President Biden Proposes Increasing Domestic Content Requirement for Federal Contracts

According to this FACT SHEET released by the White House July 28 the proposed rule directs the following changes to strengthen Buy American requirements:

• “Make Buy American Real” and close loopholes by raising the domestic content threshold. The Buy American statute says products bought with taxpayer dollars must “substantially all” be made in the U.S. However, today, products could qualify if just 55%–just over half—of the value of their component parts was manufactured here. The NPRM proposes an immediate increase of the threshold to 60% and a phased increase to 75%. This proposal would close a problematic loophole in the current regulation, while also allowing businesses time to adjust their supply chains to increase the use of American-made components. If adopted, this change would create more opportunities for small- and medium-sized manufacturers and their employees, including small and disadvantaged enterprises, from all parts of the country. To support this work, the Small Business Administration has created a new manufacturing office in its federal contracting division.

• Strengthens domestic supply chains for critical goods with new price preferences. As the pandemic made clear, supply chain disruptions can impact the health, safety, and livelihoods of Americans—leaving us without access to critical goods during a crisis. Some products are simply too important to our national and economic security to be dependent on foreign sources. The NPRM proposes applying enhanced price preferences to select critical products and components identified by the Critical Supply Chain review, mandated under E.O. 14017, and the pandemic supply chain strategy called for under E.O. 14001. These preferences, once in place, would support the development and expansion of domestic supply chains for critical products by providing a source of stable demand for domestically produced critical products.

• Increases transparency and accountability in Buy American rules. Reporting challenges have hampered implementation of Buy American rules for decades. Currently, contractors only tell the government if they meet the content threshold rather than reporting the total domestic content in their products. The NPRM proposes to establish a reporting requirement for critical products. The new reporting requirement would bolster compliance with the Buy American Act and improve data on the actual U.S. content of goods purchased. More complete and accurate data would be used to target future improvements to support America’s entrepreneurs, farmers, ranchers, and workers— and along the way, create good jobs and resilient communities.

For more on the Buy American rules, and U.S. government efforts to boost manufacturing see this January 28, 2021, report from Agathon Associates.