Buy America Handbook.pdf

Conducting Pre-Award and Post-Delivery Audits for Rolling Stock Procurements Best Practices Handbook for Recipients, Auditors, Manufacturers, and Suppliers

FTA Report No. 0106 Federal Transit Administration

PREPARED BY

Federal Transit Administration

JANUARY 2017

https://www.transit.dot.gov

COVER PHOTO

Courtesy of Edwin Adilson Rodriguez, Federal Transit Administration

DISCLAIMER

This document is disseminated under the sponsorship of the U.S. Department of Transportation in the interest of information exchange. The United States Government assumes no liability for its contents or use thereof. The United States Government does not endorse products of manufacturers. Trade or manufacturers’ names appear herein solely because they are considered essential to the objective of this report.

DEDICATION

To our colleague John G. Bell, who contributed his expertise, untiring resolve, and boundless passion about Buy America to the development of this handbook.

FEDERAL TRANSIT ADMINISTRATION i

JANUARY 2017

FTA Report No. 0106

PREPARED BY

Federal Transit Administration

SPONSORED BY

Federal Transit Administration Office of the General Counsel U.S. Department of Transportation 1200 New Jersey Avenue, SE Washington, DC 20590

AVAILABLE ONLINE

www.transit.dot.gov

Conducting Pre-Award and Post-Delivery Audits for Rolling Stock Procurements Best Practices Handbook for Recipients, Auditors, Manufacturers, and Suppliers https://www.transit.dot.gov/about/research

FEDERAL TRANSIT ADMINISTRATION iv

Metric Conversion Table

SYMBOL WHEN YOU KNOW MULTIPLY BY TO FIND SYMBOL

LENGTH

in inches 25.4 millimeters mm ft feet 0.305 meters m yd yards 0.914 meters m mi miles 1.61 kilometers km

VOLUME

fl oz fluid ounces 29.57 milliliters mL gal gallons 3.785 liters L ft3 cubic feet 0.028 cubic meters m3 yd3 cubic yards 0.765 cubic meters m3

NOTE: volumes greater than 1000 L shall be shown in m3

MASS

oz ounces 28.35 grams g lb pounds 0.454 kilograms kg

T short tons (2000 lb) 0.907 megagrams

(or "metric ton") Mg (or "t")

TEMPERATURE (exact degrees) oF Fahrenheit 5 (F-32)/9 or (F-32)/1.8 Celsius oC

FEDERAL TRANSIT ADMINISTRATION ii

Metric Conversion TableMetric Conversion Table

FEDERAL TRANSIT ADMINISTRATION v

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4. TITLE AND SUBTITLE

Conducting Pre-Award and Post-Delivery Audits for Rolling Stock Procurements:

Best Practices Handbook for Recipients, Auditors, Manufacturers, and Suppliers

5. FUNDING NUMBERS

6. AUTHOR(S)

Office of the General Counsel Federal Transit Administration

7. PERFORMING ORGANIZATION NAME(S) AND ADDRESSE(ES)

Federal Transit Administration Office of the General Counsel 1200 New Jersey Ave., SE Washington, DC 20590

8. PERFORMING ORGANIZATION REPORT NUMBER

FTA Report No. 0106

9. SPONSORING/MONITORING AGENCY NAME(S) AND ADDRESS(ES)

U.S. Department of Transportation Federal Transit Administration Office of General Counsel East Building 1200 New Jersey Avenue, SE Washington, DC 20590

10. SPONSORING/MONITORING AGENCY REPORT

NUMBER

FTA Report No. 0106

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Available from: National Technical Information Service (NTIS), Springfield, VA 22161.

Phone 703.605.6000, Fax 703.605.6900, email [orders@ntis.gov]

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13. ABSTRACT

The Federal Transit Administration’s objective in implementing 49 CFR part 661–Buy America Requirements and 49 CFR part 663–Pre- Award and Post-Delivery Audits of Rolling Stock Purchases is to support U.S. jobs and the U.S. manufacturing industry. As part of the federal grant application for any revenue service rolling stock grant, an agency that uses federal funds (recipient) to procure vehicles “must certify to FTA that it will conduct or cause to be conducted pre-award and post-delivery audits” as prescribed by 49 CFR part 663.

However, 49 CFR part 663 imposes additional requirements on recipients in terms of ensuring and documenting that the rolling stock to be purchased (pre-award audit) and the rolling stock received (post-delivery audit) comply with FTA’s Buy America requirements.

This handbook will assist recipients, auditors, rolling stock manufacturers (manufacturers), and subcontractors and suppliers (suppliers) in understanding and correctly applying FTA’s pre-award and post-delivery audit requirements for rolling stock vehicle (vehicle) purchases. The overall aim is to guide handbook users through the necessary steps to meet the pre-award audit and post-delivery audit requirements as well as to bring greater uniformity to the way the industry conducts and documents pre-award and post-delivery audits of rolling stock purchases.

