Buy America Waiver Notification |
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Nicole R. Nason
Federal Highway Administration
6 April 2020
[Federal Register Volume 85, Number 66 (Monday, April 6, 2020)]
[Notices]
[Pages 19212-19214]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07145]
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DEPARTMENT OF TRANSPORTATION
Federal Highway Administration
Buy America Waiver Notification
AGENCY: Federal Highway Administration (FHWA), U.S. Department of
Transportation.
ACTION: Notice.
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SUMMARY: This notice provides information regarding FHWA's finding that
it is appropriate to grant a Buy America waiver to the Inter-Island
Ferry Authority (IFA) of Alaska for procurement of foreign iron and
steel components for refurbishment of two ferry vessels, specifically
including (i) two sets of reduction gear replacement parts, one for the
M/V Stikine ferry and the other for the M/V Prince of Wales ferry; and
(ii) one set of pitch control units for the M/V Prince of Wales ferry.
DATES: The effective date of the waiver is April 7, 2020.
FOR FURTHER INFORMATION CONTACT: For questions about this notice,
please contact Mr. Gerald Yakowenko, FHWA Office of Program
Administration, (202) 366-1562, or via email at
Gerald.Yakowenko@dot.gov. For legal questions, please contact Mr.
Patrick Smith, FHWA Office of the Chief Counsel, (202) 366-1345, or via
email at Patrick.C.Smith@dot.gov. Office hours for FHWA are from 8:00
a.m. to 4:30 p.m., E.T., Monday through Friday, except Federal
holidays.
SUPPLEMENTARY INFORMATION:
Electronic Access
An electronic copy of this document may be downloaded from the
Federal Register's home page at: http://www.archives.gov and the
Government Publishing Office's database at: http://www.access.gpo.gov/nara.
Background
The FHWA's Buy America regulation, 23 CFR 635.410, requires a
domestic manufacturing process for any steel or iron products
(including protective coatings) that are permanently incorporated in a
Federal-aid construction project. The regulation also provides for a
waiver of the Buy America requirements when the application would be
inconsistent with the public interest or when satisfactory quality
domestic steel and iron products are not produced in the United States
in sufficient and reasonably available quantities. This notice provides
information regarding FHWA's finding that it is appropriate to grant
IFA a Buy America waiver for procurement of non-domestic iron and steel
components for refurbishment of two ferry vessels, specifically
including (i) two sets of reduction gear replacement parts, one for the
M/V Stikine ferry and the other for the M/V Prince of Wales ferry; and
(ii) one set of pitch control units for the M/V Prince of Wales ferry.
The reduction gear replacement units and pitch control units are not
available to be produced using 100 percent domestic steel or iron.
Background on the IFA System: The IFA system provides the only
ferry service to Prince of Wales (POW) Island, which is the fourth-
largest island in the United States with a landmass of 2,577 square
miles. It has a population of approximately 6,000. The POW Island is
located west of the City of Ketchikan, but is not accessible by road or
bridge. Because of the lack of road access, residents and visitors rely
heavily on the IFA ferries to reach POW Island or return to the
mainland. The IFA ferries make daily runs between Ketchikan and Hollis,
a census-designated place on POW Island. The ferries include passenger
and vehicle decks. They carry more than 50,000 passengers and 12,000
vehicles annually.
The IFA provides critical ferry service to businesses and
individuals on POW Island. For example, island residents rely on ferry
service for access to health care, employment, and markets in Ketchikan
including for groceries, goods, and services. In addition, many
businesses on POW Island and in Ketchikan rely on this daily
transportation connection to transport goods and customers. Finally,
passengers brought to the island from the mainland support the island's
tourism industry.
Considering the lack of access to POW Island by road or bridge, the
IFA system is the only reliable and affordable mode of transportation
for many users. The IFA system is critical to users in a way that not
all Federal-aid-supported ferry systems are: It is the only available
route for owner-occupied vehicles to access the island. Although POW
Island may also be accessed by more expensive air travel or much slower
cargo barges, the IFA system provides a reliable, middle alternative
that is essential to many of its users (including low-income users who
cannot afford alternative modes). It also provides transportation
security on
[[Page 19213]]
days when weather prevents travel by air.
