Overview
FAR Subpart 25.1 implements the Buy American statute and associated Executive Orders, establishing a preference for domestic supplies in government procurement. It requires agencies to acquire domestic end products for use within the United States unless a specific exception applies or the cost is determined to be unreasonable.
Key Rules
- The Two-Part Test: To qualify as a "domestic end product," a manufactured item must:
- Be manufactured in the United States; and
- Meet specific Domestic Content Thresholds:
- Current: 60% of the cost of components.
- 2024–2028: Increases to 65%.
- 2029 onwards: Increases to 75%.
- Iron and Steel: For products consisting predominantly of iron or steel, the cost of foreign iron and steel must be less than 5% of the total component cost.
- COTS Items: The domestic content test is generally waived for Commercially Available Off-the-Shelf (COTS) items, except for those consisting predominantly of iron or steel (excluding COTS fasteners).
- Evaluation Factors: When comparing domestic and foreign offers, the government applies a price penalty to foreign offers for evaluation purposes:
- 20% if the lowest domestic offer is from a large business.
- 30% if the lowest domestic offer is from a small business.
- Exceptions: Restrictions do not apply in cases of public interest, non-availability (see the list in 25.104), unreasonable cost, commissary resale, or commercial Information Technology (IT).
Responsibilities
- Contracting Officers (COs):
- Conduct market research to determine domestic availability.
- Apply the correct evaluation factors (20% or 30%) to foreign offers.
- Ensure the appropriate Buy American clauses are included in solicitations.
- Document determinations of "unreasonable cost" or "non-availability."
- Agency Heads:
- Authorize "Public Interest" exceptions.
- Make "Nonavailability" determinations for specific articles or classes of items.
- Senior Procurement Executives:
- Approve the use of an alternate domestic content test for contracts spanning multiple threshold increase years (after consulting the Made in America Office).
- Offerors/Contractors:
- Certify the origin of their products.
- Comply with shifting domestic content percentages based on the year of delivery.
Practical Implications
- Escalating Compliance: Contractors with long-term supply contracts must track delivery dates closely; an item that qualifies as "domestic" in 2023 (60%) may fail in 2024 (65%) or 2029 (75%) without supply chain adjustments.
- Competitive Disadvantage for Foreign Goods: Foreign manufacturers must be significantly cheaper (at least 20-30%) than domestic counterparts to win a contract, unless a trade agreement (Subpart 25.4) applies.
- Administrative Burden: For non-COTS items, contractors must perform detailed cost accounting of all components to prove they meet the 60/65/75% thresholds.
- Critical Items: The "Reserved" sections for critical items suggest that future updates will likely target specific industries (like semiconductors or pharmaceuticals) for even higher protectionist price factors.
AI Insights
- Protectionist Trajectory: The structured increase in content thresholds (reaching 75% by 2029) indicates a long-term federal policy to decouple supply chains from foreign dependencies and reshore manufacturing.
- Iron & Steel Rigidity: The 95% domestic requirement for iron and steel is significantly stricter than for general supplies, reflecting the strategic importance placed on the domestic metals industry.
- Dynamic Market Research: Because the "Nonavailability" list (25.104) is reviewed every five years, COs cannot rely solely on the list; they have a proactive duty to perform market research for every acquisition to see if a domestic source has emerged.
- Risk of "Fallback" Logic: Section 25.106(b)(2) provides a "fallback" threshold of 55% domestic content if no higher-content offers are available. This acts as a safety valve to prevent total procurement failure while still favoring "mostly domestic" products over purely foreign ones.