Another Buy American Question - Domestic End Product

[Almeisan]

Hi everyone, 

I've been a long time lurker of WIFCON, but first time posting. I am not an 1102 myself, but I am a federal employee who works with small businesses engaged in federal contracting. 

I was presented with a potential issue from a small business (SB) who was awarded a purchase order to provide a COTS item to DLA. However, after award, the KO requested evidence that the item was manufactured in the United States thereby qualifying as a domestic end product. The SB contends that because the item is COTS it automatically is considered a domestic end product. The KO contends that the COTS item must be manufactured within the US in order to be considered a domestic end product. 

The Clause in question is DFARS 252.225-7001,which states in part: 

Quote

“Domestic end product” means—

(1) For an end product that does not consist wholly or predominantly of iron or steel or a combination of both—

(i) An unmanufactured end product mined or produced in the United States; or

(ii) An end product manufactured in the United States if—

(A) The cost of its qualifying country components and its components that are mined, produced, or manufactured in the United States exceeds 55 percent of the cost of all its components. The cost of components includes transportation costs to the place of incorporation into the end product and U.S. duty (whether or not a duty-free entry certificate is issued). Components of unknown origin are treated as foreign. Scrap generated, collected, and prepared for processing in the United States is considered domestic. A component is considered to have been mined, produced, or manufactured in the United States (regardless of its source in fact) if the end product in which it is incorporated is manufactured in the United States and the component is of a class or kind for which the Government has determined that—

(1) Sufficient and reasonably available commercial quantities of a satisfactory quality are not mined, produced, or manufactured in the United States; or

(2) It is inconsistent with the public interest to apply the restrictions of the Buy American statute; or

(B) The end product is a COTS item.

Having no direct experience with BAA, I read this clause to mean that (B) is only true if (ii) is also true. That is, if the end product is a COTS item, it must be manufactured within the US in order to be considered a domestic end product. The SB strongly contends that COTS item automatically qualifies as a domestic end product by virtue of it being COTS. 

I am wondering if anyone has previous experience in this area and would be able to lend their expertise. 

Thank you!

[Fara Fasat]

The SB is wrong. Only the domestic content test is waived for COTS items. The FAR states it explicitly: "In accordance with 41 U.S.C. 1907, this domestic content test of the Buy American statute has been waived for acquisitions of COTS items." Note, this waiver does not apply to products that are predominantly iron or steel. 

Maybe your SB is thinking of the exception for commercial information technology.

[Almeisan]

Hi Fara, 

Thank you for your response! I am still in learning mode on this topic, but from what I gather, it appears to me that IT COTS items are  generally exempt from the BAA requirements per FAR 25.103(e). Again, I am still reading up on this, but it looks like the President signed an EO back in 2021 that directed the FAR Council to study the possibility of lifting at least some of the IT COTS BAA exemptions. Are you aware of any other action regarding this EO?

If I am following correctly, it seems to me that if the item I described above was a commercially available IT Item, 25.103(e) would effectively allow the purchase of an item that was manufactured overseas. 

Thanks again - I really do appreciate you lending your expertise!

[Almeisan]

3 minutes ago, Almeisan said:

Hi Fara, 

Thank you for your response! I am still in learning mode on this topic, but from what I gather, it appears to me that IT COTS items are  generally exempt from the BAA requirements per FAR 25.103(e). Again, I am still reading up on this, but it looks like the President signed an EO back in 2021 that directed the FAR Council to study the possibility of lifting at least some of the IT COTS BAA exemptions. Are you aware of any other action regarding this EO?

If I am following correctly, it seems to me that if the item I described above was a commercially available IT Item, 25.103(e) would effectively allow the purchase of an item that was manufactured overseas. 

Thanks again - I really do appreciate you lending your expertise!

Sorry - meant to link to the 2021 EO so HERE it is. 

[Fara Fasat]

I don't know the details of the contract or the products that the SB is selling. The fact that 252.225-7001 is in the contract should mean two things: the buying agency is DoD; and the contract value is under the TAA threshold. If the CO has used the correct clause, then a product that meets the definition of commercial information technology should be exempt. You will have to ask the CO is he/she believes the products are commercial IT, and if so, does the exception apply.

[Don Mansfield]

18 hours ago, Fara Fasat said:

I don't know the details of the contract or the products that the SB is selling. The fact that 252.225-7001 is in the contract should mean two things: the buying agency is DoD; and the contract value is under the TAA threshold. If the CO has used the correct clause, then a product that meets the definition of commercial information technology should be exempt. You will have to ask the CO is he/she believes the products are commercial IT, and if so, does the exception apply.

Wouldn't the fact that the CO used the clause also indicate that they did not think an exception applied? I'm looking at DFARS 225.1101(2)(i)(C).

[Fara Fasat]

It would be nice if we could rely on the CO's clause selection. Unfortunately a GAO study a few years ago found that in about 60-70% of acquisitions, the government used the wrong BAA/TAA clauses. I frequently see both BAA and TAA clauses in a contract, even though they are mutually exclusive. 

[Don Mansfield]

That doesn't surprise me.

[Retreadfed]

2 hours ago, Fara Fasat said:

It would be nice if we could rely on the CO's clause selection. Unfortunately a GAO study a few years ago found that in about 60-70% of acquisitions, the government used the wrong BAA/TAA clauses.

This observation should not be limited to just BAA/TAA.  In my experience neither COs nor contract writing software know what clauses should go in specific contracts.  I frequently find clauses in contracts that do not belong.  Even more egregiously, many contracting officers include solicitation provisions in Section I of contracts.

[Don Mansfield]

I used to have a class exercise where I would have students select a solicitation of their choice on FedBizOpps, and then identify ten clauses or provisions that were erroneously included and ten clauses or provisions that were erroneously excluded. I never had a class that couldn't do this.

[Retreadfed]

17 hours ago, Don Mansfield said:

I used to have a class exercise where I would have students select a solicitation of their choice on FedBizOpps, and then identify ten clauses or provisions that were erroneously included and ten clauses or provisions that were erroneously excluded. I never had a class that couldn't do this.

Of course we don't know what these students do in real life.  If they can do the exercise in class, but don't do it in their everyday jobs, knowing why would be a good exercise.

[Almeisan]

Thank you everyone for your feedback. At this point, the order has been cancelled and a colleague is liaising with the KO. I'll update the post for posterity if/when I hear what the resolution/final determination was.