The FAR Buy American Act, 41 USC 10a -10d (2000 and Supp. I 2001), provides for the acquisition of American materials and goods for public use. The exception to the rule is that such an acquisition is inconsistent with the public interest or the cost is unreasonable.
If there is a domestic offer that is not the low offer, and the restrictions of the Buy American Act requirements apply to the low offer, the contracting officer must decide the cost reasonableness of the domestic offer by adding an evaluation factor (of either 6 or 12 percent for civilian agency procurements, Federal Acquisition Regulation FAR 25.105(a), or 50 percent for Department of Defense procurements, DFARS 225.105) to the low offer.
FAR Part 25 Basic FAR Buy American Act Requirements Analysis in GAO Bid Protests
Under the FAR Buy American Act requirements, the price of the domestic offer is reasonable if it does not exceed the evaluated price of the low offer after the addition of the evaluation factor. FAR Part 25.105(c). In the case of manufactured end products, the FAR uses a two-part test to define a domestic end product:
1. The article must be manufactured in the United States, and
2. The cost of domestic components (i.e., components mined, produced, or manufactured in the U.S.) must exceed 50 percent of the cost of all components. FAR Part 25.003 and 25.101; see also DFARS 225.101 and 41 USC 10(a).
The FAR defines “component” as an article, material, or supply incorporated directly into an end product. FAR 25.003. In government contract bid protests involving an end product derived from a single component or material, GAO looks at the FAR Buy American Act requirements to see whether the component/material has undergone substantial changes in physical character in determining whether manufacturing has occurred. See A. Hirsh, Inc., B-237466, Feb. 28, 1990, 90-1 CPD ¶ 247 at 3; 45 Comp. Gen. 658 (1966).
This is a highly contested issue during DOJ BAA investigations and litigation involving the Buy American Act. Construction contractors involved in federal government contracting must take the time and develop internal policies and controls to minimize the chance of getting hefty fines and criminal liability. See information on challenging BAA decisions.
(a) Definitions. As used in this clause—
Commercially available off-the-shelf (COTS) item—
(1) Means any item of supply (including construction material) that is–
(i) A commercial product (as defined in paragraph (1) of the definition of “commercial product” at Federal Acquisition Regulation (FAR) 2.101);
(ii) Sold in substantial quantities in the commercial marketplace; and
(iii) Offered to the Government, under a contract or subcontract at any tier, without modification, in the same form in which it is sold in the commercial marketplace; and
(2) Does not include bulk cargo, as defined in 46 U.S.C.40102(4), such as agricultural products and petroleum products.
Component means an article, material, or supply incorporated directly into an end product.
Cost of components means—
(1) For components purchased by the Contractor, the acquisition cost, including transportation costs to the place of incorporation into the end product (whether or not such costs are paid to a domestic firm), and any applicable duty (whether or not a duty-free entry certificate is issued); or
(2) For components manufactured by the Contractor, all costs associated with the manufacture of the component, including transportation costs as described in paragraph (1) of this definition, plus allocable overhead costs, but excluding profit. Cost of components does not include any costs associated with the manufacture of the end product.
Domestic end product means—
(1) For an end product that does not consist wholly or predominantly of iron or steel or a combination of both-
(i) An unmanufactured end product mined or produced in the United States;
(ii) An end product manufactured in the United States, if-
(A) The cost of its components mined, produced, or manufactured in the United States exceeds 55 percent of the cost of all its components. Components of foreign origin of the same class or kind as those that the agency determines are not mined, produced, or manufactured in sufficient and reasonably available commercial quantities of a satisfactory quality are treated as domestic. Components of unknown origin are treated as foreign. Scrap generated, collected, and prepared for processing in the United States is considered domestic; or
(B) The end product is a COTS item; or
(2) For an end product that consists wholly or predominantly of iron or steel or a combination of both, an end product manufactured in the United States, if the cost of foreign iron and steel constitutes less than 5 percent of the cost of all the components used in the end product. The cost of foreign iron and steel includes but is not limited to the cost of foreign iron or steel mill products (such as bar, billet, slab, wire, plate, or sheet), castings, or forgings utilized in the manufacture of the end product and a good faith estimate of the cost of all foreign iron or steel components excluding COTS fasteners. Iron or steel components of unknown origin are treated as foreign. If the end product contains multiple components, the cost of all the materials used in such end product is calculated in accordance with the definition of “cost of components”.
- End product means those articles, materials, and supplies to be acquired under the contract for public use.
- Fastener means a hardware device that mechanically joins or affixes two or more objects together. Examples of fasteners are nuts, bolts, pins, rivets, nails, clips, and screws.
- Foreign end product means an end product other than a domestic end product.
Foreign iron and steel means iron or steel products not produced in the United States. Produced in the United States means that all manufacturing processes of the iron or steel must take place in the United States, from the initial melting stage through the application of coatings, except metallurgical processes involving refinement of steel additives. The origin of the elements of the iron or steel is not relevant to the determination of whether it is domestic or foreign. See information regarding Buy American exemptions.
Two Distinct Phases Test for Buy American Act Requirements 41 USC 10a
GAO protest decisions show that under the Buy American requirements, when the original material is of foreign origin and there is no evidence of two distinct manufacturing phases yielding two distinct products, then there is noncompliance with the two-pronged test for defining a domestic end product.
Agencies Can Rely on Your Buy American Act Certification As Submitted
A common approach in a Buy American Act protest is that the awardee’s submission does not meet the BAA requirements. This is almost always a losing argument unless there are more facts.
If the contracting officer or agency has no reason to believe that a successful offeror will not provide domestic products, the agency does not have to go beyond a firm’s representation of compliance with the Buy American Act. See Sea Box, Inc., B-420130, B-420130.2 (Nov. 18, 2021). In other words, if a contracting officer “has no information prior to award that would lead to the conclusion that the product to be furnished is not a domestic end product, the contracting officer may properly rely upon an offeror’s self-certification without further investigation.” Id. The question is what would the proper argument to stand a chance of the Court looking at the protest would have more merit.
When filing a bid protest or intervening in a case where the Buy American requirements are at issue, arguments about the two-part test is critical to sustaining the protest under 41 USC 10a.
For help filing a bid protest about the FAR Buy American Act requirements, contact our bid protest lawyers at 1-866-601-5518. FREE INITIAL CONSULTATION.