2023-02617. Guidance for Grants and Agreements

AGENCY:

Office of Federal Financial Management, Office of Management and Budget.

ACTION:

Proposed rule; notification of proposed guidance.

SUMMARY:

The Office of Management and Budget (OMB) is proposing to revise OMB Guidance for Grants and Agreements. The proposed revisions are limited in scope to support implementation of the Build America, Buy America Act provisions of the Infrastructure Investment and Jobs Act; and to clarify existing requirements. These proposed revisions provide further guidance on implementing these statutory requirements, and improve Federal financial assistance management and transparency.

DATES:

Comments are due March 13, 2023. Please note that all public comments received are subject to the Freedom of Information Act and will be posted in their entirety, including any personal and business confidential information provided. Do not include any information you would not like to be made publicly available.

ADDRESSES:

Comments on this proposal must be submitted electronically before the comment closing date to www.regulations.gov.

FOR FURTHER INFORMATION CONTACT:

Please contact Dede Rutberg, Office of Management and Budget, 202-881-7359, or via email (preferred) at [e-mail].

SUPPLEMENTARY INFORMATION:

Background

On November 15, 2021, President Biden signed into law the Infrastructure Investment and Jobs Act (“IIJA”), Public Law 117-58, which includes the Build America, Buy America Act (“the Act”). The Act required by May 14, 2022—180 days after the enactment of the IIJA—the head of each covered Federal agency shall ensure that “none of the funds made available for a Federal financial assistance program for infrastructure may be obligated for a project unless all of the iron, steel, manufactured products, and construction materials used in the project are produced in the United States.” The Act affirms, consistent with Executive Order 14005, Ensuring the Future Is Made in All of America by All of America's Workers (“the Executive order”), this Administration's priority to “use terms and conditions of Federal financial assistance awards to maximize the use of goods, products, and materials produced in, and services offered in, the United States.”

The Act provides statutory authorities for the Made in America Office (MIAO) in OMB to maximize and enforce compliance with Made in America Laws. On April 18, 2022, OMB released M-22-11 Initial Implementation Guidance on Application of Buy America Preference in Federal Financial Assistance Programs for Infrastructure (OMB Guidance), which provides implementation guidance to Federal agencies on the application of: (1) a “Buy America” preference to Federal financial assistance programs for infrastructure; and (2) a transparent process to waive such a preference, when necessary and consistent with the law. The OMB Guidance also provides “preliminary and non-binding” guidance on the definition of construction materials, while OMB obtained stakeholder input on potential refinement of that definition and standards for manufacturing processes.

OMB is proposing a new part 184 in 2 CFR chapter I to support implementation of the Act, and clarify existing requirements within 2 CFR 200.322. The proposed revisions are intended to improve uniformity and consistency in the implementation of “Build America, Buy America” (BABA) requirements across the Government.

OMB proposes these revisions after consultation and in collaboration with agency representatives. In addition, OMB solicited feedback from the public and the broader Federal financial assistance community through a Notice of Listening Sessions and Request for Information (87 FR 23888) published on April 21, 2022, for construction materials. OMB made changes to the proposed revisions based on feedback received, as appropriate. OMB also considered feedback from requests for information published by the Department of Transportation on July 28, 2022 (87 FR 45396), and the Department of Housing and Urban Development on June 1, 2022 (87 FR 33193).

Changes Proposed by OMB and Expected Impact

OMB is proposing a new part 184 in 2 CFR chapter I and revisions to 2 CFR 200.322, Domestic preferences for procurements. The revision adds a new part addressing the Buy America Preference for all awards with infrastructure expenditures set forth in section 70914 of the Act. The new part generally aligns with OMB Guidance provided in OMB memorandum M-22-11. The new part also provides definitions for the purposes of 2 CFR part 184 and a common framework for applying Buy America Preferences to Federal Financial Assistance. In so doing, these revisions will provide consistent implementation of Buy America requirements for infrastructure projects Government-wide.

The new part 184 includes guidance for determining the cost of manufactured products, and proposes to use the definition of “cost of components” in the Federal Acquisition Regulation (FAR) (48 CFR 25.003) that is used for Federal procurement. Using this definition of “cost of components” for determining the cost of manufactured products for Federal Financial Assistance aims to provide consistent and clear market requirements for industry to meet one standard for determining the cost of components of manufactured products. OMB is soliciting specific feedback on guidance proposed in this section.

