Major Changes Proposed to Buy American Rules.

• Author: Terenzio, Peter
• Position: Government Contracting Insights

On July 30, the Biden administration issued a proposed rule billed as "the most robust changes to the implementation of the Buy American Act in almost 70 years."

Aimed at strengthening domestic content requirements and bolstering domestic procurement preferences, it comes on the heels of several other actions by the administration to limit reliance on foreign sources of critical components and promote greater economic and national security by supporting domestic manufacturing.

The Notice of Proposed Rulemaking proposed three major changes.

Consistent with Executive Order 14005 on "Ensuring the Future Is Made in All of America by All of America's Workers," it would initially increase the domestic content threshold for determining whether an item qualifies as "domestic end product" or "domestic construction material" from 55 percent to 60 percent. It also proposes to increase the threshold to 65 percent in two years, and to 75 percent five years after the second increase.

Suppliers holding a contract with a period of performance that spans the schedule of threshold increases would be required to comply with each step increase for the items in the year of delivery. However, there is a "fallback threshold" exception that would allow end products--other than certain iron and steel products --that meet the current 55 percent threshold to qualify as "domestic" when other products that meet the higher thresholds are unavailable or unreasonably expensive.

The proposal outlines a framework for enhanced price preferences for certain "critical items" and "critical components" manufactured in the United States. Notably, it does not designate any specific articles as "critical"--the list of "critical" items and associated preference factors will be set forth in a separate rulemaking. This list will be updated periodically and published in the Federal Register to allow for public comment.

The proposed rule also sets forth new domestic content disclosure requirements for "critical items" and end products containing "critical components." Contractors that supply these items would be required to submit a post-award disclosure to the newly established Made in America Office identifying the percentage of domestic content in each critical product, and the percentage of domestic content in each domestic end-product they supply that includes a critical component.

If implemented without revision, the proposed rule has the potential to alter the contracting...