Made in the USA: Executive Order Promotes Strict Adherence to Buy American Laws and Signals Potential Legal Reform in Fall 2017
Government Contracts Newsletter
“It shall be the policy of the executive branch to buy American and hire American.” On April 18, 2017, President Trump announced this policy in an executive order, aptly titled “Buy American and Hire American.” The order requires federal agencies to “scrupulously monitor, enforce, and comply with Buy American Laws” and to “minimize the use of waivers” that provide exceptions to the laws. The order defines “Buy American Laws” as all federal laws and regulations that require, or provide a preference for, United States goods, products, or materials, including the Buy American and Buy America Acts. Although the order does not promote specific amendments to the Buy American Laws, it directs agencies to assess how to enforce and strengthen them.
President Trump’s strong words reinforce federal laws that set a preference for American products in federal procurements. The Buy American Act (enacted in 1933) applies to purchases in public construction projects. The Buy America Act (enacted in 1982) applies to Federal Transit Authority (FTA) mass transit procurements valued at over $100,000. Other Buy American Laws apply to federal grants for Amtrak, Federal Aviation Administration projects, and federal rail improvement programs.
Under the Buy American Act, the government must include, in public contracts, a requirement that contractors at every tier use unmanufactured “articles, materials, and supplies” mined or produced in the United States and articles, materials and supplies manufactured in the United States substantially from United States materials. The Buy America Act requires that all “iron, steel, and manufactured products” in applicable mass transit projects be produced in the United States, and that steel and iron manufacturing processes take place in the United States. The Buy America Act also sets preferences for United States components of “rolling stock” (transit vehicles such as buses) and capital leases. In December 2015, President Obama signed the Fixing America’s Service Transportation (FAST) Act, which incrementally increases the rolling stock U.S. component requirements beyond 2020.
Exceptions or waivers to the Buy America Laws are limited, and the process can be a time-consuming burden for contractors and the government alike. The FAR provisions implementing the Buy American Act permit a contracting officer to “acquire foreign construction materials without regard to the restrictions of the Buy American statute” if: 1) the head of the relevant agency determines compliance would be “impracticable or inconsistent with public interest;” 2) the head of the contracting activity determines that a material is not available in “sufficient and reasonably available commercial quantities of a satisfactory quality;” 3) the cost is unreasonable; or 4) the purchase is an acquisition of “information technology that is a commercial item.”
The Buy America Act affords the FTA discretion to grant waivers to recipients, such as contractors, provided the grantee demonstrates that a waiver is warranted by the public interest, non-availability of materials, or a price-differential between American and foreign materials. Historically, the FTA has set a substantial bar for obtaining a waiver, and in many cases, expects compliance as long as there are comparable materials or manufacturing processes available in the United States. The FAST Act of 2015 shifts some of the burden to the FTA by requiring it to justify waiver denials. The act requires the FTA, when denying a waiver, to certify that a sufficient and reasonably available amount of American materials exists; identify where to obtain them in the United States; and publish the waiver denial and rationale on the Department of Transportation website.
President Trump’s executive order is not necessarily a departure from previous regulations, but it signals a shift toward expanded agency enforcement and perhaps, eventually, stricter Buy American Laws with higher bars for exceptions. It is unlikely that this administration will require agencies to justify strict implementation of the Buy American Laws. With that said, on June 17, 2017, pursuant to the executive order, the Secretary of Commerce and Director of the Office of Management and Budget issued a joint report that required agency heads to submit their own reports by September 15, 2017. The order also requires the Secretary of Commerce to make specific recommendations for strengthening the Buy American Laws by November 24, 2017.
It is possible that that stricter Buy American Laws and regulations will follow the Secretary of Commerce’s November 2017 report. Until then, contractors can expect limited waiver opportunities under the Buy American Laws. Contractors on federal projects should become well-acquainted with applicable Buy American Laws and prepare to comply with them unless it is absolutely necessary to apply for a waiver.