The historic infrastructure bill, now approved by the U.S.
Congress and pending President Biden’s signature, includes
broad policy provisions designed to improve governmental sourcing
from U.S. manufacturing sectors. These new statutory authorities
aim to:
- Expand domestic preference procurement policies applicable to
federal financial assistance programs for public works
infrastructure; - Increase the domestic component content requirements of
products and construction materials sold to the Federal Government
under the Buy American Act; and - Provide transparency into governmental contracting decisions
related to domestic sourcing.
Suppliers to public works projects and to the Federal government
should assess these new statutory directives as they will impose
new domestic origin requirements and standards for construction
materials and products acquired for federally-aided public works
infrastructure projects at the state and local levels, and impose
new domestic component content standards for goods and construction
materials acquired by the Federal Government.
BACKGROUND
On November 5, 2021 the U.S. House of Representatives passed a
bipartisan $1.2 trillion “physical” infrastructure bill,
paving the way for enactment of a major component of President
Biden’s “Build Back Better” domestic infrastructure
agenda. The Infrastructure Investment and Jobs Act (IIJA) H.R. 3684
– also known as the Bipartisan Infrastructure Deal –
was passed by the House by a vote of 228-206, with 13 Republicans
joining all but six Democrats in supporting the measure. The bill
now awaits the President’s signature, nearly three months after
Senate passage.
The IIJA contains approximately $550 billion in new
infrastructure spending over current spending levels and covers
roads and bridges, public transit, rail, safety and research
programs that are typically included in five-year surface
transportation reauthorizations. Additionally, the five-year bill
makes major investments in drinking and wastewater infrastructure;
ports and airports; broadband; grid security; and clean energy
programs (e.g., electric vehicle infrastructure and carbon
capture). The bill also includes major domestic procurement
(“Buy America”) requirements for infrastructure
materials.
“BUILD AMERICA, BUY AMERICA”
Perhaps most significantly, the IIJA includes the Build
America, Buy America Act (BABA). The BABA statutorily directs
the application of “Buy America” domestic preference
policies to federal financial assistance programs for
infrastructure, both to programs not subject to any such laws
currently, as well as to those that are currently subject to Buy
America laws that may be limited in scope to specific materials or
products. In contrast to the Buy America requirement applied to the
2009 American Recovery and Reinvestment Act, the statutory
authority provided by the BABA is not limited to the funds
appropriated or authorized in the IIJA. Rather, the BABA directs
the application of Buy America laws to federal-aid infrastructure
programs that will have enduring, permanent impact.
In summary, the BABA would bar the award of federal financial
assistance for infrastructure unless all of the iron, steel and
manufactured products and construction materials used in the
project are produced in the United States.1
Waivers traditionally available under existing Buy America laws
are authorized under the BABA where (1) applying the Buy America
requirement would be inconsistent with the public interest; (2)
where the iron, steel, manufactured products and construction
material is not produced in the United States in sufficient and
reasonably available quantities or of a satisfactory quality; and
(3) where inclusion of the domestic products or construction
materials will increase the cost of the overall project by
more than 25 percent. In addition, Congress directs that the BABA
be applied in a manner consistent with U.S. trade agreement
obligations related to government procurement.
Robust Origin Standards
The BABA imposes robust origin standards for the products and
construction materials acquired for federally-assisted
infrastructure projects. The bill defines “produced in the
United States” to mean, “in the case of iron or steel
products, that all manufacturing processes, from the initial
melting stage through the application of coatings, occurred in the
United States.” Similar origin standards for iron and steel
are currently imposed by regulation and agency guidance to
federal-aid subject to existing Buy America laws, including those
applicable to certain federal-aid transportation infrastructure
programs as well as federal-aid clean and drinking water
infrastructure programs.
The BABA will impose Buy America requirements on nonferrous
construction materials – a break in precedent from existing
Buy America laws applicable only to iron and steel. It identifies
common construction materials as nonferrous metals, plastic and
polymer-based products, glass (including optic fiber), lumber, and
drywall. The BABA directs the imposition of similarly significant
“all manufacturing processes” origin standards for
non-ferrous construction materials. The OMB is required by the BABA
to issue standards that define “all manufacturing
processes” for construction materials.
Relative to the origin standard for manufactured products, the
BABA is more explicit. Manufactured products will be deemed
produced in the United States if: (1) the product was manufactured
in the United States; and (2) the cost of the product’s
components mined, produced or manufactured in the United States
exceeds 55 percent of the total cost of the product’s
components. This origin standard is consistent with the recently
revised origin standard for domestic end products and construction
materials under the federal BAA, but not reflective of changes to
the BAA’s origin standard imposed by another section of the
IIJA.
Rapid Timeline for Implementation
The BABA imposes a rapid timeline for implementation.
Upon enactment: The Office of Management and Budget
(OMB) is directed to issue guidance to Federal agencies to assist
in identifying programs that have “deficient” Buy America
coverage and to issue guidance to assist Federal agencies in
applying new domestic content preferences.
The BABA deems as deficient those programs that are not
currently subject to Buy America requirements at all, are subject
to limited Buy America requirements, the scope of which does not
include iron, steel, manufactured products and
construction materials, or are subject to Buy America requirements
that have been waived by generally-applicable and longstanding
waivers. For example the Buy America requirement imposed by 23
U.S.C. § 313 is limited in application by the Agency’s
implementation policy to iron and steel only. The Federal Highway
Administration has estimated that the ferrous inputs account for
less than 5 percent of the cost of a federally-aided highway
project.
