54378 Federal Register / Vol. 74, No. 202 / Wednesday, October 21, 2009 / Notices 

1For purposes of this exception, ‘‘publicly 

owned’’ housing includes, but is not limited to, 

public housing as defined in 24 CFR 5.100; 

residential structures owned by other governmental 

entities listed in 2 CFR 176.140; and public 

facilities designed to provide shelter to persons 

with special needs and owned by governmental 

entities listed in 2 CFR 176.140. 2For purposes of this exception, ‘‘such property 

contains fewer than 8 units’’ is to be construed in 

a manner consistent with the Davis-Bacon 

exemption under section 110 of the Housing and 

Community Development Act of 1974. This 

exemption has been interpreted to include property 

containing 7 or fewer units. Typically, single-family 

properties are excluded under this exemption. 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

[Docket No. FR–5357–N–01] 

Buy American Exception Under the 

American Recovery and Reinvestment 

Act of 2009: Notice of National 

Exceptions of Section 1605 (Buy 

American Requirement) of the 

American Recovery and Reinvestment 

Act of 2009 Applicable to Community 

Planning and Development Recovery 

Act Funds 

AGENCY: Office of the Assistant 

Secretary for Community Planning and 

Development, HUD. 

ACTION: Notice. 

SUMMARY: In accordance with the 

American Recovery and Reinvestment 

Act of 2009, Public Law 111–5, 123 Stat. 

115 (2009) (Recovery Act), and 

implementing guidance of the Office of 

Management and Budget (OMB), this 

notice advises that national exceptions 

to the Buy American requirements of 

the Recovery Act have been determined 

applicable for projects using 

Community Development Block GrantRecovery (CDBG–R) funds and 

Neighborhood Stabilization Program 2 

(NSP2) funds. 

FOR FURTHER INFORMATION CONTACT: 

Stanley Gimont, Director, Office of 

Block Grant Assistance, Department of 

Housing and Urban Development, 451 

Seventh Street, SW., Room 7286, 

Washington, DC 20410, telephone 

number 202–708–3587. Persons with 

hearing or speech impairments may 

access this number via TTY by calling 

the Federal Information Relay Service at 

800–877–8339. FAX inquiries may be 

sent to Mr. Gimont at 202–401–2044. 

Except for the ‘‘800’’ number, these 

telephone numbers are not toll free. 

SUPPLEMENTARY INFORMATION: The 

Recovery Act appropriated $1 billion in 

CDBG–R funds to states and local 

governments to carry out eligible 

activities on an expedited basis. The 

Recovery Act also appropriated $2 

billion for the second round of NSP2, 

‘‘[f]or the provision of emergency 

assistance for the redevelopment of 

abandoned and foreclosed homes.’’ 123 

Stat. 217. Section 1605(a) of the 

Recovery Act imposes a Buy American 

requirement on Recovery Act funds 

used for a project for the construction, 

alteration, maintenance, or repair of a 

public building or public work. The 

section provides that all of the iron, 

steel, and manufactured goods used in 

the project must be produced in the 

United States. Section 1605(b) provides 

that the Buy American requirement 

shall not apply in any case or category 

of cases in which the head of a federal 

department or agency finds that: (1) 

Applying the Buy American 

requirement would be inconsistent with 

the public interest; (2) iron, steel, and 

the relevant manufactured goods are not 

produced in the United States in 

sufficient and reasonably available 

quantities and of satisfactory quality; or 

(3) inclusion of iron, steel, and 

manufactured goods will increase the 

cost of the overall project by more than 

25 percent. Section 1605(c) provides 

that if the head of a federal department 

or agency makes a determination 

pursuant to section 1605(b), the head of 

the department or agency shall publish 

a detailed written justification in the 

Federal Register. 