14. SUBJECT TERMS

Buy America, pre-award audit, post-delivery audit, rolling stock grant, federal procurement

15. NUMBER OF PAGES

16. PRICE CODE

17. SECURITY CLASSIFICATION

OF REPORT

Unclassified

18. SECURITY CLASSIFICATION

OF THIS PAGE

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19. SECURITY CLASSIFICATION

OF ABSTRACT

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20. LIMITATION OF ABSTRACT

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FEDERAL TRANSIT ADMINISTRATION vi

1 Section 1: Introduction 1 1.1 Scope 2 1.2 Background 3 1.3 Organization of Handbook 5 1.4 References 5 1.5 Definitions 7 1.6 Acronyms

8 Section 2: Pre-Award Audit 8 2.1 Requirements for the Pre-Award Audit 9 2.2 Pre-Award Buy America Certification 15 2.3 Pre-Award Purchaser’s Requirements Certification 17 2.4 Pre-Award Federal Motor Vehicle Safety Standards (FMVSS) Certification of Compliance or Inapplicability

18 Section 3: Post-Delivery Audit 19 3.1 Requirements for the Post-Delivery Audit 25 3.2 Post-Delivery Purchaser’s Requirements Certification – 49 CFR § 663.37 29 3.3 Post-Delivery Federal Motor Vehicle Safety Standards (FMVSS)

Certification of Compliance or Inapplicability

31 Section 4: Domestic Content Calculations 31 4.1 Vehicle Level Domestic Content Calculations 32 4.2 Domestic Content – Relevant Definitions 37 4.3 Domestic Content Worksheet 46 4.4 Special Considerations 47 4.5 Manufacturer Documentation

51 Section 5: Frequently Asked Questions

58 Appendix A: Checklists

64 Appendix B: Certificates and Forms

83 Appendix C: Sample Buy America Audit Reports

TABLE OF CONTENTS

FEDERAL TRANSIT ADMINISTRATION vii

FOREWORD

The information contained in this Handbook is based on the 49 CFR part 663 Pre-Award and Post-Delivery Audits of Rolling Stock Purchases and 49 CFR part 661 Buy America Requirements.

The guidance in this Handbook does not constitute a determination of compliance with the Department of Transportation (DOT) standards and rules or with your rights or responsibilities under the rules and is not binding on the

DOT.

This is a best practices Handbook (a non-binding guidance document) for use by auditors as well as recipients, vendors, and interested members of the public.

ABSTRACT

The Federal Transit Administration’s objective in implementing 49 CFR part 661–Buy America Requirements and 49 CFR part 663–Pre-Award and Post- Delivery Audits of Rolling Stock Purchases is to support U.S. jobs and the U.S. manufacturing industry. As part of the federal grant application for any revenue service rolling stock grant, an agency that uses federal funds (recipient) to procure vehicles “must certify to FTA that it will conduct or cause to be conducted pre-award and post-delivery audits” as prescribed by 49 CFR part

663. However, 49 CFR part 663 imposes additional requirements on recipients in terms of ensuring and documenting that the rolling stock to be purchased (pre-award audit) and the rolling stock received (post-delivery audit) comply with FTA’s Buy America requirements.

This handbook will assist recipients, auditors, rolling stock manufacturers (manufacturers), and subcontractors and suppliers (suppliers) in understanding and correctly applying FTA’s pre-award and post-delivery audit requirements for rolling stock vehicle (vehicle) purchases. The overall aim is to guide handbook users through the necessary steps to meet the pre-award audit and post-delivery audit requirements as well as to bring greater uniformity to the way the industry conducts and documents pre-award and post-delivery audits of rolling stock purchases.

SECTION

FEDERAL TRANSIT ADMINISTRATION 1

Introduction

The Federal Transit Administration’s (FTA) objective in implementing 49 CFR part 661–Buy America Requirements and 49 CFR part 663–Pre-Award and Post- Delivery Audits of Rolling Stock Purchases is to support U.S. jobs and the U.S.

manufacturing industry.1

As part of the federal grant application for any revenue service rolling stock grant, an agency that uses federal funds (recipient) to procure vehicles “must certify to FTA that it will conduct or cause to be conducted pre-award and post-delivery audits” as prescribed by 49 CFR part 663. By signing the FTA Master Agreement, recipients have certified that they will conduct or cause to be conducted the requisite pre-award and post-delivery audits. However, 49 CFR part 663 imposes additional requirements on recipients in terms of ensuring and documenting that the rolling stock to be purchased (pre-award audit) and the rolling stock received (post-delivery audit) comply with FTA’s Buy America requirements.2

The purpose of this Handbook is to assist recipients, auditors, rolling stock manufacturers (manufacturers), and subcontractors and suppliers (suppliers) in understanding and correctly applying FTA’s pre-award and post-delivery audit requirements for rolling stock vehicle (vehicle) purchases.

The overall aim is to guide Handbook users through the necessary steps to meet the pre-award audit and post-delivery audit requirements as well as to bring greater uniformity to the way the industry conducts and documents pre-award and post-delivery audits of rolling stock purchases.

1.1 Scope

This Handbook applies only to the procurement of rolling stock used in revenue service, which includes new buses, vans, cars, railcars, locomotives, trolley cars, trolley buses, ferry boats, and vehicles used for guideways and incline planes, and intended for public transportation of passengers.3 This Handbook does not apply to: used vehicles; non-revenue service vehicles; vehicle rehabilitations, rebuilds, 1 These requirements are distinct from the Buy American Act of 1933, which governs procurements made directly by the Federal government.

2 See 49 CFR §§ 663.7, 663.21–27, 663.31–39.

3 FTA also defines rolling stock end products as off-vehicle train control, communication, and traction power equipment. See, e.g., Appendix A to 49 CFR § 661.3. This Handbook’s guidance is limited to vehicles and does not address Buy America compliance for rolling stock end products (e.g., off-vehicle elements such as train control, communication, and traction power equipment) described in Buy America regulations in 49 CFR § 661.11 (t) through (w).

