The White House recently issued a memorandum, titled "Increasing Opportunities for Domestic Sourcing and Reducing the Need for Waivers from Made in America Laws," which provides guidance to federal agencies on the implementation of the Biden administration's "Made in America" executive order (the E.O.). The Made in America Memo offers additional insight into the role of the newly created "Made in America Office" (MIAO) and the White House's plans to review several longstanding waivers and exceptions to the Buy American Act (BAA). With less than one month to go before the Federal Acquisition Regulation (FAR) Council is scheduled to issue potentially major changes to the regulations governing the BAA (on or before July 25, 2021), contractors should look to the Memo for clues on where the administration's Made in America policies are headed next.
The Made in America Executive Order
On January 25, 2021, President Biden signed the "Made in America" executive order, which contemplates a series of actions to maximize the U.S. government's use of goods, products, and materials produced, and services offered, in the United States. Among other actions, the E.O. required the Office of Management and Budget (OMB) to establish the MIAO with the principal mission of increasing reliance on domestic supply chains and reducing the need for waivers. The E.O. also signaled the White House's intent to: (1) reassess the continuing need for the BAA's commercial item information technology (IT) exception and partial BAA waiver for commercial-off-the-shelf (COTS) items (Section 10) and (2) study the economic impact of BAA waivers under the Trade Agreements Act (TAA) (Section 12).
The Made in America Memo
The Made in America Memo provides additional guidance regarding the MIAO's implementation of the E.O. and sets forth a "phased implementation approach" to help covered agencies adjust. The first step is for each covered federal agency to designate a "Senior Accountable Official," or SAO, which will direct the agency's compliance with Made in America Laws and interface with the MIAO. Next, the MIAO and OMB will work with SAOs across government to review "market conditions" for product categories where domestic "non-availability" determinations are most prevalent. The MIAO also will develop standardized waiver requirements, focusing first on non-availability and Jones Act waiver requests, and implement new reporting requirements designed to help the MIAO evaluate existing waiver procedures.
After this initial phase, the MIAO will initiate a series of "additional planned actions related to waivers," several of which promise to be of great interest to U.S. government contractors. These additional actions will include assessment of unreasonable cost waivers, the commercial item IT exception to the BAA, the partial BAA waiver for COTS items, enforcement of domestic sourcing laws in federal property sales, and how to ensure agency compliance with U.S.-flag cargo preference laws. We provide additional detail on each of these initiatives below.
Senior Accountable Officials
The Memo requires each covered agency to designate a "sufficiently senior" SAO for domestic sourcing by June 30, 2021. The SAO will be in charge of implementing Made in America Laws throughout the agency. In conjunction with the MIAO, this individual also will be responsible for identifying opportunities to increase the agency's reliance on U.S. products, materials, and services by, among other actions:
- Conducting supplier scouting via the Department of Commerce's Manufacturing Extension Partnership (MEP) to identify U.S. companies that produce U.S.-made goods
- Participating in interagency product level reviews to explore new domestic sourcing opportunities
- Strengthening agency waiver processes
- Managing a waiver reduction strategy
Product Category Reviews
The MIAO and OMB's Office of Federal Procurement Policy will "convene" covered agencies to review product categories where domestic non-availability determinations are most common. Leveraging category management principles, the focus of these reviews will be on the underlying market conditions supporting such determinations. Covered agencies also will share "market intelligence" to identify common challenges, coordinate multi-agency procurement strategies (where feasible), and work to stimulate industry interest in domestic sourcing. Though not specifically stated in the Memo, the starting point for such reviews could be the non-available articles listed in FAR Subpart 25.1 (Buy American Supplies) and agency-specific non-availability determinations (e.g., DFARS 225.7018-4 (Non-availability determination)).