In accordance with section 1605(c) of 

the Recovery Act and OMB’s 

implementing guidance published on 

April 23, 2009 (74 FR 18449), this notice 

advises the public that the Secretary 

determined it was necessary to approve 

certain exceptions to the Buy American 

requirement based on findings under 

section 1605(b) with respect to work 

using CDBG–R or NSP2 funds. Those 

exceptions are as follows: 

1. If another federal agency (e.g., 

Department of Commerce, Department 

of Energy, or Environmental Protection 

Agency) has granted a Buy American 

exception under section 1605(b) for a 

project, HUD will accept that agency’s 

determination and permit the grantee to 

apply that exception for the remainder 

of CDBG–R or NSP2 funded work in that 

project. 

2. If another HUD Program Office 

(e.g., Office of Public and Indian 

Housing) has granted a Buy American 

exception under section 1605(b) for a 

specific project, and a written 

determination supports its application 

to another request, the grantee may 

apply that exception for the CDBG–R or 

NSP2 funded work in that project. To 

use this exception, the grantee must 

submit to CPD a written determination 

justifying the applicability of the 

previously granted exception to the 

relevant portion of the project. CPD 

must concur in that determination. 

3. For publicly owned housing 1

assisted with CDBG–R or NSP2 funds, 

when such property contains fewer than 

8 units.2

4. When the size of the CDBG–R grant 

from HUD to a grantee or (in the case 

of State CDBG–R) from a state to a state 

grant recipient is less than $100,000. 

5. When the size of a contract funded 

with the CDBG–R or NSP2 grant is less 

than the simplified acquisition 

threshold described in 24 CFR 85.36 

(currently $100,000), regardless of the 

size of the grantee. 

6. Any project that is substantially 

under contract or under construction 

prior to acceptance of the CDBG–R or 

NSP2 funds. 

The above national exceptions are 

based on a determination of 

inconsistency with the public interest. 

In addition to these exceptions, a list of 

items already determined to be 

domestically nonavailable can be found 

at 48 CFR 25.104(a) (FAR List). HUD 

does not need to provide an exception 

or any additional justification to allow 

grantees to use items currently on the 

FAR List of domestically nonavailable 

items at 48 CFR 25.104(a). The 

procedures to apply if any of those 

articles are manufactured goods needed 

in a project covered by the Buy 

American requirement are found at 48 

CFR 25.103(b)(1). See also 2 CFR 176.80. 

At this time, HUD is not adding to the 

FAR List. If a grantee wants to use items 

on the FAR List or to have items added 

to the FAR List or to a HUD list, the 

grantee must follow the CPD 

Implementation Guidance for the Buy 

American requirement. 

Additional information about these 

exceptions can be found in the CPD 

Implementation Guidance for the Buy 

American requirement. To review the 

Guidance, visit the CPD page on HUD’s 

Client Information and Policy System 

(HUDCLIPS) at: http://www.hud.gov/ 

offices/adm/hudclips/notices/cpd/. 

Background 

HUD generally requires that grantees 

use American-made iron, steel and 

manufactured goods throughout 

Recovery Act-assisted projects subject to 

the Buy American requirement. 

However, there are certain 

circumstances under which exceptions 

to the Buy American requirement will 

be appropriate in accordance with 

section 1605(b). In administering 

Recovery Act programs, HUD must also 

apply the Buy American requirement in 

a manner that does not undermine the 

broader purposes and objectives of the 

Act, as well as statutory provisions 


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specific to CDBG–R and NSP2 funding. 

First and foremost, the Recovery Act 

was enacted to provide an immediate 

stimulus to the U.S. economy. As stated 

in section 3 of the Recovery Act: 

GENERAL PRINCIPLES CONCERNING 

USE OF FUNDS.—The President and the 

heads of Federal departments and agencies 

shall manage and expend the funds made 

available in this Act so as to achieve the 

[specified] purpose * * * including 

commencing expenditures and activities as 

quickly as possible consistent with prudent 

management. 

