More Uncertainty for Pending Modifications to Buy American Act Federal Acquisition Regulations

Kelley Drye Client Advisory

In a one sentence correction” published February 5, 2021, the Federal Acquisition Regulatory (FAR) Council changed by two days the effective date for last month’s final rule – Federal Acquisition Regulation: Maximizing Use of American-Made Goods, Products, and Materials (86 FR 6180, January 19, 2021) – amending the FAR to implement President Donald Trump’s July 2019 Executive Order 13881 (84 FR 34257) strengthening Buy American Act (BAA) standards governing federal procurement of supplies and construction materials.

In changing the effective date from January 21, 2021 to January 19, 2021, the correction likely removes the final rule from the purview of the Biden Administration’s January 20 regulatory freeze memorandum directing agencies to postpone the effective date for pending rules (i.e., those not yet in effect) by 60 days or longer for the purpose of reviewing any questions of act, law, and policy the rules may raise.” As a result, there is an increased likelihood that the changes to the FAR stipulated in the final rule will begin to appear in solicitations issued on or after February 22, 2021 and in the resultant contracts.

As background, the January 19 final rule changes FAR clauses implementing the Buy American Act by:

  • Increasing the domestic content requirements for domestic end products” and domestic construction materials” to:

    • 95% for predominantly iron and steel products (excluding COTS fasteners); and

    • 55% for all other products and materials;

  • Increasing the price preference (differential) for domestic products, utilized to determine a bid’s reasonableness, to:

    • 20% - from 6% - for large businesses; and

    • 30% - from 12% - for small businesses;

  • Applying the domestic content requirement to predominantly iron and steel products” that heretofore have been treated as commercial off-the-shelf” and for which the BAA’s traditional domestic component content requirement had been waived; and

  • Imposing a robust origin requirement for iron and steel used as inputs to predominantly iron and steel construction material and other end products, which will require that most ferrous inputs originate from steel melted and poured” in the United States.

Again, the changes outlined herein are applicable to the Buy American Act, which covers direct federal procurement. The rule does not impact the myriad federal-aid Buy America laws applicable to certain federal financial assistance awards, such as those for highway and public transportation construction.

Notably, as we detailed in a previous advisory, President Biden’s January 25, 2021 Executive Order 14005, Ensuring the Future Is Made in All of America by All of America’s Workers (86 FR 7475) directs the FAR Council to consider proposing a rulemaking to make changes to existing BAA standards, including potential changes to the domestic content thresholds and price preferences – in addition to replacing the FAR’s existing component test” with a new method of measuring domestic content. How such a rulemaking would build upon the January 19 final rule – itself the product of an extensive notice and comment process – remains to be seen.

Despite ongoing uncertainty and potential further changes, manufacturers serving federal markets should assess their ability to offer domestic end products and construction materials meeting the amended standards promulgated in the January 19 final rule given the heightened prospect that they will apply to solicitations issued and contracts entered into on and after February 22.