In the ever-evolving landscape of federal regulations, the Build America, Buy America Act (BABA) stands out as a pivotal piece of legislation with significant implications for contractors. Enacted in 2021 as part of the Infrastructure and Investment Jobs Act (IIJA), BABA builds on its predecessors, aiming to stimulate economic growth by promoting the use of U.S.-sourced materials in federally funded infrastructure projects. Let’s delve into the key aspects of this legislation and explore the best practices for contractors to ensure compliance and navigate the complexities of BABA.
Overview of BABA
BABA’s scope extends far beyond its predecessors, covering a wide array of infrastructure projects receiving federal funding. This includes roads, railways, airports, water systems, broadband infrastructure, and more. Notably, BABA applies not only to projects where the federal government is the contracting party but also to those where state or local government entities take the lead.
Material Requirements
While the Buy America Act primarily focused on iron, steel, and manufactured products, BABA takes a step further by including construction materials in its ambit. This expansion encompasses commodities like glass, drywall, fiber-optic cable, nonferrous metals, PVC, and other polymer-based products. Notably, aggregates and cement are excluded from BABA’s material requirements.
Threshold Increases and Compliance Deadlines
Contractors must be aware of the incremental increases in the required domestic content threshold for manufactured goods. Starting at 55%, the threshold rises to 60% in October 2022, 65% in 2024, and culminates at 75% in 2029. Some increases may be subject to review and potential delays.
COTS Items and Categories
BABA introduces the concept of commercially available off-the-shelf (COTS) items, allowing for the use of such items made abroad if they are not modified. The guidance emphasizes that all items incorporated into an infrastructure project fall into one of three categories: iron and steel, manufactured products, or construction materials.
Waivers and Compliance Best Practices
Contractors must be proactive in ensuring compliance with BABA. Key best practices include obtaining certification from suppliers, sharing liability through contracts with subcontractors, staying updated on regulatory changes, and not solely relying on waivers. Waivers may be available in cases where compliance is contrary to the public interest or materials are unavailable or unreasonably priced.
Navigate the Build America, Buy America Act with the Accountants at MKS&H
As contractors navigate the intricate landscape of federal regulations, adherence to the Build America, Buy America Act becomes paramount. The consequences of non-compliance are substantial, ranging from the cost of removing and replacing completed work to potential debarment from federally funded projects. By staying informed, obtaining certifications, and implementing best practices, contractors can not only ensure compliance but also contribute to the broader goal of bolstering the nation’s infrastructure while supporting domestic industries.
About MKS&H: McLean, Koehler, Sparks & Hammond (MKS&H) is a professional service firm with offices in Hunt Valley and Frederick. MKS&H helps owners and organizational leaders become more successful by putting complex financial data into truly meaningful context. But deeper than dollars and data, our focus is on developing an understanding of you, your culture and your business goals. This approach enables our clients to achieve their greatest potential.
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