The Federal Acquisition Regulation Council recently released a proposed rule to implement the requirements of the Maximizing Use of American-Made Goods, Products, and Materials Executive Order, which was signed by President Trump on July 15, 2019. As discussed below, the proposed rule contains important amendments regarding domestic component thresholds and domestic pricing preferences, as well as reintroduces the domestic content test for commercially available off-the-shelf (COTS) items as it relates to certain steel and iron products.
Domestic Content Cost Threshold Changes
First, the proposed rule increases the “domestic content requirement for iron and steel end products” from 50% to 95%, meaning that at least 95% of the content (determined by the cost of the components) for end products or construction materials that consist wholly or predominantly of iron or steel (or a combination of both) must be mined, produced, or manufactured in the United States.
Next, for everything else, the proposed rule increases the domestic content requirement from 50% to 55% percent “of the cost of all components.”
Domestic Pricing Preference Changes
The proposed rule additionally expands pricing preferences for domestic end products and construction materials as follows:
- Increases the current 6% price preference that large businesses receive to 20%;
- Increases the current 12% price preference that small businesses receive to 30%.
The proposed rule does not, however, impact the 50% price preference that both large and small businesses receive for using domestic end products on Department of Defense procurements.
Revival of Domestic Content Test for Certain COTS
Notably, the proposal rule “partially restore[s] the domestic content test for COTS items as it pertains to iron and steel products.” In particular, the proposed rule states that the “bulk of iron and steel products acquired by the Government are primarily COTS items, used as construction material,” and thus a “[r]oll-back” of the 2009 waiver of the domestic content test for COTS items is “necessary to give full effect” to the 2019 Executive Order’s requirement “that domestic iron and steel products shall not contain more than 5 percent foreign iron and steel.”
The proposed rule does, however, continue to waive the domestic content test for iron and steel “fasteners,” which is defined as “a hardware device that mechanically joins or affixes two or more objects” and includes “nuts, bolts, pins, rivets, nails, clips, and screws.”
The FAR Council invites interested parties to submit written comments on the proposed rule by November 13, 2020. A final rule presumably will be issued by the FAR Council in the ensuing months.
Bradley will continue to monitor this noteworthy development. If you have any questions about the new proposed rule or any related issues, please feel free to contact Aron Beezley.