On April 18, 2022, the Biden Administration (through the Office of Management and Budget (“OMB”)) issued OMB Memorandum M-22-11 (the “Guidance”)[1] relating to the “Buy America” sourcing requirements under the “Build America, Buy America” portion of the Infrastructure Investment and Jobs Act (“IIJA”), Pub. L. No. 117-58, §§ 70901-70953. The Act aimed to strengthen Made in America Laws in accordance with President Biden’s Executive Order 14005, “Ensuring the Future is Made in America by All of America’s Workers” (discussed previously here). In addition to tasking the Federal Acquisition Regulatory Council with amending FAR regulations for the Buy American Act (“BAA”), Congress also imposed new “Buy America” requirements on federal infrastructure programs.
Accordingly, the OMB has issued the Guidance to assist Federal agencies on: (1) the application of “Buy America” sourcing requirements for infrastructure programs (applying broadly to all federally-funded infrastructure projects, not just IIJA-funded projects); and (2) processes for issuing “Buy America” waivers. These new requirements are effective May 14, 2022.
“Buy America” Requirements
Implementing the IIJA, the Guidance sets forth “Buy America” sourcing requirements for three key types of products that might be used in an infrastructure project:
- Iron and Steel, requiring all manufacturing processes for the iron and steel – from the initial melting stage through the application of coatings – occur in the United States;
- Manufactured Products, requiring: (a) the end product must be manufactured in the United States; and (b) more than 55% of the total cost of all components of the manufactured product must also be U.S.-origin;
- Construction Materials,[2] requiring that all manufacturing processes for the construction material occur in the United States (including both the final manufacturing step, as well the immediately preceding manufacturing stage for the construction material).
Many of these new infrastructure requirements are similar to the requirements under the BAA (discussed in greater detail here, and which currently are being updated). But there are at least three key differences between the BAA and the new infrastructure “Buy America” sourcing requirements, especially with regard to manufactured products.
First, the BAA currently requires at least 55% domestic content, but that threshold is scheduled to increase to 60% by October 2022 and will continue to climb to 75% by 2029. The new infrastructure Buy America requirement pins the threshold at 55%, with no discussion of escalation; still, the Guidance does leave room for potential escalation if the OMB desires it, recognizing that the Guidance requires “greater than 55 percent,” and 75% is greater than 55%.
Second, the Guidance makes clear that the government may choose to use an alternative method of calculating domestic content, stating that the “greater than 55 percent” threshold may be displaced by “another standard for determining the minimum amount of domestic content.” This kind of alternative standard is not recognized under the BAA, although the Biden Administration currently is exploring whether such alternatives should be available.
Third, where the FAR long has recognized an exception to the domestic content threshold requirement for commercially available off-the-shelf (“COTS”) items under the BAA, both the IIJA and the Guidance are noticeably silent on the subject, strongly suggesting that the partial COTS waiver will not be available for infrastructure projects.
Helpfully, the Guidance also makes clear that the “Buy America” sourcing requirements do not reach down to every single product purchased in connection with an infrastructure project. For example, the “Buy America” preference:
only applies to articles, materials, and supplies that are consumed in, incorporated into, or affixed to an infrastructure project. As such, it does not apply to tools equipment, and supplies, such as temporary scaffolding, brought to the construction site and removed at or before the completion of the infrastructure project. Nor does a Buy America preference 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 the structure or permanently affixed to the infrastructure project.
In this respect, the infrastructure “Buy America” requirement may be more forgiving than the BAA, which applies to every “end product” purchased by the U.S. government, including chairs, desks, and ancillary equipment.
“Buy America” Waivers
The majority of the Guidance focuses on the waiver process – providing agencies with detailed guidance on the process for receiving, analyzing, publishing for public comment, and ruling on waiver requests, while also requiring coordination with the new Made in America Office (“MIAO”) to centralize and standardize the waiver process. The “Buy America” requirements permit agencies to issue waivers in the following circumstances (all of which are fairly familiar):
- Public interest – a broad catch-all category providing the government buyer with flexibility to execute the project, and potentially allowing non-U.S. content in de minimis amounts, for small value procurements, in exigent circumstances, and/or allowing the “Buy America” requirement to be applied consistent with international trade obligations;
- Nonavailability – where a product is not reasonably available in the U.S. in the required quantity or quality; or
- Unreasonable cost – where the domestic product increases the cost of the overall project by more than 25%, when compared to the alternative of using foreign-made products.
The Guidance also contemplates the use of general applicability waivers to apply across multiple awards, although those waivers will be subject to public notice and comment and may need to be newly issued by the MIAO. For example, while the U.S. Department of Transportation, Federal Transit Administration (“FTA”), currently has a general waiver in place for “small purchases” under $150,000, there is no indication that this existing waiver automatically will transfer to the new infrastructure “Buy America” requirements. The Guidance instructs agencies to consider whether it might be in the public interest to waive the Buy America requirements to awards below the simplified acquisition threshold (currently $250,000). But it seems that the MIAO will consider anew such requests as they are made by industry and agency alike.
Conclusion
Various federal agencies have implemented their own “Buy America” provisions over the years, including standalone provisions that apply to grant and infrastructure projects. The new Guidance is applicable to all Federal financial assistance programs where funds are made available for infrastructure projects – regardless of whether the funding comes from the IIJA – although limited exceptions might be available for emergency response expenditures. New rules and further updates are likely to be formalized in the coming months in 2 C.F.R. Part 200. But if an agency has existing “Buy America” requirements that are more stringent than these new requirements (as is the case, for example, with FTA-funded projects, 49 C.F.R. Part 661, which generally require all “components” to be U.S.-origin, subject to a few exceptions and waivers), then these new requirements may be superseded by the more restrictive requirement.
According to the Guidance, new or amended infrastructure programs must be aligned with the “Buy America” requirements by May 14, 2022. Though the requirements will not apply retroactively to infrastructure programs started and awards made before May 14, 2022, unless and until they are renewed or amended, these changes still could drastically alter a company’s compliance and ability to continue doing work on federally-funded infrastructure projects. Companies that work on federally-funded infrastructure projects should familiarize themselves with the changing “Buy America” requirements, assessing and documenting their compliance with the various country of origin requirements, including a review of products acquired through the supply chain for various projects and customers. Interpreting the Government’s various “Buy America,” “Made in America,” and “Buy American” requirements can be tricky, especially where compliance with one does not necessarily mean compliance with another. For companies navigating these tricky waters and being asked to certify compliance, we are here to help you through these rocky shoals.
FOOTNOTES
[1] The Guidance is titled “Initial Implementation Guidance on Application of Buy America Preference in Federal Financial Assistance Programs for Infrastructure.”
[2] “Construction material” includes an article that is or consists primarily of: non-ferrous metals; plastic and polymer-based products; glass; lumber; or drywall. But it does not include: cement; aggregates such as stone, sand, or gravel; or aggregate binding agents or additives. Additional updates to this definition may still be coming.