Biden Administration Issues Proposed Rule Seeking to Strengthen Buy American Requirements
The Biden administration's newly proposed rule would increase Buy American Act requirements and impose new reporting obligations.
On July 30, 2021, the Biden administration issued a proposed rule to amend the Federal Acquisition Regulation's ("FAR") Buy American Act ("BAA") requirements. The proposed rule builds on a January 2021 executive order calling for greater reliance on domestic suppliers in government contracts. The rule would increase domestic content requirements, create a framework for providing price preferences for domestic critical products and components, and impose new tracking and reporting obligations. Contractors should be mindful of potential exemptions, but will likely need to revisit existing supply chains and compliance programs. The proposed rule calls for comments by September 28, 2021.
The BAA generally applies to procurement contracts above the micro-purchase threshold, but below the Trade Agreements Act ("TAA") threshold. It does not prohibit the government from purchasing foreign end products or construction materials; rather the BAA imposes a price preference for domestic products and construction materials. Domestic end products and construction materials must currently include at least 55 percent domestic content. The proposed rule would increase the percentage to 60 immediately, 65 in 2024, and 75 in 2029.
The proposed rule would also create a framework for giving greater price preferences to critical products or components. The proposed rule does not specify which items will qualify or the extent of the preference, both of which will be addressed through separate rulemaking.
Contractors currently indicate only whether items meet the required domestic content threshold. The proposed rule would require reporting the specific domestic content for domestic products deemed critical or containing a critical component. The government may use the data to further increase thresholds and compliance obligations. The government could also use this data (which will be in the form of express representations) in enforcement actions such as False Claims Act litigation. Contractors will need to determine whether any of the items they provide qualify as critical and, if so, implement appropriate mechanisms to accurately track domestic content.
The BAA requirements would continue to apply even to most commercial item acquisitions. However, contractors should understand several important exemptions that may apply to these requirements. Commercial information technology acquisitions are exempt from the BAA, though President Biden has called for the FAR Council to consider removing or revising this exemption. Certain commercially available off-the-shelf ("COTS") items are also exempt, but a recent rule rolled back some of the exemption. The TAA, which is not changed by this proposed rule, also operates as an exemption from BAA requirements in many instances.
Jones Day publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information purposes only and may not be quoted or referred to in any other publication or proceeding without the prior written consent of the Firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our “Contact Us” form, which can be found on our website at www.jonesday.com. The mailing of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship. The views set forth herein are the personal views of the authors and do not necessarily reflect those of the Firm.