On July 28, the Biden Administration issued a Notice of Proposed Rulemaking that makes changes to the implementation of the Buy American Act. In January, President Biden signed the Executive Order (EO) 14005, Ensuring the Future is Made in All of America by All of America’s Workers. This EO lays out a series of actions for the Federal Government to maximize the use of goods, products, services, and materials produced and offered in the United States in order to strengthen domestic supplier bases and create new opportunities for American businesses. This proposed rule addresses Section 8 of the order, which requires the Federal Acquisition Regulation (FAR) Council to “strengthen the impact of the Buy American Act.” Specifically, the proposed rule calls for an increase to the domestic content threshold, a framework for application of an enhanced price preference for a domestic product that is considered a critical product or made up of critical components, and a post-award domestic content reporting requirement for contractors.
Domestic Content Threshold
Under the proposed rule, the domestic content threshold would initially increase from 55 percent to 60 percent. After two years, the threshold would increase to 65 percent, and would then increase to 75 percent five years after the second increase. According to the proposed rule, suppliers holding a contract with a period of performance that spans the schedule of threshold increases must comply with each increased threshold in the year of delivery. The proposed rule also allows, until one year after the increase of the domestic content threshold to 75 percent, for the acceptance of the former threshold in situations where end products or construction materials that meet the new threshold are not available or are not of an acceptable price. Offerors would be required to specify which of their foreign end products exceed 55 percent domestic content. This fallback threshold only applies to end products and construction materials that do not consist wholly or predominately of iron or steel, or a combination of both.
Enhanced Price Preference Framework
The proposed rule calls for a framework in which higher price preferences will be applied for end products and construction materials that are deemed to be critical or made of critical components. The list of critical items and components will be added to the newly-designated FAR 25.105. Offerors would be required to identify domestic end products that contain a critical component in their offer to allow contracting officers to apply the higher price preference when suitable. The process for identifying critical items and components that will receive the price preference would use the quadrennial critical supply chain review that was instituted by the EO on America’s Supply Chains and the National COVID Strategy. The Office of Management and Budget (OMB) will then do a subsequent review to refine the list further. The process for identifying critical items and components will also be used to determine the enhanced price preference for each of these items or end product with critical components. Once the list is established in the FAR, it will be published in the Federal Register for public comment at least once every four years.
Postaward Reporting Requirement
In order to gain insight into the domestic content of products sold under contract and to support the Administration’s supply chain security initiatives, the proposed rule would require contractors to provide the specific domestic content of critical items, domestic end products containing a critical component, and domestic construction material containing a critical component that were awarded under a contract. Contractors would not be required to report the domestic contents of commercial off-the-shelf (COTS) items. Two new FAR clauses have been created to implement the reporting requirement – one for supplies and one for construction materials. These clauses will not be operational until specific critical items and critical components are added to the FAR.
Public Meeting
On August 26, the Made in America Office and FAR Council are hosting a virtual public meeting to hear thoughts from industry experts regarding the implementation of Section 8, as well as other sections, of EO 14005. This meeting will be recorded and a transcript of the meeting will be posted to regulations.gov. More details about the agenda are to come and will be posted to www.acquisition.gov/publicmeeting_FAR_proposedrule-2021-008_BuyAmericanAct. You can register to attend the meeting here. Spots are limited to the first 3,000 registrants.
The Coalition has registered to present during the meeting in order to share our feedback on the changes to the implementation of the Buy American Act.