Proposed Rule Portends Increased Contractor BAA Obligations

Scott Arnold and Carolyn Cody-Jones

On September 14, 2020, the FAR Council published a proposed rule, Case 2019-016 “Maximizing Use of American-Made Goods, Products, and Materials,” 85 FR 56558, which proposes certain increased and new thresholds for contractors subject to the Buy American Act (“BAA”). The proposed changes implement Executive Order 13881 (July 15, 2019). There is a November 13, 2020, deadline for interested parties to submit written comments for consideration in the final rule.

The key proposed changes are as follows:

    1. Items subject to a minimum domestic component test would need to meet a new threshold of 55 percent, an increase of five percent from the current 50 percent threshold. Domestic end items and construction materials would need to be manufactured in the United States, and would need to be manufactured from components which, based on cost, are over 55 percent domestic (components mined, produced, or manufactured in the United States).
    2. A new, distinct threshold would be created for end items and construction materials that are made predominantly of iron or steel or a combination of both—meaning that the iron and steel content of the item exceeds half of the total cost of all components in the item. For such items, the domestic component content threshold would be 95 percent. In other words, for items made predominantly of iron or steel to be considered domestic, they would need to be manufactured in the United States and contain less than 5 percent non-domestic components by cost. This is a significant change; currently these items are subject to a much lower domestic content requirement—anything over 50 percent.
    3. The commercially available off-the-shelf (“COTS”) exception to the cost of component requirements would still apply to end items and construction materials that are not made predominantly of iron or steel. In other words, such COTS items would need to be mined, manufactured, or produced in the United States, but there would be no requirement that any portion of the components of such COTS items be domestic.
    4. The COTS exception to the cost of component requirements would not apply to end items and construction materials that are made predominantly of iron or steel. The rule set forth in (2) above would apply—to be considered domestic, such COTS items would need to be manufactured in the United States and contain less than five percent non-domestic components by cost.
    5. However, the rule set forth in (4) above would not apply to fasteners—hardware devices that mechanically join or affix two or more objects together—such as nuts, bolts, pins, rivets, nails, clips, and screws. Fasteners, even if made predominantly of iron or steel, would still fall within the COTS exception in (3) above, such that they only need to be manufactured in the United States. The source of components would not matter.
    6. Price evaluation adjustments made to bids for non-domestic items would increase from six percent to 20 percent (if bidder is not small) and from 12 percent to 30 percent (if bidder is a small business). For Department of Defense procurements, the existing 50 percent price evaluation adjustment applied to offers of non-domestic items would still apply.

Continue reading “Proposed Rule Portends Increased Contractor BAA Obligations”

Executive Order Regarding Domestic Production and Purchase of Essential Medicines: A Lot to Unpack and More Than Meets the Eye

Merle M. DeLancey Jr. and John M. Clerici 

On August 6, 2020, President Trump issued another Executive Order (“EO”) that will likely have dramatic and long-lasting effects on the pharmaceutical industry.[1] The impact of the EO may be far greater than currently anticipated. It is well-considered, well drafted, and structured in a way that is likely to survive if there is a change in Administration. The EO will have a greater and immediate impact on Medical Counter Measures (“MCMs”) for chemical, biological, radiological, and nuclear threats, and emerging infectious diseases than on Essential Medicines. The inclusion of Critical Inputs (i.e., active pharmaceutical ingredients (“API”)) and starting materials potentially makes the impact far reaching, especially when coupled with the significant funding from the federal government to support onshoring efforts as a result of the COVID-19 pandemic. Continue reading “Executive Order Regarding Domestic Production and Purchase of Essential Medicines: A Lot to Unpack and More Than Meets the Eye”

After Acetris Decision, Trade Agreements Act Compliance Questions Abound: Contractors Need Guidance

Merle M. DeLancey Jr., Jay P. Lessler, and James R. Staiger

The Federal Circuit’s recent decision in Acetris has left many contractors scratching their heads and asking questions. To recap, on February 10, 2020, the Federal Circuit held that, under the Federal Acquisition Regulation (“FAR”), to qualify as a “U.S.-made end product” under the Trade Agreements Act (“TAA”), a drug must be either “manufactured” in the United States or “substantially transformed” in the United States. (See Federal Circuit Holds Generic Drugs Manufactured in the U.S. from API Produced in India Qualify for Sale to U.S. under Trade Agreements Act (Acetris Decision).) This is a stark change from the Government’s long-held position that manufacturing and substantial transformation were one in the same.

As a result of the Acetris decision, federal contractors seeking to comply with or maintain compliance with the TAA are facing many questions. Some of the more prominent questions are below. Continue reading “After Acetris Decision, Trade Agreements Act Compliance Questions Abound: Contractors Need Guidance”

Trade Agreements Act Compliance: Some Welcome News for Some Federal Contractors, But Will It Last?

Merle M. DeLancey Jr.

Recently, the United States District Court for the District of Columbia dismissed a qui tam action involving allegations of fraud in connection with country of origin requirements imposed by the Trade Agreements Act (“TAA”). United States ex rel. Folliard v. Comstor Corp., 308 F.Supp.3d 56 (D.D.C. 2018).

Comstor involved a False Claims Act (“FCA”) action filed by a serial whistleblower who alleged two contractors violated the FCA by selling non-TAA compliant products on their General Services Administration (“GSA”) Federal Supply Schedule (“FSS”) contracts to federal government customers. Depending on the dollar value of the acquisition, most procurements are subject to either the Buy American Act (“BAA”) or TAA. Currently (2018), the BAA applies to supply procurements valued at or below $180,000. Accordingly, the TAA currently applies to such procurements valued in excess of $180,000. GSA has determined the TAA applies to FSS contracts. Continue reading “Trade Agreements Act Compliance: Some Welcome News for Some Federal Contractors, But Will It Last?”