OMB is required by the Act to issue standards that define “all manufacturing processes” in the case of construction materials. While OMB memorandum M-22-11 provides “preliminary and non-binding” guidance on the definition of construction materials, the new part 184 includes OMB's proposed standards for “all manufacturing processes” for the manufacture of construction materials. These proposed standards are based on industry feedback, agency consultation, and market research conducted for each construction material.

OMB is proposing to modify 2 CFR 200.322 to direct the Federal agency to the new part in chapter I (2 CFR part 184) for guidance on all awards that include infrastructure projects.

Executive Orders 12866 and 13563

Executive Orders (EOs) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). This is not a significant action under E.O. 12866.

Paperwork Reduction Act

This guidance does not contain a requirement for information collection and thus the Paperwork Reduction Act does not apply.

Request for Comments Regarding Proposed 2 CFR Part 184 Amendments

OMB requests public comment on the proposed guidance. Public comments are particularly invited on:

• (1) Cost of components. In determining the “cost of components” for manufactured products for purposes of this guidance, should OMB adopt a definition based on the definition provided in the FAR at 48 CFR 25.003?

○ We note that under 48 CFR 25.003, Cost of components means—

1. For components purchased by the contractor, the acquisition cost, including transportation costs to the place of incorporation into the end product or construction material (whether or not such costs are paid to a domestic firm), and any applicable duty (whether or not a duty-free entry certificate is issued); or

2. For components manufactured by the contractor, all costs associated with the manufacture of the component, including transportation costs as described in item 1., plus allocable overhead costs, but excluding profit. Cost of components does not include any costs associated with the manufacture of the end product.

○ The definition for “cost of components” at 48 CFR 25.003 refers to components “purchased by the contractor” and “components manufactured by the contractor.” In the context of Federal financial assistance for an infrastructure project, is the “contractor” the appropriate subject for OMB to use in the standard proposed in this guidance? Should OMB delete “by the contractor” when used in the standard in this guidance? Should OMB insert an alternate subject in the standard? For example, the “manufacturer” or some other entity?

○ The definition for “cost of components” at 48 CFR 25.003 uses certain terms defined in the FAR but not in this proposed guidance including “end product” and “component.” “End product” is defined in the FAR to mean “those articles, materials, and supplies to be acquired for public use.” 48 CFR 25.003. “Component” is defined in the FAR to mean “an article, material, or supply incorporated directly into an end product or construction material.” Id. In the context of manufactured products, should OMB use the FAR definitions for “end product” and “component”? If OMB uses the FAR definitions for these terms, should it make any conforming changes for this guidance or changes to provide additional clarity?

○ The definition for “cost of components” at 48 CFR 25.003 includes a reference to “construction materials.” Because the standard proposed in this guidance will only apply to manufactured products, OMB proposes to delete the reference to construction materials.

○ OMB intends to adopt the “cost of components” standard from FAR for manufactured products in this guidance for Federal Financial Assistance with minimal modification to ensure that there are consistent and clear market requirements for industry to meet one standard for determining the cost of components of manufactured products. Is there a reason OMB should apply a different standard?

• (2) Other construction material standards. What, if any, additional construction materials should be included in the proposed guidance? OMB requests feedback on the inclusion of the following construction materials and proposed standards for manufacturing processes for those construction materials to determine if they are produced in the United States:

○ Coatings (e.g., paint, stain, and other coatings applied at the work site): All manufacturing processes, from initial mixing of pigments, resin, solvents, and additives through final canning or other packaging, occurred in the United States.

○ Brick: All manufacturing processes, from initial tempering and forming through cooling and de-hacking, occurred in the United States.

○ Engineered wood products: Are engineered wood products covered under the definition of “lumber,” or are engineered wood products a different category of construction material? If a separate category, should engineered wood products be defined as: “All manufacturing processes, from initial debarking through pressing, trimming, and sanding of glued sheets or boards, occurred in the United States.”

