On April 18, 2017, Donald Trump signed a Presidential Executive Order on Buy American and Hire American (EO). As we reported at the time, Section 3 of the EO directed the heads of all federal agencies to, among other things: (1) assess the monitoring of, enforcement of, implementation of, and compliance with Buy American laws within their agencies; (2) assess the use of BAA waivers within their agencies; and (3) develop and propose policies to ensure federal funds maximize the use of materials produced in the United States. It also ordered the Department of Commerce (DOC) and the Office of Management and Budget (OMB) to issues guidance to agencies about how to comply with their obligations.

In accordance with the EO, on June 30, 2017, the DOC and OMB issued a joint memorandum directing the heads of all Executive departments and agencies to conduct an analysis and prepare a report of their efforts to meet their Section 3 obligations (a “Section 3 Report”). Pursuant to that guidance, each agency’s Section 3 Report must address the agency’s BAA-related procedures and guidance, compliance reviews, marketing and outreach, and training. Agencies are also required to submit detailed information regarding their issuance of BAA exceptions and waivers.

Finally, the memorandum requires agencies to propose policies to ensure that federal procurements maximize the use of materials produced in the United States, including through: improved workforce guidance regarding domestic sourcing restrictions, instructions and support regarding BAA recording requirements, plans for strengthened internal reviews, improved marketing and outreach, improved training, ideas for strengthening Buy American laws, and additional steps for ensuring compliance with the Trade Agreements Act (which acts, in certain circumstances, as an exception to the BAA).

While both the President’s EO and the recent DOC/OMB directive merely strengthen enforcement of existing federal law, these initiatives likely signal a number of changes for federal contractors moving forward, including:

  1. Fewer Waivers. The Trump Administration’s increased focus on BAA compliance likely means tougher scrutiny of the issuance of BAA waivers. For instance, the EO requires that public interest waivers “be construed to ensure the maximum utilization of goods, products, and materials produced in the United States.”  Government contractors can also expect increased reporting requirements when seeking a waiver.
  2. Increased Compliance Burden. Both the EO and the DOC/OMB directive are likely to result in a number of additional internal agency compliance procedures, and agencies are likely to conduct more internal reviews of BAA compliance. For contractors, these changes could result in increased friction when coordinating with executive agencies that are adapting to new compliance procedures.
  3. Future Legislation. The President’s current focus on BAA compliance coupled with his request that agencies provide feedback regarding future legislative efforts suggests the potential for future legislation to modify the BAA. Given the EO’s widespread support among labor unions, it is possible that even Congressional Democrats could support an effort to enhance the protections afforded to American businesses under the BAA.

The President’s EO and the DOC/OMB directive signal a renewed focus on the longstanding principles underlying the BAA. As the Executive Branch begins to focus more heavily on BAA compliance and the development of supplemental legislation to support the BAA’s framework, federal contractors should anticipate various changes to domestic sourcing requirements and enforcement in the near future.

We would like to thank Timothy Pellegrino, a Bass, Berry & Sims summer associate based in our Washington, D.C. office, for his assistance in drafting this blog post.