Buy American Requirements - Assignment Example

Buy American Requirements Buy American Requirements According to Jorgensen , the Buy American Requirements specify the following: i) Those who need to comply – these include public building and public work projects. This category implies a public building of a governmental entity and a public work of a governmental entity. A governmental entity can be a regional or a local government. However, Profit Organizations are not impacted by these requirements. ii) What is regulated – these are Iron, steel and manufactured goods used in projects for construction, alteration, maintenance, and repair. These goods must be “Produced in the United States.” Something is produced in the United States if its final manufacturing takes place in the U.S. and any form of assembly at the construction site is not considered “Produced in the United States.” iii) What is not regulated – this category comprises of raw materials other that iron and/or steel, non-manufactured goods that are not either iron or steel, the origin of component and the sub-components parts of manufactured goods, and Loan and Grant Funds that was intended for the purchase of equipment ONLY. iv) Concerning construction bidding and contract documents – advertisement for bids is expected to be funded in whole or part with funds from the American Recovery and Reinvestment Act (ARRA) and the use of these funds are applicable only when all the iron, steel, and manufactured goods are produced in the U.S. The contract on information for bidders and supplemental general conditions are also funded in part or whole by ARRA in accordance with Section 1605 of the ARRA (funds are used only if all the iron, steel, and manufactured goods are produced in the US). v) Certification – certification is provided by the consulting Architect/Engineer on their letterhead. (Buy American Certification) Benefits of the Buy American Requirements to both VectorCal and DroneIn As was discussed previously, VectorCal is an already established firm that provides security services to governmental departments, the private sector, and individuals through drone navigation. DroveIn is also intended to perform theses duties, in addition to the provision of services that are not available from VectorCal. These services include the development of more user-friendly, wholesome, and affordable drones and the creation of a long-term relationship with the customers using a quantitative model (Deberg, 2011). Just like VectorCal, my company (DroneIn) will most probably develop its drones using iron and steel, and other manufactured items produced in the United States. Thus, these two firms may benefit from the Buy American Requirements in the following ways: 1) They are profit-making organizations and are thus, not impacted by these requirements. This implies that there will be no requirement for the components and the sub-components of their final manufactured goods and products. If the raw materials required for their productions are determined to be unavailable in the United States, it will be possible to purchase them from a foreign source without fewer rules on authorization (Deberg, 2011). 2) Most of the production of drones in DroneIn, as in VectorCAal, will be in form of assembly work at these firms’s location (thus, the construction site). This adds the advantage that the companies would save on compliance funds of the Buy American Requirements and maximize on the profits that are generated by their business. 3) Given the fact that the two firms plan using iron and still produced in the United States to produce/manufacture their drones, it will save them the cost of advertisement for bidders, the provision of appropriate information for bidders, and supplemental general conditions; through funding in whole or part from the American Recovery and Reinvestment Act (ARRA). Their funding by ARRA will also be possible by the fact that all their iron and steel manufacturing processes will be taking place in the United States (Deberg, 2011). Buy American Requirements and the US Capitalistic Ethos The United States government has always been in the forefront when it comes to the promotion of competition in the economic sector. Competition leads to the development of the economy when it is realized in areas such as industries, the education sector, and government departments and so on. Under competition, there is space for innovation and the creation of new products and services, as well as, the integration of technological advisement in the production line, as the companies compete to produce the best for their customers under the free market system (Deberg, 2011). However, the Buy American Requirements brings forth an idea of monopoly in terms of purchase and production. Under these requirements, companies dealing in steel and iron products are expected to use steel and iron that are produced only on the Unites States. It is required that all the iron, steel , and manufactured goods be produced in the US. This makes it difficult to open the market for these companies and it may be costly to produce their products if the producers of iron and steel in the USA charge extremely large amount of money. The result is a rise in the cost of the goods and services from these companies that will lead to low demand as consumers look for alternate products (500 Mile Upgrade, 2014). The regulation also blocks a way for developments and innovation in the manufacturing industry that may involve a comparison of different types of materials that produce the same items. The Buy American Requirements also creates an imperfect competition in the market for the companies that have to comply with the rules as compared to the companies that are not restricted by the rules. Since raw materials other than iron and steel and non-manufactured goods that are not either steel or iron are not regulated, the market for the steel and iron industries are likely to be limited in case another unregulated company decides to produce to alternate goods at cheaper costs (Deberg, 2011). This contradiction between the Buy American Requirements and the US government’s capitalistic ethos is best demonstrated by the following instances: The American Recovery and Reinvestment Act (ARRA) funds all the contracts for advertisement for bids and information for bidders if all iron, steel, and manufactured goods are produced in the United States. This implies that only certain parts of the economy are favored and, as always, leads to a certain form of reluctance in which the companies no extra effort to improve their production level and technological advancement. The Buy American Requirements puts no