Breakout Session # 409 Rendigs, Fry, Kiely & Dennis, L.L.P. 1 W 4 th Street, Ste 900 Cincinnati, OH 45202 Date: Apr

2. Buy American/Buy America Acts Breakout Session #409 Rendigs, Fry, Kiely & Dennis, L.L.P. 1 W 4th Street, Ste 900 Cincinnati, OH 45202 Date: April 25, 2007 Time: 1:30 p.m. – 2:30 p.m.

3. Buy American Act • The Buy American Act restricts the purchase of supplies, that are not domestic end products, for use within the United States. A foreign end product may be purchased if it is determined that the price of the lowest domestic offer is unreasonable or if another exception applies. • Buy American Act uses a two-part test to define a domestic end product. • The article must be manufactured in the US; and • The cost of the domestic components must exceed 50% of the cost of all the components.

4. Buy American Act • It applies to the purchase of supplies exceeding $25,000 and to construction purchases valued between $25,000 and $7,407,000.

5. Buy American Act Requirements • The Buy American Act, requires that procurement of covered items in excess of the $3,000, the micro-purchase threshold, for supplies or construction materials must be produced in the United States/its possessions or qualifying countries that are exempt unless the Contracting Officer determines that satisfactory quality and sufficient quantity “cannot be procured as and when needed at United States market prices” and delivered within a timely fashion.

6. Buy American Act Requirements/Waivers • Statutory requirement – 41 U.S.C. 10a-10d • Executive Order - 10582 • Acquisitions for supplies above $3,000 micro-purchase acquisition threshold • Restricts the procurement of specified items that are not produced in the U.S. • Authority of the Contracting Officer to approve a waiver to the Buy American Act under certain conditions • Inconsistent with public interest • Not available domestically • Unreasonable cost • For commissary resale (automatically exempt)

7. Exemptions • Public Interest Exemption • Qualifying Countries have DoD “predetermined” public interest exemption for those items mined, produced, or manufactured in the following countries: • Australia, Belgium, Canada, Denmark, Egypt, Federal Republic of Germany, France, Greece, Israel, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Switzerland, Turkey, United Kingdom of Great Britain, and Northern Ireland. • Austria and Finland may, on a purchase-by-purchase basis, be exempted from application of the Buy American Act. • No pre-determined exemption for these two countries

8. Non-availability • Non-availability • Written determination IS NOT required if: • DoD non-availability determination has already been made • Acquisition is full and open • Acquisition was synopsized and no offer for a domestic end product was received

9. Non-availability • Written determination IS required if: • Items not listed in FAR 25.104 and DFARS 225.104 • Approval Levels for a written determination • At a level above the contracting officer for acquisitions valued at or below the simplified acquisition threshold ($100,000); • By the chief of the contracting office for acquisitions with a value greater than the simplified acquisition threshold but less than $1,000,000; or • By the head of the contracting activity (HCA) or immediate deputy for acquisitions valued at $1,000,000 or more.

10. Unreasonable Cost • Unreasonable Cost • Apply as an evaluation factor if the low offeror IS NOT a domestic end item • Written determination IS NOT required if: • DoD determination has already been made for item end products • Spare or replacement parts that must be acquired from the original foreign manufacturer or supplier. • Foreign drugs acquired by the Defense Supply Center, when the Director, Pharmaceuticals Group, Directorate of Medical Material, determines that only the requested foreign drug will fulfill the requirements.

11. Unreasonable Cost • Written determination IS required if: • Items are not listed in FAR 25.104 and DFARS 225.104 • Use an evaluation factor of 50 percent instead of the factors specified in FAR 25.105(b). • The price of a domestic offeror is considered reasonable if it does not exceed the price of the low offeror plus 50%

12. Federal Supply Schedules • Federal Supply Schedules • Contracting Activities must apply the evaluation procedures in DFARS 225.5 when using federal supply schedules • Federal Supply Schedules are not exempt for the Buy American Act

13. Trade Agreements • Impact of Trade Agreements • Trade Agreements Act • Applies only to specific Federal Supply Groups on acquisitions > $169,000 • Trade Agreements apply to only eligible products. See DFARS 225.401-70 for a list of eligible products under current trade agreements • NAFTA • Applies to acquisitions over $25,000 (Canadian end products over $56,190) • Ability to evaluate offerors (only on specific supply groups – See DFARS 225.401-70) without regards to restrictions to the Buy American Act • Caribbean Basin Trade Initiative • Acquisitions subject to the Trade Agreements Act – Caribbean Basin end products must be treated as eligible products

14. Determining Factors • Evaluating Foreign Offerors – Supply Contracts • If price is the determining factor, Contracting Officials will use the following procedures: • If the low offer is a domestic offer, award on that offer. • If there are no domestic offers, award on the low offer • If the low offer is a foreign offer that is exempt from application of the Buy American Act or Balance of Payments Program evaluation factor, award on that offer.

