Attachment_A_-_FAA_Procurement_Restrictions.pdf

June 11, 2014

Fact Sheet: Foreign Assistance Act Procurement Restrictions

This fact sheet summarizes two procurement restrictions that affect Foreign

Assistance funds: 1) the vehicle procurement restriction, and 2) the more general equipment restriction.

1. Vehicle Procurement Restrictions:

Pursuant to section 636(i) of the Foreign Assistance Act of 1961, as amended

(FAA), none of the funds made available to carry out the FAA (including, but not limited to, Economic Support Funds (ESF), Peacekeeping Operations (PKO), and

Nonproliferation, Anti-terrorism, Demining and Related Programs (NADR) funds) may be used to finance the purchase, sale, long-term lease, exchange, or guarantee of a sale of a motor vehicle unless such motor vehicle is manufactured in the

United States (this restriction does not pertain to spare parts for vehicles).

Section 636(i) provides that “where special circumstances exist the President is authorized to waive the provisions of this section in order to carry out the purposes of the [FAA].” This waiver authority has been delegated to the Secretary of State by Executive Order 12163 of September 29, 1979, as amended, and the authority has been further delegated to Assistant Secretaries pursuant to section 2(e)(2) of

State Department Delegation of Authority 293-2. Examples of circumstances that have been used to justify a waiver in the past include:

1. Availability: Vehicles that are manufactured in the U.S. cannot be procured because of interoperability issues (e.g. African Model Diesel Variant vehicles for peacekeeping missions in Africa); and,

2. Timeliness: The vehicles need to arrive at their destination within a specific time period (e.g. for specific peacekeeping deployments) and procuring in the United States will cause unacceptable delays.

As a general matter, cost savings alone is not a sufficient justification to seek a vehicle procurement restriction waiver.

Long-term lease is not defined in the statute. However, USAID has promulgated regulations implementing the restriction. The USAID regulations can be found at 22 C.F.R. part 228, which define “long term lease” as “a single lease of more than 180 calendar days; or repetitive or intermittent leases under a single award within a one-year period, which cumulatively total more than 180 calendar days. A single lease may consist of a lease of one or more of the same type of commodity within the same lease term.”

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**Even if the vehicle procurement restriction is waived, the general procurement restriction described below still applies.**

2. General Equipment Procurement Restrictions

Section 604(a)(1) of the FAA requires that funds made available for assistance under the FAA (including but not limited to ESF, PKO, and NADR funds) may be used for procurement only in the United States, the recipient country, or non-advanced developing countries (see below for definition), unless the provision of such assistance requires commodities or services of a type that are not produced in and available for purchase in any such country, or the President waives the restriction under circumstances described below. This waiver authority has been delegated to the Secretary of State by Executive Order 12163 of September 29, 1979, as amended January 17, 2014, and the authority has been further delegated to

Assistant Secretaries pursuant to section 2(e)(2) of State Department Delegation of

Authority 293-2.

For purposes of determining whether procurement takes place “in” a given country, it matters only where the equipment is being procured (i.e. the country from which it will be exported).

The seller’s home country or country of incorporation is not relevant to this question. However, recipients and contractors must not engage suppliers of commodities in an authorized country to import commodities from a non-authorized country outside for the purposes of circumventing the restriction.

This restriction does not apply if the equipment or supplies in question are not available for purchase in the United States, recipient country or non-advanced developing countries (for example, under certain circumstances where Hesco barriers were required, they have been purchased from the UK without a waiver).

Equipment or supplies may not be considered available for purchase if not available in sufficient quantities or reasonable quality (i.e. they are not of a quality fit for the intended purpose). Although a waiver is not necessary under these circumstances, an action memo is still sent to the relevant Assistant Secretary documenting his decision that such commodities are not available in the United

States, recipient country, or any non-advanced developing country.

Where the commodity is purchased in the recipient country, the recipient country is the country in which the procurement takes place. Where the commodity is shipped to the recipient country from a free port or bonded warehouse, procurement is considered to have taken place in the country from which the commodity was shipped to the free port or bonded warehouse.

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Where the restriction does apply, procurement may be made from a country other than the United States, recipient country, or non-advanced developing country only if the relevant Assistant Secretary determines, on a case-by-case basis, that procurement in such other country is necessary:

1. to meet unforeseen circumstances, such as emergency situations, where it is important to permit procurement in an advanced developing or developed country (e.g. for timeliness); or

2. to promote efficiency in the use of United States foreign assistance resources, including to avoid impairment of foreign assistance objectives.

With respect to any funds, a request to waive this provision has to be done for each separate procurement (i.e. it cannot cover an entire program for the year – it has to list specific equipment for a specific program), and will be scrutinized closely.

Note: In order to determine whether a country is an advanced developing country, check the most recent DAC List of ODA Recipients which includes a list of

“Upper Middle Income Countries” that are considered to be advanced developing countries. The latest list can be found:

http://www.oecd.org/dac/stats/DAC%20List%20used%20for%202012%20and%20

2013%20flows.pdf

3. Implementation Guidance for Offerors

To address these restrictions offerors should NOT:

Propose procurement strategies requiring a 636(i) waiver without first exploring available U.S.-manufactured procurement options for vehicles that satisfy the statement of work (SOW) requirements. The offerors should be explicit in the proposal as to what U.S.-manufactured vehicle procurement options were examined and what timeline and other implementation challenges (if any) were posed. Failure to do so may result in a determination that the offeror’s procurement approach is unacceptable, particularly in cases where another offeror proposes U.S.-manufactured vehicles that meet the SOW specifications and can be provided on a similar timeline.

Propose any procurement involving sales through a business office/subsidiary in the United States/a non-advanced developing country/the recipient country, when the product will actually be procured

- 4 -and shipped from a country that is not the United States, the recipient country, or a non-advanced developing country.

Propose procurements where a new production facility/manufacturing facility/subsidiary is temporarily established in a non-advanced developing country for the sole purpose of addressing the 604(a) restriction.

Propose procurements where finished “kits” are sent from a non-authorized country for final assembly in a non-advanced developing country or other authorized country.

Propose procurements where new manufacturing of major components takes place in non-authorized countries, which are then shipped to an authorized country. While not every component of the vehicle or equipment item has to originate from the procurement location, significant new manufacturing of major components (i.e., hulls) should not be taking place in non-authorized countries following award.