Comments on U.S. Department of Transportation Notice of Proposed Rulemaking DOT OST-2015-0013-0002

On April 6, 2015, Jobs to Move America submitted a letter to then Secretary of Transportation, Anthony Foxx, on behalf of 39 organizations. Read the full letter below, and find our press release about the letter here.

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Hon. Anthony Foxx

Secretary
U.S. Department of Transportation
1200 New Jersey Avenue SE
Washington, DC 20590 

Special attention to:
Michael Harkins
Deputy Assistant General Counsel for General Law (OST-C10)
Office of the Secretary, Department of Transportation
1200 New Jersey Avenue SE, Room W83-312
Washington, DC 20590

Re: Comments on Notice of Proposed Rulemaking, ID Number DOT OST-2015-0013-0002

Dear Secretary Foxx:

We are writing on behalf of the Jobs to Move America Coalition (hereinafter “JMA”), an alliance of over 40 organizations from across the United States that is dedicated to the creation and improvement of jobs and opportunity for low income communities through the investment of public transportation dollars. Specific organizations signing onto this letter are listed below.

We submit these comments in response to the DOT’s Notice of Proposed Rulemaking (hereinafter “NPRM”) ID number DOT-OST-2015-0013-0002, Geographic-Based Hiring Preferences in Administering Federal Awards. Because the collective work of JMA is focused on the creation of good manufacturing jobs in the transit vehicle manufacturing industry, our comments relate primarily to strengthening the final rule currently entitled Geographic-Based Hiring Preferences in Administering Federal Awards (hereinafter “Final Rule”) as it relates to rolling stock and other equipment procurement. While we have seen many creative examples of geographic preferences and targeted hiring programs linked to the award of construction contracts, we leave other organizations to comment more specifically in that arena.

GENERAL COMMENTS:

First, we applaud the DOT’s proposed rule as well as the recently launched DOT experimental program for 2015. Virtually all of the JMA member organizations have extensive experience in the creation of geographic and targeted-based hiring preferences in public contracting, and therefore recognize the historic nature of the DOT’s proposed rule as well as the recently launched DOT experimental program. As discussed below, we urge the DOT to include a direct reference to targeted hiring programs in the Final Rule. The evidence shows that, if grantee agencies are allowed to apply innovative contracting language to all of their procurements, the job creation and economic development impact of that investment will grow substantially. Past experience has also shown – as described below – that these increased community and economic benefits will occur without significant negative impacts on open competition in the bidding process. In addition, we believe that grantee agencies should be able to use geographic preferences in rolling stock procurement with certain limitations, as described below.

We have long believed that the previous Department of Justice and DOT interpretation of the “open competition rules” (as reflected in http://www.justice.gov/sites/default/files/olc/opinions/1986/06/31/op-olc-v010-p0101.pdf) has stifled creativity and innovation in the award of construction, rolling stock and service contracts. In fact, the historic DOT interpretation of the “open competition” requirements in 49 USC§5325(a) and 49 CFR 18.36 has significantly hindered DOT grantees from maximizing the impact of transportation expenditures: i.e., purchasing high-quality and cost-effective equipment and services AND creating high quality jobs and opportunity for low income people and communities in the United States.

As we write these comments, the Political Economy Research Institute (PERI) of the University of Massachusetts, Amherst is finishing a comprehensive report on the significant leakage of transit vehicle production jobs outside of the United States because of the weakness of the existing Buy America law as well as the status quo prohibition on the use of innovative contracting language by grantee agencies. For more information on this research, please contact Professor Robert Pollin at pollin@econs.umass.edu. Preliminary findings show that transit vehicle manufacturers awarded federally funded contracts generally source only about 40 percent of the total value of their contracts from domestic firms. In short, the DOT restriction on the use of innovative job requirements/incentives in federally funded rolling stock procurement is currently causing an unnecessary loss of up to about 60 cents on every transit dollar spent. This enormous opportunity lost comes at a time when the U.S. economy and its most disadvantaged communities are still struggling to recover from the deep 2007 – 2009 recession.

The example of the U.S. Employment Plan language used by the Los Angeles Metropolitan Transportation Authority (hereinafter “USEP”) in a 2012 light rail vehicle contract illustrates that allowing DOT grantees to use targeted hire criteria can actually help bring production over to the United States from overseas. (For more information on this experience, please contact Victor Ramirez from LA Metro at ramirezv@Metro.net.)

