Alert
02.16.24
On February 15, 2024, the Department of Defense (DoD) issued a final rule that amends the Defense Federal Acquisition Regulation Supplement (DFARS) and imposes higher U.S. and qualifying country content requirements for certain DoD procurements. As we discussed at the time of the proposed rule, this represents the U.S. government’s overall push to ensure that products and services it acquires are manufactured domestically. The final rule implements President Biden’s January 28, 2021 Executive Order, “Ensuring the Future Is Made in All of America by All of America’s Workers,” and follows a similar rule amending the applicable Federal Acquisition Regulation (FAR) clauses published on March 7, 2022. The DoD’s final rule is effective as of February 15, 2024—the date of its publication.
Consistent with the final rule amending applicable FAR clauses, the DoD’s final rule increases the U.S. and qualifying country content threshold for manufactured end products to 65 percent for products delivered in 2024 through 2028, and further to 75 percent for products delivered in 2029 and later. While the final rule generally requires contractors to comply with the threshold in effect when the product is delivered, it provides the same “alternate domestic content” (ADC) test that was included in the FAR clauses. The ADC test will allow contractors to “lock in” the threshold applicable at the time of contract award for the duration of the contract, upon approval by the senior procurement executive in consultation with the Office of Management and Budget’s Made in America Office. It must be reiterated, however, that as with the final rule amending the applicable FAR clauses, the ADC test is not a replacement or an alternative test to the component test. Instead, the ADC test provides an avenue for contractors to meet the domestic content threshold in place at the time of contract award. The final rule also allows for the use of a “fallback threshold” of 55 percent until January 1, 2030, where products meeting a higher threshold are unavailable or the cost to acquire them would be unreasonable.
Finally, the final rule provides for the use of enhanced price preferences for products deemed to be “critical items” or made up of “critical components.” Consistent with the final FAR rule, however, the DoD’s final rule states that the framework for the enhanced price preference will be set forth in another rulemaking under the currently pending FAR Case 2022–004.
DoD contractors at all tiers should assess these changes to ensure their products and supply chains comply with the new rules.