By Marcos R. Gonzalez, Timothy D. Matheny, Steven Weber of Peckar & Abramson, P.C.
Originally published August 18, 2023
On August 15, 2023, the Office of Management and Budget (“OMB”) released its final guidance to federal agencies regarding the implementation of the Build America, Buy America (“BABA”) requirements under the Infrastructure Investment and Jobs Act (“IIJA,” or “Bipartisan Infrastructure Bill”). The IIJA is a one-trillion-dollar bill that invests in the following infrastructure categories:
[R]oads, highways, bridges, public transportation, dams, ports, harbors, and other maritime facilities, intercity passenger and freight railroads, freight and intermodal facilities, airports, water systems, including drinking water and wastewater systems, electrical transmission facilities and systems, utilities, broadband infrastructure, and buildings and real property.1
Congress included BABA in Title IX of the IIJA starting at Section 70901 to ensure that the influx of infrastructure money would support domestic manufacturing, adjust some domestic sourcing requirements, and to establish domestic sourcing requirements for new categories of construction materials. The new categories include “steel, iron, manufactured products, 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, and drywall.”2 BABA also established a domestic preference for all Federal financial assistance obligated to infrastructure projects as of May 14, 2022. That bill was signed into law on November 15, 2021, and the requirements under the final guidance released on August 15 were already in place for applicable Agencies. OMB provided its first round of guidance on April 18, 2022.3 Following a notification of proposed guidance issued on February 9, 2023, which opened a comments period on the proposed guidance until March 13, OMB has now released its pre-publication version of its “Final Rule, Notification of Final Guidance” on August 14, 2023. It is currently scheduled for publication to the Federal Register on or about August 18, 2023. It is effective 60 days after publication in the Federal Register, and until then, the former guidance (M-22-11) remains in place.4
I. How Does BABA Differ from the Federal Acquisition Regulation’s Application of the Buy America Act?
In an effort to achieve some parity with existing domestic sourcing rules, OMB notes that its guidance is “[consistent] with certain provisions of the [Federal Acquisition Regulation (“FAR”)].”5 However, as OMB notes, the FAR implements portions of the Buy American Act (“BAA”) applicable to “Federal procurement—what the Federal government buys for its own use,” whereas BABA applies to “Federal financial assistance for infrastructure projects – or grants, cooperative agreements, and other Federal awards that Federal agencies provide to recipients constructing such projects.”6 In other words, BABA applies to federal transactions covered under the Uniform Guidance (2 CFR 200 et seq), not to government contracts that fall under the provisions of the FAR. OMB also notes that, despite the desire for parity between existing regulations and the final guidance, the IIJA includes several statutory requirements inapplicable to the BAA. Despite the statutory differences, and likely recognizing the potential for conflation between the several different approaches to domestic sourcing requirements across different purchasing instruments, OMB intended to stick to the FAR definitions of “brought to the work site,” the components test7, and “predominantly of iron or steel or a combination of both.”8 OMB notes that its ability to provide guidance consistent with the FAR is complicated by the language of the law, which differs substantially from BAA requirements, but also the types of transactions covered by the BABA, which are broader than those covered by the BAA.
II. Changes in the Final Guidance
The final guidance (hereinafter, “guidance”) creates a new part 184 to Title 2 of the Code of Federal Regulations and revises parts of the procurement standards applicable to grants and other non-contract instruments covered by the “Uniform Guidance” (2 CFR 200.322). The guidance characterizes the additions in 2 CFR § 184 as “high-level coordinating guidance for Federal agencies to use in their own direct implementation of BABA;” In other words, while it provided further guidance, it recognizes that it is not a final comprehensive guide to requirements under the law.9 Additional guidance will likely be released by Agencies on a piecemeal basis with input from GAO and OMB on future additions or changes. In some circumstances, the variety of Agency guidance on issues like cybersecurity has caused headaches in the Federal government, and the move to uniform standards across agencies (such as Cybersecurity Maturity Model Certification [“CMMC”]) shows a trend against fragmented agency regulations. However, despite the statutory language, Agencies may benefit from coordinating their approaches.
III. Final Definition of “Construction Materials”
The final guidance does replace some key features of OMB’s previous guidance, M-22-11. The initial definition of “construction materials” defined them in a manner that suggested a 50% content test would apply, stating that a construction material is anything that “is or consists primarily of” one or another applicable material.10 The final guidance replaces “is or consists primarily of” with “of only one or more of” the materials listed. This confused commenters, who noted that it resulted in an arbitrary definitional boundary between “manufactured products” and certain “construction materials” that may include other materials but that we would not intuitively classify as a “manufactured product.” The final guidance resolves this by adding a provision that “minor additions of articles, materials, supplies, or binding agents to a construction material do not change the categorization of the construction material.”11
In addition to changing the definition of “construction materials,” the final guidance adds several categories of materials that did not appear in the M-22-11 guidance: optical fiber, fiber optic cable, engineered wood.12 The Agencies responses to comments throughout the document explain the rationale for including these categories of materials. The Infrastructure Bill distributes $42.45 billion in grants to states for broadband deployment and infrastructure, which explains the inclusion of fiber optic cable and optical fiber.