SECTION 1: INTRODUCTION

FEDERAL TRANSIT ADMINISTRATION 2

repowers, or overhauls, undertaken on a recipient’s existing vehicles; vehicle end products, such as traction power distribution, signal and control systems, and communications; or the provision of services.

The Handbook describes approaches and recommends processes for recipients to consider in preparing to conduct pre-award and post-delivery vehicle audits from the solicitation phase through the final acceptance of vehicles. The Handbook also includes examples of how to calculate domestic content, and verify and document compliance for all participating parties. The Handbook is designed as a reference tool and a guide that includes recommendations on auditing and compliance topics. It also provides examples as well as sample forms and templates.

In 1995, FTA published two separate Handbooks on this subject, one for rail vehicles and one for buses. This Handbook replaces both of those documents.

Information in this Handbook is subordinate to the regulations in 49 CFR part 661–Buy America Requirements and 49 CFR part 663–Pre-Award and Post- Delivery Audits of Rolling Stock Purchases.

Recipients, auditors, manufacturers, and suppliers should all be familiar with the most current revision of both 49 CFR parts 661 and 663.4 It is important to keep current on FTA guidance and final decisions affecting these regulations as published in the Federal Register or on the FTA website. The FTA website has links to the regulations, relevant Federal Register publications, waivers, and letters of interpretation, frequently asked questions, this vehicle Handbook, and related Dear Colleague letters.

In case of a conflict between the contents of this Handbook and FTA’s Buy America regulations and decisions, the regulations and decisions shall control.

1.2 Background

FTA’s Buy America requirements apply to third-party procurements by FTA grant recipients. The first Buy America provision was included in the Surface Transportation Assistance Act and is currently codified at 49 U.S.C. 5323(j) and implemented under 49 CFR part 661.5 This provision prohibits FTA from obligating funds for a project unless the steel, iron, and manufactured products used in the project are produced in the United States. Recipients are required

4 The regulations can be found online on the FTA “Buy America” webpage in the “Regulations” Section. https://www.transit.dot.gov/regulations-and-guidance/buy-america/buy-america.

5 49 U.S.C. 5323(j) (formerly sec.165 of the Surface Transportation Assistance Act of 1982 (Pub. L.

97– 424); as amended by sec. 337, Pub. L. 100–17; sec. 1048, Pub. L. 102–240; sec. 3020(b), Pub. L.

105–178; sec. 3023(i) and (k), Pub. L. 109–59; sec. 20016, Pub. L. 112-141; sec. 3011, Pub. L. 114-94);

49CFR 1.91.

https://www.transit.dot.gov/regulations-and-guidance/buy-america/buy

FEDERAL TRANSIT ADMINISTRATION 3

to conduct pre-award and post-delivery audits of rolling stock under 49 U.S.C.

5323(m), as implemented by 49 CFR part 663.

As a condition to receiving FTA grant funds for the purchase of rolling stock, recipients must certify compliance with Buy America and the pre-award and post-delivery audit requirements.

The recipient must either verify that the vehicles will contain the required domestic content6 by cost, or request a waiver from FTA. Also, if rolling stock frames or car shells are not produced in the U.S., but the steel or iron used is domestic, and the average cost of a rolling stock vehicle in the procurement is more than $300,000, then the steel or iron in the frames or car shells shall be included in the domestic content calculation.7 In addition, to comply with Buy America, final assembly of the vehicles must take place in the United States in accordance with 49 CFR § 661.11. At each phase in the vehicle procurement cycle, there are specific actions that a recipient must take to ensure compliance with 49 CFR part 661 Buy America Requirements and 49 CFR part 663–Pre-Award and Post-Delivery Audits of Rolling Stock Purchases.

Recipients purchasing vehicles must ensure that a pre-award audit, as described in 49 CFR §§ – 27, is completed before the recipient enters into a formal contract to purchase vehicles. Similarly, those recipients purchasing vehicles must also ensure that a post-delivery audit, as described in 49 CFR §§ 663.31

– 39, is completed before the title to the vehicle is transferred to the recipient or before the rolling stock is placed in revenue service, whichever comes first.

1.3 Organization of Handbook

This Handbook is divided into five major sections addressing the following areas:

• Section 1 – Introduction

• Section 2 – Pre-Award Audit

• Section 3 – Post-Delivery Audit

• Section 4 – Domestic Content Calculations

6 Effective October 1, 2015, Congress amended 49 U.S.C. 5323(j) to provide a phased increase in domestic content from more than 60 percent for FY16 & FY17, to more than 65 percent in FY18 & FY19 and more than 70 percent in FY20 and beyond. On September 1, 2016, FTA issued final policy guidance on implementing the phased increase in domestic content. This policy guidance is available at 81 FR 60278 and on FTA’s website at https://www.transit.dot.gov/buyamerica.

7 See 49 U.S.C. 5323(j)(5). Note that the general Buy America requirements for manufactured products in 49 CFR § 661.5 requiring 100% U.S. steel/iron and 100% of components to be manufactured in the United States are separate and apart from the 49 CFR § 661.11 requirements for rolling stock. Therefore, the structural steel requirements in § 661.5 do not apply to the vehicular steel used in rolling stock, as noted in § 661.5(c).

https://www.transit.dot.gov/buyamerica

FEDERAL TRANSIT ADMINISTRATION 4

• Section 5 – Frequently Asked Questions

• Appendices

Each major section presents guidance to recipients, auditors, manufacturers, and component/subcomponent suppliers.

