Tariffs and Policy Shifts Reshape Global Procurement
Recent global tariff escalations and policy changes are significantly altering government procurement law, according to a new analysis. These shifts are forcing government buyers to reassess global supply chains and are increasing the compliance burden for contractors. The new rules require more rigorous documentation for sourcing, particularly impacting firms that use foreign-developed technology or components.
- The Buy American Act's domestic content threshold for federal procurement is undergoing phased increases, moving from 55% to 60% in 2022, 65% in 2024, and is scheduled to reach 75% in 2029. A "fallback threshold" allows agencies to purchase products with at least 55% domestic content if other options are unavailable or too costly, a provision set to last until 2030. - Section 889 of the 2019 National Defense Authorization Act prohibits federal agencies from contracting with entities that use "covered" telecommunications and surveillance equipment from specific Chinese companies, including Huawei and ZTE. This prohibition extends to a contractor's commercial operations, even if they are unrelated to their federal contracts. - The SBIR and STTR Extension Act of 2022 prolonged these small business research programs through September 2025 and mandated that participating agencies create due diligence programs to evaluate risks posed by firms with foreign connections. Competing legislative proposals, such as the INNOVATE Act and the SBIR/STTR Reauthorization Act of 2025, are now being debated to determine the programs' future, with some proposals calling for permanent authorization and increased funding set-asides. - A comprehensive overhaul of the Federal Acquisition Regulation (FAR) was initiated by Executive Order 14275, "Restoring Common Sense to Federal Procurement," aiming to streamline the complex regulations. As part of this, FAR Part 19, which governs small business programs, was updated in September 2025 to reorganize requirements by acquisition stage and eliminate the need for small businesses to re-certify their size status at the task order level. - The Department of Defense is advancing its Responsible AI (RAI) Strategy, structured around tenets like Governance, Warfighter Trust, and the AI Product and Acquisition Lifecycle. This strategy is designed to modernize governance structures for continuous oversight and to ensure AI is acquired and implemented in line with DoD ethical principles. - Recent tariffs have targeted a wide array of goods, including electronics, steel, and aluminum, leading to increased procurement costs for government contractors. To mitigate these impacts, some companies are accelerating "China+1" strategies, diversifying their manufacturing hubs to countries like Mexico and Vietnam. - The DoD's "Data, Analytics, and Artificial Intelligence Adoption Strategy" provides a framework to speed up the acquisition of AI capabilities and give warfighters a decision advantage. To support this, the Tradewinds Solutions Marketplace was launched to accelerate the procurement process for AI/ML, data, and digital analytics solutions that address DoD challenges.
