On April 18, President Trump signed an Executive Order referred to as the “Buy American, Hire American” Executive Order (“EO”). The EO makes clear the Trump Administration’s priorities of buying American products when spending taxpayer dollars and strict enforcement of laws governing the use of non-U.S. labor.
“Buy American” requirements are nothing new to federal government contracts. The Buy American Act (“BAA”) of 1933 restricts the acquisition and use of products or construction materials that are not “domestic.” The Act’s provisions are implemented in the Federal Acquisition Regulation through a price adjustment prior to the cost reasonableness determination. The Berry Amendment, another “Buy American” requirement, imposes further requirements on the Department of Defense for procurement of specific products.
In practice, “Buy American” provisions in government contracts are subject to a myriad of exemptions and waivers. Most notable among these is the frequent waiver of “buy American” requirements in trade agreements, such as NAFTA. In addition, the DoD has authority not to apply the BAA requirements to products from countries with which the U.S. has a reciprocal defense agreement. The result is a system that is confusing to government contractors and results in products from numerous foreign countries being treated as “domestic” for federal procurement purposes.
The EO seeks to tighten the enforcement of the already existing “Buy American” requirements. The Trump Administration hails the EO as a “new, more muscular Buy American policy based on the twin pillars of maximizing Made in America content and minimizing waivers and exceptions to Buy American laws.” The EO does this through three main mechanisms relevant to government contractors.
First, each Executive Branch agency will be required to conduct a “top-to-bottom Buy American performance review” of its enforcement of the existing rules and use of waivers and exceptions. Included in this will be a requirement to provide recommendations to the White House on ways to strengthen “Buy American” provisions.
Second, agencies are directed to judiciously apply waivers and exceptions. This will be done by more narrowly construing public interest waivers under “Buy American” requirements and raising the approval authority for such waivers within Agencies.
Third, the Department of Commerce and the U.S. Trade Representative are directed to review relevant trade agreements to determine if they meet the Administration’s standard of being “both fair and reciprocal.” In many trade agreements, the U.S. provides national treatment to foreign supplies in exchange for that same treatment for U.S. suppliers by the foreign country. The Administration believes the U.S. is not getting the benefit of these concessions. The review directed by the EO may eventually lead to efforts to renegotiate some trade agreements.
What will all this mean for government contractors? At a minimum, government contractors can expect higher scrutiny of their proposals for compliance with the “Buy American” provisions of the solicitation and increased enforcement of existing rules and regulations. Government contractors should ensure they have a process in place to track and verify the country of origin and comply with existing “Buy American” rules. Looking ahead, government contractors should be alert for changes to the BAA and the FAR provisions implementing the BAA once the review and report required by the EO is completed.
For more information about “Buy American” requirements or other government contracting issues, contact a member of Maynard Cooper & Gale’s Government Solutions Group. For questions on the “Hire American” provisions or other immigration related questions, contact a member of Maynard Cooper & Gale’s Immigration Practice Group.