Barriers Guide
Other Key Information
2.1 Evaluating Market Potential
2.2 Acquisition Laws and Regulations
For Canadian firms, it is critical to determine the specific level of U.S. government that is funding the project on which they are bidding. In other words, who is the "buyer"? By tracing the source of funding for the buyer, you can determine which barriers you may face going forward. This page covers common barriers faced when pursuing U.S. government procurement, when the buyer is:
- the U.S. Federal Government;
- a U.S. State or Local Government: when a transporation authority is the buyer; federal government provides grants and related limitations;
- a U.S. State Government: where no federal government grants are involved; or
- the U.S. Department of Defense (DoD).
For a more complete discussion on U.S. efforts to fulfill certain socio-economic goals, visit our Barriers – Other Considerations page.
Buyer: U.S. Federal Government
| Law / Regulations | U.S. Manufacturing | U.S. Content | Definitions, Waiver Provisions, and Work-Arounds | Price Differential |
|---|---|---|---|---|
| Barrier: The Buy American Act of 1933, 49 U.S.C. 10 (a) – (d) | ||||
| Goods: NAFTA Chapter 10 and 48 CFR Part 25 | 100% | 50% | Trade Agreements: 25.103 Other waivers: 25.203 Price, quality, quantity, public interest. Subcontracting or teaming. | 6% large business 12% small business |
| Construction services (and component products): NAFTA covered above US$10,079,365 | 100% of material | 50% | Waivers / exceptions Teaming must comply with coverage of waivers. | Normally 6% regardless of business size |
| Barrier: Small Business Set-Asides, Small Business Act of 1953 | ||||
| 48 CFR Part 19 "Rule of Two" (responsive, responsible) Any value / size contract Defined: 13 CFR 121 | 100% | 50% | Basic definition of Small Business Concern:
| Not applicable |
Buyer: U.S. State or Local Government – transportation authority is the buyer; U.S. federal government provides grants and related limitations
| Law / Regulations | U.S. Manufacturing | U.S. Content | Definitions, Waiver Provisions, and Work-Arounds | Price Differential |
|---|---|---|---|---|
| Barrier: Buy America – Transit (grants provided by the Federal Transit Administration) – no barriers on prime contracts under US$100,000 | ||||
| Rolling stock: 49 CFR Part 661.11 | Final assembly of rolling stock | 60% of cost of components of rolling stock | Waivers based on quality, quantity, price, public interest at: 49 CFR Part 661.9 and 661.12. Teaming is common. | U.S. product would increase the price by more than 25% |
| Other than rolling stock: 49 CFR Part 661.6 | 100% | 100% | Waivers based on quality, quantity, price, public interest at: 49 CFR Part 661.7. Teaming not usually a solution. | U.S. product would increase the price by more than 25% |
| Barrier: Buy America – Highways (grants from the Federal Highway Administration) – largely prohibits permanently incorporated products made of iron or steel. Canadian firms can compete for highways on federal land. | ||||
| 23 CFR Part 635.410 | 100% | 100% | Waivers at: 23 CFR Part 635.410 (c) | Prime contract level: 25% if total bid exceeds the lowest total bid based on furnishing foreign steel and iron or if cost of such materials is less than 0.1% of total contract cost or $2,500, whichever is greater. |
| Barrier: Buy American – Airports (grants from the Federal Aviation Administration) | ||||
| Aviation Investment and Reform Act for the 21st Century (AIR-21) (PDF, 536 KB, 137 pages) | Final assembly in U.S. | 60% (manufactured products) | Waivers based on quality, quantity, price, public interest. Teaming can be a solution. | Prime contract level: US product would increase the price between the grantee and the prime contractor by more than 25%. |
Buyer: U.S. State Government – no federal grants involved
| Law / Regulations | U.S. Manufacturing | U.S. Content | Definitions, Waiver Provisions, and Work-Arounds | Price Differential |
|---|---|---|---|---|
| Barrier: Restrictions vary by state | ||||
| NAFTA Chapter 10 does not cover state or local government purchases | ||||
Buyer: U.S. Department of Defense – all the above, plus:
| Law / Regulations | U.S. Manufacturing | U.S. Content | Definitions, Waiver Provisions, and Work-Arounds | Price Differential |
|---|---|---|---|---|
| Barrier: Defense Federal Acquisition Regulations Supplement (DFARS) | ||||
