White House Releases Final Guidance on Build America, Buy America Requirements; DOT Issues Waiver for De Minimis Costs and Small Grants

This week, the White House and the U.S. Department of Transportation (DOT) released two significant documents regarding the implementation of Buy America and Build America, Buy America (BABA) Act requirements in federally funded infrastructure projects.

First, yesterday, the White House's Office of Management and Budget (OMB) released a final rule and guidance that outlines how federal agencies and grant recipients, including airports and their contractors, are expected to comply with the BABA Act requirements that were included in the Bipartisan Infrastructure Law (BIL). The final guidance will take effect 60 days after being published in the Federal Register, which is expected to happen sometime this week. The guidance is intended to provide clarity on what constitute 'construction materials' for purposes of the BABA Act and how to differentiate manufactured products from construction materials, among other things. The 162-page guidance document can be viewed here, and a summary of key provisions can be viewed here.

Second, today, DOT released a waiver of Buy American requirements for iron, steel, manufactured products, and construction materials used in projects funded through any DOT-administered grant program, including the Airport Improvement Program (AIP) and BIL. The waiver applies to any grant for which (1) the size of the award is below $500,000, or (2) the total value of the non-compliant products is no more than the lesser of $1,000,000 or 5% of total applicable costs for the project. AAAE expressed support for the waiver when it was originally proposed back in November 2022. The waiver, which can be viewed here, will apply to any grants obligated beginning tomorrow and for the next five years.

The documents released this week largely conclude a 16-month period filled with temporary waivers, preliminary guidance, and general uncertainty over how federal grant recipients are expected to comply with the new BABA Act requirements. We encourage airport staff that is responsible for Buy America compliance and procurement to review the guidance and waiver and provide AAAE with feedback, concerns, or questions. This will help us as we continue to engage with federal agencies and Capitol Hill on these issues.

Background on BABA Act Requirements

BABA Act Requirements. Under FAA's long-standing Buy America statute, all steel and manufactured goods used in AIP-funded projects must be produced in the United States. Under the BIL, Congress expanded the traditional rules and required that iron and 'all construction materials' used in infrastructure projects be manufactured in the United States. Congress also directed the OMB, an office within the White House, to develop guidance for federal agencies on how to implement the new requirements in federal grant awards.

Timeline for New BABA Act Requirements. BIL required the new BABA Act requirements to take effect for all federal grant awards beginning in May 2022. However, before the implementation deadline, DOT issued a temporary public interest waiver of the new requirements for construction materials that remained in effect and applied to any grants that were awarded to airports and obligated up until November 10, 2022. Despite repeated requests from AAAE and the lack of meaningful implementation guidance, DOT declined to extend the waiver, and the new requirements went into effect for grants awarded after November 10, 2022.

BABA Act Implementation Guidance. Since spring 2022, there have been a slew of proposals, guidance documents, and other resources pertaining to BABA implementation from several federal agencies. It can be challenging to track these various moving pieces because different agencies publish different types of documents based on their specific role and responsibility. The following summarizes each agencies' role and actions that have been taken leading up to this week:

• Office of Management and Budget: Under BIL, OMB is responsible for developing guidance for federal agencies on how to apply the new BABA Act requirements, such as explaining how to determine whether an item is a construction material or manufactured product. The rest of the federal government is then required to comply with this guidance when enforcing BABA Act requirements through grant agreements. In April 2022, OMB published 'preliminary and non-binding' guidance on BABA, known as Memorandum M-22-11. However, the preliminary guidance failed to address many questions that industry stakeholders raised. Based on listening sessions and requests for comment, which AAAE responded to, OMB released the guidance yesterday to address those questions and provide clearer direction to federal agencies and grant recipients. 

• U.S. Department of Transportation: DOT has the authority to issue certain waivers and additional BABA guidance-so long as it is consistent with the guidelines and resources developed by OMB-for its operating administrations, including the Federal Aviation Administration (FAA). While DOT allowed the BABA Act requirements to go into effect for grant awards issued after November 2022, which AAAE strongly opposed, the department simultaneously proposed two new waivers that were more targeted in nature. One of the two proposals would waive Buy America requirements for steel, iron, manufactured products, and construction materials for de minimis costs, small grants, and minor components. Specifically, it would apply to grants below $500,000 and not be limited to construction materials. 

• Federal Aviation Administration: To date, FAA has taken some steps to help airports ensure they are complying with the new BABA Act requirements. In November 2022, FAA published an update to its federal contract provisions guidance document and provided airports with some details on how to comply with the new BABA Act requirements regarding construction materials. The updated guidance explained methods for ensuring that contractors comply with the new rules, including sample certification statements, and outlined the process and documentation required for airports to request and receive a waiver. Since then, FAA has also updated its forms for airports to request BABA-related waivers. 

Over the past 16 months, AAAE has weighed in with OMB, DOT, and FAA on several different occasions, urging the federal government to allow for additional time for implementation and to provide clearer guidance on how airports are expected to comply with the new BABA Act requirements.

