I TOLD YOU THIS WOULD HAPPEN…..
Canadian municipal leaders threatened to retaliate against the “Buy America” movement in the United States on Saturday, warning trade restrictions will hurt both countries’ economies. The Federation of Canadian Municipalities endorsed a controversial proposal to support communities that refuse to buy products from countries that put trade restrictions on products and services from Canada. The measure is a response to a provision in the U.S. economic stimulus package passed by Congress in February that says public works projects should use iron, steel and other goods made in the United States.
ORIGINAL POST FOLLOWS
The Trade Wars are coming! The Federal Register is the official daily publication for rules, proposed rules, and notices of Federal agencies and organizations, as well as executive orders and other presidential documents. The below proposed interim rule for BAA requirement for ARRA construction projects will become law and included in the Federal Acquisition Regulation:
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 1, 5, 25, and 52
[FAC 2005-32; FAR Case 2009-008; Item I; Docket 2009-0008, Sequence 1] RIN 9000-AL22
Federal Acquisition Regulation; FAR Case 2009-008, American Recovery and Reinvestment Act of 2009 (the Recovery Act)–Buy American Requirements for Construction Material
AGENCY: Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Interim rule with request for comments.
SUMMARY: The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (Councils) have agreed on an interim rule amending the Federal Acquisition Regulation (FAR) to implement the American Recovery and Reinvestment Act of 2009 (Pub. L. 111-5) (Recovery Act) with respect to the Buy American provision, section 1605in Division A. This rule does not cover procurements funded withFederal financial assistance such as Federal grants. Additional guidance will be provided by the Office of Management and Budget with respect to the application of section 1605 to procurements funded withFederal financial assistance.
A. Background This interim rule implements the Recovery Act with respect to the unique Buy American provision, section 1605 of the Recovery Act, by adding a new Subpart 25.6, entitled “American Recovery and Reinvestment Act–Buy American Act–Construction Materials,” and adding new provisions and clauses at Part 52, with conforming changes to Subparts 1.1, 5.2, 25.0, 25.2, and 25.11.
On February 17, 2009, the President signed Public Law 111-5, the American Recovery and Reinvestment Act of 2009, which includes a number of provisions to be implemented in Federal Government contracts. Among these provisions is section 1605, entitled “Buy American.”
It prohibits the use of funds appropriated or otherwise made available by the Act for any project for the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States.
The law requires that this prohibition be applied in a manner consistent with U.S. obligations under international agreements, and it provides for waiver under three circumstances: 1. Iron, steel, or 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 contract by more than 25 percent; or 3. Applying the domestic preference would be inconsistent with the public interest.
The implementation of section 1605 is expected to stimulate the economy by increasing and maintaining jobs in the United States in the steel, iron, and manufactured construction materials industries and providing new opportunities to construction firms to win contracts for construction and public works projects.
B. Discussion Because of the need to appropriately segregate the unique Buy- American provisions of the Recovery Act from the requirements of the Buy American Act and the Trade Agreements Act, the Councils have decided to include them in a separate subpart of FAR Part 25. Subpart 25.6, currently reserved, will be entitled “American Recovery and Reinvestment Act–Buy American Act–Construction Materials.”
A reference to Subpart 25.6 was added to the “Scope” section of Subpart 25.2, Buy American Act–Construction Materials. Subpart 25.6 includes a policy statement at 25.602 that repeats the prohibition against using funds appropriated by the Recovery Act for U.S. construction projects to purchase iron, steel, or other manufactured goods that were not produced in the U.S. It also notes that unmanufactured construction materials remain covered by the provisions of the Buy American Act. The exceptions to this policy (see Background section above) are similar to those for the Buy American Act, but the Recovery Act requires publication in the Federal Register of the detailed written justification that the agency used to make an exception to the statute.
The Councils welcome comments on additional steps that may enhance transparency consistent with the goals of the Recovery Act. In order to enable implementation of the policy, the interim rule includes definitions of “steel,” “manufactured construction material,” “unmanufactured construction material,” “domestic construction material,” and “foreign construction material.”
These definitions are drawn from existing Federal domestic-sourcing laws and the longstanding interpretations that have evolved from them. It also includes a cross reference to the definition of “public work” at FAR 22.401, which defines “public building or public work” to mean “uilding or work, the construction, prosecution, completion, or repair of which * * * is carried on directly by authority of, or with funds of, a Federal agency to serve the interest of the general public regardless of whether title thereof is in a Federal agency.”
