Morrison Foerster’s Government Contracts Insights provides our in-depth analysis of developments and trends impacting government contracting. Through Insights, our attorneys offer a real-time assessment of the statutory, regulatory, legal, and business-related developments and trends that are shaping the industry. We also examine a full array of non-U.S. public procurement issues, mindful that our clients compete in a global marketplace.Morrison Foerster’s nationally recognized Government Contracts and Public Procurement practice represents the world’s leading companies in the aerospace and defense, intelligence, cybersecurity, information technology, financial and professional services, education, healthcare, infrastructure, and logistics support sectors. We are enlisted to address our clients’ most complex and important legal issues. Our work includes contract and subcontract negotiation and other transactional matters, business and regulatory compliance counseling, internal investigations, bid protests, and a wide array of enforcement and litigation matters. Our clients range from Fortune 50 companies to small and medium-sized companies just entering the public sector. We advise both U.S. and non-U.S. companies involved in municipal, state, federal, and non-U.S. procurement matters.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Tina is Co-chair of Morrison Foerster’s Government Contracts & Public Procurement practice. She represents a wide variety of government contractors including information technology, defense, biotechnology, and pharmaceutical companies, with a focus on general contract counseling and compliance, particularly concerning intellectual property, and cybersecurity matters and federal grant funding.Tina counsels contractors on compliance with federal, state and local acquisition and ethics regulations and with the evolving myriad of requirements pertaining to data security and cybersecurity. She has been involved with numerous internal investigations and compliance reviews, and with mandatory and voluntary disclosures to agencies, and litigation of False Claims Act matters.Tina routinely advises clients concerning:<ul><li>Prime-subcontractor relationships</li><li>Sources of supply and country of origin requirements</li><li>Price reductions and price reporting issues</li><li>Organizational conflicts of interest</li><li>Safeguarding of intellectual property and other proprietary interests</li><li>Licensing and data rights issues</li><li>Handling of classified materials and controlled unclassified information</li><li>Agency suspension and debarment proceedings</li></ul>She also assists clients with due diligence and other activities related to the acquisition of government contracting concerns, and with the drafting and negotiation of teaming agreements, subcontracts, licensing agreements, and cooperative research and development agreements. She also assists clients applying for federal grants (including SBIR and STTR agreements), and those who seek to obtain other transactional authority agreements, as well as those competing for state and local government work.Tina’s litigation experience includes government contracts claims litigation in federal courts and before boards of contract appeals, bid protests before the Government Accountability Office and the Court of Federal Claims, and complex disputes in federal courts, including civil fraud and False Claims Act litigation and reverse Freedom of Information Act litigation.Prior to joining Morrison Foerster, Tina worked at another large national firm and as a trial attorney in the Office of the General Counsel of the Navy, Navy Litigation Office.<h4>Representative Experience</h4><ul><li>Negotiation of largest CHIPS Act federal funding agreement between multinational semiconductor corporation and U.S. Department of Commerce.</li><li>Negotiated prime contract and major subcontracts related to the Department of Energy’s next generation supercomputer program, including extensive IP rights negotiations and negotiation of associated patent rights waivers.</li><li>Negotiated series of other transaction authority agreements with DARPA and associated subcontracts with more than a dozen research universities on behalf of a firm biotech client, including complex IP rights allocations and material transfer agreements.</li><li>Assist clients with FedRAMP authorization process and with development of license agreements for software products sold to federal, state and local government agencies.</li><li>Cyber incident response counseling to some of the largest companies and organizations impacted by security incidents.</li><li>Advises clients on Bayh-Dole reporting of inventions and IP strategies for contracts and grants.</li><li>Conducts due diligence for major government contract mergers and acquisitions.</li></ul>

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Tina is co-chair of Morrison Foerster’s Government Contracts & Public Procurement practice. She counsels a wide variety of government contractors on compliance with federal acquisition and ethics regulations. She drafts and negotiates contracts on their behalf and has been involved with numerous internal investigations and compliance reviews, and with bid protest, contract claims, and False Claims Act litigation. She also advises on M&A transactions involving government contractors.

