As you already know, the "Buy America" Act (BAA), 41 U.S.C. §8303 and 48 C.F.R. §25.100-206, requires, in general, use of materials produced in the United States on federal construction projects. Failure to comply with this Act may serve as the basis for a False Claims violation. But whether it has been violated in any particular case is not always easy to determine. "It's complicated," as a very recent court decision explained.
In U.S. ex rel. Michael Kress v. Masonry Solutions International, Inc. (E.D. La. 6/8/2015, CA No. 12-2380), a federal court said that you can't just look at where particular products came from. A product, you see, doesn't violate the BAA as long as it is "manufactured" in the U.S. (48 C.F.R. 52.225-11(i)) Quoting other judges who have been exasperated with this law, the court noted that the standards of what it takes to be "manufactured" are hard to pin down. "The basic test seems to be that if the operations performed on the foreign item create a basically new material or result in a substantial change in the physical character, the item becomes a component manufactured in the United States." (A. Hirsch Inc. v. U.S., (E.D. Pa. 6/11/1991, 1991 WL 102984 at p.3)
Further, the U.S. Army Corps of Engineers has determined that the World Trade Organization's Government Procurement Agreement and Free Trade Agreements permit waivers for materials from designated countries. (Kress v. Masonry Solutions, at pp. 8-9) It gets even more complicated (if that is possible) when materials are furnished under a fixed-price contract, since that makes it hard to say that the government overpaid for any one item.
As a result, a situation that at first blush looks like a pretty serious violation can end up being no violation at all – if the contractor knows the rules and how to follow them.
Lots to think about!
NOTE: the "ex rel" in the title of this court case indicates that it was brought by a whistleblower – a former employee who kept enough information after his employment ended about what Masonry Solutions was doing to be able to file a suit that, if it had been successful, could have netted him a lot of money.
