On November 15, 2021, the Biden-Harris Administration enacted the Build America, Buy America Act (“BABA”), which represents the latest and most expansive statue implementing what is commonly referred to as “Buy America,” a phrase used to describe the growing number of statutes obligating certain Federal agencies to require goods, products, and materials used in projects to be produced in the United States.
BABA places requirements on all infrastructure projects receiving Federal financial assistance. Specifically, BABA requires all iron, steel, manufactured products, and construction materials used in projects be produced in the United States.
For the Federal Highway Administration (“FHWA”), BABA represents a revolutionary change for contractors for two reasons. First, it adds a new category—i.e., “construction materials”—to the list of FWHA-project inputs that must be produced in the United States. Second, BABA has propelled the FHWA to reexamine and possibly discontinue its long-standing, 1983 waiver of Buy America requirements for manufactured products, which, if discontinued, would be a sea change for FHWA-project contractors.
What does BABA mean for the FHWA?
BABA requirements only apply to FHWA projects to the extent the FHWA’s existing policies and provisions do not meet or exceed the BABA requirements. Currently, the FHWA’s existing requirements under Buy America for iron, steel, and manufactured products meet/exceed the BABA requirements. For example, under Buy America, FHWA-projects generally require all iron and steel be “poured and bent” in the United States. With respect to manufactured products requirements, the FHWA has applied a general, nationwide waiver since 1983 that—for now—means the BABA requirements for manufactured products are no concern for contractors on FHWA projects.
However, BABA imposes new requirements for construction materials that FHWA project contractors should be aware of and, under BABA, FHWA’s long-standing waiver for manufactured products requirements could be discontinued in the near future.
Reconsideration of the FHWA’s Nationwide Waiver for Manufactured Products
Prompted by BABA, on March 17, 2023, the FHWA began seeking comments on its existing general waiver for manufactured products requirements under its Buy America waiver authorities. Following its review of comments (which are due May 17, 2023), the FHWA will “continue, discontinue, or otherwise modify the waiver” for manufactured projects requirements for future FHWA projects. Federal Register, Vol. 88, No. 52, pp.1617–20; Federal Register, Vol. 88, No. 77, pp.24651–52. If the FHWA decides to not continue the 40-year-old Buy America waiver for manufactured products, the impact of such a radical shift in policy will send shock waves through the whole construction industry. Contractors are advised to stay tuned for coming announcements from the FHWA.
New Category: Construction Materials
The BABA requirements for construction materials apply to all FHWA projects. BABA requires that “all manufacturing processes for the construction material occurred in the United States.” BABA, Section 70912(6)(C).
As part of the Made in America Office, the Office of Management and Budget (OMB) has provided preliminary guidance for construction materials and manufacturing processes. OMB Memorandum M-22-11. Under BABA and OMB guidance, construction materials includes an article, material, or supply—other than an item of primarily iron or steel; a manufactured product; cement and cementitious materials; aggregates such as stone, sand, or gravel; or aggregate binding agents or additives—that is or consists primarily of:
- non-ferrous metals;
- plastic and polymer-based products (including polyvinylchloride, composite building materials, and polymers used in fiber optic cables);
- glass (including optic glass);
- lumber; or
- drywall.
According to the OMB, contractors should consider “all manufacturing processes” for construction materials to include at least the final manufacturing process and the immediately preceding manufacturing stage for the construction material.
However, the OMB’s current guidance with respect to “all manufacturing processes” may soon change. On February 9, 2023, the OMB requested feedback regarding more specific and demanding proposed standards for “manufacturing processes” of nonferrous metals; plastic and polymer-based products; composite building materials; glass; fiber optic cables; optical fiber; lumber; and drywall. Federal Register, Vol. 88., No. 27, pp.8374–78. FHWA-project contractors are strongly encouraged to stay apprised of the OMB’s upcoming decisions.
What if a Listed Construction Material is Combined with Iron, Steel, a Manufactured Product, or Another Construction Material?
The OMB advises the following should be considered manufactured products:
- Items that consist of two or more of the construction materials listed above that have been combined together through a manufacturing process.
- Items that include at least one of the materials listed above combined with a material not listed above through a manufacturing process.
In essence if any of the items listed as a construction material is combined together with a second listed construction material, or any non-listed material, then the product should be considered a manufactured product and therefore exempt from the BABA requirements under the FHWA-Buy America waiver. For example, while the polymers used in fiber optic cables are considered a construction material and thus required to be manufactured in the United States, the finished fiber optic cable product (which is a combination of polymer-based products and other products) is considered a manufactured product and therefore falls under the existing FHWA-Buy America waiver.
However, this waiver for fiber optic cables could soon end because the OMB is seeking feedback regarding its proposal to add “the final fiber optic cable and optical fibers” as construction materials. Comments were due March 13, 2023, but the OMB has not yet announced a final decision. Federal Register, Vol. 88., No. 27, pp.8374–78. The addition of fiber optic cables as a construction material would dramatically impact FHWA contractors currently benefiting from the manufactured products waiver as these contractors may soon be obligated to use only fiber optic cables manufactured in the United States.
What is not Considered a Construction Material?
Construction materials do not include the following:
- Cement;
- Cementitious materials;
- Aggregates such as stone, sand, or gravel;
- Aggregate binding agents or additives; and
- Asphalt.
If any of these excluded materials is combined with a construction material, the combined product would additionally be considered a manufactured product and exempt from BABA requirements.
The BABA requirements for construction materials only applies to articles, materials, and supplies that are consumed in, incorporated in, or affixed to an infrastructure; therefore, BABA requirements do not apply to tools, equipment, and supplies brought to the construction site and removed at or before the completion of the infrastructure project. BABA requirements also do not apply to equipment and furnishings that are used at or within the finished infrastructure project but are not an integral part of or permanently affixed to the structure.
Conclusion
For the FHWA, BABA is a revolutionary change, adding a new category—construction materials—and potentially discontinuing the long-standing, nationwide FHWA-Buy America waiver for manufactured products. Even more, the OMB is now considering expanding the list of and standards for construction materials applied by construction contractors. Please feel free to reach out to the Oles Made in America team attorneys with any questions.
To obtain help with the new requirements of BABA, please reach out to the Oles Made in America team attorneys: Howard W. Roth roth@oles.com or Trevor H. Lane at lane@oles.com at Oles Morrison Rinker & Baker, LLP.
