There has been a lot of movement in Washington D.C. lately. We’ve talked a bit about infrastructure, and we will discuss it again. But there are certainly other developments on Capitol Hill that warrant our attention. The first one we wanted to discuss today was the Buy America program that was worked on by former President Trump and has been expanded upon by the Biden administration.
The main thrust of the Biden administrations movements on this plan lies in enforcement. The Buy American Act has been languishing under a lax enforcement policy for many years, resulting in a dilution of its overall effect. As a result, the current administration is making a specific commitment to ensure the letter of the law is followed when it comes to federal agencies buying American products.
What is the Buy American Act?
The Buy American Act was passed to in order to ensure the U.S. government spends tax dollars on American goods and not on foreign products. Still, not all products can be purchased in America. When the government is looking for a product that is not made in America, such as vehicle components, they can issue a waiver to purchase those goods from a foreign entity. In many cases, the company in question often operates a subsidiary in the United States.
The problem is that those waivers have been used in ways not intended by the Act. As a result, the United States has lost tens of billions of dollars that did not go to American companies and workers. The problem lies in enforcement. There simply has not been effective enforcement mechanism to ensure agencies are conducting due diligence in their efforts to find American companies to supply what they need.
According to many, the Buy American Act has been unable to meet the needs of the day because those responsible for procurement have had no incentive to follow it. Instead, many federal procurement managers are instead focusing more on the bottom line than buying American. To make the Buy America program successful, the Biden administration wants to ensure the government focuses on enforcement. Moving forward, if a department needs a waiver, they will need to get explicit permission from the White House and must be able to explain why they need the waiver.
Government agencies will also be required to post a request for the item they need on a public forum. This way American companies have a chance to respond and see if they have a product that might meet the government’s needs without shopping foreign companies.
How Stricter Enforcement Will Work
Consider the number of vehicles the federal government owns. We are talking more than a half-a-million. The Buy America Act calls for the replacement of those vehicles, but agencies must do so using made in America parts. If at all possible, they must find sources for at least half of the vehicles and components they need to overhaul the federal vehicle workforce. In fact, the Biden administration wants to move that goalpost from 50% to 75%.
The goal is that by 2029 the U.S. government will be able to source vehicles and components using 75% of parts and components made and procured in the United States. The government also wants to ensure that contractors are disclosing the amount of domestic content, parts, and components in the products they use. Currently, there is no one enforcing how contractors acquire and disseminate products.
Right now, government agencies simply take contractors at their word that they have hit the Buy American threshold. Moving forward, however, government agencies will be required to check the details provided by the contractors. It will no longer be on an honors system, but instead will be strictly verified. They will be required to fill out web-based forms and provide hard data related to their purchasing and procurement decisions. The Biden administration hopes that if American companies know the federal government is enforcing the Buy American Act, they will make critical investments in their businesses and increase production.
It’s All About the Parts Shortage
There is no secret that thanks to the COVID-19 pandemic and an upending of the supply chain, there is a parts shortage in the trucking and transportation sectors. One of the main issues is the ongoing chip shortage happening across the world. American companies may be susceptible to having their business decisions held hostage thanks to the shortage of critical parts and components.
To prevent this, the Biden administration is partnering with a group of 20 lawmakers to craft new legislation aimed specifically at the chip sector. If passed, the new legislation would incentivize South Korean and Taiwanese chipmakers to open up plants in the United States. Should these companies manufacture their chips here, they would meet the Buy American criteria and have no problem selling chips and components to government agencies and federal contractors.
The Biden administration has also directed the White House budget office to create rules specific for critical components and products, such as chips. Wherever there is a kink in the supply chain, the White House plans to make it clear what the rules of the game are.
As the supply chain has dealt with a critical parts shortage, many across the country have seen massive production slowdowns. Hours have been cut and products have stayed on the production line because of the shortage in advanced batteries, computer chips, and other hard-to-find raw materials. And this isn’t just about cars, there have been problems in the home appliance and electronics sectors as well.
Enforcing the Rules for EVs
The Buy American Act has been rolled into the Biden administration’s Build Back Better plan, and for good reason. The BBB plan calls for comprehensive incentives to increase electric vehicle adoption and increase the amount of renewable energy the U.S. buys. And since there is so much uncertainty in the marketplace right now, they could also go a long way in stabilizing the supply chain.
With countries like China making big inroads in the EV sector, many in the White House and in Congress feel that addressing EV parts supply chain issues is a matter of national security. Congress has already passed laws designed to doll out billions of dollars to American companies in an effort to counteract China.
According to the Biden administration, enforcement in the Buy American Act and continued investments in American competitiveness will yield positive results on a number of fronts. Not only do American companies need to be prepared to compete in a future dominated by innovative technologies, but the government must support purchasing products from American providers. A lot of this will come to fruition should the current infrastructure bill be signed into law.
What’s Going on With Infrastructure
There has been a lot of movement on the infrastructure front since we last reported on it. After working with a bipartisan group of senators, the White House now must watch as the Senate debates the latest bill. There is room for optimism, however, as this is a bipartisan effort, and the vote to debate it was supported by senators on both sides of the aisle, a rare feat in today’s polarized political environment.
On the surface, it should be easy to pass an infrastructure bill with the president’s party also controlling Congress. But the Democrats hold the House by a narrow margin and the Senate by the slimmest of margins, with the tie-breaking vote of Vice President Kamala Harris throwing the chamber into Democratic favor. And in this era of hyper-partisanship, it’s not easy to drum up Republican senators willing to support a landmark Democratic initiative. Yet, there is hope.
Biden’s proposal to improve public-works and safety-net programs, dubbed the American Jobs Plan, calls for spending roughly $2.2 trillion, a staggering amount, especially when compared to the money already spent on government stimulus. The $2.2 trillion would include $621 billion on road, bridge, rail, port, waterway, airport, and public transit improvements, as well as building the market for electric vehicles. Broken down further, $115 billion would go to modernizing 20,000 miles of highways and other roads and $20 billion to improve road safety for all users. In addition, funds would be directed to repair the “most economically significant large bridges” and the worst 10,000 smaller bridges.
Only time will tell when and if this bill makes it to President Biden’s desk, but as it stands, it has a greater chance than attempts by previous administrations. We all have our fingers crossed, because this would be the biggest boost to infrastructure in 70 years.