May 2013
Table of Contents
Latest News
Sarah Says
DOT OIG Report Highlights Opportunities to Improve Oversight
MacLeod Addresses AMROI
Obama Fills FAA Deputy Spot with Aviation Exec
Funding Opportunities for Partnerships with Higher Education
Appeals Court Unpins NLRB Poster Rule
Join ARSA’s Grassroots Efforts
Legislative News
Lawmaker Unveils Bill to Jump-Start Small Aircraft Innovation
Bipartisan, Bicameral Leaders Launch Tax Reform Campaign
Legal Briefs
ARSA on the Hill
Final Documents/Your Two Cents
Quality Time
Legal Waypoints
Employment Law & Repair Stations
Membership
Member Spotlight
Have You Seen This Person?
A Member Asked
Check Out ARSA’s Library of Recorded Webinars and Online Training Classes
Get 10% Off on Membership Dues by Utilizing ARSA’s Members Getting Members Program
Advertise Today in ARSA’s Newsletters and Website!
Interested in Exhibiting or Sponsoring the 2014 Repair Symposium?
Positive Publicity
International News
International Roundup
Welcome New Members
Regulatory Compliance Training
Upcoming Events
Previous 12 issues
Latest News
By Sarah MacLeod, ARSA executive director
This month, ARSA Executive Director Sarah MacLeod discusses her experience representing ARSA before the Indonesian aviation community. To read MacLeod’s blog, as well as other commentary issued during the month of May, please visit http://blog.arsa.org/
DOT OIG Report Highlights Opportunities to Improve Oversight
The FAA has been too slow in shifting to risk-based oversight of the aviation maintenance industry, a May 6 report released by the Department of Transportation’s Office of Inspector General (OIG) found. To improve regulation of the aviation maintenance industry, ARSA believes the OIG should ensure the FAA issues regulations in strict accordance with statutes; provides clear, concise guidance material to its workforce and the public; and enforces the regulations uniformly and consistently. Read more at http://arsa.org/dot-oig-report-highlights-opportunities-to-improve-faa-maintenance-oversight/
MacLeod Addresses AMROI
ARSA Executive Director Sarah MacLeod grew the association’s global profile at Aviation MRO Indonesia and gave the International Key Note Address about strengthening bilateral regulatory cooperation. Read more at http://arsa.org/macleod-addresses-amroi/
Obama Fills FAA Deputy Spot with Aviation Exec
President Obama announced he will nominate Michael Whitaker, a former aviation industry executive, to serve as the FAA’s deputy administrator. Whitaker’s service will become effective upon the president’s official nomination. Read more at http://arsa.org/obama-fills-faa-deputy-spot-with-aviation-exec/
Funding Opportunities for Partnerships with Higher Education
ARSA strives to help with opportunities to train the future workers and leaders of the aviation industry, including fostering partnerships with local trade schools. Two federal grant opportunities are available to fund partnerships between your repair station and higher education institutions. Read more at http://arsa.org/funding-opportunities-for-partnerships-with-higher-education/
Appeals Court Unpins NLRB Poster Rule
On May 7, the U.S. Court of Appeals for the D.C. Circuit reversed a lower court decision and struck down a 2010 National Labor Relations Board (NLRB) regulation requiring most private-sector employers to post a government-drafted notice of employee rights. Read more at http://arsa.org/appeals-court-unpins-nlrb-poster-rule/
Join ARSA’s Grassroots Efforts
Don’t let the industry’s opponents tell our story—visit ARSAaction.org for the political resources to fight for contract maintenance. Read more at http://arsa.org/your-eyes-and-ears-in-washington/
Legislative News
Lawmaker Unveils Bill to Jump-Start Small Aircraft Innovation
On May 7, Rep. Mike Pompeo, R-Kan., introduced bipartisan legislation that would update regulations for certification of small airplanes to improve safety, decrease costs, and unleash private-sector creativity.
