We dissect the final buy-American guidance out from the White House
When Congress passed the so-called Bipartisan Infrastructure law two years ago, it also strengthened buy-American requirements for construction projects. Now the final guidance is out from the White House on the BABA part of the law, Build American, Buy American. For analysis, the Federal Drive with Tom Temin with Haynes Boone procurement attorney Dan Ramish.
Interview Transcript:
Dan Ramish So, Tom, the final guidance. There was hope that it would clarify some of the points that came up in the proposed guidance, which was issued back in February. But I think many in reviewing the final guidance issued last month, which goes into effect Oct. 23, will find that in fact it’s more complicated because one of the central things that [Office of Management and Budget (OMB)] did in the final guidance was indicate that this new section of the uniform guidance applicable to federal grants and cooperative agreements and other assistance agreements is not going to be a one stop shop for recipients or construction contractors or subcontractors that are trying to figure out what their Buy American requirements are. They’re going to have to go and look at agency guidance and other OMB guidance. So OMB got a bunch of questions about things that weren’t addressed in the proposed guidance. And by way of addressing those questions, they said, well, we issued this implementing guidance in a memo m-2211, and that memo is going to stay in place. That’s why we’re not addressing everything in the uniform guidance Section 184. So it’s not going to be possible for construction contractors just to look at the uniform guidance or recipients or awarding agencies to know what the requirements are. And these are complicated requirements. There are three different categories. Really we’re talking about all of the articles, material supplies that are going into a construction project that’s funded by a grant or cooperative agreement. So it’s manufactured products, construction materials and iron or steel products. These three categories, and there are separate tests for each of the categories. And the final guidance made some changes in the margins about some of the standards for construction materials, added a few additional construction materials that will fall into that category. There weren’t major changes substantively, but the big changes were saying that OMB is going to keep their old guidance in place. Awarding agencies have to do more to issue additional guidance for their own programs and grants.
Tom Temin If you’re building a bridge under a grant, say you’re your state or you’re doing a bridge under the Transportation Department. Bridges have steel that could have one requirement, but that requirement could be subtly different from, say, I don’t know, another agency, [Housing and Urban Development (HUD)], say granting housing improvements, which also might have steel in them and HUD could have different guidance than transportation.
Dan Ramish Yes, each agency’s own requirements and the types of materials that will go into their projects and the specifics of their programs will differ. One of the complexities is that some agencies had existing by America statutes, so the various [Department of Transportation (DOT)] instrumentalities, the Federal Highway Administration, the Federal Transit Administration already had some statutes that imposed Buy American requirements. And so that was one of the big questions for the proposed guidance. OMB said there are some areas where even those agencies with a legacy Buy America requirements will have to follow the new guidance. There’s a waiver process that’s specified in the BABA Act and in the final guidance. Construction materials weren’t covered under those old statutes. And so even the agencies that had by America requirements are going to have to incorporate new elements from the final guidance. Another major area of concern has been trade agreements. So the state and local governments aren’t covered by the WTO GPA automatically. But many states have opted into trade agreements. And so one of the questions was, well, if there’s a trade agreement that says we can’t discriminate against the products of our trading partners, how is that going to factor into these Buy America requirements? And that was a topic that wasn’t addressed in the proposed guidance at all. And that’s one of the areas where OMB said, well, we had this initial implementing guidance that said you can seek a waiver based on public interest if you have a trade agreement that is in play. But that doesn’t totally solve the problem. If you have to get a waiver every time you need to purchase something from a trading partner, that becomes very onerous. So far there’s a website that posts all the waivers that have gone through under the [Infrastructure Investment and Jobs Act (IIJA)], and there have been a total of 35 waivers and some of them are pending, haven’t even been approved yet. So there’s going to be a real issue if every instance where a trade agreement comes into play, they need a waiver. There are practical questions that have yet to play out.
Tom Temin We’re speaking with Dan Ramish. He’s a procurement attorney with Haynes Boone. I imagine in some cases the only sources available might be foreign. I mean, I-beams is generally a commodity that comes from Korean steel mills, Japanese steel mills, and I don’t know where else, but they come from American steel mills, I think, still. But they’re more expensive. And I wonder if the public interest would be the price. In other words, would a grant or cooperative agreement tolerate a 30% price differential because you bought it from a American supplier and you could have saved a lot of money getting the raw material from overseas and maybe the fabrication done locally.
Dan Ramish Right. So you’re raising some natural points in. There in line with the way the guidance is set up. So the details of the waiver issue or one of the things that’s actually addressed in the old memo in 2211, which by the way, OMB said they’re going to update the memo to keep it in place because they made some changes in the final guidance and they want the documents to be consistent. But there are three bases for waivers, and this is consistent with how it’s handled under the [Federal Acquisition Regulation (FAR)]. You can get a waiver if the item is unavailable, you can get a waiver if there is public interest in waiving the requirements. And you can get a waiver based on unreasonable cost. But the unreasonable cost waivers are pretty difficult to obtain. Realqly, all of them are pretty difficult to obtain. Traditionally, a federal awarding agency would be able to make some of their own determinations in this area. But now there is a Made in America office out of OMB that has to generally approve waivers, which adds additional scrutiny in granting them.
Tom Temin Sure. And is there anything in any of these requirements for union labor? Because the administration has made no bones about the fact that it favors union over management. Federal government is no longer the referee here. It’s on the side of unions. Those are more expensive shops. Is that addressed at all in the guidance?
Dan Ramish So not in this guidance, but you’re right that Labor doesn’t get off the hook on this either. We spoke actually on a previous program about the Davis-Bacon related Act requirements. So between Davis-Bacon and the Build America Buy America, both the labor and the materials and supplies are really regulated heavily going into these construction projects. And so as we’ve talked about, there’s a lot of money in the Infrastructure Investment and Jobs Act, but companies that are signing on for new construction projects who may not have dealt with the federal government before are going to have a lot of things to get up to speed on in how they’re approaching both their labor force and supply chain.
Tom Temin Sort of bring this all around then the people affected then are not so much federal procurement people because they’re not actually doing the buying. This is money mostly from federal funding to other entities that actually do construction. So who has to be on their toes here and mine their Ps and Qs? Is that the grant making authorities in an agency. Say I’m making a grant and you’re going to build this bridge if there is actually anything built like that under the infrastructure law, but let’s presume there is one somewhere, then it would be the grant or part of the agency that would have to get the proposal and ensure it’s compliance from the grantee. Is that basically who’s affected here?
Dan Ramish So, yes, the state local governments that are receiving grant funds will need to be aware of these rules. The awarding agencies also have some obligations under the rules and construction contractors that will actually be performing the work on the ground need to know about these rules because it takes some advanced planning to be able to source these kinds of materials. And one important wrinkle that came out of the final guidance. So if a for profit entity receives a grant itself or a more commonly a loan or loan guarantee, which is other forms of federal assistance under the Build America Buy America Act, and the final guidance for profit entities that are direct recipients of assistance aren’t supposed to be covered automatically. However, there were nonprofits that raised their hands and said, Well, this is going to put us at a disadvantage competing for funding against for profit entities. And OMB came back and said, Well, under the uniform guidance, there’s authority for agencies to decide to apply the requirements to for profit entities as well. And we’ve been hearing about instances where awarding agencies are imposing these requirements on for profit entities, sometimes at the last minute. So that’s got to be something that construction contractors are on the lookout for, that this requirement doesn’t sneak into their award.