Of note in this definition is the omission of “emergency life safety systems,” which under the FAR can be brought to the construction site for assembly without subjecting the components to the “domestic contents test.” In comments on the updated definition, OMB states that it preferred to use the term “kit”—not found in M-22-11—a term encompassing a general category of items within which emergency life safety systems would likely fall. This seems to imply that a larger category of items’ components will be exempt from the domestic contents test, not just emergency life safety systems. OMB also gave agencies the discretion on how to apply the definition to items purchased as a bundle but brought separately to the construction site.13 As is the case with the BAA, and consistent with the prior OMB guidance, the domestic sourcing restriction only applies to features of construction that become permanently affixed to a public infrastructure work and excludes scaffolding, furnishings, tools, equipment, and supplies.14
IV. Definition of “Manufactured Products”
The final guidance notes that the final definition of “manufactured products” differs from the proposed rule by avoiding a purely negative definition (a definition of a word according to what it is not).15 The proposed rule defined manufactured products as any article, material, or supply incorporated into an infrastructure project that are not construction materials and that do not consist wholly or predominantly of iron, steel or both.16 The final guidance provides a positive definition that notes the items must have been “processed into a specific form and shape” or “combined with other articles, materials or supplies to create a product with different properties than the individual articles, materials, or supplies.”17 Lastly, the definition notes that certain manufactured products may include components that are construction materials.18
V. Definition of “Manufacturing Process” Relevant to Covered Construction Materials
BABA also mandated a standard definition of “all manufacturing processes” for construction materials.19 M-22-11 noted that a detailed description of applicable manufacturing processes was forthcoming in the final guidance, and preliminarily required “agencies [to] 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.”20 The final guidance provides an enumerated list of such processes for each listed construction material.21
The comments on the final guidance are nearly 150 pages, and will provide a form of guidance themselves. Practitioners and stakeholders should review the discussion of relevant sections of the guidance in the comments for clarificatory remarks about OMB’s intentions in drafting the guidelines as they did. As stated above, OMB expects that additional guidance will be forthcoming from the various agencies, GAO and OMB.
Marcos R. Gonzalez is a senior associate with Peckar & Abramson, P.C. He focuses his practice on government contracts, regulatory compliance, claims litigation, and bid protests. He can be reached at mgonzalez@pecklaw.com or 202.293.8815.
Timothy D. Matheny is managing partner of Peckar & Abramson's Dallas office. He focuses his practice on construction disputes and litigation, including all phases of public procurement law, including bid and proposal preparation, contract award controversies, performance-related disputes, and contract claims. He can be reached at tmatheny@pecklaw.com or 214.523.5100.
Steven Weber is a partner and co-chair of Peckar & Abramson's Government Contracting & Infrastructure practice, leading the firm’s federal government contracting efforts. He has 35+ years of experience representing domestic and international contractors in a wide range of construction litigation and governmental contract matters in and outside the U.S. He can be reached at sweber@pecklaw.com or 202.293.8815.
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[1] Section 70911(10). The scope of “projects” under the IIJA includes “construction, alteration, maintenance, or repair” of the above categories of works. See Section 70912(7).
[2] Section 70911(5). The law excluded a large category of construction materials from domestic sourcing requirements: “[T]he standards developed under section 70915(b)(1) shall not include cement and cementitious materials, aggregates such as stone, sand, or gravel, or aggregate binding agents or additives as inputs of the construction material.” See 70917(c)(2). In the body of the final guidance, OMB discusses its decision to include fiber optic cable as a construction material (pp. 48-58) as well as lumber (pp. 58-59) and engineering wood (pp. 60-64).
[3] M-22-11. Initial Implementation Guidance on Application of Buy America Preference in Federal Financial Assistance Programs for Infrastructure.
[4] Final Guidance at 150-51 (§ 184.2).
[5] Final Guidance at 14.
[6] Id.
[7] See FAR 25.201(b)(2).
[8] Final Guidance at 14.
[9] Id. at 6.
[10] OMB Memo M-22-11 at 16; the materials included “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.”
[11] Final Guidance at 153 (§184.3).
[12] Id.
[13] Id. at 105-6.
[14] OMB Memo M-22-11 at 15.
[15] Final Guidance at 10.
[16] Notice of Proposed Rule at 4.
[17] Final Guidance at 153 (§184.3).
[18] Id.
[19] Section 70915(b)(1): “[T]he Director of the Office of Management and Budget shall issue standards that define the term ‘all manufacturing processes’ in the case of construction materials.”
[20] OMB Memo M-22-11 at 14.
[21] Final Guidance at 158, §184.6 Construction material standards. The comments on the final rule also go into great detail about the definition of “manufactured products” applicable to each type of construction material. See Final Guidance at 75-92.