Build America, Buy America: Requirements, Waivers, and Penalties

The Build America, Buy America Act requirements apply to any non-federal entity spending federal infrastructure assistance: the iron, steel, manufactured products, and construction materials used on the project must be produced in the United States under category-specific standards, backed by documentation, unless a waiver covers the item. Enacted November 15, 2021 as part of the Infrastructure Investment and Jobs Act, the law has governed covered federal financial assistance obligated for infrastructure projects since May 14, 2022.¹

One clarification up front, because the names run together. The older Buy American Act (41 U.S.C. § 8303) governs direct federal procurement, where the government itself buys goods.² BABA governs federal financial assistance: grants, cooperative agreements, and similar funding passed to state and local governments and other recipients for infrastructure work. A state highway department resurfacing a bridge with grant money follows BABA, not the older statute.

Who Has to Comply

BABA reaches non-federal entities that receive federal financial assistance for infrastructure, including state and local governments, tribal nations, territories, universities, and nonprofits.¹ For-profit companies are not automatically covered as prime recipients, but a for-profit picks up BABA obligations when it takes a subaward under a grant carrying BABA terms, or when it commits to domestic sourcing in an application and wins the award on that basis.

Once BABA attaches to a grant, it flows all the way down. The prime recipient’s terms pass through to every subrecipient, contractor, subcontractor, and purchase order, regardless of entity type.¹ A supplier three tiers down still has to meet the same standards, and the prime recipient is responsible for making that happen.

What Counts as an Infrastructure Project

BABA reads infrastructure broadly: any project involving structures, facilities, or equipment serving a public function, including roads, bridges, transit, airports, drinking water and wastewater systems, electrical grids, dams, broadband networks, and buildings built with federal assistance.¹

The trap for grant recipients is that BABA follows the money, not the program title. A public health grant that pays for clinic construction triggers BABA for those construction activities, even though the program itself is not about infrastructure. What the dollars pay for determines coverage.

The Four Material Categories and Their Standards

Every item used on a covered project falls into one of four categories under 2 CFR Part 184, and each category has its own test for “produced in the United States.”³ Applying the wrong test to an item is one of the most common ways a project falls out of compliance.

Iron and Steel Products

For items that are predominantly iron or steel, every manufacturing process from initial melting through the application of coatings must occur in the United States.⁴ There is no percentage test. A steel beam whose raw steel is melted overseas fails, even if it is shaped and coated here. Minor iron or steel components inside a larger manufactured product are judged under the manufactured product rules instead.

Manufactured Products

A manufactured product is an article processed into a specific form or combined with other materials so it has different properties than its inputs.⁵ To count as domestic, two things must be true: the product is manufactured in the United States, and the cost of its domestically sourced components exceeds 55 percent of total component cost.⁶

The component math has its own rules. Purchased components are counted at acquisition cost including transportation to the manufacturing site and any applicable duties. In-house components are counted at all manufacturing costs plus allocable overhead, excluding profit.⁶ Getting this calculation wrong on equipment with global supply chains is where a lot of compliance failures start.

Construction Materials

Construction materials are their own category, separate from manufactured products, and each type has its own all-or-nothing production standard. The eight covered types:

Non-ferrous metals: all processes from initial smelting or melting through final shaping, coating, and assembly
Plastic and polymer-based products: all processes from initial combination of constituent inputs through final form
Glass: all processes from batching and melting of raw materials through annealing, cooling, and cutting
Fiber optic cable: all processes from ribboning (if applicable) through buffering, stranding, and jacketing
Optical fiber: all processes from preform fabrication through completion of the draw
Lumber: all processes from initial debarking through treatment and planing
Drywall: all processes from blending of gypsum plaster and additives through cutting and drying of panels
Engineered wood: all processes from initial combination of constituent materials through final form

⁷

There is no percentage threshold. Every listed step must happen in the United States.

Section 70917(c) Materials

Cement, cementitious materials, aggregates such as stone, sand, and gravel, and aggregate binding agents or additives sit in a separate fourth category under Section 70917(c) of the IIJA, not under construction materials or manufactured products.⁸ Classify these items in their own bucket rather than folding them into another category.

