Georgia Tech Procurement Assistance Center

How does recent “Buy American” executive order affect government contractors?

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On July 15, 2019, President Trump issued an Executive Order, “Maximizing Use of American- Made Goods, Products, and Materials.”  The Executive Order builds on two prior “Buy American” Executive Orders and recommends two changes to current regulations implementing the Buy American Act of 1933.  This alert summarizes the changes proposed in the Executive Order (known as “Buy American III”) and how they may affect a government contractor’s supply chain.

The Buy American Act does not apply to every procurement, but when it does apply, it mandates that federal agencies purchase domestic products.  The Federal Acquisition Regulation (“FAR”) implements this mandate by requiring the use of “domestic end products” and defining what percentage of domestic content a domestic end item must contain.  The Buy American Act contains a number of exceptions implemented in the FAR, including an exception when the cost of acquiring a domestic end product is unreasonable.

We predicted in an earlier publication that these two aspects of current Buy American Act regulations—the domestic content requirement and the determination of whether a domestic end product’s cost is “unreasonable”—were particularly susceptible to revision under President Trump’s “Buy American” agenda.  One year later, these are precisely the provisions the new Executive Order seeks to revise.  Below, we provide key takeaways from the Executive Order, followed by an in-depth analysis of the Executive Order’s potential affect on current Buy American Act compliance requirements.

Bottom Line Up Front: Key Takeaways From The New Executive Order: 

  1. For manufactured products other than steel or iron products, the Executive Order does not present a drastic change: it requires manufacturers to increase a product’s domestic content from 51% to 55% in order to qualify as a “domestic end product.”
  2. For steel and iron manufactured products, the Executive Order does propose a significant change, increasing domestic content from 51% to 95% in order to qualify as a “domestic end product.”  It is unclear whether the Executive Order extends its proposed changes to “domestic construction materials.”  If so, this change could be particularly significant for construction contractors on civilian agency construction sites.
  3. The Executive Order’s proposed change to domestic content requirements will not affect manufactured products that qualify as commercially available off-the-shelf (“COTS”) items, as the FAR exempts COTS items from domestic content requirements.
  4. The Executive Order increases the “price penalty” against foreign end products from 6% to 20% (or from 12% to 30% for small business competition) which will reduce federal agency use of the “unreasonable cost” waiver and thereby increase procurement of domestic products.
  5. The change to the “unreasonable cost” exception does not affect DoD acquisitions, as DoD previously implemented a separate—and more severe— price penalty for foreign products.
  6. The proposed changes must be considered by the FAR Council within 180 days, but the Executive Order does not mandate subsequent rulemaking until (1) notice and comment, and (2) the FAR council determines that any proposed changes are appropriate and consistent with the law and the national security interests of the United States.

Continue reading at:  K&L Gates

Congressional, executive, and legal developments for government contractors to consider

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Regulatory Developments

On June 24, 2019, the U.S. Small Business Administration (“SBA”) finally issued a proposed rule in response to the 2018 Small Business Runway Extension Act, which increased the time period over which receipts are averaged for purposes of calculating a concern’s size from three years to five.  The proposed rule specifies that it will go into effect only after the effective date of a final rule, confirming SBA’s intention to continue to apply the three-year averaging period to any certification submitted prior to the effective date of the final rule.

On May 20, 2019, the U.S. Department of Veterans Affairs (“VA”) issued a class deviation from Department of Veterans Affairs Acquisition Regulation (“VAAR”) 808.002, Priorities for Use of Government Supply Sources, and VAAR Subpart 808.6, Acquisition from Federal Prison Industries, Inc., the two provisions implementing the FAR Part 8 mandatory source priority of AbilityOne Procurement List and Federal Prison Industries contractors.  The class deviation effectively gives Veterans First providers priority over AbilityOne providers in all VA contract opportunities should two or more veteran-owned small businesses (“VOSBs”) or service-disabled veteran-owned small businesses (“SDVOSBs”) be capable of performing the contract at a reasonable price.  The newly implemented class deviation preempts the AbilityOne priority in all VA procurements in favor of a Veterans First priority.  However, “if an award is not made to an eligible . . . VOSB under VAAR Subpart 819.70, the priority use of AbilityOne applies, and supplies and services on the Procurement List are mandatory sources.”  The class deviation was immediately effective and to be implemented in all VA contracts.

