White House Issues Guidance on Limiting Waivers of Domestic Sourcing Laws – What Contractors Need to Know

On June 11, 2021, the White House released new guidance on its plans to limit waivers of domestic sourcing laws, bolstering its January 2021 Executive Order on “Ensuring the Future is Made in All of America by All of America’s Workers.”  The guidance, entitled “Increasing Opportunities for Domestic Sourcing and Reducing the Need for Waivers from Made in America Laws,” provides insight on how the Biden Administration intends to enforce domestic sourcing laws such as the Buy American Act (“BAA”) over the coming years.

We have previously written about the January 2021 Executive Order here.  Among other things the Executive Order established a federal Made in America Office (“MIAO”) to review agency decisions to waive laws such as the BAA from procurements, grants, and other government contracting activities.  It also directed the Office of Management and Budget to establish reporting and oversight procedures to promote enforcement of the Made in America Laws.  The guidance fulfills that requirement.

Among other things, the guidance:

  • Requires each agency to designate a Senior Accountable Official, an official responsible for coordinating with the Made in America Director to implement the waiver review process,
  • Establishes the procedures for review of waiver requests by the Made in America Office (“MIAO”),
  • Implements the Executive Order’s requirement that acquiring activities prepare agency reports on compliance with Made in America Laws, and
  • Explains the process to develop the public database of all proposed waivers by early fiscal year 2022.

Importantly, the guidance creates an “initial phase” of implementation for the Executive Order, indicating that future phases will follow.  In this “initial phase,” the Biden Administration will focus on (1) Jones Act waivers and (2) non-availability procurement waivers pursuant to the BAA proposed by the 24 agencies subject to the Chief Financial Officers (“CFO”) Act.  During the first quarter of fiscal year 2022, the MIAO will phase in reviews of waivers proposed by non-CFO Act agencies and other types of waiver requests.

In a blog post announcing the guidance, the new Director of the Made in America Office, Celeste Drake, stated that the guidance is intended “to improve practices and processes to ensure that Made in America laws are not a mere compliance exercise,” as well as “reinforc[e] the actions announced in the 100-Day Supply Chain Review.”

Made in America Executive Order

President Biden’s January 25, 2021, Executive Order aims to “maximize” the U.S. Government’s purchasing of goods and services produced in the United States.  The Executive Order established the MIAO to oversee and administer domestic preference requirements in federal procurements.  The Executive Order generally requires agencies to obtain approval from the Made in America Director prior to granting a waiver of Made in America Laws.  The term “Made in America Laws” is broadly defined in the Executive Order as covering all statutes, regulations, rules, and Executive Orders that refer to “Buy America,” “Buy American,” or include other domestic preference requirements.

The Executive Order also required the Made in America Director, within 45 days after appointment, to publish a list of the information and justification required to support a proposed waiver and a timeframe under which the Made in America Direction will notify the agency of the results of the review.  Celeste Drake, a trade policy expert and former labor union official, was selected by President Biden as the Made in America Director on April 27, 2021.  To the extent permitted by law and consistent with national security, the results of the waiver review will be made available on a public website.

Key Provisions of the Initial Guidance

The initial guidance details a phased approach to implementing the Executive Order starting summer 2021.  Specifically, the guidance falls into four categories: (1) appointment of Senior Accountable Officials at each agency; (2) procedures for review and approval of waivers; (3) additional requirements for the initial and bi-annual agency reports on use of Made in America Laws; and (4) steps for development of the public website listing all proposed waivers and whether the waivers have been granted.

Senior Accountable Officials

The initial guidance requires agencies designate a Senior Accountable Official (“SAO”) for domestic sourcing by June 30, 2021, and send the name of the SAO to the MIAO.  The SAO must be “sufficiently senior” so as to direct the agency’s activities regarding relevant Made in America Laws such as identifying opportunities to increase the agency’s reliance on domestic products and services by scouting suppliers, participating in inter-agency product level reviews, managing a waiver reduction strategy, and meeting regularly with the Made in America Director to discuss progress on implementing the waiver reduction strategy.  The SAO is also responsible for ensuring that the agency complies with the below procedures for submitting waiver requests to the MIAO.

Review and Approval of Agency Waiver Requests

The guidance broadly defines the term “waiver” to include all “exceptions and waivers under applicable Made in America Laws,” including automatically-effective legal waivers.  Indeed, the guidance lists various FAR provisions among the “waivers and exceptions,” including those implementing the Trade Agreements Act and the commercial information technology exception, which occur by operation of law.  It remains to be seen how the Biden Administration will enforce its waiver review procedures for these kinds of exceptions, but the current “initial phase” does not require agencies to address them.

