OP-ED: Contractors Should Prepare for Additional Changes to Buy American Act
Daily Journal of Commerce Oregon
On Jan. 25, President Biden signed Executive Order 14005 (the “Executive Order on Ensuring the Future Is Made in All of America by All of America’s Workers”), which modified the Buy American Act (BAA) to require the use of more American-made components on government projects.
2021 amendments to the BAA
Under the 2021 version of the BAA, contractors must certify “that each end product … is a domestic end product …” The definition of “domestic end product” varies based on whether it’s “wholly or predominately made of iron or steel or a combination of both.” A “domestic end product” that is not wholly or predominately made of iron or steel, must be provided so that “the cost of its components mined, produced or manufactured in the United States exceeds 55 percent of the cost of all its components.” This 55 percent “cost” is an increase from 50 percent under the prior version of the act.
A “domestic end product” that is “wholly or predominately made of iron or steel” must be provided so that the cost “of foreign iron and steel constitutes less than 5 percent of the cost of all the components used in the end product.” Thus, to comply with the BAA, a predominately steel end product must be 95 percent mined, melted, and manufactured in the United States. This is a significant increase from the 50 percent requirement required under the prior version of the act.
To be deemed a “wholly or predominately” steel or iron (or a combination thereof) end product, “the cost of the iron and steel content exceeds 50 percent of the total cost of all its components” – including “the cost of iron and steel is the cost of the iron or steel mill products (such as bar, billet, slab, wire, plate, or sheet)” but excluding commercially available off-the shelf fasteners.
Notably, the term “component” means “an article, material or supply incorporated directly into an end product.” This is different from a “fastener” (for which there are some exceptions), which is defined as “a hardware device that mechanically joins or affixes two or more objects together; examples of fasteners are nuts, bolts, pins, rivets, nails, clips, and screws.” Contractors should also be aware that there are exceptions for “commercially available off-the-shelf” products, which are essentially (and oversimplified) those products sold in the commercial marketplace.
Proposed changes to the BAA
On July 30, the Federal Acquisition Regulatory Council (FAR Council) proposed additional BAA amendments that would further increase the domestic component requirement, increase price preferences for “critical” components, and implement reporting requirements.
If adopted without revisions, the amendments would keep the “cost of component” threshold but immediately increase the 55 percent requirement to 60 percent. Then, over several years, that requirement would increase to 65 percent (in 2024) and eventually 75 percent (in 2029). The FAR Council proposes some exceptions to implementation of this rule, but contractors should gear their operations toward complying with these requirements on federal projects.
The amendments increase the price preference for “critical” components and products. For end products designated as “critical,” contractors will be given price preferences where those end products are domestic. The government is still developing this critical components list. Still, contractors should stay informed of which products and components receive this preferential treatment in making decisions regarding future operations and strategies if trying to perform more public work.
The amendments further require the contractor, within 15 days of award, to disclose “the amount of domestic content in each critical item, and the amount of domestic content in each domestic end product containing a critical component …” This change will increase the administrative burden on government contractors and require them to provide the “domestic content” within a limited time period.
While these changes have not yet been implemented, government contractors should plan accordingly when looking and planning for future government projects.
Buy American vs. Buy America
Don’t confuse the Buy American Act with the Buy America Act. The Buy American Act applies to federal government procurements, including construction of federal projects such as dams, federal buildings or jetties. In contrast, the Buy America Act applies to federally funded transportation projects that are often procured at state or local government levels. Under the Buy America Act, all steel and/or iron components must be mined, melted and manufactured in the United States.
Contractors with questions regarding the Buy American Act (or even the Buy America Act) should consult with an attorney experienced in government contracting issues.
This article summarizes aspects of the law and does not constitute legal advice. For legal advice for your situation, you should contact an attorney.
Column first appeared in the Oregon Daily Journal of Commerce on December 17, 2021.