After months of negotiations and returning to the drawing board, President Joe Biden's long-awaited $1.2 trillion bipartisan infrastructure framework, the Infrastructure Investment and Jobs Act was passed by Congress on Nov. 6, 2021, and signed into law on Nov. 15, 2021.
The law opens up access to new sources of revenue and opportunities for many industries, particularly for businesses involved in complex construction projects such as roads, bridges and tunnels, traditional and renewable energy, drinking and wastewater delivery, and information technology infrastructure.
With the new opportunities this year and beyond, however, dangers will increase.
The loosely enforced and iron-and-steel-focused domestic preference policies have been tightened to increase the domestic content and manufacturing requirements down the infrastructure supply chain. The policies have broadened beyond iron and steel to drywall, glass and plastic so that, in essence, everything in the supply chain except aggregate is included.
This year, there will be new agency rules across all funded agencies for domestic preference compliance, likely implementing the most aggressive proof-of-compliance obligations currently in force in any agency and department. There will also be more robust enforcement in the Made in America Office. For the next five-plus years, there will be more oversight at the project level for proof of compliance.
The future could bring bid protests of large project awards that do not clearly demonstrate compliance with Buy American policies, supply chain and manufacturing audits by the awarding agencies and the Made in America Office, an office tasked with the sole job of increasing domestic manufacturing.
It could also bring criminal and civil False Claims Act investigations spurred by the U.S. Department of Justice, that single-minded agency egged on by the bounties promised to qui tam relators, whether competitors, private entrepreneurs or contractors' own employees.
Domestic preference initiatives are not new and can be traced back as far as the 1930s. In the federal procurement area, the Buy American Act and associated Trade Agreements Act regime are codified in Part 25 of the Federal Acquisition Regulation.
Those contract clauses are generally consistent across civilian and defense procurement, and contracting officers, inspectors general and the private qui tam industry have led a successful campaign to encourage compliance with the manufacturing and substantial transformation rules for domestic and trade partner supplies and construction materials.
Likewise, FAR Part 25 has always applied to products beyond iron and steel, to all elements of federal supply and construction material acquisition. That said, the domestic-preference procurement requirements have been increasing since the middle of the Trump administration.
On Jan. 31, 2019, former President Donald Trump issued Executive Order No. 13858 on strengthening Buy American preferences for infrastructure projects. The executive order emphasized the importance of compliance with the Buy American Act in the federal procurement process. The executive order also reiterated the Trump administration's desire to prioritize domestic sourcing and asked agencies to minimize the use of waivers and adhere to Buy American policies more strictly.
Months later, on July 15, 2019, Trump issued Executive Order No. 1388 for maximizing use of American-made goods, products and materials, which asked that the Federal Acquisition Regulatory Council consider revising and updating the FAR to best reflect the goals of the Buy American Act.
The July 2019 executive order sought to treat non-U.S. companies as if they were 20% to 30% more expensive than their actual cost during the contract bidding process as a way to give American companies a greater chance at winning the bid. This represented a price preference increase of 14% — from 6% to 20% — for larger businesses and an increase of 18% — from 12% to 30% — for small businesses.
Though there were significant changes in the procurement space, the federal assistance space remained largely unaffected.
Federal assistance is not the same as federal procurement. With federal assistance, the money is handed out to the states and other grantees, and primary enforcement responsibility is placed upon those recipients. By and large, the domestic preferences in federal assistance only apply to boost domestic production of iron, steel and manufactured products containing iron and steel.
Moreover, rather than codified in Title 2 of the Code of Federal Regulations to be applicable to all federal assistance, the domestic preference rules in federal assistance have been far narrower and spotty. The sources of these rules are many, including funding-specific statutes such as the 2009 American Recovery Act and agency-specific statutes such as the handful of statutes targeting U.S. Department of Transportation agencies.[1]
The multiplicity of statutory sources has led to significant variations in policy and enforcement. Within the DOT alone, the variations are striking. The Federal Aviation Administration does not have a single regulation on Buy American and has been heavily criticized for lax enforcement, which was highlighted in a report by the DOT Office of Inspector General in June 2021.[2]
The report notes that the FAA lacks an effective process for recording place of manufacture data, does not require its staff to assess and report on compliance, and does not adequately oversee post-award compliance.
