July 15, 2024
Government Audit Identifies BAA Violations in LED Products
Inspector General discovers widespread use of Asian LED products at various military installations
A recent Department of Defense (DoD) audit has uncovered significant compliance issues with the Buy American Act (BAA) in the procurement of LED lighting products for energy savings projects. The audit, conducted by the DoD Office of Inspector General (OIG), examined $34.9 million worth of LED lighting improvements across four contracts, revealing a troubling lack of documentation to support BAA compliance.
The audit, initiated in response to a congressional request and a DoD Hotline complaint, found that contracting officials failed to adequately verify that installed LED products were manufactured in the United States or met the required domestic content percentage. This oversight has raised concerns about the DoD's commitment to supporting domestic manufacturing and reducing dependency on foreign suppliers for critical goods.
The report does not cite any instances where manufacturers were suspected of wrongdoing; rather, the audit indicates that the contractors' responsibilities and the procurement process are where some of the missteps seemingly occurred. However, one manufacturer cited in the audit, Patriot LED, does have a history of making false "Made in USA" claims.
Widespread Non-Compliance Across Military Installations
One of the more intriguing findings involved LED products installed at Goodfellow Air Force Base in Texas. The audit team observed that two of the four LED product models examined were marked "Made in China," while the other two contained components with the same marking. These products, supplied by manufacturers Current and SLG Lighting, included models such as the 12ET8 LED lamps and ABV Albeo LED high bays from Current, and ALC series area lights from SLG Lighting.
| Manufacturer | Product Models |
|---|---|
| GE Current | 12ET8/G/4/840 |
| GE Current | ABV3018T481DQV23KQW |
| SLG Lighting | ALCS96 T5 G1 5K PC-3 ALC-SPAR |
| SLG Lighting | ALCS60 T5 G1 5K PC-3 ALC-SPAR |
Above: Four LED Lighting Product Models Observed at Goodfellow AFB Marked “Made in China” or Containing Components Marked “Made in China”
At Fort Meade in Maryland, the situation was equally concerning. Of the 12 LED product models examined from manufacturer Invictus Lighting, eight contained internal components (drivers) marked "Made in China." These included models the IAT24 and IAB4N LED driver series among others.
The Naval Surface Warfare Center in Dahlgren, Virginia, also had issues with BAA compliance. Four LED product models from manufacturer Patriot LED were found to contain components marked "Made in China." These included various PT-CDL10 models.
A project at The Pentagon revealed that six of twelve LED product models contained components marked “Mexico” or “Made in Taiwan.” The remaining six of twelve LED product models contained no country of origin markings. In addition, manufacturer documentation for the 12 LED product models from the contract file stated the products were BAA or TAA compliant.
Source: United States Department of Defense
Waivers: The proposal evaluators reviewed the specification sheets received using a random sampling approach. Contracting personnel stated that if they identified any products as noncompliant with the BAA during their reviews, they notified the prime contractor that it was required to submit BAA compliant products or request a waiver for those items. Contractors did not submit waivers for any of the LED product models that were reviewed.
Industry Challenges and Market Realities
It's important to note that these findings highlight a significant challenge faced by the lighting industry. Seasoned lighting people may point out that it may be extremely difficult to find LED lamps and LED drivers that are not made in China. The global supply chain for LED components is heavily concentrated in Asian markets, particularly China, making full compliance with BAA requirements a complex issue for manufacturers and suppliers.
Some large trade associations that advocate for contractors have pushed back against stringent BAA regulations, urging the government to modify requirements that are challenging to meet given the overwhelming prevalence of overseas manufacturing of certain lighting components. These contractors argue that the current regulations don't reflect market realities and could lead to increased costs and project delays.
Systemic Issues in Contracting Practices
The audit also revealed a systemic problem in how project management teams approached BAA compliance. They often relied on contractor assurances without conducting thorough verifications. Moreover, officials frequently viewed these energy savings contracts as service agreements rather than product procurements, leading to less stringent oversight of the actual products being installed.
Another important issue identified was the misclassification of LED products as commercially available off-the-shelf (COTS) items. This classification waives certain domestic content requirements, potentially allowing non-compliant products to slip through the cracks. The audit found that contracting personnel often lacked proper documentation to support COTS designations or to verify domestic content percentages for non-COTS items.
Implications for National Security and Domestic Manufacturing
The implications of these findings extend beyond mere regulatory non-compliance. As Inspector General Robert P. Storch noted, "Reducing dependency on foreign suppliers for critical goods enhances national security. DoD personnel must ensure that materials and products acquired for public use be manufactured in the United States."
The audit's recommendations call for significant changes in how the DoD approaches BAA compliance in LED lighting procurements. These include requiring contracting personnel to ensure that contract files contain affirmations from prime contractors regarding BAA compliance, performing component tests to verify domestic content percentages, and providing support for COTS designations.
Recommendations and Future Outlook
The OIG recommended that the Principal Director of Defense Pricing and Contracting issue guidance to ensure that energy savings service contracts include and enforce the appropriate Federal Acquisition Regulation clauses related to BAA compliance for construction materials.
The lighting industry should take note of these findings, as they highlight the need for increased vigilance and documentation in the supply chain. Manufacturers and suppliers of LED products to government projects must be prepared to provide detailed information about the origin of their products and components, even as they grapple with the reality of a China-dominated component market.
Possible Industry Impact
This audit seems to serves as a wake-up call for both government contractors and federal decision makers. As the push for energy-efficient lighting continues, ensuring compliance with domestic manufacturing requirements will seemingly be of heightened importance. The lighting industry may be further encouraged to reevaluate its supply chains and manufacturing processes to meet these stringent requirements while remaining competitive, potentially spurring innovation in domestic LED component manufacturing.
As the DoD works to implement the audit's recommendations, lighting stakeholders may possibly experience increased scrutiny and potentially stricter enforcement of BAA requirements in future government contracts. This could lead to significant shifts in the competitive landscape for goventment projects, potentially favoring manufacturers with robust domestic production capabilities or those who can navigate the complex terrain of global sourcing while maintaining BAA compliance.