The IFA is a public, non-profit corporation organized under
Alaska's Municipal Port Authority Act. The IFA is governed by a Board
of Directors who are appointed by the member communities. Although the
IFA is separate from the State of Alaska, its operations are dependent
on subsidies from the State government. The IFA reports that it runs
approximately 75 to 80 percent of its operational costs out of incoming
revenue from fares; subsidies from the State cover the remainder. The
IFA maintains that current fiscal problems in Alaska have put those
subsidies at risk and make it highly unlikely that IFA or Alaska will
be able to cover significant cost overruns on the ferry refurbishment
project.
Need for refurbishment of IFA ferries: The IFA owns two ferries,
the M/V Stikine and the M/V Prince of Wales. The M/V Prince of Wales
was built in 2002 and the M/V Stikine was built in 2005. The IFA needs
to refurbish both ferries to keep them in service and allow them to
continue operating safely. The IFA reports that the anticipated service
life for these vessels, with proper maintenance and refurbishment, may
be up to 50 years. Thus, IFA anticipates that the ferries may have a
remaining service life of 25 years to 35 years if they are maintained
and refurbished as required. During preliminary engineering, the IFA
confirmed that most parts needed for the refurbishment will comply with
FHWA's Buy America requirements. The IFA identified only two parts
needed for the refurbishment project that could not satisfy FHWA's Buy
America requirements: (i) Reduction gear replacement parts for both
ferries; and (ii) pitch control units for the M/V Prince of Wales.
Based on estimates received from IFA, the two parts requiring
waivers constitute approximately 30 percent of the total estimated
project cost of approximately $3 million. The IFA has confirmed that
both the reduction gear replacement parts and the pitch control units
can be installed domestically in the shipyard in Ketchikan, Alaska.
The existing reduction gears on both vessels have exceeded their
recommended service life and must be replaced. The IFA maintains that
there are no satisfactory replacement reduction gears made domestically
meeting FHWA's Buy America requirement that will ensure: (i)
Synchronization with its existing propulsion (or powertrain) system;
and (ii) continued safe operation of the ferries. The existing
reduction gears on both ferries were manufactured by Reintjes GmbH in
Germany. Considering the age and hours of use of the existing reduction
gears, the IFA maintains that there is urgent need for the replacement
parts to ensure the continued safe transportation of its users. The IFA
also maintains the replacement is urgent due to the importance of the
IFA system to the communities it serves in terms of access and
connectivity. The service life of the replacement reduction gears would
be 13 to 15 years.
The IFA also maintains that the existing pitch control units in the
M/V Prince of Wales are obsolete and must be replaced. It maintains
that there are no satisfactory pitch control units made domestically
meeting FHWA's Buy America requirement that will ensure: (i)
Synchronization with its existing propulsion system; and (ii) continued
safe operation of the ferry. The IFA also maintains that timely
replacement of this part is necessary to ensure the continued safe
transportation of its users and due to the importance of the IFA system
to the communities it serves in terms of access and connectivity. The
service life of the replacement pitch control units would be 15 to 20
years.
Waiver Request and Supporting Information: The IFA originally
submitted a Buy America waiver request to FHWA for the reduction gear
replacement parts and pitch control units in September 2018. Prior to
submitting its waiver request, IFA sought but failed to identify
domestic manufacturers for these products. Consistent with Executive
Order 13788, after receiving the request, FHWA requested that IFA seek
to maximize the use of goods, products, and materials produced in the
U.S. on the project. In response to this request and several iterations
of follow-up questions from FHWA, IFA spent the ensuing 12 months
seeking to identify domestic manufacturers for the parts that it had
not identified in its original search or, if full compliance was not
possible, foreign manufacturers that could maximize use of domestic
content by using greater quantities of U.S. steel. These search
activities continued between September 2018 and September 2019.
Although IFA did not identify compliant products, IFA provided
information to FHWA supporting its waiver request, including:
Information describing the domestic content
characteristics of the manufactured products needed, including the
sources and assembly locations of those products;
information supporting the technical necessity of these
specific products for the continued safe operation of the ferries and
demonstrating that alternative designs were infeasible;
information documenting efforts to maximize domestic
content even if full compliance was not possible, including efforts to
have foreign manufacturers incorporate domestic steel; and
information describing the effects of denying the request,
including the infeasibility of completing the acquisitions without
Federal funding.
