Notice of National Exceptions to Section 1605 of the Recovery Act (Buy American Requirement) Applicable to Public and Indian Housing Recovery Act Funds, 46783-46784 [E9-21958]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 74, Number 175 (Friday, September 11, 2009)]
[Notices]
[Pages 46783-46784]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-21958]



[[Page 46783]]

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5344-N-01]


Notice of National Exceptions to Section 1605 of the Recovery Act 
(Buy American Requirement) Applicable to Public and Indian Housing 
Recovery Act Funds

AGENCY: Office of the Assistant Secretary for Public and Indian 
Housing, HUD.

ACTION: Notice.

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SUMMARY: In accordance with the American Recovery and Reinvestment Act 
of 2009 (Pub. L. 111-05, approved February 17, 2009) (Recovery Act), 
and implementing guidance of the Office of Management and Budget (OMB), 
this notice advises that certain national exceptions to the Buy 
American requirement of the Recovery Act have been determined 
applicable for work using Capital Fund Recovery Formula and Competition 
(CFRFC) grant funds.

FOR FURTHER INFORMATION CONTACT: Dominique G. Blom, Deputy Assistant 
Secretary for Public Housing Investments, Office of Public Housing 
Investments, Office of Public and Indian Housing, Department of Housing 
and Urban Development, 451 7th Street, SW., Room 4210, Washington, DC 
20410-4000, telephone 202-402-8500 (this is not a toll-free number). 
Persons with hearing- or speech-impairments may access this number 
through TTY by calling the toll-free Federal Information Relay Service 
at 800-877-8339.