A brief overview of each section of the Handbook is provided below.

Section 1 – Introduction – Describes the objectives, purpose, and scope of the Handbook, background, definitions, relevant references, and acronyms.

Section 2 – Pre-Award Audit – Recommends processes to the recipient for conducting effective pre-award audits. It includes general guidance on best practices during the vehicle solicitation (i.e., source selection and contract award), and contract execution phases to facilitate verification of compliance.

It also seeks to clarify requirements and provide guidance to manufacturers and its suppliers about how to prepare documentation to satisfy pre-award requirements.

Section 3 – Post-Delivery Audit – Provides recommended post-delivery audit processes, including a discussion about Post- Delivery Domestic Content Monitoring in Section 3.1.3.4. It includes guidance to clarify the post-delivery requirements of 49 CFR parts 661 and 663. This section includes guidance to assist recipients, auditors, vehicle manufacturers, and suppliers with various aspects of the post-delivery audits. It also describes the information necessary to substantiate compliance.

Section 4 – Domestic Content Calculations – Provides guidance and clarification on methods used to correctly calculate domestic content. This section discusses the distinctions in the treatment of domestic content for components and subcomponents and offers clarification on how to determine what is a component versus a subcomponent. Finally, this section provides an example of calculating domestic content with step by step instructions.

Section 5 – Frequently Asked Questions – Provides FTA responses to FAQs concerning the pre-award and post-delivery audits of rolling stock purchases. The responses also incorporate lessons learned from FTA Project Management Oversight Contractor’s (PMOC’s) oversight of federally funded projects.

Appendices – Include process checklists, sample certification forms, Buy America waiver references, and sample Buy America audit reports.

FEDERAL TRANSIT ADMINISTRATION 5

1.4 References

The principal references for FTA’s Pre-Award and Post-Delivery Audit and Buy America regulations are:

United States Code

• 49 U.S.C. Chapter 53, Section 5323(j)

• 49 U.S.C. Chapter 53, Section 5323(m) Legislation

• Surface Transportation Assistance Act of 1978, Pub. L. 95-599 Surface Transportation Assistance Act of 1982, Pub. L. 97-424

• Surface Transportation and Uniform Relocation Assistance Act of 1987, Pub.

L. 100-17 Buy America Act of 1988, Pub. L. 100-418

• The Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users, (SAFETEA-LU), Pub. L. 109-59

• The Moving Ahead for Progress in the 21st Century Act, (MAP-21), Pub. L.

112-141 Fixing America’s Surface Transportation (FAST) Act, Pub. L. 114-94

Regulations

• Buy America Requirements, 49 CFR part 661

• Pre-Award and Post-Delivery Audits, 49 CFR part 663

• Federal Acquisition Regulation; Foreign Acquisition, Exempted Articles, Materials and Supplies, 48 CFR part 25

1.5 Definitions

The definitions below are provided to assist the reader with terms used in the manual. Definitions from the Pre-Award and Post-Delivery Audits of Rolling Stock Purchases Rule (49 CFR part 663) and the Buy America Requirements Rule (49 CFR part 661) are identified in italics. Non-italicized definitions are provided for clarification to assist the reader in correctly implementing the requirements.

Audit: A review resulting in a report containing the necessary certifications of compliance with Buy America standards, purchaser’s requirements specifications, and, where appropriate, a manufacturer’s certification of compliance with or inapplicability of the Federal Motor Vehicle Safety Standards. (49 CFR § 663.5).

Auditor: Person or persons who verify Buy America compliance and prepare pre-award and post-delivery reports. Pre-award and post- delivery audits may be performed directly by recipient staff or by qualified independent auditors. An auditor conducting the pre- award audit must be qualified and independent from the manufacturer and the manufacturer’s agents.

FEDERAL TRANSIT ADMINISTRATION 6

Component: Any article, material, or supply, whether manufactured or unmanufactured, that is directly incorporated into the end product at the final assembly location (49 CFR § 661.11(c)). Appendices B and C to section 661.11 provide lists of typical components of buses and rail rolling stock, respectively.

End product: Any vehicle, structure, product, article, material, supply, or system, which directly incorporates constituent components at the final assembly location, that is acquired for public use under a federally-funded third-party contract, and which is ready to provide its intended end function or use without any further manufacturing or assembly change(s). A list of representative end products is included in Appendix A to 49 CFR § 661.3 End Products.

Final assembly: Final assembly is the creation of the end product from individual elements brought together for that purpose through application of manufacturing processes. If a system is being procured as the end product by the grantee, the installation of the system qualifies as final assembly. 49 CFR 661.11(r). Minimum final assembly requirements are described in Appendix D to section 661.11.

FMVSS: Federal Motor Vehicle Safety Standards issued by the National Highway Traffic Safety Administration under 49 CFR part 571.

Manufactured product: An item produced as a result of the manufacturing process (49 CFR § 661.3).

Manufacturing process: The application of processes to alter the form or function of materials or of elements of the product in a manner adding value and transforming those materials or elements so that they represent a new end product functionally different from that which would result from mere assembly of the elements or materials

(49 CFR § 661.3).

Post-delivery: The time period in the procurement process from when the rolling stock is delivered to the recipient until title to the rolling stock is transferred to the recipient or the rolling stock is put into revenue service, whichever is first (49 CFR § 663.5).

Pre-award: That period in the procurement process before the recipient enters into a formal contract with the supplier (49 CFR § 663.5).

Recipient: Any entity that is a recipient of Federal financial assistance from FTA (49

CFR § 663.5).

