25.504-1 Buy American statute
Source: FAR 25.504-1 on acquisition.gov
For small business set-asides under $50,000, the Buy American statute requires careful evaluation of domestic content and application of a 30% price factor to non-domestic offers, directly impacting award decisions.
Overview
FAR 25.504-1 provides detailed evaluation examples for applying the Buy American statute to acquisitions set aside for small business concerns, specifically for end products used in the United States with a value below $50,000. The section illustrates how to evaluate offers from small businesses that provide domestic end products versus U.S.-made but non-domestic end products, emphasizing the application of price evaluation factors and the determination of reasonableness in award decisions.
Key Rules
- Application of the Buy American Statute
- For small business set-asides under $50,000, the Buy American statute applies, but trade agreements do not.
- Evaluation of Offers
- Offers for domestic end products are evaluated at face value, while U.S.-made but non-domestic end products are treated as foreign and subject to a 30% price evaluation factor.
- Determining Reasonableness
- If the lowest evaluated price (after applying the factor) is still below the domestic offer, the domestic offer may be deemed unreasonable, and award may go to the non-domestic offer.
- Domestic Content Thresholds
- Offers exceeding 55% domestic content may be treated as domestic for evaluation purposes.
Responsibilities
- Contracting Officers: Must correctly apply the Buy American statute, evaluate offers using the prescribed factors, and determine reasonableness per FAR 25.502 and 25.106.
- Contractors: Must accurately represent the domestic content of their products and understand how their offers will be evaluated.
- Agencies: Ensure compliance with evaluation procedures and document award decisions.
Practical Implications
- This section clarifies how to apply price evaluation factors and domestic content thresholds in small business set-asides, helping avoid misapplication of the Buy American statute.
- Contractors should be aware that even if their product is U.S.-made, it may be evaluated as foreign if it does not meet domestic content requirements, impacting competitiveness.
- Common pitfalls include misclassifying end products or failing to apply the correct evaluation factors, which can lead to improper award decisions.
(a)
(1) Example 1.
| Offer A | $16,000 | Domestic end product, small business |
| Offer B | $15,700 | Domestic end product, small business |
| Offer C |
$10,100 |
U.S.-made end product (not domestic), small business |
(2) Analysis: This acquisition is for end products for use in the United States and is set aside for small business concerns. The Buy American statute applies. Since the acquisition value is less than $50,000 and the acquisition is set aside, none of the trade agreements apply. Perform the steps in 25.502(a). Offer C is of 50 percent domestic content, therefore Offer C is evaluated as a foreign end product, because it is the product of a small business but is not a domestic end product ( see 25.502(c)(4)). Since Offer B is a domestic offer, apply the 30 percent factor to Offer C ( see 25.106(b)(2)). The resulting evaluated price of $13,130 remains lower than Offer B. The cost of Offer B is therefore unreasonable ( see 25.106(b)(1)(ii)). The 25.106(b)(2) procedures do not apply. Award on Offer C at $10,100 ( see 25.502(c)(4)(i)).
(b)
(1) Example 2.
| Offer A | $11,000 | Domestic end product, small business |
| Offer B | $10,700 | Domestic end product, small business |
| Offer C | $10,200 | U.S.-made end product (not domestic), small business |
(2) Analysis: This acquisition is for end products for use in the United States and is set aside for small business concerns. The Buy American statute applies. Perform the steps in 25.502(a). Offer C is evaluated as a foreign end product because it is the product of a small business but is not a domestic end product (see 25.502(c)(4)). After applying the 30 percent factor, the evaluated price of Offer C is $13,260. Award on Offer B at $10,700 (see 25.502(c)(4)(ii)).
(c)
(1) Example 3.
| Offer A | $14,000 | Domestic end product (complies with the required domestic content), small business. |
| Offer B | 12,500 | U.S.-made end product (not domestic, exceeds 55% domestic content), small business. |
| Offer C | 10,100 | U.S.-made end product (not domestic, with less than 55% domestic content), small business. |
(2) Analysis. This acquisition is for end products for use in the United States and is set aside for small business concerns. The Buy American statute applies. Since the acquisition value is less than $50,000 and the acquisition is set aside, none of the trade agreements apply. Perform the steps in 25.502(a). Offers B and C are initially evaluated as foreign end products, because they are the products of small businesses but are not domestic end products ( see 25.502(c)(4)). Offer C is the low offer. After applying the 30 percent factor, the evaluated price of Offer C is $13,130. The resulting evaluated price of $13,130 remains lower than Offer A. The cost of Offer A is therefore unreasonable. Offer B is then treated as a domestic offer, because it is for a U.S.-made end product that exceeds 55 percent domestic content ( see 25.106(b)(2)). Offer B is determined reasonable because it is lower than the $13,130 evaluated price of Offer C. Award on Offer B at $12,500.