Michael Peloso and Dan McCrave-Bessette are director and associate director, respectively, in the practice of JS HELD’s construction advisory services, a Global Consulting Firm based in Jericho, New York. Opinions are typical of the authors.
The Federal Road Administration has issued a final rule to implement the Build America Law, Buy America, which will affect the financial transport projects for federal dollars.
Although the rule can be adjusted after a regulatory freezing period, the Trump administration has stated that it can strengthen the purchase requirements of America.
This final rule, published on January 14 and in force on March 17, terminates the general resignation of manufactured products. To terminate this resignation will require contractors to certify that the products used in projects with federal funding meet two main requirements: the final assembly of products is produced in the United States and that the manufactured products are composed of most national content per cost.
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Courtesy of Js Held
The new rule is part of the Build America Law, Buy America, enacted by 2021 as part of the Investment and Infrastructure Investment Office Law, and aims to align with federal goals to strengthen household supply chains and reduce confidence in foreign materials. To meet Buy America’s requirements, products must satisfy the following criteria:
- For projects forced on October 1 or after October 1, 2025 – the Final Product Assembly must occur in the United States.
- For projects forced on October 1 or after October 1, 2026, products must contain at least 55% of domestic content per cost.
While these changes are intended to prioritize domestic manufacturing, there may be implications for the cost, calendar and project compliance. The following is what the construction professionals on the rule, their requirements and possible impacts, should be understood.
Potential impacts of rescinded resignation
The duration of the design and construction life cycle of projects is usually longer and usually covers different political environments. Due to this, the magnitude and calendar of these changes can have several impacts, specifically if later in the life cycle of the project.
In some cases, this will lead to expensive disputes of the unpayed change orders, mediation, arbitration or long litigation. The renunciation of the general resignation of the manufactured products will have implications in the cost, calendar and quality of federally funded projects.
Cost: The change in the requirements could affect the project budgets due to the increases in both contracting and compliance costs. This can lead to the lower margins, change the orders and disputes of subcontractors, the ability to link additional projects and financial state pressures.
As contractors and suppliers are forced to use domestic sources for manufactured products, the availability of materials, at least in the short term, is likely to be limited, causing an increase in demand and increasing prices. The additional requirements will also result in the need for larger resources to ensure compliance with Buy America’s requirements on a wider range of products than historically needed.
Contractors and suppliers must consider the budget implications of these additional resources during the project planning stage in order to prevent subsequent expenses.
Programming: Changes in resignation and new requirements may also affect the entire product recruitment cycle, including purchase, engineering, manufacturing and delivery.
Dan McCrave-Bassette
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With the potential of more restrictions on the availability of products, the supply chain will lead to longer efforts than normal to identify appropriate national suppliers instead of foreign companies. An additional time must be assigned to ensure these companies to ensure compliance with the purchase requirements and the technical specifications of Buy America.
Contractors must prepare in the planning phases with additional risk management planning and contingencies for extended contracting time or supply chain problems compared to existing product sources. A cost-benefit analysis must be taken into account when deciding to make a resignation request, since processing times and approvals are not guaranteed.
Some states, such as Rhode Island, have already updated specifications to include the language that any delay caused by the resignation process will be the sole responsibility of the contractor. In addition to the costs, contractors and suppliers it would be advisable to evaluate these additional time considerations associated with these processes during the development of early programs, including the pre-projection and project reference lines.
Quality: Finally, in addition to the calendar and calendar concerns, contractors and suppliers need to keep vigilantes to ensure compliance with the product of the technical requirements as new sellers and new products enter the market or the lower options are available.
The contractors will increase their quality guarantee and control efforts to ensure that the due diligence of the products continues to fulfill the quality standards required by the contract, the specifications and the standards of the industry.
Like the cost and the calendar, it would be prudent that contractors and suppliers evaluate what the additions or changes to be made to their quality management programs to ensure that the products from domestic sources meet the requirements of the contract. Not only is the requirement of contracts and industry, but the failures that occur due to quality problems can lead to reputational or potentially criminal problems.
Risk mitigation at each phase of the project
It is important to consider what steps can be taken by contractors and suppliers and when they meet these requirements. Specifically, it is worth considering the pre-projection stage and the stage of the active project, as well as the way to approach the management of change.
Pre-Bid Stage: Contractors and suppliers should begin a review of their existing supply chains. This review must focus on identifying possible challenges to meet the requirements.
From this evaluation, contractors and suppliers should participate as soon as possible with the appropriate interest groups to determine what steps to be taken to maintain -fulfilling. In support of this process, it can be worth an analysis of alternative suppliers.
Finally, contractors and suppliers must ensure that they clearly communicate the changes in the contracting requirements through their pre-projections contracts and conferences.
Active construction stage: Communication between contractors and their suppliers will be key to ensuring compliance during the active construction stage of projects. Contractors and suppliers must be diligent in sharing information on costs and calendar as the work progresses through the phases of engineering, recruitment and construction.
In support of this communication, contractors and suppliers would be well served to establish or strengthen existing monitoring systems for the material and implement inspections to the site to confirm compliance.
Change management: In the event that changes are required to maintain compliance, it is essential that a protocol be established to identify, evaluate and approve material substitutions. It is of the interest of all stakeholders disciplined to maintain the documentation related to all certifications, resignations and modifications of contracts.
Looking forward
The FHWA expansion of Buy America’s requirements reflects a broader federal government commitment to strengthen the domestic supply and manufacturing chains. However, that
It also requires important adjustments to the project’s interest group, as they consider the cost, time and quality of the projects in which they choose to participate.
The resignation of the general resignation of the manufactured products will consequences that contractors and suppliers should begin planning as soon as possible. Although the rule is kept in a regulatory freezing, contractors and suppliers would do well to consider the implications for future projects.
This includes an additional approach to early and continuous risk management to identify the impacts of the cost, programming and quality and work with suppliers to understand the restrictions on the supply chain. This will be critical of understanding and mitigating these impacts
Dan Mcrave-Besste also contributed to this article.
