Biden has ambitious infrastructure goals. Made-in-America rules could slow them.

Matt Dunne/Vox

New rules could hold back $1 trillion in infrastructure spending that extends to housing, broadband, and electric vehicle charging projects.

Nearly two years ago, the Tri-Valley Transit agency started to construct a new bus facility in Bradford, Vermont. The agency’s fleet, which residents across eight towns used to get to work, school, and medical appointments each day, was outgrowing the building it had been renting for 16 years. New buses were bigger than the vehicles they used to have, and they didn’t have the equipment to efficiently wash and maintain them.

Soon after breaking ground, officials ran into complications. The agency had planned to install a solar-powered heat pump system, which would have been cleaner for the environment and less expensive to maintain, said Jim Moulton, the agency’s executive director. But officials couldn’t find an American manufacturer to build a large enough system. Although two Italian companies could have fulfilled the order, the project was receiving federal funds, meaning that it was subject to “Buy America” rules that required manufactured products to be made domestically.

Moulton said the agency applied for a waiver from the federal government but was denied, so officials redesigned the $3.4 million project and purchased a wood pellet boiler system manufactured in the United States. Although the agency moved into the facility in August 2021, the debacle delayed the project for nearly three months and added on about $100,000 in extra costs.

“It was a little bit frustrating,” Moulton said. “We were anticipating that were would be a better balance of these rules.”

It was a logistical headache that could soon become more common — and extend to areas far beyond transit projects.

The $1 trillion infrastructure law passed last year expanded Buy America rules, which require state and local agencies to buy certain materials made in the United States for federally funded infrastructure projects. Rules that iron, steel, and manufactured products be made in America have been in place for decades, but they’ve traditionally applied to transportation and water-related projects, such as highways, rail, and public transit.

The Infrastructure Investment and Jobs Act’s new rules broadened the scope of goods that have to be produced in the United States by creating a new category for “construction materials.” It also expanded the types of infrastructure projects subject to the requirements to permanently include housing, broadband, and new programs for electric vehicle charging projects for the first time.

Ahead of the midterm elections, President Biden has hailed the bill as a once-in-a-generation investment in the nation’s infrastructure, promising that it would rebuild miles of crumbling roads and bridges, expand access to clean drinking water, and deploy broadband to communities that have long lacked high-speed internet.

“Instead of infrastructure week, which was a punchline for four years under my predecessor, it’s infrastructure decade,” Biden said in Pennsylvania last week.

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President Joe Biden greets carpenter Gregory Allen Stahl before speaking about rebuilding the nation’s infrastructure on October 20 in Pittsburgh, Pennsylvania.

Biden has also highlighted the package’s Buy America provisions, which the administration has said will help create American manufacturing jobs and improve the resiliency of the nation’s supply chain. During his first State of the Union address in March, Biden vowed that the country would “buy American to make sure everything from the deck of an aircraft carrier to the steel on highway guardrails are made in America.”

But many state and local officials across the country say the new rules could delay much-needed infrastructure projects and significantly drive up costs amid the fastest inflation in 40 years. Some say they’re already struggling to deal with supply-chain disruptions that have emerged during the pandemic and worry that material shortages could worsen if they’re limited to domestic manufacturers. Higher costs could also lead to fewer projects and soften the impact of the package, officials say.

The effect could be felt beyond stalled roadway projects. Housing advocates worry the packages’ broader Buy America requirements mean it could take longer to build public housing. Broadband internet expansions could be delayed for the millions of Americans without reliable internet access.

Many state agencies, local officials, and industry groups have urged federal officials to delay implementation or provide more clarity surrounding the new rules. Individual federal agencies are tasked with enforcing the new rules, and several have granted waivers temporarily delaying them.

Mitch Landrieu, a senior advisor to Biden and the infrastructure coordinator, said it wouldn’t be reasonable to expect state and local officials to completely “turn on a dime” and that the administration would try to be flexible by evaluating waivers on a case-by-case basis.

“When you pressure test the system, you’re going to find holes in it,” Landrieu said. “We’re building a system that can actually implement these new rules and regulations, and of course, that takes time.”

