The Department of Defense (DoD) has issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to carry out an Executive Order (E.O. 14005) that addresses domestic preferences in DoD procurement. The rule, which takes effect on February 15, 2024, aims to strengthen and diversify domestic supplier bases while also creating new opportunities for US firms and workers by maximizing the use of US-produced goods, products, and materials.

The final rule amends the Federal Acquisition Regulation (FAR) final rule with the necessary conforming changes for DoD-specific requirements. The definitions of domestic end product, domestic construction material, and qualifying country end product are revised, and the applicable DFARS solicitation provisions and contract clauses are updated accordingly. The rule also establishes a framework for the future implementation of an enhanced price preference for a domestic product that is classified as a critical item or is composed of critical components.

The rule focuses on several key areas:

1. Solicitation Provisions: The rule revises the prescriptions for the use of solicitation provisions, such as the Buy America—Balance of Payments Program Certificate and the Buy American—Free Trade Agreements—Balance of Payments Program Certificate, to clarify their use in solicitations containing the provision at FAR 52.204-7 System for Award Management.

2. Definitions: The rule updates the definitions of domestic end product, domestic construction material, and qualifying country end product to reflect a newly established schedule for the domestic content threshold that a product must meet to be classified as "domestic."

3. Enhanced Pricing Preference: The rule contemplates the future implementation of an enhanced price preference for a domestic product that is considered a critical item or is composed of critical components.

4. Buy American Act Exceptions and Waivers: The rule addresses the use of the public interest exception and Reciprocal Defense Procurement (RDP) Agreements with qualifying countries to meet Buy American Act requirements.

5. Alternate Domestic Content Test: The rule allows for an alternate domestic content test, in which the domestic content threshold in effect at the time of contract award applies throughout the contract's performance period.

6. Impacts on the Supply Chain: The rule supplements the FAR final rule, which aimed to increase the impact of Federal procurement preferences under the Buy American Act for end products and construction materials manufactured domestically with substantially all domestic content.

The rule is expected to benefit domestic industries by giving them a competitive advantage as they adjust their supply chains to include more domestic content. It also aims to reduce supply chain risk for the Department of Defense by increasing content sourcing domestically.