Georgia Tech Procurement Assistance Center

The two-part manufacturing test under the Buy American Act

By

Congress enacted the Buy American Act (“BAA”) during the Great Depression, in order to protect American industry from foreign competition on federal procurement contracts.  While the BAA is simplistic in its policy goal of promoting domestic purchasing, government contractors and subcontractors are often faced with complex and confusing rules for compliance.

The operative language of the BAA provides:

Only 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 acquired for public use unless the head of the department or independent establishment concerned determines their acquisition to be inconsistent with the public interest or their cost to be unreasonable.

The Government flows down BAA requirements to government contractors in the form of standardized clauses contained in the Federal Acquisition Regulation (“FAR”) and Defense Federal Acquisition Regulation Supplement (“DFARS”).

The key to understanding the BAA is determining whether the solicited goods or “end products” are domestic, i.e. were mined, produced, or substantially manufactured in the United States.

Continue reading at:  Seyfarth Shaw

Latest Executive Order proposes major changes to Buy American rules

By

For the third time since he entered the White House, President Trump has issued an Executive Order aimed at maximizing the Government’s procurement of American-made products.  While the two previous “Buy American” Orders were primarily aimed at enforcing existing Buy American rules, the latest Executive Order proposes significant changes to the Federal Acquisition Regulation (FAR) rules on Buy American preferences—rules that have been in place for more than 60 years, and have guided how contractors manufacture products and source components to comply with the Buy American Act.  As a result, the impacts of this latest Order on government contractors subject to the Buy American Act and their existing supply chains could be significant.

The latest Executive Order on “Maximizing Use of American-Made Goods, Products, and Materials” comes on the heels of two prior Executive Orders aimed at enforcing the “Buy American” policy: EO 13788, “Buy American and Hire American” issued in January 2017, which directed federal agencies to strengthen enforcement of existing Buy American laws and close “loopholes” to maximize the procurement of American-made products in Federal procurements; and EO 13858, “Strengthening Buy-American Preferences for Infrastructure Projects,” issued in January 2019, which called for maximizing the procurement of American-made products in federally-funded infrastructure projects.  The President’s newest Order—billed by White House Director of Trade and Industrial Policy Peter Navarro as the President’s “third pillar to his Buy American platform”—goes further than merely enforcing existing rules, and instead calls for significant changes in two key aspects of the FAR rules on Buy American preferences.

Continue reading at:  Wiley Rein

Trump executive order extends Buy American policy

By

President Donald Trump on Jan. 31 signed an executive order asking federal agencies to promote the purchase of American-made materials by contractors working on infrastructure projects that receive federal grants or loans.

Within 90 days, agencies covered by the order must submit their plan as to how they will encourage contractors on such projects to buy domestically-produced products including iron, aluminum, steel and cement. Within 120 days, agencies must also report any “tools, techniques, terms, or conditions” that they have used or believe they should use to promote the agenda outlined in the executive order.

Agency heads were also asked to consider in their reports whether a Buy American mandate on projects that receive federal financial assistance would be feasible.

Keep reading this article at: https://www.constructiondive.com/news/trump-executive-order-extends-buy-american-policy/547507/

 

GAO says strict compliance with Buy American Act exception requirements not necessary

By

The Situation: The Government Accountability Office (GAO) recently held that a bid need not contain all of the information listed in the Federal Acquisition Regulation (FAR clause 52.225-9) to qualify for the “unreasonable cost” exception to the Buy American Act (BAA).

The Result: The decision requires agencies to analyze the contents of a bid, rather than mechanically rejecting it on a technicality.

Looking Ahead: A company can protest a rejected bid so long as the missing information would not allow the bidder to later alter its price or relative standing.

The GAO recently sustained a protest finding that it was unreasonable for the Department of Energy (DOE) to reject a bid simply because it failed to strictly comply with all of the requirements for an exception to the BAA. In Addison Constr. Co., B-416525 (Sept. 4, 2018), Addison Construction Company submitted a bid to construct a capacitor bank for DOE in Arizona. Addison’s bid informed DOE that a portion of the construction materials used would be foreign, not domestic. Addison’s bid requested an exception to the BAA pursuant to FAR clause 52.225-9, available when the cost of domestic construction material is “unreasonable” (i.e., it exceeds the cost of foreign material by more than six percent).

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=760680

Defense contractors to pay $8 million to settle False Claims Act allegations involving defective equipment sold to Army

By

False Claims ActThe Department of Justice (DOJ) announced last week that Kilgore Flares Company and one of its subcontractors, ESM Group Inc., have agreed to pay a total of $8 million to resolve allegations that they violated the False Claims Act by selling or conspiring to sell defective infrared countermeasure flares to the U.S. Army and, in the case of ESM, knowingly evading customs duties owed to the United States.

