The provision in the American Recovery and Reinvestment Act can affect premises-cabling contracts funded by stimulus dollars.
Robert Carlson, Siemon
The American Recovery and Reinvestment Act (ARRA) that Congress signed into law in February 2009 represents a $787 billion investment to create new jobs and spur economic activity. While the stimulus investment has received little attention in the premises cabling industry, much emphasis has been placed on these funds in the outside plant industry, which is no big surprise considering the ARRA authorized $7.2 billion for broadband programs. But that’s not to say that ARRA funding doesn’t include the cabling and connectivity within the premises environment, especially when you consider that $53 billion is allocated for education and another $59 billion for health care—both of which aim to cover improving information technology (IT) in these vertical markets.
Another reason for the lack of attention is the fact that agencies are just now beginning to organize stimulus programs. To date only 27% of the total $275 billion in ARRA funds allocated for contracts, grants, and loans has been paid out. While most of the contract funds so far have gone to large nuclear decommissioning and remediation projects, science and research activities, and environmental management programs, more than $6 billion has been awarded in the form of grants and loans to expand education and health care facilities in several states. A portion of that funding may ultimately make its way into the premises cabling industry, and more ARRA stimulus funds are being requested and received on a daily basis. Companies in our industry would therefore be wise to stay on top of funding opportunities while also understanding the ARRA includes a very significant requirement: the Buy American provision.
Section 1605 of the ARRA states that none of the funds made available may be used for the construction, alteration, maintenance, or repair of a public building unless all the iron, steel, and manufactured goods used in the projects are produced in the Untied States. For the sake of clarification, the ARRA defines manufactured goods as “any good brought to a construction site for incorporation into the building or work that has been processed into a specific form and shape or combined with other raw materials to create a material that has different properties than the properties of the individual raw materials.” When any part of a project receives stimulus funds, the Buy American provision applies to the whole project, even when funds are used for only certain contracts.
Opponents seek waivers
No one can argue that if the point of the ARRA is to stimulate the U.S. economy, it doesn’t make sense to have funds going to companies and manufacturing facilities overseas. That doesn’t exactly create jobs here at home. Unfortunately, far too many companies have sent their manufacturing abroad in recent years, and the Buy American provision has been faced with widespread opposition from many U.S. businesses and foreign trade partners. Several have hired lawyers and lobbyists to study the Buy American provision more closely, find loopholes, and lobby to ease the rules.
In the spring of 2009 Cisco, Motorola, and other leading manufacturers lobbied against strict interpretation of the ARRA’s Buy American provision, claiming that it could not be reasonably applied to telecommunications because so many components are fabricated abroad and the equipment is too complex to be made exclusively in the U.S. Shortly thereafter, the National Telecommunications and Information Administration (NTIA), responsible for distributing more than two-thirds of the $7.2 billion allocated for broadband, agreed and removed the Buy American requirements on switching, transport, and access equipment.
In addition to lobbyists getting their way, other loopholes and exceptions to the Buy American requirement exist, and recipients of funds can seek a waiver if they can prove one or more of the following conditions.
Carrying out the Buy American requirement is inconsistent with the public interest for the purposes of the project.
Necessary manufactured goods are not produced in the U.S. in sufficient and reasonably available quantities and of a satisfactory quality.
Inclusion of manufactured goods produced in the U.S. will increase the total cost of the overall project by more than 25%.
Infrastructure to comply
Within the broadband program, the exception to the Buy American provision instituted by the NTIA does not apply to simpler manufactured telecommunications good such as cable, connectors, racks, cabinets, and cell-phone towers. Nor does it necessarily apply to funds allocated to improve IT within facilities like schools and hospitals. With simpler goods like cable and connectors, the existing loopholes are also more difficult to exploit. For example, when it comes to a network cabling infrastructure, increasing the total cost of a project by more than 25% is virtually impossible because cable and connectivity typically accounts for 5 to 10% of the total network deployment, and an even smaller percentage of a total building construction project.
While there is no requirement with regard to the origin of components or subcomponents in manufactured goods, the manufacturing must occur in the U.S., and this creates challenges for many cabling and connectivity vendors in our industry. In the premises cabling industry, few leading vendors actually manufacture the bulk of their products within the U.S. Some are not even U.S.-owned companies, while many others have sent, or are in the process of sending, their manufacturing out of the country to cut costs. However, the fact remains that some do manufacture infrastructure components in the U.S., and these companies are being sought by recipients of ARRA stimulus funds.
Connecticut-based American Networks International (ANI), a provider of voice, data, and video infrastructure cabling solutions, is coming across the Buy American requirement on more public projects than ever before. The company recently needed to meet that requirement for a new science center project at the United States Military Academy at West Point.
“Anytime we deal with the federal government and the military, they want products that are manufactured here in the U.S., and now we’re seeing this more and more on any project that uses public money,” says Jack Pragosa, executive vice president of ANI. “Only a few cabling system and connectivity manufacturers have nearly all of their products made in the U.S. Choosing a cabling manufacturer with a full line of products made in the U.S. versus one with just some products made in the U.S. makes the bidding process go a lot smoother.” Pragosa visited the Siemon factory in Watertown, CT, saw the products being made and met the people making them. The visit influenced his decision to specify Siemon products.
When a public project requires the Buy American provision and not all the proposed products are made in the U.S., there can be much labor involved in getting approvals. Pragosa believes the extra labor to justify foreign-made products is worse than a slight premium that might appear on American-made products. “It’s advantageous to put your best foot forward from the start on any Buy American project; it eliminates a lot of stress. In the current economy, pricing is more aggressive and premiums for American-made products are becoming a non-issue,” he says. “Sometimes it’s impossible to buy everything American, but we do it to the best of our ability and strive to always find an American-made equivalent.”
It makes sense
While many of us understand cases in which only deploying U.S.-made products is impractical, if the products are manufactured in the U.S., if they are high quality, and if they don’t add substantial cost to a project, why would anyone purchase components that have been manufactured abroad?
In addition to overseas manufacturing taking potential jobs away from the U.S. economy, there is always the lingering question about whether products manufactured elsewhere actually comply with the performance and safety requirements set forth in industry standards. Last year the Communications Cable and Connectivity Association released test results showing that nine randomly selected offshore cabling samples did not fully meet the minimum requirements for performance and safety. All of the products were also marked with the names of well-known industry compliance testing agencies, indicating that different products are being shipped to the U.S. than those that are being tested. Companies that manufacture infrastructure components in the U.S. are not only better positioned to create and sustain the U.S. economy, but it is also easier to ensure that their products and processes comply with performance and safety requirements.
Despite network infrastructure components only representing a very small percentage of an overall construction project, not complying with the Buy American provision for ARRA-funded projects also can get contractors into hot water. Prime and subcontractors bidding on ARRA-funded projects need to certify that their bids comply with the Buy American provision and provide adequate documentation. Violation of the requirement can result in termination of the contract, liability under the U.S. False Claims Act, license suspension if applicable, and possible criminal charges.
Those that scoff at the Buy American provision of the ARRA economic stimulus bill, claiming it doesn’t make sense and that the quality isn’t there, are often trying to protect their own interests and inexpensive overseas manufacturing. But buying American is about creating jobs, boosting the economy, and getting back to self-sufficiency and independence. It is also one of the ways we can help keep our national debt from continuing to spiral out of control. Whether it’s for an ARRA-funded project or not, we should all consider buying from America while there is still an America to buy from. It’s a simple act that just makes sense.
ROBERT CARLSON is vice president for Siemon (www.siemon.com).