To sufficiently assess why the agency requires the waiver, the initial guidance details the required information that must be included by the agency.  If a covered agency seeks a waiver on the grounds of non-availability it must submit the following information:

(1) identify the agency, contracting activity, and program office;

(2) provide a description of the end item or construction material being acquired including discussing the impact to the mission if not acquired, country(ies) of origin and U.S. content, the estimated value of the procurement, and, if pre-award, whether the supplier of the item(s) is a small or disadvantaged business;

(3) describe the market research activities used to identify domestically manufactured items satisfying the agency’s requirements;

(4) describe whether competition is anticipated or the procurement was conducted using competitive procedures;

(5) identify whether the solicitation will or did include a price preference for domestic end products and construction materials;

(6) explain, if pre-award, a U.S.-made end product would be rejected for reasons other than price; and

(7) identify the approving authority for non-availability determinations over $25,000.

CFO Act agencies requesting Jones Act waivers must provide a description of the transportation required, explain why the agency cannot acquire transportation on a Jones Act qualified vessel, justify why it is in the interest of national defense to waive the requirement, and provide any additional clarifying information.

The MIAO plans to complete review of the majority of waivers within 3 to 7 business days and not more than 15 days from submission.

Agency Reports on Use of Made in America Laws

Under Section 11 of the Executive Order, each agency must report on its use of Made in America Laws by July 24, 2021.  The initial guidance provides a list of sections that must be included in the report.  First, the report will identify all types of waivers of Made in America Laws that are relevant to the agency and the agency’s plan to manage waivers.  This section includes a discussion of the agency’s process for maximizing use of domestic sources, explanation of the agency’s waiver review procedures, profile of waivers granted in fiscal year 2020, and summary of the types of products and/or construction materials for which non-availability waivers are used most frequently.  Second, the report must describe the agency’s ongoing use of and justification for any longstanding or nationwide waivers.  Third, the report will include the agency’s recommendations for maximizing the use of domestic goods, products, and services.  Last, the report will detail the status and outcome of the agency’s review of actions inconsistent with the Executive Order including whether any agency actions will be suspended, revised or rescinded or if new actions are proposed.

In addition to the initial reports, Section 12 of the Executive Order requires each agency to file bi-annual reports on the agency’s ongoing implementation of and compliance with Made in America Laws.  The initial guidance includes similar content requirements for these bi-annual reports.

Development of the Public Website

Under Section 6 of the Executive Order, the Administrator of General Services is required to develop a public website to report information on all proposed waivers and whether those waivers have been granted.  The MIAO is responsible for reporting all proposed waivers after 5 days of receipt to GSA to post on the public website.  The initial guidance explains that the website “will be designed to help manufacturers, resellers, and other interested parties, including potential domestic manufacturers who are not currently selling to Federal agencies, easily identify opportunities to do business in the Federal marketplace.”

Conclusion

As previously discussed, the new MIAO waiver procedures are intended to reduce agencies use of waivers of Made in America Laws by increasing scrutiny of such waiver requests.  In addition to the increased scrutiny by the MIAO, proposed waivers and the results of the MIAO review will be published on a public website.  The public database of waiver determinations has the potential to provide useful precedents for contractors that are considering whether to seek a waiver from an agency.  However, given the added scrutiny of waiver decisions and public reporting, contractors should carefully consider the information provided to the agency in connection with the review process that could become public.

President Biden Signs Executive Order Aimed at Improving Government Cybersecurity

On May 12, the Biden Administration issued an “Executive Order on Improving the Nation’s Cybersecurity.”  The Order seeks to strengthen the federal government’s ability to respond to and prevent cybersecurity threats, including by modernizing federal networks, enhancing the federal government’s software supply chain security, implementing enhanced cybersecurity practices and procedures in the federal government, and creating government-wide plans for incident response.  The Order covers a wide array of issues and processes, setting numerous deadlines for recommendations and actions by federal agencies, and focusing on enhancing the protection of federal networks in partnership with the service providers on which federal agencies rely.  Private sector entities, including federal contractors and service providers, will have opportunities to provide input to some of these actions.

In particular, and among other things, the Order:

  • seeks to remove obstacles to sharing threat information between the private sector and federal agencies;
  • mandates that software purchased by the federal government meet new cybersecurity standards;
  • discusses securing cloud-based systems, including information technology (IT) systems that process data, and operational technology (OT) systems that run vital machinery and infrastructure;
  • seeks to impose new cyber incident[i] reporting requirements on certain IT and OT providers and software product and service vendors and establishes a Cyber Safety Review Board to review and assess such cyber incidents and other cyber incidents, and;
  • addresses the creation of pilot programs related to consumer labeling in connection with the cybersecurity capabilities of Internet of Things (IoT) devices.

