The President's New(est) Buy American Act Executive Order (Not as Big a Deal as It Seems)
by Susan Lavington
You may have seen reports about the President’s July 15, 2019, Executive Order on the Buy American Act (“BAA”). The first two BAA Executive Orders were basically “study the BAA and maybe try not to invoke exceptions as often as you do now.” This third Order supposedly has teeth. But here is my contrarian view: this one is not that big a deal. Let’s look at what the Order does, and what it doesn’t do.
In the newest Order, the President directs the FAR Council (the body that manages, and changes, the FAR, where the BAA is actually implemented), over the next six months, to consider amending the FAR in a few ways:
- Increase the percentage of required U.S. components from 50% to 55%, and eventually to 75% (in addition to the current requirement that products be “manufactured” in the U.S).;
- Increase the evaluation price preference for domestic products from 6% to 20% for large businesses, and from 12% to 30% for small businesses; and
- Increase the required U.S. iron and steel content to 95% for covered contracts.
Sounds draconian, right?
Here is why I am not getting too excited about the impact of the Executive Order:
- It is still an Order to consider making changes. Nothing is set in stone. (Just ask Congress how long it took the SBA to change the time period for calculating revenue on small business set aside contracts, in the face of explicit Congressional direction to do so.)
- All “commercial information technology” will remain exempt from the BAA, just as it is now. That means that the industry segment with the greatest exposure to (let’s face it) restrictions on Chinese components in the supply chain will be exempt from the changes under consideration. Changes to the BAA only impact contracts subject to the BAA.
- COTS products will remain exempt from the BAA requirement to have any U.S. components.
- And most importantly, the BAA only applies to a small percentage of U.S. government contract spending, because the Trade Agreements Act kicks in at a contract threshold of $180,000 for supply contracts, and $6.9 million for construction contracts. Again, the President’s changes only apply to contracts covered by the BAA.
That’s right: The current BAA just doesn’t apply to many contracts. And even if the new Executive Order changes the parameters around the BAA, the BAA still won’t apply to many contracts. So, there certainly will be contracts, and contractors, impacted if the Order results in the changes to the BAA provisions in the FAR. But I think the Administration will be surprised (or perhaps not) by how few and far between they are…