Enacted as part of the Infrastructure and Jobs Act (IIJA) on November 15, 2021, the Build America, Buy America Act — sometimes referred to as BABA or BABAA — was signed into law to stimulate domestic manufacturing and job creation, as well as enhance supply chains by reducing reliance with foreign suppliers.
This article provides organizations with the following regarding BABA:
- The Origin of the Act
- Infrastructure and Domestic Content Requirements
- Waiver Eligibility and Submission Process
- Compliance Procedures
- Benefits and Risks
What Is Build America, Buy America Act (BABA) Compliance?
The Build America, Buy America Act established domestic content procurement preference (Domestic Content) requirements for all federal financial assistance obligated for domestic infrastructure projects after May 14, 2022. Domestic Content compliance requires all iron, steel, manufactured products and construction materials used in federally funded projects for infrastructure to be produced in the United States.
Build America, Buy America Act Certification
Build America, Buy America Act compliance is broken down into two types of requirements. First, the infrastructure project must be eligible, and second, the materials used must satisfy Domestic Content standards.
Infrastructure Requirements
To be BABA compliant, a project must be classified as an infrastructure project. These projects are required to meet specific criteria to qualify, including:
- Serve a public function and benefit the community at large
- Be publicly owned and operated, with government entities managing and maintaining projects or privately operated on behalf of the public
- Serve as places of public accommodation or facilities that provide services to the general public
For detailed guidance on applying the Buy America preference to a federal award, refer to the Code of Federal Regulations section 184.4, titled "Applying the Buy America Preference to a Federal Award." This section includes relevant examples of different types of infrastructure projects.
Domestic Content Requirements
Manufacturers are required to perform their own self-certification process to demonstrate they meet the following Domestic Content requirements to become BABA compliant. These requirements are:
- All iron and steel utilized in an infrastructure project must be manufactured in the United States, encompassing all phases from the initial melting process to the application of coatings.
- All construction materials for an infrastructure project must be made in the U.S., including:
- Non-Ferrous Materials
- Plastic and Polymer-Based Products
- Glass
- Fiber Optic Cable
- Lumber
- Engineered Wood
- Drywall
All manufactured products must be produced in the U.S., as defined in the Code of Federal Regulations section 184.3 Definitions. To qualify as a U.S. product, the cost of the components of the manufactured product must be greater than 55% of the total cost of all components.
BABA Waiver Eligibility and Submission Process
Manufacturers and contractors should apply for a waiver if a product does not initially meet the Domestic Content requirements under the following circumstances:
- Domestic Content requirements that are inconsistent with public interest
- Types of iron, steel, manufactured products or construction materials not produced in the United States in sufficient quantity or satisfactory quality
- Inclusion of iron, steel, manufactured products or construction materials produced in the United States that will increase the cost of the overall project by more than 25%
5 Steps for Waiver Submission
In general, the waiver submission process for a respective domestic infrastructure project includes the following actions steps:
- The award recipient sends waiver request in writing to the respective U.S. federal government agency (the Agency) for review and evaluation.
- The Agency notifies the Office of Management and Budget Made in America Office (MIAO) of the respective waiver request.
- The Agency posts a draft of the submitted waiver letter for public review and submission of comments for a period of no less than fifteen calendar days.
- The Agency evaluates public comments and sends the final waiver request to the MIAO for review.
- Once the respective waiver letter is approved by the MIAO, the Agency signs the final waiver, notifies the award recipient and posts the final waiver letter on their approved waivers website.
For more information on the Domestic Content waiver requirements and the submission process, refer to the Code of Federal Regulations section 184.7, titled “Federal Agency’s Issuance of a Buy American Preference Waiver.” Currently, award recipients must send a waiver request for a product that pertains to the covered agencies.
BABAA Compliance Procedures and Best Practices
Implementing best practices for BABA compliance is crucial for ensuring successful participation in federally funded infrastructure projects. These practices include thoroughly understanding the specific requirements for infrastructure projects, maintaining accurate documentation and regularly reviewing compliance guidelines.
