» Legislative Alerts Archive

Background

The National Office is pleased to provide you with this Legislative Alert, which contains an analysis of the Updated Implementation Guidance for the American Recovery and Reinvestment Act of 2009 released by the White House Office of Management and Budget (OMB) on April 3, 2009. A copy of the guidance is available by clicking here . This is the second formal guidance document published by OMB to provide further information on implementation of the American Recovery and Reinvestment Act (ARRA) and distribution of allocated stimulus funds, including various provisions and requirements contained in the Act. The 175-page document is intended to supplement, amend, and clarify the original OMB guidance issued February 18, 2009. This most recent guidance attempts to clarify the process of implementing the ARRA, including the specific implementation requirements and reporting requirements attached to expenditures of ARRA funds.

The most important section of the guidance for the clean water community, is Appendix 9, which is OMB’s Interim Final Guidance for Federal Financial Assistance. This interim final guidance provides important direction for implementation of the state reporting requirements, Buy American requirements, and Davis-Bacon prevailing wage requirements of the ARRA. Many NACWA members have expressed concern over the confusion surrounding the application of Buy American requirements, and have stated that the uncertainty regarding the Buy American provision has prevented them from contracting for otherwise shovel-ready infrastructure projects with ARRA funds. This Alert will distill the key information regarding Buy American requirements contained in the OMB’s interim final guidance in an attempt to provide some clarification. This Alert will also direct NACWA members that are being negatively impacted by Buy American requirements to submit comments detailing their experiences directly to OMB for consideration during the comment period for the interim final guidance.

It is important for NACWA members to note that while the April 3 OMB guidance addressed in this Alert provides some additional information regarding Buy American requirements, the most important document on this subject for clean water utilities is likely to be the U.S. Environmental Protection Agency’s (EPA) forthcoming guidance on Buy American requirements for ARRA funds distributed via the clean water state revolving fund (CWSRF). This EPA guidance, currently under development and to be released in the next few weeks, is expected to address Buy American requirements in more detail, including how the Agency will go about granting waivers to Buy American provisions. NACWA will be reviewing the draft guidance and working with EPA to ensure it meets the needs of the clean water community. NACWA will distribute it to its members as soon as the document is made public.

OMB Interim Final Guidance and Buy American Requirements

OMB’s Interim Final Guidance for Federal Financial Assistance, found at Appendix 9 of the April 3 OMB memorandum, took effect on April 3, 2009, and is expected to be published in the Federal Register in the coming days. It will also be published in the Code of Federal Regulations (CFR) at 2 CFR Part 176. There will be a 60-day public comment period from the date of publication of the interim final guidance in the Federal Register. OMB will consider all comments received on the interim final version in development of the final guidance.

The bulk of the interim final guidance addresses application of Buy American provisions under the ARRA. Section 176.60 of the guidance reiterates the statutory Buy American language of the ARRA, which restricts the use of ARRA funds to projects using iron, steel, and manufactured goods produced in the United States. The only exceptions apply where:

1. Iron , steel, or relevant manufactured goods are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality;

2. Inclusion of iron, steel, or manufactured goods produced in the United States will increase the cost of the overall project by 25 percent; or

3. Applying the domestic preference would be inconsistent with the public interest.

The guidance states in §176.80 that in order for any of these exceptions to apply to clean water utilities, EPA must first make a waiver determination exempting a specific product or item from Buy American provisions. The OMB guidance does not specify how these waivers might be used with regard to CWSRF projects, although it is anticipated that EPA’s forthcoming guidance will further explain the waiver process as it applies to wastewater utilities.

However, §176.70 in the interim final guidance does provide some additional clarification regarding what kinds of construction products used in an ARRA project fall under Buy American requirements with the following language:

1. Production in the United States of the iron or steel used in the project requires that all manufacturing processes must take place in the United States, except metallurgical processes involving refinement of steel additives. These requirements do not apply to iron or steel used as components or subcomponents of manufactured goods used in the project.

2. There is no requirement with regard to the origin of components or subcomponents in manufactured goods used in the project, as long as the manufacturing occurs in the United States.

