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Fara Fasat

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For the construction part of the Buy American Act, the test for a domestic product is applied to "construction material." The FAR generally defines construction material as the thing brought to a construciton site and installed in the project. However, it treats emergency life safety systems as a single item, no matter how the individual products are brought to the site.

How does this work in practice? The test for an item of domestic construction material has two parts: it must be made in the US, and it must consist of at least 50% US-made components. If the entire system is considered one item, is it considered made in the US because the system is assembled in a project located in the US? And are the individual products (such as alarms, smoke detectors, etc. in a fire alarm system) considered the components that are used to determine the 50% content test?

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No. My question would be the same whether the government specified a system or left it open. The question is about how you apply the test for "domestic construction material" to an entire system.

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I'd like to hear from the construction experts on this forum. How do you apply the domestic construction material test to entire emergency systems, which the FAR defines as a single item?

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Guest carl r culham

Fara ? I used to be very familiar with construction so had to brush up. Here is my opinion based on read of FAR Part 25.

Construction material = Fire System

Fire System manufactured in the United States = Domestic construction material IF cost of components mined, produced, or manufactured in the United States exceeds 50 percent of the cost of all its components or system is COTS.

So answer to your two questions from my view is Yes.

If looking at this from a contract administration view do not forget FAR part 25.206.

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I would agree with that interpretation. If the whole system is one item, then it is "manufactured" in the US because the system is put together in a building located in the US. The individual products (e.g. alarms, smoke detectors, strobes, etc.) are then the components of the item (system), 50% of which must be manufactured in the US.

It would be comforting, though, to have a CO confirm that interpretation.

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I would agree with that interpretation. If the whole system is one item, then it is "manufactured" in the US because the system is put together in a building located in the US. The individual products (e.g. alarms, smoke detectors, strobes, etc.) are then the components of the item (system), 50% of which must be manufactured in the US.

It would be comforting, though, to have a CO confirm that interpretation.

The determination of whether or not construction material is domestic is made on the basis of when the system or materials would arrive on the construction site, not after they are installed. Thus, installation labor is not considered to be part of the manufacturing effort of the materials.

Is that what you are asking? See the definitions of construction materials and domestic construction materials. If construction installation were included, many foreign manufactured materials would be "domestic".

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No, not counting the labor.

The test for domestic construction material has two parts. The first is that it has to be "manufactured" in the US. Since the entire system isn't really an item that is manufactured, I think you have to count its assembly and installation in the building as its manufacture.

Do you agree with that?

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No, not counting the labor.

The test for domestic construction material has two parts. The first is that it has to be "manufactured" in the US. Since the entire system isn't really an item that is manufactured, I think you have to count its assembly and installation in the building as its manufacture.

Do you agree with that?

No, I just tried to say that construction installation is not "manufacturing" and that the determination of domestic or foreign construction material is made on the basis of its condition before being installed during construction. It is either domestic or foreign construction material when it arrives at the construction site.

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Are you saying that each item individually has to meet the test for domestic construction material? What about the definition that says the entire system is treated as one item, no matter how the individual products are brought to the site?

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No, I did not say that.I was speaking in general terms about materials and systems. A Chinese air handler doesn't become domestic after installation, for example. Neither would a sprinkler or fire alarm system.

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Guest carl r culham

Joel - Are you sure? Air handler comes as a unit, system by definition has components and comes with many. Lights, sirens, switches, control boards, wiring, conduit with other possible components added to the list that I cannot quickly think of. Therefore the system becomes one after installation. To split hairs the BAA states that foreign construction materials shall not be used or otherwise purchased by the Federal government it does not address arrival. Playing this out all the components for the system arrive on site, some are foreign some are not, then installed and government is ready to final inspect and pay and discovers that the mix is not right as components amount to 49% for American made as installed.

One could even argue that a Chinese air handler that arrives on site has not yet violated BAA. I do understand that in the context of construction contract adminsitration it would be rejected due to its certificate of origin and the Ktr ordered to obtain an American made one. So again comparing this to the system how can you reject anything brought to site until the system is installed? Example - contractor can only buy rolls of 10,000 feet of copper wire but only 4,000 feet are going to be used in the work. Wire arrives at site from China, do you accpet 4,000 feet at arrival and reject 6,000? Then in actual construction due to modifications by the Government the need wire does become 10,000 feet, then what?

Overall in the case of a system I would suggest that the test is not arrival but installation.

I have done some research as this thread has unraveled and have found no discussion or decision to support arrival versus install but the sequence coupled with interpretation regarding systems seems to make my conclusion more sensible.

