Administration Makes Good on Promise to Increase Domestic Content Requirements Under the Buy American Act

On March 7, 2022, the FAR Council published a Final Rule implementing further revisions to the Buy American Act (BAA), as contemplated by President Biden’s Executive Order titled Ensuring the Future is Made in All of America by All of America’s Workers, which he issued his first week in office. The Final Rule makes three key changes to the BAA regulations, which are for the most part consistent with the Proposed Rule:

• Initiating a staged increase in the percentage cost of domestic components to qualify as domestic end products and construction materials from the current 55% to 60% and then to 65% in 2024 and 75% in 2029.  These thresholds do not apply to commercially available off-the-shelf (COTS) items or to items made predominantly of iron and steel – each of which has its own special rules. For contracts with a period of performance that spans a scheduled threshold increase, the general rule is that contractors will have to comply with each increased threshold for the items in the year of delivery, although contracting officers will have discretion to issue exceptions fixing the domestic content threshold to the one in effect at the time of award. Unlike the Proposed Rule, the Final Rule builds in a grace period (until the next fiscal year) before the 60% threshold goes into effect.
• Easing transition to the new higher component cost thresholds, by providing the contracting officer authority – based on a determination that no end products or construction materials meet the increased threshold – to “fallback” the threshold to the current 55% to qualify as domestic. This fallback threshold will remain available until 2030.
• Creating a framework for applying higher price preferences for domestic end products and construction materials that are deemed “critical” or that contain critical components. The list of critical items and components and the associated price preferences will be implemented through subsequent rulemaking. While the Proposed Rule contemplated post-award reporting on the specific amount of domestic content for critical end products, construction materials, or components, the Final Rule defers the reporting requirement to subsequent rulemaking to allow for more industry comments on the scope and scale of the reporting obligations.

The FAR Council noted that the majority of comments on the proposed rule were on potential changes that are not implemented in this Final Rule, such as eliminating the waiver for commercial item information technology (IT) end products and the waiver of the component test for COTS items. For now, end products and construction materials that qualify as COTS or commercial item IT remain unaffected by these changes. In addition, it is important to note that the Final Rule makes no changes to the regulations implementing the Trade Agreements Act (TAA), which apply to a broad swath of federal procurements, including all products and services sold under Federal Supply Schedule contracts administered by the General Services Administration.