Is the Buy America Act hurting or helping our contractors?
By spending American money on American-made materials we can help balance the economy, however, what does this mean for contractors? Many argue both sides because there are a lot of facts to weigh and consider.
The Buy America Act came into effect in 1983 and was included as a provision in the American Recovery and Investment Act of 2009. This act applies to mass-transit related products and ensures that transportation infrastructure projects are built with American-made products. All steel or iron products used must be at least 90% American. Under this act it is required for contractors to submit a certificate of Buy America Act compliance which can represent false claims.
In the initial Guidance issued by NHTSA (Attachment “Buy America”) it states:
- The Buy America Act, 23 U.S.C. § 313, prohibits States from using highway grant funds under 23 U.S.C. Chapter 4 to purchase products, unless they are produced in the United States. This prohibition applies to steel, iron and all manufactured products, unless the Secretary of Transportation has determined that it is appropriate to waive the Buy America Act requirement. There is no minimum purchase threshold that exempts the need for a waiver. For compliance purposes, American-made covers any product that is manufactured or assembled in the United States.
- The FHWA, in its 1983 rulemaking, determined that Buy America did not apply to raw material and found that it was in the public interest to waive application of Buy America to manufactured products other than steel and iron manufactured products. Thus, in order for a manufactured product to be considered subject to Buy America, a product must be manufactured of at least 90% steel or iron content when it is delivered to the job site for installation.
- Lack of adequate domestic supply resulted in a 1995 nationwide waiver for iron ore, pig iron, and reduced/processed/pelletized iron ore. In 1994, a nationwide waiver for specific ferryboat parts came into effect.
- Now, only applies to iron and steel products and their coatings that are to be permanently incorporated into the project.
For contractors, this could either seriously hurt or help them in business. Although it is required for them to fill out a Buy America confirmation form holding them liable, there could still be those who outsource for materials in order to get them at a cheaper rate and be able to outbid other contractors. Also, contractors who do business overseas could lose business on projects they otherwise would have been competitive on.
This act was in effect for over 20 years but was often over looked. With the reinstatement of this act in the Obama Stimulus during the economic crisis many controversies have arisen and exceptions have been made.
Three exceptions are:
1) Iron, steel or manufactured goods are not produced in the United States in sufficient and reasonably available quantities and of satisfactory quality.
2) Inclusion of iron, steel or manufactured goods produced in the United States will increase the cost of the project by more than 25 percent.
3) Applying the Buy American restriction is inconsistent with the public interest.
Controversy sparked from these exceptions due mostly to:
- The lack of definition and the vagueness in the explanation of these exceptions.
- It is unclear how much of the produced good would qualify it as “sufficient quantities and satisfactory quality.”
- The debate of whether 25% higher cost pertains to the total project cost or just the products needed.
- Finally, there is an issue of being "inconsistent with the public interest." This can be interpreted in a variety of ways but has never been used to challenge this act.
This act is meant to ensure that American businesses reap the benefits of the Obama Administration’s investments in transportation and for construction contractors, subcontractors and suppliers to help stabilize the American economy.
As an organization that has a role in the construction industry, we hope this act will help level our economy and generate an increased demand for these products in order to benefit those that supply the goods needed to improve our community.
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