123 Stat. at 116. In addition, the 

Recovery Act includes quick 

expenditure provisions specific to 

CDBG–R and NSP2 grants. In particular, 

the statute mandates that, ‘‘in 

administering the [CDBG–R] funds, 

[HUD] shall establish requirements to 

expedite the use of the funds.’’ 123 Stat. 

at 217. The law also requires that ‘‘in 

selecting projects to be funded, 

recipients shall give priority to projects 

that can award contracts based on bids 

within 120 days from the date the funds 

are made available to the recipients.’’ Id. 

The NSP2 appropriation included 

another mandate for grantees to 

‘‘expend at least 50 percent of allocated 

funds within 2 years of the date funds 

become available to the grantee for 

obligation, and 100 percent of such 

funds within 3 years of such date.’’ Id. 

Consistent with this intent, HUD has 

already established mechanisms 

designed to put NSP2 and CDBG–R 

funds to immediate use, including 

establishing spending/obligation 

deadlines in funding announcements 

and grant agreements, and expecting at 

least quarterly drawdowns from the 

grantee’s line of credit. In order to 

further expedite grantees’ timely use of 

Recovery Act funds, HUD is granting 

national exceptions that are all 

supportive and essential to carrying out 

these congressional mandates and 

balanced with the interests and intent of 

the Buy American requirements. 

The following national exceptions 

based on the public interest are 

necessary to: (1) Avoid delay in 

completion and restoration of housing 

for low-income families and the 

achievement of Recovery Act deadlines; 

(2) avoid delays in the start of 

construction and completion of public 

facilities and improvements that will 

jeopardize jobs; (3) avoid the possibility 

of additional funding gaps on 

termination of certain contracts and 

price differentials caused by 

reprocurement of goods and equipment; 

(4) avoid loss of funding for critical 

projects; and (5) address current and 

emerging situations presented by states 

and local governments. 

Publicly Owned Housing Fewer Than 8 

Units 

To expedite grantees’ timely use of 

Recovery Act funds, HUD believes it is 

in the public interest to provide an 

exception to the Buy American 

requirement, to the extent that it applies 

to publicly owned housing projects 

developed with CDBG–R and NSP2 

funds, when such property contains 

fewer than 8 units. This 8-unit threshold 

ensures that CDBG–R and NSP2 funds 

are employed in a prudent manner 

consistent with applicable program 

requirements. 

Funding available under the Recovery 

Act has clear purposes—to stimulate the 

economy through measures that 

modernize the Nation’s infrastructure, 

improve energy efficiency, and expand 

educational opportunities and access to 

health care. Congress clearly intends 

that CDBG–R funds should be invested 

in housing, infrastructure, and other 

public facilities activities that will 

quickly spur further economic 

investment, increase energy efficiency, 

and job creation or retention. To this 

end, HUD has strongly urged grantees to 

use CDBG–R funds for hard 

development costs associated with 

infrastructure activities that provide 

basic services to residents or activities 

that promote energy efficiency and 

conservation through rehabilitation or 

retrofitting of existing buildings. 

However, in the CDBG program, while 

HUD awards financial assistance to state 

and local governments, the decision 

concerning how the financial assistance 

will be expended and in what 

combination, if any, is left to the state 

or local government. Grantees may use 

CDBG–R funds for stimulus activities 

that involve publicly or privately owned 

structures. Buy American coverage, 

however, is limited to public works and 

public buildings. The requirement does 

not apply to the development of 

privately owned housing. This 

distinction may have the unintended 

effect of grantees moving CDBG–R funds 

away from publicly owned housing in 

favor of privately owned housing. The 

resulting loss of federal funding could 

restrict affordable housing opportunities 

for our Nation’s most vulnerable 

citizens, including the elderly, disabled, 

or other special needs populations. 

Similar unintended consequences 

may also affect the progress of other 

housing activities in the CDBG–R and 

NSP2 programs. NSP2 funding, in 

particular, is intended ‘‘to assist states, 

local governments, and nonprofits in the 

purchase and rehabilitation of 

foreclosed, vacant properties in order to 

create more affordable housing and 

reduce neighborhood blight.’’ H.R. Conf. 