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Joel, I appreciate the response, but I'm afraid I just don't understand what you're saying. As I read the original question, it asks how you apply the BAA test to an emergency life safety system, which is defined as a single item no matter how the individual products are brought to the site. Here's the definition:

"However, emergency life safety systems, such as emergency lighting, fire alarm, and audio evacuation systems, that are discrete systems incorporated into a public building or work and that are produced as complete systems, are evaluated as a single and distinct construction material regardless of when or how the individual parts or components of those systems are delivered to the construction site."

The first part of the BAA test is that the product must be manufactured in the US. This is fine for a product, but where is a system "manufactured?" I would say that the assembly, installation, and connection in a building is the "manufacturing" of the system, and if that occurs in the US, then it satisfies the first part of the BAA test.

The second part is the component test: the cost of components manufactured in the US must exceed 50% of the cost of all components. If the item being evaluated is an entire system, then it seems to me that the components of this system must be the individual products that are brought to the site. The evaluated cost is the acquisition cost "including transportation costs to the place of incorporation into the end product or construction material." Any product could come from a non-US source, as long as the overall US-made component cost exceeds 50%.

To Carl's point, I agree that you won't know whether you have remained above 50% until you know the content of the installed system. However, it shouldn't happen very often. Usually the quantities of individual components are known in advance, and any indeterminates, like wire, should be a small percentage of the overall cost. Nothing "becomes" domestic after installation; you simply don't know the final total cost of components until you know what you have used. You could also reduce any uncertainty by making sure your US content is well above 50% so that the final tally of non-US products does not take you below 50%.

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" Here's the definition:

"However, emergency life safety systems, such as emergency lighting, fire alarm, and audio evacuation systems, that are discrete systems incorporated into a public building or work and that are produced as complete systems, are evaluated as a single and distinct construction material regardless of when or how the individual parts or components of those systems are delivered to the construction site."

Carl says that the determination is made after installation and Ron says that we don't know until after installation.

In my expereince, the determination is made at the material submittal stage which is before the materials are installed.

A life safety system may arrive on the jobsite as individual components, partly assembled, etc. As per the definition, it is still evaluated as a system, regardless of how it arrives on the jobsite. Installation has nothing to do with determining if it is domestic or not. Nothing in the definition mentions construction installation. The definition of an emergency life safety system refers to the time of arrival on the construction site but nothing after that. Construction is not part of the manufacturing process of construction materials. Rather, construction materials are used in the process of construction.

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Guest carl r culham

Joel - Agree common practice is to review at submittal time. Also understand your view about installation but my question regarding "Are you sure?" relates to the policy of BAA which states -

25.201 Policy.

Except as provided in 25.202, use only domestic construction materials in construction contracts performed in the United States.

This policy says nothing about what arrives at site, what is approved in submittals, etc. Use is prohibited unless certain exceptions apply. It seems this "use" issue plays a more important role in the system evaluation matter than with regard to a certain individual material.

Splitting hairs? as I noted but contract clauses prevent use not arrival on site.

In the end I think all comments in the thread lead to the same basic conclusion, it is the components that will sway the decision as to whether BAA compliant or not, we are just debating where that decision is made - arrival, installation or after installation.

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Thanks for the replies. A couple of comments on where this has gone.

I don't think anyone is saying that you can't know whether a product is foreign or domestic until after delivery or installation. For single items, they are either foreign or US both when they arrive and after installation. Of course they don't change. It's just that you can't know percent of foreign vs. US components of a system until you know how much of certain components you have used.

Joel, if "Construction is not part of the manufacturing process of construction materials," then how does a system meet the first part of the BAA test -- that it must be manufactured in the US? Since the FAR defines a life safety system as a single item of construction material, how and where is that item of construction material manufactured?

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Thanks for the replies. A couple of comments on where this has gone.

I don't think anyone is saying that you can't know whether a product is foreign or domestic until after delivery or installation. For single items, they are either foreign or US both when they arrive and after installation. Of course they don't change. It's just that you can't know percent of foreign vs. US components of a system until you know how much of certain components you have used.

Joel, if "Construction is not part of the manufacturing process of construction materials," then how does a system meet the first part of the BAA test -- that it must be manufactured in the US? Since the FAR defines a life safety system as a single item of construction material, how and where is that item of construction material manufactured?

Fara, the items comprising an emergency life safety system are manufactured like other construction materials, through some type of manufacturing process.

The point made in the definition is that we don't evaluate individual components of the system for compliance with the BAA requirements. We have to look at all the components comprising the system. Thus, we don't accept or reject the horns, controllers, sensors or whatever, individually for BAA compliance. We must look at the collective content and manufacture of the components. To do this of course, you'd have to examine and the contractor or supplier would have to identify the sources and costs of thevarious components to determine whether the system as a whole meets the BAA requirements.

But the materials comprise the system when they arrive on the job for installation, not after installation, just like any other construction material that WILL be installed in construction.

