Court Vacates FHWA 90-Percent Threshold and Miscellaneous Products Exemptions Aspects of FHWA Secretary’s 2012 “Buy America” Exceptions Memorandum

LEGAL ALERT: Court Vacates FHWA 90-Percent Threshold and Miscellaneous Products Exemptions Aspects of FHWA Secretary’s 2012 “Buy America” Exceptions Memorandum

By recent order, the United States District Court for the District of Columbia vacated the Federal Highway Administration (FHWA) 2012 Memorandum regarding exceptions to the “Buy America” preferences for use of domestic steel and iron on federally funded highway programs. Among other things, the Memorandum exempted manufactured items that were at least 90 percent steel or iron, and other miscellaneous steel and iron products, from the Buy America requirements.

 

The Buy America preference requirement is grounded in several evolutions of the Federal Surface Transportation Assistance Act. One aspect of the related acts was the preference for domestic unmanufactured and manufactured products purchased with monies funded in conjunction with those acts. Those preferences included domestic steel and iron products, both manufactured and unmanufactured.

 

However, the acts allowed the Secretary of the U.S. Department of Transportation to exempt the Buy America preference when the Secretary deemed Buy America compliance would be inconsistent with the public interest. The 2012 Memorandum resulted from the Secretary’s most recent exercise of that exemption authority, and was intended to clarify earlier exception determinations by the Secretary.

 

Using his exemption authority, in the 2012 Memorandum, the Secretary exempted from Buy America policy application two categories of products: 1) manufactured products made up of less than 90 percent steel or iron; and 2) miscellaneous or “off-the-shelf” steel or iron products. The case before the District Court involved challenge to those policy exemptions.

 

In short, the court agreed with the challenging plaintiffs and held the 2012 Memorandum violated the Administrative Procedures Act (APA) because: a) the 90 percent threshold had not been subjected to required notice and comment rulemaking processes, and was itself arbitrary and capricious; and b) the miscellaneous products exceptions likewise were not subjected to required notice and comment rulemaking processes under the APA and also for Buy America waivers.

 

Thus far, the FWHA has not issued any additional clarification regarding Buy America implementation, nor has it initiated any related rulemaking processes. The overall impacts remain to be seen, but pending any overturning of the decision on appeal, or such rulemaking processes, all steel and iron for new federally funded highway projects must be reviewed for compliance with the Buy America requirements, and potential exemptions .

 

FWHA personnel have suggested that vacating the 2012 Memorandum is likely to significantly impact utility components. However, there will be other impacts as well. For more information about this sea-change for steel and iron used for federally funded highway programs, or other government or construction contracting matters, Vandeventer Black's Construction and Government Contracts Team attorneys are poised to assist. Please visit the firm's website to learn more about the firm and our professionals at www.vanblacklaw.com.

Cybersecurity Regulations: Implementation Update Per New DOD Interim Rule

Our October 16, 2015 blog discussed DOD's cybersecurity regulatory changes. This blog updates that information.

After issuing its earlier rule, the DOD has issued a new interim rule delaying most compliance implementation until December 31, 2017. This is apparently in recognition of the difficulties and expense associated with implementation as noted in our earlier blog.

In that same vein, the interim rule amends flowdown requirements to limit subcontractor coverage to those providing "operationally critical support." But, although most compliance implementation is delayed, informing DOD of certain cybersecurity shortcoming at the time of awards remains a current requirement.

The interim rule is available at this link as of the time this blog was published: https://www.federalregister.gov/articles/2015/12/30/2015-32869/defense-federal-acquisition-regulation-supplement-network-penetration-reporting-and-contracting-for?utm_campaign=email+a+friend&utm_medium=email&utm_source=federalregister.gov.

Federally-Funded Highway Projects Facing Impacts by Federal Cargo Preference Act Changes

By Memorandum dated December 11, 2015, the Federal Highway Administration (FHWA) changed the FHWA’s legal position regarding applicability of the Cargo Preference Act (CPA) to federally-funded highway projects. That Memorandum reversed and superseded contrary position in place since 1988.

