Impact of Rescinded Waiver on Federal Projects: Cost, Schedule, Quality

New Build America, Buy America Rule Promises Changes for Federal Transportation Projects

The Federal Highway Administration has finalized a rule to enforce the Build America, Buy America Act, a move set to transform federally funded transportation projects. While the directive's future may be subject to regulatory adjustments, the rule signals a significant shift in project requirements.

Effective from March 17, the rule abolishes the Manufactured Products General Waiver. This change compels contractors to validate that manufactured products in federally funded projects are predominantly American-made, with final assembly occurring within the United States.

The rule is part of the broader Build America, Buy America Act, established in the 2021 Infrastructure Investment and Jobs Act. It aligns with federal strategies to bolster domestic supply chains and reduce foreign material dependencies. Key compliance deadlines include October 1, 2025, for U.S. assembly and October 1, 2026, for 55% domestic content by cost.

The Impact of Waiver Rescission on Projects

The transition may complicate project costs, timelines, and compliance, given the lengthy nature of design and construction cycles. The removal of the waiver could lead to disputes over unapproved changes and potential litigations, impacting project budgets and timelines.

Cost: The new requirements could inflate costs due to increased procurement and compliance expenses. With a potential shortfall in domestic materials, projects might face higher demands and prices. Contractors need to anticipate these financial demands during project planning to avoid budget overruns.

Schedule: The changes will likely affect the product procurement cycle, necessitating careful supplier selection and compliance verification. Contractors should incorporate risk management and contingency strategies to address potential supply chain disruptions.

States like Rhode Island have already revised specifications, holding contractors accountable for any delays resulting from the waiver process (read more here).

Quality: Ensuring product compliance as new vendors enter the market is crucial. Contractors must enhance quality assurance processes to meet industry and contract standards.

Strategies for Risk Mitigation

To ensure compliance, contractors and suppliers should focus on pre-bid and active project stages, as well as change management.

Pre-bid Stage: Reviewing existing supply chains to identify potential compliance challenges is essential. Engaging with stakeholders early and analyzing alternative suppliers can support adherence to the new requirements.

Active Construction Stage: Effective communication between contractors and suppliers is vital for compliance. Tracking systems and onsite inspections can help monitor material compliance throughout the project phases.

Change Management: Establishing protocols for material substitution and maintaining thorough documentation of certifications and modifications will aid in managing necessary changes.

Preparing for the Future

The FHWA's expanded Buy America requirements underscore the federal dedication to domestic manufacturing and supply chain resilience. Stakeholders need to prepare for potential impacts on costs, schedules, and project quality. As the rule undergoes a regulatory freeze, early risk management and supplier collaboration will be vital strategies for mitigating these impacts.

Article co-authored by Dan McCrave-Bessette