Overview
FAR 25.204 outlines the procedures Contracting Officers must follow to evaluate construction offers that include foreign construction material. It establishes specific price evaluation factors (penalties) applied to foreign materials to determine if the cost of domestic construction material is "unreasonable" under the Buy American statute.
Key Rules
- Standard Evaluation Factor: For non-critical items, the Contracting Officer adds 20% to the price of any foreign construction material proposed for an "unreasonable cost" exception (unless the agency head specifies a higher percentage).
- Critical Items and Components: If the foreign material is a "critical item" or contains "critical components" as listed in FAR 25.105, the evaluation factor is 20% plus an additional preference factor specific to that item.
- Tie-Breaking Preference: In the event of a tie between a domestic offer and an offer including foreign material excepted for unreasonable cost, the Contracting Officer must give preference to the domestic offer.
- Domestic Content Fallback (Transition Rule): Until January 1, 2030, for certain non-COTS items that are not predominantly iron or steel, an offer with more than 55% domestic content may be treated as a domestic offer if the lowest offer is for foreign material with less than 55% domestic content.
- Alternate Offers: Offerors are explicitly permitted to submit an alternate offer based on domestic construction material to protect against the total rejection of their bid if the government denies the foreign material exception.
- Post-Award Documentation: If a contract is awarded based on an exception for foreign material, the Contracting Officer must formally add that specific material to the list of excepted materials in the contract clause.
Practical Implications
- Competitive Disadvantage: Contractors proposing foreign materials must realize that their bid price will be artificially inflated by at least 20% for evaluation purposes, making it difficult to win against domestic suppliers unless the domestic price is significantly higher.
- Risk Mitigation: Savvy offerors should utilize the "alternate offer" provision; this allows them to propose a lower price using foreign material while providing a "safety" bid using domestic material to ensure they remain in the running if the Buy American exception is denied.
- Critical Item Awareness: Contractors must check the FAR 25.105 list frequently, as items designated as "critical" carry higher penalties that could drastically alter the competitive landscape of a solicitation.