Manufacture This

The blog of the Alliance for American Manufacturing

Between 2008 and 2016, specifically — and the Defense Department led the way, a new report finds.

Michigan Sen. Debbie Stabenow (D) is a longtime proponent of Buy America, which ensures that when the federal government builds new infrastructure or buys new goods, the materials and products purchased are American-made.

It’s commonsense policy, as it reinvests taxpayer money into local communities, supporting job growth and strengthening the economy.

But loopholes have meant that some federal agencies have skirted Buy America — and so Stabenow wanted to find out just how much money is being sent overseas.

Spoiler: It’s a lot.

A new report from Stabenow’s office found that 13 federal agencies used Buy America loopholes to spend more than $92 billion on foreign contracts between 2008 and 2016.

The Defense Department led the way, spending nearly $85 billion on foreign contracts because of loopholes (and spent about $154 billion total on foreign purchases during that same period). The department, unfortunately, has a history of skirting these laws — 81 out of 280 Defense Department contracts were found to not comply with Buy America, a recent audit by the agency’s inspector general found.

And while the Defense Department is certainly the biggest offender, it is hardly alone. Other agencies that used loopholes to spend money on foreign contracts include the State Department, which spent nearly $2.5 billion; the Department of Homeland Security, which spent more than $1.58 billion; and the Treasury Department, which spent more than $510 million.

These agencies bypass Buy America in a variety of ways, including granting themselves an exemption if a particular item isn’t available in “sufficient quality or quantity” from U.S. manufacturers; if an agency determines complying with Buy America is “inconsistent with the public interest,” such as responding quickly to a national emergency; and if a product is set to be used outside the United States, like at an embassy or for overseas military operations.

The problem is that federal agencies have often stretched the limits of the loopholes, the report notes.

“[F]ederal agencies have abused their authority by granting domestic non-availability waivers even when a U.S. manufacturer could clearly fill the intended contract,” the report states. “In February 2018, DoD’s Inspector General issued a report finding multiple instances when DoD contracting officials improperly purchased foreign-made items… In one documented example, Air Force officials did not perform adequate research to find American vendors to produce Buy American-compliant football uniforms. Instead, officials issued two domestic non-availability waivers to purchase foreign made jerseys and pants.”

Agencies also are allowed Buy America waivers if a purchase is from a company that is located in a country that has joined certain free-trade agreements with the United States. This eases certain Buy America restrictions, so long as U.S. manufacturers are given equal access to that country’s market.

The problem is that the United States is rarely given that access.  “These agreements have given foreign manufacturers substantially more opportunities to bid on U.S. government contracts and have shortchanged American manufacturers,” the report states.

For example, the United States opened about 80 percent of its federal procurement market in 2010 to countries that were signers to the World Trade Organization (WTO) Agreement on Government Procurement. Other signers gave significantly less access to their markets; South Korea granted access to just 13 percent of its total procurement spending, while the European Union provided U.S. companies access to just 16 percent.

Stabenow recommends strengthening Buy America laws in the report, including via her Make It In America Act, which seeks to close Buy America loopholes, further prioritize American companies, eliminate the overseas exemption, and create more transparency in the foreign procurement process. The senator is also supportive of the Made In America Act of 2018, which would add new Buy America requirements to 16 federal programs.

“My report shows that foreign companies are benefitting from loopholes in our nation’s Buy American laws," Stabenow said. "My agenda closes these loopholes, holds the federal government accountable, and creates opportunities for Michigan businesses and workers.”

Find the whole report here.