Mixed views on ‘Buy America’

Columns - Editor’s Letter

While the U.S. steel industry has embraced the Buy America provisions, the construction industry has not.

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April 29, 2022

The White House issued guidance to federal agencies April 18 that outlines obligations to use domestic steel for infrastructure projects under the Build America, Buy America Act, which was part of the $1.2 trillion Infrastructure Investment and Jobs Act. While the United States steel industry has embraced the Buy America provisions, the construction industry has not.

The Buy America provision applies to all taxpayer-funded infrastructure and public works projects. The guidance, released by the Office of Management and Budget, also aligns with the “Made in America” executive order that President Joe Biden issued shortly after coming into office.

Under the Build America, Buy America Act, by May 14, the head of each covered federal agency must ensure that projects receiving federal funds use U.S.-produced iron and steel. According to the guidance, “This means all manufacturing processes, from the initial melting stage through the application of coatings, occurred in the United States.”

The head of a federal agency can waive the application of a Buy America preference if the types of iron or steel are not produced in the U.S. in “sufficient and reasonably available quantities or of a satisfactory quality” or if their inclusion increases the cost of the project by more than 25 percent.

The American Iron and Steel Institute (AISI), Washington, supports the guidance. AISI President and CEO Kevin Dempsey released a statement that reads in part, “As some federal programs do not apply Buy America requirements for the procurement of iron and steel products, we are pleased that today’s initiative begins the process to remedy this situation by providing clear guidance to federal agencies for adopting appropriate Buy America requirements for all federally funded infrastructure projects.”

However, the guidance has not gone over well in the construction sector, which has been dealing with escalating costs for building materials.

The CEO of the Arlington, Virginia-based Associated General Contractors of America (AGC) Stephen E. Sandherr released a statement that reads in part: “It makes no sense to place unrealistic limitations on firms’ ability to source key materials at a time when prices for those products are skyrocketing and supplies are limited.”

He adds, “Whatever minimal gains in domestic construction material production this new mandate might temporarily generate will be offset by the increased cost of constructing new projects, slower schedules to build those projects and the fact some key projects could be hamstrung from moving forward.”

Ken Simonson, AGC chief economist, says prices climbed at double-digit rates for many building materials year over year in February. Further increases could undermine demand for some construction projects and the sector’s recovery.