○ Other than those specifically listed, should other construction materials and subsequent manufacturing processes be included in the category of construction materials? We note that a general, catchall category of “other construction materials” is not a feasible option because it would not allow recipients to distinguish between “manufactured products” and “construction materials” when determining what standard applies to an item. If other specific construction materials should be included, please identify them and the standards that should apply to them.

• (3) Proposed definition of construction materials. Is additional guidance needed on the proposed definition of construction materials? In this proposed guidance, OMB only intends to classify materials that consist of only one or more of the construction materials listed in § 184.3(c)(1) as construction materials. However, OMB also seeks to avoid disqualifying construction materials with only de minimis additions of non-construction materials. For example, if de minimis additions of non-construction materials do not add significant value to, or substantially transform, the otherwise qualifying construction material, they should not change the categorization of the material under this guidance.

• (4) Definition for “predominantly” iron or steel items. To be consistent with certain existing Buy America and Buy American laws and policies, or for other reasons, should OMB adopt a definition of “predominantly” iron or steel items? Other reasons for providing such a definition may include efficiency and to help differentiate between categories of products. What, if any, definition of the term “predominantly” should be provided in this guidance in the case of iron or steel products, as reflected in the definitions of “manufactured products” and “iron and steel products” in § 184.3 of this guidance. OMB is specifically interested in feedback on whether it should adopt a definition of the term “predominantly” similar to the definition of the term “predominantly of iron or steel or a combination of both” in the FAR at 48 CFR 25.003 so that Federal procurement requirements through the FAR are aligned with the uniform guidance in order to reduce burden on industry. The definition of “predominantly of iron or steel or a combination of both” in the FAR at 48 CFR 25.003 means that the cost of the iron and steel content exceeds 50 percent of the total cost of all its components; and also addresses the meaning of “the cost of iron and steel.”

• (5) How to distinguish between categories of products. Is further guidance needed on how to distinguish between steel or iron products, manufactured products, and construction materials? For example, OMB Guidance explained that items that consist of two or more of the listed construction materials that have been combined together through a manufacturing process, and items that include at least one of the listed construction materials combined through a manufacturing process with a material that is not listed as a construction material, should be treated as manufactured products, rather than as construction materials. Relative to the OMB Guidance, OMB has proposed a modified approach in this guidance for distinguishing among categories of products. That approach is set forth in the proposed definitions under § 184.3 and in particular under the definition for construction materials at § 184.3(c). OMB seeks feedback on the approach proposed in this guidance relative to the approach in the earlier OMB Guidance.

• (6) Meaning of composite building materials. The definition of “construction materials” in § 184.3 of this proposed guidance includes “composite building materials” as an example of “plastic and polymer-based products.” This is based on the congressional findings on “common construction materials” in section 70911(5) of the Act. Section 184.6 of the proposed guidance includes “composite building materials” as a stand-alone category of “construction materials.” Should OMB include “composite building materials” as a sub-category of plastic and polymer-based products or as a stand-alone category? Is further guidance needed on the meaning of the term to distinguish it from “plastic and polymer-based products” in general? If additional guidance is needed, how should “composite building materials” be defined?

• (7) Fiber optic cables and optical fibers. Congress identified the elements of a completed fiber optic cable as construction materials for which all manufacturing processes must occur in the United States. The definition of “construction materials” in § 184.3 of this proposed guidance includes “polymers used in fiber optic cables” as an example of “plastic and polymer-based products.” This is based on the congressional findings on “common construction materials” in section 70911(5) of the Act. OMB also proposes in this guidance that the final fiber optic cable and optical fibers be treated as construction materials. Sections 184.3 and 184.6 of the proposed guidance include “fiber optic cable” and “optical fibers” as two stand-alone categories of “construction materials.” Is there any reason the standards in § 184.6 of this proposed guidance should be applied differently for optical fibers that include both plastic and polymer-based components and glass components? Is further guidance needed on the meaning of the terms “fiber optic cable” and “optical fibers”?

• (8) Standards applicable to optical fiber and optic glass. The definition of “construction materials” in § 184.3 of this proposed guidance includes “optic glass” as an example of “glass products.” This is based on the congressional findings on “common construction materials” in section 70911(5) of the Act. Section 184.6 of the proposed guidance does not include a stand-alone category for “optic glass,” but does include a stand-alone category for “optical fiber.” Is any additional guidance needed on this topic?