Why is this so difficult?

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Fara and others, you ask how anyone can evaluate the system before installation until you know how much of each component has been installed.

Installers estimate the quantity of materials and equipment required when they prepare bids or proposals and again when they order the components. To me, this is a reasonable basis for a BAA compliance evaluation.

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Joel,

I think the difficulty is in how do you apply the "manufacturing" requirement. The construction material must be "manufactured" in the US. What if a fire alarm system has certain pieces that are manufactured in China, they are delivered to the site separately, but are part of the system? Does this mean that every separate piece of the system must be manufactured in the US and, thus, those Chinese parts can't be used?

What does the statement regarding evaluating such systems as "a single and distinct construction material regardless of when or how the individual parts or components of those systems are delivered to the construction site" really mean? Does that mean it's okay to bring individual pieces to the site that aren't made in the US as long as, when the system is put together, they represent less than 50% of the cost of all the components, assuming that the 50% test has to be satisfied?

If that's what the FAR means by evaluating such systems as a "single and distinct construction material," what happens if the assembled product is viewed as a COTS product? In that case, you don't care about the cost of the components test. What test do you apply then?

OLG

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Quoting Outside legalguy "Does this mean that every separate piece of the system must be manufactured in the US and, thus, those Chinese parts can't be used?"

No, I don't think so.

"What does the statement regarding evaluating such systems as "a single and distinct construction material regardless of when or how the individual parts or components of those systems are delivered to the construction site" really mean? Does that mean it's okay to bring individual pieces to the site that aren't made in the US as long as, when the system is put together, they represent less than 50% of the cost of all the components, assuming that the 50% test has to be satisfied?"

Yes and no. I believe that they can be used if they represent less than 50% of the cost of all the components, assuming that the 50% test has to be satisfied. But it is not dependant upon "being put together" if you are referring to "installation".

"If that's what the FAR means by evaluating such systems as a "single and distinct construction material," what happens if the assembled product is viewed as a COTS product? In that case, you don't care about the cost of the components test. What test do you apply then?

OLG"

I am in a car this week. Don't have access to all of Part 25. However, in my experience, we often evaluate commercial items and it is up to the contractor to provide the necessary information to justify meeting the BAA requirements. If you are tying COTS to the exemption for providing "cost or pricing data", what has that to do with evaluating BAA compliance? Ill admit that it often takes a "Philadelphia Lawyer" to interpret Part 25 though. Our Office of Counsel provides help. I remember having to evaluate comercial items that were assembled in both Mexico and the US from American material sources. Of course that was before everything we buy seems to be made in the PRC or Taiwan. I see we just added Formosa to the qualified country list for the larger construcion jobs. :)

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Quoting Outside legalguy

"If that's what the FAR means by evaluating such systems as a "single and distinct construction material," what happens if the assembled product is viewed as a COTS product? In that case, you don't care about the cost of the components test. What test do you apply then?

OLG"

Ok, I pulled up FAR 25.2. It lists laws not applicable to commercial item acquisitions.

A construction contract is not a commercial item acquisition. The 41 USC 431 exemption is not applicable to a construction contract.

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Guest carl r culham

outside - Your questions go further into depth regarding BAA. Not only is COTS a consideration but trade agreements and designated countries are as well. You have noted specifically COTS and I believe Joel's response is confusing as COTS does apply not because FAR Part 12 does but because the definitions of FAR Part 25 allow COTS to be considered with regard to the components test. See citations of FAR 25.001 and 25.003 below.

Direct to your question by my read of FAR Part 25 the only way COTS enters into the system picture is if the whole system is COTS In other words by my read it does not matter if the compoents in a system are COTS their cost is still considered into the 50% equation however if the whole system is a COTS then there is no component test for the system.

FAR 25.001 © The test to determine the country of origin for an end product under the Buy American Act (see the various country ?end product? definitions in 25.003) is different from the test to determine the country of origin for an end product under the trade agreements, or the criteria for the report on end products manufactured outside the United States (see 25.004).

(1) The Buy American Act uses a two-part test to define a ?domestic end product?or ?domestic construction material? (manufactured in the United States and a formula based on cost of domestic components). The component test has been waived for acquisition of commercially available off-the-shelf items.

FAR 25.003

?Component? means an article, material, or supply incorporated directly into an end product or construction material.

?Construction material? means an article, material, or supply brought to the construction site by a contractor or subcontractor for incorporation into the building or work. The term also includes an item brought to the site preassembled from articles, materials, or supplies. However, emergency life safety systems, such as emergency lighting, fire alarm, and audio evacuation systems, that are discrete systems incorporated into a public building or work and that are produced as complete systems, are evaluated as a single and distinct construction material regardless of when or how the individual parts or components of those systems are delivered to the construction site. Materials purchased directly by the Government are supplies, not construction material.

