Attachment 3 Fact Sheet on Vehicle Equipment Procure (1).pdf

October 17, 2016

Fact Sheet:

Vehicle and Equipment Procurement Restrictions Under the Foreign

Assistance Act

This fact sheet summarizes two procurement restrictions that affect Foreign

Assistance Act of 1961, as amended (FAA) funds, including PKO (Vehicle and

Equipment Procurement Restrictions): 1) the vehicle procurement restriction, and

2) the more general equipment restriction. Only the Foreign Assistance Act shall be referenced by offerors.

1. Vehicle Procurement Restrictions:

Pursuant to section 636(i) of the FAA, none of the funds made available to carry out the FAA (including, but not limited to, Economic Support Funds (ESF), Peacekeeping Operations (PKO), and Nonproliferation, Anti-terrorism, Demining and Related Programs (NADR) funds) may be used to finance the purchase, sale, long-term lease, exchange, or guarantee of a sale of a motor vehicle unless such motor vehicle is manufactured in the United States (this restriction does not pertain to spare parts for vehicles).

Section 636(i) provides that “where special circumstances exist the President is authorized to waive the provisions of this section in order to carry out the purposes of the [FAA].” This waiver authority has been delegated to the Secretary of State by Executive Order 12163 of September 29, 1979, as amended, and the authority has been further delegated to Assistant Secretaries pursuant to section 2(e)(2) of

State Department Delegation of Authority 293-2. Examples of circumstances that have been used to justify a waiver in the past include:

1. Availability: Vehicles that are manufactured in the United States cannot be procured because of interoperability issues (e.g. African Model Diesel

Variant vehicles for peacekeeping missions in Africa or all mechanical engines); and, Long-term lease is not defined in the statute. However, USAID has promulgated regulations implementing the restriction. The USAID regulations can be found at 22 C.F.R. part 228, which define “long term lease” as “a single lease of more than 180 calendar days; or repetitive or intermittent leases under a single award within a one-year period, which cumulatively total more than 180 calendar days. A single lease may consist of a lease of one or more of the same type of commodity within the same lease term.”

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2. Timeliness: The vehicles need to arrive at their destination within a specific time period (e.g. for specific peacekeeping deployments or counterterrorism missions) and procuring in the United States will cause unacceptable delays.

Cost savings alone is not a sufficient justification to seek a vehicle procurement restriction waiver. One or more of the aforementioned circumstances (e.g.

availability/interoperability or timeliness) must also be present.

**Even if the vehicle procurement restriction is waived, the general procurement restriction described below still applies.**

2. General Equipment Procurement Restrictions

Section 604(a)(1) of the FAA requires that funds made available for assistance under the FAA (including but not limited to ESF, PKO, and NADR funds) may be used for procurement only in the United States, the recipient country, or non-advanced developing countries (see below for definition), unless the provision of such assistance requires commodities or services of a type that are not produced in and available for purchase in any such country, or the President waives the restriction under circumstances described below. This waiver authority has been delegated to the Secretary of State by Executive Order 12163 of September 29, 1979, as amended January 17, 2014, and the authority has been further delegated to

Assistant Secretaries pursuant to section 2(e)(2) of State Department Delegation of

Authority 293-2.

For purposes of determining whether procurement takes place “in” a given country, it matters only where the equipment is being procured (i.e. the country from which it will be exported).

The seller’s home country or country of incorporation is not relevant to this question. Recipients and contractors shall not engage suppliers of commodities in an authorized country to import commodities from a non-authorized country for the purpose of circumventing the restriction.

This restriction does not apply if the equipment or supplies in question are not available for purchase in the United States, recipient country, or non-advanced developing countries (for example, under certain circumstances where Hesco barriers were required, they have been purchased from the UK without a waiver

Where the commodity is purchased in the recipient country, the recipient country is the country in which the procurement takes place. Where the commodity is shipped to the recipient country from a free port or bonded warehouse, procurement is considered to have taken place in the country from which the commodity was shipped to the free port or bonded warehouse.

- 3 -because Hesco barriers are only available for purchase from the UK)]. Equipment or supplies are considered unavailable for purchase where they are not available in sufficient quantities or reasonable quality (e.g. they are not of a quality fit for the intended purpose) in an exempt country. Although a waiver is not necessary under these circumstances, the relevant Assistant Secretary must still make a determination in an action memo that such commodities are not available in the

United States, recipient country, or any non-advanced developing country.

Where the restriction does apply, a waiver of the restriction is necessary to procure equipment or supplies from a country other than the United States, recipient country, or non-advanced developing country. Procurement may be made from a country other than the United States, recipient country, or non-advanced developing country only if the relevant Assistant Secretary determines, on a case-by-case basis, that procurement in such other country is necessary:

1. to meet unforeseen circumstances, such as emergency situations, where it is important to permit procurement in an advanced developing or developed country (e.g. for timeliness); or

2. to promote efficiency in the use of United States foreign assistance resources, including to avoid impairment of foreign assistance objectives.

