At the end of July, the Federal Acquisition Regulatory Council (FAR Council) introduced its proposed amendments to the Buy American Act (BAA) regulations. The amendments are made pursuant to Executive Order No. 14005, issued by President Biden on January 25, 2021, in which the President urged the FAR Council to take certain measures to bolster the Buy American requirements in federal government procurements. As a general matter, the Buy American statute is not a blanket prohibition on the purchase of foreign end products or the use of foreign construction material. Instead, it encourages domestic sourcing by imposing a price preference for them. Further, the BAA is only applicable to procurements that are below the Trade Agreements Act (TAA), or below $182,000, the current threshold. The proposed rule broadly amends the Buy American regulations in three distinct ways.

First, the FAR Council has proposed to increase the domestic content requirements for domestic end products from 55% to 60%. A product is only considered domestic for purposes of procurement where a certain percentage of the value of components of the end item were mined, produced or manufactured in the U.S. Up until January 2021, the determination as to domestic input was known as the “component test” but is now referred to as the “domestic content test.” The increase to 60% would take effect immediately and then be subject to two incremental increases over the next seven years, capping off at 75%. Notably, if a contractor is contracting with the government during these staged increases, the contractor will be required to meet the higher threshold once it goes into effect despite that the contract was awarded under the lower percentage requirements.

Second, the FAR Council proposed designating certain products as “critical products,” which would include products made up of critical components. Products designated as “critical products” would receive an enhanced price preference in agency evaluation processes for the purposes of providing “a steady source of demand for domestically produced critical products.” The list of critical items and components has yet to be drafted as it is to be informed by the critical supply chain review that was instituted by Executive Order 14017 and the National COVID Strategy. Thus, we can expect the list to encompass components crucial to semiconductors, critical minerals, strategic metals, and highcapacity batteries as well as the pharmaceutical industry. The list will be subject to further edits by the Office of Management and Budget and then eventually published in an additional rulemaking procedure. Once the list of critical products is finalized, any offeror would be required to identify the products in their proposal documents that contain critical components.

Third, in efforts to collect better data that allows for clearer insight into the impact of domestic preference rules and the implementation of the extant procurement programs, the FAR Council has proposed a postaward domestic content reporting requirement for contractors. Any contractor who contracts for supplies or construction would be required to report the domestic content of critical items, domestic end products that contain critical components, and domestic construction materials that contain critical components and that were provided to the federal government.

Ultimately, these proposed changes to the Buy American requirements less dramatic than expected, considering the Administration’s strong commitment to revamping and revitalizing the federal procurement programs as articulated in E.O. 14005. While the increased percentages of domestic content required are notable, contractors will still be operating under the same compliance regime. In any event, those contractors who anticipate subTAAthreshold contracts should begin evaluating their supply chains to ensure future compliance with the FAR Council’s proposed amendments to BAA.

The notice contained a robust question set geared towards companies effected by or who operate under the BAA requirements. Those questions can be found here. Responses to the questions and other general comments on the proposed rule should be submitted to the Regulatory Secretariat Division via the online Rulemaking portal on or before September 28, 2021. Virtual public meeting will be held on August 26, 2021 from 9 am to 3 pm.

If you have any questions on the Buy American Act or any regulations regarding federal procurement programs, please contact an attorney at Barnes, Richardson & Colburn LLP.