President Trump Expands Buy American Act – Another Wrench in the Works?
Fri Feb 1, 2019
While domestic preference requirements in federal procurements, namely the Buy America and Buy American Acts, are not new their increased emphasis are. As has been well publicized, a central focus of the Trump Administration has been to encourage and increase the use of domestically sourced products and materials in connection with federal procurements. While this policy objective is relatively straightforward, the intersection and resulting nuances, between these Acts, their regulations and related trade statutes, agreements or exceptions generally are anything but. On Jan. 31, 2019, the President added to the mix by signing an executive order to further the administration’s Buy American push. The Jan. 31, 2019 Executive Order, “Strengthening Buy American Preferences for Infrastructure Projects,” expands on the President’s April 18, 2017, Executive Order 13788 and instructs federal agencies to develop plans and rules to encourage contractors to adhere to domestic preference requirements to the maximum extent practicable in all projects that receive indirect federal government assistance by way of loans, loan guarantees, or grants and other cooperative agreements. The Jan. 31, 2019 Executive Order has significant, potential implications for the contractor community because prior to the Executive Order the Buy American Act only applied in cases of federal procurements directly issued by the government. With the new Executive Order, however, the Buy American Act now potentially applies to any project that receives financial assistance from the federal government even if the project is not a procurement that was solicited by the federal government.
So what is covered now? The Executive Order directs federal agencies to “maximize, consistent with law, the use of goods, products, and materials produced in the United States . . . [including] through the terms and conditions of Federal financial assistance awards.” In this regard, the Executive Order directs agencies “[w]ithin 90 days . . . [to] encourage recipients of new Federal financial assistance awards pursuant to a covered program to use, to the greatest extent practicable, iron and aluminum as well as steel, cement, and other manufactured products produced in the United States in every contract, subcontract, purchase order or sub-award that is chargeable against such Federal financial assistance award.” The scope of the Executive Order, in terms of the materials, projects, and the types of work that are covered, is very broad. For example, “manufactured products” broadly covers any “items and construction materials composed in whole or in part of non-ferrous metals such as aluminum; plastics and polymer-based products such as polyvinyl chloride pipe; aggregates such as concrete; glass, including optical fiber; and lumber.” This term also encompasses iron, aluminum, steel and even cement.
The Executive Order further applies to all “infrastructure projects,” which broadly includes, but is not necessarily limited to, any “project to develop public or private physical assets that are designed to provide or support services to the general public in the following sectors: surface transportation, including roadways, bridges, railroads and transit; aviation; ports, including navigational channels; water resources projects; energy production, generation and storage, including from fossil-fuels, renewable, nuclear and hydroelectric sources; electricity transmission; gas, oil, and propane storage and transmission; electric, oil, natural gas and propane distribution systems; broadband internet; pipelines; stormwater and sewer infrastructure; drinking water infrastructure; and cybersecurity.” Notably, the Executive Order pushes the envelope beyond construction projects as it now includes broadband internet and cybersecurity programs. Finally, as for the types of work that are covered, the Executive Order, again, cuts a broad swath by including any “alteration, construction, conversion, demolition, extension, improvement, maintenance, reconstruction, rehabilitation, or repair of an infrastructure project in the United States.”
While the implementing details will have to wait until agencies issue their guidance, the Executive Order aims to have a profound impact on contractors who traditionally have not had to deal with the Buy American Act, given the $700 billion in federal financial assistance that is provided annually. Contractors will now have yet another issue on their plate when preparing bids and they must also evaluate, exercise diligence and incur the added burden of either seeking waivers or in ensuring that any certifications that they provide are accurate and complete. Indeed, an incorrect certification can pose substantial business and legal risks regarding pricing, contract administration, and compliance and even potential exposure under the False Claims Act in the event a defective certification on Buy American Act compliance is submitted on a project. Given the risks and complexity, it is all the important that contractors fully understand the impact and nuances of the Executive Order on their projects, and in relation to other domestic preference requirements, as well as the options that contractors have at their disposal.
David Yang, Partner, firstname.lastname@example.org