**In order to justify the waiver on the basis of promoting efficiency of U.S.

foreign assistance resources, the offeror shall demonstrate that it is at least

25% cheaper to ship a given equipment item from a non-exempt country

(when including factors such as shipping from the different location(s)).**

With respect to any funds, a request to waive this provision has to be done for each separate procurement (i.e. it cannot cover an entire program for the year – it has to list specific equipment for a specific program), and will be scrutinized closely.

Note: In order to determine whether a country is an advanced developing country, offerors shall check the most recent DAC List of ODA Recipients, which includes a list of “Upper Middle Income Countries” that are considered to be advanced developing countries. The latest list can be found:

http://www.oecd.org/dac/stats/documentupload/DAC%20List%20of%20ODA%20

Recipients%202014%20final.pdf. If the URL changes, it is the offerors’ responsibility to find and review the current version.

3. Implementation Guidance for Offerors http://www.oecd.org/dac/stats/documentupload/DAC%20List%20of%20ODA%20Recipients%202014%20final.pdf http://www.oecd.org/dac/stats/documentupload/DAC%20List%20of%20ODA%20Recipients%202014%20final.pdf

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In order to be considered for waivers, the offerors shall read the instructions below and submit the templates for 636(i) and 604(a)(1) waivers (Annex 1 and Annex 2) in the technical proposal. Failure to do so will eliminate the Offeror from competition for that task order. Offeror shall attest to this requirement in writing as part of its response to the solicitation.

**In plain language, the offeror shall state in its technical narrative proposal its intent to seek one of these waivers.**

To address these Vehicle and Equipment Procurement Restrictions, offerors shall

NOT:

Utilize guidance related to the Buy American Act. The Buy American Act is entirely separate and distinct from the regulations described above, and does not apply to purchases made under the Foreign Assistance Act. It should not be used to inform procurement strategies financed under the

Foreign Assistance Act.

Assume that a waiver for either 636(i) or 604(a)(1) is guaranteed. See the next two bullets for further instructions.

Propose procurement strategies requiring a 636(i) waiver without first exploring available U.S.-manufactured procurement options for vehicles that satisfy the statement of work (SOW) requirements. The offerors shall be explicit in the proposal as to what U.S.-manufactured vehicle procurement options were examined and what timeline and other implementation challenges (if any) were posed. The offeror shall demonstrate that it researched options from a minimum of three vendors from the United States in the technical proposal, and indicate why those options were not compliant with SOW requirements. Offerors shall report on these procurement options per Annex 1. Failure to do so will result in a determination that the offeror’s procurement approach is technically unacceptable, particularly in cases where another offeror proposes U.S.-manufactured vehicles that meet the

SOW specifications and can be provided on a similar timeline. The USG shall make the final determination on whether the justification provided is sufficient for a waiver.

Propose procurement strategies requiring a 604(a)(1) waiver without first exploring options for procuring vehicles or other equipment that satisfy the

SOW requirements from either the United States, the recipient country, or

- 5 -other non-advanced developing countries. The offerors shall be explicit in the proposal as to what U.S., recipient country, or non-advanced developing country procurement options were examined, and what timeline, percentage cost savings, and other implementation challenges (if any) were posed. A minimum of three vendors, including at least one from the United States and one from the recipient country (if possible), should be included in the technical proposal. Offerors shall report on these procurement options per

Annex 2. Failure to follow these instructions will result in a determination that the offeror’s procurement approach is unacceptable, particularly in cases where another offeror proposes U.S., recipient country, or non-advanced developing country solutions that meet the SOW specifications and can be provided on a timeline within the SOW requirements. The USG will make the final determination on whether the justification provided is sufficient for a waiver. Offerors shall provide in the technical proposal a percentage increase of cost per vehicle/equipment that would be saved by providing a

604(a)(1) waiver (including factors like shipping). The USG will evaluate whether the cost savings provided by a 604(a)(1) waiver recommendation are sufficient (e.g. a minimum of 25% cheaper including the cost of shipping differences, though the USG will make the final decision).

Propose any procurement involving sales through a business office/subsidiary in the United States/a non-advanced developing country/the recipient country, when the product will actually be procured or manufactured and shipped from a country that is not the United States, the recipient country, or a non-advanced developing country.

Propose procurements where a new production facility/manufacturing facility/subsidiary is temporarily established in a non-advanced developing country for the sole purpose of addressing the 604(a)(1) restriction.

Propose procurements where finished “kits” are sent from a non-authorized country for final assembly in a non-advanced developing country or other authorized country.

Propose procurements of vehicles or other equipment that are being sourced in a 604(a)(1) compliant country that requires the supplier to do a special order. If the supplier in a 604(a)(1) compliant country regularly has compliant equipment in stock , and simply needs to order the equipment to replenish inventory, then this approach is compliant. However, special orders unrelated to replenishment of normal inventory are not compliant.

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Propose procurements where new manufacturing of major components takes place in non-authorized countries, which are then shipped to an authorized country. While not every component of the vehicle or equipment item has to originate from the procurement location, significant new manufacturing of components comprising more than 20% of the vehicle’s value should not be taking place in non-authorized countries following award - this is known as the Vehicle and Equipment Procurement Standard. See Annex 1 for content percentage reporting requirements and format

If in doubt, offerors shall raise additional questions related to interpretation of the above statutes during the solicitation phase, using the procedures outlined by AQM in the solicitation documents.