March 26, 2004

Mr. Richard J. Simonetta
Chief Executive Officer
Valley Metro Rail
411 North Central Avenue
Suite 200
Phoenix, Arizona 85004

Dear Mr. Simonetta:

This responds to your letter dated February 5, 2004, requesting a waiver of the final assembly requirements of Buy America for two prototype light rail vehicles (LRV) for Valley Metro Rail (Valley Metro). For the reasons below, I have determined that such a waiver is in the public interest.

Applicable Law

Section 5323(j)(2)(C) of the Federal transit laws (49 U.S.C. 5301, et seq.) sets forth the general requirements for the procurement of rolling stock. This section provides that when rolling stock is procured with Federal Transit Administration (FTA) funds, the cost of the components and subcomponents produced in the U.S. must be at least 60 percent of the total component cost and the vehicle must undergo final assembly in the U.S. You request a public interest waiver of the final assembly requirements. 49 U.S.C. 5323(j)(2)(A). This section provides that the general Buy America requirements may be waived if their application “would be inconsistent with the public interest.” The regulations implementing this section provide that “[i]n determining whether the conditions exist to grant this public interest waiver, the [FTA] will consider all appropriate factors on a case-by-case basis . . . .” 49 C.F.R. 661.7(b).

Arguments Made in Support of a Waiver

Valley Metro is in the process of procuring 36 low-floor LRVs and has requested a public interest waiver of the final assembly requirements for two prototype vehicles. The highest rated proposer, Kinkisharyo International and Mitsui and Co., CPEV Joint Venture (Kinkisharyo), certified non-compliance with the Buy America requirements for the assembly of the prototype vehicles. You argue that it is essential that the first order of vehicles for the new light rail system be properly designed and tested to ensure that the components and assemblies of the vehicles will interface properly and operate in accordance with its performance parameters. This is best accomplished if Kinkisharyo is allowed to assemble and test the prototypes in its primary facility, with the accompanying expertise, in Osaka, Japan.

Summary of Comments

FTA posted a request for comments on this matter on our website and received six comments, all in support of the waiver.

Richard Trail, of Penn Machine, explained that the practice of prototype development at the carbuilder’s factory, usually in a foreign country, has been a critical practice for new vehicles. Mr. Trail also argued that Kinkisharyo has developed domestic suppliers for its vehicles and if a waiver expedites development and on-time delivery, it should be granted. Ian McAvoy, of San Mateo County Transit District, explained that no agency wants to build its prototypes as the first units processed in a new final assembly plant. Mr. McAvoy also commented that prototype vehicles are used to define design, component interface, specification compliance, and performance testing, which leads to the release of the final bill of material and documentation for production vehicles. Therefore, it is a good industry practice to do this first article work near the engineering, materials, and quality assurance teams to allow good project management and control of the initial phases of these complex projects. Four other commenters generally supported the waiver request.[1]

Decision

Consistent with recent decisions granting public interest waivers for prototype vehicles, the information provided here supports the issuance of this waiver.[2] Given the public’s interest in riding and paying for properly tested trains, FTA hereby grants the requested final assembly waiver as in the public interest.

If you have any questions, please contact Meghan G. Ludtke, at (202) 366-1936.

Very truly yours,

Gregory B. McBride
Deputy Chief Counsel

cc: Leslie Rogers

[1] Trillium, USA; Washington Group International; an individual commenter; and Indianapolis Public Transportation Corp.

[2] Please see, December 16, 2003, letter to Southeastern Pennsylvania Transportation Authority and February 28, 2003, letter to New York City Transit.