Iraq Reconstruction: Frequently Asked Questions Concerning the Application of Federal Procurement Statutes

Prepared for Members and Committees of Congress

The announcement and award of contracts for the postwar reconstruction of Iraq have engendered
several questions concerning the application of Federal procurement laws and regulations. This
report addresses several of these questions.
Does the Buy American Act apply to contracts for the reconstruction of Iraq?
What is a “Little Buy American Act” and could one be used to require use of American products
in the reconstruction of Iraq?
May contracts for the reconstruction of Iraq be limited to American owned companies?
Are contracts for the reconstruction of Iraq subject to full and open competition?
If a contract is “sole-sourced,” what information must be made available?

The Buy American Act,1 the major domestic preference statute governing procurement by the
federal government, is quite broad in scope, applying to all federal procurements that do not come 23
under one of the five exceptions. Enacted in 1933, the act attempts to protect domestic labor by
providing a preference for American goods in government purchases. In determining what are
American goods, the place of mining, production, or manufacture is controlling. The nationality 4
of the contractor is not considered in determining whether a product is of domestic origin.
There are five primary exceptions to the Buy American Act. The act excepts procurements: (1) to
which application would be inconsistent with the public interest; (2) for which compliance would 5
require unreasonable cost; (3) of products or services for use outside the United States; (4) of
products not produced or manufactured in the United States in sufficient and reasonably available 67
commercial quantities and of satisfactory quality; or (5) for under $2,500.
The third exception, exempting articles or services purchased “for use outside of the United 8
States,” would apply to most contracts for the reconstruction of Iraq. This exception is not 9
limited to only the country of use, but to products of any origin. For example, the exemption has
applied to Canadian steel towers for use in West German communications system procured by the 1011
military and military bases leased from foreign governments.
A “Little Buy American Act” is a domestic preference enacted to govern a specific type of
procurement that for some reason is exempt from the Buy American Act. This is usually
necessitated because a procurement is for articles for use outside of the United States. Targeted
domestic preference provisions have often been attached to the appropriations acts for the
agencies making the procurement in question and are of the form—“Notwithstanding any other
law, no funds may be used to purchase ... not made in America.” The most well known of these
Acts is commonly referred to as the “Berry Amendment” and requires domestic origin under a 12
long list of certain procurements of the Department of Defense.

1 41 U.S.C. §§ 10a through 10d.
2 41 U.S.C. §§ 10a & 10b. The act applies to leases as well as purchases. National Office Equipment Co., B-191003,
78-1 CPD 413 (1978).
3 Ch. 212, 47 Stat. 1520, 72nd Congress, 2nd session. (1933).
4 See, E-Systems, Inc., 61 Comp. Gen. 431 (1982); and Patterson Pump Co., B-200165, 80-2 CPD 453 (1980).
5 41 U.S.C. § 10a.
6 Id.
7 P.L. 103-355, 108 Stat. 3346-7, 103rd Cong., 2nd sess. (1994) codified at 41 U.S.C. 10a.
8 41 U.S.C. § 10a.
9 B-166137, 49 Comp. Gen. 176 (1969).
10 Id.
11 B-122519, 34 Comp. Gen. 448 (1955); see also B-221211, 85-2 Comp. Gen. Proc. Dec. P653 (1985).
12 For more information on this act, see CRS Report RL31236, The Berry Amendment: Requiring Defense Procurement
to Come from Domestic Sources, by Valerie Bailey Grasso.

The United States Agency for International Development (USAID) has a key role in providing
government aid for the reconstruction of Iraq. A “Little Buy American”-like provision in the
Foreign Assistance Act of 1961 authorizes special rules for the source and nationality of 13
commodities and services financed by USAID. These special rules are set out at 22 C.F.R. part 14

228 and apply to goods and services financed directly with program funds under the act.

Detailed rules restrict contracts and subcontracts by categories of countries classified according to 15
certain foreign policy considerations. Also, special rules require U.S. procurement of
agricultural commodities (with some exception), motor vehicles designed for normal road speeds, 16
and pharmaceutical products. Other rules set forth U.S.-flag requirements for transporting 17
procured goods, and yet other provisions set forth preference requirements for placing marine 18
The existence of the USAID provision does not preclude the enactment of a “Little Buy American
Act” aimed specifically at Iraqi reconstruction funds. Such provisions have in the past been
attached to an appropriation placing a Buy American restriction on the use of the funds.
There is no general limitation on the nationality of ownership of a company contracting with the
Federal government. However, Congress has placed this type of limitation under certain
programs, the most pertinent being the special rules limiting the nationality of suppliers of 19
commodities and/or services financed by USAID, discussed above. Under these rules lists of 20
countries are excluded from certain covered contracts. These limits are on the nationality of the
ownership of the company.
Under the Competition in Contracting Act, federal procurement generally requires full and open 21
competition. Unlike the Buy American Act, the Competition in Contracting Act does apply to
contracts for good or services to be used outside the United States. The act does contain seven
exceptions to the general rule. Other than full and open competition is permitted under the
following circumstances:

13 P.L. 87-195, § 621, 75 Stat. 445, 494, 87th Cong., 1st sess. (1961), codified at 22 U.S.C. § 2381.
14 22 CF.R. § 228.02.
15 22 CF.R. § 228.03.
16 22 C.F.R. § 228.13.
17 22 C.F.R. §§ 228.21, 228.22.
18 22 C.F.R. § 228.23.
19 P.L. 87-195, § 621, 75 Stat. 445, 494, 87th Cong., 1st Sess. (1961), codified at 22 U.S.C. § 2381.
20 22 C.F.R. §§ 228.03 and 228.13.
21 10 U.S.C. § 2304 which applies to the Department of Defense and NASA and 40 U.S.C. § 253 which applies to all
other executive agencies. See, also, 48 C.F.R. Part 6.

