Strengthening Domestic Sourcing: A New Direction in Federal Procurement
On March 13, 2024, the Office of Management and Budget issued a memorandum establishing a new path in government procurement, a significant step toward strengthening American manufacturing and supply chains. The memo is part of a larger government effort to reinvigorate local manufacturing, create new opportunities for US enterprises and workers, and position American businesses to compete and lead worldwide in important industries.
The memorandum is in response to Executive Order 14005, which mandated efforts to strengthen and modernize the implementation of the Buy American Act (BAA). In 2022, the Federal Acquisition Regulatory Council, in collaboration with the Made in America Office (MIAO), implemented the most comprehensive revisions to the BAA in nearly 70 years. These revisions included a plan to raise domestic content criteria for eligible domestic end products and construction materials. The staggered hikes, which begin at 55 percent in 2022 and gradually grow to 75 percent in 2029, are intended to encourage corporations to rely more heavily on US supply chains while still creating possibilities for small and medium-sized industries.
To achieve these goals, the memorandum creates a pilot program for voluntary agency testing of enhanced price preferences (EPPs) to provide additional incentives in federal acquisitions for the domestic manufacture of critical end products and construction materials, known as "critical items." This pilot program is intended to help create and expand domestic supply chains for vital commodities by providing a source of consistent demand through federal procurement.
Agencies interested in participating in the pilot program must create a strategy outlining the scope of the project, the size of the EPP, and how it will be implemented. The strategy must be reviewed by MIAO and the Office of Federal Procurement Policy (OFPP), as well as a public notice for feedback. The pilot program data will be shared with the FAR Council to help guide future rulemaking, including the most effective EPP level.
The memorandum also reminds agencies of existing jurisdiction that may be deemed suitable to aid industrial mobilization. In other cases, EPPs may not be sufficient to establish or maintain local manufacturing capability for crucial commodities. Agencies are expected to disclose how their acquisitions encourage domestic manufacturers to rely more on domestic supply networks, as well as identify domestic supply chain offerors. Contracting officers are responsible for developing the Justification for Other than Full and Open Competition (JOFOC) and receiving the necessary approvals.
The endeavor to increase domestic sourcing for critical commodities is an important step in revitalizing the American manufacturing sector and ensuring the country's economic and national security. By ensuring a consistent market for domestically manufactured key commodities, the government hopes to generate additional opportunities for small and medium-sized manufacturers and their employees, as well as tiny and disadvantaged enterprises from across the country. This endeavor demonstrates the dedication to ensure that the future is built in America by all of America's people, allowing US firms to compete and lead worldwide in vital areas.