Government Contracting and the Buy America Act
-As shared by Hannah Altman
In his first week in office, President Biden signed Executive Order 14005, “Ensuring the Future is Made in All of America by All of America’s Workers.” This executive order calls for a review of, among other things, 1933’s Buy America Act (BAA). Passed during the Great Depression, BAA is designed to show preference to American industry and disincentivize foreign competition in government contracts. While that is all good in theory, what do small businesses need to know about EO 14005 and how it will affect their government contracting practices?
1. Know your End Product
If you are selling a product or good to the U.S. government, you must consider both the finished product and the components that go into making that product. In order to qualify as domestic, your product must be manufactured in the United States, and at least 55% of its components must be manufactured in the United States as well. Make sure you know where your component parts are coming from, because the percentage of domestic production required will only increase! A new rule that recently went into effect increases the domestic content threshold significantly over the next several years: from 55% to 60% on October 25, 2022, then to 65% in calendar year 2024, and 75% in calendar year 2029. (Side note – did you just find out that you are going to need to find a new component supplier? govmates can help with that! Just shoot us an email and tell us what you need.)
2. Don’t get too comfortable with waivers
The executive order also cracks down on companies looking for a waiver for the requirements explained above. Previously, an Agency or contracting officer could issue a waiver if the components were too expensive or too scarce to source or from the United States. The Biden administration has added extensive oversight and transparency to the process by creating a Made in America Office – housed in OMB. In order to obtain a waiver, the Agency must submit a justification for the use of foreign components to the Made in America Director. The Director will then publish its decision on a new website, also established by the executive order. If you are a company using foreign components, start the waiver process early! Agencies will likely be reticent to use waivers unless totally necessary, so consider which component parts are critical.
3. Transparency, Transparency, Transparency
Executive Order 14005 is promoting transparency by establishing MadeinAmerica.gov. The website lets businesses find information on waivers and contact information for points of contact at each granting agency. Agencies will also be required to report to the Made in America Director twice a year regarding their implementation and compliance with the Buy America Act, with an opportunity to share policy prescriptions for improving BAA’s outcomes.
While all of this may create a longer lead time in your process, it helps to ensure the security of products made for and used by government customers. As evidenced by the recent changes to many programs regarding R&D, Manufacturing, etc.., your customers are paying attention. Not heeding the requirements of these Executive Orders may mean the difference between winning new work or not.