(1) Only one responsible source is available, and no other supplies or services will satisfy 22
agency requirements.
(2) The agency’s need is of such unusual and compelling urgency that the Government would 23
be seriously injured.
(3) The Government needs to ensure suppliers are maintained in case of national emergency
or to achieve industrial mobilization; establish or maintain an engineering, research, or 24
development capability; or obtain expert services for litigation.
(4) Such competition is precluded by international agreement.25
(5) A statute specifically authorizes or requires that the acquisition be made through an other 26
agency or from a specified source.
(6) Disclosure of the agency’s need would compromise national security.27
(7) The public interest would be better served by other than full and open competition.28
One can at least envision situations where exemptions (2) or (6) could be applied to contracts for
reconstruction of Iraq.
Apart from the Competition in Contracting Act, USAID need not use full and open competition
when it would impair or otherwise have an adverse effect on programs conducted for the 29
purposes of foreign aid, relief and rehabilitation. This authority may be used for award of
personal service contracts under Section 636(a)(3) of the Foreign Assistance Act of 1961; award
of $250,000 or less by an overseas contracting activity; individual awards with respect to which
an assistant administrator of USAID has found that use of full and open competition would
impair foreign assistance objectives, and would be inconsistent with fulfillment of the foreign
assistance program; awards for particular countries, regions, or projects, or programs, where the
administrator of USAID has found that compliance with full and open competition would impair
foreign assistance objectives, and would be inconsistent with fulfillment of the foreign assistance
program; or awards when open competition would result in substantial additional costs or would 30
result in unacceptable delay.

22 10 U.S.C. § 2304(c)(1), 40 U.S.C. § 253(c)(1), and 48 C.F.R. § 6.302.1.
23 10 U.S.C. § 2304(c)(2), 40 U.S.C. § 253(c)(2), and 48 C.F.R. § 6.302.2.
24 10 U.S.C. § 2304(c)(3) 40 U.S.C. § 253(c)(3), and 48 C.F.R. § 6.302.3.
25 10 U.S.C. § 2304(c)(4), 40 U.S.C. § 253(c)(4), and 48 C.F.R. § 6.302.4.
26 10 U.S.C. § 2304(c)(5), 40 U.S.C. § 253(c)(5), and 48 C.F.R. § 6.302.5.
27 10 U.S.C. § 2304(c)(6), 40 U.S.C. § 253(c)(6), and 48 C.F.R. § 6.302.6.
28 10 U.S.C. § 2304(c)(7), 40 U.S.C. § 253(c)(7), and 48 C.F.R. § 6.302.7.
29 40 U.S.C. § 474 and 48 C.F.R. §706.302-70.
30 48 C.F.R. §706.302-70(b).

The Federal Acquisition Regulations require a written, certified justification before any of the 31
exceptions to full and open competition is used. The regulations specifically require each
justification to contain sufficient facts and rationale to justify the use of the specific authority
cited. As a minimum, each justification must include the following information:
(1) Identification of the agency and the contracting activity, and specific identification of the
document as a “Justification for other than full and open competition.”
(2) Nature and/or description of the action being approved.
(3) A description of the supplies or services required to meet the agency’s needs (including
the estimated value).
(4) An identification of the statutory authority permitting other than full and open
(5) A demonstration that the proposed contractor’s unique qualifications or the nature of the
acquisition requires use of the authority cited.
(6) A description of efforts made to ensure that offers are solicited from as many potential
sources as is practicable, including whether a notice was or will be publicized and, if not,
which exception applies.
(7) A determination by the contracting officer that the anticipated cost to the Government will
be fair and reasonable.
(8) A description of the market research conducted (see part 10) and the results or a statement
of the reason market research was not conducted.
(9) Any other facts supporting the use of other than full and open competition, such as:
(i) Explanation of why technical data packages, specifications, engineering descriptions,
statements of work, or purchase descriptions suitable for full and open competition have not
been developed or are not available.
(ii) When 6.302-1 is cited for follow-on acquisitions as described in 6.302-1(a)(2)(ii), an
estimate of the cost to the Government that would be duplicated and how the estimate was
(iii) When 6.302-2 is cited, data, estimated cost, or other rationale as to the extent and nature
of the harm to the Government.
(10) A listing of the sources, if any, that expressed, in writing, an interest in the acquisition.

31 48 C.F.R § 6.303-1.

(11) A statement of the actions, if any, the agency may take to remove or overcome any
barriers to competition before any subsequent acquisition for the supplies or services
(12) Contracting officer certification that the justification is accurate and complete to the best
of the contracting officer’s knowledge and belief.
Each justification shall include evidence that any supporting data that are the responsibility of
technical or requirements personnel (e.g., verifying the Government’s minimum needs or
schedule requirements or other rationale for other than full and open competition) and which form
a basis for the justification have been certified as complete and accurate by the technical or 32
requirements personnel.
These justifications must be approved in writing by the agency official designated. The 33
designated official varies according to the size of the contract. Written justifications and related
materials are to be available to the public, consistent with the Freedom of Information Act (5 34
U.S.C. § 552).
John R. Luckey
Legislative Attorney, 7-7897

32 48 C.F.R. § 6.303-2.
33 48 C.F.R. § 6.304.
34 41 U.S.C. § 253(f)(4) and 48 C.F.R. § 6.305.