[Federal Register Volume 75, Number 167 (Monday, August 30, 2010)]
[Rules and Regulations]
[Pages 53153-53169]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-21027]


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

DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 2, 5, 25, and 52

[FAC 2005-45; FAR Case 2009-008; Item III; Docket 2009-0008, Sequence 
1]
RIN 9000-AL22


Federal Acquisition Regulation; American Recovery and 
Reinvestment Act of 2009 (the Recovery Act)--Buy American Requirements 
for Construction Material

AGENCIES: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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

SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (the Councils) have adopted as final, 
with changes, an interim rule amending the Federal Acquisition 
Regulation (FAR) to implement the American Recovery and Reinvestment 
Act of 2009 (Recovery Act) with respect to the ``Buy American--Recovery 
Act'' provision, section 1605 in Division A.

DATES: Effective Date: October 1, 2010.
    Applicability Date: The rule applies to solicitations issued and 
contracts awarded on or after the effective date of this rule. 
Contracting officers shall modify, on a bilateral basis, in accordance 
with FAR 1.108(d)(3), existing contracts to include the appropriate FAR 
clause for future work, if Recovery Act funds will be used. In the 
event that a contractor refuses to accept such a modification, the 
contractor will not be eligible for award of any work that uses 
Recovery Act funds.

FOR FURTHER INFORMATION CONTACT: For clarification of content, contact 
Ms. Cecelia L. Davis, Procurement Analyst, at (202) 219-0202. For 
information pertaining to status or publication schedules, contact the 
Regulatory Secretariat at (202) 501-4755. Please cite FAC 2005-45, FAR 
case 2009-008.

SUPPLEMENTARY INFORMATION:

A. Background

    This final rule implements the unique ``Buy American--Recovery 
Act'' provision, section 1605 of the Recovery Act, by revising FAR 
subpart 25.6, and related provisions and clauses at FAR part 52, with 
conforming changes to FAR subparts 2.1, 5.2, 25.0, and 25.11. An 
interim rule was published in the Federal Register at 74 FR 14623, 
March 31, 2009. The public comment period ended June 1, 2009.
    As required by section 1605, the final rule makes it clear that 
there will be full compliance with U.S. obligations under all 
international trade agreements when undertaking construction covered by 
such agreements with Recovery Act funds. The new required provisions 
and clauses implement U.S. obligations under our trade agreements in 
the same way as they are currently implemented in non-Recovery Act 
construction contracts. The Caribbean Basin countries are excluded from 
the definition of ``Recovery Act designated country,'' because the 
treatment provided to them is not as a result of a U.S. international 
obligation.

B. Discussion and Analysis

    The Regulatory Secretariat received 35 responses, but 2 responses 
lacked attached comments and 1 response appeared unrelated to the case. 
The responses included multiple comments on a wide range of issues 
addressed in the interim rule. Each issue is discussed by topic in the 
following sections.

Table of Contents

1. Comments on Section 1605 of the Recovery Act
2. Applicability of Section 1605 of the Recovery Act
    a. Relation to the Buy American Act
    b. Applicability to Construction Projects/Contracts
    c. Applicability to Construction Materials or Supplies
    d. Manufacture vs. Substantial Transformation or Tariff Shift
    e. Iron and Steel
    f. Components
    g. Summary Matrix of Requirements for Domestic Construction 
Material
3. Applicability of International Agreements
    a. Trade Agreements
    b. G20 Summit Pledge
4. Other Definitions
    a. Construction Material
    b. Public Building or Public Work
    c. Manufactured Construction Material/Unmanufactured 
Construction Material
5. Exceptions
    a. Class Exceptions
    b. Public Interest
    c. Nonavailability
    d. Unreasonable Cost
6. Determinations That an Exception Applies
    a. Process and Publication
    b. Requests for Specific Exceptions
7. Exemption for Acquisitions Below the Simplified Acquisition 
Threshold
8. Remedies for Noncompliance
9. Funding Mechanisms
    a. Modifications to Existing Contracts
    b. Treatment of Mixed Funding
10. Interim Rule Improper
11. Inconsistencies Between This Rule and Pre-Existing FAR Rule and 
the OMB Grants Guidance
    a. Inconsistency With Pre-Existing FAR
    b. Inconsistency With the OMB Grants Guidance
12. Need for Additional Guidance

1. Comments on Section 1605 of the Recovery Act

    Comments: Although the respondents expressed general support for 
the goals of the Recovery Act to stimulate the U.S. economy, many were 
concerned about the Recovery Act Buy American restrictions of section 
1605. For example:
    Several entities representing other countries objected to the 
potential restrictions on trade. They alleged that the Recovery Act Buy 
American requirement in section 1605 is not in conformity with the U.S. 
pledge to refrain from raising new barriers in the framework of the 
Summit on Financial Markets and the World Economy, November 2008, and 
the G20 pledge, April 2009. They alleged that it will have a negative 
impact on the world trade and economy. One respondent stated that it is 
not rational for the U.S. to take trade protection actions such as the 
``Buy American--Recovery Act'' provision, because it will not be useful 
for the American and global economy in promoting recovery from the 
current downturn. Another respondent stated that, to the extent 1605 
imposes more restrictive requirements than previously existed, it 
represents a new barrier to trade in goods between the United States 
and Canada. One respondent found several aspects of section 1605 
problematic because of their ``inherent lack of clarity.''
    Some United States industry associations also had concerns about 
section 1605. One objected that the real-life burdens of complying with 
these country-of-origin requirements cannot be overstated. This 
respondent concluded that, where the U.S. Government places a premium 
on

[[Page 53154]]

promoting its important socio-economic goals, this requires companies 
interested in selling in the Federal marketplace to segregate their 
inventories based on country of origin and implement costly compliance 
regimes. Another respondent noted a risk that the Recovery Act Buy 
American provisions may have numerous unintended consequences on the 
United States and harm American workers and companies and the global 
economy. A third respondent commented that ``Congress' well-meaning 
intentions, like all protectionist measures, could inadvertently hurt 
the downstream U.S. users.''
    Response: Comments on the merits of section 1605 of the Recovery 
Act are outside the scope of this case, because the Councils cannot 
change the law.
    This final rule is focused on the optimal implementation of section 
1605 in the FAR, i.e., the Councils have attempted to find the balance 
between domestic-sourcing requirements and simplicity and clarity of 
implementation, so that the rule does not become so onerous that it 
does more harm than good to U.S. industry.

2. Applicability of Section 1605 of the Recovery Act

a. Relation to the Buy American Act
    There are two main issues raised by respondents with regard to the 
applicability of the Buy American Act in contracts funded with Recovery 
Act funds.
i. Does the Buy American Act apply to manufactured construction 
material used in Recovery Act projects?
    Comments: A few respondents contended that the Buy American Act 
still applies to goods covered by section 1605 of the Recovery Act--
that both standards must be met. These respondents objected that the 
interim rule deviated from existing law and regulations that should 
still govern the purchase of goods covered by the Recovery Act. 
According to these respondents, any final rule must, at a minimum, 
preserve the basic requirements of assembly in the United States and 
the 51 percent domestic component rule, because the Buy American Act 
still applies. Another respondent claimed that this rule cannot waive 
the Buy American Act's component test without additional authority.
    Response: The Recovery Act sets out specific domestic source 
restrictions for iron, steel, and manufactured goods incorporated into 
Recovery Act construction projects. In many ways, these restrictions 
mirror the Buy American Act, but there are specific differences (no 
component test, different standards for unreasonable cost, no exception 
for impracticable, etc.). The Councils and OMB determined that it was 
reasonable to interpret section 1605 as including all of the ``Buy 
American--Recovery Act'' restrictions that Congress intended to apply 
to iron, steel, and manufactured goods covered by the Recovery Act, 
i.e., these goods are not also covered by the Buy American Act. Since 
Congress was clearly aware of the Buy American Act when creating the 
Recovery Act domestic source restrictions and exceptions, if Congress 
had wanted the component test or other aspects of the Buy American Act 
to apply, they would have included them. Congress incorporated those 
aspects of the Buy American Act that they wanted to apply, and excluded 
or modified those aspects that they did not want to apply. The Councils 
have determined that section 1605 of the Recovery Act supersedes the 
Buy American Act with regard to the acquisition of manufactured 
construction materials used on a project funded with Recovery Act 
funds. Therefore, the component test does not apply to construction 
material used in projects funded by the Recovery Act.
ii. Does the Buy American Act apply to unmanufactured construction 
material used in Recovery Act projects?
    Comments: Several non-U.S. respondents objected that the interim 
rule applies the Buy American Act to unmanufactured construction 
material. One of them stated that the interim rule has expanded the 
scope of the Recovery Act by way of arbitrary interpretation and 
constitutes an unjustified limitation of the use of foreign 
unmanufactured construction materials, given that the use of foreign 
unmanufactured construction materials is not prohibited by the Recovery 
Act. A respondent believed that ``statutory authority does not exist to 
extend the provisions required by section 1605 to unmanufactured 
goods'' and asked that this be struck from the final rule. Another 
objected that the additional 6 percent evaluation factor applied to 
unmanufactured construction material is only stipulated in the FAR, and 
should not be permitted under the spirit of the ``G20 Statement.''
    Response: Section 1605 did not address unmanufactured construction 
material. The interim rule coverage of unmanufactured construction 
material is not based on extending the coverage of section 1605, but on 
continuing to apply the Buy American Act to that material not covered 
by the Recovery Act.
b. Applicability to Construction Projects/Contracts
i. How To Identify a ``Construction'' Contract
    Comments: A respondent wanted to know whether the contracting 
agency will be required to affirmatively stipulate whether a contract 
is considered a ``construction'' contract and require that this 
language be flowed down to subcontractors.
    Response: Construction contracts are easily identifiable by the 
presence of construction provisions and clauses in the solicitation and 
contract, such as the clauses prescribed in FAR subpart 36.5 as well as 
the Buy American Act provisions and clauses for construction contracts 
in FAR clauses 52.225-9 through 52.225-12 or now the Recovery Act Buy 
American, FAR provisions at 52.225-21 through 52.225-24. It is the 
responsibility of the prime contractor to comply with contract clauses 
and impose on subcontractors whatever conditions are necessary to 
enable the prime contractor to meet the contract requirements.
ii. Use of terms ``contract'' and ``project''
    Comments: Two respondents contended that the interim rule is 
unclear in several places regarding the scope of coverage because the 
terms ``projects'' and ``contracts'' appear to be used interchangeably.
    <bullet> FAR 25.602(a) states that ``None of the funds appropriated 
or otherwise made available by the Recovery Act may be used for a 
project for the construction, alteration, maintenance or repair of a 
public building or public work * * *''
    <bullet> FAR 25.603(c), implementing the Trade Agreements Act, 
states that ``For construction contracts with an estimated acquisition 
value * * *''
    <bullet> FAR 52.225-21(b)(2) states, ``The contractor shall use 
only domestic construction material in performing this contract * * 
*.''
    Response: Construction ``project'' is often a more inclusive term 
than construction ``contract.'' Large construction projects may involve 
more than one construction contract. The term ``project'' may also be 
used to denote a segment of a contract, if the funds are clearly 
segregated. To clarify this meaning, the Councils have added a 
statement in the policy section at FAR 25.602 and also clarified in the 
provision and clause prescriptions at FAR 25.1102(e)(2) that the 
contract must indicate if the Recovery Act provision

