What Contractors Need to Know About the Build America, Buy America Act

This post is part of a series sponsored by IAT Insurance Group.

Battling the Great Depression, the Hoover administration passed the “Buy American Act” in 1933. The basic premise of the act was self-evident: to revive and strengthen the US economy by requiring American-sourced iron and steel mined or produced in the United States to be used in projects for the federal government.

In 1982, Congress passed the “Buy America Act,” which for the first time expanded the requirement that contractors use only US-sourced iron and steel on state transportation projects receiving federal funds. The Buy America Act also expanded the items that must be of American origin to include manufactured items.

More recently, a new expansion, dubbed the “Build America, Buy America Act” (BABA), was passed in November 2021, as part of the Infrastructure and Investment Jobs Act (IIJA). Contractors should be aware of how the law related to Buy American requirements has changed and how it could affect their business in new ways.

Most importantly, BABA’s material requirements apply to all infrastructure projects receiving federal funds, not just IIJA projects, and not just where the federal government is the contracting party, but also where the federal government is the contracting party. projects in which a state or local government entity is the contracting party. Additionally, “infrastructure” projects are broadly defined to include:

• roads, tunnels and bridges
• Railways (both passenger and freight)
• dams, ports, docks and other maritime facilities
• airports
• water systems
• electrical transmission facilities and systems
• utilities
• broadband infrastructure
• buildings related to all of the above, including, for example, train and bus stations, toll facilities, and even offices

Here are some other things to know about BABA:

• Along with iron, steel and manufactured goods, BABA’s requirements are extended for the first time to construction materials, which must also be of US origin. Construction materials are defined to include basic products such as glass, drywall, fiber optic cable, non-ferrous metals such as copper and aluminum, and PVC and other plastic or polymer-based products. Aggregates and cement are excluded.
• BABA gradually increases the required domestic content threshold (by cost) of manufactured goods from 55% to 60% starting in October 2022, up to 65% by 2024, peaking at 75% in 2029.[1] However, in certain cases the increases have been delayed until they are reviewed.
• Commercially available off-the-shelf items manufactured abroad may be used if left unmodified.

Some frequently asked questions about BABA

Q: Can a particular item or component fall into more than one category between iron and steel, manufactured goods, and building materials?

A: No. The guide suggests that all elements incorporated into an infrastructure project fall into one of three categories. For example, an item that combines a construction material, such as glass, with another material or a manufactured product (such as a window unit) would be considered a manufactured product.

Q: What exactly is a Commercially Available Standard (COTS) item?

A: Under the Federal Acquisition Regulations, a COTS is any supply item (including a building material) that is sold in substantial quantities on the commercial market and is used without modification in the same form in which it is sold.

Q: Are there waivers available for the BABA requirements under the IIJA?

A: Yes. A waiver may be available if the mandate is determined to be contrary to the public interest or if the materials are unavailable or unreasonably priced. Waivers issued by a particular government agency may apply to that agency or be specific to a project. In addition, under International Treaty obligations, products from certain preferred trading partners are treated as made in the United States for contracts of $7,804,000 or more, with certain exceptions, such as Small Business Administration contracts, which fall under the mandates from Buy American, regardless of the amount of the project.

Q: What can contractors do if they are not sure if BABA’s requirements apply to a specific project or product or if other help is needed to comply with the law?

A: In addition to consulting an attorney or other professional, contractor questions about Buy American requirements can be emailed to BuyAmerican@ee.doe.gov. In addition, the Office of Management and Budget periodically publishes guidance on the changing landscape of BABA requirements.

Contractor Best Practices

If you are working on a project that is federally funded in any way, meeting applicable Buy American requirements is critical to your bottom line. Stay on top of regulations with these best practices:

• Get your suppliers certified. Obtain supplier certification confirming that construction materials or manufactured products meet BABA requirements.
• Shared responsibility. Construction contracts with subcontractors and suppliers must include language that holds these parties responsible for the cost of non-compliance with BABA.
• Stay up to date with changing requirements. Laws change frequently. Pay close attention to bulletins issued by federal agencies such as the Office of Management and Budget. The conditions for the exemptions could change along with the types of building materials subject to BABA. The exceptions to the rule can also change. While cement and aggregates are not currently included in BABA, that could change.
• Don’t count on a resignation. BABA exists for a reason, so exemptions will not be easy to obtain and are likely to be project or even product specific. Do your due diligence, be aware that the timing of implementing BABA requirements is not uniform for all federally funded infrastructure projects, and ensure BABA requirements applicable to the project are met.
• Consider dedicating one person to supervise BABA. Documentation is key, so be sure to record all facts related to BABA’s work and compliance. Assign someone in your organization to do the follow-up documentation or consider having a dedicated person in charge of ΒΑΒΑ compliance. If in doubt seek legal advice.

Failure to comply with applicable BABA requirements may result in the need to remove and replace completed work at your expense, termination of contract, and potentially even disqualification from performing federally funded work. In addition, a knowing failure to comply with Buy American’s requirements may give rise to liability under the False Claims Lawpenalties that include triple damages.

For more information on BABA and the IIJA, Contact the IAT team.

This article should not be used as legal advice. All parties should consult an attorney of their choosing and seek expert advice on legal and compliance issues.

[1] Federal Register, “Federal Acquisition Regulations: Amendments to the Buy American FAR Requirements,” March 7, 2022.

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