Office of Management and Budget Issues Guidance on Implementing Buy America Requirements Applicable to Infrastructure Projects That Receive Federal Financial Assistance

On April 18, the Office of Management and Budget (OMB) issued guidance to federal departments and agencies regarding implementation of the Buy America requirements in the Infrastructure Investment and Jobs Act (IIJA). M-22-11 (whitehouse.gov). On April 21, OMB published in the Federal Register a “Notice of Listening Session(s) and Request for Information” (the “Guidance”) regarding the standard for determining whether construction materials used in infrastructure projects are produced in the United States.¹  We have summarized this Guidance below.

The Guidance includes, as an appendix, sample language agencies can use in applying Buy America requirements to federal financial assistance awards. The Guidance notes that if an agency wants to use different terms and conditions it must submit them to the Made in America Office (MIAO) within OMB to ensure consistency across agencies and programs. While Buy America requirements already applied to transportation and water infrastructure projects, the infrastructure law applies the requirements more broadly to all infrastructure projects, which is broadly defined, that receive federal financial assistance (grants and loans) from any federal department or agency. Specifically, the law adds (1) the requirement that construction materials used in infrastructure projects be produced in the United States; (2) the requirement that manufactured products included in infrastructure projects be manufactured in the U.S. and meet a 55 percent domestic content test (unless an agency has another appropriate test); and (3) additional conditions on the granting of waivers by federal departments and agencies, including that the MIAO be engaged in reviewing waivers before they are granted in most circumstances.

 Guidance Regarding Implementation

The Guidance clarifies that Buy America requirements apply to nonfederal entities, including state and local governments, institutions of higher education, Indian Tribes and nonprofits but not to for-profits receiving federal financial assistance directly. Nonfederal entities, however, will be required to impose Buy America requirements on all of their for-profit contractors supplying products incorporated into infrastructure projects that receive any federal funds, in order to meet Buy America requirements.

With respect to what qualifies as “infrastructure” and thus subject to the requirements, the Guidance notes that the IIJA includes a representative list of types of infrastructure projects, but cautions that the term infrastructure should be construed broadly. It states that agencies should consider whether a project will serve a public function, including whether the project is publicly owned and operated, privately operated on behalf of the public, or is in a place of public accommodation, as opposed to a project that is privately owned and not open to the public. The Guidance further states that Buy America requirements apply to the entire infrastructure project even if it is funded with a mix of federal and state funds. It also clarifies that Buy America requirements “only” apply to articles, materials and supplies that are consumed in, incorporated into or affixed to an infrastructure project. However, it does not apply to tools, equipment and supplies such as temporary scaffolding; or to equipment and furnishings, such as movable chairs, desks and portable computer equipment if they are not an integral part of or permanently affixed to the structure. The Guidance further clarifies that agencies should treat structures, facilities and equipment that generate, transport and distribute energy as infrastructure. This would include electric vehicle charging and broadband projects.

Importantly, the Guidance states that agencies must include Buy America requirements in awards issued on or after May 14, even if the Notice of Funding Opportunity for the federal financial assistance did not include the Buy America preference, but also that agencies can consider whether to issue a public interest waiver to avoid an undue increase in time and cost to a specific project. The Guidance further notes that public interest waivers may be utilized for awards and amendments made on or after May 14 where budgets for the purchase of covered materials have already been agreed upon.

 Preliminary Guidance on Construction Materials

The IIJA requires that within 180 days after enactment, OMB shall issue standards that define the term “all manufacturing processes” in the case of construction materials, in order to comply with the new law’s requirement that all manufacturing processes involving construction materials occur in the U.S. In the meantime, the Guidance states that items that consist of two or more non-ferrous metals, plastic and polymer-based products, glass, lumber and drywall, which have been combined together through a manufacturing process; and items that include at least one of the listed materials combined with a material that is not listed through a manufacturing process, should be treated as a manufactured product rather than a construction material. The Guidance states that until OMB issues final standards, agencies 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.

OMB announced in the April 21 Federal Register notice that it will hold two listening sessions and seek input regarding the initial manufacturing processes for construction materials that should be considered part of “all manufacturing processes.” Listening Session 1 on April 25 will focus on non-ferrous metals and plastic and polymer-based products (including polyvinylchloride, composite building materials and polymers used in fiber optic cables). Listening Session 2 on April 28 will focus on glass (including optic glass), lumber, drywall and all other products.

