Agency engineers warn Buy America rule expansion could complicate Vermont highway projects, raise costs

Jeremy Reed, chief engineer with the Vermont Agency of Transportation, told the Senate Transportation Committee that recent federal rulemaking expanding Buy America requirements could materially affect state highway projects, increase administrative burdens and raise material costs.

Reed outlined the Buy America categories that now apply under the Infrastructure Investment and Jobs Act: iron and steel products, manufactured products and construction materials. He said the longstanding manufactured-products waiver has been phased out by recent Federal Highway Administration guidance and a phased implementation creates immediate uncertainty for procurements and suppliers.

Under the new timeline Reed described, manufactured products must have final assembly in the United States starting on Oct. 1 (year specified in federal guidance), with a further domestic-content threshold (55 percent of core constituent materials sourced in the U.S.) required by Oct. 1, 2026. Reed said the phased timeline gives some time for adjustment but still poses near-term procurement risk for items that historically were imported.

Reed provided a quick inventory of the agency pay items: the department tracks roughly 1,200 discrete pay items on road projects; about 425 of those include manufactured products. In a preliminary review, Reed said staff identified approximately 116 items with potential or confirmed U.S. supply and about 309 items where U.S. availability is unclear or not yet confirmed. He said that for many products manufacturers will not disclose sourcing publicly, which complicates compliance verification.

Reed and staff identified several product categories they believe are particularly vulnerable to supply constraints: traffic signal equipment (many intersection controllers and some signal components are sourced from outside the U.S.), specialty glass beads used in pavement striping for retroreflectivity, and some intelligent-transportation-system components. "We don't know exactly what the impacts will be yet," Reed said. "Until we let a project and a contractor tries to bid that project and tries to get suppliers to meet these requirements, we won't know."

Reed summarized Federal Highway Administration cost estimates included with the rulemaking. FHWA's analysis, he said, estimated national annual increases in material costs in a wide range (roughly tens of millions to under $1 billion per year), with additional administrative and compliance costs for states and FHWA. Reed said FHWA estimated state administrative costs in the low tens of millions (roughly $22 million) and provided a 10-year federal/state total cost estimate range (roughly $545 million to $8.46 billion) depending on assumptions.

Committee members asked about waiver processes. Reed described three main waiver categories he expects to use: public-interest waivers (for compatibility/sole-source reasons), non-availability waivers (no domestic producer), and unreasonable-cost waivers (FHWA guidance suggests a threshold tied to about a 25 percent increase in total project cost). He said waiver determinations will be influenced by the federal rulemaking process and public comments and that obtaining waivers may be politically charged.

Reed said the department will continue assessment of specific pay items and urged vigilance in procurement planning and contractor outreach to determine which supplies can meet domestic-content rules. He warned the committee that, in practice, the new rules may shift risk to contractors and increase the administrative recordkeeping needed to demonstrate compliance.