regulation on other raw materials apart from iron and steel. This hinders the concept of free market on the operations of these companies as whatever they produce is under watch by the provisions of this act. It becomes very difficult for these companies to produce goods that can effectively compete in the market due to this regulation, and as such, other companies that produce goods that can be used similarly fetch a high income in the market compared to these companies under regulation (Jorgensen, 2010). The exceptions to the Buy American Requirements set forth by the United States government have an impact on the economy of the US that are both advantageous and disadvantageous. The requirements mainly refer to public building and public work projects that are for a particular governmental entity. This leaves room for other players in the economic sector such as companies, industries and even the agricultural departments to carry out there operations without regulation and lead to the development of the US economy (Deberg, 2011). The part of the US economy that is exceptional to the Buy American Requirements have the ability to maximize the income from their products and services but maximizing on the input to their business coupled with a thorough analysis of market trends. There is room for innovation and creation in this exceptional sector and, as a result, competition to produce the best products and services rises that lead to a positive contribution to the economy. These organizations also have the ability to increase the supply of their raw materials by importing from foreign countries. This leads to a large volume of production that is able to satisfy the needs of their customers. On the other hand, the part of the economy that have comply with the requirements of the Buy American provision are not allowed to import raw materials like steel and iron from foreign countries unless, in exceptional cases. This reduces their level of production and their ability to invent new ways of production. As a result, their contribution to the economy becomes very dismal. Thus, it is evident that the exceptions to the Buy American Requirements set by the government are advantageous to the US economy (Jorgensen, 2010). Another rationale to justify that the exceptions to these requirements is an advantage to the US economy is that for the regulated companies and business projects, all the goods made of steel and iron must be “Produced in the United States.” This puts them in a situation in which they cannot sort for any similar finished products from other countries to suffice for their production at any time of the economy. Thus, these regulated products and services do not have the ability to fetch market as compared to the sales activities that result from the products and services that are not regulated. It thus makes the companies to be able to multi-task in producing their normal products and services and allows for indulgence and domination of other sectors of the economy. The production from these companies is thus diversified leading to economic growth (Jorgensen, 2010). The Buy American Requirements can also be used with the navigation system that my company, DroneIn, and the VectorCal firm. As discussed earlier, DroneIn, just as VectorCal, will major in the production of fast and affordable drones for efficient security provision. The use of the Buy American Requirements with these navigation systems has both advantages and disadvantages The advantages i) The companies will major on using raw materials such as steel and iron that are readily available in the United States. This will save on the cost of importing this same raw materials and assist in maximizing the income for theses companies. It will also be easy to operate with the already-established suppliers of the raw materials, as this will lead to a subsidized cost of raw materials from the government. ii) Since the government will regulate the operations, using these navigation systems with the Buy American Requirements will lead to constant government supervision that will ensure that all the operations are in accordance with the set regulations. In case of a hitch in their operations, the government will be in a position to step in and solve the issue before it worsen, be it a financial crisis in the created DroneIn firm or in the existing VectorCal company. iii) Operating with the Buy American Requirements will also be a merit to these navigating companies in that the ARRA funds contracts for Advertisement for bids and information for bidders. However, this provision is pegged on the condition that the steel and iron that these companies will be using be “Produced in the United States.” Even though this restriction holds, there is the advantage of funds from ARRA that will save these navigation companies from spending on advertisements bids and in providing information for bidders. The Disadvantages i) The operation of these navigating companies will lead to their blockage to important raw materials like steel and iron for their production, from foreign countries. This could lead to a sharp shortage in raw materials at certain points of the production lifespan and eventually lead to the dissatisfaction of customer needs. ii) The fact that the these two navigation firms could be applying to the Buy American Requirements does not imply that their competitors in the drone industry will have a relative advantage over them if they are not also operating under the Buy American Requirements. This could lead to a stiff competition for these two in the market, as their competitors will be able to get the same raw materials even from foreign countries by importing. The result could a serious loss of their market and eventual failure of their operations from low customer demands. Conclusion From the foregoing, operating with the Buy American Requirements can be both advantageous or disadvantageous to a company but the main point that should be considered, is a firm’s ability to contribute to its development and to the economy of the United States. If compliance to these requirements reduces the availability of raw materials to any company, the alternative that brings growth to the economy should be considered. References 500 Mile Upgrades. (n.d.). 500 Mile Upgrades. Retrieved May 11, 2014, from http://www.aa.com/i18n/AAdvantage/eliteStatus/upgrades/500mileUpgrades.jsp Deberg, M. (2011, December 5). RAHALL: STRENGTHENING "BUY AMERICA" REQUIREMENTS CAN BOOST AMERICAN JOBS.. States News Service, pp. 23-45. Jorgensen, B. (2010). Erroneous application of the Recovery Acts buy American requirements to sub-federal entities. New York: McGraw Hill. Read More