Federal Infrastructure Contractors: Build America, Buy America Now Mandates More Restrictive Definition of “Construction Materials” for Federal Grants and Agreements

Husch Blackwell LLP

The Infrastructure Investment and Jobs Act, Pub. L. No. 117-58, which includes the Build America, Buy America Act (“BABA”), was signed into law by President Biden on November 15, 2021. BABA provisions apply to all Federal financial assistance awards (e.g., grants, cooperative agreements, non-cash contributions or donations, direct assistance and loans) that will be used to fund a portion or all of the construction, alteration, maintenance or repair of infrastructure in the United States.

Effective on October 23, 2023, new BABA regulations for construction materials require that “all manufacturing processes occurred in the United States.” This new standard is materially different than the Office of Management and Budget’s (“OMB”) Initial Implementation BABA Guidance that only required “the final manufacturing process and the immediately preceding manufacturing stage for the [construction] materials” to occur in the United States. Here are some things to look for in the new BABA regulations.

What the New BABA “Construction Materials” Manufacturing Standards Include

The new final regulations provide industry-specific manufacturing standards for each listed construction material. The updated “construction materials” manufacturing standards found in 2 CFR § 184.6 are for:

  • Non-ferrous metals,
  • Plastic and polymer-based products,
  • Glass,
  • Fiber optic cable (including drop cable),
  • Optical fiber,
  • Lumber,
  • Drywall, and
  • Engineered wood.

The new regulations also eliminated the standalone interim standard for “composite building materials,” which has been subsumed by the standard for plastic and polymer-based products in 2 CFR §184.3. Additionally, this list is newly expanded to include separate standards for fiber optic cable (to include drop cable), optical fiber and engineered wood. With billions in federal funding earmarked for broadband infrastructure projects, contractors sought more clearly defined domestic preference standards for broadband construction materials. These new regulations recognize that “infrastructure” encompasses “broadband infrastructure,” which utilizes fiber optic cables as a main construction input. 2 CFR §184.4(c). “Infrastructure” is broadly interpreted and includes solar and wind “structures, facilities, and equipment that generate, transport, and distribute energy including electric vehicle (EV) charging.” 2 CFR §184.4(c)

Importantly, even if more than one standard may apply to a single construction material, the new regulations clarify that only the standard that best fits the relevant article, material, or supply item is applied. 2 CFR §184.6(b). “Minor additions” of articles, materials, supplies, or binding agents to a construction material do not change the categorization. 2 CFR §184.3.

What BABA “Construction Materials” Do Not Include

Generally, BABA restrictions do not include tools, equipment and supplies that will be removed from the construction site at the completion of the project. BABA only applies to articles, materials, and supplies that are consumed in, incorporated into, or affixed to an infrastructure project. Those items temporarily brought to the site and removed at or before completion of the project (such as temporary scaffolding) are not included. Additionally, removeable equipment and furnishings (e.g. desk chairs) that are used at or within the infrastructure but are not an integral part of the structure are not typically included. However, exceptions may apply in the case of deliverables under public infrastructure contract that are needed for ongoing operations or maintenance after the project is commissioned. Many of these determinations are fact intensive so it is generally wise to seek clarification from the project owner/grantee agency if there is any doubt as to whether BABA applies to an item.

How to Remain Compliant in Exceptional Circumstances

One of the loudest criticisms of BABA is the potential to compound challenges with existing supply chain constraints. The lack of existing domestic capacity can make it difficult to produce certain types of materials, such as zinc and lumber, in the United States. Non-compliance with BABA requirements can result in severe penalties, such as suspension, debarment or violation of the False Claims Act, and in some circumstances, potential criminal prosecution. The proper mechanism for addressing such concerns is to seek an exception to the BABA mandates through the waiver process.

The revisions to BABA did not substantively change the waiver request process. Federal agencies maintain direct statutory authority to propose and issue waivers under section 70914(b) of BABA and 2 CFR §184.7(a). Every waiver must be reviewed by the Made In America Office. Grant recipients may apply for a waiver in these justifiable circumstances:

1) Applying the Buy America Preference would be inconsistent with the public interest;

2) Types of iron, steel, manufactured products, or construction materials are not produced in the United States in sufficient and reasonably available quantities or of a satisfactory quality; or

3) 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. 2 CFR §184.7(a).

Best practices suggest working with legal counsel to address any identified compliance issues timely and seek needed clarification by communicating with the project owner/grantee agency. If a waiver is necessary, follow the proper procedure and request the waiver as soon as possible.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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