?Cost of components? means?

(1) For components purchased by the contractor, the acquisition cost, including transportation costs to the place of incorporation into the end product or construction material (whether or not such costs are paid to a domestic firm), and any applicable duty (whether or not a duty-free entry certificate is issued); or

(2) For components manufactured by the contractor, all costs associated with the manufacture of the component, including transportation costs as described in paragraph (1) of this definition, plus allocable overhead costs, but excluding profit. Cost of components does not include any costs associated with the manufacture of the end product.

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outside - Your questions go further into depth regarding BAA. Not only is COTS a consideration but trade agreements and designated countries are as well. You have noted specifically COTS and I believe Joel's response is confusing as COTS does apply not because FAR Part 12 does but because the definitions of FAR Part 25 allow COTS to be considered with regard to the components test. See citations of FAR 25.001 and 25.003 below.

Direct to your question by my read of FAR Part 25 the only way COTS enters into the system picture is if the whole system is COTS In other words by my read it does not matter if the compoents in a system are COTS their cost is still considered into the 50% equation however if the whole system is a COTS then there is no component test for the system.

FAR 25.001 ? The test to determine the country of origin for an end product under the Buy American Act (see the various country ?end product? definitions in 25.003) is different from the test to determine the country of origin for an end product under the trade agreements, or the criteria for the report on end products manufactured outside the United States (see 25.004).

(1) The Buy American Act uses a two-part test to define a ?domestic end product?or ?domestic construction material? (manufactured in the United States and a formula based on cost of domestic components). The component test has been waived for acquisition of commercially available off-the-shelf items.

FAR 25.003

?Component? means an article, material, or supply incorporated directly into an end product or construction material.

?Construction material? means an article, material, or supply brought to the construction site by a contractor or subcontractor for incorporation into the building or work. The term also includes an item brought to the site preassembled from articles, materials, or supplies. However, emergency life safety systems, such as emergency lighting, fire alarm, and audio evacuation systems, that are discrete systems incorporated into a public building or work and that are produced as complete systems, are evaluated as a single and distinct construction material regardless of when or how the individual parts or components of those systems are delivered to the construction site. Materials purchased directly by the Government are supplies, not construction material.

?Cost of components? means?

(1) For components purchased by the contractor, the acquisition cost, including transportation costs to the place of incorporation into the end product or construction material (whether or not such costs are paid to a domestic firm), and any applicable duty (whether or not a duty-free entry certificate is issued); or

(2) For components manufactured by the contractor, all costs associated with the manufacture of the component, including transportation costs as described in paragraph (1) of this definition, plus allocable overhead costs, but excluding profit. Cost of components does not include any costs associated with the manufacture of the end product.

Can anyone provide an example of an emergency life safety system that is COTS? I understand that such a system could be comprised of COTS components, but what would a COTS system be in and of itself as it pertains to a construction contract? I am unable to download FAR part 12 or find the definition for a COTS system. Thanks.

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Guest carl r culham

Joel - No example but having been in this business for a long time I am not going to guarantee that one does not exist. Likewise it could in the future. Remember too we do not have specifics from Fara but I could imagine going to a store and buying a system for say a single housing unit right of the shelf in Home Depot. When you begin to think big, such as a large industrial or commercial like building no doubt a COTS is probably a stretch. Overall I am still confused why you continue to refer to FAR Part 12. We are talking COTS with regard to FAR Part 25 and my view would be that absent a definition in FAR Part 25 or FAR Part 2 then COTS definition would revert to normal definition not FAR Part 12.

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Joel - No example but having been in this business for a long time I am not going to guarantee that one does not exist. Likewise it could in the future. Remember too we do not have specifics from Fara but I could imagine going to a store and buying a system for say a single housing unit right of the shelf in Home Depot. When you begin to think big, such as a large industrial or commercial like building no doubt a COTS is probably a stretch. Overall I am still confused why you continue to refer to FAR Part 12. We are talking COTS with regard to FAR Part 25 and my view would be that absent a definition in FAR Part 25 or FAR Part 2 then COTS definition would revert to normal definition not FAR Part 12.

Carl,

There is a definition of COTS in Part 2:

?Commercially available off-the-shelf (COTS)? item?

(1) Means any item of supply (including construction material) that is?

(i) A commercial item (as defined in paragraph (1) of the definition in this section);

(ii) Sold in substantial quantities in the commercial marketplace; and

(iii) Offered to the Government, under a contract or subcontract at any tier, without modification, in the same form in which it is sold in the commercial marketplace; and

(2) Does not include bulk cargo, as defined in section 3 of the Shipping Act of 1984 (46 U.S.C. App. 1702), such as agricultural products and petroleum products.

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