Navigating the Build America, Buy America Act: Implications for Construction Bonds and FHWA Compliance
The Build America, Buy America Act (BABA) has introduced significant changes to the procurement policies governing federal funding for state and local construction projects. As the most extensive domestic preference law in U.S. history, BABA mandates that all federally funded projects use American-made iron and steel, manufactured products, and construction materials. For those in the construction bond industry, understanding these requirements is crucial, especially with the Federal Highway Administration (FHWA) at the forefront of implementing these changes.
The FHWA’s adherence to BABA introduces a new category for compliance: “construction materials.” This addition requires careful attention from contractors to ensure their sourcing aligns with the new regulations. Furthermore, the FHWA’s traditional “manufactured products” Buy America waiver is set to expire, placing additional scrutiny on where and how materials are sourced.
Under BABA, existing Buy America provisions that meet or exceed new standards for iron and steel will remain effective. However, the act also allows for the review of existing waivers, signaling tighter controls and possibly altering long-standing practices within the construction sector. The FHWA has already indicated moves to eliminate its general waiver for manufactured products, requiring that more than 55% of a product’s cost come from U.S.-based components.
Moreover, the proposed FHWA rule introduces specific deviations for materials like precast concrete and electronic hardware systems. These deviations maintain the requirement for American-made iron and steel in these products, ensuring that even specialized materials comply with stringent domestic sourcing standards.
The broader implications of BABA extend to a new mandatory category: “construction materials” must now all be produced in the United States. The definition includes a variety of materials such as non-ferrous metals, various polymers, glass, and lumber. This extensive list underlines the act’s aim to bolster domestic industries, though it notably excludes aggregate and cement products.
For construction bonds, these changes mean heightened diligence from contractors and increased reliance on comprehensive compliance strategies. The industry must navigate these new rules effectively to avoid project delays and potential penalties. As the FHWA prepares to finalize its rules, stakeholders should stay informed and ready to adapt to these evolving regulatory landscapes. This proactive approach will not only ensure compliance but also support the broader goals of enhancing U.S. infrastructure and fostering domestic economic growth.
Learn more about the requirements and FAQs regarding the BABA Act, here.
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Written by the Digital Marketing Team at Creative Programs & Systems: https://www.cpsmi.com/.