FHWA's Expanded Application of Buy America to Utility Relocations Causes Consternation, Delays

by Nossaman LLP
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As we have previously reported, the Federal Highway Administration (FHWA) has issued guidance holding that "Buy America applies to any utility work that is accomplished as a result of a Federal-aid highway project", unless the utility work cannot legally be reimbursed by the State.  This conclusion is based on an amendment to Buy America found in Section 1518 of MAP-21, which requires the application of Buy America to all contracts eligible for assistance within the scope of a project (as defined by the NEPA document), if at least one contract for the project is funded with Federal-aid highway funds.  The rule applies even if no federal funds are used to reimburse the utility work.

The relatively sudden application of Buy America to utility work that was not previously subject to its requirements has had serious consequences.  Utilities in many states are refusing to sign agreements that incorporate the Buy America requirements, which threatens to delay and increase costs for many projects.  Reasons advanced for this refusal vary, but many appear to be based on practical concerns; for example, a utility states that it does not have any experience in complying with Buy America, its current procurement processes do not yield the information necessary to confirm compliance, or it is not certain that it will be able to procure quality Buy America-compliant materials.

For a project sponsor, the consequences of noncompliance with Buy America could be dire.  According to FHWA (as stated on FHWA's MAP-21 website), failure to incorporate Buy America provisions where required ". . . would render all contracts within the scope of the NEPA document ineligible for Federal-aid highway funds." 

State DOTs, other project sponsors and related groups have expressed the need for guidance and practical assistance from FHWA in the application of this new law.  For example, in a February 12, 2013 letter to outgoing Transportation Secretary Ray LaHood, the American Public Works Association (APWA) and the National Association of County Engineers (NACE) requested guidance and future rule making to the effect that "Buy America requirements are not applied to contracts or work under an agreement with a utility that is not funded by title 23 programs".  Others have suggested a grace period for implementation of the new rules.  Discussion at a recent meeting of the AASHTO Subcommittee on Right of Way, Utilities, and Outdoor Advertising Control found that notwithstanding the guidance posted on FHWA's website, so far the new rules are not being interpreted or applied uniformly throughout the country. 

We understand that FHWA anticipates issuing a Notice of Proposed Rule Making for regulations dealing with these Buy America compliance issues sometime in 2013.  We urge FHWA to act quickly in developing its proposed regulations, and to pursue whatever other measures are necessary to resolve this impasse as soon as possible.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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