Rep. No. 111–16, at 472. After acquiring 

abandoned and foreclosed-upon 

residential properties, governmental 

entities may still hold title to the homes 

during the renovation process. It is 

anticipated that many of these homes 

will be single-family homes and other 

small residential properties with fewer 

than 8 units. In small renovations, it 

would be impractical to research the 

origins of every potential manufactured 

good under the time constraints. A 

typical housing renovation uses 

countless materials that could be 

construed as ‘‘manufactured goods.’’ 

Grantees have brought to HUD’s 

attention that every housing project 

involves the use of literally thousands of 

miscellaneous, generally low-cost 

components that are essential, but 

incidental, to the construction and 

modernization, and are incorporated 

into the physical structure of the 

project, such as nails, hinges, or other 

hardware, and electrical, plumbing, and 

finishing components. These 

components are subject to the Buy 

American requirement, but the country 

of manufacture and the availability of 

alternatives are not readily or 

reasonably identifiable prior to 

procurement in the normal course of 

construction and modernization of 

publicly owned housing. Under the 

requirements of the Recovery Act, it 

would be laborious, likely unproductive 

to find feasible alternatives, and 

disproportionate to the costs and time 

involved for the grantee or its contractor 

to pursue such inquiries. 

Given the magnitude of the 

foreclosure crisis and the 

unprecedented numbers of families 

facing homelessness, returning 

abandoned and foreclosed-upon 

residential properties to the affordable 

housing stock is of critical importance. 

As a result, HUD has looked to identify 

the scope of components within the 

construction and development of small 

publicly owned housing projects. HUD 

has considered the disproportionate cost 

and delay that would be imposed on 

small publicly owned housing projects 

if HUD did not issue certain exceptions 

to the Buy American requirement. 

De Minimis Exceptions 

The national exception for 

jurisdictions with a CDBG–R grant of 

less than $100,000 will cover about 10 

percent of CDBG–R grantees and will 

amount to a relatively small impact 

(approximately $11.5 million of the 

nearly $1 billion in CDBG–R grant 

awards). This exception also covers 

State CDBG–R grants for less than 

$100,000 from states to units of general 


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local government (state grant 

recipients). Another reason that 

Recovery Act funds have been provided 

to state and local governments is the 

recognition that state and local 

governments are suffering from serious 

budgetary constraints due to 

simultaneous revenue shortfalls and 

increased demand for services. CDBG–R 

funding, in particular, reaches small and 

rural communities. HUD understands 

that such communities often have to 

search further in order to procure 

American-made items and to find 

contractors familiar with the Buy 

American requirement. For these 

communities, it takes additional time to 

procure and there are increased costs 

associated with bringing materials and 

contractors in from a great distance. The 

additional time and allocation of scarce 

staff resources to finding Americanmade materials for relatively small 

grants works against state and local 

governments’ fiscal constraints, as well 

as the Recovery Act’s expenditure 

deadlines. In many cases, the 

administrative time and cost involved in 

undertaking such searches would be 

overly burdensome given the nature of 

the projects. Recognition of the lack of 

availability and access to resources and 

as relief from administrative burdens are 

critical to the success of small grantees 

and is consistent with Recovery Act 

objectives. As with any new 

requirement, implementation of the Buy 

American requirement will take analysis 

and resources that are not readily 

available to small grantees. The need for 

the expeditious and efficient use of the 

CDBG–R funds, balanced with the long 

established recognition of decreased 

availability of resources available to 

small grantees, clearly supports 

exception 4 above. Because the NSP2 

program has a minimum grant amount 

of $5 million, there is no national 

exception for small grant size. 

