The U.S. Department of Defense (DOD), the National Aeronautics and Space Administration (NASA), and the U.S. General Services Administration (GSA) proposed to amend the Federal Acquisition Regulation (FAR) to enforce Executive Order 13881, which seeks to strengthen domestic preferences in government procurements. Once final, the rule will amend current FAR provisions implementing the Buy American Act (BAA).
Where applicable, the BAA “restricts the purchase of supplies that are not domestic end products.” FAR 25.101(a). To qualify as a “domestic end product,” (1) the product must be domestically manufactured, and (2) the cost of the product’s domestic components must exceed 50 percent of the cost of all components. Id. Since 2009, the government has not applied the domestic content test to commercially available off-the-shelf (COTS) products that were manufactured in the United States. FAR 25.101(a)(2).
Currently, the BAA provides an exemption where the contracting officer determines that the cost of the domestic end product is unreasonable. FAR 25.103(c). The price of the domestic offer is deemed reasonable “if it does not exceed the evaluated price of the low offer after addition of the appropriate evaluation factor.” FAR 25.105(c). For civilian agencies, the baseline “evaluation factor” added to the price of the lowest domestic offer is 6% if the domestic offer is from a large business and 12% if the lowest domestic offer is from a small business. DOD applies a 50% evaluation factor regardless of whether the lowest domestic offer is from a small or large business. DFARS 225.105.
The proposed rule would make the following changes:
The changes in the proposed amendment are sure to have a significant compliance impact for companies providing goods to the federal government. Public comment on the proposed rule will be accepted until November 13, 2020.
Smith Pachter McWhorter will continue to monitor the proposed amendments to the FAR and provide additional guidance as it becomes available. We are available to answer any questions on the Buy American Act and other domestic preference laws.