On June 11, 2019, the House Armed Services Committee published the draft 2020 National Defense Authorization Act (“NDAA”).  Notable potential changes include a reduction in the monetary threshold for enhanced DoD post-award debriefing rights and a grant of permanent authority for DoD’s Mentor-Protégé Program.  The 2018 NDAA implemented “Enhanced Post-Award Debriefing Rights” for certain DoD procurements.  This change required defense agencies to provide the agency’s written source selection award determination for all small business contracts valued between $10 and $100 million, and all defense contracts valued over $100 million.  Section 828 of the draft 2020 NDAA would reduce the monetary threshold for these enhanced debriefings to only $50 million, significantly increasing the number of procurements for which they must be provided.  Section 881 of the draft NDAA permanently authorizes the DoD Mentor-Protégé Program and requires that the DoD’s Office of Small Business Programs establish mentor-protégé performance goals and periodic reviews.

Continue reading at:  Venable LLP

Trump executive order extends Buy American policy

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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/

 

Increase in 2017 Service Contract Act health & welfare rate; Lower rate for contracts covered by federal paid sick leave EO

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The U.S. Department of Labor (DOL) has released its annual memorandum with the rate increase for Service Contract Act (SCA) Health and Welfare (H&W) Fringe Benefits. The new rate of $4.41 per hour (up from the 2015-2016 rate of $4.27 per hour) is required in all government contract bids or other service contracts awarded on or after August 1, 2017.

A special rate of $1.91 per hour is set for Hawaii, which takes into account that state’s mandatory health insurance coverage. However, an employer may use this lower rate only if it actually makes contributions for employees under the Hawaii Prepaid Health Care Act.

DOL officials indicated earlier this year that the rates set for 2017 would account for contracts subject to Executive Order 13706, which applies to new contracts that result from solicitations issued on or after January 1, 2017, or that are awarded outside the solicitation process on or after that date. The EO requires covered contractors to provide employees up to 56 hours of paid leave sick leave annually.

Keep reading this article at: http://www.jdsupra.com/legalnews/increase-in-2017-service-contract-act-87128/

Cyber executive order could signal windfall for contractors

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This week, the House passed a major bill that would create working capital funds agencies to modernize their internal technology. Last week, President Donald Trump signed an executive order directing agencies to update their cybersecurity practices and to hold agency heads, not chief information officers, accountable for incidents.

What do these moves mean for technology contractors? They could signal continued or greater upcoming investments in private-sector cyber services, Candace Worley, McAfee’s chief technical strategist, told Nextgov.

Keep reading this article at: http://www.nextgov.com/cybersecurity/2017/05/mcafee-vp-cyber-executive-order-could-signal-windfall-contractors/137979

How will Trump’s ‘Buy American, Hire American’ executive order impact construction?

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In the latest of a series of executive orders signed since his inauguration, President Donald Trump has again chosen that method as a way to affect policy in the U.S. Unlike some other executive orders that aim to streamline project schedules and cut red tape, however, the “Buy American and Hire American” measure could put more restrictions on the construction industry.

Inside the executive order

The executive order doesn’t change anything just yet. Through the order, Trump calls on all of his administration’s agency heads to:

  1. Evaluate the implementation and compliance of existing Buy America laws under their jurisdictions
  2. Take a look at their waiver process and determine how it is affecting American business.
  3. Come up with additional policies, within the confines of existing law, that “maximize” the use of American-made products and their components, including common construction materials like steel, iron, aluminum and cement.

For purposes of the order, administration officials added that American-made steel means that it is produced in the U.S. from the melting phase forward.

Keep reading this article at: http://www.constructiondive.com/news/trumps-buy-american-hire-american-executive-order-construction-industry/441115/

‘Buy American’ order draws mixed reviews from contractors

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Last Tuesday (Apr. 18, 2017) President Trump traveled to the Snap-On Tool manufacturing plant in Kenosha, Wis., to sign a previously announced executive order that tasks agencies and contractors with ramping up efforts to “Buy American” and “Hire American.”

Combined with a crackdown on unmerited high-level work visas and unfair trade practices, the order taps procurement specialists to propose contracting reforms to be assembled over 220 days by Commerce Secretary Wilbur Ross to create a “more muscular” Buy American policy, as a senior administration official told reporters Monday.

“It’s time,” Trump told the crowd on Tuesday, for the government to “aggressively promote and use American-made goods and to ensure that American labor is hired to do the job.” The purpose of the order is to require “federal agencies to strictly uphold our Buy American laws and minimize waivers and maximize Made in America content in all federal projects,” he said. “We will fully monitor, uphold and enforce our Buy American laws, which we haven’t done.”

