Buy American Act

Enacted in 1933 during the Great Depression, the Buy American Act emerged as a response to economic challenges and aims to stimulate domestic production.

In an increasingly globalized world, economic policies that promote domestic industries and protect national interests take center stage. One such policy is theĀ Buy American Act (BAA), a federal law designed to bolster domestic manufacturing and support American businesses by requiring that a certain percentage of the products used in government procurement contracts be sourced from U.S. manufacturers. The Buy American Act requires that federal agencies give preference to domestically produced goods and materials in government procurement contracts. Under the act, a product is considered “domestic” if it is manufactured in the United States and at least 50% of its components are sourced domestically. However, a higher threshold of domestic content is often required for some specific industries, such as iron and steel.

Noncompliance with the Buy American Act can lead to violations of the terms and conditions of financial assistance awards and civil False Claims Act liability. Consequently, grantees should carefully consider the impact of this executive order on their internal processes and procedures. The act requires that the United States government avoid foreign-manufactured materials unless two conditions are met: the goods or materials are required for public use and must be present in the United States in sufficient commercial quantities of satisfactory quality. The president and agency heads are allowed to waive the requirement on the basis of the public interest, unavailability, or cost.

Proponents of the new executive order argue that it will help reduce overreliance on international supply chains and move the country toward self-sufficiency and resiliency. However, critics argue that it will only harm American contractors by making them less competitive against their foreign competitors and will do little to stem the loss of U.S. manufacturing jobs, which have been in decline since 1980.

Is the Buy American Act Still in Effect
Buy American Act 1

Is the Buy American Act Still in Effect?

The Buy American Act is still in effect, but its rules are being tightened under the Biden Administration’s “Build Back Better” economic recovery agenda. This effort began with President Joe Biden’s January 25, 2021, Executive Order and continued with a rule published in July 2021 by the Federal Acquisition Regulatory Council (FAR).

For example, FAR part 25 provides that for a manufactured end product or construction material to be considered domestic, it must have been assembled or manufactured in the United States or made from foreign components in the United States. This is a significant change from the previous two-part test of the Buy American Act, which required the components to be produced in the United States.

Another rule increases the percentage of domestic content for products deemed critical to national security and establishes price preferences for these items. Contractors must include these requirements in their contract proposals, and false certification of compliance could result in debarment.

The FAR also sets rules for different kinds of federal-aid projects. For example, grants, financial assistance, and loans administered by State and local entities are governed by their own set of rules separate from those that apply to direct federal work carried out under contract with a Federal agency.

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button