By contrast, the Federal Transit Administration has a more robust Buy American set of policies and regulations. For example, it has a Buy American handbook requiring post-performance compliance auditing and documentation collection, just for rolling stock — e.g., buses — acquired with FTA funds.[3] The FTA even incorporated a regulation that allows bidders to effectively protest a supplier's or contractor's noncompliance, which includes a report back to the complainant with the results of the investigation.[4]
The result of these intra- and interagency differences has been that, in the federal assistance space, domestic preferences have done little to spur domestic manufacturing, with the lone possible exception of rolling stock and steel — though many would argue that waivers and workarounds remain that allow a substantial amount of foreign steel to find its way into our bridges, highways, tunnels, railways and airports.
Immediately upon taking office, Biden and his administration sought to focus on domestic preferences to spur manufacturing, and sought to increase this manufacturing through an infusion of funds. In his Jan. 25, 2021, Executive Order No. 14005 on ensuring the future is made in America by America's workers, Biden sought to appoint a senior leader to be in charge of the Made in America Office, and assured the public that the federal government would focus on investing in American-owned businesses.
The executive order's goals were to normalize and standardize waivers in procurement and assistance across the entire federal government and to increase attention to domestic preferences in federal assistance, where laws and regulations have historically been neglected.
Biden's bipartisan infrastructure framework sought to standardize and increase the requirements of domestic manufacturing in ways that the previous administration was not able to do. In April 2021, Biden opened the new Made in America Office, which promises greater enforcement and oversight of Made in America programs.
As a result of these changes, manufacturers and contractors should expect a consistent set of rules and regulations incorporated into their funding assistance agreements, as well as vendor and supplier contracts. Gone are the huge differences in interpretations of statutory language between departments, not to mention those between agencies of the same department.
Equally important, the domestic preferences will apply to all aspects of infrastructure product supply — everything from plastic to drywall, glass, lumber, electronics, and of course, iron and steel.[5] Indeed, everything except aggregates.[6]
Moreover, the definition of "produced" in the U.S. will be standardized across the government for iron and steel products — where all the manufacturing processes, from initial melting through application of coatings, must take place domestically — to all the aforementioned manufactured products — where final assembly must occur in the U.S. and 55% of the cost of components must also be domestic.[7]
Likewise, the Made in America Office's raison d'etre is to boost domestic manufacturing.[8] The new office will have every incentive to prove its effectiveness, especially in the early days of its reign.
As described in a Congressional Research Service report prepared for Congress earlier this year, for decades the civil FCA has been utilized by qui tam bounty hunters for recoveries of billions of dollars against contractors that misrepresent the domestic source and content in federal procurement.[9]
With the expansion of the scope of domestic preferences in federal assistance, combined with governmentwide rulemaking, we can expect an explosion in mandatory disclosures, routine and nonroutine audits, and sealed qui tam FCA cases enforced by the DOJ and inspectors general of the DOT, U.S. Department of Commerce and other agencies that fund the bipartisan infrastructure framework.
It is likely that we will not be able to truly measure the impact of Biden's Made in America policies and the infrastructure bill for years to come. However, one thing is certain: Passage of the bipartisan infrastructure framework promises to be one of the largest investments in physical infrastructure to date and promises to create more jobs in the U.S. than we have seen in years.
Those seeking to bid on projects stemming from the framework will need to remain alert to how the changes to domestic preferences will be implemented and enforced in the coming months and years.
Let us not forget that the framework is a double-edged sword that brings together the promise of great opportunity for American manufacturers and contractors while also bringing about the added entanglements of stricter compliance and oversight. As usual, the strings attached to these government funds might seem like — American-made — razor wire for the unwary.
[1] See, e.g., 23 U.S.C. § 313; 49 U.S.C. §§ 5323(j), 22905(a), 50101.
[2] U.S. Department of Transportation Office of Inspector General, FAA Report No. ZA2021026, "Gaps in Guidance, Training and Oversight Impede FAA's Ability to Comply with Buy American Laws" (June 2, 2021) (available at https://www.oig.dot.gov/sites/default/files/FAA%20Buy%20American%20Final%20Report_6-2-21.pdf).
[3] Federal Transit Administration Report No. 0106, "Conducting Pre-Award and Post-Delivery Audits for Rolling Stock Procurements" (Jan. 2017) (available at https://www.transit.dot.gov/sites/fta.dot.gov/files/docs/regulations-and-guidance/buy-america/58191/buy-america-handbook-rpt0106.pdf).
[4] 49 U.S.C. § 661.15.
[5] BIF § 70911(5).
[6] BIF § 70917(c)(1)-(2).
[7] BIF § 70912(6).
[8] BIF § 70923(b)(1).
[9] Congressional Research Service, "Qui Tam: An Abridged Look at the False Claims Act and Related Federal Statutes (Apr. 26, 2021) (available at https://sgp.fas.org/crs/misc/R40786.pdf).