Tina D. Reynolds

Jim Tucker is of counsel in Morrison Foerster’s Government Contracts and Public Procurement Practice Group and is based in the firm’s Washington, D.C. office.Jim’s practice runs the gamut of litigation and counseling in federal procurement matters, with an emphasis on bid protests, Cost Accounting Standards disputes, and small business matters. He has represented both protesters and awardees in scores of protests before the Government Accountability Office, the Court of Federal Claims, and procuring agencies, in acquisitions ranging from small business procurements to multibillion-dollar contracts of global significance. His representative protest matters span the aerospace sector, the Intelligence Community, base operations and logistics, healthcare, nuclear and environmental work, and information technology and software acquisitions. His protests have included both classified and unclassified programs. In addition to prevailing in published decisions, Jim has also secured favorable corrective action on behalf of clients in a wide variety of protests that were resolved without a published decision.Jim’s work also focuses on disputes over cost allowability and compliance with the Cost Accounting Standards, and he has appeared before the Armed Services and Civilian Boards of Contract Appeals, in size and status protests before Small Business Administration (SBA) area offices, and appeals before the SBA Office of Hearings and Appeals. Jim regularly counsels clients on contract interpretation, organizational conflicts of interest, and small business compliance.Jim graduated with high honors from the George Washington University Law School, where he focused his studies on federal procurement law, was a member of the Law Review, and interned with the General Services Administration’s suspension and debarment office. Jim also holds a degree in theology magna cum laude from the Pontifical Gregorian University in Rome and a bachelor’s degree in classical languages and literature summa cum laude from the University of Kentucky, where he graduated Phi Beta Kappa.

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Jim maintains an active practice in bid protests before the Government Accountability Office and contracting agencies and counsels clients in contract disputes and compliance obligations.

Jim Tucker is of counsel in Morrison Foerster’s Government Contracts and Public Procurement Practice Group and is based in the firm’s Washington, D.C. office. Jim’s practice runs the gamut of litigation and counseling in federal procurement matters, with an emphasis on bid protests, Cost Accounting Standards disputes, and small business matters.

James Tucker

<div style="margin-bottom: 15px;" class="videoWrapper"><iframe class="sticky-video" title="Meet Alex Ward, Government Contracts Practice Co-Chair" src="https://www.youtube-nocookie.com/embed/TkliwdSlTaQ?rel=0" frameborder="0" allow="autoplay; encrypted-media" allowfullscreen="1" title="iframe"></iframe></div>J. Alex Ward is co-chair of Morrison Foerster’s Government Contracts and Public Procurement group. His practice covers a full range of government contracts matters, including investigations, bid protests, claims, general litigation, corporate transactions, and counseling. Alex strives in all matters is to provide his clients the highest level of efficient and effective representation.Alex represents contractors in internal and external investigations, disclosures to the government, and qui tam litigation, with great success in reducing or eliminating his clients’ exposure through active engagement with the government. His work in this area includes obtaining numerous declinations and dismissals of False Claims Act cases in their earliest stages, sparing his clients the cost, risk, and exposure of litigation.He has also served as lead counsel in dozens of bid protests involving military and civilian agency procurements of a wide range of products and services, including all manner of pre- and post-award protests in the GAO, the U.S. Court of Federal Claims, and state tribunals, as well as appeals to the U.S. Court of Appeals for the Federal Circuit and size protest appeals before the SBA’s Office of Hearings and Appeals.Alex handles all aspects of the claims process, from the initial assessment and drafting of requests for equitable adjustment through litigation in the Boards of Contract Appeals and the Court of Federal Claims. Alex’s practice also covers the full gamut of other controversies confronting government contractors, including prime-sub, teaming partner, employer-employee, competitor, and indemnification disputes. His litigation work also includes a wide variety of pro bono engagements, in which he has represented both individual and institutional clients in matters ranging from immigration and criminal defense to sustainable procurement and protection of the environment.Prior to joining the firm, Alex served in the U.S. Army as a commissioned officer and an Assistant to the General Counsel of the Army responsible for civil works and international matters, and as a clerk for judges on the U.S. Courts of Appeals for the Armed Forces and the D.C. Circuit. He is a member of the Boards of the Morrison & Foerster Foundation and the Chesapeake Bay Foundation and of Law360’s Government Contracts Editorial Board.

