Thales Water Advisors: What you need to know about BABAA-The Build America, Buy America Act

Thales Water Advisors released an insightful article about Build America, Buy America Act, featuring Inovair CEO Ken Jones:

Thales Water Advisors May 2024: The Fountain

What you need to know about BABAA-The Build America, Buy America Act

"By now, you have probably heard about The Build America, Buy America Act (BABAA) - but may not have felt the impact to your business yet. Whether you are an investor, supplier, or procurer of equipment, this will surely change in the coming years – perhaps even later this year. Behind the scenes, the battle over BABAA in Washington DC has been raging for over two years – primarily over which products are entitled to receive a waiver or not and how broad those waivers should be. Make no mistake, BABAA is coming and the implications for water equipment procurement and the supply chain of where these discussions lands will be enormous.

"BABAA was enacted as part of the bipartisan Infrastructure In-vestment and Jobs Act on November 15, 2021. It established a domestic content procurement preference requiring that all infrastructure projects supported by federal financial assistance and federal contracts and man-dates use a threshold of iron, steel, manufactured products, and construction materials made in the United States. As a result, BABAA is applicable to many municipal water plants. In particular, BABAA mandates that the cost of a product’s components that were mined, produced, or manufactured in the United States must be greater than 55% of the total cost of the product’s components, unless another standard for determining the minimum amount of domestic content of the manufactured product has been established under applicable law or regulation.

"However, the law also provides that waivers may be granted if there are insufficient US manufacturers of a certain component able to sufficiently supply the market. This opens up a massive loophole that can either allow the suppliers that don’t meet the BABAA threshold to continue suppling their products, or if no waiver is provided, a competitive advantage to domestic suppliers. As is the case with many laws, there is significant room for interpretation about what constitutes a component category and a sufficient domestic supply base. Bring on the lobbyists!

"Taking the lobbying lead has been water trade organizations like the Water and Wastewater Equipment Manufacturers Association (WWEMA) which has been working closely with the EPA regarding how to segment the market and what is the capacity of existing domestic manufacturers. WWEMA is often in a tough position since its member-ship is composed of both domes-tic manufacturers that prefer that waivers not be issued for their US-made products and US-based importers that prefer that waivers be issued for their imported products. This has resulted in some internal jockeying within WWEMA to influence how WWE-MA interacts with EPA.

"Many equipment and component supplies have taken it on them-selves to make sure that they are fairly treated by the new standards. For instance, Ken Jones, CEO of the high efficiency wastewater blower company, Inovair, spent a week in Washington DC in April 2024 attending a WWEMA event and meeting directly with EPA officials. Inovair has recently launched an advertising campaign claiming to be the “only fully BABAA-compliant high efficiency blower.” Thales spoke to Ken Jones to understand the impact of BABAA on Inovair’s business. Ken stated that “We hired a lobbyist in 2023 to help make sure the EPA was aware of our large domestic manufacturing capacity and ability to supply the market with US-made high efficiency blowers” and that “Inovair has already participated in a bid where all of the foreign made high efficiency blowers were disqualified which meant that Inovair was the only compliant bid”. Ken further stated that “We expect BABAA to have a positive impact on our blower sales as all of our blowers of manufactured in Kansas City, mostly with US-based components.”

"The EPA has yet to rule on the waiver status of many components including UF membranes, UVs, VFDs, and Valves. Given the stakes involved, Thales has been advising our clients that companies taking a passive role in the process do so at their own peril because if you’re not advocating for yourself then you might end up falling behind those that are doing so." (reference page 18 of May 2024 newsletter)

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