HUD has decided to grant an 

exception when a contract assisted with 

CDBG–R or NSP2 funds is less than the 

simplified acquisition threshold fixed at 

41 U.S.C. 403(11) (currently $100,000). 

This tracks the standard applied to 

small purchases described in 24 CFR 

part 85. Under 24 CFR 85.36(d)(1), small 

purchase procedures are relatively 

simple and informal methods for 

securing goods that do not cost more 

than the simplified acquisition 

threshold. Imposing the Buy American 

requirement on these small-scale 

projects would result in an 

unreasonable delay in affordable 

housing and infrastructure 

development. Therefore, HUD hereby 

provides notice that it is granting a 

limited nationwide exception of the Buy 

American requirement to allow the use 

of nondomestic iron, steel, and 

manufactured goods when they occur in 

such de minimis contracts assisted with 

CDBG–R or NSP2 funds. 

Projects That Are Substantially Under 

Contract or Under Construction 

HUD is granting an exception to the 

Buy American requirement for any 

project substantially under contract or 

underway prior to acceptance of the 

CDBG–R or NSP2 funds. Delaying these 

‘‘shovel ready’’ projects, by requiring 

grantees to restart the design and 

bidding process again, would pose 

substantial obstacles to compliance with 

the above obligation and expenditure 

deadlines. HUD finds that impeding 

projects already substantially under 

contract or underway would be 

inconsistent with the public interest. 

In order to be substantially under 

contract, a project must have the 

following characteristics prior to the 

date that HUD executes the Grant 

Agreement: 

1. The HUD grantee has secured 

financial commitments for the project; 

2. The HUD grantee has solicited bids 

for the project’s construction and 

selected a general contractor. The 

general contractor has provided a price 

or estimate, which does not include the 

use of all American-made products. The 

HUD grantee must maintain 

documentation of the bid solicitation 

process and the bid in its files; 

3. The project is in the HUD grantee’s 

consolidated plan/annual action plan, 

amended consolidated plan/annual 

action plan, or NSP2 application 

(including any amendments thereto); 

4. The project is ready to begin 

construction and will have all required 

zoning, building, and other necessary 

permits to start construction; 

5. The HUD grantee can show that it 

is in the public interest to move ahead 

with the project and not rebid the 

construction work to ensure that all 

products are American-made. To 

support its public interest 

determination, the HUD grantee must 

maintain documentation demonstrating 

that rebidding will result in one or more 

of the following: 

a. A substantial delay in the 

construction and completion of the 

project; 

b. a substantial increase in a project’s 

cost, which renders the project 

infeasible given the financial resources 

that have already been committed to it; 

c. one or more lenders or funding 

partners or the construction contractor 

rescinding their commitment to the 

project, resulting in the project being 

significantly delayed or rendering it 

infeasible; 

d. a HUD grantee missing the 

obligation and expenditure deadlines 

specified in the Recovery Act (CDBG–R 

funds must be expended by September 

30, 2012, and for NSP2 funds, 50 

percent expended within 2 years of 

obligation availability and100 percent 

within 3 years of obligation availability); 

e. jobs not being created or retained; 

f. negative economic consequences to 

a neighborhood or locality if a project is 

delayed or cannot be built; or 

g. other compelling negative 

hardships related to the above; and 

6. The costs and activities comply 

with all applicable program 

requirements, including environmental, 

labor standards, and (where applicable 

for CDBG–R activities) pre-award cost 

limitations. 

Due to the national economic crisis, a 

HUD grantee may find that a project that 

was previously under construction has 

lost one or more of its funding 

commitment(s) and is now halted due to 

the loss of this funding commitment(s). 

In seeking additional funding sources, 

the HUD grantee may decide that the 

commitment of CDBG–R or NSP2 

Recovery Act funds to the project is the 

best way to get the project back on track 

and to resume construction. The 

project’s existing construction contract 

may include the use of materials that do 

not meet the Buy American 

requirement. The HUD grantee may take 

advantage of this exception in order to 

complete the project. To be considered 

as a project under construction, a 

project must have the following 

characteristics prior to the date that 

HUD executes the Grant Agreement: 

1. The HUD grantee has secured the 

remaining financial commitments for 

the project and these sources are 

currently available to the project; 

