In an earlier article on stacking, braiding, or fitting grant funds, we discussed how federal grants come with goals and requirements that require careful thought and effort to bring into alignment with local objectives. This creates increased implementation complexity, which is why stakeholders – including the awardee, subrecipients, potential contractors – can feel overwhelmed or intimidated when grant programs adopt new requirements. 

The Build America Buy America Act (BABA) introduced a new cross-cutting requirement on the Greenhouse Gas Reduction Fund (GGRF) and other federal infrastructure programs. This is added to other cross-cutting requirements for federal grants that may include compliance with environmental assessment, labor standards, equal opportunity and civil rights, and federal financial management regulations at 2 CFR 200. 

Below, we summarize the BABA basic concepts, discuss potential obstacles and available resources, and offer some suggested approaches to compliance.

BABA basics

BABA, enacted in the Infrastructure Investment and Jobs Act (IIJA) in November 2021, supports American industry by requiring that federal infrastructure projects are constructed with U.S.-produced iron, steel, manufactured products, and construction materials. Its long-run goals are to support higher paying domestic manufacturing jobs and greater supply chain stability. In the short term, however, BABA created a new overlay requirement for federal grant programs before detailed guidance and supply chain tracing and labeling systems existed. In other words, implementing BABA has been like building a plane while flying it.

For grantees, BABA imposes specific requirements. After October 23, 2023, every federal award for an infrastructure project must include the Buy America preference in its terms and conditions, as well as appropriate compliance and reporting provisions in contracts and subaward agreements. Grantees must verify and document that products used in covered projects are either manufactured in the U.S. or BABA compliant. Being BABA compliant means using appropriate products or operating under a general (such as agency-level) waiver or an individual project waiver. There is a process for individual BABA waivers, but as of now, it is universally viewed as lengthy and time-intensive.

BABA covers several broad categories of products, with the intention that no material or product should fit in more than one category. The main types of products included in BABA are:

1. Iron and steel products: This category includes all products made primarily of iron or steel.
2. Manufactured products: These are items that have undergone a manufacturing process using raw materials and turning them into finished goods. Machinery and prefabricated buildings are in this category.
3. Construction materials: This broad category includes materials used in the construction of infrastructure projects, such as lumber.
4. Section 70917(c) materials: This category includes cement, aggregates (like sand, stone, and gravel), and other related materials such as binding additives.

Potential hurdles in BABA compliance

One significant challenge grantees usually discover is locating established, BABA-qualified products on the market. For example, BABA labeling and listings are not yet uniform or consistently deployed, particularly in the case of manufactured products. Additionally, “Buy America” and “Buy American” may refer to two different standards. Simply relying on a “Made in America” label might not document meeting the new BABA requirements. 

In addition to understanding how to source compliant products, a grantee must create a process for demonstrating compliance. To comply with BABA, the grantee should be prepared to:

• Document and verify: A grantee must maintain appropriate documentation to show that all iron, steel, manufactured products, and construction materials used in each of its covered projects are produced in the United States. For example, according to the EPA, this includes keeping records of purchase orders, invoices, and certifications from suppliers that verify the origin of the materials. 

If a project is not subject to BABA, the grantee must maintain documentation of the “non-subject” reason, such as a specific citation of the applicable waiver, type of project (non-infrastructure), or below-threshold project size. Proper documentation “tells the story” of the project and is crucial for successfully surviving audits and compliance monitoring visits by federal agencies.

• Monitor for compliance: Each federal agency is responsible for monitoring its grantees’ compliance with BABA, and each grantee is responsible for requiring that its program participants, contractors, and subrecipients comply. Non-compliance can result in penalties, including the repayment of federal funds or required changes to policies and procedures. For major grants, a best practice is to deploy integrity monitoring, which integrates oversight for financial, data, process checkpoints, and reporting. (For more on grantee compliance approaches, see our earlier article on choosing the right compliance model for your project.)

