What is the Build America, Buy America (BABA) Act?
The Build America, Buy America (BABA) Act, enacted under the Infrastructure Investment and Jobs Act (IIJA), continues to reshape how federally funded construction projects are planned, sourced, and executed. While the act has been on the books since 2021, a major enforcement milestone arrived on March 17, 2025, when the U.S. government fully implemented new sourcing requirements for manufactured products. This requirement applies to a broad range of federal agencies, including the Department of Transportation (DOT), Housing and Urban Development (HUD), and the Department of Agriculture (USDA).
The intent behind BABA is clear: strengthen domestic manufacturing, reduce reliance on foreign supply chains, and ensure taxpayer dollars support American-made products. However, there are potential implications for developers, lenders, and contractors, particularly when it comes to project budgets, procurement, and timelines.
What’s Changing?
Until recently, manufactured products such as plumbing fixtures, piping, HVAC units, and other critical systems were subject to a longstanding waiver that exempted them from full BABA enforcement. That waiver is now rescinded. As of March 17, 2025, these components must meet BABA standards:
• Iron and Steel: Must be 100% made in the United States—no exceptions.
• Manufactured Products: Must be assembled in the U.S. (no content percentage required yet).
• Construction Materials (e.g., glass, drywall, engineered wood): Must be sourced domestically.
And there’s more ahead. Starting October 1, 2025, a new phase begins:
• Manufactured Products must still be made in the U.S., but at least 55% of the cost of their components must be of U.S. origin.
By October 1, 2026, that requirement becomes even stricter:
• The 55% threshold will apply to the components themselves, not just their cost. This means more detailed compliance tracking and even tighter sourcing constraints.
What This Potentially Means for Federally Funded Multifamily Projects
• Increased Costs: Domestic products—particularly plumbing, HVAC, and finish materials—often come at a higher cost. Combined with compressed supply, this can potentially drive up construction bids significantly.
• Longer Timelines: The increased demand on U.S. manufacturers may result in longer lead times and require contractors to adjust schedules to account for procurement delays. The process of obtaining waivers for non-compliant materials, when necessary, can also be time-consuming, with some agencies reporting review timelines of up to 60 days.
• Greater Compliance Complexity: As BABA continues to evolve, project teams must stay current on material certification, sourcing documentation, and federal audit readiness, especially with the 55% content rule on the horizon.
According to the Department of Energy, BABA rules now affect nearly all federally funded infrastructure and housing projects, and agencies like HUD are tightening oversight. A recent Government Accountability Office (GAO) report found that many project sponsors were unaware of how quickly enforcement would escalate, leaving them unprepared to meet new compliance benchmarks.
Looking Ahead with Moran Consultants
With over 50 years of experience in construction risk mitigation and a project database spanning more than 600 developments nationwide, Moran Consultants offers a unique, real-time perspective on how economic volatility is impacting construction across the country.
We leverage this insight to keep our clients informed and prepared—offering practical, proactive solutions that reflect what’s happening on the ground. In the current climate, that means re-evaluating contract language, factoring in tariffs, and ensuring procurement strategies are fully bought out to avoid costly delays.
If you’re navigating federal funding requirements like the BABA Act or simply want to safeguard your investment, our team is here to protect your project every step of the way. Give us a call or contact us online to learn more!