In addition, available evidence shows that the historic interpretation of the “open competition” rules has in effect stifled genuine open competition, especially for firms competing in the U.S. market based on any criteria other than low price. Numerous discussions with U.S.-based rolling stock manufacturers confirm that, while some firms prefer to compete based on offering the absolute lowest price possible, (see, e.g., http://www.bostonglobe.com/metro/2015/02/15/red-orange-line-car-contract-clears-another-hurdle/gBNCV7EIEzgGl1YBAPXygN/story.html and http://www.mbta.com/uploadedfiles/Business_Center/Bidding_and_Solicitations/Staff%20Summary

%20for%20Red%20and%20Orange%20Line%20Procurement%2010-22-2014.pdf) other firms compete based on the quality of their vehicles, the creativity and innovation of their technology, the reduced environmental impact of their equipment, the number of jobs that they propose to create in the United States, the quality of jobs and training provided to employees and other factors that are unrelated to low price. (See, e.g. http://www.usa.siemens.com/intelligent-infrastructure/ and http://www.alstom.com/us/products-and-services/transport/alstom-buys-america/.)

In fact, growing evidence shows that living wage requirements, for example, attached to public contracts have actually increased competition from firms vying for those contracts. In a report written by Paul Sonn and Tsedeye Gebreselassie, “The Road to Responsible Contracting: Lessons from States and Cities for Ensuring That Federal Contracting Delivers Good Jobs and Quality Services,” National Employment Law Project, 2009 at page 14 the authors found that: “by increasing the ability of firms that pay their workers more than the minimum wage to compete for public service contracts, living wage laws can increase the competitiveness of the procurement process as a whole.” In a 2008 assessment of Maryland’s living wage law after its first year in operation, almost half of bidders interviewed reported that the living wage requirement encouraged them to bid on state contracts because it meant that contractors that paid very low wages would not automatically be able to underbid them. Maryland found that the average number of bidders for state service contracts increased once its living wage policy took effect—from an average of 3.7 bidders to 4.7 bidders. As one current contractor explained, “I would rather our employees work with a good wage. If a living wage is not mandated, the bids are a race to the bottom. That’s not the relationship that we want to have with our employees. [The living wage] puts all bidders on the same footing.” (Department of Legislative Services, Impact of the Maryland Living Wage (Dec. 2008), available at http://www.chamberactionnetwork.com/documents/LivingWage.pdf.

The best example of the anti-competitive impact of a strictly low bid rolling stock procurement process (versus a best value process that includes criteria around U.S. job creation, job quality, training opportunities and hiring in disadvantaged communities) is the experience of the Chicago Transit Authority (hereinafter “CTA”) as it has tried to procure up to $2 billion worth of new rapid transit vehicles for the Chicago transit system over the past two years. In 2013, the CTA released an Invitation for Bids (hereinafter “IFB”) to procure these rapid transit cars from the lowest-priced responsible bidder. (http://articles.chicagotribune.com/2014-05-20/news/chi-cta-tosses-out-rail-car-bids-will-start-over-on-new-fleet-contract-20140520_1_bombardier-transit-corp-nippon-sharyo-u-s-a-base-order and http://www.surdna.org/whats-new/news/688-chicago-transit-authority-restarts-2-billion-rail-car-procurement-with-strong-manufacturing-job-creating-approach.html). While the CTA initially received interest from four car builders, only two railcar manufacturing companies actually submitted proposals. Subsequently, the CTA canceled the IFB and in October of 2014, re-issued a best value format request for proposals (hereinafter “RFP”) that used the U. S. Employment Plan framework, the innovative contracting language mentioned above and described below. While RFP responses are not due until May 29, 2015, according to publicly available information, the CTA has received expressions of interest from 11 different railcar manufacturers. (file:///C:/Users/lnguyen/Desktop/IL%20JMA/7000%20RFP/7000_RFP_Add_4.pdf, at page 145.)

Based on the Chicago and other procurement experiences, JMA believes that innovative contracting language that could be permitted under the proposed new DOT rule would create more open competition as described above or, at the very least, would have little or no impact at all on the rolling stock procurement process. We look forward to discussing the CTA experience – as we have observed it – as well as our experiences working with other U.S. transit agencies over the past 10 years, such as LA Metro, Amtrak, the California High Speed Rail Authority, and the Maryland Transportation Authority.

SPECIFIC SUGGESTIONS FOR CRAFTING THE FINAL RULE:

As described above, JMA strongly supports both the DOT experimental program and the NPRM. Based on our experience, we also have a number of specific suggestions for the crafting of the Final Rule as it relates to rolling stock and other equipment purchases. We believe that the Final Rule will have greater positive impacts on the state and local procurement process if it is written in a way that more specifically guides DOT grantees in the use of both geographic and targeted hiring language in their federally funded contracts.

