The Buy American Requirements
The Main Points of the Buy American Requirement
Among the earliest statutes that relate to the USA’s domestic products procurement is the buy American requirement. This can apply to all procurements made by the US government directly. The history of this act goes back to the 1930s during the Great Depression. It aims at protecting industries, investments, labor and capital in America.
Being a regulation, the act requires individuals and companies to purchase construction products and materials in the USA after winning the federal government tenders (Luckey, 2009). The implication of this act is that before outsourcing construction materials outside the country, construction companies must consider the US market first, and purchase materials at reasonable prices.
Buying non-domestic goods is restrained by this requirement. However, companies are not entirely compelled by this act since it provides some exceptions. In terms of the completed or manufactured products, careful analysis should be done to determine whether they are domestic or imported. While evaluating the company in order to award it tenders, the US government ought to give priority to local firms that quote low prices (Manuel, 2013). This way, the prosperity of local companies is ensured by the benefits realized from the tenders of the federal government. This improves the economy of America.
This act has a quite broad coverage and it entails the requirement which compels the federal government in American to purchase public use goods that are produced domestically. The act requires this to be the usual occurrence unless when there are exceptions applying to such deals. Here are the exceptions that the act provides; first, this act is not applied if it is not consistent with the public interest or reasonable cost. Second, it is not applied when procuring products that will be consumed outside the country and goods that are manufactured outside the country. Third, this act is not applied in procurement deals whose costs are not more than $ 2,500 (Wise, 2009).
The Benefits of the Requirement to VectorCal and my New Company
Although this can seem non-beneficial and controversial for some firms, its overall goal and intention is beneficial to the citizens and companies in America. The act began during the Great Depression. At this time, companies in America were facing many difficulties in their competition with foreign firms. As such, the federal government realized the essence of regulating the economy by taking this measure which would offer protection to American companies.
Many American individuals and companies have benefited from this act. It has made selling and supplying local commodities to contractors and the US government possible (Luckey, 2009). The requirement has provided an added advantage to local companies over foreign firms. Additionally, wining government tenders has been made easier for the local companies as compared to foreign companies. Apart from this being beneficial to the local companies, it has also boosted the economy of America through the exploitation of local resources and taxes.
Being one of the US local companies, my new firm and VectorCal Company will benefit from this requirement. These companies will enjoy the protection provided by the federal government. Local companies are preferred by the federal government while awarding tenders. As such, my new firm would be favored by the government while awarding tenders. This implies that VectorCal Company and my new firm might benefit from this requirement while applying for tenders. If both companies fail to win government tenders, they will supply goods produced locally to the firms that will be awarded tenders. This is because the requirement stipulates that the firms that are awarded tenders shall use the resources available in the US (Wise, 2009). Consequently, the firms that win tenders may get goods from these companies. Thus, buy American requirement will benefit both companies.
This argument is based on the rationale that these are local companies that work with resources that are locally available in their construction and other activities. Therefore, they have better chances of being awarded government tenders as compared to the foreign firms. In addition, even if the companies fail to win tenders that are offered by the government, they can supply goods produced locally to both local and foreign firms that win the tenders. The notion here is that the firms awarded the tenders may look for goods produced locally from VectorCal Company and my new firm (Luckey, 2009).
Contradiction of the requirements to the capitalist ethos
Contrary to the capitalism that is endorsed by the federal government in America, the buy American requirement acts as a means of protecting American firms from foreign firms. Fair competition is not interfered with by the governments in the capitalists markets. Companies are allowed to compete on the basis of their capacities (Connolly, 2008). Buy American requirement does not advocate for this since fair competition is interfered with by the federal government. Actually, the American companies are favored by the federal government which gives them a competitive edge over foreign firms. The government declares that only local goods should be used by the companies that win its tenders. Additionally, local companies are preferred to local firms while awarding tenders. This might be a good proposition for American companies. However, it is in contrast with the capitalism spirit which is endorsed by the government in America (MacCraw, 1999).
On the basis of this analysis, buy American requirement is a contrast of capitalism because it interferes with fair competition which ought to exist in a capitalist state. This is due to the fact that foreign firms that supply foreign goods are not allowed to supply their goods to the US government. Contractors are also not allowed to use foreign goods once they win tenders. Local firms that supply foreign goods are not allowed to import these goods for contractors who win the tenders or the federal government unless when this is allowed by the exceptions of the requirement. As such, buy American requirement is a contradiction of capitalist ethos which supports fair competition (Scott, 2011).
