Buy American Act: Actions Needed to Improve Exception and Waiver Reporting and Selected Agency Guidance

The Buy American Act of 1933, as amended, is the main U.S. law promoting domestic purchasing. The Act permits agencies to buy foreign end products only under certain exceptions, such as when domestic items are not available at a reasonable cost. Further, U.S. trade agreements waive the Buy American restrictions for certain products.

GAO was asked to review implementation of the Buy American Act. This report assesses the extent to which (1) the federal government procures foreign products through Buy American Act exceptions and waivers; and (2) selected agencies provide training and guidance to implement the Act.

GAO reviewed laws, regulations, and policies related to the Buy American Act and analyzed data for fiscal year 2017 from FPDS-NG. GAO also analyzed a non-generalizable sample of 38 contracts from DOD, HHS, DHS, and VA—the agencies with the most obligations for products in fiscal year 2017. The 38 awards selected include a mix of foreign and domestic products, as well as dollars obligated. Finally, GAO interviewed cognizant contracting and policy officials from the selected agencies.

According to data reported in the Federal Procurement Data System-Next Generation (FPDS-NG) in fiscal year 2017, foreign end products accounted for less than 5 percent—about $7.8 billion—of federal obligations for products potentially subject to the Buy American Act. Federal agencies procured foreign products using exceptions to Buy American Act requirements, as well as through waivers or when the Buy American Act did not apply, as shown in the figure.

The amount of foreign end products purchased could be greater than reported in FPDS-NG, however, due to reporting errors and system limitations. GAO found that 6 of the 38 contracts reviewed from the Departments of Defense (DOD), Health and Human Services (HHS), Homeland Security (DHS), and Veterans Affairs (VA) inaccurately recorded waiver or exception information. FPDS-NG system limitations compound these errors because it does not fully capture Buy American Act data. Among other things, the database does not always enable agencies to report the use of exceptions or waivers on contracts for both foreign and domestic products, reducing data accuracy. The Office of Management and Budget (OMB) is considering strategies to improve Buy American Act data.

The four agencies GAO reviewed varied in their approaches to Buy American Act training and guidance. DOD reports that it will have trained more than 18,000 personnel by the end of 2018. DHS reports training almost 1,400 people—approximately 94 percent of its contracting staff—as of April 2018. Some VA courses mention the Act, but none is focused specifically on implementing its requirements. HHS does not have agency-level training or guidance on the Act. GAO found that contracting officers for the contracts it reviewed face challenges implementing Buy American Act requirements. Having specific and targeted Buy American Act guidance and training can better ensure that agencies meet the Act's requirements.

GAO is recommending that OMB take steps to improve Buy American Act data and that HHS, DHS, and VA improve agency guidance and training on implementing the Act. All of the agencies either concurred or generally concurred with GAO's recommendations.

Each year, the federal government obligates hundreds of billions of  dollars to procure goods and services—reporting $508 billion in fiscal  year 2017 alone. Congress has enacted a variety of laws commonly  referred to as domestic preference laws that establish preferences or  requirements for federal agencies to purchase domestically produced  goods, products, and materials.

The Buy American Act, enacted during the Great Depression in 1933, is  one of the most prominent domestic preference laws. The Act requires  federal procurement of domestic products, but permits federal agencies to  procure foreign products under certain exceptions, such as where  domestic end products are not reasonably available in sufficient quantities  of a satisfactory quality. The restrictions also may be waived under  international trade agreements so that the goods provided by designated  countries can compete on an equal footing with domestic products.

Congress and the administration have undertaken efforts to increase  opportunities for domestic manufacturers. In the current Congress, bills  have been introduced related to the Buy American Act. In April 2017, the  president issued an Executive Order stating that it shall be the policy of  the executive branch to maximize the use of domestic goods in an effort  to, among other things, stimulate economic growth and create jobs in the  United States.

You asked us to review federal agency implementation of the Buy  American Act. This report assesses the extent to which (1) the federal  government procures foreign products through Buy American Act exceptions and waivers; and (2) selected agencies provide training and  guidance to implement the Buy American Act requirements.

To assess the extent of the federal government’s procurement of foreign  end products through exceptions and waivers to the Buy American Act,  we analyzed data from the Federal Procurement Data System-Next  Generation (FPDS-NG) for fiscal year 2017, which represented the most  recent and complete data available at the time of our review. We  analyzed the fiscal year 2017 data to identify the dollars obligated. We  used the categories within the FPDS-NG “Place of Manufacture” and  “Country of Product or Service Origin” fields to determine whether  agencies characterized the origin of a product as either domestic or  foreign. We conducted data checks for obvious errors, such as verifying  that agencies did not use exceptions that were not applicable. We also  made some minor adjustments to mitigate potential data reliability issues.  Based on these steps, we determined that FPDS-NG data were  sufficiently reliable to allow us to calculate the approximate extent of  obligations for foreign end products and the use of Buy American Act  exceptions and the Trade Agreements Act waiver. Because of the  reporting errors and data system limitations we identified, however, as  described later in this report, we are unable to precisely determine the  amount spent on foreign end products through the use of exceptions and  waivers.

We supplemented our analysis by reviewing documentation from a non- generalizable sample of 38 contracts from four selected agencies—the  Departments of Defense (DOD), Health and Human Services (HHS),  Homeland Security (DHS), and Veterans Affairs (VA)—which had the  highest obligations for the types of goods that may be subject to the Buy  American Act. The non-generalizable sample of 38 contracts and orders  were selected from among the following contracting offices in the four  agencies:

DOD: Defense Logistics Agency, Land and Maritime

HHS: National Institutes of Health and the Office of the Assistant  Secretary for Preparedness and Response

VA: Veterans Health Administration  We selected these contracts to obtain a mix of awards that reported  foreign product acquisitions authorized by the various Buy American  exceptions or trade agreement waivers, and to ensure contracts that  reported the purchase of domestic end products were also represented.  We also interviewed cognizant contracting officials and analyzed contract  file documentation to determine how Buy American requirements were  implemented or waived.

To assess the extent to which selected agencies provide training and  guidance to implement the Buy American Act, we reviewed training  materials and acquisition regulations, policies, and guidance from the four  selected agencies—DOD, HHS, DHS, and VA—and interviewed officials  responsible for acquisition policy and training. We also reviewed the  Federal Acquisition Regulation (FAR), as well as relevant work from the  DOD Inspector General regarding DOD’s compliance with Buy American  Act requirements. A more detailed description of our scope and  methodology is included in appendix I.

We conducted this performance audit from October 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.

The Buy American Act of 1933 was enacted during the Great Depression  when there was a need to create and preserve jobs for American  workers, and it established a preference for the federal government to  buy domestic end products. Many of the products the federal  government buys—including aircraft engines and medical supplies—are  end products that may be subject to the requirements of the Buy  American Act. Further, the Buy American Act does not apply to products  that are purchased for use outside the United States or   obtained through contracts under the micro-purchase threshold, which  was generally $3,500 in fiscal year 2017. end products manufactured in the United  States provided that (a) the product is a  commercially available off-the-shelf item;  or (b) the cost of the components mined,  produced, or manufactured in the United  States exceeds 50 percent of the total  cost of all components.

