President Biden issues ‘Buy American’ executive order for federal government spend

Derek du Preez Profile picture for user ddpreez January 26, 2021
Newly inaugurated President Biden has signed an executive order to direct more of the federal government’s $600bn annual procurement spend to American businesses.

An illustrated image of Joe Biden
(Image by BarBus from Pixabay )

Less than a week after his inauguration, President Biden has signed an executive order to help strengthen American businesses that are facing unpredictable and challenging economic conditions, as a result of the COVID-19 pandemic. 

The ‘Buy American' order essentially tries to direct federal government procurement spend away from foreign companies and towards American businesses, updating almost century-old legislation and closing loopholes that allowed federal agencies to spend their money abroad. 

The White House said that the federal government spends approximately $600 billion a year on products and services, highlighting the potential scale of how this order could impact the American economy and businesses. What the federal government spends its money on is diverse and wide-ranging, but if the order is executed on effectively, there will clearly be opportunities for USA-based digital and technology companies. 

The news also plays well to Biden's commitment to try and bridge the gap between his own and Trump's supporters, with the ‘Buy American' mantra feeling tangibly close to ‘Make American Great Again'. 

Commenting on the commitment this week, President Biden said: 

It's based on a simple premise: that we'll reward work, not wealth, in this country.  And the key plank of ensuring the future will be "Made in America." I've long said that I don't accept the defeatist view that the forces of automation and globalization...keep union jobs from growing here in America.  We can create more of them, not fewer of them.

Under the previous administration, the federal government contract awarded directly to foreign companies went up 30 percent.  That is going to change on our watch. 

Under the Build Back Better Recovery Plan, we'll invest hundreds of billions of dollars in buying American products and materials to modernize our infrastructure, and our competitive strength will increase in a competitive world. 

That means millions of good-paying jobs, using American-made steel and technology, to rebuild our roads, our bridges, our ports, and to make them more climate resilient, as well as making them able to move faster and cheaper and cleaner to transport American-made goods across the country and around the world, making us more competitive.

What's in the order? 

The executive action taken by the President aims to ensure that the federal government is investing taxpayer dollars in American businesses - both small and large. It aims to support the manufacturing and technology capabilities needed to build a "clean energy future" and to give companies the tools they need to compete globally. 

Details of the executive order include: 

  • Closing loopholes - Current rules already include a ‘domestic content threshold' (the amount of product that must be made in the US), but the Biden administration believes that these don't go far enough. This threshold will be increased and will also include updates for how the government decides if a product was sufficiently made in America. 

  • A new senior leader - A new Director of Made-in-America at the Office of Management and Budget will oversee the implementation of the executive order to make sure the President's new rules are followed, as well as work with key stakeholders.

  • Increased oversight - A central view of agency waivers will be created, in order to crack down on unnecessary wavers. It also directs the General Services Administration to publish relevant waivers on a publicly available website, to give American businesses the opportunity to offer their services/products. 

  • New connections - Agencies must now utilise the Manufacturing Extension Partnership - a national network that supports SMEs - to help agencies connect with new domestic suppliers. 

  • A cross-agency review - Agencies will have to report on their implementation of current Made in America laws and make recommendations for achieving President Biden's goals, and continue to do so on a bi-annual basis. 

During his comments this week, Biden was keen to highlight the American technology and R&D opportunity. He said: 

We'll also make historic investments in research and development - hundreds of billions of dollars - to sharpen America's innovative edge in markets where global leadership is up for grabs - markets like battery technology, artificial intelligence, biotechnology, clean energy. 

The federal government also owns an enormous fleet of vehicles, which we're going to replace with clean, electric vehicles made right here in America by American workers, creating millions of jobs - a million autoworker jobs in clean energy - and vehicles that are net-zero emissions.

And together, this will be the largest mobilization of public investment in procurement, infrastructure, and R&D since World War Two.

My take

The Trump administration's commitment to American business was often more bravado and PR than it was effective in pushing taxpayer dollars into the hands of American business. Whilst there were some very public trade wars and foreign company bans, it's clear that spending across federal government with international businesses actually increased. Government procurement is complex and existing relationships and habits run deep. This won't change overnight. But what does bode well for Biden's executive order is his commitment to putting in place a leader to hold people accountable, as well as his determination to make federal spending transparent. That will go some way to changing habits, but time will tell...

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