Running Head: Assignment 3

Buy America Requirements
William Henderson
BUS315-Cost and Price Analysis
Professor Joseph Arbeiter
August 10, 2013

The Buy America Act was introduced as a response to the recession of late 2000s. It was part of the American Recovery and Reinvestment Act of 2009 and was intended to boost the US economy by encouraging the purchase of American products. The Act imposed regulation and general requirements on iron, steel and other material used to build public facilities and public work projects. The buy America Act went into effect on March 31st 2009. It states that all steel purchase to construct public building must be processed in the United States. This means that smelting and any required process needed to confirm the steel materials to physical shape or specification such as rolling, extruding, grinding, drilling, machining etc. must be completed in America for the product to be considered domestic. All agencies are required to provide adequate oversight to guaranty that their materials comply with the Buy America specification.
Agencies must understand the following:
1. Who needs to comply with the Act; all parties (including local government) involved with public works and public buildings.
2. The components of the regulation: it regulates Iron, steel and manufactured products used in public construction projects, modification, and repairs
3. Items not regulated are raw materials other than steel or iron. Non-manufactured goods that is not steel or iron. Origin of component and parts of manufactured products and loans/grand funds used to purchase equipments. Agencies must also take steps to verify that all sub-contracts comply with the new regulations. Initially the Buy America Act seem to be unfair and an unusually step for a capitalist country. Since the requirements only refer to public project and public money it is well within its rights as a process to stimulate the domestic economy. The Act did not violate any of our current trade agreements. There are provisions in the act that prevent any violation on the part of the United State with regards to its partners included in the World Trade Organization (WTO). All countries in the WTO are exempt from the buy America act.
Many companies disagree with the act and claim it to be unfair and in some cases illegal. Most of the companies that had problems with the requirements are those who are not in position to gain access to these specific government funds. Companies like caterpillar and general electric that has major production facilities in China, Russia and other foreign countries. If these companies were to gain access to recovery funds then the bill would have negated its intention as a stimulus since these monies would have been spent overseas.
I have to agree that the act supports its intention regardless of the politics or lobbyist behind the scenes pushing its requirements. The government’s obligations to public funds are to minimize expense and make sure the funds provide the most benefit for Americans. In times of recession these are necessary measures to stimulate the economy. When steel is purchased from a domestic source all the money generated from that purchase is circulated back into the economy; this includes the wages generated which supports more job creation.
There are exceptions to the buy America act which provide fairness to the procurement process. If the required material/ products required are not produced in the United States or are not produced in reasonable quantity and well as satisfactory quality then contractors are within their rights to purchase the material from a foreign manufacture or source. This is a needed amendment to the act to prevent sub-par construction. It also avoids delays if the material is not in sufficient quantities. This will allow projects to progress at a steady pace instead of holding up construction until adequate supplies are ready.
Another important exception that allow contractor to source from a foreign county is: if the steel, iron or any of the other material in the act will increase the cost of the contract by more than twenty five percent. If a contract cost begins to pass this mark then it will not be an effective stimulant instead it will force the government to overspend on individual projects. The third exception in the buy America act states that when a determination is made for any reason that certain foreign construction material may be used to complete as public project the contracting officer must list all the excepted materials in the contract. The contracting agency must justify their reason for the exception and must make it available for public inspection.
The overall idea of the Buy America Act was to stimulate the economy. It did not violate any trade laws currently in place with the United States. The act only refers to public funds and did not make any specific requirements to private companies and their spending; in doing so it maintains the capitalist economic system. In time of recession it is important that the government make necessary adjustment to their spending and focus their efforts to job creation within the nation. This was the sole purpose of the Buy America Act of 2009.

Reference
Faiola, A. (2009, January 29). Buy American Rider Sparks Trade Debate. The Washington Post. Retrieved May 15, 2011, from http://www.washingtonpost.com/wpdyn/content/article/200
Frank, Dana (2000). Buy American: The Untold Story of Economic Nationalism. Beacon Press. p. 65
The Buy American and Buy America Acts. (2009). Canada: Department of Foreign Affairs and International Trade.