On April 18, 2017, President Trump issued an executive order (the EO) aimed at increasing the buying of American-made products and the hiring of American workers titled “Buy American and Hire American.” This GT Alert is focused on the “Buy American” side of the EO.1 In sum, the EO does not impose any new requirements related to the Buy American Act that were not already incumbent upon federal contractors. However, the EO does require agency heads to perform assessments of their agency’s compliance with the various Buy American provisions and, ultimately, these assessments may show a lack of compliance which may lead to increased efforts by agencies to ensure that their contractors are providing Buy American compliant products.
Federal contractors have been subject to the Buy American Act—which generally requires contractors to provide agencies with products manufactured in the United States—since 1933. Since that time, Congress has enacted a number of “Little Buy American Acts” which apply to procurements that, for various reasons, were outside of the coverage of the original Buy American Act. Perhaps the best example of a Little Buy American Act is the confusingly named Buy America Act (notice the distinction between “American” and “America”) which requires that all state transportation projects financed by federal highway funds only use iron or steel manufactured in the United States. Nearly every Congress that has sat since the enactment of the original Buy American Act has enacted some form of domestic preference legislation.
One significant exception to the Buy American regime is the Trade Agreements Act which essentially allows the products of “designated countries,” i.e., countries that are party to certain free trade agreements with the United States, to be considered equal with American made products for the purposes of federal procurements.
Against this background, what is perhaps most remarkable about the EO is that it makes no changes to existing laws or regulations requiring government agencies to provide a preference for the purchase of American made products. The EO includes precatory language that “it shall be the policy of the executive branch to maximize, consistent with law, . . . the use of goods, products, and materials produced in the United States.” Furthermore, the EO directs every agency to “scrupulously monitor, enforce, and comply with Buy American Laws, to the extent they apply, and minimize the use of waivers . . .” However, the only operative provision in the Buy American portion of the EO is the requirement that federal agencies perform several “assessments” to determine the agencies’ level of compliance with the Buy American Act and the various Little Buy American Acts. Specifically, the EO mandates the following:
(a) Within 150 days, the heads of all agencies must:
(i) assess their agency’s compliance with and enforcement of Buy American laws;
(ii) assess their agency’s use of waivers of the Buy American provisions;
(iii) develop policies to ensure that their agency is maximizing the use of products manufactured in the United States;
(iv) submit their findings to the Secretary of Commerce and the director of the Office of Management of Budget (OMB).
(b) Within 60 days the Secretary of Commerce and the director of the OMB must issue guidance to agencies about how to make the assessments and implement the policies.
(c) Within 150 days the Secretary of Commerce and the United States Trade Representative shall assess the impact of the free trade agreements on federal government procurement and the Buy American laws.
Thus, while the EO itself is far from a sea change, it certainly portends future efforts by executive agencies to ensure that their contractors are complying with the Buy American provisions. It will not be known what those enforcement efforts will look like until the agencies report back with their required findings in 150 days.
Contractors may be lulled into complacency by the fact that the EO, and the possible future enforcement crackdown, only pertains to a long standing requirement with which they always have been in compliance, or so they believe. However, many contractors have not taken efforts to keep track of the provenance of the various components that go into the products that they are providing to the federal government. For example, manufacturers sometimes change the “recipe” for their products and include new components without determining the place of origin of those components and suppliers of components often relocate their factories or produce the same component in multiple locations without telling the manufacturer. Indeed, there have been several recent bid protest cases where a contractor protested a contract award because the awardee knew that the products offered by the awardee were not Buy American compliant.
The conscientious contractor should consider undertaking an audit to ensure that its products are Buy American Act compliant well in advance of any crack down by the government. As the saying goes, an ounce of prevention is worth a pound of cure.