The Buy American Act: A Guide for New Federal Contractors

The Buy American Act (BAA) is a cornerstone of federal procurement policy, particularly for businesses seeking to provide commercial products or services to the U.S. Government. For new contractors unfamiliar with federal contracting, understanding the BAA is important to entering and executing in this space. While the requirements can seem complex at first, this article simplifies the key elements and recent developments to help businesses comply with BAA regulations and make informed decisions.

The BAA, codified in 41 U.S.C. §§ 8301-8305 and implemented in the Federal Acquisition Regulation (FAR), primarily governs the procurement of supplies and construction materials. The act restricts the purchase of foreign goods, requiring that end products used in federal projects meet specific domestic content requirements. However, the application of the BAA varies depending on whether the procurement is conducted by civilian agencies or the Department of Defense (DoD), and exceptions and waivers are available in certain circumstances.

For commercial products, the BAA mandates that the end product be manufactured in the United States and meet specific domestic content thresholds. Currently, this threshold is set at 65% for civilian agencies and 55% for the DoD. This means that the cost of components mined, produced, or manufactured in the U.S. must meet or exceed these percentages of the total component cost. Products made predominantly of iron or steel face even stricter requirements, with domestic content thresholds of 95%. These thresholds are set to increase incrementally over the next few years, with a goal of reaching 75% domestic content by 2029 for most products.

For businesses providing commercial services, the BAA is less restrictive, as its primary focus is on the procurement of supplies and construction materials. However, understanding the broader domestic preference landscape, including related policies like the Trade Agreements Act and Build America, Buy America provisions, can be beneficial for service providers as well. These policies influence how federal agencies approach procurement and prioritize domestic suppliers.

One of the most significant aspects of the BAA is its treatment of commercially available off-the-shelf (COTS) products. COTS items, which are commercial products sold in substantial quantities in the non-governmental market, are subject to a partial exemption from the domestic content requirement if they are not predominantly made of iron or steel. However, the end product must still be manufactured in the U.S. This exemption offers an important opportunity for businesses selling widely available commercial products to enter the federal market with fewer barriers.

Exceptions and waivers to the BAA are another critical area for contractors to understand. Waivers can be granted for reasons such as public interest, nonavailability of domestic alternatives, or unreasonable cost. For example, if a domestic product is significantly more expensive than a foreign alternative, a waiver may be issued to allow the procurement of the foreign product. The specific cost evaluation factors vary: civilian agencies typically apply a 20-30% evaluation factor, while the DoD uses a 50% factor. This flexibility allows agencies to balance domestic preference with cost-effectiveness in their procurements.

Qualifying country exceptions are also important, particularly for businesses working with the DoD. Under these provisions, products from certain countries with cooperative defense agreements with the U.S. are treated as domestic products. This can open the door for international businesses from approved countries to compete in the federal market.

Recent developments in BAA policy highlight the federal government’s increasing emphasis on domestic content. A proposed rule issued in 2023 aims to harmonize the content requirements under the FAR and DFARS, reducing inconsistencies between civilian and defense procurement. Additionally, the FAR Council is considering further changes, such as revising the longstanding "component test" to a broader "domestic content" test and possibly extending BAA coverage to services. These changes reflect a broader trend toward strengthening domestic preference in federal procurement.

For new contractors, compliance with the BAA requires careful attention to detail, particularly in the certification process. Contractors must certify that their products meet BAA requirements, but this certification does not equate to "Made in the USA" labeling under Federal Trade Commission rules. Missteps in certification can lead to significant legal and financial consequences, as evidenced by recent enforcement actions. For instance, several companies have faced fines and penalties for falsely certifying compliance with the BAA or providing foreign products that did not meet domestic content requirements.

To navigate these complexities, businesses should familiarize themselves with the relevant FAR and DFARS clauses that implement the BAA. FAR clauses such as 52.225-1 and 52.225-9 outline the requirements for supplies and construction materials, while DFARS clauses like 252.225-7001 address additional considerations for defense acquisitions. Understanding these clauses and their implications for specific contracts is essential for ensuring compliance.

Another critical area for contractors is understanding the distinction between preference and requirement under the BAA. While the BAA generally requires domestic end products, it operates as a preference rather than an absolute mandate. This means that foreign products can be procured under certain conditions, such as when domestic options are unavailable or cost-prohibitive. However, the preference for domestic products remains strong, and contractors should aim to meet BAA requirements whenever possible to enhance their competitiveness.

For businesses new to federal contracting, the BAA offers both challenges and opportunities. On one hand, the act’s domestic content requirements and certification process can be daunting for those unfamiliar with federal procurement. On the other hand, the BAA’s emphasis on domestic products creates a favorable environment for U.S.-based manufacturers and service providers. By understanding the act’s requirements and leveraging its exceptions and waivers strategically, contractors can position themselves for success in the federal market.

To further support compliance and competitiveness, businesses should invest in training and resources to navigate BAA regulations effectively. Partnering with experienced legal or consulting professionals can also provide valuable guidance in interpreting the act’s requirements and tailoring procurement strategies to meet agency expectations. Additionally, staying informed about policy changes and enforcement trends is critical for adapting to the evolving federal procurement landscape.

As federal agencies continue to prioritize domestic content, the BAA is likely to play an even more significant role in shaping procurement practices. For contractors, this presents a unique opportunity to align with government priorities and build a strong foundation for success in the federal market. By understanding the BAA’s requirements and taking proactive steps to ensure compliance, businesses can unlock the full potential of federal contracting and contribute to the government’s mission of promoting American industry and innovation.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Businesses should consult with a qualified attorney or expert for advice specific to their circumstances. Compliance with federal regulations, including the Buy American Act, requires careful analysis of individual contract requirements and applicable laws.