July 27 2017

The Implementation of President Trump's Buy American Policy Is Underway: What Federal Contractors Should Know

4 min

In April 2017, Venable reported (here and here) on the Trump administration's intent to move forward with a "new policy" that would maximize Made in America content and minimize exceptions to Buy American laws through the "Buy American and Hire American" Executive Order. On June 30, 2017, the U.S. Department of Commerce (DOC) and the Office of Management and Budget (OMB) published implementing guidance for executive departments and agencies regarding the "Assessment and Enforcement of Domestic Preferences in Accordance with Buy American Laws." The guidance focused on federal procurements and federal financial assistance (grants) and, within those categories, on agencies' oversight, enforcement, and/or waiver usage, as well as steps intended to strengthen the implementation of Buy American laws.

Notwithstanding the intent of the memorandum to "maximize, consistent with law, the policy and the statutory mandate to buy domestically manufactured products in [federal] contracts and grants, and minimize the use of exceptions and waivers," it is clear that executive departments and agencies retain discretion to use authorized exceptions to Buy American laws in the following situations: (1) domestic non-availability, (2) unreasonable cost, (3) purchase of commercial IT, (4) resale, and (5) when it is in the public interest. Additionally, the DOC and OMB implementing guidance does not disturb the exceptions to the Buy American Act (BAA) for purchases at or below the micro-purchase threshold, or procurements for use outside of the United States. Moreover, Trade Agreements Act (TAA) waivers—which exempt products under U.S. Department of Defense Reciprocal Agreements with certain other countries—remain a viable option for agencies. Instead of creating a sea change, the memorandum merely provides guidance regarding what agencies must include in their "Section 3" reports, which are due by September 15, 2017, as described in greater detail below.

With respect to the oversight of Buy American laws in federal procurements, the memorandum outlined four areas for review and potential improvement: procedures and guidance; internal reviews; marketing and outreach; and training. The memorandum stated that "agencies shall, at a minimum, evaluate and report on their oversight of the BAA and other Buy American Laws, including the Berry Amendment, if applicable to the agency, which imposes domestic source requirements on certain agencies for the acquisition of textiles, food, and hand or measuring tools."

Regarding the enforcement of Buy American laws and waiver usage in federal procurements, the memorandum directed agencies to report whether their contracting officers record exceptions and waivers in the Federal Procurement Data System (FPDS). The memorandum also directed agencies to review the MAX webpage, which contains information about an agency's use of BAA exceptions and waivers; confirm whether the MAX summary is accurate and complete (or revise accordingly); and review agency files of contracts listed on the site to report whether any relevant exception or waiver was associated with the predominant North American Industry Classification System (NAICS) codes and product service codes (PSCs) reported in FPDS.

To strengthen the implementation of Buy American laws in federal procurements and thus maximize the use of materials produced in the United States, the memorandum stated that agencies should identify actions to improve guidance, reporting instructions, internal reviews, marketing and outreach, and training, as well as any additional actions that could strengthen Buy American laws and ensure compliance with the TAA.

In addition to addressing federal procurements, the OMB June 30, 2017 memorandum directed agencies to evaluate and report on their oversight of Buy American laws by: taking an inventory of existing authorities and gathering information on the extent to which Buy American laws could apply to "financial assistance program" awards; describing agency guidance to assist federal financial assistance recipients in complying with Buy American laws; and describing reviews the agency conducted in the last two fiscal years to evaluate recipient compliance with Buy American laws. Agencies were also directed to review the use of BAA waivers, and to take action to maximize the use of materials produced in the United States by addressing improvements to relevant agency guidance to assistance recipients and related internal procedures. Agencies were further directed to provide ideas for strengthening and applying Buy American laws.

Ultimately, the purpose of the Section 3 report is to capture agencies' compliance with Buy American laws, and to generate new policies to maximize the use of U.S.-produced material. As with the executive order, the implementing guidance of DOC and OMB will result in a fact-finding exercise that may or may not result in changes to existing enforcement, legislation, or trade agreements. We will keep you posted on any developments.