What’s new in this long-standing area?
The FAR Council at long last issues final rule to implement the Trump Executive Order 13881, Maximizing Use of American-Made Goods, Products, and Materials. Only a few days later a Biden Executive Order 14005, Ensuring Future of America is Made in America by all of America’s Workers, hit the streets.
Final Rule – Issued January 19, 2021
The highlights include:
- Changing the percentage of US costs to 55% to qualify as a domestic item, except for commercial off the shelf items.
- New rules related to steel and iron.
- Items from small businesses get 30% advantage in price analysis.
Biden Order - Signed January 25, 2021
A new organization within Office of Management and Budget to review any request waivers as well as more transparency by creating a website to publish the requests and any waivers granted. It also requires additional changes to the acquisition regulations within 180 days.
Now to the point of this BLOG
Because these changes and renewed focus on federal agencies compliance, it will drive significant oversight by IGs and the GAO, contractors can expect the same, if not greater, increase in oversight by DCMA and DCAA in this area. While DCMA normally focuses on getting contractor policies and practices improved to protect the Government’s interest, DCAA auditors are looking to question cost. We would not be surprised to see DCAA auditors asking for documentation of US and foreign cost content of delivered items. Coming up even a single percentage point short of the required 55% will very likely result with 100% of the cost incurred being questioned.
So, what’s a contractor to do?
Here are a few things we recommend:
- Update your purchasing policies for the FAR rules changes as soon as possible.
- Implement a peer review process of all purchases and deliverables with foreign content by program management, technical staff, and purchasing staff. Start the peer review using only the documentation in the contract and purchasing files and then expand to interaction between the peer review team and the original staff. Then update the documentation based on the peer review team's input. Remember for a DCAA auditor if you did not write it down it did not happen.
- For anything with significant foreign content, set up and document a briefing with the Government contracting officer and Program Office. If there is a prime or higher tier subcontractor involved invite them to the party along with the Government.
- Keep the documentation until well after the contract is closed.
- Be prepared to support Government data requests on foreign content in your supply chain as Congress is already asking for this through the 2021 NDAA Section 831 Reporting.
If you buy commercial IT equipment that is delivered to the Government, keep watching for potential new rules that could significantly impact this area.
Redstone GCI is available to assist contractor’s in assessing or updating their purchasing policies and practices to ensure you will meet the DCMA/DCAA expectations. Redstone GCI assists contractors throughout the U.S. and internationally with understanding the Government’s expectations in applying FAR and DFARS purchasing requirements.