[[Page 53155]]

and clause only apply to certain line items in the contract.
    The scope of this rule is established, in accordance with section 
1605(a) of the Recovery Act, as applying restrictions to ``a project 
for the construction, alteration, maintenance, or repair of a public 
building or public work.'' The final rule has clarified at FAR 25.602 
that the agency determines the scope of the project and conveys this to 
the contractor through the specified applicability of the Recovery Act 
provision and clause in the contract.
    However, the statute can only be implemented through clauses that 
go into a specific construction contract. Each contract can only impose 
requirements applicable to that particular contract. Therefore, the 
term ``contract'' is used when the interim rule is addressing a 
requirement that is specific to a contractor or contract, particularly 
as used in the provisions and clauses.
c. Applicability to Construction Materials or Supplies
i. Equating ``Manufactured Goods Used in the Project'' to 
``Construction Material''
    Comments: There were many concerns about the interpretation in the 
interim rule of the applicability of section 1605 to manufactured 
goods, namely that the rule equates manufactured goods used in the 
project to construction material.
    A respondent contended that the narrow interpretation of 
manufactured goods ``ignores common sense and well-established 
precedent.'' According to the respondent, the rule equates manufactured 
goods to construction material and limits the applicability to 
construction materials that are incorporated into a public building or 
work.
    Another respondent stated that the rule should apply to all 
manufactured goods--not just construction materials, contending that 
manufactured goods ``used in the project'' means ``all hazmat suits, 
tool belts, masks, tarps, covers, safety straps, construction clothing, 
gloves, etc. purchased by the contractor as part of doing the work.''
    A respondent stated that regulations for public works projects must 
require that all manufactured goods, including textile products, must 
be manufactured in the United States, as intended by the Recovery Act.
    On the other hand, a respondent expressed concern that the 
perceived requirement that all manufactured products on the 
construction site are covered is proving disastrous for American 
equipment manufacturers. This respondent stated that construction 
equipment manufacturers provide the machines that improve operations 
and reduce costs of any infrastructure project. The process to verify 
and prove 100 percent U.S. content of each piece of equipment is 
onerous.
    Some respondents expressed support for the Councils' approach in 
FAR subpart 25.6 of treating iron, steel, and manufactured goods as 
another way of describing ``construction material: As that term has 
been understood and applied with respect to 41 U.S.C. 10a-10d in FAR 
subpart 25.2 and its associated clauses.''
    Response: One of the goals in implementation of the Recovery Act 
was to make the definitions and procedures as close to existing FAR 
definitions and procedures as possible, except where differences are 
required by the Recovery Act.
    Therefore, when applied to a construction contract, FAR subpart 
25.6 and the associated construction clauses use the standard 
definition of ``construction material'' at FAR 25.003 that is familiar 
to contractors and contracting officers. There is a long series of 
Government Accountability Office (GAO) decisions and case law that then 
can be applied without completely starting over. For use in a 
construction contract, the Councils interpreted ``manufactured goods 
used in the project'' to be comparable to the long-standing definition 
of ``construction material'' as an ``article, material, or supply 
brought to the construction site by the contractor or a subcontractor 
for incorporation into the building or work.'' Review of the existing 
case law clarifies the many possible nuances relating to construction 
material and its delivery to the site. Rather than ``ignoring well 
established precedent,'' the Councils relied on well-established 
precedent. The FAR has never applied domestic source restrictions to 
such items as hazmat suits, tool belts, masks, tarps, covers, safety 
straps, construction clothing, and gloves, which are used in a 
construction project by the contractor but are not incorporated into 
the construction project. Further, the interim rule did not apply the 
Recovery Act Buy American requirement of section 1605 to equipment used 
at the construction site, because it is not incorporated into the 
construction project. These items are not deliverables to the 
Government, but remain the property of the contractor. The contractor 
may already have purchased these items before commencement of the 
contract, and may continue to use them on subsequent contracts. 
Therefore, their purchase is not generally subject to restrictions in 
the terms of the contract.
ii. Applicability to Supplies Purchased by the Government
    Comment: One respondent expressed concern that the interim rule, in 
the definition of construction material, stated that manufactured goods 
that are purchased by the Government are supplies and, therefore, 
excluded from the definition of manufactured goods, as used in section 
1605.
    Response: The statement that items purchased by the Government are 
supplies, not construction material, has been a standard part of the 
definition of construction material for many years. It is a true 
statement that items purchased by the Government are not ``construction 
material'' as it is defined in the FAR. However, section 1605 does 
require that all manufactured goods incorporated into the project must 
be produced in the United States, whether purchased by the contractor 
as construction material or purchased by the Government as an item of 
supply. If the Government directly purchases manufactured goods and 
delivers them to the site for incorporation into the project, such 
material must comply with the ``Buy American--Recovery Act'' 
restriction of section 1605, even though it is not construction 
material as defined in the FAR. The final rule clarifies this in the 
policy section. Furthermore, for added clarity, the final rule deletes 
from the definition of ``construction material'' in FAR clauses 52.225-
21 and 52.225-23 the phrase about items purchased by the Government not 
being construction material, because it appears to cause confusion and 
because the information about actions the Government may take is not 
pertinent to the contractor for performance of the construction 
contract.
iii. Contractor-Purchased Supplies for Delivery to the Government
    Comments: A respondent requested that the final rule clarify that, 
to the extent purchases of supplies made with Recovery Act funds are 
not covered as construction material, they are subject to normal Buy 
American Act/Trade Agreements Act requirements.
    Response: Contractor-purchased supplies that are for delivery to 
the Government, not for incorporation into the project, continue to be 
covered by the pre-existing FAR regulations on the Buy American Act and 
trade agreements, as applicable. This rule only applies to construction 
contracts funded with Recovery Act funds or

[[Page 53156]]

supplies purchased by the Government for incorporation into the 
project.
d. Manufacture vs. Substantial Transformation or Tariff Shift
    There were many comments on the issue of manufacture and 
substantial transformation.
i. Buy American Act and Substantial Transformation
    Comments: Several respondents believed that the Buy American Act 
includes a requirement for substantial transformation. One respondent 
stated that the rule should use the ``long-standing definition'' of a 
domestic manufactured good, i.e., final substantial transformation must 
occur in the United States. Another respondent stated that the Buy 
American Act of 1933 includes a substantial transformation test. A 
respondent also stated that the Buy American Act requires substantial 
transformation in the United States. The respondent was concerned that 
the interim rule only requires assembly in the United States.
    Response: Whether or not the Buy American Act requires 
``manufacture'' or ``substantial transformation'' is not directly 
relevant to this rule, but only might be used as a matter of comparison 
for interpretation of section 1605. The Councils have determined that 
the Buy American Act does not apply to manufactured construction 
material. Many of the respondents, whether contending that the Buy 
American Act still applies or using the Buy American Act for purposes 
of comparison and interpretation, have misinterpreted the Buy American 
Act. The Buy American Act includes the requirement for domestic 
manufactured goods to be ``manufactured'' in the United States. This 
term has been used consistently in the FAR as the first prong of the 
test for domestic manufactured end products and construction material. 
There is no substantial transformation test included in the Buy 
American Act. The term ``substantial transformation'' only comes into 
the FAR to implement trade agreements. The rule of origin for 
designated country end products and designated country construction 
material requires products to be wholly the product of, or be 
``substantially transformed'' in the designated country. Even under 
trade agreements, there is no requirement for substantial 
transformation of products produced in the United States, because U.S.-
made end products are not designated country products. Actually, the 
definition of ``U.S.-made end product'' allows either ``substantial 
transformation'' or ``manufacture'' in the United States to qualify as 
a U.S.-made end product, because the Buy American Act has been waived 
for U.S.-made end products when the World Trade Organization Government 
Procurement Agreement applies. However, this is not the case for 
domestic construction material. Even when trade agreements apply, 
domestic construction material must meet the Buy American requirements 
of domestic manufacture, not substantial transformation. Therefore, 
those respondents who argue that the Buy American Act requires 
substantial transformation are simply wrong.
ii. Should ``manufacture'' in this rule include the standard of 
substantial transformation?
    Comment: Further elaborating on substantial transformation, two 
respondents recommended that the Councils should adopt a clear rule 
defining the concept of domestic manufacture consistent with the 
``well-established standard'' of substantial transformation as the 
first part of the two-pronged test for domestic construction material. 
The respondent stated that the rule should not confer domestic status 
simply as a result of minor processing or mere assembly in the United 
States. According to these respondents, by not adopting substantial 
transformation, the interim rule has created ambiguity. These 
respondents pointed out a clear administrative process in the Federal 
Government for making substantial transformation determinations. They 
also stated that U.S. Customs and Border Protection (Customs) considers 
the totality of the circumstances and makes determinations on a case-
by-case basis. The respondents questioned why the interim rule omitted 
any reference to substantial transformation.
    Three respondents recommended allowing either manufacture (perhaps 
combined with the component test) or substantial transformation. 
According to one of the respondents, allowing both models to determine 
when a product has been manufactured in the United States ensures 
greatest flexibility. This respondent believed that this is only 
relevant below the Trade Agreements Act threshold, i.e., above the 
threshold, the requirements defined under those pre-existing 
regulations would apply.
    Response: Section 1605 of the Recovery Act does not require 
substantial transformation. It requires that manufactured goods be 
``produced'' in the United States. The Councils have interpreted the 
law to equate ``production'' of manufactured goods to ``manufacture.'' 
To the extent that the Recovery Act domestic source restriction is 
worded consistently with the Buy American Act, it is reasonable to 
implement in a similar fashion. ``Substantial transformation'' has 
never been applied in the FAR to domestic construction material, just 
to designated country construction material that is subject to trade 
agreements.
    Therefore, the final rule continues to utilize the FAR language 
that parallels the pre-existing construction contract definition of 
domestic construction material, requiring manufacture in the United 
States.
iii. Definition of Manufacture
    Comments: Other respondents were concerned about the definition of 
``manufacture.'' A respondent stated that the interim rule does not 
provide a clear definition of what constitutes manufacture, i.e., how 
to determine whether sufficient activity has taken place in the United 
States for a material to be considered produced in the United States. 
Likewise, two respondents noted the various interpretations of 
``manufacture,'' i.e., some believe it is similar or identical in 
concept to substantial transformation under Customs' rules, while 
others believe it is closer to the Buy American Act--Construction 
clause test for manufacture. One of these respondents asked that the 
final rule clarify the definition. Yet another respondent stated that, 
although the rule does not define ``manufacture,'' the regulations 
suggest that the test will be similar to the requirement of U.S. 
manufacture applied under the Buy American Act. This may in some cases 
be less demanding than the substantial transformation test, which 
examines whether an article is transformed into a new and different 
article of commerce, having a new name, character, and use.
    Response: The Councils have considered in the past including a 
definition of ``manufacture'' in the FAR but did not do so because of 
the case-specific nature of its application. The definition may be 
different for canned beans than for an aircraft. However, for those who 
find the word ``manufacture'' confusing and cite the long-standing 
tradition of interpretation of ``substantial transformation,'' there is 
also a longstanding record of interpretation of ``manufacture'' under 
the Buy American Act. (See for example B-175633 of November 3, 1975, 
which addressed the issue of whether a radio had been manufactured in 
the United States. The GAO did not find against the Army position that, 
if the final manufacturing process takes place in the United States, 
the end product is ``manufactured in the United States.'')