Keep reading this article at: http://www.govexec.com/contracting/2017/04/trumps-buy-american-order-draws-mixed-reviews-contractors/137129

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New DHS acquisition rules proposal could disrupt contracts, hurt small business

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President Donald Trump celebrated a new executive order designed to eliminate regulations on small businesses. But a series of new acquisition rules proposed weeks ago by the Department of Homeland Security (DHS) have Federal contracting experts worried about future governmentwide disruptions and a decrease in competition.

DHS’s Office of the Chief Procurement Officer on Jan. 18 issued three proposed rules that would require privacy training and security awareness training for contractors, and would add five new categories of Controlled Unclassified Information (CUI)—unclassified information that is still sensitive—that contractors will need to secure and manage.

DHS’s proposed regulations are troubling to some Federal contracting experts because they disrupt the governmentwide standards that took years to set up, and may impose costs on small businesses that make it impossible for them to compete for DHS contracts.

Alan Chvotkin, executive vice president and counsel for the Professional Services Council (PSC), said the new CUI categories “don’t square” with the governmentwide rule that took six years to create.

Keep reading this article at: https://www.meritalk.com/articles/new-dhs-acquisition-rules-proposal-could-disrupt-contracts-hurt-small-business/

Reducing the costs of procurement regulation – A step in the right direction

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The Code of Federal Regulations (CFR) is around 180,000 pages and is growing at about 2,000 pages a year.

In 2008, the Office of Management and Budget (OMB) and the Small Business Administration estimated the regulatory compliance costs to be approximately $1.752 trillion.

These figures were cited in 2015 testimony before the Senate Armed Services Committee by the Honorable Jacque S. Gansler, Ph.D., currently professor emeritus at the University of Maryland’s School of Public Policy. He cited these figures in making the case for reducing regulations, policies, and procedures to reduce barriers to entry to the federal market and to increase the Defense  Department’s access to commercial innovation, which is needed desperately to ensure technological superiority on the battlefield.

That is why the Jan. 30, 2017 executive order Reducing Regulation and Controlling Regulatory Costs, is a step in the right direction in reducing regulatory burdens.  The EO provides, in part, that for fiscal year 2017, the heads of agencies are directed that the total incremental cost of all new regulations to be finalized this year, including repealed regulations, shall be no greater than zero.  The EO further provides that any new incremental costs associated with the new regulations shall be offset by the elimination of existing costs of at least two prior regulations.

Keep reading this article at: http://federalnewsradio.com/commentary/2017/02/reducing-the-costs-of-procurement-regulation-a-step-in-the-right-direction/

Update on government contracts ramifications of the Trump administration

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In December 2016, Jones Day issued “ Government Contracts Ramifications of the Trump Election,” a Commentary in which we discussed several likely impacts of the Trump Administration in the government contracts arena. Specifically, we discussed that the new Administration would:

  • Seek repeal of numerous Executive Orders affecting government contractors.
  • Reject some Obama Administration procurement policies, such as: the preference for fixed-price type contracts; the preference for lowest-price technically acceptable (“LPTA”) evaluation schemes; and the preference against outsourcing government jobs to private companies.
  • Embrace Commercial Item contracting.
  • Increase government spending for defense, cybersecurity, infrastructure, and immigration-related activities.
  • Decrease spending by many agencies, including the Department of Education, Environmental Protection Agency, and Internal Revenue Service.
  • Focus on compliance issues such as rooting out fraud, waste, and abuse, and ensuring compliance with the Buy American Act and Trade Agreements Act.
  • Withdraw from, or renegotiate America’s participation in, certain trade relationships, which could affect companies’ supply chains.
  • Decrease the federal workforce, which could result in understaffing and undertraining within the acquisition workforce.
  • Appoint the members of the FAR Council, including the Office of Federal Procurement Policy (“OFPP”) Administrator, Secretary of Defense, Administrator of National Aeronautics and Space Administration, and the Administrator of General Services Administration.

Since the issuance of our earlier Commentary, President Trump has taken several actions that provide additional insight into the impact his Administration will have on government contractors.

Keep reading this article at: http://www.mondaq.com/unitedstates/x/564798/Government+Contracts+Procurement+PPP/Update+On+Government+Contracts+Ramifications+Of+The+Trump+Administration

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