End products that are not considered domestic under the Buy American  Act are treated as foreign. This characterization is based on the origin of  the end product—that is, where the product is manufactured or  produced—and not the vendor’s location. For example, a vendor located  in Finland may supply end products manufactured in the United States, in  which case these products would be treated as domestic products.  Conversely, a vendor located in the United States may supply end  products manufactured in Finland. In this case, the end products would  be considered foreign.

Although the Buy American Act establishes a preference for domestic end  products, there are situations in which agencies can procure foreign end  products through established exceptions to the Buy American  requirements. In addition, under the Trade Agreements Act of 1979, the  United States has waived domestic purchasing requirements—including  the Buy American Act—for certain acquisitions of foreign end products  from countries that are party to international trade agreements or are  considered designated countries by the U.S. Trade Representative.

In implementing the Buy American Act, the FAR sets forth several  exceptions that permit federal agencies to buy foreign end products.  These include situations when a domestic end product is not produced in  sufficient quantities or cases where the cost would be unreasonable to  buy a domestic end product. The steps that contracting officers must take  to determine or document an exception will vary depending on the  circumstances of the acquisition. For example, a written determination  from the Head of Contracting Activity (HCA) or a delegate may be  necessary to determine non-availability in some cases. However, a  written determination may not be required when an acquisition is  conducted through full and open competition, is synopsized, and no  domestic offer is received. Other exceptions to the Buy American Act  restrictions on the purchase of foreign products, such as the exception for  commercial information technology, are blanket exceptions that do not  require a written determination. In addition, some agencies have specified  additional considerations that must precede a determination and what  level of authority is appropriate for certain determinations. The five Buy  American Act exceptions that apply government-wide and the  corresponding determination standards in the FAR are listed in Table 1.

Individual federal agencies may make blanket determinations of situations  in which the Act’s restrictions should not apply to that agency’s  procurements, when it is not in the public interest to restrict the purchase  of foreign end products. For example, over the years, DOD has entered  into reciprocal procurement agreements with 27 foreign counterparts.  DOD determined that it would be inconsistent with the public interest to  apply the Buy American Act restrictions on products from these 27  qualifying countries. Thus, if an offer includes end products from a  qualifying country, those products are not restricted by the Buy American  Act and the acquisition of qualifying country end products does not  require higher approval. This public interest exception for qualifying  countries applies only to contracts awarded by DOD.

Federal agencies can purchase eligible foreign end products from  designated countries when the Buy American Act’s requirements are  waived because of the terms of an international trade agreement or other  criteria, such as a designation by the U.S. Trade Representative as a  least developed country. In accordance with the Trade Agreements Act  of 1979, the president has the authority to waive the Buy American Act.  For eligible products that come from countries covered by the World  Trade Organization’s Government Procurement Agreement, Free Trade  Agreements, and the Israeli Trade Act, the Buy American Act has been  waived so that these items receive nondiscriminatory consideration and  are on equal footing with domestic end products. In total, these  agreements cover approximately 60 countries—overlapping with all but  two of the DOD qualifying countries. Appendix II highlights the overlap.

Unlike DOD’s blanket public interest exception for qualifying countries,  the Buy American Act requirements are only waived under a trade  agreement if the acquisition is of a certain value set by the U.S. Trade  Representative. Current trade agreement thresholds, at or above which  the requirements are waived, range from $25,000 for contracts for eligible  products from Canada to $180,000 for the 45 other parties to the World  Trade Organization’s Government Procurement Agreement. Table 2 lists the parties eligible for trade agreements and the associated threshold  for supply contracts.

The FAR specifies certain conditions in which trade agreements do not  apply, even if the acquisition is above the requisite threshold value set by  the U.S. Trade Representative. In these cases, the Buy American Act  would apply. These conditions include, but are not limited to: acquisitions that do not use full and open competition, when the  limitation of competition would preclude the procedures applicable to  acquisitions covered by trade agreements;  certain sole-source acquisitions for commercial items using simplified  acquisition procedures; acquisitions set aside for small businesses; acquisition of ammunition, arms, or war materials, or for purchases  indispensable for national security or national defense purposes; and acquisitions from federal prison industries or nonprofit agencies  employing people who are blind or severely disabled.

If the contracting officer determines that a trade agreement applies to a  particular acquisition, which waives the Buy American restrictions, that  determination does not require additional review at a higher level. This is  similar to other circumstances where Buy American Act restrictions do not  apply, such as for the acquisition of products for use outside the United  States or contracts valued below the micro-purchase threshold.

The Buy American Act’s applicability is based on the country of origin of  the product being supplied, rather than the country of the vendor offering  the product to the government. Vendors who propose to do business with  the U.S. government are required to certify as to where their products are  manufactured or produced—whether in the United States or in a  designated country covered by the Trade Agreements Act.

Vendors can provide an annual certification applicable to all of their  contracts through the federal government’s contractor registry, known as  the System for Award Management (SAM). Through SAM, a vendor  identifies the country of origin for foreign products associated with a broad  category of products. For example, a vendor could state that it provides  aircraft components that originate in France and Mexico. Vendors also  have the option not to certify the origin of their products in SAM, but  instead provide information about foreign end products in their individual  offers for contracts. Contracting officials include the relevant clauses in solicitations and contracts in accordance with regulation to require vendor  certification. For example, the clause at FAR 52.225-2, Buy American  Certificate, requires the offeror to certify that each end product is a  domestic end product, or list any foreign end products and their country of  origin.

Federal Procurement Data System-Next Generation

Once a contract is awarded, the awarding agency must enter certain  information into FPDS-NG, a government-wide database for contract  awards and obligations. The Office of Federal Procurement Policy  (OFPP) within the Office of Management and Budget provides the overall  direction for FPDS-NG, which is managed by the General Services  Administration. FPDS-NG data can be populated through the individual  systems agencies use to develop contracts. Agencies are responsible for  the quality of the information transmitted to FPDS-NG, including data  captured on the contract value and whether the foreign product  acquisition is authorized by one of the Buy American Act exceptions or a  trade agreement. This information is recorded at the contract level, or at  the delivery order level for orders from indefinite delivery contracts. For  certain product categories—essentially those that represent end  products—FPDS-NG requires that contracting staff enter information in  the “Place of Manufacture” drop-down data field, as shown in Figure 1.  This field must be populated for all reported manufactured end products,  including those valued under the micro-purchase threshold, which at the  time of our review was generally $3,500. Options in this field include  indicating that the product is made in the United States, or that it is made  outside the United States and qualifies under one of the Buy American  Act exceptions, or that it is subject to the requirements of a trade  agreement instead of the Buy American Act requirements.

In 2018, FPDS-NG data on agencies’ historical reporting of the use of  Buy American exceptions were added to the website on which agencies  post contracting opportunities (www.fbo.gov). According to OFPP, this  allows vendors selling domestic products to more easily see how  agencies acquire foreign goods pursuant to Buy American Act  exceptions.

