On January 25, 2021, just five days after taking office, President Biden signed executive order (EO) “Ensuring the Future Is Made in All of America by All of America’s Workers. This EO, applicable to the nearly $600 billion (FY19) in federal government contracts sets forth procedures related to the many domestic preference laws including: the Buy America, Buy American, and Jones Acts, as well as other “Made in America Laws.” Some key takeaways from the EO include:
- Directing the Federal Acquisition Regulatory (FAR) Council to consider amending the Buy American Act and replace the FAR Part 25 “component test” – which is a somewhat convoluted process used to identify and measure the domestic content in construction materials. The EO suggests instead that the FAR consider a “value added” approach wherein “domestic content is measured by the value that is added to the product through U.S.-based production or U.S. job-supporting economic activity.”
- Requiring the FAR Council to increase the numerical threshold for domestic content requirements for end products and construction materials.
- Federal agencies must now conduct “supplier scouting” to identify American companies – regardless of size – that are able to produce goods, products, and materials in the United States.
- Requiring OMB to establish a “Made in America Office” and an associated Director to govern the waiver process for any agency seeking to waive the “Made in America Laws.” The EO sets forth the new waiver protocol that must be followed. GSA will then maintain a publicly available website to document proposed and granted waivers.
- Federal agencies to report biannually to the new Made In America OMB Director on their progress related to Made in America requirements. Specifically, the agency must report:
1) ongoing implementation of, and compliance with, Made in America Laws; 2) analysis of goods, products, materials and services not subject to Made in America Laws or where requirements have been waived; 3) analysis of spending as a result of waivers issued pursuant to the Trade Agreements Act (separated by country of origin); and 4) recommendations for how to further effectuate President Biden’s Made in America goals.
The consideration of a change from the component test to a value added test for domestic construction materials is an important development. The impact of all the EO requirements on the construction industry remains to be seen. There is no immediate effect on federal contractors until a new FAR rule is released. But most economists agree that it will raise the costs of the projects. For example, the U.S. Chamber of Commerce said the initiative was unlikely to bring home lost manufacturing jobs and would boost the cost of government projects. Labor Unions, however, including the AFL-CIO have stated its “a good first step in revitalizing U.S. manufacturing.”
Contractors should watch for the publication of the proposed FAR rule in order to be prepared to evaluate any changes needed to their supply chain.
Howard W. Roth Partner, roth@oles.com, 206.467.7461