Table of Contents
The Main Points of Buy American Requirements
The Buy American Act refers to the 1933 law that was enacted to regulate the purchase of products by the federal government within the U.S (Federal Government, 2009). The Act requires that all the items that are meant for the public use must be produced in the country. Also, all the manufactured commodities must be completed in the U.S and from U.S materials. The federal government should also purchase the goods at the set favorable prices. Nevertheless, there are instances when the Buy American provisions can be waivered in favor of foreign made items regardless of the procurement entity, the commodity, or the source of fund. Such waivers might become necessary when the domestic product is not consistent with the interest of the public. Additionally, the same could apply if the available quantity of the item is not sufficient to meet the intended purpose (Canadian Trade Commissioner Service, 2017). Lastly, the waiver could take place if the local product would readily increase the total cost of the project activity by 25%.
Substantive Means by which Buy American Requirements would benefit both VectorCal and DanLan
The fact that Buy American requires the federal government to purchase the products meant for public consumption from the local firms gives both VectorCal and DanLan the opportunity to sell their commodities to the government as a client. At least, they are assured of a ready market that they only need to meet its product specifications (Tkatchova, 2011). Additionally, the condition of having to meet the capacity to supply the required quantity of the specific items also encourages the firms to expand their capabilities so as to qualify for the government sales agreements (Federal Government, 2009). In the process, the companies end up with a surplus that enables them to sell to additional clients, thereby, maximizing their sales turnover.
VectorCal and DanLan also benefit from the significant reduction in the level of competition from the foreign firms whose products can only be considered for purchase by the federal government if the local organizations do not have the right commodities. Moreover, the two companies will initiate self-regulating quality standards that will see them win the government contracts as well as attract several consumers (Tkatchova, 2011). Apparently, the achievement of high quality could not be easy if the government failed to cite it as a condition for purchase.
The firms would benefit from reliable payment agreements because the federal government often operates with a budget that often allocated funds for such purchases. Therefore, the organizations will readily receive their money for their operational and expansion activities (Tkatchova, 2011). Lastly, VectorCal and DanLan will manage to build their brands once they serve the government because most of the local and foreign buyer will trust the quality of the commodities and their ability to meet commercial agreements.
Analysis of the Fundamental Ways in which Buy American Requirements are Contradictory to Capitalistic Ethos
A capitalistic ethos is whereby an economy is controlled by the activities of the private sector and not by the state. Following the requirements of Buy American, it is contrary to the principles of capitalism that the American government claims to promote. For instance, the federal authorities state that the government would only purchase the products that they require from the domestic firms unless they do not meet the stipulated conditions (Mueller, 2012). As such the government already controls the economic system because they restrict the type of organizations that can supply the items for public consumption.
Additionally, the setting of the prices for the purchase of the product also indicates the element of intervention in the activities of the private sector. Apparently, every willing supplier will have to comply with the pricing requirement or forfeit the chance to sell to the government. The pricing condition is also contrary to claimed promotion of a free market because the state should allow the pricing to comply with the market forces (Mueller, 2012). In fact, the federal government needs to buy at the price that the sellers offer their commodities and have the opportunity to bargain, but not to dictate on pricing. Otherwise, even the private consumers will want to buy at the prices that the state authorities claim as favorable.
Discussion of the Fairness and Advantages of the Exceptions to the Buy American Requirements to the U.S. Economy
The exceptions to Buy American requirement include the need to purchase the non-U.S. manufactured commodities if the locally produced ones are deemed to be consistent with the interest of the public. Additionally, the waivers apply if the American items are insufficient to meet the intended purpose and if the local product would steadily increase the total cost of the project activity by 25% (Federal Government, 2009). Notably, the stated exceptions are fair to the local manufacturers because the state would only consider buying from outside in the case that they are unable to provide the required commodities at the right, prices, quality, and quantity. The conditions are understandable because the public cannot consume what does not meet the quality requirements. Moreover, the inability to supply in the needed quantities would inconvenience the government because it might need to purchase other similar items from outside, but with no guarantee of the same quality (Federal Government, 2009). Lastly, it proper to stick to the budgeted funds and making the decision to purchase from the foreign producers is of help if it helps keep the expenses within the required limits as opposed to the highly priced local products.
The creation of the exceptions to the Buy American Act is of advantage to the U.S. economy in several ways. First, it motivates the local manufacturers to produce in bulk so as to meet the minimal supply requirement by the government. In the process, the country generates a relatively high GDP as well as creates a surplus for export that earns foreign exchange (Tkatchova, 2011). Second, the commitment to buy at stipulated prices also prompts the American-based manufacturers to control the costs of production so as to enable them to keep the prices at desirable levels. The production plants are forced to devise cost effective processes that would see them sell their commodities at favorable prices, thereby, helping the country to minimize the chances of inflation. Third, the freedom to purchase from outside if the local manufacturers fail to meet the quality standards further motivates the producers to maintain high quality (Tkatchova, 2011). The maintenance of high quality helps the American-produced commodities to become attractive even to the outside market, thus, enabling the country to earn foreign exchange.
Advantages and Disadvantages of using the Buy American Requirements with the Navigation Systems that both VectorCal and DanLan Produce
The application of the Buy American Requirements enables both VectorCal and DanLan to have the opportunity to serve the government without stiff competition from the foreign-manufactured navigation systems. The firms would further find it relatively easy to acquire additional client from the local and foreign markets once the supply the American government. Notably, most of the private consumers would wish to associate with a firm that is trustworthy and can meet their quantity and quality requirements (Tkatchova, 2011). Therefore, the supply partnership with the state departments will promote the image of the two corporations to the consumers.
The point that the price at which the firms sell the products to the government is known will also lead to the stabilization and reasonable charging of the costs of the inputs such as raw materials. Apparently, the suppliers of inputs would charge at relatively high prices if they are ignorant of what the consumers pay for the final products. However, they will likely know the price which the government set as reasonable and make them price their commodities reasonably (Tkatchova, 2011). VectorCal and DanLan will also have to adjust the quality requirements and strictly monitor the attainment of the same so as to help it enter into satisfactory purchase agreement with the government that would consider the quality of the product as one of the critical factors.
Despite the benefits of applying the Buy American Requirements, the two firms suffer from the lack of freedom to price the products that they sell to the government. The state declares what it deems as favorable price, and the organizations cannot charge above the rate even if it is not practical in helping cover the production overheads. The fact that most of the manufacturing materials have to come from the country further limits the ability of the enterprises to minimize the cost of production by getting the raw inputs from outside. In the case that they obtain the raw materials from other countries, then they would forfeit the chance of supplying the government with the navigation systems.
Also, the government-desired sales price will expose the corporations to cost bargaining by the consumers in the case that they want to increase the value for the private customers (Tkatchova, 2011). Besides, some of the buyers often perceive the government to be capable of purchasing at high prices and that they would only buy the items at reduced prices. That makes it less profitable especially if the state only bought the prices at reasonable costs, but then the companies are forced to sell at reduced prices.
- Canadian Trade Commissioner Service (2017). The Buy American Act and Buy America Provisions. Retrieved on 17th May 2017 http://tradecommissioner.gc.ca/sell2usgov-vendreaugouvusa/procurement-marches/buyamerica.aspx?lang=eng
- Federal Government (2009). Stimulus: American Recovery and Reinvestment Act of 2009. (2009). Lanham, Md: Government Institutes. Bernan Press.
- Mueller, D. C. (2012). The Oxford handbook of capitalism. Oxford: Oxford University Press.
- Tkatchova, S. (2011). Space-based technologies and commercialized development: Economic implications and benefits. Hershey, PA: Engineering Science Reference.