Agencies Report Applying Buy American Act Exceptions and Waivers but Data Quality Issues Exist

In fiscal year 2017, the federal government obligated approximately $7.8  billion for the acquisition of foreign end products, which accounts for less  than 5 percent of total federal contract obligations for end products in that  year. We observed differences in how civilian agencies and DOD apply  Buy American Act exceptions and waivers. In our review of 38 contracts  and orders from four agencies—DOD, HHS, DHS, and VA—we found 6  instances where the place of manufacture information was misreported in  FPDS-NG. We further identified system limitations in how FPDS-NG  captures information.

Foreign End Products Accounted for Less Than 5 Percent of Contract Obligations for Products Potentially Subject to the Buy American Act in Fiscal Year 2017

Based on our analysis of FPDS-NG data, almost 40 percent of federal  contract obligations in fiscal year 2017—totaling approximately $196  billion—were for domestic and foreign end products, such as aircraft  parts, that may be subject to the Buy American Act. Less than 5 percent  of these obligations—approximately $7.8 billion—were reported as  foreign end products. This is consistent with the information agencies  reported in FPDS-NG in the previous 4 years, with foreign end products  accounting for approximately 3 to 8 percent of goods subject to Buy  American Act restrictions between fiscal years 2013 through 2016. The  foreign end products in fiscal year 2017 primarily came from South Korea,  the United Kingdom, Afghanistan, Canada, Mexico, and the United Arab  Emirates, which together accounted for almost half of the total foreign end  products reported. Appendix III shows the federal government’s  obligations for foreign end products from various countries for fiscal year  2017.

The procurement of foreign end products is permitted by the flexibilities  available under the Buy American Act’s exceptions and waivers.  Agencies also procured foreign end products through means separate  from the exceptions allowed under the Buy American Act, primarily in  cases where the Act would not apply.

Agencies reported obligating more than $700 million to procure  foreign end products by applying one of the five government-wide Buy  American Act exceptions—such as domestic non-availability or  unreasonable cost—in FPDS-NG for fiscal year 2017.

Agencies reported obligating approximately $550 million to procure  foreign end products as permitted by the Trade Agreements Act,  which waives the Buy American Act’s domestic preference  requirements for US trading partners when eligible products are  covered by trade agreements and are above certain dollar thresholds.

DOD also obligated nearly $2.9 billion to procure foreign products  from countries with which it has reciprocal procurement agreements,  using what is referred to as the DOD qualifying country exception.  This is an exercise of the authority available to agencies under the  Buy American Act’s public interest exception. DOD determined that  it is not in the public interest to restrict the purchase of foreign end  products from 27 countries. All but two of these qualifying countries  are also US trading partners, so some of these awards for eligible  products may be authorized by a trade agreement. However, the  qualifying country exception allows DOD to procure foreign end  products without regard to dollar thresholds or other trade agreement  eligibility limitations.

Agencies also procured foreign end products, such as fuel, to be used  outside the United States, in which circumstance the Buy American  Act’s requirements do not apply. For fiscal year 2017, these  obligations accounted for almost $3.7 billion—about 47 percent of all  dollars obligated for foreign end products, as reported in FPDS-NG.

Figure 2 highlights fiscal year 2017 obligations, including agencies’  reported spending on foreign end products under the Buy American Act  exceptions and other means.

DOD Buys Most Foreign End Products for Use Outside the United States while Civilian Agencies Report a Wide Array of Buy American Act Exceptions and Waivers

DOD accounted for more than 80 percent—roughly $6.4 billion—of the  total obligations for foreign end products in fiscal year 2017. Almost all of  DOD purchases were either for use outside of the United States, so were  not subject to Buy American Act restrictions, or were reported under the  public interest exception for DOD qualifying countries. In contrast, civilian  agencies report a more varied mix of the exceptions and waivers of the  Buy American Act. The civilian agencies—which are unable to apply  DOD’s qualifying country exception—were more likely to report buying  foreign end products based on trade agreements or another exception to  the Buy American Act requirements. Figure 3 shows how DOD and the  civilian agencies acquired foreign end products authorized by the various  exceptions and waivers of the Buy American Act.

From our review of FPDS-NG data, the civilian agencies are more likely  to cite one of the five Buy American Act exceptions or a trade agreement  waiver when buying foreign end products, and thus take corresponding  actions to document or approve the authority cited. For example, in our  review of contracts from four agencies, VA obligated $71,000 for medical  imaging equipment from Canada, and had to consider whether a trade  agreement waiver applied. The manufacturer was determined to be the  only source available and the contracting officer determined the  acquisition was authorized by a Buy American exception based on  domestic non-availability, which can require additional review.

In contrast, DOD may make a similar contract award for equipment from  Canada based on the qualifying countries exception. DOD acquisitions,  then, may be authorized by exceptions such as domestic non-availability  when a required item does not come from a qualifying country. For  example, we reviewed a $744,000 DOD award for vehicle equipment that  was only available from South Africa—which is not one of the DOD  qualifying countries and not covered by any of the trade agreements—so  the acquisition was authorized by the domestic non-availability exception.

In addition, the civilian agencies also reported buying foreign end  products for use outside the United States but to a lesser extent than  DOD. For example, this included one of the contracts we reviewed, an  HHS award for Ebola vaccines manufactured in the Netherlands, with  $44.7 million obligated in fiscal year 2017. This contract was reported as  used outside the United States because it is primarily stored overseas.

Coding Errors and System Limitations Highlight Data Reliability Issues

FPDS-NG is the primary means for capturing procurement data regarding  the Buy American Act, but we found that agencies may not always input  reliable information on the extent to which exceptions or waivers  authorized the acquisition of foreign end products. In addition, some  aspects of how FPDS-NG is structured could lead to additional data  reporting errors.

In the non-generalizable sample of 38 contracts and orders we examined  from DOD, HHS, DHS, and VA, we found 6 awards where information  related to the Buy American Act was incorrectly reported in FPDS-NG. In  three of the six contracts, agencies recorded the wrong exception or  waiver, most often because of an error when reporting the place of  manufacture in FPDS-NG. For example, DOD reported a $22,000  contract for vehicle equipment from South Africa as a Buy American Act  exception due to unreasonable cost. But the contract file indicated that  the exception that applied was domestic non-availability. DOD officials  acknowledged the error and corrected it in FPDS-NG during the course of  our review.

In the three remaining contracts, agencies misreported whether an end  product came from the United States or another country. For example,  DHS incorrectly recorded that an $18 million contract was for aircraft  accessories and other parts manufactured in the United States, even  though file documentation showed the contract was for Italian-produced  spare parts from the original equipment manufacturer. The Italian- produced spare parts were available from existing inventory maintained  by the manufacturer and were needed immediately to meet a mandatory  operational requirement. Officials from DHS acknowledged the recording  oversight, attributed it to a mistake when entering information in FPDS- NG, and have since corrected the error in response to our observation.