The Law. Congress passed the CPA in 1954 to promote a U.S. maritime transportation system. The CPA’s policies are intended to provide a revenue base that will retain and encourage a privately-owned and operated merchant marine. The CPA achieves these goals by requiring “at least 50 percent of any equipment, materials or commodities procured, contracted for or otherwise obtained with funds granted, guaranteed, loaned, or advanced by the U.S. Government . . . [to] be transported on privately owned United States-flag commercial vessels, if available.”

The Change. The CPA’s 50% requirement is not interpreted as applying to federally-financed highways - including state projects with federal funding. But there is an exception if the goods or materials are independently acquired.

As example, fabricated steel, tunnel boring machines, large-capacity cranes, and other goods or materials bought specifically for FHWA funded projects must comply with the CPA transportation requirements; however, compliance is not required for shipments of cement, asphalt, or other materials regularly purchased to replenish existing inventories.

Implementation. The FHWA has directed implementation of the change for all federal-aid projects awarded after February 15, 2016. Pending development of FHWA-specific clauses, the recommended clauses in 46 CFR 381.7(a)-(b) are expected to be incorporated by reference into the federal-aid projects. 

The Impact. Contractors must now consider whether federal-aid projects will require CPA compliance, including associated logistical coordination and cost implementation into bids and proposals. Practically, CPA will still not apply to many projects since most materials will not require maritime transportation, and project Buy America Act (BAA) requirements may further dampen CPA impact absent presidential waiver of the BAA. . But, as companies consider their options regarding foreign sources of specially-purchased equipment and project materials, CPA compliance requires attention.

For more information regarding the CPA or other government or construction contracting matters, Vandeventer Black's Construction and Government Contracts Team attorneys are poised to help our clients navigate those needs. Please visit the firm's website to learn more about the firm and our professionals at www.vanblacklaw.com.

"Final DRAFT" of VDOT Road and Bridge Specifications Published for Comment

Vandeventer Black Construction and Government Contracts Group attorneys Pat Genzler and John Lockard have prepared the below summary of the newly published Final DRAFT of VDOT's proposed Road and Bridge Specification changes for review by the industry and the Federal Highway Administration. More information will be available at the Firm's website as well.

FINAL REVISED VDOT ROAD AND BRIDGE SPECIFICATIONS PUBLISHED AND AVAILABLE FOR COMMENT
 
Since the Virginia Department of Transportation (VDOT) proposed changes in 2013 to its Road and Bridge Specifications, Vandeventer Black lawyers have been working with industry representatives to try and initiate a more collaborative process about them. Vandeventer Black lawyer Pat Genzler, as General Counsel for the Virginia Transportation Construction Alliance (VTCA), has helped lead those efforts.

VDOT has now published the revised specifications in Final DRAFT form, and they are available as of this posting at the following VDOT website:

http://www.virginiadot.org/business/const/construction_division_road_and_bridge_specification_book_2016_final_draft.asp

VDOT is now opening the complete book to final review from the industry and the Federal Highway Administration. The same webpage includes a form for comments on the Final DRAFT.

Separately, on December 28, 2015 VDOT announced interim revisions to the 2007 Road and Bridge Specifications would be effective with the First January 2016 Advertisement (January 28, 2016). Those revisions are available in full on the VDOT website at http://www.virginiadot.org/business/const/spec-default.asp.


Despite prior industry input, Final DRAFT includes various changes significantly shifting risks from VDOT to contractors, including among those the following Section 100 changes:

-        Increased requirements for pre-bid review of contract documents and site information to identify any “ambiguities, conflicts, errors or omissions” and to provide written notice to VDOT – with the intended purpose of using the lack of written notice to bolster claim waiver arguments by VDOT.

-        Additional requirements for prompt written Notice of changed circumstances and waivers of contractor claims where notice has not been provided.

-        Shortened times for providing Notice of various changed conditions.

-        Additional bidder disqualification requirements.