Rolling stock: Buses, vans, cars, railcars, locomotives, trolley cars and buses, ferry boats, vehicles used for guideways and incline planes. (49 CFR § 663.5).8

8 Note that Section 661.3 defines rolling stock to include vehicles used for support services.

However, pre-award and post-delivery audit requirements do not apply to vehicles used for support services.

FEDERAL TRANSIT ADMINISTRATION 7

Subcomponent: Any article, material, or supply, whether manufactured or unmanufactured, that is one step removed from a component in the manufacturing process and that is incorporated directly into a component, but does not include raw materials produced in the United States and then exported for incorporation into a component. (49 CFR § 661.11(f) & (h)-(k)).

Supplier: Any entity that provides components or subcomponents which are incorporated into the vehicle, either as part of the manufacturing process or during final assembly.

United States: The several States, the Commonwealth of Puerto Rico, the District of Columbia, Guam, American Samoa, the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands (49 CFR § 661.3).

1.6 Acronyms

CFR Code of Federal Regulations

DOT Department of Transportation

FAQ Frequently Asked Questions

FAST Fixing America’s Surface Transportation Act

FMVSS Federal Motor Vehicle Safety Standards

FTA Federal Transit Administration

OEM Original Equipment Manufacturer

QA/QC Quality Assurance/Quality Control

U.S. United States of America

U.S.C. United States Code

FEDERAL TRANSIT ADMINISTRATION 8

Pre-Award Audit

A recipient purchasing revenue service rolling stock with FTA funds must ensure that a pre- award audit under [49 CFR part 663] is complete before the recipient enters into a formal contract for the purchase of such rolling stock. 49 CFR § 663.21.

The Pre-Award Audit includes making and obtaining required certifications and reviewing the documentation provided by the manufacturer in support of its certification. The Pre-Award Audit is undertaken before contract award and is for the purpose of ensuring that the vehicles delivered by the manufacturer will comply with Buy America and the contract specifications.

This section addresses the requirements for a pre-award audit conducted pursuant to the Pre- Award and Post-Delivery Audits of Rolling Stock Purchases regulations.9 This section also provides some best practices for the recipient, auditor, manufacturer or supplier, when conducting or participating in a pre-award audit. While FTA does not require the use of these best practices, FTA does encourage all parties to adopt such procedures and processes to the extent they will help achieve compliance. Sample forms and certifications are provided in the appendices.

2.1 Requirements for Pre-Award Audit

Recipients of FTA financial assistance purchasing rolling stock must complete a pre-award audit before entering into a formal contract with a manufacturer.

Recipients may perform the audit processes using internal staff or hire third-party auditors to carry out all or some of the review functions on the recipient’s behalf. In either case, the person(s) conducting the pre-award audit must be qualified and independent from the manufacturer and the manufacturer’s agents.

Appendix A.2 provides useful pre-award checklists.

There are three certifications that must be included in the pre-award audit:

• Pre-Award Buy America Certification or Pre-Award Buy America Certificate of Non-Compliance

– Note: To complete this Certification, the recipient must receive the Manufacturer’s Certification of Compliance or Non-Compliance with Buy America Rolling Stock Requirements per 49 CFR § 661.12.

9 49 CFR part 663.

SECTION 2: PRE-AWARD AUDIT

FEDERAL TRANSIT ADMINISTRATION 9

• Pre-Award Purchaser’s Requirements Certification

• Pre-Award Certification of Compliance with or Inapplicability of Federal Motor Vehicle Safety Standards (FMVSS)

Table 1.

Pre-Award Audit

Certification Responsibilities

Recipient Manufacturer

Solicitation

Pre-Award Buy America Certification (49 CFR § 663.25) ü

Pre-Award Buy America Certificate of Non-Compliance (if applicable) (49 CFR § 663.25) ü

Certification of Compliance or Non-Compliance with Buy America Rolling Stock Requirements (49 CFR § 661.12) ü

Pre-Award Purchaser’s Requirements Certification (49

CFR § 663.27) ü

Pre-Award FMVSS Compliance Certification (49 CFR § 663.41) ü

Pre-Award Certification of FMVSS Inapplicability (49 CFR § 663.43) ü

The recipient is responsible for obtaining the Pre-award Buy America Certification, Purchaser’s Requirement Certification, and the FMVSS Certification (if applicable) or the Pre-Award Certification of FMVSS Inapplicability. In order for the recipient to certify Buy America compliance or that it received a Buy America waiver, the recipient must obtain and keep on file the bidder’s or the offeror’s (the manufacturer or supplier) Certification of Compliance (or Non- Compliance) with Buy America Rolling Stock Requirements.10

2.2 Pre-Award Buy America Certification

The recipient must keep on file a Pre-Award Buy America Certification that certifies that:

• There is a letter from FTA granting a waiver from the Buy America requirements for the vehicle procurement, or

• The recipient is satisfied that the rolling stock to be purchased meets the Buy America requirements after having reviewed itself or through an audit prepared by someone other than the manufacturer or its agent documentation provided by the manufacturer which lists—

– Component and subcomponent parts of the rolling stock to be purchased identified by manufacturer of the parts, their country of origin and costs;

and

10 See 49 CFR § 663.25 and 49 CFR § 661.12.

FEDERAL TRANSIT ADMINISTRATION 10

– The location of the final assembly point for the rolling stock, including a description of the activities that will take place at the final assembly point and the cost of final assembly.11

This subsection describes the Pre-Award Buy America Certification requirements and recommends best practices to facilitate compliance with the pre-award audit requirements.

