Dfars Compliance: Austria's Complex Relationship With The Regulation

The Defense Federal Acquisition Regulation Supplement (DFARS) is a regulatory body that governs the acquisition of goods and services for the US Department of Defense (DoD). One of the challenges DFARS presents for contractors and subcontractors is a restriction on the countries they can procure supplies from. Austria was moved from allowable on a purchase-by-purchase basis to allowable for any purchase as of March 2022. This means that Austria is now a DFARS-compliant country, along with 26 other countries.

Austria's DFARS compliance status

The Defense Federal Acquisition Regulation Supplement (DFARS) is a complex regulatory body governing the acquisition of goods and services for the US Department of Defense (DoD). DFARS compliance is mandatory for officials, contractors, and subcontractors supplying or working with the DoD. Non-compliance can lead to penalties.

A "qualifying country" under DFARS refers to a country with a reciprocal defense procurement memorandum of understanding or international agreement with the United States. As of 2024, there are 26 countries considered DFARS-compliant. These countries have agreements with the US to remove barriers to purchases of supplies or services, complying with specific requirements under the Arms Export Control Act and the US Code.

Austria is not included in the list of 26 DFARS-compliant countries. However, contractors with the DoD can procure products from Austria. These procurements are exempted from the Buy American Act on a case-by-case basis. As of March 2022, Austria was moved from allowable on a purchase-by-purchase basis to allowable for any purchase. This change in status indicates an increased flexibility for contractors to source from Austria without the previous restrictions.

While Austria is not explicitly listed as a DFARS-compliant country, its exemption from the Buy American Act and inclusion in the broader list of qualifying countries suggest a level of recognition and flexibility regarding DFARS compliance. This status enables contractors to source from Austria without facing the same level of restrictions as non-qualifying countries.

To summarize, Austria has a unique status regarding DFARS compliance. While not officially listed as a DFARS-compliant country, it is considered a qualifying country, and its exemption from the Buy American Act provides flexibility for contractors working with the DoD to source from Austria. This status change in 2022 highlights the evolving nature of DFARS compliance requirements and the need for contractors to stay updated.

Qualifying country criteria

The Defense Federal Acquisition Regulation Supplement (DFARS) is a regulatory body that governs the acquisition of goods and services for the US Department of Defense (DoD).

A "qualifying country" is a country with a reciprocal defense procurement memorandum of understanding or international agreement with the United States. Both countries agree to remove barriers to purchases of supplies produced in the other country or services performed by sources of the other country. The memorandum or agreement must comply with the Arms Export Control Act and 10 U.S. Code § 2457.

As of March 2022, Austria has been moved from allowable on a purchase-by-purchase basis to allowable for any purchase. This means that Austria is now a qualifying country under DFARS.

The list of qualifying countries is essential for all contractors to understand and abide by, meaning that all procurement of goods and services must go through these countries. As of 19 April 2023, the following countries are considered qualifying countries:

• Australia
• Austria
• Belgium
• Canada
• Czech Republic
• Denmark
• Egypt
• Estonia
• Finland
• France
• Germany
• Greece
• Israel
• Italy
• Japan
• Latvia
• Lithuania
• Luxembourg
• Netherlands
• Norway
• Poland
• Portugal
• Slovenia
• Spain
• Sweden
• Switzerland
• Turkey
• United Kingdom of Great Britain and Northern Ireland

DFARS specialty metals clause

The Defense Federal Acquisition Regulation Supplement (DFARS) is a document that covers the acquisition of goods and services for the US Department of Defense (DoD). It is part of the 'Federal Acquisition Regulations' and outlines how a Department of Defense purchasing contract is written, negotiated, awarded, and paid for.

The DFARS Specialty Metals Clause is part of this document and provides rules about what's considered a "specialty metal", how specialty metals are used, and which countries those metals must be melted in. The purpose of the specialty metals clause is to ensure that the US and its allies have an adequate industrial base to defend their countries.

The clause defines a "specialty metal" as:

> A metal with a maximum alloy content exceeding one or more of the following limits: manganese, 1.65 percent; silicon, 0.60 percent; or copper, 0.60 percent; or containing more than 0.25 percent of any of the following elements: aluminum, chromium, cobalt, molybdenum, nickel, niobium (columbium), titanium, tungsten, or vanadium.

It also includes:

• Nickel or iron-nickel alloys that contain a total of alloying metals other than nickel and iron in excess of 10 percent.
• Cobalt alloys that contain a total of alloying metals other than cobalt and iron in excess of 10 percent.
• Titanium and titanium alloys.
• Zirconium and zirconium alloys.

