Impact of the Build America, Buy America Act on Construction Industry

The Build America, Buy America Act (BABAA), enacted as part of the Infrastructure Investment and Jobs Act in 2021, aims to increase the utilization of American goods, services, and resources by the government. However, construction officials are raising concerns about the potential consequences of the upcoming regulations on the sourcing of products and materials for the industry. Today we will explore the possible price increases and limitations that contractors may face under the new legislation.

Uncertainty Surrounding Implementation

While the BABAA is already in effect, the practical and legal aspects of the regulations are yet to be finalized. Debates are ongoing among significant government agencies, including the U.S. Department of Transportation (US DOT), regarding the specific guidelines for implementation. Federal agency heads have the authority to propose waivers to the regulations, allowing the public to evaluate and provide feedback for a period of 15 days.

Contractors’ Concerns

Contractors in the construction industry are worried that the new regulations may lead to price hikes just as they are recovering from inflation and supply chain disruptions. The Associated General Contractors of America (AGC) reports that the majority of states currently accept tenders with disclaimers stating that contractors cannot guarantee compliance with anticipated Buy America rules. However, once the regulations are enforced, contractors fear that the availability of materials may be severely limited, driving up their prices.

Limitations on Materials and Goods

Officials from the AGC highlight that the new Buy America standards may impose strict limitations on the types of commodities contractors can utilize. They argue that the regulations are so stringent that they may even prevent the sale of products that require imported materials. For example, the regulations may demand that every component of a construction project, down to the smallest screw, be both manufactured and sourced domestically. This level of restriction could disrupt the supply chains that currently support construction projects.

Impact on Concrete Supply

One potential area of concern is the supply of concrete, a vital material in construction. AGC suggests that the US DOT may require that all aggregates and cement used in concrete originate from the United States. This restriction could significantly limit the supply of concrete since a substantial portion is currently imported, particularly from countries like Mexico. The potential reduction in available concrete could further escalate prices and cause delays in construction projects.

Criticism of the Legislative Approach

Stephen E. Sandherr, CEO of AGC, criticizes the legislative approach, stating that federal authorities are attempting to dismantle a diverse global supply chain for building supplies through legislative fiat. While there is a desire to increase domestic production, Sandherr points out that it will likely take years, if ever, for all goods produced in American factories to be obtained domestically as the administration aims to compel.

The upcoming implementation of the Build America, Buy America Act raises concerns within the construction industry about potential price increases and limitations on the availability of materials. Contractors fear that the regulations may disrupt supply chains, restrict the use of certain products, and lead to higher construction costs. The ongoing debates among government agencies indicate that further clarity is needed regarding the practical implementation of the guidelines, as well as potential waivers to accommodate industry concerns.