In 2024 the White House continues to place an emphasis on the U.S. Government’s longstanding domestic purchase preferences. The latest update implementing the domestic purchase preference is the Department of Defense’s Final Rule that was published on February 15, 2024, which amends the Defense Federal Acquisition Regulation Supplement (DFARS). This revision to the DFARS supplements the FAR Final Rule that implements Executive Order (E.O.) 14005, “Ensuring the Future Is Made in All of America by All of America’s Workers.”
Even while contractors are working to maintain compliance with the current set of requirements, it is important to keep in mind that the stated overarching goal of the FAR Final Rule is “…to strengthen the impact of Federal procurement preferences in the Buy American statute for products and construction materials that are domestically manufactured from substantially all domestic content” (see FAR Final Rule). What that means is that contractors should both be maintaining compliance now and planning for accommodation of scheduled future threshold increases. The messaging from the White House and actions across the U.S. Government demonstrate that domestic preference is likely to continue to be a priority — which means higher content thresholds and heightened scrutiny on waivers for contractors.
The DoD Final Rule revises the definitions of “domestic end product,” “domestic construction material,” and “qualifying country end product,” and lays out a schedule for domestic content threshold increases that a product must meet to be defined as “domestic.” Within the new definition of “domestic end product” the Final Rule also authorizes procurement executives to use the alternate domestic content test (fallback threshold). This portion of the new definition is aimed at aiding a smoother “industry transition” by allowing the use of the 55% domestic content threshold until one year after the increase of the domestic content threshold to 75% if domestic products at a higher threshold are not available, or the cost to acquire them would be unreasonable.
Although commenters to the proposed rule expressed concern that this Final Rule will create supply chain challenges, DoD has made its position clear when it responded that the Final Rule supplements the FAR Final Rule, which is “…aimed to strengthen the impact of Federal procurement preferences in the Buy American statute for end products and construction materials that are domestically manufactured from substantially all domestic content.” (emphasis added)
As we have seen over the past few years, focus on domestic preference has only increased. Whether through new rulemakings, audit, enforcement, or increased scrutiny on waivers, the message that is being sent to contractors is clear: Know your supply chain well and make sure it complies.