Exemptions and Waivers

Not everything has to be domestically sourced. Two general exemptions have been in effect since November 2022. The de minimis exemption allows non-compliant materials totaling up to 5 percent of the project’s combined iron, steel, manufactured product, and construction material costs, capped at $1 million. Projects with a total cost at or below the simplified acquisition threshold of $250,000 are exempt from BABA entirely.⁹ A separate exemption exists for urgent situations threatening life, safety, or property.

Beyond those, the statute gives three grounds for a waiver:¹⁰

Public interest: applying the domestic preference would conflict with broader national goals.
Nonavailability: the material is not produced domestically in sufficient quantity or satisfactory quality.
Unreasonable cost: domestic materials would raise total project cost by more than 25 percent.

Federal agencies also issue general applicability waivers that cover entire programs or product categories at once, including waivers for tribal projects, Pacific Island territories, and items like advanced water meters where domestic supply does not yet exist.¹¹ Before writing your own waiver request, check whether one of these already covers the situation.

Requesting a Waiver

A waiver request needs the project described, the specific items identified, and evidence of the market research you did to look for domestic suppliers before concluding none existed. Agencies publish standard forms; the GSA’s data collection form asks for the Federal Award Identification Number, awarding agency information, and the waiver type. For an unreasonable cost waiver, show the math: the agency wants to see that compliance drives total costs up by more than 25 percent and that you have identified which specific items, if waived, bring the increase back below that threshold.¹²

Once submitted, the request goes out for a public comment period of at least 15 days, during which domestic manufacturers can respond, sometimes by offering to supply what you said was unavailable.¹³ The agency then sends the request to the Made in America Office at OMB, which targets three to seven business days for most reviews and up to 15 days for more complex ones.¹⁴ The award cannot be finalized until that review is complete or waived.

Documentation You Have to Keep

Meeting the standards is only half of compliance. You also have to prove you met them. For each covered project, maintain records of every iron, steel, manufactured product, and construction material acquisition, including acquisition date, price, domestic sourcing verification, how the item was used, and its current location.¹⁵ Under 2 CFR § 200.334, retention runs for the period the grant agreement specifies.

Your suppliers are part of this chain. A manufacturer’s BABA certification letter should reference the applicable domestic manufacturing requirement, name and describe the product, state the quantity and manufacturing location, and carry the signature of an authorized company representative.¹⁵ A supplier that cannot produce this is a problem to solve before materials show up on site, not during an audit.

For anything sourced from a foreign supplier under a waiver, documentation is stricter: records must include the domestic sourcing efforts you made, the foreign source’s identity, and the same acquisition and location data required for domestic materials.¹⁵ Program officers and auditors can ask for any of this at any time.

What Non-Compliance Costs

BABA itself carries no standalone penalty provision. The consequences come through existing federal grant enforcement. An agency can claw back funds already spent, delay or suspend the project, or issue adverse audit findings that damage future funding eligibility. Where a recipient knowingly misrepresents domestic sourcing, exposure can extend to the False Claims Act, which carries civil penalties and, in serious cases, criminal liability. Treating BABA as paperwork rather than a substantive procurement requirement is how projects lose their funding.

1
Department of Energy. Build America, Buy America
2
Office of the Law Revision Counsel. 41 USC 8303 Contracts for Public Works
3
Legal Information Institute. 2 CFR Part 184 – Buy America Preferences for Infrastructure Projects
4
GovInfo. 2 CFR 184.4
5
Environmental Protection Agency. Codified and Other Guidance
6
eCFR. 2 CFR 184.5 – Determining the Cost of Components for Manufactured Products
7
eCFR. 2 CFR 184.6 – Construction Material Standards
8
eCFR. 2 CFR Part 184 – Buy America Preferences for Infrastructure Projects
9
U.S. Department of Housing and Urban Development (HUD). Build America, Buy America
10
Department of Energy. Build America, Buy America Act Provisions
11
U.S. Department of the Interior. Approved DOI General Applicability Waivers
12
General Services Administration. Build America Buy America Waiver Request Data Collection
13
U.S. Department of Housing and Urban Development. Proposed Public Interest Waiver
14
Biden White House Archives. Improving the Transparency of Made in America Waivers
15
National Telecommunications and Information Administration. Build America, Buy America Compliance and Documentation