[[Page 53157]]

iv. Tariff Shift
    Comments: A respondent proposed that the rules of origin under 19 
CFR part 102, currently used for NAFTA country-of-origin 
determinations, be applied to decisions regarding whether construction 
materials are considered domestic. According to the respondent, Customs 
is currently proposing that the CFR part 102 rules (also known as 
``tariff shift'' rules) be applied for all country-of-origin 
determinations (See Federal Register at 73 FR 43385, July 25, 2008). 
Tariff shift rules consider the Harmonized Tariff Schedule of the 
United States classification of the article before and after 
manufacturing. If the classification shifts, then the article takes on 
a new country of origin.
    Response: Companies that contract with the Government are 
accustomed to the well-established meaning of the term ``manufacture'' 
as applied under the Buy American Act and now the Recovery Act.
e. Iron and Steel
i. Similarity to Federal Transportation Laws
    Comments: Three respondents pointed out that the section 1605 
restrictions on iron and steel are similar to the Recovery Act Buy 
American requirements within the statutory and regulatory framework of 
Federal transportation laws (U.S. Department of Transportation highways 
and transit program), which mandate that 100 percent of the iron and 
steel used in a project be domestically manufactured and also impose 
comparable standards of unreasonable cost.
    Response: The drafters of the FAR interim rule recognized the 
similarity to the restrictions applicable to the Federal Transit 
Administration, and modeled the FAR interim rule restriction on iron 
and steel after 49 CFR part 661, ``Buy America Requirements.''
ii. 51 Percent Component Test
    Comments: One respondent wanted the FAR to go back to the 51 
percent component test of the Buy American Act for what constitutes 
iron and steel products manufactured in the United States in order to 
ensure compliance with our international agreements, assist in getting 
projects started, limit delays, and ensure competition.
    Response: Reverting to the 51 percent component test of the Buy 
American Act to determine what constitutes iron or steel products 
manufactured in the United States would not fully implement section 
1605 of the Recovery Act. Section 1605 singled out iron and steel. In 
addition to requiring that manufactured construction material be 
manufactured in the United States, the law requires that the iron and 
steel also be produced in the United States. If the 51 percent 
component test of the Buy American Act were sufficient, then it would 
have been unnecessary to impose section 1605 at all. The Recovery Act 
could have continued to apply the Buy American Act without revision.
iii. Iron or Steel as a Component of Construction Material That 
Consists Wholly or Predominantly of Iron or Steel
    Comments: One respondent also requested clarification that 
construction materials (such as welded steel pipe) that are produced in 
the United States using steel that was rolled in the United States from 
foreign slab are ``produced in the United States'' within the meaning 
of the Recovery Act.
    A respondent stated that the FAR rule should allow contractors to 
utilize imported steel slab as raw material feed stock--and 
substantially transform that slab in the United States into flat rolled 
steel (hot rolled, cold rolled, galvanized, etc.) products, which in 
turn are used by other manufacturers to produce a wide variety of 
construction materials. Absent such an approach, construction material 
using these steel products could be deemed foreign construction 
materials, simply because the steel slab from which it was made was 
imported. According to the respondent, this will result in U.S. buyers 
shying away from these U.S. manufactured construction materials, thus 
eliminating U.S. jobs.
    Another respondent, a carbon steel finishing mill, was concerned 
that steel can be either the construction material itself or a 
component of some other manufactured product (such as welded steel 
pipe). The respondent noted that a manufactured good may consist of 
only one component.
    One respondent approved of the distinction between ``steel used as 
a construction material'' and ``steel used in a construction material'' 
but requested clarification of the boundaries of these two categories 
in the final rule. The respondent proposed that the boundary should be 
between--
    <bullet> Steel goods delivered to the construction site directly 
from a steel mill (or its warehouse distributor) (e.g., structural 
steel items (H-beams, I-beams, etc.), reinforcing rod, and plate); and
    <bullet> Steel goods that have been further processed from 
intermediate, non-construction material products produced by a steel 
mill, into manufactured goods delivered to the construction site.
    Alternatively, the respondent offered another definition of ``steel 
used in a construction material''--``all steel goods except steel goods 
delivered to the construction site directly from a steel mill (or its 
warehouse/distributor) for use as a construction material.''
    Response: The Councils agree that a clearer distinction is required 
for circumstances when the Recovery Act Buy American restriction of 
section 1605 applies to iron or steel components. The intent of the 
interim rule was not to draw a line between iron or steel used as a 
construction material, and iron or steel used in a construction 
material, as suggested by one respondent, but between construction 
material that consisted wholly or predominantly of iron or steel and 
construction material in which iron or steel are minor components. The 
suggestion that manufactured steel goods not delivered to the 
construction site directly from the mill should be exempt would not be 
fulfilling the intent of the law. On the other hand, the requirement 
that every piece of iron and steel, no matter how miniscule, must be 
melted and rolled in the United States, would be quite unworkable, and 
would be counterproductive to the overall intent of the law.
    The interim rule separated manufactured construction material into 
two main categories: Iron or steel used as a construction material and 
``other'' manufactured construction material. The interim rule made 
clear that manufactured construction material that consisted wholly of 
iron or steel must be produced in the United States, including all 
stages of production except metallurgical processes involving 
refinement of steel additives. It also stated that ``other'' 
manufactured construction material would require manufacture in the 
United States, but imposed no requirement on the components or 
subcomponents in this category of ``other'' manufactured construction 
material.
    The interim rule is not clear, however, with regard to treatment of 
construction material that consists predominantly, but not wholly, of 
iron or steel. Some respondents assumed that all construction material 
would fall in the ``other'' category unless it was wholly of iron or 
steel. Others interpreted, as was intended, that the ``other'' category 
was to cover material which did not consist wholly or predominantly of 
iron or steel.
    The Councils re-examined the requirement of the statute and how 
best to convey these requirements in the regulations. Because iron and 
steel are singled out for specific mention in the

[[Page 53158]]

statute, the Councils conclude that a primary objective of the Act is 
to promote the use of domestic iron and steel. The Councils have 
determined that a clearer way to express the requirements of the law 
would be to interpret the requirement for iron or steel to be produced 
in the United States as being in addition to (rather than a subset of) 
the requirement for all manufactured construction material to be 
manufactured in the United States. The statute did not include the word 
``other.'' All manufactured construction material must be manufactured 
in the United States. This interpretation supports the requirement that 
iron or steel, whether or not it has reached the stage of being 
manufactured construction material, must be produced at all stages in 
the United States. This is similar to some other domestic source 
restrictions on particular materials or components such as the 
restrictions on domestic melting or production of specialty metals at 
10 U.S.C. 2533b. The intent of the Councils was to balance full 
implementation of the law with feasibility of compliance. Therefore, 
the final rule applies this restriction on domestic production of iron 
and steel only when the iron or steel is a component of construction 
material that consists wholly or predominantly of iron or steel. (The 
respondent was correct that there may be just one component in a 
construction material).
    In view of this policy clarification, the proposal to treat foreign 
slab as a ``component'' of other manufactured goods, not requiring 
production in the United States, is not acceptable, because the 
resultant construction material consists wholly or predominantly of 
iron or steel, and allowing foreign slab would not meet the objectives 
of the law.
    The Councils have made changes to the policy at FAR 25.602 to 
clarify the restriction on the production of iron and steel and have 
revised the definitions of ``domestic construction material'' in FAR 
25.601 and paragraph (a) of the FAR clauses at 52.225-21 and 52.225-23, 
specifying that all of the iron or steel in manufactured construction 
material that consists wholly or predominantly of iron or steel shall 
be produced in the United States, but the origin of the raw materials 
of the iron or steel is not restricted.
iv. Iron or Steel as Components of Manufactured Construction Material 
That Does Not Consist Wholly or Predominantly of Iron or Steel
    Comments: Some respondents objected to the provision in the interim 
rule that the Recovery Act Buy American restriction does not apply to 
iron or steel used as components of other manufactured goods. One 
respondent stated that the Recovery Act Buy American requirements of 
section 1605 must apply to all iron and steel, including all iron and 
steel components and subcomponents used in manufactured construction 
material. One respondent believed that this provision of the interim 
rule creates a loophole, in that the use of foreign steel reinforcing 
bar (rebar) used in concrete slab would be allowed, because the steel 
rebar would be considered a component of a manufactured product (the 
concrete slab).
    On the other hand, a different respondent believed that the fact 
that the regulations permit foreign steel or iron used as components or 
subcomponents of other manufactured construction material to be 
considered domestic construction materials as long as the manufacturing 
is done in the United States is a sound and practical decision. This 
respondent commented that the rule allows U.S. companies flexibility to 
prudently source from both American and foreign vendors to manage 
costs, while promoting U.S. manufacture.
    Response: The interim rule would not allow foreign steel rebar (as 
a component of concrete slab) because the rule applies to construction 
material brought to the construction site. The steel rebar is brought 
separately to the construction site and is therefore itself 
construction material, not a component of the concrete slab, which is 
poured and formed on the construction site.
    As stated in the prior section, iron and steel components are only 
exempt from the restriction of section 1605 if the construction 
material does not consist wholly or predominantly of iron or steel.
f. Components
    Comments: Three respondents agreed with the interim rule approach 
of not including a requirement relating to the origin of components. 
They argue that an expansive and practical definition of manufactured 
goods is needed to allow the contractor leeway in getting the project 
done on time and within budget.
    Many other respondents strongly argued for inclusion of a 
``component test,'' often citing the Buy American Act as a precedent.
    <bullet> One respondent stated that the costs of all the domestic 
components in the final product must exceed 50 percent of the cost of 
all the components.
    <bullet> A respondent stated that Congress' deliberate inclusion of 
the term ``manufactured goods'' was plainly intended to be under the 
precedent established under the Buy American Act. Yet another 
respondent stated that the interim rule does not meet the requirements 
of section 1605 because domestic content requirements for components 
and subcomponents parts have been omitted. This respondent also 
objected that the interim rule has ignored a long history of applying a 
domestic content rule in determining if a good is produced in the 
United States for purposes of enforcing domestic source restrictions. 
According to the respondent, OMB acknowledges that the two-part test 
relied upon is from the Buy American Act, then simply waives the 
domestic content part of the 1933 Act's text. Desiring an expeditious 
flow of funding cannot trump the statutory requirement to procure 
domestically produced goods. Longstanding interpretation of domestic 
manufactured goods under the Buy American Act also comports with 
Congressional intent to save and create manufacturing jobs.
    <bullet> A respondent was disturbed that the interim rule 
explicitly rejected the use of a component test, one of the minimal Buy 
American Act standards for rule of origin. The respondent contended 
that allowing for the use of non-domestic component parts will have a 
significant impact on the job-creation ability of the stimulus.
    <bullet> Two respondents stated that the Councils should adopt a 
clear rule defining the concept of domestic manufacture consistent with 
the well-established standard of substantial transformation and a 50 
percent component content standard (by cost). The FAR should not confer 
domestic status simply as a result of minor processing or mere assembly 
in the United States.
    Response: The Councils in the interim rule did not, as respondents 
claim, acknowledge dependence on the two-prong Buy American Act test 
and then waive the component test. The Councils relied on the 
difference in wording between section 1605 and the Buy American Act. 
The preamble to the interim rule specifically stated: ``Because section 
1605 does not specify a requirement that significantly all the 
components of construction material must also be domestic, as does the 
Buy American Act, the definition of domestic construction material 
under this interim rule does not include a requirement relating to the 
origin of the components of domestic manufactured construction 
material'' (see Federal Register at 74 FR 14624, March 31, 2009). The 
Buy American Act requires manufacture in the United States 
``substantially all from articles,

[[Page 53159]]

materials, or supplies mined, produced, or manufactured * * * in the 
United States'' (41 U.S.C. 10b). On the other hand, section 1605 only 
requires the manufactured goods to be ``produced'' in the United 
States. If Congress intended the component test to apply, it could have 
easily so stated in section 1605.
    Comments: In fact, a few respondents even suggested carrying the 
component test further than the Buy American Act interpretation of the 
50 percent domestic component test. A respondent stated that statutory 
language could be interpreted to mean a 100 percent domestic content 
requirement. Another respondent stated that, if OMB wanted to be 
aggressive, it could write a rule with an even more stringent component 
test (see Berry Amendment), especially with respect to textile and 
apparel products.
    Response: Even if section 1605 were not silent on the issue of a 
100 percent domestic component requirement, it would be almost 
impossible to comply with such a requirement in this current global 
economy. It would cause immense difficulty to American manufacturers, 
and section 1605 does not require it.
    Comments: One respondent was confused about the waiver by the 
Administrator of OFPP of the component test for COTS items because of 
the technical correction made to FAR 25.001 by the interim rule. The 
respondent noted that the interim rule amends FAR 25.001(c)(1) by 
waiving the component test for commercially available off-the-shelf 
items for all procurements, regardless of whether the procurement is 
funded with Recovery Act funds.
    Response: The interim rule did not introduce the component test 
waiver for COTS items at FAR 25.001(c)(1). The final rule for that 
change was published in the Federal Register at 74 FR 2713, January 15, 
2009, and became effective February 17, 2009. However, the rationale 
for that waiver may provide support for the decision that the component 
test is not appropriate for implementation of the Recovery Act. The 
Administrator of OFPP waived the component test of the Buy American Act 
for COTS items because ``a waiver of the component test would allow a 
COTS item to be treated as a domestic end product if it is manufactured 
in the United States, without tracking the origin of its components. 
Waiving only the component test of the Buy American Act for COTS items, 
and still requiring the end product to be manufactured in the United 
States, reduces significantly the administrative burden on contractors 
and the associated cost to the Government.'' The FAR procedures for 
evaluation of foreign offers in acquisitions of supplies covered by 
trade agreements is predicated on agencies treating offers of U.S.-made 
end products (i.e., offers that may not be domestic end products that 
meet the component test of the Buy American Act) more like the agencies 
treat eligible products (the trade agreements do not apply any 
component test to eligible products from designated countries). Today's 
markets are globally integrated with foreign components often 
indistinguishable from domestic components. The difficulty in tracking 
the country of origin of components is a disincentive for firms to 
contract with the Government.
    Comments: A number of respondents that agreed with not including 
the component test for domestic products still requested a definition 
of ``component'' in the rule.
    Response: There are two basic definitions of ``component'' in the 
FAR, at 2.101 and 25.003, and associated Buy American Act clauses. In 
the final rule, there is no separate definition of component in FAR 
subpart 25.6, so the definition at FAR 25.003 applies to FAR subpart 
25.6. However, for increased clarity, the appropriate definition of 
``component'' has been included in the FAR clauses at 52.225-21 and 
52.225-23.
g. Summary Matrix of Requirements for Domestic Construction Material
    The following matrix summarizes the requirements for domestic 
construction material in projects that use Recovery Act funds.

