New Guidance on Domestic Sourcing Waivers

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On June 11, the White House released new guidance on its plans to limit waivers of domestic sourcing laws, bolstering its previously issued “Executive Order on Ensuring the Future is Made in All of America by All of America’s Workers.” The new guidance provides insight on how the Biden administration intends to enforce domestic sourcing laws such as the Buy American Act over the coming years.

The executive order established a Made in America Office, also known as MIAO, to review agency requests to waive laws such as the Buy American Act from procurements, grants and other government contracting activities. It also directed the Office of Management and Budget to establish reporting and oversight procedures to help enforce the Made in America Laws.

Importantly, the new guidance creates an “initial phase” of implementation for the executive order, indicating that future phases will follow. In this initial phase, the Biden administration will focus on Jones Act waivers and non-availability procurement waivers pursuant to the Buy American Act proposed by 24 agencies subject to the Chief Financial Officers Act. During the first quarter of fiscal year 2022, the MIAO will phase in reviews of waivers proposed by non-CFO Act agencies and other types of waiver requests.

The executive order aimed to “maximize” the U.S. government’s purchasing of goods and services produced in the United States by establishing the MIAO to oversee and administer domestic preference requirements in federal procurements. The office must review agency requests to waive Made in America Laws. The term “Made in America Laws” is broadly defined as covering all statutes, regulations, rules and executive orders that refer to “Buy America,” “Buy American,” or include other domestic preference requirements.

The new guidance tasked agencies to designate a “senior accountable official” for domestic sourcing by June 30. The official must be “sufficiently senior” so as to direct the agency’s activities regarding relevant Made in America Laws, such as identifying opportunities to increase the agency’s reliance on domestic products and services. The official also ensures that the agency complies with procedures for submitting waiver requests to the MIAO.

The guidance broadly defines the term “waiver” to include all “exceptions and waivers under applicable Made in America Laws,” including automatically-effective legal waivers. The guidance lists various Federal Acquisition Regulation provisions among the waivers and exceptions, including those implementing the Trade Agreements Act and the commercial information technology exception. It remains to be seen how the Biden administration will enforce its waiver review procedures for these kinds of exceptions, but the current “initial phase” does not require agencies to address them.

To sufficiently assess why the agency requires the waiver, the guidance details the required information that must be included by the agency.

Among other information, the waiver request must describe the end item or construction material being acquired, including discussion of the impact to the mission if not acquired, country of origin and U.S. content, the estimated value of the procurement, and, if pre-award, whether the supplier of the item is a small or disadvantaged business.

It must also describe: the market research activities used to identify domestically manufactured items satisfying the agency’s requirements; whether competition is anticipated or the procurement used competitive procedures; and the approving authority for non-availability determinations over $25,000.

CFO Act agencies requesting Jones Act waivers must provide a description of the transportation required; explain why the agency cannot acquire transportation on a Jones Act qualified vessel; and justify why it is in the interest of national defense to waive the requirement.

The MIAO plans to review the majority of waivers within 3 to 7 business days.
Under the executive order, each agency was directed to report on its use of Made in America Laws by July 24. The new guidance provides a list of sections that must be included in the report, including: identifying all types of waivers of Made in America Laws that are relevant to the agency and the agency’s plan to manage waivers; describing the agency’s ongoing use of and justification for any longstanding or nationwide waivers; discussing the agency’s recommendations for maximizing the use of domestic goods, products and services; and detailing the status and outcome of the agency’s review of actions inconsistent with the executive order.

The order requires the administrator of the General Services Administration to develop a public website to report information on all proposed waivers and whether those waivers have been granted.

The new MIAO waiver procedures are intended to reduce agencies’ use of waivers of Made in America Laws by increasing scrutiny of such waiver requests. Proposed waivers and the results of the MIAO review will be published on a public website, which may provide useful precedents for contractors considering whether to seek a waiver from an agency. However, given the added scrutiny of waiver decisions and public reporting, contractors should carefully consider the information provided to the agency in connection with the review process that could become public.

Michael Wagner is a partner and Anna Menzel and Evan Sherwood are associates at Covington & Burling LLP.

Topics: Defense Department