A new executive order from President Donald Trump is reinforcing his administration’s preference for contractors that source their materials and goods from the U.S.
On Jan. 31, the president signed an executive order following up on his “Buy American, Hire American” order from April 2017. The new directive tells federal agencies to favor domestic goods and services when making procurement decisions in infrastructure or cybersecurity projects. Agencies are to “encourage” companies receiving federal grants, loans and other financial assistance for those projects to maximize U.S.-sourced materials and products.
While the order isn’t a substantive change in the law concerning federal contractors, it might have construction- and cybersecurity-related companies making sure they’re leveraging the domestic goods and materials when competing for contracts.
Under existing law, federal agencies must show a preference toward U.S.-sourced goods and services. These statutes include the Buy American Act of 1933, under which agencies would deem a domestic supplier’s bid to be a “better value” compared to a foreign supplier’s even if the foreign supplier bids lower by a certain margin.
Trump’s Buy American, Hire American executive order directed agencies to “scrupulously monitor, enforce, and comply with Buy American Laws.” But the order also directed agencies to minimize public interest waivers, which allow them to buy foreign goods and materials if buying domestic would be “inconsistent with the public interest.”
The new Executive Order 13858, “Strengthening Buy-American Preferences for Infrastructure Projects,” builds on the previous one by targeting federal contractors working on federally-funded infrastructure projects. It directs agencies to “encourage” companies receiving federal financial assistance “to use, to the greatest extent practicable, [U.S.-sourced] iron and aluminum as well as steel, cement, and other manufactured products … in every contract, subcontract, purchase order, or sub‑award that is chargeable against such Federal financial assistance award.”
In terms of the industries it implicates, the order’s scope is narrow. “Infrastructure projects” include contracts to develop “physical assets” that support transportation, energy, water, utilities and cybersecurity. But the order creates a broad swath of contractors within that scope — any companies receiving “federal financial assistance,” which the order defines to include federal grants, cooperative agreements, direct appropriations and loans.
With a variety of Buy American-related requirements already on the books, “contractors were already having to live with these rules to begin with,” said Eric Whytsell, a partner in Stinson Leonard Street’s Denver office who advises companies on government contract issues. That being the case, the two executive orders together aren’t a substantive change in the law so much as a change in procurement priorities under the Trump administration, he added.
It’s hard to gauge the impact of the “Buy American” half of Trump’s 2017 order on federal contracting, Whytsell said. As there are many factors that influence an agency’s procurement decision, he explained, it’s difficult for a company to tell whether it won or lost a contract because of the Trump administration’s emphasis on domestic materials.
The new order should have prime contractors, particularly in the construction industry, paying more attention to their suppliers in light of the administration’s emphasis on domestic goods, Whytsell said. By that same token, U.S. manufacturers that read the new executive order will likely use it to their business advantage when they sell supplies to prime contractors or U.S. government. “They are going to tout this and make this a selling point,” Whytsell said. “If you’re a domestic manufacturer, you’d be an idiot not to bring it up early and often.”
The January executive order directs agencies to report to the president, through his trade and manufacturing policy advisor, Peter Navarro, how they might maximize the amount of domestic materials used in infrastructure contracts. Whytsell said he wouldn’t expect “any big policy rollouts” originating from that aspect of the order, however.
— Doug Chartier