Overview
FAR Subpart 25.6 implements Section 1605 of the American Recovery and Reinvestment Act of 2009 (ARRA) and the Buy American statute specifically for construction projects funded by the Recovery Act. It mandates that all iron, steel, and manufactured goods used in such projects be produced in the United States, while applying traditional Buy American restrictions to unmanufactured construction materials.
Key Rules
- Domestic Content Requirement:
- Manufactured Materials: Must be manufactured in the U.S. If the material consists predominantly of iron or steel, all manufacturing processes (except refinement of additives) must occur in the U.S.
- Unmanufactured Materials: Must be mined or produced in the U.S.
- Trade Agreement Integration: For projects valued at $6,708,000 or more, materials from "Recovery Act designated countries" (WTO GPA, FTA, or least developed countries) are generally treated as domestic, though Caribbean Basin countries are specifically excluded from this exception for manufactured goods.
- Unreasonable Cost Thresholds: Domestic material is considered "unreasonably priced" if:
- The total contract cost increases by more than 25% by using domestic manufactured materials.
- The cost of domestic unmanufactured material exceeds foreign material by more than 20%.
- Public Transparency: Any exception granted for Recovery Act funds (unless for domestic nonavailability already on the FAR 25.104 list) requires a notice published in the Federal Register within three business days.
Responsibilities
- Contracting Officers (CO):
- Evaluating offeror requests for exceptions based on cost, availability, or public interest.
- Applying price evaluation factors (25% for manufactured; 20% for unmanufactured) to offers proposing foreign materials.
- Negotiating "adequate consideration" (price reductions) if an exception is granted after contract award.
- Investigating allegations of noncompliance and determining remedies (removal of material, price reduction, or termination).
- Head of Agency / Head of Contracting Activity (HCA):
- Authorizing nonavailability determinations.
- Determining if applying the Buy American/ARRA restrictions is inconsistent with the public interest.
- Offerors/Contractors:
- Requesting determinations of inapplicability before or after award (with justification).
- Providing detailed data to support claims of unreasonable cost or nonavailability.
- Ensuring subcontractors adhere to U.S. production requirements for iron and steel.
Practical Implications
- Stringent Iron/Steel Traceability: Contractors must ensure that every stage of the manufacturing process for predominant iron/steel components happens in the U.S. A "steel guardrail" is a prime example: even if finished in the U.S., the underlying steel production must also be domestic.
- High Evaluation Penalties: The 25% evaluation factor for manufactured goods is significantly higher than standard Buy American penalties for non-construction items, making it very difficult for foreign-sourced manufactured goods to win on price.
- Post-Award Risk: If a contractor uses unauthorized foreign material, the Government can force the "removal and replacement" of the material. If removal is impracticable, the Government will typically demand a price reduction and may still pursue debarment or suspension.
- Limited Post-Award Flexibility: COs are discouraged from granting exceptions after award unless the contractor can prove the need was not "reasonably foreseeable," placing a heavy burden of due diligence on the contractor during the bidding phase.