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Major Update to BAA Rules Promises to “Make Buy American Real”

On Behalf of | Apr 4, 2022 | Capital Connections

On March 7, 2022,[1] a final rule amending the FAR’s Buy American Act (BAA) requirements was published in the Federal Register,[2] marking an acceleration in the Biden Administration’s “made in America” policy. Beginning on October 25, 2022, the amendments will affect the current Buy American Act requirements in two important ways:

  • The domestic content threshold will increase, in steps, from the current 55% to 75%; and
  • Domestic product offers will receive an enhanced price preference for critical products and components.[3]

According to the White House, these changes are designed to strengthen the Unites States industrial base, create more good-paying union jobs, and, in part, mitigate future supply chain disruptions caused by pandemics and geopolitical strife.[4]

Starting now, government contractors will have a short grace period to prepare for compliance with these new domestic content thresholds. But on October 25, 2022, the threshold will increase from 55% to 60%.[5] Two more stepwise increases will then occur in the coming years: the threshold will increase to 65% in 2024, and then to 75% in 2029.[6] However, anticipating the potential burdens these changes may place on American businesses, the rule change also comes with a built-in fallback threshold that applies when:

  • There are no offers that meet the new domestic content threshold; or
  • After applying the relevant evaluation factors,[7] the low offer is a foreign offer.[8]

When the fallback threshold applies, an offer exceeding 55% domestic content will still be treated as a domestic offer, regardless of the current domestic content threshold.[9] In other words, offers need only meet the fallback threshold – the old 55% domestic content threshold – to be considered domestic when there are no reasonably priced offers that meet the new domestic content threshold. The fallback threshold does not apply to all types of materials and products,[10] but it does provide some critical safeguards. However, this fallback provision will expire in 2030,[11] so contractors should plan accordingly.

The new rule also provides a structure for giving an enhanced price preference to offers for domestic construction materials and end products that are deemed “critical items” or are made up of “critical components.”[12] If a foreign offer is lower in price than such a domestic offer, the current price preference percentage will be added to the foreign offer’s price, plus an additional “preference factor” for the critical item or product containing a critical component.[13] This new preference factor will give offers for certain critical, domestic goods an additional edge over offers for similar foreign goods. Unfortunately, neither the list of critical items and critical components nor their associated preference factors have been established yet. A separate rulemaking process will establish the list and preference factors, giving interested parties time to submit their comments on this important aspect of the new FAR rule.

If you have questions about the FAR’s new Buy American Act requirements and its potential impact on your business, please contact the government contract attorneys at Eckland & Blando LLP.

[1]              Research and drafting assistance provided by Adrian Kipp, law clerk at Eckland & Blando LLP.

[2]              Federal Acquisition Regulation: Amendments to the FAR Buy American Act Requirements, 87 Fed. Reg. 12,780 (Mar. 7, 2022) [hereinafter Amendment].

[3]              Id. at 12,781-82.

[4]              Press Release, The White House, FACT SHEET: Biden-Harris Administration Delivers on Made in America Commitments (Mar. 4, 2022), https://www.whitehouse.gov/briefing-room/statements-releases/2022/03/04/fact-sheet-biden-harris-administration-delivers-on-made-in-america-commitments/.

[5]              Amendment at 12,781-82.

[6]              Id. at 12,781.

[7]              See, e.g., id. at 12,794.

[8]              Id. at 12,781.

[9]              Id.

[10]             The fallback threshold only applies to construction materials and end products that are not made predominantly or wholly of iron, steel, or both, and that are not commercially available off-the-shelf items. Id.

[11]             Id. at 12,781.

[12]             Id.

[13]             See, e.g., id. at 12,791.

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