On February 15, 2024, the Department of Defense (“DOD”) issued a final rule that increases the domestic content requirements for defense procurements. 

The new rule amends the Defense Federal Acquisition Regulation Supplement (“DFARS”) to implement Executive Order 14005 (“EO”).  The EO was intended to strengthen the requirements of the Buy American Act (“BAA”) by, among other things, directing the FAR Council to issue new rules increasing the domestic content threshold for determining whether a product qualifies as a domestic end product. 

Although the FAR Council issued a final rule implementing the EO on March 7, 2022, the BAA requirements for defense procurements remained unchanged.  The new DOD rule aligns the DFARS BAA provisions with the FAR revision implemented in 2022.

The new rule (1) increases the applicable domestic content threshold for domestic end products, and (2) creates a framework for the application of an enhanced price preference for domestic products that are considered critical products or are made up of critical components.

Higher Domestic Content Threshold

Previously, the cost of domestic components had to exceed 55 percent of the cost of all components in order for a product to qualify as a domestic end product.  Under the new rule, the domestic content threshold is 65 percent in calendar years 2024 through 2028.  Beginning in calendar year 2029, the threshold will be 75 percent.  The increased threshold modifies the DFARS definitions for domestic end product, qualifying country end product, and domestic construction material. 

To help contractors transition to the increased domestic content requirements, the new rule includes exceptions for awards made prior to January 1, 2030.  First, there will be a 55 percent fallback threshold for situations where domestic products at a higher threshold are not available or the cost to acquire them would be unreasonable.  Second, an alternate domestic content threshold may be applied at the discretion of an agency senior procurement executive in instances where it is not feasible to meet the increasing threshold, e.g., under an indefinite-delivery, indefinite-quantity contract.  Under the alternate domestic content threshold, the threshold in effect at the time of contract award would apply to the entire period of performance.

Enhanced Price Preferences for Critical Items and Components

Under the new rule, domestic end products containing a critical component or item are eligible for an enhanced price preference.  The rule relies on FAR 25.105 for its definition of “critical item” and “critical component.”  For now, FAR 25.105 itself has only a placeholder for the list of critical items and components.  The list will be populated in a separate rulemaking. 

Under the new framework, contractors must meet additional reporting requirements for certain products.  Defense contractors must identify all domestic end products containing a critical component or item.  They must also identify all foreign end products and indicate whether each foreign end product exceeds 55 percent domestic content.  Commercially available off-the-shelf (“COTS”) items are exempt from the enhanced reporting requirements.

The new rule also maintains certain domestic content provisions that are unique to defense procurements.  For example, the rule defines domestic content to include components that are mined, produced, or manufactured not only in the U.S., but also in qualifying countries — countries with reciprocal defense procurement memoranda of understanding or international agreements with the U.S. in which both countries agree to remove certain barriers to the purchase of supplies.

Defense contractors should be prepared to comply with the now-effective increased domestic content threshold and make plans for how they will eventually meet the 75 percent threshold before it is implemented in 2029.  Further, contractors should continue to monitor additional developments in this area, as policymakers on both sides of the aisle are increasingly focused on expanding domestic content requirements and incentivizing enforcement.

The government is moving forward with further changes to Buy American Act (“BAA”) regulations.  But based on yesterday’s public meeting to discuss the July 30 notice of proposed rulemaking (“NPRM”) to revise existing BAA regulations, it remains to be seen exactly where those changes are headed.

As discussed in our prior client alert, the NPRM implements Executive Order 14005 (“Ensuring the Future Is Made in All of America by All of America’s Workers”) by proposing three major changes to existing BAA regulations: (1) higher domestic content thresholds; (2) enhanced price preferences for “critical” items and components; and (3) new domestic content reporting requirements for “critical” items and components.  The agenda for the public meeting covered each of these changes, as well as other questions raised in the NPRM related to BAA waivers and exceptions.

Continue Reading Buy American Act Update: FAR Council Holds Public Meeting on New Proposed Rule

Last week, President Trump issued a new executive order, entitled “Strengthening Buy-American Preferences for Infrastructure Projects.”  This order serves as an extension of the President’s earlier April 2017 “Buy American and Hire American” executive order, which we have previously analyzed in this space.  The April 2017 order stated that “it shall be the policy of the executive branch to buy American and hire American,” and, among other things, directed agencies to “scrupulously, monitor, enforce, and comply with” domestic preference laws (referred to by the executive order as “Buy American Laws”) and to minimize use of waivers that would permit the purchase of foreign end products.

The President’s new order continues to emphasize the importance of “the use of goods, products, and materials produced in the United States,” but is specifically directed towards infrastructure projects that are recipients of federal financial assistance awards.  As we have reported previously, federally-financed infrastructure has also been a stated area of focus for the Trump administration, although the Administration’s “Legislative Outline for Rebuilding Infrastructure in America” released last year curiously lacked any domestic preference requirements.

The new executive order makes up for this previous omission and then some:  it has the potential to affect a vast number of programs and projects, and may in fact impose domestic sourcing requirements in areas—such as internet infrastructure—that are not typically targets for domestic preferences.

Continue Reading Trump’s New Executive Order Requires Additional Buy American Preferences For Infrastructure Projects

Last month, GAO released a report analyzing federal agency implementation of the Buy American Act (“BAA”), 41 U.S.C. §§ 8301-8305.  As we have previously reported, BAA enforcement is an area of focus for the Trump Administration, which has repeatedly emphasized the need to “Buy American and Hire American,” including in an April 2017 executive order.  And for government contractors, compliance with the BAA and other domestic sourcing regimes also has been an increasingly common subject of litigation, particularly under the civil False Claims Act, as we have detailed in this space.

