The Department of Defense (DOD) issued a proposed rule on August 30, 2021, that would amend the Defense Federal Acquisition Regulation Supplement (DFARS) to align the Buy American Act (BAA) domestic content requirements in the DFARS with the recently revised requirements in the Federal Acquisition Regulation (FAR).
Trump Administration Executive Order (EO) 13881, “Maximizing Use of American-Made Goods, Products, and Materials,” provided for significant changes to BAA requirements. The EO directed the Federal Acquisition Regulatory Council (FAR Council) to consider proposing amendments to the FAR that would provide that, in order for a product to be considered a domestic end product, the cost of its components mined, produced, or manufactured in the U.S. must exceed 55% of the cost of all of the product’s components (and must exceed 95% for a product consisting wholly or predominantly of iron or steel). The FAR Council published a final rule on January 19, 2021, revising the domestic content requirements at FAR part 25 in line with the EO. The FAR Council’s final rule also increased price evaluation preferences from 6% to 20% for large businesses offering domestic end products and from 12% to 30% for small businesses offering domestic end products.
However, DOD has its own DFARS clauses that implement the BAA for DOD procurements, and the changes to the BAA requirements in FAR part 25 have not applied to the DFARS. The DOD’s proposed rule now seeks to revise the DFARS to implement the EO in line with the current FAR requirements. Namely, the rule proposes to raise the domestic content threshold to 95% for products consisting wholly or predominantly of iron or steel and 55% for all other products. Notably, DOD is not proposing any change to its price preference for offers of domestic end products, which—at 50% regardless of whether the offeror is a large or small business—already significantly exceeds the price preference applied by civilian agencies.
The alignment of the BAA’s domestic content thresholds across the FAR and DFARS clauses may be short lived, as increases to the FAR’s domestic content thresholds are on the horizon once again. Similar to the Trump-era EO, President Biden’s January 25, 2021, EO 14005 titled “Ensuring the Future is Made in All of America by All of America’s Workers” also required the FAR Council to consider amending the FAR to increase the threshold for domestic content requirements, but did not specify by how much. The FAR Council published a proposed rule on July 30, 2021, as PilieroMazza previously explained, intending to amend FAR part 25 to increase the domestic content threshold for non-steel and iron products even further. Upon implementation, the threshold would increase from 55% to 60%, then to 65% in two years, and finally to 75% five years after the second increase. If the FAR Council’s proposed rule becomes final, DOD may follow suit with similar amendments to the DFARS.
Comments on DOD’s proposed rule are due October 29, 2021. If you have any questions about the BAA or how recent proposed and final rules will impact the BAA’s implementation, please contact Jackie Unger and Anna Sullivan, the authors of this blog, or a member of PilieroMazza’s Government Contracts Group.