For the reduction gears on both vessels, IFA determined that only
the original equipment manufacturer, Reintjes GmbH, could produce
replacement parts to synchronize with its existing system and ensure
continued safe operation. Due to existing supply contracts and warranty
requirements for its parts, Reintjes GmbH was unable to offer an option
to produce the reduction gears using United States steel.
For the pitch control units on the M/V Prince of Wales, IFA
reported the following: It identified a manufacturer in Denmark that
could potentially produce the parts using United States steel. However,
considering the revised cost of raw materials and the transportation
costs for sending the materials from the United States to Denmark,
among other factors, this option increased the cost estimate for the
pitch control units by approximately $750,000 compared to pitch control
units produced with foreign steel (including both parts and
installation). This doubled the total cost estimate for the parts. The
IFA also identified a manufacturer in Sweden that could produce an
alternate propulsion system for the M/V Prince of Wales using mostly
Unites States content, but this option would increase the project cost
by at least $1.5 million compared to pitch control units produced with
foreign steel (including both parts and installation). This more than
tripled the total cost estimate for refurbishing the pitch control
units. Moreover, the manufacturer could not guarantee that the
alternate propulsion system would properly synchronize with all other
existing parts on the M/V Prince of Wales. The IFA determined that
these alternatives would be cost prohibitive: If required to purchase
one of these options, IFA would not be able to refurbish the vessel.
This would effectively end the remaining service life of the M/V Prince
of Wales, which could otherwise continue in operation for decades if
properly refurbished and maintained. The IFA also maintains that the
current fiscal situation in Alaska makes the State government unwilling
to increase the existing subsidy to absorb significant cost overruns
relative
[[Page 19214]]
to IFA's estimate for pitch control units produced with foreign steel.
Public Comments on Waiver Request: In accordance with the
Consolidated Appropriations Act of 2016 (Pub. L. 114-113) and the
Continuing Appropriations Act of 2017 (Pub. L. 114-223), FHWA published
a notice of intent to issue a waiver on its website, https://www.fhwa.dot.gov/construction/contracts/waivers.cfm?id=155, on February
19, 2020. The FHWA received six comments in response to the
publication. Four comments supported the waiver, one comment was
generally opposed to the waiver, and one comment was nonresponsive. The
comment FHWA considered non-responsive appeared to request FHWA to
publish notice of its waiver finding in the Federal Register, which
FHWA does through this notice. The comment opposing the waiver did not
offer any information on the availability of compliant products, nor
did it suggest specific, additional actions that IFA could take to
maximize its use of goods, products, and materials produced in the
United States. Thus, IFA has not received any new information
indicating that the subject parts can be produced by domestic
manufacturers.
Finding and Request for Comments
Based on all the information available to the Agency, FHWA
concludes that there are no domestic manufacturers of the reduction
gear replacement parts and pitch control units needed for refurbishment
of the M/V Stikine and M/V Prince of Wales by IFA. This finding is only
for the procurement of non-domestic iron and steel components for
refurbishment of two ferry vessels, specifically including (i) two sets
of reduction gear replacement parts, one for the M/V Stikine ferry and
the other for the M/V Prince of Wales ferry; and (ii) one set of pitch
control units for the M/V Prince of Wales ferry.
The IFA and its contractors and subcontractors involved in the
procurement of the reduction gear replacement parts and pitch control
units are reminded of the need to comply with the Cargo Preference Act
in 46 CFR part 38, if applicable.
In accordance with the provisions of Section 117 of the SAFETEA-LU
Technical Corrections Act of 2008 (Pub. L. 110-244, 122 Stat. 1572),
FHWA is providing this notice as its finding that a waiver of Buy
America requirements is appropriate. The FHWA invites public comment on
this finding for an additional 5 days following the effective date of
the finding. Comments may be submitted to FHWA's website via the link
provided to the waiver page noted above.
Authority: 23 U.S.C. 313; Pub. L. 110-161, 23 CFR 635.410
Nicole R. Nason,
Administrator, Federal Highway Administration.
[FR Doc. 2020-07145 Filed 4-3-20; 8:45 am]
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