Key Notes:

  • OMB issued a June 30 memorandum on enforcement of domestic preferences under Buy American laws.
  • Agencies are reviewing and enforcing Buy American Act and Berry Amendment requirements.
  • Contractors can expect increased scrutiny over exceptions and waivers, and increased reviews of agency and contractor compliance.
  • Contractors need to ensure that their policies and procedures meet their domestic preference obligations.

On June 30, 2017, Office of Management and Budget Director Mick Mulvaney and Department of Commerce Secretary Wilbur Ross issued a joint memorandum to executive departments and agencies addressing "Assessment and Enforcement of Domestic Preferences In Accordance with Buy American Laws." The Trump administration has made enforcement of Buy American laws a top priority, and the memorandum is a signal to both the government and its contractors and grantees that these efforts will remain a priority, and that robust compliance measures are appropriate and necessary.

The June 30 memorandum facilitates implementation of the April 18, 2017 Executive Order 13788, Buy American and Hire American, "to ensure that Federal procurement and Federal financial assistance awards maximize the use of goods, products, and materials produced in the United States, including iron, steel, and manufactured goods." The memorandum provides guidance to agencies to "maximize, consistent with law, the policy and the statutory mandate to buy domestically manufactured products in [federal] contracts and grants, and minimize use of exceptions and waivers[.]"

As stated in the memorandum, E.O. 13788 "directs each agency to monitor, enforce, and comply with Buy American Laws, to the extent they apply, and minimize the use of waivers[.]" The heads of agencies are directed to assess their compliance with Buy American Laws, including exceptions and waivers; develop and propose policies to maximize use of material produced in the United States; and report their findings and recommendations to the OMB Director and Commerce Secretary. The memorandum provides guidance on the contents of the reports to be prepared by agency heads and directs them to submit these "Section 3 reports" by September 15, 2017.

These issues are high on the acquisition policy, compliance and enforcement agendas of the Department of Defense in particular. On June 20, 2017, DoD Defense Procurement and Acquisition Policy Director Claire Grady issued a memorandum on "Improving Compliance with the Berry Amendment and Buy American Act" that provides notice of revised training modules to DoD contracting workforces. She states that E.O. 13788 requires agencies to "scrupulously monitor, enforce, and comply with Buy American Laws." She also notes that "recent fraud convictions related to compliance with Buy American laws highlight the need for the defense acquisition workforce to be vigilant in its oversight and enforcement strategies."

On July 7, 2017, the DoD Office of Inspector General issued a report on "Defense Logistics Agency Compliance With the Berry Amendment and the Buy American Act." The OIG found that of 32 DLA contracts reviewed for Berry Amendment compliance, DLA personnel did not properly comply for 19 contracts valued at $453 million, and that of 56 DLA contracts reviewed for Buy American Act compliance,

DLA personnel did not comply for 12 contracts valued at $1.8 million. This report underscores the need for agencies to improve their own compliance efforts, in addition to those of their contractors and grant recipients.

Government contractors and grant recipients can also expect that while agencies are analyzing their current practices pursuant to E.O. 13788, enforcement efforts will continue to be stepped up. Following delivery of Section 3 reports to OMB and Commerce by September 15, further agency enforcement measures can be expected as the administration acts on the findings and recommendations in the reports. In the meantime, government contractors and grant recipients should review their contracts and grants for domestic preference terms and conditions, evaluate their policies and procedures to address these requirements, and assess the steps they can take now to improve their current compliance measures.