A recent report from the Department of Defense (DoD) Inspector General (IG) identified a number of significant flaws regarding the Defense Logistics Agency’s (DLA) compliance with the Buy American Act (BAA) and the Berry Amendment. The IG’s findings will likely result in a renewed focus on both BAA and Berry Amendment compliance. As a result, contractors are likely to experience increased frustration as they seek to remain aligned with DLA policies. The IG’s report also draws further attention to the previously discussed government-wide effort by President Trump to both enhance compliance with the BAA as presently drafted and potentially strengthen the BAA through legislative action in the future.

Both the BAA and the Berry Amendment are intended to ensure that government contracts are sourced from within the United States. The BAA specifically requires government contracts meeting certain specifications to be sourced and staffed primarily from within the United States. Similarly, the Berry Amendment dictates that DoD procurement of certain products (food, fabrics, hand tools, etc.) must come from U.S. companies. The burdens of complying with the BAA and the Berry Amendment fall not just on government contractors but also on the agencies that oversee those contractors.

The IG’s audit of DLA was prompted by the National Defense Authorization Act for Fiscal Year 2014. The audit specifically analyzed several DLA contracts that spanned a two-year period and totaled over $386 million in obligated funds. The audit sought to determine whether those contracts complied with the BAA and Berry Amendment. The report outlines a number of deficiencies: of 32 contracts reviewed for Berry Amendment compliance, only 13 were found to be fully compliant; only 44 of 56 contracts reviewed for BAA compliance were found to be adequate. The report noted that poor internal procedures, such as a lack of familiarity with the statutory requirements or reliance on contract writing systems without adequate post-drafting review, led to a number of discrepancies.

From the audit, the IG produced a number of recommendations for DLA to ensure compliance with both the BAA and Berry Amendment going forward. Among other recommendations, the report called upon DLA to (1) review and improve internal procedures to ensure compliance with the BAA and the Berry Amendment in the future, and (2) review a number of previously-executed contracts to ensure non-conforming products are replaced with BAA and Berry Amendment products where appropriate.

As DLA begins to incorporate the IG’s recommendations into their standard operating procedures, contractors that either currently support DLA or are seeking to do so in the future should anticipate more burdensome compliance reviews. While the report simply calls upon DLA to incorporate existing federal law into their framework, the recommendations are likely to spawn a number of agency-level process changes that will likely cause some frustration for contractors. Moreover, the IG’s request that DLA review previous contracts for BAA and Berry Amendment compliance and thereafter replace any goods that were improperly procured could prove taxing for contractors. Notably, a DLA review of previous contracts to ensure BAA and Berry Amendment compliance could carry significant consequences under the False Claims Act for any contractor who falsely certified that previously provided goods were compliant with the BAA or Berry Amendment.

While the IG’s audit was initiated several years prior to the Trump Administration’s recent focus on BAA compliance, the report’s timing reaffirms a government-wide focus on federal laws designed to benefit American industry. Despite the fact that such efforts are likely to increase the compliance burden for some federal contractors, a renewed focus on both the BAA and Berry Amendment (and Trade Agreements Act) could ultimately result in significant business opportunities for American companies and workers. As the White House enters “Made in America” week, contractors can expect to again see the administration highlight its ongoing efforts to support American industries through stricter compliance with existing federal laws like the BAA and the Berry Amendment.

The breadth and scope of each agency’s compliance efforts related to both the BAA and the Berry Amendment are likely to increase in the coming months. As these changes occur, contractors should remain abreast of these developments to ensure minimal negative impact on their operations going forward.