Alerts

President Biden Acts on His ‘Buy American' Promise

Alerts / February 9, 2021

On Jan. 25, 2021, President Biden signed an executive order (EO), “Ensuring the Future Is Made in All of America by All of America’s Workers.” This EO initiates the implementation of Biden’s campaign promise to Buy American, including his commitment to “tighten domestic content rules” and “crack down on waivers to Buy American requirements.”

The EO implements a more consistent and centralized approach to waiver review by establishing a new Made in America office and director role at the Office of Management and Budget (OMB). The EO also initiates several key reviews, which could result in significant changes to current practice, including potential changes to the domestic preference requirements, revocation of exceptions applicable to certain commercial information technology (IT) and revisions to the list of nonavailable items.

The Buy American Act requires federal agencies to procure domestic materials and products in order to maximize the use of goods, products and materials produced in the United States. Under certain circumstances, the requirement to purchase domestic products may be waived. This alert discusses some key features of the recently signed EO that could, or will, result in changes to the implementation of the Buy American Act.

New OMB Made in America Office and Director Role

The EO establishes a Made in America office within the OMB. This new office will be headed by the Made in America director and will oversee implementation of the initiatives included in the EO

Centralization of the Made in America Waiver Process

The EO implements several new requirements aimed at centralizing the waiver process:

  • Agencies, unless otherwise provided for by the OMB director, will submit to the Made in America director descriptions and justifications for all proposed waivers. The Made in America director will provide further guidance to agencies on the type of information they must submit. The Made in America director will issue a determination to the agency on whether the information submitted by the waiver-granting agency is consistent with applicable law. The EO provides some guidance on resolving conflicts between the Made in America director and the agency’s determinations. While this process may add time to waiver reviews, the EO appears to provide a limited exception to these requirements when a granting agency is obligated by law to act more quickly than the review procedures allow. This limited exception could possibly apply in the event of a national emergency – for example, the ongoing COVID-19 pandemic.
  • Agencies will now be required to assess whether “a significant portion of the cost advantage of a foreign-source product is the result of dumped or injuriously subsidized steel, iron, or manufactured goods.”
  • The General Service Administration (GSA) will develop a public website, which will include information on all proposed and granted waivers. This increased transparency is expected to enable manufacturers and other industry participants to more easily identify useful waivers.

Centralization of the waiver process could improve what many have considered a haphazard application of the waiver review criteria by federal agencies. Despite the fact that this EO implements new requirements, these changes could potentially result in a perceived increase in granted waivers as compared to the industry’s current perception that waivers are infrequently granted.

Revisions to Buy American Rules

The Buy American rules impose a domestic content requirement for end products or materials in federal procurements. Under the current Buy American rules, to qualify as “domestic,” (i) a product or material must be manufactured in the U.S. and (ii) a specified percentage of the total cost of all components must be of U.S. origin unless the product or material is a commercial off-the-shelf (COTS) item. The second prong of the “domestic” qualification is commonly known as the “component test.” Changes to these rules are issued by the FAR (Federal Acquisition Regulation) Council.

The EO directs the FAR Council to consider amendments to the following Buy American rules:

  • Replace the component test used to identify domestic end products with a test under which domestic content is measured by the value that is added to the product through U.S.-based production or U.S. job-supporting economic activity. The EO does not provide any guidance on how this “value” will be calculated.
  • Increase the numerical threshold for domestic content requirements for end products and construction materials. Notably, the EO does not propose a target threshold for the domestic content requirements. The domestic content requirements were recently increased in accordance with a final rule issued by the FAR Council on Jan. 19, 2021. While we can only speculate that the new requirements may exceed those imposed under the recently issued final rule, industry engagement and comment will likely be critical in informing the FAR Council’s decision on further updates to these requirements.
  • Increase the price preferences for domestic end products and domestic construction materials.
Updates to List of Nonavailable Articles

Buy American rules do not apply to certain articles, materials or supplies that are not mined, produced or manufactured in the United States in sufficient and reasonably available commercial quantities and of a satisfactory quality. The EO directs the Office of Federal Procurement Policy to review the list of nonavailable articles and to determine if there is a reasonable basis to remove the waivers for any listed items. Companies that currently rely on nonavailable article waivers should closely monitor the results of this review for changes to the nonavailable article list.

Report on Commercial Item IT

The EO directs the FAR Council to review and to consider removing the existing exception (see FAR 25.103(e)) to the Buy American rules for IT that is a commercial item. Commercial items include COTS items, as defined in FAR 2.101. Note, however, that the EO does not require review of the separate exception covering COTS items. Similar to the potential changes related to the list of nonavailable articles, companies providing IT to the government should closely monitor the results of commercial item IT exception review for changes that could be problematic for their existing operations.

Agency Review and Reporting

The EO requires agencies to report on their implementation of and compliance with Made in America laws. Agencies are also directed to make recommendations on how to best effectuate Made in America initiatives. Finally, the EO implements a biannual agency reporting requirement, which will give the new director of Made in America insight into agencies’ compliance with the Made in America initiatives and goals.

This EO confirms the Biden administration’s commitment to advancing its Buy American initiatives. Industry participants, and especially federal government contractors, should closely monitor the reviews initiated by this EO Companies that could be affected by changes to domestic preference requirements, revocations of the commercial item IT exceptions or removals from the list of nonavailable articles should consider participating in any forthcoming public comment period associated with proposed changes. With respect to the potential revisions to the Buy American rules, the FAR Council is instructed, within 180 days of the date of the EO, to consider proposing for notice and public comment amendments to the applicable provisions in the FAR.

For further information, contact Mike Snarr at msnarr@bakerlaw.com or 202.861.1710, Barron Avery at wavery@bakerlaw.com or 202.861.1705, Casey Weaver at cweaver@bakerlaw.com or 713.276.1614, Chelsea Clapp at cclapp@bakerlaw.com or 713.646.1374, or any member of BakerHostetler’s Government Contracting or International Trade and National Security team.

Authorship Credit: Mike Snarr, Barron Avery, Casey Weaver and Chelsea Clapp

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