The Small Airplane Revitalization Act (H.R. 1848) requires the FAA to issue a final rule based on the Part 23 Reorganization Aviation Rulemaking Committee’s recommendations by the end of 2015. Outdated regulations are hindering innovation and inhibiting release of modern safety technologies. Companion legislation (S. 1072) has been introduced in the Senate by Sens. Amy Klobuchar, D-Minn., and Lisa Murkowski, R-Alaska.
The legislation has been referred to the appropriate congressional committees for consideration. Stay tuned for future updates.
Bipartisan, Bicameral Leaders Launch Tax Reform Campaign
Senate Finance Chairman Max Baucus, D-Mont., and House Ways & Means Chairman Dave Camp, R-Mich., have joined forces to launch an online comprehensive tax reform campaign aimed at bringing in families and job creators to weigh in on the conversation. Read more at http://arsa.org/bipartisan-bicameral-leaders-launch-tax-reform-campaign/
Legal Briefs
Keeping it on the Record
Editor’s note: This edition of Legal Briefs was originally published in the October, 2008 version of the hotline.
This month’s Legal Brief will explore how maintaining business records can help a repair station stay in compliance with Title 14 CFR part 145. Specifically, this article will explore how the contracts a facility enters into with air carriers and sub-contractors can help ensure and document its compliance with the regulations.
Air Carrier Contracts
The contracts between operators and their maintenance providers are an important element in ensuring regulatory compliance. Part 121 and 135 air carriers are, of course, primarily responsible for the airworthiness of their aircraft and for the maintenance performed thereon, including engine, propeller and component maintenance (see §§ 121.363 and 135.413). In addition, those operating aircraft type certificated with 10 or more passenger seats must follow their Federal Aviation Administration (FAA)-approved continuous airworthiness maintenance programs (CAMP) and ensure that the work is performed in accordance with their manuals (see §§ 121.367, 121.369, 135.425 and 135.427). These obligations apply whether the work is being performed in-house or by a contract maintenance provider.
Indeed, the FAA considers the vendor to be an extension of the air carrier’s maintenance organization. Part 145 mirrors part 121 by requiring that work performed on behalf of an air carrier must be performed in accordance with the carrier’s maintenance program and “the applicable portions” of the carrier’s manual (see § 145.205). Due to the size of most carriers’ manuals the FAA expects them to identify the applicable portions that apply to the work performed by their contractors.
There are only a few ways to formally flow down this essential regulatory information to a repair station. These include the air carrier’s General Maintenance Manual (GMM) or similar document, the purchase order (PO) directing the accomplishment of specific work in accordance with the operator’s instructions, a General Terms Agreement (GTA) that usually covers the commercial aspects of the relationship or an Airworthiness Agreement, used by many air carriers and their substantial maintenance providers.
Some air carriers have done a good job communicating the basic work instructions that must be followed by the contractor when performing maintenance and alterations. This is generally contained in a PO, but it is inadequate for addressing policy and procedural issues. However, the parties do not often have as clear an understanding of the applicable requirements in the administrative and quasi-technical areas. These include, but are not limited to, handling deviations from the work instructions, substitution of parts, making equivalence determinations of tools and equipment, subcontracting (including the approved vendor list, drug and alcohol compliance, and the use of individually certificated personnel not employed by the maintenance contractor). This is where a contract, such as a GTA or an airworthiness agreement, comes into play.
There are a variety of issues that should be included in a contract between an operator and maintenance provider. These include sections on key regulatory definitions, location and scope of work, the controlling regulatory authority, certificates and ratings of the maintenance provider, coordination of service difficulty/malfunction defect reporting, voluntary disclosure, drug and alcohol compliance, information exchange, audits, and life limited parts. Most of these issues are important in any maintenance contract, regardless of the type of work being performed.
However, maintenance contracts are not created in a vacuum and ensuring that the parties’ general regulatory expectations are clearly defined is not a “one size fits all” proposition. Therefore, contracts will vary depending on the type of work being performed, such as substantial maintenance, line maintenance, component maintenance, and specialized services.
The type and scope of maintenance contemplated affects the applicable sections of the operator’s maintenance program and manual that must be flowed down to the maintenance provider. Because the amount of information that must be exchanged is directly proportional to the scope and type of work, the contract should cover the specific information needed in each kind of maintenance relationship.
