President Biden signed an executive order (EO) on January 25, 2021, titled “Ensuring the Future Is Made in All of America by All of America’s Workers.” Referring broadly to all statutes, regulations, rules, and executive orders that relate to Buy America, Buy American, or domestic sourcing requirements as “Made in America Laws,” the EO expresses the new administration’s policy that the U.S. government should maximize the use of domestic products and services and “should, whenever possible, procure goods, products, materials, and services from sources that will help American businesses compete in strategic industries and help America’s workers thrive.” This new EO was issued just days after the Federal Acquisition Regulatory Council (FAR Council) finalized a rule to increase the Buy American Act (BAA) domestic content requirements. With the EO directing significant changes to federal procurement practices under the Made in America Laws, we have highlighted key implications for government contractors below.
Strengthening BAA Domestic Content Requirements
The EO proposes significant changes to promote the enforcement of the BAA’s preference for domestic end products. The EO directs the FAR Council to, within 180 days, consider proposing for notice and public comment amendments to the Federal Acquisition Regulation (FAR) provisions implementing the BAA to replace the “component test” used to identify domestic end products and construction materials with a “value added” test. Under the new proposed test, domestic content would be measured by the value added to the product through U.S.-based production or U.S. job-supporting economic activity—though the EO does not explain how such value would be calculated.
Additionally, the EO states that the FAR Council should consider FAR amendments that would increase the numerical threshold for domestic content requirements for end products and construction materials and increase the price preferences for domestic end products and domestic construction materials. The FAR Council is also directed to promptly review any existing constraints on the extension of the Made in America Laws to information technology that is a commercial item and develop recommendations to lift these constraints to further the EO’s policy.
Importantly, the FAR Council recently published a final rule on January 19, 2021, which increases the BAA domestic content requirements and pricing preferences to implement President Trump’s EO 13881, “Maximizing Use of American-Made Goods, Products, and Materials.” The final rule makes three critical changes: (1) it increases the domestic content requirement to 55% for most products and to 95% for products consisting “wholly or predominantly” of iron or steel (or a combination of both), (2) it removes the commercially available-off-the-shelf exception for products consisting “wholly or predominantly” of iron or steel (or a combination of both), and (3) it increases price preferences for domestic products to 20% for large businesses and 30% for small businesses. This final rule applies to solicitations issued on or after February 22, 2021.
Though Biden’s EO does not invalidate this final rule, it remains to be seen whether these changes will be kept as is or further modified as a result of the new EO.
Increasing Scrutiny of Requests for Waivers of Made in America Laws
Next, Biden’s EO indicates that it may become harder to obtain a waiver of Made in American Laws in the future. The EO directs the Director of the Office of Management and Budget to establish a Made in America Office, headed by a Made in America Director. Before an agency grants a waiver, and unless the OMB Director provides otherwise, the agency will be required to provide the Made in America Director with a description of its proposed waiver and a detailed justification for the use of goods, products, or materials that have not been mined, produced, or manufactured in the U.S. The Made in America Director will review all proposed agency waivers and make a determination as to whether the waiver is justified. Any disagreements between the Director and the agency would be resolved through administrative procedures. Additionally, in order to increase transparency, the General Services Administration is to develop a public website that includes information on proposed waivers and whether those waivers are granted.
Assisting Contractors with Supplier Scouting
The EO also directs agencies to take action to identify suppliers of American-made products, which may be helpful to prime contractors looking for domestic sources for their supply chains. Pursuant to the EO, agencies are to partner with the Hollings Manufacturing Extension Partnership to conduct supplier scouting to identify American companies that can produce goods, products, and materials in the U.S. that meet the federal government’s procurement needs.
Imposing Agency Reporting Requirements
Lastly, the EO imposes new reporting requirements on agencies. It directs federal agencies to, as soon as practicable, consider “suspending, revising, or rescinding” any agency actions that are inconsistent with the aforementioned policy and to consider any additional action necessary to enforce it. More specifically, agencies are directed to submit a report to the newly created Made in America Director within the 180-day window detailing their implementation and compliance with Made in America Laws, a description of any waivers to Made in America laws, and any recommendations on how to further effectuate the EO’s policy. Agencies are thereafter to submit biannual reports on implementation and compliance with Made in America Laws, with analysis on any applicable waivers.
The EO shows the intent of the Biden Administration to prioritize American industry, but it remains to be seen how its directives will play out among federal agencies and their procurements. Contractors subject to the BAA or other Made in America Laws should be cognizant of agency implementation of the EO.