Additionally, FPDS-NG has system limitations that could hinder complete  and accurate reporting of Buy American Act information:

DOD Qualifying Country Exceptions and Trade Agreement  Waivers. FPDS-NG requires that information on the type of Buy  American Act exception or waiver applied be provided when end  products are reported as foreign. But FPDS-NG does not identify  errors associated with this process. For example, we reviewed an  $8.3 million DHS contract for engines manufactured in Germany that  was recorded as a DOD qualifying country exception in FPDS-NG,  although this exception is not available to civilian agencies.  Contracting officials corrected the data in FPDS-NG during the course  of our review. Further, FPDS-NG does not prevent agencies from  reporting trade agreement waivers when the contracts are valued  below applicable thresholds or waivers do not apply, such as for small  business set asides. For example, in the fiscal year 2017 data we  reviewed, more than 5 percent of contract obligations reported for  trade agreement waivers were for awards set-aside for small  businesses, which would not be eligible under the Trade Agreements  Act. OFPP officials noted that because of the various dollar thresholds  applicable to different trade agreements, adding automatic thresholds  in FPDS-NG to guide contracting staff in reporting an applicable trade  agreement could lead to additional data errors in the procurement  database.

Awards under the Micro-purchase Threshold. Although the Buy  American Act requirements do not apply to contract awards valued  below the micro-purchase threshold—generally $3,500 in fiscal year  2017—the FPDS-NG ‘Place of Manufacture’ field does not have an  option to indicate whether a contract is under the threshold. Instead,  contracting officers entering information for awards under the micro- purchase amount must still state whether the product is domestic or  foreign. If the product is foreign, the officials must select a Buy  American Act exception authorizing the purchase, even though no  exception is needed at these dollar levels. As a result, when agencies  report in FPDS-NG that a Buy American Act exception or waiver  applied for a procurement valued at less than $3,500, that information  would not be accurate. Based on our review, this may have involved  about $16 million in fiscal year 2017 obligations.

Awards for both Foreign and Domestic Products. When reporting  data for contracts that include multiple end products from both the  United States and a foreign country, FPDS-NG only allows for one  country of origin to be identified. Contracting officers told us that they  typically will report a foreign end product in FPDS-NG when the  foreign products account for the preponderance of the contract value.  Thus, in cases where a contract includes foreign end products that do  not account for the preponderance of the contract’s value, the value of  these foreign end products would not be reported in FPDS-NG. We  have previously reported that FPDS-NG has similar limitations in other  fields, such the type of product or service provided, which prevent  contracting officers from identifying more than one condition.  According to OFPP, a recent change in the FAR requiring contract  reporting at the line item level should provide greater transparency of  all products included in a contract.

Buy American Act Exceptions and Waivers under Indefinite  Delivery Contracts. The way FPDS-NG captures data for Buy  American Act exceptions and waivers for some indefinite-delivery  contracts results in inaccurate data reporting. When an indefinite- delivery contract is initially awarded, FPDS-NG functionality does not  give contracting staff the option to enter information for the ‘Place of  Manufacture’ field. Instead, this information is typically captured once  an order is placed on the contract. In our review of FPDS-NG data  across the four agencies, however, we found that in some cases  obligations are reported on the initial indefinite delivery contract so the  Buy American Act exceptions or waivers are not recorded. This  occurred with multiple agencies, but particularly at HHS, where  information for almost 28 percent of HHS obligations for end products  in fiscal year 2017 was not captured in FPDS-NG because the  obligations were reported in the system through the initial contracts  rather than orders. As a result, the applicability of the Buy American  Act for HHS contracts totaling almost $1.9 billion in fiscal year 2017  was unreported in FPDS-NG.

DOD, DHS, and VA officials told us they identified FPDS-NG reporting as  an area of concern. GAO Standards for Internal Controls in the Federal  Government state that management should use quality information to  support objectives, and that such data should be complete and  accurate.

In response to the 2017 Executive Order calling for federal agencies to  assess their implementation of the Buy American Act requirement, OFPP  officials told us they are identifying potential strategies for improving the  information agencies submit to FPDS-NG. As OFPP weighs potential  options for FPDS-NG reporting, implementing enhancements to reduce  data entry errors and ensure that the data collected are complete and  accurate would help enable the system to provide the most useful  information possible. Ensuring information is correctly reported in FPDS- NG is critical because the data are used to inform procurement policy  decisions and facilitate congressional oversight.

Agency Approaches to Training and Guidance Varied and Certain Contracting Practices Highlight Buy American Act Implementation Concerns

The four agencies we reviewed—DOD, HHS, DHS, and VA—took  different approaches to provide training and guidance for the Buy  American Act requirements. Contracting officers faced challenges when  procuring products subject to the Buy American Act. For example, we  found instances in which contracting officers applied a waiver or  exception to contracts where the waiver did not apply and did not have  complete guidance for required determinations or reviews. There also  were challenges in confirming product origin information when vendors  did not provide consistent information.

Agency Approaches to Guide Implementation of Buy American Act Requirements Varied

The four agencies we reviewed varied in the mix of training and guidance  provided to aid contracting officers in implementing the requirements of  the Buy American Act. Three of the four agencies—DOD, DHS and VA— supplemented the federal acquisition regulation, which implements the  requirements of the Buy American Act and Trade Agreements Act, with  their own acquisition regulations. In addition, DHS and DOD have  recently updated existing training or added new training and guidance. VA  issued policy memoranda in 2017, emphasizing the importance of  meeting Buy American Act requirements, but has not added training or  provided specific guidance. HHS does not provide department-level  training or guidance related to the Buy American Act. Most of the DHS  and DOD contracting officers we spoke to reported that they had attended  training and several found the guidance provided by the training to be  helpful. HHS and VA contracting officials described confusion due to the  lack of resources available at their respective agencies.

DOD Updated Its Buy American Act Training in 2017

In 2017, in response to a series of recommendations from the DOD  Inspector General to re-emphasize Buy American Act training and  guidance, the Defense Acquisition University introduced an updated  training course that specifically focuses on the requirements and  implementation of the Buy American Act. While not mandatory, a June  2017 memo notified all DOD services and the defense agencies that  members of their contracting workforce should complete this training as  part of their professional development. At the current pace of enrollment,  DOD officials anticipate approximately 18,000 people will have taken this  course by the end of September 2018, which is a seven-fold increase  over previous graduation rates. Incorporated into these trainings were  supplemental on-the-job tools to assist contracting officers when  awarding contracts for end products subject to the Buy American Act  requirements. One such tool is a flowchart outlining applicable solicitation  provisions or contract clauses based upon the awarded contract’s total  dollar value. DOD contracting officials we interviewed from Defense  Logistics Agency’s (DLA) Land and Maritime division had completed the  agency-level Buy American Act training and said it served as a good  refresher, with some noting that most of the training they had received on  the subject came when they were first hired.

DOD provides regulations and guidance on Buy American Act  requirements through both the Defense Federal Acquisition Regulation  Supplement (DFARS) and the accompanying Procedures, Guidance and  Information. DOD contracting officers use the provisions and clauses in  DFARS to address the public interest exception for DOD qualifying  countries. In addition, as a part of the updated training, the Defense  Pricing and Contracting Office developed two documents to provide  additional Buy American Act guidance. One outlines a step-by-step  approach contracting officers can follow to determine whether the Buy  American Act applies to their particular procurement and, if so, whether  the use of an exception or waiver is appropriate. The second assists  contracting officers with evaluating all offers—foreign and domestic— when price is the determining factor.

