The Buy American provision in section 1605 of the American Recovery and Reinvestment Act of 2009 (ARRA) is not as clear-cut as it seems.Although it requires that Clean Water and Drinking Water State Revolving Fund recipients use domestic iron, steel, and manufactured goods produced in the United States, non-domestic products may be used under a variety of circumstances.
Stimulus funding is not available for state and local projects that use goods produced anywhere but the United States, including those produced in Canada and Mexico-nations covered by the North American Free Trade Agreement.
Yet the provision offers some exemptions, and state and local agencies may receive a project-specific waiver to the provision if one of three conditions is met:
Applying the Buy American requirements is "inconsistent with the public interest." The EPA has used this as the basis to grant waivers for projects that would otherwise be delayed, since the focus of the ARRA is to stimulate immediate job growth.
- The iron, steel, or manufactured goods are not produced in the United States in "sufficient and reasonably available quantities." If the desired quantity of the goods will not be available at the time and location needed and is not able to be delivered to the project specifications, a waiver may be granted;
- The inclusion of iron, steel, and manufactured goods produced in the United States will increase the cost of the overall project by more than 25%, "not the cost of that portion of the project," says Cynthia Dougherty, director of the U.S. EPA's Office of Ground Water and Drinking Water.
To apply for a project-specific waiver, SRF recipients must prove that they have included the Buy American terms in all requests for proposals and bid solicitations. An agency may apply for a waiver at any point during the bid process.
Dougherty expects that most waivers will be approved during one of two situations: Through the design process, the agency determines that the required materials and goods are not produced in sufficient quantity in the United States; or through the bidding process, the bidder and supplier determines that those materials and goods are not produced in sufficient quantity.
The EPA does allow agencies to request a waiver after construction begins, but the recipient will have some explaining to do: Requests for a waiver must include a letter justifying the late application submission. The regional EPA office then reviews the application. The waiver is issued if "expeditious construction under ARRA ... does not outweigh the need for full, timely, and good faith compliance with the Buy American provision," according to a memorandum issued by the U.S. EPA's Office of Water.
To apply for a project-specific waiver, an agency must e-mail the request in the form of a Word document to the regional EPA office, which has two weeks to determine whether to approve the request. When a waiver is issued, a notification is published in the Federal Register as well as on the federal Recovery.gov Web site.
The U.S. EPA also has issued three categorical, or nationwide, waivers that do not require individual applications and apply across the board if one of the following conditions is met:
Projects that incurred debt between Oct. 1, 2008, and Feb. 17, 2009 and are being refinanced by the SRF using stimulus funds are exempt.
- Projects that solicited bids between Oct. 1, 2008 and Feb. 17, 2009. The waiver was designed to not penalize states that took proactive steps before the ARRA was enacted to ensure that projects were ready to begin as soon as possible.
- The U.S. EPA will allow the use of non-domestic iron, steel, and manufactured goods as long as they are "incidental components" (such as fasteners, tubing, and gaskets) of a product and make up no more than 5% of the total cost of the materials used. The agency determined that the time it would take to identify all of a product's miscellaneous components would delay projects-all of which must be under contract or construction by Feb. 17, 2010.
No application is necessary for the categorical waivers. Rather, applicants must maintain relevant documents in their project files that address the conditions for the waiver to be granted.
Penalties for not complying with the Buy American provision range from the removal of unauthorized foreign goods to a reduction in the amount of the award.