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Government Issues Proposed Rule Increasing Contractor Buy American Requirements Government Issues Proposed Rule Increasing Contractor Buy American Requirements

Government Issues Proposed Rule Increasing Contractor Buy American Requirements

The federal government aims to require more American-made content in the goods that contractors sell to the government. On July 30, 2021, the Federal Acquisition Regulation’s (“FAR”) Council issued a Proposed Rule (the “Proposed Rule”) to amend the FAR Buy American Act (“BAA”) requirements. The proposed rule follows President Biden’s January 2021 executive order to increase the government’s preference to purchase goods made in America. Significantly, the recently Proposed Rule seeks to increase the domestic content requirements, i.e., content sourced from the U.S., from 55 percent to 60 percent. Here are three of the key takeaways that contractors should review:
 
  1. Phased Increase of Domestic Content Requirements: The BAA is a procurement sourcing preference that the federal government applies to supply and construction contracts valued over the micro-purchasing threshold but under the Trade Agreements Act threshold unless certain exceptions, such as national security, apply. If the BAA applies, contractors must disclose foreign end products or construction material that they intend to deliver to the government based on the domestic content test. Currently under that test, an end product or construction material (excluding items made predominately out of steel or iron) are considered “domestic” if at least 55 percent of the cost of their components come from the U.S. The recently Proposed Rule aims to change this. Specifically, the Proposed Rule would increase the percentage to 60 immediately upon finalization of the Proposed Rule, 65 in 2024, and 75 in 2029.
  2. New Preference for “Critical” Products: Aside from products predominately made from iron or steel (which must have a domestic content amount over 95 percent), the current FAR BAA regulations do not differentiate between various types of supplies for purposes of determining whether they are considered domestic. The Proposed Rule, however, aims to create a framework that places higher price preferences on specific types of supplies or construction material deemed to be “critical” or made of “critical components.” The FAR Council indicated that it plans to propose separate rulemaking to identify which items are “critical.” Accordingly, this part of the Proposed Rule would not apply until the regulations define “critical.”
  3. Additional Reporting Requirements for “Critical” Products: Contractors currently indicate only whether supplies or construction materials do not meet the domestic content requirement. The Proposed Rule seeks to require contractors to report, post contract award, the amount of domestic content in each “critical” item. Like the new proposal to give preference to critical products, this reporting requirement would not become operational until a separate rulemaking concludes and identifies which items are “critical.”
Connect with Ice Miller for More Details

If you have questions concerning the impact of this recent development, Ice Miller has extensive experience assisting companies to comply with the BAA and FAR. Our team includes Christian Robertson, a former U.S. Air Force intelligence officer who regularly advises clients on government contracts matters.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.
 
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