How Biden’s Purchase American Plan May Increase Small Enterprise
If your company has not yet worked with the federal government in any way, now may be the time to do it.
On Monday, President Joe Biden signed his “Made in America” executive order to strengthen existing Buy American laws, including those of his predecessor, to bolster domestic utility lines and provide access to contracting options for small and medium-sized businesses improve.
Manufacturers welcome the efforts. “Any successful manufacturing policy must ensure that we can drive our economic recovery by strengthening supply chains and accelerating onshoring by providing incentives to create the next job or invest the next dollar here in America,” said Jay Timmons, President and CEO the National Association of Manufacturers, an industry group, in an emailed statement.
Biden’s mandate directs federal agencies to revise the definition of US-made components and raise both the threshold for US-made components considered “Made in America” and the pricing preferences for domestic goods to qualify. In other words, the government will start making more parts of a product domestically, and they may be willing to pay more for an item made locally than for one made by a foreign supplier. The original Buy American Act, which codified these procedures, was created under President Herbert Hoover in 1933 – also a time of economic strain.
Biden’s contract establishes a website that allows American companies to see contracts that have been placed with non-US suppliers and notices of “Buy American” orders issued by the General Services Administration, the federal agency that does the majority of government procurement needs. The exemptions have served as a loophole in recent years, allowing federal agencies to purchase products that may only be partially made in the United States. A yet-to-be-named director of Made in America at the Office of Management and Budget will lead the new initiative and report on its progress.
For small businesses, the contract also offers federal contract options, as the agencies must now use the Manufacturing Extension Partnership, a national network that works with small and medium-sized manufacturers in the United States and Puerto Rico. The White House estimates that contract spending is nearly $ 600 billion.
Overall, the measures for small, potential federal entrepreneurs could play a crucial role, says Karen Kerrigan, president of the Small Business & Entrepreneurship Council, a non-partisan advocacy group in Vienna, Virginia. The complexity of working with the government and the lack of transparency about opportunities have traditionally been a major barrier, she notes.
Buy American Backlash
Of course, some companies could run out of effort, Kerrigan adds. Tightening the rules for Buy American may create opportunities for some smaller contractors, but it hurts those who need to source from Canada and other countries. “A real concern is that the increase in American purchase content may mean some [small and midsize businesses] will be forced to turn to newly restricted domestic supply chains who can increase their costs and price these contracts competitively or win new offers. “It’s essentially going to be a back door tariff.
And to the extent that Biden hopes to restore long-standing trade ties with U.S. allies like Canada and Mexico, his command could undermine it – or even spark retaliation. Based on an advertisement from Biden’s conversation with Justin Trudeau over the weekend, it is clear that the Canadian Prime Minister is dismayed by Biden’s decision to revoke approval for the controversial Keystone XL pipeline to carry Canadian crude oil south. “No doubt there will be a response from Canada. Other nations are watching these kinds of protectionist measures to see if the US will regain leadership in trade or double up on the Trump approach,” says Kerrigan.
Former President Donald Trump also bragged about Buy American policies with his America First agenda. (Trump also imposed tariffs that attempted and failed to win trade wars.) The Trump administration issued a number of executive orders, restricting exemptions or exemptions from “Buy American” rules and extending those rules to loans, grants, and others included federal aid programs. The day before he left office, Trump also issued a definitive rule that increases the percentage of US-made content that an end product can contain in order to qualify under the “Buy American” rules. It also increased price preferences for domestic goods under the Buy American Act.
This rule is now subject to a regulatory freeze. On January 20, Biden’s chief of staff, Ronald Klain, sent a memo instructing all heads of executive departments and agencies to withdraw or maintain new or pending rules until an administrative agent or Biden-appointed agent can review them.