies that it will comply with the 
applicable Buy America requirements, the bidder, offeror, or grantee is 
not eligible for a waiver of those requirements, except as provided in 
section 661.7(c)(3) in the case of a post-award non-availability 
waiver.
    8. In Sec.  661.15, revise paragraphs (a), (b), (d), and (g) to 
read as follows:


Sec.  661.15  Investigation procedures.

    (a) It is presumed that a bidder or offeror who has submitted the 
required Buy America certificate is complying with the Buy America 
provision. A false certification is a criminal act in violation of 18 
U.S.C. 1001.
    (b) Any party may petition FTA to investigate the compliance of a 
successful bidder or offeror with the bidder's or offeror's 
certification. That party (``the petitioner'') must include in the 
petition a statement of the grounds of the petition and any supporting 
documentation. If FTA determines that the information presented in the 
petition indicates that the presumption in paragraph (a) of this 
section has been overcome, FTA will initiate an investigation.
* * * * *
    (d) When FTA determines under paragraph (b) or (c) of this section 
to conduct an investigation, it requests that the grantee require the 
successful bidder or offeror to document its compliance with its Buy 
America certificate. The successful bidder or offeror has the burden of 
proof to establish that it is in compliance. Documentation of 
compliance is based on the specific circumstances of each 
investigation, and FTA will specify the documentation required in each 
case.
* * * * *
    (g) The grantee's reply (or that of the bidder or offeror) will be 
transmitted to the petitioner. The petitioner may submit comments on 
the reply to FTA within 10 working days after receipt of the reply. The 
grantee and the low bidder or offeror will be furnished with a copy of 
the petitioner's comments, and their comments must be received by FTA 
within 5 working days after receipt of the petitioner's comments.
* * * * *
    9. Revise Sec.  661.17 to read as follows:


Sec.  661.17  Failure to comply with certification.

    If a successful bidder or offeror fails to demonstrate that it is 
in compliance with its certification, it will be required to take the 
necessary steps in order to achieve compliance. If a bidder or offeror 
takes these necessary steps, it will not be allowed to change its 
original bid price or the price of its final offer. If a bidder or 
offeror does not take the necessary steps, it will not be awarded the 
contract if the contract has not yet been awarded, and it is in breach 
of contract if a contract has been awarded.
    10. Revise Sec.  661.19 to read as follows:


Sec.  661.19  Sanctions.

    A willful refusal to comply with a certification by a successful 
bidder or offeror may lead to the initiation of debarment or suspension 
proceedings under part 29 of this title.
    11. Revise Sec.  661.20 to read as follows:


Sec.  661.20  Rights of parties.

    (a) A party adversely affected by an FTA action under this 
subsection shall have the right to seek review under the Administrative 
Procedure Act (APA), 5 U.S.C. section 702 et seq.
    (b) Except as provided in paragraph (a) of this section, the sole 
right of any third party under the Buy America provision is to petition 
FTA under the provisions of Sec.  661.15 of this part. No third party 
has any additional right, at law or equity, for any remedy including, 
but not limited to, injunctions, damages, or cancellation of the 
Federal grant or contracts of the grantee.

    Issued in Washington, DC this 18th day of November, 2005.
David B. Horner,
Acting Deputy Administrator.
[FR Doc. 05-23323 Filed 11-22-05; 11:43 am]
BILLING CODE 4910-57-P


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