What contractors should know about the Build America, Buy America Code

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

Faced with the Great Depression, the Hoover administration passed the American Purchase Act in 1933. The basic premise of the Act was self-explanatory—to revive and support the American economy by requiring iron and steel from American sources mined or produced in the United States. United States for use in federal government projects.

In 1982, Congress passed the America Buy Act, which for the first time expanded the requirement that contractors use American-sourced iron and steel only on government transportation projects that receive federal funding. The Buy America Act also expanded items that must be US sourced to include manufactured items.

More recently, another expansion, called the Build America, Buy America Act (BABA), was passed in November 2021 as part of the Infrastructure and Investment Jobs Act (IIJA). Contractors must be aware of how the law surrounding American Buy requirements is changing and how it may affect their business in new ways.

Importantly, the requirements of the BABA Articles apply to all infrastructure projects that receive federal funding—not just IIJA projects—and not only when the federal government is the contracting party, but also to projects where a state or local government entity is the contracting party. Furthermore, “infrastructure” projects are broadly defined to include:

• Roads, tunnels and bridges
• Rail (passenger and freight)
• Dams, ports, harbors and other marine facilities
• airports
• water systems
• Electricity transmission facilities and systems
• services
• broadband infrastructure
• Buildings ancillary to all of the above, including but not limited to train and bus stations, toll facilities and even office facilities

Here are some other things you should know about Baba:

• Besides iron, steel, and manufactured products, BABA’s requirements extend for the first time to building materials, which must also be of US origin. Building materials are defined as including commodities such as glass, drywall, fiber optic cable, non-ferrous metals such as copper, aluminum, PVC, and other plastic or polymer-based products. Aggregates and cement are excluded.
• BABA is progressively increasing the required local content threshold (by cost) for manufactured goods from 55% to 60% as of October 2022, up to 65% by 2024, and to 75% in 2029.[1] However, in some cases, the increases have been delayed pending review.
• Commercially available ready-made items made abroad can be used if not modified.

Some frequently asked questions about BABA

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

A: No. The guidelines indicate that all items included in the infrastructure project fall into one of three categories. For example, an item that combines a building material, such as glass, with another material or a manufactured product (such as a window unit) will be considered a manufactured product.

Q: What exactly is a ready-made commercially available ingredient (COTS)?

A: Under federal acquisition regulations, a COTS is any supply item (including building materials) that is sold in bulk on the commercial market and used without modification in the same form in which it is sold.

Q: Are waivers available to BABA requirements under IIJA?

A: Yes. A waiver may be available if the authorization is found to be contrary to the public interest or if the materials are unavailable or unreasonably priced. Waivers issued by a particular government agency can apply to that agency or be project-specific. Further, under international treaty obligations, products from certain preferred trading partners are treated as made in America for contracts worth $7,804,000 or more with certain exceptions, such as Small Business Administration contracts, which fall under purchase authorizations. American regardless of the amount of the project.

Q: What can contractors do if they are unsure whether BABA requirements apply to a particular project or product or if other assistance is needed to comply with the law?

A: In addition to consulting with an attorney or other professional, contractors’ questions regarding Buy American requirements may be directed via email to BuyAmerican@ee.doe.gov. In addition, the Office of Management and Budget periodically publishes guidance on the changing landscape of BABA requirements.

The best agreements for contractors

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

• Get certification from your suppliers. Obtain a supplier certificate that confirms that the building materials or manufactured products comply with Alibaba requirements.
• Responsibility sharing. Construction contracts with subcontractors and suppliers must include language that will hold these parties responsible for the cost of non-compliance with BABA.
• Stay informed of requirements changes. Laws change frequently. Pay close attention to bulletins from federal agencies such as the Office of Management and Budget. The terms of the exemptions can change along with the types of building materials subject to BABA. Exceptions to the rule may also change. While cement and aggregate are not currently included in BABA, this could change.
• Don’t count on compromise. BABA was implemented for a reason, so it won’t be easy to get concessions and it’s likely to be project related or even to a specific product. Conduct your due diligence, know that the timing of implementation of BABA requirements is not uniform for all federally funded infrastructure projects, and ensure that the BABA requirements applicable to the project are met.
• Consider dedicating someone to supervise BABA. Documentation is key, so be sure to record all facts surrounding the job and BABA compliance. Assign someone in your organization to track documentation or consider having a dedicated person responsible for ΒΑΒΑ compliance. Whenever in doubt, seek legal advice.

Failure to comply with applicable BABA requirements can result in the need to remove completed work and replace it at your expense, termination of contract and possibly even disqualification from performing federally funded work. In addition, willful failure to comply with Buy American requirements can result in liability under the False Claims Act, penalties for which include damages up to three times as much.

For more information about BABA and IIJA, contact: IAT team.

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

[1] Federal Register, “Federal Acquisition Regulation: Amendments to U.S. Requirements for Procurement of the Royal Armed Forces,” March 7, 2022.

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