CREATE SEPARATE GUIDANCE FOR USE OF RULE IN CONSTRUCTION CONTRACTING, ROLLING STOCK AND PERSONAL SERVICE CONTRACTS.

First, members of our coalition have worked long and hard with numerous transit agencies to craft and implement geographic and targeted hiring programs in the three main categories of transit agency procurement: construction, rolling stock and personal service contracts. Successful policy and contract language has varied significantly based on the type of contract and the related industry. We have noticed a consistent, significant difference in the market circumstances and practical implementation challenges for each of these three general categories of contracts. For example, construction contracts generally require that the actual construction work be done in a specific location where the infrastructure is being built or redeveloped. In addition, the construction industry has created comprehensive apprenticeship and/or pre-apprenticeship programs to help contractors recruit and hire local and targeted workers. Thus the strongest construction local and targeted hire programs use these existing apprenticeship networks in crafting the language and program. (See, e.g., programs from LA Metro and the California High-Speed Rail Authority, referenced below.)

In rolling stock procurement, there is no practical requirement that the manufacture of the vehicles be done in a specific geographic location in the United States. In fact, existing domestic rolling stock manufacturing facilities are located in a dozen or so locations around the U.S. generally unrelated to where the contracts are awarded (see, www.jobstomoveamerica.org/map). In addition, the U.S.-based transportation manufacturing industry has very few apprenticeship or pre-apprenticeship programs to help rolling stock manufacturers recruit and train local and disadvantaged workers. Personal service contracts also have distinct circumstances.

We therefore urge the DOT to create separate criteria and general language in the Final Rule for each of these three categories of contracts supported by DOT funds.

CREATE SEPARATE CRITERIA FOR THE USE OF TARGETED HIRE VERSUS LOCAL HIRE LANGUAGE.

In addition to separating out the application of the rule to construction, rolling stock and personal services contracts, we urge the DOT to clarify in the Final Rule that federally funded transit agencies have broad flexibility to include provisions in their bid documents that incentivize or require targeted hire programs that do not include any geographic or locally-based preferences. As we have previously argued in a legal analysis submitted to the DOT in 2013 (https://jobstomoveamerica.org/jmaresources/JMA%20Policy%20Documents%20-%20Legal%20Memo%20to%20Robert%20S.%20Rivkin.pdf and incorporated by reference) we believe that – under relevant statutes and 49 CFR 18.36 – grantees may currently implement non-geographic specific targeted hire programs to incentivize or require contractors to hire disadvantaged, low income, veterans or other targeted categories of workers from anywhere in the United States. Unfortunately, this flexibility to implement non-geographic specific targeted hiring language is not widely understood by DOT grantees. Therefore we urge the DOT to use the Final Rule to clarify that grantees may apply non-geographic specific targeted hire language to federally funded contracts.

A. Final rule should give grantee agencies clear authority to use non-geographic specific targeted hiring language

As mentioned above, the DOT pilot program temporarily clarifies that FTA and FHWA grantee agencies have authority from the DOT to utilize non-geographic specific targeted hiring language in their contracting processes so long as the agencies request advance permission from those agencies to do so. We urge the DOT to clarify in the Final Rule that grantee agencies can use this kind of language, so long as it does not have a significantly negative impact on open competition.

The targeted hire of workers from disadvantaged backgrounds has been identified by the Obama administration as a high priority (see e.g. https://www.whitehouse.gov/blog/2014/02/27/my-brother-s-keeper-new-white-house-initiative-empower-boys-and-young-men-color). Other federal programs use specific targeted hiring criteria to incentivize employers to directly hire more workers from disadvantaged backgrounds. For example, the Department of Labor encourages employers to take advantage of the Work Opportunity Tax Credit by committing to hiring workers from any or all of 8 specific disadvantaged categories.

According to the website of the Department of Labor’s Employment and Training Administration (http://www.doleta.gov/business/incentives/opptax/eligible.cfm ), “Employers can hire eligible employees from the following target groups for WOTC.

Unemployed Veterans (including disabled veterans)

Temporary Assistance for Needy Families (TANF) Recipients

Food Stamp (SNAP) Recipients

Designated Community Residents (living in Empowerment Zones or Rural Renewal Counties)

Vocational Rehabilitation Referred Individuals

Ex-Felons

Supplemental Security Income Recipients

Summer Youth Employees (living in Empowerment Zones).”

In our experience, successful targeted hire programs have created incentives for bidders to hire people from high poverty census tracts (anywhere in the United States), to hire low income veterans, more women, more people of color and other disadvantaged workers such as the long-term unemployed or people who have a history with the criminal justice system that makes it hard for them to get jobs.