Still, Landrieu said waivers would be limited and the administration would apply “downward pressure pretty aggressively on states and cities” to implement the requirements, which he said would help bolster the American manufacturing sector and the nation’s long-term economic prosperity.

“The imperative is to lean in, not to lean back,” Landrieu said.

Transportation projects will be subject to stricter rules

Before the infrastructure law passed last year, Buy America rules were mostly a collection of laws enforced by various agencies within the Transportation Department (although they sound similar, they’re different from “Buy American” rules, which deal with materials and products the federal government purchases directly).

Because there was no blanket rule across the Transportation Department, each agency formed its own interpretations of the laws and issued different waivers that were tailored to its own programs. The Federal Highway Administration (FHWA), for example, has had a waiver for manufactured products since 1983, meaning that roadway and bridge projects have only been required to use domestically made iron and steel products if they’re incorporated into the project permanently.

Under the new rules, three categories of materials have to be produced in the United States: iron and steel, manufactured products, and construction materials.

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Pedestrians walk by a construction site in Pawtucket, Rhode Island, in April 2021.

To be considered “produced in the United States,” manufactured goods now have to contain at least 55 percent domestic content and be manufactured in America. Construction materials, which have to be manufactured entirely in the United States, include plastic and polymer-based products, glass, lumber, drywall, and non-ferrous metals with the exception of cement and aggregate products like sand and gravel.

But the new requirements for transportation projects largely haven’t been in effect yet. In May, the Transportation Department issued a temporary waiver for construction materials to give state and local agencies time to adjust to the new category. The waiver, which is set to expire on November 10, should not be expected to be extended, a DOT spokesperson said in a statement. The FHWA also plans to initiate a review of its waiver for manufactured products by November 15.

Although many state and local agencies say they support the policy goals of Buy America, some have urged the Transportation Department to extend the construction materials waiver in recent months.

The American Association of State Highway and Transportation Officials, which represents transportation departments in the 50 states, the District of Columbia, and Puerto Rico, said in a public comment that domestic manufacturing was currently “unable to ensure the availability and timely delivery of many materials needed for transportation projects” and urged federal officials to extend the waiver period by 12 to 18 months.

Jim McDonnell, the association’s director of engineering, said state officials were fully supportive of boosting American jobs, but worried about how the new rules would be implemented and how they could increase costs if demand exceeds available supply. He said that officials, for instance, import many glass beads and metals like zinc from other countries since supply is limited in the United States.

“Six months isn’t enough time for a new industry to start churning out products or even for existing industries to ramp up production enough for a whole country,” McDonnell said. “We’re still concerned, even though we’ve got this six-month waiver, that state DOTs are going to have trouble figuring out where to get products.”

Jimmy Christianson, the vice president of government relations at the Associated General Contractors of America, said the organization wanted clearer final guidance from the federal government since there is confusion about what constitutes a construction material versus a manufactured product.

“Fiber optic glass is a construction material, but fiber optic glass is usually covered in some sort of rubber or plastic to prevent it from getting ruptured,” Christianson said. “If it’s covered in plastic, is it a construction material now or is it a manufactured product? We don’t know the answer.”

The Office of Management and Budget (OMB) released initial guidelines in April, which said that any item that consists of two or more construction materials listed and combined through a manufacturing process would be considered a manufactured product. The OMB is expected to issue more guidance in the coming months.

Christianson also urged the federal government to be flexible with future waiver requests. Although state and local agencies can submit individual waiver requests that are reviewed on a case-by-case basis, some say they’ve been discouraged by the process and told that waivers would unlikely be granted. Requests are eligible if certain materials aren’t produced in sufficient quantities in the United States, if the overall project cost would increase by more than 25 percent, or if the rules aren’t in the “public interest.”

A recent Associated General Contractors of America survey found that 93 percent of respondents were experiencing material shortages and most construction firms believed that meeting the new Buy America requirements would be difficult. Steel, non-ferrous metal, plastic products, electrical equipment, and HVAC systems would likely be the most difficult to source domestically, the respondents said. Lead times for some electrical equipment were reported to be nearly two years, and deliveries of ductile iron pipe and roofing materials were also reported to have waiting periods of more than a year.

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Construction workers work on the expansion of IMCO Carbide Tool in Perrysburg, Ohio, on October 7.

