Strengthening Buy America Requirements

In his recent State of the Union speech, President Biden highlighted an intention to increase enforcement of Buy America requirements for federally funded infrastructure projects. The next day, the Office of Management and Budget (OMB) issued a proposed rule and notice of proposed guidance aimed at standardizing the implementation of the Build America, Buy America provision of the bipartisan Infrastructure Investment and Jobs Act (IIJA or Act) enacted in November 2021. This proposed guidance is intended to clarify and strengthen enforcement of the Buy America requirements. Contractors pursuing and working on infrastructure projects funded by the Act need to be aware of these requirements summarized below.

The Buy America provision of the Act became applicable to recipients of federal funds and contractors performing infrastructure projects on May 14, 2022. It requires federal agencies to ensure that all of the iron, steel, manufactured products and construction materials used in federally funded infrastructure projects are produced in the United States. The Act defines infrastructure broadly to include roads, bridges, public transportation, dams, harbors, railroads, airports, water systems, utilities and similar structures, facilities and equipment.

For construction materials, all manufacturing processes for the material must occur in the U.S. For iron and steel products, all manufacturing processes, from the initial melting stage through the application of coatings, must occur in the U.S. For manufactured products, the product must be manufactured in the U.S. and more than 55% of the cost of components must be mined, produced or manufactured in the U.S.

The new proposed guidance includes standards for determining whether specific categories of construction materials should be considered “produced in the United States” for purposes of the Buy America requirements. It includes specific manufacturing standards for several categories of construction materials used on infrastructure projects, including non-ferrous metals, plastics, composite building materials, glass, fiber-optic cable, lumber and drywall.

The Buy America provision of the Act allows for certain exceptions to or waivers of the requirement. These include:

1. Non-availability: If products produced in the United States are not available in sufficient quantities or of satisfactory quality, the procuring agency may procure foreign products.
2. Cost: If the cost of domestically produced products is more than 25% higher than the cost of foreign products, the procuring agency may procure foreign products.
3. Public interest: If the application of the Buy America provision would be inconsistent with the public interest, the procuring agency may waive the requirement.
4. Trade agreements: The Buy America provision does not apply to products from countries that have a trade agreement with the United States that prohibits discrimination against U.S. products or services.

Even if one of these exceptions applies, the procuring agency must still maximize the use of domestic content in the project to the greatest extent possible. The recent OMB guidance addresses the process of securing a waiver. Before it can issue a waiver, an agency must publish a written explanation for the waiver on its website and allow for public comment. The proposed guidance specifies information required to be submitted with the waiver request.

Some federal agencies have posted waivers from the Buy America requirements. For example, the Federal Highway Administration (FHWA) established a temporary public interest waiver for steel, iron, manufactured products and construction materials used in electric vehicle (EV) chargers. It applies to EV chargers manufactured by July 1, 2024, where installation is commenced by October 1, 2024. The U.S. Department of Transportation (DOT) also established a waiver for DOT contracts entered into before November 10, 2022, and for contracts entered before March 20, 2023, that result from solicitations published before May 14, 2022. It is worth checking the DOT website for such posted waivers. The OMB website has links to other agency waivers.

The Buy America requirements of the Act are enforced by the FHWA and other federal agencies responsible for overseeing the infrastructure projects funded by the federal government. These agencies require bidders and contractors to certify that they will comply with the Buy American provisions, and may request documentation and other evidence to verify compliance.

If a contractor is found to be noncompliant with the requirements, the agency may take a number of enforcement actions, including requiring the contractor to replace noncompliant materials with domestic materials, withholding payment for noncompliant materials, or imposing other penalties. The Act also includes a private right of action, which allows a private party to bring a lawsuit and seek damages or other relief against a contractor that they believe has violated the Buy America requirements.