By Timothy D. Matheny and Abby Bello Salinas of Peckar & Abramson, P.C.
Originally published April 28, 2023
On March 7, 2022, the Department of Defense (“DoD”), General Services Administration (“GSA”), and National Aeronautics and Space Administration (“NASA”) issued a final rule amending the Federal Acquisition Regulation (FAR) to implement Executive Order (“EO”) 14005, Ensuring the Future is Made in All of America by All of America’s Workers.
The final rule amends the FAR to include:
• A near-term increase to the domestic content threshold; and
• A fallback threshold for special circumstances.
Increase to the Domestic Content Threshold
Pursuant to the final rule, the cost of the domestic components in a manufactured end product delivered in 2023 must exceed 60% of the cost total component cost. This is an increase from the previous 55% domestic content threshold.
The final rule also increases the domestic content thresholds for subsequent years, requiring 65% for items delivered between 2024-2028 and 75% for items delivered in 2029 or later.
For contracts with deliveries spanning multiple years, suppliers must comply with the appropriate threshold for the year of each delivery. For example, a supplier awarded a three-year contract in 2023 may deliver products with 60% domestic content through the end of 2023 but must comply with the 65% threshold for the remaining two years of the contract. If this application is unfeasible for a given contract, a senior procurement executive, in consultation with OMB’s Made in America Office (“MIAO”), has the discretion to allow the application of an alternate domestic content test.
Fallback Threshold
If, before January 1, 2030, an agency determines that it is not possible for a contract to meet the threshold, either because there are no domestic offers that meet the new threshold or because the procurement of such products would create unreasonable costs, then the 55% threshold may be used.
This fallback threshold applies only to construction materials that:
• Are not Commercially Available Off-the-Shelf (COTS) items; or
• Do not wholly or predominantly consist of iron and/or steel.
Assistance for Contractors Moving Forward
Contractors navigating these new rules can look to the NIST’s Hollings Manufacturing Extension Partnership Network for help identifying manufacturers who can meet their supply chain needs and can soon engage with the Small Business Administration’s new manufacturing office, which will connect small manufacturers to assistance and resources.
Tim Matheny is Managing Partner of Peckar & Abramson's Dallas office. He focuses his practice on construction disputes and litigation, including all phases of public procurement law, including bid and proposal preparation, contract award controversies, performance-related disputes, and contract claims. He can be reached at tmatheny@pecklaw.com or 214.523.5100.