What is the Build America, Buy America Act, and how does it apply to local governments?

Written by Katherine Tsou

The Build America, Buy America Act (BABA), enacted as part of the Infrastructure Investment and Jobs Act (IIJA), adds to the existing body of federal laws that require certain items be produced in the United States. In particular, BABA requires that, as of May 14, 2022, iron, steel, manufactured products and construction materials used in federally assisted infrastructure projects be produced in the United States, unless a waiver applies. To ensure compliance with BABA, local governments that are currently engaged in or may pursue a federally assisted infrastructure project should be aware of this rapidly evolving area of law. This article provides a brief summary of BABA’s applicability, requirements and recent developments.

BABA applies to federally assisted infrastructure projects, which are broadly defined to include “construction, alteration, maintenance or repair of infrastructure in the United States.” (IIJA, PL 117-58, November 15, 2021, 135 Stat 429, Sec. 70912(7).) For purposes of BABA, infrastructure includes, but is not limited to, 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, including structures, facilities and equipment that generate, transport and distribute energy, including electric vehicle (EV) charging; utilities; broadband infrastructure; and buildings and real property. (IIJA, PL 117-58, November 15, 2021, 135 Stat 429, Sec. 70912(5); OMB Memorandum M-22-11, “Initial Implementation Guidance on Application of Buy America Preference in Federal Financial Assistance Programs for Infrastructure.”)

Applicability of BABA
When determining if, and to what extent, BABA applies to a federally assisted infrastructure project, local government agencies should initially consider: (1) the award date for the federal grant supporting the infrastructure project, (2) any domestic content procurement requirements imposed by the federal funding source, and (3) whether a waiver applies.

First, local governments should review the date and terms and conditions of the grant agreement to determine if the award is subject to BABA. Additional legal analysis and consultation with the federal awarding agency may be necessary in certain cases, particularly if the federal awarding agency has approved or proposed a waiver of BABA’s requirements.

Second, BABA applies only to the extent that a domestic content procurement preference consistent with BABA’s requirements does not already apply to a federally assisted infrastructure project. Various federal agencies with infrastructure programs require that certain categories of items procured with federal financial assistance be produced in the United States pursuant to laws and regulations that predate BABA. For instance, the Federal Transit Administration’s (FTA) Buy America requirements apply to steel, iron and manufactured products (see 49 U.S.C. § 5323(j); 49 C.F.R. Part 661), and such requirements are consistent with and unaffected by BABA. FTA does not have its own Buy America requirement for construction materials (that do not fall into the categories of steel, iron or manufactured products), as defined by BABA, which means construction materials used in an FTA-assisted infrastructure project are now subject to BABA’s construction materials requirement, unless a waiver applies. Local governments should consult with their legal counsel to determine the extent to which BABA applies to a particular infrastructure project, given other overlapping Buy America and Made in America laws and regulations that may apply to the project by virtue of the federal funding source’s requirements.

Third, BABA contains procedures by which federal agencies may waive BABA’s requirements. Some federal agencies have issued waivers for certain circumstances. For example, the U.S. Department of Transportation (DOT) approved a waiver of BABA’s construction materials requirement for certain categories of solicitations and contracts depending on a variety of factors and timing considerations. DOT has also proposed a waiver of BABA’s Buy America preferences for iron and steel, manufactured products and construction materials for de minimis costs, small grants and minor components.

Construction materials
Federal agencies have taken or proposed actions to interpret and implement BABA, particularly with respect to BABA’s construction materials requirement. BABA does not contain a precise definition of “construction materials” or standards for determining whether construction materials are produced in the United States. The Office of Management and Budget (OMB) has been tasked with developing guidance to implement BABA and has taken several actions since the law was enacted. On April 18, 2022, OMB issued Memorandum M-22-11, “Initial Implementation Guidance on Application of Buy America Preference in Federal Financial Assistance Programs for Infrastructure.” On February 9, 2023, OMB issued a Notice of Proposed Rulemaking, Guidance for Grants and Agreements, 88 FR 8374-01 (Proposed Rule).

If approved, OMB’s Proposed Rule would add new regulations to Title 2 of the Code of Federal Regulations that define “construction materials” that are “produced in the United States” as articles, materials or supplies incorporated into an infrastructure project that consist of only one or more of the following materials, and that meet certain standards specified in the Proposed Rule: “Non-ferrous metals; Plastic and polymer-based products (including polyvinylchloride, composite building materials and polymers used in fiber optic cables); Glass (including optic glass); Fiber optic cable; Optical fiber; Lumber; or Drywall.” (Guidance for Grants and Agreements, 88 FR 8374-01.) The Proposed Rule provides a separate and specific standard for each category of construction materials to determine if the construction materials is produced in the United States. For instance, the Proposed Rule states that non-ferrous metals are considered to be produced in the United States if “all manufacturing processes, from initial smelting or melting through final shaping, coating and assembly, occurred in the United States.”

Conclusion
Local government agencies receiving federal funds for infrastructure projects should carefully evaluate whether their projects are subject to BABA, as outlined above. Moreover, as federal agencies develop guidance and regulations regarding BABA, local government recipients should monitor such developments, particularly developments related to the implementation and enforcement of BABA’s construction materials requirement.

Katherine Tsou is a senior counsel at Hanson Bridgett LLP in San Francisco and her practice focuses on public agency law. She assists transportation agencies, cities and other local agencies with procurements and contracts, including federally assisted projects, and matters related to the California Public Records Act, the Brown Act, and government ethics, among other areas of law.