By Patrick Lozada, Global Policy Director, TIA
Recently, the Biden Administration proposed amendments to the Federal Acquisition Regulations’ Buy American Act requirements to “increase U.S. content in the products the federal government buys and support the domestic production of products critical to our national and economic security.”
While well-intentioned, these proposed changes risk unintended consequences, specifically on the information and communications technology (ICT) sector. Innovation doesn’t happen in a vacuum. Likewise, it doesn’t happen within geographical boundaries.
By accelerating connectivity and ensuring companies have access to materials to continue innovating new technologies, globalized technology supply chains are critical to supporting the administration’s goals of creating American jobs, strengthening domestic manufacturing, and ensuring the U.S. economy is in position to address the challenges of the future.
As the administration reviews these regulations, we have identified three important points for consideration:
Innovation is global
Global companies and technology supply chains play a vital role in supporting an innovative and competitive telecommunications industry. Both public and private sector users rely on global networks to connect to the internet. In fact, there is not a single telecommunications network in the U.S. that could fully function using only products from U.S. vendors made with exclusively U.S. contents within.
Every year, countless global companies make substantial investments to employ engineers who conduct cutting-edge research in the U.S., manufacture products in the U.S. and pay U.S. taxes. The accessibility and diversity of the American economy is a strength not a weakness, and that should be kept in mind when considering new barriers to trusted international products and suppliers.
Limiting foreign products hurts U.S. businesses in other countries
Changes to the Buy American Act rules that would limit or restrict U.S. government sourcing of foreign products could inspire or give other governments reason to take similar counter measures against U.S. companies.
In fact, Canada recently told the Biden Administration that it might limit the ability of U.S. companies to win Canadian procurement contracts if tougher Buy American Act requirements are put into place. Other foreign officials have expressed concern about potential changes to U.S. procurement policies, even before the rule change was proposed, including from the EU, UK, China and Mexico.
COTS and IT exemptions promote innovation
The administration directed the FAR Council to review exemptions for the Commercial-Off-The Shelf (COTS) information technology products. The exemption was codified in 2004 in part to enable the federal government and other public sector entities to access the most up-to-date IT solutions and at a reasonable prices.
Working with Congress to narrow or lift the exemption will not yield its intended results and would limit government access to innovative and otherwise proven and affordable technologies in the market.
Among other consequences, the new requirements could cause companies to segment production into public sector and consumer product lines. Those companies would then likely need to raise prices for government customers to cover the costs of additional resources required to satisfy supply and production constraints.
Additionally, dramatic changes in sourcing requirements would likely create problems with systems integrations and backward compatibility, leading to a public sector product line that is less useful than its consumer counterpart. The government would, in time, fall behind the private sector in terms of operational efficiency and interoperability.
At TIA, our member companies employ tens of thousands of workers across all 50 states and U.S. territories, and power billions in U.S. exports on an annual basis. Any changes to regulation requirements should be openly discussed with the consideration and input of all affected industries, especially during a time when the United States seeking to re-establish its role as the dominant leader in global technology innovation.
As the United States continues to weather impact from the pandemic, increasing cyberattacks and inflating costs; all weighing down the potential for economic growth, it’s crucial that government does not tighten restrictions on doing business with allies and businesses that invest in America. Rather, we should find ways to lift the American workforce and restore our leadership on the global stage.
CLICK HERE to read TIA’s comments filed on the potential changes to Buy American provisions of government procurement rules.