Catching Waves: OMB Issues New Implementation Guidance For Biden Administration Buy American Executive Order

McCarter & English Blog: Government Contracts & Export Controls

After 15 months of quarantines, restrictions, and mandatory home schooling, summer 2021 is luring with escape and excitement across the country.  We all hope for beach days and reunions with loved ones as we (hopefully) paddle toward normalcy once again. However, before setting up the “out-of-office” auto-replies and heading for the sand and surf, Government contractors interested in the implications of the Biden Administration’s January 25, 2021 Executive Order on Ensuring the Future Is Made in All of America by All of America’s Workers (EO) will want to take note of a June 11, 2021 Memorandum from the Office of Management and Budget on Increasing Opportunities for Domestic Sourcing and Reducing the Need for Waivers from Made in America Laws (Memorandum). This Memorandum outlines the wave of changes the Made In America Office (MIAO) is poised to take over the summer of 2021 as it begins to implement the mandates of the EO.

As we discussed here, the goals of the MIAO are to increase reliance on domestic supply chains and ultimately reduce the need for waivers.

To meet these goals, the Memorandum identifies four key areas of implementation of the Biden Administration’s EO:

                  • Senior Accountable Officials
                  • Agency reports
                  • Agency-OMB waiver review process
                  • Waiver transparency

While there is still a lot left to be clarified as to the full scope of the MIAO’s duties and activities to implement the mandates of the EO, this Memorandum provides some important guidance to agencies regarding the first steps toward the wholesale review of waivers from Made in America laws.  Contractors that have previously relied on agency waiver processes to supply non-domestic items to the Government will want to make note of this guidance and prepare for the tides to change.

Senior Accountable Officials

The Memorandum requires agencies to designate a Senior Accountable Official (SAO) who will be responsible for directing their respective agency’s management activities regarding the Made in America Laws, as defined in the EO.  The Memorandum required agencies to designate their SAOs by June 30, 2021.  The SAO will be “responsible for identifying opportunities to increase the agency’s reliance on U.S. products, materials, and services,” which will include (1) conducting supplier scouting with the Manufacturing Extension Partnership (MEP) to identify US-based companies that produce US-made goods, (2) participating in “inter-agency product level review to explore new domestic sourcing opportunities,” (3) “strengthening” agency waiver processes and “managing a waiver reduction strategy,” and (4) meeting regularly with the Made in America Director “to discuss progress on limiting the need for waivers and to share ideas for strengthening Made in America policies and practices.”

Agency Reports

The Memorandum also describes the required elements of the initial and semi-annual reports on Made in America Laws that agencies are required to submit pursuant to Sections 11 and 12 of the EO.  By July 24, 2021, agencies, through their SAO, should have provided their first report on their use of Made in American Laws.  The MIAO instructs agencies that these reports should focus on “proactive steps the agency is or will be taking to strengthen and diversify existing domestic supplier bases and create new opportunities where there are gaps[.]”  Agency reports are to include several elements: (1) the agency’s implementation of, and compliance with, Made in America Laws, (2) the agency’s use of any longstanding or nationwide waivers, and (3) recommendations for how to “further effectuate” the policy set forth in the EO.  In these reports, the MIAO expects agencies to discuss their internal management controls to maximize the use of domestic sources and review waivers granted by the agency and describe the extent to which agency procurement waivers already reflect the waiver review process outlined in the Memorandum for non-availability and Jones Act waivers.  The MIAO is also looking for a “baseline of waiver activity” to be established by the agencies’ waivers reported in the Federal Procurement Data System (FPDS) in FY 2020.  Finally, agencies should provide an analysis of the non-availability waivers they use, and identify the types of products and/or construction materials for which non-availability waivers are used most frequently.

The Memorandum instructs agencies to update their reports semiannually, beginning on January 23, 2022, and address ongoing efforts to increase U.S. manufacturing, comply with Made in America laws, and identify the impact of approved waivers.

KEY TAKEAWAY: In requesting agencies provide details on their ongoing use of longstanding or nationwide waivers, the Memorandum takes specific aim at the Federal Highway Administration (FHWA) waiver exempting manufactured products from Buy America requirements. The FHWA Buy America statute at 23 U.S.C. 313 is explicit that the domestic preference requirements set forth therein are applicable to manufactured products. However, the FHWA Buy America regulations exempt manufactured products that do not include steel or iron components.

Agency-OMB Waiver Review Process

The Memorandum also sets forth a list of information that agencies must include when submitting proposed waivers to the Made in America Director for review, and establishes the deadline by which the Made in America Director will either waive the review or notify the head of the agency of the result of the review.

The MIAO has chosen to take the broad mandate of the EO in stages, focusing first on an “initial phase” of “transactional reviews” including Jones Act waivers and non-availability procurement waivers. The Memorandum posits that routinely addressing specific information will “promote greater consistency across agencies in the quality of waiver determinations, improve domestic industry insight, and help the MIAO meet its goal of completing timely reviews.”