             Requirements for Domestic Construction Material in Projects That Use Recovery Act Funds
----------------------------------------------------------------------------------------------------------------
                                                         Production of
  Type of construction material       Applicable         construction     Production of iron/    Production of
                                        statute            material              steel         other  components
----------------------------------------------------------------------------------------------------------------
Manufactured--wholly or           Section 1605 of     Manufacture in      All processes in    No requirement.
 predominantly iron or steel.      Recovery Act.       U.S..               U.S. (except
                                                                           steel additives).
Manufactured--not wholly or       Section 1605 of     Manufacture in      No requirement....  No requirement.
 predominantly iron or steel.      Recovery Act.       U.S..
Unmanufactured..................  Buy American Act..  Mined or produced   XXX...............  XXX.
                                                       in U.S..
----------------------------------------------------------------------------------------------------------------

3. Applicability of International Agreements

a. Trade Agreements
    Comments: As provided by section 1605(d), the Recovery Act Buy 
American provisions must be applied in a manner consistent with United 
States obligations under international agreements. One respondent 
requested that the final regulations should ensure compliance with 
existing international obligations, but did not specify any 
shortcomings in the interim rule in this regard. Another respondent 
considered that the interim rule is creating great consternation with 
our international trading partners and could lead them to retaliate 
with their own protectionist measures. A third respondent claimed that 
the interim rule did not ensure consistency with international 
obligations.
    Response: As required by section 1605, the FAR rule provides for 
full compliance with U.S. obligations under all international trade 
agreements when undertaking construction covered by such agreements 
with Recovery Act funds. The new required provisions and clauses 
implement U.S. obligations under our trade agreements in much the same 
way as they are currently implemented in non-Recovery Act construction 
contracts, with one exception. The Caribbean Basin countries are 
excluded from the definition of ``Recovery Act designated country,'' 
because the treatment provided to them is not as a result of any U.S. 
international obligation but is the result of a United States 
initiative. The new cost evaluation standards do not apply to 
manufactured construction material from Recovery Act designated 
countries.
    Comments: One respondent stated that, as drafted, the interim rule 
implied that all construction material from Recovery Act designated 
countries is exempt from the Recovery Act Buy

[[Page 53160]]

American requirements set forth in section 1605 and the Buy American 
Act. This implication is inconsistent with the law because, according 
to the respondent, not all Recovery Act designated country construction 
material is exempt. FAR subpart 25.4 limits the foreign products 
eligible for equal consideration with domestic offers. Even if end 
products for resale or set asides for small business are produced in 
Recovery Act designated countries, for example, they would not be 
deemed eligible products per FAR subpart 25.4. Likewise, one respondent 
pointed out that FAR subpart 25.4 does not apply to procurements set 
aside for small businesses and requested clarification in the final 
rule on continuation of this policy.
    Response: The FAR subpart 25.4 exception for resale of end products 
is inapplicable to construction contracts.
    FAR subpart 25.4 states that it does not apply to acquisitions set 
aside for small businesses. FAR 25.603(c) has a cross reference to FAR 
subpart 25.4.
    Comments: Two respondents considered that the situation created by 
the interim rule with regard to sources of iron and steel is unfair. 
Namely, designated countries have unrestricted ability to provide iron 
and steel from anywhere, whereas domestic sources must provide iron and 
steel melted in the United States. According to these respondents, this 
would incentivize designated country steel firms to stop shipping slabs 
to the U.S. and to substitute finished construction materials. The 
result would be a loss of U.S. jobs in both the steel-finishing and 
construction-material manufacturing sectors.
    Response: In its trade agreements, the United States commits to 
apply to products from designated countries the rule of origin that is 
used in the normal course of trade between these countries, i.e., 
``wholly the product of'' or ``substantially transformed'' in the 
designated country. In projects funded by the Recovery Act, we cannot 
add new restrictions on the products of our trading partners that are 
not applied to other procurements covered by our agreements.
    Comments: A respondent recommended that the final FAR rule should 
provide for the use of an inventory accounting methodology to determine 
the origin of fungible goods that are commingled American and foreign 
inventories. This respondent noted that NAFTA permits this methodology 
to avoid unfairly disqualifying companies that produce eligible 
products but commingle such products in inventories with foreign 
products.
    Response: The Recovery Act does not permit such methodology.
b. G20 Summit Pledge
    Comments: The countries of the G20 stated at the summit that they 
would refrain from raising new trade barriers to trade in goods and 
services. According to various respondents, the new law and the interim 
rule, by adding the restrictions on the production of iron and steel 
and increasing the test for unreasonable costs, raise new barriers to 
trade, even though the Recovery Act Buy American requirement must be 
applied consistent with U.S. international obligations. A respondent 
stated that overly restrictive implementation of the Recovery Act will 
undermine the ability of the U.S. companies with global supply chains 
to participate in the Recovery Act. According to a respondent, it will 
lead to closed markets overseas to the detriment of American exports, 
products, and jobs.
    A respondent stated that ambiguities in the interim rule were open 
to interpretation by Government agencies on multiple levels. In the 
absence of examples of permissible procurement from foreign sources, 
the business community must await test cases to determine whether, for 
example, the letter of the law in terms of the WTO GPA signatory 
exceptions to the exclusionary principles will truly apply. The 
respondent believed that this ambiguity serves as a de facto obstacle 
to foreign suppliers engaging in commerce or any form of business 
alliance with American bidders.
    A non-U.S. respondent stated that access to the U.S. procurement 
market has been further limited in areas not covered by the WTO GPA. 
Their preference would be non-application of the new requirements to 
European Union member countries.
    Two foreign respondents also wanted to emphasize that the United 
States should uphold the G20 statement in implementing the Recovery Act 
Buy American provisions. One stated that, for acquisitions below the 
WTO GPA threshold of $7,443,000 for construction, the new 
discriminatory procurement requirements would apply in relation to 
goods from Recovery Act designated countries.
    Response: These concerns essentially go back to the requirements of 
section 1605 of the Recovery Act. The FAR rule must implement the law. 
Section 1605 provides for application consistent with United States 
obligations under international agreements. Pledges at the G20 Summit 
do not constitute international agreements, as contemplated by section 
1605. The FAR rule cannot create new exemptions.

4. Other Definitions

a. Construction Material
    Comments: Three respondents stated that, in some circumstances, if 
foreign pieces are delivered to the jobsite and assembled there instead 
of being delivered as part of an assembled construction material, those 
pieces would presumably be in violation. The respondents believe that 
this rule will encourage or force some assemblies to be done offsite in 
order to maintain compliance. They recommend allowing the contracting 
officer some level of discretion.
    Response: The definition of construction material in the rule as an 
article, material, or supply brought to the construction site by the 
contractor or subcontractor for incorporation into the building or work 
is unchanged from the first sentence of the current FAR 25.003. That is 
how Government construction subject to the FAR has worked for many 
years.
    Comments: One respondent further objected that the new FAR clause 
52.225-23 included a definition of construction material that singles 
out ``emergency life safety systems'' as discrete and complete, 
allowing them to be evaluated as a single and distinct construction 
material, regardless of how and when the parts or components are 
delivered to the construction site. The respondent stated that there 
are numerous other types of systems, such as environmental control 
communications systems, that are integrated into the building in such a 
fashion that warrant being treated in a similar manner that the FAR 
should consider.
    Response: This is the current FAR definition of construction 
material (see, for example, FAR 52.225-9(a)).
b. Public Building or Public Work
    Comment: A respondent stated that there is no definition or cross 
reference for ``public building'' or ``public work.''
    Response: The interim rule at FAR 25.602 referenced the definition 
of ``public building or public work'' at FAR 22.401. For the definition 
in the final rule, please see FAR 25.601.
c. Manufactured Construction Material/Unmanufactured Construction 
Material
    Comment: One respondent expressed concern that the definitions of 
manufactured and unmanufactured create no clear standard for 
determining

[[Page 53161]]

when a good is a domestic construction material.
    Response: The standard for determining whether a good is a domestic 
construction material is not found in the definitions of ``manufactured 
construction material'' and ``unmanufactured construction material.'' 
It is found in the definition of ``domestic construction material'' at 
FAR 25.601 and in the policy at FAR 25.602. In the final rule, the 
Councils have expanded the definition of ``domestic construction 
material'' at FAR 25.601 to include the more detailed standards 
relating to iron and steel that were included in the policy statement.