The contract should set forth the specific provisions of the operator’s GMM or similar document that will apply to the work performed. It should specify the sections of the GMM that apply in each maintenance setting (i.e., substantial, component, line, or specialized service). Because most GMMs are designed for in-house work, some revisions are often necessary to ensure that they adequately address the specific work being performed by a contractor. ARSA believes it is in the interests of safety for repair stations to follow their own procedures to the maximum feasible extent since this promotes standardization and uniformity. However, this requires the appropriate authorization from the air carrier under § 145.205, which can occur if the GMM signs off based on the carrier’s evaluation of the repair station’s procedures.
The objective is to ensure that the parties have a clear understanding about how they will handle the various regulatory situations that will undoubtedly arise during the course of their relationship. As you can see, there is large amount and variety of information that should make its way into a maintenance contract. It therefore becomes extremely important to ensure your repair station maintains these contracts for each carrier and each job it performs in order to record its compliance with the regulations (see § 145.205).
Sub-contractor records
For the same reasons, it is important for a repair station to maintain records on its contractual obligations with each air carrier, and to record all contracts and capabilities of each sub-contractor the facility utilizes.
Under §§ 145.51 and 145.217, the FAA approves a list of all maintenance functions obtained by contract. Although the approved list of maintenance functions (and the facilities that will perform these functions) does not have to be included in the repair station manual, this information will have to be “made available” to the FAA. Therefore, a repair station must maintain records of the maintenance functions along with the name of each outside facility to which the work will be contracted and the type of certificate and ratings (if any) held by that facility.
When work is contracted to a non-certificated facility there are additional requirements to meet. Under § 145.217(b)(1) the non-certificated person must follow a quality control system equivalent to that used by the certificated facility. An audit can be accomplished and the results recorded to both qualify the non-certificated source initially and ensure its continued adherence to required quality standards. However, the repair station remains directly in charge of the work and must verify, by inspections and/or tests, that the work was performed properly.
Section 145.223 imposes additional restrictions on a repair station’s ability to use non-certificated sources. First, it states that the contract must include a provision that the FAA can inspect the non-certificated facility and observe the performance of its work. If the non-certificated facility refuses to allow the agency to conduct an inspection, the repair station cannot approve the article for return to service. Therefore, it is imperative to record the inspection requirement in every contract with a non-certificated facility and keep the contract handy to enforce compliance.
As was the case with air carriers, the contracts a repair station enters into carry significant weight in establishing the ground rules for the relationship. What may seem like a simple business agreement is also a key element in ensuring regulatory compliance.
ARSA on the Hill
By Daniel Fisher, ARSA vice president of legislative affairs
In May, ARSA’s legislation team continued implementation of the “lift the ban” lobbying effort and working with congressional leaders so legislation is ready for introduction by June 14. Don’t forget to watch the countdown to when the Office of Management & Budget’s mandatory review period concludes by visiting http://arsa.org/legislative/arsa-launches-repair-station-security-rule-countdown-clock/.
With the release of the DOT Inspector General’s report on FAA repair station oversight, the legislative team proactively reached out to key allies on Capitol Hill to ensure the analysis wasn’t being misconstrued by lawmakers.
Did you miss the legislative process webinar offering participants a basic primer on the lawmaking process? If so, click here for more information.
The Association has revamped its Government Affairs Committee. Stay tuned for details about the new and improved volunteer group of dedicated ARSA members committed to furthering the industry’s impact on the policymaking process.
Is your ARSA PAC solicitation consent updated? Visit http://arsa.org/about-arsa-pac/ to ensure it is.
Final Documents/Your Two Cents
“Final Documents”: This list includes Federal Register publications such as final rules, Advisory Circulars (ACs), policy statements and related material of interest to ARSA members. For proposals opened for public comment, see “Your Two Cents.” The date shown is the date of publication or other official release.
