Disclaimer: The content on this page does not constitute professional financial guidance. Details/requirements may change based on additional guidance from the Federal Acquisition Regulatory Council. This page should not be used as the only source of information when making purchasing decisions, investment decisions, or when executing other binding agreements. Agencies should consult with their General Counsel prior to developing a project to confirm product eligibility and details.
When sourcing projects and services needed to implement federally funded and financed projects, federal agencies must comply with Buy American Act (BAA) federal procurement regulations and other statutes that prioritize American-made products.
To ensure compliance, federal agency contracting officers must first decide whether the Buy America Act (BAA) or the Trade Agreements Act (TAA) applies to each contract. This decision is based on factors like contract size, type, and business eligibility.
It can be challenging to distinguish between the various domestic preference laws. While they may sound similar, they often apply in very different ways. See below to help determine which law applies to a project.
TAA applies to supply contracts over $183,000 and construction contracts over $7.03 million. When TAA applies, all products and services must come from TAA-designated countries.
However, if one or more of the below special set-aside small business categories applies to either the prime contractor or subcontractor, as is often the case, then BAA applies.
Special Set-Aside Categories Federal Acquisition Regulation (FAR) or Veterans Affairs Acquisition Regulation (VAAR) Citation Small Business Set Aside (SBSA) FAR 19.502-2 8(a) Business Development Program (Small Disadvantaged Business (SDB)) FAR 19.8 Women-Owned Small Businesses (WOSB) FAR 19.15 Service-Disabled Veteran-Owned Small Business (SDVOSB) FAR 19.14 Veteran-Owned Small Business (VOSB) (VA Contracts Only) VAAR 819 Historically Underutilized Business Zone (HUBZone) FAR 19.13 BAA and TAA are mutually exclusive, which means contracts follow one or the other requirement, but not both.
TAA allows qualified products from either the United States or TAA-designated countries. To qualify under TAA, end products must be “substantially transformed” in the United States or a TAA-designated country (FAR 52.225-5).
If the BAA applies, the contractor (or offeror) must ensure products and materials procured for the project comply with BAA requirements.
Procurement Under the Buy American Act
Federal agencies procure all types of products—from everyday commercial goods to specialized construction materials. The BAA breaks these out into four broad categories:
- Commercial items—Goods or services commonly used by the public (FAR 2.101), like office supplies or software. They can be slightly tailored for government use but must stay generally commercial in nature.
- Commercial off-the-shelf (COTS) products—Commercial goods sold in large quantities to the public, ready for use, and offered to government agencies without modifications.
- Construction materials—Materials brought to a construction site to be installed in a building or infrastructure (FAR 25.1102(a)). This includes items that are preassembled off-site and delivered.
- Items made mostly of iron or steel—Items that contain more than 50% iron or steel components by cost. This includes mill products like wire, sheet, plate, castings, and forgings. Fasteners (nuts, bolts, etc.) are excluded.
Buy American Act Domestic Sourcing Requirements
When federal agencies source products for construction projects, two basic tests help procurement teams determine which BAA requirements apply:
- Are they “American-made” (i.e., manufactured in the United States)?
- Are they “domestic” (i.e., composed of domestic content)?
Absent a waiver (see below), all products procured for federally funded projects must be American-made. However, certain types of products must be American-made and have a certain percentage of domestic content (by cost), including:
- Commercial end products (FAR 2.101)
- Construction materials (FAR 52.225-9)
- Items substantially of iron or steel (FAR 52.225-1).
Table 1 is a quick-reference guide to BAA domestic content requirements for the various product categories.
Table 1. Required Domestic Content Percentages by Cost
| End Product Category | Domestic Content Required? |
|---|---|
| Commercial end products | Yes—at least 65% domestic content, increasing to 75% in 2029 |
| COTS products | No (caveat: If a normally COTS item (like solar modules or inverters) gets customized for a specific project, it’s treated as a regular commercial item—and the 65% rule applies) |
| Construction materials | Yes—at least 65% domestic content, increasing to 75% in 2029 |
| Items mostly made of iron or steel | Yes—at least 95% domestic content |
Seeking a Waiver
Some products on the market may not qualify for federal procurement under BAA rules—for example, if they cost too much, don’t meet domestic content minimums, or conflict with public or national security interests. In such cases, contracting officers can request an exception. Learn more about when and how to seek a waiver.
Procurement Planning: Key Considerations
Below are the key questions contracting officers should consider to apply the BAA during procurement planning:
The BAA applies to contracts where federal agencies purchase supplies or construction materials for their own use (FAR 25.101(a)). For nonfederal recipients of grants or assistance, different rules apply (such as Build America, Buy America [BABA]).
Depending on the contract size and type, the TAA may apply instead of BAA.
Commercial items, construction materials, and iron/steel items must meet domestic content percentage thresholds (usually 65% by cost for most items, excluding profit, although items of mostly iron and steel have a higher threshold; see Table 1.)
If 65% isn’t achievable and costs are unreasonable, a temporary fallback allows for 55% domestic content through Jan. 1, 2030. If even fallback thresholds can’t be met, waivers may be requested.
COTS items need to meet American-made requirements but do not have a domestic content percentage requirement.Per FAR 25.105, “Critical components and critical items,” agencies may give preference to American-made products containing critical materials even if they cost more. This especially applies to critical materials and components that support key infrastructure or strategic needs.
For information on how BAA requirements apply to energy projects at federal facilities, see Applying the BAA to Energy Procurement for On-Site Energy Generation Projects.
The Compliance Process: What Happens When and Who Does What
Once federal contracting officers confirm that the BAA applies to a contract, the compliance process occurs in three phases—before the contract is awarded, after the contract is awarded, and throughout the contract period.
Phase 1: Pre-Award Compliance
Before the contract is awarded, the contracting officer makes sure the solicitation includes the necessary BAA clauses:
- FAR 52.225-1 and FAR 52.225-2 for supplies
- FAR 52.225-9 for construction materials.
Phase 2: Post-Award Compliance
Once the contract has been awarded, the contractor (or offeror) certifies that the products and materials meet BAA rules using the form described in FAR 52.225-2
If a product is not compliant:
- The contractor provides the contracting officer with justification to support a waiver based on one of the allowable exceptions
- The contracting officer reviews the justification and follows the waiver process.
Learn more about BAA exceptions and waivers.
Phase 3: Ongoing Oversight and Enforcement
Throughout the project, the contracting officer oversees BAA compliance, which involves:
- Recordkeeping—Maintaining documentation on certifications and related details (e.g., location of manufacture, component cost breakdowns, and supplier invoices)
- Site verification—Checking deliveries at the jobsite to make sure they match up with supplier certifications.
To investigate noncompliance concerns, the contracting officer may:
- Request a bill of materials or certificates of origin
- Ask for invoices showing item origins and costs
- Seek independent factory audit results that confirm location of manufacture, sources of components, and costs.
If an item fails to meet BAA standards, the contracting officer may take the following corrective actions:
- Request a waiver for any noncompliant item(s)
- Reject the noncompliant product(s)
- Terminate the contract for default
- Refer the case for legal action if necessary.