The DFARS also includes a list of "qualifying countries" that are exempt from the Buy American Act. These are countries that the US government has a memorandum of understanding with or another international agreement. As of March 2022, Austria is included on this list, meaning it is a DFARS-compliant country.

DFARS and the Berry Amendment

The Defense Federal Acquisition Regulation Supplement (DFARS) governs the acquisition of goods and services for the Department of Defense (DoD). Both officials and contractors must comply with the requirements set forth in DFARS.

DFARS presents challenges for contractors and subcontractors due to restrictions on the countries from which they can procure supplies. Within the DFARS regulation is a list of compliant countries that contractors must understand and abide by. This list includes 26 countries, such as the Federal Republic of Germany and the United Kingdom of Great Britain and Northern Ireland. Additionally, contractors with the DoD can procure products from Austria, which is exempted from the Buy American Act on a case-by-case basis.

The Berry Amendment (USC, Title 10, Section 2533a) is a law that requires the DoD to give preference in procurement to domestically produced, manufactured, or homegrown products, including food, clothing, fabrics, and specialty metals. It was originally passed by Congress in 1941 to protect the domestic industrial base during wartime and was made permanent in 1994. The Amendment is implemented through the DFARS at 225.7002, with exceptions outlined in DFARS 225.7002-2.

The DFARS was amended to include exceptions to the Berry Amendment for the acquisition of food, specialty metals, and hand or measuring tools in certain situations, such as contingency operations or when using non-competitive procedures due to urgent needs. The specialty metals provision, added in 1973, requires that specialty metals in products delivered under DoD contracts be melted in the United States or a "qualifying country."

The Berry Amendment has very few exceptions for DoD procurement of textiles and clothing, generally requiring that all processing, manufacturing, and sourcing be done in the United States. However, some exceptions are established in DFARS 225.7002-2, such as acquisitions for combat operations, emergency acquisitions by activities outside the US, and acquisitions of chemical warfare protective clothing from qualifying countries.

DFARS compliance and the Buy American Act

The Defense Federal Acquisition Regulation Supplement (DFARS) governs the acquisition of goods and services for the Department of Defense (DoD). Both officials and contractors must comply with the requirements set forth in DFARS. DFARS compliance is essential for contractors and subcontractors that supply or work with the DoD. Non-compliance can result in penalties.

One challenge that DFARS presents for contractors and subcontractors is a restriction on the countries that you can procure supplies from. Given the complexity of the global supply chain, organizations outside of the DoD procurement process often don't know exactly where their goods and services originate from. This can pose potential compliance issues for DFARS, thus the need for restrictions. Within the DFARS regulation itself is a list of DFARS-compliant countries. This list is essential for all contractors to understand and abide by, meaning that all procurement of goods and services must go through these countries.

The Buy American Act, passed in 1933, precludes the federal government from purchasing supplies or finished goods from outside of the United States without a waiver. Reciprocal defense procurement agreements waive these laws, allowing both countries to trade defense equipment with one another.

Austria has been moved from allowable on a purchase-by-purchase basis to allowable for any purchase as of March 2022. However, contractors with the DoD may also procure products from Austria on a case-by-case basis, exempted from the Buy American Act.

DFARS Compliance Requirements

DFARS compliance can be extremely challenging. The depth of information covered in the regulatory documents is extensive, and with numerous additional documents required to gain a full picture of the compliance advisory services and requirements organizations must abide by, most smaller and medium-sized contractors may have difficulty adhering to the requirements set forth in DFARS.

DFARS compliance requirements are essential to maintaining your government contract on an ongoing basis. It isn’t enough to simply know whether or not a country you are working with is considered qualifying. If you are an organization that is a subcontractor or primary contractor supplying the DoD, you’ll need to ensure your organization protects Controlled Unclassified Information (CUI) and is NIST 800-171 compliant. A failure to do so could result in non-compliance and a revocation of your government contract, along with the financial and reputational harm that can accompany a data breach.

The Buy American Act

The Buy American Act, passed in 1933, precludes the federal government from purchasing supplies or finished goods from outside of the United States without a waiver. The Buy American Act and the Balance of Payments Program (e.g., certifications required of offerors to demonstrate end products are domestic) remain unchanged and continue to reflect processes that have been in place for decades. Under this final rule, as under the FAR final rule, those offerors that do not modify their supply chains to comply with the scheduled increases to the domestic content threshold will still be able to propose an offer for DoD contracts. However, the price preference may no longer be available to them.

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