• (9) Aggregates. Section 70917(c) of the Act provides that the term construction materials shall not include the following materials: (i) cement and cementitious materials; (ii) aggregates such as stone, sand, or gravel; or (iii) aggregate binding agents or additives (the “Excluded Materials”). However, the Act does not specify whether these Excluded Materials should be entirely excluded from coverage under Buy America Preferences. How should OMB treat Excluded Materials in the context of the manufactured product Buy America Preference under this guidance? For example, how should the guidance treat Excluded Materials made of a combination of raw materials or combined with other raw materials to create a material that has different properties than the properties of the individual raw materials? In defining manufactured products in this guidance in § 184.3, should OMB supplement the proposed definition by adding the standard under 2 CFR 176.140(a)(1), which defines a “manufactured good” as “a good brought to the construction site for incorporation into the building or work that has been—(i) Processed into a specific form and shape; or (ii) Combined with other raw material to create a material that has different properties than the properties of the individual raw materials.” That is, should OMB exclude raw aggregates (such as stone, sand, or gravel) unless they have been processed into a specific form or shape or combined with other raw materials, such as combining them with cement powder and water to produce precast concrete products? How should OMB treat cement and cementitious materials before they are processed into a specific form and shape?

• (10) Specific sections of proposed guidance. Please provide suggestions on specific sections of the proposed guidance. Please provide clarity as to the section of the guidance that each comment is referencing by beginning each comment with the section number in brackets. For example; if the comment is on 2 CFR 184.1 include the following before the comment: 184.1.

• (11) Reducing burden on recipients. Please provide suggestions for reducing burden for recipients.

List of Subjects

2 CFR Part 184

• Administration of Federal financial assistance
• Administrative practice and procedure
• Federal financial assistance programs

2 CFR Part 200

• Administration of Federal financial assistance
• Administrative practice and procedure
• Federal financial assistance programs

For the reasons stated in the preamble, the Office of Management and Budget proposes to amend 2 CFR subtitle A as follows:

1. Add part 184, consisting of §§ 184.1 through 184.8, to read as follows:

PART 184—BUY AMERICA PREFERENCES FOR INFRASTRUCTURE PROJECTS

184.1

Purpose of this part.

184.2

Applicability.

184.3

Definitions.

184.4

Applying the Buy America Preference to a Federal award.

184.5

Determining the cost of components for manufactured products.

184.6

Construction material standards.

184.7

Federal awarding agency's issuance of a Buy America Preference waiver.

184.8

Exemptions to the Buy America Preference.

Authority: Pub. L. 117-58, 135 Stat. 429.

§ 184.1

Purpose of this part.

This part provides guidance to Federal awarding agencies on the implementation of the Buy America Preference applicable to Federal financial assistance set forth in part I of subtitle A, Buy America Sourcing Preferences, of the Build America, Buy America Act included in the Infrastructure Investment and Jobs Act (Pub. L. 117-58) at division G, title IX, subtitle A, part I, sections 70912 through 70917. Section 70914 of the Build America, Buy America Act requires the head of each Federal agency to ensure that none of the funds made available for a Federal award for an infrastructure project may be obligated unless all of the iron, steel, manufactured products, and construction materials used in the project are produced in the United States.

§ 184.2

Applicability.

This part applies to a Federal award for an infrastructure project only to the extent that a Buy America Preference meeting or exceeding the requirements of section 70914 of the Build America, Buy America Act did not apply to iron, steel, manufactured products, and construction materials in the Federal financial assistance program under which the Federal award is provided before November 15, 2021.

§ 184.3

Definitions.

Terms not defined in this part shall have the same meaning as provided in 2 CFR part 200, subpart A. As used in this part:

Build America, Buy America Act means division G, title IX, subtitle A, part I, sections 70901 through 70927 of the Infrastructure Investment and Jobs Act (Pub. L. 117-58).

Buy America Preference means the “domestic content procurement preference” set forth in section 70914 of the Build America, Buy America Act, which requires the head of each Federal agency to ensure that none of the funds made available for a Federal award for an infrastructure project may be obligated unless all of the iron, steel, manufactured products, and construction materials used in the project are produced in the United States.