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Alex is co-chair of Morrison Foerster’s Government Contracts and Public Procurement practice. His practice covers a full range of government contracts matters, including bid protests, claims, investigations, corporate transactions, and counseling.

J. Alex Ward

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Morrison Foerster’s Government Contracts Insights blog provides an in-depth analysis of news, developments, and trends impacting government contracting and procurement. Through Insights, attorneys from our nationally recognized Government Contracts and Public Procurement practice will offer a real-time assessment of the statutory, regulatory, legal, and business-related developments that are shaping the industry. This blog will also examine a full array of U.S. and non-U.S. public procurement issues, mindful that our clients compete in a global marketplace.Read about our <a href="http://govcon.mofo.com/editors/">Authors</a>.Never miss a post. Subscribe to get real-time updates.

Brad is a partner in Morrison Foerster’s Litigation Department, Managing Partner of the Austin office, and Chair of the firm’s Israel practice. He is the former Co-Chair of the firm’s Global Litigation Practice and the Government Contracts + Public Procurement Practice.

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Despite their many differences, Presidents Trump and Biden agree on one thing: that the Government should favor American manufacturers over foreign companies by

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New Year, New Domestic Preference Restrictions: Trump Final Rule and Biden Executive Order

New Year, New Domestic Preference Restrictions: Trump Final Rule and Biden Executive Order | Government Contracts Insights