Resources for compliance

Federal funding agencies – such as the Environmental Protection Agency (EPA), the National Institute of Standards and Technology (NIST), and the U.S. Departments of Housing and Urban Development, Transportation, and Interior – do provide guidance on implementing BABA on their respective grant program websites, including some training and resources. These resources are designed to clarify the requirements and provide strategies for finding domestic suppliers.

For example, the Department of Housing and Urban Development (HUD) offers webinars, FAQs, and guidance documents to assist grantees in navigating the compliance process, and the HUD Office of General Counsel maintains a streamlined website with BABA guidance applicable to HUD programs. 

Sourcing tips for BABA-approved materials

Grantees can also explore these other useful methods for finding domestic suppliers for BABA-covered projects:

• Peer grantees: In some areas, a major federal grantee (such as a state or urban county transportation or housing agency or a major city planning department) may develop a list of locally available domestic suppliers or products they have researched and concluded were BABA compliant. Grantees with smaller awards, who may not have the resources to exhaustively research products, may wish to connect with other grantees in their region to pool information.
• Hollings Manufacturing Extension Partnership (MEP): The MEP network, managed by the NIST, offers supplier scouting services to help grantees identify small- and medium-sized domestic manufacturers.
• Trade associations and industry groups: Many trade associations maintain directories of their members as a resource for finding domestic suppliers. 
• Networking and industry events: Attending industry conferences, trade shows, and networking events can also be an effective way to meet or find out about potential suppliers. 
• Developers and general contractors: As BABA went into effect more than a year ago, some developers and general contractors have experience with finding BABA-compliant suppliers or products, making them potential sources of useful information for grantees. 

Waivers and applicability: when BABA doesn’t apply

As mentioned earlier, there are currently opportunities for grantees to seek waivers. Agency sites will note whether “general public interest” waivers are available and applicable to a project’s time period. For example, grantees can see a current list of approved waivers on the EPA site. If a grantee cannot procure a material domestically, they can apply for an individual project waiver.

Agencies will also post these individual project waivers, so it’s a good idea to first check the BABA website to see if there are any waivers specific to the relevant federal granting agency. 

To qualify for a waiver, a grantee must demonstrate that the materials needed are not available domestically in sufficient quantity or quality, or that using domestic materials would increase project costs by more than 25%. Waivers are reviewed on a case-by-case basis and must be approved by the relevant federal agency. It’s also important to remember that individual project waiver requests take time to review and may not be granted.

The BABA waiver process includes a public comment period of at least 15 days before the agency’s consideration of each general or project waiver (for example, this EPA web page lists BABA waivers currently open for public comment). After consideration, the agency will post each approved waiver as well. Grantees must not rely on a proposed waiver when entering into contracts or obligations, as only an approved waiver may be used to support compliance. 

On the HUD Exchange site, in addition to linking to general waivers, technical assistance is available for HUD grantees on how to use its BABA waiver request automated system.

There are also other cases in which BABA requirements currently would not apply. Grantees should take note of these distinctions: 

• Disaster recovery: HUD has determined that BABA requirements do not apply to funds used for disaster or emergency response infrastructure spending, such as CDBG-DR grants. FEMA, for example, maintains a list of programs subject/not subject to BABA on its site.
• Private homes: Projects consisting solely of the purchase, construction, or improvement of a private home for personal use, for example, would not constitute a public infrastructure project for purposes of BABA. The requirements would also not apply to non-residential buildings not used for public purposes (such as a business). However, there may be case-specific exceptions to this (e.g., for some HUD projects), so a grantee should always refer to its specific agency resources. 

Looking to the future

Complying with the terms of a particular federal award takes careful preparation and follow-up monitoring, which can be particularly daunting when requirements are new and best practices and waivers are evolving. In the future, as our supply chains adjust to produce and clearly identify BABA-compliant products – and as all stakeholders gain experience with BABA implementation – emerging benefits to the U.S. industrial sector are projected to offset any remaining compliance burdens.