In the beginning months of 2021, President Biden signed two executive orders addressing the lack of domestic manufacturing infrastructure and capabilities in the United States. The first, signed in January of 2021, was titled “Ensuring the Future is Made in All of America by All of America’s Workers”. Simply put by the White House briefing room, this executive order maximizes the “use of goods, products, and materials produced in, and services offered in, the United States.”
In February of 2021, an executive order on America’s supply chains was released, stating that the United States needs “resilient, diverse, and secure supply chains to ensure our economic prosperity and national security.”
The Biden administration quickly made it a priority to evaluate where critical deficiencies are in domestic manufacturing and moved to rectify them. President Biden’s ‘Made in America’ executive order specifically has implications for the federal contracting industry. Here is a breakdown of the executive order:
- Agencies must stop or revise actions that don’t promote Made in America Laws.
- A Made in America Office will be established and will be headed by a Director appointed by the Director of the Office of Management and Budget (OMB).
- Agencies must submit detailed justification, along with a proposed waiver, if they want to make an exception to the Made in America Laws and purchase goods or services from an international company.
- These waivers submitted by the agencies will be made publicly available on a new website to promote transparency within federal procurement. The website will also contain information as to whether or not the waiver was approved by the Made in America Office.
- Agencies can partner with the Hollings Manufacturing Extension Partnership (MEP) to scout out small to mid-sized American companies that can meet federal procurement needs.
Changes to Part 25 of the FAR
The executive order also outlined suggestions for changing Part 25 of the Federal Acquisition Regulation (FAR). While these changes to the FAR are not final, it’s important to keep up with all FAR updates so that your organization complies with federal procurement rules and regulations.
The suggested changes are broken down below.
- Increase the threshold for domestic content requirements for end products and construction materials. The FAR states that the cost of components mined, produced, or manufactured in the U.S. (for end products or construction materials) must exceed 50 percent of the cost of all of its components. This percentage is subject to increase under President Biden’s executive order.
- Increase the price preference for domestic end products and domestic construction materials. Simply put, the government will favor end products and construction materials that are made in the U.S. by increasing the price preference for those products.
- Update the list of nonavailable articles or items that are not sufficiently made in the United States. Nonavailable articles are items that are not readily available and/or made in the U.S. The executive order suggests updating the list of nonavailable articles for accuracy.
What does the executive order mean for federal contractors and the government procurement industry?
The government will continue to encourage domestic products by making it more attractive to utilize them via price preference. Additionally, the government will require a greater percentage of end products to come from domestic manufacturers via FAR threshold adjustments. Finally, this executive order will close a loophole in the list of nonavailable articles.
Overall, the federal government is moving toward rules that will make it more advantageous for businesses to have a more domestically located supply chain.
If you are currently a subcontractor for a government contract, you may want to reach out to your prime contractor to discuss these changes and their implications for your business.
Have further questions about these changes? Chat with our team today.