On July 30, 2021, the Biden Administration issued a proposed amendment to the Federal Acquisition Regulations (FAR), the comprehensive and overarching regulatory framework for federal government contracts, in support of President Biden’s Executive Order 14005 issued on January 25, 2001 (“Executive Order”). The objective of the Executive Order – aptly entitled “Ensuring the Future is Made in America by All of America’s Workers” - is to “maximize the use of goods, products, and materials produced in, and services offered in, the United States.” The proposed amendment to the FAR (“FAR Amendment”) is intended to bolster this policy objective, as well as support the fulfillment of Biden’s promise to strengthen the nation’s manufacturing base.
The FAR Amendment modifies the Buy American Act requirements by mandating that the federal government take certain measures to strengthen U.S. manufacturing and materials sourcing, thereby promoting growth in sustainable jobs that provide a meaningful, living wage to Americans. The proposed rule amendment identifies three key changes:
Increased domestic content threshold from 55% to 60% initially, then to 65% after two years, then to 75% after five years;
Enhanced price preference for domestic products designated as “critical items” or that contain “critical components”; and
Post-award reporting requirements for contractors relating to the specific domestic content of critical items or critical components, except for commercial off-the-shelf (“COTS”) items to which the reporting requirements will not apply.
The FAR Council has not yet published a list of critical items or critical components. Likewise, additional rules affecting government contractor manufacturing and sourcing can be expected throughout the term of the Biden Administration.
Not surprisingly, unions have expressed unbridled enthusiasm for the FAR Amendment, while industry representatives voice concerns about global sourcing, the impact on foreign relations with American partners and allies, and the burdensome post-award reporting requirements which may compromise both national security and confidential business information. Meanwhile, speaking in support of the Administration during a public meeting held on August 26th, Celeste Drake, Director of the Office of Management and Budget’s new Made in America Office (also established under the Executive Order) emphasized the need to close current loopholes in the FAR in order to “raise the bar to make [the requirements of the] Buy American [Act] real” by encouraging greater domestic content in procurement, while acknowledging the need to give contractors adequate time to adjust their supply chains accordingly.
Interested parties on both sides of the issue have requested more time to submit comments on the FAR Amendment. Those comments are due by September 28, 2021. For more information or assistance with determining the impact of the proposed rule on your business or submitting comments to the U.S. Government, please contact Michael Mendelson at email@example.com or 202.596.6610.
Michael Mendelson is a Member of Outside GC in the Washington, DC region. With over 20 years of experience, Michael handles a broad variety of matters for established and start-up clients including complex international transactions, M&A, early stage financing, government contracts, commercial contracts, and export control compliance.