Editor’s note: CPA supports strong Buy America rules in government procurement.
Our government’s procurement policy falls far short of its potential to encourage and support good jobs in domestic manufacturing. We need to strengthen domestic sourcing requirements for publicly funded programs, including those intended to repair our failing infrastructure….
[Owen E. Herrnstadt | March 4, 2019 | Economic Policy Institute]
While the recently issued “Executive Order on Strengthening Buy-American Preferences for Infrastructure Projects” is an improvement over the status quo, it falls far short of making the substantive improvements that are needed to make sure that “Buy American” actually means buying American.
To begin, the EO does nothing to strengthen domestic content requirements that agencies use to determine if a good is “domestically sourced”—that is, actually made in the United States. Many Americans would be startled to learn that a product requires only 51 percent U.S. content to be considered domestically made under the Buy American Act, which applies to federal government procurement. This does not even take into account the substantial transformation test, when a product is deemed domestic even if it is “made at least in part from materials manufactured in another country,” a special concern for the federal government’s procurement of the equipment and construction materials that are required for infrastructure projects.
In contrast, the Federal Trade Commission requires that the entire product be made substantially domestically in order to satisfy its definition of “Made in the U.S.A.,” although much more must be done to ensure that the FTC rules are effectively enforced.
The EO also fails to address key questions about how to calculate domestic content. Are intangible items such as patent rights and research and development included in the calculation? How are materials valued? Is the origin of components and subcomponents considered, and if so how? Are executive salaries and benefits included? Is there a uniform policy on implementing domestic content requirements throughout the federal government? If not, why not? Is each federal agency left to make up its own way of calculating content?
Further, the EO itself does little to tighten waivers that allow exemptions from domestic procurement requirements in the following circumstances: when the use of foreign-sourced goods are in the “public interest,” when domestic end products are not reasonably available in sufficient commercial quantities, or when the cost of the domestic end product is “unreasonable.” It also fails to require that waiver applications provide information about the impact the waiver will have on domestic jobs or how job losses offset the rationale on which the waiver is based.
The EO also appears to be limited to materials and other products that are used for repair and construction. Tools and other equipment are not explicitly referenced. This means that while the EO attempts to incentivize the use of domestically produced cement for a project, it ignores the sourcing of the cement mixer and trowel used with the cement. The result is that one of the largest opportunities to support U.S. manufacturing workers—the domestic production of tools and other equipment—is lost.
Last, implementation of the Buy American rules must do more than simply encourage recipients of taxpayer-derived public funds to use domestically sourced materials. Efforts by policymakers like Senator Chris Murphy and others to strengthen enforcement of the FTC’s Made in America rules and to require stronger domestic content for defense procurement are sorely needed. Once strong and uniform content requirements are established, without the broad waivers that currently exist, effective enforcement and rigorous monitoring rules are needed to make sure that all recipients of Buy American funds actually buy American.
Read the original article here.
