Proposed changes to the Buy American Act in Executive Order 14005

On January 25, 2021, President Joe Biden signed an executive order which aims to impose more stringent restrictions on federal procurement by tightening the enforcement of the Buy American Act (BAA).

Within 180 days, the Federal Acquisition Regulation (FAR) Council will consider a new regulation, which would be built on the FAR final rule that went into effect on January 19, 2021, implementing former President Trump’s Executive Order 13881 (Maximizing Use of American-Made Goods, Products, and Materials). That final rule increased the domestic content requirements from 50% to 95% for iron and steel products, and from 50% to 55% for other products. It also increased the price evaluation preference to 20% for large domestic businesses and to 30% for small businesses. Now, Executive Order 14005 directs more tightened BAA standards.

First, the Made in America Office will be established within the Office of Management and Budget (OMB). The new office will be headed by a director appointed by the OMB and will conduct a review of BAA waiver requests. Granting agencies must submit proposed waiver requests to the Made in America Office and may appeal the office’s determination. The office will have up to 15 days to review each request and must publish their determinations on the website.

Second, the Order calls for a new test in measuring the domestic content requirement. The current “component test” focuses on the cost of domestic components in end products. The proposed change is to adopt a “value-added” test under which domestic content will be measured by “the value that is added to the product through U.S. based production or U.S. job supporting economic activity.” The order provides no further details on how to implement the “value-added” test. However, it may suggest that labor costs will be included as part of the value added to the end products.

Third, the Order proposes to increase the threshold for domestic content requirements, but it does not provide any specific numbers regarding the increase.

Fourth, waiver requests will be subject to more stringent review by the Made in America Office. For instance, in granting a BAA waiver in the public interest, agencies will have to assess whether a significant portion of the cost advantage of a foreign-sourced product is the result of the use of dumped steel, iron, or manufactured goods or the use of injuriously subsidized steel, iron, or manufactured goods. Furthermore, the OMB is directed to update the list of domestically non-available articles, which may narrow down the scope of non-available articles waiver.

Lastly, BAA requirements may extend to information technology. The Order calls upon the FAR to review current constraints on the extension of the BAA requirements to information technology, and to develop recommendations to lift these constraints.

For a look at the rest of the National 8(a) Association please click on the following 2021 Spring Newsletter.