Legal Alert

HUD Issues Limited Waivers of Build America, Buy America Act

by Georgi Banna
November 8, 2022

Summary

The U.S. Department of Housing and Urban Development (HUD) has released three proposed waivers to the Build America, Buy America Act (BABA) that limit the application of BABA to recipients of federal funds.

The Upshot

  • The De Minimis, Small Grant, and Minor Components waiver would exempt infrastructure projects that have a total cost at or below the simplified acquisition threshold (currently $250,000). Small grants of federal financial assistance are also excluded. BABA also would be waived for minor components of infrastructure projects.
  • The Exigent Circumstances waiver excludes projects using federal financial assistance to respond quickly to address critical needs to ensure protection of life, safety, and property of residents and communities.
  • The Phased Implementation waiver provides for an additional 90-day extension of the implementation date of the BABA Buy America Preference requirement, except for Community Development Block Grant funds, which would result in a new implementation date no sooner than February 13, 2023.

The Bottom Line

HUD is currently accepting comments on all three proposed waiver notices. Comments are due November 15, 2022, for the De Minimis, Small Grant, and Minor Components and Exigent Circumstances waivers; and November 17, 2022, for the Phased Implementation waiver.

In the past week, the U.S. Department of Housing and Urban Development (HUD) has released three proposed waivers to the Build America, Buy America Act (BABA) that limit the application of BABA to recipients of federal funds.

BABA was passed as part of the Infrastructure Investment and Jobs Act (IIJA) and created a Buy America Preference (BAP) that requires recipients of federal financial assistance to purchase iron, steel, manufactured products, and construction materials produced in the United States for infrastructure projects. The definition of infrastructure includes buildings, real property structures, and equipment in the United States. To be considered “produced” in the United States, the entire process for manufacturing of steel and iron (from melting to applying coatings) and construction materials must occur in the United States and at least 55 percent of the total cost of the components of manufactured products must be mined, produced, or manufactured in the United States.

Even though the IIJA did not specifically provide new funding for HUD housing programs, BABA and its BAP do apply to a number of HUD’s programs. In a January 2022 Federal Register notice, HUD listed the HUD funding programs that qualify as federal financial assistance and must comply with BABA. They include, but are not limited to, Public Housing Capital Fund, Community Development Block Grants (CDBG), Housing Trust Fund, HOME Investment Partnerships Program, Choice Neighborhood Planning and Implementation, Fair Housing program funds, Lead Hazard and Healthy Homes programs, and Office of Housing Project Rental Assistance Demonstration (PRA Demo) Program of Section 811 Supportive Housing for Persons with Disabilities and Supportive Service Demonstration Program for Elderly Housing. The full list of applicable programs can be found in Identification of Federal Financial Assistance Infrastructure Programs Subject to the Build America, Buy America Provisions of the Infrastructure Investment and Jobs Act, 87, FR 2894.

While HUD has provided this list of programs that are subject to the BABA requirements, HUD also has determined that there are no HUD programs that meet the statutory standard to exclude a program from the BABA requirements. HUD and the Office of Management and Budget (OMB) have stated that agencies should err on the side of over-inclusion and include programs that may be funding infrastructure. This HUD determination does not address whether the BABA requirements apply to Section 8 programs and Rental Assistance Demonstration (RAD) conversions. As additional guidance is provided by HUD, the Ballard Spahr Affordable Housing and Community Development team will share updated information.

BABA was initially to take effect on May 14, 2022, however HUD issued a general waiver that extended the implementation date of the BAP to November 15, 2022. HUD noted that it would continue to review BABA and may issue additional waivers. Accordingly, HUD issued three additional proposed waivers this week–De Minimis, Small Grant, and Minor Components; Exigent Circumstances; and Phased Implementation.

The De Minimis, Small Grant, and Minor Components waiver includes three key items. First, it would waive application of BABA to infrastructure projects that have a total cost at or below the simplified acquisition threshold (currently $250,000). Second, small grants of federal financial assistance are also excluded from the BABA requirements. A small grant is an award of funds from a federal entity to a non-federal entity that is at or below the simplified acquisition threshold. An example of a small grant would be the annual Public Housing Capital Funds Grant of $200,000 to a small or medium PHA. Third, BABA would be waived for minor components of infrastructure projects. A “minor component” is a non-domestically produced small component comprising no more than a total of five percent (to a cap of $1 million) of the total cost of the iron, steel, manufactured products, and construction materials used in the project. These waivers would be available for five years and HUD would have to review the waivers within the five year period and revoke, amend, or extend the waivers.

The Exigent Circumstances waiver excludes from the BABA requirements projects using federal financial assistance to respond quickly to address critical needs to ensure protection of life, safety, and property of resident sand communities. The remediation of defects impacting housing quality standards that HUD requires to be completed in 30 days or less are considered to meet the exigent circumstances standard. This waiver would be available for five years and HUD would have to review the waiver within the five-year period and revoke, amend, or extend the waiver.

The Phased Implementation waiver provides for an additional 90-day extension of the implementation date of the BABA BAP requirement, which would result in a new implementation date no sooner than February 13, 2023. There is a significant exception to this waiver: CDBG formula grants are not covered by the waiver. Thus CDBG funds obligated to participating jurisdictions on or after November 15, 2022, must comply with the BABA BAP requirement.

HUD is currently accepting comments as to the standards and content on all three proposed waiver notices with comments due on November 15, 2022, for the De Minimis, Small Grant, and Minor Components and Exigent Circumstances waivers; and November 17, 2022, for the Phased Implementation waiver.

Ballard Spahr is a national leader working at the forefront of the legal and business elements of affordable housing and community development, including the RAD program. Our attorneys ensure that clients get the most benefit from transactions and help navigate shifts in the market, regulatory obligations, and government incentive programs. Please reach out if you have questions, or visit us at our Affordable Housing and Community Development web page.

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