Biden Administration Releases ‘Made in America’ Proposed Rule

The Biden administration released a proposed rule on Wednesday to further the president’s goal of boosting American manufacturing through federal procurement. 

The draft rule furthers the “Made in America” executive order that President Biden issued on January 25, which builds on the Buy American statute passed in 1933 and the Buy America law from 1982.  The order said that within 180 days, the Federal Acquisition Regulatory Council should consider: updating the “component test” (which says that over 50% of a product’s cost must have domestic origins), increasing the numerical threshold for domestic content requirements for construction materials and end products, and increasing the price preferences for domestic construction materials and end products. 

“With $600 billion in annual procurement spending, almost half of which is in manufactured products from helicopter blades to trucks to office furniture, the federal government is a major buyer in a number of markets for goods and services, including the single largest purchaser of consumer goods in the world,” said a fact-sheet from the White House. The changes announced on Wednesday are “the most robust changes to the implementation of the Buy American Act in almost 70 years,” the administration said.  

Also, as the novel coronavirus pandemic has shown “federal procurement can strengthen the resiliency of domestic supply chains and reduce the risk of Americans being adversely impacted by the actions of competitor nations during a time of crisis,” the White House said. 

First off, the proposed regulation would immediately increase the domestic content threshold from 55% to 60%, and then raise it to 65% by January 2024 and to 75% by 2029.

“The phased increase will allow small and large contractors time to transition their supply chains to domestic suppliers and to increase the use of American-made components,” said an administration official on a press call. There will also be a “temporary fallback threshold to maximize domestic content and procurement and prevent the issuances of more waivers to buy American while domestic manufacturers transition to more domestically produced component parts.” 

This would “allow U.S.-made goods with more than 55% U.S. content to receive a price preference only when no U.S. supplier can meet the increased threshold” and will be eliminated when the 75% figure takes effect.

This is a “significant increase,” said Alan Chvotkin, partner at the government contracts law firm Nichols Liu LLP and former executive vice president and counsel at the Professional Services Council. “It's going to put greater pressure on agencies” by either costing them more (he said he thinks right now there is a limited supply of firms and products that can meet that threshold) or there will be a “greater pressure on waivers,” which he believes could create a “tension in this administration.” 

The proposed rule also works to strengthen the domestic supply chain for critical goods by “applying enhanced price preferences to select critical products and components,” which are identified in executive orders issued in January and March.

It is unclear so far what those exact new enhancements will be. 

“Historically, the FAR also required large businesses offering domestic end products or domestic construction materials in civilian procurements to receive a price preference of 6% compared to competitors offering foreign end products or construction materials,” said members from the law firm Miller & Chevalier. “The preference was 12% for small businesses offerors.” However, those percentages changed to 20% and 30% respectively, not including Defense procurements, following a regulation the Trump administration issued shortly before leaving office. 

Lastly, the proposed rule would increase the transparency and accountability of the Buy American rules by strengthening reporting requirements and improving data on the U.S. manufactured content of the goods bought.

Right now, according to General Services Administration records, more than 96% of “purchases recorded so far this year are recorded as being manufactured in America,” said an administration official. But in reference to the third provision of the rule “what we know is that contractors certify that they have hit the current threshold, so part of what we are doing is to go that extra mile to find out how much American content is in the particular critical goods that we are buying and to use that as a way to determine if we’re getting enough data to expand that requirement beyond this initial proposal.” 

Administration officials said the process to develop the proposed rule involved multiple agencies and over a dozen roundtables with outside stakeholders and this is just the first of the proposed reforms regarding “Made in America” under the administration. 

They also said the proposed rule will “complement” the Biden administration’s other procurement goals, such as for racial equity, climate change and small businesses. The White House said the Small Business Administration opened a new office to help small manufacturers acquire federal contracts, financial and business growth support. 

The executive order also established a new Made in America office within the Office of Management and Budget to review waivers to purchase goods from outside the United States. Celeste Drake, previously the executive in charge of government affairs at the Directors Guild of America and a trade and globalization policy specialist for the AFL-CIO, was named director in April. 

Additionally, last month the White House released a memo instructing agencies to designate a senior official to spearhead efforts to support domestic manufacturing and outline reporting requirements for them. 

In the fact-sheet, the White House outlined $2 billion in new purchases from federal agencies––such as the Energy, Labor and Defense departments; GSA; NASA; the Office of Naval Research; and the Army Corps of Engineers–– to support American manufacturing.

For example, the Energy Department bought new electric vehicles that are all produced in the United States or have batteries made at U.S. facilities. “The president’s COVID-19 response has also advanced his Buy American strategy by increasing U.S. capacity to produce critical products,” said the White House. 

Shortly before leaving office, the Trump administration issued a similar final rule, which took effect in February. In response to Government Executive’s question about the final rule on the press call, an administration official said Biden’s work “goes beyond what was in the Trump rule” as it is “one of the largest changes since the Buy American [law] in 70 years.” 

The executive order Biden issued in January also asks the FAR council to review long-standing exceptions to commercial information technology from being applied to the Buy American Act. This is not mentioned in the White House’s release. 

“I don't know if they're going to address that in this proposed rule or not,” Chvotkin said. “But I think that in and of itself would have a significant impact across a broad range of agencies and a broad range of companies if that waiver...were to go away.” 

The proposed rule will have a 60-day comment period and there will also be a public meeting to discuss it. The prepublication version of the proposed rule was posted online, which says there could be “formatting or other administrative changes" when it is published in the Federal Register on Thursday. 

Biden issued a proclamation on Monday declaring July 26 to July 30, 2021 “Made in America Week.” On Wednesday afternoon he traveled to the Lehigh Valley in Pennsylvania to tour a facility that produces Mack trucks, of which there are 1,500 in federal fleets, according to White House Press Secretary Jen Psaki, and gave remarks on his “Buy American” agenda.