In addition, we found that DLA supplements the available Defense  Acquisition University training and guidance with a robust level of support,  including annual training and subject matter expertise. DLA contracting  officers told us that while they found the updated training helpful, they  also appreciated the training course internal to their agency, as it  addresses the types of procurements they typically handle in their day-to- day work, such as buying spare parts. Further, DLA contracting officers  noted that they use the job aid provided through the local training.

DHS Added Buy American Act Training and Revised Policy

DHS introduced training courses in 2017 that specifically focus on the  requirements and implementation of the Buy American Act, including a  mandatory training course for DHS contracting officers. DHS reported that  94 percent of contracting staff had taken the required course as of April  2018. DHS developed these courses in response to the 2017 Executive  Order to ensure its staff was familiar with the Buy American Act  requirements. Incorporated into these training courses are supplemental  on-the-job tools to assist contracting officers when awarding contracts for  end products subject to the Buy American Act requirements, such as a  flowchart outlining applicable solicitation provisions or contract clauses  based upon contract dollar value. Contracting officials generally view the  training and tools they received as beneficial. For example, several DHS  contracting officials we interviewed said that the agency’s new course  provided a helpful review on the topic, while one contracting officer  specifically noted that the course materials are useful to new staff, to help  them understand the Act’s waivers and exceptions.

DHS also revised its acquisition manual in December 2017 to add further  detail regarding the Buy American Act requirements. Specifically, DHS  updated its acquisition manual to provide contracting officers more explicit  FPDS-NG reporting instructions for procurements subject to the Buy  American Act, as well as discretion to purchase domestic end products at  or below the micro-purchase threshold. Additional changes include  increasing the documentation and level of managerial review required to  use several of the exceptions to the Buy American Act. For example, prior  to 2018—which includes the time period in which the DHS contracts and  orders we reviewed were awarded—the head of individual contracting  offices had the authority to approve domestic non-availability and  unreasonable cost exceptions, with a notification made to the DHS Chief  Procurement Officer. But under the new policy, the use of these  exceptions must have the concurrence of the HCA—who is responsible  for contracting activities within individual DHS components—and be  approved by the department’s Chief Procurement Officer. Table 3 outlines  these changes.

In September 2017, VA issued guidance to reinforce existing Buy  American Act requirements. The policy memorandum encourages the  HCAs within VA to institute reviews of awarded contracts subject to the  Buy American Act to ensure compliance. As of September 2018, policy  officials did not know how many HCAs had taken this step. Further, the  guidance emphasizes the importance of Buy American Act training for its  acquisition workforce. VA policy officials explained that the Buy American  Act is introduced in several VA training courses, but the agency does not  have a specific course on implementing the Buy American Act  requirements or provide additional instruction or tools. During the course  of our review, VA officials said that some of the HCAs had added internal  training on the Buy American Act. In addition, VA contracting staff has the  option of taking training offered outside the agency, such as the updated  Defense Acquisition University course on the Buy American Act. This  training is not required.

Contracting officials we spoke to at VA said they struggled with the details  of awarding contracts subject to Buy American Act requirements because  they are not provided sufficient agency-specific training and guidance on  the topic. Moreover, several contracting staff noted an increased need for  training due to recent changes in VA contracting practices. Specifically, in  response to a 2016 Supreme Court decision, VA has increased  contracting efforts with veteran-owned small businesses through the  Veterans First Contracting Program. As a result, contracting officials  explained they have reduced their use of schedule contracts, in which the  determinations related to the Buy American Act requirements were made  with the initial awards. As one contracting officer explained, prior to this  change, more than 90 percent of her division’s procurements were  through VA schedule contracts in which Buy American Act applicability  had already been established. However, this shift in contracting practices  means contracting officers will more frequently need to consider the  applicability of the Buy American Act, but contracting officers have not  received specific guidance or training to do so. Noting the significance of  this change, one contracting officer stated she approached VA  management to obtain Buy American Act training for her division, but  such training was not available.

Federal internal controls state that agencies should ensure that training is  aimed at developing and retaining employee knowledge, skills, and  abilities to meet changing organizational needs. In September 2018, we  reported that VA was experiencing difficulties implementing multiple  aspects of the Veterans First policy, and we recommended that VA  provide more targeted implementation training. As VA moves forward to  implement this training, incorporating the Buy American Act requirements  will be important to provide greater assurance that staff has the  knowledge and skills needed to navigate the changing procurement  environment.

HHS Does Not Provide Department-wide Buy American Act Training or Guidance

HHS does not have agency-level Buy American training or guidance. The  HHS Acquisition Regulation Supplement does not address foreign  acquisitions. HHS officials told us that efforts to develop guidance that  would address Buy American Act requirements are underway, but they do  not know when they will be finalized and made available to contracting  officers, and could not describe the extent to which they will address Buy  American Act implementation. The HHS contracting officers we  interviewed discussed informal Buy American Act training their divisions  had developed because department-level training was not available. For  example, at HHS’ National Institutes of Health, a contracting official told  us about a training course she recently developed because her office was  taking on the administration of additional contracts for which the Buy  American Act requirements would apply. Contracting officers at HHS’  Office of Biomedical Advanced Research and Development Authority  described informal training on the agency’s contract writing system— included as part of their weekly internal staff meetings—that provides  additional guidance on how to appropriately complete certain data fields  relevant to the Buy American Act.

Agencies Face Challenges Applying Waivers and Exceptions Where Guidance and Training Is Incomplete or Does Not Exist

In our analysis of 38 contracts from across the four agencies, we found  that agencies faced various levels of challenge in applying the Trade  Agreements Act waivers and Buy American Act exceptions to acquire  foreign end products. This was particularly apparent in cases where  contracting officers had to determine if a trade agreement applied or  cases which required a determination that a domestic end product was  not sufficiently available, in accordance with the domestic non-availability  exception to the Buy American Act requirements. Contracting staff also  had difficulty determining the origin of products in light of incomplete or  conflicting information.

Trade Agreements Act Incorrectly Applied

Of the six contracts we reviewed reporting that a trade agreement applied  to the foreign end products purchased, we found two cases in which this  waiver did not apply to the contracts in question. The value of the contract  is one determining factor for whether a trade agreement waives the Buy  American Act requirements, although the FAR also states additional  factors that would affect applicability under a trade agreement. The two  contracts we found, both from VA, had total dollar values at award— $8,435 and $11,950, respectively—that were less than any of the  thresholds at which trade agreement waivers of the Buy American Act are  applicable. Both contracts were for products from countries that are party  to the World Trade Organization Government Procurement Agreement,  so the value of the acquisition would have to be equal to or exceed  $191,000—the threshold that was in effect at the time of award—for  waivers from Buy American requirements to apply. Contracting officials in  both cases were generally unaware that the applicable threshold was not  met, making the trade agreement waiver inapplicable.

