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Catalyst for Improving the Environment
Site Visit Report
American Recovery and Reinvestment
Act Site Visit of Wastewater Treatment
Plant—Phase II Improvements Project,
City of Ottawa, Illinois
Report No. 11-R-0700
September 23, 2011
~ ~~ RECOVERY.GOV
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Report Contributors:
Michael Rickey
Larry Brannon
Patrick Mclntyre
Abbreviations
CFR Code of Federal Regulations
EPA U.S. Environmental Protection Agency
Cover photo: New rotary press system at the Ottawa, Illinois, wastewater treatment plant
construction site. (EPA OIG photo)
Hotline
To report fraud, waste, or abuse, contact us through one of the following methods:
e-mail: OIG Hotline@epa.gov write: EPA Inspector General Hotline
phone: 1-888-546-8740 1200 Pennsylvania Avenue NW
fax: 703-347-8330 Mailcode 8431P (Room N-4330)
online: http://www.epa.qov/oiq/hotline.htm Washington, DC 20460
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• U.S. Environmental Protection Agency 11-R-0700
| \ Office of Inspector General September 23, 2011
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At a Glance
Catalyst for Improving the Environment
Why We Did This Review
The U.S. Environmental
Protection Agency, Office of
Inspector General, conducts
site visits of American
Recovery and Reinvestment
Act of 2009 (Recovery Act)
clean water and drinking water
projects. The purpose of the
visits is to confirm compliance
with selected Recovery Act
requirements. We selected the
wastewater treatment plant
project in the City of Ottawa,
Illinois, for review.
Background
The city received a $7,720,293
loan from the State of Illinois
under the Water Pollution
Control Loan Program. The
loan included $3,860,147 in
Recovery Act funds. The city
will use these funds to
rehabilitate and improve the
city's wastewater treatment
plant.
For further information,
contact our Office of
Congressional, Public Affairs
and Management at
(202) 566-2391.
The full report is at:
www.epa.qov/oiq/reports/2011/
20110923-11 -R-0700.pdf
American Recovery and Reinvestment Act Site
Visit of Wastewater Treatment Piant—Phase II
Improvements Project, City of Ottawa, Illinois
What We Found
We conducted an unannounced site visit of the wastewater treatment plant project
in the City of Ottawa, Illinois. As part of our site visit, we toured the project,
interviewed city representatives and engineering and contractor personnel, and
reviewed documentation related to Recovery Act requirements.
The city could not provide sufficient documentation to support that some
manufactured goods used on the project met the Buy American requirements of
Section 1605 of the Recovery Act. In these instances, the documentation did not
demonstrate clearly that items were either manufactured in the United States or
substantially transformed in the United States. As a result, the state's use of over
$3.8 million of Recovery Act funds on the Ottawa project is prohibited by
Section 1605 of the Recovery Act, unless a regulatory option is exercised.
What We Recommend
We recommend the Regional Administrator, Region 5, employ the procedures set
out in Title 2 of the Code of Federal Regulations (CFR) to resolve the
noncompliance on the Ottawa project. In the event that the region decides to retain
foreign-manufactured goods in the Ottawa project under 2 CFR § 176.130 (c)(3),
the region should either "reduce the amount of the award by the cost of the steel,
iron, or manufactured goods that are used in the project or . . . take enforcement or
termination action in accordance with the agency's grants management
regulations/'
Neither the region nor the city agreed with our conclusion that the documentation
was not sufficient to support Buy American compliance for some items. Based on
additional documentation provided by the city, we agree that some items are now
sufficiently supported, and we have revised the report accordingly. However,
documentation is still insufficient in four instances.
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THE INSPECTOR GENERAL
September 23, 2011
MEMORANDUM
SUBJECT: American Recovery and Reinvestment Act Site Visit of
Wastewater Treatment Plant—Phase II Improvements Project,
City of Ottawa, Illinois
Report No. ll-R-0700
FROM: Arthur A. Elkins,
Inspector General
TO: Susan Hedman
Regional Administrator, Region 5
U.S. Environmental Protection Agency
This is our report on the subject site visit conducted by the Office of Inspector General of the
U.S. Environmental Protection Agency (EPA). The report summarizes the results of our site visit
to the Wastewater Treatment Plant—Phase II Improvements Project, City of Ottawa, Illinois.
We performed this site visit as part of our responsibility under the American Recovery and
Reinvestment Act of 2009 (Recovery Act). The purpose of our site visit was to determine the
city's compliance with selected requirements of the Recovery Act pertaining to the Clean Water
State Revolving Fund Program. The Illinois Environmental Protection Agency approved the
city's project. The city received a $7,720,293 loan, including $3,860,147 in Recovery Act funds.
The estimated direct labor and travel costs for this report are $170,910.
Action Required
The Agency disagreed with our recommendation, and the recommendation is considered
unresolved with resolution efforts in progress. In accordance with EPA Manual 2750, Chapter 3,
Section 6(f), you are required to provide us your proposed management decision for resolution of
the findings contained in this report before you formally complete resolution with the recipient.
As part of the audit resolution process, your proposed decision is due in 120 days, or on
January 20, 2012. To expedite the resolution process, please e-mail an electronic version of your
proposed management decision to adachi.robert@epa.gov.
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
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Your response will be posted on the Office of Inspector General's public website, along with our
memorandum commenting on your response. Your response should be provided as an Adobe
PDF file that complies with the accessibility requirements of Section 508 of the Rehabilitation
Act of 1973, as amended. The final response should not contain data that you do not want to be
released to the public; if your response contains such data, you should identify the data for
redaction or removal. We have no objection to the further release of this report to the public.
This report will be available at http://www.epa.gov/oig.
If you or your staff have any questions regarding this report, please contact Melissa Heist,
Assistant Inspector General for Audit, at (202) 566-0899 or heist.melissa@epa.gov; or Robert
Adachi, Product Line Director, at (415) 947-4537 or adachi.robert@epa.gov.
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American Recovery and Reinvestment Act 11 -R-0700
Site Visit of Wastewater Treatment Plant—Phase II
Improvements Project, City of Ottawa, Illinois
Table of
Purpose 1
Background 1
Scope and Methodology 1
Results of Site Visit 2
Buy American Requirements 2
Wage Rates 11
Limits on Use of Funds and Reporting Requirements 11
Contract Procurement 12
Recommendation 12
City, Region 5, and State Responses 12
Office of Inspector General Comment 13
Status of Recommendations and Potential Monetary Benefits 15
Appendices
A City of Ottawa Response to Draft Report 16
B Agency Response to Draft Report 22
C Illinois EPA Response to Draft Report 38
D Distribution 39
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Purpose
The purpose of our unannounced site visit was to determine whether the City of
Ottawa, Illinois, complied with selected requirements of the American Recovery
and Reinvestment Act of 2009 (Recovery Act), P.L. 111-5, pertaining to the
wastewater treatment plant project jointly funded by the Recovery Act and the
Illinois Water Pollution Control Loan Program.
Background
In May 2009, the U.S. Environmental Protection Agency (EPA) awarded over
$177 million of Recovery Act funds to the State of Illinois to capitalize its
revolving loan fund, which provides financing for construction of wastewater
treatment facilities and other authorized uses. In addition to the regulatory
requirements at Title 40 Code of Federal Regulations (CFR), Chapter 1,
Subchapter B, the assistance award was subject to 2 CFR Part 176, "Requirements
for Implementing Sections 1512, 1605, and 1606 of the American Recovery and
Reinvestment Act of 2009 for Financial Assistance Awards."
In January 2010, the city accepted a $7,720,293 loan from the Illinois
Environmental Protection Agency. The terms of the loan were based on an annual
fixed loan rate of zero percent on a 20-year note. The loan included $3,860,147 in
Recovery Act funds, of which half is to be repaid to the state. The loan balance
was funded by the state's Water Pollution Control Loan Program. The city used
these funds to rehabilitate and improve the city's wastewater treatment plant.
Scope and Methodology
Due to the time-critical nature of Recovery Act requirements, we did not perform
this assignment in accordance with generally accepted government auditing
standards. Specifically, we did not perform certain steps that would allow us to
obtain information to assess the city's internal controls and any previously
reported audit concerns. As a result, we do not express an opinion on the
adequacy of the city's internal controls or compliance with all federal, state, or
local requirements.