Standardized Waiver Information
The Made in America Memo also identifies information that all covered agencies must provide the MIAO when submitting waiver requests based upon non-availability and under Section 501 of the Jones Act (also known as Merchant Marine Act of 1920 (Pub. L. No. 66-261)). Among other information, a covered agency will have to describe its market research/outreach efforts and acquisition planning (for non-availability waiver requests) and explain why a qualified vessel cannot be utilized (for Jones Act waiver requests). For transactional waiver reviews (e.g., in connection with a procurement), the MIAO will complete its review of most waiver requests within three to seven business days and no later than 15 days from the date of submission to OMB. The MIAO also plans to develop standard procedures requiring agencies to describe and publicize proposed waivers on a public website to be established by the General Services Administration (GSA) by early FY 2022.
Made in America Reporting
SAOs must submit by July 24, 2021 an initial report regarding their agency's use and compliance with Made in America Laws. According to the Memo, these reports "should focus on proactive steps the agency is or will be taking to strengthen and diversify existing domestic supplier bases and create new opportunities where there are gaps, consistent with the purpose and policy of the [Made in America E.O.]." At a minimum, each SAO's report must describe:
- Their agency's implementation of, and compliance with, Made in America Laws, including the management of waivers and a description of internal management controls aimed at maximizing use of U.S. domestic sources
- Their agency's reliance on any longstanding or nationwide waivers of Made in America Laws, including a description of whether and how such waivers are consistent with the policy goals set forth in the E.O.
- Recommendations for how to further effectuate the policy goals set forth in the E.O.
- The status and outcome of the agency's review of any actions that are inconsistent with the policy goals set forth in the E.O.
Beginning January 23, 2022, covered agencies will be required to update their reports semi-annually. These updated reports must demonstrate progress towards growing U.S. domestic manufacturing and increasing compliance with Made in America Laws.
Up Next: Taking Aim at Longstanding BAA Exceptions and Waivers?
After completing those "initial" steps, the MIAO will take "additional planned actions related to waivers," according to the Made in America Memo. The scope and outcome of these additional actions remains to be seen, though U.S. government contractors should pay close attention to this second phase of the White House's Made in America strategy because it could result in a weakening or abolishment of longstanding exceptions and waivers of the BAA's test for identifying a domestic end product or construction material. Many companies have structured their existing supply chains and BAA compliance on the availability of such exceptions and waivers. As a result, any major changes to the applicable rules could have a significant impact on contractors and the federal agencies that purchase their products.
For example, government and commercial IT contractors have long depended on the commercial item IT exception to the BAA. The Memo highlights the White House's plan to review the continuing need for this exception, however, noting that it has been in effect for 15 years. Specifically, the MIAO will work with the FAR Council, agency IT experts, and interested stakeholders to "understand the extent to which the original purpose of the [commercial item IT] exception, or other goals of the exception, remain relevant, the impact of narrowing or lifting the exception, and the extent to which current conditions may support such narrowing or lifting to further promote Made in America policies with appropriate strategies in place to strengthen domestic IT supply chains." Similarly, the government and many commercial item contractors have come to rely on a waiver of the BAA's "cost of components" test for commercial off-the-shelf (COTS) items. But this partial waiver is predicated on policy justifications that may longer be applicable, according to the Memo. Therefore, the MIAO will review "the extent to which the basis of the partial waiver remains relevant, the impact of rescinding the partial waiver, and the extent to which current conditions may support rescission of the partial waiver to further promote Made in America policies with appropriate strategies in place to strengthen domestic commercial supply chains." Finally, though not included in the list of exceptions and waivers slated for MIAO review, the Memo requires covered agencies to report on the use of BAA waivers under the TAA. It is unclear how the MIAO will use this information, but agencies and contractors that rely on such TAA waivers should closely monitor any related changes proposed by the administration, as such changes could greatly impact their approach to BAA compliance.
Since issuing the Made in America E.O. in January 2021, the White House has taken steps to follow through on President Biden's promise to bolster U.S. domestic manufacturing. The June 2021 Made in America Memo is the latest evidence of this plan of action and comes just one month before the FAR Council is set to make potentially game-changing modifications to the FAR's BAA regulations. We will continue to monitor and report on the developments in this critical area of compliance. In the meantime, if you have questions about the administrations Made in America initiatives.
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