Earlier this month, the Federal Acquisition Regulatory Council (“FAR Council”) issued a final rule tightening the Buy American Act preference for domestic products and construction materials. The final rule makes only limited changes to the proposed rule we previously commented on. First, the effective date of the rule is pushed back to October 25, 2022, giving industry additional time to prepare for the more stringent requirements for future procurements. Second, when keeping up with changing domestic content thresholds is not feasible in a particular procurement, the final rule provides an alternative and less onerous domestic content test. Third, the FAR Council has postponed creation of a price preference for domestically made critical items or critical components until a definitive list of such items and components is established, and the Council similarly has delayed creation of new post-award reporting requirements.
Here are the key takeaways from the final rule:
- Increase in the Domestic Content Threshold: The final rule initially increases the domestic content threshold to 60%, with additional increases to 65% in 2024, and 75% in 2029. The rule will not go into effect until October 25, 2022. Once in effect, the new threshold will apply to new procurements. The rule also allows agencies (in consultation with the Made in America Office) to use an alternative domestic content test, which applies the threshold in effect at award for the entire period of performance where complying with the changing thresholds during the life of a particular contract is not feasible.
- Fallback Threshold: The final rule retains the proposed temporary allowance (or “fallback”) for continued use of the previous 55% domestic content threshold “in instances where an agency has determined that there are no end products or construction materials that meet the new domestic content threshold or such products are of unreasonable cost.” The fallback provisions will sunset in 2030.
- Enhanced Price Preference for Critical Products and Critical Components: The final rule provides a framework for applying higher price preferences to end products and construction materials deemed critical or made of critical components. The FAR Council has delayed implementation of this new price preference until issuance of a definitive list of critical items and critical components in a future rulemaking.
- Post-Award Reporting Requirements: The final rule removes the proposed rule’s post-award reporting requirements for contractors with respect to domestic content for critical items and critical components. The FAR Council deferred implementation of the reporting requirements until the definitive list of critical items and critical components is established.
We will continue to monitor progress as the FAR Council establishes a definitive list of critical items and critical components and promulgates reporting requirements.