We get a lot of questions about federal government contracting as federal government contracting attorneys, which makes sense. One thing we get asked about a lot is the Buy American Act. This is also unsurprising, as the government really did not do the best job in making it clear what this act does. We have talked about the Act before, but now, let’s take a deeper dive into it.
Overview
The Buy American Act is one of those “more complicated than it looks” laws. It is implemented at FAR § 25.001. The Buy American Act “[r]estricts the purchase of supplies, that are not domestic end products, for use within the United States” unless an exception applies. However, this law does not actually prohibit the acquisition of non-U.S. products. It really just creates a preference for American products for procurements above the micro-purchase threshold (currently $10,000) that aren’t subject to the Trade Agreements Act (most supply contracts above $174,000 and most construction contracts above $6,708,000 for 2024-2025 are subject to the Trade Agreements Act), and, more importantly for many of you, for all small business set asides and sole-source acquisitions.
Price Preference
For civilian agencies, if the contractor with the lowest priced domestic end product is a large business, then the agency will add a price evaluation penalty to the offeror with the lowest priced foreign end product of 20%. If the contractor with the lowest priced domestic end product is a small business, the penalty is 30%. For Department of Defense procurements, the agency adds a 50% penalty, regardless of the size of the contractor with the lowest priced domestic end product.
What is a Domestic End Product?
FAR 25.003 defines “Domestic End Product” as, generally, an unmanufactured end product mined or produced in the United States or, if it is manufactured, a product that is commercially-available off the shelf, or where 65% of the cost of its components is made up of components mined, produced, or manufactured in the United States. That 65% will become 75% in 2029. One thing to note, if the end product is wholly or predominantly iron, steel, or both, the cost of any foreign iron or steel must constitute less than 5 percent of the cost of all components in the end product. Keep in mind this is a very general overview of the end product rule, there are further exceptions, for example, that the commercially-available off the shelf exception does not apply if the item is primarily iron or steel (unless it’s a fastener).
Exceptions
FAR 25.103 provides a number of exceptions to the BAA rule applying. For starters, the agency can simply waive the requirement for public interest (although the language is unclear; it arguably only applies when the agency has an agreement with a foreign government that provides the exception). Also, the BAA doesn’t apply if the agency determines the product really isn’t available in substantial quantities in the United States. A list of these items is at FAR 25.104. Furthermore, the contracting officer for a matter can even determine that for that specific procurement that the item in question isn’t really available in the United States. Further, if the offered cost of a domestic end product is unreasonably low, the contracting officer can find the BAA doesn’t apply. Resales at commissaries also are excepted, as are IT products sold as a commercial item. Also, for Department of Defense procurements, qualifying countries’ products are treated as domestic end products.
Summary
This is, again, just a very general overview of the Buy American Act, but hopefully it helps clear up many questions on the Act. We always recommend that contractors discuss compliance with the Act with an attorney to be safe for any procurement. The Buy American Act has many moving parts, but, with a little review, compliance can be achieved quite reasonably.
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