15. Determining Factors • If price is not the determining factor, the Contracting Official will use the following procedures: • If there are domestic offers, apply the 50 percent Buy American Act or Balance of Payments Program evaluation factor to all foreign offers unless an exemption applies. • Evaluate in accordance with the criteria of the solicitation. • If these procedures will not result in award on a domestic offer, re-evaluate offers without the 50 percent factor. If this will result in award on an offer to which the Buy American Act, but evaluation in accordance with paragraph (c)(ii) of this section would result in award on a domestic offer, proceed with award only after execution of a determination, that domestic preference would be inconsistent with the public interest.

16. Buy American v. Berry Amendment • The Buy American Act (BAA)applies to all supply purchases over the micro-purchase threshold for use in the U.S. It also requires the use of domestic construction material. The BAA requires application of differential factor to the evaluated cost or price of supplies that are not domestic end products. A two part test is used to define a domestic end product: (1) the end product must be manufactured in the U.S. and (2) the cost of all its domestically manufactured components must exceed 50% of the cost of all its components. It is applicable to the entire Federal Government. • The Berry Amendment is applicable to all purchases over the simplified acquisition threshold using funds appropriated or otherwise made available to DoD, and applies even if another agency, such as the GSA, is purchasing the item for DoD.  It requires 100% domestic content for covered items of food; clothing; tents, tarpaulins, or covers; textiles, fibers & fabrics; items of individual equipment; specialty metals; and hand or measuring tools.

17. Buy America Act 23 U.S.C.A. §313 49 U.S.C.A. §5323(J) 23 CFR 635.410 49 C.F.R. 661 Interpretations and FTA Guidance

18. Buy America Applicability • Applies to all “Federal Aid” construction projects • Includes local roads and highways, transportation enhancement projects, and non-highway construction when funded by FTA grant money • Applies to manufactured products • Steel and iron requirements • NAFTA does not apply

19. Buy America Requirements • Buy America requires the use of domestic steel and iron in Federally funded construction projects. • Steel and iron requirements do not apply to components in manufactured products or rolling stock.

20. Domestic “Manufacture” • Manufacturing must take place domestically • Alter the form or function of materials or of elements in a manner adding value and transforming materials or elements so that they represent a new end product functionally different from mere assembly • Component vs. Subcomponent • Numerous interpretations of this section • Examples

21. Manufacturing cont’d • Certification Requirements

22. Waiver • Public interest • Non-availability • Price-differential • Rolling stock waivers: foreign sourced steel parts when total cost is 10 percent or less of the contract

23. Waiver • Not produced in sufficient quantities and satisfactory quality • Cost waiver • Exception relating to trade agreements • Micro-computer equipment and software

24. Waiver • Projects under $100,000 not subject to Buy America • Bidder must go through grantee • Allow sufficient time for response • Bidders can request waivers if seeking public interest exception or quantity exception

25. Rolling Stock Requirements • Cost exception • Act does not apply if cost of components produced in the US is more than 60% of the cost of all components and final assembly takes place in US. • Component Defined • Subcomponent Defined • Audit Requirement

26. Certification Requirements • Contracting officials should review all certifications to ensure that FTA will not withdraw funding for non-compliance • Criminal penalties/investigations • Intentional violations • Sanctions • Third party petitions

27. State Restrictions • May be more restrictive than Federal requirements. • More restrictive provisions must be required by state law. • State must provide legal opinion that more restrictive requirements do not conflict with State competitive bidding statutes. • State law must not establish in-State materials preference.

28. Enforcement • FTA responsible for enforcing Buy America provisions. • Materials certification processes are adequate for ensuring compliance

29. Summary • Issue spotting • Interpretations