We made our unannounced site visit on October 5-8, 2010. On November 18-19,
2010, and again on April 4-5, 2011, we visited the city to perform additional
work related to Buy American compliance. During our visits, we:
1. Toured the proj ect
2. Interviewed city, engineering, and contractor personnel
3. Reviewed documentation maintained by the city, its engineer, and
contractors on the following matters:
a. Buy American requirements under Section 1605 of the Recovery
Act
11-R-0700
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b. Wage rate requirements under Section 1606 of the Recovery Act
c. Limits on funds and reporting requirements under Sections 1604
and 1512 of the Recovery Act
d. Contract procurement
Results of Site Visit
The city could not provide sufficient documentation in four instances to assure
compliance with the Buy American requirements of the Recovery Act. Unless the
city can comply with Buy American requirements or obtain a waiver from EPA,
the city's project to rehabilitate its wastewater treatment plant would not be
eligible for Recovery Act funds. We did not identify any other Recovery Act
issues. We summarize specific results below.
Buy American Requirements
Ottawa did not provide sufficient documentation to show that some manufactured
goods used in the project, funded in part by the Recovery Act, were produced or
manufactured in the
United States. In two
instances, we
identified materials
on site as foreign
made. The federal
grant to capitalize
Illinois's revolving
loan fund with
Recovery Act funds
required that all
projects use
manufactured
goods produced in
the United States, unless certain exceptions apply as provided for in 2 CFR
§176.60. The state included the Buy American requirements in the loan
agreement with Ottawa. However, we do not believe that the city fully understood
the procedures necessary to determine and document compliance. Further, the
state had not visited the project site.
Because the city cannot show that it complied with the Buy American
requirements and has not obtained a waiver from EPA, the treatment plant's
rehabilitation project presently is not eligible for Recovery Act funding. As a
result, the state's use of over $3.8 million of Recovery Act funds on the Ottawa
project is prohibited by Section 1605 of the Recovery Act, unless a regulatory
option is exercised.
Foreign-made steel pipe for the Ottawa project. (EPA OIG photo)
11-R-0700
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Title 2 CFR §176.60 states that Section 1605 of the Recovery Act prohibits the
use of Recovery Act funds for a project unless all of the iron, steel, and
manufactured goods used in the project are produced in the United States. The
regulation requires that this prohibition be consistent with U.S. obligations under
international agreements, and provides for a waiver under three circumstances.
Title 2 CFR §176.140(a)(1) defines a manufactured good as a good brought to the
construction site for incorporation that has been processed into a specific form
and shape, or combined with raw materials to create a material that has different
properties than the properties of the individual raw materials. There is no
requirement with regard to the origin of components in manufactured goods, as
long as the manufacture of the goods occurs in the United States.1 In the case of a
manufactured good that consists in whole or in part of materials from another
country, a domestically manufactured good is one that has been substantially
transformed in the United States into a new and different manufactured good
distinct from the materials from which it was transformed.2
To assist recipients of Recovery Act funds, EPA developed several guidance
documents and Internet-based training modules explaining the concept of
substantial transformation and the types of documentation needed to support a
substantial transformation determination. Key documents include:
• Determining Whether "Substantial Transformation " of Components Into a
"Manufactured Good" Has Occurred in the U.S.: Analysis, Roles, and
Responsibilities, dated October 22, 2009 (Determining Substantial
Transformation)
• Buy American Provisions of ARRA Section 1605 Questions and Answers—
Part 7, revised September 22, 2009 (Buy American Q&A Part 1)
• Buy American Provisions of ARRA Section 1605 Questions and
Answerers—Part 2, dated November 16, 2009 (Buy American Q&A
Part 2)
These guidance documents provide:
• An explanation of substantial transformation
• A matrix of questions for determining whether substantial transformation
has occurred in the United States
• The requirements for the type of documentation needed to support
substantial transformation
• The need to retain the documentation to support compliance with
Section 1605 of the Recovery Act
During our initial site visit, we noted that stainless steel drop pipes had
manufacturing markings from Malaysia, China, and Taiwan. We also noted that
1 Title 2 CFR §176.70(a)(2)(ii) and Title 2 CFR §176.160(a), "Domestic iron, steel, and/or manufactured good."
2 Title 2 CFR §176.160(a), "Domestic iron, steel, and/or manufactured good."
11-R-0700
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some of the electrical panels were made in Mexico. To explore this issue further,
we reviewed supporting documentation to confirm Buy American compliance for
57 items listed in various sections of the Bidding, Contract, and Specifications
document for the Ottawa project. The supporting documentation for 53 items was
sufficient to confirm compliance with the Buy American requirements.
Pipe at the Ottawa project site labeled as made in Malaysia (left) and China. (EPA OIG photo)
The documentation provided for the equipment items in table 1 did not provide
meaningful and specific technical descriptions of the manufacturing process to
determine whether the items were manufactured or substantially transformed in
the United States.
Table 1: Equipment for which supporting documentation was not sufficient to support
Buy American compliance
Equipment
Model
No. units
Company
Submersible pumps
Fiygt
WP3085-183
2
ITT Water and Wastewater U.S.A.
Submersible chopper pump
Fiygt
FP3127.390
1
ITT Water and Wastewater U.S.A.
Positive displacement blowers
Kaeser
EB 420C
2
Kaiser Compressors, Inc.
Centrifugal blowers
KTurbo
TB 100-0.6S
3
KTurbo USA
Source: OIG analysis.
There was no clear support that the equipment had been substantially transformed
into a "new and different manufactured good distinct from the materials from
which it was transformed," as defined in 2 CFR 176.160. In all four instances, the
equipment items were assembled in the United States by companies with foreign
affiliations. The supporting documentation did not provide clear and persuasive
evidence that the assembly processes completed in the United States were
sufficiently complex or meaningful to qualify as substantial transformation.
Recipients of Recovery Act funds must have adequate, project-specific
documentation to support compliance with Buy American requirements. Without
such documentation, compliance cannot be credibly and meaningfully
11-R-0700
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demonstrated.3 For items substantially transformed in the United States, the
documentation must be meaningful, informative, and contain specific technical
descriptions of the activities in the actual transformation process. The
documentation cannot simply assert a conclusion or describe an end state.4
Substantial transformation determinations are always made on a case-by-case
basis and cannot occur by undergoing a simple combining or packaging
operation.5 Assembly operations that are minimal or simple, as opposed to
complex or meaningful, generally will not result in a substantial transformation.6
Design, planning, procurement, component production, or any other step prior to
the process of physically working on and bringing together components to form
an item incorporated into the project cannot constitute or be a part of substantial
transformation. Activities that occur at the project site are generally considered
construction, not manufacturing.7
Flygt Pumps
ITT Water and Wastewater U.S.A. provided two letters to Ottawa to
support that the submersible pumps it supplied complied with Buy
American requirements. The first letter, dated February 24, 2010, made
general statements about Buy American requirements and EPA guidance,
and asserted, "With the strength of ITT's nearly 10 pump factories located
in more than five states, ITT WWW will comply fully with this
requirement by assembling Flygt brand model NP3085 and FP3127
submersible pumps listed on quote 2009-CHI-1810 in a facility located in
the United States. ..."
The statement is both prospective and too general to draw any conclusion
regarding the actual manufacturing process. EPA's Buy American Q&A
Part 2 states that documentation should include meaningful, informative,
and specific technical descriptions of the activities in the actual process
and not simply assert a conclusion or describe an end state.
On June 1, 2011, a business development manager for ITT Water and
Wastewater U.S.A. certified that the Flygt model NP3085-183
submersible pumps and the FP3127.390 submersible chopper pump were
substantially transformed based on processes performed in the United
States that were complex and meaningful. According to the certification,
the processes took a substantial amount of time, were costly, were
completed by highly skilled labor, required a number of different
processes, and added substantial value. To support this claim, the
3 Buy American Provisions ofARRA Section 1605 Questions and Answerers—Part 2, dated November 16, 2009,
question 5, p. 4.
4 Determining Whether "Substantial Transformation" of Components Into a "Manufactured Good" Has Occurred
in the U.S.: Analysis, Roles, and Responsibilities, dated October 22, 2009, p. 6.
5 Ibid.
6 Ibid.
7 Ibid., pp. 7 and 8.
11-R-0700
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manufacturer provided additional detail and pictures of its Pewaukee,
Wisconsin, facility in a letter, also dated June 1, 2011.
The June 1, 2011, letter stated that prior to the manufacturing process,
significant design, facility development, engineering, logistics, scheduling,
and training was accomplished in addition to sales company activities,
which included defining, sizing, and selecting proper equipment and
ordering materials, which took an average of 48 minutes per pump unit.
