In mid-September, the Trump Administration announced proposed major changes strengthening certain of the Buy American preferences for purchases by the federal government. The federal Buy American Act is the leading federal law, of several in effect, that mandates a preference for American origin manufactured end products and construction materials. Currently, the Buy American regulations empower federal agencies to provide qualifying domestic products with a cost evaluation advantage of from 6 to 50 percent depending on the procuring agency. Under the Buy American Act, manufactured end products and construction materials qualify as domestic if they meet two criteria: first, they must be manufactured in the U.S.; and, second, more than 50 percent of all components by cost of the products are mined, produced or manufactured in the United States. The BAA provide a waiver for so-called COTS or commercially available off-the-shelf items. COTS items are considered “domestic” for purposes of the BAA if they are manufactured in the United States regardless of the dollar value of the foreign components.
The Federal Acquisition Regulations or FARs which implement the Buy American Act do not currently distinguish between iron and steel items and other types of products. The proposed rule will amend this by setting a separate standard for US-origin content for end products and construction materials made predominantly of iron and steel versus all other end products and construction materials.
Under the proposed changes to the FARs the domestic content requirement for predominantly iron and steel end products and construction materials will be raised to 95%. Excepting fasteners, in order to qualify as domestic, the cost of the foreign origin iron and steel must constitute less than 5% of the cost of all content.
In addition, COTS items made predominantly of iron or steel must meet the 95% domestic content requirement to be considered domestic end products or construction material.
For all other end products and construction material, the domestic content requirement will be raised from the current 50% to 55%. To qualify as domestic, more than 55% of all the content by cost must be mined, produced, or manufactured in the United States unless the end product/construction material is COTS. If the item does not consist predominantly of iron or steer, only the COTS item’s manufacture need take place in the United States tin order to qualify as domestic.
Other major changes to the current Buy American regulations include an increase in the price evaluation preference provided to domestic suppliers from 6% to 20% for large businesses and from 12% to 30% for small businesses. It must be noted, however, that the proposed rule impacts only those procurements subject to the BAA. Ordinarily, such requirements are waived for qualifying products originating from the 130+ countries that are recognized under the Trade Agreements Act (“TAA”). Accordingly, the proposed Buy American revisions will apply only to procurements in amounts below the dollar threshold for Trade Agreements Act applicability, some $182,000 for supply contracts and in excess of $7,000,000 for construction contracts.
Comments on the Buy American changes in the proposed rule will be accepted through November 13th.
Robin W. Grover