Construction materials means articles, materials, or supplies incorporated into an infrastructure project that consist of only one or more of the following materials, except as provided in paragraph (2) of this definition:

(1)(i) Non-ferrous metals;

(ii) Plastic and polymer-based products (including polyvinylchloride, composite building materials, and polymers used in fiber optic cables);

(iii) Glass (including optic glass);

(iv) Fiber optic cable;

(v) Optical fiber;

(vi) Lumber; or

(vii) Drywall.

(2) For an item that consists only of a combination of one or more of the construction materials listed in paragraph (1) of this definition and binding agents, any binding agents shall be disregarded, and each construction material must meet the Buy America Preference standard defined in § 184.6.

Infrastructure project is any activity related to the construction, alteration, maintenance, or repair of infrastructure in the United States regardless of whether infrastructure is the primary purpose of the project.

Iron or steel products means articles, materials, or supplies incorporated into an infrastructure project that consist wholly or predominantly of iron, steel, or both.

Manufactured products means articles, materials, or supplies incorporated into an infrastructure project that:

(1) Do not consist wholly or predominantly of iron or steel or both; and

(2) Are not categorized as a construction material (as defined in this section).

Produced in the United States means the following, for:

(1) Iron and steel products. All manufacturing processes, from the initial melting stage through the application of coatings, occurred in the United States.

(2) Manufactured products. (i) The product was manufactured in the United States; and

(ii) The cost of the components of the manufactured product that are mined, produced, or manufactured in the United States is greater than 55 percent of the total cost of all components of the manufactured product, unless another standard for determining the minimum amount of domestic content of the manufactured product has been established under applicable law or regulation. The costs of components of a manufactured product are determined according to § 184.5.

(3) Construction materials. All manufacturing processes for the construction material occurred in the United States. See § 184.6 for more information on the meaning of “all manufacturing processes” for specific construction materials.

§ 184.4

Applying the Buy America Preference to a Federal award.

(a) The Buy America Preference applies to awards where funds are appropriated or otherwise made available for infrastructure projects in the United States, regardless of whether infrastructure is the primary purpose of the award.

(b) All Federal awards with infrastructure projects must include the Buy America Preference in the terms and conditions. The Buy America Preference must be included in all subawards, contracts and purchase orders for the work performed, or products supplied under the award. The terms and conditions of a Federal award flow down to subawards to subrecipients unless a particular section of the terms and conditions of the Federal award specifically indicate otherwise.

(c) Infrastructure encompasses public infrastructure projects which includes at a minimum, the structures, facilities, and equipment for, in the United States, roads, highways, and bridges; public transportation; dams, ports, harbors, and other maritime facilities; intercity passenger and freight railroads; freight and intermodal facilities; airports; water systems, including drinking water and wastewater systems; electrical transmission facilities and systems; utilities; broadband infrastructure; and buildings and real property; and structures, facilities, and equipment that generate, transport, and distribute energy including electric vehicle (EV) charging.

(d) The Federal awarding agency should interpret the term “infrastructure” broadly and consider the description provided in paragraph (c) of this section as illustrative and not exhaustive. When determining if a particular project of a type not listed in the description in paragraph (c) constitutes “infrastructure,” the Federal awarding agency should consider whether the project will serve a public function, including whether the project is publicly owned and operated, privately operated on behalf of the public, or is a place of public accommodation, as opposed to a project that is privately owned and not open to the public.

§ 184.5

Determining the cost of components for manufactured products.

In determining whether the cost of components for manufactured products is greater than 55 percent of the total cost of all components, use the following definitions:

(a) For components purchased by the manufacturer, the acquisition cost, including transportation costs to the place of incorporation into the end product (whether or not such costs are paid to a domestic firm), and any applicable duty (whether or not a duty-free entry certificate is issued); or

(b) For components manufactured by the manufacturer, all costs associated with the manufacture of the component, including transportation costs as described in paragraph (a) of this section, plus allocable overhead costs, but excluding profit. Cost of components does not include any costs associated with the manufacture of the end product.

§ 184.6

Construction material standards.

The Buy America Preference applies to the following construction materials used in infrastructure projects. Each construction material is followed by a standard for the material to be considered “produced in the United States.”