Materials handling, which included receipt of individual components,
inventorying of materials, material picking, cable cutting, and data plate
printing, took an average of 82 minutes per pump unit.
This information is irrelevant when determining whether goods are
manufactured in the United States. EPA guidance, Determining
Substantial Transformation, states that design, planning, procurement,
component production, or any other step prior to the process of physically
working on or bringing together the components to form an item
incorporated into the project cannot constitute or be a part of substantial
transformation.
EPA's Determining Substantial Transformation also states that no good
"satisfies the substantial transformation test by . . . having merely
undergone '[a] simple combining or packaging operation.'"8 Secondly,
"[ajssembly operations which are minimal or simple, as opposed to
complex or meaningful, will generally not result in a substantial
transformation."9 The guidance also states:
An oversimplified summary of substantial transformation
analysis is to ask whether the activities in the U.S.
substantially transformed the components that go into the
completed item. . . . Because assembly is in most cases
further down the spectrum towards non-transformative
work, a more demanding standard is appropriate. . . .
According to the Flygt USA Internet site (http://www.flygtus.com). ITT
Water and Wastewater is an international company headquartered in
Sweden. Manufacturing facilities are in Sweden (main plant), China, and
South America. The company has a corporate office, which supports sales
and services, and branch offices in the United States. The Internet site lists
no manufacturing facilities in the United States. For an international
company with manufacturing facilities throughout the world, it is
important to clearly understand the roles of related companies, including
detailed descriptions and cost information of materials and components
8 Determining Whether "Substantial Transformation" of Components Into a "Manufactured Good" Has Occurred
in the U.S.: Analysis, Roles, and Responsibilities, dated October 22, 2009, p. 6.
9 Ibid.
11-R-0700
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that are used in the manufacturing processes performed by related
companies. EPA's Buy American Q&A Part 1 states that if all the pieces
are shipped by one company with the intent of providing all components
necessary to be assembled in a functional good, then substantial
transformation would not occur and the product would not be a U.S.-made
good.
We do not believe that the manufacturer's letters adequately support its
claim of substantial transformation by complex or meaningful assembly.
We find no evidence that components were transformed. The company did
not provide information about the manufacturing processes completed
outside the United States by related companies. The company did not
support its claim that the processes were costly and tripled the value of the
components with any type of cost breakdown or detail. The company did
not provide a description as to the type of skills and certifications needed
by the labor force to assemble and test the pumps. Without detailed
descriptions of the entire manufacturing process and supporting
documentation, we cannot determine whether the Flygt pumps met the
Buy American requirements.
Kaeser Blower
Kaeser Compressors, Inc., provided a letter to Ottawa dated October 29,
2010, to support substantial transformation. The letter stated that for
Recovery Act-funded projects, the company purchases a base chassis of
proprietarily designed components from the parent company, Kaeser
Kompressoren, GmbH, located in Germany. This
chassis consists of components such as the blower
block, silencer base, and enclosure. The items
added in the United States include the electric
motor, pulleys, belts, relief valves, and expansion
joints. The letter described the building process as
mounting and aligning the motor and v-belt pulley
drive, adjusting and installing the pressure relief
valve(s), and assembling and installing of check
valves, fan motors, gauges, and switches.
Depending on the size and complexity of the
specification, additional wiring and setting of
ancillary devices may be required. Each unit
requires 16 to 20 hours to build. The assembly
procedures, combined with the U.S.-sourced items,
account for 35 to 50 percent of the package's total
Kaeser blower. (EPA OIG photo) i
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The October 29
letter does not
provide a
meaningful and
specific technical
description of the
assembly process
in the United
States that would
enable us to
determine whether
the Ottawa blowers
were manufactured
or substantially
transformed in the
United States.
Product literature and physical inspection of the equipment at the
construction site showed that the chassis manufactured in Germany was
essentially a blower without a drive system. The documentation did not
explain how the addition of the drive system (motor, pulley, and belts)
substantially changed or transformed the character and use of the blower
chassis manufactured in Germany and imported into the United States.
The number of assembly hours in the Uni ted States and the added value
are not meaningful without some context, i.e., a demonstration of the
relationship of the assembly time in the United States to the number of
hours and operations spent to manufacture the chassis obtained from the
parent company in Germany, Finally, the letter is too general and does not
specifically address the assembly of the blowers incorporated into the
Ottawa project. Without additional documentation, there is no evidence
that blowers have been substantially transformed into a "new and different
manufactured good distinct from the materials from which it was
transformed," as described in 2 CFR 176.160. This documentation should
provide details about the entire manufacturing and assembly process to
determine that the assembly process in the United States was complex or
meaningful as required to qualify as substantial transformation.
KTurbo Blower
The sole support for three KTurbo TB-100-0.6S multistage centrifugal
blowers was a May 31, 2010, signed statement by the sales manager that
"all iron, steel an (sic) Manufactured Goods provided by the manufacturer
above is made in the United States in full conformance with requirements of
ARRA Section 1605 Buy American requirements." However, catalog
literature showed that KTurbo's manufacturing facility, head office, and
research and development center were located in the Republic of Korea.
KTurbo had an assembly and testing facility in Batavia, Illinois, near
Fredericksburg, VA 22404
Tel. (540) 898-5500
FAX (540) 898-5520
COMPRESSORS
Model EB 420 C
Part No.
EBC.1C
Seria No
Free Air
Delivery
1.177 dm
Max. End ,0 „ .
Pressure (gage pr.) Psla
3 HP
Max.Pressure i „„i
Difference (gage pr.) '5-' Psl
60(3600
Motor Hz/RPM
Rated Blower Speed 3.720 rpm
Motor FLA
For service, refer
to equipment number
MADE IN GERMANY
3888656
Kaeser blower label, indicating product was made in
Germany. (EPA OIG photo)
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Chicago. In catalog photographs, the Batavia assembly and testing facility
resembled a warehouse and training facility. Information on the website
http://www.industrydirect.com stated that KTurbo's facility in Batavia was
less than 2,000 square feet in size, was subcategorized as a warehouse, and
employed one to four staff.
Chassis assembled in Batavia from
parts shipped from Korea, (photo
courtesy City of Ottawa)
In October 2009, Region 5, along with a contractor, visited KTurbo's
Batavia facility. At that time, no manufacturing was taking place. KTurbo
representatives described its intended assembly/manufacturing process.
Region 5 and the contractor were told that part of the blower assembly
would be imported, and part of the assembly would be done in Batavia.
Both the contractor's report and
the region's site visit summary
included detail about the number
or percentage of components that
would be sourced from the United
KTurbo blower parts at the Batavia facility,
(photo courtesy City of Ottawa)
States. However, 2 CFR
§176.70(a)(2)(ii) states, "there is
no requirement with regard to the
origin of components or
subcomponents ... as long as the
manufacturing takes place in the
United States." Therefore, the
source of components cannot be
part of the substantial
transformation determination. Further, EPA's Buy
American Q&A Part 1 states that all substantial
transformation cases are matters of degree;
however, the transformation or change to imported
materials brought about by manufacturing or other
processes in the United States must be substantial.
Simple assembly or stand-alone testing is not
sufficient to support substantial transformation of
manufactured goods in the United States.
Both Region 5 and Office of Water staff believe that
substantial transformation could occur at the
Batavia, Illinois, facility. We have not been
provided sufficient documentation to determine that
substantial transformation can or will occur at
Batavia. We cannot determine whether the assembly
taking place in Batavia is complex or meaningful, or
simple assembly. Further, because the blower parts
are manufactured in a related foreign facility and
sent to the United States for final assembly, we need
detailed descriptions of the manufacturing process
11-R-0700
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and supporting documentation to determine whether the KTurbo blowers
meet Buy American requirements. As previously noted, Buy American
Q&A Part 1 states that if all the pieces are shipped by one company with
the intent of providing all components necessary to be assembled in a
functional good, then substantial transformation would not occur and the
product would not be a U.S.-made good.
On April 19, 2011, KTurbo USA, Inc., in Batavia, Illinois; KTurbo, Inc.,
located in Chungbuk, Korea; and certain principals were placed on the
federal government's Excluded Parties List System for an indefinite
period. The companies and principals were suspended from receiving
federal funds based on an indictment or other adequate evidence to suspect
the commission of an offense that is a cause for debarment. The company
provided certifications to multiple municipalities containing allegedly
fraudulent statements that KTurbo blowers were manufactured in the
United States and were in conformance with the Buy American provisions
in the Recovery Act.