2.2.1 Recipient’s Pre-Award Certification of an

Applicable Buy America Waiver

By statute, the procurement of rolling stock is subject to a waiver from the requirement that manufactured goods must contain 100 percent domestic content. Section 5323(j)(2)(C) allows FTA to waive Buy America requirements for rolling stock procurements by permitting domestic content less than 100 percent.12 The Buy America statute also includes three additional waivers: public interest waivers; non-availability waivers; and price differential waivers.13 The procedures for each of these statutory waivers are set forth in 49 CFR § 661.7.

Only waivers based on public interest or non-availability may be granted for a component or subcomponent in the case of the procurement of rolling stock.14

Generally, recipients, not the manufacturer, must apply for the Buy America waiver.15 However, a potential bidder, offeror or supplier may seek a public interest or non-availability waiver for a component or subcomponent.16 Waiver requests must be made before contract award and the process for obtaining a waiver is time-consuming. Therefore, recipients or manufacturers or suppliers who wish to seek a waiver from FTA are encouraged to apply for the waiver as early as possible in the procurement process.

2.2.2 Documentation for Pre-Award Buy America

Certification (Pre-Award Audit Report)

A recipient’s Pre-Award Audit Report will summarize the process the recipient has used to verify the proposed manufacturer’s compliance with the Buy America requirements.

The recipient must maintain a file for FTA review that includes the following documentation:

11 49 CFR § 663.25.

12 49 USC § 5323(j)(2)(C).

13 49 U.S.C. § 5323(j)(2)(A), (B), and (D).

14 See 49 CFR § 661.7(f).

15 49 CFR § 661.9(c).

16 49 CFR § 661.9(d).

FEDERAL TRANSIT ADMINISTRATION 11

• A copy of the Pre-Award Audit Report;

• The recipient’s Pre-Award Buy America Certification;

• The manufacturer’s certificate of compliance or non-compliance with Buy America rolling stock requirements (see Appendices B.1 and B.2 for certification templates);

• The pre-award purchaser’s requirements certification;

• The manufacturer’s FMVSS certification, if appropriate.

A sample Pre-Award Audit Report is included in Appendix C.1.

The recipient, or an auditor acting on the recipient’s behalf, will review the supporting cost documents in order to verify the estimated domestic content, especially if the manufacturer provides such domestic content only as a percentage. Manufacturers may provide estimated domestic content by cost either in dollar figures or as percentages of total materials cost. Therefore, auditors will verify that the manufacturer’s pre-award audit documentation supports all costs used in developing the domestic content list (worksheet) and request any additional information necessary in order to verify and certify compliance with Buy America. In the absence of purchase orders or supplier quotes, this verification may be based on, among other things, estimates or other sources used in developing the bid.

Manufacturers may have concerns about recipients’ review of cost data. The manufacturer and recipient may agree that the recipient will contract with an external auditor to conduct the manufacturer’s Buy America certification review—and assure the manufacturer that the cost data will be kept confidential.

Alternatively, a recipient may be able to keep its Buy America audit function independent by using a “firewall” and assuring the manufacturer that those employees of the recipient performing the Buy America audit are prohibited from disclosing any of the manufacturer’s proprietary data. Further, the review of documents may occur at the manufacturer’s place of business; there is no requirement that the recipient or its auditors obtain copies of the documents;

they need simply to review them. Whether conducted by a contractor or the recipient’s employees, the manufacturer may require the auditor to sign a non-disclosure agreement prior to reviewing the documents.

2.2.3 Best Practices for Pre-Award Buy America

Certifications

This subsection describes best practices to aid recipients, auditors, manufacturers, and suppliers in achieving compliance with the Pre-Award Buy America Certification requirements. This subsection includes descriptions of recommended processes and special considerations, beginning with key steps

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that recipients may take early in the solicitation process, as well as processes to verify compliance with domestic content and U.S. final assembly requirements.

Throughout the vehicle procurement process recipients should be alert to conditions that could pose challenges for Buy America compliance. Examples of these conditions include:

• Manufacturers who are inexperienced with the U.S. market and regulations;

• A new subcomponent/component supplier;

• Vehicles with the domestic content close to the minimum threshold;

• Components with the domestic content close to the minimum threshold;

• Manufacturers creating new U.S. final assembly facilities;

• Engineering changes, field modifications or contract change orders causing changes in project scope (completed projects must comply with Buy America requirements after all change orders have been implemented for all vehicles).

Recipients may adopt practices to lessen the risks of non-compliance. It is important to clearly define and communicate the recipients’ processes and expectations about verifying compliance to manufacturers throughout the procurement and production periods. Another useful tool that recipients may use is intermediate audits (see Section 3.1.3.4 for a discussion of Post-Delivery Domestic Content Monitoring). Some recipients also consider a requirement that vehicles have domestic content percentages even greater than the required domestic content percentage for vehicles and/or components to prevent inadvertent noncompliance with Federal requirements. Further, recipients may provide incentives for bidders to increase domestic content as long as those incentives are consistent with Federal and local law.

The following are some recommended best practices for the pre-award audit stage.

2.2.3.1 Solicitation Phase

As the pre-award audit must be completed prior to the recipient entering into a formal contract with a manufacturer or supplier, there are several steps that the recipient may take during the procurement process to help ensure Buy America compliance.

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Buy America requirements, e.g., domestic content requirements, supply chain implications, manufacturer’s certification, etc.

