On Monday January 25, 2021, President Joe Biden signed an executive order giving preference to American businesses and supply chain operations in federal agency contracts. While signed at the end of January, most of the executive order’s goals are still in the progress of becoming policy. The new order will make it more difficult for federal agencies to purchase foreign products and services, thus tightening procurement rules favoring U.S. companies. According to the executive order, “It is the policy of [President Biden’s] Administration that the United States Government should, consistent with applicable law, use terms and conditions of Federal financial assistance awards and Federal procurements to maximize the use of goods, products, and materials produced in, and services offered in, the United States.” While the order serves as (1) a commitment by the President Biden administration to prioritize local and domestic companies, and (2) a win for domestic producers generally, the executive order both reforms and complicates a variety of issues in contract law.

The biggest change resulting from the executive order is the establishment of a new office – the Office of Made in America – in the Office of Management and Budget (OMB) which will be used to oversee and direct the federal government’s conduct in contract agreements. The Made in America Director will oversee the office and ensure its efficiency by posting reports and targeting transparency between government agencies and the public. The newly established office will review the waiver process that prioritizes American companies, but will also allow some purchases to be made outside of the existing rules. If a business feels wronged by the decision, they can file a bid protest at the agency that conducted the procurement, the GAO Office, or at the US Court of Federal Claims.

In addition to the new office and position in the OMB, important definitions were altered with the executive order. Most notably, the definition and policies surrounding ‘domestic content’ were changed to reflect a commitment to accessibility for small and medium-sized companies. The “component test” in Part 25 of the Federal Acquisition Regulation (FAR) will be replaced with a test under which domestic content is measured by the value that is added to the product through U.S.-based production or U.S. job-supporting economic activity. Moreover, there will be an increase in the maximum threshold for input products into a U.S. good. This will expand the previously lower floor for foreign inputs into an American good, hence mutually expanding what is considered an American product or service. With the change in definition and process for domestic content, the executive order also increases the price preferences for domestic end products and domestic construction materials. This component of the executive order attempts to counteract the impact of COVID-19 on working-class America while establishing a precedent of high-biding for U.S. products. Between the redefining of ‘domestic content,’ legal procedure (input of foreign products into the American good/service), and artificial price inflation, American companies will be able to more efficiently compete for the roughly $600 billion in government contracts available annually.

Accessibility to small and medium-sized U.S. companies as well as minority owned businesses was a priority for candidate Joe Biden in his campaign and in his first week in office. In the executive order, the administration expressed its commitment to create a public website so U.S. companies can see government contract opportunities and determine whether they can make a more competitive bid. According to the executive order, “The Administrator of General Services shall develop a public website […] to enable manufacturers and other interested parties to easily identify proposed waivers and whether those waivers have been granted. The website shall also provide publicly available contact information for each granting agency.” By expanding availability, the Biden Administration hopes smaller businesses, especially historically excluded companies, will have a chance to compete for otherwise foreign or major corporation contracts. The website also targets transparency in bureaucracy by publicly displaying exceptions (waivers) to American-purchased goods. However, in an interview on Monday, President Biden stated such exceptions would only take place in the case of national security or emergency. While there is no timeline for the website launch, it can be inferred that once a Director of Made in America is appointed, the first order of business will be website design and business accessibility.

Though direct government procurement represents only a small portion of the large American economy, the new executive order’s impact on U.S. jobs and companies could be significant if applied to infrastructure funding and relief packages promised by the administration. In relation to contract law, American businesses have more leverage if denied a contract to a foreign competitor, and in some cases a large corporation. While the executive order is a significant move made by President Biden in his first week in office, many of the details are still being tweaked and refined to create a better relationship between bureaucracy and the private sector. But the fact that American businesses will be prioritized is a major win for many contractors and companies who were denied work in exchange for larger, often overseas businesses.