On January 25, 2021, President Biden issued 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. On July 30, 2021, the Federal Acquisition Regulatory Council (“FAR Council”) proposed regulation changes that would further increase the domestic component requirement, increase price preferences for “critical” components, and implement reporting requirements. We previously discussed the FAR Council’s proposed changes, and the FAR Council issued its final rule on March 7, 2022.
On June 9, 2023, the Department of Defense (“DoD”) proposed its own changes to the DFARS, the FAR clauses and regulations that apply to DoD contracts, to make conforming changes associated with implementation of Executive Order 14005. These changes are intended to supplement the FAR by making conforming changes that incorporate the DoD-unique requirements (e.g., inclusion of qualifying countries). Comments are due August 8, 2023, and may be submitted at through the Federal eRulemaking Portal: https://www.regulations.gov, using “DFARS Case 2022–D019.”
Under these proposed rules, a DoD contractor who is awarded a contract with a period of performance that spans the schedule of domestic content threshold increases will be required to comply with each increased threshold for the items in the year of delivery. If compliance with the changing domestic content thresholds is not feasible, the applicable agency, after consultation with Office of Management and Budget’s Made in America Office (MIAO), may allow the contractor to comply with the domestic content threshold that applied at the time of contract award, for the entire period of performance for that contract. To implement this, the contracting officer will be required to select one of the newly created alternate clauses for 252.225–7001, Buy American—Balance of Payments Program and one of the newly created alternate clauses at 252.225–7036, Buy American—Free Trade Agreements—Balance of Payments Program.
The proposed rule also permits DoD contractors to use the 55 percent domestic content threshold until one year after the increase of the domestic content threshold to 75 percent, in instances where the procuring agency has determined that there are no end products or construction materials that meet the new domestic content threshold, or such products are of unreasonable cost. The proposed rule supplements the FAR by using a consistent 55 percent threshold until 2030 for use where domestic products at a higher threshold are not available or the cost to acquire them would be unreasonable.
This 55% fall back threshold requires offerors to identify which foreign end products exceed 55 percent domestic content, and only applies to construction material that “does not consist wholly or predominantly of iron or steel or a combination of both and that are not commercially available off-the-shelf (COTS) items, as well as to end products that do not consist wholly or predominantly of iron or steel or a combination of both and that are not COTS items.”
The proposed rule also provides that a “qualifying country offer” will be subject to the domestic content requirement for end products that are wholly or predominantly of iron or steel, or a combination of both, if the low offer is a foreign offer exempt from the application of the Buy American statute or Balance of Payments Program evaluation factor.
Finally, the proposed rules includes revisions to two key definitions. First, the definition of “critical component,” which means a component that is mined, produced, or manufactured in the United States and deemed critical to the U.S. supply chain. Second, the definition of “critical item,” which means a domestic construction material or domestic end product that is deemed critical to the U.S. supply chain. The lists of critical components and critical items are at FAR 25.105. The revisions are intended to conform to the FAR final rule.
This article summarizes aspects of the law and does not constitute legal advice. For legal advice for your situation, you should contact an attorney.