OMB also is seeking comments by May 23 on questions related to (1) what materials, products or categories of materials or products should be included as “construction materials” for the purposes of the IIJA; (2) what should “all manufacturing processes” mean; (3) how should agencies distinguish “construction materials” from “manufactured products” to provide clarity on how to comply with the IIJA’s requirements and ensure efficient and effective administration; (4) how should OMB take into consideration and seek to maximize the direct and indirect jobs benefited or created in the production of construction materials; (5) what is the current and projected capacity of United States manufacturers to supply construction materials that meet the IIJA’s standards and how will this capacity be impacted by the standard provided for “all manufacturing processes” for any relevant construction material; (6) whether the commenter anticipates that United States manufacturers will be able to supply construction materials that meet the IIJA’s standards in sufficient and reasonably available quantities and of a satisfactory quality to all infrastructure projects covered by the Act, whether this ability will be impacted by the increased demand for United States manufacturing, whether the commenter foresees supply shortages or other issues for any material and, if so, what federal policies exist that may help alleviate the challenges the commenter identified for all relevant materials; (7) how can the IIJA’s waiver transparency requirements and supplier scouting programs be leveraged to identify gaps in domestic sourcing and inform capital investment planning; (8) how else might OMB spur and incentivize domestic manufacturing of construction materials that meet the IIJA’s standards; and (9) any additional considerations OMB should consider when developing guidance.

Broadband Infrastructure Projects

For the $65 billion allocated for broadband infrastructure projects, the IIJA specified a preference that infrastructure funding be used for programs which use goods manufactured in the United States with at least 55 percent of the cost of components coming from domestic sources. The Guidance provides little insight into how this requirement will operate. It is unclear if the manufactured product will be each final product incorporated the project, the entire project or elements of a final product before it is incorporated into the project. The Guidance further fails to define how the cost of components will be calculated. These definitions appear to be left to the Department of Commerce with approval by OMB. However, the Guidance does hold out hope that OMB is willing to consider public interest waivers for project purchases below $1 million.

Waivers

The Guidance provides information regarding the process for agencies to consider and approve Buy America waivers based on (1) public interest; (2) non-availability; and (3) unreasonable cost. The Guidance states that agencies must perform due diligence in approving or rejecting waivers, and give the MIAO notice before posting an award or project-level proposed waiver for public comment. It also states that federal agencies must consult with the MIAO for proposed waivers with broader applicability (such as general applicability waivers) before posting them for public comment. The Guidance states that the purpose of the consultation is to maximize the opportunity to narrow a waiver as much as possible to promote the use of U.S. products. Federal agencies are also required to submit to the MIAO a proposed waiver for review after the public comment period is over, and MIAO will review the proposed waiver to determine if it is consistent with applicable law and policy. Waiver requests must include a certification that there was a good faith effort to solicit bids for domestic products, as well as other information upon which the MIAO can review the waiver and make its determination. The Guidance notes that where agencies issue a waiver based on unforeseen and exigent circumstances, they must submit a report to the MIAO within 30 days explaining their justification. The Guidance further states that all waivers should be time limited, targeted and conditional. It also provides additional information regarding factors agencies should consider in granting non-availability, unreasonable cost and public interest waivers.

For public interest waivers specifically, OMB provides examples of the type of waivers that agencies may consider using (with appropriate written justification), including de Minimis waivers for project purchases below a certain threshold (e.g., 5 percent of project costs up to $1 million); small grants below the simplified acquisition threshold; minor components (e.g., no more than 5 percent of the total material cost of an otherwise domestically produced iron and steel product); short term adjustment period; waivers to address international trade obligations where a state has assumed obligations pursuant to the World Trade Organization (WTO) Government Procurement Agreement or another trade agreement; and for other considerations based on the facts and circumstances.

The Guidance notes that by November 15, agencies with existing nonproduct specific general applicability waivers issued more than five years before November 15, 2021, must review those waivers and if they want to continue them, and publish a notice in the Federal Register providing justification for their continuation. The Guidance states that agencies should include appropriate expiration dates to ensure that previously available Buy America-compliant products receive appropriate consideration. The Federal Transit Administration (FTA) and Federal Highway Administration (FHWA) have a number of general applicability waivers in effect that will be subject to review, including the FTA waivers for microcomputers and software, and vans and minivans and the FHWA waiver for manufactured products.

Conclusion

Agencies will continue to release and update their guidance as they implement the Buy America requirements with regarding to the provision of federal financial assistance for infrastructure projects, including considering and acting on general applicability and project-specific waivers with oversight from the MIAO. Stakeholders also have the opportunity to submit comments to OMB regarding the manufacturing processes for construction materials that must occur in the U.S. to meet Buy America requirements.

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¹ OMB also seeks feedback on behalf of the Federal Acquisition Regulatory (FAR) Council regarding the meaning of manufacturing for purposes of determining if an end product is manufactured in the United States and information on its own behalf on the value of aligning the definition of manufacturing for the purposes of federal procurement and federal financial assistance.