FAR Subpart 25.2 - Buy American-Construction Materials Analysis

Overview

Subpart 25.2 implements the Buy American statute specifically for federal construction, alteration, or repair contracts performed within the United States. It mandates the use of domestic construction materials unless specific exceptions apply, and establishes the "two-part test" for domesticity and the price penalties used to evaluate offers containing foreign materials.

Key Rules

• The Domestic Content Test: For a construction material to be "domestic," it must be manufactured in the U.S., and the cost of domestic components must exceed specific thresholds:
  • 60% for items delivered before 2024.
  • 65% for items delivered between 2024 and 2028.
  • 75% for items delivered starting in 2029.
• Iron and Steel Rule: For materials consisting "wholly or predominantly" of iron or steel, the cost of foreign iron and steel must be less than 5% of the total component cost.
• COTS Waiver: The domestic content test is generally waived for Commercially Available Off-the-Shelf (COTS) items, except for construction materials predominantly made of iron or steel (though COTS fasteners remain waived).
• Evaluation Factor (Price Penalty): When an offeror proposes foreign construction material based on "unreasonable cost," the Contracting Officer adds a 20% penalty to the cost of those foreign materials for evaluation purposes. If the material is a "critical item," the penalty is 20% plus an additional factor.
• Fallback Threshold: Until January 1, 2030, if domestic offers are unavailable or at an unreasonable cost, the government may treat foreign material with at least 55% domestic content as domestic under specific conditions.

Responsibilities

• Contracting Officers (CO):
  • Evaluate pre-award and post-award requests for exceptions.
  • Apply evaluation factors (price penalties) to non-domestic offers.
  • Negotiate "adequate consideration" (price reductions) if an exception is granted post-award.
  • Investigate allegations of noncompliance and determine remedies.
• Senior Procurement Executive (SPE):
  • Authorizes the use of an "alternate domestic content test" for contracts spanning threshold increase dates.
  • Must consult the Made in America Office (MIAO) before allowing alternate tests.
• Offerors/Contractors:
  • Identify and request determinations for foreign materials during the solicitation phase.
  • Provide detailed cost data and supporting information for exception requests.
  • Explain why any post-award exception requests were not foreseeable.
• Agency Heads:
  • Determine if the Buy American statute is "impracticable" or "inconsistent with the public interest" for specific materials.

Practical Implications

• Escalating Compliance Requirements: Contractors on multi-year projects must be aware that the domestic content threshold may increase (from 65% to 75%) during the life of the contract, potentially impacting their supply chain halfway through a build.
• Bidding Strategy: Offering foreign materials is a high-risk strategy. The 20% evaluation penalty often makes foreign-sourced bids non-competitive unless the domestic equivalent is significantly more expensive.
• Strict Iron/Steel Enforcement: The <5% foreign content rule for iron and steel is much stricter than the general 65%/75% rules, requiring rigorous tracing of raw material origins.
• Post-Award Penalties: If a contractor uses unauthorized foreign material, the CO has the power to force removal and replacement. If removal is "impracticable," the government will likely demand a contract price reduction as a penalty.

AI Insights

• Dynamic Threshold Management: This subpart is unique because it includes "time-locked" increases (2024 and 2029). Contracting Officers and Contractors should utilize the "Alternate" versions of FAR clauses (52.225-9/11) to lock in thresholds if the Senior Procurement Executive approves, providing price stability for long-term infrastructure projects.
• The "Fallback" Bridge: The 55% fallback provision acts as a safety valve for the domestic supply chain. It acknowledges that while the goal is 65% or 75%, the market may not yet be able to support those levels. This prevents projects from stalling due to a total lack of compliant material.
• Transparency Requirements: The requirement to make findings "available for public inspection" (25.202(b)) aligns with the broader "Made in America" initiatives to increase accountability and reduce the frequency of waivers.
• Critical Items Priority: The introduction of higher penalties for "critical items" or "critical components" signals a shift from purely economic protectionism to a national security/supply chain resilience focus.