Policy
FAR 25.201 requires contractors to use domestic construction materials in U.S. federal construction contracts, with strict and increasing domestic content thresholds and special rules for iron and steel.
Overview
FAR 25.201 establishes the core policy for the use of domestic construction materials in federal construction contracts performed in the United States, implementing the Buy American statute and related Executive Orders. The regulation mandates that, except as provided in FAR 25.202, only domestic construction materials may be used. It defines domestic construction materials using a two-part test for manufactured items: (1) the item must be manufactured in the U.S., and (2) the cost of domestic components must exceed a specified percentage of total component costs (60% currently, increasing to 65% in 2024-2028, and 75% from 2029 onward). For iron and steel construction materials, foreign content must be less than 5% of total component costs. There are specific waivers and exceptions for Commercially Available Off-The-Shelf (COTS) items, but not for iron and steel materials except for COTS fasteners. The section also addresses how to handle contracts that span threshold increases, allowing for an alternate domestic content test with senior procurement executive approval and OMB consultation.
Key Rules
- Domestic Material Requirement
- Only domestic construction materials may be used in U.S. construction contracts, unless an exception applies (see FAR 25.202).
- Two-Part Domestic Test for Manufactured Materials
- Manufactured materials must be made in the U.S. and meet escalating domestic content thresholds (60%, 65%, 75%).
- Iron and Steel Content Rule
- For iron/steel materials, foreign content must be less than 5% of total component cost; COTS waiver does not apply except for fasteners.
- Threshold Increases Over Time
- Contracts spanning threshold increases must comply with the applicable threshold at the time of delivery, unless an alternate test is approved.
- Alternate Domestic Content Test
- Senior procurement executives may approve an alternate test, applying the threshold at contract award for the entire period, after OMB consultation.
Responsibilities
- Contracting Officers: Ensure solicitations and contracts include the correct domestic content requirements and clauses; seek senior procurement executive approval and OMB consultation for alternate tests.
- Contractors: Source and certify construction materials to meet domestic content thresholds; track and document component origins and costs; comply with escalating thresholds over contract duration.
- Agencies: Oversee compliance, approve alternate tests at the senior procurement executive level, and consult with OMB as required.
Practical Implications
- This policy ensures federal construction spending supports U.S. manufacturing and labor. Contractors must carefully track the origin and cost of components, especially as thresholds increase over time. Failure to comply can result in contract penalties or disqualification. The rules are complex for contracts spanning multiple years, requiring close coordination with contracting officers and awareness of changing thresholds.