A new FAR final rule recently went into effect that has increased the percentage for the domestic component requirement under the Buy American Act, a percentage that had been in place for nearly 70 years before this recent change.
Originally passed in 1933, in simple terms, the Buy American Act (BAA) encourages Federal agencies to procure domestic materials and products which are intended for domestic use, so long as the procured items or the materials thereof are present in sufficient and reasonably available commercial quantities and of a satisfactory quality, with some waivers that may apply.
In the past, we have written about the many exceptions and waivers that may apply to the BAA. And recently, we discussed the new executive order from President Biden and its possible effects on the BAA, as well as Government procurement as a whole. Along with knowing these exceptions, and the potential future changes to the BAA, it’s also crucial that government contractors stay up to date on manufacturing thresholds under the BAA.
A FAR rule altering some BAA compliance requirements became effective just before the new President was inaugurated (it may have been a bit overshadowed by the bustle that was the transition of power). Under the new rule, a number of thresholds were increased in an effort to strengthen domestic preferences under the BAA. The overall goals were decreasing the amount of foreign-sourced content in a U.S. manufactured product in order to promote economic and national security, stimulating economic growth, and creating jobs.
To do that, price evaluation preferences for both large and small businesses as well as domestic content requirements for iron and steel were increased. The price evaluation preferences increased from 6 percent to 20 percent for large business and from 12 percent to 30 percent for small business. Note that this change does not impact the price preference for end products for DoD procurements, which was already 50 percent for both large and small businesses.
In addition, the longstanding 50 percent threshold in FAR 25.101(a)(2)(i) which is required to meet the domestic component test was increased to 55 percent. This was the first increase in domestic component requirements under the BAA since the 1950’s, when the “substantially all” language in the statute was interpreted to mean at least 50%.
As a reminder, the BAA does apply to small business set-asides, so small business manufacturers should pay close attention to the increased domestic component requirement. While the rule may change again under the new administration, as it stands today, the current rule is a component test of 55% made in America.
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