Domestic preference and powering the infrastructure for a clean energy future

Blase Kusterle

Blase supports Eaton’s Electrical Division’s efforts in addressing federal government domestic preference requirements working closely with the sales organization, product lines, supply chain, and legal. Prior to joining Eaton, Blase served in the United States Army Reserves from 1998 through 2003 as a Company Executive Officer. Beginning in 2003 through 2007, Blase was on Active Duty as a Company Executive Officer, Battalion Supply Officer and Brigade Support Staff Officer. 

In July of 2007, Blase joined the Eaton Federal Sales team as an Inside Sales Representative and as Government Market Analyst, where he helped determine product compliance for uninterruptible power supplies for listing on GSA contracts. In 2015 Blase transitioned to Eaton’s IT department where he was a CRM Functional Analysis Specialist responsible for implementing and improving functionality for Sales and Case Management. Later in his time in IT, Blase served as a Field Service Product Analyst where he was engaged on the team that selected, configured and implemented Salesforce to address Eaton’s Field Service Management and CRM needs. Blase holds a bachelors of science degree in Environmental Science from the University of North Carolina at Asheville.

Jim Dankowski

In his current role as Eaton’s Federal Government Marketing Director, Jim oversees the strategic planning, value proposition development and customer engagement for the government segment. With 44 years of experience in the electrical power distribution and control industry, his knowledge has delivered unique and creative solutions that support Eaton’s clients with their energy initiatives and facility/systems optimization efforts.

Jim is leading the effort for the development and implementation of a strategic plan to address the American Rescue Plan Act (ARPA), Infrastructure and Investment Job (IIJA) and the Inflation Reduction Act (IRA). This included the identification of the types of funding that align to Eaton’s offering with federal, state, and local governments customers.

WOMAN: Welcome to Eaton's 10 in 10 podcast, where we focus on industry trends shaping the future of power management. In this series, our expert answers 10 questions about one of today's most talked about industry topics in 10 minutes or less. From the energy transition to digital transformation and beyond, we explore trends and discuss strategies for delivering safer, more efficient, and reliable power. 

JIM DANKOWSKI: The energy transition is driving the need for a more resilient and sustainable infrastructure, and the US government is investing heavily to enable this shift. With the passage of several acts, there are unprecedented opportunities through direct funds, grants, tax credits, tax incentives, and rebates for organizations to maximize the return on investment of critical infrastructure and clean energy projects. Navigating the complexities of federal funding and tax-incentive mechanisms can be an intimidating challenge for those unfamiliar with the procedures and processes, but the rewards for understanding and adhering to the regulations are substantial.

Hello, my name is Jim Dankowski, and I am the federal government marketing director at Eaton. With me today is Blase Kusterle, our domestic preference program manager, to give you some insights on domestic preference and the impact it's having on today's marketplace. 

Blase, thank you for joining us today to discuss this hot topic. 

BLASE KUSTERLE: My pleasure to be here. Thank you, Jim. 

JIM DANKOWSKI: So with that, let's get started. Some real basic questions, Blase. Let's start off with, what is domestic preference?

BLASE KUSTERLE: The United States government has several laws specifying made in America requirements for purchases made by the federal government or for federal grant monies issued to state and local governments. These laws are aimed at creating manufacturing jobs with the United States by requiring products and the majority of their components to be produced domestically. 

The Buy American Act is the oldest domestic preference law enacted in 1933 and applies to federal purchasing. The Build America By America Act is one of the most recent and was signed into law in November 2021. Many state and local governments also have their own domestic preference statutes, which may apply to government purchases within their jurisdiction. 

JIM DANKOWSKI: Thank you for that, Blase. It's interesting that we've had some domestic preference requirements since 1933. So why is domestic preference important? 

BLASE KUSTERLE: The US government has funding available for federal, state, and local infrastructure projects. The Infrastructure Investment and Jobs Act alone designated $550 billion in grant money for infrastructure projects within the United States. Whenever federal funding is involved, every vendor in a project supply chain must comply with the domestic preference requirements listed in the applicable statutes for each project.

JIM DANKOWSKI: Wow, that's a lot of money that's being invested. So, can you kind of elaborate on when the domestic preference may apply?

BLASE KUSTERLE: Domestic preference requirements apply when any government project uses federal funding, either with direct federal spending or through federal grants issued to state or local governments. For example, airport improvement projects, highway transportation, railroad, and other infrastructure projects may all have federal funding supporting all or part of a project. If federal funding is involved, domestic preference statutes will apply. 

JIM DANKOWSKI: Wow, that's a lot of different types of projects of which the funding can be used, Blase. Can you explain how one might identify if my project that they're working on has domestic preference requirements?

BLASE KUSTERLE: Sure. The domestic preference statutes are normally located in the General Solicitation section or 0000 bid document or boilerplate. You can also search the bid documents for terms such as "By America, Buy American," "Build America, Buy America," et cetera. When in doubt, just ask the issuer of the RFQ.

JIM DANKOWSKI: Yeah, thank you for that. So that gives us an idea of how to find out whether a specific project has domestic preference requirements. So let's say that I have a project and it does have domestic preference requirements. How do I engage my suppliers from the standpoint of addressing the domestic preference requirements for that specific project? 

