Implementation of the Build America, Buy America Act (“BABA”) domestic sourcing requirements for federally supported infrastructure projects is now well underway. With BABA imposing broad new obligations upon recipients of federal funding for nearly all “infrastructure” projects, it is a good time to review what BABA requires.

First, though the requirements were originally to be imposed upon awards starting as far back as May 2022, various implementation delays and waivers led to BABA becoming a more significant issue for recipients of infrastructure funding in 2023.[1] In late 2022 and 2023, many implementing federal agencies issued longer-term waivers specific to their particular agency’s awards, creating compliance exceptions for various small grants and projects entailing only de minimis non-compliant products or materials.[2]

As individual awarding agencies and the Office of Management and Budget (“OMB”) continued to refine BABA implementation, in the late summer and fall of 2023, three key final resources were issued:

• Final BABA regulations at 2 C.F.R. Part 184 (available here) (herein the “BABA Rule”);

• The Federal Register notice issuing and explaining the final BABA Rule (available here) (herein the “BABA Notice”); and

• OMB Memorandum M-24-02, “Implementation Guidance on Application of Buy America Preference in Federal Financial Assistance Program for Infrastructure” (available here).

Although a degree of harmonization is yet needed between these new requirements and historical Buy America requirements,[3] the above resources lay out a reasonably clear framework for application of BABA itself.

First, consistent with the BABA statute[4] and early interpretive guidance from OMB, the new requirements apply broadly to all federally supported projects involving “construction, alteration, maintenance, or repair of the infrastructure in the United States regardless of whether infrastructure is the primary purpose of the project.”[5] “Infrastructure” is, in turn, defined broadly to include essentially any facility, public transit system, or broadband system, that is operated by a public entity or on behalf of the public, or which serves as a place of public accommodation.[6] Fortunately for grantees, with respect to gray areas, federal awarding agencies are required to state whether BABA requirements apply to a particular award.[7] Once applicable to a project, the requirement applies to all covered products and materials incorporated into the final infrastructure work supported by the funds, regardless of whether the particular product or material is itself paid for with federal funds.[8]

For covered infrastructure, BABA requires that all “iron, steel, manufactured products, and construction materials incorporated into the project are produced in the United States.”[9]  As one might imagine, this standard leads to numerous definitional questions, such as:

• What is an iron or steel product as compared to a manufactured product?
• When is an item a manufactured product as compared to a type of construction material?
• What processes must occur in the United States for iron, steel, manufactured products, or construction materials to be “produced” in the United States?

Collectively, the BABA Rule, BABA Notice, and OMB Memo M-24-02 address the majority of these questions.

The regulatory framework is built upon four basic categories of items: (1) iron/steel items, (2) manufactured products, (3) construction materials, and (4) cement, cementitious materials, and aggregates (such as stone or gravel).[10] Helpfully, the BABA Rule and guidance (i) deconflicts between these categories, (ii) instructs that an item can only be one of the above for purposes of BABA analysis, and (ii) instructs that determinations should generally be made at the time the item arrives at the worksite.[11] Taking each category in turn:

There is a hierarchy to the definitional categories above. If a product is an iron/steel product, that categorization will overcome the fact that the item would otherwise be a manufactured product.[16] If a product is made from combination of two or more construction materials, it will become a manufactured product (at least so long as the added material is not a mere “minor addition”).[17] If a product meets the relatively narrow definition for Section 70917(c) materials, it will not be considered a manufactured product.[18]

The BABA Rule, BABA Notice, and OMB Memo M-24-02 leave enforcement approach to the discretion of the federal awarding agency. In this regard, the Environmental Protection Agency Office of Water’s November 2022 “Implementation Procedures”[19] offer useful insight. The procedures: (i) encourage grantees to include a particular clause in their supported construction contracts, shifting compliance risk to the construction contractor and declaring the United States government a third-party beneficiary of the term;[20] and (ii) call for grantees to assess compliance of materials to be incorporated into covered infrastructure work as they are delivered to the job site, generally by mandating and checking certifications provided to the prime construction contractor by suppliers.[21]

Beyond compliance measures, one of the most significant challenges grantees face as implementation of the BABA requirements moves forward will be harmonizing BABA obligations with historical obligations applicable to a particular agency’s infrastructure funding, such as the Federal Transit Administration’s Buy America regulations at 49 C.F.R. Part 661 and Federal Highway Administration’s longstanding Buy America requirements and exceptions. Complicating matters, those individual agency regimes were not consistent with each other, and none are consistent with federal practice under “Buy American” requirements applied to construction projects contracted directly by federal agencies.[22] The implementation of BABA offers opportunities for increased consistency across Buy America regimes applicable to federally supported infrastructure projects, but we are not there yet.