In particular substantial evidence shows that workers with criminal records can face significant employment discrimination, costing the United States economy between $57 and $65 billion annually in lost economic output (John Schmitt and Kris Warner, “Ex-offenders and the Labor Market,” Center for Economic and Policy Research, November 2010.)

In addition, LA Metro’s Construction Careers Policy identifies one category of disadvantaged workers as “having a criminal record or other involvement with the criminal justice system.” http://media.metro.net/about_us/pla/images/Construction_Careers_Policy.pdf

Again, targeted hiring programs without geographic preferences are currently being implemented across the United States with great success. Below are links to good examples of targeted hire programs used by U.S. transportation agencies:

• California High-Speed Rail Authority’s Community Benefits program: http://www.hsr.ca.gov/docs/brdmeetings/2012/December/brdmtg1212_bot3.pdf and http://www.hsr.ca.gov/docs/programs/construction/National_Targeted_Hiring_Initiative_Plan.pdf
• LA Metropolitan Transportation Authority’s Construction Careers Program: http://media.metro.net/about_us/pla/images/Construction_Careers_Policy.pdf
• LA Metro’s U.S. Employment Plan program: https://drive.google.com/a/laane.org/file/d/0B0nUvS4Ma2deVEF3bzNnNWZzNms/view
• Amtrak’s U.S. Employment Plan program: https://docs.google.com/a/laane.org/file/d/0B0nUvS4Ma2dedmtXZlFZNGlNNzk0WGFiV1BQTVZrU0ltWTNJ/edit and https://docs.google.com/a/laane.org/file/d/0B0nUvS4Ma2ded0Y5TVJZOWhDX2QyTHlDTVFoM0RKUlZfWEsw/edit
• The Maryland Purple Line’s U.S. Employment Plan program: https://docs.google.com/a/laane.org/file/d/0B0nUvS4Ma2dedFBJbTIycHdVZWxRYVU0cFN6d3BYakMxYnA4/edit
• The Chicago Transit Authority’s U.S. Employment Plan program: https://drive.google.com/a/laane.org/file/d/0B0nUvS4Ma2deNEk4dFlGYTNFM0E/view?pli=1 and http://www.railresource.com/content/?p=15806

B. Geographic preferences for rolling stock procurement should be authorized in the Final Rule under limited circumstances:

While we support the limited use of geographic preferences in rolling stock procurement, we strongly urge the DOT to develop a set of qualifying parameters for the utilization of local hire or geographic preferences as part of the public procurement of rolling stock. We suggest that these parameters be written into the language of the Final Rule. While we have not had time to specifically develop proposed language regarding the criteria for inclusion of geographic preferences, we suggest that factors including size and value of a procurement as well local transit market demand be part of a required market demand assessment as a prerequisite to the use by transit agencies of geographic preferences in rolling stock procurement. The rule should incentivize geographic preferences in locations where there is the potential for continued demand either in transit vehicle manufacturing or combined with other related industries that would create long-term, high quality jobs, rather than short term investments in employment. Additionally, to ensure that transportation investments result in real economic benefit for our communities, we suggest that the development of geographic boundaries for local hire also take into consideration population density, local demographics, educational attainment, and availability of industrial sites.

CREATE A SUGGESTED IMPLEMENTATION FRAMEWORK, TO ENSURE TRANSPARENCY, ACCOUNTABILITY AND EFFECTIVE EVALUATION BY GRANTEES.

Finally, in our experience, both targeted and local hire procurement and contract language is significantly less effective without a suggested implementation framework, to ensure that the language and the accompanying programs are enforceable and publicly transparent. To achieve this important goal of transparency and enforceability, we suggest that the DOT require its grantees to implement basic common language that is inserted into awarded contracts. This language – at a minimum – should spell out reporting requirements on the achievement of targeted or local hire goals, proposed enforcement mechanisms in the case of noncompliance or inaccurate reporting as well as cooperation by the private contractor with the awarding agency in the evaluation of the results of the hiring language. This kind of contract language will give both the grantee and the DOT the ability to assess the success and effectiveness of the grantees’ language and program. One implementation framework that has been extensively shared with the DOT is the U.S. Employment Plan, which has been adopted and adapted by a number of transit agencies across the country, as described above. In addition, model contract language for the U.S. Employment Plan can be found at www.jobstomoveamerica.org/resources. Also at https://jobstomoveamerica.org/jmaresources/JMA%20Policy%20Documents%20-%20USEP%20Full%20Version.pdf (page 36.)

Again, on behalf of our entire coalition, we applaud the DOT for launching this bold initiative, to help achieve the full promise of public transportation investment in communities across the nation.

Yours very truly,

Madeline Janis, Esq., Director

Submitted on behalf the following organizations, in alphabetical order: