FAR 25.504-1—Buy American statute.
Plain-English Summary
FAR 25.504-1 explains how to apply the Buy American statute in a small-business set-aside when evaluating offers for end products to be used in the United States. The section is presented through examples that show how to identify whether the Buy American statute applies, when trade agreements do not apply because the acquisition is under the dollar threshold and set aside, how to treat domestic end products versus U.S.-made end products that are not domestic, and how to use the evaluation procedures in FAR 25.502(a) and the price adjustment factor in FAR 25.106(b)(2). It also shows how to determine when a domestic offer is unreasonable under FAR 25.106(b)(1)(ii), and when award may be made to a small-business offer that is not a domestic end product because it remains the lowest evaluated price after the 30 percent evaluation factor is applied. In practice, this section matters because it teaches contracting officers how to compare offers correctly, avoid misclassifying small-business products, and make award decisions that comply with both domestic preference rules and small-business set-aside procedures. The examples also illustrate the interaction between domestic content, foreign end products, and the special treatment of small-business products that are U.S.-made but do not meet the domestic end-product definition.
Key Rules
Buy American applies here
For end products to be used in the United States, the Buy American statute applies unless an exception or trade agreement rule removes it. In the examples, the acquisitions are small-business set-asides and under the stated threshold, so the trade agreements do not apply.
Use FAR 25.502(a) first
The evaluation must begin with the steps in FAR 25.502(a). That means the contracting officer first identifies which offers are domestic end products and which are not, then applies the required evaluation treatment to non-domestic offers.
Small-business U.S.-made items may be foreign for evaluation
A product made by a small business can still be treated as a foreign end product if it is not a domestic end product under the Buy American definition. The examples show that these offers are evaluated as foreign even though the offeror is a small business.
Apply the 30 percent factor
Non-domestic offers are increased by the 30 percent evaluation factor under FAR 25.106(b)(2) when comparing prices. This can make a lower-priced non-domestic offer lose to a higher-priced domestic offer.
Determine whether domestic price is unreasonable
If the evaluated price of a non-domestic offer remains lower than the domestic offer, the domestic offer may be considered unreasonable under FAR 25.106(b)(1)(ii). In that case, award may go to the non-domestic offer if the rules allow it.
U.S.-made but not domestic can still win
A U.S.-made end product that is not domestic may still receive award if, after evaluation, it remains the lowest acceptable offer and meets the applicable small-business set-aside rules. The examples show award going to such an offer when it stays below the domestic offer after the adjustment.
Domestic content matters
The examples distinguish between U.S.-made end products that exceed 55 percent domestic content and those that do not. An offer exceeding the domestic-content threshold is treated as a domestic offer for evaluation purposes, while one below the threshold is treated as foreign.
Responsibilities
Contracting Officer
Identify whether the acquisition is for end products for use in the United States, determine whether the Buy American statute and any trade agreement exceptions apply, and follow the evaluation steps in FAR 25.502(a). The contracting officer must apply the 30 percent factor to non-domestic offers, decide whether a domestic offer is unreasonable, and make award consistent with the small-business set-aside and Buy American rules.
Offeror / Contractor
Represent accurately whether the offered product is a domestic end product, a U.S.-made end product, or otherwise non-domestic, and ensure the domestic-content information is correct. Small-business offerors must understand that being a small business does not automatically make a product domestic for Buy American evaluation purposes.
Agency
Structure the acquisition correctly as a small-business set-aside when applicable, ensure the solicitation and evaluation method reflect the Buy American statute and related FAR provisions, and support contracting officers in applying the proper thresholds and exceptions.
Source Selection / Evaluation Team
Evaluate offers using the required domestic-preference framework, apply the price adjustment correctly, and document the comparison results so the award decision can be justified under the cited FAR provisions.
Practical Implications
Contracting officers must not assume that a small-business product is automatically a domestic end product; the domestic-content test still controls.
The 30 percent evaluation factor can change the winner even when a non-domestic offer has the lowest initial price, so the arithmetic must be done carefully and documented.
When the acquisition is under the stated threshold and set aside, trade agreement rules do not apply in these examples, so teams should not import trade-agreement analysis where it is excluded.
A domestic offer can be rejected as unreasonable if a non-domestic offer remains lower after evaluation, so price reasonableness and evaluation are linked.
The examples show that award can go to a U.S.-made but non-domestic small-business offer when it remains the best evaluated value, so offer classification and domestic-content percentages are critical to the outcome.
Official Regulatory Text
(a) (1) Example 1 . Offer A $16,000 Domestic end product, small business Offer B $15,700 Domestic end product, small business Offer C $10,100 U.S.-made end product (not domestic), small business (2) Analysis: This acquisition is for end products for use in the United States and is set aside for small business concerns. The Buy American statute applies. Since the acquisition value is less than $50,000 and the acquisition is set aside, none of the trade agreements apply. Perform the steps in 25.502 (a). Offer C is of 50 percent domestic content, therefore Offer C is evaluated as a foreign end product, because it is the product of a small business but is not a domestic end product ( see 25.502 (c)(4)). Since Offer B is a domestic offer, apply the 30 percent factor to Offer C ( see 25.106 (b)(2)). The resulting evaluated price of $13,130 remains lower than Offer B. The cost of Offer B is therefore unreasonable ( see 25.106 (b)(1)(ii)). The 25.106 (b)(2) procedures do not apply. Award on Offer C at $10,100 ( see 25.502 (c)(4)(i)). (b) (1) Example 2 . Offer A $11,000 Domestic end product, small business Offer B $10,700 Domestic end product, small business Offer C $10,200 U.S.-made end product (not domestic), small business (2) Analysis : This acquisition is for end products for use in the United States and is set aside for small business concerns. The Buy American statute applies. Perform the steps in 25.502 (a). Offer C is evaluated as a foreign end product because it is the product of a small business but is not a domestic end product (see 25.502 (c)(4)). After applying the 30 percent factor, the evaluated price of Offer C is $13,260. Award on Offer B at $10,700 (see 25.502 (c)(4)(ii)). (c) (1) Example 3 . Offer A $14,000 Domestic end product (complies with the required domestic content), small business. Offer B 12,500 U.S.-made end product (not domestic, exceeds 55% domestic content), small business. Offer C 10,100 U.S.-made end product (not domestic, with less than 55% domestic content), small business. (2) Analysis. This acquisition is for end products for use in the United States and is set aside for small business concerns. The Buy American statute applies. Since the acquisition value is less than $50,000 and the acquisition is set aside, none of the trade agreements apply. Perform the steps in 25.502 (a). Offers B and C are initially evaluated as foreign end products, because they are the products of small businesses but are not domestic end products ( see 25.502 (c)(4)). Offer C is the low offer. After applying the 30 percent factor, the evaluated price of Offer C is $13,130. The resulting evaluated price of $13,130 remains lower than Offer A. The cost of Offer A is therefore unreasonable. Offer B is then treated as a domestic offer, because it is for a U.S.-made end product that exceeds 55 percent domestic content ( see 25.106 (b)(2)). Offer B is determined reasonable because it is lower than the $13,130 evaluated price of Offer C. Award on Offer B at $12,500.