On November 15, 2021, President Biden signed into law the Infrastructure Investment and Jobs Act, Public Law 117-58. The Infrastructure Investment and Jobs Act included, as part of its programs and authorizations, the Build America, Buy America Act (“BABA”) (Sections 70901-70927 of the Infrastructure Investment and Jobs Act). The BABA generally requires Federal agencies to “ensure that none of the funds made available for a Federal financial assistance program for infrastructure, including each deficient program, may be obligated for a project unless all of the iron, steel, manufactured products, and construction materials used in the project are produced in the United States.” This preference is generally referred to as the Buy America Preference.
On April 18, 2022, the Office of Management and Budget released OMB Memorandum M-22-11, entitled “Initial Implementation Guidance on Application of Buy America Preference in Federal Financial Assistance Programs for Infrastructure”. OMB Memorandum M-22-11 provided initial implementation guidance to Federal agencies on the application of the Buy America Preference and the waiver process. On February 9, 2023, OMB issued a Notification of Proposed Guidance in the Federal Register, which explained that OMB was proposing a new part 184 in 2 CFR chapter I to support implementation of BABA and clarify existing provisions in 2 CFR 200.322.
OMB is now issuing a final rule, adopting new regulations to implement BABA. The final rule’s effective date is October 23, 2023.
The scope of the new regulations is broad. They apply to all Federal awards, including any subawards, contracts and purchase orders for work performed, or products supplied under the Federal award, where federal funds are appropriated or otherwise made available for infrastructure projects in the United States, regardless of whether infrastructure is the primary purpose of the Federal award. 2 C.F.R. § 184.3 and § 184.4(a) through (d).
An “infrastructure project” is defined as “any activity related to the construction, alteration, maintenance, or repair of infrastructure in the United States regardless of whether infrastructure is the primary purpose of the project.” 2 C.F.R. § 184.3. This is a very broad definition, and OMB intends for it to be construed expansively. 2 C.F.R. § 184.4(d).
The regulations specifically provide that Federal agencies should “interpret the term ‘infrastructure’ broadly” and, when doing so, “consider whether the project will serve a public function, including whether the project is publicly owned and operated, privately operated on behalf of the public, or is a place of public accommodation, as opposed to a project that is privately owned and not open to the public.” 2 C.F.R. § 184.4(d). The regulations provide the following examples of what would constitute an “infrastructure project,” while also noting that this list was only illustrative, and not exhaustive:
Infrastructure encompasses public infrastructure projects in the United States, which includes, at a minimum, the structures, facilities, and equipment for roads, highways, and bridges; public transportation; dams, ports, harbors, and other maritime facilities; intercity passenger and freight railroads; freight and intermodal facilities; airports; water systems, including drinking water and wastewater systems; electrical transmission facilities and systems; utilities; broadband infrastructure; and buildings and real property; and structures, facilities, and equipment that generate, transport, and distribute energy including electric vehicle (EV) charging. 2 C.F.R. § 184.4(c).
If a Federal award involves an “infrastructure project,” the new regulations generally require Federal agencies, and awardees, to comply with the Buy America Preference on four categories of products: “iron or steel products,” “manufactured products,” “construction materials,” or “section 70917(c) materials.” 2 C.F.R. § 184.4(e)(1). An item will not fall into more than one of these four categories and may not fall under any of these categories. The determination of which category an item falls into is “based on its status at the time it is brought to the work site for incorporation into an infrastructure project. In general, the work site is the location of the infrastructure project at which the iron, steel, manufactured products, and construction materials will be incorporated.” 2 C.F.R. § 184.4(e)(2).
The Buy America Preferences only apply to materials that will be incorporated into the project. It does not apply to tools, equipment, and supplies brought to the construction site and removed at or before the completion of the infrastructure project. Examples of such exceptions include temporary scaffolding or framing for temporary walls or supports. Nor does a Buy America Preference apply to equipment and furnishings, such as movable chairs, desks, and portable computer equipment used at or within the finished infrastructure project, but which are not an integral part of the structure or permanently affixed to the infrastructure project.
For products falling into one of these categories, the product must be “produced in the United States,” which is defined as:
(1) In the case of iron or steel products, all manufacturing processes, from the initial melting stage through the application of coatings, occurred in the United States.
(2) In the case of manufactured products:
(i) The product was manufactured in the United States; and
(ii) The cost of the components of the manufactured product that are mined, produced, or manufactured in the United States is greater than 55 percent of the total cost of all components of the manufactured product, unless another standard that meets or exceeds this standard has been established under applicable law or regulation for determining the minimum amount of domestic content of the manufactured product.
(3) In the case of construction materials, all manufacturing processes for the construction material occurred in the United States. 2 C.F.R. § 184.3.
