Build America, Buy America Act: Navigating the Implications for ARPA and IIJA-Funded Projects

In a significant development, the Office of Management and Budget (“OMB”) released its final guidance on implementing the statutory requirements of the Build America, Buy America Act (“BABA”) provisions as part of the Infrastructure Investment and Jobs Act (“IIJA”), Public Law 117-58. BABA establishes a preference for domestic content in procurement for projects funded by federal financial assistance within the infrastructure sector. Published as a Final Rule in the Federal Register on August 23, 2023, this guidance introduces a new part 184 to Title 2 of the Code of Federal Regulations (“2 CFR”). It also revises 2 CFR § 200.322 concerning domestic preferences for procurements and, most significantly, provides critical clarification on applying BABA's domestic content preference.

Understanding BABA: An Overview

The IIJA, signed into law in 2021, provides substantial funding for critical infrastructure improvements across the United States. Within this framework, BABA plays a pivotal role. It stipulates that companies use iron, steel, manufactured products, and construction materials produced in the United States on all federally funded infrastructure projects. BABA requires that when federal grants are used for infrastructure projects, more than 55% of the total cost of all components must be of U.S. origin.

BABA's primary objective is to ensure that federal funding allocated to infrastructure projects promotes the use of American-made materials, products, and labor. This strategic emphasis on bolstering domestic manufacturing and employment aligns with the broader goal of revitalizing the nation's infrastructure.

BABA and Implications for Implementation

The significance of BABA extends to various federal grant programs, including, but not limited to, those funded under the American Rescue Plan Act (“ARPA”) and the IIJA. The OMB final guidance serves as a source of clarity and guidance for federal agencies tasked with implementing BABA. This guidance encompasses critical areas such as project scope, product coverage, compliance assessment, waivers, and the interaction of BABA with international trade agreements.

The Final Rule clarifies and standardizes key BABA terms, aiding both federal agencies and contractors in applying domestic content preferences. It is important to note that BABA's requirements extend to products "incorporated into" infrastructure projects but exclude temporary items. A few highlights from the Final Rule include:

Scope of Covered Projects

• Definition of "infrastructure project."
• Clarification on which materials are subject to BABA.

Product Coverage

• Amendments and clarifications to "iron, steel, manufactured products, and construction materials."
• Categorizing products and assessing compliance.

Assessing BABA Compliance

• Different compliance criteria for iron and steel, construction materials, and manufactured products.
• Consideration of "kits" for assessing compliance.

Waiver Process

• Conditions for granting waivers and handling conflicts
• Changes entity that can request waiver from non-federal entity to recipient.
• No general exception for commercial off-the-shelf (“COTS”) products.

The Final Rule's effective date is October 23, 2023, applicable to federal awards obligated on or after this date. Projects obligated between May 14, 2022, and October 23, 2023, will follow OMB Memorandum M-22-11 until a new memorandum replaces it. 

Federal agencies, recipients, and contractors working on infrastructure projects that receive federal funding will need to comply with BABA and determine waiver applicability. The EisnerAmper grants management team has decades of experience navigating complex federal guidance to assist our clients with compliance in executing their critical programs. Contact us below if you have questions about how this guidance may impact your organization.