The Buy American Act & Berry Amendment

Transcription

1 The Buy American Act & Berry Amendment Govology December 1, 2016

2 Presentation Overview

3 Presentation Overview The Buy American Act BAA Overview BAA Application Domestic Products BAA Certification BAA Price Preference The Berry Amendment

4 The Buy American Act

5 BAA Overview BAA, on its face, appears to prohibit the acquisition of non-u.s. products and construction materials. In practice, however, the BAA serves as a price preference for domestic products. Amount of price preference ranges from 6% to 50%.

6 BAA Overview BAA doesn t apply if there is a waiver (as is the case where the Trade Agreements Act applies). BAA doesn t apply if one of several statutory/far exemptions applies. When BAA does apply, offerors must prepare and submit BAA information and certification. False certifications subject to severe penalties.

7 BAA Application BAA applies to many supply and construction contracts between the micro-purchase threshold (currently $3,500) and the so-called TAA Threshold. At TAA Threshold, Trade Agreements Act not BAA applies to many contracts. When TAA applies, BAA is waived (think NAFTA and other free trade agreements). TAA Thresholds are updated every two years. Current TAA thresholds are $191,000 for most supply contracts and $7,358,000 for most construction contracts.

8 BAA Application BAA applies to small business set-aside contracts regardless of dollar value. Includes socioeconomic subcategories of small businesses. Example: VA issues SDVOSB set-aside for the procurement of medical supplies. Estimated procurement value is $1 million. BAA applies. TAA does not apply to small business set asides.

9 BAA Application BAA also applies to certain other contracts regardless of dollar value, including certain purchases for arms or war materials. BAA does not apply to contracts for supplies acquired for use outside United States.

10 BAA Application BAA does not apply when one of the following exceptions applies: Public Interest. Agency head determines that public interest is inconsistent with applying BAA. May apply when a foreign government has negotiated a blanket BAA exception. Nonavailability. Items aren t available in sufficient and reasonable available commercial quantities and of a satisfactory quantity. See list at FAR

11 BAA Application BAA does not apply when one of the following exceptions applies: Unreasonable Cost. This is the exception that turns the BAA into a price preference statute rather than a domestic supply requirement. (More on this later in the course). Resale at Commissaries. Information technology that is a commercial item.

12 BAA Application Does BAA apply to a specific solicitation? Look for these FAR clauses: FAR (Buy American Act Supplies) FAR (Buy American Act Certificate) FAR (Buy American Construction Materials) FAR (Notice of Buy American Act Construction Materials)

13 Domestic Products What is a Domestic Product under the BAA? Unmanufactured Product: a product provided to the government in its original form. An unmanufactured product is a domestic product if it is mined or produced in the United States. Example: bananas grown in Hawaii, and sold to the government without alteration, are a domestic unmanufactured product.

14 Domestic Products What is a Domestic Product under the BAA? Manufactured Product (essentially a product that is not unmanufactured ): Two-part test to determine if it is domestic : First, end product must be manufactured in the United States. Second, cost of components mined, produced, or manufactured in United States exceeds 50% of the cost of all components, or end product is a commercially available off the shelf (COTS) item.

15 Domestic Products When is an end product manufactured in the United States? Manufacture not defined in the FAR or BAA statute. Case-by-case basis, but case law by GAO, courts, etc. has adopted a fairly broad view. Generally, final assembly in the United States will qualify. Less stringent than TAA s substantial transformation test. However, some transformation of the product must occur. Mere packaging is not enough.

16 Domestic Products Cost of Components: Question sometimes arises whether an item is a component or subcomponent. A component is an item directly incorporated into the end product. Contractor has some measure of discretion in determining what constitutes a component, but discretion isn t unlimited. Close Calls should be disclosed to contracting officer.

17 Domestic Products Cost of Components: For components purchased by the contractor, the acquisition cost (including transportation to the place of incorporation and any applicable duty) is the cost of the component. For components manufactured by the contractor, all costs associated with manufacture, plus allocable overhead costs (but excluding profit) are the cost of the component.

18 BAA Certifications When BAA applies to a solicitation, offerors must complete BAA certifications with their proposals See FAR (Buy American Act Certificate) for supply contracts See FAR (Buy American Act Construction Materials) for construction contracts

19 BAA Certification False certification can result in: Sustained protests False Claims Act liability Suspension Debarment Other civil and criminal penalties

20 BAA Price Preference Because of the unreasonable cost element, the BAA is, in practice, a price preference statute. There are three separate price preferences depending on the low domestic offeror s size and the identity of the procuring agency.

21 BAA Price Preference Civilian Agencies: Where low domestic offeror is a large business, agency adds a price evaluation penalty to the low foreign offeror of 6%. Where low domestic offeror is a small business, the agency adds a price evaluation penalty to the low foreign offeror of 12%.

22 BAA Price Preference DoD: Agency adds 50% price evaluation penalty to low foreign offeror, regardless of whether low domestic offeror is large or small. All agencies: Penalty is for evaluation purposes only. Agency pays offered price, not penalty price.

23 The Berry Amendment

24 The Berry Amendment What is the Berry Amendment? A statute that prohibits the DoD from using funds to procure certain items that are not grown, reprocessed, reused, or produced in the United States. When it applies, Berry Amendment is a pure domestic requirement; no unreasonable cost exception.

25 The Berry Amendment The Berry Amendment Applies: To all DoD contracts (but not non-dod contracts) Applies even if another agency is purchasing on behalf of DoD For certain listed products (but not other products) Unless an exception exists

26 The Berry Amendment Listed Products Include: Clothing and most clothing components Tents, tarpaulins, or covers Cotton and other natural fiber products Woven silk and woven silk blends Spun silk yarn Wool Hand or measuring tools Several others (see DFARS )

27 The Berry Amendment Berry Amendment Exceptions: Acquisitions at or below simplified acquisition threshold High-ranking (e.g., Secretary of Army) official has made nonavailability determination. FAR insufficient without additional market research Acquisitions outside U.S. in support of combat operations. Several other exceptions (see DFARS ).

28 The Berry Amendment Does Berry Amendment apply? Check solicitation for DFARS clause (Preference for Certain Domestic Commodities) or DFARS (Restriction on Acquisition of Hand or Measuring Tools). If clause is omitted when it appears that it should apply, check with the Contracting Officer before bidding non-conforming products. DoD IG Report (2015): Berry Amendment clause improperly omitted in 4 of 33 evaluated contracts. Unclear whether contractor could be on the hook if clause omitted.

29 Questions? Thank you! Questions?

30 For More Information Steven J. Koprince Managing Partner Koprince Law LLC (785) Visit to sign up for our free monthly electronic newsletter