Homeland Security Acquisition Regulation, Make Personal Protective Equipment in America Act Restrictions on Foreign Acquisition (HSAR Case 2024-003)

SUPPLEMENTARY INFORMATION:

I. Background

The Buy American Act of 1933, as amended (BAA), addresses preferences in Federal procurement. The BAA provides a preference for the purchase of domestic supplies.

On November 15, 2021, the Infrastructure Investment and Jobs Act was signed into law. Subtitle C of title IX of Division G of the Infrastructure Investment and Jobs Act is the Make PPE in America Act (“the Act”). The Act requires the Department of Homeland Security (DHS), Department of Veterans Affairs (VA), and the U.S. Department of Health and Human Services (HHS) to take certain actions to ensure the sustainment and expansion of domestic manufacturing for certain types of PPE critical to the United States' national response to a public health crisis, such as the COVID-19 pandemic.

The Act defines PPE as surgical masks, respirator masks and powered air purifying respirators and required filters, face shields and protective eyewear, gloves, disposable and reusable surgical and isolation gowns, head and foot coverings, and other gear or clothing used to protect an individual from the transmission of disease. The Act requires that any contracts for the procurement of PPE entered into by DHS, VA, and HHS be for PPE, including the materials and components thereof, that is domestically grown, reprocessed, reused, or produced. The Act also requires that these contracts with DHS, HHS, or VA for PPE last at least two years in duration plus all option periods necessary, to incentivize investment in the domestic production of PPE and the materials and components thereof. The Act allows for alternatives to domestic production under certain conditions ( i.e., where PPE assembled outside of the United States contains only materials and components grown, reprocessed, reused or produced in the United States). When using alternatives to domestic production, DHS, HHS, or VA, as applicable, must certify every 120 days that alternatives to domestic production are necessary to procure PPE due to the immediate needs of a public health emergency. The Act further recognizes certain exceptions to the domestic production of PPE, such as due to nonavailability, or where the PPE cannot be procured at U.S. market prices. Where DHS, HHS, or VA respectively grants an exception, that Secretary would also need to certify that implementing these exceptions are necessary to meet the immediate needs of a public health emergency.

The DHS Chief Procurement Officer can issue HSAR deviations when necessary to allow Components to deviate from the HSAR. On October 17, 2022, DHS issued a deviation regarding how DHS would comply with the Make PPE in America Act requirements (Deviation 23-01).

DHS proposes to amend the HSAR at 48 CFR part 3025, Foreign Acquisition, and at 48 CFR part 3052, Solicitation Provisions and Contract Clauses, to reflect the requirements of the Act.

II. Discussion

DHS is proposing to add a new HSAR subpart, add an HSAR clause, and add an HSAR provision to codify how DHS complies with the Act. These proposed changes would also be consistent with Deviation 23-01. Each of these proposed changes is described in detail in the following paragraphs.

DHS is proposing to add new subpart 3025.71, Make PPE in America Act Restrictions on Foreign Acquisition, to the HSAR. This would codify the restrictions in Deviation 23-01 applicable to the acquisition of certain PPE consistent with the Act. These restrictions include minimum time periods for contract duration, content requirements for certain PPE, alternatives to domestic production when conforming PPE is not available, and exceptions when conforming PPE is either nonavailable or cannot be procured at U.S. market prices (or in other words, only available at an unreasonable cost). This rule also proposes to codify the definitions of terms used in Deviation 23-01. These terms are “component,” “domestic personal protective equipment,” “foreign-assembled domestic personal protective equipment,” “foreign personal protective equipment,” “personal protective equipment,” and “United States.”

HSAR 3025.7102-1 would apply to all types of actions, orders, option exercises, and contracts awarded and administered by DHS. It would require contracting officers to purchase domestic PPE except for certain exceptions specified in HSAR 3025.7102-2 and would require that any contract for PPE have a base period of performance of at least two years, plus option periods.

HSAR 3025.7102-2 proposes to codify the conditions under which acquisitions of PPE, or component thereof, would be excepted from the requirements of HSAR 3025.7102-1 ( i.e., alternatives to domestic production, nonavailability, and unreasonable cost) consistent with Deviation 23-01.