Finally, grantees should be aware that they may request BABA compliance waivers from their funding agencies under three circumstances: (i) nonavailability of a domestic source for/version of a particular item; (ii) unreasonable project costs caused by use of only compliant products and materials; and (iii) waivers that are in the “public interest.”[23] “Public interest” is the basis of the waivers, touched upon above, issued by many funding agencies for small grants and projects involving only a de minimis amount of non-compliant products or materials.[24] In the unusual circumstance that a particular infrastructure project may be subject to coverage by a U.S. free trade agreement with one or more other nations (for example, through the subcentral governmental procurement provisions of the World Trade Organization Agreement on Government Procurement), such exceptions are also to be implemented through individual public interest waivers.[25] In all cases of waivers, OMB’s guidance has consistently been that they should be time-limited, targeted, and conditional.

For more information on the Build America, Buy America Act implementation requirements for grantees, take advantage of Feldesman Training Solutions’ upcoming webinar, Build America, Buy America Act Provisions for Federal Grantees, taking place on Thursday, February 15 at 1:00 p.m. ET.

If you have any questions on matters of federal grants or the Build America, Buy America Act, please contact Scott S. Sheffler (ssheffler@feldesman.com) or call 202.600.3581.

[1] See OMB Memo M-22-11 (Apr. 18, 2022) (rescinded and replaced by OMB Memorandum M-24-02 (Oct. 25, 2023)); See also, e.g., Department of Transportation BABA construction material implementation waiver through November 4, 2022, 87 Fed. Reg. 31931 (May 19, 2022), Department of Interior adjustment period waiver through January 12, 2023, available at https://www.doi.gov/grants/BuyAmerica/GeneralApplicabilityWaivers.

[2] See, e.g. Federal Transit Administration BABA webpage available at https://www.transit.dot.gov/buyamerica; Environmental Protection Agency BABA waivers webpage available at https://www.epa.gov/cwsrf/build-america-buy-america-baba-approved-waivers.

[3] See, e.g., Federal Highway Administration request for comment regarding its broad historical manufactured products waiver for non-iron/steel items, 88 Fed. Reg. 16517 (Mar. 17, 2023).

[4] Build America, Buy America Act, Pub. L. 117-58, §§ 70901-70927 (Nov. 15, 2021).

[5] 2 C.F.R. 184.3 (definition of “infrastructure project”).

[6] Id. § 184.4(c) and (d).

[7] Id. § 184.4(b).  Note that, in early 2022, the Department of Health and Human Services (“HHS”) issued a Federal Register notice suggesting that it did not consider its construction awards subject to BABA requirements.  87 Fed. Reg. 8852 (Feb. 16, 2022).  HHS has, however, since implemented a BABA website which states it is “currently working with the Made in America Office [of OMB] to coordinate compliance . . .”  HHS BABA website available at https://www.hhs.gov/grants-contracts/baba/index.html.

[8] Id. § 184.1(b); OMB Memo 24-02 at 4-5.

[9] Id. § 184.1(b).

[10] Id.

[11] Id. 184.4(d); 88 Fed. Reg. 57771 (Aug. 23, 2023).  Note, however, that the BABA Notice acknowledges that some manufactured products may, despite the pieces arriving at the worksite separately, be analyzed as a single manufactured product item—under the concept of a “kit”—when they are sold as a single item.  88 Fed. Reg. 57775 (Aug. 23, 2023).

[12] 2 C.F.R. § 184.3.

[13] Id. (“Produced in the United States” definition); § 184.6 for additional detail on “construction materials.”

[14] Although OMB has updated the 2 C.F.R. § 200.322 within the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”) to cross-reference 2 C.F.R. Part 184, additional editing to the section seems necessary.  Currently, 2 C.F.R. § 200.322(b) still confusingly includes “aggregates such as concrete” within its definition of “manufactured products,” as well as glass, optical fiber, and lumber.

[15] 88 Fed. Reg. 57772 (Aug. 23, 2023).

[16] 2 C.F.R. § 184.3 (“Manufactured product” definition).

[17] 88 Fed. Reg. 57770 (Aug. 23, 2023).

[18] 88 Fed. Reg. 57771-72 (Aug. 23, 2023).

[19] BABA Implementation Procedures for EPA Office of Water Federal Financial Assistance Programs (Nov. 3, 2022) available at https://www.epa.gov/cwsrf/build-america-buy-america-baba.

[20] Id. at 22.

[21] Id.at 13

[22] See 48 C.F.R. (Federal Acquisition Regulation) Subpart 25.2.

[23] OMB Memo M-24-02 (Oct. 25,2023) at 10-12.

[24] See supra fn 2; see also OMB Memo M-24-02 at 11-12.

[25] OMB Memo M-24-02 at 5-6.