THE GOVERNMENT IS MOVING FORWARD WITH FURTHER CHANGES TO BUY AMERICAN ACT ("BAA") REGULATIONS. BUT BASED ON YESTERDAY'S PUBLIC MEETING TO DISCUSS THE JULY 30 NOTICE OF PROPOSED RULEMAKING ("NPRM") TO REVISE EXISTING BAA REGULATIONS, IT REMAINS TO BE SEEN EXACTLY WHERE THOSE CHANGES ARE HEADED.
As discussed in our prior client alert, the NPRM implements Executive Order 14005 ("Ensuring the Future Is Made in All of America by All of America's Workers") by proposing three major changes to existing BAA regulations: (1) higher domestic content thresholds; (2) enhanced price preferences for "critical" items and components; and (3) new domestic content reporting requirements for "critical" items and components. The agenda for the public meeting covered each of these changes, as well as other questions raised in the NPRM related to BAA waivers and exceptions.
At the outset, Celeste Drake, Director of the recently established Made in America Office, provided prepared remarks regarding the goals of that office. The goals include: (1) creating confidence and trust in Made in America Laws; (2) maximizing the use of domestic content to support economic recovery and expand the U.S. manufacturing base; and (3) institutionalizing the Made in America Office so that it is viewed as a valuable resource.
The FAR Council devoted the rest of the meeting to soliciting input from various stakeholders on the ten identified topic areas set out in the NPRM. A variety of interests were represented among the commentators; some spoke as representatives of trade associations or unions, while others spoke in their own individual capacities as small business owners. The nature of the NPRM's questions for discussion — which included, for example, a question concerning the role of trade agreements and a question concerning the existing BAA waivers for commercial IT products and COTS products — necessarily resulted in a wide-ranging conversation.
As expected, commentators took different positions with respect to the proposed rule, with some speaking in favor of the proposed changes while others warned that the significant changes proposed in the NPRM could have a range of unintended consequences for industry and government customers. In particular, some commentators suggested that an increase in domestic content thresholds to 75% might lead companies to exit the market if the cost of reaching that threshold are too high, and that BAA priorities must be considered in the context of U.S. international trade relationships and national defense priorities. Others correctly noted that BAA requirements and other procurement rules are only one of many tools that the government may use to influence industrial development, and that the BAA rules in particular may impact some industries more significantly than others. At the same time, many commentators — including union spokespersons and representatives of domestic manufacturing concerns — spoke in favor of the proposed increase to the domestic threshold, based on the perceived benefits for U.S.-based manufacturing.
Through it all, Ms. Drake and the representatives of the FAR Council appeared to be primarily in listening mode and gave away little about whether and how they intended to further revise the proposed rule in the next phase of the rulemaking process. Moving forward, the FAR Council will need to determine not only how it manages domestic content thresholds and requirements related to "critical" items, but also whether and how it pursues further changes to BAA waivers and exceptions identified in the NPRM.
Written comments on the rule may be submitted through September 28, 2021, and we expect to see detailed comments filed by a variety of interested parties. We will continue to monitor changes to the NPRM and other domestic preference developments and provide further updates in this space.
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