“Your Two Cents”: This is your chance to provide input on rules and policies that will affect you. Agencies must provide the public notice and an opportunity for comment before their rules or policies change. Your input matters. Comments should be received before the indicated due date; however, agencies often consider comments they receive before drafting of the final document begins.
“Final Documents” and “Your Two Cents” are available at http://arsa.org/final-documents-your-two-cents/.
Quality Time
Editor’s note: The views and opinions expressed by contributing authors do not necessarily state or reflect those of ARSA, and shall not be used for endorsement purposes.
Legal Waypoints: Liquidated Damages – A Remedy for Breach of Contract
By Steven E. Pazar, attorney at Law, 11 Carriage House Lane, Boxford, Massachusetts 01921. © 2013 Steven E. Pazar ALL RIGHTS RESERVED.
Steven is a counselor to businesses operating in many industries, including aviation. He provides templates, tools and training to improve contracting efficiency, close deals faster and control costs.
In the context of commercial contracts the term “liquidation” means to fix or establish the damages owed in the event of a breach of contract. Rather than add the calculation of the dollar amount of damages for breach to a list of items in dispute, a carefully drafted liquidated damages (“LDs”) provision can establish the dollar damages for breach at the outset of the relationship. The law on the enforceability of LDs varies slightly from state to state, but the general rules are well settled and fairly easy to implement. Using a well-crafted LD provision in a contract can offer benefits to both parties as they allocate particular transaction risks.
For sellers of goods, the Uniform Commercial Code (“UCC”) provides a simple basis for recovery of liquidated damages as a remedy for breach of contract:
UCC § 2-718. Liquidation or Limitation of Damages; Deposits.
(1) Damages for breach by either party may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated damages is void as a penalty.
Note, this section of Article 2 above is not an actual liquidated damages provision but rather it serves as a basis for enforceability in sales contracts. Most states have adopted versions of the UCC Article 2 for application within their jurisdiction. The UCC provision sets forth elements that are typically considered when actual LD provisions are litigated to determine intent and enforceability.
Likewise the Restatement (Second) of Contracts Section 356(1) also provides a basis for LDs as a remedy in breach of contract cases in the event the UCC does not apply:
§ 356. Liquidated Damages and Penalties
(1) Damages for breach by either party may be liquidated in the agreement but only at an amount that is reasonable in the light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss. A term fixing unreasonably large liquidated damages is unenforceable on grounds of public policy as a penalty.
Both the UCC and the Restatement seek to serve the goal of allowing the parties to stipulate damages for breach at the time of contracting to save the time of the courts and the parties in the event of litigation, thereby reducing the cost of resolving disputes. This is especially true where the damages are small and best resolved by the parties. The parties should be free to negotiate fair compensation for a breach so long as the remedy does not become punitive in nature, crossing the line into an unenforceable penalty.
In most instances, an LD provision will be upheld if the damages would be:
- Uncertain as to amount and difficult to prove;
- Not unconscionable and disproportionate in amount as related to reasonable intentions of the parties; and
- Consistent with conclusion that the parties intended damages in such amount would follow a breach.
The following is a sample provision that may be appropriate for use as a basis for developing a contract specific remedy:
“The parties acknowledge that given the uncertainty they anticipate associated with the ability to calculate the buyer’s damages for the seller’s failure to deliver the goods in accordance with the schedule, the amount stipulated herein as liquidated damages is a good faith estimate of reasonable compensation for the damages resulting from late delivery and that such liquidated damages are not intended, and shall not be construed, as a penalty.”
Note: The sample provision above is for illustration purposes only and is not intended as legal advice.
Employment Law & Repair Stations
Look for Jonathan Yarbrough’s series to resume with the June 2013 issue. If members or readers have specific concerns about employment law, Mr. Yarbrough may be contacted via email at Jonathan W. Yarbrough to answer questions.
Membership
Member Spotlight: Liebherr-Aerospace, Saline, Mich.
Liebherr-Aerospace Saline Ltd, located in Saline, Mich., provides a full range of repair and customer support services to aircraft operators based in the Americas.
