Update: On Feb. 24, 2021, President Joe Biden signed an executive order (EO) triggering a comprehensive review of U.S. supply chains, ordering agencies to identify ways to secure the American economy against shortages of critical and essential goods. For more details, see our March 1, 2021, alert.
On Jan. 25, 2021, President Joseph R. Biden signed an executive order aimed at strengthening “Buy American” rules to increase the federal government’s procurement of American-made goods.
According to the White House, this order makes several significant changes to the implementation of the laws requiring federal government agencies to procure materials and products domestically.
The order aims to increase domestic content requirements and close existing loopholes upon which many government contractors currently rely. To accomplish this, the order instructs the Federal Acquisition Regulatory Council to amend the FAR to (1) replace the “component test” in Part 25 of the FAR that is used to identify domestic end products; (2) increase the numerical threshold for domestic content requirements for products; and (3) increase the price preferences for domestic end products. It also updates how agencies decide if a product was sufficiently “Made in America,” which may require government contractors to re-evaluate their manufacturing process and supply chain.
The Biden Administration will create a new senior role at the White House Office of Management and Budget to oversee the implementation of the new Buy American rules. According to administration officials, there will be increased oversight of potential waivers to domestic preference laws, which will likely make them more difficult for contractors to obtain. The order further creates a central review of waivers for Buy American requirements, with the goal of reducing the total number of waivers that allow agencies to buy foreign end products. The order would also require “transparency” in the Buy American waiver process, directing the General Services Administration to create a website where waiver requests can be publicly viewed.
In addition, the order requires federal agencies to use the manufacturing extension partnership, a network of small and medium-sized businesses across 50 states and Puerto Rico, to ensure that agencies are connecting with new domestic suppliers. President Biden, in the order, also reiterated his support for the Jones Act, which requires that only U.S.-flag vessels carry cargo between U.S. ports.
Through necessary forthcoming regulatory changes, the Biden Administration is poised to issue a slate of new rules for Buy American compliance to implement the policy shift reflected in the order. Government contractors and subcontractors that sell products to the federal government should closely monitor developments in this area, as they may require significant changes to existing practices, and penalties for noncompliance can be severe.
Please contact the authors if you have any questions about Buy American polices and their potential impact on your business, or if you require assistance interpreting the governing rules and regulations.