Buy American Act Requirements and Buy America Impact on Government Construction ContractorsYour Company May Have A Unique Process that Can Avoid Liability. If Your Company is Under a DOJ Investigation for Buy American Act Fraud or False Claims in a Federal Government Contract Call Our BBA Defense Attorneys Immediately.

The past and new administrations have placed a unique focus on both the Buy American Act (BAA) and the Buy America Act. Many companies, including federal government contractors and small businesses, should assess how the government’s focus will impact their daily business operations. Buy American Act requirements have now become an issue of serious concern for thousands of companies throughout the United States.  Buy American Act compliance has become a serious topic in the growing number of DOJ investigations and criminal action brought by government investigative agencies against federal construction companies, their subcontractors and or suppliers.

There was a Presidential Memorandum in January 2017 which directs the Secretary of Commerce to “develop a plan under which all new pipelines . . . inside the borders of the United States . . . use materials and equipment that are produced in the U.S.

This paves the road for penalties and fines for contractors that fail to comply with the new directive. For example, government contractors must certify that they will comply with both the Buy American Act requirements and Buy American Statute. The main concern is what are prime contractors doing to make sure that subcontractors are also complying with Buy American laws.

Federal government construction contractors should also be mindful that they too are liable for violations of subcontractors. Given the stiff criminal penalties and fines associated with Buy American Act violations and failure to comply with Buy American law, one mistake whether through failure to act or simply negligence can cripple a company both financially or through loss of reputation.

What Does the Buy American Act Cover?

As Buy American Act lawyers we suggest to government contractors that the Act on generally applies to prohibit the government’s acquisition of foreign goods if unmanufactured articles, materials, and supplies that have been mined or produced in the United States, and only manufactured articles, materials, and supplies that have been manufactured in the United States substantially all from articles, materials, or supplies mined, produced, or manufactured in the United States, shall be purchased for public use.

Buy American Act requirements for construction materials

The Buy American Act of 1933 was enacted to give preference to buying products made in America. The statute attempts to protect U.S. businesses and labor by restricting the acquisition and use of end products or construction materials that are not “domestic.”

For purposes of the Buy American Act compliance and for certification, domestic end products and domestic construction materials include (1) unmanufactured end products or construction materials mined or produced in the United States, as well as (2) end products or construction materials manufactured in the United States, provided that (a) the cost of the components mined, produced, or manufactured in the United States exceeds 50% of the cost of all components, or (b) the product is a commercially available off-the-shelf item. End products or construction materials that do not qualify as domestic under these definitions are generally treated as foreign and offers that supply foreign end products or construction materials are foreign offers, regardless of the offeror’s nationality. Purchases of services are generally not subject to the Act.

Statutory Language of 41 USC 8302(a)(1) and 41 USC 8303(a)(1)-(2) (“Every contract for the construction, alteration, or repair of any public building or public work in the United States shall contain a provision that in the performance of the work the contractor, subcontractors, material men, or suppliers shall use only (1) unmanufactured articles, materials, and supplies that have been mined or produced in the United States…. ”).

Prime contractors and their subcontractors can expect more oversight over Buy American Act certification and compliance. In addition, and based on the President’s heightened focus on buying American made products, government contractors can also expect to see more criminal investigations and severe fines issued for violations and non-compliance with Buy American Act requirements.

Although the Act requirements sometimes use the word “purchase,”  a question arises as to whether the act has been found to apply to leases of goods on the grounds that “it would be unreasonable to presume that Congress intended to narrow the protection afforded to American manufacturers by allowing the lease of foreign-made products where the purchase of such products is prohibited.” Postmaster General, B-156082 (May 1, 1967).

See More on Buy American Act Frequently Asked Questions (FAQs)

January 2021 Final Rule and the Impact on Contractors?

The Buy American statute is not intended to prohibit the purchase of foreign end products or use of foreign construction material. Instead,  the statute merely encourages the use of domestic end products and construction material by imposing a price preference for domestic end products and construction material. E.O. 13881 and this final rule increases the various price preference in order to stimulate realistic outcomes as intended in the rule itself. The contracting agencies and contracting officers must be able to have the tools in place to help the government meet its objectives.

Contractors should now focus on developing internal policies and controls and implement rigorous training programs into their day-to-day operations.

  • the costs of civil and criminal fines resulting from a DOJ or IG investigation are substantially more expensive.
  • Companies must protect their reputation and the possibility of reaching the headlines

    1.  Added Definitions. At FAR 25.003, the definitions of ‘‘domestic construction material,’’ ‘‘domestic end product,’’ and ‘‘predominantly of iron or steel or a combination of both’’ are revised; and a definition of ‘‘foreign iron and steel’’ is added.