Liebherr supplies aircraft air management, flight, actuation, hydraulic, and landing gear systems for commercial transport aircraft, commuter and regional aircraft, business jets, fighter jets, military transport, and trainer aircraft, as well as civil and military helicopters.
Liebherr-Aerospace provides a complete OEM Customer Service based on a global network with repair and overhaul services, engineering support, documentation, and spare parts, as well as AOG service.
Liebherr-Aerospace in Saline has been an active ARSA member and participant in the government affairs efforts, including hosting Rep. Tim Walberg, R-Mich., for a facility visit last Congress.
For more information, visit http://www.liebherr.us/AE/en-GB/default_us-ae.wfw
Are you an ARSA member who would like to be in the “Member Spotlight?” If so, please contact Jess Hammett at jess.hammett@arsa.org.
Have You Seen This Person?
Each month, the hotline spotlights key regulatory, legislative, and business leaders making important contributions to the aviation industry. This month we look at Calvin Scovel, III, inspector general for the U.S. Department of Transportation (DOT).
Calvin L. Scovel III was sworn in on Oct. 26, 2006, as the sixth inspector general of the U.S. Department of Transportation.
Scovel joined the DOT after 29 years of active service in the U.S. Marine Corps, from which he retired as a brigadier general. His last military assignment was as a senior judge on the U.S. Navy-Marine Corps Court of Criminal Appeals. Scovel previously served as assistant judge advocate general of the Navy for military justice, the principal advisor to the Secretary of the Navy, and the judge advocate general on all criminal justice policy matters. He also commanded a military police battalion that provided security and law enforcement for Marine Corps Base, Quantico, Va.
Scovel served as senior legal advisor for the 4th Marine Expeditionary Brigade, which included all Marine amphibious forces in Operation Desert Storm and later in a NATO exercise above the Arctic Circle in Norway. He had previously served as legal advisor for a Marine amphibious unit deployed to the Western Pacific and Indian Oceans, where it conducted exercises in Hawaii, Japan, the Philippines, Kenya, and Australia.
A Marine judge advocate, Scovel served as prosecutor, defense counsel, or judge in 250 courts-martial that included charges of murder, rape, child sexual assault, and drug trafficking.
As an adjunct faculty member for the Defense Institute of International Legal Studies, Scovel led instruction teams in the rule of law and civilian control of the military for senior civilian and military officials in Honduras, Mauritius, Albania, and Serbia. His military awards include the Legion of Merit (four awards) and Combat Action Ribbon. Scovel was also in the Pentagon on Sept. 11, 2001.
Scovel received his bachelor’s degree from the University of North Carolina at Chapel Hill and his Juris Doctor degree from Duke University School of Law. He also received a master’s degree from the Naval War College.
Scovel is married and has two sons.
A Member Asked…
Q: We are having a dispute regarding language in 43.2 “Records of Overhaul and Rebuilding.” Some on our team want to write a contract so we can “overhaul” an article using only the language defined under (a) without regard for data defined in (2) requiring that it has been tested. I believe the contracts should satisfy both (a)(1) and (a)(2), however, I understand that industry prefers to just use the definition in (1).
(a) No person may describe in any required maintenance entry or form an aircraft, airframe, aircraft engine, propeller, appliance, or component part as being overhauled unless—
(1) Using methods, techniques, and practices acceptable to the Administrator, it has been disassembled, cleaned, inspected, repaired as necessary, and reassembled; and
(2) It has been tested in accordance with approved standards and technical data, or in accordance with current standards and technical data acceptable to the Administrator, which have been developed and documented by the holder of the type certificate, supplemental type certificate or a material, part, process or appliance approval under part 21 of this Chapter.
A: The legal interpretation indicates that each step in (a)(1) need not be taken to use the term “overhauled” in a maintenance record. The bottom line is that the greatest extent of work possible must have been accomplished on the article being maintained. If that is a piece part, it need not be “disassembled,” since it already is; the same with reassembly. The AFS-300 memorandum clearly states to use the methods, techniques, and practices required by a manufacturer’s maintenance document to accomplish the greatest scope of work. The interpretation for (a)(2) indicates that testing may not be necessary; the letter from AFS-300 indicates that if a test is required, it must be done in accordance with a manufacturer’s maintenance manual (“approved data”) or by an approved process (such as a repair specification).