Non-availability determinations

The MIAO will begin implementing its mandate by conducting “transactional reviews” of non-availability waivers covering specific business transactions.  Agencies’ proposed non-availability waivers must include the following information:

  • Identification of agency and contracting activity
  • Nature and/or description of end item or construction material to be acquired (to include the impact on the mission if the agency is not able to acquire the item)
  • Market research and outreach conducted (including the timing of the research and conclusions reached on the availability of sources)
  • Use of competition
  • Expectation of price preference (including whether the solicitation will or did include a provision announcing the agency’s intention to provide a price preference for domestic end products and construction material)
  • Exclusion of source offering a US-made end product (including an explanation of whether a US-made end product was offered but would be rejected for reasons other than price)
  • Identification of approving authority (the Memorandum specifies that non-availability determinations above $25,000 generally should be reviewed and approved at a level no lower than the head of the contracting activity)

Jones Act Waivers

The Merchant Marine Act of 1920, a section of which is known as the Jones Act, has as its purpose the development and maintenance of the United States merchant marine. The Jones Act requires merchandise being transported by water between US points, even by way of foreign ports, to be shipped aboard vessels that are (1) US-built, (2) US-citizen owned, and (3) registered in the US. A waiver from the Jones Act is available by statute (46 U.S.C. 501) in limited circumstances where necessary for the national defense.

The MIAO will take a close look at Jones Act waivers as part of its initial phase of EO implementation, and requires agencies requesting a waiver of the Jones Act to provide the following information:

  • Nature and/or description of the transportation required by the agency
  • Why the agency cannot acquire the transportation on a Jones Act qualified vessel
  • An explanation of why it is in the interest of national defense to waive the Jones Act for the required transportation, including impacts if the waiver is not granted
  • Any additional information necessary to clarify the need for the waiver or to comply with 46 U.S.C. 501

Waiver Transparency

The Memorandum also outlines initial steps toward the development of a public website that will include all information on proposed waivers to Made in America Laws and whether those waivers have been granted. The MIAO will work with agency SAOs to determine the processes for posting descriptions of proposed waivers and justifications on the website to be developed by the General Services Administration (GSA) per Section 6 of the EO.  The MIAO aims to have the website “fully functional” in early FY 2022.

Meanwhile, the MIAO will move forward with its “phased implementation” of its receipt and review of agency waiver requests, and it intends to work with SAOs to conduct initial transactional reviews ahead of an expanded review process in the first quarter of FY 2022.  For transactional waiver reviews, the MIAO intends to complete its reviews of the majority of waivers within three to seven business days and no more than 15 days from submission to OMB—with the caveat that the dates “may be revised after processes are developed and/or based on experience.”

Additional Planned Actions Related to Waivers

With respect to waivers for unreasonable cost, the Memorandum identifies that the MIAO “seeks to better understand the relative competitiveness of domestic sources in Federal competitions where foreign end-products and construction materials were acquired” in the hopes of informing a “more strategic application of price preferences in the future.” The MIAO intends to work with agencies to create a process to share information regarding the differential between the prices paid and the price offered by domestic source that was the most competitive.

The Memorandum also notes the EO’s mandate that the longstanding waivers for commercial item information technology must be examined. The MIAO will collaborate with the FAR Council, agency IT experts, SBA, the Federal Acquisition Security Council, and other “interested stakeholders” to analyze whether the exception remains relevant, and what impact may result from either narrowing or eliminating the exception, and whether narrowing or eliminating the exception would further promote Made in America policies.

The MIAO will also examine the partial waiver for commercially available off-the-shelf (COTS) items. In 2009, the component test of the Buy American Act was waived for the acquisition of COTS items. Recently, the Final Rule issued in January of 2021 walked back that waiver in part, reintroducing the domestic content test for COTS items made wholly or predominantly of iron or steel, or a combination of both (with the exception of fasteners). Now, the MIAO, in collaboration with other stakeholders, intends to review the COTS waiver writ large to determine whether the partial waiver remains relevant, the impact of rescinding the partial waiver, and the extent to which rescinding the partial waiver would further promote Made in America policies.

The MIAO will also work with GSA in accordance with Section 13 in the Executive Order to ensure that “products offered to the general public on Federal property are procured in accordance with the policies set forth in section 1 of the Executive Order.” The MIAO will coordinate with GSA once it has received GSA’s recommendations to address any appropriate actions.

Finally, the MIAO will examine compliance with cargo preference laws, working with relevant agencies to determine strategies to maximize the utilization of US-flag vessels to the greatest extent practicable. This review will include steps for SAO notification to the MIAO and the Administrator of the Maritime Administration of activities of the agencies that may be within the scope of 46 U.S.C. 55305(b), which requires that at least 50 percent of all equipment, materials, or commodities purchased or financed by non-DOD entities with Federal funds must be carried on privately owned, US-flag commercial vessels when transported to and from international destinations. The MIAO will also examine processes to be used for making determinations of non-availability under cargo preference laws.

While summer will come and go before these strategies are fully realized, contractors should continue to analyze their supply chains and consider whether they are, or can be, in a position to pivot to more domestic sources of supply. While the progress of the MIAO’s efforts may ebb and flow, contractors that want to be sure they are positioned to catch the right waves will need to chart the MIAO’s progress and plan accordingly.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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