CARH’S BROADCAST E-MAIL – Regulatory Update
February 7, 2023
The Build America, Buy America Act (BABAA), enacted as part of the Infrastructure Investment and Jobs Act on November 15, 2021, focuses on maximizing the federal government’s use of services, goods, products, and materials produced and offered in the United States. As previously reported by CARH, Rural Development’s (RD) implementation waiver for the BABAA expired on February 3, 2023. Moving forward, all non-federal organizations receiving RD financial assistance for infrastructure projects will be required to exclusively use iron, steel, manufactured products, and construction materials manufactured or produced in the U.S.
However, it’s important to note that “for-profit organizations” are not considered “non-federal entities” under BABAA pursuant to the Memorandum for Heads of Executive Departments and Agencies provided by the Office of Management and Budget, dated April 18, 2022, and enclosed here. Earlier this week, CARH also confirmed with RD senior leadership that the BABAA requirements only apply to “non-profit” organizations or instrumentalities of state and local government. Additionally, RD confirmed that a “for-profit” limited partnership with a “non-profit” entity as its general partner would not be subject to BABAA requirements as long as the ownership structure meets the definition of a “for-profit” entity under BABAA.
BABAA only applies to articles, materials, and supplies that are consumed in, incorporated into, or affixed to an infrastructure project. As such, it does not apply to tools, equipment, and supplies, such as temporary scaffolding, brought to the construction site and removed at or before the completion of the infrastructure project. BABAA does not apply to equipment and furnishings, such as movable chairs, desks, and portable computer equipment, that are used at or within the finished infrastructure project but are not an integral part of the structure or permanently affixed to the infrastructure project.
Rural Housing Service programs covered by the law are “Rural Housing Site Loans and Self-Help Housing Land Development Loans, Rural Rental Housing Loans (Section 515), Section 538 Rural Rental Housing Guaranteed Loans, The RD Multi-Family Housing Revitalization Demonstration Program (MPR), and Community Facilities Loans and Grants. RD has confirmed to CARH that RD’s Rural Rental Assistance Program (Section 521) does not apply to BABAA.
A Project is subject to BABAA if:
- The Project is for a Non-Federal Entity (Includes any state government, local government, Indian Tribe, Institution of higher education (IHE) or Nonprofit organization).
- The Project is for infrastructure such as structures, facilities and equipment for certain project types including buildings and real property, which RD has confirmed includes multifamily properties but again only if the owner of the property is a non-profit as outlined earlier in this email.
- The Project is for construction including altering, maintaining, or repairing.
USDA may waive the application of the domestic content procurement preference in the case of one of the following three exceptions:
- Nonavailability. The types of iron, steel, manufactured products, or construction materials are not produced in the U.S. in sufficient and reasonably available quantities or of a satisfactory quality; or
- Unreasonable Cost. The inclusion of iron, steel, manufactured products, or construction materials produced in the U.S. will increase the cost of the overall project by more than 25 percent.
- Public Interest. Applying the domestic content procurement preference would be inconsistent with public interest.
De Minimis, Small Grants and Minor Components Waiver include:
- De minimis (setting a threshold of 5% of project costs up to a maximum of $1,000,000)
- Small Grants (awards below the Simplified Acquisition Threshold which is currently $250,000)
- Minor Components
USDA agencies are responsible for processing and approving waivers by recipients. To the greatest extent practicable, waivers should be targeted to specific products and projects.
If a recipient receives funding from multiple federal agencies for a single project, the recipient must submit their waiver request to the federal awarding agency that contributes the greatest amount of federal funds for the infrastructure project. This agency will take the responsibility for coordinating with the other federal awarding agencies.
BABAA requires that USDA make a proposed waiver available for a 15-day public comment period. Once the public comment period has closed, USDA will consider any comments it received in its evaluation of the waiver request. RD and The Office of Management & Budget will review all supported waivers. If no solutions meet the project requirements, the final approved waiver will be issued and posted publicly.
USDA has also created a webpage, to assist USDA agencies, staff offices, award recipients, and subrecipients by providing important information about BABA Act requirements, guidance documents on the waiver and comment process, and the full list of USDA waiver requests.
Please contact the CARH national office at email@example.com or 703-837-9001 should you have questions or concerns. For other news and information affecting the affordable rural housing industry, please visit the Newsroom on CARH’s website, www.carh.org.