Companies, unions criticize waivers for ‘Buy American’ rules

Federal agencies have granted more than two dozen exceptions to Buy American rules in the $787 billion economic stimulus package.

The waivers have frustrated unions and manufacturers that lobbied for the rules, which were intended to ensure stimulus funds were spent on U.S. companies. Union leaders say the waivers keep the stimulus from creating jobs in an economy with unemployment headed toward 10 percent.

“I think it is going to be a huge erosion of the capacity of the stimulus program to generate jobs,” said Leo Gerard, president of the United Steelworkers.

He said the waivers need to be better policed. “They publicized the way you can get around the bill, but no one publicized how to enforce it,” Gerard said.

But business groups opposed to the Buy American rules say getting a waiver is too complicated and that the process should be streamlined so stimulus funds are delivered more quickly to the economy.

“To the extent that the waivers have been granted, they have been successful,” said Perry Fowler, director of the municipal and utilities division at the Associated General Contractors (AGC).

“We would like to see municipal and state authorities be able to use the waiver process in an efficient way, and we still have concerns about that,” he said.

Five agencies have approved at least 28 agency-wide exceptions and project-based waivers to the measure, which requires companies to use American-made goods and materials as long as doing so does not violate U.S. trade obligations, according to a review compiled from the Federal Register and several sources interviewed by The Hill.

The Hill’s tally of waivers is not comprehensive, according to sources who provided their own lists of exceptions. In addition, more waivers are expected since only 18 percent, or $52.1 billion, of the stimulus’s $275 billion in funds for contracts, grants and loans has been spent.

Agency heads can sign off on waivers to the Buy American provision as long as the request meets three requirements: that the waiver is consistent with the public interest; that American-made iron, steel and other manufactured goods are not available in sufficient quantity or high enough quality; and that using American-made materials would increase the overall cost of the project by more than 25 percent.

In addition, they must publish a written justification for the waiver in the Federal Register.

For example, in October, the Federal Highway Administration approved a waiver to use foreign-made butterfly valves for a road project in Colorado Springs, Colo.

However, agencies also have announced waivers for entire classes of stimulus funds without specifying what foreign-made materials can be used.

The Department of Housing and Urban Development (HUD) signed off on a Buy American waiver in October for stimulus grants worth $100,000 or less that would help create affordable housing.

Groups representing labor and small manufacturers have complained about a lack of transparency with the waivers.

“There really is an unprecedented amount of information available on the stimulus, except for Buy American,” said Scott Paul, executive director of the Alliance for American Manufacturing (AAM), an advocacy group for U.S.-based manufacturers. “It is ridiculously hard to track these waivers.”

Sometimes the lack of transparency makes it difficult to determine the amount of stimulus funds actually exempted by a waiver.

Waivers filed by agencies often do not detail how much will be spent on foreign-made materials and goods.

The HUD waiver, for example, will cover only a sliver of the stimulus funds for affordable housing since only $11.5 million out of $1 billion appropriated will be made available for the small grants.

Paul said ideally the waivers and waiver requests would be posted on Recovery.gov, the website detailing the stimulus spending.
Fowler of AGC agreed that there should be more information disclosed.

“We would like to see more transparency in all of this,” Fowler said. “The more information there is, the better.”

But a spokeswoman for the Recovery Accountability and Transparency Board said there is no requirement in law for them to post the waivers to the website, unlike other information such as non-compete contracts.

“Any directive to agencies to include Buy American waivers in their reports to the Recovery Board would have to come from the Office of Management and Budget,” said Cheryl Arvidson, a spokeswoman for the board.

Some agencies have failed to follow rules that they first try to find U.S. producers before turning to a foreign company.

An August U.S. Forest Service Inspector General report said officials bought Canadian shingles for projects worth more than $600,000 without looking for a U.S.-based producer. A Forest Service official thought NAFTA exempted the purchase but was wrong under the stimulus guidelines.

Both sides in the debate are waiting for the Office of Management and Budget to issue final guidance on the Buy American rules in the stimulus, which is expected soon.

Paul hopes OMB will not weaken the provision since several companies have begun to develop American-made supply lines to meet its requirements. Fowler is still dealing with confusion created by the rules.

“We get a call from a chapter or a member every week who is confused about the requirement because they have never had to deal with this before,” Fowler said. “The cumulative effect is that it has created confusion on the front end of these projects, which then prevents these projects from getting out.”

Tom Gavin, an OMB spokesman, said the agency is still developing its final guidance. In the meantime, stimulus fund recipients will have to follow the interim measure issued in April.  The agency continues to answer questions as they pop up.