Transportation Moving Forward with Buy America Relief for Certain Contracts
With Dave Yang
The landmark Bipartisan Infrastructure Law (“BIL”) is a once-in-a-generation initiative to address aging U.S. infrastructure needs and equalize greater access to public resources. While the Administration continues to move with impressive speed in creating the administrative channels and oversight offices necessary to implement the billions of dollars that have been appropriated for this impressive undertaking, recipient agencies have had more difficulty in evaluating and implementing the requirements of the BIL, including the domestic sourcing preferences mandated under its Build America, Buy America (“BABA”) provisions.
As one of the largest recipients of BIL and other federally assisted funding, the Department of Transportation (“DOT”) has borne the brunt these challenging evaluation efforts. For example, to implement the $7.5 billion that has already been approved by Congress to build a national EV charging network, an essential infrastructure component that will be necessary to increase the viability of electric vehicles, the Federal Highway Administration (“FHWA”), on August 31, 2022, issued a Notice of Proposed Waiver of Buy America Requirements for Electric Vehicle Chargers (“FHWA Notice”). The FHWA Notice was published to ascertain, in relevant part, whether a general or more limited waiver was warranted for EV chargers given complex and nuanced questions from industry and other stakeholders as to whether the U.S. domestic supply chain can supply such manufactured products in both the types and quantities that are needed to allow for an efficient and economical deployment of such projects, and how existing Buy America regimes under FHWA’s regulations would be able address, or if needed exempt, manufactured EV charging products from Buy America or BABA requirements given DOT’s decades-old exclusion of manufactured products from Buy America requirements. On September 30, 2022, comments closed on the FHWA Notice. A final determination from FHWA is expected shortly.
Beyond the FWHA Notice, on May 19, 2022, DOT issued a Temporary Waiver of Buy America Requirements for Construction Materials, which was one of the new domestic sourcing categories added under BABA for federally assisted projects (apart from iron and steel construction materials for such requirements had already existed). This six-month waiver, which began on May 14, 2022 concluded on November 10, 2022, was implemented to allow DOT to work through various issues regarding the “implementation of Buy America requirements to construction materials, specifically how recipients of Federal funds will need to require contractors to source Buy America compliant construction materials and how industry will certify and demonstrate compliance,” and further issues regarding the Department’s recognition of “both the importance of ensuring Buy America compliant construction materials and the need to implement the requirement in a way that is not overly burdensome.”
Shortly before the waiver’s expiration, on November 4, 2022, DOT issued a Notice of Proposed Waiver of [Construction Materials] for a Narrow Category of Contracts and Solicitations (“DOT Notice”), which was published on November 15, 2022 in the Federal Register. The DOT Notice stated that DOT would not be extending its temporary waiver on construction materials, and as such, federally-backed assistance programs would be subject to BABA’s preferences that construction materials permanently incorporated in such projects be “produced in the United States,” meaning that “all manufacturing processes occurred in the United States.” However, the DOT Notice also stated that while it “recognizes the importance of ensuring the use of domestically produced construction materials on infrastructure projects receiving Federal assistance[, it also recognized] … the need to implement the requirement in a way that does not delay delivery of projects that were sufficiently advanced before the requirement applies to DOT funding.”
Accordingly, the DOT acknowledged that due to the long lead times typically associated with large public infrastructure endeavors to solicit and secure the proper contractors, suppliers, and materials for projects that may well have resulted from solicitations that were issued before the effective May 14, 2022 date of the BIL, from contracts that were awarded before the BIL’s effective date, or even from contracts that were issued before the November 10, 2022 expiration of the DOT’s temporary construction materials waiver, the agency was cognizant of the substantial delays in project administration and performance that could occur if such affected recipients were required to reassess and recompete their supply chain for projects that are well underway. The DOT Notice acknowledged that such delays would not serve the public interest particularly when such project recipients did not receive sufficient notice of the potential sea change in the acquisition of non-ferrous metal, plastic, glass, lumber, and drywall-based construction materials for federal assistance projects when they originally pursued and received such work.
To address these concerns, the DOT Notice requested comments for a proposed rule based on a general public interest waiver of the BABA’s domestic preference requirements for construction materials for: (1) any contracts entered into before November 10, 2022; and (2) any contract entered into before March 10, 2023 if the contract resulted from a solicitation published prior to May 14, 2022. The DOT Notice explained that the March 10, 2023 date is intended to afford recipients and their supply-chain partners time to plan and complete their procurements without undue delay or burden. The DOT Notice also stated that any agency-funded projects on or after the effective date of the proposed waiver would be covered, and that any project assistance that had been obligated before the now expired November 10, 2022 temporary waiver would be exempt from BABA’s requirements. However, contracts outside of the forgoing circumstances would still be subject to BABA’s construction material preferences. The comment period on the DOT Notice closes on November 20, 2022, with DOT noting that it would consider late-comments to the extent practicable.
Ultimately, developments in this area are rapidly evolving, which should come as no surprise given the substantial amount of funding at issue and the complex – and often interrelated – statutory and regulatory requirements that agencies, including and particularly DOT, must examine, dovetail, or reconcile with BABA’s requirements. This is no easy feat. But, with billions of dollars on the line and equally important prerogatives to further Administration agendas, we can expect the lead agencies, like DOT, will continue moving quickly to balance legacy and prospective waivers in a manner that can support the current domestic supply chain without causing undue delays, costs or burdens that would only be to the detriment of taxpayers.
Notably, while it is certainly too soon to predict, it appears that supply chain issues will likely continue to impact issues regarding the need for project specific – or even general – waivers for programs that fall outside of any proposed waivers, whether in the DOT Notice or in other notices, and where (absent such relief) performance could be significantly delayed due to BABA requirements if OMB, as it has been directed to do pursuant to BABA, promulgates a more stringent definition for what constitutes produced in the United States beyond the preliminary guidance that the agency has issued that “all manufacturing processes occur[ring]in the United States” means at least “the final manufacturing process and the immediately preceding manufacturing stage for the construction material.” If additional requirements are issued by OMB on this matter, it could result in further constraints on the domestic supply chain and may necessitate further waiver proposals.
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