Published: Friday, 20 May 2022 01:37
Written by Mark A. Amadeo
As we discussed in Part 1 of our Buy American Rules Update, a Final Rule issued under Federal Acquisition Regulations (FAR) that implement the Buy American Act raises the domestic content requirement for certain products. In another significant development, last month the Office of Management and Budget (OMB) issued Guidance to federal agencies on how they should implement the Build America, Buy America Act provisions of the massive infrastructure bill that was signed into law in November 2021. In this edition of The GovCon Bulletin,™ we take a closer look at that OMB Guidance.
May 20, 2022
BUY AMERICAN RULES UPDATE PART 2 - A LOOK AT OMB'S BUILD AMERICA, BUY AMERICA ACT GUIDANCE
Last month, OMB issued Guidance for how federal government agencies are expected to implement the Build America, Buy America Act (BABAA) provisions of the the Infrastructure Investment and Jobs Act (IIJA).
The BABAA requires OMB to establish within OMB the Made in America Office (MIA) that would ensure compliance with federal domestic preference laws.
The BABAA also requires federal agencies to ensure - by May 14, 2022 - that iron, steel, and manufactured products and construction materials used in projects for which federal infrastructure funds are obligated were “produced in the United States.”
In the case of iron or steel products, “produced in the United States” under the BABAA means that all manufacturing processes - from the initial melting stage through the application of coatings - occur in the U.S. For manufactured products, it means that (i) the product is manufactured in the U.S., and (ii) the cost of the manufactured product components that are mined, produced, or manufactured in the U.S. is greater than 55 percent of the total cost of components, unless another domestic content requirement under applicable laws or regulations applies. For construction materials, “produced in the United States” means that all manufacturing processes for the construction material occurs in the U.S.
Under the BABAA, federal agencies may waive these domestic production requirements if (1) applying them would be inconsistent with the public interest (the “public interest waiver”); (2) the types of iron, steel, manufactured products, or construction materials are not produced in the United States in sufficient and reasonably available quantities or of a satisfactory quality (the “nonavailability waiver”); or (3) the inclusion of iron, steel, manufactured products, or construction materials produced in the United States will increase the cost of the overall project by more than 25 percent (the “unreasonable cost waiver”).
Before issuing a waiver, agencies must publicize on their websites written explanations for any proposed waivers they intend to grant and must allow at least 15 days for public comment. For waivers that are intended to apply generally to multiple contract awards, BABAA requires agencies to publish their justifications for the waivers in the federal register and to allow at least 30 days for public comment.
OMB's Guidance provides several key clarifications on how agencies should implement the BABAA domestic production requirements.
The Guidance reiterates that the BABAA domestic production requirements apply to all federal financial assistance programs - whether or not they are funded through IIJA - in which funds are appropriated, used or made available for infrastructure projects.
IIJA’s definition of infrastructure encompasses all public infrastructure projects including, at a minimum: the structures, facilities, and equipment for U.S. 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.
OMB’s Guidance explains that agencies should treat structures, facilities, and equipment that generate, transport, and distribute energy – including electric vehicle (EV) charging – as infrastructure. The Guidance also states that federal agencies should interpret the term “infrastructure” broadly and should consider IIJA’s definition of the term as illustrative but not exhaustive.
The Guidance further instructs that when determining if a particular construction project of a type not listed in the definition constitutes infrastructure, agencies should consider whether the project will serve a public function, including whether the project is publicly owned and operated, privately operated on behalf of the public, or is a place of public accommodation, as opposed to a project that is privately owned and not open to the public.
Covered Programs and Awards
OMB’s Guidance explains that the BABAA domestic production requirements only apply to items used for an infrastructure project under a contract award and that if an agency determines that no funds from a particular award will be used for infrastructure, the domestic production requirement does not apply to the award. Similarly, for a covered program, the domestic production requirement does not apply to non-infrastructure spending under an award that also includes a covered project. A BABAA domestic production requirement applies to an entire infrastructure project, even if it is funded by both Federal and non-Federal funds under one or more awards.
Tools, Equipment and Furniture
The Guidance clarifies that the BABAA domestic production requirements only apply to articles, materials, and supplies that are consumed in, incorporated into, or affixed to an infrastructure project. Consequently, they do not apply to tools, equipment, and supplies, such as temporary scaffolding brought to a construction site and removed at or before the completion of the infrastructure project. Nor do they apply to equipment and furnishings, such as movable chairs, desks, and portable computer equipment, that are used at or within the finished infrastructure project, but are not an integral part of or permanently affixed to the structure.
OMB instructs that, for the purposes of its Guidance, an article, material, or supply should only be classified into one of the following categories: (1) iron or steel; (2) a manufactured product; or (3) a construction material.
OMB’s Guidance contains several detailed instructions that federal agencies should follow when they wish to issue waivers of the BABAA domestic production requirements, including an instruction to submit proposed waivers to MIAO after applicable public comment periods have concluded. The agency waiver applications to MIAO are required to contain approximately 14 items of information. Under the Guidance, MIAO is required to review proposed waiver applications to determine if the waiver is consistent with applicable law and policy.
OMB’s Guidance also outlines the principles that agencies are encouraged to follow when issuing waivers – namely, that the waivers should be time-limited, targeted and with conditions that support the BABAA’s policies.
Lastly, the Guidance sets out in detail the considerations that federal agencies should take into account when they grant nonavailability, unreasonable cost, and public interest waivers, as well as general applicability waivers.
Federal government contractors, particularly those that perform or intend to perform on contracts that may include infrastructure-related components or projects, should take care to examine if or how the BABAA domestic production requirements have been implemented into solicitations and awarded contracts and should familiarize themselves with OMB’s Guidance.