5. Exceptions

a. Class Exceptions
    Comment: One respondent posited that blanket waivers or broad 
temporary waivers would be appropriate and should be broadly defined in 
the FAR. Another respondent noted that the statute was changed during 
conference to include, at paragraph (b), the phrase ``category of 
cases'' for which section 1605 would not apply and wondered why the FAR 
doesn't mention or take advantage of this language.
    Response: The Councils note that neither the statute nor the FAR 
precludes the use of class waivers in appropriate circumstances.
    Comments: Four respondents stated that the FAR should include a de 
minimis waiver in order to limit detrimental impacts of a very small-
value item preventing a company from providing an entire system on a 
project. One respondent suggested a waiver for any construction 
material that costs less than 10 percent of the entire project cost. 
Another respondent believed that such minimal use should not trigger 
the 25 percent evaluation factor because such de minimis usage will not 
threaten the commercial viability of relevant U.S. industry. Two 
respondents used the example of piping where specific gaskets and 
fittings must be added on site and are not always manufactured 
domestically.
    Response: Because construction material is defined as the article, 
material, or supply delivered to the construction site, and there is no 
component test (except for iron or steel), it is not possible for the 
delivery of an entire system to be considered non-domestic because of a 
very small value foreign component of the system, as long as the 
component is not delivered separately to the construction site.
    Further, the clarification of ``produced in the United States'' 
(FAR 25.602(a)(1)) makes clear that iron and steel components will only 
be tracked if the construction material is a manufactured construction 
material that consists wholly or predominantly of iron or steel.
b. Public Interest
    Comments: One respondent wanted a nationwide public interest waiver 
issued to enable Recovery Act funds to be deployed now, when most 
needed, rather than await publication of ``Buy American regulations.'' 
The respondent stated that ``(t)he U.S. Environmental Protection Agency 
(EPA) has taken the prudent approach of using the `public interest' 
exception to issue a nationwide waiver of the Recovery Act Buy American 
requirement for State Revolving Loan Fund projects for which debt was 
incurred between October 1, 2008 and February 17, 2009.''
    Two respondents noted that the ``public interest'' exception does 
not specify criteria for the agency head to use. One of these 
respondents asked if there are special procedures that should be 
included in the FAR.
    Response: The Councils believe that the first comment is moot, 
given that the Recovery Act regulations were published in the Federal 
Register at 74 FR 14623, March 31, 2009. Further, the EPA class 
exception referred to by the respondent was for State Revolving Loan 
Fund projects, an area that is covered by the OMB guidance, not the 
FAR.
    With regard to the second comment, the Councils note that the 
language for this exception is modeled on the public interest exception 
currently in use for the Buy American Act at FAR 25.103(a). The public 
interest exception may only be authorized by the agency head (with 
power of redelegation) and is used infrequently. The FAR includes no 
special procedures so that agency heads retain appropriate flexibility.
    Comment: Another respondent wanted to know whether each State uses 
the same criteria or procedures.
    Response: The FAR is not used by State or local governments; it is 
used by Federal agencies to contract with appropriated funds. Each 
agency has a unique mission, and it would not be appropriate to require 
them all to use the same criteria.
    Comment: A respondent suggested that the public interest exception 
be interpreted flexibly, considering economic efficiency and overall 
quality of goods so that, ``even if non-American iron, steel, and 
manufactured goods may not satisfy the 25 percent rule, they can still 
be accepted under the public interest exception.''
    Response: The public interest exception is designed to be used 
flexibly and only as a last resort when the nonavailability or 
unreasonable cost exceptions do not fit. However, it is not designed to 
circumvent the new statutory standards for determination of 
unreasonable cost of domestic construction material.
c. Nonavailability
    Comments: Four respondents queried the nonavailability waiver at 
FAR 25.603. One of these respondents believed that the nonavailability 
exception should be modified to require consideration of the 
geographical scope of the market in which production takes place so 
that foreign products are not unfairly discriminated against.
    Response: The Councils disagree. The statute contained no such 
provision, and to add one now would contradict the intention of the 
U.S. Congress in enacting the Recovery Act. The statute provides an 
exception for nonavailability of domestic manufactured construction 
material. This does not result in any discrimination against foreign 
construction material, but actually allows the purchase of foreign 
construction material when domestic manufactured construction material 
is unavailable.
    Comment: Another respondent recommended that the final rule provide 
for a time-limited, streamlined process for issuing nonavailability 
waivers.
    Response: The reason for issuing a nonavailability exception is 
that the items in question are truly not available ``in the United 
States in sufficient and reasonably available commercial quantities of 
a satisfactory quality.'' (FAR 25.603(a)(1)). The Councils believe that 
contracting officers should not unfairly rush the process of 
determining whether these conditions apply to an item.
    Comment: Another point of view expressed by a respondent was that 
the final rule should require an offeror proposing a nonavailability 
waiver to provide, in addition to the items already listed, the 
following: (1) Supplier information or pricing information from a 
reasonable number of domestic suppliers indicating availability/
delivery date for construction materials, (2) information documenting 
efforts to find available domestic sources, (3) a project schedule, and 
(4) relevant excerpts from project plans, specifications, and permits 
indicating the required quantity and quality of construction materials.
    This respondent also requested that the contract list all foreign 
material

[[Page 53162]]

used, including construction material from designated countries.
    Response: The Councils' intention was to use the same requirements 
for this exception as have been used for Buy American Act non-
availability determinations for some 15 years. It would be an 
unnecessary burden to list designated country construction material, 
because section 1605 requires compliance with trade agreements, and 
there is no restriction on the use of designated country construction 
material when trade agreements apply.
    Comment: A respondent noted that it seems inconsistent, if 
designated country materials are not considered foreign construction 
items, not to consider them when making the determinations in FAR 
25.603(a) and (b).
    Response: Designated country material is considered to be foreign.
d. Unreasonable Cost
    Comment: One respondent stated that ``it is quite apparent that a 
preference for offers excluding foreign construction material lacks the 
necessary legal justification and constitutes an obvious prejudice 
against foreign construction material.''
    Response: The Councils disagree. The paragraphs in the solicitation 
provisions on evaluation of offers (FAR clauses 52.225-22(c) and 
52.225-24(c)) clearly state that the preference is for an offer that 
does not include foreign construction material excepted at the request 
of the offeror on the basis of unreasonable cost. This does not 
constitute a prejudice against all foreign construction material. 
Inclusion of Recovery Act designated country construction material will 
not cause the Government to discriminate against an offer. This is in 
accordance with the law, as promulgated by the U.S. Congress and 
applied consistent with U.S. international obligations.
    Comments: Two respondents stated that the evaluation of foreign 
construction materials, and the authority provided to submit alternate 
offers with equivalent domestic material, constitutes a prejudice 
against foreign construction material.
    Response: The Councils disagree and note that the FAR is 
implementing U.S. law. Further, the implementation scheme is fully 
compliant with U.S. international agreements.
    Comments: Two respondents commented that the 25 percent evaluation 
factor likely renders the unreasonable cost exception moot because it 
is so high that it will be impossible to meet.
    Response: The Councils had no discretion about the requirement to 
add 25 percent to the contract cost when foreign iron, steel, or 
manufactured goods are proposed to be used in a construction project or 
public work. The factor is specifically required by the language of 
section 1605(b)(3) of Public Law 111-5.
    Comment: Another respondent suggested that the table at FAR 52.225-
23(d) should include another category entitled ``Recovery Act 
designated country material.''
    Response: The respondent gave no reason for this suggestion, and 
the Councils cannot accept the recommendation. The statute provides an 
exception for unreasonable cost of domestic material, not for 
unreasonable cost of designated country construction material. The 
statute requires a comparison of the price differential between 
domestic manufactured construction material (including iron and steel) 
and foreign manufactured construction material (other than designated 
country manufactured construction material). In an acquisition subject 
to trade agreements, the material that is obtained from designated 
countries is not part of the evaluation because it is not domestic 
construction material.

6. Determinations That an Exception Applies

a. Process and Publication
    Comments: Two respondents stated that the use of waivers should be 
encouraged and simplified.
    Response: The Councils have made the exception process as 
streamlined as is possible within the terms of the statute. Agencies 
already have authority to use class exceptions.
    Comments: Two respondents believed that the specific two-week 
timeframe for publication of a waiver in the Federal Register should be 
replaced with language requiring publication in the fastest practicable 
manner. In addition, the Office of Federal Procurement Policy (OFPP) 
requested that a copy of the nonavailability determination be provided 
to the OFPP Administrator.
    Response: The statute specifically called for publication in the 
Federal Register (Pub. L. 111-5, section 1605(c)). However, the law 
does not set a time frame for such publication. The Councils agree with 
the respondents that timely publication is desirable, but the Federal 
Register often must accommodate workload priorities that are out of the 
control of contracting officers. Therefore, FAR 25.603(b)(2) is revised 
to require the agency head to provide the notice to the Federal 
Register within 3 business days after the determination is made. Except 
in unusual workload circumstances, this change should result in 
publication in the Federal Register in less than 2 weeks.
    The final rule includes, at FAR 25.603(b), a requirement to provide 
to the Administrator for Federal Procurement Policy and to the Recovery 
Accountability and Transparency Board a copy of a determination made in 
accordance with FAR 25.603(a) concurrent with its provision to the 
Federal Register.
    Comments: Six respondents demanded that OMB provide full 
transparency in the process of obtaining waivers of section 1605's 
application by requiring that all waiver requests be posted publicly on 
line. Several of these respondents wanted the waiver request to be 
posted promptly and publicly on line (the internet or Recovery.gov); 
one wanted the waiver request to be posted within 3 days of its 
receipt; and one respondent wanted waiver requests to be e-mailed to 
any trade associations and domestic manufacturers desiring to be on an 
alert list.
    Response: While section 1605 does require publication of exceptions 
made to the requirement to use U.S.-produced iron, steel, and 
manufactured goods used in the project, there is no requirement in the 
statute to publish requests for an exception. Therefore, no change is 
being made to the FAR to introduce such a requirement.
    Comment: One respondent considered that FAR 25.604(a) confuses 
inapplicability with exceptions and appears to refer to one of the 
exceptions as a rationale for that ``inapplicability'' determination. 
The respondent believed that the concept of the Buy American clause not 
being applicable is distinct from a situation where the Buy American 
clause may apply, but an exception has been granted.
    Response: The FAR language for this case uses the exact wording 
from the current FAR Buy American Act coverage. Contracting officers 
are not waiving section 1605 of the Recovery Act or the Buy American 
Act, but determining whether an exception applies, and then, if an 
exception does apply, determining that section 1605 of the Recovery Act 
or the Buy American Act is inapplicable.
b. Requests for Specific Exceptions
    Comments: Three respondents stated that the recent addition of 
commercial off-the-shelf (COTS) items to exceptions from the Buy 
American Act for construction materials (FAR 25.225-9

[[Page 53163]]

and -11) and the exception at FAR 25.103(e) for commercial information 
technology (IT) should be available for Recovery Act-funded 
construction projects.
    Response: The Councils do not agree. The COTS item exception only 
exempts COTS items from the component test of the Buy American Act. 
This rule does not apply a component test to any of the manufactured 
construction material subject to section 1605 of the Recovery Act 
except iron and steel. By definition, unmanufactured construction 
material does not have components.
    With regard to the commercial IT exception, it applies only to the 
Buy American Act. The Recovery Act exceptions are explicitly stated in 
section 1605 and are not identical to the Buy American Act exceptions.
    Comments: Two respondents requested that commercial items, as a 
category, be exempt from coverage under section 1605.
    Response: The Councils decline to make this change, as the Congress 
did not exempt commercial items from section 1605 applicability.
    Comment: One of these respondents also asked that other typically 
non-construction materials not primarily made of iron or steel be 
excluded from coverage.
    Response: The Councils do not understand the respondent's use of 
the term ``other typically non-construction materials.'' The Councils 
have used the standard FAR definition of ``construction material'' 
without change. Under this definition, if it is incorporated into a 
public building or public work, then the material is construction 
material.
    Comment: One respondent recommended that the FAR waive application 
of section 1605 for all manufactured goods not made primarily of iron 
and steel.
    Response: The Councils decline for the reason that the Congress 
specifically included manufactured goods in the coverage of section 
1605.
    Comment: A respondent wanted the Councils to issue a class waiver 
from the Buy American Act requirements for electronic fluorescent 
lighting ballasts.
    Response: The FAR includes, at FAR 25.104(a), a list of items that 
have been determined nonavailable in accordance with FAR 
25.103(b)(1)(i). A class determination made in accordance with the 
above reference does not necessarily mean that there is no domestic 
source for the listed items, but that domestic sources can only meet 50 
percent or less of total U.S. Government and nongovernment demand. The 
respondent is free to make a request for a class determination. In 
addition, the offeror may request, and the contracting officer may 
grant, an exception on an individual contract in accordance with FAR 
25.603.

7. Exemption for Acquisitions Below the Simplified Acquisition 
Threshold

    Comments: Two respondents requested that the final rule exempt 
purchases under the simplified acquisition threshold (SAT) from the 
Recovery Act.
    Response: The determination was made under the interim rule that 
section 1605 of the Recovery Act would apply to all contracts, 
including those below the SAT (see Interim Rule, Supplementary 
Information, Section C (see Federal Register at 74 FR 14625, March 31, 
2009)). The Councils remain committed to this position in order to 
fully implement the goals of the Recovery Act. Therefore, any project, 
of whatever dollar value, financed with Recovery Act funds is subject 
to these limitations.

8. Remedies for Noncompliance

    Comments: One respondent requested that the final rule include a 
safe-harbor provision protecting companies receiving Recovery Act funds 
without proper notice from the Government or the purchasing company.
    Response: The Councils believe that this is unnecessary, given the 
protections already built into the use of Recovery Act funds. First, 
any appropriation of Recovery Act funds receives a special designation 
that identifies it as Recovery Act money. In addition, FAR 4.1501, 
5.704, and 5.705, along with the contract checklist issued by the 
Recovery Accountability and Transparency Board, require contracting 
officers to indicate, in the solicitation or award, which products or 
services are funded under the Recovery Act.
    Comment: One respondent stated that the regulations must provide 
adequate remedies, such as debarment, for non-compliance with section 
1605. It claimed that only such meaningful remedies can serve to deter 
misbehavior.
    Response: All of the usual remedies available through the FAR or 
Federal law are equally available as remedies for noncompliance with 
section 1605 regulations. No additional remedies are needed.
    Comment: One respondent recommended replacing the requirement, at 
FAR 25.607(c)(4), to refer apparent fraudulent noncompliance to ``the 
agency's Inspector General'' rather than to ``other appropriate agency 
officials.''
    Response: This recommendation has been partially accepted. While 
the agency Inspector General is available for referral of suspected 
fraud, it is not the only option in this situation. FAR 25.607(c)(4) is 
revised to include both the agency's Inspector General and other 
possible officials.

