White House Shares Guidance on Buy America Preference in Federal Infrastructure Projects

The Infrastructure Investment and Jobs Act (IIJA), which included the Build America, Buy America Act (the Act), was signed into law on Nov. 15, 2021, and created a deadline of May 14, 2022, for federal agencies to ensure their funding of infrastructure projects are in line with the Act's requirements. With less than 30 days until the effective date, the White House released guidance (the WH Guidance) concerning how it will interpret, apply and grant waivers to the domestic preference requirements contained in the Act.

The WH Guidance has two stated goals: 1) explain the application of "Buy America" preference to federal financial assistance programs for infrastructure and 2) provide a transparent process to waive such a preference, when necessary. Provided in this alert is a guide to understanding how the WH Guidance may impact your business.

Entities to Which the WH Guidance Applies

The WH Guidance applies to "federal financial assistance," the scope of which includes financial assistance – in any form – that non-federal entities (i.e., states, local governments, territories, tribes, institutions of higher education and nonprofit organizations) receive or administer. Non-federal entities do not include for-profit organizations; instead, agencies should continue to rely on independent statutory authorities for domestic content requirements for federal financial assistance issued to for-profit organizations.

Entities to Which the WH Guidance and Act Does Not Apply

There are a few noteworthy instances explained in the WH Guidance for when the Buy America preferences in the Act will not apply:

• The domestic preference requirements apply only to the extent that no otherdomestic content procurement preference does not already apply to iron, steel, manufactured products and construction materials. The intent of this carveout is to avoid disruption to current programs wherever possible. For a separate procurement preference to take priority over the Act, it must meet or exceed the domestic preference requirements set forth in Section 70914 of the Act, meaning certain domestic preference programs may have to adopt new standards (i.e., the Federal Highway Administration's (FHWA) Buy America Act program likely will need to adopt specific provisions associated with manufactured products and construction materials).
• If an agency determines that no funds from a particular project under a covered program will be used for infrastructure, the Buy America preference does not apply.
• The Buy America preference applies only to the infrastructure itself. In other words, a Buy America preference does not apply to tools or supplies brought to the construction site and removed before completion of the project; furnishings such as chairs, desks and portable computer equipment; or any other equipment not an integral part of or permanently affixed to the structure.

Infrastructure Within the Act and WH Guidance

The guidance explains that infrastructure has the broad definition originally contained in Section 70912(5) of the Act and that, even with that broad definition, agencies should treat the statutory definition of "infrastructure" as illustrative and not exhaustive. To that end, the WH Guidance specifically mentions that "structures, facilities, and equipment that generate, transport, and distribute energy – including electric vehicle (EV) charging – [are] infrastructure." Further, the Buy America preference applies to an entire infrastructure project, even if it is funded by both federal and non-federal funds under one or more awards.

Additional Information Regarding Waivers

The WH Guidance contains helpful information regarding the intended use of each available waiver and the criteria the agency will use to determine whether a waiver should be granted. The WH Guidance makes clear that agencies must notify the Made in America Office (MIAO) before posting any proposed waiver for public comment; information regarding submission criteria and processes is included in the WH Guidance. In summary form, the three waivers available under the Act are the:

• public interest waiver for when applying the domestic content preference would be inconsistent with the public interest
• nonavailability waiver for when the types of iron, steel, manufactured products or construction materials are not produced in the U.S. in sufficient quantity or satisfactory quality
• unreasonable cost waiver for when the inclusion of items produced in the U.S. will increase the cost of the overall project by more than 25 percent

Of note, the WH Guidance outlines standard criteria agencies must use to review waivers and requires agencies to either bring their evaluation criteria in line with the guidance or establish criteria. Granting waivers that are 1) time-limited, 2) targeted and 3) conditional are framed as "minimum requirements for the use of waivers" within the WH Guidance.

Public Interest Waivers

While simultaneously stressing that agencies should issue waivers "judiciously," the WH Guidance explains that public interest waivers "may have a variety of bases" and outlines several instances in which it may be advisable for an agency to seek a public interest waiver for a particular project. Namely:

• Federal agencies may consider whether a general applicability public interest waiver should apply to waive Buy America preference requirements for infrastructure project purchases below a de minimis threshold, awards below the Simplified Acquisition Threshold or for miscellaneous minor components within iron and steel products.
• The WH Guidance also contemplates what it calls adjustment period waivers. For example, a public interest waiver may be warranted if an award is issued on or after May 14, 2022, for a Notice of Funding Opportunity that preceded the deadline and did not include the Buy America preferences. Here, the public interest waiver may be necessary to avoid undue increases in the time and cost of a project.
• Public interest waivers also may be appropriate to allow states to comply with their international trade obligations, whether pursuant to the World Trade Organization (WTO) Government Procurement Agreement or other trade agreements.
• Generally speaking, the WH Guidance says that other considerations that play into whether a public interest waiver may be appropriate include the resources available to the recipient, the value of the items, the potential domestic job impact and policy considerations such as sustainability, equity, accessibility and performance standards.

Beyond the justifications for public interest waivers, the WH Guidance provides a brief outline of the steps required before granting a public interest waiver:

• Applicants for public interest waivers must submit detailed written statements justifying why the requested waiver is in the public interest.
• The agency must, to the extent permitted by law, examine whether a significant source of the cost advantage associated with foreign-sourced products is the result of dumping or subsidies.
• The agency must integrate any findings regarding dumping and subsidies into its assessment of whether to grant the waiver.

Nonavailability Waivers

When reviewing applications for nonavailability waivers, the WH Guidance indicates that agencies should consider whether the applicant has conducted thorough market research and considered domestic alternatives. Both the timing of the research and conclusions reached on the availability should factor into whether an agency grants a nonavailability waiver request.

Unreasonable Cost Waivers

The WH Guidance instructs agencies to focus on the adequacy of an applicant's pricing and cost documentation. In particular, the WH Guidance explains that unreasonable cost waiver requests need to contain a comparison between the cost of the domestic product and the cost of the foreign product or a comparison of the overall cost of the project with domestic versus foreign products.

Underscoring the guidance for all three types of waivers is an emphasis on narrowness, judicious use, and clear documentation and proof of the need for the waiver. Overall, the WH Guidance explains that one of the primary purposes of the MIAO is to bring increased transparency to waivers to send clear demand signals to domestic producers.

Notably, the WH Guidance does not address the existing regulatory waivers available for the agencies already subject to domestic preference requirements of the Buy America Act (e.g., the microprocessor waiver or the rolling stock waiver for procurements by the Federal Transit Administration).

Preliminary Guidance Regarding Construction Materials

With the caveat that the guidance is preliminary and non-binding, the WH Guidance included a much-anticipated clarification of what will constitute "all manufacturing processes" within the context of the requirement that all manufacturing processes of construction materials occur in the United States. After referring to the statutory definition of construction materials in the Act (Sections 70917(c)(1) and 70911(5)), the WH Guidance explains that "all manufacturing processes" should include at least the final manufacturing process and the immediately preceding manufacturing stage. The Office of Management and Budget (OMB) is seeking additional stakeholder input on this definition; Holland & Knight can assist any businesses affected by this definition that want to provide input. 

Questions

Holland & Knight continues to closely follow developments in this area and assess the impact on U.S. businesses. Reach out to the authors or another member of the firm's International Trade Group to understand the impact on your business.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.