[Note- BAA does not apply to the GSA Multiple Award Schedule Program but is an issue that is of importance to Federal Contractors.]
Numerous changes to the Buy American Act (“BAA”) have been proposed and implemented in recent years, with another one coming this week. Beginning… on October 25, 2022, the domestic content requirement for components in non-ferrous manufactured end products and construction materials will increase from 55% to 60%. This increase will be the first of three phased increases for such products implemented under the Biden Administration.
As a brief recap, the BAA is a domestic preference statute that encourages federal agencies to procure manufactured end products or construction materials from domestic sources of supply unless a waiver applies (most notably under the Trade Agreements Act). For such products, the BAA does so pursuant to a two-part test: first, the end product or construction material must be manufactured in the United States; and second (with limited exceptions), a certain percentage of the components that constitute the end product or construction material also must be manufactured in the United States. The BAA further requires procuring agencies to apply various price penalties to foreign offers for evaluation purposes, such that if the foreign offer is still less expensive than a domestic source after applying the evaluation penalty, the agency may select the foreign offer. While this framework remains intact, the BAA has been refined through Executive Orders and rulemaking by the Federal Acquisition Regulation (“FAR”) Council in both the prior and current Administrations.
President Trump issued Executive Order (“EO”) 13881, Maximizing Use of American-Made Goods, Products, and Materials, pursuant to which the FAR Council published its final rule on January 19, 2021. The final rule amended the FAR to increase the domestic content requirements for components from 50% to 55% for manufactured end products or construction materials and substantially increased the content requirement for wholly or predominantly iron and steel end products and manufactured construction materials to 95%. The final rule also removed the long-standing commercial-off-the-shelf (“COTS”) exception from the BAA’s domestic component content requirements for COTS components that are wholly or predominantly of iron or steel (except for fasteners). Finally, the final rule increased the price evaluation penalties in civilian acquisitions from 12% to 30% for small business offerors and from 6% to 20% for large businesses. DoD acquisitions, however, remained unchanged at a 50% price evaluation penalty.