(a) Non-ferrous metals. All manufacturing processes, from initial smelting or melting through final shaping, coating, and assembly, occurred in the United States.

(b) Plastic and polymer-based products. All manufacturing processes, from initial combination of constituent, plastic or polymer-based inputs until the item is in a form in which it is delivered to the work site and incorporated into the project, occurred in the United States.

(c) Composite building materials. All manufacturing processes, from initial combination of constituent materials until the composite material is in a form in which it is delivered to the work site and incorporated into the project, occurred in the United States.

(d) Glass. All manufacturing processes, from initial batching and melting of raw materials through annealing, cooling, and cutting, occurred in the United States.

(e) Fiber optic cable. All manufacturing processes, from the initial preform fabrication stage through fiber stranding and jacketing, occurred in the United States.

(f) Optical fiber. All manufacturing processes, from the initial preform fabrication stage through fiber stranding, occurred in the United States.

(g) Lumber. All manufacturing processes, from initial debarking through treatment and planing, occurred in the United States.

(h) Drywall. All manufacturing processes, from initial blending of mined or synthetic gypsum plaster and additives through cutting and drying of sandwiched panels, occurred in the United States.

§ 184.7

Federal awarding agency's issuance of a Buy America Preference waiver.

(a) A Federal awarding agency may waive the application of the Buy America Preference in any case in which it finds that:

(1) Applying the Buy America Preference would be inconsistent with the public interest (a “public interest waiver”);

(2) Types of iron, steel, manufactured products, or construction materials are not produced in the United States in sufficient and reasonably available quantities or of a satisfactory quality (a “nonavailability waiver”); or

(3) The inclusion of iron, steel, manufactured products, or construction materials produced in the United States will increase the cost of the overall project by more than 25 percent (an “unreasonable cost waiver”).

(b) A request from a non-Federal entity to waive the application of the Buy America Preference must be provided to the Federal awarding agency in writing. Federal awarding agencies shall provide waiver request submission instructions and guidance on the format, contents, and supporting materials required for waiver requests from non-Federal entities.

(c) Before issuing a waiver, the Federal awarding agency must:

(1) Prepare a detailed written explanation for the proposed determination to issue the waiver, including for those proposed waivers based on a request from a non-Federal entity;

(2) Make the proposed waiver and the detailed written explanation publicly available in an easily accessible location on a website designated by the Federal awarding agency and the Office of Management and Budget;

(3) Provide a period of not less than 15 calendar days for public comment on the proposed waiver; and

(4) Before finalizing a waiver, submit the waiver determination to the Office of Management and Budget Made in America Office for final review pursuant to Executive Order 14005 and sections 70923(b)(2) and 70937 of the Infrastructure Investment and Jobs Act (Pub. L. 117-58).

(d) The review of existing waivers of general applicability are subject to a minimum 30-day public comment period.

§ 184.8

Exemptions to the Buy America Preference.

(a) The Buy America Preference does not apply to expenditures for assistance authorized under section 402, 403, 404, 406, 408, or 502 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5170a, 5170b, 16 5170c, 5172, 5174, or 5192) relating to a major disaster or emergency declared by the President under section 401 or 501, respectively, of such Act (42 U.S.C. 5170, 5191) or pre and post disaster or emergency response expenditures.

(b) “Pre and post disaster or emergency response expenditures” consist of expenditures for financial assistance that are:

(1) Authorized by statutes other than the Stafford Act, 42 U.S.C. 5121 et seq.; and

(2) Made in anticipation of or response to an event or events that qualify as an “emergency” or “major disaster” within the meaning of the Stafford Act, 42 U.S.C. 5122(1), (2).

PART 200—UNIFORM ADMINISTRATIVE REQUIREMENTS, COST PRINCIPLES, AND AUDIT REQUIREMENTS FOR FEDERAL AWARDS

2. The authority citation for part 200 continues to read as follows:

Authority: 31 U.S.C. 503.

3. Amend §  200.322 by adding paragraph (c) to read as follows:

§ 200.322

Domestic preferences for procurements.

* * * * *

(c) Federal awarding agencies providing Federal financial assistance for infrastructure projects must comply with the Buy America Preferences set forth in 2 CFR part 184.

Deidre A. Harrison,

Deputy Controller, Office of Federal Financial Management.