In terms of government interventions, buy American requirement is a contradiction of capitalistic ethos. This requirement allows government interference with a fair market. It does this by introducing regulations. It is crucial to note that this government intervention is not allowed by capitalism. Instead, the government should allow competition between companies. If necessary, weak companies are eliminated.
However, government intervention makes it impossible for companies to engage in such a competition. This occurs due to the pressures that the government put while regulating competition. In this regard, local companies are favored by the government in the US. This enables them to beat foreign companies in the competition with ease. The requirement also stipulates how companies should supply their goods to the US government. When the requirement does this, it contradicts capitalistic ethos. This should not happen in capitalism since no terms should be dictated to companies by the government. Instead, companies should be left alone by the government to compete on the basis of their capacities (Connolly, 2008). Nevertheless, the government in the US advocates for intervention in the capitalistic market. The intervention contradicts what ought to happen within a capitalistic state which is endorsed by the American government.
The advantages of the exceptions of the requirements
Buy American requirement has five exceptions. One exception claims that the requirement’s application should not conflict the public interest. The implication of this is that the requirement ought to be in line with the public interest. Another exception claims that this requirement should prefer goods produced locally if their prices are reasonable. Third, the exception excludes goods that are not used in the US. Fourth, the exception excludes deals that are not worth $2,500 or more from this requirement (Luckey, 2009). Fifth, the exception excludes foods whose the manufactured quantities within the US are not reasonable.
On the basis of this analysis, my view is that the buy American requirement’s exceptions are advantageous and fair to the economy of America. I hold this view because the exceptions aim at strengthening the economy. In the first exception, public interest is protected. The other exception attempts to reduce government expenses on tenders. The third exception prevents interference with businesses that are not in the US. In the fourth exception, tenders where the requirement can be applied are indicated, which in my view are reasonable. Companies are allowed the necessary freedom in their operations by the last exception (Wise, 2009). On the basis of what the exceptions aim to accomplish, my view is that they are advantageous and fair to the economy of America. Additionally, the exceptions are advantageous and fair to the economy since they do not contradict the US economic goals.
Advantages of the requirements on the navigation system
As indicated, there are many benefits of buy American requirement for local companies. The navigation system produced by my new firm and VectorCal Company would also benefit from the application of the requirement. This is because both companies would combine forces in order to provide local products at prices that are lower than those of the other local firms.
This should not be taken to imply that the firms would provide substandard commodities. Instead, the implication is that the companies would take advantage of their resources and the requirement to grow themselves (Manuel, 2013). Every firm would major on exploiting its strengths and dealing with its weaknesses. This way, the companies would enhance their competitive advantage. Thus, applying buy American requirement can be advantageous to a navigation system that both companies would produce.
Applying buy American requirement would also benefit both companies when there is a procurement process of the goods produced locally while being consistent with the public interests. In this regard, winning tenders or supplying government goods would be easier. Both companies would enjoy the benefits of the application of buy American requirement in the navigation system if this happens.
Disadvantages of the requirements on the navigation system
Although the application of the buy American requirement would benefit the navigation system that both companies would produce, this move can also have disadvantages. Actually, the navigation systems that both companies ought to produce are reduced when they are combined to come up with one navigation system. In practice, this implies that the companies will work as a single firm as they apply the buy American requirement. When this happens, the possibility of these firms to win tenders or to supply government goods will also be reduced. This implies that the application of the buy American requirement can be disadvantageous to a navigation system that both firms would produce (Manuel, 2013).
Additionally, both companies would not be favored by such a practice over the local companies which may have more advantages over these firms. This implies that this practice will not benefit them even after combining resources. As such, applying buy American requirement will be disadvantageous to their navigation system. Contrary to this, applying buy American requirement to each company individually is likely to be beneficial or advantageous as opposed to its application on both companies combined.
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Connolly, W. (2008). Capitalism and Christianity, American style. Durham: Duke University Press.
Luckey, J. (2009). The buy American act: requiring government procurements to come from domestic sources. Congressional research service.
MacCraw, T. (1999). Creating modern capitalism: How entrepreneurs, companies, and countries triumphed in three industrial revolutions. Cambridge, Mass: Harvard Univ. Press.
Manuel, K. (2013). The buy American act in brief: preferences for “domestic” supplies and construction materials in federal procurements. Congressional research service
Scott, B. (2011). Capitalism: Its origins and evolution as a system of governance. New York: Springer.
Wise, D. (2009). Federal-aid highways: federal requirements for highways may influence funding decisions and create challenges, but benefits and costs are not tracked. Darby: Diane publishing.