The Next Buy American Compliance Battleground: Product Characterization for Technology Manufacturers

There are plenty of risks with Buy American Act compliance, but the biggest risk is hidden – that a company started with the wrong legal framework. A perfectly documented domestic-content analysis provides little protection if the product should have been evaluated under a different regulatory standard.

Beginning in 2029, the standard domestic-content requirement for many manufactured products under the Buy American Act will increase to 75 percent. At the same time, products consisting wholly or predominantly of iron or steel remain subject to a separate and substantially different compliance framework.

DOJ is pursuing False Claims Act matters involving domestic sourcing and country-of-origin certifications, based not only on the importance of documentation but also on the legal rationale supporting a company’s compliance position.  And the pressure is building.

However, most companies preparing a federal bid are asking the same surface, undifferentiated question:  Where was this product made? Unfortunately, this formulation is no longer sufficient and is not even the most accurate or competitive way to comply with federal procurement requirements.   Many companies still think of themselves as software companies, electronics manufacturers, or technology innovators. Federal procurement law may take a different view. They are waking up to discover themselves mired in the depths of whether a product they are used to thinking of as a tech/IP/innovation economy product is – despite all of the tech involved – “primarily iron or steel” to comply with federal procurement.

This shift matters as product characterization moves to the forefront and technology manufacturers who “Leeroy Jenkins” themselves into the depths of procurement percentages before addressing how their product is characterized can waste time inside the wrong legal framework and forgo competitive opportunities.

No doubt, the traditional domestic content (BAA) and substantial transformation analysis (TAA) remain essential.  However, they are no longer the entire conversation.  Federal agencies, COs, and private-sector compliance officers are digging deeper into supply chains, manufacturing processes, and product composition.  Here lies a great risk: becoming mired in these details before properly characterizing your product threatens to be a costly and frustrating exercise in futility and lost opportunity cost.

Today, modern products can deny legal characterizations that were often accepted in the late twentieth and early twenty-first centuries.   They blend software, electronics, fabricated steel, communications hardware, sensors, and mechanical systems into a single platform, as every business chases that integrated, next value-added step to beat the competition.  Anxiously awaiting legal guidance at this crossroads are everything from server racks, communications cabinets, and industrial automation equipment to utility controls, transportation electronics, security systems, and power-distribution equipment.

Product characterization is not dictated solely by engineering; it is a legal conclusion informed by engineering, procurement law, regulatory definitions, and the solicitation’s specific language.  And here is the opportunity, but only if your legal analysis keeps pace with your engineering.

Product Characterization Determines the Rulebook.

From this “fork in the road,” the options branch out in several directions: the BAA, the TAA, and BABA, not to mention individual federal agencies themselves, all have different requirements that diverge from this starting point. Different procurement regimes, including the Buy American Act, the Trade Agreements Act, and the Build America, Buy America Act, ask different legal questions.

Before taking the wrong road, a business must ask: are we a manufactured product? Do the specialized iron and steel rules apply to us?  Rather than later agonizing over the correct “Road Not Taken”, this determination makes all the difference.

What Should Manufacturers Do Now?

Now is the time to revisit legacy compliance positions. A product classified five years ago may deserve another look under today’s regulatory environment.  An early legal review can identify risk before a solicitation is released. It can also uncover defensible positions that preserve market access while remaining faithful to the governing statutes and regulations.

Looking Ahead: Compliance as a Competitive Differentiator.

At present, there is no reverse gear on this trend. Domestic sourcing requirements are becoming more important, documentation expectations are increasing, and technology products are becoming more complex.

Those who succeed will not be decided by simply who has the simplest supply chains. The victors will be those who understand how their products fit within the domestic preference framework – before they submit a proposal.

Clients have invested heavily in the next generation of engineering products. Protect that investment with the same attention to the legal framework that governs them. In today’s procurement environment, the first competitive advantage may not be found in the factory but in the legal analysis before you bid.

At Centre, we regularly advise manufacturers, defense contractors, software developers, and technology companies on the BAA, TAA, BABA, country-of-origin determinations, domestic-content requirements, and related supply-chain issues. In recent matters, we have seen that careful product characterization can make the difference between preserving a valuable product line and unnecessarily limiting access to the federal marketplace.

The best time to evaluate these issues is before the next solicitation arrives, not after questions are raised during the procurement process.

Have questions regarding compliance issues? Contact us for a consultation.