We do not believe that the city initially understood the process and documentation
necessary to comply with Buy American requirements prior to our visit. The city
relied on its contractor and its resident engineer to assure compliance. The city
included the Buy American requirement in the construction contract, but did not
include any specific Buy American compliance responsibilities in the engineering
agreement. About 8 months after the initiation of construction, the city assigned
the resident engineer to document Buy American compliance. The contractor
obtained the manufacturer documentation and submitted the information to the
resident engineer. We found no evidence that the city was directly involved in
reviewing Buy American documentation.
The contractor relied on the resident engineer, as the representative of the city, to
determine the adequacy of the Buy American certifications and supporting
documentation submitted by the supplier. The engineer reviewed the
documentation as part of the shop drawing review. At the time of our review, the
resident engineer stated that the contractor and the city, not the engineering firm,
were responsible for ensuring Buy American compliance. The resident engineer
noted that the engineering firm had neither received any training to understand
whether Buy American certifications were adequate or legitimate, nor received
any additional methods to research this information. In cases where the contractor
submitted shop drawing information without Buy American documentation, the
resident engineer returned the submission to the contractor for appropriate
followup. On October 29, 2010, during a weekly status meeting, the city assigned
additional responsibility to the resident engineer to document Buy American
compliance based on information provided by the contractor.
The city also told us that the state had not visited the project. We spoke with a
state project manager familiar with the Ottawa project. He stated that the state had
11-R-0700
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done little on-site monitoring of municipal Recovery Act projects because of the
large number of projects and the state's limited resources. The project manager
also said that he was not aware that the city had contacted the state to request
guidance related to areas of uncertainty specific to federal requirements when
using Recovery Act funds for its project.
The city, its engineering firm, and contractors used information we provided
during the site visits to enhance their understanding of Buy American
requirements, which assisted them in making Buy American determinations for
the remainder of the project. The engineering firm used EPA guidance to reject
inadequate Buy American documentation. The foreign-made steel pipes and
electrical panels identified during our site visit were replaced with American-
made goods. The prime contractor rejected questionable equipment and asked
vendors to provide goods that were better supported as being manufactured or
substantially transformed in the United States.
However, based on our review of supporting documentation for four items, the
city did not comply with Buy American requirements. The Recovery Act does not
permit the use of Recovery Act funds unless the requirements of Section 1605 are
met. Consequently, the state's use of Recovery Act funds on the Ottawa project is
not permitted.
Wage Rates
The construction contractor and subcontractor complied with Section 1606 of the
Recovery Act. We interviewed all general contractor and subcontractor
employees at the construction site on October 5, 2010, to obtain information about
their job duties, training, qualifications, and compensation. We compared the pay
rates to those specified by the U.S. Department of Labor for workers in La Salle
County, Illinois, where Ottawa is located. All employees were paid union wages
equal to or above the required wage rate specified by the U.S. Department of
Labor.
Limits on Use of Funds and Reporting Requirements
Ottawa complied with Recovery Act Sections 1604 and 1512(c). Based on our
review of the loan document and a visual inspection of the construction site,
Ottawa has not used Recovery Act funds for any prohibited facilities as described
in Section 1604 of the Recovery Act. We also reviewed quarterly reports and
supporting documentation prepared by the city's project engineer and submitted
to the state to verify that Ottawa complied with the reporting requirements in
Section 1512(c) of the Recovery Act.
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Contract Procurement
We did not identify any issues of concern related to contract procurement.
Ottawa publicly advertised for sealed bids and received 10 bids. Based on the
engineer's recommendation, the city awarded the contract to the lowest bidder.
We reviewed the bid tabulation and also contacted several of the unsuccessful
bidders to obtain their viewpoint on the bidding process. We did not identify any
inappropriate or unfair bidding practices.
Recommendation
We recommend that the Regional Administrator, Region 5:
1. Employ the procedures set out in 2 CFR §176.130 to resolve the
noncompliance on the Ottawa project. In the event that the region makes
a determination to retain foreign-manufactured goods in the Ottawa
project under 2 CFR§176.130 (c)(3), the region should either "reduce
the amount of the award by the cost steel, iron, or manufactured goods
that are used in the project or . . . take enforcement or termination action
in accordance with the agency's grants management regulations."
City, Region 5, and State Responses
The OIG received comments on the draft report from the City of Ottawa,
Region 5, and the Illinois Environmental Protection Agency. The City of Ottawa
also provided supplemental documentation to support its comments.
The city disagreed with our conclusion that the documentation for several items
did not support compliance with Buy American requirements. The city stated that
it had worked diligently to comply and noted that the contract documents did not
require the general contractor to provide Buy American documentation until the
iron, steel, or manufactured goods were ready to be incorporated into the project.
The city stated that the final assessment of Buy American compliance could not
be determined until the projected construction completion date of October 15,
2011. The city stated that it had provided sufficient documentation for all but one
item identified in the draft report, the KTurbo blowers, which the city believed
would be substantially transformed in the company's Batavia, Illinois, facility.
The city planned to send additional documentation in the near future. The city
also stated that it believed that the Kaeser blowers were acceptable based on the
company's October 29, 2010, letter and an understanding that similar blowers
were found acceptable to EPA on another project. The full text of the city's
comments and the OIG's detailed response are included in appendix A.
Region 5 did not agree with the conclusions in the draft report. The region
provided an initial response on June 23, 2011, and stated that it would review the
Buy American documentation for compliance by July 29. In its second response,
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the region concluded that the documentation was sufficient to support Buy
American compliance for all the items questioned in the draft report except for the
KTurbo blowers, which were still being built. The region stated that it would
monitor the process and take corrective action if it subsequently found that the
item did not meet the test of substantial transformation. The region stated that it
would not reduce the amount of Recovery Act funds applied to this project at this
time. The region's second response is in appendix B.
Illinois EPA agreed with our recommendation. A copy of the state's response is in
appendix C.
Office of Inspector General Comment
Our recommendation remains unchanged. We modified our report based on the
comments and additional documentation. However, we do not agree with the city
and the region that all items except the KTurbo blowers comply with Buy
American requirements. We believe that supporting documentation is not
sufficient to support Buy American compliance in four instances. Except for the
June 21, 2011, letter from KTurbo USA, neither the city nor the region identified
any new documentation that we had not already evaluated during the course of
our review.
The documentation provided for the questioned equipment items did not provide
sufficiently meaningful and specific technical descriptions of the manufacturing
process to enable us to determine whether the items were manufactured or
substantially transformed in the United States. The companies did not provide
clear support that the equipment had been substantially transformed into a "new
and different manufactured good distinct from the materials from which it was
transformed," as defined in 2 CFR 176.160. In all four instances, the equipment
items were assembled in the United States by companies with foreign affiliations.
The supporting documentation did not provide clear and persuasive evidence that
the assembly processes completed in the United States were complex or
meaningful to support that substantial transformation occurred.
With regard to the Kaeser blowers, the region stated that EPA Office of Water
staff engineers provided "anticipatory" oversight to address the issue of
substantial transformation to determine whether the products were actually
manufactured in the United States. Office of Water staff engineers opined that
substantial transformation is occurring at Kaeser's Fredericksburg, Virginia,
facility, and that the products are therefore made in the United States. An Office
of Water e-mail message to Kaeser, dated November 1, 2010, documents this
opinion. During our review, we discussed the November 1, 2010, e-mail with
Office of Water staff. We were not made aware that the Office of Water had any
additional information beyond Kaeser's October 29, 2010, letter, which we
determined to be insufficient in this report. EPA's Buy American Q&A Part 2
states, "Substantial transformation determinations are made by assistance
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recipients . . . EPA does not and will not make determinations as to substantial
transformations . . . EPA's role under §1605 is to review waiver requests. . .
Office of Water staff providing an opinion on substantial transformation to Kaeser
is inconsistent with EPA's guidance and its role under Section 1605 of the
Recovery Act.
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Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (In $000s)
Rec.
No.
Page
No.
Subject
Status1
Action Official
Planned
Completion
Date
Claimed
Amount
Ag reed-To
Amount
12 Employ the procedures set out in 2 CFR §176.130
to resolve the noncompliance on the Ottawa
project. In the event that the region makes a
determination to retain foreign-manufactured goods
in the Ottawa project under 2 CFR§176.130 (c)(3),
the region should either "reduce the amount of the
award by the cost of the steel, iron, or
manufactured goods that are used in the project or
... take enforcement or termination action in
accordance with the agency's grants management
regulations."
