What is BABA, and why is it important to law firms everywhere?
The second Trump Administration has doubled down on its promise to prioritize American interests by expanding the reach of the Build America, Buy America Act (BABA). BABA was originally enacted in November 2021 as part of the Infrastructure Investment and Jobs Act. Any infrastructure project that is federally funded must procure materials and labor from American sources by order of priority and availability. The hope was that the act would create jobs and stimulate America’s manufacturing sector.
Bridges, roads, utility systems and public transit infrastructure projects using iron and steel must source that iron and steel entirely within the U.S. Of other component parts used to complete the project, 55% of those parts must be sourced from U.S. manufacturers. And all manufacturing of construction materials must be done in the U.S. The sectors most deeply impacted by these requirements are entities that use federal funds to fund their infrastructure projects.
Positive clean residual impacts
The U.S.-centric focus of BABA is projected by economists to have a residual environmental impact on the world. And though the Trump administration is largely indifferent to the health of the planet; it cannot be denied that reduction in shipments of manufactured construction consumables will positively impact the emission levels. Also, the US is the second cleanest steel manufacturer in the world, according to BlueGreen Alliance. So it stands to reason, that more steel produced by a clean manufacturer will also positively impact global emission levels.
To be clear: The goal of BABA is not to achieve net zero emissions from the manufacturing sector in the U.S. However, because of a reduced need to ship goods and the increased production of clean construction materials like steel, BABA has the potential to create cleaner constructions projects by reducing industrial emissions.
How is U.S. trade impacted?
BABA’s creation of an increased demand for American manufactured industrial materials will support domestic manufactures through an increase in business as more consumers turn to these manufacturers to meet their needs. Manufacturers will have to invest in efficiency and innovation to keep pace with the increased demand for their goods from the domestic market. An increased demand on the domestic market is projected to strengthen the domestic economy because the buyers and manufacturers can still rely on one another for business irrespective of other international disruptions. In other words, BABA hopes to provide a solid, un-disruptable source of supply and demand domestically.
As the U.S. gets better at developing clean, efficiently produced industrial materials, BABA primarily hopes to take those materials to the larger global market to compete. BABA supporters assert it is reasonable to expect well-made, ecologically-sound products to perform well against international standards to meet global needs.
How is the world affected?
For all the good BABA does for the U.S., its plan to increase American manufacturing and competition does not bode well for the E.U. Economists watching the trade sector project a loss of upwards of 1 million manufacturing jobs in the E.U due to BABA. If American demand for E.U. manufactured products results in a deficit to trade and a reduction in imports, there simply will not be a sustained demand for output from E.U. with one of its largest consumers no longer coming to draw from the well.
How should law firms prepare for the possible distruptions and new opportunities that BABA might bring?
Understanding the background and purpose of BABA is only the first step. Looking at some of the largest impacts of BABA will help firms identify what next steps they should take to prepare to support their clients. The Walker Clark team has identified a series of questions that we apply when large-scale policy changes are poised to upend an existing market structure:
1. Does your firm's client base include any of these potentially impacted clients?
Based on the areas of manufacturing that BABA targets and the buyers that will be required to participate in BABA’s purchasing structure, these are clients that have the highest likelihood of being impacted:
Government contractors
Domestic manufacturers
Recipients of Federal funds
Federal suppliers
Construction companies
If your firm currently represents any clients in any of these sectors, now is the perfect time to reach out to them to explain what BABA means and what impacts they could see.
2. How are your clients affected?
Chances are, if you represent civil developers of any kind, non-profits, public agencies, property developers and construction companies, BABA is on their already on their radar. New legislation comes with new guidelines. Now is the time for your firm to prepare summaries of the regulatory changes in order to best support your client.
Focus on the following areas, so your client will experience minimal disruption to their business:
Legal compliance – Know what guidelines apply to your client and how to show that your client is in compliance with the guidance.
Risk management – Assist your client in assessing and mitigating by identifying where the client is most exposed. Consider helping the client to create internal processes to support them as they integrate the new standards into their daily operations.
Contract review – If the changes require your client to obtain new suppliers or adjust their business activity, review their contracts to ensure compliance with BABA. Make sure that language adjustments to any agreements align with BABA.
Non-compliance defense – If your client is found to be non-compliant, ensure your firm is prepared to support the client through any investigation process and thoroughly understands how compliance can be achieved to avoid further adverse action.
Training – With a bit of preparation, most clients can become compliant without significant cost or time allocation. You can help keep the amount of resource investment in compliance low by teaching clients how to comply and offering general explanations of how BABA will be implemented.
BABA is complicated, but it is not impossible to navigate. A bit of planning will ensure your firm is in the best position to assist your clients. Offering up-front explanations and suggestions for moving forward will reinforce the relationship of trust you have built with your clients.
We at Walker Clark understand how critical trust is in a working relationship. We take a holistic approach to our work as we teach firms how to develop systems that they can use to serve their clients more effectively. Contact us for a free 30-minute consultation to discuss how we can help you prepare to be a safe harbor for your client in a tumultuous market.
Sarah Max
For more information about Walker Clark strategic planning services, click here.
