Made in America Changes in Federal Procurement

[Neil Roberts]

President Biden's Executive Order

https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/25/executive-order-on-ensuring-the-future-is-made-in-all-of-america-by-all-of-americas-workers/

[bob7947]

Things are moving so quickly that the White House information has been out of date.  I knew this happened but it wasn't posted.

[MBrown]

Does anyone else find some of the E.O. language confusing or concerning?

Pursuant to Sec. 8, within 180 days FAR Council is to “consider proposing” a change to FAR Part 25 whereby the “component test” used for domestic end products, would be replaced by some type of value added test (“a test under which domestic content is measured by the value that is added to the product through U.S.-based production or U.S. job-supporting economic activity”).  Seemingly at odds with the value added concept, the FAR Council is also to consider increasing “the numerical threshold for domestic content requirements...”, as well as the Buy American price preferences. 

Appreciate your thoughts.

[Neil Roberts]

5 hours ago, MBrown said:

Appreciate your thoughts.

On January 19, 2021 (effective Jan 21), before the above Biden E.O., the following FAR revision Maximizing Use of American-Made Goods, Products, and Materials appeared at:

https://www.federalregister.gov/documents/2021/01/19/2021-00710/federal-acquisition-regulation-maximizing-use-of-american-made-goods-products-and-materials

I found the following excerpts in it:

Response: The Councils note that the domestic content test is not applied to determine whether an item is wholly or predominantly of iron or steel or a combination of both, but to determine whether such a product is foreign or domestic. As explained in paragraph II.B.2.i of the proposed rule preamble, the term “component test” was replaced with “domestic content test” because of the wording of the E.O. regarding iron and steel.

Increased Price Preference for Domestic Offers

The Buy American statute does not prohibit the purchase of foreign end products or use of foreign construction material. Instead, it encourages the use of domestic end products and construction material by imposing a price preference for domestic end products and construction material. E.O. 13881 and this final rule increase the price preference from 6 percent to 20 percent for large businesses, and from 12 percent to 30 percent for small businesses. The E.O. does not impact the price preference for end products for DoD procurements, which is 50 percent for both large and small businesses, because the DoD percentage exceeds the requirements of the E.O.

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;

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

(A) The cost of its components mined, produced, or manufactured in the United States exceeds 55 percent of the cost of all its components. Components of foreign origin of the same class or kind as those that the agency determines are not mined, produced, or manufactured in sufficient and reasonably available commercial quantities of a satisfactory quality are treated as domestic. Components of unknown origin are treated as foreign. Scrap generated, collected, and prepared for processing in the United States is considered domestic; or

 Not sure what to make of this puzzle and the freeze. Is this the kind of language that is meant by the Biden E.O.?

 

 

Edited January 30, 2021 by Neil Roberts
sp. add editorial thoughts

[Fara Fasat]

The current US content test for a domestic product is simple. It just considers the cost of the parts and components you buy to make your product. No labor, no "value-added"; no profit or overhead. I call it a shopping list test. Make a list of all the parts and components you need to buy to make your product; put the US-made parts in one column, all others in another column; add them up. The price of the US column must be greater than the other column (i.e., at least 50% of the total) for your end product to be "domestic." 

The revision of the FAR to implement Trump's EO did not change the test, only the percent of US content. I see nothing but added complexity to put the Biden EO into practice. How do you measure "the value that is added...through US-based production"? Even more amorphous, what is "US job-supporting economic activity"? That seems like an invitation to claim all sorts of costs as "job-supporting."

No matter what your views on the wisdom of Buy American-type laws, I think we can agree that they are confusing enough as is. I would hate to see a change to the one part of it that has been relatively straight-forward.

[Neil Roberts]

A couple of new thoughts about this situation.

1. It is not clear to me that the Biden E.O. was aimed at Part 25 regulations specifically applicable to Government procurement and/or 52.225-x clauses specifically applicable to contractors (the component test). The obligations of each party are different.

2. Perhaps the "value added" and "job supporting activity" in the Biden E.O. is to be applicable only to Government acquisitions. And, in that connection, an argument seems to be available that the existing "price preference" evaluation in Government acquisitions (FAR 25.105 (b)] might already be considered a form of "value added" and "job supporting activity."