On September 14, 2020, the Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) published in the Federal Register a proposed rule [FAR Case 2019-016; Docket No. FAR-2019-0016, Sequence No. 1] to amend the Federal Acquisition Regulation (FAR) to implement Executive Order (E.O.) 13881 Maximizing Use of American-Made Goods, Products, and Materials (84 FR 34257, July 18, 2019) addressing domestic preferences in Government procurement. E.O. 13881, changes FAR clauses implementing the Buy American statute by increasing the— 1. Domestic content requirements; and 2. Price preference for domestic products.
Interested parties should submit written comments at the address shown in the Federal Register document on or before November 13, 2020, to be considered in the formation of the final rule.
Increased domestic content requirements
Under E.O. 13881, the domestic content requirement for iron and steel end products increases to 95 percent. For everything else, the domestic content requirement increases from 50 percent to exceeds 55 percent of the cost of all components. E.O. 13881 creates a new separate higher domestic content standard for iron and steel end products. This distinction does not currently appear in the FAR clauses implementing the Buy American statute. But it has been around for many years in domestic preference requirements governing certain federal grant programs, such as the Federal Transit Administration’s Buy America regulations applicable to grantees. DoD procurements are affected by the increased domestic content requirements of E.O. 13881; the changes will be implemented in the Defense Federal Acquisition Regulation Supplement (DFARS) through DFARS Case 2019-D045, Maximizing Use of American-Made Goods.
Increase preference for domestic offers
The Buy American statute does not prohibit the purchase of foreign end products or use of foreign construction material. Instead, it encourages the use of domestic end products and construction material by imposing a price preference for domestic end products and construction material. Under current Buy American regulations, large businesses receive a 6 percent price preference. Small businesses get a 12 percent price preference. For DoD procurements, the price preference for end products from both large and small businesses is 50 percent. The 6 percent price preference was originally established by E.O. 10582, which permitted the head of an executive agency to determine that a greater differential is appropriate. In October 1958, the Assistant Secretary of Defense (Supply and Logistics) and the Assistant Secretary of State agreed that a differential of 12 percent would be used for offers from small business (see Armed Services Procurement Regulation (ASPR), 1955 edition, Revision 45, 20 April 1959, Case 58-99).
E.O. 13881 increases the price preference from 6 percent to 20 percent for large businesses and from 12 percent to 30 percent for small businesses. The E.O. does not impact the 50 percent preference for DoD procurements, because the DoD percentage exceeds the requirements of the E.O.