9. Funding Mechanisms

a. Modifications to Existing Contracts
    Comments: Three respondents strongly recommended that the Recovery 
Act limitations should not be applied to task orders issued under 
Governmentwide Acquisition Contracts (GWACs) or Multiple Award 
Contracts (MACs).
    Response: The Councils cannot make the change requested by these 
respondents because the Recovery Act restrictions follow the 
appropriations. Any construction project or public work funded with 
Recovery Act money must comply with the restrictions in section 1605, 
whether the contracting vehicle for the project is a contract or task 
order.
b. Treatment of Mixed Funding
    Comments: Seven respondents were concerned that the interim rule 
failed to provide any clarity about how projects with mixed funding 
(some Recovery Act funds and other Federal appropriations) would be 
treated. Several respondents expressed a strong preference for treating 
mixed-funded projects as not covered by the Recovery Act limitations.
    Response: Given that the statute was designed so that the section 
1605 limitations are tied to the source of funding, the Councils do not 
have the option of complying with respondents' preference. Any Federal 
construction or public works contract effort that is funded by any 
funds, however miniscule, appropriated by the Recovery Act must, by 
law, comply with the section 1605 requirements. However, the 
regulations do provide that a contract may be funded with Recovery Act 
funds and non-Recovery Act funds if the funds are properly segregated 
by line item or sub-line item. In addition, contracting officers are 
required to indicate, in the solicitation or award, which products or 
services are funded under the Recovery Act. However, if the contracting 
officer does not properly segregate Recovery Act and non-Recovery 
funds, then the law requires the mixed-funded line items or contracts 
to be treated as if they were entirely Recovery-Act funded. (See 
discussion of ``project'' at 2.b. above and in the FAR text at 25.602-
1(c).)

[[Page 53164]]

10. Interim Rule Improper

    Comment: One respondent believed it was inappropriate to publish an 
interim rule, as it deprived interested parties of the right to 
comment. The need to have rules available as soon as the Recovery Act 
funds were made available to Federal agencies for obligation, according 
to the respondent, was not a sufficient justification for the absence 
of prior public comment.
    Response: The Administration directed the Councils to publish an 
interim rule in order to provide contracting agencies with the 
necessary direction quickly. In any case, respondents were given an 
opportunity to comment fully on the interim rule, and each comment has 
been thoroughly considered by the Councils.

11. Inconsistencies Between This Rule and Pre-Existing FAR Rule and the 
OMB Grants Guidance

a. Inconsistency With Pre-Existing FAR
    Comments: One respondent objected that this rule will require well-
intentioned and compliant companies to establish yet more processes and 
systems (many of which will be largely duplicative of existing Buy 
American Act/Trade Agreements Act compliance requirements) to comply 
with the Recovery Act. The respondent claimed that this creates 
significant cost burdens and delays in construction projects. Another 
respondent stated that any change in current supply chains made in 
order to comply with this rule will limit competition, cause delays, 
and increase costs. A respondent objected to the creation of yet 
another list of designated countries.
    Response: The Councils used pre-existing FAR language and processes 
to the extent that it was possible to do so and still meet the 
requirements of the Recovery Act. The Recovery Act also specified the 
new requirements for iron and steel and the 25 percent contract 
evaluation factor.
    Recovery Act-designated countries were identified from the language 
of the statute, the Committee report, and consultation with the United 
States Trade Representative. Caribbean Basin countries were not 
included as Recovery Act-designated countries because they are not 
covered by an international agreement.
b. Inconsistency With the OMB Grants Guidance
    Comments: Four respondents expressed a strong preference that the 
final rule should have the closest possible alignment with the OMB 
guidance governing grants under the Recovery Act.
    One respondent noted that the OMB grants guidance includes examples 
of ``public building.'' The respondent would like to know whether a 
public building in the FAR is the same as a public building in the OMB 
guidance.
    Response: The Councils agree and note that the final rule was 
developed in close coordination with OMB grant officials. The Councils 
point out, however, that grants, financial assistance, and loans are 
not subject to the Buy American Act. Therefore, the coverage cannot be 
the same in these two regulations regarding unmanufactured construction 
material. Further, the OMB guidance applies to all assistance 
recipients, including States. Trade agreements do not apply uniformly 
at the State level.
    The final revised FAR provisions include the definition from FAR 
22.401 and add examples of public buildings and public works from the 
OMB grants guidance.
    It is our understanding that the OMB grants coverage will be 
conformed to the FAR terminology to use ``manufacture'' in lieu of 
``substantially transformed.'' The Councils and OMB are not aware of 
any other areas where the OMB guidance and this FAR rule are not 
aligned.
    Comment: One respondent requested that the Councils consider 
requesting EPA, Federal Transit/Highways Administration, and other 
agencies that have issued their own guidance to withdraw it.
    Response: The Councils decline. There is no reason to request any 
agency to withdraw contracting guidance that is in compliance with the 
FAR.
    Language in the Recovery Act exempted the Federal Highway 
Administration (FHA) from section 1605. It is appropriate that FHA 
maintain separate regulations.

12. Need for Additional Guidance

    Comments: Two respondents stated that there is confusion about the 
scope of applicability of this rule and requested that the FAR more 
clearly spell out that contracting authorities are obliged to comply 
with international commitments and request relevant and user-friendly 
guidance.
    Response: The Councils note that changes in the final rule have 
differentiated projects that are subject to the Recovery Act rules from 
projects that are subject to existing Buy American Act and trade 
agreements requirements. The Councils have made it abundantly clear in 
the final rule and this preamble that Federal agencies must comply with 
international agreements when conducting procurements for Recovery Act 
projects that are covered by such agreements.
    Further, contracting authorities that do not comply with the FAR, 
and thereby with international commitments, should be reported and are 
subject to sanctions.
    Comment: One of those respondents thought that the FAR does not 
explain what regime must be followed in cases where an entity covered 
by the World Trade Organization Government Procurement Agreement (WTO 
GPA) conducts procurement jointly with an entity that is not covered by 
the WTO GPA.
    Response: If one entity in a joint procurement is covered by the 
GPA or another international agreement, but another entity that is also 
involved in the same procurement is not covered by the GPA or another 
international agreement, the procurement will be conducted in a manner 
that ensures that U.S. obligations under international agreements are 
honored. That means that in such a case, products from Recovery Act 
designated countries will not be subject to the restrictions of section 
1605 of the Recovery Act.

C. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold

    Section 4101 of Public Law 103-355, the Federal Acquisition 
Streamlining Act (FASA) (41 U.S.C. 429), governs the applicability of 
laws to contracts or subcontracts in amounts not greater than the 
simplified acquisition threshold. It is intended to limit the 
applicability of laws to them. FASA provides that if a provision of law 
contains criminal or civil penalties, or if the Federal Acquisition 
Regulatory Council makes a written determination that it is not in the 
best interest of the Federal Government to exempt contracts or 
subcontracts at or below the simplified acquisition threshold, the law 
will apply to them.
    The FAR Council determined, for the interim rule, that it should 
apply to contracts or subcontracts at or below the simplified 
acquisition threshold, as defined at FAR 2.101. The public comments 
received did not cause the FAR Council to modify this position for the 
final rule.
    This is a significant regulatory action and, therefore, was subject 
to review under Section 6(b) of Executive Order 12866, Regulatory 
Planning and Review, dated September 30, 1993. This rule is not a major 
rule under 5 U.S.C. 804.

[[Page 53165]]

D. Regulatory Flexibility Act

    The Department of Defense, the General Services Administration, and 
the National Aeronautics and Space Administration certify that this 
final rule will not have a significant economic impact on a substantial 
number of small entities within the meaning of the Regulatory 
Flexibility Act, 5 U.S.C. 601, et seq., because it will only impact an 
offeror that wants to use non-U.S. iron, steel, and manufactured goods 
in a construction project in the United States. The Councils stated in 
the interim rule their belief that there are adequate domestic sources 
for these materials, and the Office of Management and Budget (OMB) 
guidance M-09-10 issued February 18, 2009, entitled ``Initial 
Implementing Guidance for the American Recovery and Reinvestment Act of 
2009,'' provides a strong preference for using small businesses for 
Recovery Act projects wherever possible. No comments to the contrary 
were received from small entities in response to the interim rule.

E. Paperwork Reduction Act

    The Paperwork Reduction Act does apply; however, the information 
collection requirements imposed by the FAR provisions 52.225-22 and 
52.225-24 are currently covered by the approved information collection 
requirements for FAR provisions 52.225-9 and 52.225-11 (OMB Control 
number 9000-0141, entitled Buy America Act--Construction--FAR Sections 
Affected: Subpart 25.2; 52.225-9; and 52.225-11). No public comments 
were received regarding the data elements, the burden, or any other 
part of the collection.

List of Subjects in 48 CFR Parts 2, 5, 25, and 52

    Government procurement.

    Dated: August 18, 2010.
Edward Loeb,
Director, Acquisition Policy Division.

0
Therefore, DoD, GSA, and NASA amend 48 CFR parts 2, 5, 25, and 52 as 
set forth below:
0
1. The authority citation for 48 CFR parts 2, 5, 25, and 52 continues 
to read as follows:

    Authority:  40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

PART 2--DEFINITIONS OF WORDS AND TERMS

0
2. Amend section 2.101 in paragraph (b)(2), in the definition 
``Component'', by revising paragraphs (2) and (3); and adding paragraph 
(4) to read as follows:


2.101  Definitons.

* * * * *
    (b) * * *
    (2) * * *
    Component * * *
    (2) 52.225-1 and 52.225-3, see the definition in 52.225-1(a) and 
52.225-3(a);
    (3) 52.225-9 and 52.225-11, see the definition in 52.225-9(a) and 
52.225-11(a); and
    (4) 52.225-21 and 52.225-23, see the definition in 52.225-21(a) and 
52.225-23(a).
* * * * *

PART 5--PUBLICIZING CONTRACT ACTIONS


5.207  [Amended]

0
3. Amend section 5.207 by removing from paragraph (c)(13)(iii) the word 
``Other''.

PART 25--FOREIGN ACQUISITION

0
4. Amend section 25.001 by adding a new sentence to the end of 
paragraph (c)(4) to read as follows:


25.001  General.

* * * * *
    (c) * * *
    (4) * * * If the construction material consists wholly or 
predominantly of iron or steel, the iron or steel must be produced in 
the United States.

0
5. Amend section 25.003 by revising the definition ``Domestic 
construction material'' to read as follows:


25.003  Definitions.

* * * * *
    Domestic construction material means--
    (1)(i) An unmanufactured construction material mined or produced in 
the United States;
    (ii) A construction material manufactured in the United States, 
if--
    (A) The cost of the components mined, produced, or manufactured in 
the United States exceeds 50 percent of the cost of all its components. 
Components of foreign origin of the same class or kind for which 
nonavailability determinations have been made are treated as domestic; 
or
    (B) The construction material is a COTS item;
    (2) Except that for use in subpart 25.6, see the definition in 
25.601.
* * * * *

0
6. Revise section 25.600 to read as follows:


25.600  Scope of subpart.

    This subpart implements section 1605 in Division A of the American 
Recovery and Reinvestment Act of 2009 (Pub. L. 111-5) (Recovery Act) 
with regard to manufactured construction material and the Buy American 
Act with regard to unmanufactured construction material. It applies to 
construction projects that use funds appropriated or otherwise provided 
by the Recovery Act.

