HomeMy WebLinkAbout4.a. Receive information from District Counsel on pros and cons of developing a "Buy America" policy Page 1 of 3
Item 4.a.
CENTRAL SAN
Y-109-ITMEN ME
April 14, 2020
TO: ADMINISTRATION COMMITTEE
FROM: ALEX J. MOG, MEYERS NAVE ASSOCIATE
KENTALM, DISTRICT COUNSEL
REVIEWED BY: ROGER S. BAILEY, GENERAL MANAGER
SUBJECT: RECEIVE INFORMATION FROM DISTRICT COUNSEL ON PROS AND
CONS OF DEVELOPING A"BUYAMERICA" POLICY
In December 2018, the Administration Committee requested information on the pros and cons of
developing a Buy America policy at Central San, including what is and is not permissible under the law.
District Counsel Kent Alm and Alex J. Mog of Meyers Nave address those issues in the attached
memorandum.
Mr. Alm will be available at the meeting to respond to questions.
ATTACHMENTS:
1. Memo from District Counsel
April 14, 2020 Regular ADM IN Committee Meeting Agenda Packet- Page 3 of 11
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,,illACENTRAL SAN
CENTRAL CONTRA COSTA SANITARY DISTRICT
March 27, 2020
TO: ADMINISTRATION COMMITTEE
FROM: KENT ALM, DISTRICT COUNSEL
ALEX J. MOG, MEYERS NAVE
SUBJECT: BUY AMERICA POLICIES
We have been asked whether the District may adopt a "Buy America" policy governing
its purchase of goods and equipment. Based on our analysis, it appears that a "Buy
America" policy would likely be legal, but we recommend that the District exercise
caution in enacting such a policy for the reasons discussed below.
DISCUSSION
A "Buy America" Policy can take many different forms. In general, a "Buy America"
policy would either require the District and its contractors to buy goods and equipment
made in America, or would create a preference for suppliers or contractors using
American made goods and equipment.
During World War 11, the Legislature enacted the California Buy American Act, which
required that contracts for the construction of public works or the purchase of materials
for public use be awarded to companies who used or supplied material manufactured in
the United States. This policy was challenged in Bethlehem Steel Corp. v. Board of
Commissioners, and the California Court of Appeal invalidated the law. The Court
explained that because the policy prohibited public agencies from purchasing foreign-
made products, the policy was a "usurpation by this state of the power of the federal
government to conduct foreign trade policy."' The Court reasoned that because only the
federal government had the power to conduct foreign policy, only the federal
government could authorize or impose a Buy America policy or requirement.
Notably, courts in many other states have reached the opposite conclusion from the
Bethlehem court, and determined that a "Buy America" policy is legal. These other
courts have stressed that while these types of "Buy America" policies may be
unconstitutional when the state enacts them in its regulatory capacity, if a state is acting
as a market participant, the policies are legal.' A public agency is acting in its regulatory
capacity when it establishes rules for how other entities and the public can operate, and
is acting as a market participant when it establishes policies for how the public agency
' Bethlehem Steel Corp. v. Board of Commissioners(1969)276 Cal.App.2d 221,225
2 See Trojan Techs.,Inc. v. Com. of Pa,_916 F.2d 903,910(3d Cir. 1990).)
April 14, 2020 Regular ADMIN Committee Meeting Agenda Packet- Page 4 of 11
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itself will operate. Simply put, when the state is itself buying or selling goods, rather than
regulating the market, it has more latitude to decide with whom to do business. It
appears that the Bethlehem Steel Corp. case predated the major United States
Supreme Court cases that established that the Constitution does not impose the same
restrictions on a state when it is acting as a market participant rather than regulator, and
so the Bethlehem court didn't consider that distinction.3
Although the Bethlehem Steel Corp. case has never been directly overturned, based on
subsequent developments in the law as discussed above, we believe that it would be
legal for Central San to implement a "Buy America" policy governing its own purchase of
goods and equipment. In adopting such a policy, Central San would be acting simply as
a "market participant" and would not be regulating the market. For that reason, the Buy
America policy is likely permissible.
Although it may be legal for Central San to adopt a "Buy America" policy, we
recommend the District be cautious when considering such a policy. There are
numerous practical considerations related to implementing this type of policy, in addition
to the obvious fiscal considerations. For example, any adopted policy must be strictly
and consistently applied, otherwise the District could face bid protests and other claims
by contractors or suppliers losing out on business. The less specific the policy is, the
easier it will be for contractors or suppliers to make those claims. For this and similar
reasons, it is our understanding that few public agencies in California have voluntarily
implemented a "Buy America" policy.
AJM/KA:dma
s See e.g., White v. Massachusetts Council of Constr. Employers,Inc., 460 U.S. 204(1983).
April 14, 2020 Regular ADMIN Committee Meeting Agenda Packet- Page 5 of 11