Payne Hackenbracht & Sullivan
Buy American Act
The Buy American Act (41 USC. 10) and the attendant Executive Order 10582, December 17, 1954, as amended, essentially provide that unless it is inconsistent with the public interest, or the cost is unreasonable, only such unmanufactured articles, materials, and supplies, as have been mined or produced in the United States, and only such manufactured articles, materials, and supplies as have been manufactured in the United States substantially all from articles, materials or supplies mined, produced, or manufactured in the United States shall be acquired for public use. With respect to construction contracts, the regulations found at FAR 25.2 apply to contracts for the construction, alteration, or repair of any public building or public work in the United States.
It is the policy of the Act that only domestic construction materials be used in construction in the United States, except when:
(1) The cost would be unreasonable, i.e., the cost of domestic construction material exceeds the cost of foreign construction material by more than 6 percent, unless the agency head determines a higher percentage to be appropriate (see Executive Order 10582);
(2) The head of the contracting activity or designee determines the construction material is not mined, produced, or manufactured in the United States in sufficient and reasonably available commercial quantities of a satisfactory quality (see 25.108);
(3) The agency head determines that application of the restrictions of the Buy American Act to a particular construction material would be impracticable; or
(4) The agency head determines that application of the restrictions of the Buy American Act to a particular construction material would be inconsistent with the public interest. Under this authority, agencies may have agreements with foreign governments that provide blanket exceptions to the Buy American Act (e.g., Trade Agreements Act and North American Free Trade Agreement (NAFTA)).
The Act, unfortunately, is frequently misunderstood by construction contractors. It is important to remember that a "domestic construction material" means (a) an unmanufactured construction material mined or produced in the United States or (b) a construction material manufactured in the United States if the cost of its components mined, produced or manufactured in the United States exceeds 50% of the cost of all of its components. Therefore, in determining whether a particular construction material complies with the Buy American Act, it must be first determined whether or not the material is a domestic material, as defined by the clause. If it is not, it violates the Buy American Act unless one of the exceptions apply. If the material is manufactured in the United States, it will only comply with the Buy American Act if 50% of the cost of its components are mined, produced, or manufactured in the United States.
Great care should be taken to avoid violations of the Buy American Act because of the possibility that an intentional violation may result in the debarment of the contractor for a period of up to three years. A contractor must request permission to use a foreign construction material, preferably before bidding, and must show that such use of a foreign material is waranted.
It is also possible to request permission to use a foreign material after award, if circumstances allow for an exception, upon application to the government. This rule follows John C. Grimberg Company, Inc. v. U.S., in which the Federal Circuit in effect decided that the Defense Department's practice of denying postaward waivers was unreasonable.
Before the government is required to make a postaward determination regarding the applicability of the Buy American Act, however, the contractor must explain why the determination could not have been requested before award or why the need for a determination otherwise was not reasonably foreseeable.