I Will Find You: DOJ Uses Its Particular Set Of Skills To Enforce Domestic Preference Rules For Amtrak Projects

McCarter & English Blog: Government Contracts & Export Controls

“Now, the next part is very important…”

As scrutiny of domestic preference requirements increases in the wake of the Biden Administration’s Executive Order on Ensuring the Future Is Made in All of America by All of America’s Workers, the time is now for contractors to brush up on those requirements, examine supply chains to identify non-domestic content, and implement internal policies and procedures to ensure they are compliant with the domestic preference rules applicable to their contracts.  On May 20, 2021, the US Attorney’s Office for the Eastern District of Pennsylvania announced a settlement under which a contractor agreed to pay $54,983 and implement “enhanced compliance measures” to resolve claims arising from its use of Chinese-made parts during a fire alarm installation and renovation project at Amtrak’s 30th Street Station in Philadelphia, PA. While the settlement amount is relatively minimal, the settlement is remarkable in that it telegraphs that funding agencies, along with the Department of Justice (DOJ), are willing to go to great lengths to be a nightmare for suppliers that do not adhere to the “Buy America” statutes and regulations.

The Buy America rules that apply to Amtrak projects are distinct from the Buy American requirements applicable to purchases by most federal agencies found at 41 U.S.C. § 8301 et seq. and the Federal Acquisition Regulation (FAR) Part 25. Amtrak is governed by two statutes with respect to its Buy America requirements: 49 U.S.C. § 22905(a) and 49 U.S.C. § 24305(f). The statute at 49 U.S.C. § 22905(a) applies when Amtrak is operating under a grant or performing a contract for another grantee that is applying 49 U.S.C. § 22905(a). This statute provides that the Secretary of Transportation may obligate funds for a project only if the steel, iron, and manufactured goods used in the project are produced in the United States. Waivers are available if the application of the restriction would be inconsistent with the public interest; the steel, iron, and goods produced in the United States are not produced in a sufficient and reasonably available amount or are not of a satisfactory quality; rolling stock or power train equipment cannot be bought and delivered in the United States within a reasonable time; or including domestic material would increase the cost of the overall project by more than 25 percent.

The statute at 49 U.S.C. § 24305(f) applies when Amtrak is spending funds from its own capital or operating grant from the Federal Railroad Administration. This statute requires Amtrak to buy only (1) unmanufactured articles, material, and supplies mined or produced in the United States, or (2) manufactured articles, material, and supplies manufactured in the United States substantially from articles, material, and supplies mined, produced, or manufactured in the United States. Under this statute, the restriction only applies when the cost of those articles, material, or supplies bought is at least $1 million. Amtrak may request a waiver from the requirements, which will be granted if the Secretary of Transportation determines that (1) for particular articles, material, or supplies, (i) the requirements are inconsistent with the public interest, (ii) the cost of imposing those requirements is unreasonable, or (iii) the articles, material, or supplies, or the articles, material, or supplies from which they are manufactured, are not mined, produced, or manufactured in the United States in sufficient and reasonably available commercial quantities and are not of a satisfactory quality; or (2) rolling stock or power train equipment cannot be bought and delivered in the United States within a reasonable time.

The DOJ’s announcement did not specify which set of Buy America requirements was at issue in the recent settlement; however, the use of Chinese-made parts would be problematic under the requirements set forth in either statute. This enforcement action signals to unwary contractors up and down the government supply chain that there is no project—or part—too small to escape the government’s scrutiny, particularly now that infrastructure projects are a key focus of the Biden Administration, with investment in America’s rail system serving as a key component of the Biden Administration’s American Jobs Plan and its calls for a $165 billion investment to modernize national and local transit systems to help meet rider demand—an investment that will double federal spending for public transit.

This increased focus on and funding for infrastructure projects will give rise to more enforcement activity, particularly with respect to the Department of Transportation Buy America requirements. When speaking about the American Jobs Plan, President Biden has stated: “Not a contract will go out, that I control, that will not go to a company that is an American company with American products, all the way down the line, and American workers.” Thus, contractors wishing to obtain and retain the billions of federal dollars contemplated under the American Jobs Plan should spend time now acquiring their own particular set of skills to ensure Buy America(n) compliance—skills that will help them avoid being “taken” by agency Office of Inspector General or DOJ enforcement actions.

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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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