By adhering to these best practices, companies can maximize their eligibility for financial assistance. To ensure compliance with BABA, manufacturers and contractors should perform the following action steps:
- Assess products for compliance with BABA’s Domestic Content requirements.
- Replace non-compliant suppliers, where possible.
- Implement and enhance procedures, processes and systems for reporting, product costing and monitoring the origins.
- Include BABA requirements in contracts and purchase orders.
- Monitor covered agencies websites for product specific waivers.
- Accumulate self-certification documentation for each project, including prescribed letters to supply chain partners (refer to pages six and seven of FEMA’s sample self-certification letter for manufacturers performing the final assembly).
BABA Self-Certification List for the Broadband Equity Access and Deployment Program
Manufacturers involved in the Broadband Equity Access and Deployment (BEAD) Program infrastructure projects should complete a BEAD BABA Self Certification Intake Form provided by the National Telecommunications and Information Administration. This process enables manufacturers to self-certify their products as BABA-compliant. Once certified, these products will be listed on the BEAD self-certification page on the Department of Commerce website.
The Benefits and Risks of BABA Compliance
Compliance with the BABA offers numerous advantages for domestic manufacturers and contractors, including financial assistance, supply chain reliance, competitive advantage and stimulation of the U.S. economy. However, there can also be complications associated with this type of federal program.
Benefits of Being BABA Compliant
Embracing BABA compliance is a strategic move supporting individual businesses and the broader economic landscape. Here are some key differentiators:
- Financial Assistance: Compliance qualifies businesses for U.S. federal, state and local financial assistance to subsidize costs associated with certain domestic infrastructure projects.
- Competitive Advantage: American manufacturers can achieve preferential provider status based on their eligibility for domestic-based infrastructure projects, increasing their competitive advantage.
- Increased Demand: Stimulation of the U.S. economy is achieved by increasing demand for American-made products, promoting a stable marketplace for American manufacturers.
- Stronger Supply Chain: The Act reduces reliance on foreign suppliers, making the supply chain more resilient to global disruptions.
Risks of Applying for BABA
Compliance with BABA presents several challenges and risks due to its complexity, varying interpretations and differences among covered agencies. Common challenges include:
- Increased Costs: Domestic-based suppliers may have higher costs due to increased wages and raw material expenses compared to foreign suppliers.
- Supply Chain Disruptions: Replacing non-compliant providers can lead to significant disruptions in the supply chain.
- Competitive Disadvantage: Non-compliant manufacturers may find themselves less competitive in the market, particularly for domestic-based infrastructure projects.
- Inaccurate Self-Certifications: There is a risk that supply chain partners may provide false or inaccurate information on self-certifications, leading to potential non-compliance.
- Interpretation of Domestic Content Requirements: The requirements for domestic content are subject to interpretation, making it challenging to determine the origin of materials and products. This ambiguity can put manufacturers at risk of non-compliance.
- Consequences of Non-Compliance: Failure to comply with BABA can result in severe penalties, suspension, debarment, violations of the False Claims Act and potential criminal prosecution.
These challenges highlight the importance of thorough understanding and diligent adherence to BABA requirements to mitigate risks and ensure compliance.
How Can Cherry Bekaert Help
Cherry Bekaert’s Risk Advisory team can assist with BABA compliance in several ways. Our professionals will perform an analysis of products and supply chain partners to assess current state compliance with the Domestic Content requirements outlined in BABA.
They also provide advice on interpreting BABA’s requirements and reviewing project bid and contractor requirements. Additionally, our team is able to select, prepare and send self-certifications to the company’s suppliers as outlined by BABA’s requirements, as well as accumulate and review self-certifications to verify that the Domestic Content requirements were met.
Furthermore, we assist with:
- The submission process of required documentation to agencies to achieve BABA compliance
- The implementation of procedures and processes
- Enhancement of systems for reporting, product costing and monitoring the origin of materials and products
- Training for procurement and project management staff on BABA requirements and compliance procedures
If you have any questions about how to implement and comply with BABA, reach out to your Cherry Bekaert advisor or contact our Risk Advisory group to help you navigate the federal requirements.
