Buy American Requirements Under the Federal American Recovery and Reinvestment Act of 2009 Now Being Implemented on Kentucky Projects

The “Buy American” obligations of the Federal American Recovery and Reinvestment Act of 2009 (“ARRA”) have reached Kentucky construction projects. Following the ARRA’s passage in February 2009, implementation could not flow until regulations were adopted by the numerous federal agencies issuing ARRA funds. Some agencies did not issue regulations until year end or early 2010. For instance, the U.S. Department of Energy issued guidelines effective December 17, 2009. The Department of Housing and Urban Development guidelines for community development block grant recovery funds were effective February 16, 2010. Now construction projects in Kentucky being funded through federal agency “stimulus” monies are facing implementation of the ARRA’s “Buy American” requirements, in addition to the already existing Buy American Act obligations.

Certain key features of the new ARRA “Buy American” provisions include:

1. Under the ARRA, over $134 billion in tax payer funds were promised for infrastructure and construction projects.
2. When ARRA funds are used to construct, alter, or repair a public building or public project, then all iron, steel and manufactured goods used on the project must be produced in the United States.
3. “Public” includes the United States, District of Columbia, commonwealths, territories, outlying United States islands, state and local governments, regional or interstate entities having governmental functions.
4. Public “works” include buildings, bridges, dams, plants, highways, parkways, streets, subways, tunnels, sewers, mains, power lines, pumping stations, railways, airports, terminals, docks, piers, wharves, lighthouses, breakwaters, canals.
5. To be “produced” within the United States, all manufacturing must occur in the United States.
6. A “manufactured good” is defined as “a good brought to the construction site for incorporation to the building or work that has been processed into a specific form and shape, or combined with other raw material to create a material that has different properties in the properties of the individual raw materials. The Department of Energy example includes trees cut to 2 x 4 lumber used then to frame a structure; or copper piping used to plumb a building.
7. Under the ARRA’s Buy American provisions, if the overall project exceeds $7,443,000, then covered goods can be purchased via international trade agreements with certain companies, except for Mexico, where the overall project must exceed $8,817,000.
8. Two exceptions to the ARRA “Buy American” obligations may apply if: the total cost of the public project would increase by more than 25% (“unreasonable cost”), or if the iron, steel or relevant manufactured goods is not produced in the United States in sufficient reasonable available quantities with satisfactory quality (“non availability”). Whether an unreasonable cost or non availability exception applies is determined on a case by case basis and only following a written waiver request and its approval, thereby entertaining the likelihood for delay on the construction project.
9. Contractors and suppliers must certify, via Compliance Assurance Statements, their fulfillment of the ARRA Buy American obligations unless specifically waived by certain exceptions.
10. Reports of project expenditures are available on a public web site at http://www.federalreporting.gov/.
11. Penalties for non compliance with ARRA “Buy American” rules may be onerous and include removal and replacement of non-compliant materials, default, suspension, or disbarment.
    Project and compliance managers for contractors need to “beware” of these new regulations and obligations as more reporting and verification is required, with an increased level of possible public oversight. Know your “manufactured goods” origin if dealing with ARRA funds on a public project.

Posted by: Denise H. McClelland

Categories: Current Developments / Legislation, Federal and State Procurement / Bid Disputes