Regional Administrator,
Region 5
$3,860
1 0 = recommendation is open with agreed-to corrective actions pending
C = recommendation is closed with all agreed-to actions completed
U = recommendation is unresolved with resolution efforts in progress
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Appendix A
City of Ottawa Response to Draft Report
City Commissioners
Daniel Aussem
CITY of OnflSVA
Pool, Leigh & Kopko
Donald J. Harris
City Treasurer
Corporation Counsel
Accounts & Finance
ROBERT M. ESC H BACH
MAYOR
301 W. MADISON STREET, OTTAWA, ILLINOIS 61350
Wayne A. Eichelkraut, Jr.
Public Property
David A. Noble
City Engineer
Dale F. Baxter
Streets & Public Improvements
Shelly L. Munks
City Clerk
Edward V. Whitney
Public Health & Safety
www.cityofottawa.org
Phone: 815-433-0161
Fax: 815-433-2270
June 22, 2011
Robert Adachi
Director of Forensic Audits
USEPA
Office of Inspector General
Washington, DC 20460
Re: Draft Report:
American Recovery and Reinvestment Act Site Visit of
Wastewater Treatment Plant-Phase II Improvements Project
City of Ottawa, Illinois
Project No. OA-FY11-A-0001
This is the City of Ottawa response to the Draft Report.
In February 2009, the ARRA program was passed in an effort to put Americans
back to work. The program was designed to support projects that were "shovel ready."
The plans and specifications for the project at issue here, the City of Ottawa
Wastewater Treatment Plant, were substantially complete at the time ARRA was
passed. It was the perfect "shovel ready" project. Being one of the first projects funded
under ARRA has brought many challenges. First, the construction documents had to be
modified to comply with ARRA requirements. Second, and more importantly, both the
City of Ottawa and the enforcing agencies have had to struggle with the interpretation
and application of ARRA's requirements. It has become clear that all the parties—the
City, the USEPA and the Inspector General—have been working their way through the
requirements of the ARRA and trying to give life and "teeth" to those requirements. It is
unfair to suggest that the City alone has been uninformed and ill-prepared when the
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representatives of other government agencies have expressed similar confusion over
some of the ARRA's requirements. As the federal agencies made determinations that
affected the City's obligations, the City worked diligently to comply with those
determinations and to gather the information necessary to satisfy USEPA and the OIG.
OIG Response 1: We recognize that the Recovery Act's Buy American requirements were new,
and that projects were required to be under contract or construction 12 months after the Recovery
Act was signed. The city accepted funds from the State of Illinois through the Water Pollution
Control Loan Program. The loan agreement between the city and the Illinois Environmental
Protection Agency stated that acceptance of the loaned funds required the city to "comply with
any future reporting and/or accountability requirements that may result as a condition for
receiving ARRA funds." Further, paragraph 16 of the loan agreement's standard conditions
required Buy American compliance and incorporated by reference a notice on the Illinois
Environmental Protection Agency's Internet site that provided guidance on Buy American
compliance. If the city was unclear about the procedures necessary to fulfill its responsibilities
under the loan agreement, the city should have sought guidance from the state. In addition, EPA
published several training and guidance documents on its public Internet site to assist recipients
in meeting Recovery Act requirements.
Initially, the City would note that the contract documents for the project require
the general contractor to provide and document that "all iron, steel and manufactured
goods used in the project are produced in the United States" as defined in Section 1605
of ARRA. However, the contract documents also provide that such documentation is
not required until the iron, steel or manufactured goods are ready to be incorporated
into the project. The work is currently only 93% complete with an expected completion
date of October 15, 2011. Consequently, there are products for which the required
documentation has not yet been provided to the City. Only when the project is complete
and all the documentation has been provided can a final assessment of the City's
compliance with ARRA be reached.
OIG Response 2: The city's procedure to wait until iron, steel, or manufactured goods were
ready to be incorporated into the project before confirming compliance with Buy American
requirements was risky and not fully consistent with regulations. For example, both 2 CFR
176.100, "Timely determination concerning the inapplicability of section 1605 of the Recovery
Act," and 2 CFR 176.150, "Notice of Required Use of American Iron, Steel, and Manufactured
Goods - Section 1605 of the American Recovery and Reinvestment Act of 2009," suggest a
waiver process that takes place before funds are obligated. Further, 2 CFR 176.120,
"Determinations on late requests," provides specific procedures for instances in which a recipient
requests a determination regarding the inapplicability of Section 1605 after obligating Recovery
Act funds. The award official may deny the request. If an exception determination is made after
funds are obligated for a project, the award official must amend the award to allow the use of
foreign iron, steel, and/or relevant manufactured goods. In certain circumstances, the award
official must adjust the award amount, redistribute budgeted funds, and/or take other appropriate
actions to cover the costs associated with acquiring or using the foreign iron, steel, or
manufactured goods. By waiting until iron, steel, or manufactured goods were ready to be
incorporated or already installed to confirm compliance with Buy American requirements, the
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city limited its ability to substitute foreign products with domestic products and increased its risk
of losing federal assistance. The city should have determined compliance before products and
materials were ordered.
Documentation for the 18 Items
Since the OIG report was received, the documentation for 17 of the 18 items listed as
not having "meaningful, informative, and specific technical descriptions of activities to
determine if the items were manufactured or substantially transformed in the United
States" has been sent to OIG. The City believes the documentation for these 17 items
now shows they were manufactured or substantially transformed in the U.S. and ask for
OIG to review the documentation. The documents are not included with this response
since they have been transmitted to OIG with acknowledgment of receipt and because
of the large volume of the files. If additional copies are required, they will be provided
upon request.
OIG Response 3: We reviewed the additional documentation and concluded that supporting
documentation in four instances did not provide sufficiently meaningful, informative, and
specific technical descriptions to determine whether the items were manufactured or
substantially transformed in the United States. We revised our report to identify the questioned
items and the documentation deficiency.
The remaining undocumented item is the K-Turbo blowers. The equipment
representative, the Contractor, the consulting engineer and the Asst. City Engineer are
working with K-Turbo and we feel the blowers that are being made in Batavia, IL will be
found "substantially transformed" based on our visit to the fabrication facility and
additional communication. See the attached memo, dated June 21, 2011, from K-Turbo
USA, Inc. USEPA and their consultants have visited K-Turbo in Batavia and have told
us that the feel K-Turbo has the capability to meet the substantially transformation
guidelines. The City is making every effort to assure this is achieved. The Substantial
Transformation checklist is being completed at this time and will be forwarded to OIG in
the near future.
OIG Response 4: Regarding the KTurbo blower, we cannot make a determination on
Section 1605 compliance without the documentation supporting the actual manufacturing
process of the equipment used in the Ottawa project. To date, all information has been
prospective. Because the company has been suspended indefinitely from receiving any new
federal funds, we need to clearly understand KTurbo's manufacturing process. Supporting
documentation should include: (1) a detailed list of all parts and components and their sources,
supported by bills of lading and invoices; (2) a detailed description of the manufacturing and/or
assembly steps completed in Batavia; (3) a detailed list of manufacturing and/or assembly steps
completed by KTurbo in Korea or any other related or formerly related company in a foreign
country; (4) a detailed description of the specialized labor and tools used in the Batavia facility;
and (5) a detailed description of material and labor costs incurred for the blowers built for the
Ottawa project.
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The Kaeser blowers are considered to be acceptable based on the submittal letter to
the blower supplier, Peter Lynch, LAI, Ltd. of October 29, 2010 describing substantial
transformation. The letter is similar to a letter regarding similar blowers for a project in
Fredricksburg, VA which we understand was acceptable to USEPA.
OIG Response 5: We reviewed the referenced October 29, 2010, letter during our field work
and discussed our conclusion in the Kaeser example beginning on page 7 of this report. Also, we
were aware of the e-mail sent by an employee from EPA's Office of Water. We find no authority
in Section 1605 of the Recovery Act or the relevant regulations at 2 CFR Part 176,
"Requirements for Implementing Sections 1512, 1605, and 1606 of the American Recovery and
Reinvestment Act of 2009 for Financial Assistance Awards," that would authorize EPA to make
a determination of substantial transformation. In fact, EPA's Determining Substantial
Transformation clearly states that "EPA does not and will not make determinations as to
substantial transformation or the U.S. or foreign origin of manufactured goods." Since Kaeser
Compressors, Inc., is an affiliate of Kaeser Kompressoren, GmbH, and "the base chassis of
proprietary designed components" was obtained from the parent, we need to clearly understand
the precise steps and costs completed in the United States versus the process and steps completed
in Germany for the actual blowers used in the Ottawa project. Because we did not receive any
new documentation, we did not change our position in the report.
