A new, much tougher Buy American final rule soon applies to new solicitations issued by the Government. The final rule implements former President Trump’s “Maximizing Use of America-Made Goods, Products, and Materials” Executive Order (EO). Previously we reported on the January 22, 2021 Biden EO, “Buy American Executive Order Doubles Down on Domestic Preferences.” Thus, the new Buy American final rule passes into sight just as President Biden issues his own domestic content EO. These changes may impact supply chains and will likely form the basis for increased enforcement actions by the Government against contractors.
Here are key changes for contractors:
- The domestic content requirement for end products or construction materials to be considered domestic is increased from 50% to 55% measured as a percentage of cost.
- A new category “end products or construction materials that consist wholly or predominantly of iron or steel or a combination of both.” These are products where the cost of the iron and steel content exceeds 50% of the total cost of the product’s components.
- New 95% content standard created for “end products or construction materials that consist wholly or predominantly of iron or steel or a combination of both.” Thus 95% of the iron or steel components of these products must be domestic. A bidder must make a good-faith estimate that the cost of the iron or steel content not produced in the United States is less than 5% of the total cost of all components of the end product or material.
- The percentage added to bids using foreign end products and construction material is increased. The Final Rule increase these from 6% for bidders that are large businesses and 12% for small businesses to 20% and 30%. The Department of Defense rule remains at 50%.
- New domestic content test for commercially available off-the-shelf (COTS) items that “consist wholly or predominantly of iron or steel or a combination of both,” as defined by the final rule. Before all COTS items qualified as domestic if manufactured in the United States, regardless of the origin of its components. This final rule removes the COTS exemption for this specific class of COTS items. Other COTS items that do not fall under the new domestic content test continue to qualify as domestic if manufactured in the United States.
The final rule states that it is effective January 21, 2021 and that it applies to solicitations issued on or after February 22, 2021.
Clearly the increase to 95% domestic iron and steel content for wholly or predominantly iron and steel end products or construction materials is huge. The domestic content increase from 50% to 55% for non-COTS end products while a smaller increase is not insignificant. For COTS products with predominant iron or steel content the changes require evaluation of the supply chain as well as, where applicable, working on BAA exceptions and waivers like public interest or non-availability.
These new Buy American requirements will likely lead to tougher enforcement by the Government because the standards are tightened. The Government will want to make sure contractors have changed content or received waivers. The old days of easier compliance with domestic content restrictions are ancient history now. With the new Biden EO, compliance will get even tougher in the future.
Howard Roth, Partner, roth@oles.com, 206.467.7461