Check Out ARSA’s Library of Recorded Webinars and Online Training Classes
ARSA is pleased to announce that recorded online training classes and webinars are now available for member purchase. Check back often as courses will be continually added. The association will resume live, weekly webinars June 5. The next webinar, titled “Major/Minor Primer,” will feature Sarah MacLeod, managing member, Obadal, Filler, MacLeod & Klein, and executive director, ARSA. Read more and register at http://arsa.org/training-2/online-training/
Get 10% Off on Membership Dues by Utilizing ARSA’s Members Getting Members Program
The best form of advertising is word of mouth. Use the Members Getting Members Toolkit to recruit an ARSA member and your company will receive a discounted membership rate for your next membership term. Get more information at http://arsa.org/membership/members-getting-members/
Advertise Today in ARSA’s Newsletters and Website!
ARSA recently updated its menu of advertising opportunities for arsa.org, the hotline and the ARSA Dispatch. Take advantage of these great opportunities today to showcase your company, a new product or event. For more information go to http://arsa.org/advertise/
Interested in Exhibiting or Sponsoring the 2014 Repair Symposium?
As the maintenance industry’s top event devoted exclusively to regulatory compliance, the ARSA Symposium attracts a highly qualified professional audience. Use this opportunity to promote your company while showing support for ARSA. Get more information at http://arsa.org/news-media/events/arsa-annual-repair-symposium-sponsorship/
Positive Publicity
As part of ARSA’s ongoing Positive Publicity Campaign (PPC), the association is actively working to enhance the media’s understanding of our $65 billion industry and its vital importance to global civil aviation. To accomplish this goal, ARSA monitors media coverage on aviation maintenance to spread the word about the valuable role repair stations provide their communities in jobs, economic opportunities, and community involvement. These are some of this month’s top stories highlighting the industry’s contributions.
International News
West Africa Considers Launching Aviation Maintenance Operation
The Economic Community of West Africa Nations (ECOWAS), made up of fifteen countries, recently began studying the feasibility of establishing an aviation maintenance, repair, and overhaul (MRO) facility for aircraft in the region. The new enterprise would allow airlines to keep maintenance costs lower since they would no longer have to outsource repairs to Europe and the United States.
ECOWAS working groups are researching potential locations for the new facility, what its operational capacity would be, how the intergovernmental organization could integrate various regional airlines, and ways to harmonize regulations to facility growth in the aviation industry.
The maintenance facility would be funded by the African Development Bank, which has already directed experts to review past studies on building an MRO in the region.
ECOWAS members include Benin, Burkina Faso, Cape Verde, Gambia, Ghana, Guinea, Guinea-Bissau, Ivory Coast, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo.
International Roundup
To provide more international coverage, ARSA presents a monthly roundup of world events pertaining to the industry. Articles for May 2013 are available at http://arsa.org/international-roundup/
Welcome New Members
● BD Aero Works, Whitehouse, OH
● Cal-Draulics, Corona, CA
● Cherry Capital, Traverse City, MI
● DFW Instrument Corporation, Addison, TX
Regulatory Compliance Training
Click here to test your knowledge on §145.5 Certificate and operations specifications requirements.
Upcoming Events
2013 EASA/FAA International Aviation Safety Conference — June 12-14, 2013 — Paris, France
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the hotline is the monthly publication of the Aeronautical Repair Station Association (ARSA), the not-for-profit international trade association for certificated repair stations. It is for the exclusive use of ARSA members and federal employees on the ARSA mailing list. For a membership application, please call 703 739 9543 or visit http://arsa.org/membership/join/
This material is provided for educational and informational purposes only. It does not constitute legal, consulting, tax or any other type of professional advice.
Law, regulations, guidance and government policies change frequently. While ARSA updates this material, we do not guarantee its accuracy. In addition, the application of this material to a particular situation is always dependent on the facts and circumstances involved. The use of this material is therefore at your own risk.
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