Damien C. Specht

James A. Tucker

Despite their many differences, Presidents Trump and Biden agree on one thing: that the Government should favor American manufacturers over foreign companies by tightening the protectionist restrictions applicable to many Federal procurements. The outgoing and incoming Administrations each took actions this January that will cheer the hearts of many American manufacturers, while dismaying advocates of free trade and broader competition, as well as those agencies and contractors whose purchasing options the new rules seek to limit.Last September, we <a href="https://govcon.mofo.com/acquisition-regulations/proposed-rule-to-amend-the-fars-implementation-of-the-buy-american-act/">commented</a> on the <a href="https://www.federalregister.gov/documents/2020/09/14/2020-20116/federal-acquisition-regulation-maximizing-use-of-american-made-goods-products-and-materials">proposed rule</a> to implement President Trump’s <a href="https://www.federalregister.gov/documents/2019/07/18/2019-15449/maximizing-use-of-american-made-goods-products-and-materials">Executive Order 13811</a>, which called for the expansion of the preference for domestic goods, products, and materials – particularly domestic iron and steel – in Federal procurements subject to the Buy American Act (BAA). On the last full day of the Trump Administration, the Federal Acquisition Regulation (FAR) Councils issued the <a href="https://www.govinfo.gov/content/pkg/FR-2021-01-19/pdf/2021-00710.pdf">final rule</a> implementing this order. Aside from adding new definitions for greater clarity, the final rule largely reflects the proposed rule from last September and alters the regulatory application of the BAA for certain items and materials in important ways. The final rule will apply to new solicitations issued on or after February 22, 2021.Less than a week after the Trump preferences were finalized in the FAR, President Biden issued <a href="https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/25/executive-order-on-ensuring-the-future-is-made-in-all-of-america-by-all-of-americas-workers/">an executive order of his own</a>, also promising to increase the favor shown to American-made goods and services in Federal procurements. Most of the Biden initiatives will require further agency action and rulemaking to take effect. We’ll first address the baseline against which the two executive orders and FAR amendment were issued, and then consider each change in turn.BAA in a NutshellThe BAA has been around since the Great Depression. In its current regulatory implementation, found in FAR Part 25 and its associated provisions and clauses, the BAA requires offerors on Federal procurements covered by the BAA (more on that in a moment) to certify whether all of the “end products” they offer are domestic. For many procurements, the BAA is not applicable, and the less onerous (but generally less forgiving) Trade Agreements Act (TAA) applies instead. The BAA does not apply to services. Where domestic goods are not available in sufficient quantities or quality, or at reasonable prices, agencies have authority to waive the BAA restrictions – with some waivers being procurement-specific, and others being blanket waivers. Waivers or exceptions are also currently in place for commercial item information technology, goods destined for resale in commissaries, as well as goods covered by a blanket exception that an agency may negotiate with a foreign government.But what is a domestic end product? Prior to this month’s changes, the heart of the BAA analysis of whether an end product is domestic was a two-prong test: (1) was the end product mined, produced, or manufactured in the United States; and (2) are more than 50% of the component parts of the end product (calculated as a percentage of cost) also mined, produced, or manufactured in the United States? If the answer to both questions was “yes,” the end product was domestic under the BAA. For Commercial Off-the-Shelf (COTS) end products, the pre-January 2021 implementation of the BAA required only the first part of the analysis: if a COTS end product was mined, produced, or manufactured in the United States, it was considered a domestic product without the need to calculate component costs.FAR 25.502(c) establishes a special price evaluation factor (rather than a strict prohibition as under the TAA) for BAA-covered procurements when both domestic and foreign end products are offered and eligible for award, and the domestic offer does not have the lowest price. In those cases, civilian agencies must take the price of the non-domestic end product and add a certain percentage if the lowest-price domestic offer is from a large business or a higher percentage if the lowest-price domestic offer is from a small business; the Defense Department applies a 50% preference in all covered procurements. The agency then uses this adjusted price for evaluation purposes. FAR 25.502(a)(3). The agency also uses this approach for determining the price reasonableness of domestic end products when an otherwise eligible offer for foreign end products is the lowest price. FAR 25.105.FAR Final Rule Modifying Implementation of the BAAThe new <a href="https://www.govinfo.gov/content/pkg/FR-2021-01-19/pdf/2021-00710.pdf">final rule </a>implementing Trump’s <a href="https://www.federalregister.gov/documents/2019/07/18/2019-15449/maximizing-use-of-american-made-goods-products-and-materials">Executive Order 13811</a> tightens the BAA rules in some important ways, particularly with respect to iron and steel items. These requirements apply only to procurements subject to the BAA and will have no impact on TAA-covered procurements. The final rule largely mirrors the proposed rule from September 2020, with the differences coming mainly from additional clarifications and more precise definitions that the proposed rule lacked.