Although VA has added Buy American Act guidance since these  contracts were awarded early in fiscal year 2017, the information currently  available does not provide sufficient detail to assist contracting officers  when awarding contracts in these situations. For example, the guidance  VA provided contracting officers in September 2017 does not emphasize  consideration of the applicable trade agreement thresholds or include  information on how contracting officers should determine the applicable  waiver or exception. When contracting officers procure foreign end  products, the type of waiver or exception used to support the purchase  matters—particularly when required additional steps and review are not  completed because the wrong waiver or exception was applied. We found  that the two VA contracts with foreign end products were incorrectly  reported as the Trade Agreements Act waiver having applied. If one of  the other Buy American Act exceptions permitting purchases of foreign  end products had applied, contracting officers may have been required to  obtain higher-level review or complete a written determination.

In addition, we reviewed contracts that show some of the complexities  contracting officers face beyond applying the dollar thresholds when  determining if an award for foreign end products is eligible under the  Trade Agreements Act waiver of the Buy American Act. Specifically, we  found instances where DHS contracting officials took different  approaches for non-competed awards for similar foreign-manufactured  products. For example, we reviewed a non-competed $58 million DHS  award for acquiring spare aircraft parts from an original equipment  manufacturer located in a foreign country that is party to the World Trade  Organization Government Procurement Agreement. DHS reported in  FPDS-NG that the procurement was waived by the Trade Agreements  Act. However, we also reviewed two other sole-source awards from DHS  for similar products—spare aircraft parts from two separate  manufacturers in foreign countries that are also party to the World Trade  Organization Government Procurement Agreement—that were instead  reported as subject to the Buy American Act, but excepted due to the  non-availability of domestic products.

Contracting officers may come to different conclusions for similar  products, in part, because of the multiple factors that have to be  considered when determining whether an acquisition is subject to the Buy  American Act and whether any waivers or exceptions apply. However,  available guidance does not always address these complexities. For  example, agencies need to decide if other conditions, such as the  procurement of products deemed indispensable for national security or  national defense purposes apply to an acquisition that would make a  trade agreement inapplicable. Further, if the product’s country of origin  is considered a designated country under the World Trade Organization  Government Procurement Agreement, officials need to determine that the  product is eligible under that agreement.

DHS updated its training and guidance for the Buy American Act, which  includes a job aid outlining at what dollar values solicitation provisions  and contract clauses under a trade agreement waiver are applicable.  However, it does not address other situations in which contracts may not  be eligible under the Trade Agreements Act, such as non-eligible  products or products for national defense purposes.

For the other agencies in our review, we found that DOD’s updated Buy  American Act training and its acquisition supplement both address trade  agreement eligibility, but HHS does not yet have Buy American guidance  to address this topic. Federal internal control standards state that  agencies should communicate quality information internally to achieve  their objectives and that they should select the appropriate methods of  communication. When written guidance is not available, agencies may  miss opportunities to ensure appropriate steps are taken to meet Buy  American Act requirements.

Guidance for Determining Domestic Non-Availability Exceptions Incomplete

Our review of 38 contracts also included 8 contracts for foreign end  products pursuant to the domestic non-availability exception. In certain  situations, such as when contracts are awarded without full and open  competition, this exception requires an approved written determination.  The FAR establishes requirements for domestic non-availability  determinations, but agencies can delegate the level of review required or  specify information to be included in the determination.

Three of the agencies we reviewed—DOD, DHS, and VA—provide  supplemental guidance on the process for making determinations,  including who must make the determination when applying a domestic  non-availability exception. However, DHS policy officials told us that when  the agency uses the domestic non-availability exception for a sole-source  acquisition, the written justification that the FAR requires for non- competed awards should suffice as the documentation to support the  non-availability determination as well. The practice of using sole-source  justifications to support Buy American determinations is not addressed in  DHS guidance. According to DHS policy updated in 2018, determinations  of domestic non-availability must be concurred with by the HCA and  approved by the Chief Procurement Officer. Federal and DHS acquisition  regulations, however, state that some justifications can be approved at a  lower level. In the absence of further guidance, this difference in approval  levels could result in inconsistent application within the department.

In addition, as previously noted HHS does not yet have Buy American Act  guidance so the department does not provide information on how to make  determinations. According to federal internal control standards, agencies  should communicate quality information internally to achieve their  objectives and that they should select appropriate communication  methods. When written guidance is not available, agencies may miss  opportunities to ensure that contracting officers take the steps needed to  meet requirements when applying a domestic non-availability exception.

Inconsistent Information and Guidance Limits Efforts to Accurately Determine Product Origin

Knowing the country of origin of the products the federal government  buys is necessary to implement the Buy American Act, but contracting  officers do not always have access to accurate information on originating  countries. The FAR and the DFARS provide various clauses which, when  incorporated into contracts, require vendors to certify that the end  products they provide to the government are domestic and, if necessary,  declare the foreign countries from which they provide products. Vendors  frequently certify this information through the System for Award  Management (SAM), the government-wide system used to collect  vendors’ annual representations and certifications.

Contracting officers may rely on the information vendors provide about  their product origins, but they are generally expected to take actions to  verify incomplete or conflicting information when they have reason to  believe that a vendor will be providing a non-compliant product. We found  that SAM certifications and offers did not always include accurate  information on end products from foreign countries. In 6 of the 38  contracts that we reviewed—from DHS, HHS, and VA—the vendors  certified that they only provided domestic end products although the end  products provided were foreign. In all of these cases, the contracting  officers knew that the acquisitions included foreign end products. For  example, we reviewed two DHS awards for spare aircraft parts from an  Italian-based company, one of which was reported in FPDS-NG under the  domestic non-availability exception to the Buy American Act, and the  other which was incorrectly reported as being manufactured in the United  States but has since been corrected. Contracting officials said they knew  the parts were made in Italy based on extensive experience contracting  with the company and, in part, because they had visited the production  location. Contracting officials—including some at HHS and VA—said they  use SAM as their primary source to determine whether the vendor is  offering domestic end products. Others reported some awareness of the  limitations of SAM certifications.

At all four agencies, contracting officials emphasized that it is important to  ask questions when end product origin information is not readily  available—or if there is conflicting information—but agency guidance that  we reviewed does not address this need or provide information on how to  do so. Only the local training offered by DOD’s DLA addresses other  sources of information, which officials said was helpful because it is  specific to the industries with which they work. Instead, some officials  described how they rely on their experience to know how to verify  products’ origins but this can be problematic, particularly with newer staff.  For example, in one contract we reviewed VA contracting officials  acknowledged that a new contracting specialist at VA did not follow-up  when the product origin certification was not provided and assumed all of  the items procured were domestic. During the course of our review, the  contracting specialist’s supervisor said that she contacted the vendor and  learned that some of the items provided were in fact foreign end products.  The foreign products were not considered to account for the  preponderance of the contract so were not reported in FPDS-NG, but the  contracting officer was acting with incomplete information at the time of  award.

Further, in 4 of the 38 contracts that we reviewed, it is not clear how  contracting staff took steps to obtain product origin information in  situations where it was not provided in SAM. In these cases—which  include contracts for both domestic and foreign end products—the  vendors had opted not to certify their product origins in SAM, but instead  said that they would provide the information with their individual  proposals. However, based on the information in the contract files, the  proposals did not include this information. For example:

Three of the contracts we reviewed from HHS—all reported as  purchasing end items manufactured in the United States—did not  certify product origin in SAM. The supervising contracting officer for  two of the awards explained that his contracting staff regularly check  the vendor’s written representations and certifications provided in the  offer, because the SAM certifications are general and do not always  apply to the specific equipment they buy. However, the three contract  files we reviewed did not include manufacturing or origin information.

