With a new administration comes new policies. Most federal contractors are familiar with this and have been gearing up to ready themselves for whatever these new policies may throw at them. With the “Made in America” executive order issued by President Biden on his fifth day in office, contractors are still wondering what implications this may have on their businesses.
The notion of buying American is nothing new for the country. In fact, this new executive order builds on current laws—the Buy American and Buy America statutes, passed in 1933 and 1982, respectively. These laws have not been updated since 1954 according to a fact-sheet issued by the White House. Looking back, the extent to which the government and its contractors were to give preference to American sourcing has been blurry and has reportedly not been closely followed.
The federal government spends roughly $600 million annually in contracting, so defining these practices related to buying American can have a significant impact on contractors and the country at large. Specifically, the executive order said that within 180 days, the FAR Council should consider: replacing the “component test” (which says that over 50% of a product’s cost must have a domestic origin), 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. “At this point it’s very hard for contractors to predict and make any supply chain adjustments because we just don’t know what this test is going to look like,” said Adelicia Cliffe, partner at the law firm Crowell and Moring.
Biden has also issued executive orders on using federal procurement to advance racial equity and support for underserved communities, tackle the climate crisis and to order a review of the U.S. supply chain. We will continue to monitor these developments.
Author: Paul McVeigh