The Buy American Act has been in place since 1933, ensuring the federal government prioritizes purchasing goods and services from American businesses. Recent updates to the Act introduce new rule changes to how the federal government buys goods and services.
In this overview, you’ll learn what the Buy American Act is and how to use it as an opportunity to grow your small business.
What is the Buy American Act?
The Buy American Act requires a preference for domestic end products. While it’s been updated over time, the Buy American Act has new compliance requirements for businesses that sell products and services to the government. The new rules aim to:
- Increase the requirements for goods made in the U.S.
- Tighten compliance
- Expand the goods required to be purchased domestically.
The Buy American Act states that as of 2025, 65% of a product’s components must be made in the U.S. By 2029, this will increase to 75%, further restricting federal contractors’ ability to source from international suppliers. These are big moves: in just a few short years, the majority of all goods sold to the federal government must be made in the U.S.
Iron and steel products have even stricter rules, requiring at least 95% of your content to be sourced from within the U.S. As a result, you must restructure your supply chain related to these materials to remain eligible for federal contracts.
How will the Buy American Act impact your business?
The Buy American Act brings additional requirements and challenges if you’re selling your products and services to the Federal government. To address these challenges, you’ll need to adjust your supply chains by:
- Finding new suppliers: Many small businesses rely on foreign suppliers, and transitioning to domestic suppliers can be difficult. You may need to identify new partners, renegotiate contracts, and sometimes pay higher materials costs. Working with new suppliers may also require adjusting your production timelines and budgeting for higher expenses. This makes long-term financial planning even more important.
- Finding material replacements: If you’re using foreign suppliers for most of your materials, you’ll need to find substitutes from the U.S. This is easy when there’s a readily available U.S.-based substitute, but that’s not the case for every material. Start assessing your materials now to determine what can and can’t be replaced with a domestic supplier now, and what will take longer to find a substitute.
- Adapting pricing: Domestic materials can be more expensive, which can affect your profit margins. If that’s the case for your material substitutes, you’ll need to review your pricing strategies and potentially update them for bidding on federal contracts.
- Increasing documentation: To meet the new requirements, you’ll need to prioritize documentation and compliance. Your contract bids must include proof of using domestic sources, and you should implement supply chain tracking systems to ensure you’re in compliance.
- Investing in training: Compliance training is essential to navigate procurement regulations and ensure proper documentation. Train your employees on compliance requirements and work with procurement experts or legal consultants to avoid expensive mistakes. Attending government-sponsored training sessions and workshops can keep you updated on regulatory changes and new compliance strategies.
- Improving record-keeping and compliance systems: Monitoring your material sources and maintaining detailed records with supply chain tracking software will make it easier for you to submit eligible contract bids and navigate potential audits. You should develop internal teams to ensure you follow the Buy American requirements, further streamline operations, and reduce compliance risks.
Making these changes can seem like a daunting task, however, the government provides free assistance for small business government contractors through a network of APEX Accelerators. These accelerators can support your business with all aspects of government contracting, from registration as a government contractor, bid-matching and preparation, and more.
When you locate your APEX Accelerator, reach out to one of their procurement counselors who will have you sign up as a client for free! The procurement counselors can assist you as you navigate the new procurement regulations featured in the Buy American Act.
Pursuit can help you navigate these changes and more
Pursuit is a leading small business lender that serves businesses across New York, New Jersey, Pennsylvania, Connecticut, Nevada, Illinois, and Washington. We offer more than 15 business loan options, a line of credit, resources, and advisory services to keep your business on track.
Contact us today to learn more about ways we can help you.
