Contracts & Legal

Buy American Act

The Buy American Act (BAA) (41 U.S.C. 8301) was passed in 1933 and restricts the purchase of supplies that are not domestic end products. It applies to all U.S. federal government agency purchases of goods valued over the purchase threshold but does not apply to services. Under the Act, all goods for public use (articles, materials, or supplies) must be produced in the U.S., and manufactured items must be manufactured in the U.S. from U.S. materials.

The Buy American Act of 1933 (BAA) requires federal agencies to purchase “domestic end products” and use “domestic construction materials” on contracts above certain monetary thresholds performed in the United States.

Contracts awarded by State and local authorities under Federal grant programs are not covered by the act unless authorizing statutes explicitly provide for the application of the act.

Buy American Act (BAA) Regulation

The Buy American Act applies to all U.S. federal government agency purchases of goods valued over the U.S. micro-purchase threshold ($10,000). Companies that sell goods to the U.S. government are required to comply with domestic source restrictions that dictate the percentage of domestic content and have the potential to impact design, sourcing, and manufacturing decisions.

Purpose of the Buy American Act (BAA)

The purpose of the BAA is to protect the U.S. industrial base.

Buy American Act (BAA) Two-Part Test

The BAA uses a two-part test to define a domestic end product.

  1. The article must be manufactured in the United States
  2. The cost of domestic components must exceed 55% percent of the cost of all the components

DoD has issued a final rule amending DFARS 252.225-7000 and 252.225-7001 provision and clause which includes a partial waiver to the two-part test. The waiver allows a Commercial-Off-The-Shelf (COTS) item to be treated as a domestic end product if it is manufactured in the U.S., without tracking the origin of the item’s components.

Buy America Act (BAA) Exceptions

Exceptions that allow the purchase of a foreign end product are listed at FAR 25.103 and DFARS 225.103. Under certain conditions, federal and/or DoD procurements may be waived:

  • Public Interest: The head of the agency determines that a domestic preference would be inconsistent with the public interest. This exception applies when an agency has an agreement with a foreign government that provides a blanket exception to the Buy American Act. DoD currently has the following agreements: World Trade Organization Government Procurement Agreement (WTO GPA), Free Trade Agreements (FTAs) with various countries (including Caribbean Basin Trade Initiative (CBTI)), Memorandum of Understandings (MOUs) with Qualifying Countries listed in DFARS 225.872 and North American Free Trade Agreement (NAFTA).
  • Non-availability: BAA does not apply with respect to articles, materials, or supplies not mined, produced, or manufactured in the U.S. in sufficient and reasonable available commercial quantities and of satisfactory quality. FAR 25.104 and DFARS 225.104 list articles determined to be non-available.
  • Unreasonable Costs: If purchasing the material domestically would burden the government with an unreasonable cost. The unreasonable cost exception is implemented through the use of an evaluation factor applied to low foreign offers. The Contracting Officer may determine the unreasonable cost in accordance with FAR 25.105/Subpart 25.5 and DFARS 225.105/Subpart 225.5.
  • Resale: The contracting officer may purchase foreign end products specifically for commissary resale.
  • Information Technology is a commercial item.

Office of Management and Budget Proposed Changes

Proposed Changes to the percentage of manufacturing in the US (July 2021)

  • Raises the required amount of domestic content from 55% to 60% as measured by cost by 2022.
  • Raises the required amount of domestic content from 60% to 65% as measured by cost by 2024.
  • Raises the required amount of domestic content from 65% to 75% as measured by cost by 2029.

Executive Order 13881’s Buy American Act Changes

Three Major Changes have changed with EO 13881 (Jan 2021) which are:

  • Raises the required amount of domestic content from 50% to 55% as measured by cost.
  • Except for commercial-off-the-shelf (COTS) fasteners (g., nuts, bolts, pins, rivets, nails, and screws), domestic iron and steel end products and construction material, including commercial items and COTS items, may contain no more than 5% foreign iron or steel.
  • Raises the price evaluation preference for domestic items in non-Department of Defense (DoD) procurements from 12% to 30% for small businesses and from 6% to 20% for large businesses (the DoD price preference, 50% regardless of the size of the business before this rule, remains the same).

AcqLinks and References:

Updated: 7/28/2021

Rank: G8.6

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