Understanding the Buy American Act’s Scope

Federal government contractors–and especially small businesses–often find themselves competing under solicitations subject to the Buy American Act (BAA). While the BAA’s name may sound like a mandate to purchase only American-made products, the BAA is actually a domestic preference statute that can give a leg up to contractors providing domestic products, but does not prohibit foreign products. Here is a brief overview of how the BAA works in practice

When the BAA applies to a solicitation, the federal government is required to purchase domestic products unless one of the several exceptions applies. These exceptions allowing for the purchase of foreign products include, but are not limited to:

• The acquisition falls below the micro-purchase threshold (currently $15,000 for most acquisitions);
• The products or their components are not sufficiently produced or available in the United States;
• The cost of purchasing domestic products would be unreasonable, and
• For Department of Defense contracts, the products are sourced from a so-called “Qualifying Country” with which the United States has a certain type of reciprocal defense agreement.

Perhaps the most commonly used exception is the “unreasonable cost” exception. As implemented by FAR 25.106 and DFARS 225.106, when an offered domestic product is not the lowest cost, the Contracting Officer must add an evaluation penalty to the foreign product, generally in an amount of 20%-50%. The cost of the domestic product is deemed reasonable if it does not exceed the adjusted cost of the foreign product. In this manner, the Buy American Act attempts to balance two important public policies: supporting and promoting American businesses, on the one hand, and being good stewards of the taxpayers’ money, on the other.

Contractors should understand that, unlike a separate domestic preference law, the Trade Agreements Act, the BAA does not prohibit the government from purchasing products from certain countries if one of the exceptions, like the unreasonable cost exception, applies. In fact, in a recent bid protest case, Auburn Manufacturing, Inc., B-423308, B-423308.2 (2025), the GAO held that the government did not violate the Buy American Act by purchasing products manufactured in China.

Understanding how the Buy American Act operates can help government contractors better decide which products will be most competitive on bids covered by the BAA. Contractors who bid on BAA-covered acquisitions would be well-served to investigate the statute and its requirements in more detail.