0
7. Amend section 25.601 by revising the definition ``Domestic 
construction material''; and adding, in alphabetical order, the 
definition ``Public building or public work''.
    The revised and added text reads as follows:


25.601  Definitions.

* * * * *
    Domestic construction material means the following:
    (1) An unmanufactured construction material mined or produced in 
the United States. (The Buy American Act applies.)
    (2) A manufactured construction material that is manufactured in 
the United States and, if the construction material consists wholly or 
predominantly of iron or steel, the iron or steel was produced in the 
United States. (Section 1605 of the Recovery Act applies.)
* * * * *
    Public building or public work means a building or work, the 
construction, prosecution, completion, or repair of which is carried on 
directly or indirectly by authority of, or with funds of, a Federal 
agency to serve the interest of the general public regardless of 
whether title thereof is in a Federal agency (see 22.401). These 
buildings and works may include, without limitation, bridges, dams, 
plants, highways, parkways, streets, subways, tunnels, sewers, mains, 
power lines, pumping stations, heavy generators, railways, airports, 
terminals, docks, piers, wharves, ways, lighthouses, buoys, jetties, 
breakwaters, levees, and canals, and the construction, alteration, 
maintenance, or repair of such buildings and works.
* * * * *

0
8. Revise section 25.602 to read as follows:


25.602  Policy.


25.602-1  Section 1605 of the Recovery Act.

    Except as provided in 25.603--
    (a) None of the funds appropriated or otherwise made available by 
the Recovery Act may be used for a project for the construction, 
alteration, maintenance, or repair of a public building or public work 
unless the

[[Page 53166]]

public building or public work is located in the United States and--
    (1) All of the iron, steel, and manufactured goods used as 
construction material in the project are produced or manufactured in 
the United States.
    (i) All manufactured construction material must be manufactured in 
the United States.
    (ii) Iron or steel components. (A) Iron or steel components of 
construction material consisting wholly or predominantly of iron or 
steel must be produced in the United States. This does not restrict the 
origin of the elements of the iron or steel, but requires that all 
manufacturing processes of the iron or steel must take place in the 
United States, except metallurgical processes involving refinement of 
steel additives.
    (B) The requirement in paragraph (a)(1)(ii)(A) of this section does 
not apply to iron or steel components or subcomponents in construction 
material that does not consist wholly or predominantly of iron or 
steel.
    (iii) All other components. There is no restriction on the origin 
or place of production or manufacture of components or subcomponents 
that do not consist of iron or steel.
    (iv) Examples. (A) If a steel guardrail consists predominantly of 
steel, even though coated with aluminum, then the steel would be 
subject to the section 1605 restriction requiring that all stages of 
production of the steel occur in the United States, in addition to the 
requirement to manufacture the guardrail in the United States. There 
would be no restrictions on the other components of the guardrail.
    (B) If a wooden window frame is delivered to the site as a single 
construction material, there is no restriction on any of the 
components, including the steel lock on the window frame; or
    (2) If trade agreements apply, the manufactured construction 
material shall either comply with the requirements of paragraph (a)(1) 
of this subsection, or be wholly the product of or be substantially 
transformed in a Recovery Act designated country;
    (b) Manufactured materials purchased directly by the Government and 
delivered to the site for incorporation into the project shall meet the 
same domestic source requirements as specified for manufactured 
construction material in paragraphs (a)(1) and (a)(2) of this section; 
and
    (c) A project may include several contracts, a single contract, or 
one or more line items on a contract.


25.602-2  Buy American Act.

    Except as provided in 25.603, use only unmanufactured construction 
material mined or produced in the United States, as required by the Buy 
American Act or, if trade agreements apply, unmanufactured construction 
material mined or produced in a designated country may also be used.

0
9. Revise section 25.603 to read as follows:


25.603  Exceptions.

    (a)(1) When one of the following exceptions applies, the 
contracting officer may allow the contractor to incorporate foreign 
manufactured construction materials without regard to the restrictions 
of section 1605 of the Recovery Act or foreign unmanufactured 
construction material without regard to the restrictions of the Buy 
American Act:
    (i) Nonavailability. The head of the contracting activity may 
determine that a particular construction material is not mined, 
produced, or manufactured in the United States in sufficient and 
reasonably available commercial quantities of a satisfactory quality. 
The determinations of nonavailability of the articles listed at 
25.104(a) and the procedures at 25.103(b)(1) also apply if any of those 
articles are acquired as construction materials.
    (ii) Unreasonable cost. The contracting officer concludes that the 
cost of domestic construction material is unreasonable in accordance 
with 25.605.
    (iii) Inconsistent with public interest. The head of the agency may 
determine that application of the restrictions of section 1605 of the 
Recovery Act to a particular manufactured construction material, or the 
restrictions of the Buy American Act to a particular unmanufactured 
construction material would be inconsistent with the public interest.
    (2) In addition, the head of the agency may determine that 
application of the Buy American Act to a particular unmanufactured 
construction material would be impracticable.
    (b) Determinations. When a determination is made, for any of the 
reasons stated in this section, that certain foreign construction 
materials may be used--
    (1) The contracting officer shall list the excepted materials in 
the contract; and
    (2) For determinations with regard to the inapplicability of 
section 1605 of the Recovery Act, unless the construction material has 
already been determined to be domestically nonavailable (see list at 
25.104), the head of the agency shall provide a notice to the Federal 
Register within three business days after the determination is made, 
with a copy to the Administrator for Federal Procurement Policy and to 
the Recovery Accountability and Transparency Board. The notice shall 
include--
    (i) The title ``Buy American Exception under the American Recovery 
and Reinvestment Act of 2009'';
    (ii) The dollar value and brief description of the project; and
    (iii) A detailed justification as to why the restriction is being 
waived.
    (c) Acquisitions under trade agreements. (1) For construction 
contracts with an estimated acquisition value of $7,804,000 or more, 
also see subpart 25.4. Offers proposing the use of construction 
material from a designated country shall receive equal consideration 
with offers proposing the use of domestic construction material.
    (2) For purposes of applying section 1605 of the Recovery Act to 
evaluation of manufactured construction material, designated countries 
do not include the Caribbean Basin Countries.

0
10. Amend section 25.604 by revising paragraph (c)(1), and by removing 
from paragraph (c)(2) ``the unmanufactured'' and adding ``the domestic 
unmanufactured'' in its place.
    The revised text reads as follows:


25.604  Preaward determination concerning the inapplicability of 
section 1605 of the Recovery Act or the Buy American Act.

* * * * *
    (c) * * *
    (1) Manufactured construction material. The contracting officer 
must compare the offered price of the contract using foreign 
manufactured construction material (i.e., any construction material not 
manufactured in the United States, or construction material consisting 
predominantly of iron or steel and the iron or steel is not produced in 
the United States) to the estimated price if all domestic manufactured 
construction material were used. If use of domestic manufactured 
construction material would increase the overall offered price of the 
contract by more than 25 percent, then the contracting officer shall 
determine that the cost of the domestic manufactured construction 
material is unreasonable.
* * * * *

0
11. Amend section 25.605 by--
0
a. Revising paragraphs (a)(1) and (a)(2);
0
b. Redesignating paragraphs (b) through (d) as paragraphs (c) through 
(e);
0
c. Adding a new paragraph (b); and

[[Page 53167]]

0
d. Removing from the newly designated paragraph (c) ``If two'' and 
adding ``Unless paragraph (b) applies, if two'' in its place.
    The revised and added text reads as follows:


25.605  Evaluating offers of foreign construction material.

    (a) * * *
    (1) Use an evaluation factor of 25 percent, applied to the total 
offered price of the contract, if foreign manufactured construction 
material is incorporated in the offer based on an exception for 
unreasonable cost of comparable domestic construction material 
requested by the offeror.
    (2) In addition, use an evaluation factor of 6 percent applied to 
the cost of foreign unmanufactured construction material incorporated 
in the offer based on an exception for unreasonable cost of comparable 
domestic unmanufactured construction material requested by the offeror.
    (b) If the solicitation specifies award on the basis of factors in 
addition to cost or price, apply the evaluation factors as specified in 
paragraph (a) of this section and use the evaluated price in 
determining the offer that represents the best value to the Government.
* * * * *

0
12. Amend section 25.607 by revising paragraph (c)(4) to read as 
follows:


25.607  Noncompliance.

* * * * *
    (c) * * *
    (4) If the noncompliance is sufficiently serious, consider 
exercising appropriate contractual remedies, such as terminating the 
contract for default. Also consider preparing and forwarding a report 
to the agency suspending or debarring official in accordance with 
subpart 9.4. If the noncompliance appears to be fraudulent, refer the 
matter to other appropriate agency officials, such as the agency's 
inspector general or the officer responsible for criminal 
investigation.

0
13. Amend section 25.1102 by redesignating paragraph (e)(2) as 
paragraph (e)(3); adding a new paragraph (e)(2); and revising the newly 
designated paragraph (e)(3) to read as follows:


25.1102  Acquisition of construction.

* * * * *
    (e) * * *
    (2) If these Recovery Act provisions and clauses are only 
applicable to a project consisting of certain line items in the 
contract, identify in the schedule the line items to which the 
provisions and clauses apply.
    (3) When using clause 52.225-23, list foreign construction material 
in paragraph (b)(3) of the clause as follows:
    (i) Basic clause. List all foreign construction materials excepted 
from the Buy American Act or section 1605 of the Recovery Act, other 
than manufactured construction material from a Recovery Act designated 
country or unmanufactured construction material from a designated 
country.
    (ii) Alternate I. List in paragraph (b)(3) of the clause all 
foreign construction material excepted from the Buy American Act or 
section 1605 of the Recovery Act, other than--
    (A) Manufactured construction material from a Recovery Act 
designated country other than Bahrain, Mexico, or Oman; or
    (B) Unmanufactured construction material from a designated country 
other than Bahrain, Mexico, or Oman.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
14. Amend section 52.225-21 by--
0
a. Revising the section heading;
0
b. Revising the heading and the date of the clause;
0
c. In paragraph (a) by--
0
1. Adding, in alphabetical order, the definition ``Component'';
0
2. Removing the last sentence from the definition ``Construction 
material''; and
0
3. Revising the definition ``Domestic construction material''; and
0
d. Revising paragraphs (b)(1)(i), (b)(1)(ii), and (b)(4).
    The revised and added text reads as follows:


52.225-21  Required Use of American Iron, Steel, and Manufactured 
Goods--Buy American Act--Construction Materials.

* * * * *

Required Use of American Iron, Steel, and Manufactured Goods--Buy 
American Act--Construction Materials (Oct 2010)

    (a) * * *
    Component means an article, material, or supply incorporated 
directly into a construction material.
* * * * *
    Domestic construction material means the following--
    (1) An unmanufactured construction material mined or produced in 
the United States. (The Buy American Act applies.)
    (2) A manufactured construction material that is manufactured in 
the United States and, if the construction material consists wholly 
or predominantly of iron or steel, the iron or steel was produced in 
the United States. (Section 1605 of the Recovery Act applies.)
* * * * *
    (b) * * *
    (1) * * *
    (i) Section 1605 of the American Recovery and Reinvestment Act 
of 2009 (Recovery Act) (Pub. L. 111-5), by requiring, unless an 
exception applies, that all manufactured construction material in 
the project is manufactured in the United States and, if the 
construction material consists wholly or predominantly of iron or 
steel, the iron or steel was produced in the United States (produced 
in the United States means that all manufacturing processes of the 
iron or steel must take place in the United States, except 
metallurgical processes involving refinement of steel additives); 
and
    (ii) The Buy American Act (41 U.S.C. 10a-10d) by providing a 
preference for unmanufactured construction material mined or 
produced in the United States over unmanufactured construction 
material mined or produced in a foreign country.
* * * * *
    (4) The Contracting Officer may add other foreign construction 
material to the list in paragraph (b)(3) of this clause if the 
Government determines that--
    (i) The cost of domestic construction material would be 
unreasonable;
    (A) The cost of domestic manufactured construction material, 
when compared to the cost of comparable foreign manufactured 
construction material, is unreasonable when the cumulative cost of 
such material will increase the cost of the contract by more than 25 
percent;
    (B) The cost of domestic unmanufactured construction material is 
unreasonable when the cost of such material exceeds the cost of 
comparable foreign unmanufactured construction material by more than 
6 percent;
    (ii) The construction material is not mined, produced, or 
manufactured in the United States in sufficient and reasonably 
available quantities and of a satisfactory quality;
    (iii) The application of the restriction of section 1605 of the 
Recovery Act to a particular manufactured construction material 
would be inconsistent with the public interest or the application of 
the Buy American Act to a particular unmanufactured construction 
material would be impracticable or inconsistent with the public 
interest.
* * * * *

0
15. Amend section 52.225-22 by--
0
a. Revising the section heading;
0
b. Revising the heading and the date of the provision;
0
c. Removing from paragraph (a) the word ``Other'';
0
d. In paragraph (c) by--
0
1. Adding in paragraph (c)(1) introductory text ``in accordance with 
FAR 25.604'' after the word ``applies'';
0
2. Revising paragraph (c)(1)(i);
0
3. Adding in paragraph (c)(1)(ii) ``an exception for the'' after the 
words ``based on''; and
0
4. Redesignating paragraph (c)(2) as paragraph (c)(3); adding a new 
paragraph (c)(2); and revising the newly designated paragraph (c)(3); 
and
0
e. Removing from paragraph (d)(1) ``paragraph (b)(2)'' and adding 
``paragraph (b)(3)'' in its place.

