On April 18, 2022, the Office of Management and Budget (“OMB”) published a memorandum entitled “Initial Implementation Guidance on Application of Buy America Preference in Federal Financial Assistance Programs for Infrastructure” (“OMB Guidance”). OMB M-22-11. The OMB Guidance supplements the Build America, Buy America Act (“BABA”) provisions of the Infrastructure Investment and Jobs Act (“IIJA”), which was enacted in November 2021. In addition, OMB issued a Notice of Listening Sessions and Request for Information (“RFI”) on April 21, 2022 seeking public input on BABA implementation. Public comments are due by May 23, 2022.
Expanded Application of Buy America Preferences to Federal Infrastructure Programs
Pursuant to the IIJA, starting May 14, 2022, federal agencies administering federal financial assistance programs (i.e., grants, cooperative agreements, non-cash contributions or donations of property, direct assistance, loans, loan guarantees, and other financial assistance) must implement a “Buy America preference” for infrastructure projects. The IIJA dramatically expanded the applicability of Buy America requirements. Buy America laws previously only covered certain transit-related financial assistance programs, such as the Federal Transit Administration (“FTA”) and Federal Highway Administration (“FHWA”). The new Buy America preference applies to all federal infrastructure projects, whether or not the project is funded by the IIJA.
The IIJA and OMB Guidance define “infrastructure projects” broadly to include not just structures, facilities, and equipment for traditional infrastructure (e.g., roads, bridges, and public transportation), but also water systems, electrical transmission facilities, utilities, broadband infrastructure, and facilities related to the generation, distribution, and transportation of energy (e.g., electric vehicle charging). See IIJA, Pub. L. No. 117-58 § 70912(5); OMB M-22-11 at 3-4. “Infrastructure” includes articles, materials, and supplies that are consumed in, incorporated into, and affixed to an infrastructure project, but not equipment and furnishings that are not an integral part of or permanently affixed to the finished structure. The OMB Guidance expressly instructs agencies to “interpret the term ‘infrastructure’ broadly and consider the definition  as illustrative and not exhaustive.” OMB M-22-11 at 4. Further, the preference applies to a project even if infrastructure is not the primary purpose of the award and even if federal funding is combined with other sources of funding.
Although the OMB Guidance and IIJA use the term “preference,” it is effectively a requirement that, for infrastructure projects:
- All iron and steel is produced in the United States;
- All manufactured products are produced in the United States, meaning that:
- The manufactured product was manufactured in the United States, and
- 55% of the total cost of components must be components mined, produced, or manufactured in the United States; and
- All construction materials are manufactured in the United States.
See IIJA, Pub. L. No. 117-58 §§ 70912(2), (6).
The OMB Guidance does not require immediate amendment of existing agreements, but starting May 14, 2022 terms effectuating this requirement must be included in all new agreements, renewals, and amendments of existing agreements that obligate additional funds. To assist agencies, sample agreement terms are included in the OMB Guidance as Appendix I. The OMB Guidance notes that for certain awards and renewals happening on or soon after May 14, where budgets and materials purchases are already agreed upon, “public interest waivers may be needed.” OMB M-22-11 at 5.
New Buy America Requirements for Construction Materials
The inclusion of construction materials in the IIJA is also an expansion of prior Buy America laws. Construction materials are defined as articles, materials, or supplies that are (or consist primarily of) non-ferrous metals, plastic and polymer-based products, glass, lumber, or drywall. The definition expressly excludes cement and cementitious materials, aggregates such as stone, sand, or gravel, and aggregate binding agents or additives.
The IIJA requires OMB to issue guidance defining the relevant manufacturing process for construction materials. To that end, the April 18 OMB Guidance defines the “manufacturing process” for construction materials to include the final manufacturing process and the immediately preceding manufacturing stage. If any of the construction materials listed are combined together through a manufacturing process, they are to be treated as a manufactured product rather than a construction material. See OMB M-22-11 at 13-14.
OMB’s April 18 guidance on construction materials is preliminary and non-binding, and the agency currently is soliciting industry feedback before issuing further guidance on construction materials by May 14, 2022. In particular, the RFI requests additional input regarding the definition of construction materials, including whether materials or products should be added or clarified, as well as how to distinguish construction materials from manufactured products. OMB has set up listening sessions that individuals can register for including Session 2 on April 28 which focuses on glass, lumber, drywall, and other products.
Effect on Existing Buy America Regimes
The new Buy America preference applies only to the extent that an agency does not already have an existing domestic content requirement that meets or exceeds these standards. For example, FTA’s Buy America requirements for steel and iron and manufactured products should continue to apply, but the FTA presumably would need to adopt new standards for domestic construction materials. See OMB M-22-11 at 4-5 (“Avoid Unnecessary Disruption”). As another example, recipients of FHWA funding for infrastructure projects should watch the agency’s implementation closely to see whether the agency preserves its longstanding waiver of Buy America requirements for manufactured products.
Waivers of Buy America Requirements
Finally, the IIJA and OMB Guidance modify the process for securing a waiver of domestic preference requirements, codifying the changes initiated by President Biden’s January 2021 Executive Order 14005 on “Ensuring the Future Is Made in America by All of America’s Workers.” Before an agency can issue a waiver, it must publish a written explanation for the waiver on its website and BuyAmerica.gov, and allow for public comment. After the public comment period ends, the proposed waiver must be approved by the Made In America Office (“MIAO”). The OMB Guidance specifies information required to be submitted to the MIAO with the waiver request, including a detailed justification for the non-domestic materials and a certification of a good faith effort to solicit bids for domestic materials.
The OMB Guidance instructs agencies that they may grant or reject waivers in whole or in part, with the goal of issuing waivers at the project and product level that are time-limited, targeted, and conditional. In this way, the new waiver guidance aims to boost reliance on and use of domestic supply chains by avoiding waivers that, in the eyes of OMB, might be overly broad.
Three types of waivers are contemplated: 1) nonavailability waivers, 2) unreasonable cost waivers (if domestic material requirements will increase the overall cost of the project by more than 25%), and 3) public interest waivers. The OMB Guidance specifically addresses six types of public interest waivers: 1) de minimis (for project purchases below a certain threshold), 2) small grants, 3) minor components, 4) adjustment period, 5) international trade obligations, and 6) other considerations. The MIAO also will increase scrutiny for general applicability waivers, which will include appropriate justification by the agency and a review of the waiver every five years. There is a carve-out for product-specific general applicability waivers that were issued before May 19, 2021, as those waivers do not need to be reviewed until November 15, 2026.
Certain agencies have begun to issue waivers to ease the transition to the new BABA regime. For instance, on April 28, 2022, the Department of Transportation issued a six-month “transitional waiver” of BABA requirements applicable only to construction materials. And on May 3, 2022, the Department of Housing & Urban Development will be officially publishing a six-month “general applicability waiver” of BABA requirements while the agency collects further information on the “burdens . . . arising from compliance and monitoring” with BABA requirements.
Domestic preference requirements for federal procurement and federal financial assistance have continued to evolve at an unprecedented pace, and the most recent OMB Guidance and RFI are the latest developments in this dynamic area. Additional OMB regulations under the IIJA are due by May 14, 2022. Contractors and financial assistance recipients should continue to monitor the evolving domestic preference standards as additional regulations are issued and implemented.