In keeping with this Buy American focus, GAO was commissioned to report on (A) the extent to which federal agencies procure non-domestic end products through the use of BAA exceptions and waivers, and (B) the ways in which the government’s largest buyers provide training and guidance to implement BAA requirements.  Although GAO found that only a relatively small percentage of goods purchased were foreign end products, GAO also found that this number could have been misstated due to reporting errors and system limitations.  Moreover, GAO found that the level of BAA training varied significantly among the agencies it canvassed.  GAO’s findings, which are discussed in greater detail below, offer a window into the government’s view of its own compliance with the BAA’s complex and often confusing regulatory scheme.

Continue Reading GAO Report Shows That Agencies Buy Only A Small Percentage of Non-American Goods, But Buy American Act Implementation Remains A Challenge

Last month, the Government Accountability Office (GAO) issued a bid protest decision regarding the application of Buy American Act (BAA) requirements to a solicitation for construction.  In this decision, GAO rejected the agency’s determination that an offeror’s bid was nonresponsive because the offeror failed to provide certain required information for the evaluation of a potential BAA exception.  A summary of the decision and our takeaways are below.
Continue Reading Pragmatism Wins the Day in GAO Buy American Protest

Due to the government’s increased focus on domestic preference requirements – for example, through President Trump’s formal policy and action plan for agencies to “scrupulously monitor, enforce, and comply” with the so-called “Buy American Laws,” and Congress’s proposed legislation to make certain Buy American requirements more robust – contractors should not be surprised if there is a corresponding increase in related False Claims Act (FCA) activity.  Notwithstanding, based on a review of recent FCA decisions, we have found that courts generally have been skeptical of attempts by relators to allege FCA liability regarding a purported Buy American Act (BAA) or Trade Agreements Act (TAA) violation.  We discuss these decisions and provide several key takeaways that will help contractors avoid (and defeat) such FCA lawsuits in an article that can be downloaded here.

[A modified version of this blog post was published in Law360.]

Last month, Senators Dan Sullivan (R-AK) and Maria Cantwell (D-WA) introduced legislation to “improve the requirement to purchase domestic commodities or products” under the National School Lunch Program (the “NSLP”) and the School Breakfast Program (the “SPB”).  Even if this legislation fails to make it out of Committee, it signals a continued trend to strengthen the “Buy American” requirement under these programs.

Continue Reading Bipartisan Legislation Aims To Strengthen “Buy American” Requirement Under National School Lunch Program

[This article was originally published in Law360 and has been modified for the blog.]

This was not an April Fools’ Day joke: The New York Buy American Act (“NY BAA”) went into effect on April 1, 2018. Signed by Governor Andrew M. Cuomo in December 2017 and championed by state legislators on both sides of the aisle, the NY BAA amends the existing domestic content restrictions in Section 146 of the N.Y. State Finance Law and Section 2603-a of the N.Y. Public Authorities Law by adding another layer of “Buy American” requirements focused on structural iron and structural steel products used in certain construction projects.

Although Governor Cuomo has noted that this new law is intended “to support hardworking men and women, revitalize infrastructure across the state, bolster the strength of our manufacturing industries and cement our status as a global economic leader” – a sentiment in step with President Trump’s stated “Buy American” policy – the economic impact of this legislation remains to be seen. As will be discussed, this set of requirements is focused on only two categories of items (structural iron and structural steel) used on a specific set of construction projects (roads and bridges) that will be awarded by certain New York agencies or authorities during a two-year window.

Notwithstanding, the NY BAA is a noteworthy development because it further reinforces the general rallying cry behind “Buy American.” Most importantly, this new law serves as a reminder to contractors that an already cumbersome regime of federal and state domestic preferences will continue to remain complex.

Continue Reading Key Takeaways From The “New York Buy American Act” And Beyond

Last week, President Donald Trump released his long-awaited infrastructure plan, entitled a “Legislative Outline for Rebuilding Infrastructure in America.”  Clocking-in at 53 pages, this plan is designed to “stimulate at least $1.5 trillion in new investment over the next 10 years” through $200 billion of federal funding.  The infrastructure plan is intended to provide a “roadmap for the Congress to draft and pass the most comprehensive infrastructure bill in our Nation’s history.”  Our high-level key takeaways from that plan are discussed below.

Continue Reading Key Takeaways from Trump’s Infrastructure Plan—Private Financing And A Capital Budget, But No “Buy American” Requirements?

Following recent efforts by Democrats to push for “Buy American” action, on January 9, 2018, Senator Chris Murphy (D-CT) proudly announced via Twitter that there now is “bipartisan support for strengthening our Buy American laws” and that he is “excited to have the Trump admin[istration] and partners like [Senators Rob Portman (R-OH), Lindsey Graham (R-SC) and Sherrod Brown (D-OH)] working together to get this done.” That same day, these senators reached across the aisle to sponsor the BuyAmerican.gov Act of 2018 (S.2284) to “strengthen Buy American requirements.”

This proposed legislation may be the most significant “Buy American” development since President Donald J. Trump issued his “Buy American” Executive Order (E.O. 13788, April 2017), which set forth a policy and action plan to “maximize . . . the use of goods, products and materials produced in the United States” through federal procurements and federal financial assistance awards to “support the American manufacturing and defense industrial bases” (and which we analyzed in a prior blog post).

Continue Reading Key Takeaways from Bipartisan Bill to “Strengthen Buy American Requirements”