In one of the Trump Administration’s last major regulatory changes, effective for certain federal procurement solicitations today, February 22nd, the Buy American Act standards have been tightened to make it more difficult to offer foreign-origin products in response to purchases by the U.S. Government.
Multiple federal laws mandate a preference for the procurement of US-origin goods by the agencies of the U.S. Government. These laws vary in scope, requirements and product coverage. By far the widest in its scope and impact on federal procurement is the Buy American Act of 1933 or “BAA” which mandates a bid preference evaluation for providers of American-made products in response to many federal procurements. For the purpose of product evaluation, the purchasing agency will apply a percentage premium to the price of competing foreign-origin end products. Under the federal agency regulations implementing the BAA, in order to qualify for preference as an American-origin item an “end product” must be both: 1) manufactured in the United States; and, 2) be composed of at least 50 percent by value of U.S. origin components compared to total component value. A major exception to the two-part BAA standard is the exemption for commercial-off-the-shelf (COTS) products which still must meet the “domestic manufacture” criterion of the two-part qualifying test but do not have to satisfy the “component” origin requirement.
The Trump rule significantly tightened these requirements by making the following major changes to the BAA procurement regulations:
– Raises the domestic component content by value requirement from 50% for all end products to 95 percent for end products that are made wholly or predominantly of iron or steel (or both). The domestic component content requirement is raised to 55 percent for all other end products. A product qualifies as “predominantly” made of iron or steel if 50% or more of the total cost of components for the end product is iron or steel;
– Eliminates the partial-exemption for COTS products that are predominantly made of iron or steel. Importantly, the existing COTS exemption stays in place as is for COTS products not predominantly made of iron or steel in that they do not have to satisfy the 55 percent domestic component requirement.
– Increases the bidder price preference for domestic end products from 6% to 20% in the case of large businesses, and from 12% to 30% in the case of small businesses. For domestic construction materials, this price preference is increased from the current 6% to 20 percent.
Joseph Biden recently issued an Executive Order mandating that federal procurement agencies further tighten or at least modify the newly-revised BAA requirements. We will keep you posted regarding any further developments or changes involving the Buy American Act of 1933 and how it may impact you as a current or prospective supplier to the federal government.
Robin W Grover