De minimis waiver items
The Contractor has tabulated the cost of all materials in the project, $3,709,957 (see
attached memo). The 5% allowable for non-domestic goods is $185,500 according to
the de minimis waiver, ARRA Section 1605 (b)(1). The identified non-domestic item on
the OIG list is number 39, Specification 15915 - Electric and Electronic Control. This is
the thermostat for hydronic heating system in the sludge dewatering building. Cost =
$248.
Two other items not on the OIG List that are not American made are:
1. Specification Section 16905: computer and monitor for the SCADA system in the
operations building. Cost = $1,201
2. Specification Section 16496 Enclosed Transfer Switch: Cost = $4,863
The total cost of these three items is $6,312. This is 0.17% of the material cost.
Therefore it is accepted within the guidelines of the de minimus waiver.
OIG Response 6: We agree and have revised the report accordingly.
Consulting engineer as Agent for the City
The City hired the consulting firm of McClure Engineering Associates, Inc. for the
Construction Phase services as defined in paragraph A.1.05 of the Agreement between
the Owner and Engineer for Professional Services dated 2/3/2010. The addition of
services for review of the ARRA compliance documentation was authorized in the
weekly project progress review meetings when the need and magnitude of the effort
became apparent. The authorization is recorded in the meeting notes. It is best to
review the ARRA documentation along with the Shop Drawing review since the system
is already in place for review, receiving transmittal from the Contractor, systematic filing
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and communication with the City on items needing specific involvement of the City staff
or Commissioners. It is normal for the City of Ottawa to rely on the consulting engineer
for such detailed reviews.
OIG Response 7: We agree with the city's comments. Based on our review of the meeting
notes, which state that the engineering firm received additional responsibilities regarding the
review of Recovery Act Buy American documentation, we have revised the report accordingly.
Project Funding Status
The current financial status of the project cost and the funding are as follows:
The current Construction Contract $8,233,169.93
Design Engineering $ 435,000.00
Construction Engrg $ 487,857.86
Total eligible cost $9,155,027.79
Funding: SRF Loan $7,720,293.00
Illinois Clean Energy $ 250,000.00
City Bonding $1,184,734.79
Excluded items which still comply with ARRA requirements
IEPA has previously eliminated the following items from the project funding as ineligible
cost items:
OIG List No. Spec. Section Item Cost
11 11304 RAS Pumps $ 65,200
15 11315 Floating Mixers Equipmt $ 40,000
18 11336 Grit Removal Equipment $118,100
19 11337 Rotary Press System $901,500
Engineering services associated with the above items $202,063
Other construction items $ 57,000
Total ineligible costs per award letter $1,419,317
This is to show that the above four items, though they have met the ARRA Buy
American provision are not being covered by the ARRA funding.
OIG Response 8: We agree with the city's comments. The supporting documentation for the
ineligible items sufficiently demonstrated compliance with Buy American requirements.
On June 2, 2011, Andrew Bielanski, USEPA Region 5 and Mike Grimm, Cadmus
Group, consultant to USEPA, conducted a site visit to review the City's documentation
of compliance with the terms of the SRF/ARRA loan/grant. Although we have not
received a report from their evaluation, they indicated that our compliance appeared to
be in order.
OIG Response 9: The region's response to the draft report is in appendix B. We have not
changed our position as a result of the region's comments.
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We appreciate the funding provided for our project and have made every effort to
understand the requirements. We feel we have met the requirements up to this date and
will continue to by the time the project is completed later this year. We stand ready to
answer any questions or clarifications need to fully comply. I am available by phone,
815-433-0161 ext 41 or e-mail enqineer@cityofottawa.org.
Sincerely,
Robert M. Eschbach
Mayor
cc: John Trefry, via e-mail
Michael Rickey, via e-mail
Larry Brannon, via e-mail
Dave Hall, McClure Engineering
Attachments: de minimus tabulation
K-Turbo memo, June 21, 2011
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Appendix B
Agency Response to Draft Report
MEMORANDUM
SUBJECT: Final Comments on Draft Report
American Recovery and Reinvestment Act Site Visit of Wastewater Treatment
Plant - Phase II Improvements Project, City of Ottawa, Illinois
Project No. OA-FYll-A-OOO
FROM: Susan Hedman /signed July 29, 2011/
Regional Administrator, Region 5
U.S. Environmental Protection Agency
TO: Robert Adachi
Director of Forensic Audits
We have completed the actions outlined in our memorandum dated June 23, 2011, and are
providing final comments on the draft report, American Recovery and Reinvestment Act Site Visit
of Wastewater Treatment Plant - Phase II Improvements Projects, City of Ottawa, Illinois. The
attached table summarizes our concurrence or non-concurrence with the 18 findings of Recovery
Act non-compliance, the basis and rationale for our determination, and a description of any
corrective actions taken or planned.
We obtained documentation from the City of Ottawa for the 18 questioned items (which was also
provided to the OIG in response to the draft report). We coordinated our review with the Office
of Water to ensure a consistent and fair application of EPA's Buy American guidance. Our
engineers evaluated product documentation to ensure that the items were either manufactured or
substantially transformed in the United States as required under the Buy American provision.
We also applied EPA's de minimis waiver for incidental and low-cost items as appropriate.
We conclude that 17 of the 18 items complied with Buy American requirements. One item (K-
Turbo blower) is currently being manufactured, and the city is closely monitoring this process to
ensure that substantial transformation is taking place in the U.S., making the item eligible for
Recovery Act funding. We will monitor this process and take corrective action if we find that
the item did not meet the test of substantial transformation. We will not reduce the amount of
Recovery Act funds applied to this project at this time. If you have any questions, please contact
Debbie Baltazar at 312-886-3205.
Attachment
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cc: Geoff Andres, Manager, Infrastructure Financial Assistance Section, Illinois EPA
Arnold Bandstra, Assistant City Engineer, City of Ottawa, Illinois
Arthur A. Elkins, Jr., Inspector General
Melissa Heist, Assistant Inspector General for Audit
John Manibusan, EPA OIG Office of Congressional, Public Affairs and Management
bcc: Eric Levy, Audit Follow-up Coordinator, Region 5
Tinka Hyde, Director, Water Division, Region 5
Debbie Baltazar, Chief, State and Tribal Programs Branch, Region 5
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Item
Number
Section
Number
Equipment
Description
Manufacturer
Concur
or
Non-
concur
Basis & Rationale for
Determination
Planned
Corrective
Action
8
08520
Aluminum
Windows
Kawneer
Non-
concur
We find the documentation
sufficient to support Buy American
compliance. Alternatively, the City
of Ottawa would be reasonably
justified in claiming these items
under EPA's "de minimis" waiver.
• Kawneer Buy American
certification indicates that all
Kawneer products are
manufactured in 13 locations
across the United States. These
domestic construction materials
are in compliance with Buy
American requirements.
• Certification clearly references
the Ottawa project.
• Bill of Lading lists Kawneer's
facility in Itasca, Illinois as the
place of origin for the shipment.
The Itasca facility was listed on
Kawneer's Buy American
certification.
• Bill of Lading indicates two boxes
containing window and door
frames totaling 141 pounds were
shipped. Due to the very limited
quantities of this item, the City of
Ottawa would be reasonably
justified in claiming these items
under EPA's "de minimis" waiver.
N/A
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Item
Number
Section
Number
Equipment
Description
Manufacturer
Concur
or
Non-
concur
Basis & Rationale for
Determination
Planned
Corrective
Action
10
11300
Progressive
Cavity
Sludge
Pumps
Moyno
Non-
concur
We find the documentation
sufficient to support Buy American
compliance.
• Moyno Buy American
certification documentation
includes two letters dated May
11, 2011, and May 27, 2011.
• Letters reference pumps
provided in the Ottawa project by
section number.
• Documentation indicates that the
only manufacturing facility of
Moyno pumps is located in
Springfield, Ohio, and it is the
sole supplier of Moyno products
destined for the US.
• Documentation indicates that the
following manufacturing
operations are performed at the
Springfield facility by highly
trained individuals: 1) injection
molding; 2) machining; 3) buffing;
4) chrome plating; 5) pump
assembly; 6) unit assembly; and
7) painting.
