Executive Order Seeks to Strengthen Preferences for American-Made Products
The Situation: On January 25, 2021, President Biden signed an Executive Order titled "Ensuring the Future is Made in All of America by All of America's Workers" ("Made in America EO" or "EO"). The Made in America EO encourages the U.S. government to "procure goods, products, materials, and services from sources that will help American businesses compete in strategic industries and help America's workers thrive."
The Result: The Made in America EO reinforces the government's policy of favoring American-made goods and services by creating a centralized process for evaluating waivers of domestic preference requirements and recommending more restrictive regulatory changes.
Looking Ahead: Given the government's continued focus on promoting American-made products and services, contractors should ensure their compliance programs meet existing domestic preference requirements. Contractors should also be prepared to meet potentially more restrictive requirements for what constitutes a domestic end product.
The Made in America EO seeks to bolster domestic preference laws applicable to U.S. federal procurements, federal grants, and other forms of federal assistance through increased transparency and potentially more restrictive rules with respect to what constitutes a domestic end product. The EO establishes a new process for waiving domestic preference requirements, directs the establishment of a new office to oversee that process, and directs specific consideration of changes to the Federal Acquisition Regulation ("FAR"), including replacement of the "component part" test used to identify domestic end products and construction materials.
Promoting Accountability and Transparency
The EO directs the Office of Management and Budget ("OMB") to create and appoint a director of the Made in America Office. Unless OMB provides otherwise, this office will review all agency waivers of domestic preference laws. The EO requires the government to assess whether a significant portion of the cost advantage of a foreign-sourced product is the result of dumped or injuriously subsidized steel, iron, or manufactured goods. The EO also directs the General Services Administration to create a public website to publish information on all proposed waivers. The website will allow interested parties to easily identify proposed waivers and determine whether they have been granted.
The EO directs all agency heads to issue a report within 180 days on the implementation of and compliance with domestic preference requirements, the ongoing use of nationwide waivers, and recommendations for further effecting the policy of the EO. Agency heads must report biannually to the Made in America Office. Agency heads must also consider suspending, revising, or rescinding any agency actions inconsistent with the policy of the EO, and consider proposing additional actions to enforce the policy of the EO.
Amendments to the FAR
The EO directs the Federal Acquisition Regulatory Council ("FAR Council") to consider proposing FAR amendments, within 180 days, to promote the policy of maximizing the government's purchase and use of U.S.-produced goods and services. The EO directs the FAR Council to consider proposing amendments to replace the existing FAR Part 25 "component part" test used to identify domestic end products and construction materials. The new test would measure domestic content by the value added to the product through U.S.-based production or U.S. job-supporting economic activity. The FAR Council must consider increasing the threshold for domestic content requirements and price preferences for domestic end products and construction materials. Further, the EO directs the FAR Council to make recommendations on lifting existing constraints on the extension of domestic preference requirements to commercial item information technology.
The Made in America EO also directs agencies to partner with the Hollings Manufacturing Extension Partnership to conduct "supplier scouting." This partnership is designed to connect agencies with small and medium-sized domestic suppliers capable of producing goods in the United States that meet federal procurement needs.
Effect on Prior Executive Orders
The Made in America EO revokes or supersedes several previous domestic preference-related EOs. The new EO revokes EO 13788, which served primarily as an information-gathering exercise. The EO also revokes EO 13795, which directed implementation of an "America-First" offshore energy strategy.
The new EO supersedes, but does not revoke, EOs 10582 and 13881 insofar as they are inconsistent with the Made in America EO. EO 10582, issued in 1954, prescribes uniform procedures for establishing domestic content requirements and determining whether the price of materials of domestic origin is unreasonable or inconsistent with the public interest. The recently issued EO 13881 directed the FAR Council to propose changes to the FAR related to domestic content requirements and evaluation preferences.
The changes proposed under EO 13881, none of which were revoked or changed by the Made in America EO, became final in a rule issued on January 19, 2021, just one day before President Biden's inauguration. These changes apply to solicitations issued on or after February 22, 2021. The final rule increases from 50% to 55% the domestic content requirements for domestic construction materials and end products. It increases from 50% to 95% the domestic content requirements for end products or construction materials that consist wholly or predominantly of iron, steel, or a combination of both.
The final rule implementing EO 13881 also increases the evaluation preference for offerors of domestic end products. For large business offerors of domestic end products, the government must add 20% (increased from 6%) to the price of any offeror providing nondomestic end products. For small business offerors of domestic end products, the advantage is 30% (increased from 12%). The new rule also eliminates an existing waiver for iron and steel content requirements in commercially available off–the-shelf ("COTS") products, with the exception of COTS fasteners.
Three Key Takeaways
- The continued focus on enhancing oversight of domestic preference requirements may also signal an increased focus on enforcement actions.
- The recent changes in the FAR pursuant to EO 13881 will take effect on February 22; contractors should understand these new requirements and expect further revisions to domestic content requirements and evaluation factors later this year.
- With the establishment of a centralized review process and the publication of information concerning the use of waivers, contractors can expect greater consistency and more predictability in the application of waivers.
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