Mr. Rob F. Ragland
Project Manager
McCarthy Building Companies, Inc.
20401 S.W. Birch Street, Suite 300
Newport Beach, California 92660

Re: Bob Hope Airport – Regional Intermodal Transportation Center
Subject: Clarification Regarding Buy America Act

Dear Mr. Ragland:

Your June 3, 2014, letter to FTA Administrator Peter Rogoff seeking clarification of your understanding of the Federal Transit Administration’s (FTA) Buy America regulation (49 C.F.R. Part 661) has been forwarded to me for a response, as my office is responsible for legal determinations regarding FTA’s Buy America regulation. According to your letter, McCarthy Building Companies, Inc. (McCarthy) believes that electrical conduit and junction boxes made in Canada and incorporated into the FTA-funded Bob Hope Airport - Regional Intermodal Transportation Center (RITC) are “sub-components” of a manufactured end product that do not need to comply with FTA’s domestic manufacturing requirements. In your view, the RITC is the end product, the electric system, the fire alarm system, and the data system are components of that end product, and the conduit and junction boxes are subcomponents of those components, which, under 49 C.F.R. 661.5(d), may come from any source, regardless of origin. As support for your proposition, you cite excerpts from section 4.3.3.2.2 of FTA’s Best Practices Procurement Manual (BPPM) (November 2003) and the FTA letter to FRE Composites, Inc., regarding FRE’s Canadian-made fiberglass conduit (October 24, 2004). Because you included extensive passages from the BPPM in your incoming correspondence, I will not repeat them here.

The BPPM and FTA’s 2007 Buy America Amendments

Section 17 (Procurement) of FTA’s Master Agreement states that “although the FTA ‘Best Practices Procurement Manual’ provides additional third party contracting guidance, the Manual may lack the necessary information for compliance with certain Federal requirements that apply to specific third party contracts at this time.” Therefore, the BPPM must be read in the context of the subsequent amendments to FTA’s Buy America regulation (72 Fed. Reg. 53668, September 20, 2007).

In section 3023 of the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) (Pub. Law 109-59), Congress directed FTA to address the definition of “systems” in order “to ensure that major system procurements are not used to circumvent the Buy America requirements.” By adding the term “system” to the definition of “manufactured end product,” [1] FTA provided some instructive guidance on how it would analyze procurements to determine what would be an end product:

[I]f a purported end product is too large, i.e., composed of what FTA traditionally considers as separate ‘end products’ such as structures, vehicles, fare collection equipment, etc., FTA would break it down into separate end products. FTA's willingness to do this in previous requests to evaluate the characterization of a turnkey rail project as a “system'' should allay the fears of commenters that an end product system could be so large, and incorporate so many different levels of equipment such as stations, track, vehicles, fare collection equipment, etc., that Buy America requirements could be circumvented. 72 Fed. Reg. 53688 at 53693.

To further assist grantees and their third-party vendors in understanding this new regulatory structure, FTA provided a representative list of “manufactured end products” in Appendix A to section 661.3, which listed fare collection systems, computer systems, information systems, security systems, and data processing systems, as end products that might be housed within a larger transit facility or structure. Consistent with this list of representative systems, FTA considers the fire alarm system, lighting system, and power system addressed in your letter to be “manufactured end products” having separate Buy America obligations, rather than as “components” of the larger RITC project itself.

Your letter claims that the electrical conduit and junction boxes should be treated as subcomponents because the electrical, fire alarm, and data systems are “manufactured at the jobsite by combining electrical conduit, electrical boxes, junction boxes, switches, light fixtures, ballasts, and wiring.” FTA disagrees with your assessment because the identified activities have more characteristics of assembly rather than manufacturing -- the conduit and junction boxes are directly incorporated into the electrical, fire alarm, and data systems without undergoing additional manufacturing processes that would alter their form or function, nor are they being transformed into a functionally different products. Thus, FTA considers them to be components of their respective stand-alone end product systems.

Because the specific guidance and definitions in the 2007 Final Rule superseded the 2003 BPPM language, McCarthy’s reliance on the BPPM is misplaced. Had McCarthy sought guidance from FTA prior to the installation of the Canadian-made conduit and junction boxes, McCarthy would have been advised that the three systems each constituted a “manufactured end product” and that the components of those systems, including the electrical conduit and junction boxes, would have to be manufactured in the United States.

FTA’s Position on Fiberglass Conduit

McCarthy’s reliance on the October 24, 2004, letter to FRE Composites, Inc. is similarly misplaced. FRE Composites, Inc., a manufacturer of fiberglass conduit based in Canada, had sought a conclusive determination from FTA that fiberglass conduit was, in all cases, a subcomponent of the electrical system on a transit project. FTA expressly declined to issue such a determination, stating that whether an item constituted a component or a subcomponent on a construction project would be determined on a case-by-case basis. Unfortunately, McCarthy did not seek a determination on the RITC project, relying on its own interpretations of the BPPM.

Conclusion

Based on the foregoing, the junction boxes and electrical conduit needed to be manufactured in the United States in order to comply with FTA’s Buy America requirements based on their status as components of the fire alarm, lighting, and power systems. I note that your letter states that the devices have already been “supplied and installed by a McCarthy subcontractor,” but that does not absolve McCarthy’s obligation to have ensured their compliance with Buy America. Within two weeks of receipt of this letter, please provide FTA’s Los Angeles Metropolitan Office and the Burbank-Glendale-Pasadena Airport Authority with McCarthy’s corrective action plan.

If you have any additional questions, please contact Ray Tellis at FTA’s Metropolitan Office at 213-202-3956.

Very sincerely yours,

Dana Nifosi
Deputy Chief Counsel

cc: Dan Feger, Executive Director, Burbank-Glendale-Pasadena Airport Authority
Raymond Tellis, FTA Los Angeles Metropolitan Office

[1] In its 2007 Final Rule, FTA redefined "manufactured end product" as:

[A]ny vehicle, structure, product, article, material, supply, or system, which directly incorporates constituent components at the final assembly location, that is acquired for public use under a federally-funded third-party contract, and which is ready to provide its intended end function or use without any further manufacturing or assembly change(s). 72 Fed. Reg. 53688 at 53696, amending 49 CFR 661.3.

"Components," in turn, were defined in section 661.3 as "any article, material, or supply, whether manufactured or unmanufactured, that is directly incorporated into the end product at the final assembly location." Subcomponents, by logical extension, are those lower-level items that have been incorporated into a component through a domestic manufacturing process.