The vendor for a DHS contract that was reported as manufactured in  the United States did not certify this information in SAM. The  contracting officer said that he checks SAM for product origin  information, but in the documents we reviewed there is no evidence of  the information in the contract file.

Federal internal control standards state that agencies should  communicate the necessary quality information needed to achieve the  agency’s objectives, thereby enabling personnel to address risks.  Providing guidance regarding the situations in which contracting officers  should verify product origin information with vendors may help agencies  better meet the requirements of the Buy American Act.

Although purchases for foreign end products account for less than 5  percent of federal procurement spending in fiscal year 2017, it is  important that these purchases be consistent with the domestic- purchasing restrictions in the Buy American Act. This requires that Buy  American Act exceptions and trade agreement waivers be used only  when applicable, and that agencies report accurate data on the extent to  which they are used. However, data reporting errors by contracting staff  and FPDS-NG limitations mean that data on the use of exceptions and  waivers are not fully captured. The federal agencies all have  responsibilities to ensure Buy American Act data are accurate and  complete. The lack of good data can hinder congressional oversight of  the extent to which foreign end products are procured as authorized by  one of the exceptions or waivers of the Buy American Act.

Agencies have taken varied approaches for providing information to  contracting officers that navigate the complexities and nuances  associated with applying the different Buy American Act exceptions or  trade agreement waivers. DOD has added such detailed information  through its revised training course and policy guidance. Adding these  types of targeted information to address challenging areas would help  contracting officers at other agencies implement the Buy American Act’s  domestic preferences, as well as related exceptions and waivers. Further,  to accurately determine how exceptions and waivers apply requires  complete product origin information. Although the responsibility to certify  the origins of products supplied to the federal government rests with the  contractors, contracting officers would benefit from resources that help  them identify information that may be inconsistent, to ensure that  accurate information is available.

We are making four recommendations, one each to the Office of  Management and Budget, DHS, VA, and HHS.

The Director of the Office of Management and Budget should instruct the  Office of Federal Procurement Policy:

To facilitate additional training to improve the understanding of the  contracting workforce regarding the Buy American Act requirements;  and

To facilitate clarifying revisions to FPDS-NG, where needed, and  provide training and guidance for recording Buy American Act  information in FPDS-NG to improve the accuracy of the Buy American  data. (Recommendation 1)

The Secretary of Homeland Security should clarify existing guidance in  the Homeland Security Acquisition Manual or update training to help  contracting officials:  Identify the factors that should be considered in order to determine the  applicability of the Trade Agreements Act and waiver of the Buy  American Act;

Document determinations of the use of Buy American exception for  domestic non-availability and ensure the required approvals are  obtained, particularly when such determinations are evidenced  through justifications for other than full and open competition; and  Identify sources of information available for determining product origin  and the steps they should take to verify information that is  inconsistent. (Recommendation 2)

The Secretary of Veterans Affairs should clarify existing guidance, or  provide training or other instruction, to help contracting officials:

Address the applicability of the Buy American Act requirements and  provide instruction on how to implement the requirements, including in  any training developed to implement the Veterans First policy;  Identify the factors that should be considered in order to determine the  applicability of the Trade Agreements Act and waiver of the Buy  American Act; and  Identify sources of information available for determining products’  origins and the steps they should take to verify information that is  inconsistent. (Recommendation 3)

The Secretary of Health and Human Services should provide guidance,  training, or other instruction to help contracting officials:  Identify the factors that should be considered in order to determine the  applicability of the Trade Agreements Act and waiver of the Buy  American Act;

Document determinations of the use of Buy American exceptions for  domestic non-availability and ensure the required approvals are  obtained; and  Identify sources of information available for determining products’  origins and the steps they should take to verify information that is  inconsistent. (Recommendation 4)

We provided a draft of this report to DOD, HHS, DHS, VA, and the Office  of Management and Budget for review and comment. DOD reviewed the  report, but did not offer comments. HHS, DHS, and VA provided written  responses, which are reproduced in Appendices IV, V, and VI of this  report, respectively. A senior official within the Office of Federal  Procurement Policy (OFPP) at the Office of Management and Budget  provided a response via email. In addition, HHS, DHS, and OFPP  provided technical comments, which we incorporated into the report  where appropriate.

In their responses, HHS, DHS, VA agreed, and OFPP generally agreed,  with our findings and recommendations. The written response from HHS  and DHS included information on the steps each agency plans to take to  address the recommendations. Specifically, HHS stated that the agency  will evaluate ways to provide additional training and guidance to  contracting officials. DHS stated that it will provide guidance on the  applicability of the Buy American Act and the Trade Agreements Act in  certain situations and the documentation and approvals required when  awarding non-competed contracts that require an exception. Additionally,  DHS plans to update training regarding actions contracting officers should  take when there are discrepancies in product origin information.

VA concurred with our three-part recommendation and described some of  the actions the agency plans to take in response. However, VA’s  comments do not fully address our recommendation. Specifically, we  recommended that VA clarify guidance or provide training to identify  factors that could help contracting officers determine the applicability of  Trade Agreements Act waivers of the Buy American Act. The comments  from VA, however, only restate the existing Buy American Act exceptions  and make no mention of Trade Agreements Act waivers. Further, we  recommended that VA identify sources of information regarding product  origin and the steps to be taken to verify inconsistent product origin  information. VA’s response only noted that contracting officers are  responsible for conducting market research and ensuring that all product  origin requirements are met. VA did not outline any additional steps the  agency would take to help contracting officers navigate the complexities  inherent in this area. Going forward, VA will need to develop a more  robust and responsive approach in order to fully implement our  recommendation.

We are sending copies of this report to the appropriate congressional  committees; the Secretaries of the Departments of Defense, Health and  Human Services, Homeland Security, and Veterans Affairs; the Director  of the Office of Management and Budget; and other interested parties. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or woodsw@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix VII.

Appendix I: Objectives, Scope and Methodology

The objectives of this report are to assess the extent to which (1) the  federal government procures foreign products through Buy American Act  exceptions and waivers; and (2) selected agencies provide training and  guidance to implement the Buy American Act requirements.

To address both of these objectives, we reviewed relevant laws and  policies, such as sections of the Federal Acquisition Regulation (FAR);  the Buy American Act as amended; the Trade Agreements Act of 1979 as  amended; federal acquisition regulation supplements from audited  agencies such as the Department of Defense Federal Acquisition  Regulation Supplement (DFARS); the Executive Order “Buy American,  Hire American” of 2017; the World Trade Organization’s Agreement on  Government Procurement; and memorandums, policy, guidance, and  instructions related to the Buy American Act.