The Order contains eight substantive sections, which are listed here, and discussed in more detail below:

  • Section 2 – Removing Barriers to Sharing Threat Information
  • Section 3 – Modernizing Federal Government Cybersecurity
  • Section 4 – Enhancing Software Supply Chain Security
  • Section 5 – Establishing a Cyber Safety Review Board
  • Section 6 – Standardizing the Federal Government’s Playbook for Responding to Cybersecurity Vulnerabilities and Incidents
  • Section 7 – Improving Detection of Cybersecurity Vulnerabilities and Incidents on Federal Government Networks
  • Section 8 – Improving the Federal Government’s Investigative and Remediation Capabilities
  • Section 9 – National Security Systems

The summaries below discuss highlights from these sections, and the full text of the Order can be found here.

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Government Contractors Should Prepare Now for the $15 Per Hour Minimum Wage

On April 27, 2021, President Biden signed an Executive Order entitled “Increasing the Minimum Wage for Federal Contractors” that will raise the hourly minimum wage for federal contractors to $15.00 effective January 30, 2022.  This Executive Order builds on Executive Order 13658 (“Establishing a Minimum Wage for Contractors”), issued by President Obama in 2014, which first implemented an hourly minimum wage of $10.10 for covered federal contractors.[i]

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U.S. Senators Propose Trade-Pact Waivers Amidst Focus on Domestic Preference Laws

The American Rescue Plan, signed into law last month, includes $1.9 trillion in economic stimulus, healthcare, and related funding.  And just last week the Biden administration released an infrastructure proposal, the American Jobs Plan, that includes $2.3 trillion in transportation, connectivity, power, and other critical infrastructure investments.

Contractors are right to view these plans as massive opportunities — but should be cognizant of the regulatory strings that often attach to government spending.  In general, these can include Federal Acquisition Regulation (FAR) and agency-specific FAR supplements for federal procurements, as well as the nonprocurement uniform requirements (2 C.F.R. Part 200) and related agency-specific regulations that attach to Federal grant funds even when disbursed by state or local entities.

Now, some Congressional members are seeking to add new restrictions that would significantly overhaul the existing domestic preference regime for Federal procurements — mere weeks after the promulgation of new Buy American regulations and the release of a new Executive Order to further tighten the application of these rules.

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False Claims Act Update: District Court Rejects DOJ Motion to Intervene for Lack of “Good Cause”

When the United States government decides to intervene in False Claims Act litigation after initially declining intervention, it is not “déjà vu all over again.”  Instead, as one court has recognized, the “government is getting on a moving train,”[1] and it can only be permitted to “intervene at a later date” if it can show “good cause” for doing so.  See 31 U.S.C. § 3730(c)(3).

On February 24, 2021, a Tennessee federal district court offered a pointed reminder of this principle when it denied a government motion to intervene in a qui tam suit after DOJ originally had declined to intervene six months earlier.  See U.S. ex rel. Odom v. Southeast Eye Specialists, No. 3:17-cv-00689 (M.D. Tenn. Feb. 24, 2021).  In so ruling, the court vacated a magistrate judge’s Report & Recommendation (“R&R”), which found that DOJ had established “good cause” for intervention.  Although motions to intervene pursuant to Section 3730(c) are often granted, the recent order issued in U.S. ex rel. Odom v. Southeast Eye Specialists illustrates that the “good cause” showing is not a hollow requirement and that it can serve as a meaningful constraint on belated attempts by DOJ to intervene to pursue a case after initially declining to do so.

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President Biden Directs Broad Review of America’s Supply Chains

On February 24, 2021, President Biden signed an Executive Order entitled “Executive Order on America’s Supply Chains” (the “Order”). Among other things, the Order is an initial step toward accomplishing the Biden Administration’s goal of building more resilient American supply chains that avoid shortages of critical products, facilitate investments to maintain America’s competitive edge, and strengthen the country’s national security posture. The Order imposes no new regulatory obligations on industry, but rather outlines a process for federal departments and agencies to assess risks to U.S. supply chains. The first set of reviews focusing on four critical product areas will take place over a 100-day period, while the second set of reviews targeting a broader set of key sectors will be completed over a one-year period. The Order raises a number of key questions that may impact future business plans for companies operating in the industries or sectors to be reviewed.

 

Additional details on the Order and its impact are available in a client alert that we published on March 2, available here.

