On April 18, 2022, the U.S. Office of Management and Budget (OMB) issued preliminary guidance to federal agencies on how to implement the new “Buy America” requirements applicable to federally funded infrastructure projects. These new requirements, imposed by the Infrastructure Investment and Jobs Act (IIJA), take effect on May 14, 2022. This post will examine some of the key questions answered by the new OMB Guidance.
Does the Buy America requirement apply only to infrastructure projects funded under the IIJA?
No. Effective May 14, 2022, all federal agencies must ensure that a Buy America requirement applies to all infrastructure projects that receive federal financial assistance, whether or not funded through IIJA. There are limited exceptions for pre- and post-disaster emergency response expenditures and for certain programs affecting Tribal communities.
To what articles, materials, and supplies does the Buy America requirement apply?
The Buy America requirement applies to articles, materials, and supplies that are consumed in, incorporated into, or affixed to an infrastructure project that receives federal funding. The requirement does not apply to tools or equipment used in construction of an infrastructure project, or to things like office furniture or computers that are purchased for use in, but not permanently affixed to, a structure.
What does it mean for a product to be “produced in the United States” for purposes of the new Buy America requirement?
There are three standards for three different types of items.
For “iron or steel” items, all manufacturing processes, from the initial melting stage through the application of coatings, must occur in the United States. This standard applies to “items that are predominantly iron or steel.”
For “manufactured products,” the item must be manufactured in the United States, and domestic components must account for greater than 55 percent of the total cost of the components of the item.
For “construction materials,” all manufacturing processes must occur in the United States.
What is a “construction material” for purposes of the new Buy America requirements?
The OMB guidance identifies five categories of “construction material.” They are items that are or consist primarily of: (i) non-ferrous metals; (ii) plastic and polymer-based products; (iii) glass (including optic glass); (iv) lumber; or (v) drywall. Certain other items are expressly excluded from the definition of “construction material,” including cement and cementitious materials; aggregates such as stone, sand, or gravel; aggregate binding agents; and items composed primarily of iron or steel.
Can agencies adopt public interest waivers of the Buy America requirements that would lessen the administrative burden for agencies and contractors?
Yes. The OMB guidance recognizes that agencies may wish to consider and adopt public interest waivers permitting use of a limited amount of foreign material or components. Two key examples referenced in the OMB guidance would be a “de minimis” waiver and a waiver for “minor miscellaneous components.” A “de minimis” waiver would permit the use of a relatively small amount of foreign products or material on a project, up to a designated “de minimis” threshold—for example, 5 percent of total project costs up to a maximum of $1 million. A “miscellaneous minor components” waiver would exempt from the rigorous iron/steel requirements the miscellaneous minor components within iron and steel products, such as fasteners, washers, and screws. The OMB guidance does not require agencies to adopt these types of public interest waivers, but it recognizes that there are valid public interest bases for agencies to adopt them.
For a more detailed discussion of the new OMB guidance, click here.