  • Tennessee-based Kilgore Flares manufactures and sells electronics and energetic products, such as flares, to the U.S. military.
  • ESM Group, located in New York, manufactures magnesium powder supplied to the chemical, welding and pyrotechnics industries.  ESM imported magnesium powder used in the flares from the People’s Republic of China (PRC), which it sold to Kilgore Flares.

The U.S. military uses infrared countermeasure flares to divert enemy heat-seeking missiles away from U.S. military aircraft.  A primary component of these flares is ultrafine magnesium powder, which combined with other materials, provides ignition and enables the flares to burn at high temperatures and at rates that mimic an aircraft’s engine.  Kilgore’s contracts with the Army prohibited the use of magnesium powder from foreign countries (except Canada) in order to maintain domestic manufacturing capability in the interest of national defense.

Justice Dept. seal - CopyDOJ alleged that from July 2003 through May 2005, ESM knowingly misrepresented the content of ultrafine magnesium powder imported from the PRC in order to avoid paying antidumping duties owed to the United States.  Antidumping duties protect against foreign companies “dumping” products on the U.S. market at prices below cost.  The U.S. Department of Commerce assesses and U.S. Customs and Border Protection collects these duties to protect U.S. businesses and level the playing field for domestic products.  At the time of the imports alleged in this case, ultrafine magnesium powder from the PRC was subject to a 305 percent antidumping duty.

DOJ further alleged that from March 2005 through August 2006, Kilgore used the illegally imported Chinese magnesium powder purchased from ESM in the countermeasure flares it sold to the U.S. Army.  The Chinese magnesium powder allegedly violated both the requirement for domestically produced powder and engineering specifications required by the contracts.

Kilgore and ESM agreed to pay $6 million and $2 million, respectively, to resolve the government’s allegations.

Prior to the civil settlements with Kilgore and ESM, five former employees and agents of ESM pleaded guilty to criminal offenses related to the magnesium importation scheme, including ESM’s former president, Charles Wright.  The criminal defendants were ordered to pay more than $14 million in restitution.

DOJ’s settlement with ESM resolved a lawsuit filed under the whistleblower provisions of the False Claims Act.  The act permits private parties to sue on behalf of the United States those who falsely claim federal funds or, as in this case, those who avoid paying funds owed to the government.  The lawsuit was filed by Reade Manufacturing Company, a domestic manufacturer of magnesium powder.  The act also allows the whistleblower to receive a share of any funds recovered through the lawsuit.  Reade Manufacturing received $400,000 as part of the settlement with ESM.

The lawsuit against ESM is captioned United States ex rel. Reade Manufacturing Co. v. ESM Group, Inc., Civ. No. 10 – CV – 504-S (W.D.N.Y.).  The claims resolved by these settlements are allegations only; there has been no determination of liability except as admitted by the individual defendants in the criminal proceedings.

Source: https://www.justice.gov/opa/pr/tennessee-and-new-york-based-defense-contractors-agree-pay-8-million-settle-false-claims-act

A construction contractor’s guide to “Buy American” rules and regulations

By

The federal government has a long-standing preference for using domestic products in federal manufacturing, supply, and construction procurements. Newer rules are applying this old-age preference to additional sectors of construction that the federal government has a hand
in.

The general rule for federal procurements is that all physical products provided or sold to  the government must be made in the United States, unless an exception to this rule applies.  These domestic preferences are governed by a complex framework of statutes and regulations, prohibitions and waivers, and rules and exceptions that are oftentimes difficult for contractors to understand and follow. It is crucial that all construction contractors, especially federal contractors, understand these domestic preferences in order to avoid the significant penalties that may be imposed for any failure to comply.

The federal government’s domestic preferences are generally governed by one of four statutory schemes: (1) the Buy American Act of 1933 (“BAA”), as modified by the Trade Agreements Act (“TAA”); (2) the Buy America provision of the Surface Transportation Assistance Act of 1982 (“Buy America”); (3) the American Iron and Steel Requirements (“AIS Requirements”), as part of the Consolidated Appropriations Act, 2014 (“Appropriations Act”) and the Water Resources Reform and Development Act of 2014 (“WRRDA”); and (4) the American Recovery and Reinvestment Act (“Recovery Act”).

Keep reading this article at: http://www.agc.org/galleries/default-file/The%20Construction%20Contractor-‘s%20Guide%20To%20Buy%20American%20Rules%20and%20Regulations.pdf

Contracting News

Read More

Contracting Tips

Read More

GTPAC News

Read More

Georgia Tech News

Read More