<ol><li style="padding-bottom: 16px;"> Iron and Steel: The biggest change is the special treatment given to end products or construction materials that consist wholly or predominantly of iron or steel or a combination of both. “Predominantly” is defined to mean “that the cost of the iron and steel content exceeds 50 percent of the total cost of all its components. The cost of iron and steel is the cost of the 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 iron or steel components excluding COTS fasteners.” Under the new rule, an offeror may certify these particular end products or construction materials to be domestic only if, in the offeror’s good-faith estimate, the cost of the iron and steel content not produced in the United States is no more than 5% of the cost of all components or content of the material or end product. That is, the component prong of the BAA test for these particular end products and construction materials is now a “content test” and requires at least 95% domestic iron/steel content for the item to qualify as domestic (in addition to meeting the domestic manufacture prong of the test).</li></ol>The allowance for a good-faith estimate at least recognizes the practical difficulty of calculating exact amounts, but it may be difficult even to reach a good-faith estimate of the total cost of foreign iron/steel content with any reasonable accuracy. Note that the good-faith estimate applies only to the cost of the foreign iron/steel content, and not to the origin of the iron/steel: iron/steel of unknown origin is presumed to be foreign. The final rule has also clarified that the allowance for a good-faith estimate does not apply 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,” as the end manufacturer presumably will know exactly what those incorporated products cost.<ol start="2"><li style="padding-bottom: 16px;">Partial Revocation of the COTS Waiver for Iron and Steel Products and Construction Materials: Under the new rule, both prongs of the BAA test must be applied even to COTS construction materials and end products that are made wholly or predominantly of iron or steel (except for COTS fasteners). This partially reverses the prior rule that, if an item was a COTS item, one need only determine whether it was mined, produced, or manufactured in the United States, without having to calculate the value of its foreign components or content. The waiver of the component test remains in place for COTS fasteners, including iron and steel fasteners (e.g., nails, screws, rivets, clips, etc.), and for all other COTS end products that are not predominantly composed of iron or steel.</li><li style="padding-bottom: 16px;">End Products Not Predominantly Composed of Iron or Steel: The new rule slightly increases the domestic content requirement for components of non-COTS end items that are not predominantly composed of iron or steel. The cost of the end product’s domestic components now must exceed 55% for the end product to qualify as domestic (in addition to meeting the domestic manufacture prong of the test). Components of unknown origin are deemed to be foreign.</li><li style="padding-bottom: 16px;">Increased Price Preferences/Handicaps: The rule also increases the price evaluation factor percentages applied to foreign end products in civilian acquisition: the price preferences are now 20% if the potential awardee with domestic end items is a large business and 30% if it is a small business. The percentage remains 50% for Defense Department acquisitions. The way the price factor would apply to construction materials is less clear, as there generally are not specific line items for these materials. For construction materials, the preface to the proposed rule stated: “The foreign material is evaluated on the basis of market research, not a specific competing offer.  Thus, only the 20 percent factor would be applied to construction material.”</li></ol>Biden Executive Order “Ensuring the Future Is Made in All of America by All of America’s Workers”Among the flood of new executive orders released in the first seven days of the new Administration is President Biden’s “<a href="https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/25/executive-order-on-ensuring-the-future-is-made-in-all-of-america-by-all-of-americas-workers/">Executive Order on Ensuring the Future Is Made in All of America by All of America’s Workers</a>,” which carries through with various domestic preference campaign promises. Although the order rescinds a number of Trump orders, it leaves intact the tightened BAA requirements discussed above and ups the ante. Notably, the Biden order calls for review and tightening not just of the implementation of the BAA, but of all “Made in America Laws,” which are defined as “all statutes, regulations, rules, and Executive Orders relating to Federal financial assistance awards or Federal procurement, including those that refer to ‘Buy America’ or ‘Buy American,’ that require, or provide a preference for, the purchase or acquisition of goods, products, or materials produced in the United States, including iron, steel, and manufactured goods offered in the United States[, including] laws requiring domestic preference for maritime transport, including the Merchant Marine Act of 1920 (Public Law 66-261), also known as the Jones Act.”Here is a walk-through of the main features of the order:<ul><li style="padding-bottom: 16px;">Made in America Office and Domestic Preference Waivers – Section 4 of the order calls for the Office of Management and Budget to stand up a new Made in America Office. Once the Office is in place, an agency that wants to waive the requirements of the BAA or any other domestic