To assess the federal government procurement of foreign products,  including those procured through citing exceptions and waivers of the Buy  American Act, we analyzed data from the Federal Procurement Data  System-Next Generation (FPDS-NG) for fiscal year 2017, which was the  most recent and complete data available at the time of our review. We  analyzed procurement data in FPDS-NG across the federal government  in fields relevant to the Buy American Act’s domestic preference  requirements, including the product service code, country of product  origin, and place of manufacture, in addition to fields such as the contract  value and dollars obligated. We reviewed the place of manufacture field in  particular as it contains information on how the Buy American Act applies  to the contract, including whether the preponderance of the obligations is  for manufactured end products and, if so, whether they are manufactured  in or outside of the United States. When manufactured outside of the  United States, this field also captures the reason the purchase was  permissible, which we analyzed to assess the dollar obligations  associated with the various Buy American exceptions or trade agreement  waiver reported, as well as when products were used outside of the  United States. We also analyzed data from FPDS-NG to identify the  countries where foreign end products were reported to be manufactured  and the associated dollars obligated in fiscal year 2017. In addition, we  met with officials from the Office of Management and Budget, Office of  Federal Procurement Policy to better understand ongoing reviews of the  data in FPDS-NG that pertains to the Buy American Act.

In our analysis of FPDS-NG data, we took steps to minimize issues that  might affect data reliability. Specifically, we analyzed FPDS-NG data to  identify potential errors and inconsistencies, such as non-eligible  agencies reporting the use of exceptions for DOD qualifying countries, or  reporting trade agreement waivers for contracts valued less than  minimum thresholds for trade agreements. We made minor adjustments  to minimize potential data reporting issues, including aggregating the  exceptions reported, and where appropriate, limiting our analysis to one  year of data, fiscal year 2017. Based on these steps, we determined that  FPDS-NG data were sufficiently reliable to allow us to calculate the  approximate extent of obligations for foreign end products and the use of  the Buy American Act exceptions and the Trade Agreements Act waiver.  However, we are unable to precisely determine the amount spent on  foreign end products through the use of exceptions and waivers because  of the reporting errors and data system limitations we identified in this  report.

Using FPDS-ND data, we identified four agencies—the Departments of  Defense (DOD), Health and Human Services (HHS), Homeland Security  (DHS), and Veterans Affairs (VA)—that had the highest fiscal year 2017  obligations in the product codes for manufactured products, which are  potentially subject to the Buy American Act restrictions. In addition, to  identify trends and determine if there were variations in reported  obligations for foreign end products in the past, we reviewed FPDS-NG  data on the Buy American exceptions and trade agreement waivers in  fiscal years 2013 through 2017.

To assess the extent to which selected agencies are providing training  and guidance to implement the requirements of the Buy American Act, we  reviewed training course materials and regulations, policies, and other  guidance available at the four agencies in our review—DOD, HHS, DHS,  and VA—to determine the extent to which they address the Buy American  Act requirements. In addition, we reviewed training materials available to  government employees through sources such as the Federal Acquisition  Institute. We interviewed policy officials from the four agencies to  understand how training and guidance had been implemented. We further  reviewed relevant inspector general reports from the DOD Inspector  General issued between 2015 and 2018, which made several  recommendations to improve compliance with the Buy American Act,  among other requirements.

Within the four agencies, we selected contracting offices that reported  obligating fiscal year 2017 dollars for awards with foreign end products  and awards with US-manufactured end products. We specifically focused  on offices that reported a sufficient amount of foreign end product  obligations and a sufficient number of contract awards to allow us to  select multiple contracts. We also considered offices with a variety of Buy  American exceptions and waiver types reported, in order to select a mix  of contracts. The contracting offices selected were as follows:

DOD: Defense Logistics Agency, Land and Maritime

HHS: National Institutes of Health and the HHS Office of the Assistant  Secretary for Preparedness and Response

VA: Veterans Health Administration  From these offices, we selected a non-generalizable sample of 38  contracts and delivery orders awarded in fiscal year 2017. At each  agency, we selected awards to include a mix of end items produced by  domestic and foreign manufacturers and, when products were reported  as foreign manufactured, a mix of the various exceptions and waivers  cited. We also include awards across a range of value for dollars  obligated above the micro purchase threshold—ranging from  approximately $5,000 to more than $100 million—to ensure we reviewed  awards both above and below the various thresholds at which the Trade  Agreements Act waiver might apply. Additionally, our sample included  awards for similar types of end products across agencies, including  aircraft parts at DOD and DHS and medical supplies at HHS and VA, to  compare practices in different agencies. We originally selected 40 awards  for review—10 from each agency—but removed two awards from our  sample. One was an HHS award that we determined was awarded using  Other Transaction Authority and was not subject to the Buy American Act.  The second excluded contract was from DHS, which was modified after  award to reflect that it was an information technology service rather than  a product. As a service, it would not be subject to the Buy American Act.

We reviewed the contract files for each of the 38 awards in our sample,  including documentation such as the contract and task order award,  solicitations, vendors’ offers or response to proposals, determination and  finding memos, and FPDS-NG output documents. In addition, we  reviewed the certifications each vendor provided in the System for Award  Management (SAM) at the time of contract award. We interviewed  contracting officials responsible for each of the 38 contracts and task  orders to understand how they addressed the Buy American Act  requirements, including how they determined exception or waiver  applicability and product origin. We also reviewed any agency-specific or  local training and guidance, tools, or job aids available to assist  contracting officers in implementing the Act’s requirements  We conducted this performance audit from October 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on audit objectives.

Appendix II: Countries with Free Trade Agreements or Reciprocal Defense Procurement Agreements with the United States

The United States maintains trade relationships with other countries  whose specific negotiated terms results in different levels and types of  applicability for waivers and exceptions to the Buy American Act. Figure 4  depicts the range of relationships that the United States maintains with  other nations that allow for less restrictive purchasing of foreign end  products by the federal government.

Appendix III: Federal Government Procurement of Foreign End Products, by Country

The federal government purchases foreign end products from various  countries. Figure 5 highlights the different amounts of contract obligations  for foreign end products from these countries for fiscal year 2017. The  highest category, over $500 million, includes 4 countries that account for  almost 40 percent of all federal procurement of foreign end products.  Countries where the federal government obligated less than $5 million for  the procurement of foreign end products are not included.

Appendix IV: Comments from the Department of Health and Human Services

Appendix V: Comments from the Department of Homeland Security

Appendix VI: Comments from the Department of Veterans Affairs

Appendix VII: GAO Contact and Staff Acknowledgments

In addition to the contact named above, Candice Wright, Assistant  Director; and Jennifer Dougherty, Analyst-in-Charge, managed this  review. Skip McClinton; Erin Stockdale; Adam Cowles; Stephanie  Gustafson; Julia Kennon; Anne Louise Taylor; and Robin Wilson made  key contributions to this report.

The law requires federal agencies to buy domestic products. But federal agencies can buy foreign products sometimes, e.g., when domestic items are not available at a reasonable cost or when international trade agreements waive the Buy American Act restrictions.

According to the federal procurement database, foreign products comprised less than 5% of what the government bought in fiscal year 2017. The real amount could be higher than that, in part, because of data errors. For example, some agencies had inaccurately recorded waiver information.

We recommended ways to improve reporting and compliance with the act.