• The manufacturing process
requires over 100 operations and
can take up to 12 weeks of
production time for a single
pump.
N/A
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Item
Number
Section
Number
Equipment
Description
Manufacturer
Concur
or
Non-
concur
Basis & Rationale for
Determination
Planned
Corrective
Action
11
11304
RAS Pumps
WEMCO
Non-
concur
We find the documentation
sufficient to support Buy American
compliance.
• WEMCO Buy American
certification documentation
includes two letters dated May 4,
2011, and May 27, 2011.
• Letters reference pumps
provided in the Ottawa project.
• Documentation indicates that the
manufacturing facility is located
in Salt Lake City, Utah.
• Documentation indicates that the
following manufacturing
operations are performed at the
Salt Lake City facility by highly
trained individuals such as
welders and machinists: 1)
machining raw castings and
shafts; 2) fabricating base plates
and guards; and 3) final assembly
involving belts, fasteners,
bearings, and gaskets.
• The manufacturing process
requires a stated minimum of 25
different standard procedures.
Production time ranges from
several weeks to several months
depending on the type of pump.
N/A
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Item
Number
Section
Number
Equipment
Description
Manufacturer
Concur
or
Non-
concur
Basis & Rationale for
Determination
Planned
Corrective
Action
12
11310
Submersible
Pumps
ITT-Fly gt
Non-
concur
We find the documentation
sufficient to support Buy American
compliance.
• ITT-Flygt Buy American
certification documentation
includes two letters dated
February 24, 2010, and June 1,
2011.
• Letters reference pumps
provided in the Ottawa project.
• Documentation indicates that the
manufacturing facility is located
in Pewaukee, Wisconsin.
• Documentation indicates that the
following manufacturing
operations are performed at the
Pewaukee facility by highly
trained individuals: 1) motor
stator installation; 2) rotor unit
manufacture; 3) mechanical seal
assembly; 4) impeller assembly;
5) pump housing assembly; 6)
electrical sensor installation and
connection; 7) power cable
installation; and 8) painting.
• Photographs were included with
documentation that showed the
facility and various
manufacturing areas within the
facility.
N/A
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Item
Number
Section
Number
Equipment
Description
Manufacturer
Concur
or
Non-
concur
Basis & Rationale for
Determination
Planned
Corrective
Action
13
11311
Submersible
Chopper
Pumps
ITT-Fly gt
Non-
concur
We find the documentation
sufficient to support Buy American
compliance.
• ITT-Flygt Buy American
certification documentation
includes two letters dated
February 24, 2010, and June 1,
2011.
• Letters reference pumps
provided in the Ottawa project.
• Documentation indicates that the
manufacturing facility is located
in Pewaukee, Wl.
• Documentation indicates that the
following manufacturing
operations are performed at the
Pewaukee facility by highly
trained individuals: 1) motor
stator installation; 2) rotor unit
manufacture; 3) mechanical seal
assembly; 4) impeller assembly;
5) pump housing assembly; 6)
electrical sensor installation and
connection; 7) power cable
installation; and 8) painting.
• Photographs were included with
documentation that showed the
facility and various
manufacturing areas within the
facility.
N/A
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Item
Number
Section
Number
Equipment
Description
Manufacturer
Concur
or
Non-
concur
Basis & Rationale for
Determination
Planned
Corrective
Action
16
11330
Electric
Grinder
Moyno
Non-
concur
We find the documentation
sufficient to support Buy American
compliance.
• Moyno Buy American
certification documentation
includes two letters dated May
11, 2011, and May 27, 2011.
• Letters reference pumps
provided in the Ottawa project by
section number.
• Documentation indicates that the
only manufacturing facility of
Moyno pumps is located in
Springfield, Ohio, and it is the
sole supplier of Moyno products
destined for the US.
• Documentation indicates that the
following manufacturing
operations are performed at the
Springfield facility by highly
trained individuals: 1) injection
molding; 2) machining; 3) buffing;
4) chrome plating; 5) pump
assembly; 6) unit assembly; and
7) painting.
• The manufacturing process
requires over 100 operations and
can take up to 12 weeks of
production time for a single
pump.
N/A
21
11338
Chemical
Feed
Equipment
Periflo
Non-
concur
We find the documentation
sufficient to support Buy American
compliance.
• Periflo Buy American certification
identifies items provided in the
Ottawa project, and states that
they were manufactured at
Periflo's manufacturing plant in
Loveland, Ohio.
• Documentation detailed the
amount of hours (40 hours)
required to manufacture the
product, the percentage of the
final product cost coming for
direct labor (45%), level of skilled
employees such as machinists
and mechanics needed to
perform the various operations,
and the operations performed.
N/A
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Concur
Planned
Corrective
Action
Item
Section
Equipment
Manufacturer
or
Basis & Rationale for
Number
Number
Description
Non-
Determination
concur
22
11370
Positive
Displacement
Blower
Kaeser
Non-
concur
We find the documentation
sufficient to support Buy American
compliance.
• Kaeser Buy American certification
documentation includes letter dated
October 29, 2010 to sales
representative who sold the positive
displacement blowers supplied to the
Ottawa project. Additional
documentation was also included
involving correspondence between
Kaeser and EPA Headquarters Office
of Water (OW) staff engineers
regarding whether the items are
"substantially transformed" and
actually made/manufactured in the
USA.
• Documentation indicates that the
items are manufactured in at the
Kaeser facility in Fredericksburg,
Virginia.
• Documentation focused on the issue
of substantial transformation since
questions arose as to whether the
products we actually
made/manufactured in the USA.
Narrative responses from Kaeser
provided affirmation to Question #3
of EPA's Substantial Transformation
Checklist ("Was the process
performed in the USA complex and
meaningful?").
• The manufacturing process requires
an estimated 16 to 20 hours of labor.
The added labor comprises 30 to 50
percent of the product's value.
• EPA Headquarters OW staff
engineers provided "anticipatory"
oversight to address the issue of
substantial transformation in order
to determine if the products were
actually made/manufactured in the
USA.
• EPA OW staff engineers opined that
substantial transformation is
occurring at Kaeser's Fredericksburg,
Virginia facility, and that the products
are therefore made in the USA. An e-
mail message dated November 1,
2010 documents this opinion.
N/A
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Concur
Planned
Corrective
Action
Item
Section
Equipment
Manufacturer
or
Basis & Rationale for
Number
Number
Description
Non-
Determination
concur
23
11375
Centrifugal
K-Turbo
Neither
We cannot yet make a determination
Provide
Blower
/Aerzyn
Concur
or Non-
concur
as to Buy American compliance, as
the centrifugal blowers for the
Ottawa project have not yet
completed fabrication/manufacture
at the K-Turbo facility in Batavia,
IL.
• Representatives from Ottawa
have been monitoring and
documenting the fabrication and
manufacture processes while
applying the standard of
substantial transformation to
verify the blowers are American
made.
• EPA Headquarters OW provided
"anticipatory" oversight to
address the issue of substantial
transformation in order to
determine if the products were
actually made or manufactured
at the Batavia, IL facility. An EPA
contractor (an engineer) and EPA
Region 5 staff engineer were sent
to view the fabrication and
manufacturing processes at the
K-Turbo Batavia facility in
October 2009.
• Both the EPA OW staff engineers
opined that substantial
transformation could occur at K-
Turbo's Batavia, Illinois facility
based upon the processes
described to them during the
visit. The Batavia facility was not
operational as the fit-up of the
facility was not yet fully
complete.
follow-up
review of
the
substantial
trans-
formation
document-
ation and
progress
reports
submitted
by Ottawa.
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Item
Number
Section
Number
Equipment
Description
Manufacturer
Concur
or
Non-
concur
Basis & Rationale for
Determination
Planned
Corrective
Action
24
11376
Activated
Sludge
Aeration
System
SSI Aeration
Non-
concur
We find the documentation
sufficient to support Buy American
compliance.
• SSI Aeration Buy American
certification identifies all items
provided in the Ottawa project.
• Documentation indicated that
the aeration systems are
comprised of stainless steel
piping and fittings, PVC piping
and fittings, fine and course
bubble diffusers, and stainless
steel support stands.
Manufacturing locations were
specified for all components, and
all are made in the USA.
• Mill certifications showing USA
origin were provided for the
stainless steel piping and fittings.