-        Risk shifting relating to utility relocation.

-        Requirement and allowable compensation changes for additional costs relating to delays and differing site conditions.

-        Storm water permit requirement changes, both within and outside the right of ways.

Other changes are also proposed for Section 100, and other sections as well, and more detailed summary respecting the Final DRAFT’s current proposed changes is available at Vandeventer Black’s Construction and Government Contracts Group website at www.vanblacklaw.com.

The impacts of the final version will also depend upon VDOT application of them as project issues arise. But it remains important that all prospective bidders, subcontractors, and suppliers for VDOT projects review the Final DRAFT for how the revisions may affect future bids and proposals, project contract documents, and project management – and provide comments that, perhaps, VDOT will be willing to incorporate into the final revised version.

Final Rule Prohibiting Federal Contractors Retaliating Against Employees and Applicants Who Discuss Wages Issues and Becomes Effective for Contracts Entered Into or Modified On or After January 11, 2016

On September 11, 2015, the Office of Federal Contract Compliance Programs (OFCCP) published its final rule prohibiting federal contractors from discriminating against employees and job applicants who inquire about, discuss, or disclose job compensation information. The final rule was published in the Federal Register, Vol. 80, No. 176, pp. 54934 - 54977.

The final rule implements the directives of President Obama's Executive Order 13665, which in short prohibits federal contractors from discharging, disciplining, retaliating, or discriminating in any way against employees or applicants who inquire about, discuss, or disclose their own compensation or the compensation of another employee or applicant.

But, of note, the final rule does not protect employees whose jobs give them access to compensation information (such as those in human resources, information technologies, or payroll positions) who disclose other employees’ compensation to others who do not have a legitimate business reason to obtain the information.

Also of note, this final rule mirrors the existing legal requirement for all employers subject to the National Labor Relations Act, as amended, to refrain from interfering with employees’ rights to discuss wages, hours, and terms and conditions of employment during non-work time.

The final rule applies to any business or organization with any single federal or federal-assisted contract or subcontract in excess of $10,000, or if they have combined contracts in excess of $10,000 in a year. Covered contracts are those entered into or modified on or after January 11, 2016.

The final rule requires notification to employees and job applicants of the non-discrimination protections created by Executive Order 13665 using existing methods of communicating to applicants and employees.

The final rule also requires covered contractors and subcontractors to include the following language in their existing employee manuals and handbooks and to disseminate the provision to employees and to job applicants:

"The contractor will not discharge or in any other manner discriminate against any employee or applicant for employment because such employees or applicant for employment has inquired about, discussed, or disclosed the compensation of the employee or another employee or applicant. This provision shall not apply to instances in which an employee who had access to the compensation information of other employees or applicants as part of such employee's essential job functions discloses the compensation of such other employees or applicants to individuals who do not otherwise have access to such information, unless such disclosure is in response to a formal complaint or charge, in furtherance of an investigation, proceeding, hearing, or action, including an investigation conducted by the employer, or is consistent with the contractor's legal duty to furnish information."

The OFCCP website includes a Frequently Asked Questions web page regarding the final rule, which is available (as of this Legal Alert’s publication) at:

http://www.dol.gov/ofccp/regs/compliance/faqs/PayTransparencyFAQs.html.

For more information about the final rule or its implementation, please contact a member of the Vandeventer Black team of professionals at (757) 446-8600 or www.vanblacklaw.com.

OSHA Fine "Catch Up" Provision Included as Part of 2015 Bipartisan Budget Act

Among the things included in November 2015's Bipartisan Budget Act is Section 701, which is referenced as the "Federal Civil Penalties Adjustment Act Improvements Act of 2015." In short, the purported purpose is to "catch up" OSHA fines for inflation over the last 25 years. That will translate into an as much as 80% increase for OSHA fines. The initial adjustments are currently slated for August 1, 2016, and OSHA is expected to publish related rules for public comment early this year. Job safety is its own incentive of course, but this new provision adds an additional layer of economic incentives as well.