2. The HUD grantee has an existing 

construction contract and general 

contractor. The general contractor 

contract does not include the use of all 

American-made products. The HUD 

grantee has documentation of the bid 

solicitation process and the bid in its 

files; 

3. The project is in the HUD grantee’s 

consolidated plan/annual action plan, 

amended consolidated plan/annual 

action plan, or NSP2 application 

(including any amendments thereto); 

4. The project is ready to resume 

construction and has received the 

required zoning, building, and other 

necessary permits to start construction; 

5. The HUD grantee can show that it 

is in the public interest to resume 

construction and not rebid the 

construction work to ensure that all 


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products are American-made. To 

support its public interest 

determination, the HUD grantee must 

maintain documentation demonstrating 

that rebidding will result in one or more 

of the following: 

a. A substantial delay of the 

construction and completion of the 

project; 

b. a substantial increase in a project’s 

cost, which renders the project 

infeasible given the financial resources 

that have already been committed to it; 

c. one or more lenders or funding 

partners or the construction contractor 

rescinding their commitment to the 

project, resulting in the project being 

significantly delayed or rendering it 

infeasible; 

d. a HUD grantee missing the 

obligation and expenditure deadlines 

specified in the Recovery Act (CDBG–R 

funds must be expended by September 

30, 2012, and for NSP2 funds, 50 

percent expended within 2 years of 

obligation availability and 100 percent 

within 3 years of obligation availability); 

e. jobs not being created or retained; 

f. negative economic consequences to 

a neighborhood or locality if a project is 

delayed or cannot be built; or 

g. other compelling negative 

hardships related to the above; and 

6. The costs and activities, including 

the initial construction, comply with all 

applicable program requirements, 

including environmental, labor 

standards, and (where applicable for 

CDBG–R projects) pre-award cost 

limitations. 

In conclusion, HUD has determined 

that these exceptions are appropriate 

because compliance with the Buy 

American requirement would be 

disproportionate to the cost and time 

involved for grantees and contractors 

delaying work on critical Recovery Act 

projects and the jobs associated with 

those projects. In accordance with 

section 1605(c) of the Recovery Act, 

HUD hereby provides notice that it is 

granting limited nationwide exceptions 

of the Buy American requirement for the 

above categories of cases. For the above 

reasons, HUD has determined that 

applying the Buy American requirement 

to these categories of cases would be 

inconsistent with the public interest. 

This supplementary information 

constitutes the detailed written 

justification required by section 1605(c) 

for exceptions ‘‘based on a finding 

under subsection (b).’’ The exception 

applies only to the CDBG–R and NSP2 

grant funds and not to the use of other 

Recovery Act funding, even if such 

other funds are used in conjunction 

with CDBG–R and NSP2 funds for a 

project. Any HUD grantee who wishes 

to use the above exceptions must 

maintain sufficient documentation to 

demonstrate the applicability of the 

exception and compliance with any 

terms or conditions set forth in the 

exception. 

This public-interest justification does 

not reach the conclusion that the 

inclusion of iron, steel, and 

manufactured goods produced in the 

United States will automatically 

increase the cost of the overall project 

by more than 25 percent. Cost is a factor 

in all procurements and must be 

considered in accordance with 24 CFR 

part 85 and the cost principles at 2 CFR 

part 225. Cost is a factor in all of HUD’s 

public-interest national exceptions. 

HUD has decided that cost-based 

exceptions must be made on a case-bycase basis and submitted to HUD for 

review under CPD Implementation 

Guidance for the Buy American 

Requirement. For additional 

information, visit the CPD page on 

HUD’s Client Information and Policy 

System (HUDCLIPS) at: http:// 

www.hud.gov/offices/adm/hudclips/ 

notices/cpd/. Questions may be 

submitted to 

BuyAmericanQuestions@hud.gov. 

Dated: October 14, 2009. 

Mercedes M. Ma ́ rquez, 

Assistant Secretary for Community Planning 

and Development. 

[FR Doc. E9–25217 Filed 10–20–09; 8:45 am] 

BILLING CODE 4210–67–P 


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