On April 18, 2017, President Donald Trump signed into law the “Buy American and Hire American” Executive Order (No. 13788). The Order requires agencies to do a wholesale evaluation of their compliance with “Buy American” laws and to develop additional policies and procedures to maximize the use of American materials and manufactured products. As part of this review, the Order also instructs agencies to limit their use of waivers under “Buy American” laws going forward. The Order also includes instructions to various relevant departments to step up enforcement of H-1B visas requirements to prevent fraud and abuse, protect the interests of American workers, and ensure that H-1B visas are awarded to the most-skilled or highest-paid laborers (Note: Increased H-1B enforcement should not significantly impact the construction industry, which does not appear, at present, to rely heavily on immigrant workers who meet the H-1B qualifications, but the move is in line with other steps by the administration to tighten immigration controls that may worsen the ongoing labor shortage in the industry.).
The Executive Order is as broad as it is vague, so, at this stage, it is somewhat difficult to predict how it will shape federal construction projects in the future. All laws which require or provide a preference for the purchase of goods, products, or materials produced in the United States are subject to a review, and the Order requires agencies to complete the assessment of their “Buy American” practices within 150 days with a report to be submitted to the President 70 days after that, which will include recommendations on how to strengthen implementation of “Buy American” laws. Given the breadth of laws subject to wholesale review, these agencies have a challenging task ahead of them. If the Order’s timeline holds up, the President will likely receive a report sometime in November of this year, and you can likely expect additional actions once that report is received and evaluated.
In the long term, the more heightened enforcement of “Buy American” provisions likely means increased costs of procuring materials domestically and heightened risk of material shortages on federal projects. Higher costs and potential shortages may tempt more fraud and abuse on federal procurement and construction projects. In this setting, contractors should be cautious as even inadvertent procurement of falsely certified “Buy American” materials may have severe implications under the False Claims Act and could result in suspension, debarment, and penalties. For contractors who operate overseas, you may also anticipate reactionary legislation or laws from countries you do business in as those countries seek to protect their national economic interests. Additionally, when bidding future federal work, contractors may not be able to rely on past practices with respect to the granting of waivers, as the Order instructs agencies to be more judicious in the use of waivers of “Buy American” requirements.