    2. The definitions of ‘‘domestic construction material’’ and ‘‘domestic end product’’ now specify that 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 product and a good faith estimate of the cost of all foreign iron or steel components excluding commercially available off-the-shelf (COTS) fasteners. The definition specifies that the iron or steel components of unknown origin are treated as foreign. Also, the definition explains that if the construction material contains multiple components, the cost of all the materials used in the construction material is calculated in accordance with the definition of ‘‘cost of components’’ in FAR 25.003.

    3. No Changes to Current COTS Waiver

This final rule tends to strengthen the United State’s preferences under the Buy American statute by making adjustments to the previous required percentage of domestic content and the existing percentages for the price evaluation preferences in an effort to decrease the amount of foreign- sourced content in a U.S. manufactured product to promote economic and national security, help stimulate economic growth, and create jobs.  In addition, the impact  of the price evaluation preferences increase from 6 percent to 20 percent for large business contractors and from 12 percent to 30 percent for small business firms doing business with the government; for DoD procurements there is no change to the DoD 50 percent amount.

Are You Facing a Government Investigation for False Claims Due to Buy American Act Violations?

As a government contractor or small business doing business with the federal government, you may find yourself under investigation by the DOJ for false claims violations, civil or criminal penalties. Our Buy American Act and DOJ investigation lawyers understand that deciding whether a case is in violation of the act can be confusing and complicated. The Government should be looking at each situation on a case-by-case basis. Every company has different facts and may have different manufacturing processes. Contact our attorneys for immediate help at 1-866-601-5518.

Buy American Act Construction Materials Exceptions (FAR 25.202)

FAR 25.202 lists five “exceptions” to the Buy American Act, or five situations in which an agency may purchase foreign end products or use foreign construction materials from government contractors without violating federal law.

 These exceptions  to the Buy American Act construction materials requirements apply when (1) the procurement of domestic goods or the use of domestic construction materials would be inconsistent with the public interest; (2) domestic end products or construction materials are unavailable; (3) the contracting officer determines that the costs of domestic end products or construction materials would be unreasonable; (4) the agency is procuring information technology that is a commercial item; or (5) the goods are acquired specifically for commissary resale.

  • Contractors should look to see if the purchases are above the micro-purchase threshold, and for use in the United States.
  • The government procurement agency usually makes the decision whether Buy American Act exceptions apply

Purchases of Supplies Under BAA

Under the BAA, federal government agencies that procure goods for use in the United States under a government contract that are valued in excess of the micro-purchase threshold can generally buy foreign (i.e., non-domestic) end products only in exceptional circumstances. The FAR suggests that an end product means those articles, materials, and supplies to be acquired for public use. If you are involved in a DOJ  Buy American Act Investigation, you will quickly find out that determining whether an item is an end product.

Waiver Due to Trade Agreements Act

Waiver of Buy American Act statutory provisions become available through the Trade Agreements Act. When a waiver is present, certain products that are wholly grown, produced, or manufactured in foreign jurisdictions, or “substantially transformed” into new and different articles within foreign jurisdictions, are treated the same as “domestic” ones for purposes of government procurement. See Affiliation Issues in 8a Contracting and Native American Contracting.

Government contractors should not think that the Trade Agreements Act of 1979 (TAA) on its face is an exception to the Buy American Act. Instead, by becoming TAA compliant, the result could be that you get the same result as an exception to the Act.

Being TAA compliant may then authorize the waiver of “any law, regulation, procedure, or practice regarding Government procurement” that would result in “eligible products” from countries with which the United States has a trade agreement. Find out about Urgent and Compelling Circumstances in Government Contracting.

The Trade Agreements Act does not apply to federal government contracts that are:

 (1) Acquisitions set aside for small businesses;

(2) Acquisitions of arms, ammunition, or war materials, or purchases indispensable for national security or for national defense purposes;

(3) Acquisitions of end products for resale;

(4) Acquisitions from Federal Prison Industries, Inc., under  FAR Subpart 8.6, and acquisitions under FAR Subpart 8.7, Acquisition from Nonprofit Agencies Employing People Who Are Blind or Severely Disabled; and

(5) Other acquisitions not using full and open competition, if authorized by FAR Subpart 6.2 or 6.3, when the limitation of competition would preclude the use of the procedures of this subpart; or sole-source acquisitions justified in accordance with 13.501(a). See information about Termination for Default Government Contracts & Reprocurement Costs.

Speak to an Attorney & Get a Free Initial Consultation

For help with Buy American Act requirements investigations or to defend against allegations of BAA violations and government contract fraud call the consultants and Buy American attorneys at Watson & Associates, LLC. 1.866.601.5518.