Fiscal Year 2014 Federal Appropriations

Congress Approves Domestic Procurement Preference Policy for State Revolving Funds

The United States House and Senate negotiators reached, last evening, an agreement on a $1.1 trillion omnibus appropriations package, the “Consolidated Appropriations Act, 2014.” If enacted, the spending bill will fund the federal government’s operations through the balance of FY 2014. The bill includes all 12 “appropriations bills,” including the oft controversial Interior, Environment and Related Agencies appropriations bill, which includes appropriations to the Environmental Protection Agency (EPA).

Section 436 of the omnibus includes a domestic procurement preference applicable to the EPA’s Clean Water State Revolving Fund (CWSRF) and Drinking Water State Revolving Fund (DWSRF). The preference is applicable to iron and steel products produced in the United States, which is defined to include municipal castings, pipes, fittings, hydrants, restraints and other products.

Notably, the appropriation to the SRFs (for the annual federal capitalization of the SRFs) was increased for FY 2014. In 2013 the SRFs received $2 billion in capitalization. The President’s budget request recommended cutting that to $1.9 billion. The House proposed only $600 million in its FY 2014 Interior appropriations draft. The Senate sought to increase the funding of these important programs, and their proposed number of $2.35 billion was included in the omnibus. The Buy America preference will apply both to FY 2014 appropriations for the federal capitalization and other monies in the SRFs from prior year appropriations, loan repayments and payments on interest.

Section 436 of the Consolidated Appropriations Act, 2014

Language Generally

Section 436 of the Consolidated Appropriations Act, 2014 (“the Omnibus”) includes a procurement preference for “iron and steel products” procured with grants or financing from the Clean Water State Revolving Fund or Drinking Water State Revolving Fund. Section 436 will, for the first time since the 2009 American Recovery and Reinvestment Act appropriations, apply a domestic “Buy America” preference to CWSRF and DWSRF-aided projects.

The language appears to mirror, exactly, language included in the Chairman’s mark of the House’s FY 2014 Interior, Environment and Related Agencies Appropriations Act.
The language lacks terms, such as hereafter, interpreted by the Comptroller General to infer permanence. As such, the provision will likely be interpreted to apply to FY 2014 SRF projects only.
The language applies to “funds made available” by the SRFs, which should be construed to apply to both the FY 2014 and prior year federal capitalization appropriations and to other monies in the SRFs including loan repayments and interest.

“Iron and Steel Products”

Section 436 applies to “iron and steel products.”

That term is defined to include products made primarily of iron or steel, including pipes, fittings, municipal castings, hydrants, tanks, flanges, pipe clamps, valves, structural steel, reinforced precast concrete and other “construction materials.”
Although the definition is not crafted in an illustrative manner, terms such as “construction materials” should result in a broad application of the preference to most iron and steel products incorporated into SRF projects.
The scope of this provision represents a compromise as it does not include the term “manufactured goods,” for which there was a significant amount of opposition, including opposition from the agency.

Waivers

The language includes standard waivers of the domestic procurement preference. Waivers of the preference are available when:

In the public interest;
The iron and steel products are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality;
Inclusion of the iron and steel products produced in the United States will increase the cost of the overall project by 25%.
- As drafted, this waiver should not be applied in cost comparison between two products.

Section 436 requires that the Administrator of the EPA make waiver requests available to the public and offer the public an opportunity to comment on the waiver requests in advance of the making a determination on the waiver request;

The waiver transparency requirement provides for informal public notice, including on the EPA’s website, but not notice in the Federal Register;
The 15 days allotted to the public to comment on the waiver request reflects a similar 15 day informal notice and comment period administered by the Federal Highway Administration relative to the Buy America preference applied to federal-aid surface transportation projects.

Waiver for Projects “in the Pipeline”

Section 436 also waives its requirements for projects for which the engineering plans and specifications were approved by a state agency in advance of the enactment of the Omnibus.

The EPA, using the “public interest” waiver of Section 1605 of the ARRA granted a similar waiver for projects already “in the pipeline” after enactment of the ARRA in 2009.

Section 436 permits the EPA to retain 0.25 percent of the funds appropriated to it to administer the preference and conduct oversight.

Trade Agreement Consistent

In accordance with Section 1605 of the ARRA, Section 436 of the Omnibus requires that the preference be administered in accordance with recipient obligations under international trade agreements.

Joint Explanatory Statement and “De Minimis” Waiver

The joint explanatory statement includes a description of the provision and an acknowledgment that the EPA may issue a waiver of the domestic preference for de minimis amounts of iron and steel building materials. In view of the EPA’s administration of a de minimis waiver to the ARRA Buy America requirement, this is concerning but not entirely unexpected.

The EPA issued a similar waiver when it administered the ARRA appropriations.
The de minimis waiver was initially manipulated to permit the purchase of non-complying iron and steel products, including some very large products that did not meet description of “incidental components” to which EPA stated the waiver applied.
In subsequent guidance the EPA narrowed the manner in which aid recipients could apply the de minimis waiver.

Updates

EPA Establishes Email for American Iron and Steel Requirement Inquiries

The EPA has established a single email address for all questions and comments concerning the American Iron and Steel requirement. The address is: SRF_AIS@epa.gov . Use the email address for all general inquiries and concerns regarding the American Iron and Steel requirement, including specific questions and comments about products, projects, and availability.

Do not use the new address for comments on waiver requests or to submit confidential business information.

Waiver requests and comments concerning waiver requests should still go to the cwsrfwaiver@epa.gov for CWSRF waiver requests and to dwsrfwaiver@epa.gov for DWSRF waiver requests.