As you may recall, on November 5, 2021, the Biden administration finalized the Bipartisan Infrastructure Law (BIL), which was intended to bolster this nation’s manufacturing and rebuild our infrastructure. One key component of that law is the Build America, Buy America Act (BABA), which requires that American-made steel, iron, manufactured products, and construction materials be used for federally funded infrastructure projects. The goal is for taxpayer dollars that make the infrastructure projects possible to also support American jobs and manufacturing.
Although the reasoning for BABA certainly has good intentions, implementing its standards is not without challenges.
The Office of Management and Budget (OMB) provided proposed guidance to help support BABA provisions in February 2023. Then, on August 14, 2023, it offered final guidance.
The OMB guidance clarifies the domestic preference provisions and offers approaches for federal agencies to implement the BABA standards for infrastructure project awards. The guidance lists definitions for essential terms and restates the circumstances when waivers may be justified. These are: (1) public interest, (2) unreasonable cost, and (3) nonavailability. It also outlines the process federal agencies must follow for award recipients to request waivers.
BABA Requirements for Manufactured Products
As the guidance explains, according to BABA, manufactured products for federal projects must be produced in the United States, and the costs of U.S.-made components of those products must exceed 55 percent of all component costs. Not all components must be made in this country.
“Manufactured products” are defined as supplies, materials, and articles that have been “(i) Processed into a specific form and shape; or (ii) Combined with other articles, materials, or supplies to create a product with different properties than the individual articles, materials, or supplies.” Per the final guidance, iron or steel products and construction materials are not considered manufactured products as defined here.
Determining the Cost of Manufactured Products’ Components
In working toward compliance with the component costs standard, contractors must consider the following:
1. What components were produced in the United States
2. The costs of the components produced in the United States
3. The cost of all components for a given material
4. The cost of the U.S.-produced components (step 2) divided by all component costs (step 3)
If the result of step 4 is more than 55 percent, the product is in BABA compliance, provided that the manufactured product itself is also produced in the United States.
BABA Requirements for Iron and Steel
For iron and steel products, all manufacturing processes must take place in the United States. These processes begin with the initial melting stage and continue all the way to the coating application.
BABA Requirements for Construction Materials
According to the final guidance, all manufacturing processes for construction materials must occur in the United States. These materials are defined as lumber, engineered wood, drywall, non-ferrous metals, plastic and polymer-based products, glass, fiber optic cable, and optical fiber. Note that, per the BABA definition, construction materials do not include cement, stone, gravel, sand, and binding agents.
When Waivers Will Be Considered
Waivers will be permitted when using the required materials fall into one of the following categories:
1. The BABA preference is inconsistent with the public interest.
2. Using U.S.-produced steel, iron, manufactured products, or construction materials would increase the costs of a given project by more than 25 percent.
3. Certain types of steel, iron, manufactured products, or construction materials are not made in the United States in necessary quantities or at an acceptable quality.
If a federal award recipient believes a waiver is justified, it may request one from the applicable federal agency.
Advice for Contractors
Landing a federal contract can be a boon for your business, but complying with BABA may prove problematic for several reasons. Cost and availability of materials are likely the most significant concerns. At a time when everyone faces challenges in securing supplies, being restricted to American-made materials may seem cumbersome. In addition, you may find it difficult to find manufacturers that will certify their materials meet the BABA requirements.
Author’s note: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.
About the author: Trent Cotney is a partner and Construction Practice Group Leader at the law firm of Adams and Reese LLP and NRCA General Counsel. For more information, call (866) 303-5868 or email [email protected].
Be the first to comment on "Complying with Build America, Buy America"