The Buy American Act gets an update

Did you know the Federal Government spends over $600 Billion in annual procurement spending?

Our Federal Government is the largest purchaser of consumer goods in the world. Nearly half of this budget is spent on manufactured goods ranging from expensive military grade equipment to your standard set of office furniture.

When President Biden took office in 2021, he signed Executive Order (E.O.) 14005, Ensuring the Future is Made in All of America by All of America’s Workers. One of the goals of this initiative is to use the Government's Spending power, mentioned above, to encourage and support American manufacturing. Ideally, domestic industries supplying domestic end products and construction materials will benefit from competitive advantage as a result of this rule’s implementation.

Fast Forward to March 2022 – DOD, GSA and NASA are issuing a final rule amending the FAR to implement this Executive order by Amending the Buy American Act Requirements. This rule is anticipated to go into effect on October 25, 2022.

Increase to the Domestic Content Threshold

The domestic content threshold will be increased incrementally from now until 2029.

The first incremental increase raises the domestic content threshold to 60%. In 2024 it will be raised to 65% and in 2029 it will reach 75%. (See FAR 25.101(a)(2)(i) and 25.201(b)(2)(i).

This increase in domestic threshold runs parallel with the Infrastructure Investment and Jobs Act which was enacted on November 15, 2021. ( See Section 70921).

If you are awarded a contract with a PoP ( Period of Performance) that is for a period of several years, then you will be required to comply with each increase in threshold for the items in the year of delivery. When submitting proposals, please make sure to keep these adjustments in mind.

What if it isn’t feasible for me to comply with the changing domestic content thresholds throughout the life of the contract?

There is a FAR provision which provides for a senior procurement executive to permit the application of an alternate domestic content test in defining “ domestic end product” or “domestic construction material” one s/he consults with the Office of Management and Budget’s Made in America Office ( MIAO). This alternate test will allow you to comply with the domestic content threshold that applies at the time of contract award, for the entire PoP instead of adjusting at the standard prescribed intervals.

Fallback Threshold

This rule permits the continued use of the 55% domestic content threshold until 2030 in instances where the agency determines there are no end products or construction materials that meet the new domestic content threshold OR such products are of unreasonable cost. (See. FAR 25.2106(b)(2) and (c)(2), and 25.205(b)(1)(ii) and (b)(2).

This fallback threshold only applies to construction material and end products that are not predominantly made of iron or steel or a combination of both AND that are not commercially available off-the-shelf (COTS) items.

Enhanced Price Preference for Critical Products and Critical Components

The rule also creates a framework where higher price preferences will be applied to end products and construction material deemed to be critical or made up of critical components. A definite list of these items has not yet been published, but it is anticipated soon at FAR 25.105. This higher price preference will be used only after the final rule establishing the list of items is put into place.