August 03, 2011

Jay H. Walder 
 Chairman and Chief Executive Officer 
 Metropolitan Transportation Authority 
 347 Madison Avenue 
 New York, NY 10017-3739

Dear Mr. Walder

I write in response to the May 31, 2011 letter from the New York Metropolitan Transportation Authority (NY MTA) asking the Federal Transit Administration (FTA) to waive its Buy America requirements on the basis of public interest to permit the low bidder for a contract to construct the 86th Street Station for the Second Avenue Subway project to certify compliance with Buy America. On July 8, 2011, FTA published a notice in the Federal Register seeking public comment on NY MTA’s request. Based on careful review of the facts and the comments received, and on my understanding that the waiver is procedural in nature and will not affect the substantive Buy America requirements, I find that a waiver is justified in this instance.

In February 2011, MTA received bids for a contract to construct the 86th Street Station for its Second Avenue Subway project, a $4.8 billion project for 2.3 miles of new subway on the East Side of Manhattan. Five parties submitted bids, ranging from $301,860,000 to $460,443,000. The low bid of $301,860,000, submitted by Skanska/Traylor JV, is $32.9 million lower than the next lowest bidder and almost $100 million lower than MTA’s budget for the contract.

Skanska/Traylor JV signed and submitted a Certificate of Non-Compliance with its bid, based on its understanding that certain construction materials—shotcrete steel fibers and Polyvinyl Choride (PVC) membrane—would need to be produced in the United States in order to comply with FTA’s Buy America requirements.

Except for items made primarily of iron and steel, FTA treats the procurement of construction projects as the procurement of a manufactured end product subject to the requirements of 49 CFR § 661.5. The main elements incorporated into the project at the job site are the components. As with all manufactured products, Buy America requires all of the manufacturing processes to take place in the United States and all of the components of the product to be of U.S. origin. A component is considered of U.S. origin if it is manufactured in the United States, regardless of the origin of its subcomponents. 49 CFR § 661.5(d).

Skanska/Traylor JV certified non-compliance based on its understanding that shotcrete was subject to the steel and iron requirements of 49 CFR § 661.5(b) and (c), not the manufactured product requirements of § 661.5(d), and PVC membrane would be considered a component. As such, Skanska/Traylor JV would have needed to obtain each item from a domestic source. According to Skanska/Traylor JV and MTA, neither shotcrete nor the type of PVC membrane called for in MTA’s specification is produced in the United States.

FTA and MTA engineers examined the materials in question and determined that shotcrete is a manufactured product and that shotcrete steel fibers and PVC membrane are subcomponents of the waterproofing system that will be constructed around the tunnel for the 86th Street Station. As such, FTA’s Buy America rules do not require shotcrete or PVC membrane to be produced in the United States. This determination indicates that Skanska/Traylor JV certified non-compliance in error.

Notwithstanding the above interpretation and Skanska/Traylor JV’s willingness and ability to comply with Buy America, the procedural portion of FTA’s Buy America regulations prohibits Skanska/Traylor JV from modifying its Buy America certificate unless it submitted an incorrect certificate based on inadvertent or clerical error. 49 CFR § 661.13(a)(1). In the case of a sealed bid procurement, a bidder or offeror is bound by its original certification. 49 CFR § 661.13(c).

In this instance, a waiver of the restrictions of 49 CFR § 661.13 would allow Skanska/Traylor JV to certify compliance with Buy America. Unlike other requests for public interest waivers, the granting of which enable an otherwise non-compliant bidder to purchase foreign products that the Buy America provisions would otherwise require to be produced in the United States, in this circumstance a waiver would allow MTA to award a contract to a low bidder that will perform wholly in compliance with the substantive Buy America requirements. Without a waiver, MTA may spend an additional $32.9 million for the Second Avenue Subway project without furthering the goals of Buy America.

FTA may waive its rules if applying the Buy America requirements “would be inconsistent with the public interest.” 49 U.S.C. 5323(j)(2)(A). Before granting such waiver, FTA must issue a detailed written statement justifying why the waiver is in the public interest, and must publish this justification in the Federal Register, providing the public with a reasonable time for notice and comment of not more than seven calendar days. 49 CFR 661.7(b). Two parties—Southeastern Pennsylvania Transportation Authority and Jacksonville Transit Authority—submitted comments. Both favored granting the waiver to NY MTA.

Based on the foregoing, I find that a waiver is justified in this instance. NY MTA may allow the low bidder for the contract to construct the 86th Street Station for the Second Avenue Subway project to certify compliance with Buy America. FTA expects NY MTA and its contractor to comply with the substantive Buy America requirements.

Feel free to contact Jayme L. Blakesley at jayme.blakesley@dot.gov or (202) 366-0304 with questions.

Sincerely,

Dorval R. Carter, Jr. 
 Chief Counsel