Within 60 Days of Enactment: Federal agencies will be
required to submit to the OMB and appropriate congressional
committees a report that identifies each Federal financial
assistance program for infrastructure administered by the agency,
identify the Buy America-type requirements applied thereto, if any,
and assess the applicability of any existing domestic content
procurement preference, including its purpose, scope, applicability
and any exceptions or waivers of the requirement. The agency report
must identify the deficient programs not subject to domestic
procurement preferences required by the BABA.
Within 180 Days of Enactment: Federal agencies must
begin applying Buy America preferences meeting the scope of
products required by the BABA. By this time, OMB must issue
standards satisfying the “all manufacturing processes”
origin standard required by the BABA for “construction
materials.”
“MAKE IT IN AMERICA”
The BABA also includes a “Make it in America” section,
which directs changes to the BAA, paves the way for increased
domestic component content standards, improves waiver processes and
creates a Made in America Office. The “Make it in
America” provisions of the BABA reflect many of the directives
included in President Biden’s January 2021 Executive Order
14005 Ensuring the Future Is Made in All of America by All of
America’s Workers.
Specifically, the “Make it in America” section of the
BABA provides statutory authority for the establishment of the new
Made in America Office within the OMB. It also includes language
aimed at reducing the use of waivers and strengthened application
of the BAA, which as noted above, applies to direct procurement by
Federal agencies.
The BABA directs the Made in America Office to promulgate
guidance to Federal agencies aimed at standardizing and simplifying
how agencies comply with the BAA. The guidance is to include the
criteria agencies utilize to grant “public interest” and
“non-availability” waivers of the BAA, providing some
framework to what has traditionally been very murky process. In the
context of non-availability waivers the BABA identifies appropriate
considerations contracting officers should base waiver
determinations upon, including anticipated project delays as well
as lack of substitutable articles, materials and supplies.
Similarly, the BABA directs agencies to avoid issuing public
interest waivers that would result in decreased employment in the
United States both among the entities that produce the product or
construction material or that would result in a contract award that
would decrease domestic employment. It will also require for the
first time that Federal agencies consider whether the cost
advantage of a foreign product is the result of unfair trade
practices such as dumping or subsidization.
Notably, the “Make it in America” section of the BABA
includes a sense of Congress that BAA’s domestic component
content standard should be amended by the Federal Acquisition
Regulatory Council (FAR Council) upward from 55 percent currently
to 75 percent. This sense of Congress is consistent with both the
directives of EO 14005 and proposed changes to the Federal
Acquisition Regulations (FAR) included in a notice of proposed
rulemaking (NPRM) issued by the FAR Council in July of 2021. The
July NPRM proposed graduated increases to the BAA’s component
content standard from 55 percent currently to 75% over five years
with a fallback mechanism at prior lower percentage standards in
the event of no qualifying offers meeting the higher component
content standards. The sense of Congress in the BABA also endorsed
a fallback mechanism in the event of no qualifying offers. The BABA
directs the FAR Council to amend the Part 25 of the FAR to provide
a definition for an “end product manufactured in the United
States,” which the FAR Council is poised to do with the
current rulemaking.
TRADE AGREEMENT OBLIGATIONS PRESERVED; DIRECTED TO BE
REVIEWED
The IIJA’s Buy America provisions are universally directed
to be applied in manners consistent with United States obligations
under international trade agreements applicable to government
procurement. To that end, covered agency procurements at the
federal and sub-federal levels of government that are open to the
products and materials of other parties to these trade agreements,
by virtue of the identity of the procuring entity and the value of
the procurement, will continue to be.
Notably, the IIJA directs an assessment of the impacts of all
United States free trade agreements, the World Trade
Organization’s Government Procurement Agreement and federal
permitting processes on the operation of Buy American laws. The
required report is to be made public. While the assessment does not
direct a change in policy, it could spur the Administration to
reconsider how it interprets limitations on the scope of
parties’ obligations embodied in these agreement texts as well
as its construction and reliance on delineated reservations to its
market access obligations under these agreements.
BUYAMERICA.GOV
The IIJA also includes the BuyAmerican.gov Act, which among
other things, directs the establishment of the BuyAmerican.gov
website, a publicly available and free to access website repository
of information on all waivers and exceptions to the various Buy
America laws.
Notably, the Director of the Made in America Office at OMB issued late last month a
memorandum for senior federal procurement officials that
provides specific guidance to Federal executive branch agencies on
the use of a digital waiver portal to submit proposed waivers to
the Made in America Office and posted on a new dedicated website
MadeInAmerica.gov.
CONSIDERATIONS FOR MANUFACTURERS
Opportunity exists for manufacturers of construction materials
with U.S. manufacturing operations as well as for their upstream
suppliers of essential inputs as origin standards for nonferrous
materials are adopted and the BABA’s domestic preference
procurement requirements are imposed on federally-aided
infrastructure spending.
Manufacturers of nonferrous products used in public works
infrastructure projects are likely unfamiliar with the Buy America
requirements applicable to certain federal-aid infrastructure
programs. Federal agencies subject to existing Buy America laws
applicable to iron and steel have, over the last nearly 40 years,
adopted consistent standards construing “all manufacturing
processes” that require the initial melting stage of
steelmaking to occur in the United States. Manufacturers of
nonferrous construction materials should take note of this
precedent and consider what a comparably inclusive origin standard
would look like for their industry sector.
Manufacturers should also assess how the BABA’s waiver
transparency requirements and supplier scouting programs may be
leveraged to identify gaps in domestic sourcing and inform capital
investment planning.
Footnote
1. The BABA defines infrastructure as: 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.
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