In some cases, the rules have discouraged officials from pursuing federal grants to buy equipment that could help reduce emissions. Ryan McFarland, the senior manager of government affairs at the Northwest Seaport Alliance, a marine cargo operating partnership of the Port of Seattle and Port of Tacoma, said the authority wants to purchase zero and near-zero emissions equipment — such as electric terminal yard tractors, hydrogen top handlers, and hybrid rubber-tired gantry cranes — to increase the efficiency of handling cargo.

But in most cases, the ports can’t find an American manufacturer that can certify that their equipment is Buy America compliant. Even though some manufacturers have production facilities in the United States, parts that are used to make the equipment are often sourced overseas or companies don’t track the sources of steel that are used in parts, McFarland said.

Because the equipment is more expensive than traditional diesel versions, it’s difficult for the ports to purchase without federal funds, meaning that it would be challenging for them to phase out emissions from port operations by 2050, McFarland said.

“We simply can’t afford to meet those goals by ourselves,” he said.

Domestic content requirements have gained support from both Democrats and Republicans in recent years, said Jeff Davis, a senior fellow at the Eno Center for Transportation who has researched the topic extensively. But there is limited research on how the Buy America rules have directly impacted domestic job creation.

Landrieu pointed out that the manufacturing sector has added thousands of jobs since the start of the Biden administration and some companies have started building out production facilities in the United States. For instance, Siemens announced in March that it would invest $54 million in expanded domestic production and create about 300 jobs to help produce electric vehicle charging equipment.

A 2014 Duke University study found that projects subject to Buy America preferences “mitigate the safety risks of using potentially inferior-quality foreign inputs while delivering more economic benefits to the US economy than outsourced projects.” In a case study of two large-scale bridge projects, the researchers — Lukas Brun, G. Jason Jolley, Andrew Hull, and Stacey Frederick — found that the project not subject to Buy America rules outsourced 27 percent of the funds spent.

Industry associations representing steel, iron, and other manufacturing companies have urged federal officials to accelerate the implementation of the new rules, which they say would help create American jobs, lead to higher-quality infrastructure, and strengthen the domestic supply chain.

Scott Paul, the president of the Alliance for American Manufacturing, which sponsored the Duke study, said he was confident that steel and iron manufacturers could meet the demand. He urged the federal government to allow current blanket waivers to expire, which he said could lead to manufacturers investing more in domestic production if federal officials fully enforce the rules.

“It’s time to get on with it,” Paul said. “Some of these waivers can just get extended indefinitely, and that certainly isn’t the intent of the law or what Congress had in mind when it passed.”

Other research has found that the rules don’t create a significant amount of American jobs. A 2018 study from Victoria University concluded that Buy America rules did provide a small boost to American manufacturing jobs, but they led to fewer jobs in other parts of the economy and made projects more costly.

The authors — Peter Dixon, Maureen Rimmer, and Robert Waschik — estimated that eliminating the domestic content requirements could result in a loss of about 57,000 manufacturing jobs, but lead to a net gain of about 306,000 jobs in industries like retail, restaurants, and nursing homes. The researchers found that eliminating the rules could allow the federal government to fund more projects or “return the savings to the private sector in the form of tax cuts,” which could increase consumption.

“These sorts of policies do generate jobs in manufacturing,” said Dixon, an economics professor at Victoria University. “But not many, and they come at a great cost.”

Gary Hufbauer and Jeffrey Schott, senior fellows at the Peterson Institute for International Economics, also estimated that from 2009 to 2011, state and local governments paid an additional $5.7 billion to buy domestic steel over imported steel for projects funded by the American Recovery and Reinvestment Act of 2009, which included Buy America provisions.

Housing, broadband, and EV charging projects are newly eligible

The expanded Buy America rules are also affecting new projects beyond traditional transportation programs. The law broadened the scope of infrastructure projects that are now subject to the rules, meaning that housing, broadband, and new programs for electrical vehicle charging projects are now permanently covered.

Emily Elconin/Bloomberg via Getty Images

President Biden speaks during a visit to General Motors’ all-electric vehicle assembly plant in Detroit, Michigan, on November 17, 2021.

