The Depart of Justice (DOJ), and various inspector general offices (IG) spend a great deal of time investigating small businesses and large DOD contractors for violation of the Buy American Act of 1933 (BAA) and ultimately submitting false claims to the federal government.
Watson & Associates’ Federal government contracts practice group provides detailed legal advice and consulting to federal contractors within the United States and overseas.
We assist with Buy American Act compliance investigations and help to provide legal defense to small businesses and larger defense contractors facing serious criminal and civil consequences. We help with country of origin requirements, manufacturing concerns and waivers.
Buy American Act Compliance Services
To become compliant as a prime contractor or subcontractor on a construction project, our lawyers can help with:
- Assessment of your manufacturing process
- Products from overseas and percentage compliance requirements
- Buy American Act investigations by DOJ or IG offices
- COTS items
- Assessment for for iron steel and manufactured goods
- Allegations of fraud against the US government
- Legal defense
What is Buy American Act Fraud?
As a federal government contractor, DOJ and IG law enforcement agencies may claim that you have defrauded the government by knowingly providing goods / products in violation of the Buy American Act and the U.S. Trade Agreements Act. The key to avoiding fraud and False Claims Act claims is to make sure your federal procurement and manufacturing processes do not fall short of the statutory requirements. If your government contractors are charged with committing fraud against the government, investigations and defense can be time consuming and expensive. Protect your company immediately.
Why is the Buy American Act Present?
The BAA’s requirements create a preference for domestic end products. This preference is implemented through various government contract clauses ( See FAR 52.225-1 and DFARS 252.225-7001.)The Act is in place to protect U.S. businesses and labor by limiting the procurement and use of end products or construction materials that are not “domestic.”
What are domestic end products and domestic construction materials?
For purposes of the Buy American Act end products include unmanufactured end products or construction materials mined or produced in the United States, in addition to end products or construction materials manufactured in the United States, so long as (a) the cost of the components mined, produced, or manufactured in the United States exceeds 50% of the cost of all components, or (b) the product is a commercially available off-the-shelf item (COTS ITEM).
- Most cases fall within the ambit of trying to figure out if the contractor’s practices meet the 50% cost of all components.
- If the law enforcement agency believes that your situation does not meet the requirements, you can almost guaranty an investigation or charges.
Buy American Act Construction materials for public contract is the core of the Act. Unless you have a waiver from the agency, you can stand a good chance of being investigated.
The Federal Acquisition Regulation definition of domestic end product is not as straightforward as it may seem. Many BAA defense lawyers spend significant amounts of time looking at the facts and contractors processes: Under the government contract regulations an end product means those articles, materials, and supplies to be acquired for public use.”
If the agency is buying a system then the facts may be more complicated. Courts would tend to look to the purpose of the procurement in making determinations as to the end product.
What are Buy American Act Exceptions?
There are certain statutory “exceptions” to the Buy American Act. The government can purchase foreign materials and end products if:
- the expected value of the procurement is below the micro-purchase threshold ($3,500);
- the goods are for use outside the United States;
- the procurement of domestic goods or the use of domestic construction materials would be inconsistent with the public interest;
- domestic end products or construction materials are unavailable;
- the agency is procuring information technology that is a commercial item; or
- the goods are acquired specifically for commissary resale.
The exceptions are present on a case-by-case basis. Having the right Buy American Act lawyer to defend your company can make a huge difference between acquittal and be subject to criminal liability or large civil fines.
What is a Manufacturer Under the BAA?
Many BAA lawyers have their own interpretation of what is a manufacturer. However, defense attorneys familiar with the Buy American Act will understand that the FAR or Statutes do not have a set definition. Each case is looked at on its own merit.
The BAA tends to suggest that end products and at least 50% of the costs of all components be manufactured in the United States, but “manufacturing” in the United States would not necessarily preclude all processing overseas. See for example. See General Kinetics, Inc., Cryptek Div., B-242052.2 (May 7, 1991).
FAR 52.225-9 Buy American Act Construction Materials
According to the Legal Information Institute Construction material means an article, material, or supply brought to the construction site by federal contractor or a subcontractorfor “incorporation into the building or work. The term also includes an item brought to the site preassembled from articles, materials, or supplies.
However, emergency life safety systems, such as emergency lighting, fire alarm, and audio evacuation systems, that are discrete systems incorporated into a public building or work and that are produced as complete systems, are evaluated as a single and distinct construction material regardless of when or how the individual parts or components of those systems are delivered to the construction site. Materials purchased directly by the Government are supplies, not construction material.
Cost of components means –
(1) For components purchased by the Contractor, the acquisition cost, including transportation costs to the place of incorporation into the construction material (whether or not such costs are paid to a domestic firm), and any applicable duty (whether or not a duty-free entry certificate is issued); or
(2) For components manufactured by the Contractor, all costs associated with the manufacture of the component, including transportation costs as described in paragraph (1) of this definition, plus allocable overhead costs, but excluding profit. Cost of components does not include any costs associated with the manufacture of the construction material.”
What is a Component Under the Buy American Act?
As Buy American Act lawyers we suggest that a component is any article, material, or supply incorporated directly into an end product or construction material. See also Marbex, Inc., B-225799 (May 4, 1987).
- Government contract components could potentially be mined, produced, or manufactured in the United States, regardless of their actual place of origin, if
- the end product in which they are incorporated is manufactured in the United States, and
- the components are of a class or kind determined by the government not to be mined, produced, or manufactured in the United States in “sufficient and reasonably available commercial quantities of a satisfactory quality.” See 48 C.F.R. §25.003 (“Components of foreign origin of the same class or kind for which nonavailability determinations have been made are treated as domestic.”); Octagon Process, Inc., B-186850 (Dec. 22, 1976).
How Do you Determine Cost of Components?
Our Buy American Act defense attorneys tend to suggest that the costs of components are generally determined based upon certain costs that you incur as a government contractor when purchasing or manufacturing the components.
- for components that you the contractor purchase, the cost of components includes the acquisition costs (including transportation costs to the place of incorporation into the end product or construction material), and any applicable duty (regardless of whether a duty-free certificate of entry is issued); and
- or components manufactured by the contractor, the cost of components includes all costs associated with the manufacture of the component (including transportation, as discussed above), and allocable overhead costs, but excluding profits and any costs associated with the manufacture of the end product.
BAA and False Claims Act Interaction
When the DOJ or other investigative agency sends a letter, it will usually allege a violation of the False Claims Act and Buy American Act. However, unless there is a Buy American violation, it may be difficult to reach the case for false claims. Therefore, it is important to first assess the underlying issue – the Buy American Act. Watson’s false claims act qui tam lawyers can help federal contractors regardless of the state.
As false claims act defense lawyers, we realize that many government contractors and corporate CEOs incorrectly believe that the Act only applies to contract change orders. This is not so. False claims penalties also can apply to bidding documents, Buy American Act certification forms, False certification under SBA small business programs, etc. Other small businesses may find themselves defending against:
- incorrect or inflated invoices,
- improper cost pricing data, wage rates and overhead;
- False representation about contract specifications, terms, and conditions
- Defective materials.
At Watson, our practitioners are gaining the reputation as one of the top false claims act lawyers when it comes to Buy American Act violations and small business procurement fraud allegations.
Avoid Buy American Penalties and Fines
Call Watson & Associates’ Law Firm Today
As a federal government contractor, whether a small business or subcontractor, having an experienced and knowledgeable Buy American Act attorney working to protect your rights is essential. The Watson & Associates law firm provides full-service government contracting legal services and Buy BAA compliance services.
Call us at 1.866.601.5518.