Buy American Act Thresholds Are Going UP
19 May 2022
PTAC, Government Contracting
The proposed rule for the final rule we are discussing today was issued in July of 2021. There are a few main changes that are occurring under the recent rule. The FAR Council also responded to various questions and comments about the earlier proposed rule.
As context, the BAA uses a two-part test to determine if something is domestic.
- The end product or construction material must be manufactured in the United States.
- A certain percentage of all component parts (determined by cost of the components) must also be mined, produced, or manufactured in the United States—a requirement known as the “component test” until early 2021, when it was redesignated the “domestic content test” to be consistent with terminology used in E.O. 13881, Maximizing Use of American-Made Goods, Products, and Materials. For an end product that does not consist wholly or predominantly of iron or steel or a combination of both, the cost of domestic components must exceed 55 percent of the cost of all components; the test is waived for acquisitions of commercially available off-the-shelf (COTS) items. For an end product that consists wholly or predominantly of iron or steel or a combination of both, the cost of foreign iron and steel must constitute less than 5 percent of the cost of all the components. That test is not waived for COTS items, except for COTS fasteners.
The BAA encourages use of domestic products by slapping a price increase (for evaluation purposes) on products that don’t meet the test. Large businesses offering domestic supplies receive a 20 percent price preference, and small businesses receive a 30 percent price preference. For DOD, the preference is generally 50% across the board.