| General Provisions on Foreign Acquisition: DFARS Part 225 | Part 225: Canada considered part of defence industrial base. Eligible for some procurements but not open to other countries. Defence Production Sharing Agreement (PDF, 16.2 KB, 7 pages) | |||
| Barrier: National Security Exceptions | ||||
| NAFTA Chapter 10 Section D – Article 1018 | 100% | 100% | Individual case advocacy. | None |
| Barrier: Berry Amendment (prohibits purchase of non-U.S. textiles, food and clothing) | ||||
| DFARS 225.7002 | 100% | 100% | Extremely rare. Waivers only on individual procurement, upon approval of Agency Head if U.S. sources cannot meet requirement. When fibres or textile leave U.S., resulting product is proscribed. | None |
| Barrier: Byrnes-Tollefson Amendment (prohibits purchase of non-U.S. ships and boats) | ||||
| DFARS 225.7013 Military ships are not covered by NAFTA | 100% | TBD | Only on individual procurement, upon approval of Agency Head if U.S. sources cannot meet requirement. Canadian teaming is common. | None |
Additional obstacles in U.S. government contracts
Jones Act
The Jones Act is not related to U.S. government procurement, but is a U.S. federal statute that affects civilian shipbuilding and maritime transportation. Highlights of the Jones Act are:
- To promote a U.S. flag fleet and protect that fleet from unfair foreign competition.
- Requires that cargo moving between U.S. ports be carried in a vessel that was built in the United States and is owned (at least 75 percent) by American citizens or corporations. Under U.S. general labour and immigration laws, crew members must be American citizens or legal aliens.
There are Buy American barriers in U.S. military shipbuilding, but those barriers are not part of the Jones Act. You will find details about U.S. domestic content requirements in military shipbuilding in the U.S. federal acquisition regulations that implement the Byrnes-Tollefson amendment as noted in the barrier summary table above.
Federal Prison Industries (FPI)
While the U.S. Department of Justice's procurement is generally covered by NAFTA Chapter 10, certain of its contracts are not. NAFTA Chapter 10 (Article 1018) permits the adoption of measures relating to prison labour.
U.S. law and regulation require U.S. federal agencies to purchase certain goods and services provided by Federal Prison Industries (FPI), also known as UNICOR, if those items meet the buyer's requirements. This self-supporting, wholly owned government corporation of the District of Columbia, part of the Department of Justice, provides training and employment for federal prisoners.
The list of covered supplies and services can be found on the Federal Prison Industries UNICOR website.
Two sample problems that a Canadian firm might face:
- Direct supply: Office furniture, for example, is on that list. Therefore, Canadian contract furniture manufacturers (and American ones, for that matter, who aren't any happier about this requirement!) selling to U.S. government buyers must consider that UNICOR is a competitor that can offer reconditioned traditional-style office furniture at exceptionally low prices. The resulting products can look quite acceptable for executive offices. Therefore, contract furniture manufacturers are careful to emphasize styling and ergonomic features to their prospects, to encourage buyers to give greater priority to evaluation factors other than price in the solicitation. Conclusion: a smart selling strategy can work around this potential disadvantage.
- Component purchase: If the U.S. Department of Justice (DOJ) were to issue a solicitation to buy textiles, for a contract that would be estimated to be worth US$65,000, that might look like a requirement that a Canadian firm might meet. However, if DOJ were buying the textiles so that prison workers employed by UNICOR could use the fabric for items to be supplied to the U.S. military (DoD), U.S. law would require the solicitation to include a "Buy American" clause that requires the textiles to be made entirely in the United States of entirely U.S. materials. Any attempt by Canadian suppliers to respond to the opportunity would require a waiver of the Berry Amendment, an exception to international agreements on procurement that is permitted for reasons of national security. Conclusion: such requirements are often incorporated by reference, and thus difficult to find. Furthermore, as DoD rarely waives the Berry Amendment, a solicitation like this would offer extremely poor prospects for a Canadian supplier.
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