Additionally, §176.140 provides the following definition of what a “manufactured good” is for purposes of Buy American requirements under the ARRA:

“Manufactured good” means a good transported to the construction site for incorporation into the building or work that has been—

1. Processed into a specific form and shape; or
2. Combined with other raw materials to create a material that has different properties than the properties of the individual raw materials.

NACWA believes the language of §176.70 and §176.140 provides some clarity and important flexibility for clean water utilities in meeting Buy American requirements by suggesting that Buy American does not apply to the parts, components, subparts, or subcomponents used in a manufactured good as long as the final assembly of that manufactured good occurs the United States at a location other than the construction site of the project installing the manufactured good. This, for example, could allow a utility funding a project with ARRA money to use a pump or piece of electronic equipment (i.e. a good that has been processed into a specific form or shape) containing foreign-made parts or components, as long as the pump or electronic equipment receives its final assembly anywhere in United States other than at the plant or construction site where the pump or equipment is to be installed. Additionally, Buy American requirements do not apply to any iron or steel used as parts, components, subparts or subcomponents in manufactured goods.

NACWA has discussed the OMB guidance with other stakeholders that also interpret §176.70 and §176.140 to allow manufactured goods as part of ARRA projects with foreign components as long as final assembly for the manufactured good is done in the United States. Many stakeholder groups, including corporations that supply equipment used in water and wastewater treatment, believe this language will allay many of their initial concerns regarding Buy American requirements. Given the flexibility provided by the OMB guidance regarding the use of subparts and subcomponents, NACWA encourages clean water utilities bidding projects with ARRA funds to work with their contractors and clarify that use of manufactured goods with foreign components and subcomponents is acceptable as long as the final assembly of the product is done in the United States. Contractors should be encouraged in turn to work with suppliers to find American produced products or find products containing foreign parts that are assembled or can be assembled in the United States, thus meeting Buy American requirements. NACWA members are also encouraged to share a copy of the OMB interim final guidance with their legal counsel for a further analysis of how the Buy American requirements as interpreted by the OMB document may affect a particular utility or project.

Comments to OMB

Although OMB’s April 3 Interim Final Guidance for Federal Financial Assistance provides some clarification regarding the ARRA Buy American provision, NACWA recognizes that many members will likely still have questions and concerns as to how Buy American may affect their specific projects. Accordingly, NACWA encourages members facing continued problems with Buy American requirements to submit comments to OMB within the 60-day comment period provided by the interim final guidance. Specifically, members should share information with OMB about their specific projects, explaining how Buy American provisions are preventing use of ARRA funds to complete the project. Members should also include information, if possible, detailing the number of new jobs their project could create if it were not being blocked by Buy American provisions. Such comments may help OMB revise the final version of the guidance, expected to be issued sometime after the 60-day comment period, and incorporate changes that give wastewater infrastructure projects more flexibility in meeting Buy American requirements. Members are asked to copy NACWA on any comments sent to OMB, as the Association also plans to file its own set of comments.

Next Steps

EPA is currently reviewing the OMB interim final guidance and is using it in development of specific guidance to EPA Regions and states regarding application of Buy American requirements to ARRA funds distributed through the CWSRF. EPA’s guidance document will be released within the next few weeks and is expected to address how EPA will address waiver requests from utilities requesting ARRA funds for infrastructure projects but unable to meet Buy American requirements. The guidance may also address more precisely how the term “Buy American” will be defined with regard to ARRA projects financed through CWSRF funds, perhaps further explaining the exception for components or subcomponents of manufactured goods set forth in the OMB guidance. Again, NACWA has received confirmation that the Association and other municipal organizations will have the opportunity to review and comment on EPA guidance before it is finalized.

NACWA will continue to track developments regarding ARRA implementation and application of Buy American provisions very closely, and will report on any developments. NACWA encourages its members to contact National Office staff, including Pat Sinicropi at This e-mail address is being protected from spambots. You need JavaScript enabled to view it   or Nathan Gardner-Andrews at This e-mail address is being protected from spambots. You need JavaScript enabled to view it   with any additional questions or concerns regarding these issues, as well as copies of any comments sent to OMB.