Senator Grassley and Senior DOJ Official Discuss Potential False Claims Act Changes and Enforcement Priorities

On February 17, 2021, Senator Chuck Grassley (R-IA) and Brian Boynton, Acting Attorney General for the Department of Justice’s Civil Division, provided opening remarks at the Federal Bar Association’s annual Qui Tam Conference. Both emphasized the key role of the FCA in combating fraud against the Government, and noted an anticipated increase in FCA enforcement actions in the coming years, particularly related to the Government’s pandemic response. In addition, Senator Grassley offered a preview of potential legislative changes to the False Claims Act, and Boynton outlined DOJ’s enforcement priorities for the coming year.

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New FAR Rule Continues Shake-Up of LPTA Procurements

Federal civilian agencies will now face new restrictions on when and how they can use Lowest Price Technically Acceptable source selection procedures. A new rule in the Federal Acquisition Regulation is the latest in a series of measures aimed at regulating the use of LPTA source selection procedures. The new rule implements an October 2019 proposed rule and takes effect on February 16, 2021. Continue Reading

President Biden Orders Tightening of Made in America Laws: What Contractors Need to Know

On January 25, 2021, President Biden issued a much-anticipated Executive Order announcing plans to strengthen the U.S. Government’s preference for domestically-sourced goods and services, including a proposal to tighten longstanding exceptions to domestic preference requirements.

Executive Order 14005 on Ensuring the Future Is Made in All of America by All of America’s Workers (“EO”) aims to “maximize” the U.S. Government’s purchasing of goods and services produced in the United States. In its key provisions, the EO:

  • Proposes to increase the domestic content threshold for determining whether a product qualifies as domestic, potentially exceeding the 55% threshold, which was increased to that number only last week by the Trump administration.
  • Directs the Federal Acquisition Regulatory Council (“FAR Council”) to replace the Buy American Act’s (“BAA”) longstanding domestic cost-of-components test with a domestic value-added test, using as-yet undetermined metrics.
  • Calls for new procedures that would increase the level of review required to obtain a waiver of domestic preference laws and the scrutiny that would apply to such waivers.
  • Contemplates leveraging trade remedies used to combat unfair trade as a means of enforcing federal procurement policies.
  • Establishes a new Made in America Office to oversee and administer domestic preference requirements in federal procurements.

This EO is the latest in a line of recent proclamations from the White House aimed at strengthening domestic preference requirements in federal contracting. Notably, the EO revokes certain earlier Trump administration executive orders, but it leaves in place—at least for now—the Final Rule issued on January 19, 2021 that increased the BAA’s Eisenhower-era domestic content requirements and price preferences in accordance with President Trump’s July 2019 Executive Order. The EO also left untouched the domestic procurement preferences for essential medicines, medical countermeasures, and critical inputs established in a separate order issued by President Trump in August 2020.

Ultimately, the effect of this latest EO will depend on the details of its implementation. While it largely avoids prescriptive details, the EO requires the FAR Council to consider proposing new implementing regulations within 180 days, and the Office of Management and Budget (“OMB”) and General Services Administration (“GSA”) likewise are directed to establish oversight and reporting mechanisms related to BAA compliance. Notably, the EO is unclear about whether and how it applies to the Trade Agreements Act of 1979 (“TAA”), and contractors will need to await guidance from the FAR Council to better understand this issue.

For our full analysis, the full client alert is available here.  We will continue to closely track these developments as they unfold. For now, however, the EO offers a clear indication that the Biden administration intends to maintain—if not increase—the U.S. Government’s recent emphasis on promoting and enforcing domestic sourcing requirements.

 

Paycheck Protection Program Expands and Offers Opportunity for Second Draw Loans

On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act opened up the Paycheck Protection Program (“PPP”) to additional organizations and authorized a second draw of PPP loans.  The U.S. Small Business Administration (“SBA”) has issued guidance on changes to the original Program and new second draw loans, and the Program has been partially reopened for both first and second draw loans as of January 13, 2021.  Loans will initially only be available through community financial institutions, but SBA has indicated that additional lenders will once again be able to participate in the Program on January 15, 2021, with a full reopening scheduled for January 19, 2021.

Similar to the Program’s original rollout, a number of questions remain with respect to SBA’s implementation of the Act.  SBA is also delaying guidance on changes to loan forgiveness, which may once again place borrowers in the position of taking out loans without knowing whether they will be fully forgiven.  However, SBA has now been managing the Program for almost ten months, and borrowers will hopefully not be subject to the same level of policy shifts and reversals that was experienced during the Program’s original rollout.

The Act makes first and second draw loans available until March 31, 2021, but there is a good chance that all available funds will be allocated before that date.

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