The following is a summary of the Buy America Preference requirements by product category:
In determining whether the cost of components for manufactured products is greater than 55 percent of the total cost of all components, the following costs are included:
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- Components purchased by the manufacturer: acquisition cost, cost of transporting product for incorporation into the manufactured product (whether or not such costs are paid to a domestic firm), and any applicable duty (whether or not a duty-free entry certificate is issued). 2 C.F.R. 184.5(a).
- Components manufactured by the manufacturer: all costs associated with the manufacture of the component, cost of transporting the product for incorporation into the manufactured product (whether or not such costs are paid to a domestic firm) allocable overhead costs. The cost of components does not include profit or costs associated with the manufacturer of the manufactured product. 2 C.F.R. 184.5(b).
These new BABA regulations will generally apply to any federal award on or after their effective date, October 23, 2023. 2 C.F.R. § 184.2(b). There are some exceptions to this.
- Federal awards issued after May 14, 2022 (the effective date of the BABA) and before October 23, 2023 (the effective date of the new regulations), will be subject to OMB Memorandum M-22-11 (the predecessor to these new regulations) and not the new regulations. 2 C.F.R. 184.2(b)
- Infrastructure projects that received a federal award on or after May 14, 2022, but before October 23, 2023 (the effective date of the new regulations), and that receive an additional Federal award by October 23, 2023, will be subject to OMB Memorandum M-22-11 (including the new Federal award) and not the new regulations. If, however, that infrastructure project has “significant design or planning changes,” the agency may apply the new regulations to the new Federal award. 2 C.F.R. 184.2(c)
- The regulations do not apply to Federal awards for assistance relating to a major disaster or emergency declared by the President under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5170, 5191) or pre and post-disaster or emergency response expenditures. “Pre and post-disaster or emergency response expenditures” consist of expenditures for financial assistance that are made in anticipation of or response to an event or events that qualify as an “emergency” or “major disaster” within the meaning of the Stafford Act, 42 U.S.C. 5122(1), (2). 2 C.F.R. 184.8.
An agency may waive the application of the BABA requirements if the agency finds that:
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- Applying the Buy America Preference would be inconsistent with the public interest (a “public interest waiver”) (2 C.F.R.184.7(1));
- The types of iron, steel, manufactured products, or construction materials required are not produced in the United States in sufficient and reasonably available quantities or of a satisfactory quality (a “nonavailability waiver”) (2 C.F.R.184.7(2));
- The inclusion of iron, steel, manufactured products, or construction materials produced in the United States will increase the cost of the overall infrastructure project by more than 25 percent (an “unreasonable cost waiver”) (2 C.F.R.184.7(3)).
The Federal agency may issue a waiver on its own or in response to a written request for a waiver from an awardee. 2 C.F.R. § 184.7(b). Before issuing any waiver, whether requested by a Federal agency or an awardee, the Federal agency must:
Notably, in its rule-making, OMB recognizes that BABA, and its Buy America Preference, will not be the only rules that Federal agencies, and awardees, will have to comply with in regards to sourcing supplies from American companies and manufacturers.
OMB specifically noted that its new regulations are:
not intended as comprehensive guidance on all topics related to the implementation of BABA. Instead, part 184 is intended to be high-level coordinating guidance for Federal agencies to use in their own direct implementation of BABA, as required under section 70914 of BABA. The guidance will help to ensure clear and consistent application of the key requirements under the statutory text…. Federal agencies, in directly implementing BABA, may issue further guidance and provide further information to their recipients and other stakeholders on their own Federal financial assistance programs for infrastructure.
Accordingly, in addition to examining the requirements under BABA, awardees and their contractors should also identify any agency-specific requirements regarding BABA. For example, the regulations provide that Federal agencies may maintain Buy America Preferences that they adopted by November 15, 2021, so long as those requirements meet or exceed the new regulatory requirements. However, to the extent existing Buy America Preferences do not meet or exceed the new regulatory requirements, the Federal agencies must supplement their existing requirements.
Moreover, the requirements under BABA are not identical to the Buy American Act requirements implemented in the FAR. As OMB noted in its rule-making:
The FAR implements the Buy American Act (BAA) (41 U.S.C. 8301–8305). BAA applies to direct Federal procurement — what the Federal government buys for its own use. By contrast, BABA applies to Federal financial assistance for infrastructure projects — or grants, cooperative agreements, and other Federal awards that Federal agencies provide to recipients constructing such projects. See 2 CFR 200.1. There are many substantive differences between the BAA, implemented in the FAR, and BABA. These differences include the applicable product categories that the domestic content preferences apply to and also the standards that apply to the categories. These differences do not allow for complete consistency on all topics between the FAR and the implementing guidance for BABA in part 184.
As such, an awardee or contractor should not assume that if their processes comply with the Buy American Act, they necessarily also comply with BABA and its implementing regulations.