[[Page 53168]]

    The revised and added text reads as follows:


52.225-22  Notice of Required Use of American Iron, Steel, and 
Manufactured Goods--Buy American Act--Construction Materials.

* * * * *

Notice of Required Use of American Iron, Steel, and Manufactured 
Goods--Buy American Act--Construction Materials (Oct 2010)

* * * * *
    (c) * * *
    (1) * * *
    (i) 25 percent of the offered price of the contract, if foreign 
manufactured construction material is incorporated in the offer 
based on an exception for unreasonable cost of comparable 
manufactured domestic construction material; and
* * * * *
    (2) If the solicitation specifies award on the basis of factors 
in addition to cost or price, the Contracting Officer will apply the 
evaluation factors as specified in paragraph (c)(1) of this 
provision and use the evaluated price in determining the offer that 
represents the best value to the Government.
    (3) Unless paragraph (c)(2) of this provision applies, if two or 
more offers are equal in price, the Contracting Officer will give 
preference to an offer that does not include foreign construction 
material excepted at the request of the offeror on the basis of 
unreasonable cost of comparable domestic construction material.
* * * * *

0
16. Amend section 52.225-23 by--
0
a. Revising the section heading;
0
b. Revising the heading and the date of the clause;
0
c. In paragraph (a) by--
0
1. Adding, in alphabetical order, the definitions ``Component'', 
``Designated country'', ``Designated country construction material'', 
and ``Nondesignated country'';
0
2. Removing the last sentence from the definition ``Construction 
material'';
0
3. Revising the definition ``Domestic construction material''; and
0
4. Removing from the definition ``Recovery Act designated country'' 
paragraph (2) the word ``Israel,'';
0
d. Revising paragraph (b);
0
e. Revising paragraph (c)(3);
0
f. Removing from the table heading in paragraph (d) ``Foreign and'' and 
adding ``Foreign (Nondesignated Country) and'' in its place; and
0
g. In Alternate I by--
0
i. Revising the date of the alternate; and
0
ii. Revising paragraph (b).
    The revised and added text reads as follows:


52.225-23  Required Use of American Iron, Steel, and Manufactured 
Goods--Buy American Act--Construction Materials Under Trade Agreements.

* * * * *

Required Use of American Iron, Steel, and Manufactured Goods--Buy 
American Act--Construction Materials Under Trade Agreements (Oct 2010)

    (a) * * *
    Component means an article, material, or supply incorporated 
directly into a construction material.
* * * * *
    Designated country means any of the following countries:
    (1) A World Trade Organization Government Procurement Agreement 
(WTO GPA) country (Aruba, Austria, Belgium, Bulgaria, Canada, 
Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, 
Greece, Hong Kong, Hungary, Iceland, Ireland, Israel, Italy, Japan, 
Korea (Republic of), Latvia, Liechtenstein, Lithuania, Luxembourg, 
Malta, Netherlands, Norway, Poland, Portugal, Romania, Singapore, 
Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Taiwan, or 
United Kingdom);
    (2) A Free Trade Agreement (FTA) country (Australia, Bahrain, 
Canada, Chile, Costa Rica, Dominican Republic, El Salvador, 
Guatemala, Honduras, Mexico, Morocco, Nicaragua, Oman, Peru, or 
Singapore);
    (3) A least developed country (Afghanistan, Angola, Bangladesh, 
Benin, Bhutan, Burkina Faso, Burundi, Cambodia, Central African 
Republic, Chad, Comoros, Democratic Republic of Congo, Djibouti, 
East Timor, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Guinea, 
Guinea-Bissau, Haiti, Kiribati, Laos, Lesotho, Liberia, Madagascar, 
Malawi, Maldives, Mali, Mauritania, Mozambique, Nepal, Niger, 
Rwanda, Samoa, Sao Tome and Principe, Senegal, Sierra Leone, Solomon 
Islands, Somalia, Tanzania, Togo, Tuvalu, Uganda, Vanuatu, Yemen, or 
Zambia); or
    (4) A Caribbean Basin country (Antigua and Barbuda, Aruba, 
Bahamas, Barbados, Belize, British Virgin Islands, Dominica, 
Grenada, Guyana, Haiti, Jamaica, Montserrat, Netherlands Antilles, 
St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, or 
Trinidad and Tobago).
    Designated country construction material means a construction 
material that is a WTO GPA country construction material, an FTA 
country construction material, a least developed country 
construction material, or a Caribbean Basin country construction 
material.
    Domestic construction material means the following:
    (1) An unmanufactured construction material mined or produced in 
the United States. (The Buy American Act applies.)
    (2) A manufactured construction material that is manufactured in 
the United States and, if the construction material consists wholly 
or predominantly of iron or steel, the iron or steel was produced in 
the United States. (Section 1605 of the Recovery Act applies.)
* * * * *
    Nondesignated country means a country other than the United 
States or a designated country.
* * * * *
    (b) Construction materials. (1) The restrictions of section 1605 
of the American Recovery and Reinvestment Act of 2009 (Pub. L. 111-
5) (Recovery Act) do not apply to Recovery Act designated country 
manufactured construction material. The restrictions of the Buy 
American Act do not apply to designated country unmanufactured 
construction material. Consistent with U.S. obligations under 
international agreements, this clause implements--
    (i) Section 1605 of the Recovery Act by requiring, unless an 
exception applies, that all manufactured construction material in 
the project is manufactured in the United States and, if the 
construction material consists wholly or predominantly of iron or 
steel, the iron or steel was produced in the United States (produced 
in the United States means that all manufacturing processes of the 
iron or steel must take place in the United States, except 
metallurgical processes involving refinement of steel additives); 
and
    (ii) The Buy American Act by providing a preference for 
unmanufactured construction material mined or produced in the United 
States over unmanufactured construction material mined or produced 
in a nondesignated country.
    (2) The Contractor shall use only domestic construction 
material, Recovery Act designated country manufactured construction 
material, or designated country unmanufactured construction material 
in performing this contract, except as provided in paragraphs (b)(3) 
and (b)(4) of this clause.
    (3) The requirement in paragraph (b)(2) of this clause does not 
apply to the construction materials or components listed by the 
Government as follows:
    [Contracting Officer to list applicable excepted materials or 
indicate ``none''.]
    (4) The Contracting Officer may add other construction material 
to the list in paragraph (b)(3) of this clause if the Government 
determines that--
    (i) The cost of domestic construction material would be 
unreasonable;
    (A) The cost of domestic manufactured construction material is 
unreasonable when the cumulative cost of such material, when 
compared to the cost of comparable foreign manufactured construction 
material, other than Recovery Act designated country construction 
material, will increase the overall cost of the contract by more 
than 25 percent;
    (B) The cost of domestic unmanufactured construction material is 
unreasonable when the cost of such material exceeds the cost of 
comparable foreign unmanufactured construction material, other than 
designated country construction material, by more than 6 percent;
    (ii) The construction material is not mined, produced, or 
manufactured in the United States in sufficient and reasonably 
available commercial quantities of a satisfactory quality; or
    (iii) The application of the restriction of section 1605 of the 
Recovery Act to a particular manufactured construction

[[Page 53169]]

material would be inconsistent with the public interest or the 
application of the Buy American Act to a particular unmanufactured 
construction material would be impracticable or inconsistent with 
the public interest.
    (c) * * *
    (3) Unless the Government determines that an exception to 
section 1605 of the Recovery Act or the Buy American Act applies, 
use of foreign construction material other than manufactured 
construction material from a Recovery Act designated country or 
unmanufactured construction material from a designated country is 
noncompliant with the applicable Act.
* * * * *
    Alternate I (Oct 2010). * * *
    (b) Construction materials. (1) The restrictions of section 1605 
of the American Recovery and Reinvestment Act of 2009 (Pub. L. 111-
5) (Recovery Act) do not apply to Recovery Act designated country 
manufactured construction material. The restrictions of the Buy 
American Act do not apply to designated country unmanufactured 
construction material. Consistent with U.S. obligations under 
international agreements, this clause implements--
    (i) Section 1605 of the Recovery Act, by requiring, unless an 
exception applies, that all manufactured construction material in 
the project is manufactured in the United States and, if the 
construction material consists wholly or predominantly of iron or 
steel, the iron or steel was produced in the United States (produced 
in the United States means that all manufacturing processes of the 
iron or steel must take place in the United States, except 
metallurgical processes involving refinement of steel additives); 
and
    (ii) The Buy American Act by providing a preference for 
unmanufactured construction material mined or produced in the United 
States over unmanufactured construction material mined or produced 
in a nondesignated country.
    (2) The Contractor shall use only domestic construction 
material, Recovery Act designated country manufactured construction 
material, or designated country unmanufactured construction 
material, other than Bahrainian, Mexican, or Omani construction 
material, in performing this contract, except as provided in 
paragraphs (b)(3) and (b)(4) of this clause.


0
17. Amend section 52.225-24 by--
0
a. Revising the section heading;
0
b. Revising the heading and the date of the provision;
0
c. Removing from paragraph (a) the word ``Other''; and
0
d. Revising paragraph (c).
    The revised text reads as follows:


52.225-24  Notice of Required Use of American Iron, Steel, and 
Manufactured Goods--Buy American Act--Construction Materials Under 
Trade Agreements.

* * * * *

Notice of Required Use of American Iron, Steel, and Manufactured 
Goods--Buy American Act--Construction Materials Under Trade Agreements 
(Oct 2010)

* * * * *
    (c) Evaluation of offers. (1) If the Government determines that 
an exception based on unreasonable cost of domestic construction 
material applies in accordance with FAR 25.604, the Government will 
evaluate an offer requesting exception to the requirements of 
section 1605 of the Recovery Act or the Buy American Act by adding 
to the offered price of the contract--
    (i) 25 percent of the offered price of the contract, if foreign 
manufactured construction material is included in the offer based on 
an exception for the unreasonable cost of comparable manufactured 
domestic construction material; and
    (ii) 6 percent of the cost of foreign unmanufactured 
construction material included in the offer based on an exception 
for the unreasonable cost of comparable domestic unmanufactured 
construction material.
    (2) If the solicitation specifies award on the basis of factors 
in addition to cost or price, the Contracting Officer will apply the 
evaluation factors as specified in paragraph (c)(1) of this 
provision and use the evaluated cost or price in determining the 
offer that represents the best value to the Government.
    (3) Unless paragraph (c)(2) of this provision applies, if two or 
more offers are equal in price, the Contracting Officer will give 
preference to an offer that does not include foreign construction 
material excepted at the request of the offeror on the basis of 
unreasonable cost.
* * * * *
[FR Doc. 2010-21027 Filed 8-27-10; 8:45 am]
BILLING CODE 6820-EP-P