Recipient & Manufacturer or Supplier’s (Bidder or Offeror) monitoring responsibilities of the status of compliance during production (e.g., the Resident Inspector program).

Recipient’s processes for conducting Pre-Award, Intermediate and Post-Delivery Audit reviews.

Manufacturer’s procedures for collecting, reviewing, and maintaining supporting documentation.

Recipient’s procedures and requirements for collecting, reviewing, and maintaining supporting documentation.

Recipient’s procedures for managing requests for waivers from Buy America requirements.

Recipient’s process for selecting a Buy America auditor.

A pre-proposal conference is a good opportunity for recipients to highlight important Buy America requirements and identify specific Buy America related documentation that manufacturers will be expected to include in their bids or produce at the pre-award audit phase. For example, recipients may want to emphasize that in a competitive sealed procurement, a bidder must submit a signed certification with the bid. If a bidder submits the wrong certification, or certifies both compliance and non-compliance, the bid generally will be deemed non-responsive.17

Also during the solicitation period, recipients will communicate to manufacturers their expectations for periodic status reporting on Buy America compliance from the manufacturer(s), including if there are any changes to Buy America content or final assembly that may occur during vehicle production due to modifications or substitutes of component or subcomponent suppliers.

Periodic reporting helps prevent post- delivery surprises in changes in domestic content and potential issues regarding compliance. For reference, a Proposal Compliance Checklist can be found in Appendix A.1.

2.2.3.2 Verifying Domestic Content Compliance

Preparing and verifying domestic content compliance is a key element of the pre-award audit process. Errors and misinterpretations during the calculation process can undermine the overall domestic content percentage and jeopardize the vehicle’s compliance with Buy America requirements. Please see Section 4, Domestic Content Calculations, for detailed instructions on calculating domestic content.

While conducting a pre-award audit, auditors should pay close attention to components with the highest dollar or percentage values. The impact on the vehicle’s overall domestic content may be impacted significantly if a high-dollar component is no longer considered to be of domestic origin under 49 CFR § 661.11(g). Section 661.11(g) provides that a component may be considered

Table 2.

Recommended

Discussion Topics during Solicitation

Phase of Procurement

17 49 CFR § 661.13(b).

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of domestic origin, if “more that 60 percent of the subcomponents of that component, by cost, must be of domestic origin, and the manufacture of the component must take place in the United States. If, under the terms of this part, a component is determined to be of domestic origin, its entire cost may be used in calculating the cost of domestic content of an end product.”18 If a component’s domestic content falls below the minimum threshold at any point during the production cycle, it could reduce the vehicle’s domestic content percentage and potentially cause the entire vehicle to fall out of compliance. Therefore, components with domestic content percentages that are close to the minimum domestic content threshold should be noted and followed up with during and at the end of the production cycle.

Similarly, when reviewing the manufacturer’s pre-award documentation, auditors should pay particular attention to vehicles that are expected to have a total domestic content that is close to the minimum domestic content threshold.

Subsequent change orders or errors in the calculations or documentation (even to smaller value components) could potentially alter the total domestic content and result in noncompliance.

Finally, auditors should confirm that labor costs for final assembly are not included in the domestic content by cost calculations.19

2.2.3.3 Verifying U.S. Final Assembly

Another essential step in the pre-award audit process is to verify that the proposed procurement would comply with the U.S. final assembly requirements.

In order to verify that the proposed final assembly activities comply with Buy America requirements, the recipient must review documentation provided by the manufacturer to determine whether the manufacturer’s planned final assembly activities in the United States are adequate to meet the requirements of 49 CFR § 661.11 and Appendix D to § 661.11 (required documentation is discussed in Section 2.2.2).

The specific scope of final assembly activities may vary from manufacturer to manufacturer and even from vehicle to vehicle. Therefore, in order to verify compliance, the auditor may perform due diligence through a variety of methods, including, among other things, reviewing:

• The manufacturer’s flow chart(s) or detailed drawing(s) of the production work station;

• The manufacturer’s work instructions;

18 Note that under the September 1, 2106 FTA Policy Guidance, increase in the required domestic content (i.e., more than 65% or 70%), requires a similar increase in domestic content under 49 CFR § 661.11(g).

19 49 CFR § 661.11(p).

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• The manufacturing plans;

• The assembly drawings (usually kept or posted on a production (shop) floor).

Final assembly costs include the proposed direct labor associated with the U.S.

final assembly production line. For the pre-award audit, costs may be established from the manufacturer’s estimate of hours, subcontractors’ labor quotes, and actual costs from similar projects. Auditors must collect as much information as needed to determine whether the final assembly costs reflect the minimum requirements for final assembly as described in Appendix D to 49 CFR § 661.11.

2.2.3.4 Supplier Buy America Certificate at Pre-Award

The manufacturer is responsible for ensuring that suppliers and subcontractors comply with Buy America requirements. At the pre-award audit state, manufacturers will need to demonstrate their process for verifying suppliers’ compliance with Buy America. This may take the form of obtaining certifications and other documentation or information from suppliers.20 A suggested template that captures relevant information is discussed in Section 4.5 and a sample is provided in Appendix B.6, “Sample Supplier Buy America Certification.”

In order to certify compliance, manufacturers and suppliers must be knowledgeable about the correct method of calculating a component’s percentage of domestic content. Section 4, “Domestic Content Calculations,” provides detailed instructions for calculating domestic content.

