Looking Ahead to 2023 – Key Supply Chain Areas to Watch

Global supply chain issues, spurred by the COVID-19 pandemic, the Ukraine/Russia war and other events have made ensuring the resilience and trustworthiness of the U.S. supply chain a top priority across multiple administrations.

Looking ahead to 2023, multiple policy initiatives are focused on achieving government-wide supply chain resilience objectives for both federal agencies and their supporting suppliers and contractors. Here are three key supply chain-related areas which contractors should watch in 2023.

White House Executive Order on America’s Supply Chains

The 2021 Executive Order 14017 directed select agencies to conduct reviews of the nation’s supply chains to strengthen their resilience, diversity and security. A diverse set of agencies ranging from the Department of Defense (DOD) to Health and Human Services (HHS) have assessed the supply chains for semiconductors and information and communications technology (ICT); energy and advanced batteries; defense and critical materials; transportation; agriculture and food products; and public health and pharmaceuticals.

In 2023, contractors should expect increased federal focus on domestic supply chain resilience and security. These concerns are driving new policies focused on rebuilding domestic production and innovation, upgrading critical infrastructure and cybersecurity, supporting future workforces, enhancing innovative partnerships and leveraging federal spending.

Buy American Act

The Biden Administration’s 2021 Executive Order 14005 on “Ensuring the Future is Made in America by All of America’s Workers” required agencies to review and eliminate regulations and rules that do not align with “Made in America” laws. The White House also directed agencies to partner with the National Institute of Standards and Technology (NIST) Hollings Manufacturing Extension Partnership (MEP) to help identify small and mid-sized U.S. companies to meet federal needs and for OMB to create a “Made in America” office (MIAO) to update waiver processes and improve transparency.

The Buy America Act-related Federal Acquisition Regulatory (FAR) rule increasing the required domestic content for certain procured goods from 55% to 60% was published in March 2022. Execution was delayed until FY 2023 (specifically October 25, 2022) to give contractors time to transition. Contractors should plan accordingly and assess the impact on supply chain health and competition.

Creation of FAR Part 40 for Cybersecurity Supply Chain Requirements

Federal acquisition rules continue to evolve to address both the underlying cybersecurity of the various products agencies procure as well as codify supply chain requirements for cybersecurity-focused products and services.

In September 2022, the director of the Defense Acquisition Regulatory Council (DARC) tasked council staff with drafting a final Federal Acquisition Regulatory (FAR) rule to establish a new FAR Part 40 to provide federal contracting officers with a single, consolidated location in the FAR for cybersecurity supply chain risk management requirements. At of the end of October, GSA had created a Part 40 section on the Acquisition.gov website reserved for the forthcoming regulation information.

There are additional cybersecurity areas to watch that have contracted supply chain implications, including software supply chain security (SSCS).

Implications for Contractors

These efforts and others are driving greater scrutiny and reporting requirements for agencies and suppliers. Contractors should have contingency plans to shore up any instabilities in their supply chains to ensure they successfully deliver on their federal contracts.

Greater scrutiny is driving evolving policies and rules. Existing acquisition regulations are changing on multiple fronts, requiring diligence to both monitor and meet new supply chain-related requirements.

Finally, higher proportions of domestically produced content and materials on federal procurements required by the Buy America Act require federal suppliers and contractors to rigorously assess their supply chain health and competitive position as these proportion requirements increase over time.

---

To learn more check out our report, Federal Contracting Trends to Watch in 2023.