Do you have a federally assisted infrastructure project late in the construction planning process, and you just got informed that Build America, Buy America Act (BABA) domestic preference rules will apply to the project’s iron, steel, manufactured products, and construction materials? Breathe! All is not lost.

When BABA is introduced late in the design process, you need to check your assumptions and process promptly to avoid pitfalls and establish compliance. Here’s a quick walk-through covering common pitfalls to consider and avoid.

Don’t assume domestic source = compliance.

Teams often assume that because a supplier is U.S.-based, their products comply. But a domestic distributor is not the same as domestic manufacturing. BABA cares about:

• • Where iron and steel is melted and poured
  • Final manufacturing location
  • Component cost origins for manufactured products (but not sub-component costs)

If BABA retrofit happens after submittals, shifting to compliant materials may force delays due to redesigns or seeking waivers during construction.

Don’t apply the wrong ‘project’ definition.

BABA requirements apply to materials used in “federally assisted infrastructure projects” – which might cover more pieces of an initiative than you might expect. It would be nice if the definition of “project” were the same for every agency and program. However, almost every federal program uses a different definition of “project,” and some don’t have a program definition at all and must apply a definition from a cross-cutting requirement.

For example, the Community Development Block Grant (CDBG) has no program definition of “project,” so HUD guidance is to use the definition of project from environmental regulations. This means that a sewer system might be the CDBG-funded activity, but the remainder of a development served by the system might also get covered by BABA because it is included in the overall “project.” This can catch all the non-CDBG-funded construction unawares.

In some agencies, Community Projects (aka earmarks) may have the same pitfall if they are integrally related to surrounding construction activity.

Don’t assume the small stuff doesn’t matter.  

Don’t assume BABA applies only to some of your construction components. BABA applies to all your project’s incorporated materials, including:

• • Rebar in foundations
  • Conduit, pipe, and fittings
  • Fasteners and frames (iron/steel rule applies strictly)

In affordable housing, smaller components might be specified early, or subcontractors may be accustomed to using previously purchased, warehoused stock or only familiar suppliers. Don’t let these small elements trip up your overall compliance – confirm that they meet BABA requirements, and substitute as needed.

Don’t use the wrong category.

Two tentpole understandings for BABA compliance are the different tests for construction materials and manufactured products:

• • Construction materials (cement, drywall, glass, insulation) – Must be 100% domestically produced
  • Manufactured products (HVAC units, elevators, fire suppression systems) – At least 55% of component costs must be domestically produced and final manufacturing completed in the U.S.

A common error is applying the manufactured product test to construction materials. This can result in noncompliance with funder requirements.

Affordable housing often includes both types of material, leaving the industry particularly vulnerable to noncompliance – especially when layered on top of the additional common error of assuming that all residential construction projects are not covered by BABA infrastructure requirements. In reality, HUD considers construction materials for most assisted multifamily residential projects to be covered by BABA.

Don’t leave ‘de minimis’ and project-specific waivers to the end.

BABA waivers may be available under certain circumstances, such as if needed materials are not sufficiently available domestically, or if using domestic materials would increase project costs by more than 25%. Don’t put off this waiver “calculus.”  As soon as you can do a first-cut calculation to see if the blanker “de minimis” waiver is insufficient for your project, you can start thinking about waiver requests. The pitfall of assuming project-specific waivers are a “last resort” is that you leave a key BABA compliance tool stuck in the toolbox.

Waivers require:

• • Market research
  • Cost documentation
  • Significant funder and agency processing time

If you wait, timely waiver approval is unlikely, which can jeopardize successful project completion.

Don’t fail to own BABA throughout your processes.

The initial push to roll out BABA must include cascading the compliance clause into your contracts and procurement vehicles. This can lead to a pitfall of pushing responsibility entirely onto contractors, when really you need to also take responsibility and make sure your specs and drawings do not lock in noncompliant products unnecessarily. If contractors have no practical way to achieve compliance without expensive and time-consuming change orders, this becomes a grant compliance risk for you. As with most other funder requirements, designing the entire process to enable compliant project delivery will be the most efficient, cost-effective approach.

Fix for now, plan for the future

Knowing potential pitfalls is the first step in avoiding them. As you work through this late-breaking implementation, consider how to assess applicability and build BABA seamlessly into future projects right from the outset. Incorporating efficient compliance mechanisms will limit risks and costs of meeting this federal overlay requirement.

Contact our team for more information or assistance with BABA compliance.