New Buy American Bill Continues Supply Chain Scrutiny

The government has placed increased emphasis on implementation and compliance with “Buy American” laws. This includes the president’s April 2017 Executive Order (EO) 13788, Buy American – Hire American, and, most recently, the BuyAmerican.gov Act of 2018 (S.2284), a bipartisan bill introduced in the Senate on January 9. These and other initiatives have heightened awareness among government contractors of the need for compliance with applicable “Buy American” requirements and the potential impact of those requirements on their supply chains.

What is Required by the BuyAmerican.gov Act of 2018?

The BuyAmerican.gov Act of 2018 (Act) reflects many of the same themes as EO 13788. (Steptoe’s advisory on the EO – Buy American Executive Order Brings Greater Attention to Contractor Supply Chains – is available here). The Act states the sense of Congress is:

(1) Every executive agency should maximize, through terms and conditions of federal financial assistance awards and federal procurements, the use of goods, products, and materials produced in the United States and contracts for outsourced government service contracts to be performed by United States nationals; and

(2) Every executive agency should scrupulously monitor, enforce, and comply with Buy American Laws, to the extent they apply, and minimize the use of waivers.

The Act then mandates the following actions:

1. A report by the Secretary of Commerce on the implementation of, and compliance with, Buy American laws – The Secretary of Commerce, in consultation with the Director of the Office of Management and Budget (OMB), the United States Trade Representative (USTR), the Secretary of State, and the heads of other executive agencies, is required to submit a report to Congress and the president on the implementation of, and compliance with, Buy American laws. This report is due not later than 180 days after enactment of the Buy American.gov Act and annually thereafter for two years. The report is to include the following elements:

   1. Assessment of the monitoring of, enforcement of, implementation of, and compliance with Buy American Laws within each executive agency.
   2. Listing of each waiver and exception used by an executive agency and assessment of waivers by type and impact on domestic jobs and manufacturing.
   3. Recommendations for executive agency policies to ensure to the extent permitted by law, federal financial assistance awards and federal contacts maximize the use of goods, products, and materials mined, produced, and manufactured in the United States, including manufactured products, components of manufactured products, and materials such as steel, iron, aluminum, and cement and services.

2. Agency reports implementation of, and compliance with, Buy American laws – The Act also requires the head of each executive agency to submit a report to the Secretary of Commerce and the Director of OMB on the implementation of, and compliance with, Buy American laws covering the three elements listed directly above. This report is also due not later than 180 days after the date of enactment of the Act and annually thereafter for two years.

3. Guidance to executive agencies – The Secretary of Commerce and the Director of OMB, in consultation with the Secretary of State, the Secretary of Labor, the USTR, and the Federal Acquisition Regulatory Council, are required to issue guidance to executive agencies on making waiver assessments and to develop the policies required under this section. This guidance is due not later than 60 days after enactment.
4. Assessment of trade agreement impacts – The Act requires the Secretary of Commerce and the USTR to “assess the impacts of all United States free trade agreements and the World Trade Organization Agreement on Government Procurement (WPO/GPA) on the operation of Buy American Laws, including their impacts on the implementation of domestic procurement preferences.” This assessment is due not later than 150 days after enactment.
5. Waiver consideration – The Act directs that waivers of “Buy American” requirements are to be used judiciously and, to the extent permitted by law, requires that determinations of public interest waivers are to be made by the head of the agency with the authority over the federal financial assistance award or federal procurement under consideration. The Act also provides that “before granting a public interest waiver, the head of an executive agency shall take appropriate account of whether a significant portion of the cost advantage of a foreign-sourced product is the result of the use of dumped or subsidized steel, iron, or manufactured goods, or manufactured goods that have entered the United States in violation of United States customs laws and, as appropriate, is to integrate any findings into the waiver determination.”
6. Establish public website – The Act requires the Administrator of General Services to establish an Internet website, BuyAmerican.gov, that is “publicly available and free to access” and includes “information on all waivers of and exceptions to Buy American laws that have been requested, are under consideration, or have been granted by executive agencies.” The website is to “be designed to enable manufacturers and other interested parties to easily identify waivers, and shall provide publicly available contact information for the contracting agencies.” This website is to be established not later than one year after enactment of the Buy American.gov Act. The Act includes additional provisions on waivers that are discussed below.
7. GAO Report – The Comptroller General is required to submit a report to Congress describing the implementation of the website, including recommendations for any legislation to improve the collection and reporting of information regarding waivers of and exceptions to Buy American laws. This report is due no later than two years after enactment.
8. International Agreements – Finally, like Buy American – Hire American EO, the Act states that it “shall be applied in a manner consistent with United States obligations under international agreements,” which would include the WTO/GPA and other international agreements which provide that offers of eligible products from WTO/GPA and other free trade agreement countries are to receive equal treatment with domestic offers. See FAR 25.402(a)(1) & 403(a).

