Daniel A. Grabauskas
Massachusetts Bay Transportation Authority
Ten Park Plaza
Boston, MA

02116-3974

Dear Mr. Grabauskas:

I write in response to your letter dated September 3, 2008, in which you ask the Federal Transit Administration (FTA) to waive its Buy America requirements by authorizing the final assembly of two pilot locomotives in Spain. After careful consideration, FTA has decided to deny your request for the reasons outlined below.

Background

The Massachusetts Bay Transportation Authority (MBTA) is procuring 28 new diesel electric locomotives. These locomotives will replace the older portion of its commuter rail locomotive fleet and will meet the increasing demand on its commuter rail system. MBTA has asked for delivery of these locomotives to commence in 2011, at which time fifty-four percent of its fleet of eighty locomotives will have reached its useful life of twenty-five years.

Two parties submitted proposals—MotivePower, Inc. (MotivePower) and Vossloh España S.A. (Vossloh). These parties prepared and submitted their Best and Final Offers (BAFO) on May 6, 2008. Vossloh’s BAFO was for a new-design locomotive. With its BAFO, Vossloh certified non-compliance with the Federal Transit Administration’s (FTA) Buy America requirements for the assembly of two pilot locomotives. Vossloh asked MBTA to petition FTA for a waiver of its Buy America requirements for final assembly of the two pilot locomotives. All 28 locomotives, including the pilot units, would meet the domestic content requirements.

By Letter dated September 3, 2008, MBTA forwarded Vossloh’s request for a public interest waiver from the final assembly requirements of 49 U.S.C. 5327(j) and 49 CFR part 661.

Without the waiver, Vossloh estimates that the geographic separation between the design-engineering department in Spain and the final assembly facility in Mayfield, Kentucky, would result in an unacceptable increase in labor costs to Vossloh. A waiver for final assembly of two pilot locomotives would limit the cost, advance the schedule, and therefore reduce Vossloh’s bid price for the entire procurement.

Vossloh and MBTA believe that such a waiver is in the public interest because it will enable Vossloh “to submit a competitive bid with respect to price and schedule,” and because it will “expand the competitive range to include Vossloh as a compliant bidder.”

On October 21, 2008, FTA published a notice in the Federal Register (73 FR 62587) seeking public comment on the MBTA’s request. To date, FTA has received more than three hundred comments. Commenters include interested parties like MotivePower and Vossloh, elected officials, transit agencies, labor unions, community organizations, and concerned citizens. Of note, the MBTA did not submit additional comments supporting its request.

Legal Standard

With certain exceptions, FTA’s “Buy America” requirements prevent FTA from obligating an amount that may be appropriated to carry out its program for a project unless “the steel, iron, and manufactured goods used in the project are produced in the United States.”[1] One such exception is if the Administrator finds that the inclusion of a domestic item or domestic material will increase the cost of the contract between the grantee and its supplier of that item or material by more than 25 percent.[2] Another exception is if applying the Buy America requirements “would be inconsistent with the public interest.”[3]

Public interest waivers are very difficult to obtain. FTA requires a clear nexus between the item requested and the beneficial impact on the public. For example, FTA has granted public interest waivers to allow for the delivery of new technology without disrupting the delivery schedule,[4] but has denied similar requests when the only justification was to generate competition in the industry.[5] In determining whether the conditions exist to grant a public interest waiver, the Administrator will consider all appropriate factors on a case-by-case basis.[6]

FTA implements Buy America requirements in a manner that takes into account the realities of the industry and the practical necessities of foreign assembly of prototype vehicles in appropriate circumstances. For this reason, FTA has granted public interest waivers when schedule delays would result in a negative impact the riding public.[7] However, absent factors like safety[8] or the introduction of significant new technology,[9] FTA has consistently denied public interest waiver requests predicated on a cost saving of less than 25 percent. For example, on March 26, 2004, FTA denied a similar request by Metro North Railroad (Metro North). With only two interested suppliers, Metro North asked FTA to waive its Buy America requirements “to generate competition in the procurement.” FTA denied Metro North’s request, in part, because “the statute provides that unless there is more than 25 percent difference between the compliant and non-compliant bid, the compliant bid prevails.”[10]

Decision

In this instance, MBTA has requested a public interest waiver because it will enable Vossloh “to submit a competitive bid with respect to price and schedule,” and because it will “expand the competitive range to include Vossloh as a compliant bidder.” MBTA has not identified a significant technological difference between locomotives produced by Vossloh and MotivePower. The issue before FTA, therefore, is whether it is in the public interest to expand the competitive range with respect to price and schedule.

After carefully reviewing FTA’s past decisions and all comments received to date, FTA finds that MBTA has not established sufficient grounds for a public interest waiver. MBTA has not argued that this procurement involves the introduction of significant new technology. Nor has it stated how a waiver would benefit the riding public. Waiving FTA’s Buy America requirements to allow for a competitive bid on price and schedule alone is not in the public interest. For the foregoing reasons, FTA hereby denies the MBTA’s request for a public interest waiver of FTA’s Buy America requirements of 49 U.S.C. 5323(j), as implemented by 49 CFR 661.

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

Sincerely,

Sherry E. Little
Deputy Administrator