N/A
25
11378
WAS
Aeration
System
SSI Aeration
Non-
concur
We find the documentation
sufficient to support Buy American
compliance.
• SSI Aeration Buy American
certification identifies all items
provided in the Ottawa, IL
project.
• Documentation indicated that
the aeration systems are
comprised of stainless steel
piping and fittings, PVC piping
and fittings, fine and course
bubble diffusers, and stainless
steel support stands.
Manufacturing locations were
specified for all components, and
all are made in the USA.
• Mill certifications showing USA
origin were provided for the
stainless steel piping and fittings.
N/A
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Item
Number
Section
Number
Equipment
Description
Manufacturer
Concur
or
Non-
concur
Basis & Rationale for
Determination
Planned
Corrective
Action
8
13424
Dissolved
Oxygen
Monitor
ITT-Royce
Non-
concur
We find the documentation
sufficient to support Buy American
compliance.
• ITT-Royce Buy American
certification indicates that the
products listed on the
certification are manufactured in
Charlotte, North Carolina.
• Model/part numbers are listed
for the items provided for the
Ottawa project including
quantities.
• The ITT-Royce Buy American
certification is simple but
sufficient.
N/A
31
15260
Plant Pipe
and Pipe
Fittings
Clow Water
Systems
Non-
concur
We find the documentation
sufficient to support Buy American
compliance.
• Clow Water Systems Buy
American certification states that
all manufacturing of their 6 inch
to 36 inch diameter ductile iron
pipe and fittings is done at their
Coshocton, Ohio facility with
exception of 3 inch and 4 inch
diameter pipe which are
outsourced and produced by
other domestic producers such as
Atlantic States Pipe, McWane
Pipe, or Griffin Pipe.
• All mechanical joint fittings and
flanges are stamped "Made in
the USA."
• Clow Water Systems website
provides additional Buy American
information on their website at
httD://www.clowwatersvstems.c
om .
N/A
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Item
Number
Section
Number
Equipment
Description
Manufacturer
Concur
or
Non-
concur
Basis & Rationale for
Determination
Planned
Corrective
Action
33
15410
Plumbing
Fixtures
Amtrol, Inc.
Non-
concur
We find the documentation
sufficient to support Buy American
compliance. Alternatively, the City
of Ottawa would be reasonably
justified in claiming these items
under EPA's "de minimis" waiver.
• Amtrol, Inc. Buy American
certification indicates that Amtrol
products are manufactured in
two locations in the United States
- Paducah, Kentucky and West
Warwick, Rhode Island.
• The Amtrol, Inc. certification is
simple but sufficient.
• Amtrol, Inc. provided a thermal
expansion tank of approximately
one gallon in size for the water
supply plumbing to a water
heater. Due to the single
quantity and low cost of this item
the City of Ottawa would be
reasonably justified in claiming
the item under EPA's "de
minimis" waiver.
N/A
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Item
Number
Section
Number
Equipment
Description
Manufacturer
Concur
or
Non-
concur
Basis & Rationale for
Determination
Planned
Corrective
Action
38
15832
Power
Ventilators
Greenheck
Non-
concur
We find the documentation
sufficient to support Buy American
compliance.
• Greenheck Buy American
certification documentation
includes three documents dated
November 17, 2010; January 19,
2011; and April 20, 2011.
• Documentation clearly references
the Ottawa project via order
number/project name, and the
two earlier documents also list
Greenheck model numbers.
• Documentation indicates that
items supplied for the Ottawa
project were manufactured at
Greenheck facilities in Schofield,
Wisconsin; Mosinee, Wisconsin;
and Frankfort, Kentucky.
• The estimated production time
for the items supplied for the
Ottawa project is 60 hours.
• Documentation indicates that
approximately 540 steps were
involved in completing the items
supplied for the Ottawa project.
The manufacturing processes
utilized roll formers, stamping
machines and fixturing
equipment to allow for consistent
and quality construction of
products.
N/A
39
15915
Electric and
Electronic
Control
Tekmar
Non-
concur
This item qualifies under EPA's "de
mimimis" waiver.
• Information from the City of
Ottawa indicates this is a low cost
(approximately $250) item that
can be claimed under EPA's "de
minimis" waiver. The City of
Ottawa did claim this item under
EPA's "de minimis" waiver.
N/A
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-------
Item
Number
Section
Number
Equipment
Description
Manufacturer
Concur
or
Non-
concur
Basis & Rationale for
Determination
Planned
Corrective
Action
42
16130
Boxes
Cooper B-Line
Non-
concur
We find the documentation
sufficient to support Buy American
compliance. Alternatively, the City
of Ottawa would be reasonably
justified in claiming these items
under EPA's "de minimis" waiver.
• Cooper B-Line Buy American
certification documentation
includes documentation dated
December 16, 2010 and June 2,
2011.
• Documentation clearly references
the Ottawa, IL project via order
number, and the earlier
documentation also lists Cooper
B-Line part/product numbers.
• Documentation indicates that
items supplied for the Ottawa
project were manufactured at
the Cooper B-Line Highland,
Illinois facility.
• The Cooper B-Line Buy American
certification is simple but
sufficient.
• Cooper B-Line provided rigid
conduit of various pipe diameters
(3/4", 1", 1 Vi", 2", 3", and 4")
plus galvanized strut channel.
Since these products could be
considered incidental to the
construction of the project the
City of Ottawa would be
reasonably justified in claiming
the items under EPA's "de
minimis" waiver.
N/A
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36
-------
Concur
Planned
Corrective
Action
Item
Section
Equipment
Manufacturer
or
Basis & Rationale for
Number
Number
Description
Non-
Determination
concur
53
16620
Packaged
Engine
Generator
System
Kohler
Non-
concur
We find the documentation
sufficient to support Buy American
compliance
• Kohler Buy American certification
documentation includes
documentation dated November
17, 2010 and June 2, 2011.
• Documentation clearly references
the Ottawa project.
• Documentation indicates that the
manufacturing was performed at
Kohler's facility in Sheboygan,
Wisconsin.
• Documentation indicates that the
following manufacturing
operations are performed at the
Sheboygan facility: 1) metal
fabrication, including
manufacturing skids, support
brackets, controller boxes,
panels, and enclosures; 2)
electrical manufacturing,
including circuit boards,
controllers, and battery chargers;
and 3) generator set final
assembly processes, including
mounting the engine and wiring,
installing the cooling system for
the motor, and installing the
exhaust system.
• The manufacturing process
required over 200 hours of labor
for the generator provided for
the Ottawa project.
N/A
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Appendix C
Illinois EPA Response to Draft Report
217/782-2027
June 24, 2011
Mr. Larry Brannon
EPA-OIG
77 W. Jackson Boulevard, Mail Code IA-13J
Chicago, IL 60604
Re: Draft Report: American Recovery and Reinvestment Act Site Visit of Wastewater
Treatment Plant - Phase II Improvements Project, City of Ottawa, Illinois
Dear Mr. Brannan:
The State of Illinois is in concurrence with the recommendation that the Region 5 Regional
Administrator employ the procedures in 2 CFR 176.130 to resolve the issues of noncompliance
on the Ottawa project.
The City of Ottawa has invested a considerable amount of time and resources in a cooperative
effort with the USEPA in an effort to resolve these issues. It is our opinion that the City did not
intentionally disregard the Buy American requirements of the Recovery Act, and that there was
no malfeasance on the part of City officials. The Illinois EPA urges the continued cooperation of
the parties involved.
If you need further information regarding this response, or regarding the City of Ottawa project
that is the subject of the draft report, please feel to contact Geoff Andres of my staff at 217/782-
2027. Thank you.
Sincerely,
Lisa Bonnett
Interim Director
Cc: Robert Adachi, EPA-OIG
Susan Hedman, USEPA Administrator, Region 5
Robert M. Esbach, Mayor, City of Ottawa, Illinois
11-R-0700
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Distribution
Office of the Administrator
Regional Administrator, Region 5
Assistant Administrator for Water
Agency Followup Official (the CFO)
Agency Followup Coordinator
General Counsel
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for External Affairs and Environmental Education
Director, Grants and Interagency Agreements Management Division,
Office of Administration and Resources Management
Audit Followup Coordinator, Region 5
Public Affairs Officer, Region 5
Director, Water Division, Region 5
Chief, State and Tribal Programs Branch, Region 5
Interim Director, Illinois Environmental Protection Agency
Mayor, City of Ottawa, Illinois
Assistant City Engineer, City of Ottawa, Illinois
11-R-0700
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