preference program (such as the Jones Act) must first explain itself to the Office. The Office will set up procedures for issuing waivers, including procedures where the Office and procuring agency disagree on the need for a waiver. Although a <a href="https://www.gao.gov/assets/700/696086.pdf">2018 study from the GAO</a> found that foreign items benefiting from waivers and exceptions accounted for less than 5% of total Federal obligations for end products potentially subject to the BAA, the President expressed an opinion that Federal agencies have been “waiving Buy American requirements with impunity,” and stated that tightening domestic preferences should start with cracking down on agencies’ use of BAA waivers. The new Made in America Office apparently will be at the forefront of the crackdown and the inquiry into whether agencies have, in fact, been engaged in a widespread flouting of the law.</li><li style="padding-bottom: 16px;">Accounting for Sources of Cost Advantage – Section 5 of the order provides that, when analyzing cost differentials between foreign and domestic items as part of a waiver analysis, agencies should “assess whether a significant portion of the cost advantage of a foreign-sourced product is the result of the use of dumped steel, iron, or manufactured goods or the use of injuriously subsidized steel, iron, or manufactured goods.”</li><li style="padding-bottom: 16px;">Publicizing Waivers and Identifying Domestic Suppliers – Section 6 of the order calls for creation of a public website to provide information on all proposed and granted waivers. This transparency initiative should provide better insight into agency waiver requests and allow capable domestic manufacturers a simple, centralized way to identify opportunities and object if they think a proposed waiver is unjustified. Section 7 calls for proactive steps (including partnering with the Hollings Manufacturing Extension Partnership) to scout out American manufacturers, including small and mid-sized businesses, capable of meeting Federal procurement needs that might otherwise be subject to a waiver.</li><li style="padding-bottom: 16px;">Changes to the FAR’s Implementation of the BAA – Similar to the Trump Executive Order 13811, Section 8 of the new Biden order tasks the FAR Councils with amending the FAR’s implementation of the BAA, including further tightening the domestic content percentage requirements and price preferences. Uniquely, this section also calls for consideration of replacing the BAA’s component test with “a test under which domestic content is measured by the value that is added to the product through U.S.-based production or U.S. job-supporting economic activity.” The order directs the FAR Councils to consider publishing a proposed rule on this subject within 180 days of the order.</li><li style="padding-bottom: 16px;">Review of the FAR’s List of Domestically Nonavailable Articles – Under Section 9, the Office of Federal Procurement Policy is tasked with a review of FAR 25.204(a)’s current list of domestically nonavailable articles to analyze whether there is a reasonable basis for concluding that domestic articles are not available and, thus, whether they should continue to be subject to a blanket waiver.</li><li style="padding-bottom: 16px;">Commercial Item Information Technology Waiver – Section 10 of the order tasks the FAR Councils with considering whether to rescind the existing waiver for information technology that is a commercial item, thereby making such products subject to the BAA.</li><li style="padding-bottom: 16px;">Reports – Sections 11-13 of the order require various studies, recommendations, and reports on enforcement and potential tightening of various domestic preference regimes. One of the directives in Section 12 calls for recurring reports from each agency on “spending as a result of waivers issued pursuant to the Trade Agreements Act of 1979, as amended, 19 U.S.C. 2511, separated by country of origin.” This appears to relate to the President’s signing remark that the Administration is committed to “working with our trading partners to modernize international trade rules, including those relating to government procurement, to make sure we can all use our taxpayer dollars to spur investment that promotes growth and resilient supply chains.” This “modernization” may foreshadow an attempt to renegotiate free trade agreements to which the United States is a party, such as the World Trade Organization’s Government Procurement Agreement, to permit participants to engage in more restrictive practices than are currently permitted. If this happens, it would be potentially one of the most wide-ranging changes in the U.S. domestic preference regime in decades, and a potential setback to goals of promoting free trade in public procurement around the globe – including the goal of giving American manufacturers access to foreign countries’ public procurements.</li></ul>Section 13 of the order requests recommendations from the General Services Administration (GSA) on “ensuring that products offered to the general public on Federal property are procured in accordance with the policy set forth in section 1 of this order.” This appears to be aimed at commissary sales, which the FAR currently exempts from application of the BAA. Depending on what the GSA recommends and what actions the Administration takes, this may result in U.S. servicemembers and others who shop at commissaries finding that Italian olive oil, Swiss chocolate, and Mexican avocados have disappeared from the shelves.Time will tell what concrete actions the Government will take in response to this executive order, what real-world impact it will have, and when any changes will be implemented. Stay tuned!

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