President Trump signed his anticipated “Buy American – Hire American” Executive Order (EO) on Tuesday, April 18, 2017. The EO requires that “[e]very agency shall scrupulously monitor, enforce, and comply with Buy American laws, to the extent they apply, and minimize the use of waivers, consistent with applicable law.”
The EO is consistent with the Administration’s stated desires to increase support for American goods and to address perceived H-1B guest worker issues. The immediate impact of this EO is to require federal agencies to undertake an assessment of the monitoring, enforcement, implementation, and compliance with Buy American laws. The EO signals greater attention to enforcement of Buy American and Hire American laws and regulations and the assessments mandated by the EO may result in new requirements and regulations. Contractors have developed global supply chains in order to obtain needed supplies and should ensure their policies and procedures are sufficient to ensure compliance.
The Executive Order broadly defines “Buy American laws” as:
[A]ll statutes, regulations, rules, and Executive Orders relating to federal procurement or federal grants including those that refer to "Buy America" or "Buy American" that require, or provide a preference for, the purchase or acquisition of goods, products, or materials produced in the United States, including iron, steel, and manufactured goods.
The EO also states that for iron and steel products, “produced in the United States” means that “that all manufacturing processes, from the initial melting stage through the application of coatings, occurred in the United States.”
At the background briefing on the Buy American Hire American EO, provided the day before signing, “Buy American” laws were described as procurement laws about how goods and manufactured products are obtained and how they are used in federal projects or federally funded projects. Hire American generally refers to the laws and policies concerning how our immigration, visa, and guest worker programs are operated to ensure proper protections for American workers. This briefing explained that both “Buy American and Hire American rules have been enormously diluted over time.”
What Does the EO Require and When?
The EO mandates federal agency actions on Buy American laws at specified dates. In addition, the EO also mandates subsequent reporting on implementation of Buy American laws.
Within 60 days of this EO, the Secretary of Commerce and the Director of the Office of Management and Budget (OMB), in consultation with the Secretary of State, the Secretary of Labor, the United States Trade Representative (USTR), and the Federal Acquisition Regulatory Council, are required to issue guidance to agencies about how to make the assessments and to develop the policies required by the EO.
Within 150 days, the EO mandates that the heads of all agencies shall:
i. assess the monitoring of, enforcement of, implementation of, and compliance with Buy American laws within their agencies;
ii. assess the use of waivers within their agencies by type and impact on domestic jobs and manufacturing; and
iii. develop and propose policies for their agencies to ensure that, to the extent permitted by law, federal financial assistance awards and federal procurements maximize the use of materials produced in the United States, including manufactured products; components of manufactured products; and materials such as steel, iron, aluminum, and cement.
On that same date, agency heads are to submit findings made pursuant to their assessments to the Secretary of Commerce and the Director of the OMB. In addition, the Secretary of Commerce and the USTR are required to assess the impacts of all US free trade agreements and the World Trade Organization Agreement on Government Procurement on Buy American laws, including impacts on the implementation of domestic procurement preferences.
Then, within 220 days of the EO, the Secretary of Commerce, in consultation with the Secretary of State, the Director of the OMB, and the USTR, are required to submit a report to the President on Buy American that includes findings from the required previous actions. This report is to include specific recommendations to strengthen implementation of Buy American laws, including domestic procurement preference policies and programs.
Each federal agency is also required to submit an annual report on implementation of Buy American laws to the Secretary of Commerce and the Director of the OMB on November 15, 2018, 2019, and 2020, as well as in subsequent years as directed by the Secretary of Commerce and the Director of the OMB. The Secretary of Commerce is in turn required to submit an annual report to the President based on the annual agency submissions beginning January 15, 2019.
The EO’s Hire American action mandates that the Secretary of State, the Attorney General, the Secretary of Labor, and the Secretary of Homeland Security propose new rules and issue new guidance to supersede or revise previous rules and guidance and suggest reforms to help ensure that H-1B visas are awarded to the most-skilled or highest-paid petition beneficiaries.
The EO also addresses the use of public interest waivers from Buy American laws and provides such waivers should be construed to ensure the maximum utilization of goods, products, and materials produced in the United States. Such waivers must be made by the head of the agency after taking “appropriate account of whether a significant portion of the cost advantage of a foreign-sourced product is the result of the use of dumped steel, iron, or manufactured goods or the use of injuriously subsidized steel, iron, or manufactured goods, and it shall integrate any findings into its waiver determination as appropriate.”
The current Buy American laws balance the preference for domestic products while allowing the government agencies to use waivers to achieve acquisition cost savings by allowing contractors to supply goods, products, and materials from foreign sources.
What Does this Mean for Contractors?
An EO is a statement of how the President wants federal agencies to operate and, as seen here, can include mandates for federal agency action. This EO is a reaffirmation of the domestic preference in the Buy American Act, a preference that has been around for many years. An immediate result of this EO is the requirement for agency assessments of compliance with these laws, including the preparation of “policies… to ensure that, to the extent permitted by law, federal financial assistance awards and federal procurements maximize the use of materials produced in the United States….” The government’s use of waivers will be examined, and while that authority may become subject to additional limitations, it seems unlikely that agencies will lose the ability to waive Buy American requirements to address critical needs.
The EO sends a strong signal that compliance with domestic preferences applicable to federal procurements is likely to be an area of increased emphasis. A prudent consideration for contractors would be to review the adequacy of their existing compliance mechanisms and controls within their supply chains and address any gaps.
Contractors will also need to be alert for any changes in laws, regulations, and policies that emerge from the various assessments discussed above, and if appropriate, enhance their compliance mechanisms and controls as appropriate. Finally, the EO’s heightened attention to Buy American laws directly impacts oversight of contractor’s supply chains; for example, there could be greater attention to Buy American compliance during the contractor purchasing system review (CPSR) performed by the government.