The Build America, Buy America (BABA) Act was signed into law as part of the Infrastructure Investment and Jobs Act (IIJA) in November 2021. BABA requires the head of each covered federal agency to ensure that “none of the funds made available for a Federal financial assistance program for infrastructure, including each deficient program, may be obligated for a project unless all of the iron, steel, manufactured products, and construction materials used in the project are produced in the United States.”
BABA has a direct influence on the manufactured precast concrete industry, which supplies critical infrastructure structures across the United States. NPCA members need to understand the different product classifications, potential impacts and risks to compliance, the waiver process and how BABA compliments the Buy American Act to stay compliant and competitive.
This is the first of a four-part series outlining BABA and what it means to precasters. This article is an overview of the BABA language and what it means for precast producers.
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The Office of Management and Budget (OMB) issues guidance to the head of each federal agency to instruct on how to apply BABA preferences.
OMB’s initial implementation guidance to agencies came April 18, 2022, in Memorandum M-22-11. This instruction served as the starting point for industry representatives and other stakeholders to provide comments and gain clarity on undefined terms or processes before a final guidance was established.
NPCA acted on behalf of the industry and filed a joint letter alongside PCI with comments and industry recommendations.
OMB received approximately 1,950 public comments. On Aug. 14, OMB issued its final guidance for implementing BABA. While the final guidance included many updates and clarifications, this article will focus solely on the determinations impacting the precast concrete industry.
According to the OMB’s determination, every product is classified into one of three defined categories:
- Iron or steel
- Construction material
- Manufactured product
Each category has its own threshold to meet the Buy America preference as defined in M-22-11.
For iron or steel products, the manufacturing processes from the initial melting stage through the application of coatings must all occur in the United States.
For construction materials, all manufacturing processes must occur in the United States to meet the Buy America preference.
Precast concrete is defined as a manufactured product and as such has two requirements to comply with the Buy America preference:
- The product is manufactured in the United States.
- The cost of components mined, produced and/or manufactured in the United States is greater than 55% of the total cost of all components.
Manufactured products originally were defined in the negative – specifically as not iron or steel and not a construction material. However, this definition was updated in the final guidance. OMB added an affirmative definition based on the definition of a manufactured good found in 2 CFR Part 176.140(a)(1).
Manufactured products means goods brought to the construction site for incorporation into the building or work that has been either:
- Processed into a specific form and shape.
- Combined with other articles, materials or supplies to create a product that has different properties than the individual articles, materials or supplies.
Since cast-in-place concrete does not arrive at the construction site in its final form, it is not defined as a manufactured product. More on that below.
As defined in the proposed 2 CFR Part 184, Guidance for Grants and Agreements, iron and steel products means articles, materials or supplies incorporated into an infrastructure project that consist wholly or predominantly of iron, steel or both. The final guidance issued by OMB further clarified that a product is predominately iron or steel if the cost of iron or steel in the product is 50% or greater of the total cost of the product.
This definition is important because some NPCA members may need to adhere to this threshold when producing reinforced products. If the cost of permanently incorporated iron or steel increases disproportionately with the cost of other inputs into a precast structure to the point that the iron or steel component is 50% or greater of the total cost of the precast structure, the precast structure is assessed as a predominately iron or steel product for the Buy America preference.
Construction materials are defined as articles, materials or supplies incorporated into an infrastructure project that consist of only one or more of the following materials:
- Non-ferrous metals.
- Plastic and polymer-based products (including polyvinylchloride, composite building materials, and polymers used in fiber optic cables).
- Glass (including optic glass).
- Fiber optic cable.
- Optical fiber.
- Lumber.
- Drywall.
There is an exception that states that if one or more of the previously listed materials is only combined with a binding agent, the binding agent is disregarded and it is still assessed as a construction material.
Cast-in-place vs. precast concrete
In the BABA language, Congress identifies specific materials in section 70917(c) that are entirely excluded from coverage under the category of construction materials. These excluded materials include:
- Cement and cementitious materials.
- Aggregates such as stone, sand or gravel.
- Aggregate binding agents or additives.
OMB specifically asked for stakeholder input on how to treat these excluded materials in the context of a manufactured product, because BABA did not specifically address this.
In the final guidance, OMB determined that section 70917(c) materials are not considered manufactured products when they are used at or combined proximate to the work site – such as is the case with wet concrete or hot mix asphalt.
However, section 70917(c) materials such as cement, stone, sand and gravel may be used to produce a manufactured product, such as precast concrete.
Precast concrete is made of components, is processed into a specific shape or form and is in such state when brought to the work site.
This OMB determination is based on language in BABA 70917(c) that specifically states that the listed materials are excluded from the product category “construction materials.”
However, the listed materials are not specifically excluded if incorporated into a manufactured product. In other words, aggregates, cement and additives are excluded as construction materials, but not when they are incorporated into a manufactured product, such as precast concrete.
Additionally, the updated definition of a manufactured product adds a time element, namely “brought to the construction site,” for when the product should be assessed and that a manufactured product has to be processed into a specific form and shape. This drives the difference in classification between cast-in-place and precast concrete.
Precast concrete has been assessed as a manufactured product – except in a case where steel or iron components are greater than 50% of the total product cost – for Buy America preference assessment. As a manufactured product, precast concrete must pass the 55% cost of components test to be considered for the Buy America preference.
For more information on this topic, NPCA members can call (800) 366-7731.
Brad Chinery, P.E., is the director of technical service at NPCA.