BLASE KUSTERLE: Great question, Jim. Federal statute 2 CFR Section 200.322 requires the domestic preference statutes flow down from the contracting officer to the prime contractor, subcontractor, and all manufacturers. All vendors must be made aware of the applicable domestic preference statutes for each project. It is imperative that you provide the domestic preference statute specific to that contract opportunity to your suppliers, as it appears in the general solicitation document. 

JIM DANKOWSKI: That's good to point to suppliers and who you're needing materials from in the right direction. So based on that, what should I be receiving from my suppliers to address the different domestic preference requirements? 

BLASE KUSTERLE: So when you receive a response back, just ensure the vendor has addressed the domestic preference requirements correctly and have provided the supporting documentation required. These documents may include certificates of origin, certificates of manufacture, certification forms that are issued by the end user for the vendors and manufacturers to complete, or any other document that's required to satisfy the federal government's requirements. Manufacturers have a responsibility to obtain these documents from their suppliers, who support their manufacturing supply chain. 

JIM DANKOWSKI: Yeah, thank you for that, Blase. That really is helpful.

So I'm looking at a project and I know it has domestic preference requirements. What should I consider when I am looking at that project from the standpoint of what the potential domestic preference requirements are and the impact it could have on my business?

BLASE KUSTERLE: So outside of the scope of work and the product specifications, you should collect the following information for domestic preference. First, identify if the project is for a US federal, state, or local government. Identify the source of the funding for the project. Determine if the project is part of the US infrastructure. Obtain the applicable domestic preference statutes to address. Ensure you have the resources who are knowledgeable and available to evaluate the domestic content requirements. And confirm the firms you're working with understand the domestic preference requirements and know how to respond to them.

JIM DANKOWSKI: You know, it's interesting, you brought this up earlier in providing some direction in regards to a project and a specific domestic preference requirements. It seems like there's a bunch of them out there. Are all federallyfunded projects have the same domestic preference requirements?

BLASE KUSTERLE: No, nor do all the grant monies issued by the federal government to state and local governments have the same domestic preference requirements. For example, the Buy American Act is intended to be used when the end user is the federal government and allows for the commercial off-the-shelf products, or COTS, justification, which waives the domestic content analysis if the products are manufactured in the United States and offered in the commercial marketplace. 

However, the FAA's Buy American statute requires 100% domestic content and has no exception for that commercial off-the-shelf product. Both are called Buy American, but differ greatly in their definitions. Additionally, the FAA grants also require addressing Build America, Buy America requirements. However, funding issued from the federal transportation administration considers the installed system, such as electrical distribution systems, as one product with each enclosure, wiring, and conduit as a component of the installed system. 

JIM DANKOWSKI: Well, that's a lot. Can you break it down for us a little bit? Just kind of give us the difference between Buy America, Buy American, and Build America, Buy America?

BLASE KUSTERLE: Sure. There's no one Buy America Act. However, some federal agencies have Buy America statutes unique to them. These include the Federal Transportation Administration, Federal Highway Administration, Federal Railroad Administration, and Amtrak. Each have their own definitions for measuring domestic content.

As stated, the Buy American Act is the oldest domestic preference law in the United States and applies to federal agency purchases. The Buy American Act has requirements for country of origin and domestic content thresholds, but some provision exists for waiving domestic content analysis for commercial off-the-shelf products. 

Build America, Buy America was enacted in November of 2021 and said domestic content threshold of 55% when federal money is issued to state and local governments for infrastructure improvement projects, and requires those products and materials manufactured in the United States again to meet that 55% domestic content threshold. Regardless of which domestic preference statute applies, when products cannot meet the domestic preference requirements, documentation must be included stating which products are not compliant and why. In these cases, the state and local government end user is responsible for filing a waiver through the agency which issued the grant money. Federal end users request waivers through the Made in America office.

JIM DANKOWSKI: OK, thank you for that. I'm going to kind of slightly change the topic here, and it has to do with the Inflation Reduction Act, which has tax incentives. Is there a domestic preference requirement associated with those tax incentives?

BLASE KUSTERLE: So no, there's no domestic preference requirement. But it does have some, as you stated, tax credits for approved projects when domestic content is sourced. The IRS's guidance following the tax credit states, "Initial guidance regarding the application of the rules that taxpayers must satisfy to qualify for the domestic content bonus credit amounts and the related record keeping and certification requirements." In summary, it's the taxpayer's responsibility to determine compliance by ensuring the iron, steel, and manufactured products, which are components of a qualifying project, are produced in the United States. Manufacturers may be requested to provide the supporting documentation to assist the end user with determining compliance. 

JIM DANKOWSKI: Well, Blase, we covered off a lot in just a short period of time. And I want to thank you for your time and appreciate your insights into addressing domestic preference requirements and the impact it's having on the marketplace today. Thank you again, Blase.

BLASE KUSTERLE: Thank you, Jim. My pleasure. 

JIM DANKOWSKI: For more information, you can go to eaton.com/stimulus.