Because section 1605 does not specify a requirement that significantly all the components of construction material must also be domestic, as does the Buy American Act, the definition of domestic construction material under this interim rule does not include a requirement relating to the origin of the components of domestic manufactured construction material. Unmanufactured construction material is not specifically addressed in section 1605 of the Recovery Act. However, the Recovery Act’s purpose of creating jobs and stimulating domestic demand is well served by applying the Buy American Act to unmanufactured construction material. The rules for preaward determination of the inapplicability of section 1605 and the Buy American Act are at FAR 25.604. Section 25.605 addresses the evaluation of offers containing foreign construction material based on an approved exception for unreasonable cost.
If the contracting officer determines that an exception based on unreasonable cost of domestic construction material applies, the contracting officer must evaluate the offer by adding to the offered price– (1) 25 percent of the offered price, if foreign iron, steel, or other manufactured goods are used as construction material based on unreasonable cost of comparable manufactured domestic construction material; and (2) 6 percent of the value of foreign unmanufactured construction material included in the offer based on unreasonable cost of comparable domestic unmanufactured construction material. The text of Subpart 25.6 makes it clear that a determination to waive the applicability of section 1605 should be made prior to award.
However, section 25.606 recognizes certain limited circumstances in which a postaward waiver could be made, but only with adequate consideration from the contractor. A contractor’s noncompliance with section 1605 is addressed at FAR 25.607. Prescriptions for the use of all of the solicitation provisions and contract clauses applicable to FAR Part 25 are [[Page 14625]] included in a single subpart, 25.11.
The Councils have modified section 25.1102, entitled “Acquisition of Construction,” to add a new paragraph that substitutes four new provisions and clauses (with appropriate alternates), to be used when contracting with funds appropriated by the Recovery Act, for the four clauses otherwise used in construction contracts to implement the Buy American Act and U.S. obligations under applicable trade agreements.
Specifically, when using Recovery Act appropriated funds, contracting officers will use– 52.225-21, Required Use of American Iron, Steel, and Manufactured Goods–Buy American Act–Construction Materials, instead of 52.225-9, Buy American Act–Construction Materials; 52.225-22, Notice of Required Use of American Iron, Steel, and Other Manufactured Goods–Buy American Act–Construction Materials, instead of 52.225-10, Notice of Buy American Act Requirement– Construction Materials; 52.225-23, Required Use of American Iron, Steel, and Other Manufactured Goods and Buy American Act–Construction Materials Under Trade Agreements, instead of 52.225-11, Buy American Act–Construction Materials under Trade Agreements; and 52.225-24, Notice of Required Use of American Iron, Steel, and Other Manufactured Goods and Buy American Act–Construction Materials under Trade Agreements, instead of 52.225-12, Notice of Buy American Act Requirement–Construction Materials under Trade Agreements.
The clauses are unique in that, for Recovery Act-funded construction projects, the 25 percent price adjustment factor for non- U.S. iron, steel, and other foreign manufactured construction material excepted from the section 1605 requirement on the basis of unreasonable cost is applied to the entire price of the project, not only to the cost of the foreign materials.
The 6 percent adjustment for the Buy American Act is retained and applied to the cost of foreign unmanufactured goods excepted from the requirements of the Buy American Act on the basis of unreasonable cost. Given the applicability of the Recovery Act to iron, steel, and manufactured goods, the definition of “component” is unnecessary in these clauses, because the definition of domestic construction material no longer includes a requirement relating to the origin of components.
However, if trade agreements apply to the acquisition, the use of the provision and clause 52.225-23 and 52.225-24, respectively, ensures that eligible construction material from designated countries is treated in accordance with Subpart 25.4. No evaluation factor is applied to offers on the basis of using eligible construction material.
This provision and clause retain the same basic processes that are used in the standard construction clauses, except for the specific changes that have been addressed relating to new requirements of section 1605 of the Recovery Act. In the Recovery Act conference report, Congress expressed its intent that least developed countries be excepted from section 1605 and that they retain their status as designated countries. However, with respect to Caribbean Basin countries, Congress did not express a similar intent. Therefore, Caribbean Basin countries are not included as designated countries with respect to the Recovery Act.