OMB's Final Guidance on BABA Act Requirements

Yesterday, the White House's OMB released a final rule and guidance that will implement the new BABA Act requirements that were included in the BIL. The final guidance will take effect 60 days after being published in the Federal Register, which is expected to happen sometime this week. It will largely replace the preliminary guidance that OMB released in April 2022. The 162-page guidance document can be viewed here, and a summary of key provisions can be viewed here.

Summary of Key Provisions. Upon initial review, AAAE has highlighted several important takeaways and areas of interest for airports and their contractors:

• BABA Act Applicability to 'Entire' Infrastructure Project: OMB reaffirmed its preliminary guidance that the new BABA Act requirements apply to the 'entire infrastructure project, even if it is funded by both Federal and non-Federal funds under one or more awards.' OMB acknowledged, however, that federal agencies may consider developing their own guidance that would allow recipients to avoid BABA coverage for the whole project in some circumstances. 

• Applicability of OMB Final Guidance to Airport Grants: The new OMB guidance will apply to any federal grant that is obligated on or after the 'effective date.' The effective date is 60 days after the date that the guidance is published in the Federal Register, which is expected to occur this week. There are limited exceptions to this rule outlined in the guidance. 

• Definition of 'Construction Materials': In the 2022 preliminary guidance, OMB only identified the following as 'construction materials': non-ferrous metals; plastic and polymer-based products; glass; lumber; and drywall. The final guidance adds three additional materials to the definition, including fiber optic cables; optical fiber; and engineered wood. OMB spent a significant amount of time explaining how it arrived at the items included in this list. 

• Distinguishing Construction Materials from Manufactured Goods: AAAE and other stakeholders raised concerns that there has been insufficient guidance on how to identify a manufactured product relative to a construction material or even specific materials that are excluded by statute from the definition of construction materials (e.g., cement and cementitious materials, aggregates, and aggregate binding agents or additives). The final guidance adds a definition for 'manufactured product' to provide some clarity. 

• Exempting Concrete and Asphalt from BABA Act Requirements: Under BIL, Congress specifically excluded cement and cementitious materials, aggregates, and aggregate binding agents and additives from the definition of 'construction materials.' In our comments, AAAE strongly urged the administration to exempt both asphalt and concrete from Buy American preference requirements because both these products are created from such excluded materials. OMB's final guidance indicates that the classification of an item will depend on its status at the time it is brought to the site of the infrastructure project. For example, wet concrete or hot mix asphalt brought to an airport for incorporation would be exempt from Buy American requirements but precast concrete (processed before brought to the airport) would not be exempt. 

DOT's Waiver of Buy America Requirements

Today, DOT released a waiver of Buy American requirements for iron, steel, manufactured products, and construction materials used in projects funded through any DOT-administered grant program, including AIP and BIL. The waiver applies to any grant for which (1) the size of the award is below $500,000, or (2) the total value of the non-compliant products is no more than the lesser of $1,000,000 or 5% of total applicable costs for the project. The waiver was based on a proposal released in November 2022 and supported by AAAE, although we pushed for a higher threshold ($5,000,000 rather than $500,000). 

The waiver effectively makes Buy American requirements inapplicable to grants that are valued at less than $500,000. However, there are several things of which to be aware:

• The waiver is only valid for 5 years, at which time DOT will revisit for a potential extension;
• The waiver applies to grant awards that are obligated on or after the effective date of the waiver, which is tomorrow, August 16; and
• 'Total applicable project costs' are defined as the 'cost of materials (including the cost of any manufactured products) used in the project that are subject to a domestic preference requirement, including materials that are within the scope of an existing waiver.'

In issuing the waiver, DOT noted that it would allow federal agencies and grant recipients like airports to focus their domestic sourcing efforts on higher value products that provide the greatest manufacturing opportunities for American workers and firms and reduce delays in delivering important infrastructure projects.

Resources on New BABA Act Requirements
• White House 'Blog' on OMB's Final Guidance on BABA Act Requirements 
• OMB's August 14 Final Guidance on BABA Act Requirements (Pre-Publication Version) 
• Summary of Key Provisions from OMB's Final Guidance on BABA Act Requirements 
• DOT's August 15 Waiver of Buy America Requirements for De Minimis Costs and Small Grants (Pre-Publication Version) 
• FAA's Resources on BABA Act Requirements 
• OMB's February 9 Proposed Guidance on BABA Act Requirements 
• AAAE's November 20, 2022 Response to DOT's Proposed Waiver of Buy America Requirements for De Minimis Costs, Small Grants, and Minor Components 
• DOT's November 4, 2022 Proposed Waiver of Buy America Requirements for De Minimis Costs, Small Grants, and Minor Components 
• AAAE's August 18, 2022 Comments on DOT's Request for Information (RFI) on BABA Act Implementation 
• DOT's July 28, 2022 RFI on BABA Act Implementation 
• AAAE's June 6, 2022 Comments to OMB on BABA Act Implementation 
• DOT's May 19, 2022 Temporary Waiver of BABA Construction Materials Requirement 
• AAAE's May 13, 2022 Comments to DOT on Proposed Temporary Waiver