2.3 Pre-Award Purchaser’s Requirements

Certification

A recipient of FTA financial assistance purchasing revenue service vehicles must certify pre- award that:

1. The rolling stock it is purchasing is the same product described in its solicitation specification; and

2. The proposed manufacturer is a responsible manufacturer with the capability to produce a vehicle that meets the recipient’s specification (Purchaser’s Requirements).21

A sample Pre-Award Purchaser’s Requirements Certification is provided in Appendix B.5. This certification must be retained by the recipient and available for FTA inspection.

20 While not required, to verify compliance with the pre-award audit and Buy America requirements, the manufacturer may consider conducting supplier qualification reviews (e.g., via site visits), detailed reviews of supplier documents, first article inspections, qualification testing, and source/pre-shipment inspections to verify suppliers’ certifications.

21 49 CFR § 663.27.

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2.3.1 Best Practices for Purchaser’s Requirements

Certification at Pre-Award

Verification of the information required in the Pre-Award Purchaser’s Requirements Certification typically is conducted by the recipient’s procurement office and the technical evaluation team before contract award.

To verify that the proposed manufacturer’s bid complies with the recipient’s specification, the recipient will compare the solicitation specification for the vehicle with the proposed manufacturer’s technical bid. A manufacturer’s technical information can include documentation submitted with the manufacturer’s bid proposal, including, but not limited to, specifications, product brochures, technical data sheets, bills of material, drawings, etc.

Recipients also need to assess a proposed manufacturer’s capacity and capability to produce the specific vehicles. The scope and depth of the assessment will vary depending on the size and complexity of the procurement and the past performance of the manufacturer. The solicitation should include requirements that bidders provide information about their manufacturing capacity and capability to produce the specified vehicles. This information may include the following:

• Past performance on previous vehicle orders;

• Qualifications of key personnel;

• Facility layouts/drawings, production line layout/flowchart;

• Plant output capacity (i.e., max. production rate per week);

• Staffing counts by craft;

• Readiness of fixtures for carbody construction;

• Quality assurance and control plan; and

• Other items necessary to execute the work.

Additionally, recipients should verify a manufacturer’s financial viability as part of the review to certify compliance with the pre-award purchaser’s requirements.

At a minimum, recipients should review the proposed manufacturer’s public financial statements (if available).

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2.4 Pre-Award Federal Motor Vehicle Safety

Standards (FMVSS) Certification of Compliance or Inapplicability

The Pre-Award FMVSS Certification is a requirement for most, if not all, motor vehicle procurements. The National Highway Traffic Safety Administration (NHTSA) has a legislative mandate under title 49 U.S.C., chapter 301, Motor Vehicle Safety, to issue FMVSS regulations. The term “motor vehicle” is defined for the purpose of the statute and regulations that NHTSA administers as “a vehicle that is driven or drawn by mechanical power and manufactured primarily for use on public streets, roads, and highways, but does not include a vehicle operated only on a rail line.”22 These Federal safety standards are the minimum safety performance requirements for motor vehicles.

Recipients purchasing motor vehicles, such as buses, must keep on file its certification that it received, both at the pre-award and post-delivery stage, a copy of the manufacturer’s self- certification information that the vehicle complies with the relevant FMVSS or a copy of the manufacturer’s self-certification that the vehicle is not subject to the FMVSS.23 (See Appendix and B.7 for sample certifications.)

22 See 49 U.S.C. § 30102(a)(7).

23 49 CFR §§ 663.41, 663.43(a).

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Post-Delivery Audit

A recipient purchasing revenue service rolling stock with FTA funds must ensure that a post- delivery audit under this part is complete before title to the rolling stock is transferred to the recipient, or before the rolling stock is put into service, whichever is first. 49 CFR § 663.31 and § 663.5(b).

This section describes the processes, certifications, and documentation required to validate the post-delivery audit. Appendix A.3 provides useful post-delivery checklists.

This section also provides best practices to assist in complying with the regulations.

The post-delivery audit is similar to the pre-award audit and follows the same multi-step process as the pre-award audit described in Section 2. In the post-delivery audit, however, recipients verify that the manufacturer complied with applicable Buy America requirements in the production of the rolling stock and this verification therefore must be based on actual data rather than plans and proposals. The conclusions of this review are captured in a Post-Delivery Audit Report.

Recipients continue to have the ultimate responsibility for ensuring compliance with all Federal requirements, post-delivery. As discussed in Section 2, Buy America requirements flow down from the FTA recipients to the manufacturers through the contract documents.

In turn, the manufacturer has the responsibility to document the domestic content and the responsibility to maintain documentation that demonstrates compliance with Buy America regulations.24

Post-delivery, a manufacturer certifies that the requirements of the Buy America provisions were satisfied for the total vehicle(s) and all of its components, which includes collecting and evaluating suppliers’ documentation. The manufacturer will ensure that any Supplier Buy America Certificates (See Appendix B.6) are valid and can provide to auditors the supplier information necessary to demonstrate compliance.

24 49 CFR § 661.15(d).

SECTION 3: POST-DELIVERY AUDIT

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Because all parties have a responsibility to ensure compliance by verifying domestic content percentages and domestic manufacturing locations, manufacturers will communicate Buy America requirements to their component suppliers and expect suppliers to perform due diligence of their subcomponent suppliers.

3.1 Requirements for Post-Delivery Audit

The post-delivery audit period is the “time period in the procurement process from when the rolling stock is delivered to the recipient until title to the rolling stock is transferred to the recipient or the rolling stock…