SUPPLEMENTARY INFORMATION: The Recovery Act awarded an additional 
$4,000,000,000 for the ``Public Housing Capital Fund.'' Section 1605(a) 
of the Recovery Act, the ``Buy American'' provision, states that for 
Recovery Act funds used for a project for the construction, alteration, 
maintenance, or repair of a public building or public work, all of the 
iron, steel, and manufactured goods used in the project must be 
produced in the United States.
    Section 1605(b) of the Recovery Act provides certain exceptions to 
the Buy American requirement. Section 1605(b) provides that the Buy 
American requirement shall not apply in any case or category in which 
the head of a Federal department or agency finds that: (1) Applying the 
Buy American requirement would be inconsistent with the public 
interest; (2) iron, steel, and the relevant manufactured goods are not 
produced in the U.S. in sufficient and reasonably available quantities 
or of satisfactory quality, or (3) inclusion of iron, steel, and 
manufactured goods will increase the cost of the overall project by 
more than 25 percent. Section 1605(c) provides that if the head of a 
Federal department or agency makes a determination pursuant to section 
1605(b), the head of the department or agency shall publish a detailed 
written justification in the Federal Register.
    In accordance with section 1605(c) of the Recovery Act and OMB's 
implementing guidance published on April 23, 2009 (74 FR 18449), this 
notice advises the public that the Secretary has determined that 
certain exceptions to the Buy American requirement are applicable to 
work using CFRFC grant funds based on findings made under section 
1605(b). The exceptions determined applicable, without the necessity of 
a grantee to seek an individual exception determination, are as 
follows:
    1. If another Federal agency (e.g., Department of Commerce, 
Department of Energy or Environmental Protection Agency) has determined 
that an exception to the Buy American requirement is applicable under 
section 1605(b), for a project including public housing, HUD will 
accept that agency's determination and permit the public housing agency 
(PHA) (HUD program grantee) to apply that exception for the remainder 
of HUD-assisted work in that project.
    2. If another HUD Program Office (e.g., Office of Community 
Planning and Development) has determined that an exception to the Buy 
American requirement is applicable under section 1605(b) for a project, 
and an analysis supports its application to another request, HUD's 
Office of Public and Indian Housing (PIH) may accept that determination 
and permit the PHA to apply that exception to the remainder of the 
CFRFC grant work in that project.
    3. Where the size of the CFRFC grant is less than $100,000 
(currently the 24 CFR part 85 simplified acquisition threshold), the 
Buy American requirement is not applicable.
    4. Where the size of a contract funded with CFRFC grant assistance 
is less than $100,000, regardless of the size of the PHA, the Buy 
American requirement is not applicable.
    5. For any project substantially under contract or under way prior 
to acceptance of CFRFC funds, the Buy American requirement is not 
applicable.
    In addition to these five national exceptions, there is also an 
existing list of nonavailable articles listed at 48 CFR 25.104(a) (FAR 
List). The procedures to apply if any of those articles are 
manufactured goods needed in the project covered by the Buy American 
requirement are found at 48 CFR 25.103(b)(1). See also 2 CFR 176.80.
    Additional information about these exceptions has been provided in 
the PIH Buy American Implementation Guidance, which can be found on 
HUD's Web site at: https://www.hud.gov/offices/pih/publications/notices/
.
    HUD's foremost expectation is that PHAs will use American iron, 
steel, and manufactured goods throughout their Recovery Act assisted 
projects. However, there are certain circumstances under which 
exceptions to the Buy American requirement will be appropriate in 
accordance with section 1605(b). The legislative history and 
Congressional intent expressed in the record for the Recovery Act make 
clear that the priority of Congress is to provide capital funding to 
projects as quickly as possible to create jobs, assist those most 
impacted by the recession and stabilize state and local government 
budgets. Further evidence of the urgency and the overarching 
Congressional directives in providing this assistance for CFRFC 
programs are the specific requirements that the funding is for: (1) 
Priority investments; (2) priority capital projects that can be awarded 
contracts based on bids within 120 days from the date the funds are 
made available to the PHAs (i.e., July 18, 2009, for Capital Fund 
Recovery Formula (CFRF) grant funds); and (3) PHA priority capital 
projects that are already underway or included in the 5-year capital 
fund plans required by the section 5A of the United States Housing Act 
of 1937 (1937 Act) (42 U.S.C. 1437c-1). The national exceptions to the 
Buy American requirement determined applicable to CFRFC grants funds 
are all supportive and essential to carrying out these Congressional 
mandates and balanced with the interests and intent of the Buy American 
requirement.
    The Recovery Act has also imposed obligation and expenditure of 
funds requirements that are stricter than the 1937 Act requirements, 
which generally provide PHAs two years to obligate grant funds and four 
years to expend those funds. Specifically, the Recovery Act requires 
PHAs to obligate 100 percent of CFRF grant funds by March 17, 2010. All 
unobligated funds will be unilaterally recaptured. PHAs must expend at 
least 60 percent of the grant by March 17, 2011, and if less than 60 
percent is expended, all unexpended funds will be unilaterally 
recaptured. PHAs must expend 100 percent of the grant by March 17, 
2012, or all unexpended funds will be unilaterally recaptured. 
Extension of the obligation and expenditure deadlines are not permitted 
under the Recovery Act.

[[Page 46784]]