Deviation 23-01 lists the clauses and provisions that apply when an exception due to nonavailability or unreasonable cost is used, clarifying that contracting officers still need to comply with applicable laws and regulations. This rule proposes to codify these clauses and provisions. DHS believes this approach maximizes the use of Made in America laws by defaulting to a Buy American-compliant or Trade Agreements Act-compliant item, depending on the dollar value of the procurement, when both domestic PPE and foreign-assembled domestic PPE cannot be acquired.

HSAR 3025.7103 proposes one provision and one contract clause. DHS is proposing to add HSAR clause 3052.225-7X, Make PPE in America, and HSAR provision HSAR 3052.225-7Y, Make PPE in America Certificate. The clause codifies Deviation 23-01 which requires contractors to deliver only domestic PPE, identify in the provision if foreign-assembled domestic PPE is being provided, and identifies the order of precedence for the Buy American statute and the Trade Agreements Act when neither domestic PPE nor foreign-assembled domestic PPE are available due to nonavailability or unreasonable cost. Regarding the provision, Deviation 23-01 also requires contractors to identify any foreign-assembled domestic PPE being offered to the Department and the country where it was assembled. This proposed rule would codify this clause and provision.

III. Regulatory Analyses

A. Executive Orders 12866, 13563, and 14094

Executive Order 12866 (Regulatory Planning and Review), as amended by Executive Order 14094 (Modernizing Regulatory Review) and Executive Order 13563 (Improving Regulation and Regulatory Review) direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility.

The Office of Management and Budget (OMB) has not designated this proposed rule a significant regulatory action under section 3(f) of Executive Order 12866, as amended by Executive Order 14094. Accordingly, OMB has not reviewed this regulatory action.

Background

During the COVID-19 pandemic, the United States encountered challenges obtaining PPE in adequate amounts to address the urgent public health and safety need. This was in part due to an unprecedented increase in demand for PPE and challenges in the supply chain. Before the COVID-19 pandemic, domestic production of PPE was limited and most PPE used in the United States was predominantly imported. The COVID-19 pandemic exposed the vulnerability of the United States PPE supply chains and lack of domestic PPE production. To help address the need for domestically produced PPE, between March 2020 to September 2021, the U.S. Government invested approximately $957.5 million into expansion of domestic PPE production. These federally-funded projects expanded an existing domestic industrial base to meet surging demand during the pandemic.

On November 15, 2021, the Infrastructure Investment and Jobs Act (Pub. L. 117-58), was signed into law and included the Act. Congress enacted this legislation to sustain domestic demand in PPE manufacturing, support the continuity of domestic PPE material sourcing and manufacturing, and reduce the U.S.'s dependence on foreign-produced PPE. Congress took this action to reduce the vulnerabilities from future pandemic supply chain challenges and to address national security concerns on foreign dependence of critical supplies.

On October 17, 2022, DHS issued Deviation 23-01 to comply with the Act's requirements. Under Deviation 23-01, solicitations for PPE released on or after February 14, 2022, or contracts awarded on or after February 14, 2022, were subject to the Act's requirements. Since issuance of Deviation 23-01, DHS Components have incorporated the domestic sourcing and production requirements for PPE in solicitations and contracts, as required by the Act.

DHS has largely transitioned to wholly domestically sourced and manufactured PPE items except for nitrile gloves. The challenges with acquiring nitrile gloves that comply with the Act are two-fold: (1) the domestic nonavailability of nitrile butadiene rubber (NBR) at the required quality and quantity to meet demand and (2) specific to DHS, insufficient domestic manufacturing capacity of nitrile gloves that can successfully pass Departmental testing requirements for interference with explosives detection equipment. Therefore, prior to publication of this proposed rule, DHS procurements and subsequent contracts for PPE already complied with the Act's requirement through the issuance of Deviation 23-01. In the following table, DHS estimated the total awarded amount for PPE procurement in Fiscal Years (FY) 2017 through 2023. DHS used data from Federal Procurement Data System and filtered for specific product codes that were most likely to include covered PPE. Table 1 displays the total award amount DHS spent, adjusted to 2023 dollars, on PPE and distribution of awards spent on domestic versus foreign manufacturers.