The 2021 Bipartisan Infrastructure Law (BIL) included extensive new requirements for infrastructure projects to be “made in America.” Known as the Build America, Buy America Act (BABAA), this section of the law promised to stimulate American manufacturing and create jobs for American workers by ensuring that a substantial portion of BIL funding would be used to purchase U.S.-made products and materials. Yet BABAA has generated considerable uncertainty across infrastructure sectors. Despite BABAA implementation guidance issued in August, questions remain about how it will impact the delivery of infrastructure projects.
What does the BABAA require?
The BABAA states that no federal funds can be used for an infrastructure project unless all iron, steel, manufactured products, and construction materials are produced in the United States. This domestic content preference (commonly called “Buy America”) applies to all federally-funded infrastructure projects, whether or not the funds come from the BIL itself. For each of the four categories, the BABAA specifies what it means to be produced in America.
Definition of “Produced in America” (BIL Section 70912)
|Iron||All manufacturing processes, from the initial melting stage through the application of coatings, occurred in the U.S.|
|Steel||All manufacturing processes, from the initial melting stage through the application of coatings, occurred in the U.S.|
|Manufactured products||The manufactured product was manufactured in the U.S., and the cost of the manufactured product’s components mined, produced, or manufactured in the U.S. is greater than 55% of the total cost of all manufactured product components, unless another standard for determining the minimum amount of domestic content of the manufactured product has been established under applicable law or regulation.|
|Construction materials||All manufacturing processes occurred in the U.S.|
The BABAA defines infrastructure to include, at a minimum: roads, bridges, public transportation, dams, ports, railroads, freight and intermodal facilities, airports, water systems, electrical transmission facilities and systems, utilities, broadband, buildings, and energy distribution systems, including EV charging infrastructure. The Buy America requirements apply not just to construction projects, but also to maintenance and repair (though not to federal disaster assistance under the Stafford Act). The BABAA applies only to infrastructure projects built by recipients of funding from the federal government, not to projects built by the federal government itself, which are covered by a different set of laws known as “Buy American.”
Twenty-five federal agencies have programs that provide financial assistance for infrastructure, including large agencies such as the Departments of Transportation and Energy, and smaller ones such as NASA and the Small Business Administration. For agencies that were already subject to Buy America requirements under prior law, those provisions will remain in place as long as they are equivalent to or exceed the BABAA standards.
What are the exceptions to BABAA requirements?
Under the BABAA, federal agencies can grant waivers in three specific circumstances:
- If applying the Buy America requirements would be inconsistent with the public interest;
- If the needed items are not produced in the U.S. in sufficient and reasonably available quantities or of a satisfactory quality; or
- The inclusion of items produced in the U.S. would increase the cost of the overall project by more than 25%.
The BABAA requires that, before a waiver can go into effect, it must be made available for public comment for no less than 15 days. For a waiver of general applicability (i.e., not tied to a specific project), the public comment period must be at least 30 days and, with a few exceptions, the waiver must be reviewed every five years.
The law codifies the new Made in America Office within OMB, which was established by executive order early in the Biden administration. The office is charged with overseeing Buy America waivers granted by federal agencies to bring additional consistency and transparency to the waiver process. The office maintains a webpage on which all proposed and finalized waivers are published, with the goal of making it easier for suppliers, manufacturers, and other industry participants to see where gaps in the domestic supply chain are. OMB encouraged federal agencies to use their waiver authority judiciously, by issuing waivers for limited periods of time and targeted to specific projects whenever possible.
How is the BABAA being implemented?
BABAA required that within 60 days of the law’s enactment, each affected agency must identify “deficient programs,” i.e., those programs not already covered by Buy America requirements at least equal to those of the BABAA. The reports were intended to inform stakeholders of the universe of programs that would now be covered by Buy America. These “60-day reports” vary widely among the agencies, depending on the extent to which they were already covered by Buy America requirements. For example, the U.S. Department of Transportation prepared an extensive report, detailing the different requirements that applied to each of its modal administrations. EPA’s report similarly showed a mix of prior requirements applying to its water, wastewater, and environmental programs. Other agencies, such as Treasury and Commerce, submitted simpler 60-day reports showing that none of their financial assistance programs had previously been covered by Buy America requirements.
At the same time, OMB embarked on the process of developing detailed guidance for agencies on compliance with the BABAA, beginning with interim guidance and a request for information in April 2022, formal proposed guidance in February 2023, and final guidance in August 2023 (which went into effect on October 23, 2023). While waiting for final guidance to be issued, many federal agencies authorized broad, short-term waivers of the new requirements to allow infrastructure projects to proceed without concern that they would be violating the new law.
OMB’s final guidance covered a number of important issues that were not spelled out in the BABAA itself. For example, the guidance:
- Specifies that only items permanently incorporated into an infrastructure project are subject to Buy America, which leaves out things like tools used during construction and furnishings like tables and chairs.
- Makes clear that Buy America requirements apply to the whole infrastructure project, not just the part paid for with federal funds.
- Explains that, although the law does not apply when federal grants go to for-profit entities, federal agencies can still encourage them to meet BABAA requirements.
- Clarifies what it means for “all manufacturing processes” for construction materials to occur in the United States, by listing the specific processes that must take place in the U.S. for each type of construction material.
- Provides instruction on how to determine whether composite items count as manufactured products or construction materials.
What comes next?
Even with OMB’s final guidance now in effect, implementation of BABAA is ongoing, with important questions still to be answered. OMB’s guidance explicitly stated that it is intended to be high-level and broadly applicable. It is not intended to cover every issue that may arise in the context of each agency’s infrastructure programs. Instead, agencies may issue their own guidance covering topics and situations unique to their infrastructure sectors. Several agencies have already issued waivers of BABAA requirements for de minimis costs and small grants.
While OMB’s guidance does answer many cross-cutting questions, others were left open. For example, OMB declined to answer the question of whether federally-supported affordable housing developments count as infrastructure, leaving decisions up to the agencies that fund such buildings—e.g., HUD and USDA. OMB also did not define what would count as a “minor addition” to a construction material that would not trigger reclassification as a manufactured product, instead relying on individual agencies to make that clear for their own programs.
As a result, a good deal of uncertainty remains about how the BABAA will be applied in specific infrastructure sectors. Attention will now turn to the guidance and waiver process at each individual agency.
The principle behind the BABAA is simple: the BIL’s $1.2 trillion in infrastructure spending should benefit not just American consumers, but also American workers. However, the near-term impact of the BABAA is less straightforward. Infrastructure project sponsors, manufacturers, and suppliers are currently spending time and money to parse through the new requirements and determine how they apply to the products they use. For products that do not comply, further time must be spent either identifying an alternative or seeking a waiver.
Over time, the expectation is that fewer waivers will be needed as more products will be manufactured in the United States. In the interim, infrastructure stakeholders would benefit from increased certainty surrounding BABAA requirements. Federal agencies should focus on making those requirements as clear as possible through program-specific guidance and technical assistance and by rapidly reviewing requested waivers.
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