These strict obligation and expenditure requirements demonstrate the 
financial and construction expediency requirements that the PHAs must 
meet along with the additional requirement of Buy American and the need 
for transparency.
    The five exception determinations listed above are based on a 
determination of inconsistency with public interest. The FAR List is 
based insufficient and not reasonably available quantities and of a 
satisfactory quality. At this time, HUD is not adding to the FAR List 
or creating a HUD list. HUD does not need to provide any additional 
justification for use of items currently on the FAR List of 
domestically nonavailable items at 48 CFR 25.104(a). If a PHA wants to 
use items on the FAR List or to have items added to the FAR List or to 
a HUD list, the PHA must follow the PIH Buy American Implementation 
Guidance.
    The five national exceptions determined applicable are based on 
public interest are necessary to: (1) Avoid delay in completion and 
restoration of housing for low-income families and the achievement of 
the Recovery Act deadlines; (2) avoid delays in the start of 
construction and modernization of public housing that will jeopardize 
jobs; (3) avoid the possibility of additional funding gaps on 
termination of certain contracts and price differentials cause by 
reprocurement of goods and equipment; (4) avoid loss of funding for 
critical projects; and (5) address current and emerging situations 
presented by PHAs. The national exception for PHAs where the size of 
the CFRFC grant is less than $100,000 will cover 30 percent of the PHAs 
(often referred to as ``small PHAs'') and will amount to a relatively 
small impact (approximately $52 million of the nearly $4 billion in 
grant awards). A determination was made that an exception is also 
applicable to PHAs where the size of a contract funded with CFRFC grant 
assistance is less than $100,000 (which is currently the 24 CFR part 85 
simplified acquisition threshold fixed at 41 U.S.C. 403(11)) in part 
because under 24 CFR 85.36(d)(1), these are small purchase procedures 
that are relatively simple and informal procurement methods for 
securing goods. If small purchase procedures are used by a PHA, price 
or rate quotations are to be obtained from at least three qualified 
sources.
    PHAs have brought to HUD's attention that every public housing 
development and modernization project involves the use of literally 
thousands of miscellaneous, generally low-cost components that are 
essential for but incidental to the construction and modernization, and 
are incorporated into the physical structure of the project, such as 
nails, hinges, other hardware, electrical, plumbing and finishing 
components. These incidental components are subject to the Buy American 
requirement, but unlike major components, the country of manufacture 
and the availability of alternatives are not readily or reasonably 
identifiable prior to procurement in the normal course of construction 
and modernization of public housing. Over 2,300 PHAs have less than 250 
units in inventory, and many of these PHAs are located in rural areas 
or small towns. HUD understands that these PHAs in particular often 
have to search further in order to procure American-made items and find 
contractors familiar with the Buy American requirement. For these PHAs, 
it takes additional time to procure, and there are increased costs 
associated with bringing materials and contractors in from a great 
distance. Under the requirements of the Recovery Act, HUD is concerned 
that it could be disproportionate to the costs and time involved for 
the PHA or their contractor and would not be feasible for PHAs to find 
alternatives. In an effort to address this concern, HUD sought to 
identify the scope of these incidental components within the 
construction and modernization of public housing, consulted with PHAs 
and PHA trade associations and considered the number of ways and the 
number of sources of these components.
    Recognition of the lack of availability and access to resources as 
well as relief from administrative burdens are critical to the success 
of small PHAs and consistent with Recovery Act objectives. As with any 
new requirement, implementation of the Buy American requirement will 
take analysis and resources that are not readily available to small 
PHAs. The need for the expeditious and efficient use of the CFRFC funds 
balanced with the long established recognition of decreased 
availability of resources available to small PHAs clearly supports 
exceptions 3 and 4 above.
    Based on the information resulting from this process, the 
determination was made that these exceptions were appropriate because 
compliance with the Buy American requirement would be disproportionate 
to the cost and time involved for PHAs and delay work on critical 
public housing projects and the jobs associated with those projects. 
This public-interest justification does not reach the conclusion that 
the inclusion of iron, steel, and manufactured goods produced in the 
United States will automatically increase the cost of the overall 
project by more than 25 percent. Cost is a factor in all PHA 
procurements and must be considered in accordance with 24 CFR part 85 
and the cost principles at 2 CFR part 225. Cost is in part a factor in 
all of HUD's public interest national exceptions. HUD has decided that 
cost-based exceptions must be determined on a case-by-case basis and 
submitted to HUD for review under the PIH's Buy American Implementation 
Guidance.
    For additional information see https://www.hud.gov/offices/pih/publications/notices/.

    Dated: September 4, 2009.
Sandra B. Henriquez,
Assistant Secretary for Public and Indian Housing.
[FR Doc. E9-21958 Filed 9-10-09; 8:45 am]
BILLING CODE 4210-67-P