Some housing groups have objected to the new rules and called on the federal government to exclude public housing projects, since they say the requirements could increase costs and delay the construction of affordable housing units when there is already a nationwide shortage of homes. They’ve also said housing authorities lack staff members who could investigate whether all materials and products they purchase meet domestic content requirements.

Although OMB’s guidance says that projects consisting solely of the construction or improvement of a private home for personal use would not be considered an infrastructure project, some grant programs that provide federal funds to public housing authorities could be subject to the rules, according to an initial review from the Department of Housing and Urban Development.

That has caused uncertainty among housing authorities, said Sunia Zaterman, the executive director of the Council of Large Public Housing Authorities. HUD has issued a waiver delaying the implementation of the new rules for its financial assistance programs, but it’s set to expire on November 14.

“We think that we’re clearly exempt because we’re operating residential properties,” Zaterman said. “These aren’t school buildings. They aren’t courthouses. These are properties used for private residential purposes.”

Brien Thane, the executive director of the Bellingham and Whatcom County Housing Authorities in Washington, said officials were already struggling to deal with supply shortages. Thane said the authority is trying to replace about 100 windows in one of its properties for senior citizens and people with disabilities but they’ve struggled to procure them because lead times are about four to six months, significantly longer than before the pandemic, when it would have taken about 30 to 45 days to get a shipment. Ahead of the winter season, Thane said officials were worried about water intrusion since the windows are about 50 years old and “starting to fail.”

Thane said the authority ran into similar issues when Buy America rules were tied to funding in the Obama administration’s American Recovery and Reinvestment Act, which resulted in officials having an “extremely hard time” sourcing toilets, refrigerators, and other materials.

“The infrastructure bill does not include one cent for public housing,” Thane said. “So why are we extending the domestic procurement requirements to public housing?”

Some broadband groups have also praised the infrastructure law’s $65 billion in funding to build out the nation’s access to reliable internet, but have said Buy America rules could impede projects. In January, a coalition of organizations urged federal officials to consider a waiver for broadband infrastructure programs since the rules do not “reflect the realities of the global” supply chain. A broadband network contains dozens of elements — including switching and routing equipment — and devices used in each of those elements often include hundreds of components that are sourced from around the world, according to the letter.

Shirley Bloomfield, the chief executive officer of NTCA–The Rural Broadband Association, which signed the letter, said many rural communities are often served by smaller broadband providers who might struggle to procure supplies if they’re limited to domestic manufacturers and competing with larger companies. Bloomfield said some of the association’s members were already seeing delays of “well over a year” for fiber optic cable deliveries, and other equipment like handholes and pedestals were experiencing shortages. Bloomfield said she hoped to see the federal government further incentivize American suppliers to ramp up production.

“They’re going to have to make sure that the large guys aren’t able to grab up all the supplies so that the small carriers who are the ones building out into these rural communities don’t get stuck with the short end of the stick,” Bloomfield said.

Some contractors have said the new Buy America rules have made them hesitant to pursue federally funded projects, said Ben Brubeck, the vice president of regulatory, labor, and state affairs at Associated Builders and Contractors. Brubeck said contractors are mostly concerned about potential delays in receiving materials and how that could impact costs, especially since input prices are already up more than 40 percent since the pandemic’s start.

“There is work in the private sector, and if they can make profit in the private sector and not have to wade into all this uncertainty and added costs and regulatory risk, they will do that,” Brubeck said.

Some state and local agencies have also expressed concerns about the supply of electric vehicle chargers and charger equipment manufactured in the United States.

Patrick Murphy, the sustainability and innovations project manager at the Vermont Agency of Transportation, said he was worried that every state would be seeking EV chargers and necessary equipment like transformers and switchgear at the same time, which could strain supplies and increase costs. Vermont, which is set to receive $21.2 million over five years to build out its network, has so far identified 15 locations that will host chargers.

The FHWA has proposed initially waiving all Buy America requirements for EV chargers and components until January 1 and then gradually phasing out parts of the waiver through 2024. Still, Murphy said he was worried that it could take more time for American manufacturers to ramp up capacity.

“We’re already experiencing extreme aspects of climate change throughout the country,” Murphy said. “We need to build out the infrastructure that encourages more people to adopt electric vehicles as quickly as possible. Anything that hinders that will be an issue.”