WASHINGTON — A rule going into effect Oct. 25 will increase a requirement for U.S.-made content in the hundreds of billions of dollars of goods and services the federal government procures each year.
The requirement, handed down by the White House via executive order in 2021 but going into force this month, will bolster existing domestic preferences to require a greater share of a product’s overall cost come from components produced on U.S. soil.
The Buy American Act, first passed in 1933, applies pricing incentives to domestic products that the government deems “critical” to U.S. supply chains. Amendments and presidential executive orders have been made to tweak the goal over the decades.
“This is a continuance of the emphasis on ‘know your supply chain’ that we’ve seen in the government for the past several years,” said Sheila Armstrong, of the law firm Morgan Lewis.
Under the latest revision, domestic components will have to account for 60% of the total cost of a product or service to be considered American-made, up from 55%. Incremental increases will follow each fiscal year until 2029, when the made-in-America requirement will reach 75%.
Buy American Act
The act seeks to maximize government procurement of American materials in support of greater domestic production. Over the past two decades purchases have concentrated in only a few industries as manufacturing declined, according to consulting firm McKinsey.
The White House has said it is working to close loopholes in regulations while allowing businesses to onshore manufacture and adjust their supply chains to support use of American-made components.
Another step is to require agencies to apply higher price preferences to end products and construction materials that the White House’s Office of Management and Budget deems to be a linchpin in supply chains or made up of “critical components.”
The Buy American Act is not a prohibition against the purchase of foreign products, but as the authorization legislation for year-to-year threshold increases that push the needle toward domestic priority, it forces the hand that feeds domestic industry.
There are some exceptions.
The provisions of the act may be waived if the head of the procuring agency determines the act to be inconsistent with the public interest or the cost of acquiring the domestic product is unreasonable.
The amendment applies annual thresholds to suppliers who are awarded contracts that span multiple years. A supplier awarded a five-year contract in November 2022 will have to comply with the 60% domestic content threshold initially, but in 2027 will need to supply products with 65% domestic content.
Molly Weisner is a staff reporter for Federal Times where she covers labor, policy and contracting pertaining to the government workforce. She made previous stops at USA Today and McClatchy as a digital producer, and worked at The New York Times as a copy editor. Molly majored in journalism at the University of North Carolina at Chapel Hill.