The Act Imposes Additional and Important New Requirements on Waivers

Existing “Buy American” and domestic preference and content laws as well as regulations permit waivers agencies to waive “Buy American” requirements in certain specified circumstances. For example, FAR 25.103 provides for waivers of the Buy American statute where American-made goods are not unavailable, where the cost of an American made good would be unreasonable, or where application of a domestic preference would not be in the “public interest.” The Buy American – Hire American EO reflects the administration’s concern that federal agencies may be overusing this waiver authority, and the Act not only also reflects that concern but also includes a number of provisions imposing additional requirements and limitations on waivers Buy America laws.

In addition to the provisions regarding the use of public interest waivers and the creation of the public website for waivers noted above, the Act also directs the president and heads of relevant agencies to “develop a mechanism to collect information on requests to waive Buy American laws and other domestic content restrictions...for purposes of providing early notice to possible waivers via the website established under [this Act].”

The Act also provides for “transparency” regarding waivers and the establishment of an opportunity for public comment on requests for waivers. It requires, agencies to submit a copy of any proposed waiver and “information concerning the request available to the agency” regarding the proposed waiver of an applicable “Buy American” law to the Administrator of General Services not less than 20 days prior to making the waiver. Then, not later than five days after receiving this information, the Administrator of General Services shall make available on the public website, a copy of the request and related information available to the agency and allow for what is described as “informal public comment on the request for at least 15 days prior to the head of the agency making a finding based on the request.” The Act states that no requested waiver may be granted if the waiver request and related information were not made available to the public or if there was no opportunity for public comment concerning the request. Further, the Act goes on to provide that the information made available to the public must be “properly and adequately documented and justify the statutory basis” for the requested waiver. In all cases, this must include “a detailed justification for the use of goods, products, or materials mined, produced, or manufactured outside the United States” and certification of a “good faith effort to solicit bids for domestic products supported by terms included in requests for proposals, contracts, and communications with the prime contractor.” The Act also imposes specific information requirements for the different types of statutory waivers:

i. Waivers based on unreasonable cost of domestic products, the Act requires “a comparison [] of the cost of the domestic product to the cost of the foreign product or a comparison of the overall cost of the project with domestic products to the overall cost of the project with foreign-origin products or services, pursuant to the requirements of the applicable Buy American law, except that publicly available cost comparison data may be provided in lieu of proprietary pricing information;”

ii. Waivers based on availability, quantity, or quality, require “information “from a reasonable number of domestic suppliers concerning the product’s availability, quantity, or quality, as well as documentation of the procurement official’s or assistance recipient’s efforts to procure from domestic sources, and excerpts from project plans, specifications and permits “indicating the required quantity and quality of the relevant products;” and

iii. Waivers based on the public interest exception require “a detailed written statement” which is to address “all appropriate factors, such as potential obligations under international agreements” that justify why the requested waiver is in the public interest.

Conclusion

The federal government requires that its supply chain not only provides the quality products and services but that it also supports our domestic economy by giving priority to domestic content and/or sources. The administration, and now Congress, are focusing on the “Buy American” requirements and whether they must be tightened. The bipartisan support for the Act indicates that contractors should expect to see changes to the implementation of the Buy American laws.